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What Is A Loan Pre-Approval, and Why You Should Get One?

by Team Ulster

 

Few people can buy a home for cash. According to the National Association of REALTORS® (NAR), nearly nine out of 10 buyers finance their purchase, which means that virtually all buyers -- especially first-time purchasers -- required a loan.

The real issue with real estate financing is not getting a loan (virtually anyone willing to pay lofty interest rates can find a mortgage). Instead, the idea is to get the loan that's right for you -- the mortgage with the lowest cost and best terms.

REALTORS® routinely suggest that consumers start the mortgage process well before bidding on a home. Many lenders (the sources of money) and programs, for example, are available right here in the finance section of Realtor.com as well as through recommendations from local REALTORS®. By meeting with lenders -- either online or face to face -- and looking at loan options, you will find which programs best meet your needs and how much you can afford.

REALTORS® also recommend pre approvals for another reason: Purchase forms often require buyers to apply for financing within a given time period, in many cases, seven to 10 days. By meeting with loan officers in advance and identifying mortgage programs, it won't be necessary to quickly find a lender, check credit, and rush into a financing decision that may not be the best option.

"Pre-approval" means you have met with a loan officer, your credit files have been reviewed and the loan officer believes you can readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will provide a pre approval letter, which shows your borrowing power. You can visit as many lenders as you like and get several pre-approvals, but keep in mind that each one carries with it a new credit check, which will show up on future credit reports.

Although not a final loan commitment, the pre approval letter can be shown to listing brokers when bidding on a home. It demonstrates your financial strength and shows that you have the ability to go through with a purchase. This information is important to owners since they do not want to accept an offer that is likely to fail because financing cannot be obtained.

How do you get pre-approval?  Real estate financing is available from numerous sources, including lenders here in the finance section of Realtor.com, mortgage companies that have worked with local REALTORS® and in some cases, individual REALTORS® themselves. Based on his or her experience, the REALTOR® may suggest one or more lenders with a history of offering competitive programs and delivering promised rates and terms.

The loan officer will carefully review your financial situation, including your credit report and other information. The lender will then suggest programs which most-closely meet your needs. For instance, a first-time buyer may qualify for state-backed mortgage programs with little money down and low interest rates, while a repeat purchaser (someone who has bought a home before) with more equity (money invested in the home) might want to get a 15-year loan and the lower overall interest costs it represents. Typically, first-time buyers opt for the traditional 30-year loan, with either a floating interest rate or a fixed rate of interest over the life of the loan.

What Can You Deduct When You Own a Home?

by Team Ulster


For tax purposes, deductions for residential real estate held for personal use generally fall into two main categories:

1. Costs that can be deducted as expenses from a buyer’s or seller’s personal income on a tax return

2. Costs that can be used to alter the basis of the home, with the idea of lowering the capital gains

Note that a second, or vacation, home generally qualifies for all of the same deductions as a principal residence provided that it isn't rented for a significant portion of the year.

Buyers may deduct the following items associated with buying a home as expenses on their personal income tax in the year that they buy the home.

Points—including loan origination fees and loan discounts, provided that the home is your principal residence, the amount is clearly stated on the settlement statement, and the purchase meets the nine criteria for deducting points established by the IRS. (See www.irs.gov/prod/forms_pubs/pubs/p53001.htm for details on these criteria.)

If the buyer doesn't satisfy all of these criteria, points must be prorated and deducted over the life of the mortgage.

