Tax deductions are a hot topic these days. It seems we’re all looking for ways to owe Uncle Sam less and keep more in our pockets. Did you know that mortgage points can be deductible in many situations?

This topic can get a little confusing so let’s start with the basics.

What are mortgage points?

Points are a part of the closing costs for obtaining a mortgage. Paid to the mortgage lender, each point is 1% of the loan value. In the example of a $200,000 home with a $170,000 mortgage, one point of the mortgage would be $1,700.

There are two different types of points. The first is origination points, also known as the origination fee or broker fee. Lenders charge points as a way to make a profit. They are basically used to recover some of the costs of loan origination. Depending on the lending institution, they can be negotiated in part or in full.

The second is known as the discount points. Borrowers pay for discount points in order to obtain a lower mortgage rate. This process is known as a “buy down”. Purchasing one point generally will result in a quarter of a percent (0.25%) reduction in a fixed interest rate and a 0.35% decrease on an adjustable rate loan. Like origination points, these too are negotiable.

How are points deductible?

The IRS allows for the deduction of any extra charges paid by the homebuyer as a part of the closings costs for obtaining a mortgage. Origination points are not deductible because they are part of the mortgage fees and not an extra. Discount points are extra though. They are tax deductible*.

After the homebuyer obtains a mortgage, at the end of the year they will receive a Form 1098 Mortgage Interest Statement. The points paid to purchase the home will appear on the form in Box 2. Discount points can be deducted under “Schedule A” of a 1040 tax form if the homebuyer itemizes the deductions.

What are the eligibility requirements to deduct points?

1. The loan is secured for your primary residence.
2. Your primary residence is located in an area in which buying points is practiced.
3. The price paid for the points was consistent with the prices in the area.
4. The homebuyer must use the cash method of accounting, in which income is reported the year it is received and then deducted in that year when it’s time to pay.
5. The points were only used on closing costs, such as appraisal fees, inspection fees, title fees, attorney fees, or property taxes, and no initial fees.
6. The homebuyer is the one who purchased the points. Points that were outright purchased by the seller, or purchased with money borrowed from the lender or mortgage broker are not deductible.
7. The loan is being used to buy or build a primary residence.
8. The points were calculated to be a percentage of the principal amount of the mortgage (i.e. 1%).
9. The amount appears on the settlement statement (a form known as the HUD-1 Settlement Statement) or Closing Disclosure.

Apart from being all around helpful to most homebuyers during the initial purchase and taxes associated with buying a home, there are other perks of mortgage points. One of the biggest is that the deduction can be spread out over the life of the mortgage. This is especially helpful if you – for one reason or another – do not itemize your deductions. Another major perk is that points can be used for home refinancing.

That’s a lot to take in. Hope you found it helpful. Call me soon at [phone] and we can talk more about mortgage points in the home loan process.

Source: Salted Stone

*Skyline Financial Corp. and its loan officers are not tax advisors. Always consult a tax professional for details.

One of the main reasons I chose to work for Skyline Home Loans is because they make closing loans quickly such a priority. We have an incredibly hard-working and dedicated family here. In fact, Mortgage Executive Magazine just ranked us number 35 of the Top 100 Mortgage Companies in America for 2015. Our loan volume grew to more than $3.2 billion last year, a 48% increase over 2014.

That much loan volume doesn’t happen if loans are just sitting around waiting to be processed. Our entire operations and support team works hard every day to process loans accurately and quickly.

The type of loan you’re applying for and the complexity of your financial situation will ultimately determine the time it takes to close.

The good news is that some things are in your control… like, having all your documents in order, sharing as much information with me as possible during the process so we can address concerns before they become problems, and putting your patience and trust in me along the way.

For the rest of it – the moving parts that are out of your control like getting the home appraised, purchasing insurance and running a title check – I’m here to help guide and get it moving. And I will keep you updated along the way.

We’re always working on getting loans done better and I can’t wait to show you how! Call me to set up an appointment so we can talk soon. I can be reached at [phone]!

Last time, we shared about some lenders misrepresenting themselves to borrowers and what you should watch out for to protect yourself and find a reputable lender. Today, I want to share how I work to protect myself and my company from fraudulent claims of borrowers.

