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When can I get my PMI removed? February 22, 2011

PMI Insurance (private mortgage insurance) is a cost added to the monthly payment of many home loans.  PMI mortgage insurance protects lenders against the costs of foreclosure. PMI mortgage insurance provides what the equity of a higher down payment would provide to cover a home lender’s losses in the event of foreclosure.

The Homeowners Protection Act of 1998 establishes rules for automatic termination and borrower cancellation of PMI mortgage insurance on home mortgages . These protections apply to certain home loans signed on or after July 29, 1999 for the purchase, initial construction, or refinance of a single-family home. These protections do not apply to government insured FHA or VA mortgages.  FHA loans require 5-years of on-time payments and a 20%+ equity position at the time of the request to remove the monthly PMI payment from your loan.  If your loan was funded prior to 2001 other FHA rules apply.

For home mortgages signed on or after July 29, 1999, your PMI must – with certain exceptions – be terminated automatically when you reach 22 percent equity in your home based on the original property value, if your loan payments are current. Your PMI mortgage insurance also can be canceled, when you request – with certain exceptions – when you reach 20 percent equity in your home based on the original property value, if your mortgage payments are current.

One exception is if your loan is “high-risk.” Another is if you have not been current on your mortgage payments within the year prior to the time of termination. A third is if you have other liens on your home. For these mortgage loans, your Mortgage insurance may continue. Ask your home lender for more information about these requirements.

Did you know, even if you have not paid down your loan to 78% of your original purchase price, you can still ask the lender to remove this PMI insurance and the payment they charge you monthly?  Many home lenders will remove your PMI mortgage insurance when the value of your house has increased, your equity is above 20% and you have two years of a good payment history.  You will have to provide the lender with an appraisal to verify that your equity is above 20%. 

Do this to get rid of your PMI

1.  Contact your home lender ask for the PMI department

a. Ask them to send you the procedures and requirements to cancel your PMI insurance.

2.  Order a home appraisal - let your mortgage holder guide you on this selection.

a. If you feel you qualify for your lender’s requirements, then order a real estate appraisal from a licensed or certified appraiser.

3.  Submit a request to cancel your PMI.

a.  Providing you meet all of home lender’s requirements.

b.  Providing the appraised value indicates you have 20% or more equity (appraised value minus loan balance equals equity)

 
Have a great week and remember at the Valeo-Croy Team we are here for you.

In line with the new government restrictions on rate quotes** we will be providing a link to http://www.mortgagenewsdaily.com/mortgage_rates/ and their rate guide.

**Please note the rates quoted are at the absolute best loan amount, the highest credit score and lowest LTVs allowed with a 1% origination fee and indicate the absolute lowest rate possible. You should use this list as a guideline and trend indicator and get a specific quote for your project (often it may be slightly higher).
 

The Valeo-Croy Team -  (704) 488-1421

 Todd Croy - NMLO license #91428
Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings                              
 
Facebook link: http://www.facebook.com/valeocroyteam?v=app_4949752878


The Valeo-Croy Team and New American Mortgage Bankers are Equal Housing Lenders.This information is for illustration only. It does not constitute an application for a loan or an offer or commitment for New American Mortgage to make a loan on these terms. Interest rates are subject to change until an application is completed and you lock in your interest rate. The figures noted are estimates and may vary depending on discount points, taxes and insurance. Programs, terms and conditions are subject to change without notice. Mortgage loans are subject to credit qualifications. Normal credit standards apply.   Date: 2/13/2011


Home office expense deduction gets added back as self employment income? February 28, 2011

 

"Impatience never commanded success" ~ Edwin H. Chapin


Recently I was working with a self-employed borrower who had a home office deduction.  This along with depreciation on a tax return is one of the few “add backs” to income allowed by Fannie Mae when calculating self employment income.  For example if you deduct $4800 in home office expense on your tax returns we can  credit back $400 per month.  

Since we are closing in on tax time I thought you might be interested in what the IRA will allow for a home office deduction.  The link to the IRS web site follows along with an excerpt outlining how to calculate the deduction.  


We hope you have a great week and remember at the Valeo-Croy Team we are here for you…

Accessible | Product Knowledge | On-Time closings.

 

The IRS web page: http://www.irs.gov/publications/p587/index.html 

 

Figuring the Home Office Deduction 

After you determine that you meet the tests under Qualifying for a Deduction, you can begin to figure how much you can deduct. You will need to figure the percentage of your home used for business and the limit on the deduction.

If you are an employee or a partner, or you file Schedule F (Form 1040), Profit or Loss From Farming, use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to help figure your deduction. If you file Schedule C (Form 1040), Profit or Loss From Business, you must generally use Form 8829, Expenses for Business Use of Your Home. The Schedule C Example, near the end of this publication, shows how to report the deduction on Form 8829.

