What is your Plan for Retirement?

Don't Pat Yourself on the Back Just Yet

You’ve got $500,000 in liquid assets for your retirement and you’re still 15 years away. All your bills are paid; you have a small mortgage on your home; cars are paid for and great credit. Don’t break your arm patting yourself on the back yet.

People think more about what they’re going to do when they retire than whether they’ll have the funds to do them. Ask anyone who has retired, it takes more money than you thought it did. Let’s look at a hypothetical situation.

To retire with $125,000 income in today’s dollars with a life expectancy of 25 years after retirement, you’ll need to have a net worth of $1.5 million at retirement including what Social Security may provide. Your $500,000 will grow to $1,045,420 in 15 yearswhich will leave you about a half million short. You’ll need to save $24,149 each year for the next 15 years to reach your goal.

FHA Mortgage View

FHA insured mortgages serve a sector of the market that is not necessarily being met by other loan programs.

Securing an 80% conventional mortgage that doesn’t require mortgage insurance may be the lowest cost of financing but if the buyer doesn’t have 20% down payment, it isn’t really an option.

Securing a 100% VA loan doesn’t require a down payment or mortgage insurance but if the buyer isn’t a veteran with his/her eligibility intact, it isn’t an option either.

There are conventional loan programs with as little as 3% down payment but they not only require mortgage insurance, they also require a credit score of 740 or above which may eliminate some buyers.

For these reasons, FHA is a viable alternative to about 20% of new and existing home sales. The Federal backing of these mortgages makes it easier for first-time and low-income buyers to qualify because the requirements are not as demanding. They’re even more lenient towards buyers who have previously experienced bankruptcy, foreclosure or a short sale.

Finding the right mortgage for the right home is a team effort where both mortgage and real estate professionals work in harmony to get a buyer into their own home. Call us at (360) 721-2603 for a recommendation of a trusted mortgage professional.

General FHA loan requirements include:

• The loan is for primary residences only but can include two, three or four units.
• The property must be appraised by an FHA-approved appraiser.
• The property must be safe, sound and secure, in compliance with minimum property standards as defined by the U.S. Department of Housing and Urban Development.
• The borrower must be a legal resident of the U.S. and have a valid Social Security number.
• The minimum credit score of 580 with a down payment of at least 3.5 percent, or a minimum credit score of 500 with a down payment of at least 10 percent.
• The borrower may not have delinquent federal debt or judgments, or debt associated with past FHA loans.
• The borrower must have steady employment history.
• Documentation is required if the down payment was gifted by a family member.
• The borrower must have a debt-to-income not exceed limits of 31% for front-end and 43% back-end ratio (some exceptions may apply).
• Any judgments or collections on the credit report must be resolved or satisfactorily explained.

Cyber Monday Tool

Cyber Monday or any day of the week.  Download this app and advance your search for your new home...It is a great market to buy a home for you and your family.  Meet your goal and be in your home for 2018.

Click for tool:

House Goal Tool..

Efficient Lighting For Your Home.

In 2007, Congress passed an energy act that required new energy-efficient standards for basic light bulbs. Standard incandescent bulbs are being phased out and eventually will be unavailable.
The alternative bulbs differ considerably in price. LED bulbs are the most efficient but they also cost the most. CFLs are a less expensive alternative.  Interestingly, the more expensive replacements offer lower operating costs and longer economic life.
One approach will be to inventory the different types and quantities of light bulbs you need in your home. Then, research either online or a big box store to find out what each type of bulb costs. This information will give you a total budget for converting your lighting.
It could be a significant expense to replace all the bulbs in a home at one time, especially when most of the bulbs still work. That’s where a plan might make sense. 
Replace the bulbs in the rooms where the lights are used the most such as kitchen, family rooms and bathrooms. There may be other “rooms” where the lights are used frequently like certain hallways or stairs. Outside flood lights for security purposes may be a large energy consumption.
Bulbs can vary in light output measured in lumens as well as color of light from warm white to bright white and daylight. The lighting label required by the Federal Trade Commission on all packaging will help you determine which will give you the most bang for your buck.

Leaving Home For The Hoidays?

The last thing you want if you’re traveling these holidays is to worry about someone burglarizing your home. Use this check list to add some peace of mind while you’re out of town.

