Homeowner Tax Deductions

Deducting Mortgage Interest. Mortgage interest on a primary residence is usually fully tax-deductible, unless your mortgage balance exceeds $1 million or you took out a mortgage for reasons other than buying, building or improving a home.

To claim this tax deduction, you should fill out Schedule A, labeled "itemized deductions." Your lender should send you a "Form 1098" that tells you how much mortgage interest you paid for the year. You should record your interest deduction on line 10.

Late payment charges also may be deducted as home mortgage interest if not for a specific service received in connection with your home loan. The same is true for mortgage prepayment penalties—if you pay off your mortgage early and incur a prepayment penalty, you can deduct that penalty as home mortgage interest (subject to the same requirements for late payments).

Deducting Real Estate Taxes. Real estate taxes, which are annual taxes based on the assessed value of a property, also are tax deductible. Your mortgage interest statement may list the amount of real estate taxes you paid if your taxes and homeowners' insurance were placed in an escrow account when you closed on your mortgage. If real estate taxes aren't included, you could review your cancelled checks to determine your total real estate tax deduction.

Deducting Loan Points Paid on a Purchase. The points you pay on a purchase mortgage are deductible the year you made the purchase. You can deduct any points you paid—and that a seller paid on your behalf*—if you meet the following criteria:

• The loan is secured by your primary residence and the loan was used to buy, improve or build the home.
• Paying points (and the amount of points paid) is not an irregular practice in the seller's geographic area;
• The points are computed as a percentage of the loan principal;
• The points are clearly delineated on the buyer's settlement statement; and
• You put cash into your home purchase in an amount at least equal to the points you were charged.

*Seller Paid Points are Deductible by the Buyer. When a seller pays points for the buyer (or in other words, buys the mortgage rate down) the buyer gets a lower mortgage rate.

Deducting Loan Points Paid on a Refinance. If you refinanced last year, you may be able to write-off any points you paid to buy down the mortgage rate. To do so, you deduct the points proportionately over the life of the new loan. For example, if you took out a 30-year loan, you would deduct 1/30th of the points you paid each year.

Have you refinanced more than once in recent years? Many homeowners may have overlooked an important opportunity. Say, for example, you refinanced in 2003 and paid points. You can deduct 1/30^th of those points in that tax year. However, say you refinanced again in 2006, paying off that 2003 loan. The remaining points from the 2003 refinance-that is, those that hadn't yet been deducted-can now be deducted in full since that loan has been paid off.

Deducting Interest on a Home Equity Loan. The interest on a home equity loan is usually tax-deductible*. However, if your home equity loan when combined with your first mortgage amount, increases the debt on your home to an amount more than the property's actual value, there may be deductibility limits. Usually, you can deduct the smaller of interest on a $100,000 loan or your home's value less the amount of your existing mortgage.

http://www.quickenloans.com/mortgage/articles/buying_home/homeowner_tax_tips.html

What to Do Before You Start Shopping for a Home

Looking for a home can be stressful and daunting. But there are things you can do to decrease your stress level and make the home buying process easier.

Before you even think about what kind of home you want, you have to decide on what kind of home you need. Doing this will narrow down the number of houses you look at and will save you valuable time. At the same time, you should make a list of things you don't want in a home so that you don't waste time looking at houses that don't fit your needs or your budget.

To set your priorities, ask yourself these questions.
Where do you want to live?

Location is one of the most important elements to choosing the right home. So, not only are you looking for the right home, you're looking for the right neighborhood. Among all your decisions, you should consider things like: how far or near do you want to live to your other family members? If you have your own family, what kind of schools you want your children to go to? How important is it to you to be close to the highway or public transportation, shopping, work, hospitals, entertainment, community amenities?

How long do you expect to live in your new home?

