Is Interest on Home Equity Loans Tax Deductible?


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The Internal Revenue Service recently advised taxpayers that interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not. Click here to view the announcement.  Here are three examples from the announcement:
  • Example 1: In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home with a fair market value of $800,000.  In February 2018, the taxpayer takes out a $250,000 home equity loan to put an addition on the main home. Both loans are secured by the main home and the total does not exceed the cost of the home. Because the total amount of both loans does not exceed $750,000, all of the interest paid on the loans is deductible. However, if the taxpayer used the home equity loan proceeds for personal expenses, such as paying off student loans and credit cards, then the interest on the home equity loan would not be deductible.
     
  • Example 2: In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home.  The loan is secured by the main home. In February 2018, the taxpayer takes out a $250,000 loan to purchase a vacation home. The loan is secured by the vacation home.  Because the total amount of both mortgages does not exceed $750,000, all of the interest paid on both mortgages is deductible. However, if the taxpayer took out a $250,000 home equity loan on the main home to purchase the vacation home, then the interest on the home equity loan would not be deductible. 
  • Example 3: In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home.  The loan is secured by the main home. In February 2018, the taxpayer takes out a $500,000 loan to purchase a vacation home. The loan is secured by the vacation home.  Because the total amount of both mortgages exceeds $750,000, not all of the interest paid on the mortgages is deductible. A percentage of the total interest paid is deductible.
PLEASE NOTE: THIS ARTICLE AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. FOR MORE INFORMATION ON ANY OF THESE ITEMS, PLEASE REFERENCE IRS PUBLICATION 936.

Source: CMPS Institute

How to Calculate the After-tax Cost of Your Mortgage


Article Image Homeowners who itemize tax deductions can deduct the interest on up to $750,000 of mortgage balances used to buy, build or improve a qualified home.  Here’s how to figure out the impact of that tax deduction:

What’s your marginal income tax bracket?
In our example, we’re going to use a tax bracket of 24%.

What’s your mortgage rate?In our example, we’re going to use a mortgage rate of 5%.

What’s your after-tax interest rate?Step 1: Express your tax bracket as a decimal: 24% = 0.24
Step 2: Subtract that number from the whole number one: 1 – 0.24 = 0.76
Step 3: Multiply that number by your interest rate: 5% x 0.76 = 3.8%

In this example, a 5% mortgage costs 3.8% after-tax for someone in a 24% tax bracket.

Contact me for more info or to explore your options!

PLEASE NOTE: THIS ARTICLE AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. FOR MORE INFORMATION ON ANY OF THESE ITEMS, PLEASE REFERENCE IRS PUBLICATION 936. Also, this article is not an offer or commitment to lend you money, and it is not an advertisement for a specific mortgage or a specific interest rate. Payment examples don't include property taxes and home insurance.

Source: CMPS Institute

Five Pitfalls to Avoid When Buying a Home


Here are five of the most common pitfalls associated with buying a home:
  1. House shopping before getting a solid mortgage approval: low housing inventory in many markets means that you'll be competing with multiple offers when you find a home that you like.  Getting a solid mortgage approval BEFORE you start house shopping allows you to make a stronger offer when you find a home you like.  This places you in a much better negotiating position, and it could possibly save your deal.
  2. Not considering the costs of sale (8% +): when you sell your house in the future, you will most likely need to sell the house for at least 8% - 10% more than what you paid for it just to break even and cover the real estate commissions and transfer taxes on the sale.  If your house goes up in value by the long-term average of 3% per year, you would likely break even in 2-3 years.  That's why it's important to make sure that buying this home is part of a longer-term strategy.
  3. Overlooking the Costs of Improvements, Utilities & Maintenance: have you considered the costs of improvements, utilities, and ongoing maintenance expenses?  That's why it's important to:
    • Get your home properly inspected before the closing
    • Investigate the cost of utilities, and make sure to budget for them
    • Budget 1%-2% of the home's value for annual maintenance expenses
  4. Choosing the wrong down payment strategy: a study was recently conducted by the Federal Reserve showing that a home buyer's down payment strategy is eight times more impactful on housing affordability than the mortgage interest rate.  That's why it's important to consider your down payment options carefully.
  5. Shopping for a mortgage vs. shopping for the right mortgage professional: as you can see, the right mortgage professional can help you consider things that you may otherwise overlook during the homebuying process.
Your mortgage is most likely going to be your single largest debt, and your home is most likely going to be your single largest investment. That’s why it's important to work with a qualified mortgage professional when considering your options.  Contact me so we can get started!

Source: CMPS Institute

Why Your Down Payment Strategy Matters More Than You Think


Article Image The New York Federal Reserve Board conducted a 2015 study on the factors impacting housing affordability (click here to view).  The interesting thing is that housing affordability among people who currently rent improves by a whopping 40% when down payment requirements are reduced.  However, a 2% difference in interest rates has only a 5% impact on housing affordability.

This means that your down payment strategy has EIGHT TIMES MORE IMPACT on your home affordability vs. the interest rate on your mortgage.  This is great news for homebuyers who qualify for some of the low down payment programs available in today's mortgage market!

Please contact me for further information on how this may impact you.  Source: CMPS Institute

Four Questions to Ask Before Choosing a Mortgage or Buying a Home


Article Image These four questions can help you make smarter mortgage and housing choices:
  1. Why is it better to buy a home right now vs. renting a home?  Buying a home usually requires more upfront capital, more ongoing expenses and a longer-term commitment.  Make sure to run the numbers with a professional to evaluate whether you'd be better off buying vs. renting.
  2. How can I make sure this fits into my short-term and long-term budget?  Make sure to compare your options when it comes to:
    • Choosing a down payment amount and strategy
    • Choosing a monthly payment scenario
    • Choosing a price range for your new home
  3. How will this financial decision impact other areas of my life?  Make sure to think through how your cash flow situation will impact:
    • Children’s college funding
    • Retirement planning
    • Taking care of elderly parents
    • Other large financial purchases or commitments
  4. What mortgage and home buying strategy will result in less overall financial risk? The mortgage is most likely going to be your single-largest debt, and your home is most likely going to be your single largest investment. That’s why it's important to evaluate and compare your options with a mortgage professional.
Contact me so we can get started!

Source: CMPS Institute

Three Reasons Why Homebuyers Should Consider Seller-Paid Points

          
"Seller-paid points" are where the seller pays points to reduce the interest rate on your mortgage.  Consider a home where the list price is $300,000 and the seller is willing to accept a bottom line of $291,000.  If the seller reduces the price by $9,000, you would be able to purchase the home for $291,000.  Both you and the seller would be happy.  However, what if you purchase the home for $300,000 and ask the seller to contribute $9,000 toward your closing costs?  The seller still walks away with his/her bottom line of $291,000.  However, there are three extra benefits to you in this scenario:

#1 - Lower Interest Rate and Lower Monthly Payment

Your mortgage interest rate would likely be 0.5% - 0.75% lower if the seller pays 2 or 3 points on your behalf. This means that your monthly payment will likely be lower as well. This is true even though your mortgage balance would be slightly higher, and based on a $300,000 purchase price vs. $291,000 purchase price.

