Who Owns the Home When Two Names are on the Mortgage?

We shed some light on buying a home as a couple so you’re not in the dark when it’s time to sign on the dotted lines.

When couples start a new journey as homeowners, questions can linger as to whose name (or names) should be listed on the mortgage and title. Many couples want a 50/50 split, indicating equal ownership to the asset, but sometimes that isn’t the best financial decision. Plus, with more than one person on the loan, the legalities of who owns the home can get tricky. A home is often the largest purchase a couple or an individual will make in their lifetime, so ownership can have big financial implications for the future.

Title vs. mortgage

For starters, it’s important to note the difference between a mortgage and a title. A property title and a mortgage are not interchangeable terms.

In short, a mortgage is an agreement to pay back the loan amount borrowed to buy a home. A title refers to the rights of ownership to the property. Many people assume that as a couple, both names are listed on both documents as 50/50 owners, but they don’t have to be. Listing both names might not make the most sense for you.

Making sense of mortgages

For many, mortgages are a staple of homeownership. According to the Zillow Group Consumer Housing Trends Report 2017, more than three-quarters (76 percent) of American households who bought a home last year obtained a mortgage to do so.

When a couple applies jointly for a mortgage, lenders don’t use an average of both borrowers’ FICO scores. Instead, each borrower has three FICO scores from the three credit-reporting agencies, and lenders review those scores to acquire the mid-value for each borrower. Then, lenders use the lower score for the joint loan application. This is perhaps the biggest downside of a joint mortgage if you have stronger credit than your co-borrower.

So, if you or your partner has poor credit, consider applying alone to keep that low score from driving your interest rate up. However, a single income could cause you to qualify for a lower amount on the loan.

Before committing to co-borrowing, think about doing some scenario evaluation with a lender to figure out which would make more financial sense for you and your family.

True ownership

If you decide only one name on the mortgage makes the most sense, but you’re concerned about your share of ownership of the home, don’t worry. Both names can be on the title of the home without being on the mortgage. Generally, it’s best to add a spouse or partner to the title of the home at the time of closing if you want to avoid extra steps and potential hassle. Your lender could refuse to allow you to add another person — many mortgages have a clause requiring a mortgage to be paid in full if you want to make changes. On the bright side, some lenders may waive it to add a family member.

In the event you opt for two names on the title and only one on the mortgage, both of you are owners.

The person who signed the mortgage, however, is the one obligated to pay off the loan. If you’re not on the mortgage, you aren’t held responsible by the lending institution for ensuring the loan is paid.

Not on mortgage or title

Not being on either the mortgage or the title can put you in quite the predicament regarding homeownership rights. Legally, you have no ownership of the home if you aren’t listed on the title. If things go sour with the relationship, you have no rights to the home or any equity.

To be safe, the general rule of home ownership comes down to whose names are listed on the title of the home, not the mortgage.

Source: zillow.com ~ BY BRITTAN JENKINS

How To Get The Biggest Tax Break When You Sell Your Home

Well, the time has finally arrived. After more than 22 years, we have begun the process to sell our home.  Our three daughters have all established themselves in New York and Boston and a multi-bedroom house seems way too large for the two of us.

We have begun the exhausting and time-consuming task of de-cluttering 22 years of life.  We followed the approach of many – which is, if you have closet space you might as well fill it.  And fill it we did.

There is an important financial aspect regarding selling a home that you have lived in for many years that deals with an issue in the tax code.  It is a valuable tax break available to sellers of a personal residence, whether house, condo or co-op.  It allows for exclusion – meaning you pay no taxes to the Internal Revenue Service – for certain amount of capital gains on the sale.

The exclusion which currently is capped at $500,000 for married couples who file jointly and $250,000 for singles and married couples who file separate returns.  As we are married and file a joint return so we will be able to exclude $500,000 in gains from the taxman.

How do you claim this exclusion? It all starts with the original cost of your home.  This is known as cost basis.  What can be added to the original cost basis are any home improvements as well as the costs incurred when buying or selling the home such as real estate commissions.

