Category: Mortgage Education

One of the perks of being a homeowner is getting to use your home for tax deductions. Tax deductions reduce how much you pay in taxes by lowering your taxable income.

When filing your annual taxes, you can use standard or itemized deductions. Standard deductions are a set amount deducted from your adjusted gross income based on factors like your marital status, filing status, and age. For the 2022 tax year, it ranges from $12,950 to $25,900.

Itemized deductions allow you to manually add each item you’d like to deduct from your adjusted gross income.

If you use itemized instead of claiming the standard deduction, you can take advantage of the following homeowner deductions:

Mortgage interest
Depending on the type of mortgage you have and the way you file your taxes, you may be able to deduct interest payment on your mortgage, home equity loans, and lines of credit (if they were used to buy, build, or improve your home). The amount may vary, but for the 2022 tax year you can deduct up to $750,000 in mortgage interest.

Real estate taxes
You can deduct the real estate taxes you paid for your primary residence, co-apartment, vacation home, or land.

Mortgage points
The year you purchase mortgage points, the full amount you paid can be an itemized deduction. If you can’t deduct the points in the year you bought them, you may still be able to deduct them over the life of the loan.

Mortgage insurance
For the 2022 tax year, the amount you paid for private mortgage insurance premiums (or mortgage insurance premiums for FHA-baked loans) can be an itemized deduction. However, your loan must have been taken out after January 1, 2007 to qualify.

Energy-efficient improvements
Renewable energy tax credits are available for both existing and new construction primary and secondary homes. To see a full list of credits, visit energy.gov.

BONUS: Possible first-time homebuyer credits
This isn’t a tax credit, but it’s something to be aware of if you’re considering buying a home for the first time. If coming up with a down payment is keeping you from becoming a home buyer, keep an eye out for the proposed First-time Homebuyer Act. It’s a bill that, if passed into law, gives eligible first-time homebuyers up to a $15,000 credit.

Another bill is the Downpayment Towards Equity Act of 2021 which is a first-generation homebuyers grant of up to $25,000 to use towards down payment, closing costs, mortgage interest rate reduction, and other home purchase expenses.

Talk to your loan officer about the status of these bills and whether you’re eligible for them (some are retroactive so you may be eligible even after your home purchase) or other assistance programs.

Next steps
The above list will give you an idea of some of the tax benefits available to homeowners. At Mann Mortgage, we’re home loan experts, not tax pros. If you have any questions about your taxes, be sure to work with a local tax professional.

There are a lot of financial benefits for home ownership. If you’re interested in finding out how your current home or new home can best benefit your financial goals, give us a call. We’ll crunch the numbers together and find the right mortgage program for you.

A starter home is a single-family, condo, or townhome that a first-time homeowner can afford and may outgrow. They’re normally small, modest, and lacking in upgraded amenities. They can be a good investment for some young people and a way to build equity towards a bigger and better house in the future. They’re becoming more expensive and harder to find. Some people are skipping starters altogether – choosing to rent for longer to save money towards a bigger first home purchase.

Stats on starter homes:

• 31% of home buyers are first-timers.
• The increased price of homes and the amount of student debt young adults have are impacting the median age of first time homebuyers. It’s the highest it’s been since they started tracking it  – 33 years old.
• If you’re like most people, you’ll spend an average of 13 years in a home before you sell it
• The longer you live in your home, the more equity you’ll build in it

Characteristics of a good starter home

It’s in a nice neighborhood
It’s important for you to get a home in as good an area as you can. What exactly is a “good” neighborhood? Generally, it’s one that’s quiet, walkable, in a good school district, close to amenities, and is well maintained. Homes in a good neighborhood will be safe to live in and be easier to sell when you’re ready. If you have any questions about neighborhoods, ask your hometown home lender. They’ll give you an unbiased opinion on the best areas in your community.