#2 - Less Interest Cost Over the Life of the Loan

Your total savings over the life of the loan is likely to be significantly more with seller-paid points vs. a reduction in purchase price. In our example, if you purchase the home for $291,000, you would save $9,000 vs. the list price. However, if you purchase the home for $300,000, with $9,000 in seller-paid points, your total savings over 30 years would be approx. $27,000. This is three times as much impact for you!

#3 - Easier to Qualify for a Mortgage

Your interest rate, your APR, and your monthly payment would all be lower with seller-paid points vs. a reduction in purchase price. This means that your debt ratio would also be lower and it would likely be easier for you to qualify for financing.

So there you have it! Let me know if you'd like for me to run some numbers and see if seller-paid points might make sense in your situation.

Source: CMPS Institute

Why Housing Inventory Matters to You


Article Image Housing inventory measures how many months it would take to sell all the houses currently listed for sale, at the current pace of home sales.  For example, if there are 400 homes currently listed for sale, and an average of 100 homes are selling each month, there would be a 4-month housing supply.  This is because it would take 4-months to sell all the homes currently listed for sale.

A buyer’s market is anything more than 6 months.  If the inventory numbers are a little higher than 6 months, buyers have a little more negotiating power than sellers.  But if the inventory numbers are a lot higher than 6 months, buyers have a lot more negotiating power than sellers.  In this case, home prices are very likely to move lower, and sellers will most likely accept an offer for less than the listing price.

A seller’s market is anything less than 6 months.  If the inventory numbers are a little less than 6 months, buyers have a little more negotiating power than sellers. But if the inventory numbers are a lot lower than 6 months, sellers have a lot more negotiating power than buyers.  Home prices are very likely to move higher, and buyers will most likely be competing with multiple offers (in some cases, dozens of offers), on the house they want.


Source: CMPS

Three Ways to Avoid Getting Outbid on Your New Home


Article Image Bidding for a new home can get pretty fierce in today's market.  Here are three potential solutions to avoid getting outbid on your new home:
  1. Turn in your loan paperwork BEFORE you place an offer.  In many cases, you are bidding against cash buyers who don't need to wait for financing approvals.  Look at it this way:  if you were the seller, would you prefer to do business with a buyer who needs to wait for financing approvals or a cash buyer who can close the deal quickly?  With that in mind, it's important to be proactive and provide your mortgage lender with things like your source of down payment funds, your asset documentation, your credit report and your income documentation.  This way, you'll be in a better position to close the deal quickly and compete with those cash buyers.
  2. Pay cash, but do it right.  Keep in mind that you only have 90 days after closing to place a mortgage on a property that you bought with cash if you want to secure your tax deduction.  (For more info, see my article entitled, 90 Day Rule for Cash Buyers.)  In order to get that loan approval after closing, you'll need to document the source of funds that you used for your cash purchase.  Talk to me for more details so that you can avoid problems down the road.
  3. Write your offer correctly.  Mortgage lenders are implementing some pretty significant changes this year to the legal requirements for mortgage paperwork as part of the Dodd-Frank Act. When real estate agents and loan officers aren't familiar with some of these changes, it causes unnecessary delays in the loan process. That's why it's important to work with someone like myself who keeps up to date on all the new requirements. I can work with your real estate agent to make sure you write your offer correctly in the beginning so that you won't have to redo the paperwork and delay the closing.
Contact me so that we can further explore any/all of these ideas together!

Source: CMPS Institute

How to Understand Your Home Appraisal ($200k)


Article Image A home appraisal is an estimate of your home's value.  It's simply a professional appraiser's opinion of what he/she thinks your home may be worth.

Why Do Appraisals Matter?

Mortgage lenders base your loan amount on the LESSER of the appraised value or the purchase price. Here's an example:
  • You sign a contract for a $200,000 home with a $10,000 (5%) down payment.  Your loan amount, in this case, would be $190,000 (95% of the purchase price).
  • The appraisal comes back at a value of $190,000
  • The mortgage lender is no longer willing to lend you $190,000 because that would represent 100% of the appraised value.
  • The lender reduces the loan amount to $180,500, which represents 95% of the $190,000 appraised value.
  • You have two options:
    • Make up the difference yourself (purchase the home for $200,000 and come up with a down payment of $19,500); or,
    • Ask the seller to reduce the purchase price to make up the difference (purchase the home for $190,000 instead of $200,000, and use a down payment of $9,500)

What if You Don't Agree With the Appraiser's Opinion?

Tough luck!  No, seriously.  Although you and I are entitled to our own opinion on the matter, the mortgage guidelines require the loan amount to be based on the LESSER of the appraised value or the purchase price.

How Does the Appraiser Determine Value?

Appraisers are usually required by the lending guidelines to compare your home with similar homes that have sold within the past 6 months.  Then, they make adjustments based on the differences in the comparable sales (see illustration below).


In this example, Comp 1 sold for $172,000, but it didn't have a finished basement.   So the appraiser adjusted the sales price up by $20,000 to $192,000.  This means that the appraiser thinks Comp 1 could have sold for $192,000 if it was more like your home.  Comp 2 had a basement that was 50% finished, and it only had a 1 car garage.  However, it's a little larger than your home.  All things considered, the appraiser adjusted the sales price up by $10,000 to $191,500. This means that the appraiser thinks Comp 2 could have sold for $191,500 if it was more like your home.  The only major difference between your home and Comp 3, is that Comp 3 is a little bigger than your home. So, the appraiser thinks Comp 3 could have sold for $188,900 if it was more like your home.  In this example, the appraiser thinks your home is worth $190,000 based on the comparable sales (and all the adjustments outlined above).

What does this mean for you?

Here are two things you may be able to do if the appraisal comes back different than your purchase agreement:
  • Option 1:  Renegotiate the sales price if permitted in your purchase agreement.  The benefit with this option is that you may save some money on the purchase price of the house.  The drawback is that you risk losing the deal because the seller may not agree to renegotiate.
  • Option 2:  Increase your down payment.  The benefit with this option is that you close the deal without worrying about renegotiating with the seller.  The drawback is that you'll need a larger down payment and you may be paying more for the house than it's worth.
This is probably one of the most important financial transactions of your life. My commitment is to communicate and strategize with you every step of the way.  Contact me for more info!
Source: CMPS

Two Reasons to Buy vs. Rent

          
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1: Cost of renting:

According to recent studies, rents have increased dramatically in recent years.  Vacancy rates are low, and the growth in renter households is high.  This means that landlords have greater pricing power when setting rents.

2: Cost of not owning:

The average rate of house price appreciation over the past 20 years has been over 3% per year.  In the past five years, house price appreciation in many markets for starter homes has been even greater.  At 3% annual house price appreciation, a $10,000 down payment on a $200,000 house could grow to $40,000 over a five-year time period.  That growth could be money that you would have lost by not owning a home. Click here to view house price trends in your local market.

