The Best Tax Deductions for Homeowners

24th Feb 2021 Uncategorized

Tax season is around the corner. That means it’s time to start thinking about your tax deductions. Fortunately, there are quite a few tax deductions homeowners can take. Read them over so you have a better idea of which deductions you can take on your tax return this year. What are tax deductions? Tax deductions are expenses deducted from your gross income to reduce your taxable income on your tax return. In general, people either take the standard deduction or an itemized deduction in an effort to lower their tax burden. However, as a rule of thumb, it only makes sense to take an itemized deduction if the total tax benefit is greater than it would be for the standard deduction. For the 2020 tax year, the standard deduction is as follows: Single filers and those married filing separately: $12,400 Those married filing jointly: $24,800 Heads of household: $18,650 Common tax deductions for homeowners While there’s no specific homeowner tax deduction, homeowners will often choose to itemize their deductions because quite a few of the costs related to home ownership qualify as tax deductions. We’ve laid them out so you can determine which ones apply to you specifically. Mortgage interest The mortgage interest deduction is one of the most common deductions homeowners take. Every month, when you pay down a portion of your loan, some of it goes to interest. Each tax year, you can deduct a portion of the interest you’ve paid for a tax break. Unfortunately, though, you can only deduct mortgage interest up to a certain limit, and that limit depends on when your loan was originated. These are the limits as they stand in 2021: If your mortgage originated any time between October 14, 1987 and December 16, 2017, you are allowed to deduct up to …

How much will the commercial mortgage market grow in 2021?

16th Feb 2021 Uncategorized

The MBA is forecasting commercial and multifamily lending to increase 11% in 2021, bringing total volume up to $486 billion. While this is good news for hard-hit commercial mortgage sectors, it represents only a partial recovery from the pre pandemic lending levels. As with much of the economic story in the past year, that recovery is predicted to be highly sectoral and differentiated between asset types. Nevertheless, it offers an opportunity for mortgage pros working in the commercial space to win again this year. “That 11% increase might look a little odd in the throes of the pandemic and the recession that it caused, but that’s coming off a 27% decline last year,” said Jamie Woodwell (pictured) VP of commercial real estate research at the MBA. “We saw markets hit a very rough spot in 2020…Q2 and Q3 were each down by 50% from where they had been a year earlier and when we got to the fourth quarter, production was only down 18% from the year earlier. We started to see a bit of a bounceback in Q4 and we think a lot of that momentum is going to carry forward into 2021 as well.” The MBA’s forecast also predicted a 7% volume increase in multifamily lending, after a 17% drop last year. Woodwell noted that multifamily fared better from a volume standpoint than most CRE last year because of an uptick in refi activity, even as purchase activity was driven down. The sector, therefore, doesn’t have as far to bounce back as other areas might. While low interest rates drove some of that refinance activity, Woodwell believes that by the time rates rise in any meaningful way, sales activity in the multifamily space will have recovered. Along with predicted strength in multifamily, Woodwell expects industrial will remain the …

Buying your first home? Here are 6 questions to ask yourself

10th Feb 2021 Uncategorized

The spring home buying season is about to start, and the housing market is especially scary for first-time buyers. Home values have been soaring. Bidding wars are common. For novice home shoppers, it all can feel a bit intimidating. “There are so many savvy buyers out there that you’re competing against,” says Katie Severance, an agent at Brown Harris Stevens in New Jersey and author of The Brilliant Home Buyer’s Guide. If you’re a first-time buyer, here are six questions to ask yourself. 1. What’s your credit score? Mortgage rates remain at rock-bottom levels. But to lock in the most favorable rate, you’ll need a credit score of 740 or above. Your credit score is the single most important factor in determining your rate. So if you have a choice between paying down credit card debt or scraping together a down payment, it’s probably wiser to tackle the debt, because that should help your credit score. 2. What’s your plan for the future? Put another way, how long do you plan to stay in the house? In general, if you expect to be in the same place for less than three to five years, buying doesn’t make as much sense. That’s because real estate commissions and mortgage closing fees can eat into your proceeds when you sell the property. One wild card: Home prices have been appreciating quickly. If strong growth in home values continues, then owning a home for just a couple of years can pay off. However, predicting the path of home prices is nearly impossible. 3. How much do you have for a down payment? This issue isn’t a deal killer, but it does make a difference. If you can put down 20 percent — $60,000 on a $300,000 home — you’ll avoid private mortgage insurance (PMI). …