Most people end up moving within seven to nine years of living in a home and move for several reasons: job transfers, starting a family, needing a bigger home, don't like the area, etc. If you plan on living in your new home for only a few years, or if you don't have children, then proximity to schools may not be an issue, but resale value may be. On the other hand, if you have a family and plan on staying in the home for ten years or more, schools, as well as size of the home, will be priorities. How long you expect to stay in your home can have a large impact on which home you choose as well as what type of mortgage you choose.
Consider your lifestyle

Power Buyer - Get more bargaining leverage than a pre-approval!

As you make a list of your wants and needs (as well as what you don't want), it may also be important to consider the type of lifestyle you have. If you like to entertain a lot, then you'll want a spacious home that lends itself to that. If you work from home, or have your own business that you run out of your home, you'll need space for a home office. If you're a gardener, then lot size may be your priority.

Put these items on your list in order of importance. For instance, a large kitchen may be more important to you than a fireplace. Remember, your list should be somewhat flexible in case you can't find a home in your price range with all the amenities you need or want.
How much home can you afford?

Few things are more frustrating than falling in love with a home only to discover it's out of your price range. But, how do you figure out what you can afford? You should consider two major factors when determining how much home you can afford:

1. Your Credit Score

Your credit report determines your credit score, which is needed for qualifying for a home loan. Your credit score can help you qualify for a bigger loan amount and/or better interest rate .

It's important to check your credit report carefully for discrepancies and errors. You can order your credit report from the three major credit bureaus, Experian, TransUnion and Equifax. There are many other ways you can improve your credit score to get the best loan possible including paying your bills on time, paying off debt and keeping credit card balances low.

2. Mortgage Payment

It's possible you may qualify for a loan amount that would require a higher monthly mortgage payment, but you may not want to stretch yourself too far financially. If that's the case, you should calculate how much you'd be comfortable paying for your mortgage payment. Use the Quicken Loans Home Affordability Calculator to give you an idea of your potential monthly mortgage payment, and how much you'll be able to borrow.

Mortgage Basics

Once you've figured out what you want in a home, how long you plan on living there, and what you're comfortable paying each month, you need to shop for a mortgage.

A mortgage is a legal document by which real property (your house) is pledged as security for the repayment of a mortgage loan. You can think of a mortgage loan like an auto loan, but instead of getting a loan to finance the purchase of a car, you're getting a loan to finance the purchase of a home. It's a legal contract stating that you promise to pay back the loan on a monthly basis over a certain amount of time. Your monthly payment typically goes toward the loan principal , interest , taxes and insurance . Although there are hundreds of loan options, you only need to know a few basics to understand how they work:

* Fixed-rate mortgages have a fixed interest rate over the term of the loan. Most people opt for 30-year terms, but 15- and 20-year terms are available. The biggest advantage of a fixed-rate mortgage is that your interest rate and monthly payment do not change over the term of the loan. However, if interest rates happen to fall below your current fixed rate, you may be "locked in" to a higher rate and should consider refinancing .
* Adjustable-rate mortgages (ARMs) usually start with a lower interest rate than a fixed-rate mortgage for an introductory period—typically one, three, five or seven years. After that initial introductory period, the rate adjusts—usually annually—based on a pre-determined index . As a result, the interest rate on your loan and the monthly payment will rise and fall with increases and decreases in overall interest rates. An interest rate cap limits the amount by which the interest rate can change. An ARM is a good choice if you're expecting to live in your home for seven years or less and it may also allow you to borrow a larger loan amount.
* The down payment is the amount you plan to pay up front, in cash, when you buy a home. It is typically the difference between how much you borrow and the purchase price of your home. To avoid paying private mortgage insurance (PMI), a 20 percent down payment is usually required. However, lenders like Quicken Loans offer many low and no down payment loans.

Get a loan before you house shop

It sounds counter-intuitive: why would you apply for a mortgage when you haven't even started looking for a house yet? The answer is simple. When you take advantage of our exclusive Power BuyerSM loan option, you're in a better position to negotiate.