Contact me if you’d like me to run a buy vs. rent analysis for your specific scenario!
Source: CMPS Institute

Three Ways to Get Prepared for Home Ownership

         
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1: Prepare Your Credit

Mortgage lenders typically require at least 24 months of good credit history in order for you to qualify for a mortgage.  It's normally a good idea to have a few credit cards, a few installment loans and a 24-month history of making rent payments on time.

2: Prepare Your Cash Flow

Mortgage lenders typically require less than a 43% debt-to-income ratio in order to qualify for a mortgage.  This means that your total monthly debt payments (including the new mortgage payment) should be no more than 43% of your monthly income.

3: Prepare Your Savings

Mortgage lenders typically require you to have a certain amount of savings in reserve in order to qualify for a mortgage.  Your savings should be in your account for at least three months in order to qualify, and any large deposits will need to be explained and documented.  The amount of the required savings will vary based on the loan program that you choose.  However, a good goal is to save enough for a 3%-5% down payment, plus 1-3 months of mortgage payment reserves.  For example, if your new mortgage payments will be $1,400 per month, you should probably aim to save approx. $4,200 plus the amount of your down payment.

Of course, each loan program has its own guidelines that may be different than what I've outlined above.  That's why it's important to speak to a professional who could help you consider your options and evaluate your specific scenario.  Please contact me for further information!

Source: CMPS Institute

The Opportunity Cost of Paying Cash


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When you pay cash for a property, you are missing out on the opportunity to earn a rate of return on that cash. In the illustration below, Option 1 is to pay cash for a $200,000 house.  Option 2 is to use $100,000 of cash, and a $100,000 mortgage.  If you go with Option 1, you’d be losing money by giving up the ability to earn a rate of return in an outside investment (such as stocks, bonds or another real estate property).  If you go with Option 2, you’d be losing money by paying interest.  You’d lose money either way.

These are the two questions you could ask yourself in order to find out which option would cause you to lose the least amount of money:
  • Question #1:  What would be my after-tax interest rate if I used a mortgage? Mortgage interest may be tax deductible.  For example, a 4.5% tax-deductible mortgage for someone in a 24% income tax bracket may only cost 3.42% after-tax (4.5% minus 24% tax benefit = 3.42% after-tax cost).  For more details, please see my article called, When is Mortgage Interest Tax Deductible?
  • Question #2:  What would be my after-tax rate of return if I keep my cash invested? Please see a financial advisor for more details on this.
If your rate of return on investments is greater than the after-tax cost of a mortgage, it may make more sense for you to use a mortgage and keep your funds invested. 

Please contact me for more details, or if you’d like for me to run a cash vs. mortgage analysis for your situation.

Source: CMPS Institute

30-Year vs. 15-Year Mortgage: Four Questions to Ask When Comparing Your Options


Here are four questions that can help you make a more informed decision when comparing a 30-year fixed rate mortgage vs. a 15-year fixed rate mortgage.

1 - What will I do with the difference in cash flow?

There are two main benefits that a 15-year mortgage has vs. a 30-year mortgage:
  • 1 - Fifteen-year mortgages often carry lower interest rates vs. thirty-year mortgages. This could save you some money over time. (See Figure 1 that illustrates what would happen if the interest rate on a 15-year mortgage was 0.5% less than the interest rate on a 30-year mortgage.)
  • 2 - Fifteen-year mortgages are paid off in half the time of thirty-year mortgages. This results in less interest over time and no monthly payments after 15 years.  (See Figure 1.)
Even so, you could accomplish similar results by investing the extra cash flow experienced from the lower payments on a 30-year mortgage. (See Figure 2.) Therefore, the main issue here is: what will you do with the difference in cash flow if you choose a 30-year mortgage? Here are three options:
  • Option 1: Invest the extra cash flow. This could be worth considering if you're looking to build your retirement account or a child's college fund.
  • Option 2: Spend the extra cash flow. This could be worth considering if you're looking to enhance your lifestyle or create more life experiences.
  • Option 3: Use the extra cash flow to bid higher or buy a more expensive house. This could be worth considering if you're facing tough competition from other buyers in your market and if home values are likely to increase.

2 - What's the outcome in 15 years?

As you can see from Figure 2, you'll probably come out ahead going the 30-year mortgage route if you invest the extra cash flow.  Further, you'll have access to the funds after 15-years as they'd likely be in a liquid investment account vs. being trapped in your home equity.  The bottom line is that you are in more control of your cash flow with a 30-year vs. a 15-year mortgage.

3 - What's the outcome in 30 years?

See Figure 3 for an illustration showing a comparison over a 30-year timeframe.  With the 15-year option,  we are showing what would happen if, in years 16-30, you invest the entire monthly payment you'd no longer have with the 15-year option.  With the 30-year option, we are showing what would happen if you simply invest the extra cash flow each month for 30-years.  As you can see from Figure 3, you'll probably come out ahead going the 30-year mortgage route if you invest the extra cash flow. 
 

4 - What's the risk with either option?

The main risk with a 30-year fixed rate mortgage is that you may not be disciplined enough to use the extra cash flow in a productive way that improves your life.  As with any other choice in life, it's up to you to stay the course.
The main risk with a 15-year fixed rate mortgage is that you may find it difficult to make the higher monthly payment if you run into financial challenges down the road.  So it really boils down to this: would you rather obligate yourself to a higher monthly payment with the 15-year option, or would you rather bet on yourself that you'll make smart choices with the extra cash flow you experience with the 30-year option?
In either case, this is probably one of the most important financial transactions of your life. My commitment is to communicate and strategize with you every step of the way.  Contact me for more info and I'll be happy to run the numbers for your specific situation!
*PLEASE NOTE: This article is provided for educational purposes. The examples and interest rates used in this article are for illustrative purposes only. The US government requires me to disclose that this is not a commitment to lend you money under Regulation Z, this is not an advertisement for a particular loan program or for particular interest rates, and you are not pre-approved or pre-qualified for any of the options illustrated in this article. You are welcome to complete a loan application to find out if you qualify and what loan programs you may qualify for. Also, keep in mind that these illustrations don't take into account the additional tax advantages that may be available with the 30-year option vs. the 15-year option. Finally, the scenario would be impacted by the rate of return you are able to earn on investments. We are using 6% in our example, but your actual return will vary depending on the type of investment you choose. Please see a CPA or financial advisor for more details.
Source: CMPS Institute

Fixed vs. ARM: Four Questions to Ask When Comparing Your Options

   
Here are four questions that can help you make a more informed decision when comparing an adjustable rate mortgage (ARM) vs. a fixed rate mortgage.

1 - How do ARMs work?

Most ARMs have an initial note rate that is fixed for a period of time... usually 3, 5 or 7 years.  See Figure 1 for details.

After the initial fixed period, your mortgage interest rate would change based on adding the then-current index, to the margin.  See Figure 2 for details.
It's important to pay attention to the "caps" on your loan because these caps indicate how much your mortgage rate can change after the initial fixed period.  See Figure 3 for details.

2 - What is my timeline for refinancing or selling the house?

