Since you're at home anyway and may even have kids at home who need something to do, now is a great time to get a current home inventory done.  One of the easiest ways to accomplish this seemingly, daunting task is to put together a collection of pictures of every room in your home.    

The more valuable, the more important it is to take a close-up picture.  It will be necessary to open the drawers and closets and, in some cases, to pull things out in order to show everything in the picture.  That's why having someone to help you makes it faster and easier.

Not to get distracted from the job at hand, you may discover things that you had forgotten you had which is why you should do an inventory rather than trying to reconstruct it after the loss.  In some cases, it may be years after you've filed a claim when you remember you forgot some things.

Having photos or videos of the different rooms in your house combined with a list of the items can serve as the proof you need for your claim.

There are other benefits to doing a home inventory also.  You'll know the "right" amount of insurance to have on your personal belongings by assigning replacement costs to them.  It will simplify filing a claim if you ever need to. 

To organize your photos and even provide a detailed list of higher value items, you can download a Home Inventory in an interactive PDF that you can complete.  You can put it together on your computer and store it online to make it available if the computer is stolen or damaged.

The American bank robber, Willie Sutton, was asked why he robbed banks and his answer was "because that is where the money is."  During his 40-year career, he stole about $2 million but Internet scammers are stealing many times that amount in phishing schemes preying on unsuspecting home buyers.

These crooks know where the money is because buyers have the down payment and closing costs and are expecting to transfer it to the close the sale of their home.  The FBI, in their 2018 Internet Crime Report, stated victims lost over $149 million and the CFPB estimates the losses at over $1 billion as a result of fraud in real estate transactions.    The scammers want to take advantage of the situation while it is still in the buyer's account.

Commonly, during the closing process, scammers will send spoofed emails to homebuyers from someone they expect to hear from regarding the transaction like the real estate agent or the settlement agent.  They will include false instructions for the closing funds.

Following these suggestions can help to protect you and possibly, avoid scams:

• Call before you click to verify the wiring instructions to transfer funds.  DO NOT use the phone number or email in the email request.  Use a trusted source, preferably, in person, of contact information.
• Confirm everything independently with your real estate agent and closing officer.   Confirm the actual instructions with the bank before transferring money.
• Verify immediately, within four to eight hours, with the title company and real estate agent that the money was received.  If it has not been received, notify the bank immediately to determine if it can be cancelled.

If you believe you have been the victim of a phishing scheme, call your bank immediately and ask them to issue a recall notice on the money transfer.  File a complaint with the FBI at www.IC3.gov and report it to your local FBI office.

The Consumer Financial Protection Bureau has released two documents in an effort to inform consumers about wire fraud scams that commonly occur during closings: Mortgage Closing Checklist and Mortgage Closing Scams.

This is for information purposes only and should not be considered legal advice.

While you're isolating at home, there are things you can do to help buy a home now or in the near future.  Instead of spending time surfing the Internet looking at homes, do the groundwork necessary to be able to purchase the home that you find.

• There is a lot of documentation necessary to qualify for a mortgage and to be approved.  This part of the homebuying process can be done in advance, long before you even start looking at homes much less finding the one that you want.
  • Assemble all documents to make a pre-approval
  • Photo ID
  • Two months current pay stubs
  • Last two years' W2s
  • Complete copies of checking and savings statements for last three months
  • Copies of statements for IRAs, 401k, savings, CDs, money market funds, etc.
  • Employment history for last two years with addresses and contacts
  • Proof of commissioned or bonus income
  • Residency history for last two years with addresses and contacts
  • Assets for down payment, closing costs, and reserves; must provide paper trail
  • If self-employed, last two years tax returns, current profit and loss statement and balance sheet; copy of partnership/corporate tax returns for last two years if owning more than 25% of company
  • FHA requires driver's license and social security card
  • VA requires original certificate of eligibility and DD214
  • Other things may be required such as previous bankruptcy, divorce decree
• Get pre-approved giving you the confidence
  • Determining the amount you can borrow - decreases as interest rates rise
  • Looking at "Right" homes - price, size, amenities, location
  • Finding the best loan - rate, term, type
  • Uncovering issues early - time to cure possible problems
  • Creating bargaining power - price, terms, & timing
  • Being able to close quicker - verifications have been made
• If using a gift as a down payment, construct your gift letter
  • The donor's relationship to borrower
  • State the dollar amount is a gift and not a loan
  • State that no repayment is required
  • Signed and dated by the donor and borrower
  • Include all contact information
• Build your homebuying team
  • REALTOR® - this person will coordinate the efforts of the other team members to make the transaction move smoothly, without unnecessary delays to close on time.
  • Lender* ... consider a trusted professional you can meet with face-to-face
  • Title company* ... guaranteeing the title and closing on time is important
  • Inspector* ... more than a flashlight and a clipboard

*Your agent can recommend these professionals based on their experience and having worked with them in the purchase and sales of other homes.  This can keep you from getting hooked-up with someone that may not be familiar with the type of home, area, or loans that you might be considering.

