Primary Residence Coupled With Over 65 Exemption

Hi Prospects & Friends!

When buying a home, majority of us buy the home to live in permanently, and don't bother to make plans on renting our home out. We use this primary home residence on our drivers license, our mail and on all our bills we pay associated with our home, as well as all other bills outside the home. When you first buy your home, you already know if it will be your primary residence or not, and will plan accordingly. Primary residences come with home perks, and the biggest one is your homestead exemption which just means you get a discount on your annual property taxes. The second biggest homestead perk comes for buyers 65 or over, and these buyers are exempt from paying the majority of their annual property taxes, which does have a capped value, so to better understand this particular exemption here is an example;

Mary & Peter buy a home and they're both 68, for the county jurisdiction their home is zoned in they're entitled to the over 65 exemption, because of being 65 or over, and for just homesteading the property (living their with proof of drivers license showing the address). So Mary & Peter are happy and start to analyze their over 65 exemption more in depth. Mary writes down the numbers and discovers;

• Assessed Value- $175,000
• Over 65 Homestead Exemption- $250,000 cap
• Homestead Exemption- 20% (for all the county jurisdictions 5 total for their house) 
• School Exemption - 20% and $40,000 for homestead exemption, and $25,000 for over 65 exemption
• College Jurisdiction- 1%  and $75,000 for over 65 exemption
• Emergency Jurisdiction- 5% and $160,000 for over 65 exemption

Mary immediately informs Peter their over 65 exemption is eliminating a total of 5 taxing jurisdictions, because of each one offering them a $250,000 discount, and this amount is not including the 20% additional homestead discount. Mary & Peter smile and say this is great, because of their assessed value being $175,000 which is lower than the over 65 exemption of $250,000 they will not have to pay any taxes on those 5 particular taxing jurisdictions. The other few taxing jurisdictions that are left, Mary and Peter aren't concerned since those taxing jurisdictions are very minimal amounts they will have to pay annually. Mary then looks at Peter and says "I think we should of gotten a bigger home equal to the over 65 exemption of $250,000 since we would not have to pay taxes on that home either for those 5 particular taxing jurisdictions. Peter then says to Mary, lets just homestead this primary residence for 2 years, in order to claim our up to $500,000 capital gains tax exemption for being a married couple, and we will renovate and flip this home into the home you really want which we will pay up to $250,000. Mary then says, thanks hubby and glad we both understand how the over 65 exemption works. 

So inconclusion, for buyers under 65 you do get the homestead exemption for allowing your home to be your primary residence, and this will save you money on your annual property taxes, so don't ignore filing this exemption. The key here is to know what taxing jurisdictions you're paying before you buy the home whether your over 65 or under 65. Reason for needing to know this, because if you analyze more in depth, you can actually buy a home that will fit in these perks to even benefit you even more, if you know the rules to the capital gains taxes, the over 65 exemptions, and the primary residence rules.

When Applying For A Mortgage

Hi Prospects & Friends!

When applying for a mortgage some key factors you will have to have available already in advance are;

• 2+ years stable job history
• A seasoned bank account showing 6+ months of money saved as a down payment
• 2+ years of most recent tax returns

These key factors are what makes up 70% of the mortgage application while coupled with the other 30% being your credit being decent which totals out the 100% requirements for your preapproval process to take place. If you lack any of these key factors listed, then you will need to be prepared to accept getting rejected for approval or possibly getting a over rider and being allowed to have a co-signor in exchange. Most banks and lenders are not all the same in how they view their application process, but the key factors listed here are the main ones 90% of banks and lenders go by. It can be devastating to find out during the middle of the loan processing, the bank decides that ok you passed all the key factors, and have a decent credit score, but they want another 3 months of the mortgage payment reserved along with what you already have in your bank account for the down payment. To make this make sense, and not overwhelm you, look at example below;

Jack gets a preapproval letter for $250,000 and he is safe to go ahead and look at homes under this price, but because Jack is searching around the time the mortgage company does their annual tax estimates they now project his mortgage monthly payment will be $1,860 instead of $1,625. So Jack gets a call from his lender to add another $1,305 to his bank account for the reserves of the new projected monthly taxes being added to his monthly mortgage, since he didn't put down 20% to waive this option. Jack realizes after the call he doesn't have the $1,305 readily and available, because he cant touch his IRA or Roth or any of his brokerage accounts, during the loan processing, since he knows it will trigger the lender to analyze he is having money issues, and borrowing money. So Jack then contacts his girlfriend Jackie, and says I've got 24 hours to get the lender $1,305 reserved in order to get final approval on my loan, and its all because the mortgage servicer waited to last minute to project my monthly taxes for the next year in advance. Jack informs Jackie he doesn't know what to do, and she then says I have an idea, can you reduce your loan amount to justify the shortage by picking a much cheaper home? Jack then says wow ok, I didn't think of that let me call my real estate broker. In conclusion Jack gets the advice from his real estate broker by being told to just knock of about $50,000, and look for homes under $200,000 if this isn't an issue, and Jack says ok. Jack enters back in safe zone, after the lender estimates the new numbers for his loan and now his mortgage will be about $1,550. The point of this example is this kind of stuff does happen in the real world of loan processing, and to not get tangled in it, best thing to do is make sure you're fully prepared for that sporadic call from the lender possibly requesting;

• More down payment
• More mortgage payments reserved
• Looking at your credit at last minute to see if you bought something or stopped paying on something
• Monitoring your balances in your asset accounts against what was provided when you applied, by requesting at last minute another most recent bank statement as well as the other asset statements showing most recent balances
• Contacting your job day of closing to make sure you weren't fired or lied if your not a small business owner
• Making sure somebody else isn't putting more money in your accounts if it was you that only applied for the mortgage by analyzing the balances from what you provided against your sources of income against the most recent balances they are now requesting
• Making sure you're not using a ghost/private investor to provide you all the money but use your credit to get the house

This list can become longer, but key here is you're not safe until the loan is signed at closing and it funds at the title company and you get the keys to your new place. I use to be a loan officer years ago, and from my experience I have witnessed these kinds of issues going on while the buyers thought all was good because they received their "preapproval letter" by their lender.