The main reason why people consider ARMs is because they often have a lower interest rate than fixed-rate loans.  The risk is that the rate on your ARM could go up in the future, after the initial fixed period.  So if you think that you may sell the house or refinance within a 3-4 year timeline, you might want to consider a 5 year ARM to buy yourself a few extra years in case plans change.  Likewise, you may want to choose a 7 year ARM if your timeline is 5-6 years.  When considering your timeline, keep in mind that most people move or refinance within 7-8 years of buying a house.  Your timeline could be shorter or longer than that based on your objectives.
The bottom line is that paying the higher rate on a fixed rate mortgage is like paying for an insurance policy that you may not need... especially if you invest the extra monthly cash flow that you'll experience from the lower rate on an ARM.

3 - What will I do with the extra cash flow?

Here are three options if choosing an ARM will produce additional cash flow in your situation:
  • Option 1: Invest the extra cash flow. This could be worth considering if you're looking to build your retirement account or a child's college fund.
  • Option 2: Spend the extra cash flow. This could be worth considering if you're looking to enhance your lifestyle or create more life experiences.
  • Option 3: Use the extra cash flow to bid higher on a home or buy a more expensive house. This could be worth considering if you're facing tough competition from other buyers in your market and if home values are likely to increase.

4 - What is the risk involved with either option?

The main risk with an ARM is that your mortgage rate and monthly payment could go up after the initial fixed period. You could reduce the potential impact of that risk by choosing an initial fixed period that is a little longer than your timeline.  Also, make sure to understand the index used on your ARM so that you know what could cause your interest rate to go up or down in the future.
The main risk with a fixed rate loan is that you're losing cash flow NOW in exchange for the chance of saving money at some point down the road if you keep the loan for more than 3, 5 or 7 years.
In either case, this is probably one of the most important financial transactions of your life. My commitment is to communicate and strategize with you every step of the way.  Contact me for more info and I'll be happy to run the numbers for your specific situation!

Source: CMPS

How to Understand Your Home Appraisal ($500k)

    
Article Image A home appraisal is an estimate of your home's value.  It's simply a professional appraiser's opinion of what he/she thinks your home may be worth.

Why Do Appraisals Matter?

Mortgage lenders base your loan amount on the LESSER of the appraised value or the purchase price. Here's an example:
  • You sign a contract for a $500,000 home with a $100,000 (20%) down payment.  Your loan amount, in this case, would be $400,000 (80% of the purchase price).
  • The appraisal comes back at a value of $480,000
  • The mortgage lender is no longer willing to lend you $400,000 because that would represent 83.3% of the appraised value.
  • The lender reduces the loan amount to $384,000, which represents 80% of the $480,000 appraised value.
  • You have three options:
    • Make up the difference yourself (purchase the home for $500,000 and come up with a down payment of $116,000); or,
    • Ask the seller to reduce the purchase price to make up the difference (purchase the home for $480,000 instead of $500,000, and use a down payment of $96,000); or,
    • Ask the lender if there options available to make up the difference (e.g., change loan programs, add a second mortgage, add private mortgage insurance, etc.)

What if You Don't Agree With the Appraiser's Opinion?

Tough luck!  No, seriously.  Although you and I are entitled to our own opinion on the matter, the mortgage guidelines require the loan amount to be based on the LESSER of the appraised value or the purchase price.

How Does the Appraiser Determine Value?

Appraisers are usually required by the lending guidelines to compare your home with similar homes that have sold within the past 6 months.  Then, they make adjustments based on the differences in the comparable sales (see illustration below).

In this example, Comp 1 sold for $440,000, but it didn't have a finished basement.   So the appraiser adjusted the sales price up by $50,000 to $490,000.  This means the appraiser thinks Comp 1 could have sold for $490,000 if it was more like your home.  Comp 2 had a 50% finished basement, and it only had a 1 car garage.  However, it's a little larger than your home.  All things considered, the appraiser adjusted the sales price up by $19,000 to $469,000. This means the appraiser thinks Comp 2 could have sold for $469,500 if it was more like your home.  The major differences between your home and Comp 3, are that Comp 3 is a little bigger than your home and it has a 3-car garage. So, the appraiser thinks Comp 3 could have sold for $477,000 if it was more like your home.  In this example, the appraiser thinks your home is worth $480,000 based on the comparable sales (and all the adjustments outlined above).


What does this mean for you?

Here are three things you may be able to do if the appraisal comes back different than your purchase agreement:
  • Option 1:  Renegotiate the sales price if permitted in your purchase agreement.  The benefit with this option is that you may save some money on the purchase price of the house.  The drawback is that you risk losing the deal because the seller may not agree to renegotiate.
  • Option 2:  Increase your down payment.  The benefit with this option is that you close the deal without worrying about renegotiating with the seller.  The drawback is that you'll need a larger down payment and you may be paying more for the house than it's worth.
  • Option 3:  Talk to your lender.  There may be options available to help you make up the difference (e.g., change loan programs, add a second mortgage, add private mortgage insurance, etc.).
This is probably one of the most important financial transactions of your life. My commitment is to communicate and strategize with you every step of the way.  Contact me for more info!
Source: CMPS

How Low Housing Inventory Impacts You

          
Article Image Here's a chart illustrating the supply of homes for sale as reported by the US Census Bureau. This illustrates how many months it would take to sell all the houses currently listed for sale, at the current pace of home sales. For example, if there are 500 homes currently listed for sale, and an average of 100 homes are selling each month, there would be a 5-month housing supply. This is because it would take 5-months to sell all the homes currently listed for sale.

More than a 6-month housing supply is a buyer's market.  Less than a 6-month supply is a seller's market.  Housing supply is running at less than four months locally. THIS INDICATES A SELLER'S MARKET. Here's how this impacts you:
  1. You May Have to Compete with Multiple Offers on a Home.   In some cases, there have been dozens of offers on the same house.
  2. You May be Competing With Cash Buyers. In many cases, you may be bidding against cash buyers who don't need to wait for financing approvals.  Look at it this way:  if you were the seller, would you prefer to do business with a buyer who needs to wait for financing approvals or a cash buyer who can close the deal quickly?
There are three main strategies that my clients are implementing right now to beat the competition and avoid getting outbid on their new home. Contact me for more details!

Source: CMPS Institute

Two Reasons Why You Should Keep Your Home Improvement Receipts

       
Article Image

1: Ability to Deduct Your Mortgage Interest:

If you take out a mortgage for home improvement purposes, the IRS may ask you to prove the project was a "substantial improvement" that:
  1. Adds to the value of the home,
  2. Prolongs the home’s useful life, or
  3. Adapts the home to new uses.  For example, painting a room may not qualify, but an addition or new kitchen may qualify.
Keeping the receipts from your home improvement project would go a long way toward proving this. Also, keep in mind that the IRS gives you 24 months to reimburse yourself for improvements made in the past, or 12 months to complete future improvements. For more details, please reference IRS Publication 936, and see my article called, Three Things You Should Know About Pulling Cash Out for Home Improvement.

2: Ability to Reduce Your Capital Gains Tax:

Capital Gain is calculated by taking your sales price, minus your costs of selling the house, minus your "tax basis" (see illustration).  Tax basis is the total cost of buying, building or improving your house.  When you make a "substantial improvement", the cost of the home improvement is added to your tax basis.  This reduces your capital gain when you sell the house, and it could save you quite a bit of money on capital gains taxes.  That's another reason why it's important to keep your home improvement receipts.