Additional information about the buying process and things that you can be doing while you're waiting to look at homes can be found in the Buyers Guide.

During these unsettling times, sellers and buyers are concerned about staying healthy and virus-free as we all are.  To keep all parties safe, new procedures should be considered regarding the procedure for showing houses.

Agents are reporting that they are selling homes where the buyers have not physically been in the home and base their decision on the virtual tour found online.  Some states have suspended showings because they are not considered essential services and other states have not addressed the subject.

In the spirit of stepping up to do what is necessary, the following suggestions should be considered:

• Buyers should view the pictures online first to see if the home meets their needs.  Most listing agents upload enough pictures to get a good idea of what a home looks like.
• Buyers should ask their agent questions that the photos don't address.  Then, their agent can go through the listing agent to ask the seller direct.
• It may be possible for the agent or owner to do a Facetime walk-through which would allow the buyers to ask questions and direct the agent or owner where to point the camera.
• When possible, buyers can make an appointment to see the home through their agent.  They should meet the agent at the home in their own car.  No children should attend showings.
• Recommended safe distances will be maintained between the owners and listing agent, if present, the buyers and their agent.
• Transfer is almost inevitable, and all precautions should be taken.  Buyers should carry their own sanitizing wipes and or gloves and avoid unnecessarily touching surfaces.  Allow their agent to open doors and cabinets.
• They should be disposed of in a trash bag in their car after they exit the home.

The social distancing and isolation could present some buying opportunities due to a lack of competition.  At the same time, the lack of inventory in many markets could keep prices high.  Overall, home prices nationwide are stable and, in many cases, continuing to rise which makes it a far less volatile alternative to investing in the stock market.   

With mortgage rates being at historic lows, there will probably never be a cheaper time to finance a home. 

Thank you again for looking at our listings and let us know if we can help you in anyway.

Please stay safe; wash your hands; practice social distancing and follow all the guidelines necessary to promote good health. We're all in this together!

A lower rate will not only result in a lower payment, it will amortize the loan quicker.  A $250,000 mortgage at 4.5% for 30 years will have a $1,266.71 principal and interest payment.  At 4%, the same loan will have $1,193.54 payment saving $73.18 a month and the unpaid balance would be $1,776 lower at the end of five years.

Mortgage lenders tend to price their mortgages based on the credit score of the borrower.  The higher the credit score, the lower the mortgage rate.  There is an inverse relationship that the lower the credit score, the higher risk and therefore, a higher rate is needed to balance the risk.

In order to get a valid rate that will be available to you with your credit score, you need to be pre-approved. The process of making a loan application before you find a home, allows the lender to verify your credit, income, and ability to repay the loan.  Lenders usually only charge the cost of the credit report for this type of service.  Be aware that pre-approval is not the same thing as pre-qualification which is simply a loan officer's opinion.

When you shop for a mortgage with multiple lenders, the credit bureaus count them as a single credit inquiry if they are done within a two-week period. On the other hand, restrain yourself from applying for other credit such as cars, furniture or credit cards until after you have closed on the purchase of your home because those inquiries can negatively affect your credit score.

The Consumer Financial Protection Bureau recommends that you let lenders know that you are shopping the mortgage for the best rate and fees.

Instead of going to the Internet and Googling mortgage lenders, start with recommendations for a lender from your real estate professional.  They see the good, the bad and the ugly and can save you a lot of time.  Another reliable source would be from a friend who has recently purchased a home.

There are lenders who bait unsuspecting borrowers with lower rates and fees into making an application and after critical time has lapsed, try to switch them to a different program.  By that point, many buyers feel they don't have any choice but to accept what is offered.

Another confusing factor is the way that loans are priced to the public.  They are usually quoted at a rate with a certain amount of points.  A point is one percent of the amount borrowed.  An example would be a quote for a loan at 4.5% with 1 point or at 4% with 2.5 points.

The points combined with the rate affect the yield the lender will earn, and you will pay.  A simple way to make this an apple to apple comparison is to have the lender quote the loan as a "par-value" loan with no points involved.  Then, the lowest rate will produce the lowest cost to you.

Another way to compare loans will be to uses a financial app called Will Points Make a Difference.  You can plug in the rate and points to calculate the lowest yield over a projected holding period or the full term.

The lenders do not want to make it easy for you to compare.  Mortgage money is a commodity and shopping will be worth the effort. 

A well-planned garage or yard sale can give you extra space in your home, get rid of unused items and make some money but it needs some of the same considerations that any business needs to be successful. 

• Start early to research and plan
• Promotion is key
• Display items attractively
• Price items right
• Organize checkout

Determine the date of your sale, remembering that there are exceptions, but Saturdays are generally the best day.  Experienced garage-salers believe that a well-planned one-day event will do as well as a multi-day event.  Serious purchasers will look for the "new" sale and most people don't come back multiple days.

Recognize that the first day of the sale will have the most people.  Everyone will be looking for a bargain but some of them actually want to purchase things for them to resell at their own sales.