Rental to employer: If you rent part of your home to your employer and you use the rented part in performing services for your employer as an employee, your deduction for the business use of your home is limited. You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. However, you cannot deduct otherwise allowable trade or business expenses, business casualty losses, or depreciation related to the use of your home in performing services for your employer.


Business Percentage


To find the business percentage, compare the size of the part of your home that you use for business to your whole house. Use the resulting percentage to figure the business part of the expenses for operating your entire home.

You can use any reasonable method to determine the business percentage. The following are two commonly used methods for figuring the percentage.

1.      Divide the area (length multiplied by the width) used for business by the total area of your home.

2.      If the rooms in your home are all about the same size, you can divide the number of rooms used for business by the total number of rooms in your home.


Example 1.

Your office is 240 square feet (12 feet × 20 feet).

Your home is 1,200 square feet.

Your office is 20% (240 ÷ 1,200) of the total area of your home.

Your business percentage is 20%.

Example 2.

You use one room in your home for business.

Your home has 10 rooms, all about equal size.

Your office is 10% (1 ÷ 10) of the total area of your home.

Your business percentage is 10%.


TIP = Use lines 1–7 of Form 8829, or lines 1–3 on the Worksheet To Figure the Deduction for Business Use of Your Home (near the end of this publication) to figure your business percentage.


Part-Year Use
You cannot deduct expenses for the business use of your home incurred during any part of the year you did not use your home for business purposes. For example, if you begin using part of your home for business on July 1, and you meet all the tests from that date until the end of the year, consider only your expenses for the last half of the year in figuring your allowable deduction.


Deduction Limit

If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home.

If your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited.

Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation (with depreciation taken last), that are allocable to the business, is limited to the gross income from the business use of your home minus the sum of the following.

1.      The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). These expenses are discussed in detail under Deducting Expenses, later.

2.      The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself.

If you are self-employed, do not include in (2) above your deduction for half of your self-employment tax. Carryover of unallowed expenses. If your deductions are greater than the current year's limit, you can carry over the excess to the next year. They are subject to the deduction limit for that year, whether or not you live in the same home during that year.


Figuring the deduction limit and carryover. If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829.

Example.

You meet the requirements for deducting expenses for the business use of your home. You use 20% of your home for business. In 2010, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order.
 

Gross income from business

   $6,000

Minus:

 

Deductible mortgage interest
and real estate taxes (20%)

3,000

Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment)

2,000

Deduction limit

$1,000

Minus other expenses allocable to business use of home:

 

Maintenance, insurance, and utilities (20%)

800

Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit)

200

Other expenses up to the deduction limit

$1,000

Depreciation carryover to 2011 ($1,600 − $200) (subject to deduction limit in 2011)

$1,400

You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). You also can deduct all of your business expenses not related to the use of your home ($2,000). Additionally, you can deduct all of the business part of your expenses for maintenance, insurance, and utilities, because the total ($800) is less than the $1,000 deduction limit. Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. You can carry over the $1,400 balance and add it to your depreciation for 2011, subject to your deduction limit in 2011.

More than one place of business: If part of the gross income from your trade or business is from the business use of part of your home and part is from a place other than your home, you must determine the part of your gross income from the business use of your home before you figure the deduction limit. In making this determination, consider the time you spend at each location, the business investment in each location, and any other relevant facts and circumstances.

TIP = If your home office qualifies as your principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses.

 

Please consult your tax professional for any tax advice this article is meant to give you some ideas as you move forward with tax preparation this year.


 

 

In line with the new government restrictions on rate quotes** we will be providing a link to http://www.mortgagenewsdaily.com/mortgage_rates/ and their rate guide.

**Please note the rates quoted are at the absolute best loan amount, the highest credit score and lowest LTVs allowed with a 1% origination fee and indicate the absolute lowest rate possible. You should use this list as a guideline and trend indicator and get a specific quote for your project (often it may be slightly higher).
 

The Valeo-Croy Team -  (704) 488-1421

 

Todd Croy - NMLO license #91428
Deanna Valeo - NMLO license #91421

Accessible | Program Expertise | On-Time Closings                              
 
Facebook link: http://www.facebook.com/valeocroyteam?v=app_4949752878


The Valeo-Croy Team and New American Mortgage Bankers are Equal Housing Lenders.This information is for illustration only. It does not constitute an application for a loan or an offer or commitment for New American Mortgage to make a loan on these terms. Interest rates are subject to change until an application is completed and you lock in your interest rate. The figures noted are estimates and may vary depending on discount points, taxes and insurance. Programs, terms and conditions are subject to change without notice. Mortgage loans are subject to credit qualifications. Normal credit standards apply.   Date: 2/28/2011