Please see a CPA for further details on the deductibility of mortgage interest or the capital gains tax in your specific scenario.  Contact me for further information on your mortgage options.

Source: CMPS Institute

Two Questions to Ask Yourself Before You Turn Your Primary Home Into a Rental

       
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How can I take advantage of tax-free capital gain?

When you sell your property for more than what you paid for it, you have a "capital gain" that could be subject to the capital gains tax. The current tax rate for capital gains is anywhere from 0% to 20%, depending on your level of income. If you've lived in your house as your primary residence for two full years out of the past five years, you may be able to sell your house without paying any capital gains tax.  The primary residence capital gains tax exclusion is $250,000 for single taxpayers, and $500,000 for married couples filing a joint tax return.  In order to qualify for this exclusion, you'd need to sell your house within three years of moving out.  Otherwise, you could miss out on a significant amount of tax-free money.  For more details, see my article called, How to Get the Primary Residence Capital Gains Tax Exclusion. Also, please reference IRS publication 523 and speak to a CPA for more details.

What's my estimated rate of return on investment?

If you're going to turn the house into an investment, it would be smart to estimate your rate of return.  Consider:
  • How much will you charge for rent?
  • What will be your monthly expenses (including maintenance)?
  • What's your holding period, and when will you sell the investment?
  • What will be the sales price, the costs of sale and the net proceeds from the sale?
  • What's your annual rate of return, and how does this compare with other investment opportunities?
Contact me for further information or if you’d like me to run some numbers for your specific scenario.

Source: CMPS

Vacation Home Math: Buy it or Rent it?


Article Image You’re soaking in the sun, sipping champagne, and thinking to yourself, “This is the life!” The only question is: do you own or rent this opportunity? Here’s some vacation home math to help you run the numbers:

STEP 1: CALCULATE YOUR “NET HOMEOWNERSHIP COST”

1: Annual ExpensesMortgage Payments + Property Taxes + Insurance + MaintenanceMINUS:

2: Annual Rental Income 
What do you earn in rent when you’re not using the vacation property?MINUS:

3: Annual Equity Creation How much equity are you building each year through principal reduction on the mortgage and house price appreciation?
EQUALS:

4: Net Homeownership CostIf this number is negative, you’re earning money by owning the property. Your rate of return on your down payment would be positive, and you could probably skip steps #2 and #3 below because you'd be making money on your vacation home. Alternatively, if this number is positive, it’s costing you money to own the vacation property. Your rate of return on your down payment would be negative, and you'd need to complete steps #2 and #3 below.

STEP 2: CALCULATE YOUR “NET HOTEL COST”

This includes the money you would otherwise spend each year on vacation home rentals, hotel accommodations, extra dining out costs, etc.

STEP 3: COMPARE THE TWO OPTIONS

If your "Net Hotel Cost" is greater than your "Net Homeownership Cost," it may make sense for you to own a vacation home! Contact me for more info or to run some numbers for your situation.

PLEASE NOTE: THIS ARTICLE AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX OR INVESTMENT ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. Source: CMPS Institute

How to Plan Ahead for Vacation Home Rentals


Article Image On May 22, 2018, the IRS issued tax tip 2018-79, which I’ve excerpted for you below:
During the summer, taxpayers often rent out their property. They usually think about things such as cleanup and maintenance, but owners also need to be aware of the tax implications of residential and vacation home rentals. If taxpayers receive money for the use of a house that’s also used as a taxpayer’s personal residence, it generally requires reporting the rental income on a tax return.
  • Vacation Home. This may be a house, an apartment, condominium, mobile home, boat, vacation home or similar property. It's possible to use more than one unit as a residence during the year.
  • Used as a Home. When the property is used as a home, the rental expense deduction is limited. This means the rental expenses cannot be more than the rent received.
  • Personal Use. Personal use means use by the owner, owner’s family, friends, other property owners and their families. Personal use includes anyone paying less than a fair rental price.
  • Divide Expenses. Generally, special rules apply to the rental expenses of a property used by the taxpayer as a residence during the taxable year. Usually, rental income must be reported in full, and any expenses need to be divided between personal and business purposes. 
  • How to Report. Taxpayers use Schedule E to report rental income and rental expenses. Rental income may also be subject to Net Investment Income Tax
  • Special Rules. If the home unit is rented out fewer than 15 days during the year, none of the rental income is reportable and none of the rental expenses are deductible. 
More Information:
  • Tax Topic 415 – Renting Residential and Vacation Property
  • Publication 527, Residential Rental Property (Including Rental of Vacation Homes)
Source: IRS - https://www.irs.gov/newsroom/plan-ahead-for-vacation-home-rentals

PLEASE NOTE: THIS ARTICLE AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. FOR MORE INFORMATION ON ANY OF THESE ITEMS, PLEASE REFERENCE THE IRS LINKS PROVIDED ABOVE.

Source: CMPS Institute

Two Things to Consider When Renting Out Your Vacation Home


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1 - IRS Guidelines: How Many Days Are You Using the Home for "Personal Use"?

In order to deduct the mortgage interest on your vacation home as "qualified home mortgage interest", you need to use the vacation home for your own "personal use" for the greater of:
  • 14 Days per Year; or
  • 10% of the number of days that you rent it out for fair market value
For example, if you rent out the home for 100 days per year, you'd need to live there for at least 14 days per year. On the other hand, if you rent out the home for 200 days per year, you'd need to live there for at least 20 days per year.  Keep in mind that "personal use" includes use by your immediate family including your spouse, brothers and sisters, half-brothers and half-sisters, ancestors (parents, grandparents, etc.), and lineal descendants (children, grandchildren, etc.).

2 - Lending Guidelines: Do You Have Control of the Property?

You may still be able to treat the property as a second home for mortgage approval purposes if you rent it out for part of the year. In this case, conventional lending guidelines require that:
  • You must occupy the property for some portion of the year;
  • You must have exclusive control over the property; and,
  • The property cannot be subject to any agreements that give a management firm control over the occupancy of the property.
Of course, there may be other rules to consider.  Contact me for more information.
PLEASE NOTE: THIS ARTICLE AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED FINANCIAL OR TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION.
Source: CMPS Institute

Three Reasons Why Buying a Vacation Home Could be a Great Financial Investment

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1 - House Price Appreciation

The average rate of house price appreciation in the US over the past 20 years has been over 3% per year.  This means that if you bought a vacation home 20 years ago for $100,000, it would likely be worth over $180,000 today.  If you used a 20% down payment, your $20,000 investment would have yielded more than an 8% annual rate of return.

2 - Ability to Rent Out the Property and/or Save Money on Hotels

You may be able to rent the property for part of the year that you're not using it.  Additionally, you could save some money on hotel bills if you vacation in your own property instead of vacationing in a hotel.  These factors could help you to reduce your cost of ownership.