Advertise in local newspapers and free online classified sites like Craigslist.  If several families are going together for the sale, mention that in the ad; it will be a big draw.  Mention your bigger-ticket items like furniture, equipment and baby items.

Garage sale signs can be purchased or you could have them made at Office Depot or FedEx Office.  Signs need large lettering so they're easy to read without too many words on them.  Remember that people will be driving when they see them.  Most important info: Garage or Yard Sale, address, date and time.  Directional signs are also important along with balloons and streamers to attract attention.

Consider using the service Square so that you can take credit cards.  The cost is 2.6% + 10¢ per swipe and you can do it on your smartphone or iPad.  You'll need to sign up at least two weeks in advance to receive your reader.

You will be amazed at what sells and what doesn't.  If your goal is to get rid of some things regardless, put those items in the sale and at the end of the sale, donate what you can to Goodwill and the balance goes to the dump.  If you can't bear to do that, box them up and try again next year or possibly, at one of your neighbors' sales.

Other supplies you'll need will be:

• Labels and markers for pricing items.
• Newspaper and clean, grocery bags to wrap breakables.
• Tables to display the items.

Unless you're having an estate sale, keep your home locked.  You don't want people wandering through your home while you're outside.  If you start to accumulate a lot of money, take some of it inside.  Don't discuss how much money you've made during the sale or how successful it has been.

People will want to bargain; it's the nature of the game.  Consider this strategy: less negotiations early in the sale and possibly, more toward the end of the sale.

It is the way the property is used that determines the type of property it is, not what it looks like.  Based on the intent of the owner, the property could be a principal residence, income property, investment property or dealer property.

A principal residence is a home that a person lives in.  There can be only one declared principal residence.  It is afforded certain benefits like deducting the interest and property taxes on a taxpayers' itemized deductions, up to limits.  Up to $250,000 of gain for a single taxpayer and up to $500,000 for a married couple filing jointly can be excluded from income if the property is owned and used as a principal residence for two out of the previous five years.

An income property is an improved property that is rented for more than 12 months.  The improvements can be depreciated based on a 27.5-year life for residential property or 39-years for commercial property.  This is a non-cash deduction that shelters income.  When the property is sold, the cost recovery is recaptured at a 25% tax rate.

An investment property could be an improved property or vacant land that does not produce income and is not eligible for depreciation or cost recovery.  The gain on both income and investment properties are taxed at a lower, long-term capital gain rate and are eligible for a tax deferred exchange.

Second homes are properties that a taxpayer primarily uses for personal enjoyment but is not their principal residence.  For IRS purposes, it is treated as an investment property in that the gain is taxed at preferential long-term rates if it is held for more than 12 months.   However, it is not eligible for exchanges because personal use properties are excluded from that benefit.

Properties that are built or bought to make a profit are considered inventory and are labeled dealer properties.  The gain is taxed at ordinary income rates and they are not eligible for section 1031 deferred exchanges.

The financing available differs considerably based on the intent of the owner which determines the type of property.  Owner-occupied homes, used as a principal residence, are eligible for low down payment mortgages like VA, FHA, USDA and conventional ranging from nothing down to 20%.

A second home, in most cases, requires a minimum of 10% down payment.  Investment and Income properties, generally, require 20% or more in down payment with some possible exceptions.  There is not any long-term financing available for dealer property.

The least amount in a down payment is an attractive option when people are thinking of buying a home.  A common reason is to have cash available for furnishing the new home and  possible unexpected expenses.

Some people don't have any options because they only have enough for a minimum down payment and the closing costs.  For those fortunate buyers who do have extra money available, let's look at why you'd want to do such a thing.

Most loans in excess of 80% loan to value require mortgage insurance to protect the lenders for the upper portion of the loan if the home were to go into foreclosure.  FHA requires an up-front premium of 1.75% of the amount borrowed plus a monthly amount of .85% on the balance.  FHA mortgage insurance premium must be paid for the life of the loan.

Mortgage insurance on conventional loans varies depending on the borrowers' credit and the amount of down payment being made.  Unlike FHA, when the unpaid balance reaches 78% of the original amount borrowed, the mortgage insurance is no longer needed.  If the home enjoys rapid appreciation, after a period, the lender may allow the borrower to get an appraisal to show that the unpaid balance is now less that 78% of the current appraised value.

The premium for mortgage insurance on conventional loans can be paid as a single premium upfront in cash or financed into the mortgage.  A second option would be monthly mortgage insurance included in the payment until it is no longer needed.  A third option could be lender-paid MI where the cost is included in the mortgage interest rate for the life of the loan.

VA loans do not require mortgage insurance but there is a one-time funding fee of 2.3% that can be paid in cash at closing or added to the amount borrowed.  Disabled veterans and Purple Heart recipients are not required to pay the funding fee.

Putting at least 20% down payment on a home not only will avoid the mortgage insurance, it could also help you to get a little lower interest rate.  Since the loan to value is lower, there is less risk for the lender.

