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Tuesday, January 30, 2018

What is Alt-A, does it still exist?

U.S. mortgage

Alt-A: If you ask 5 different mortgage persons what they are, you are likely to get 5 different answers. However, most will probably be pretty close, just a bit different perspective.

"A classification of mortgages where the risk profile falls between prime and subprime. The borrowers behind these mortgages will typically have clean credit histories, but the mortgage itself will generally have some issues that increase its risk profile. These issues include higher loan-to-value and debt-to-income ratios or inadequate documentation of the borrower's income."

"Alt-A mortgage, short for Alternative A-paper, is a type of U.S. mortgage that, for various reasons, is considered riskier than A-paper, or "prime", and less risky than "subprime," the riskiest category."

As real estate professionals or consumers using the services of a real estate professional, you will be exposed to an onslaught of acronyms. The Alt-A -- or Alternative A-Paper (also known as prime and conforming) mortgage type is not lacking. Falling in the middle of the three general categories (oh, don't forget the government categories FHA and VA :), these are famous for their acronyms which bleed over to the Prime and sub-prime arena as well:

1. SIVA -- Stated Income, Verified Assets -- also known as "Stated"
Your income is stated, your job (not income) is verified and so are your assets

2. SISA -- Stated Income, Stated Assets
Both your income and assets are stated, but not verified, job is verified

3. NIVA -- No Income, Verified Assets
No job verification but assets are verified

4. NINA -- No Income, No Assets
Neither your job nor your assets are verified (can't understand why this caused a problem in the mortgage market :)

5. No Ratio -- No Ratio
Your Debt-To-Income Ratio is not taken into consideration

6. No Doc-- No Documentation (clever with that one)
They don't care anything about, job or assets, just credit score

All of the above are credit score driven and were as Investopedia said these mortgages were typically given to clients with clean credit histories.

Many, many lenders have temporarily or permanently shut down these type of loan programs and others were put out of business b/c of their use. We still have a few brave lenders out there willing to fund these loans. Since the secondary market (where lenders and bank sell these loans and replenish their funds) lost their appetite for these, the rates have begun to climb dramatically. Only time will tell whether these loans will come back. I believe they will, but we are not likely to see the near Prime rates that we once had.

The virtues, or lack thereof, of these programs, can be discussed 'til the cows come home. Feel free to comment, but I hope this provides a little introduction as to what these products were/are.

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Thursday, January 25, 2018

Deducting Mortgage Points For My 2018 Tax Return

My 2015 Tax Return
Real Estate Agent
Gina B. Gonzales

You may be faced with fees in terms of mortgage points as part of owning a home.

You can often deduct points on your taxes by paying mortgage points. Sometimes this makes good financial sense. You have decided to buy a new home, the largest debt you'll ever take on is most commonly a mortgage. 

FAQ: Mortgage Points - What are they?

One percent of your loan amount on the mortgage is equal to a point. One point of a $100,000 home loan is equal to $1,000. Two types of points are used in the home mortgage industry, origination points and discount points. Origination points are typically equal to the income of the loan originator, discount points are a type of prepaid interest and are often fully deductible.

Citing from the TurboTax Website for your 2018 Tax Return:

"Qualifying for a Deduction

Generally, the Internal Revenue Service (IRS) allows you to deduct the full amount of your points in the year you pay them. If the amount you borrow to buy your home exceeds $1 million, you are generally limited on the amount of points that you can deduct. The same is true if your home equity debt exceeds $100,000. The IRS also imposes the following requirements to deduct mortgage points:
• The mortgage must be used to buy or build your primary residence
• The points must be a percentage of your mortgage amount
• The use of points must be a normal business practice in your area
• The amount of points paid must not be excessive for your area
• You must use cash accounting on your taxes
• The points must not be used for items that are typically stand-alone fees, such as property taxes
• You cannot have borrowed the funds to pay for the points from the mortgage lender or broker
• The amount you pay must be clearly itemized as points on your statement

If you aren't able to deduct your points in the year you pay them, you may still qualify to deduct them over the life of the loan.