This is where good record-keeping comes in handy.  When you improved your home by adding new windows or undertook a large addition, these amounts get added to the original cost basis.  In our case, we undertook two large renovations which will be able to offset potential gains from the sale price.

If you are able to sell your home in excess of this cost basis plus the additions, normally these gains would be subject to taxes on the profit.  This profit would be taxed as a long-term capital gain tax, which for high-income sellers could be as high as 23.8% federal tax, as well as additional state taxes.

Now this is where the benefit comes in for exclusion.  A married couple filing jointly can exclude up to half million dollars of profit from any capital gains tax. A valuable tax break indeed.

To qualify for this tax break, the seller must have lived and owned the property for two out of last five years that ends on the day of the sale.  Not consecutive years, just two of the last five years.  In addition, sellers can only claim an exclusion every two years.

We have begun determining not just the original cost basis of our home, but all of the money that we added to the property in improvements over the last 22 years.  It’s a good idea to create a file that documents these home improvements as they occur so the task is easier when the time comes for them to sell.

Hopefully you have sold your home for more than you paid for it. And, if like many who are selling after 15 to 30 years, the likelihood is that you will have a capital gain from the sale of your home.

How do you determine the cost basis?  And what costs are allowed to be included in this calculation?

The IRS has specific guidelines and worksheets to assist you.  Publication 523- Selling your Home provides insights to determine your tax implications for your filing.

The following are some of the improvements that can be included to your cost basis:

Additions: Bedroom, bathroom, deck, garage, porch, patio.

Lawn and grounds:  Landscaping, driveway, walkway, fence, retaining wall, swimming pool.

Systems:  Heating, central air conditioning, furnace, duct work, central humidifier, central vacuum, air or water filtration, wiring, security system, lawn sprinklers.

Exterior:  Storm windows and doors, new roof, new siding, satellite dish.

Plumbing:  Septic system, water heater, soft water system, filtration system.

Insulation:  Attic, walls, floors, pipes and duct work.

Interior:  Built-in appliances, kitchen modernization, flooring, wall-to-wall carpeting, fireplace.

It’s helpful to begin to itemize all these improvements before you decide to sell your home.  These improvements that were completed over the years should be included in your cost basis before you file your tax returns.

If you would like to view what the tax collectors say on the subject, click here: IRS Guidelines. 

Source:  forbes.com ~ By: Larry Light 

11 Reasons Why Your Home Isn’t Selling

When you first put your house on the market, you might be hopeful for a quick sale—especially if you’ve put a lot of money into improving the house over the years and if the neighborhood is one that has historically attracted a lot of buyers. While you shouldn’t panic if the house doesn’t sell the moment you list it, you should begin to worry if the months start flying by without any real offers. If this is the case, here are 11 reasons why your house may not be selling.

You overvalued your property. If your house is overpriced, it’s simply not going to sell. Compare your property to similar properties that recently sold within your area to get a better idea of its true value. An experienced real estate agent can give you an accurate value of your home. Additionally, don’t make the mistake of tacking on the cost of any renovations you made. You can’t just assume that the cost of a renovation translates to added value.

Your listing is poor. If the listing of your home includes a poorly written description without any images, a lot of buyers are going to skip over it. Make sure you and your REALTOR® put an effort into creating a listing that attracts the attention of buyers. Make sure to add high quality photographs of both the interior and exterior of your home. Don’t forget to highlight unique features as well.

You’re always present at showings. Let your agent handle your showings. Buyers don’t want to have the seller lurking over their shoulder during showings, especially during an open house. This puts unwanted pressure on the buyer, which will make them uncomfortable and likely chase them away.

You’re too attached. If you refuse to negotiate even a penny off your price, then there’s a good chance that you’ve become too attached to your home. If a part of you doesn’t want to sell it, or you think your house is the best house in the world, odds are you’re going to have a lot of difficulties coming to an agreement with a potential buyer.

You haven’t had your home professionally cleaned. A dirty house is going to leave a bad impression on buyers. Make sure you have a professional clean your carpeting and windows before you begin showing your house.

