Renters Have Much to Gain by Pursuing Home Ownership

By Don Johnson, Broker/Owner/CEO
The Don Johnson Realty Group

MURRIETA, CA – Buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants will agree. But the rewards of home ownership are great. For many years, purchasing real estate has been considered an extremely profitable investment. It is an achievement that offers a sense of pride, financial stability and potential tax advantages.

Yes, there are certain responsibilities associated with owning a home. Landlords will often argue the benefits of renting, and for obvious reason. If you are renting, you’re helping them make their mortgage payment.

The numbers are staggering if you look at it this way. If you are paying $1,000 per month for an apartment, and you know your rent will increase 5% every year, then over the next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won’t benefit when the property value goes up!

However, if you were to purchase your own home or condominium, you would be on your way toward building equity. By choosing a fixed-rate loan program, you can have the comfort of knowing that your monthly mortgage payment will never go up. In fact, you would have the option of refinancing to a lower interest rate at some point in the future should interest rates drop lower than the rate you’d currently be locked in at, and this would cause your monthly mortgage commitment to go down.

And not only would your own home give you added space, your own back yard and overall privacy—home ownership would also give you some tax advantages. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments on a mortgage below $1 million are tax-deductible, and your mortgage consultant should help you evaluate the tax advantages of various loan scenarios, and share this information with your tax consultant to glean feedback on your behalf.

To find the loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with the report of your credit score, will determine how much house you can afford and what interest rate you will pay for financing. It is also important to let your mortgage consultant know what your future goals are, because this will help narrow down which loan option is the best fit for your long-term needs.

There are many different types of loan programs available, including “low” down payment mortgage programs. The most common and beneficial loan for people buying their first home is the FHA loan, which only requires a 3.5% down payment. In addition, FHA allows a seller to cover up to 6% of a buyer’s closing costs which really helps decrease the amount of money it takes to buy a home. Many people also don’t know that FHA allows the lowest credit scores of any loan available today, only needing a 640 score in most cases.

If there is any time to buy it is NOW! Why? Because home prices are low today. Low home values are surely not good for people selling homes but they are great news for people wanting to buy a home. Don’t miss this opportunity to take advantage of the current market before home values rise. Call me today for a free consultation: 714-856-3992.

Don Johnson, a Licensed Broker with the California Department of Real Estate, is the owner of Don Johnson Realty Group DRE#01398835, a resale real estate brokerage located in Murrieta, California. We specialize in short sales, rental properties, foreclosures and mortgage lending. If you would like to obtain more information, please contact Don at findyouahome@msn.com or call 714-856-3992. http://www.djrealtygroup.com

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Tax Deductions When You Work from Home

http://platform.twitter.com/widgets/hub.1326407570.htmlReposted by: DonJohnson Realty Group

By: Donna Fuscaldo

Published: January 3, 2012

Working from home can offer many advantages including tax deductions. Just take care what you try to write off for your home office on your return. Passing the IRS litmus test To meet IRS guidelines, your home office must be your principal place of business, or the place you see clients in the normal course of business. Parts of your home you use to store products or equipment for your business also count. That doesn’t mean that all your work has to be done from home. If you’re an outside salesperson, you probably spend most of your work time elsewhere. But if you do you billing and return customer calls primarily from your home, your home office should qualify. You can also qualify for the deduction if your employer requires you to work from home, as long as you don’t charge your employer rent. One big catch is that you must maintain the at-home office for your employer’s convenience, not your own, such as to complete reports at night or on weekends. Self-employed workers use IRS Form 8829 to calculate the deduction, which they list on Schedule C. Measuring your home office The amount you can deduct for your home office depends on the percentage of your home used for business. Your work space doesn’t need to be a separate room—a table in a corner qualifies. But it has to be an area that’s used solely for business. The tax break also covers separate structures on your property, like a detached garage you’ve converted to an office. Unlike an office inside your home, a separate structure doesn’t have to be your main place of business to qualify for a deduction. That’s because the IRS believes your family is less likely to use a separate structure as a part-time play area or den, says Mark Luscombe, principal analyst for tax and consulting at CCH. To calculate what percentage of your house the home office occupies, divide your home office’s square footage by the total square footage of your home. If your home is 3,000 square feet and your office is 150 square feet, for example, you’d use 5% to calculate your deductions. Not sure how big your house is? Check the documents you received when you bought your home—there’s probably a detailed rendering—or measure the outside of your home and multiply length times width. What can you deduct?Once you’ve figured out what percentage of your home you use for business, you can apply that percentage to different home expenses. These include:
  • Mortgage interest
  • Real estate taxes
  • Utilities (heating, cooling, lights)
  • Home repairs and maintenance (painting, cleaning service)
  • Home owners insurance premiums
Just take each expense and multiply it by your home office percentage (the 5% mentioned above). That’s the amount you can deduct as a business expense. So if you spend $150 a month on electricity, you can deduct $7.50 as a business expense. That adds up to a $90 deduction per tax year. Save bills or cancelled checks to prove what you spent in case of an IRS audit. Take an hour a week to file them away. Also, only repairs can be expensed; improvements must be depreciated. Don’t forget depreciation Depreciation is based on the idea that everything—even something like a home—wears out eventually. To figure home office depreciation, start by calculating the tax basis of your home: generally the purchase price plus the cost of improvements, minus the value of the land it sits on. Next, multiply the tax basis by the percentage of your home used for work. This gives you the tax basis for your home office. Usually, depreciation deductions for a home office are figured over a 39-year period. There are caveats. For a crash course, read IRS Publication 946 or talk to a tax pro. Keep in mind that depreciation deductions on your home office increase the amount of profit on a home sale that is subject to taxes. There’s an exclusion of $250,000 of profit if you’re a single filer, $500,000 for joint filers. Consult with a qualified tax professional on how depreciation deductions affect your tax liability when you sell. __________________________________________________________________________________ For questions, homebuying needs, mortgage questions, and general real este inquiries, email us at findyouahome@msn.com www.DJRealtyGroup.com
This article provides general information about tax laws and consequences, but shouldn’t be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.

