Palos Verdes Has Free Income Tax Preparation!

Palos Verdes Has Free Income Tax Preparation!

Bluff Cove courtesy of Arvin Design

Palos Verdes homes owners who are looking for assistance with their tax return, can make an appointment at the Peninsula Seniors Center for free help with tax preparation.  This is an AARP Tax-Aide Program which has one-hour appointments that can be scheduled on Saturdays only from 9 a.m. to 2 p.m. beginning on January 31, 2015, and ending on April 11, 2015.  In order to take advantage of this program, you must have all your tax documents for 2014 in hand before making your appointment.  You are also required to bring copies of your 2013 Federal and State income tax returns.   It is open to all ages including seniors, but remember that space will be limited and you must bring your tax documents organized and ready to go.

To make an appointment contact the Peninsula Seniors Center Monday through Friday between 10 a.m. and 4 p.m.  For further information and to make an appointment call (310) 377-3003 or go to seniors@pvseniors.org.

To read my prior article on Free Income Tax Preparation click here.

Peninsula Seniors is located at 30928 Hawthorne Boulevard, Rancho Palos Verdes 90275.

Photo of Bluff Cove courtesy of Arvin Design

Palos Verdes Home Buying Mortgage Tips

Palos Verdes Home Buying Mortgage Tips

cottage

This well-written article will assist Palos Verdes home buyers in determining their mortgage options when purchasing their new home.  Home buyers strengthen their position when they submit a PreApproval letter and proof of funds along with their Purchase Offer.  Below is some information to gather before applying for a home mortgage/loan:

4 Tips to Determine How Much Mortgage You Can Afford
By: G. M. Filisko  Published: August 20, 2014
By knowing how much mortgage you can handle, you can ensure that homeownership will fit in your budget.
Homeownership should make you feel safe and secure, and that includes financially. Be sure you can afford your home by calculating how much of a mortgage you can safely fit into your budget.

Why not just take out the biggest mortgage a lender says you can have? Because your lender bases that number on a formula that doesn’t consider your current and future financial and personal goals.

Think ahead to major life events and consider how those might influence your budget. Do you want to return to school for an advanced degree? Will a new child add day care to your monthly expenses? Does a relative plan to eventually live with you and contribute to the mortgage?

Consider those lifestyle issues as you check out these four methods for estimating the amount of mortgage you can afford.
1. Prepare a Detailed Budget

The oldest rule of thumb says you can typically afford a home priced two to three times your gross income. So, if you earn $100,000, you can typically afford a home between $200,000 and $300,000.

But that’s not the best method because it doesn’t take into account your monthly expenses and debts. Those costs greatly influence how much you can afford. Let’s say you earn $100,000 a year but have $1,000 in monthly payments for student debt, car loans, and credit card minimum payments. You don’t have as much money to pay your mortgage as someone earning the same income with no debts.

Better option: Prepare a family budget that tallies your ongoing monthly bills for everything — credit cards, car and student loans, lunch at work, day care, date night, vacations, and savings.

See what’s left over to spend on homeownership costs, like your mortgage, property taxes, insurance, maintenance, utilities, and community association fees, if applicable.

2. Factor in Your Downpayment

How much money do you have for a downpayment? The higher your downpayment, the lower your monthly payments will be. If you put down at least 20% of the home’s cost, you may not have to get private mortgage insurance, which protects the lender if you default and costs hundreds each month. That leaves more money for your mortgage payment.

The lower your downpayment, the higher the loan amount you’ll need to qualify for and the higher your monthly mortgage payment.

But, if interest rates and/or home prices are rising and you wait to buy until you accumulate a bigger downpayment, you may end up paying more for your home.

3. Consider Your Overall Debt

Lenders generally follow the 43% rule. Your monthly mortgage payments covering your home loan principal, interest, taxes and insurance, plus all your other bills, like car loans, utilities, and credit cards, shouldn’t exceed 43% of your gross annual income.