Loan Estimate: Decoding Your Important Form

01st Feb 2021 Uncategorized

When applying for a mortgage, there are a ton of details to iron out. And if you are shopping a few lenders in search of the best deal, that is an incredible amount of info to keep track of and compare. Fortunately, a very important document known as a loan estimate (LE) can help. Reviewing your loan estimate is an important part of the mortgage application process. Here’s a closer look at what it is and how to read it. What Is a Loan Estimate? Formerly known as a “Good Faith Estimate,” this form was updated in 2015 to be more useful and easy to read. Now known as a loan estimate, this document tells you everything you need to know about your potential mortgage, including the interest rate, term length, monthly payment amount, escrow details and closing costs. All loan estimates are formatted the same way, making it easy to compare multiple loan options. In order to receive a loan estimate, you need to provide the lender with six pieces of personal information: your name, income, Social Security number (SSN), the address of the property you want to finance, the property’s value and the total amount you want to borrow. Once you provide this information, the lender is required to send you an LE within three days. Keep in mind that simply receiving a loan estimate does not mean you are approved for the loan; it’s an estimate of what the lender plans to offer you based on the information you provided. You’ll still need to accept the offer and then provide additional documentation that you can repay the loan in order to lock it in. Once issued, the terms of the loan estimate are good for 10 days. As long as there aren’t any major changes to your …

How To Give Adult Children Money For A Home, And Avoid Tax Problems

19th Jan 2021 Uncategorized

 Some parents feel the need to help their children out to purchasing a home. But what does that mean for the parents when it comes to doing their taxes? are they allowed to give the entire amount, or just a small sum? Below we have a scenario and some answers to a few questions that may arise during the process. Here are a few scenarios that may make sense to you if you are planning to help your children out with their home mortgage: For Example, Let’s say my spouse and I lent our daughter and her husband the total amount they needed to purchase their new home but none of this was documented. What should we be doing to minimize the tax bite and keep things legal? Well, there are a number of factors you and your spouse should consider—and your daughter and her husband, too Let’s presume your intention is to be repaid this amount. The loan should be documented by a written promissory note. The note should reflect the amount borrowed, with the interest rate, and the terms of repayment and other key provisions. The loan interest rate can either be a fixed rate or can be a floating rate based on some benchmark, such as a specified prime rate of interest. And it should be payable in periodic intervals. While the intervals can provide for annual, quarterly or monthly payments, most home mortgage loans are paid on a monthly basis. The interest should be set at a rate no less than the IRS prescribed rate of interest so the loan is not treated as a below-market loan, which could trigger taxes. Here is another question you may have: What’s the tax vulnerability? Gift taxes are the issue here.  If there is no promissory note and the IRS …

An Indicator of Mortgage Rates Spiked Last Week. What does that Mean for You?

13th Jan 2021 Uncategorized

A sudden movement in the bond market this week could predict rising mortgage interest rates ahead, financial experts say. For the first time since March of last year, U.S. 10-year Treasury bonds hit 1%. This change comes on the heels of Georgia’s two runoff elections concluding this week, in which Democrats won control of the U.S. Senate. The increase to 1.08%, up from 0.93% at the beginning of the week, was driven by investors’ expectations that when Democrats take control of both houses of congress — and the White House — there will be more stimulus spending in an effort to boost the struggling economy. The bond market did exactly what it should do. The prospect of more disaster relief combined with increased distribution of COVID-19 vaccines will continue to push bond rates higher if the economy rebounds. Historically, 10-year Treasury rates and mortgage rates have moved in tandem. So normally, we’d expect to see mortgage rates climb, but so far the increase has been minimal. And sustained rate growth is still dependent on a variety of factors outside of investor optimism on the potential for government aid. Here’s what this could mean for the housing market. What Are the Short-Term Implications for Mortgage Rates? This week, 30-year fixed rates hit another record low of 2.65%, according to the latest data released by Freddie Mac. But don’t read too much into that. “Bond yields have only moved up in the last two days, and Freddie’s survey looks over the last week,” says Greg McBride, chief financial analyst at Bankrate. While mortgage rates aren’t poised to skyrocket, there’s no guarantee rates will remain at an all-time low. This uncertainty is due to the spread between 10-year U.S. Treasury bonds and 30-year mortgage rates during the pandemic, which have been higher than …

10 outrageous 2021 predictions for the mortgage industry

30th Dec 2020 Uncategorized

If a year ago at this time, everyone looked into their personal crystal balls and predicted mortgage originators would have their best year ever in the midst of a pandemic, odds are that would have been considered too outrageous. For 2021, National Mortgage News reached out to people in the mortgage and ancillary businesses for their (more or less) outrageous predictions on what could happen. Several of our pundits’ short takes on the market are diametrically opposed! Pop goes the bubble Banks realize that real estate is in an artificial bubble and rates are artificially low. They realize that values are likely to go down from here and they’re going to be saddled with fixed rate mortgages that are upside down and [will] crush their balance sheets. They pull back on lending and increase standards to what they used to be: 20% down, only top credit with financial reserves and clawback provisions. This is what it always should have been. Mortgage loans will shift to a digital currency Twenty-five percent of all mortgages (mainly in cities like Austin, San Francisco and Denver) will be made in Bitcoin (BTC). The mortgage will be ‘tokenized’ on a blockchain. Tranches of a loan will be sold as BTC addresses, packaged together on the secondary market, linked to a BTC Exchange Trade Fund. Lenders change the way they assess borrowers because of the coronavirus. “The loan underwriting process will drastically change to include ‘health points’ like, ‘you have got the vaccine, you are in good physical and mental health, more points to you;’ the rationale is as you will be alive, you will keep a job and pay back the loan. And social media could affect underwriting as well. “Facebook will use all of your data and serve up preapproved loans for homes. It …