The taxes are affordable
Your mortgage is just one portion of what you’ll pay each month for your home. One of the biggest ongoing expenses for your home will be your property tax. This is an annual tax levied by your state and local governments on your land and buildings. And it’s a sizeable fee – usually thousands of dollars. The tax is collected once a year, but many homeowners put money into an escrow account each month to pay the fee. Find out what the current owners paid for their taxes, but be aware the taxes will increase over time. Some states increase property taxes annually while others reassess them at set increments (as example, every 5 years).

Utility bills aren’t too high
Starter homes are no frill, which make them affordable to purchase. The price was kept down by NOT getting the most energy-efficient and latest upgrades. And if the starter home is older, be especially aware of the potential utility costs. You can request to see copies of the seller’s utility bills to see what it may cost you for your electric, water, and other utilities.

It’s affordable
Be strategic about your purchase. If you are planning on selling your home in a few years, think of your starter home as an investment. That means, buy something that will easily sell again. Find the best house in your price and in a good location – and don’t go over budget! If you make a wise purchase now, you’ll be better able to afford an upgraded home in a few years.

Couples going through a breakup face many difficult decisions including what to do with their mortgage. In 2020, the average mortgage debt in the U.S. was $208,185 with a payment of just over $1,500 per month. When your relationship changes, what do you do with your mortgage bill?

If the mortgage is in both your names, you’re both responsibilities for the monthly payments regardless of who is living in the house. Missed payments will negatively impact both your credit scores. So the first thing you’ll need to decide is how to continue to make payments during your separation. Then decide what you’ll do with your mortgage.

There are normally two ways separating couples handle their mortgage. Couples either sell their home or refinance to remove one person from the mortgage.

Sell your home and pay off your mortgage
Find a local real estate agent, agree on the asking price, and place your home on the market. When you accept an offer for the house, use the funds to pay off your mortgage. If you’re lucky enough to get any additional proceeds from the sale, those funds can be split between you and used towards financing your new homes. It’s a good way to make a clean split and each have a little extra money to go towards your new life.

Refinance your house in one person’s name
If one of you would like to stay in the house, you can work with your home lender to refinance in just one person’s name. To do this, the spouse remaining in the home will have to apply for the new loan, your home lender will verify they are able to make payments on their own, then the refinance will close. Refinancing typically takes 30 – 60 days and the spouse who stays in the home will have to pay closing costs.

A less common option is for you to continue to co-own the home together. You will both continue to have the mortgage listed as a debt on your credit report and you’ll both be negatively impacted by any missed payments. But it may be a good option if a custodial parent can’t afford the house on their own. By co-owning it together, your kids are able to stay in their house and have a sense of continuity.

A note about community property
Some states observe community property laws meaning both you and your spouse make equal ownership claims to assets, like houses, acquired during your marriage. In these states, you’re both responsible for the mortgage debt whether your name is on the loan or not. And you’re both going to split the home sale proceeds wither you’re on the mortgage or not. The law is more detailed than that, so be sure to contact your attorney if you have any questions.

As of 2021, there are nine states where community property laws are in place for married couples:

• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin

The law is also observed in the U.S. Territories of Guam and Puerto Rico.

If you have any questions about your mortgage or how you can refinance to remove someone from it, be sure to contact your loan officer. Mann Mortgage loan officers are here to work through any changes you need to make to your mortgage due to life changes.

A Barndominium a trendy new type of home that’s gaining popularity. They’re usually defined as an energy-efficient low maintenance metal building you can live in. Think of a warehouse or metal barn with the inside transformed into living quarters. That’s a barndominium. Sometimes they have an attached shop, horse stable, or garage. Sometimes not. The exterior gives homeowners a sleek farmhouse look while the interior can be any style possible.

People love the barndominium because they offer a lot of advantages over traditional stick-built homes:

• Cheaper and quicker to build
• Open concept floor plans
• Energy-efficient metal roof
• Low-maintenance metal exterior
• High vaulted ceilings
• Option for an attached shop

How much does a barndominium cost?
Like anything real-estate related, costs vary based on location and material costs. However, for a rough comparison, a standard house is between $100 to $200 a square foot and luxury and custom homes ran closer to $200 to $500 a square foot to build in the United States in 2020.