• Ask a trusted friend - to pick up mail, newspaper and keep yard picked up to avoid an appearance of being empty.
• Consider discontinuing your mail (USPS Hold Mail Service)
• Don’t post about your trip on Facebook and other social media until you return – some burglars actually look for this type of announcement to schedule their activities.
• Do notify police or neighborhood watch – especially if you’re going to be gone for more than just a few days. Let your monitoring service know when you’ll be gone and if someone will be checking on your home for you.
• Light timers make it look like someone is home – use several sets for different times to better simulate someone being at home.
• Do unplug certain appliances – TV, computers, toaster ovens that use electricity even when they’re off and to protect them from power surges.
• Don’t hide a key – burglars know exactly where to look for your key and it only takes them a moment to check under the mat, above the door, in the flower pot or in a fake rock.

These easy-to-handle suggestions may protect your belongings while you’re gone while adding a level of serenity to your trip.

Is it time to look at Refinancing?

Would someone really refinance their home and not take money out of it? Certainly, if they could get a lower rate, build equity faster and pay off the home sooner.

For people with extra cash available, this can be very attractive compared to the low savings rates being paid by banks.
In the example below, the current mortgage is 5% for 30 years after 48 payments of $1,342.05. The owner can refinance for 15 years at 3.37%. If they put $36,000 into the refinance, their payments will be slightly more but the mortgage will be paid off in 15 years. At that same point, if they keep the current mortgage, their unpaid balance will be $136,049.03.
If you have a goal to get your home paid off and have the available funds, a Cash-In Refinance may be just the strategy for you.

What are you paying upfront for your new loan?

Up-front Points to Lower the Rate

When loans are quoted by lenders, most buyers pay attention to the interest rate but not so much to the points that may be charged along with the rate.

A point is one-percent of the mortgage amount and considered pre-paid interest that affects the yield on the loan. Buyers or sellers can pay points but there can be limits based on underwriting guidelines for different types of loans.

A lower note-rate would obviously make the payments less. However, with a little analysis, you can determine how much points paid up-front can save a borrower or whether you'll recapture the additional costs in the anticipated time in the home.

In the example below, two choices are compared; a 4.25% loan with no points vs. a 4.00% loan with one point. If the buyer stays in the home at least 69 months, he will recover the $2,700 cost for the point on the lower interest rate.

If the purchaser stays ten years, he’ll save two thousand dollars over the cost of the point. A less obvious advantage will be realized because the unpaid balance on the lower interest rate loan will results in an additional $1,780 savings.

This is an example of a permanent buy-down but temporary buy-downs are also available.  A trusted mortgage advisor can help you determine alternatives.

The Many Factors in Determining Your Rate!!

Regardless of what a lender quotes on mortgage rates, the actual rate a borrower pays is based on a number of variables. Lenders determine whether to loan money and at what rate based on the risk involved with the transaction.
Factors that increase the risk that the loan will be repaid will proportionately increase the interest rate charged to the borrower. If the risk becomes too high, the loan will not be approved.

• Loan amounts – conventional mortgages above conforming limits as set by Fannie Mae and Freddie Mac are considered jumbo loans and generally have a higher interest rate.
• FICO score – the lowest interest rate is reserved for the highest score; the lower the score, the higher the rate the borrower will pay.
• Occupancy – borrowers occupying a home as their principal residence are considered a better loan risk than second homes and investment properties.
• Loan purpose – purchase transactions generally have the lowest interest rate with refinancing for better rates and terms being priced slightly higher. An even higher rate might be charged for refinancing and taking cash out of the property.
• Debt-to-Income Ratio – a borrower’s monthly liabilities divided by their gross monthly income develops a ratio that helps lenders to assess the borrower’s ability to repay the mortgage.
• Property Type – some types of property are considered higher risk than others which could adversely affect the rate.
• Loan-to-value – the lower the percentage of the loan to the appraised value of the property will generally lower the interest rate.

Any combination of these factors could limit a borrower’s ability to secure a mortgage at the rate initially quoted. Pre-approval by a trusted mortgage professional can be the best way to know what rate you can expect to pay. Please call for a recommendation of a trusted mortgage professional.

Getting Started on the Right Track..