Fannie Mae Rolls Out Online-only REO Offers

On February 7, 2012, in Breaking News, Mortgage Financing, Selling, by Robert Freedman

If you’re working with a buyer who’s interested in submitting an offer for a Fannie Mae REO, you’ll have to do it online. The secondary mortgage market company last week launched an all-online system for submitting offers on its inventory of foreclosed homes.

Here’s how Fannie describes it on its HomePath website:

“Making an offer to purchase a HomePath property is now quick, easy and entirely online! Beginning February 2, all offers on HomePath properties must be made using the HomePath Online Offer system. If you’re ready to make an offer, just have your real estate professional click the “Make an Offer” button on the property information and follow the instructions.”

Only licensed agents can make offers, so any consumers shopping for a home on Fannie’s HomePath site have to contact an agent first.

If you’re not already registered as an agent with the site, you’ll need to do that, then click the “Make an Offer” button and follow the instructions. You’ll have to be able to scan documents and otherwise be prepared to input information digitally.

Registering with the site so you can submit offers as a selling agent is not the same thing as registering with Fannie Mae as an approved listing agent. That seems obvious, but sometimes it helps to state the obvious to avoid confusion. To become a listing agent for Fannie Mae in your market, you have to submit an application (also an online process) and then go through its proprietary selection process, which requires you to submit information about your practice. Every market is different, but generally the company works with a handful of brokers or agents that it has selected to list its REO properties.

The company says it pays a commission of 2.5 percent to the listing broker, with a $1,000 minimum, and a commission of 3 percent to the selling broker, also with a $1,000 minimum. It says it has some additional selling incentives in some markets.

Fannie gives owner-occupant buyers a 15-day window after a property comes on the market to make an offer without competition from investors. Offers made by investors during that “first-look” period are rejected from the system with instructions to resubmit after the 15-day period ends, if the property isn’t under contract by that time. The offers are not kept in the system and queued up.

Buyers can use any financing they want, including Fannie Mae financing through its two HomePath mortgage programs, one for purchases and one for purchases with renovation. If the buyer is using HomePath financing, Fannie only requires a downpayment of 3 percent, waives the appraisal and also doesn’t require mortgage insurance. Investors can get up to 90 percent financing.

You can learn more about online submissions on the Real Estate Professionals’ page on the HomePath website and click on “HomePath Online Offers Support page.”

For more real estate questions and resources: visit us at www.djrealtygroup.com

Tax Deductions When You Work from Home

http://platform.twitter.com/widgets/hub.1326407570.htmlReposted by: DonJohnson Realty Group

