Mortgage Insurance is Tax Deductible for 2013

Home owners who acquired their home after 2006 and who have mortgage insurance may be able to treat the mortgage insurance premiums as they would their mortgage interest deduction when they file their 2013 income taxes. This is per IRS Publication 936.

Here are some basic requirements:

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Happy Birthday, Son!

scanToday is my son’s birthday. Although to me, it seems like just  yesterday he was toddling around in his Barney slippers, he is now entering his third year of college. I simply could not be more proud of him.

The one piece of advice that I would offer anyone with children is to start saving for your child’s education NOW if having your son or daughter attend college is important to you. I’m thankful that I’m able to help my son out with his tuition. He does have student loans…however I’m at least able to help contribute. I set up an auto-payment into a 529 account years ago and before that, bought savings bonds.  I didn’t miss what was taken from my checking account. Of course it did take a hit in recent years – but I’m still so glad I’ve been able to save some money for him.

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Which mortgage is best for you? Consider your retirement and savings accounts.

On my recent post, Comparing 15 and 20 Year Fixed Rates, a reader asks how do I decide which program is best for my clients?  The short answer is: I don’t. The decision of what type of mortgage to select is up to my client (assuming they qualify for the shorter term mortgage with the higher payment, of course). I feel it is my duty to help my clients understand the mortgage programs, so they can make an educated decision and to provide them with various scenarios to consider. [Read more…]

Financing a “Kiddie Condo” for your College Student


A few weeks ago, I helped a Kent couple purchase a condominium located in Seattle for their daughter to live in while she attends college at Seattle University. They were prequalifed with their credit union, however the credit union was treating the transaction as if it were an investment property even though the couple (we’ll call them Mr. and Mrs. Kent) were not going to rent the property.

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Student Loans: Subprime Financing of the Future?

My son is getting ready to start college this fall and although I've done my best to plan and save to help out for his education, I'm not able to foot the entire cost. Like many parents, the 529 I've been religiously plunking away at was butchered when our markets crashed… I've continued plunking every month to this account but it's really a drop in the bucket. I'm very proud of him and he has earned a nice academic scholarship that will help go towards the expense.  He's going to have to take out some student loans and it's something I'm not thrilled about. 

I recently watched a show on CNBC about the student loan crisis and it has me very very concerned.  It's appalling how much it smacks of the subprime crisis.  Some of the stories on the show revealed how predatory some of the student loan companies and some colleges can be when they have a young student wanting "the American dream" and I'm not talking about home ownership, I'm referring to a college education.  Many justify the huge expense because payments are deferred and they believe they'll graduate with employers knocking down their doors.  Some students use their student loan money to buy pizza, beer…even go on a shoe shopping spree.  I understand that students need money for food, but should this be financed?  If they are receiving "student loan money" for essential food, should they only be allowed to use credits on campus?   I'm rambling….

I plan on sharing some of my personal thoughts, experiences and opinions as I venture down this road with my son.  I'll also address how student loans can impact borrowers when they on obtaining a mortgage: first time home buyers.

Any tips from parents of college grads?

The Importance of Having a Will

My father passed away last December after a battle with skin cancer and COPD.  He was not a financially wealthy man.  He was rich with love from his daughters, grandchildren, family and friends.  I'm not sure if he was being optimistic or was in denial about his health, he never created a will despite his failing health.

A few weeks after we buried Dad, I went to his bank to see what I was suppose to do.  At the very least, I wanted them to know that he was no longer living and to close the account to prevent any charges or activity that should no longer be happening.  The person who "helped" me wouldn't even speak to me without a will.  In fact, he hinted that if I opened an account, it might be easier to assist me.  I was so upset and emotional that I stormed out.  I was looking for guidance and received nothing…silly me.

If you don't create a will, then the State of Washington has specific laws as to what will happen with any real or personl property and who will be the beneficiary of the estate.  This is referred to as "intestate".   Dad's "estate" is probably is not enough to hire an attorney over.  If there's anything to help reimburse the cost of his burial, we'll be pleasantly surprised.   

By the way, this site has been the most helpful that I've found so far with trying to figure out what to do: This site has been probably the most helpful that I've found so far regarding Dad's estate:

If you're drafting or updating your will, you may want to consider an estate planner or attorney who specializes in this matter to help you determine if you need a trust and to avoid possible death taxes. 

Please take time to create a will for you and your loved ones.  Make sure your wishes are honored and let someone know where your will is.  If you have a will, when was the last time you updated it?   Please don't leave this matter up to Washington State laws.  If my Dad would have had a will, I believe this issue would have been easily resolved by now.

Are Mortgage Points Tax Deductible?

It's that time of year when people are thinking about their income taxes and many who bought a home last year are wondering what the can deduct on their income taxes.  Let me start by stating:  I am not a tax advisor;  I am a NMLS Licensed Mortgage Originator.  Please review your tax scenarios with your CPA or professional tax advisor.