Here’s an example of how the 43% calculation works for a homebuyer making $100,000 a year before taxes:

1. Your gross annual income is $100,000.

2. Multiply $100,000 by 43% to get $43,000 in annual income.

3. Divide $43,000 by 12 months to convert the annual 43% limit into a monthly upper limit of $3,583.

4. All your monthly bills including your potential mortgage can’t go above $3,583 per month.

You might find a lender willing to give you a mortgage with a payment that goes above the 43% line, but consider carefully before you take it. Evidence from studies of mortgage loans suggest that borrowers who go over the limit are more likely to run into trouble making monthly payments, the Consumer Financial Protection Bureau warns.

4. Use Your Rent as a Mortgage Guide

The tax benefits of homeownership generally allow you to afford a mortgage payment — including taxes and insurance — of about one-third more than your current rent payment without changing your lifestyle. So you can multiply your current rent by 1.33 to arrive at a rough estimate of a mortgage payment.

Here’s an example: If you currently pay $1,500 per month in rent, you should be able to comfortably afford a $2,000 monthly mortgage payment after factoring in the tax benefits of homeownership.

However, if you’re struggling to keep up with your rent, buy a home that will give you the same payment rather than going up to a higher monthly payment. You’ll have additional costs for homeownership that your landlord now covers, like property taxes and repairs. If there’s no room in your budget for those extras, you could become financially stressed.

Also consider whether or not you’ll itemize your deductions. If you take the standard deduction, you can’t also deduct mortgage interest payments. Talking to a tax adviser, or using a tax software program to do a “what if” tax return, can help you see your tax situation more clearly.

G.M. Filisko is an attorney and award-winning writer who’s owned her own home for more than 20 years. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Visit HouseLogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.

 

Free Tax Preparation Program

Palos Verdes flowers

Palos Verdes homes owners who are looking for assistance with their tax filings, are able again this year to make appointments at the Peninsula Seniors Center for free help with tax preparation.  This is an AARP Tax-Aide Program which has one-hour appointments that can be scheduled on the hour from 9 a.m. to 2 p.m. on Saturdays only.

In order to take advantage of this program, you must have all your tax documents for 2012 in hand before making your appointment.  You are also required to bring copies of your 2011 Federal and State income tax returns.   It is open to all ages including seniors, but remember that space will be limited and you must bring your tax documents organized and ready to go.

To make an appointment contact the Peninsula Seniors Center, Monday through Friday between 10 a.m. to 4 p.m. For further information and to make an appointment call (310) 377-3003, or go to seniors@pvseniors.org.

Peninsula Seniors is located at 30928 Hawthorne Boulevard, Rancho Palos Verdes 90275.

Tax Tips For Palos Verdes Homes Owners

Sculpture

It is tax time and here are some tips to avoid common mistakes regarding your Palos Verdes real estate deductions courtesy of National Association of Realtors:

10 Easy Mistakes Home Owners Make on Their Taxes

By: G. M. Filisko, Published: January 5, 2012

Don’t rouse the IRS or pay more taxes than necessary — know the score on each home tax deduction and credit.

Sin #1: Deducting the wrong year for property taxes

You take a tax deduction for property taxes in the year you (or the holder of your escrow account) actually paid them. Some taxing authorities work a year behind — that is, you’re not billed for 2011 property taxes until 2012. But that’s irrelevant to the feds.

Enter on your federal forms whatever amount you actually paid in 2011, no matter what the date is on your tax bill. Dave Hampton, CPA, tax manager at the Cincinnati accounting firm of Burke & Schindler, has seen home owners confuse payments for different years and claim the incorrect amount.

Sin #2: Confusing escrow amount for actual taxes paid

If your lender escrows funds to pay your property taxes, don’t just deduct the amount escrowed, says Bob Meighan, CPA and vice president at TurboTax in San Diego. The regular amount you pay into your escrow account each month to cover property taxes is probably a little more or a little less than your property tax bill. Your lender will adjust the amount every year or so to realign the two.

