Monday, September 26, 2011

FICO Score and its importance

What is a FICO Score?
FICO is a branded name credit score and stands for Fair Isaac Corporation, which originally developed this method of measuring an individual’s creditworthiness through a number of factors. FICO scores range from 350 and 850.

What’s in your FICO Credit Score?
FICO Scores are calculated from a lot of different credit data which can be grouped into five categories Payment History, Amounts Owed, Length of Credit History, New Credit, and Types of Credit Used as outlined in the chart. The percentages in the chart are based on the importance of the five categories for the general population and reflect how important each of the categories is in determining your FICO score.

Why FICO Credit Scores are Important?
Banks, credit companies and other financial institutions usually take a look at a number of factors before approving any loan. They will normally look at a person’s income, marital status, employment, length of stay at the current residence, and of course the FICO score. People with higher FICO scores will definitely have a better chance of getting approved in comparison to people with lower scores.

How to Improve One’s Credit Score?
It’s important to remember that the items in one’s credit report will stay there for at least seven years, so the negative marks will have to stay there for quite some time before disappearing completely.

One way to prevent a low credit score is by paying on time. Payment history is the most important factor when it comes to credit scores. Paying on time will slowly raise credit scores. Another thing that can be done in order to raise credit score is by reducing the amount of debt. Aside from payment history, debt is the second most important factor for one’s credit score. Reducing debt as much as possible can help increase credit score as well.

Don't Buy A Car Just Before Looking for a Home!

In conclusion, a word of advice not directly related to FICO scores. When people begin to think about the possibility of buying a home, they often think about buying other big ticket items, such as cars. Quite often when someone asks a lender to prequalify them for a home loan there is a brand new car payment on the credit report. Often, they would have qualified in their anticipated price range except that the new car payment has raised their debt-to-income ratio, lowering their maximum purchase price. Almost every time you sit down in a car dealership, it generates two inquiries into your credit.

Monday, September 19, 2011

Not all homeownership expenses are tax-deductible

Not all homeownership expenses are tax-deductible
By Stephen Fishman

Most people know that homeownership comes with great tax breaks: home mortgage interest and property taxes are deductible from federal income tax as itemized deductions. The value of these deductions should always be factored in when determining the true cost of homeownership.

However, homebuyers should be aware many of the costs of buying and owning a home are not deductible.

You cannot deduct any of the following items:

•insurance (other than mortgage insurance premiums), including fire, title and homeowners insurance;
•rent for occupying the home before closing;
•wages you pay for domestic help;
•the cost of utilities, such as gas, electricity, or water; or
•forfeited deposits, down payments, or earnest money.
Real estate taxes

Homeowners can deduct property taxes based on the assessed value of their real property. However, not all charges imposed on homeowners by local taxing authorities are deductible. These nondeductible charges include charges for services.
The Internal Revenue Service says that an itemized charge for services to specific property or people is not considered tax, even if it is paid to the taxing authority. You cannot deduct a charge as a real estate tax if it is:

•a unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use);
•a periodic charge for a residential service (such as a $20 per month or $240 annual fee charged for trash collection); or
•a flat fee charged for a single service provided by your local government (such as a $30 charge for mowing your lawn because it had grown higher than permitted under a local ordinance).
You must look at your real estate tax bill to decide if any nondeductible itemized charges are included in the bill. If your taxing authority (or lender) does not furnish you a copy of your real estate tax bill, ask for it.

Assessments for local benefits

You also cannot deduct amounts you pay for local benefits that tend to increase the value of your property, such as assessments for the construction of streets, sidewalks, or water and sewer systems. You must add these amounts to the basis of your property.

You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. An example is a charge to repair an existing sidewalk and any interest included in that charge.

If only a part of the assessment is for maintenance, repair or interest charges, you must be able to show the amount of that part to claim the deduction. If you cannot show what part of the assessment is for maintenance, repair or interest charges, you cannot deduct any of it.

An assessment for a local benefit may be listed as an item in your real estate tax bill. If so, use the rules in this section to find how much of it, if any, you can deduct.

Homeowners association assessments

You cannot deduct homeowners association assessments because the homeowners association, rather than a state or local government, imposes them.

The interest paid on a mortgage or mortgages of up to $1 million for a principal residence and/or second home is deductible as an itemized deduction.

Home loans

In addition, homeowners can borrow up to $100,000 against the equity in their home and deduct the interest as an itemized deduction. However, lender charges connected with getting or refinancing a mortgage loan are not deductible, including:

•loan assumption fees;
•cost of a credit report, and fee for an appraisal required by a lender;
•notary fees; and
•preparation costs for the mortgage note or deed of trust.
Settlement costs

The following settlement costs are not deductible, but may be added to the home's basis. This will reduce the amount of any taxable profit when the home is sold:

•abstract fees (abstract of title fees);
•charges for installing utility services;
•legal fees (including fees for the title search and preparation of the sales contract and deed);
•recording fees;
•transfer or stamp taxes;
•owner's title insurance; and
•any amount the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, cost for improvements or repairs, and sales commissions.


For Buying or Selling, it helps to have a guide that gives you straight answers. For more information on buying, selling, or renting out an income property in San Diego, please call Frank Rashid's cell phone at (858) 676-5250 or email him at More to follow within the next couple of weeks.

Friday, September 9, 2011

The Facts and Stats on the Value of a Real Estate Professional

Posted by Jim Gillespie July 28, 2011

I just read an article that made me laugh. I have seen my share of articles and headlines. But this one tops the list: Why Getting Rid Of Realtors Will Save The Housing Market

I hope no one believes anything in the article.

Sellers realize a real estate agent is extremely important today. In fact, according to real estate industry analyst Real Trends, the average commission paid to a professional sales associate has actually gone up because selling a home is more difficult today than it was five years ago. There will be approximately 30% fewer homes sold this year than in the peak year of 2006.

And you want to use an agent. Since 2004, the amount of homes that were For Sale By Owner (FSBO) has dropped from 14% to 9% of all homes sold. And the median price for all FSBOs last year was $140,000 compared to $168,000 for those who started as a FSBO and then hired an agent to get their home sold. That’s a 17.5% increase. Clearly doing it yourself leaves money on the table largely because pricing the home correctly is critical.

Buyers and sellers today are anxious, confused and nervous about engaging in the home buying and selling process. We know that both anecdotally and factually through a survey we did. Where once there was a lot of excitement in the process, today consumers are rightly cautious. Let’s face it, economic conditions impact all of us.

But through all of this, buyers are buying and sellers are selling. And they are doing so largely because of lifestyle reasons. Getting married, having kids, getting a job transfer or promotion, downsizing to a smaller home. These are just some of the reasons people continue to buy or sell today.

And clearly real estate agents play a major role in those transactions. They obviously help set the sales price, market the home, and guide you through every step of the process. And in most cases, they are paid a commission at the conclusion of the sale. And that commission is based upon the sales price, not “added on” as the article indicates.

I could go on and on about this article, but it’s just so off-base that I think 389 words on it is enough! So what do you think?