Here's why:

* The seller knows that your offer is serious and valid, giving you a stronger edge over other buyers.
* You know exactly how much home you can afford, saving you valuable time since you won't be looking at homes outside of your price range.
* You can close on the home you want in days—not weeks.
* Your Power BuyerSM approval is good for four months* while you shop for homes.


https://www.quickenloans.com/mortgage/articles/home_loans_before.html?cm_ref=/mortgage/articles/smooth_home_purchase.html

Getting a Home Equity Line of Credit

Credit cards are a good thing, but a home equity credit line is a great way to use the equity in your home to finance big ticket items such as home improvements, paying off high-interest debt, financing a car, or paying for college tuition.

A credit card is a revolving line of credit that you use when you need it, and make payments only if you use it. But credit cards can charge very high interest rates. A home equity line of credit (HELOC) is also a revolving line of credit. You draw from it again and again as you need it, and make payments only if you use it. But, unlike most credit cards, you get a much lower interest rate with a home equity line of credit than with a credit card.

Using a home equity line of credit is a way to turn bad debt into good debt. In other words, the interest on the debt you have on your high-interest credit card cannot be deducted from your taxes. But the interest on your HELOC is usually tax-deductible*.

There is also flexibility that can be built into home equity loans that you wouldn’t get for say, an auto loan. There are different home equity programs that have an interest-only option. With an interest-only loan, you can pay only the interest for a pre-determined amount of time and pay as much principal as you want, even none. You can’t do that with an auto loan. Most lenders offer home equity lines of credit for up to $100,000. But Quicken Loans offers a line of credit for up to $500,000! This is a great option to have when buying your dream vacation home.
Get a Home Equity Line of Credit

It’s fairly easy to get a home equity line of credit. That’s one of the best things about it! Nowadays, many companies allow you to apply online and close within a very short period of time, 7-10 days typically. There’s less paperwork to deal with, the closing costs are less expensive and the process is just as easy as applying for a credit card. If you get a home equity line of credit at the same time as your first mortgage with the same lender, you only have one closing to go to for both loans.

Learn about a Home Equity Line of Credit

A home equity line of credit can be thought of not as a mortgage or a loan, but as a smarter way of using your home’s equity to finance big-ticket items. Think of it as a low-interest alternative to high-interest credit cards that comes with greater flexibility and tax advantages.

If you are wondering whether a home equity line of credit is right for you, call us at 800-251-9080 to talk to a home loan expert or click the button below and a home loan expert will contact you.


http://www.quickenloans.com/mortgage/articles/home_equity_line_credit.html?lid=965

Purchasing a Vacation Home

It's vacation season. Whether you're enjoying a beachfront house, country cottage, or mountain chalet, chances are you have a vision of calling your favorite vacation spot "home" one day.

With an expected increase in demand, today's favorable interest rates, and creative vacation home mortgage options, it's a great time to invest in a second home. In fact, it's a wise investment.

CNN recently reported that homes in 13 top seasonal (vacation) counties appreciated by 49% between the fourth quarters of 2000 and 2003.*

This trend will likely continue. As baby boomers begin to retire, it's expected that more than 30 million Americans will buy a vacation home within the next decade.

With rising demand in popular vacation areas, knowing your vacation home mortgage options and how much you can afford can make a big difference in getting your perfect vacation home. Many homeowners use the equity in their primary home to finance their vacation investment, or take advantage of other vacation home mortgage options such as interest-only programs. Calculate your potential monthly payments using our payment calculator to see if you can afford to invest in a vacation home, or call a Quicken Loans home loan expert at 800-251-9080 for creative financing advice.

Before you begin your search, here are a few things you should consider:

* Family appeal: How does it fit the needs of your family? Will there be space and activities for family members who visit?
* Travel time: If it takes all day to get to your vacation home, you may not visit it as frequently. Two to three hours travel time is ideal.
* Climate: What is the area like year-round, especially during off-season? What are the political and tax issues? Browse through local newspapers as a guide.
* Healthcare facilities: If your vacation home becomes your primary residence one day, quality healthcare may be one of your top priorities.