How to Deduct Points

As far as filing taxes goes, claiming a tax deduction for mortgage points is a fairly straightforward process. Mortgage points are considered an itemized deduction and are claimed on Schedule A of Form 1040. Here are the specifics:
• Usually, your lender will send you Form 1098, showing how much you paid in mortgage points and mortgage interest
• Transfer this amount to line 10 of Form 1040 Schedule A
• If any of your points were not included on Form 1098, enter the additional amount you paid on line 12 of Form 1040 Schedule A"

Thursday, January 29, 2015

How Can I Receive Rental Property Tax Deductions for Depreciation

Rental Property Tax Deductions

Do you rent property to others? 

You must report the rent as income on your taxes. You can deduct, or subtract, your rental expenses (money you spent in your actions as the owner renting out the property) from that rental income, reducing your tax obligation.

Many expenses can be deducted in the tax year you spend the money but depreciation is calculated differently.

What Is Depreciation

A Brief Overview of Depreciation from

"Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance for the wear and tear, deterioration, or obsolescence of the property.

Most types of tangible property (except, land), such as buildings, machinery, vehicles, furniture, and equipment are depreciable. Likewise, certain intangible property, such as patents, copyrights, and computer software is depreciable.

In order for a taxpayer to be allowed a depreciation deduction for a property, the property must meet all the following requirements:

The taxpayer must own the property. Taxpayers may also depreciate any capital improvements for property the taxpayer leases.

A taxpayer must use the property in business or in an income-producing activity. If a taxpayer uses a property for business and for personal purposes, the taxpayer can only deduct depreciation based only on the business use of that property.

The property must have a determinable useful life of more than one year."

Depreciation Definition Examples

"1.Accounting: The gradual conversion of the cost of a tangible capital asset or fixed asset into an operational expense (called depreciation expense) over the asset's estimated useful life.

The objectives of computing depreciation are to (1) reflect reduction in the book value of the asset due to obsolescence or wear and tear, (2) spread a large expenditure (purchase price of the asset) proportionately over a fixed period to match revenue received from it, and (3) reduce the taxable income by charging the amount of depreciation against the company's total income. In effect, charging of depreciation means the recovery of invested capital, by gradual sale of the asset over the years during which output or services are received from it. Depreciation is computed at the end of an accounting period (usually a year), using a method best suited to the particular asset. When applied to intangible assets, the preferred term is amortization.

2.Commerce: The decline in the market value of an asset.

3.Economics: The decrease in the economic potential of an asset over its productive or useful life.

4.Foreign exchange: The reduction in the exchange value of a currency, either by a government or due to weakening of the underlying economy in a floating exchange rate system."

Saturday, November 15, 2014

VA loan Program

Veterans Home Loan Information
Veterans Home Loan Information

A low-cost loan for U.S. veterans that is partially guaranteed by the Department of Veterans Affairs (VA).

If you are a veteran, you can get some VA loans without a down payment. You also can negotiate the interest rate with the lender. The loan amount cannot be more than the VA's appraisal. If it is, you have to pay the difference in cash.
You still need to pay closing costs, including appraisal and title insurance fees, as well as one-time funding fee for about 2% of the loan amount.

VA loans present high risk to a lender since the VA guarantees a portion of the loan amount- usually 25%. So, in case of foreclosure, the VA has two choices: pay the lender the loan's balance and take the property or pay the guaranteed amount and let the lender keep the property.

Usually, to be eligible for VA loan, you must have served at least 181 days of active duty or at least six years in the National Guard.

If you need information contact your regional VA office or call

Refinancing with a VA Loan

Through the powerful VA Loan program, those eligible are also able to refinance in a couple of different ways. The most popular types of refinance options include the VA Streamline Refinance (also known as an Interest Rate Reduction Refinance Loan, or IRRRL) and a VA cash-out refinance.

Streamline Refinances allow Veterans with a VA Loan already to refinance to a lower interest rate. Cash-Out Refinances give the borrower the opportunity to use the equity of the home and use it as cash.

Home Loans

VA helps Servicemembers, Veterans, and eligible surviving spouses become homeowners. As part of our mission to serve you, we provide a home loan guaranty benefit and other housing-related programs to help you buy, build, repair, retain, or adapt a home for your own personal occupancy.

VA Home Loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms.

Veterans Crisis Line:
1-800-273-8255 (Press 1)

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