A mortgage point is a percentage of the loan amount and is used to reduce the mortgage interest rate.  A mortgage priced with zero points has a higher rate than a mortgage priced with a point.  Typically, but not always, one point (1 percent of your loan amount) equates to 0.25% in interest rate.  Points are prepaid interest, and like the interest your pay on your home mortgage, are currently deductible for your primary residence.   

If you paid points to purchase the home you live in (owner occupied/primary residence), you may deduct the full point on your itemized 1040.  If you paid points for a refinance, the point must be deducted over the term of the loan.   However if your refinance was for home improvement, you may be able to deduct the full point instead of spreading over the life of the loan. 

If you purchased a second home and paid points, the points may be deducted over the life of the loan (similar to a refi that was not obtained for home improvement). 

If the seller paid for your points when you purchased your home, you may be able to deduct them as well as long as the transaction meets IRS guidelines.

For more information on what is required for points to be deductible, see IRS Publication 936: Mortgage Interest Deductions page 5.

In order to claim these deductions, you will need to itemize your tax return.  Tax Form 1098 will disclose the mortgage interest paid and the deductible points paid.  You may also want to review your HUD-1 Settlement Statement to see an itemized list of closing costs and points paid. 

Don't forget, the due date for your 2010 Federal Income Tax Returns (and requests for extensions) is on April 18, 2011 this year.

President Obama Declares April National Financial Literacy Month

Recently President Obama declared April as National Financial Literacy Month.  

In recent years, our Nation's financial system has grown increasingly complex.  This has left too many Americans behind, unable to build a secure financial future for themselves and their families.  During National Financial Literacy Month, we recommit to teaching ourselves and our children about the basics of financial education.

I've always felt that financial education should be taught in high school.  I'm not talking home-ec, at least not the the home-ec I attended at Hazen High School where I grew up in Renton, where we made up incomes and came up with a rough budget.  I'm talking about a detailed course where students would focus on the benefits and consequences of credit and debt.

I think it's great that the President is bringing attention to Financial Literacy.  During the subprime era of mortgage, I met with people who wanted to buy a home because their friend or co-worker just did.  They had no idea what financial responsibilities coincide with owning a home.  They often wanted to buy as much as they could be qualified for based on guidelines at that time even if the mortgage payment or program was not suitable

More from President Obama's proclamation:

The new Consumer Financial Protection Agency I have proposed will ensure ordinary Americans get clear and concise financial information…. While our Government has a critical role to play in protecting consumers and promoting financial literacy, we are each responsible for understanding basic concepts….

I wonder what is an "ordinary American" and what if you're not an "ordinary American"?  In his proclamation, he also talks about how our "recent economic crisis was the result of irresponsible actions on Wall Street and everyday choices on Main Street" and includes "large banks [that] speculated recklessly".  His list of who's at fault no where includes our Congress who mandated that Fannie Mae, Freddie Mac and FHA create programs or different guidelines to help more Americans buy homes

From the Wall Street Journal:

Fannie and Freddie retained the support of many in Congress, particularly Democrats, and they were allowed to continue unrestrained. Rep. Barney Frank (D., Mass), for example, now the chair of the House Financial Services Committee, openly described the "arrangement" with the GSEs at a committee hearing on GSE reform in 2003: "Fannie Mae and Freddie Mac have played a very useful role in helping to make housing more affordable . . . a mission that this Congress has given them in return for some of the arrangements which are of some benefit to them to focus on affordable housing." The hint to Fannie and Freddie was obvious: Concentrate on affordable housing and, despite your problems, your congressional support is secure.

But I digress…

President Obama is promoting a website they've created for financial literacy which appears to be an assortment of various government links organized on one site.   It' looks like it's well meaning advice but I'm not sure it's the best or most practical advice–very similar to HUD's book on buying and financing your home.  The site also has information that is very biased, in my opinion, about financial tools such as reverse mortgages, which are not right for everyone but when used in the right situation, can make a huge difference for the better in a seniors life.  I also found some information about credit repair that would potentially provide the result a consumer would be looking for.

I highly recommend that you subscribe to Get Rich Slowly.  This is a fantastic blog that is packed full of common sense financial information on getting out of debt and building your savings.  J.D. Roth's blog was recently named the most inspiring money blog by Money Magazine.

Washington State's Department of Financial Institutions also has a blog that you may find interesting:  Money Talks.  I'm a new subscriber to this blog and so far, the information seems very good.   In fact, it was from DFI's blog that I learned about the Twitter hashtag for April's Financial Literacy Month: #FinLit10

Of course I hope you're a subscriber to my blog, The Mortgage Porter.  I don't only write about mortgages or post interest rates on my blog, you'll also find quite a bit of information about credit scoringwhich impacts your life every day.  I cover other topics too.  You can subscribe in the upper right corner by entering your email address and you can un-subscribe anytime.

During April, I'll share information in recognition of National Financial Literacy Month…actually I hope that's what I've been doing at Mortgage Porter for the last couple of years!