The new tax law that was signed into effect at the end of 2017 will affect all taxpayers. Homeowners should familiarize themselves with the areas that could affect them which may require some planning to maximize the benefits.
Some of the things that will affect most homeowners are the following:
- Reduces the limit on deductible mortgage debt to $750,000 for loans made after 12/14/17. Existing loans of up to $1 million are grandfathered and are not subject to the new $750,000 cap.
- Homeowners may refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount of the existing mortgage being refinanced.
- Repeals the deduction for interest on home equity debt through 12/31/25 unless the proceeds are used to substantially improve the residence.
- The standard deduction is now $12,000 for single individuals and $24,000 for joint returns. It is estimated that over 90% of taxpayers will elect to take the standard deduction.
- Property taxes and other state and local taxes are limited to $10,000 as itemized deductions.
- Moving expenses are repealed except for members of the Armed Forces.
- Casualty losses are only allowed provided the loss is attributable to a presidentially-declared disaster.
The capital gains exclusion applying to principal residences remains unchanged. Single taxpayers are entitled to $250,000 and married taxpayers filing jointly up to $500,000 of capital gain for homes that they owned and occupied as principal residences for two out of the previous five years.
Not addressed in the new tax law, the Mortgage Forgiveness Relief Act of 2007 expired on 12/31/16. This temporary law limited exclusion of income for discharged home mortgage debt for principal homeowners who went through foreclosure, short sale or other mortgage forgiveness. Debt forgiven is considered income and even though the taxpayer may not be obligated for the debt, they would have to recognize the forgiven debt as income.
These changes could affect a taxpayers’ position and should be discussed with their tax advisor.
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’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.
REIN has received numerous calls recently asking for clear definition of what constitutes a bedroom. Here are the basics…The current Virginia Uniform Statewide Building Code states that a bedroom must have the following:
- An area of at least 70 square feet. If more than
- one person occupies the room, there must be 50 square feet per occupant.
- Ceiling heights must be no less than 7 feet.
- Two egress points, one of which leads directly outside. The emergency exit (whether a window or door) must have a minimum area of 5.7 sq.ft., or be big enough for a firefighter or other rescue personnel in full gear to be able to carry you to safety. Only exception: if the room is at grade level, the minimum size may be 5 sq.ft.. Emergency exits may measure no more than 44 inches from the floor to the bottom sill.
- In order to be considered a legal bedroom, the room cannot be the only means of acc
ess or egress to other bedrooms or habitable spaces.
- Ventilation for cooling (i.e. a window or A/C), and a heat source. Portable heaters do not count as an adequate heat source.
- Contrary to popular belief, Virginia does not require a closet in a room to call it a bedroom.
The requirements listed above are mandated by the Commonwealth of Virginia. However, each City and County within the state may have their own requirements, on top of the state’s. So what is allowed as a bedroom in Virginia Beach may differ from what is allowed in Newport News. It is recommended that you check with the local zoning authority of the home in question for a complete definition.
Businesses must treat customers fairly if they expect to do business with them again or get recommendations to their friends. Customers of stores like Nordstrom’s understand that a salesperson is an employee and represents the company.
The line becomes less clear in some industries, especially ones that involve real estate. Agency is a legal relationship authorizing a person to act for or in the place of another. It involves responsibilities that exceed treating a person fairly.
The duties a buyer or seller can expect to receive from a real estate salesperson or broker include but are not limited to honesty, accountability, full disclosure, representation and reasonable skill and care. Buyers and sellers might additionally expect representation, obedience, loyalty and confidentiality. State laws can differ on specific duties.
Mortgage and title officers are limited in their duties to the buyer to honesty and accountability and specific requirements under the federal Real Estate Settlement and Procedures Act.
A special relationship with a real estate agent makes it advantageous to have them coordinate efforts with the other professionals in the home buying process. Since most buyers’ and sellers’ transactions are infrequent, the agent can bring valuable experience to the transaction.
Every buyer and seller should discuss the level of service they expect from the real estate professional they work with. Another good question is what happens if the purchase and sale are within the same company.
59% of non-owners are not comfortable taking on a mortgage with their student debt according to the Aspiring Home Buyers 2017 survey. It is estimated that the college graduates have an average of $37,172 in student debt.
Fannie Mae, who has loan programs with as little as three to five percent down payments, has announced changes to how student loan debt is treated that could make the difference in qualifying for a mortgage.
For the 5 million borrowers who participate in the reduced payment plans, actual payments are considered for calculating debt-to-income ratio rather than maximum payment amount.
Non-mortgage debts paid by another party for at least 12 months won’t be included in calculating debt-to-income ratio. For example, payments being made on a student loan by the parents would not be counted against the DTI ratio for the student.
These changes can make it possible for would-be buyers with student debt to get a home now instead of waiting for years. Being pre-approved by a trusted mortgage professional is the best way to confirm that these changes apply to your situation. Call today for a recommendation of a trusted mortgage professional.