Rates for a standard 30 year fixed rate mortgage have risen from 2.84% at the beginning of March to 3.09%.  This is the highest level that the mortgage rate has hit since June of 2020. There is no reason for borrowers to panic. This rate increase is common in the mortgage business and represents a monetary change of only a few cents per thousand in the monthly payment.

The Federal Reserve indicated that it won’t raise interest rates until 2023 at the earliest, even though some observers have voiced concerns about rising inflation.  As of now, seven of the 18 Fed officials expect a rate hike to come in 2023, while four think one could happen next year.

INVENTORY REMAINS AT HISTORIC LOW
Housing Inventory  – March 28, 2021
– 351 homes available for sale in the five county greater Lansing area.
– 322 homes have accepted offers, awaiting inspections .
– 487 home are listed as Pending,  meaning they have passed inspection are waiting
on a  closing date.
– 7,093 homes have closed in past 12 months

Mortgage rates remain below 3% for the 30-year-fixed-rate mortgage as we close out the month of August 2020. First time buyers are enthusiastically looking to home ownership as an alternative to renting and current homeowners are taking advantage of money saving refinancing options.  So, what does this mean to you, the homebuyer or homeowner?  If you have good credit, steady employment, and a sizable down-payment, you’re in great shape to get or refinance a mortgage loan.

Q: Will my mortgage’s interest rate be higher than the one advertised?

A: When you see an ad for a low interest rate, notice the disclaimer saying this is the best possible rate. This rate goes to loan applicants who are relatively debt free, have a credit score of at least 750, and a down payment of 20% or more.  When your credit history and cash reserve is not that spectacular, you’re considered more of a risk so your interest rate will be higher.

Q: Must a first-time buyer have a 20% down payment?

A: The best interest rates go to buyers having a down payment of 20%, but there are plenty of ways to put down less and still get a mortgage.  A Federal Housing Administration (FHA) loan lets borrowers put down as little as 3.5% with a decent credit score and steady employment for at least two years. Active or retired military (or a surviving spouse of a veteran) can apply for a VA (Veteran Affairs) loan that allows 0% down.

For non-veterans, the State of Michigan as well as most banks and credit unions offer loan programs that enable borrowers with low income to receive a down payment subsidy.

Q: Is a 30-year fixed-rate loan the best option?

A: The 30-year loan with a fixed interest rate is the best mortgage for most home buyers. Adjustable-rate mortgages are often discouraged, but the lower interest ARM makes sense if you plan to move before the rates adjust to the full rate. An ARM may also make sense if you can’t afford a home with a higher rate fixed-rate mortgage.

A 15-year loan greatly reduces your interest payout, if you can afford a monthly payment that is approximately 30% higher than that of a 30 year mortgage. The upside to a 15 year mortgage is that its lower interest rate (2.46%) and shorter term will yield a savings of approximately 75% in interest over the life of the loan.

Q: What is private mortgage insurance?

A: If you can’t afford to make a 20% down payment, you’ll have to pay private mortgage insurance. PMI is a protection for lenders if the borrower is unable to pay the mortgage. Since your lender loses money, PMI helps to offset that loss. You can expect to pay about 0.3% to 1.15% of your home loan in PMI.  This can be a sizable sum, but it makes sense if you want to buy a home now rather than wait until you can amass a bigger down payment.

Tax brackets, credits, and deductions change slightly each year, and sometimes they change dramatically with new laws. Though there haven’t been any major changes in 2019 that will affect your 2019 tax return, there are some recent changes to things like mortgage interest deductions and personal deductions you should keep in mind. Here’s what homeowners need to know about filing taxes in 2020.

This newsletter post is not legal or financial advice.
Always consult with a tax expert before filing your taxes.  

The Basics for Tax Filing in 2020

Last year, all taxpayers saw a number of changes to their tax returns from President Trump’s Tax Cuts and Jobs Act (TCJA). These changes are still in effect, but filing your taxes this year in 2020 will be very similar to last year. To recap, here are some of the biggest changes from the TCJA:

• The personal exemption was eliminated and standard deduction increased: $12,200 for individuals, $18,350 for heads of household, and $24,400 for married couples.
• Deductible state, local, and property taxes are now limited to $10,000
• Mortgage interest debt ceiling reduced from $1.1 million to $750,000

When are Taxes Due in 2020? 

One of the most important things you need to know about filing taxes in 2020 is when your tax return is due. Your 2019 tax return is due on Wednesday, April 15, 2020, unless you file for an extension. It’s a good idea to get necessary documents together well before then, so you have time to track down anything that’s missing.

