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Tips for high closing cost concerns

by Home Action News

Is This Your Situation: Concerned About High Closing Costs


Buying a new home can be a really exciting time, but it can also be a bit stressful and overwhelming. Closing costs are often a point of concern for first-time home buyers. How much will they be? Will you have enough money to cover the costs? What do closing costs even cover?

Thankfully, there are some steps that you can take to reduce your closing costs, which are the fees associated with closing on your home. They typically include things like attorney fees, title search, insurance, and more.

Here's a few things to consider with your agent: 

#1: Start by understanding your closing costs. Closing costs will vary significantly depending on location where you are buying, the purchase price of the home and even the day of the month when the closing is scheduled. States with higher tax rates, for example, would have higher closing costs. Closings that occur towards the end of the month will be more cost effective as you will have to pay per diem interest for fewer days.

#2: Go shopping for your closing costs. This financial comparison shopping should include your mortgage lender, title insurance company, homeowner's insurance policy and even your home inspection. Not only can the best deal on homeowner's insurance lower your closing costs, you will save on insurance premiums in the long run. You may want to inquire about reissue rates on your homeowner's title insurance. If the seller purchased the home and the policy within the last ten years, the policy can be reissued to the buyer with as much as a 40% savings.

When talking to potential lenders about your mortgage also ask for ballpark estimates on the closing costs. All banks are not created equal and you will need to make comparisons and possibly even negotiate between lenders for the best deal. Also look out for junk fees that are unnecessary.

#3: Ask for a lender credit. A lender credit is where you agree to a higher mortgage rate. You'll end up paying a little more each month for your mortgage but your closing costs may be lower. This is a great option if you plan on staying in this particular home for a long time.

#4: Ask the seller to contribute. This isn't always an option, but in a struggling market or where a property has been listed for a long time it is worth a try to see if the seller is willing to help with the closing costs. Ask your Realtor to help you negotiate.

Of course, these are just a few of the many ways that you can save on your closing costs when buying your first home. For more tips and tricks, give me a call today.

3 Tax Implications That Arise When You Sell Your Home

by Home Action News

3 Tax Implications That Arise When You Sell Your Home


It's easy to get tunnel vision when selling a home. All you're focused on is whether you'll meet your asking price. Yet, if you aren't taking into consideration the tax implications of selling your home, you may be making a huge mistake. Here's what you need to consider before you sell.

1. You Pay Lower Taxes Only When Selling Your Primary Residence 

Homeowners get lots of tax rebates and credits. You can claim a tax deduction just for buying a new home. When you are selling your home, you need to know that these tax credits apply only if you are selling your primary dwelling, not your rental property or vacation home.

2. You May Exclude Gains IF You Meet Ownership and Use Tests 

How long you've been in your home will have a huge effect on how any gains made from selling your property are treated. Short-term gains get taxed higher than long-term gains. The IRS institutes the ownership and use tests to determine if a homeowner can exclude some or all of the gains from selling a home.

According to the IRS, you have to have both lived in the primary residence that was sold and owned it for a minimum of two years before it can be excluded. On top of that, those two years have to fall within a 5-year window between the date that you bought the property and the date that you sold it.

Say you sell your home for a million dollars. The most that you can exclude from your taxes is $500K if you own the property jointly with someone ($250K for individuals). The rest of the gains have to be counted and taxed as part of your regular income. If you lost money when you sold your home, you cannot deduct the loss from your income; it is just reported as a loss.

3. You Don't Always Have to Report a Home Sale on Your Taxes

Before you disclose any gains on your taxes, make sure that you actually have to report them. If you sold a small parcel of land for perhaps $20K, you may not even have to declare it: the reporting threshold is $250K for an individual.

If you have gains above and beyond that $250K, they have to be reported. Whether to exclude any part of your gains is up to you. You could choose not to exclude any of them.

You do have to report gains made from selling a second house, but you can still exclude any gains made from selling your primary home—that is, if you sell them both in the same year. You will have to pay taxes for at least one of these dwellings. And you have to report any gains from any rental property that you lease out unless you meet the ownership and use tests discussed above for rental properties.

For more information and advice on the tax implications of selling a home, call or email me today.

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Photo of Frank Taglienti Real Estate
Frank Taglienti
Berkshire Hathaway PenFed REALTORS®
565 Benfield Road, Suite 100
Severna Park MD 21146

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