A $350,000 with a 10% down payment at 4% interest could have a monthly mortgage insurance cost between $70 to $130.  A trusted mortgage professional can help you assess the options you have available.  It is always better to make some of these decisions before you start shopping for a home.

This is another reason it is good to start by getting pre-approved with a trusted mortgage professional.  If you need a recommendation, call me at  (859) 647-0700.

In today's market, the rates on home improvement loans could vary between 6% and 36%.  A borrower's credit score will determine the interest rate; the lower the score, the higher the rate and the higher the score, the lower the rate.

Smaller loan amounts are under $40,000 with larger loan amounts over $40,000 based on the extent of the improvements to be made.  With all things being equal, a larger loan may have a lower interest rate.

Besides the interest rate being higher than a regular mortgage, the term is shorter.  Similar to a car loan, the term can be between five and seven years.  A $50,000 home improvement loan for a borrower, with good but not great credit, could have a 12% interest rate for seven years.  That would make the monthly payment $882.64.

An alternative way to fund the improvements would be to do a cash out refinance.  These types of loans are collateralized by the home.  The current mortgage would be paid off with the new mortgage plus the amount for the improvements.  Lenders will usually require that the owner maintain a minimum of 20% equity in the home.

Assuming a homeowner owed $230,000 on the existing mortgage and wanted $50,000 for improvements.  The new loan amount would be $280,000 and the home would have to appraise for at least $350,000 for the homeowner to have a 20% equity remaining. 

Another thing that occurs on a refinance is that the standard term for mortgages is 30 years which means the owner would be financing the improvements for 30 years instead of a shorter term.  The advantage would be a smaller payment.

Let's say in this example, the owner originally borrowed $250,000 at 4.5% for 30 years with a payment of $1,266.71.  After 54 payments, the unpaid balance is $230,335.  If they did a cash out refinance at 4.5% for 30 years for the additional $50,000 and financed the estimated closing costs of $8,700, the new payment would be $1,464.50.

Using the home improvement loan, the combined payments would be $2,149.35 which would be $684.85 higher.  While the cash out refinance produces a lower payment, it adds $8,700 to the amount owed and stretches it out over a longer period.  Home improvement loans have lower closing costs than regular mortgage loans.

Another alternative loan is a HELOC or Home Equity Line of Credit which can be explored and compared to the two options mentioned above.  If a homeowner is going to finance improvements, a comparison of different types of loans and payments can be helpful in the decision-making process. 

A trusted mortgage professional is a valuable resource to assist you with current and accurate information.  If you need a recommendation, please call me at (859) 647-0700.

Reverse mortgage loans are like traditional mortgages that permits homeowners to borrow money using their home as collateral while retaining title to the property.  Reverse mortgage loans don't require monthly payments.

The loan is due and payable when the borrower no longer lives in the home or dies, whichever comes first.  Since no payments are made, interest and fees earned are added to the loan balance each month causing an increasing unpaid balance.  Homeowners are required to pay property taxes, insurance and maintain the home, as their principal residence, in good condition.

Reverse mortgages provide older Americans including Baby Boomers access to their home's equity. Borrowers can use their equity to renovate their homes, eliminate personal debt, pay medical expenses or supplement their income with reverse mortgage funds.

Homeowners are required to be 62 years and older and meet the following requirements:

• Own the home free and clear or owe very little on the current mortgage that can be paid off with the proceeds
• Live in the home as their primary residence
• Be current on all taxes, insurance, and association dues and all federal debt
• Prove they can keep up with the home's maintenance and repairs

Payouts are based on the age of the youngest spouse. The younger the age, the less money can be borrowed. Reverse mortgages offer two terms ... a fixed rate or variable rate. Fixed rate HECMs have one interest rate and one lump sum payment. Variable rate loans offer multiple payout options:

• Equal monthly payouts
• A line of credit with access until the funds are gone
• Combined line of credit and fixed monthly payments for a specified term
• Combined line of credit and fixed monthly payments for the life of the loan

Traditional reverse mortgages, also called Home Equity Conversion Mortgage, HECM, are insured by FHA. There are no income limitations or requirements and the loan funds may be used for any purpose. The borrower must attend a counseling session about the HECM, its risk, benefits, and how much can be borrowed. The final loan amount is based on borrower's age and home value. FHA HECMs require upfront and annual mortgage insurance premiums but can be wrapped into the loan.

Proprietary HECM loans are not federally insured. Lenders create their own terms, including allowing loan amounts higher than the FHA maximum. Proprietary HECMs don't require mortgage insurance (upfront or monthly), which may result in more funds available. Proprietary reverse mortgages typically have higher interest rates than FHA HECMs.

Advantages

• Create a steady stream of income during retirement
• The proceeds aren't taxed or risk borrower's Social Security payments
• Title and rights to the home are retained by the homeowner
• Monthly payments are not required

Disadvantages

• The loan balance increases over time rather than decreases as with an amortizing loan
• The loan balance may exceed the property value eliminating inheritance
• The fees may be higher than traditional mortgage loans
• Any absence of the home for longer than 6 months for non-medical or 12 months for medical reasons makes the loan due and payable

More information is available about reverse mortgages from the Consumer Financial Protection Bureau or Federal Trade Commission or HUD.gov.