The First Step in your search for your new Nest!!

Pre-approval is Good for Everyone

Buyer’s mortgage pre-approval is good for everyone in the transaction. It saves time, money and removes the uncertainty of knowing whether the buyer will be qualified after negotiating a contract. The direct benefits include:

• Looking at “Right” homes - price, size, amenities, location
• Find the best loan - rate, term, type
• Uncover credit issues early - time to cure possible problems
• Negotiating power - price, terms, & timing
• Close quicker - verifications have been made

There is a significant difference in having a trusted mortgage professional take a loan application and run all the necessary verifications compared to going through calculators on a lender’s website. Beside the peace of mind, the cost of being pre-approved is a bargain and generally, limited to the cost of the credit report.

Even if a person has been pre-approved, a second opinion from a different lender may be a good option. It can verify there is a good deal or you’ll discover that you can improve it. Either way, it works to your advantage. Contact me if you’d like a recommendation of a trusted mortgage officer.

It is not Monopoly...

Easier to Play the Game

It’s much easier to play a game when you know the rules so you can avoid mistakes that may keep you from winning. Homeownership isn’t a game but there are some rules that will protect your investment and increase your enjoyment.

Most people want a home of their own to raise their family, share with their friends and to feel safe and secure. In most cases, it is also their largest asset. These suggestions can help protect your investment and make homeownership more enjoyable.

• Don’t overpay for your home
• Maintain your home to protect its value
• Minimize your assessed value to lower property taxes
• Make extra contributions to save interest and build equity
• Validate the insured value of improvements and contents
• Be aware of current surrounding property values
• Make mortgage interest payments deductible
• Invest in capital improvements that increase market value
• Don’t over-improve the neighborhood comparables
• Keep records of capital improvement & other maintenance

We’d like to be your personal source of real estate information and we’re committed to helping from purchase to sale and all the years in between. If you need assistance with any of the items mentioned in this article or need a recommendation for a service provider, it would be our pleasure to help.

Who has your Identity?

It is highly recommended that you check on the status of your Identity...

Protecting Your Credit

One of the “big” three credit bureaus recently announced that a massive hack has exposed the personal information of up to 143 million people. To add perspective to that statement, that is about two-thirds of American credit card holders or close to half the population of the United States.  Part of protecting your credit is being vigilant and making it difficult for thieves to steal your identity.

If you suspect you are a victim of identity theft, an initial step is to place a fraud alert on your account. Contact one credit reporting company (Equifax, Experian or TransUnion), tell them you are an identity theft victim and ask the company to put a fraud alert on your credit file. Confirm that the company will contact the other two companies.
The initial fraud alert will make it harder for an identity thief to open accounts in your name. The alert lasts for 90-days and it can be renewed.
A more severe precaution called a credit freeze restricts access to your credit report. A credit freeze makes it more difficult for thieves to use your identity to apply for loans or credit cards in your name.
By contacting each of the three credit reporting agencies separately, you can request a temporary freeze. This would prevent them from providing credit information without both your explicit permission and a PIN that temporarily lifts the freeze.
Unlike the fraud alerts, the agencies may charge you a fee for instituting the freeze in addition to another fee to lift the freeze each time.
A credit freeze will not affect your credit score. If you are in the process of buying a home, contact your loan officer and discuss the decision you are considering. If you will be making a mortgage application in the near future, you can temporarily lift the freeze for the lender you are using.
A trusted mortgage professional is a key team member in purchasing a home. Making an appointment with them is one of the first steps along with determining your real estate professional. Contact us to get a recommendation of a trusted mortgage professional.
To request a credit freeze, you can do it online or by phone:
Equifax – 800-349-9960 | Experian – 888-397-3742 | Trans Union – 888-909-8872
For more information, see Credit Freeze FAQs at the Federal Trade Commission.
It is important to personally monitor your credit reports through annual credit report.com to discover any unusual activity.

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Deductible Dilemna

The purpose of insurance is to shift the risk of loss to a company in exchange for a premium. Most policies have a deductible which reduces the amount of the claim that is paid by having the insured share in the first part of the loss.