Barndominiums “shells” – the exterior walls and roof – are significantly less expensive than those of stick-built houses. Often they’re available as kits which are constructed upon a rectangular concrete slab. Costs range from $70 to $95 a square foot for a more DIY builds and more for ones built by a licensed builder.

How to finance construction for one
There are two ways to build a barndominium – and whether you’ll get financing depends on how you build it.

Option one is to hire a builder to assemble and complete your barndominium. To finance this, you’ll need a short-term construction loan financed through most home loan lenders. Once your home is built (or if you buy an already built one) you’ll need to apply for a traditional mortgage.

Option two is to built it yourself. Most home lenders won’t finance DIY construction. However, some companies that manufacture barndominium shells will offer their own financing. These shells contain the frame, exterior doors, windows, and roof. Beyond that, you will have to finance the additional items needed to complete your home such as electricity, plumbing, walls, flooring, insulation, etc.

Regardless of how you finance your build, be sure to check your land’s zoning and covenant requirements. It’s fairly common for subdivisions to have restrictions on sheds, garages, or other metal structures (which might include your barndominium). And make sure your barndominium will fit on your lot too. Barndominiums are typically larger than other structures, so you’ll want to double-check your home won’t be larger than allowed and will fit on the land you selected.

Do barndominiums hold their value?
So far, those that have sold recently seem to keep their value. They’re growing more popular across the U.S., and you can even find them listed under their own filter on Zillow. Beware, though, that one of the things that makes them appealing is their distinctive design. But it also may make them harder to sell since they’re too unconventional.

When you’re ready to crunch the numbers to see whether a barndominium would be a better option than a stick-built home, contact your local Man Mortgage home lender. They can help you decide whether you’d qualify for a construction loan or if it might be a wiser choice to get a stick-built home.

Whether it’s your first time buying a home or it’s been a few years since you last bought one, knowing where to start is your first step towards finding a home that fits your needs.

Save for a down payment
The amount of money you’ll need for a down payment depends on the type of loan you choose and the price of your home. Some conventional loans are specifically aimed at first-time home buyers with good credit and a 3% down payment and others are available to borrowers with 0% down.

Talk to a local home loan expert
There are a lot of options for financing your new house. Before you get too excited about a new home, you’ll want advice from a pro. Find a local home lender with great reviews and a solid reputation and set up a meeting with one of their loan officers. They’re experts in finding the right loan for their clients’ needs. You’re under no obligation to work with any lender you speak with and your meeting time is free. The information they’ll provide to you will let you know what type of loan you’re eligible for, first-time home buyer assistance programs for your state you could take advantage of, the approximate interest rate you would pay, and the price range for a house you would be able to afford.

>> Mann Mortgage has a rating of 4.89/5 stars with more than 15,000 reviews on SocialSurvey.

Get a pre-approval letter
When you’re ready to start home shopping, ask your home lender to pre-approve you for a loan. They’ll pull your credit score and history, verify your income, check your assets, calculate your debts, and approve you for the appropriate home loan. Your lender will give you a blanket letter stating you’re approved for a loan up to a certain amount of money or they will write you a personal letter for the home you are putting in an offer for. Either way, the pre-approval letter lets the home seller know you are a serious bidder already working with a lender, so your financing should go through without a problem.

>> What happens when a lender pulls your credit?

Choose the right real estate agent
Find someone with intimate knowledge of the community you’re purchasing in. They should be able to answer questions about the housing inventory, schools, traffic, and much more. Ask for a referral from your home lender, friends, co-workers, and neighbors. You can even drive or walk around the neighborhood you’d like to buy in to find agents selling in the area.

You’ll know you’ve found the right agent when they answer questions quickly, work as a Realtor fulltime, close on deals, and are willing to educate you about the local market and homes you’re interested in.

Know what kind of market you’re purchasing in
When you find the home with the right size, location, age, and price range, the way you make your offer may depend on the type of market you’re in. Generally speaking, there are two markets: a buyers’ market and a sellers’ market.

