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Benefits

It is always a comfortable, safe and secure feeling to own your home. There are many benefits in owning property that includes convenient tax and financial benefits. Paying interest on a mortgage allows for a tax-deductible* interest. Paying points on your loan that would reduce the interest on your new home would also be tax-deductible* for that year of purchase. Your taxable income can be reduced by deducting the property taxes and the interest of your home mortgage from your gross income. For example, if you pay $6,000 a year by way of interest and $1000 a year in property taxes, your taxable income can be reduced by subtracting $7,000. Another interesting benefit is the appreciation of the value of your home. In California, the average appreciation of homes is invariably 12-14 percent. Compared to other cities, the appreciation in California is much higher. Even if the market is slow, this percentage is higher than any other kind of investment. Real estate investors are motivated by high appreciation, which allows them to buy a lot of real estate and then rent it out. The investors do not count on high rents as profits, but instead count on the appreciation value of the homes as profit.

Just as in stocks or bonds, a house is considered as an asset. If you sell your house at a profit, then you have to pay tax on your capital gain. You can qualify for long-term capital gain treatment if you have owned your house for over a year. If this is the case then only 40% of your profit is taxable. But if you have owned it for less than a year, then all of your profit is taxable. Your tax can be spread out by making an installment sale of the property. Instead of getting a lump sum at the closing of the deal, you can defer payment or postpone payment till the next year and receive it in one or several smaller payments. This would minimize a sudden big hike in your income due to the sale of your property.

* This means that an expense or an item can be subtracted from the adjusted gross income in order to reduce the amount of income that would be subject to tax.

 

Loans

North Star Mortgage specializes in different types of loans. Do you know the differences between being pre-qualified and pre-approved? These mortgage terms though often used have many differences. When you learn the differences between pre-qualified and pre-approved, then it gives you the power to negotiate and makes it easier to deal with any hassles that may arise. When you consider buying a property and begin to look around, you should first prequalify for your mortgage. If you have acquired a pre-qualification letter, then the real estate agent and the seller will take you seriously and show more consideration towards you.

A buyer provides initial information on his/her income, assets and debts. This information is invariably provided verbally by the buyer/s. An in-file credit report might or might not be reviewed. When the purchase agreement is executed, then the buyer has to complete a loan application.

A Pre-Qualification opens out the fact that the basic criteria for a loan approval have to be met. It does not mean that the Pre-Qualification can acquire your loan, but it indicates to the seller that you are capable of purchasing the property, but have finished or completed the steps towards acquiring a mortgage.

 

Documentation

These are generally the standard documents that we require for a loan application. This is for reference only. Each individual case will be different.

Salaried:

• Most recent pay stub(s) showing year-to-date earnings
• W-2s for most recent two years from all employers

Self-Employed:

• 1040s with all schedules for the most recent two years
• Year-to-date profit and loss statement (for sole proprietorship, general and limited partnership, corporation, limited liability company)
• If you have a 25% or greater ownership interest in a corporation, limited liability company, partnership or limited partnership, you may need to provide signed business Federal Income Tax Returns (Forms 1120, 1120S, 1065, K-1, etc.) with all schedules for the most recent one or two years

Rental Property Records

• Current rental agreements
• Tax returns and all schedules

Verification of Assets

• Most recent bank and/or credit union statement(s)
• Most recent stocks, mutual funds or brokerage statement(s)

Miscellaneous Documents

• Divorce decree (if applicable)
• Settlement agreements (if applicable)
• Bankruptcy documents (if applicable)
• Green cards (permanent resident aliens, non-permanent resident aliens)