In the process of managing insurance premiums, policy holders often consider higher deductibles to lower the premium. Lower deductibles mean less money out of pocket if a loss occurs but also results in higher premiums. Higher deductibles result in lower premiums but require that the insured bear a larger part of the loss.

A small fire in a $300,000 home that resulted in $2,500 of damage might not be covered if the policy holder has a 1% deductible. If the homeowner can afford to handle the cost of repairs in exchange for cheaper premiums, it might be worth it. On the other hand, if that loss would be difficult for the homeowner, a change in the deductible could be considered.

Homes in high-risk flood areas with mortgages from federally regulated or insured lenders require additional flood insurance. However, each homeowner needs to assess the risk of being able to financially sustain a flood loss on their home when flood insurance is not required. The recent events in south Texas and Louisiana are evidence that the unexpected can happen.

It is important to review your deductible and discuss risks with your property insurance agent so that you’re familiar with the amount and make any changes that would be appropriate before a claim is made.  The FEMA website has information and frequently asked questions about flood insurance.

Flood Insurance Update..

Check on your insurance, especially if you have a Federally Funded Loan on your property.

• The federal flood insurance program is set to expire at the end of September; if it does, homeowners with federally insured loans in high-risk flood areas will be affected first.
• Houston homeowners should get their insurance claims filed before Friday, if possible.

Don't Lose out!!

Has this ever happened to you while looking for that perfect home for you and your family?

Great Investment!!

There is no greater Investment for you and your Family!  Feel free to call on me to assist you, your family and friends in Vancouver, Clark County, Washington.

After your Mortgage, budget for:

Your Mortgage is your largest Monthly expense, then comes:

After the mortgage payment, the largest homeowner expense is for utilities and the major component is energy.  Contributing factors include air leaks, insulation, heating and cooling equipment, water heaters and lighting.

Computers, monitors, TVs, cable and satellite boxes, DVRs and power adapters are spinning your electric meter even when they’re not being used. Even though they only represent a small percentage of a home’s total energy consumption, about 3/4 of the electricity is used when the products are turned off.

Unplugging devices can actually make a difference in the size of your electric bill. Plugging several of these offenders into a power strip with a single on/off switch may make the task easier. Most computers have options to put them into sleep mode or even turn when not in use.

The Department of Energy has an Energy Saver Guide and do-it-yourself suggestions.

Home Safe Home

Home is a place you should feel safe and secure. Sometimes, we take it for granted and unfortunately, we do need to remain vigilant about things we do that could compromise our safety. Here are a few tips to consider:

• Everyone loves an inviting home including burglars. Make sure it looks occupied and is difficult to break in.
  • Always lock outside doors and windows even if you’re only gone for a brief time.
  • Lock gates and fences.
  • Leave lights on when you leave; consider timers to automatically control the lights.
  • Keep your garage door closed even when you’re home; don’t tempt thieves with what you have in your garage.
  • Suspend your mail and newspaper delivery when you’re out of town or get a neighbor to pick it up for you.
• Posting that you’re out of town or away from home on social networks is like advertising your home is unprotected.
• Equally dangerous could be allowing certain social network sites to track your location.
• Don’t leave keys under doormats, in flowerpots or the plastic rocks; thieves know about those hiding places and even more than you can think.
• Trim the shrubs from around your home; don’t give criminals a place to hide.
• Use exterior motion detectors and yard lighting.
• Have an alarm system and use it when you leave home and go to bed.
• Put 3 ½” deck screws in door plates and door hinges.
• Have good deadbolts on all exterior doors.
• Exterior doors should be solid core.

Funding College...some helpful tips...

Consider the goal of funding a child’s college education in the future. If “other people’s money” in the form of a scholarship is not a possibility, there still may be another way to use some “other people’s money.”

A $25,000 investment into a mutual fund paying 5% would earn $1,250 in the first year. Alternatively, the $25,000 as a 20% down payment to purchase a $125,000 rental home appreciating 3% a year would have gone up by $3,750 or three times that of the mutual fund in the first year.

The mutual fund’s growth depends on the value of the money invested. Rental real estate benefits because a 20% down payment controls a much larger asset because you’re using “other people’s money.” Leverage allows the investor to profit not only from the amount of cash invested but from the value of the investment.