It has never been easier to bring your vision of beachfront, mountain, or lakeside properties into focus. With the proper planning and home financing, your dream of owning a vacation retreat can be a reality.


http://www.quickenloans.com/mortgage/articles/buying_home/buying_vacation_home.html?lid=804

Applying for a Mortgage:

The following is a list of documents generally required when applying for a home loan. For a fast and easy loan process, have the following items available when you talk to one of our Home Loan Experts:

Having the necessary financial documentation ready when you talk to a Quicken Loans Home Loan Expert will speed up the mortgage process.

Quicken Loans has exclusive loan options for people with special financial situations such as being self-employed or paid on commission.

Your Home Loan Expert can answer any questions you may have, and help you determine what documentation you'll need for your specific situation.

1. Credit History

When you apply for a mortgage, Quicken Loans must access your credit report to know how credit worthy (or risky) you are as a borrower. The higher your credit score, the more likely that you will qualify for a larger loan, better loan options, and/or a more favorable interest rate . In order to access your credit report, we'll need to know your Social Security number and date of birth.

2. Signed Purchase Agreement

The purchase agreement is the contract between home buyer and home seller that defines the terms and conditions of the sale. It's possible to get approved based on your income and asset information, but having a signed purchase agreement makes the process faster and easier.
3. Proof of Income

In order for us to be sure that you are able to make your mortgage payments, we need to see proof that you have a source of income. You'll usually be required to show original pay stubs for the last 30 days. You may also show two years' worth of W-2s (see #4 below), a verification of employment (VOE) or two years' worth of tax returns. How you prove your income can differ based on your situation, and what home loan is best for you. Your Home Loan Expert will explain what type of proof of income you'll need to show.

4. Copies of Your W-2 Forms
Advantage1st No Doc Home Loan

Your W-2 forms will help your lender verify that you are employed and will show your income history.

5. Copies of Asset Information

To qualify for a mortgage, you need to be able to show that you have some money for the closing costs. Acceptable sources of funds may come from other homes with equity ; a savings or checking account; proceeds from the sale of a house; stocks, bonds, mutual funds, a 401k or a money market account; or gift funds. For some home loans, you may need to show statements and/or investment records for these accounts.

6. Copy of Your Earnest Money Deposit

The earnest money deposit is a deposit made by a buyer towards the down payment in evidence of good faith when the purchase agreement is signed. The deposit becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal. Be ready to show a copy of the earnest money deposit if asked.

7. Copy of Homeowners Insurance

Just like when you show proof on insurance when buying a car, you have to have homeowner's insurance to verify that you'll have sufficient coverage on the property when getting a mortgage. Homeowners insurance covers any damages that may affect the home's value.

8. Copy of Title Insurance

Title insurance protects a buyer against any errors in the title of the property. Having a copy of your title insurance will help verify the legal description of the property, the taxes, and the names on the title.

Once you've begun the loan process, your Home Loan Expert will let you know exactly what documentation you'll need to get approved.


http://www.quickenloans.com/mortgage/articles/home_buying.html?lid=3713

Getting Pre-Qualified or Pre-Approved. What's Better?

Confused about what getting pre-qualified or pre-approved means? You're not the only one. There's a big difference between a mortgage pre-qualification, a pre-approval and an actual mortgage approval.

Getting Pre-Qualified for a Mortgage

Getting pre-qualified for a mortgage helps give you an idea of how much you might qualify to borrow. But since you have not actually applied for a loan, and the lender only has your word on your credit, income, assets and liabilities, a home loan or mortgage amount is not guaranteed. With a pre-qualification, no information has been verified. If you receive a letter from the lender, it may only state that you are likely to be approved for a mortgage.

