Targeting the Mortgage Interest Deduction

It's obviously going to be a Herculean task for Congress to balance the budget and reduce the deficit. It's sort of like the country song lyric that goes "everyone wants to go to Heaven but nobody wants to go now." It is estimated that the mortgage interest deduction cost the government $100 Billion last year which is why it is a target for cuts.

The Mortgage Interest Deduction has been part of Income Tax laws in this country since 1913. The United States of America is one of the few countries in the world that allow such a deduction. Our goverment has always supported homeownership as is evidenced in the different tax benefits it receives.

• Mortgage interest deuction up to $1,000,000 in acquisition debt on a principal residence and second home
• Deduction of interest on Home Equity debt of $100,000 over acquisition debt used for any purpose
• Capital gain exclusion on up to $500,000 for married couples filing jointly and $250,000 for single homeowners
• Favorable long-term capital gain rates if gain exceeds exclusion limits
• Property tax deduction

There is an interesting relationship between a good economy and a healthy housing market. Contrasted to profits from the stock market which tend to be plowed back into other investments, profits from home sales tend to be spent on consumer products that directly benefit the economy.

The National Association of REALTORS supports the MID and reports that one job is created for every two homes sold. It further states that $60,000 is pumped into the economy for each home sold and that homeownership accounts for over $2 Trillion of the U.S. gross domestic product.

American homeowers are currently paying 80-90% of all federal income tax collected. Some economists believe that a healthy housing market is a leading indicator for economic recovery and that tampering with a significant homeowner benefit like the mortgage interest deduction would hurt the economy.

Financing for Dummies!

The fear of rejection, the horror stories from friends, and the general mistrust of mortgage companies have made the process of getting a loan more intimidating than it actually is!

The key is education! If you know what to expect, you will know when something doesn't seem right. There are 3 costs that are associated with buying a house: the down payment, the closing costs, and the prepaid expenses.

1. The Down Payment amount is determined on what kind of loan. Remember FHA still only requires 3.5% down.
2. Closing Costs are the fees associated with getting a mortgage. These fees include the mortgage and title company fees, the appraisal, credit report and attorney fees. If they say no closing costs, be wary. But be aware that some fees can be absorbed in the loan or paid by the seller but the fees are still there.
3. Prepaid Items would include prepaid interest, property taxes, homeowners insurance. These fees are dependent on what kind of loan you are getting in setting up an escrow or not having one.

Since we have fewer loan options than we had in the past, there are still two main loans, FHA and VA which are government loans, and Conventional loans. There are fixed rates and adjustables but with interest rates so low, there is no need for adjustables. We are seeing a few second loans to go with the first lien to make up a 80% loan value, but with PMI (private mortgage insurance) and MIP (Mortgage Insurance Premium on FHA) are now both deductible costs as they were not before.

A Professional Realtor can guide you to a qualified and helpful lender for your loan. Call us for references!

Need a Job?

Where’s the best place to get a job? The US Bureau of Labor Statistic’s Metropolitan Area Jobs Report which was published in October, 2008, ranks the top 20 cities based on their unemployment rates and job growth potential:

Madison, Wisconsin was first with Washington, D.C. coming in as second, but Houston and Dallas came in 9th and 10th in that order.

Are you afraid of losing your job? Even if you are not completely sure of your job’s future, you can still buy a house if you have your job. Did you know there is a Loan that is available now that if you lose your job in the first 2 years of the loan that your principle and interest will be paid by the mortgage company for the first 6 months until you find employment? Now, can you beat that?

If you would like to know more about this Risk Free Mortgage, just email us at Betty@HomesByBetty.com and we will get some more detailed information to you. Am sure the interest rates are higher on the loans but for peace of mind, it might work for you. In the Book, Killing the Sacred Cows, the author suggested that if we really think well of ourselves, we would over-insure ourselves! That way having insurance for everything in our lives, we can live a stress-free life…we are covered! Good concept for someone who lived most of their lives without having insurance but being self insured!