You haven’t staged your home. If you’ve already moved out, then don’t show an empty house. This makes it difficult for buyers to imagine living in it. Stage your house with furniture and decor to give buyers a better idea of how big every room is and how it can be used. You want the buyer to feel at home when they are taking the tour.

You kept up all of your personal décor. Buyers are going to feel uncomfortable touring your house if you keep all of your family portraits up. Take down your personal décor so that buyers can have an easier time imagining themselves living there.

Your home improvements are too personalized. You might think that the comic book mural you painted for your child’s room is absolutely incredible, but that doesn’t mean potential buyers will agree. If your home improvements are too personalized, it can scare off buyers who don’t want to pay for features they don’t want.

Your home is too cluttered. Even if your home is clean, clutter can still be an issue. For example, maybe you simply have too much furniture in one of your rooms. This can make the house feel smaller than it is.

Your home is in need of too many repairs. The more repairs that are needed, the less likely a buyer will want your house. Many buyers simply don’t want to deal with the cost or effort of doing repair work, even if it’s just a bunch of small repairs, such as tightening a handrail or replacing a broken tile.

You chose the wrong real agent. In my opinion, choosing the right real estate is simply the most important decision you make in selling your home.  A good REALTOR® makes all the difference in selling your home within a reasonable time.

All these things can be fixed once you realize your mistake; however, the longer your property stays on the market, the less likely it will sell at listing price. One of the best ways to avoid making these common mistakes is by working with a professional real estate agent.

Source: blog.rismedia.com  ~  By Charles Muotoh

Ready For Staging: 4 Repairs You Need Before Selling Your Home

Selling your home is a complex process that may take weeks to complete. This is partially because your house may need to be updated or renovated before it can go on the market. What are some of the most crucial fixes that you should make before listing your property?

Update the Exterior

The first thing that you will want to do is make sure that the home’s exterior is in good condition. This may involve landscaping work such as removing trees or shrubs that are dead or dying. It may also involve inspecting the roof, siding or other exterior components that may need to be repaired or updated to make the house easier to sell. At the very least, a fresh coat of paint should be applied before putting the house on the open market.

Check the Air Conditioning

If you have a central air conditioning unit in your home, make sure that it works properly. This means that it should start easily and produce an even amount of cool air throughout the house.

Ideally, you will have it inspected once a year by someone like Doctor Fix-It. However, inspecting it and making repairs prior to selling your home should be considered mandatory. It may also be a good idea to check the furnace and clean the ducts before you show the home to buyers.

Make Sure the Floors Are Adequate

Whether your home has wood floors or carpet, make sure that they are in good condition. If necessary, wax and clean the wood or put down new carpet in areas where it may be frayed or dirty. If you are going to replace your carpet, make sure that it is the same color and style throughout a given space.

Check the Plumbing and Electrical Systems

Buyers aren’t going to want to put an offer on a home that has poor water pressure. They are also unlikely to want to make an offer on a home that has dangerous electrical wiring. If the fixes to either system are relatively minor, you can do them yourself. However, it may also be a good idea to call a professional to make sure that the job is done safely.

Selling your home can be a great way to help you downsize or lock in profits. However, if the process is not done right, it could reduce the sale price of the home or result in the home staying on the market longer than you anticipated that it would.

Source: realtytimes.comBY MEGHAN BELNAP

8 Ways to Increase Your Home Value on a Budget

Increasing the value of your home when selling can be a difficult task, but a few home improvement ideas can help you stage for success while keeping within your budget.

1. Install a programmable thermostat.
Heating your home accounts for more than 40% of its total energy usage, according to the U.S. Department of Energy. Programmable thermostats allow you to customize a temperature profile throughout the day. Reducing the temperature inside your home by a degree or two while you sleep can lead to huge savings on a monthly basis. And with energy costs on the rise, many buyers will appreciate your forward thinking in assisting them with long-term savings.
2. Update your fixtures
Updating tired, worn fixtures will breathe new life into any space. Give your bathroom and kitchen a critical look — could the drawer pulls and cabinet handles use an update? If new kitchen cabinets are outside your budget, new hardware is a simple way to update the room’s entire look and feel. What about the faucets? A sleek new kitchen faucet with a sprayer combines practicality with design and will be appreciated by buyers. Anticipating and tackling these smaller projects will have a big selling impact. And — bonus! — you can enjoy them in the meantime.
 