For example, your tax bill might be $1,200, but your lender may have collected $1,100 or $1,300 in escrow over the year. Deduct only $1,200. Your lender will send you an official statement listing the actual taxes paid. Use that. Don’t just add up 12 months of escrow property tax payments.

Sin #3: Deducting points paid to refinance

Deduct points you paid your lender to secure your mortgage in full for the year you bought your home. However, when you refinance, says Meighan, you must deduct points over the life of your new loan. If you paid $2,000 in points to refinance into a 15-year mortgage, your tax deduction is $133 per year.

Sin #4: Failing to deduct private mortgage insurance

Lenders require home buyers with a down payment of less than 20% to purchase private mortgage insurance (PMI). Avoid the common mistake of forgetting to deduct your PMI payments. However, note the deduction begins to phase out once your adjusted gross income reaches $100,000 and disappears entirely when your AGI surpasses $109,000. Also, unless Congress acts to extend the PMI deduction again, 2011 is the last tax year for which you can take this deduction.

Sin #5: Misjudging the home office tax deduction

This deduction may not be as good as it seems. It’s complicated, often doesn’t amount to much of a deduction, has to be recaptured if you turn a profit when you sell your home, and can pique the IRS’s interest in your return. Hampton’s advice: Claim it only if it’s worth those drawbacks. If so, here’s what to  know about what you can write off.

Sin #6: Missing the first-time home buyer tax credit

While the original home buyer tax credit deadline passed in April 2010 (and isn’t available in 2012), military families and some government workers on assignment outside the U.S. were given an extension until April 30, 2011, to get a home under contract and take advantage of up to $8,000 in tax credits for first-time buyers and $6,500 in credits for repeat buyers.

It applies to any individual (and, if married, the individual’s spouse) who serves on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010.

Sin #7: Failing to track home-related expenses

If the IRS comes a-knockin’, don’t be scrambling to compile your records. Many people forget to track home office and home maintenance and repair expenses, says Meighan. File away documents as you go. For example, save each manufacturer’s certification statement for energy tax credits, insurance company statements for PMI, and lender or government statements to confirm property taxes paid.

Sin #8: Forgetting to keep track of capital gains

If you sold your main home last year, don’t forget to pay capital gains taxes on any profit. However, you can exclude $250,000 (or $500,000 if you’re a married couple) of any profits from taxes. So if you bought a home for $100,000 and sold it for $400,000, your capital gains are $300,000. If you’re single, you owe taxes on $50,000 of gains. However, there are minimum time limits for holding property to take advantage of the exclusions, and other details. Consult IRS Publication 523.

Sin #9: Filing incorrectly for energy tax credits

If you made any eligible improvement, fill out Form 5695. Part I, which covers the 30%/$1,500 credit for such items as insulation and windows, is fairly straightforward. But Part II, which covers the 30%/no-limit items such as geothermal heat pumps, can be incredibly complex and involves crosschecking with half a dozen other IRS forms. Read the instructions carefully.

Sin #10: Claiming too much for the mortgage interest tax deduction

You can deduct mortgage interest only up to $1 million of mortgage debt, says Meighan. If you have $1.2 million in mortgage debt, for example, deduct only the mortgage interest attributable to the first $1 million.

This article provides general information about tax laws and consequences, but shouldn’t be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.

Visit HouseLogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Palos Verdes Real Estate Appraisals

Academy Hill Neighbhorhood of Palos Verdes, CA 90274

I am happy to report that appraisals are coming in at sales price for Palos Verdes homes that I have sold this past year.  After the new Fannie Mae appraisal changes, we were all experiencing appraisers from out of the area being assigned to Palos Verdes real estate appraisals and they were coming in low as they did not know the area.   This was true for both Palos Verdes homes sales and refinances.