Approximately 52 million or 16% of Americans are age 65 and over.  It is easy to understand that some of them are thinking of downsizing their home because they don't need the same space they did in the past.

It can be liberating to divest yourself of "things" that have been accumulated over the years but are no longer needed.  Moving to a less expensive home, could provide savings for unanticipated expenditures or cash that could be invested for additional income.

Savings can be realized in the lower premiums for insurance and lower property taxes, as well as,  the lower utility costs associated with a smaller home.

Typically, owners downsize to a home to 2/3 to 50% of their current home's size.  In some situations, it is not only economically beneficial, but their interests may have changed so that a different style of home, area or city might fit their lifestyle better.

The sale of a home with a lot of profit will not necessarily trigger a tax liability.  Homeowners are eligible for an exclusion of $250,000 of gain for single taxpayers and up to $500,000 for married taxpayers who have owned and used their home two out of the last five years and haven't taken the exclusion in the previous 24 months.

Homeowners should consult their tax professionals to see how this may apply to their individual situation.  For more information, you can download the Homeowners Tax Guide.

Call me at (859) 647-0700 to find out what your home is worth and what it would take to make the move to another home.

Looking for an investment that will turn $10,000 into $80,000 in seven years?  Sound too good to be true?  What if I told you that you could live in it every day during that seven years?  Would that sound even better?

A $300,000 home purchased today on an FHA loan would have a $10,500 down payment.  If it appreciated at 2% annually, which is less than  the U.S. average, the future value of the home would be $344,606 in seven years.  The unpaid balance on the loan would be $256,350 based on normal amortization which would make the equity in the home $88,256.

The annual compound rate of return on the down payment would be 35%.  This number sounds so large, that you might start doubting the credibility of this example.

Looking at some alternative investments, a ten-year Treasury note is currently paying 1.73%.  You can earn 2.1% on a ten-year certificate of deposit.  If you could handle the volatility of the stock market and pick the right stock, you might earn 7-10%. 

There really is no alternative investment that can earn the return that an owner-occupied home can offer while giving you the ability to live and enjoy the home during the holding period.

Even if you could find an investment that paid a good return, when you realize the gain, you'll be required to pay income tax, either at long-term capital gains rates or ordinary income.  However, a person who has lived in a home for at least two of the last five years can exclude up to $250,000 of gain from their income if they are single and up to $500,000 of gain if the owners are married, filing jointly.

A home can certainly be a place of your own to feel safe and secure, to raise your family, share with friends and build memories.  A home could be considered an emotional investment and one that pays big dividends.  A home is also a financial investment not just for the reasons mentioned above but also because the equity can be accessed by doing a cash-out refinance or a home equity line of credit.

See what your investment might look like by using the Rent vs. Own and giving us a call at (859) 647-0700.

Mortgage interest paid on your principal residence is deductible today as it was in 1913 when 16^th amendment allowed personal income tax.  The 2017 Tax Cut and Jobs Act reduced the maximum amount of acquisition debt from $1,000,000 to $750,000.

Acquisition debt is the amount of debt used to buy, build or improve a principal residence, up to the maximum amount.  A common misunderstanding among taxpayers is that you are entitled to that much debt even if you refinance a home during your ownership years.

Acquisition debt is a dynamic number that changes over time.  It decreases with normal amortization as the principal amount of debt is reduced.  The only way to increase acquisition debt after a home is purchased is to borrow additional funds that are used for capital improvements.

Assume a person buys a home with a new mortgage and after the home has enjoyed significant appreciation, refinances the home for much more than is currently owed.  Let's also say that the refinance amount is less than $750,000 which might lead the borrower to an erroneous conclusion that all the interest will be deductible.

The current acquisition debt is transferred to the new mortgage.  Only the portion of the funds used to pay for new capital improvements can be combined to equal the increased acquisition debt.  The interest on that part of the mortgage is deductible as qualified mortgage interest.

The remainder of the refinanced mortgage is attributed to personal debt and the interest paid on that is not deductible.

Lenders are not generally concerned with making a homeowner a fully tax-deductible loan.  Lenders are interested in making a loan which will make a profit and be repaid according to the terms.  The annual statements that most lenders issue to borrowers indicate how much interest was paid in a calendar year as they are required to do by federal law.

Part of the confusion may be because homeowners believe they can deduct interest on debt up to $750,000 and this annual statement shows the interest paid for the year.  It is up to each homeowner to keep track of their acquisition debt and only deduct the qualified mortgage interest.

Your tax professional can be very helpful in determining this amount.  It is important to notify them that you have refinanced a home during the tax year for which the taxes are being reported.  For more information, see IRS Publication 936 and Homeowners Tax Guide.  Home equity debt has not been allowed since the beginning of 2018.

Some people don't need a reason to buy a home, they just want it.  That can be enough justification by itself.  Other people need some solid logic before they're ready to make the commitment.  The following reasons might help you to make a decision.

