It all seems perfectly reasonable: one person is not satisfied with what he can earn currently in the market and another wants to find the most attractive mortgage to purchase their home. It can be a good match but the IRS has specific rules that govern the transaction.

The loan must be done in a business-like manner with a written note specifying the loan amount, interest rate, term and collateral. IRS requires that the mortgage be a recorded lien in order to allow the interest deduction.

Sometimes, these friends and family situations have a less than normal interest rate on the mortgage. However, the rate charged in the note is regulated by the minimum applicable federal rate which is published monthly by IRS according to current Treasury securities. For October 2011, the rate is 2.95% for terms over nine years.

The seller must report the interest paid to them along with the name, address and Social Security number on schedule B when the buyer uses the property as their principal residence.

A mortgage between family and friends can be good for both parties. It may allow the borrower a slightly lower rate without the expenses of a traditional lender while giving the note holder a higher rate than they can earn in available investments. Your tax professional can guide the transaction whether you’re a buyer or seller and your real estate professional can help arrange to have the documents drawn and filed.

If you invest in a savings account, you’ll make less than 1% and will have to pay income tax on the earnings. On the other hand, contribute something extra to your house payment on a regular basis and you’ll essentially, earn at the mortgage interest rate which is certain to be more than you’re earning in the bank.

Making additional principal contributions on your mortgage will save interest, retire debt and build equity. An extra $100 a month in the example shown will save thousands in interest and short the term of the mortgage as well.

Reducing your cost of housing is another way to improve the investment in your home. Becoming debt-free is a worthy goal that is achieved with discipline and good decisions. Suggestions like this are part of my commitment to help people be better homeowners when they buy, sell and all the years in between.

“If it isn’t broke, don’t fix it” is certainly popular advice, but if you’ve ever had a serious plumbing leak, you certainly wished you had taken care of the problem earlier.

Washing machines, like all appliances, are supposed to work and when they don’t, it’s time to have them fixed or replaced. However, there is a critical connection from your water supply that may even be older than your washing machine itself.

Ask someone whose hose broke while they were asleep or out of town and you’ll hear stories of how quickly the water can damage walls, flooring and furniture. Almost anyone can replace the hoses with a pair of pliers for under $30.00 to avoid this potential catastrophe.

As you’re shopping for the replacement hoses, consider the braided stainless steel connectors. The advantage is that the stainless steel offers additional protection should a soft spot develop in the hose beneath. They’ll cost a little more but offer considerably more protection for a nominal price.

It takes money to buy a home: yours or theirs. If you’re not going to pay cash for a home, you need to find out exactly what you can borrow and what it will cost before you start looking at homes.

The mortgage process is not as clear cut a path as it was a few years ago. It is certainly more complex, takes longer and assumes that you’re credit worthy. If you have less than stellar credit, a trusted mortgage professional can advise you how to improve your individual situation.

You are entitled to a free credit report from each of the three major credit bureaus each year. Go to AnnualCreditReport.com to get a copy of each from TransUnion, Experian and Equifax. Read the reports to determine if they’re accurate. Surprisingly, about 90% of all reports have errors.

The IRS has given special consideration regarding the sale of their jointly-owned principal residence after the death of a spouse. If the surviving spouse does not remarry prior to the sale of the home, they may qualify to exclude up to $500,000 of gain instead of the $250,000 exclusion for single people.

The sale needs to take place after 2008 and no more than two years after the date of death of the spouse

• Surviving spouse must not have remarried
• Both spouses must have used the home as their principal residences for two of the last five years prior to the death
• Both spouses must have owned the home for two of the last five years prior to the death
• Neither spouse may have excluded gain from the sale of another principal residence during the last two years prior to the death

The housing market has been in a downward trend for four years. There is some speculation that inventories will not reduce any time soon which will be necessary for prices to rise. However, there are other factors that can increase the cost of housing, specifically mortgages. FHA accounts for a large percentage of the current housing loans and is expected to be even more prominent when the Qualified Residential Mortgage Guidelines go into effect.

1. Rising rates are almost certain, due to looming inflation fueled by higher gas and food prices and the enormous amount of deficit spending

2. FHA loan limits have been reduced – they are lower than conventional limits in most markets and FHA has suggested that they might be reduced further.

3. FHA might increase the down payment to 5% or higher in an effort to have a more secure loan that will have less likelihood of going to foreclosure.

4. FHA might decrease the amount of seller contributions in a similar move to require the buyer to have a larger investment in the home and therefore be a more “qualified” borrower.

5. Congress may decide to increase the up-front MIP to build up the FHA reserves. The annual MIP has been adjusted twice since October 2010 when the Up-Front MIP was actually reduced.

6. Due to tougher conventional requirements, demand for FHA loans could exceed maximum annual insurable limits. If Congress is having a hard time raising the limit on national debt, they might not even consider raising the limits for FHA.

In an effort to solidify the lending industry, qualifying is becoming harder for the buyer and more expensive at the same time. Many of the rules changes could go into effect next year. In addition, market factors could easily play a role in increasing buyer’s costs. Waiting will very probably require a larger up-front investment for buyers in the future.

Do you remember going to the State Fair or Six Flags as a child? There was a terrific ride your older siblings were going on but there, at the entrance gate, was a sign that read “You must be this tall to ride.”

After standing in line and thinking you had just about made it, you found out that you weren’t tall enough. Not only was it disappointing, it was slightly embarrassing. You never want to go through that again.

FHA loans that originated with lower interest rates have great advantages for buyers and sellers.

1. Interest rate won’t change for qualified buyer
2. Lower interest rate means lower payments
3. Lower closing costs than originating a new mortgage
4. Easier to qualify for an assumption than a new loan
5. Lower interest rate loans amortize faster than higher ones
6. Equity grows faster because loan is further along the amortization schedule
7. Assumable mortgage could make the home more marketable

It’s not fair! 29% of all sales made in the fall and winter of 2011 were cash. How does a buyer who needs a mortgage compete with a cash buyer?

You’ve been looking for a home for months after thinking about it for years. You’ve found the home you want and meets your family’s needs. You write a contract but before it’s even presented to the seller, another offer comes in. With all the homes on the market, you’d think you wouldn’t have to deal with multiple offers but you’d be surprised how many times it does happen.

What do they want? What do they need? Will it fit? Do they already have one? These are the common thoughts running through our minds when trying to find the perfect gift.

The gift of really listening with no interrupting, no daydreaming and no planning your response is exactly what people want when they have something important to say.

The gift of affection with appropriate hugs, kisses and pats on the back can demonstrate your love for family and friends better than words.

The gift of laughter by sharing cartoons and funny stories will say “I love to laugh with you.”

The gift of a simple written note shows sincerity and real heartfelt sentiment that may be remembered for a lifetime and could even change a life.

The gift of a sincere compliment supports a person’s need to be accepted and appreciated. “You look great in that color”, “That was outstanding” or “I really enjoyed that” can make someone’s day.

The gift of random kindness or good deeds like holding a door or allowing someone to move ahead of you in a checkout lane shows respect for others.

Your smile, however, may be your most rewarding gift. Invariably, the person receiving the smile will in turn, smile back. The gift you gave will now be given back to you. It will be the right size and you can always use one more.</P