What is a credit Score?

First of all if you do not know what your credit report looks like please visit www.annualcreditreport.com and obtain a copy of your credit report.  Of course they will give you your report only and not your scores.  You will have to pay for the scores however, they will send you a free copy of your existing current report and you can pull it once a year through this company.  You should know your scores and you should know how your creditors are reporting you to the 3 major bureaus.  Let’s talk about the 3 major bureaus.  There are 3 major credit bureaus in the United States who have relationships with millions of creditors across the country and this is why everyone has 3 scores because your creditors (such as your Mortgage, car, installment loans, visa, mastercard, etc…) are reporting you.  These millions of creditors will report how your paying your bills to these 3 major bureaus they also report your address, date of birth, etc….  The creditors that I mentioned above do not always report to all 3 bureaus sometimes they only report to two bureaus.  Who are the 3 credit bureaus?  Let’s talk about who these bureaus the first one is a company called TU which stands for Transunion, 2nd one is Equifax which you see all over the internet, and than there is Experian.  There will be times where say for example your visa company will only report to Equifax but your Toyota dealer that you have your car payment with will report to Transunion and your Mastercard reports to Experian.  As you notice the creditors are not reporting to all 3 bureaus just to 1 bureau.  When you are applying for a mortgage or any other line of credit you really should know what your credit report looks like and what your scores are I cannot stress that enough.  When you are applying for a mortgage or prequalifying for a mortgage the mortgage company will pull your credit report and take the middle of the 3 scores and rate you.  For example, if you have a high score of 789 a middle of 760 and a low of 723 the mortgage company lender, broker or banker will use the middle scores which is the 760 when you apply.  People ask all the time if their high score will get them a better mortgage interest rate and of course it will but remember there will be add on to your rate or the pricing of your mortgage interest rate if your scores are below 720.  That is why it is so important to know your credit score.

Planning is key to buying a home!

The key to buying a home is in the planning.  In order to make the entire home buying purchase successful you need to have a plan.  You should try to have very little bills as possible.  If you have credit cards pay them off or pay them down as much as you possibly can.  However, don’t close them out completely just pay them down or pay them off.  The least amount of debt that you have going into the home buying process the better.   In order to prequalify for a mortgage what you would need to do is take your “New” monthly principal, interest, real estate taxes and homeowners insurance and multiply that by your gross monthly income.  This number can not exceed 28%.  This would be called your housing expense ratio.  Another important number to know is your debt to income ratio.  What you need to do here is take your total monthly debts including mastercard, visa, car payments plus your new mortgage payment including principal, interest, real estate taxes and insurance and divide that by your gross monthly income.  This number cannot exceed 36%.  Most of the time the mortgage underwriter will allow this number to go up to 41% however, only if there are compensating factors such as a consistent and past history of overtime or bonuses.   Everyone’s situation is different and unique that’s why it is extremely important to go into the homebuying process with very little liabilities and lots of assets.

Tax Breaks

Most homeowners are keenly aware of the interest tax deduction on their home loan, but there are many other tax breaks which are often overlooked at income tax time. Pro-rated property taxes and mortgage interest in the year of sale are deductible. You will find these amounts listed on your closing settlement statement. If you paid off your mortgage and had to pay a pre-payment penalty, it qualifies as tax deductible interest. If you paid an “acquisition mortgage loan fee” on a home loan, this fee can be deducted as itemized interest. Home improvement loan fees are also deductible. Any remaining loan fees from re-financed or paid-off mortgages are fully deductible at the time of the mortgage payoff.
Certain items don’t qualify as deductions, but can be added to the cost basis of your home, such as transfer taxes, recording and title fees, and special local property tax assessments for new sidewalks, streets, or sewers.
Don’t be intimidated by the tax code! A little research or consultation with an expert can help you maximize your real estate tax advantages. For more advice, tools and tips visit: http://www.ratesarehot.com

Broom Clean

Most purchase agreements contain language that requires a home to be free of trash and debris and “broom clean” at closing. While this language is not precise, the general idea is that you should convey a clean house to your buyers, one in the same condition that you hope to find your new home.

When the movers leave with your furniture, you may even want to consider hiring a professional cleaning service to thoroughly clean the home. It is crucial to leave your house as pristine as possible for the new owners. This includes getting rid of any leftover junk in the storage spaces. When the buyers show up for their final walk-through, they will feel much better about finalizing the sale if everything sparkles. This will set up a positive mood for completing the transaction and help to minimize any disputes at the closing.

Not At Arms Length

Not at ARMs Length
A sale of a house is just a sale, right? Not necessarily. If you are selling your house to your children or transferring title outside the open market, then the transaction may be characterized as “not at arm’s length”. Since such a transfer may have tax consequences, you should discuss it with a tax attorney or accountant before taking action.

The transfer of title to a son or daughter may cause the parents to lose favorable property tax treatment, require the payment of state gift taxes, or have other unexpected consequences. From a capital gains point of view, it may be more prudent for children to inherit property than to receive it as a gift. The disposition of any real estate should be considered within the entire framework of your tax and estate planning.

For answers to all your real estate questions, consult experienced professionals who are familiar with this area.
For more useful tips visit http://www.ratesarehot.com