3. Replace the toilet.

Replacing an old, cracked, or outdated toilet can make a significant impact on your bathroom aesthetics. Purchase a stylish new one for a few hundred dollars or take the environmentally friendly route and opt for an almost-new secondhand toilet (just be sure to buy a new seat). Repurposed construction material outlets offer a variety of well-priced goods.

4. Re-glaze the bathtub.

You can see buyers hold their breath as they slowly pull back the shower curtain, hoping for a sparkly new tub. Exceed their expectations for just a few hundred dollars by re-glazing your existing bathtub. The bathtub will be ready to use just a few days after applying the glaze. Roll up your sleeves for a DIY weekend or call in the professionals; either way, you’ll come in under budget.

5. Install a tile floor.

A shiny new tile floor can breathe life into the darkest bathrooms. Tiles are easy to clean, resist microbes and allergens, and wear well in high-traffic areas, making them a perfect material for the bathroom. Flooring liquidators typically sell a variety of quality tile, so start there. If your bathroom is small, you can probably even splurge on some designer options! Then save the rest of your budget for a professional installation.

6. Add new blinds or plantation shutters.

Is your home still sporting aluminum blinds or old-school vertical blinds? Consider replacing them: New window coverings can really modernize a room. If your windows are a standard width, you can buy basic wood blinds at a home improvement store (and most allow you to customize the length). If your window size is irregular, you’ll have to special-order them. To add a truly upscale look to a room, try plantation shutters — they can be a major selling point with the next people to own your home.

7. Replace the front door.

The front entry is the focal point of your home’s curb appeal. Give your home a face-lift and replace — or repaint — the front door. With security and safety in mind, choose a door that will appeal to a buyer’s practical side (and don’t forget to consider new hardware too). Another way to add interest and style to your home is by adding color to to your front door.

8. Add a walkway.

A new path leading to the front door can really elevate the look of your home. While brick pavers add a traditional and classic look to the exterior of your home, you can also choose stone, concrete, or even rocks — just make sure the look of the pathway matches your home’s style. Regardless of the material, a walkway is a welcoming feature, beckoning guests (and buyers!) inside to have a look around.

Source: trulia.com ~ By:  Robyn Woodman

Sellers: Here’s How to Update Your Home With Looks Buyers Love

From the desk of Modesto REALTOR Lynn Albro:  Planning to sell your house this year? Don’t be overwhelmed by all the details involved in preparing it to go on the market. Set aside a couple of weekends to do the work, and follow these four simple updates. 

Before you list, tweak your home decor and finishes to up your odds of attracting a sale.

When you’re putting your home on the market, you want it looking its best. You know you’ll need to clean and declutter, but what about making cosmetic updates?

Investing in a new look for your home might be well worth the effort. The recent Zillow Paint Colors That Sell Analysis reported that certain paint colors in specific rooms can impact the sale price of a home. And many buyers perk up when they see terms like granite countertops, stainless steel appliances, and subway tile in a home’s listing.

Let’s take a look at ways to work these trends into your home for maximum impact.

More natural, less fussy

Today’s buyer is looking for fresh and natural design elements that easily blend between varying styles, from tailored and traditional to ultra-cool and modern.

Zillow discovered that shades of cool blue spoke to these home buyers, and offered a semi-blank canvas for them to put their own spin on. A natural blue tone also looks best in listing photos and videos.

Photo from Zillow listing

Many elements impact a home’s value

While Zillow’s research shows that applying a fresh coat of paint to your home helps boost its value, there are many more components that impact a buyer’s willingness to pull out their checkbook.

