PAM DENT

Jump into Greener Pastures


434-960-0161
[email protected]

Your Charlottesville Home and the Property Tax Deduction

Your Charlottesville Home and the Property Tax Deduction

Important Information to Verify with Your Lender

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If you have a mortgage with an escrow account to pay your property taxes and insurance for your Charlottesville home or Charlottesville horse farm, you expect the company servicing your loan to pay this year’s taxes during this year so that you can deduct them on your 2014 income tax return.  After all, your monthly payment includes 1/12 the annual amount so there will be money available for them to be paid on time.

IRS requires that expenses must actually be paid in the year that a deduction is to be taken.

The predicament occurs when you’ve made your payments but the mortgage company didn’t pay the taxing authority in the tax year they were due.  If they paid your 2014 taxes in January of 2015, they wouldn’t be deductible for you until you file your 2015 income tax return.

 

Verify with your lender after you make the December payment that they did indeed pay your property taxes.  The question for your lender’s customer service is: “Have you or will you pay the 2014 property taxes this year so I’m eligible to deduct them on my 2014 income tax return?” 

Charlottesville Homes For Sale – How Do Interest Rates Affect Price?

Charlottesville Homes For Sale | How Do Interest Rates Affect Price?

Buyers and sellers alike have been keeping a close eye on interest rates.  Rates are still low by historic standards, but the reality is that they are slowly creeping up and many experts predict that they will  be up one to one and a half percent  by the end of the year.  What does this really mean to you if you are considering purchasing a home?

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A ½% increase in interest rate may not sound like much but it is roughly equivalent to a 5% increase in price.  It becomes obvious when you compare the payments.

If you financed 100% of the cost of a $250,000 home at 4.5% interest for 30 years, the payment would be $1,266.71 per month.  If the mortgage rate went up to 5%, the payment would be $1,342.05.  If the home increased 5% in value, the $262,250 loan at the lower 4.5% rate would have payments of $1,330.05.

The two payments are close enough to justify the statement that a ½% change in interest is approximately equal to 5% change in price.

Each time interest rates go up, fewer people can qualify to buy a seller’s home.  The mortgage rules that went into effect this year require buyers to meet specific payment to income ratios.  As demand picks up for the seasonal market, most experts expect rates to increase.

Buyers will be doubly challenged in the current market because prices are rising (NAR reports 11% last year) along with the anticipated mortgage rates.  Buyers who wait will inevitably be paying more to live in the same home had they acted sooner.

 

Check out on how Interest Affects Price for a home in your price range. 

If you have a Charlottesville home for sale, the increase in interest rates will also affect you.  It may mean that you will have a smaller pool of buyers who can qualify to purchase your home.  Also many sellers are waiting for prices to rise before putting their home on the market.  But the reality may be that a rise in home prices in tandom with rising interest rates will price many buyers out of the market.

If you are considering buying or selling a Charlottesville home, it may be a good strategy to to act now, if you are able to, rather than waiting for later in the year.

 

FHA & VA Assumptions

Not many buyers have assumed a mortgage in the past 25 years. Most people think it was because FHA and VA in the late 80’s began to require that buyers qualify for the assumptions. Not having to qualify for a mortgage would certainly benefit certain buyers.

If a homeowner must qualify for an assumption like a new loan, they’ll generally choose the mortgage with the lower interest rate.  Over the past 25 years, rates have been trending down but it appears that rates have bottomed out and will gradually increase.   As they continue to rise, the lower rates on the FHA and VA loans created in the last few years will appeal to buyers even if they do have to qualify for the assumption.

There are significant advantages to assuming one of these government insured mortgages if the current interest rate on a new loan is higher:

1. Mortgage is further into amortization schedule
2. Lower interest rate loans amortize faster than higher interest rate loans
3. Lower closing costs than a new mortgage
4. Easier to qualify than on a new mortgage
5. No appraisal required

FHA assumptions are only allowed as owner-occupied residents. The borrower must meet current FHA guidelines for borrowers. The total debt ratio including house payment to be assumed cannot exceed 41% of borrowers’ monthly gross income.
VA loans are also assumable with buyer qualification. However, in order for the veteran Seller to have their eligibility reinstated, the buyer must also be a veteran with eligibility.

