Donahue Real Estate Company



Posted by Donahue Real Estate Company on 12/23/2015

Have you always dreamed of owning a second home? While owning a vacation home may see like a huge expense, it can also provide some savings. There are special tax rules and regulations that apply to second properties that could have you vacationing on the cheap. Before you buy a second home you should consider how you will use it. The Internal Revenue Service will categorize the home for tax purposes on how it is used. Here are the ways it can be categorized: Residence: It will be considered a residence if you use it for personal housing at least part of the year. If your home is a residence you can deduct the mortgage interest under your vacation on line 10 of Schedule A. Investment: If the property is rented most of the year, it's considered a rental or investment property. In order to have a deduction on an investment property your rental deductions can't exceed gross rental income, less interest, taxes, and costs to advertise the property. If your income totals more than the rental income received you won't be able to list the loss (the excess expenses) on your income tax return. Another benefit of a rental property is that you may be able to deduct the value of your rental property over time. This is called depreciation. Depreciation is the wear and tear on a property over time. This can all be confusing so it is best to contact a tax advisor before purchasing a second home. There are some other key points to keep in mind: If the property is purely an investment, all the expenses are deductible against the rent. You don't have to claim income if you rent the property for less than 14 days a year. There are lots of other rules about timing and claiming a property as a residence or an investment. Always make sure to consult with your tax advisor.





Posted by Donahue Real Estate Company on 12/16/2015

One of the biggest things that can impact your ability to get a loan for a home is your credit score. Credit scores measure the risk a lender may take when deciding on a mortgage. If your credit score is not where you want it to be have no fear it's never too late to become credit worthy. Your credit score is also known as your FICO (Fair Isaac Corporation) score, it is one of the tools that lenders use to evaluate a borrower's ability or likelihood to repay a loan. Credit scores range from 300 to 850 points. Credit scores over 720 are often considered excellent.  Scores of 680 – 719 are considered good. Scores that fall between 620-679 are questionable and typically require more review by the lender. A score under 619 usually disqualifies you from getting the best rates or even a loan at all. Here are five ways to raise your credit score: 1. Obtain your credit score from the three major credit score reporting agencies. They are Equifax, Experian and Transunion. 2. Review your report and look for any discrepancies. Your report will also give you a good idea of why your score may be low. According to myFICO.com, credit score calculation is based on five key components: payment history, amounts owed, length of credit history, new credit and types of credit used. 3. Come up with a plan to improve the five key components. Payment history carries the most weight it makes up 35% of your score. So be sure to pay your bills on time. 30% of your score is determined by the use of your available credit. Only use 30% of your maximum credit limit for each credit card and revolving accounts, using anything over that hurts your credit score. 4. If you have any past-due bills, judgments or collection accounts make arrangements to pay them as soon as possible. Some creditors may accept a portion of an amount due as payment in full. 5. Minimize your requests for new credit. Credit inquiries make up 10% of your score and can ultimately bring it down.





Posted by Donahue Real Estate Company on 12/9/2015

The first step in home buying is getting a mortgage. Many home owners also find themselves in a maze when they start the refinance process. Navigating the mortgage process can be confusing. There is so much to know between rates, types of mortgages and payment schedules. Avoiding making a mistake in the mortgage process can save you a lot of money and headaches. Here is a list of the biggest mortgage mistakes that potential borrowers make. 1. No or Low Down Payment Buying a home with no or a low down payment is not a good idea. A large down payment increases the amount of equity the borrower has in the home. It also reduces the bank’s liability on the home. Research has shown that borrowers that place down a large down payment are much more likely to make their mortgage payments. If they do not they will also lose money. Borrowers who put little to nothing down on their homes find themselves upside down on their mortgage and end up just walking away. They owe more money than the home is worth. The more a borrower owes, the more likely they are to walk away and be subject to credit damaging foreclosure. 2. Adjustable Rate Mortgages or ARMs Adjustable rate mortgages or ARMs sound too good to be true and they can be. The loan starts off with a low interest rate for the first two to five years. This allows the borrower to buy a larger house than they can normally qualify for. After two to five years the low adjustable rate expires and the interest rate resets to a higher market rate. Now the borrowers can no longer make the higher payment not can they refinance to a lower rate because they often do not have the equity in the home to qualify for a refinance. Many borrowers end up with high mortgage payments that are two to three times their original payments. 3. No Documentation Loans No documentation loans or sometimes called “liar loans” were very popular prior to the subprime meltdown. These loans requires little to no documentation. They do not require verification of the borrower's income, assets and/or expenses. Unfortunately borrowers have a tendency to inflate their income so that they can buy a larger house. The problems start once the mortgage payment is due. Because the borrower does not have the income they are unable to make mortgage payments and often end up face bankruptcy and foreclosure. 4. Reverse Mortgages You have seen the commercials and even infomercials devoted to advocating reverse mortgages. A reverse mortgage is a loan available to borrowers age 62 and up. It uses the equity from the borrower’s home. The available equity is paid out in a steady stream of payments or in a lump sum like an annuity. Reverse mortgage have can be dangerous and have many drawbacks. There are many fees associated with reverse mortgages. These includes origination fees, mortgage insurance, title insurance, appraisal fees, attorney fees and many other miscellaneous fees that can quickly eat at the home’s equity. Another drawback; the borrower loses full ownership of their home and the bank now owns the home Avoiding the pitfalls of the mortgage maze will hopefully help you keep in good financial health as a home can be your best investment. .





Posted by Donahue Real Estate Company on 12/2/2015

If you are thinking of adding an addition to your home there are some things you will wants to be aware of. If you decide to add a new space, ask yourself the following questions: * Can I finance the home improvement with my own cash or will I need a loan? * How much equity is in the property? A fair amount will make it that much easier to get a loan for home improvements. * Is it feasible to expand the current space for an addition? * What is permissible under local zoning and building laws? Despite your deep yearning for a new sunroom or garage, you will need to know if your town or city will allow such improvements. * Should I make the improvement myself or hire a contractor? Many homeowners consider going to job alone to save money. Consider how much time you have, your level of expertise or willingness to handle the job, amount of help from friends or relatives, and how much you want, or need, to save by doing the job yourself. You could save up to 20 percent of the project cost through your own hard work. Be aware, however, that you may need to call in the pros. Going it alone can sometimes lead to spending more time and money. if problems arise. Most home improvement experts suggest that homeowners who do not have a lot of experience should stick to painting, minor landscaping, building interior shelving, and other minor improvements.





Posted by Donahue Real Estate Company on 11/18/2015

If your credit score could use a boost it isn't as simple as just changing bad financial behaviors. Increasing your credit score is a process that takes time. The time it takes to improve your credit history can vary. Late payments can remain on your credit report for seven years, but typically if you clear all past-due debts and pay on time from then on, your score can begin to recover quickly. One late payment doesn't hurt you that much but a pattern of bad payments will really hurt you.  If you have a few late payments continue to use credit and pay on time every time. Demonstrate that you are managing your fiances well and your scores will begin to climb. If you have suffered a bankruptcy the effects can be long-lasting. According to myFico.com, a Chapter 13 bankruptcy can linger for seven to more than 10 years on your report. A Chapter 7 bankruptcy, or total liquidation, can affect your record for 10 years. It is vital to constantly monitor your credit report and review it for accuracy. You can obtain your report for free once every twelve months from annualcreditreport.com.