CFPB Finalizes Qualified Mortgage Changes

21st Dec 2020 Uncategorized

The Consumer Financial Protection Bureau (Bureau or CFPB) issued two final rules on December 10 with significant implications for the mortgage marketplace. Of the two final rules from the Bureau, one drastically simplifies the definition of a “qualified mortgage,” or “QM,” and the other provides an alternative pathway to QM safe harbor status for certain seasoned mortgage loans, which together may encourage innovation in the mortgage market and potentially help to bring certainty to secondary market participants. Despite their technical-sounding features, these two rules together will affect a huge portion of mortgage originations in the United States and have the potential to offer meaningful regulatory relief for mortgage originators and securiti zation participants—so long as the rules go into effect as written, are upheld, and/or not revised or rescinded by the incoming administration. We previously reported on the Bureau’s proposals that were issued earlier this year with respect to these rulemakings: CFPB Proposes Substantial Amendments to Qualified Mortgage Definition, Addresses GSE Patch and CFPB Proposes New ‘Seasoned’ Qualified Mortgage Category. General QM Final Rule The Bureau’s first final rule, the General QM Final Rule, replaces the current requirement for general QM loans that the consumer’s debt-to-income ratio (DTI) not exceed 43% with a limit based on the loan’s pricing (General QM loans). In adopting a price-based approach to replace the specific DTI limit for General QM loans, the Bureau determined that a loan’s price is “a strong indicator of a consumer’s ability to repay and is a more holistic and flexible measure of a consumer’s ability to repay than DTI alone.” Additionally, the rule reflects the Bureau’s decision that conditioning QM status on a specific DTI limit could impair access to responsible, affordable credit. Under the General QM Final Rule, a loan receives a conclusive presumption that the consumer has …

10 Things to Do Now if You Plan to Buy a House Next Year

08th Dec 2020 Uncategorized

One Step at A Time Purchasing a home is exciting, but there are a lot of people and moving parts involved in the decision. Mortgage applications, real estate agents, movers, and more—it is a lot to handle all at once. You can reduce the stress of the process by getting prepared well ahead. Do your research, figure out your budget, find a lender, and get a real estate professional on your side, and before you know it, you’ll be jangling the keys to your new home sweet home. Check Your Credit The first thing a mortgage lender will do is check your credit, so before that process begins, you need to review your reports and make sure they’re accurate. Obtain a credit report from all three bureaus (Equifax, Experian, and TransUnion) at least 12 months prior to applying for a mortgage. This will give you time to make any necessary adjustments and improve your score, if needed. Put Together Your Budget Before you start shopping for a house, you need to know what you can afford. You can start by calculating your DTI (debt-to-income ratio), which is one of many metrics that lenders use to evaluate borrowers. But for yourself, be sure to do your homework on the local taxes, utility costs, and other expenditures you can expect to pay as a homeowner. Factor those monthly costs into your personal budget, because those expenses can vary greatly depending on where you buy. Get Preapproved Getting preapproved for a loan can make the shopping and purchase process go more smoothly. When you’re preapproved, you know exactly what is within your means and can narrow down neighborhoods accordingly. As well, having a preapproval letter lets sellers know you are serious and puts you a step ahead of other buyers, which could make …

2021 predictions for mortgage lending

01st Dec 2020 Uncategorized

As lenders look ahead to a new year and a new administration, they offer some insights into what lies ahead for non-bank lenders and servicers. Fannie Mae predicts 30-year FMR will stay between 2.8% and 2.9% through 2022 Fannie Mae predicts avg rates for the 30-year fixed loan will remain at 2.8% through 2021 and only rise to 2.9% for 2022.The GSE’s November forecast calls for $4.12 trillion in mortgage origination this year, up from $4.08 trillion in the October outlook. For 2021, the latest projections call for $2.72 trillion in volume, up from the $2.62 trillion that Fannie Mae Chief Economist Doug Duncan last predicted. Total home sales will increase 5.7% this year over 2019, to 6.37 million units on a seasonally adjusted annual rate basis, Fannie Mae said. That will be driven by a 21.5% increase in new-home sales. Existing-home sales will be up 3.6% on a year-over-year basis. While total home sales are expected to increase by 0.8% next year, new-home sales will be up by 6.2% while existing-home sales should remain flat in Fannie Mae’s forecast. The MBA, however, projects rates will rise to 3.3% in 2021 and to 3.6% in 2022 The MBA is more conservative than Fannie Mae, predicting the 30-year FRM will go from 2.9% in the current quarter to 3.3% one year from now and to 3.6% by the end of 2022. However, the MBA’s chief economist, Mike Fratantoni, recently said he expects rates to go even higher if both Senate seats in Georgia flip to the Democrats after January’s runoff election.In November, Fratantoni raised his projections for 2020 to $3.39 trillion from October’s $3.18 trillion. Next year, he projects $2.56 trillion, compared with $2.49 trillion one month prior. The forecasts for 2022 and 2023 were also raised to $2.2 trillion and …