3 - Step-up in Tax Basis

If you keep the property for your entire lifetime, your heirs will likely receive a "step-up in basis" when they inherit the property.  This means that their tax basis "steps up to" the future value of the property.  In our example above, if the property is worth $180,000 when your heirs inherit it, their tax basis would be $180,000.  This means that they could sell the property and pay absolutely nothing in capital gains taxes.
Contact me for more information or to consider your mortgage options.
PLEASE NOTE: THIS ARTICLE AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX OR FINANCIAL ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION.
Source: CMPS Institute

Two Ways to Protect Yourself from Identity Theft

   

Article Image Many people are concerned about identity theft in light of the Equifax data breach that impacted half the US population last year.  Here are two ideas you may want to consider in order to protect your credit and identity:

1 – You Can Place a “Credit Freeze” on Your Credit File
When a credit thief tries to open a new loan or account in your name, the creditor that they apply with typically needs to pull a new credit report.  A credit freeze allows you to restrict access to your credit report so that new creditors won’t be able to see your credit file.  This makes it more difficult for credit thieves to open new accounts in your name. In order to put a credit freeze on your credit file, you’ll need to supply some personal information to the credit bureaus and pay a fee of $5 - $10 per credit bureau.  Click here for more information about credit freezes from the FTC’s website.

Click here to place a credit freeze on your Equifax report (800-525-6285).
Click here to place a credit freeze on your Experian report (888-397-3742).
Click here to place a credit freeze on your Transunion report (800-680-7289).

2 – You Can Place a “Fraud Alert” on Your Credit FileYou can call one of the numbers listed above for the three credit bureaus, and ask to put a fraud alert on your credit file. If you have a fraud alert on your credit file, creditors are required to go through extra steps to verify your identity before they issue credit or open a new account in your name. A fraud alert stays on your credit file for 90 days (it can be renewed), and when you notify one credit bureau, that bureau will notify the two others. It’s free to sign up for a fraud alert.

Click here for more information about fraud alerts from the FTC’s website. Source: CMPS Institute

Three Things You Should Know About “Trended Credit Data”

        

Article Image 1 – What is it?“Trended credit data” is an analytical tool that helps lenders better evaluate your spending habits.  It’s a detailed analysis of the last 24 months of your credit history, including:
  • Month-by-month balances on your credit cards and other debts; and,
  • The difference between your scheduled minimum payment and your actual payment amount.
2 – Why does it matter?Mortgage lenders are now required to use “trended credit data” when they evaluate your loan application.  This helps them to spot trends including:
  • Do you typically max out your credit cards; and if so, which ones?
  • Do you typically you pay off your credit card balances each month?
  • Do you intend to carry a balance from month-to-month while making minimum or other payments? 
3 – How does it impact you?Trended credit data does not impact your credit score. It simply gives the lender a more thorough analysis of your balance and payment history over the past 24 months. For example, if you typically pay off your balances in full, this may positively impact your loan application.  On the other hand, if you typically max out your credit cards and make only the minimum payments, this may negatively impact your loan application.

You can always request a copy of your credit report from your mortgage lender, and it will now include your trended credit data.  If you notice any errors, feel free to dispute the errors with the credit bureaus using their standard dispute procedures.  Please contact me if you have any questions or for further information.
Source: CMPS Institute

How to Improve Your Credit Score


Your credit scores usually determine the price you pay for your money (your mortgages, your auto loans and leases, your credit cards, business loans, etc.). Perhaps the most significant part of your credit report is your credit score. Credit scores range from 350 to 850, with 850 being the best possible credit score that you could receive, and 350 being the worst possible credit score. There are five factors that determine your credit score:

Your Payment History: 35% impact on your credit score

Paying debt on time and in full has a positive impact. Late payments, judgments, charge-offs, collection accounts and bankruptcies have a negative impact. If you have had any bankruptcies within the last 7 years, it will seriously affect your ability to borrow or establish new credit accounts.  If you have had any judgments within the last several years, it is very important that you pay off the judgment and get a "satisfaction of judgment" from the court. Any unsatisfied or recent judgments will make a bad dent in your credit scores and adversely affect your ability to borrow. Usually, judgments and liens must be paid prior to the closing. Timely mortgage payments are weighted heavily by the scoring systems and are one of the most vital requirements that lenders look for when evaluating your credit history. Many times a single late mortgage payment within the last 12 months can hold up your file or spell the difference between the best interest rate and the next credit level. Your payment history on other debts (car payments, credit cards, etc.) is also given a lot of weight.
The credit scoring systems evaluate how many late payments you have had and whether they were 30, 60 or 90 days late, or whether they are currently in default, with default being the worst situation. Additionally the systems look at whether the late payments were consecutive. If you only have one or two minor late payments on your report with no other derogatory marks, your score will not be terribly affected, but you will have a tough time getting over the critical 700 level.  Here are four practical steps that you can implement to improve your credit score in the area of "Payments":
  • Make all your payments on time.
  • Past dues on any account will destroy your score - bring your delinquent accounts current immediately.
  • Pay your bills before they go to a collection agency.
  • Check your credit report for accuracy on a regular basis; and make sure that disputed bills are not negatively affecting your credit scores.

The Balance You Owe vs. Your Available Credit Lines: 30% impact on your credit score

Keeping your credit balances below 50% of your available limit is very important. Keeping your balances below 30% of your available credit is even better. For instance, if you owe $10,000, and you have $100,000 of credit available to you, you are only using 10% of your available credit line. On the other hand, if you owe $10,000 and you only have $10,000 available to you, you have "maxed out" your available credit and your credit scores will be very negatively impacted. Therefore, it is not how much you owe, but how much you owe compared to what you are able to borrow.
Here are three practical steps to improve your credit score in this area:
  • Don't close your credit accounts unless it is necessary to do so. It is better to have many open accounts with little or no balance than to have just one or two accounts regardless of the balance.
  • Don't concentrate large balances on just a few accounts. Pay outstanding debt down as close to zero as possible, and evenly distribute the remaining balance across all your open credit lines. The key is to keep the balances down below 30% or at the very least 50% of your available credit line(s).
  • Call your credit card companies and try to increase your credit limits if they can do so without pulling a new credit report.
 

Your Credit History (how long your accounts have been opened): 15% impact on your score

The longer your accounts have been opened, the higher your score will be; newly opened accounts will bring your score down. Here are three practical steps for you to improve your score in this area:
  • Don't close your credit accounts. If you must, close the newest ones instead of the oldest ones. Your score will improve over time if you keep accounts open and use them every once in a while.
  • Think twice before jumping on that latest 0% credit card offer or opening a new card just to get a 10% discount at a department store.
  • If you don't have much of a credit history, and you are planning on taking out a mortgage in the future, it may be a good idea to establish a few open credit lines with little or no balance on them. Although newly opened accounts tend to lower your score initially, they will improve your score once they've been open for awhile, somewhat active and paid off with little or no balance.

Type of Credit that you have open: 10% impact on your credit score

A good mixture of auto loans and leases, credit cards and mortgages is always best. Too many credit cards is not a good thing, and having a mortgage does increase your score. Practical steps to improve your score in this area include: (1) Having 3-5 revolving credit cards open is optimal.; and, (2) Having a good mix of auto loans, credit cards and mortgages is better than having only credit cards.