1. Pride of ownership ... among the most popular reasons given by homebuyers is that they want a place they can call their own and decorate and improve it the way they want.  It is a place to feel safe and secure and a place for their family.  They can share it with their friends and enjoy living in it.
2. Good investment ... Homeowners have a 80 times greater net worth than renters.  By investing in a home that appreciates over time, it contributes to an increasing equity.  The high loan to value mortgages that are available combined with the low mortgage rates also contribute to the investment through leverage which has been described as "using other people's money" to control an investment.
3. Interest and property tax deductibility ... Homeowners can deduct their qualified mortgage interest and up to a maximum of $10,000 of their property taxes as itemized deductions on their federal income tax return.  In some instances, the standard deduction may benefit them more, but they can elect to choose either method each year, whichever helps them the most.
4. Capital gain exclusion ... A single homeowner can exclude up to $250,000 of capital gain and if married filing jointly, can exclude up to $500,000 of gain on their principal residence.  The need to have owned and occupied it as their home for two of the last five years.
5. Cash out refinance ... Generally speaking, a lender will allow an owner with good credit and income to borrow the difference in their current unpaid balance and 80% of the fair market value.  This money can be used for any purpose and is not a taxable event.
6. Equity buildup ...The difference in the value of the home and the unpaid mortgage balance is called equity and it increases with each payment made.  It is like automatic savings.
7. No landlords ... Instead of dealing with landlords who may impose restrictions on things like painting, improvements and pets.  Owners are not concerned about rent increases and will have a fixed principal and interest payment for as long as they have a mortgage.

A bonus reason to buy a home now are the low mortgage rates available. The lowest rate recorded by Freddie Mac is 3.35% in December 2012.  Today's rates are 3.75% on a 30-year fixed rate mortgage and 3.21% on a 15-year fixed rate mortgage.  So, they are certainly very close to all-time lows.

The highest rate on a 30-year fixed rate mortgage was 18.45% in October 1981.  When you put today's rates in perspective, they are an incredible bargain.  Many industry experts expect that they will not remain as low as they are now.  Locking in a low rate can keep your housing costs low.

A $275,000 mortgage at 3.75% for 30 years has a principal and interest payment of $1,273.57.  If the rate goes up by 1%, the payment would increase to $1,434.53 or $160.96 per month for the 30-year term. Check the Rent vs. Own to see how the numbers look in your situation.

Before looking for a home, you need to know how much you can afford. While you may have a number in your head, the lender has the final say. Securing a pre-approval from a lender helps make the home buying process easier and helps to avoid delays.

Many buyers confuse the terms pre-qualification and pre-approval. They mean two different things. In simple terms, a pre-qualification is an estimate of what you can afford. A pre-approval is a conditional approval based on the proof you provide.

The pre-qualification is a preliminary step some borrowers take to get a feel for what price home they can afford. Based on your income, assets, and estimated credit score, lenders can estimate what you can afford.

It's important to know, there's nothing binding about a pre-qualification. It's simply a starting point.   When you are serious about buying a home, though, you want a pre-approval.

Before you shop for a home, meet with a recommended lender to get a pre-approval letter. Sellers and/or Realtors value this letter because it shows you are likely to secure the necessary financing and serious about buying a home.

Lenders meet with you in person to create the pre-approval. You'll provide the lender with all the following:

• Permission to order your credit report
• Paystubs, W-2s and/or tax returns to prove your income
• Asset statements, investment statements or any other proof of assets
• Proof of employment
• Any other miscellaneous documentation required by lender

Lenders evaluate the documents and determine your conditional approval. The letter will state the mortgage amount you qualify for, the loan's terms, and any conditions the approval is contingent upon. 

Normally, final approval is contingent on a fully executed sales contract of the property to be purchased, a satisfactory appraisal and clear title on the property.

Once a purchase contract is signed, the lender completes the underwriting on your loan. They will confirm that the property meets the necessary requirements. The lender will also re-confirm your income, assets, employment, and credit information before closing on the loan.

Securing a pre-approval prior to beginning the home buying process will give you confidence and can help your negotiations with the seller. Your REALTOR® can provide you more information in an Buyers Guide and recommendations of trusted lenders.

Maybe you're not ready to move into it but that doesn't mean that you shouldn't take advantage of the present opportunities to acquire the home you want to live in during retirement. The combination of the low mortgage rates, high rental rates, positive cash flows and tax advantages can help you get it paid for by the time you're ready to move into it.

Your tenant could literally buy your retirement home for you.  One idea would be to finance it with a 15-year loan that will have a lower rate than a 30-year loan and it will obviously be paid for in half the time. With every monthly rental check from your tenant, you make the payment on the mortgage which includes a portion that reduces debt and builds equity. Even if you don't have the home paid for by the time you retire, your equity will be larger. 

Consider you sell your current home which could be paid for by then when you are ready to move into this retirement home .  Taxpayers can exclude up to $500,000 of tax-free gain for a married couple. That profit could be used to fund your retirement.

