Michael Kelly

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Whether you’re an existing homeowner, recently bought a new home, or decided to refinance your home in 2020, it’s important to prepare the appropriate documents for your tax return.  Even though taxes are due by April 15, 2021 for most taxpayers, you are able to electronically file your taxes much earlier. The IRS will begin accepting electronic returns starting on Feb. 12, 2021, when all taxpayers should have received their final paychecks of the 2020 fiscal year. Listed below are the necessary forms you’ll need to prepare when filing your 2021 tax returns: Form 1098 The 1098 tax form allows you to deduct mortgage interest payments from your taxable income. If you have a mortgage, you should receive one of these forms from the IRS or your bank in the mail. If you’ve paid more than $600 in interest on your home loan in the past year, that interest is typically deductible.  Students may receive a 1098-T or 1098-E form. These forms outline the amount of tuition paid or the interest they’ve paid on their student loans. While student loan interest and tuition payments may also be deductible, it’s important to recognize the difference between the two forms. Form 8829 Form 8829 is known as the home office deduction. This form allows you to deduct expenses from your home office if you work at home. However, just because you work at home doesn’t mean you can write off your utilities. The IRS specifically outlines which expenses are eligible for a home office tax deduction: The area you use for work within your home must be your principal place of business. You must have a ...

With spring on the horizon and vaccines becoming more widely available, a return to normalcy could  be coming into view. With that, the historically low mortgage rates of 2020 may begin to rise. Just two weeks into the new year, Freddie Mac reported that “mortgage rates climbed 14 basis points to 2.79%.” As mortgage rates continue to rise, the overall cost of purchasing a home will be impacted. Higher mortgage rates equate to higher monthly mortgage payments, especially as home prices rise as a result of limited inventory.  While economists are predicting that the transition will come slowly, borrowers would be smart to take advantage of the current low rates while they’re here, instead of banking on another drop that may never come.  Where mortgage rates are trending for the start of 2021 There are still many unanswered questions related to the pandemic, possible stimulus checks and resulting market fluctuations. However, Len Keifer, a deputy chief economist for Freddie Mac, stated that,  “Our baseline forecast has rates right around where they are now throughout January 2021. And we forecast interest rates to remain flat over the next year overall.” And while Freddie Mac’s predictions call for rates averaging around 3.0% in 2021, Keifer also stated that, “We should be mindful that they could easily ratchet higher in a hurry. We only have to look back to 2018 to see a housing market slowed by modestly higher rates.”  Keep in mind that inventory of available homes is also at a historic low. As more buyers prepare to hit the market for a typically busy spring, it will ...

As of December 1, 2020, the Federal Housing Finance Agency (FHFA) has introduced a new refinancing fee, otherwise known as the adverse market refinance fee. The new fee was created to help offset some of the losses experienced by Fannie Mae and Freddie Mac, two government lending companies, during the COVID-19 pandemic.  The New Refinancing Fee, Explained The adverse market refinance fee is equal to 0.5% of your mortgage principal, meaning that you’ll be paying $500 for every $100,000 you borrow, not including interest.  However, there are some exemptions from the fee: If your refinanced mortgage is less than $125,000 If your government mortgage is backed by the FHA, VA, or USDA If you have a non-conforming mortgage, such as a jumbo loan The FHFA is charging the refinance fee directly to lenders, not to borrowers. Lenders may elect to roll the fee into the interest rate or add it as a one-time expense to be included with closing costs.  If your loan is likely to be subject to the new refinance fee, it’s important to make sure a refinance makes sense for you. As a general rule, there should be at least a full percentage point between your current interest rate and your refinance rate for the change to be worth it. If you’ll be saving more than a full percentage point, there’s a good chance that you’ll still be saving enough to outweigh the additional refinance fee.  Is it Still a Good Time to Refinance Your Mortgage? Mortgage rates have seen record lows in 2020 and are expected to stay at similar rates well into 2021. If your financial profile ...

The housing market was a shining star in 2020, fueling the economic turnaround throughout the country. As we look forward to 2021, can we expect real estate to continue showing such promise? Here's what four experts have to say about the year ahead. Lawrence Yun, Chief Economist , National Association of Realtors  (NAR) In 2021, I think rates will be similar or modestly higher, maybe 3%…So, mortgage rates will continue to be historically favorable . Danielle Hale, Chief Economist , realtor.com We expect sales to grow 7 percent  and prices to  rise another 5.7 percent on top of 2020's already high levels . Robert Dietz, Senior Vice President and Chief Economist , National Association of Home Builders  (NAHB) With home builder confidence near record highs, we expect continued gains for single-family construction , albeit at a lower growth rate than in 2019. Some slowing of new home sales growth will occur due to the fact that a growing share of sales has come from homes that have not started construction. Nonetheless, buyer traffic will remain strong  given favorable demographics, a shifting geography of housing demand to lower-density markets  and historically low interest rates. Mark Fleming, Chief Economist, First American   Mortgage rates are expected to remain low for the foreseeable future and millennials will continue forming households, keeping demand robust , even if income growth moderates. Despite the best intentions of home builders to provide more housing ...

Student loan debt can discourage potential homebuyers in a variety of ways. Between raising your debt-to-income ratio and making it harder to save for a down payment, securing a mortgage can often seem out of reach.  Despite the obstacles that come with paying off any amount of debt, your student loans don’t automatically disqualify you from becoming a homeowner.  According to a 2019 survey conducted by Bankrate, 61% of millennials don’t own a home , with nearly a quarter of them saying their student loan debt is preventing them from making the purchase.  However, mortgage lenders expect that you may be carrying debt. Whether it’s from your student loans, a car, or credit cards, lenders fully understand that borrowers are typically managing a variety of expenses, which is why becoming a homeowner may be more within reach than you’d expect.  Managing Your Debts Some reports have indicated that credit card debt carries more weight than your student loans when it comes to buying a home. And while it’s important to stay on top of your student loan payments, shifting your budget’s focus towards tackling any credit card balances may improve your odds of securing a mortgage.  Paying off your high-interest consumer debts is typically quicker and easier than eliminating your student loans. Managing your credit card debt will improve your debt-to-income ratios while providing you with additional funds to put towards your student loans or a down payment.  How to Increase Your Credit Score Mortgage lenders pay close attention to your credit score when determining your eligibility ...

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