If you’re in a buyers’ market: A buyers’ market means there are more homes available than people to buy them. This is great news for a buyer. You’ll have plenty of homes to choose from and you’ll have time to weigh the pros and cons each before you put in an offer. Offers with contingencies such as financing, home sale, or inspection will have a much higher chance of being accepted than they would in a sellers’ market.

If you’re in a sellers’ market: A sellers’ market means there are less homes available than people to buy them. Be prepared to act very fast when you see a house that meets your needs as it’s possible a home seller will receive multiple offers within days of the house being listed. Be prepared to make multiple offers on homes before one is finally accepted. It’s going to be tough to get a house and you’ll be competing with other very serious buyers (some people make offers in cash -meaning they don’t have to finance the house, they have the money to buy it outright). Talk with your Realtor about what you can do to make your offer more likely to be accepted. Some common tactics are:

• Have a home loan pre-approval letter.
• Don’t plan on negotiating – make your first offer strong.
• Waive as many contingencies as possible.
• Write a personal letter to the seller when you make an offer.
• Put an escalation clause on your offer. This means you make an initial offer but also set a maximum offer. If the seller receives another offer that’s higher than your initial offer, your offer will increase by a set amount to beat the other offer up to your maximum price.

Get ready for closing
If your offer got accepted and all the contingencies were removed, you should be ready to close. Closing is the final step in transferring ownership from the seller to you. Your home lender will originate and underwrite your loan and the title company will prepare a lot of paperwork for you to sign.

>> What to expect when closing on your new home.

When you’re ready to talk to a professional loan officer, contact your local Mann Mortgage office. Our loan officers are very familiar with helping first time home buyers understand their loan options, the local housing market, and how to finance the right home.

Buying a home has long been considered part of the American dream. But when you consider a home as a financial investment, is it a good choice? Below is a review of some big financial benefits of homeownership.

Build equity
Equity is the value of the property you actually own. As example, if your home is valued at $300,000 and you owe $200,000 on it, you have $100,000 in equity.

Unlike rent payments, each time you pay your monthly mortgage you gain a little more equity in your home. As you continue to pay off your loan, more money will go towards the principal every time – bringing you closer to owning more of you home. Eventually, all payments will have been made and the loan satisfied, you will no longer have a mortgage payment at all.

Get tax deductions
If you’re itemizing your tax deductions, there are a few tax breaks you get as a homeowner including writing off interest payments, real estate taxes, and energy-efficient improvements. When you sell your home, you may be able to avoid some of the capital gains tax on the profit you’ve made as long as you meet certain requirements (like having lived in the house as a primary residence for at least two of the previous five years you owned it).

Price appreciation
Houses (and the land they’re built upon) generally increase in value every year. The last quarter of 2020 saw home prices increase in value by an average of 4.29% according to S&P/Case-Shiller. So as you’re paying off your home, it will hopefully be increasing in value on its own. Just be aware that homes aren’t guaranteed to increase in value, and you’ll be able to take advantage of the appreciation only after owning it for many years.

A fixed monthly bill
A huge benefit of homeownership is that you’re better protected from inflation. If you have a fixed-rate mortgage, the amount you pay each month for your home won’t change no matter what happens to the interest rate and the economy. Even adjustable-rate mortgages have an interest rate cap to protect the homeowner. As rent continues to increase, having a steady mortgage payment that won’t increase will offer peace of mind when you’re budgeting.

Get better credit
Having a long history of making payments towards a big debt does wonders for your credit. Since mortgages typically last 15 to 30, if you make your payments on time, you can expect it to positively impact your score. Regular on-time rent payments can also positively impact your credit, but not automatically. Your rent payments must be reported to select credit agencies using a rent-reporting service.

Is a home purchase a good investment for you? You’ll need to crunch the numbers to decide. Take stock of your own financial standing and the average price of a house in your area compared to the price to rent a home. When it comes to purchasing a home, it’s always best to talk with a local home loan expert. They will tell you what loans you’ll qualify for, the minimum down payment, and provide info on the market you’re looking to buy in. Together you can review your financial goals to see whether owning a house would positively or negatively impact your future.