With a 20% down payment and current interest rates, a typical rental would have a positive cash flow. In ten years, the equity could be $75,000. On the other hand, the $25,000 initial investment in a mutual fund earning 5% annually would only grow to about $40,000 in the same 10 years. It would require an additional $2,700 each year to reach the same $75,000 value.

Leverage is just one of the many benefits that make rental real estate the IDEAL investment. Whether you are saving for higher education, retirement or wealth accumulation, consider rental real estate. Using single-family homes as investments are attractive because homeowners have a better understanding than many other investments and self-management is a possibility.

Assuming a Loan - New Information

Assumptions are an Alternative

In the late 80’s, both FHA and VA began requiring buyers to qualify to assume their mortgages. The main reason there haven’t been many assumptions in the past 25 years is that interest rates have been steadily going down and if a person has to qualify, they might as well do it on a new loan and get a lower interest rate.

Based on projections by Fannie Mae, Freddie Mac, the MBA and NAR, rates for the second half of 2017 and 2018 are expected to be higher. When interest rates on new mortgages are higher than the rates of assumable FHA and VA mortgages in the recent past, it becomes more advantageous to assume the existing mortgages.

FHA and VA loans originated with lower than current interest rates have great advantages for buyers and sellers.

1. Interest rate won't change for the qualified buyer
2. Lower interest rate means lower payments
3. Lower closing costs than originating a new mortgage
4. Easier to qualify for an assumption than a new loan
5. Lower interest rate loans amortize faster than higher ones
6. Equity grows faster because loan is further along the amortization schedule
7. Assumable mortgage could make the home more marketable

An Assumption Comparison can help determine the savings and financial benefits of an assumable mortgage with a lower rate.

Where do you choose to invest your money?

Your Home Is Your Greatest Investment.

Your home is not only an investment but, your Nest for you and your Family. 

Let us know how we can assist you in your search for your Family.

Emergency Kit for your Car!!

How to take care of an Mickey Mantle said “If I knew I was going to live this long, I’d have taken better care of myself.”

Similarly, if people planning their summer travel knew they were going to have an emergency, they would have the right things available. Only 5% of drivers carry all recommended emergency supplies in their cars.

The Federal Emergency Management Agency (FEMA) recommends that all Americans have some basic supplies on hand in order to survive for at least three days if an emergency occurs. Some of these things would be more important if you lived or traveled in remote areas.

• Reflective hazard triangle or road flares
• Spare tire
• Jumper cables
• First-aid kit
• Flashlight and extra batteries
• Cell phone and charger
• Crucial medications
• Emergency radio with batteries
• Bottled water for each person and pet in your car
• Non-perishable, high-calorie food
• Distress signal flag
• Matches or lighter

During cold weather, additional items are recommended:

• Windshield scraper and brush
• Blankets and extra warm clothing
• Road salt or cat litter to help with tire traction
• Tarp for working outside in weather

It is recommended that emergency supplies should be checked at least twice a year to see that all of the items are in working order and in good condition. It is important that items are replaced if any of them are used during the year.

The American Red Cross is among many sources where emergency preparedness kits and supplies can be purchased.mergency in your Car..

Your Ratios To Purchase A New Home May Be Better!!

The ratios for purchasing a home have just changed.  You may be closer than you think in the ability to purchase your new home!!

Fannie to Loosen Mortgage Requirements

DAILY REAL ESTATE NEWS | WEDNESDAY, JUNE 07, 2017

Government-sponsored financing giant Fannie Mae will ease its requirements next month, raising its debt-to-income ceiling from 45 percent to 50 percent on July 29. The move could pave the way for a larger number of new buyers to qualify for a mortgage, particularly millennials who may be saddled with student loan debt.

The debt-to-income ratio compares a person’s gross monthly income with his or her monthly payment on all debt accounts, including auto loans, credit cards, and student loans. It also factors in the projected payments on the new mortgage. Lenders see applicants with lower debt-to-income ratios as less at risk of defaulting.

Fannie Mae, Freddie Mac, and the Federal Housing Administration have exemptions that allow them to buy or insure loans with higher ratios than the federal rules, which are set at a maximum of 43 percent. The FHA allows debt-to-income ratios of more than 50 percent in some cases.