Getting a pre-qualification can be easy and fast. At Quicken Loans, you can get an online mortgage pre-qualification in minutes.
Getting a Pre-Approved Mortgage

A pre-approval goes one step further than a pre-qualification. When getting pre-approved, you may receive a letter stating how much you qualify to borrow. Your lender will pull your credit report and find out what liabilities you have. However, not everything (namely your income and assets) is verified.

Pre-approvals don't always guarantee financing since the buyer's information has not been verified. Think of it this way: a mortgage pre-approval is like getting a pre-approval letter in the mail for a credit card. You can't go to the store and buy anything with that letter—you have to have the approved credit card. Having a firm mortgage approval is like having the actual credit card.

And unfortunately, sometimes not all buyers are completely honest or accurate when they give their financial information to a lender. It's not unusual for some buyers to inflate their income or savings. Issues like these have caused many real estate agents and home sellers to distrust pre-approval letters.

The Solution - a Power BuyerSM Approval
Power Buyer - Get more bargaining leverage than a pre-approval!

The best way to guarantee that you'll have the financing to buy the home you really want is to skip the pre-qualification and pre-approval processes. Quicken Loans offers an exclusive Power BuyerSM approval a mortgage approval* that's good for four months while you shop for a home.

With a Power BuyerSM approval, all of your information will be verified and you will know exactly how much you can spend on a house. Therefore, you won't waste time looking at homes outside of your price range.

While it's helpful to be pre-qualified or pre-approved for a home loan, it doesn't always guarantee you'll be approved for a loan. A pre approved mortgage ensures your financial information has been verified, and really puts real estate agents and home sellers at ease. At the same time, you're in control when making an offer to a seller. They'll know you're a serious buyer who's ready and able to make a deal.

If you would like to learn more about the getting approved for a home loan, call us at 800-251-9080 and talk to a Quicken Loans Home Loan Expert today.

*With a Power BuyerSM, your loan will close as long as the property gets a satisfactory title and appraisal and your financial situation remains the same.


http://www.quickenloans.com/mortgage/articles/prequalified_vs_preapproved.html?lid=240

Interest-Only Mortgages

An interest-only loan is one that gives you the option of paying just the interest or the interest and as much principal as you want in any given month during an initial period of time after your closing.

At Quicken Loans, we offer a variety of interest-only home loan options, including 30-year fixed-rate mortgages and adjustable-rate mortgages. Our interest-only home loan programs are offered as interest-only loans for periods of either three, five, seven or ten years.

For many, the most appealing feature of an interest-only loan is that you control your payment amount and your cash flow in any given month during the interest-only period, and your monthly mortgage payment will be lower than it would be with an interest plus principal payment. Your interest rate may or may not be lower than a traditional mortgage, depending on your specific situation, but you will have the option of flexible payments.
Who Is an Interest-Only Home Loan For?

There are a number of good reasons to consider an interest only loan. For instance, it might make good financial sense. On a traditional 30-year fixed-rate mortgage, roughly 70% of the payment goes toward interest during the first six or seven years of the loan. If your interest rate is low, then you've borrowed money at a good rate.
SmartChoice Interest-Only Home Loan

Instead of paying down that low rate loan, you could take the extra money you'd have each month from making interest-only payments, and invest it in something that would bring you a higher rate of return. Depending on your loan amount, you could have access to thousands of dollars over the course of several years to invest or reduce high interest debt, including credit card debt.

An interest-only home loan may also be a good option for people who expect to be in their homes for less than ten years. The average homeowner stays in their home between five and seven years. As mentioned before, home mortgage payments are mostly interest for the first years of the loan. Many homeowners like the option of making interest-only payments and using the extra money as they please - save for college tuition, make home improvements, or buy a much-needed new car.
Common Misconceptions About Interest-Only Loans

While an interest-only loan may be an appealing option to many, there are a number of common misconceptions that you should be aware of prior to making any final decisions.

One common myth is that if you're not paying down your loan's principal, you're not building equity in your home. This is not necessarily true. Homes in the U.S. have been appreciating between 5 and 6% a year. Chances are that even if you're not paying down your principal, you're building equity in your home through appreciation.