Yesterday, a LA Times article regarding appraisal fee disclosure discussed the issue of who is actually getting paid for these new higher priced appraisals and where the appraisers are coming from.  Why would you care about that?  Because, the appraisers are sometimes getting paid only half the fee (and to find appraisers who will work for that lower fee, they were coming from out of the area)  “…while the balance flows to an enterprise you have never heard of — an appraisal management company — that assigns the job to the appraiser.  That management company, in turn, may be a wholly owned by or in a joint venture or affiliate relationship with your lender, which may be pocketing a significant portion of your appraisal dollars.”  Click here to read entire article.

Now the Consumer Financial Protection Bureau may require the appraisal fee be broken down to indicate how much is actually going to the appraiser and how much the appraisal management company is taking.  A decision should be made before summer.

What’s My Palos Verdes Homes Really Worth?

What's My Home Really Worth

Have you wondered about that little box on the left-hand side entitled “What’s My Home Really Worth?” Palos Verdes homes owners have asked for a reliable site to determine their home’s value.  Palos Verdes real estate value can best be determined by paying for a formal appraisal or contacting your real estate agent for a Comparable Market Analysis (CMA).  But what if you are not going to sell your home but are just curious or are doing some financial planning?

I installed a link at the top left-hand side of this site under my photo; it is a handy widget appropriately called “What’s My Home Really Worth?” which I invite you to use.  It is more accurate than most other sites as it uses data directly from the Multiple Listing Service which other sites cannot access.  However, it is still raw data and does not take into account condition of home, type of sale, etc.  When you are ready to sell your home, a Realtor is still best able to give you the most accurate price as they understand neighborhoods, location, market nuances, specific demand for different price point and features, etc. — but just in case you are curious, have a look!

New Mortgage Dispute Resolution Hotline

Racoon at Palos Verdes homes

Palos Verdes homes owners and home owners across the country often have unresolved questions regarding their home mortgage, private mortgage insurance escrow account, promised interest rate reduction, loan modification request and an array of other home loan questions.  I just read about a new federal service that became available on December 1, 2011 – the Consumer Financial Protection Bureau’s home mortgage complaint and dispute resolution hotline courtesy of last year’s Dodd-Frank financial reform legislation.

According to an LA Times article by Kenneth R. Harney,  “The complaint hotline is accessible online at www.consumerfinance.gov and by toll-free phone between 8 a.m. and 8 p.m. Eastern at (855) 411-2372.”  It also is a hotline/website for credit card disputes – there is a separate portal once you enter the site.  This is great for consumers to have another avenue to assist them with these financial disputes.  Click here to read entire LA Times story.

Photo courtesy of Arvin Design

Will Higher FHA Loan Limits Help Sell Palos Verdes Real Estate?

Grotto Photo courtesy of Arvin Design, Redondo Beach, CA 90277

Last week Congress approved raising the loan limits on FHA loans to $729,750.  How will that effect Palos Verdes homes owners?  At first glance, one would guess that there is not too much Palos Verdes real estate selling in the lower ranges.  Currently, 25% or 51 single family Palos Verdes houses are for sale for less than $1,000,000.  However, 46 out of the 47 Palos Verdes condos/townhomes currently for sale are under $1,000,000.

FHA mortgages require lower FICO scores than a conventional loan – 620 for FHA and 660 for conventional.  FHA mortgages require less down payment – a minimum of 3.5% versus 20% for a conventional loan.  This is attractive for some buyers and therefore helpful for some sellers of Palos Verdes real estate.  The downside for buyers is that FHA requires PMI (private mortgage insurance) which is an additional payment on top of the mortgage payment – 1.15% of the loan amount.

Kenneth R. Harney wrote a recent article in the LA Times with some wise advice, “Bottom line for house shoppers: Take a hard, close look at FHA with a local loan officer, in light of the rule changes.  Pencil out the costs, down-payment requirements and more generous standards on credit.”  Click here to read his article.