In a recent study, Fannie Mae researchers looked at more than a decade and a half of data from borrowers with debt-to-income ratios in the 45 percent to 50 percent range. They found that a significant number of these borrowers had good credit and were not prone to default.

“We feel very comfortable” with the increased debt-to-income ratio ceiling, says Steve Holden, Fannie Mae’s vice president of single-family analytics. “What we’re seeing is that a lot of borrowers have other factors” in their credit profiles that reduce the risks associated with slightly higher debt-to-income ratios. For example, these borrowers may make higher down payments or have cash reserves of 12 months or more.

Many lenders say they’re happy to see Fannie loosen up their debt-to-income guidelines a bit. Joe Petrowsky, owner of Right Trac Financial Group in Hartford, Conn, calls the move "a big deal" for potential buyers who are currently being rejected for mortgages: “There are so many clients that end up above the 45 percent debt ratio threshold.”

But that doesn’t mean that anyone with a debt-to-income ratio of below 50 percent will be approved. Borrowers will still be closely vetted by Fannie’s underwriting system to examine their complete application, including income, down payment, credit scores, and more.

Source: “Fannie Mae Will Ease Financial Standards for Mortgage Applicants Next Month,” The 

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Vancouver, WA is growing...

Wow, so thrilled that our Water Front is beginning to grow...It will be a great asset to our Community.




https://www.vbjusa.com/news/top-stories/waterfront-developer-secures-42-5-million-loan-construction-mixed-use-block/

CPR-What to do in the event of an emergency!!

Hands-Only CPR

Hands-only CPR can save lives.  The American Heart Association states that "Almost 90% of people who suffer out-of-hospital cardiac arrests die.  CPR, especially if performed in the first few minutes of cardiac arrest, can double or triple a person's chance of survival."  Most people who survive a cardiac emergency are helped by a bystander.

1. Check for responsiveness – shake the person and shout “Are you OK?”
2. Call 9-1-1 – either tell someone to call or make the call yourself
3. Compress - Push hard and fast in the center of the chest at a rate of 100 per minute.

The victim should be flat on their back preferably on the floor. Place the heel of one hand on the center of the victim’s chest and place the heel on top of the other hand lacing your fingers together. Lock your elbows and compress the chest forcefully; make sure you lift enough to let the chest recoil.
Chest compressions should be continued until the person shows obvious life-like breathing, the scene becomes unsafe, an AED (automatic external defibrillator) becomes available, or a trained responder takes over the emergency treatment.
Alternating mouth-to-mouth breaths is not necessary using this method. Compressions are adequate except in drowning or drug overdose situations where 30 chest compressions are followed by two mouth-to-mouth breaths.
Watch this two-minute video and consider taking instructions from the Red Cross or other qualified provider. Every household should have at least one person trained in life-saving skills.

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Here Comes Spring in The Couve!!

Ah, Spring has finally sprung...looking forward to many outdoor activities in May!

http://www.columbian.com/news/2017/apr/28/taste-country-life-pomeroy-farm/

2016 Tax Day!!

Suggestions for planning for your tax day in 2017

The cartoon character Wimpy would say that he’d gladly repay you Tuesday for a hamburger today. Some real estate investors say a similar thing to Uncle Sam to be able to hold on to their proceeds from the sale of an investment and agree to pay the tax later.

The benefit of a 1031 exchange is that it allows the investor to defer the tax due from the sale into the replacement property. This allows more money to be reinvested. In the example shown, the investor has 27% more to invest now by deferring the tax into the future.

The property to be exchanged must be like-kind which means real estate for real estate.   Rental property can be exchanged for other rental or investment property.  Personal-use properties like a first or second home are not eligible for exchanges.

There are some critical dates that restrict the validity of the exchange. The investor must identify the replacement property within 45 days of the sale of the relinquished property. The replacement property must be closed within 180 days of the sale of the relinquished property.

• The replacement property must be equal to or greater in value, equity and debt than the one being relinquished.
• All net proceeds must be used in acquiring the replacement property.

There are specific rules involved in constructing a valid tax-deferred exchange. There are three professionals that should be involved: a tax advisor, a real estate professional and a qualified intermediary who will assist in the acquisition and transfer of both the relinquished property and the replacement property. Additional information can be found in IRS Publication 544.