Buyers may add the following costs associated with a purchase to the basis of their home. These additions will increase the basis and serve to lower the capital gains liability when the home is eventually sold:

1. Transfer or stamp taxes and recording fees, if paid by the buyer.

2. Title abstracts.

3. Title insurance.

4. Attorney’s fees for preparing their documents for closing.

Buyers cannot deduct as expenses on their income tax or add to the cost basis of the home:

1. Fees for an appraisal required by the lender.

2. Rent paid to occupy the home before closing.

3. Cost of credit reports.

4. Loan assumption fees.


During the period of homeownership, owners of single-family homes, condominiums, coops, and other types of property occupied as a principal residence may deduct the following items as expenses each year on their income tax returns:

1. Interest paid on a mortgage loan(s) of $1 million or less taken out to buy, build, or improve a home. If the loan amounts you owe on your first and second home together exceed $1 million, not all interest is deductible. Note that married couples filing separately may each deduct interest on a total mortgage debt of $500,000.

2. Late payment charges on mortgage payments

3. Real estate taxes paid on the home in the year they are paid

Homeowners may not deduct:

1. Homeowners association dues or assessments.

2. Premiums for fire or homeowners' insurance. (Note that this is often included in the monthly house payment.)


At the time of the sale, the sellers may deduct the following expenses from their income taxes:

1. Any reserved real estate taxes credited to the buyer at closing. However, these deductions can't be taken until the year that the property taxes are actually paid to the taxing body.

2. Any mortgage interest paid for the portion of the year that the house was owned.

3. Any remaining, undeducted points for the satisfied mortgage.


In calculating the capital gains resulting from a sale, the sellers may add the costs following items to their existing basis:

1. Transfer or stamp taxes and recording fees, if paid by the seller.

2. Recording fees, if paid by the seller.

3. Attorney’s fees for preparing their documents for closing.

4. Real estate commissions paid to a broker and sales associates.

5. Money spent to repair the house prior to sale, if spent within 90 days of the sale.

 

Photographing Properties for Sale in Ulster County, Part II

by Team Ulster

In my first article in this series, Photographing Properties for Sale in Ulster County, I discussed what we (team ulster) photograph when we are preparing to list a real estate property for sale in Ulster County.  In this second article, I will discuss the procedure we follow to make the photographs look their best.

When we come back from shooting the photographs of a property that we are about to list on the Ulster County Multiple Listing Service, we first download the photographs from our camera to a folder on our computer.  We then open up our photo-editing software, and import those photographs into this program.  (To find a photo-editing program, go to Google, and type in “photo editing software“.  Google offers a very good free program called Picasa.)

Within the photo-editing program, we may do a number of things so that our photographs present the property in the best light [pun intended].  We might straighten, crop, lighten, darken, or brighten the photographs, so that the photographs show the property the way we actually saw it.  We are “fixing" the photographs because we may not have had proper lighting, or we did not hold the camera straight, or we forgot to use the flash, etc.

Occasionally we will retouch the photograph to hide an unsightly item that we forgot to move before we took the photograph.  We never retouch a photograph to hide something that is permanently there, such as a power line or telephone pole, because that would be unethical.  But if we forgot to remove that red rubber ball or that ugly garbage can before we took the photograph, we will now try to retouch it out of the photograph.  From our experience, retouching is difficult to do because the picture often looks worse with the “offensive” item retouched out of the photograph, than when that item was in the photograph.  So, we often forgo retouching, and just curse ourselves for not having seen that offensive item before we took the photograph.

We do not edit every photograph that we took, just those that we might want to use.  Once we have finished editing, than we export the edited photographs to a new folder. At this point, we pick the photographs that we will put on our Multiple Listing Service, our team website (www.UlsterCountyHouses.com), and on the slide show or property website that we will set up just for this property. 

We are now ready to use our edited photographs to prepare a virtual tour, but I will cover that procedure in my next article.

Displaying blog entries 1-3 of 3

Contact Information

Photo of Laurel Sweeney Real Estate
Laurel Sweeney
Berkshire Hathaway HomeServices Nutshell Realty
1209 State Route 213, PO Box 452
High Falls NY 12440
Office: 845-687-2200
Toll Free 877-468-5783
Fax: 845-687-4162

© 2016 BHH Affiliates, LLC. An independently owned and operated franchisee of BHH Affiliates, LLC. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc.®.  Equal Housing Opportunity.