A 1% difference in the current rates and a lower assumable mortgage rate begins to make it very attractive to assume a mortgage. When the differential becomes even greater, assumptions will become more prevalent than they’ve been in over twenty years.

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Should I Take Advantage Of The Lower Interest Rates And Buy A New Home?

Pink house This week we have been hearing the buzz in the news about the government plan to bring interest rates down to 4.5% in order to prompt home buying and ease the housing crisis.  Does this mean that you should take advantage of the new rates and buy that new home?  The Wall Street Journal discusses the pros and cons of buying a new home with the lower rates.

While the drop in interest rates will translate to a major reduction in your monthly mortgage payment, it may not make sense for you at this time to use this reduction to buy up into a larger home.  Homeowners need to be careful that they do not use the rate reduction as an excuse to buy more home than they can actually afford.  Instead it may be smarter to downsize into a more affordable home with lower payments, particularly if you are unsure about your job security.

The Central Virginia real estate market offers many opportunities to downsize and take advantage of the lowering interest rates.  In addition to lower payments a smaller home will also offer reduced energy and maintenence costs.  If you would like to explore how this option might work for you,  give me a call and we can look together at what Charlottesville area homes are available that could suit your needs and lower your expenses at the same time. 

A Thanksgiving Gift From Fannie and Freddie

Fannie Mae and Freddie Mac have given overextended borrowers a Thanksgiving present.  The mortgage giants have temporarily suspended foreclosures through January of 2009.  They have directed their loan servicing organizations and attorneys to suspend foreclosure sales and evictions on occupied single family homes.  This has been implemented as support of the modification program which was announced on November 11 and is due to begin on December 15.

Inman News has published an article going into more detail on these new developments.  According to the article "Fannie’s streamlined modification program is aimed at the highest risk borrower who has missed three payments or more, owns and occupies the primary residence, and has not filed for bankruptcy. The program creates a fast-track method for getting troubled borrowers into an affordable monthly payment through a mix of reducing the mortgage interest rate, extending the life of the loan or even deferring payments on part of the principal. Servicers have flexibility in the approach, but the objective is to create a more affordable payment for borrowers at risk of foreclosure."

This new development should offer a chance for many borrowers to keep their homes and avoid foreclosure.  According to Inman Freddie Mac expects to approve workouts on 84,000 or an estimated 140,000 who are delinquent on Freddie Mac owned mortgages.

To read the article click here.

Shopping For A Mortgage – What You Need To Know About The Good Faith Estimate

When you are starting your home home buying experience, your REALTOR will be speaking about prequalification, preapproval and loan approval.  You will be encouraged to speak with a mortgage professional to make sure that you will be able to obtain a loan and also to find out an estimate of the amount of the loan that you will qualify for.  This is a crucial step in determining how much home you will be able to afford.  It is heartbreaking to find your dream home only to learn that it is outside of your budget. 

I always recommend to my clients that they speak with several different lenders; since different companies will offer different programs.  It is important to find not only the best loan for your needs and budget, but also the mortgage officer that you are comfortable with.  But when you have obtained your good faith estimates from several lenders, how do you compare them?  Jeff Belonger – Infinity Home Mortgage Company has written an excellent post clearly explaining the basics of the good faith estimate.

If you have any questions about buying or selling a Charlottesville home, or the Charlottesville, Virginia real estate market give me a call; I am always happy to speak with you.

Contact

Pam Dent

, e-PRO, SRES, NHD, REALTOR®, Real Estate III, Charlottesville, Virginia at 434 960-0161, [email protected], to list your property for sale or to buy a property in the following areas in Central Virginia: Charlottesville, Albemarle County, Keswick, Glenmore, Ivy, Crozet, Earlysville, Free Union, Cismont, Scottsville, Fluvanna County, Troy, Palmyra, Lake Monticello, Louisa County, Louisa, Mineral, Spring Creek, Orange County, Gordonsville, Orange, Barboursville, Greene County, Ruckersville.

To view all of the Charlottesville, Virginia and Central Virginia Homes for Sale click here and click on the mls search button.

Visit my website Jump into Greener Pastures or read my blogs Charlottesville Real Estate Talk and Charlottesville Horse Farms and Country Homes.

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Contact Pam

Pam Dent
Phone: (434) 960-0161
Email: [email protected]
Gayle Harvey Real Estate Inc.
154 Hansen Rd. suite 102B
Charlottesville, VA 22911


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