How Is The Market In Your Area?

Our Market is very quick...we have inventory for approx. l.5 months.  We get multiple offers on our homes in Clark County.    This information is provided to from Keller Williams.

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Rental Income...Ideal

Rentals are IDEAL

Rental homes are the IDEAL investment because they offer a higher rate of return than other investments without the volatility of the stock market. With certificates of deposit and bonds at less than 2%, people need an alternative investment that they understand and with a reasonable amount of control.

In this case, IDEAL is an acronym identifying the advantages of rental properties.

• Income from the monthly rent contributes to paying the expenses and a return on the investment.
• Depreciation is a non-cash deduction that shelters income for some investors.
• Equity buildup occurs with amortized mortgages because each payment is composed of interest owed and principal reduction to retire the loan by the end of the term.
• Appreciation is achieved as the value of the property goes up.
• Leverage can increase the return on investment by using borrowed funds to control a larger asset.

These individual benefits working together make rental real estate a good investment for today’s economy. Increased rents, high rental demand, good values and low, non-owner occupied mortgage rates contribute to positive cash flows and very favorable rates of return. 

To find out more about how rentals might complement your current investment plans, contact your real estate professional.

MORTGAGE OPPORTUNITIES..

During the banking crisis in the Great Recession, certain types of mortgages were unavailable that are once again being offered. Fortunately, the 80-10-10 mortgage is one of those making a reappearance and it can save borrowers a considerable amount of money.
The objective of an 80-10-10 mortgage is to avoid the expense of mortgage insurance for buyers wanting a 90% loan. A buyer can obtain an 80% first mortgage and a 10% second mortgage with a 10% down payment and not be required to have private mortgage insurance.
For example, a buyer could put $30,000 down on a home priced at $300,000 and get an 80% first mortgage without mortgage insurance. The borrower could get a second mortgage, either through the same lender or a third party.
In the example, the 80-10-10 would save a buyer $193.71 per month which can be a considerable amount of money over a ten-year period. The interest rate on the second loan will be higher than the first because there is more risk.
Helping buyers make better choices is a valuable service real estate professionals can provide. Having the right tools and information can make the decisions easier to understand. Using an 80-10-10 calculator, you can see what the savings might be for your situation.

Estate Planning

An estate plan is a collection of documents to ensure that your wishes are carried out because of death or incapacity to make decisions for yourself. Spouses, minor children, adult children, property and investments can all be factors that should motivate a person to undergo the process. Will – this document specifies the way a person wants to manage and distribute his/her assets after their death. When a person dies without a will, the laws of the state where the person resided will determine the distribution of the property. Durable Power of Attorney – this document grants to a designated person the authority to act on behalf of the principal in in legal affairs should the principal become incapacitated. Among other things, this would allow the attorney-in-fact to buy and sell property on the behalf of the principal. Healthcare Proxy – this document grants that a designated person can legally make healthcare decisions on behalf of the principal when they are incapable of making and executing specific decisions stated in the proxy. Living Will – this document directs physicians with respect to life-prolonging medical treatments in case they become unable to communicate their decisions. Hippa Release – this document allows heath care providers to release your health care information to a designated person. Otherwise, they are required by federal law to protect the privacy of your health information. Letter of Instruction – This document contains information and instructions about a person’s wishes upon death. It is intended to offer details on whom to contact and where to find important documents about personal and financial matters. Requirements of these documents can vary from state to state and legal advice should be obtained. If you need a current estimate of value on real estate that may be involved, usually a price opinion from a licensed real estate professional will suffice. It would be my privilege to assist you with this at no cost or obligation.

How Does Owning a Home Benefit You and Your Taxes?

Tax Benefits of Home Ownership

U.S. taxpayers have enjoyed specific tax benefits for home ownership since personal income tax was introduced by the 16th amendment in 1913. While these benefits may not be the primary reason that motivates a person to buy a home, they are still tangible and not available to tenants.

The exclusion of capital gains tax on the profit made from a home is unique from other investments and provides homeowners significant savings. Single taxpayers can exclude up to $250,000 gain and married taxpayers up to $500,000 gain. During the five-year period ending on the date of sale, a taxpayer must have: owned the home for at least two years; lived in the home as their main home for at least two years; and, ownership and use do not have to be continuous nor occur at the same time.