Even if you don't retire to this home, it could be a placeholder to control the costs of the home you do move into.  For example, you could buy a home in a destination location now, rent it out and build equity in it until you're ready to use it as your principal residence.  That home would have kept pace with other homes in the area so that you would not be priced out of the market you want to retire to.

With home prices and mortgage rates certain to rise, this may be one of the best decisions you can make. We want 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.

Contact us if you'd like to talk about the idea or if you need a recommendation of real estate professional in another city.

Whether it is a cosmetic or a mechanical reason for upgrading a toilet, you may not know all the choices that are involved to choose the right one for your home.  The current toilet may have cracks or leaks in the bowl or tank.  It could be the aggravation of constant clogging or inefficient flushing.  Maybe there is damage in the porcelain bowl or built-up mineral deposits that are clogging the inlet holes or syphon tube.

If frequent repairs have you on a first name basis with the plumber, it may be time to consider replacing the toilet.  There are a lot of things to consider and the following list may help you sort through the choices.

• Round, oval or compact oval ... There are two basic shapes of toilets: round and oval.  The round bowl requires less space and are less expensive.  The oval or elongated tend to be more comfortable but require more space from the wall than round ones.  Most manufacturers produce a compact oval model also.
• One-piece, two-piece and wall hung ... Manufacturers make one-piece models that mold the tank and bowl into one unit.  These can be a little more expensive, but they take up less space.  The two-piece with separate tank and bowl are more common.  The wall hung requires less space and make the room look larger, but installation will be more expensive. 
• Height ... Standard toilet height is 15 inches.  An alternative to the standard is a comfort height which is more like a chair at 17-19 inches tall.  This can be an advantage for older and taller people as well as those with a mobility problem. 
• Trapway - The trapway is a channel from the bottom of the bowl to the drainpipe that also keeps gas entering the home from the sewer.  While the trapway shows on the outside of most models, there are skirted or concealed models available for a more aesthetic appearance.
• Single or dual flush ... Single flush toilets use the same volume of water each time it is flushed.  Dual flush toilets have two options for flushing liquid or solid waste.  This gives the user the ability to conserve water when appropriate.
• Water per flush ... In an effort to save water, in 1995 the Department of Energy required toilets to use 1.6 gallons per flush.  Since then, California and Georgia, increased the restriction to 1.28 gpf which saves 20% more water.
• Gravity-feed or pressure assisted - For four hundred years, gravity has been used to move the water through a flushable toilet bowl to eliminate the waste.  As water restrictions were added, pressure assisted toilets were introduced to assist the lower volume of water.  A sealed cylindrical tank inside the ceramic toilet tank provides the additional pressure.  These types of toilets are nosier than conventional flush types.

Once you've decided on what features are important, you can shop brands that fit your needs.  If you're curious to what kind of a job it is to install it, there are lots of videos on YouTube that will show you in detail what to expect.  Whether you do it yourself or hire a professional, you'll understand the process more.

Checklists work because they contain the important things that need to be done.  They provide a reminder about things we know and realize but may have slipped our minds as well as inform us about things we didn't consider.  Periodic attention to these areas can protect the investment in your home.

1. Change HVAC filters regularly.  Consider purchasing a supply of the correct sizes needed onlineand they'll even remind you when it's time to order them again.
2. Change batteries in smoke and carbon monoxide detectors annually.
3. Create and regularly update a Home Inventory to keep track of personal belongings in case of burglary or casualty loss.
4. Keep track of capital improvements, with a Homeowners Tax Guide, made to your home throughout the year that increases your basis and lowers gain.
5. Order free credit reports from all three bureaus once a year at www.AnnualCreditReport.com. 
6. Challenge your property tax assessment when you receive that year's assessment when you feel that the value is too high.  We can supply the comparable sales and you can handle the rest.
7. Establish a family emergency plan identifying the best escape routes and where family members should meet after leaving the home.
8. If you have a mortgage, verify the unpaid balance and if additional principal payments were applied properly.  Use a Equity Accelerator to estimate how long it will take to retire your mortgage.
9. Keep trees pruned and shrubs trimmed away from house to enhance visual appeal, increase security and prevent damage.
10. Have heating and cooling professionally serviced annually.
11. Check toilets periodically to see if they're leaking water and repair if necessary.
12. Clean gutters twice a year to control rainwater away from your home to protect roof, siding and foundation.
13. To identify indications of foundation issues, periodically, check around perimeter of home for cracks in walls or concrete.  Do doors and windows open properly? 
14. Peeling or chipping paint can lead to wood and interior damage.  Small areas can be touched-up but multiple areas may indicate that the whole exterior needs painting.
15. If there is a chimney and fires are burned in the fireplace, it will need to be inspected and possibly cleaned.
16. If the home has a sprinkler system, manually turn the sprinklers on, one station at a time to determine if they are working and aimed properly.  Evaluate if the timers are set properly.  Look for pooling water that could indicate a leak underground.
17. Have your home inspected for termites.