Number of Recent Inquiries made by creditors: 10% impact on your score

Inquiries affect the score for one year from the time they're made. Your score isn't impacted when you check your own report. It's only affected if a potential creditor checks your credit. These include department stores, as well as credit card, auto finance and mortgage companies. Here are three steps you can take to improve your score in this area: (1) Multiple auto and mortgage inquiries are treated as only one inquiry if made within 45 days of each other. So, it's better to shop for a car or a mortgage over a two week time-frame, rather than to prolong it over a longer timeframe. (2) Don't apply for a lot of credit or open multiple credit cards at the same time; and, (3) If you're thinking of applying for a mortgage within the next 90 days, it would be good to wait until after your loan closes before you apply for any new credit.
Source: CMPS Institute

Five Things that Impact Your Credit Scores

  

Article Image Your credit scores usually determine the price you pay for your money (your mortgages, auto loans, auto leases, credit cards, business loans, etc.). Perhaps the most significant part of your credit report is your credit score. Credit scores range from 350 to 850, with 850 being the best possible credit score, and 350 being the worst possible credit score. There are three credit bureaus in the US that collect information about you from your creditors.  These bureaus then calculate a credit score based on that information.  This means that you have three credit scores, one issued by each of the three credit bureaus: Mortgage lenders typically order a tri-merged credit report when you apply for a home loan. The tri-merged credit report gives the lender information from all three credit bureaus. The lender typically uses your middle credit score or the lowest of your three credit scores when they evaluate your loan application. These five factors determine your credit score:
  • Your timely payment history looks at whether you pay your bills on time. This has a 35% impact on your score.
  • Your balance-to-limit ratio looks at the balances you owe vs. your available credit lines. This has a 30% impact on your score.
  • Your length of credit history looks at how long your accounts have been opened. This has a 15% impact on your score.
  • Your types of credit mix looks at the types of credit you have open. This has a 10% impact on your score.
  • Your new credit and inquiries looks at the number of recent inquiries made by creditors.  This has a 10% impact on your score.
Please contact me if you have any questions or for further information!
Source: CMPS Institute

How to Improve Your Balance-to-Limit Ratio

 

Article ImageYour balance-to-limit ratio looks at the balance you owe vs. your available credit lines.  This has a 30% impact on your score. Keeping your credit balances below 50% of your available limit is very important. Keeping your balances below 30% of your available credit is even better.

For instance, if you owe $10,000, and you have $100,000 of credit available to you, you are only using 10% of your available credit line. On the other hand, if you owe $10,000 and you only have $10,000 available to you, you have "maxed out" your available credit and your credit scores will be very negatively impacted. Therefore, it is not how much you owe, but how much you owe compared to what you are able to borrow.

Here are three practical steps to improve your credit score in this area:
  • Don't close your credit accounts unless it is necessary to do so. It is better to have many open accounts with little or no balance than to have just one or two accounts regardless of the balance.
  • Don't concentrate large balances on just a few accounts. Pay outstanding debt down as close to zero as possible, and evenly distribute the remaining balance across all your open credit lines. The key is to keep the balances down below 30% or at the very least 50% of your available credit line(s).
  • Call your credit card companies and try to increase your credit limits if they can do so without pulling a new credit report.
Let me know if you have any questions or if I can help in any way!
Source: CMPS Institute

How Payment History Impacts Your Credit

Article ImageYour timely payment history has a 35% impact on your credit score. Paying debt on time and in full has a positive impact. Late payments, judgments, charge-offs, collection accounts and bankruptcies have a negative impact. If you have had any bankruptcies within the last 7 years, it will seriously affect your ability to borrow or establish new credit accounts.  If you have had any judgments within the last several years, it is very important that you pay off the judgment and get a "satisfaction of judgment" from the court.

Any unsatisfied or recent judgments will make a bad dent in your credit scores and adversely affect your ability to borrow. Usually, judgments and liens must be paid prior to the closing.

Timely mortgage payments are weighted heavily by the scoring systems and are one of the most vital requirements that lenders look for when evaluating your credit history. Many times, a single late mortgage payment within the last 12 months can hold up your file or make a big difference in your interest rate and loan terms. Your payment history on other debts (car payments, credit cards, etc.) is also given a lot of weight.

The credit scoring systems evaluate how many late payments you have had and whether they were 30, 60 or 90 days late. The worst situation is if you are currently in default. Additionally, the systems look at whether the late payments were consecutive. If you only have one or two minor late payments on your report with no other derogatory marks, your score will not be terribly affected, but you will have a tough time getting over the critical 700 level.  Here are four practical steps that you can implement:
  • Make all your payments on time.
  • Past dues on any account will destroy your score - bring your delinquent accounts current immediately.
  • Pay your bills before they go to a collection agency.
  • Regularly check your credit report for accuracy and make sure that disputed bills are not negatively affecting your scores.
Let me know if you have any questions or if I can help in any way!
Source: CMPS Institute

Two Ways to Be More Strategic with Your Credit

    

Article Image Your length of credit history looks at how long your accounts have been opened. This has a 15% impact on your score. The longer your accounts have been opened, the higher your score will be; newly opened accounts will bring your score down. Here are three practical steps for you to improve your score in this area:
  • Don't close your credit accounts. If you must, close the newest ones instead of the oldest ones. Your score will improve over time if you keep accounts open and use them every once in a while.
  • Think twice before jumping on that latest 0% credit card offer or opening a new card just to get a 10% discount at a department store.
  • If you don't have much of a credit history, and you are planning on taking out a mortgage in the future, it may be a good idea to establish a few open credit lines with little or no balance on them. Although newly opened accounts tend to lower your score initially, they will improve your score once they've been open for awhile, somewhat active and paid off with little or no balance.
A good mixture of auto loans and leases, credit cards and mortgages is always best. That’s because your types of credit mix has a 10% impact on your credit score.  Too many credit cards is not a good thing, and having a mortgage does increase your score. Here are two practical steps to improve your score in this area:
  • Having 3-5 revolving credit cards open is optimal; and,
  • Having a good mix of auto loans, credit cards and mortgages is better than having only credit cards.
Let me know if you have any questions or if I can help in any way!
Source: CMPS Institute

Why it's Important to Avoid New Credit and New Inquiries When You're Getting a Home Loan

  

Article Image Inquiries on made by creditors on your credit report affect your credit score for up to one year from the time the inquiries are made. This has a 10% impact on your credit score.

Your score isn't impacted when you check your own report. It's only affected if a potential creditor checks your credit. These include department stores, as well as credit card, auto finance and mortgage companies. Here are three steps you can take to improve your credit score in this area:
  • Multiple auto and mortgage inquiries are treated as only one inquiry if made within a short time of each other. So, it's better to shop for a car or a mortgage over a two-week time-frame, rather than to prolong it over a longer timeframe;
  • Don't apply for a lot of credit or open multiple credit cards at the same time; and,
  • If you're thinking of applying for a mortgage within the next 90 days, it would be good to wait until after your loan closes before you apply for any new credit.
Also, keep in mind that any new credit or new credit inquiries can raise a red flag when you’re in the middle of a loan application.  That’s because mortgage lenders are required to look into this, and the possibility of new debt could endanger your ability to get qualified for a home loan.