According to the data firm, CoreLogic, at the end of the second quarter of 2015 signs of fraud in mortgages decreased 8.9% year-over-year due to interest rates being lower than expected. There’s less incentive for borrowers to misrepresent themselves or their financial situation.

However, there are still those who try to deceive us. Fraud negatively impacts the mortgage industry and economies. Here are some “cases” I watch for:

A Case of Fake Identity

Identity fraud with home equity lending could become more prevalent, according to the senior director of fraud solutions at CoreLogic. Because home equity loans don’t always require face-to-face interaction, identity fraud is more likely.

A Case of Overvaluing the Home

With purchase loans on the rise, the risk of saying the home is worth more than it actually is, is increasing.

A Case of Overinflated Income

Loan application anomalies suggesting consumers might have lied about their incomes dropped more than 7% in the second quarter. But this deception could become more common if rates rise and it becomes harder for consumers to qualify with their actual incomes.

A Case of Unemployment

CoreLogic reports indicate that there were 7% fewer indicators that consumers were lying about jobs listed on their applications in the second quarter of 2015. But the fraud and anti-money laundering prevention department at Freddie Mac recently found in loan reviews that a there were many situations where the borrower was not employed at closing as represented in an approved application.

A Case of Undisclosed Debt

Consumers don’t always reveal all their mortgage debts during the application process, which is another indicator of fraud, and impacts the entire mortgage industry.

In the end, nobody benefits from fraudulent claims. I’m in the business to help quality people get quality loans! If you’re that type of person, let’s talk! Call me today at [phone].

Sources: National Mortgage News and Core Logic

At Skyline, we pride ourselves in doing business in an honest and straightforward manner. Unfortunately, in our industry, there are some ways in which lenders sometimes misrepresent or confuse things for buyers.

According to National Mortgage News, the following are 6 phrases that some lenders use that could be a red flag for buyers.

‘I Work For the Government’

Just because a lender funds a loan guaranteed by the government’s Federal Housing Administration (FHA), does not mean that the lender is a public official. Sometimes lenders may misrepresent themselves to borrowers and lead them to believe they are. This is actually a violation of the Consumer Financial Protection Bureau rules and a situation to be wary of if you ever encounter it.

‘You Need Medical Documentation’

If you are disabled and a lender asks you to provide documentation from a physician to prove your disability to qualify for a FHA loan, there’s something up! A request for medical records is considered a type of discrimination. Privacy laws protect your medical records and you should not be required to share them.

‘You’re Expecting? That May Be A Problem’

Government programs do not allow loans to be delayed or denied due to pregnancy or maternity leave. If you’re told that, it is time to find a new lender.

‘What a Deal!’

If you see rates advertised for less than what can actually be provided by a lender, then they are violating Consumer Financial Protection Bureau rules.

‘You Could Never Lose Your Home’

Unfortunately, it is possible. If you are using a Home Equity Conversion Mortgage and can’t meet the requirements outlined, such as maintaining the property, you could lose your home.

‘Yes, I’m Licensed’

You can check lenders’ credentials through the Nationwide Multistate Licensing System and Registry to make sure they have a license and have passed exams as part of their licensing requirements.

Next, we’ll take a look at how buyers sometimes confuse or complicate situations with the things they say too. Learning from other people’s mistakes along the way!

If you’re looking for a loan officer who will treat you the right way and be upfront and straightforward, I’d love to talk to you about how I can help. Call me at [phone] or email at rebecca@elitelendingteam.net anytime!

Source: National Mortgage News

Saving years and thousands on your home loan might be simpler than you think. I’m not talking about some kind of special offer or a gimmick. In fact, at Elite Lending we strive to help our clients understand all aspects of a loan, including paying it off early.

Some lenders may avoid the topic or try to sell you some kind of accelerated payment plan, but I want to help you save money where I can the good ol’ fashioned way – with proper planning.

Assuming your loan does not have any pre-payment penalties (ask me!), here’s two simple ways that may work within your budget for paying your loan down faster:

Make One Extra Payment Annually

Let’s say your monthly mortgage payment is $1,231.89. Throughout the year, set aside some extra spending money or a bonus check from work until you have saved up an extra $1,231.89. When you have it, send in an extra payment of that exact amount. Make sure you indicate that the extra payment is going toward your principal.