Fun wintery photo courtesy of Arvin Design

5 Reasons for a Mortgage Refinance Other Than Lowering Your Payment

San Francisco Pier

Interest rates are at historic lows and many homeowners are refinancing to take advantage of them.  When I saw the title of this article, I tried to guess the 5 reasons one would refinance other than lowering your interest rate (I did not guess them all).  This article is courtesy of HouseLogic.com:

By: Barbara Eisner Bayer

Published: October 22, 2010

There’s more to a mortgage refinance than lowering your monthly payments.

1. Change your mortgage term

If you decrease the term of your mortgage in a refinance by going from a 30-year to a 15-year, you’ll pay a lower interest rate and shorten your total interest costs. You’ll build home equity more quickly, and pay off your loan sooner, even though your monthly payments go up.

2. Move from an adjustable rate to a fixed rate

ARMs offer low introductory rates, but they also offer long periods of uncertainty that make it hard to budget. It makes sense in a mortgage refinance to go from an ARM to a fixed-rate loan during a low-interest rate environment. You’ll get emotional security and your rate won’t fluctuate with changing economic conditions.

3. Take out cash

With a cash-out mortgage refinance, you can turn an intangible asset—accumulated home equity—into a tangible one—cash. It makes sense for a project that will generate long-term benefits, like a home improvement or funding a child’s college education. However, don’t do it for frivolous reasons. Unless you’re extremely disciplined, you could find yourself in even deeper debt.

4. Consolidate two mortgages

When interest rates are low, a mortgage refinance lets you consolidate your main mortgage and an outstanding home equity loan to realize a lower overall monthly payment. Plus, you’ll have only one mortgage payment to make each month.

5. Recover from divorce

If your home is jointly owned with your soon-to-be ex-spouse, a mortgage refinance will turn a joint obligation into the responsibility of the person keeping the home. Nothing is more frustrating than tracking down a former spouse who doesn’t keep up with his or her end of the mortgage payment.

Lay the groundwork

If one of these reasons resonates with you, contact your current lender to see if it’ll offer you preferred rates or reduced closing costs on a mortgage refinance. But don’t assume the current lender is best: Leave no stone unturned by searching for lenders online and calling community banks and local credit unions.

No matter which lender you choose, a mortgage refinance for the right reasons can save you lots of money—and that’s the best reason of all.

Visit HouseLogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®

Photo courtesy of Arvin Design

Equity In Palos Verdes Real Estate?

Distressed Sales Southern Califonria chart by California Association of Realtors

How are Palos Verdes homes owners doing when it comes to equity in their homes and how many distressed sales do we have?

A recent LA Times article states that half of homes owners nationally have at least 25% equity in their homes and about one quarter of homeowners with mortgages have more than 50% equity in their homes.  In California, the numbers are slightly higher.  My guess would be that Palos Verdes houses have fared even better because of “the stable, relatively affluent, low-construction characteristics of high-equity areas.”  Click here to read LA Times article regarding Homeowner Equity.

California Association of Realtors’ Chief Economist, Leslie Appleton-Young, provided the above chart at the 2012 Economic Forecast last week (click here to read my article with highlights from 2012 forecast).  44% of Los Angeles County real estate sales in August 2011 were distressed sales.  After checking Palos Verdes real estate data from California Regional Multiple Listing service, I found 5 out of the 59 single family Palos Verdes homes sales in August 2011 were distressed sales; that is 8.5% – far better than the rest of LA County.

Since the first of the year, 35 out of the 432 single family Palos Verdes houses sold to date were distressed sales.  22 were short sales, 12 were bank owned sales and 1 was sold in foreclosure.  The highest priced distressed sale was a home in Palos Verdes Estates that sold for $4,800,000.  69% of the distressed sales for single family Palos Verdes homes sold under $1,000,000.  More statistics on Palos Verdes real estate can be accessed by clicking here or on the “Statistics” tab above.

Chart courtesy of California Association of Realtors