What Documents Do Homeowners Need to File Taxes in 2020? 

If you are employed, you’ll need your W-2s to complete your taxes, as well as other documents for other types of income or investments. To claim tax credits and deductions specifically for homeowners, you’ll need a few different documents.

• Form 1098 for the home mortgage interest deduction
• Records of property taxes paid if you itemize your return
• Home equity loan interest paid
• Records of home improvements and home improvements materials

Tax Credits and Deductions for Homeowners in 2020

All of these tax credits and deductions for homeowners in 2020 are only available on an itemized return. Since the standard deduction increased after the Tax Cuts and Jobs Act, it might not be worth it to itemize. You’ll want to add up all the deductions you could get from itemizing, including deductions for healthcare expenses, educational expenses, and other expenses, and see if you’ll get more from this than your standard deduction.

Deducting Mortgage Interest on Your 2019 Return

The mortgage interest deduction is one of the most important things homeowners should know about filing taxes in 2020. If you own a home, the interest that you pay on your mortgage is deductible. Your lender will provide Form 1098 showing how much you paid on mortgage interest. This deduction is for mortgage interest only, so you can’t deduct things like mortgage insurance, homeowners insurance, title insurance, or other costs. Also, you can only deduct interest on $750,000 of debt or less. If your home is more than this, only a portion of the mortgage interest you paid is deductible. You can use this deduction for a primary or second home, with some stipulations.

You’ll need to itemize your return to benefit from this deduction, so if your mortgage interest is less than your standard deduction ($12,200 for single people and $24,400 for married couples) then it might not be worth it to take this deduction. You’ll want to add up the other itemized deductions you could take advantage of to find the biggest benefits.

Deducting Home Equity Loan Interest on Your 2019 Return 

Before the TCJA, you could have deducted interest from your home equity loan regardless of what you used the loan for. Now, you can only deduct this interest if you used the loan to improve your home value. For example, if you purchased a fixer-upper intending to remodel and renovate it, and you took out a home equity loan to do it, you could deduct the interest you pay. This interest is deductible in the same way as your mortgage interest (see above), as long as it is used to repair or remodel your home. The deductible interest is subject to the same ceiling as the previous deduction, and you must combine the total debt. This means the total debt you can deduct interest from cannot be greater than $750,000.

Deducting Property Taxes and Local Income Tax 

Before the TCJA, a homeowner could deduct all of the property taxes they paid throughout the year. It was also possible to pay property taxes early if you had a good year, or expected a tougher time later on. The TCJA put a $10,000 cap on deductible property taxes as well as state and local income taxes. This means, if you add up your property taxes and your state and local income taxes, you can only deduct $10,000 of this.

These important deductions for homeowners in 2020 can help you keep more of your hard-earned money. These deductions can also make it easier to own a home, and make your budget more manageable. Talk to your tax preparer about tax deductions you can use as a homeowner, and any documents you’ll need to claim them.

Article courtesy of Berhshire HomeServices Tomie Raines Realtors

Statistics vary by area, but experts estimate that between 30 and 60 percent of taxable property in the United States is over-assessed, and this leads to higher property tax bills. Yet typically fewer than 5 percent of taxpayers challenge their assessments, even though the majority who do so win at least a partial victory when properly prepared.

Are your property taxes too high?
Your 2020 tax assessment, arriving in February, will outline county, city and school taxes, as well as special assessments. Search online for your county and/or local taxing authority assessor’s office. This will provide the property information used to assess the tax value of your home. Check the accuracy of the assessor’s math and description of your property. Compare this to your bill and make sure your square footage, lot size, number of bedrooms and baths are listed correctly.

Mistakes Happen
Assessor records were once recorded on index cards. Errors have been made when this data was transferred to modern electronic records. A two-story may be recorded as ranch, the record may indicate a finished basement where there’s a crawl space, or the stated square footage may be incorrect.

Prepare Your Appeal
The assessor will give you an opportunity to file an appeal. This is usually in March. Your tax statement will provide directions for arranging a meeting with the assessor.

Your meeting won’t go well unless you’re prepared with a rational argument. Your Berkshire Hathaway HomeServices Tomie Raines Realtor is a professional who may be able to help by providing you with a comparable market analysis of similar neighborhood homes sold during 2019. Choose three to five properties with the same age, size, and condition of your home, noting any differences between the homes, such as additions or other improvements.

Always remember that the assessor’s judgement is based on the numbers and details.
Being prepared is your best argument.