You should also know that with any Quicken Loans interest-only home loan, there are never any prepayment penalties. You can refinance anytime.


http://www.quickenloans.com/mortgage/articles/interest-only-loans_pur.html?lid=1623

Buying a Home

If you're thinking about purchasing your first home, remember—it's a big decision and several things should be taken into consideration. Here are the top 5 questions you should ask yourself.
1. How long do you plan on living in the home?

The national average for how long people live in their homes is approximately seven to nine years. Reasons for leaving a home can vary widely, but if you purchase a home and decide to move after only a short time, you may end up paying money in order to sell it. Generally, the shorter you're in your home, the less time your home has to appreciate in value—perhaps not enough to recover what it cost to buy and sell the home.

The amount of time it takes to recover those costs can depend on various economic factors. In most parts of the country, homes appreciate at an average of five percent per year. If this is the case in the area you are looking to buy a home in, you should stay in your home at least three to four years to recover buying and selling costs. If the area where you buy your home experiences an economic upturn, it may take less time to recover those costs. Conversely, if the local economy is not doing well, it may take longer.

The amount of time you plan on living in your home will have an impact on what home loan you choose. If you plan on staying there for more than ten years, a long-term fixed-rate mortgage might be a sensible choice. But if you know you're going to move within three to five years, an adjustable rate mortgage (ARM), with its lower payment options, might be a better choice.
2. Can the home meet your future needs?

It's important to find a home and a home loan that satisfy your needs in the present, as well as in the future. Do you plan to have kids in the next few years? Do you plan on starting a business out of your home? Be sure that the home has what you'll need now, and in the years to come, so that you don't outgrow the home and have to leave it prematurely.
3. What does your financial picture look like?
Power Buyer Home Purchase Loan

It's possible to find a lender for almost any financial situation. However, if your past financial history is good, you will have better home loan options to choose from. Generally, a couple of late payments on a credit report won't affect you that much and you will be considered a good credit risk, qualifying for lower interest rates . If you have more issues on your credit report, lenders like Quicken Loans may still provide you with a home loan, but because you're more of a risk to the lender, you may have to pay a higher interest rate and fees.

Some people believe you should refrain from borrowing as much as you qualify for so as not to stretch your financial boundaries. Others feel you should stretch to buy as much home as you can afford because with expected increases in your earning potential, a big payment today will seem like less of a payment in the future. Only you can make this decision.

A popular guideline is to follow the "28/36" rule. This rule says that your monthly housing costs shouldn't exceed 28 percent of your monthly income, and your total debt payments shouldn't exceed 36 percent of your total monthly income. If your payments do not follow the 28/36 rule, don't worry. Lenders offer mortgages customized to each borrower's individual situation. Depending on your assets, credit history , job potential and other factors, lenders can work with ratios 40-60% or higher.

While we are not advocating that you should purchase a home utilizing the higher ratios, it's important for you to know there are other options available.
4. Where will the money come from?

Typically, home buyers will need money for the down payment and closing costs in order to close the loan. However, you don't always have to have a lot of money for a down payment, as long as you're a good financial risk to a lender. Several loan options today offer zero down and low down payment home loans. Even if your credit isn't stellar but you have managed to save 10-20% for a down payment, you will still have some very good mortgage options.
5. Have you considered the ongoing costs of home ownership?

Maintenance, improvements, taxes and insurance all add to the costs of owning a home. And if you buy a condominium or a town home, some communities require a monthly homeowner's association fee.

If you're concerned about these types of additional costs, you should look for home loan options that minimize fees and lower your mortgage payment relative to other home loan options. Be sure to make your realtor and your lender aware of your concerns.

If you'd like to know more about the home buying process, call us at 800-251-9080 to talk to a home loan expert.


http://www.quickenloans.com/mortgage/articles/buying_home/buying_first_home.html