Let me know if you have any questions or if I can be a resource to you in any way!


Source: CMPS Institute

The 7Ps of Picking the Right Employer

What do sales people look for in an employer?

Purpose
People
Pricing
Pay
Platforms
Products
Processes

 

Dualism in the Christian Era, by John D. Beckett

From "Loving Monday," by John D. Beckett 

The Greeks couldn't get away from the concept of "dualism"—the idea of higher and lower planes of ideas and activities. 

Plato was the clearest on this. He sought to identify unchanging universal truths, placing them in the higher of two distinct realms. 

This upper level he called "form," consisting of eternal ideas. The lower level he called "matter." This lower realm was temporal and physical. Plato's primary interest lay in the higher form. He deemed it superior to the temporary and imperfect world of matter. 

The rub comes when we see where Plato placed work and occupations. Where, indeed? In the lower realm.

Nearly a thousand years later, in the fifth century A.D., Augustine sought to merge Platonic thought into a Christian framework. This approach resulted in a distinction between "contemplative life" and "active life"—the same distinction between higher and lower, but with different names. 

The higher of these realms came to be equated with church-related concerns that were considered sacred, such as Bible study, preaching and evangelism. 

Other things were secular, common, lacking in nobility. 

Where did Augustine place work and occupations? As with Plato before him, in the lower realm. 

Thomas Aquinas, in the thirteenth century, furthered this derogatory notion of work as he perpetuated the dualism of Greek thinking. He also categorized life into two realms, which he called Grace and Nature. Revelation, which gave understanding to theology and church matters, operated in the upper realm of Grace. 

In the lower realm of Nature, man's "natural" intellect stood squarely on its own. Business and occupations, operating in the lower realm, didn't require revelation. 

According to Aquinas, they survived quite well on a diet of human intellect and reasoned judgment. 

Now we bring this dichotomy up to the present. Francis Schaeffer, one of the modern era's greatest thinkers, wrote on the more recent impact of dualistic thinking. In A Christian Manifesto, he speaks of the flawed view of Christianity advanced through the Pietist movement in the seventeenth century. 

Pietism began as a healthy protest against formalism and a too abstract Christianity. But it had a deficient, 'platonic' spirituality. It was platonic in the sense that Pietism made a sharp division between the 'spiritual' and the 'material' world—giving little, or no, importance to the 'material' world. 

The totality of human existence was not afforded a proper place. Christianity and spirituality were shut up to a small, isolated part of life. 

The result of such a view is that the activity of work is removed from the sacred realm and placed squarely in the secular—making it "impossible" to serve God by being a man or woman in business. 

To me, this is a startling revelation! 

Now here's a question for you. Has this view affected you, as it has me? Second-Class? 

I can now see that the perspective of the Greeks, established so many years ago, continues alive and well to the present day, influencing and distorting our perception of work. 

For years, I thought my involvement in business was a second-class endeavor—necessary to put bread on the table, but somehow less noble than more sacred pursuits like being a minister or a missionary. 

The clear impression was that to truly serve God, one must leave business and go into "full-time Christian service." Over the years, I have met countless other business people who feel the same way. 

The reason is clear: Our culture is thoroughly saturated with dualism. In this view, business and most occupations are relegated to the lower, the worldly, the material realm. As such they are perceived to lack dignity, spirituality, intrinsic worth, and the nobility of purpose they deserve. 

Schaeffer, looking back over the legacy of nearly three millennia of Greek thought, proposes this radically different view of true spirituality: It is not only that true spirituality covers all of life, but it covers all parts of the spectrum of life equally. In this sense there is nothing concerning reality that is not spiritual. 

Indeed, there is a dramatically different way to view the world and our work—a view that liberated me to see business as a high calling. But to find this view, I had to look through a different window. 

This text is from "Loving Monday," by John D. Beckett, pages 67-69


The Way You've Been Taught To Plan is WRONG

I quick research (Google) on “business planning” overall says the same-old-thing…..1 year plans, 3 year plans, even 5 year plans.
 
That worked for Columbus and the Pilgrims. They’d need something, send a courier across the sea to England and 6-8 months later, get it. No big deal if it was another few months, ok. Everything moved slowly.
 
Today’s planning has to be short-term, with shorter-term checks and balances.
 
Today’s business moves FAST.
 
Moran and Lennington have nailed it in their book “The 12 Week Year.” They propose 3 plans:
 
  • 12 week plan that’s carried out through
  • weekly plans carried out with
  • daily plans
 
I could write about the 12 Week Year……but I won’t. For now.
 
There might be a place for long-term planning but I’m not wasting my time imagining where. I get planning. I get putting together some good what-if scenarios. I get having big hairy audacious goals. But that’s not planning. Planning is what we do to prepare to carry out those goals, intentions and aspiration. And planning more than a few weeks is lazy. Pure laziness because the planners know they need to plan, but they know the 1 year plan is useless after a few weeks and thus don’t want to spend much time planning. If I planned like that I wouldn’t blame them, I’d be lazy to. Who wants to spend time planning when it doesn’t work.
 
Who can put together a plan, divide it up into quarters and expect to follow it to any extent?
 
Definitely not an engaging salesperson. It’s getting close to a year that I’ve been using the periodization formula in The 12 Week Year. It’s a game changer and I’m not sure that 12 weeks isn’t too long. Business moves fast. Competitors most fast. New opportunities come at the engaging salesperson and they come FAST.
 
To that end.



 
 
 

My Method of Navigation Planning and Structure - adapted from The Law of Navigation by John C. Maxwell

1. I plan to plan.

2. I determine my primary purpose in each role

3. I assess the situation.

4. I prioritize the needs.

5. I ask questions.

6. I set specific goals.

7. I clarify and communicate.

8. I identify possible obstacles.

9. I plan no more than twelve weeks.

10. I schedule everything I can.

11. I budget everything I can.

12. I measure lead and lag indicators.

13. I study the results and make corrections where necessary.

14. I do less and obsess.

Remember, anyone can steer the ship, but it takes a leader to chart the course - John C. Maxwell

Spiritual Disciplines for the Christian Life, by Donald S. Whitney

"Commenting on the difference between the disciplined and the undisciplined way, he wrote, Nothing was ever achieved without discipline; and many an athlete and many a man has been ruined because he abandoned discipline and let himself grow slack. 


Coleridge is the supreme tragedy of indiscipline. Never did so great a mind produce so little. He left Cambridge University to join the army; but he left the army; he returned to Oxford and left without a degree. 


He began a paper called The Watchman which lived for ten numbers and then died. It has been said of him: "He lost himself in visions of work to be done, that always remained to be done. Coleridge had every poetic gift but one—the gift of sustained and concentrated effort." 


In his head and in his mind he had all kinds of books. But the books were never composed outside Coleridge's mind, because he would not face the discipline of sitting down to write them out. 


No one ever reached any eminence, and no one having reached it ever maintained it, without discipline." 


from "Spiritual Disciplines for the Christian Life" by Donald S. Whitney