Tax Changes for 2008 - Apr 08

Plan now for 2008 tax changes to save money on taxes

~ More money for retirement: You can contribute up to $5,000 to an IRA and $6,000 if over 50 years old

~ No state sales tax breaks: The provision allowing tax payers to deduct state sales tax expired in 2007

~ More tax breaks for retirement: Married tax payers with joint incomes up to $85,000 will be allowed to deduct IRA contributions if filing jointly.  Individuals with incomes up to $53,000 can take the deduction

~ Higher standard deductions: If you are one of the two-thirds of taxpayers who do not itemize, you will be able to deduct $10,900 as a married couple filing jointly or $5,450 for singles

~ No tax on some capital gains: Joint filers whose taxable income does not exceed $65,100 and single filers with income that does not exceed $32,550 do not have to pay any tax on capital gains they realize in 2008 – the rate for other tax payers remains at 15 percent

~ More time to sell your house when you lose a spouse: Tax payers who lose a spouse now have up to 2 years after that death to take the maximum exclusion of $500,000 in gain on the sale of a principal residence.  The other requirements for the exclusion must have been met before the death

~ Less money back for some hybrid cars: While buying a hybrid car can still save you on your taxes, the tax credit has been phased out on many popular models such as the Toyota Prius.  Look at the 2008 Model Year Hybrid list at www.irs.gov before you buy

~ Tougher tax for kids: Children under 18 or full time students up to 24 years old will pay taxes at their parent’s tax rates for investment income over $1,700. This does not apply to wages a child earns

~ Higher cut offs for Social Security: The maximum amount of earnings subject to social security tax increases to $102,000 in 2008.

~ More money for gas: The standard mileage deduction for businesses increase to 50.5 cents per mile. Mileage rates for medical and moving purposes actually falls to 19 cents per mile.

Home Financing Basics - Mar 08

Home Financing 101
Buying a home? Welcome to the wonderful world of home financing. A home mortgage is a long term loan that allows you to gain control of a very expensive asset without using all of your own money. The property becomes collateral for the loan which ensures that there is sufficient value to justify lending a large amount of capital. The mortgage will be a loan for a long period of time. This is referred to as the “life” of the mortgage or the “amortization period.” Typically the life of the loan will be for 10 to 25 years. Though some mortgages can extend to 50 years or more. The life of the mortgage may be for a long period of time but the term of the mortgage will be shorter. The term of the mortgage is the time period for which the mortgage rates apply. This is usually 5 years. At the end of the term your mortgage must be refinanced. Mortgage terms are shorter due to fluctuations in interest rates. The rates for a mortgage are largely dependant on current interest rates. Your mortgage will either lock in a rate for the 5 year term or the rate will float with changing interest rates. At the end of the term you will refinance your home with a new mortgage at the interest rates that apply at that time.

Why Get a Pre-Approved Mortgage?
Being pre-approved for your mortgage makes the home buying process easier. This will allow you to know what the maximum price you can spend on a home. Having your financing already set-up will impress the seller of the home and may make your offer more attractive over a buyer that has yet to apply for a mortgage. Getting a mortgage is easier than ever. Interest rates are low and lenders are competing for your mortgage business. You can apply for a mortgage online and receive approval in a short period of time. Online mortgage brokers like Loan.com can help you find the best rates on a mortgage regardless of your credit history.

Types of Mortgages

Conventional Mortgages:
A conventional mortgage will have a fixed interest rate. They typically come in 10, 15 or 30-year loans. These conventional loans used to require 20% down but many today will accept a lower down payment. Putting down 10% is what most home buyers do, though you will be required to purchase private mortgage (PMI) insurance if you put down less than 20%.First-time homeowners will find that there are many mortgages available to them that require less than a 10% down payment. (Highly recommended mortgages for those on long term fixed incomes).

Adjustable Rate Mortgages (ARM):
An adjustable rate mortgage will have an interest rate that changes with current market rates. An adjustable rate mortgage is most useful when you are planning to own the home for a short period of time. In today’s low interest rate climate a locked in rate may be advisable if you plan to own the home for many years. This will keep your payments steady as interest rates climb over the coming years. Before committing to an adjustable rate loan ask yourself how you can afford your mortgage payment to increase by should rates rise significantly before the end of your term. (Be cautious of adjustable rate mortgages since they can adjust upwards increasing monthly payment amounts significantly: Be sure that you are able to cover any future increases before choosing an ARM).

Bridge Loan:
A bridge loan is used when you purchase a home before your current property sells. The bridge loan is temporary until a permanent one is in place. Carrying a bridge loan will mean making two mortgage payments on the two properties till on of them sell. This will greatly increase your monthly expenditures while the bridge loan is in place so be certain you can afford to make both payments.

Assumable Mortgages:
An assumable mortgage is a loan that stays with the property. It is simply transferred to the qualified home buyer. This means considerable savings for the next buyer. It may include no points, no interest rate change and low closing costs. Assumable mortgages are often the most valuable part of a property. FHA loans given before December 1, 1986 and VA loans given before March 1,1988 are completely assumable to the qualified buyer. This means that you can take the loan along with the real estate, just as it stands.

FHA Mortgages:
Loans through The Federal Housing Administration (FHA) help low-to-moderate income home buyers purchase homes with low down payments (approximately 3%). You can use a gift or unsecured loan for the down payment and closing costs. Also, these loans are usually assumable (along with the current interest rate) by the next qualified home owner when you sell your home, which is an added benefit when it comes time to sell.

Balloon Mortgages:
The Balloon Mortgage has a fixed rate for a certain time frame, typically seven years, followed by a “balloon” payment requiring repayment of the entire home loan balance. Interest rates are generally lower than conventional loans. People may choose this type of loan because they plan on either selling the home, paying it off, or refinancing before the balloon payment is due.

VA Mortgages:
Veteran Affairs loans are great because they provide the opportunity to buy a home with no down payment. They are offered up to a predetermined loan amount (not more than $200,000) and are assumable by qualified buyers. To qualify for a VA loan, the veteran must be on active duty or have a discharge (other than dishonorable), along with one of the following:

• 180 days active (not reserve) duty between September 16, 1940 and September 7, 1980
• 90 days service during a war (Korean, Vietnam, Persian Gulf, etc.)
• Six years service in the National Guard