Pay More Each Month

If you’re able to pay even more than your monthly mortgage requires, try rounding up or paying an extra set amount monthly. Some people like to take their monthly mortgage amount, divide it by 12 and then add that amount to the payment monthly. Whatever works for you. The more you pay now, the less interest you’ll pay long term.

Figuring out all these calculations and deciding what’s best for your situation can be challenging on your own. Call me at [phone] or email me rebecca@elitelendingteam.net at anytime! Together, we can plan to save you time and money.

Skyline Financial Corp. and its loan officers are not financial planners. Always consult a financial professional for details.

Sources: interest.com and bankrate.com

When you begin the home buying process, you’ll quickly learn that different lenders offer you different loan programs and rates for loans that seem to be exactly the same.

You may get a personalized letter in the mail from a lender offering you an amazing low interest rate for a mortgage, or you see an online ad offering something similar and with an offer of no closing costs.

But when you inquire with a loan officer at your bank, the rate they offer you as an existing customer doesn’t match up. Why is that?

All Lenders Are Not Created Equal

Well, there a couple of reasons. When it comes to interest rates, not every lender is on equal footing. Banks have specific loan programs and rates offered by their organizations. Other lenders have access to more and sometimes better rates because they may have more funding available for loans from a variety of investors.

But this doesn’t necessarily mean that a bank or larger lender will be able to provide you with the best loan program. This is because each lender has different operating costs and overhead, which can result in higher fees. Every lender has a different pricing structure, which may make it confusing for you, the borrower.

Ads and Offers

The other factor that’s important to understand when shopping for a loan is the difference between an advertisement and a real loan offer.

Unfortunately, there’s still a lot of confusing advertising in our industry. In spite of all the new advertising regulations, many lenders use attractive “lowest rate” ads as a way to get you to call them. But when you read the small print and talk to them, more often than not, the interest rates being offered are only for “qualified borrowers,” which usually ends up meaning that 99.5% of borrowers can’t qualify that amazingly low rate.

For example, you may need a near-perfect credit score, put down 20% or more for a down-payment, have income within a certain bracket, and debts within a certain ratio, and the list goes on and on.

Compare Interest Rates and Terms That Are Best For Your Specific Situation.

The most important thing in selecting the right mortgage is to work with an experienced, loan officer who can realistically assess your financial situation. This means you’ll need to provide some information about your income, credit history, assets and debt, and maybe even some details about the home you’re looking to buy or refinance before providing you with a “real” interest rate.

When you’re ready to start the home loan process give me a call for a free pre-qualification review so we can determine the right home loan solution for you!

Private mortgage insurance (PMI) is an insurance policy used to protect lenders in the event that a borrower is unable to make payments on their mortgage. Certain home loans are viewed by lenders as being a higher risk than other loans. In the cases where loans are perceived as being riskier-ones in which the lender will need to cover 80% or more of the principal-the borrower is required to get private mortgage insurance (PMI).

A PMI is made available from two sources: the government and private insurers. The primary government mortgage insurer is the Federal Housing Administration (FHA), while the private insurers are corporations.

It’s important for homebuyers in [city2] to understand that the lender does not pay the premiums on this type of insurance policy; the borrower does. And if the borrower defaults on their home loan, the lender is the beneficiary.

The precise percentage rate of the private mortgage loan varies depending on your down payment, but it can be anywhere from slightly over 1% to just under 0.4% of the original loan amount, paid annually. Those numbers may not seem intimidating on the surface, but they add up.

For conventional loans, the PMI must remain in place until the loan reaches 78-80% of the Loan To Value (LTV). So in the case of a 30-year loan, the borrower would be responsible for making PMI payments for roughly 24 years. In a few instances, the PMI never goes away and lasts for the entirety of the loan payments.

The good news about PMIs is that from the year 2007 and on, the payments are tax-deductible. Created around the time of the housing crisis and economic downturn, this form of payment allowed the total annual payments to count as an itemized deduction (with a few restrictions in place, mainly the household income). If you have any further questions I am happy to help or if you’re ready to set up a free pre-qualification review, contact me today!