Instead of remembering when you need to do these different things, use your calendar to create a system.  As an example, make a new appointment with "change the HVAC filters" in the subject line.  Select the recurring event button and decide the pattern.  For instance, set this one for monthly, every two months with no end date.  You can schedule a time or just an all-day event will show at the top of your calendar that day.

By scheduling as many of these items as you can, you won't forget that they need to be done.  If you don't delete them from the calendar, you'll continue to be "nagged" until you finally do them.

If you have questions or need a recommendation of a service provider, give us a call at (859) 647-0700.  We deal with issues like this regularly and have experience with workers who are reputable and reasonable.

There may be some short term, one-year, loans at a floating rate tied to prime plus with no guarantee that it will be renewed.  Some of those loans require you to have a 50% margin of equity and if the value goes down, you'll have to put up additional cash or be forced to sell.

The advantage of having long-term mortgages is that an investor could find the optimal time to sell the property instead of needing to sell it because the term is due, and no other financing is available.   Supply and demand cause the real estate market to be higher and lower and a long-term mortgage provides options to sell when the price is optimal.

Single family homes enjoy distinct tax advantages.  If the rental or investment property is held for more than 12 months, the gain is taxed at lower, long-term capital gains rates rather than ordinary income rates.

Another advantage of rental homes is that the improvements can be depreciated over a 27.5-year life.  This is a non-cash deduction that reduces income and shelters income.  The accumulated depreciation taken over the life of the property is recaptured when the property is sold.

Since rental homes provide income that other investments may not, tax would have to be recognized on the annual income.  IRS allows normal operating expenses like interest, property taxes, insurance, repairs, and management to be deducted including the annual depreciation.

Rental and investment property are eligible for tax-deferred exchanges to avoid paying tax at the time of disposition.  Real estate also enjoys stepped-up basis which means that when an heir inherits a property, instead of having a potential gain from the value the decedent had purchased it for less depreciation taken, the heir's basis becomes the fair market value at time of death.  All potential gain may be permanently avoided.

Appreciation is a much-anticipated benefit of real estate because value tends to go up over time.

Another big benefit is the control that an investor has with rentals that is not available with other investments like stocks, bonds, or commercial real estate.  It takes a relatively small amount of cash to control the entire investment in a home that wouldn't be available in other investments without partners or publicly traded companies.

Single family homes are an investment that homeowners understand because they are essentially the same as the home they live in.  They're used for rental purposes but the maintenance is the same, the service providers are the same, and the neighborhood are the same.  Most homeowners understand rentals far better than alternative investments.

Contact me at (859) 647-0700 if you'd like to know more about rental property.

Fear of the unknown is common among all ages.  Kids, at night, imagine monsters in their closets or under their beds and adults are unsure of what the future might bring.

It may be natural for first-time buyers to be unsure of the process because they haven't been through it before but even repeat buyers need to know changes that have taken place since the financial housing crisis.

The steps in the home buying process are very predictable and generally follow the same pattern every time.  It certainly makes the move stay on schedule when you know all the different things that must be done to get to the closing.

• In the initial interview with your real estate professional, you share the things you want and need in a home, discuss available financing and learn how your agent can represent you in the transaction.
• The pre-approval step is essential for anyone using a mortgage to purchase a home to assure that they're looking at the right price of homes and so they'll know what they can qualify for and what the interest will be.
• Even with lower than normal inventory, it is difficult to stay up-to-date with the homes currently for sale and the new one just coming on the market.  Technology has simplified this process, but the buyer needs to implement them.
• Showings can be accommodated online through virtual tours, drive-bys and finally, a personal tour through the home.  Your real estate professional can work with you to see all the homes in the market through REALTORS, builders or for sale by owners.
• When a home has been identified, an offer is written and negotiation over price, condition and terms takes place.
• A contract is a fully negotiated, written agreement.
• Escrow is opened to deposit the earnest money from the buyer as a sign they're acting in good faith.  The title search is also started so that clear title can be conveyed from the seller to the buyer and that the lender will have a valid lien on the property.
• 88% of home sales involve a mortgage.  The lender will require an appraisal to be sure that the home can serve as partial collateral for the loan.  If the buyer has been pre-approved, the verifications will be updated to be certain that they're still valid.  The entire loan package when completed, is sent to underwriting for final approval.
• When the contract is completed, at the same time the title search and mortgage approval are being worked on, the buyer will arrange for any inspections that were called for in the contract.
• After all contingencies have been completed, the transaction goes to settlement where all the necessary papers are signed, and the balance of the buyer's money is paid.  This is where title transfers from the seller to the buyer.
• Possession occurs according to the sales contract.

One of the responsibilities of your real estate professional is to make sure that things are done in a timely manner so that the transaction will close according to the agreement on time and without unforeseen or unnecessary problems.

Even if you're not ready to buy or start looking yet, you need to be assembling your team of professionals.  Let us know and we'll send you our recommendations, so you can read about them on their websites.

If you have any questions, download this Buyers Guide and call us at (859) 647-0700; we're happy to help.  Informed buyers lead to satisfied homeowners and that is better for everyone involved.