In addition to paint, other elements of the kitchen and bath are important to keep in mind. Updating the countertop or flooring often breathes new life into a space.

Photo courtesy of Board and Vellum

If you don’t want to dip into construction territory, smaller scale projects like swapping out hardware, adding artwork, or installing stylish storage are all great fixes that signal your home’s been well cared for.

Dip your toe

We always tell clients who are nervous to jump into a new color or pattern this simple piece of advice: Dip your toe in and try it out.

As Zillow found, shades of blue are the go-to for home buyers today. However, that doesn’t mean you have to splash navy blue paint across your walls.

If you’re staging your home to sell, or just want to see what the color looks like in your environment, start small with throw pillows, an area rug, or window coverings. These decorative accents are small but mighty, and may offer just the right amount of impact to boost your home’s value.

Photo from Zillow listing

Now that homeowners are gravitating toward fresh, bright and clean coloration, we can expect hues of blue and gray to offer the tranquility potential buyers are looking for.

Paired with classic white countertops and cabinets, these shades complement nearly every kitchen and bathroom, making your next home sale a slam dunk — especially if sky blue or periwinkle is involved!

Source: zillow.com ~ BY KERRIE KELLY

What’s Really Included In Closing Costs?

Expect property taxes, homeowners insurance, and lender’s costs to be part of your settlement-day tab.

From the desk of Modesto REALTOR Lynn Albro: I get this question often, this article is very helpful.

With your house-hunting and lender searches now in the rear view mirror, you can start steering your way around the final bend that leads to the driveway of your new San Angelo, TX, home: settlement day and closing. A few days before you meet with your real estate agent, a title company representative, and your loan officer for this joyous event, you should have received from the title company a copy of your closing documents. Read these documents carefully — they will include details on the closing costs that are due upon settlement.

  • Closing costs are lender and third-party fees paid at the closing of a real estate transaction, and they can be financed as part of the deal or be paid upfront. They range from 2% to 5% of the purchase price of a home. (For those who buy a $150,000 home, for example, that would amount to between $3,000 and $7,500 in closing fees.) Understanding and educating yourself about these costs before settlement day arrives might help you avoid any headaches at the end of the deal.

  • What’s included in closing costs?

    Closing costs will cover both recurring and nonrecurring fees that are a part of your transaction. Recurring costs are ongoing expenses that you will continue to pay as a homeowner, with a portion due upon closing; nonrecurring fees are one-time fees associated with borrowing money and the services that were required to purchase the property.

    Recurring closing costs are placed in your escrow account, which you might view as a forced savings account for those upcoming home expenses you’ll be facing. They can vary, but the most common ones are property taxes (one to eight months’ worth, depending on when your home purchase coincided with the local tax billing cycle), homeowners insurance (the annual premium is typically due at closing, plus another two or three months’ worth of payments), and prepaid loan interest (for the number of days you’ll have the loan until its first payment is due). Also placed into escrow are costs for title insurance, which is considered a must because it protects you in case the seller doesn’t have full rights and warranties to the title of the property.

    Nonrecurring closing costs are fees paid to your lender and other professionals involved in the transaction. They include: any home inspection fees; any discount points you’re paying upfront to lower your interest rate; an origination fee, which is charged by the lender to process your loan; a document-prep fee, which covers the cost of preparing your loan file for processing; an appraisal fee, which covers the cost of a professional estimating the market value of the home; and a survey fee for verifying the home’s property lines. Also expect as nonrecurring costs: an underwriting fee for the cost of evaluating and verifying your loan application; a credit report fee for pulling your credit scores; title search and recording fees; and a wire-transfer fee for wiring funds from the lender to your escrow account.

  • How to prepare for closing costs

    The best time to study closing costs is when you’re shopping for a lender and can compare your desired loan amount with interest rates you’re offered (plus any discount points you might plan to pay upfront to lower those rates). Then use a closing-cost calculator to determine what your costs might be. The calculator will gauge your monthly mortgage payments, based on whether you’re financing the closing costs into your mortgage or whether you’ve decided to pay them upfront.

    Source: trulia.com