Gain on the sale of a principal residence in excess of the allowed exclusion are taxed at the lower long-term capital gain rate of the owner.

A homeowner may take the standard deduction or itemized deductions in any tax year based on which will create the largest deduction. Property taxes and qualified mortgage interest are allowable itemized deductions.

Qualified mortgage interest is acquisition debt plus home equity debt not to exceed the maximum amounts. Acquisition debt is the amount of debt incurred to buy, build or improve a first and second home up to $1,000,000. Home equity debt is limited to $100,000 over the current acquisition debt on the combination of a first and second home and may be used for any purpose.

For more information, see your tax advisor or see IRS Publications 523, Selling Your Home and 936, Home Mortgage Interest Deduction.

Paying Cash For Your Home?

Before You Pay Cash for a Home

The National Association of REALTORS® reports in its 2016 Profile of Home Buyers and Sellers that 12% of all buyers paid cash for their home.

Before paying cash for a home, a buyer should decide if they might put a loan on the home in the near future.  It may affect the ability to deduct the interest on a mortgage placed on the home at a later date.

Homeowners can currently deduct the interest on up to $1 million of acquisition debt which are the borrowed funds used to buy, build or improve a home. Paying cash for a home establishes acquisition debt at zero. The only deductible interest to the owner would be home equity debt which is limited to $100,000 over acquisition debt.

Paying cash certainly seems like a simple decision but it may limit a homeowner’s ability to deduct interest on a future mortgage. You can get more information about this from IRS Publication 936 or from your tax professional.

What are Your Mortgage Fears?

Mortgage Fears  https://www.fool.com/mortgages/2017/02/11/4-mortgage-fears-and-how-to-fix-them.aspx

Looking for Investment Properties?


Single-family homes offer an investor the ability to borrow large loan-to-value amounts at fixed interest rates for long terms on appreciating assets, tax advantages and reasonable control. Some of these characteristics are not available through other investments.
75-80% loan-to-value mortgages are available on most residential properties up to four units. Comparatively, the stock market allows you to borrow up to 50% on a stock but if the price goes down, they will require additional cash to keep the ratio at or below 50%. If it isn’t available, your stock can be sold to satisfy the loan.
Real estate investors call getting a long-term mortgage putting an investment to bed. The fixed-rate and the 20-30 year terms are exceptions to loans for most other investments, if they’re available at all.
Real estate tends to go up in value over time. There can be a lot of variables that affect the price like supply and demand, condition and available mortgage money, in addition to the general economy.
Rental real estate has several different tax advantages. The profits are taxed at lower, long-term capital gains rates for investors who have owned the property for more than 12 months. While the property is being rented, investors are given a non-cash deduction based on cost recovery of the improvements. Tax deferred exchanges can also be available if specific conditions are met which allow an investor to postpone paying the tax on the gain.
It isn’t necessary to have a partner with most rental homes if the investor can qualify for the mortgage. This allows investor control to make all the decisions that an owner is entitled such as setting the rent, making improvements and determining when to sell.
Rental real estate can earn a much higher rate of return than other available investments while providing income during the holding period. It certainly is worth investigating the possibility with a real estate professional who understands and works with rental properties.

What is a New Nest for Your Family Worth To You?

What Would You Give?

Yogi Berra said he’d give his right arm to be ambidextrous. While most first-time home buyers are not going to that extreme, it is interesting to see what sacrifices are being made according to the National Association of REALTORS® 2016 Profile of Home Buyers and Sellers.

• 43% - cut spending on luxury or non-essential items
• 34% - cut spending on entertainment
• 27% - cut spending on clothes
• 14% - canceled vacation plans
  9% - earned extra income through a second job
• 7% - sold or decided not to purchase a vehicle
• 44% - did not need to make any sacrifices

Forty-percent of first-time buyers experienced some difficulty during the mortgage application and approval process. Single, male buyers expressed a higher incidence of difficulty than single females and married or unmarried couples.

Pre-approval from a qualified mortgage lender before the home search process begins is still considered the best advice for all buyers who will purchase with a mortgage. Your real estate professional can make recommendations for a loan officer that could help you avoid unnecessary aggravations.