By: Donna Fuscaldo

Published: January 3, 2012

Working from home can offer many advantages including tax deductions. Just take care what you try to write off for your home office on your return. Passing the IRS litmus test To meet IRS guidelines, your home office must be your principal place of business, or the place you see clients in the normal course of business. Parts of your home you use to store products or equipment for your business also count. That doesn’t mean that all your work has to be done from home. If you’re an outside salesperson, you probably spend most of your work time elsewhere. But if you do you billing and return customer calls primarily from your home, your home office should qualify. You can also qualify for the deduction if your employer requires you to work from home, as long as you don’t charge your employer rent. One big catch is that you must maintain the at-home office for your employer’s convenience, not your own, such as to complete reports at night or on weekends. Self-employed workers use IRS Form 8829 to calculate the deduction, which they list on Schedule C. Measuring your home office The amount you can deduct for your home office depends on the percentage of your home used for business. Your work space doesn’t need to be a separate room—a table in a corner qualifies. But it has to be an area that’s used solely for business. The tax break also covers separate structures on your property, like a detached garage you’ve converted to an office. Unlike an office inside your home, a separate structure doesn’t have to be your main place of business to qualify for a deduction. That’s because the IRS believes your family is less likely to use a separate structure as a part-time play area or den, says Mark Luscombe, principal analyst for tax and consulting at CCH. To calculate what percentage of your house the home office occupies, divide your home office’s square footage by the total square footage of your home. If your home is 3,000 square feet and your office is 150 square feet, for example, you’d use 5% to calculate your deductions. Not sure how big your house is? Check the documents you received when you bought your home—there’s probably a detailed rendering—or measure the outside of your home and multiply length times width. What can you deduct?Once you’ve figured out what percentage of your home you use for business, you can apply that percentage to different home expenses. These include:
  • Mortgage interest
  • Real estate taxes
  • Utilities (heating, cooling, lights)
  • Home repairs and maintenance (painting, cleaning service)
  • Home owners insurance premiums
Just take each expense and multiply it by your home office percentage (the 5% mentioned above). That’s the amount you can deduct as a business expense. So if you spend $150 a month on electricity, you can deduct $7.50 as a business expense. That adds up to a $90 deduction per tax year. Save bills or cancelled checks to prove what you spent in case of an IRS audit. Take an hour a week to file them away. Also, only repairs can be expensed; improvements must be depreciated. Don’t forget depreciation Depreciation is based on the idea that everything—even something like a home—wears out eventually. To figure home office depreciation, start by calculating the tax basis of your home: generally the purchase price plus the cost of improvements, minus the value of the land it sits on. Next, multiply the tax basis by the percentage of your home used for work. This gives you the tax basis for your home office. Usually, depreciation deductions for a home office are figured over a 39-year period. There are caveats. For a crash course, read IRS Publication 946 or talk to a tax pro. Keep in mind that depreciation deductions on your home office increase the amount of profit on a home sale that is subject to taxes. There’s an exclusion of $250,000 of profit if you’re a single filer, $500,000 for joint filers. Consult with a qualified tax professional on how depreciation deductions affect your tax liability when you sell. __________________________________________________________________________________ For questions, homebuying needs, mortgage questions, and general real este inquiries, email us at findyouahome@msn.com www.DJRealtyGroup.com
This article provides general information about tax laws and consequences, but shouldn’t be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.

Your Kids Can Save You Money at Tax Time

While driving home from work the other day, I was listening to a call-in show on NPR. A woman called to find out the best way for her family to save money for their child’s college fund. It made me think about how expensive our little bundles of joy can be. It also made me think that we really need to get cracking on our own little guy’s college fund. So far it consists of a few small savings bonds from the grandmas and all our handfuls of loose change from the past two years. I haven’t even taken it to the bank yet, but I don’t think we’ve even hit $2000. It’s a good thing we have 16 years to go – but that time is flying by.

The good news – kids don’t always separate you from your money – sometimes they actually help you keep some! Here are a few ways your kids will help fatten your wallet come tax time.

Let’s start with the famous Child Tax Credit. This credit is usually worth $1000 per qualifying child, depending on your income and other factors. Since it’s a credit, not a deduction, you get to subtract it from the amount you owe.

If you are married and filing jointly, you get a larger standard deduction. According to the IRS, “your tax may be lower than your combined tax for the other filing statuses.” You’ll also get some extra tax breaks that aren’t available to unmarried filers.

If you’re single, check into filing as head of household. This option is usually preferable to filing single because it offers lower tax rates and a higher standard deduction. If you’ve recently divorced, make sure you follow the divorce decree as to which parent gets to claim the kids for tax purposes.

If you’ve suffered the passing of your spouse, you could file as a qualifying widow or widower with a dependent child for two years following the death. This allows you the same benefits as a married filer.

Your dependent children count as exemptions on your tax return. The IRS sets an adjusted amount each year that you multiply by the number of exemptions you have. Then you subtract this number from your income.

If you pay for daycare, you may be able to get some of your money back – up to $3000 for one child (under 13 years) and $6000 for two or more.

Did you adopt your child? You may be able to get a tax credit for qualifying expenses, if your child is eligible.

This is not an exhaustive list. Make sure you talk with a tax professional to determine the best route for you and your family.

Now, back to thinking about saving for college!

Your Kids Can Save You Money at Tax Time

Posted By Shannon Martin On January 24, 2012 @ 5:03 pm In Family Focus,Taxes