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5 Things First-Time Homebuyers Must Know Before Taking out a Mortgage

 If you’re thinking about buying your first home, there are some things you should know to increase your chance of mortgage approval. Even in today’s competitive real estate market, first-time homebuyers have many opportunities to get a home, but it all starts with knowing how to get approved for a mortgage.

 You Must Check your Credit

 Your credit is the first thing lenders look at and use to decide if you’ll qualify for financing. Everyone gets free access to their credit reports – use it.

 Check your credit report for any of the following:

  • Late payments
  • Use of more than 30% of your credit line
  • Collections
  • Inaccurate information

Dispute any incorrect information, bring late payments current, and pay any large outstanding credit lines down to improve your credit score.

 You Need Money for a Down Payment AND Closing Costs

You might only need 3 – 3.5% down on the home, but don’t forget about closing costs. They can be as much as 2% – 5% of the loan amount.

 You must prove any funds you use to cover the down payment and closing costs belong to you and they aren’t borrowed. The earlier you save, the easier it is to afford a mortgage.

 Acceptable funds can come from your checking or savings account, investment accounts, and even your 401K or IRA if allowed by your account administrator.

 Get Pre-Approved for Looking at Homes

 A loan pre-approval tells you how much you can afford and at what terms. It also tells sellers you are a serious and capable buyer, which in today’s real estate industry is important. Sellers often won’t take offers from buyers without a pre-approval.

 Think of the pre-approval as your first step to buying a home. You’ll knock out the requirements to qualify you personally for the loan. All that’s left is to qualify the property and take care of any loose ends the lender lists as conditions on your pre-approval letter.

 Know How Much you can Afford

 A pre-approval will tell you the maximum amount of loan a lender will give you. That doesn’t mean you must spend the full amount.

 Look at the payment and decide if it’s something you can afford. Not everyone borrows the full amount they qualify for because it doesn’t fit within the budget they set for themselves. Don’t forget you’ll need plenty of reserves as a homeowner since all maintenance and repairs are your responsibility.

 Compare your Loan Options

 You might qualify for more than one type of loan. Take advantage of the opportunity to compare them side-by-side. For each loan you apply for, you’ll receive a Loan Estimate. Use this document to compare your options from each lender. Look not only at the monthly payment and closing costs, but at the big picture.

 How much does the loan cost over its entire term? That’s how you choose the best loan.

 Final Thoughts

 Buying your first home is exciting but proceed with caution. Check your credit, save enough money to cover your costs, and know your loan options. With the right steps, you can enter homeownership with an attractive loan and still have money in your pocket.

New IRS Rules For Cash Payment Apps

Let’s talk about a new tax coming in 2022. It’s not exactly a new tax but it’s a new way that the IRS are going to keep tabs on your finances even down to your garage sales. I’ll explain that in a second, so on January 1, 2022, new laws are being put into place that 1099 reporting will be implemented and it will be mandatory for payment platforms like Vimeo, cash app, and PayPal. What it means is that there will be a 1099 issued for anyone who receives $600 or more in transactions throughout the entire year. Currently, to give you an idea how different this is, a lot of people believe it’s normal but it’s not normal for these payment apps. This is for anybody selling things or receiving payment on payment platforms like PayPal and that’s $600 throughout the year total. Currently, to give an idea how big of a deal this is or how big of a change from the current rule it is, those payment platforms do not have to issue a 1099 unless at least $20,000 of transactions have happened throughout the year and in that $20,000 you would have to exceed 200 transactions or more on that account. This is going to affect everybody. Right now, many people out there just trying to make ends meet so people will have garage sales to make a little extra cash. It happens all the time with garage sales. There will be a garage sale, and someone says, “Hey do you take Venmo?”  Now, think about this, that person selling items at a garage sale is now going be issued a 1099 if they sell over $600 worth of garage sale items using Venmo. They have to claim that as income and possibly if they do enough of it, they may be looking at audit down the road because the IRS is going say wait a minute do you have a business? If you do, that’s subject to self-employment tax. Therefore, people need to understand what’s going on. I get it there’s a lot of people right now not paying taxes, but you didn’t get to write off that old bedroom set that you just sold at a garage sale as an expense when you bought the bedroom set but now with this kind of reporting, you may have to claim it as income when you go to sell it at a garage sale. These are the times to start thinking ahead. I think it’s so vitally important that people understand that this is happening. You can’t wait until January 2023 because it’s too late to prepare. In 2022 alone you might have a garage sale with more than $600 worth of goods sold on one of these platforms. People may sell $600 or more worth of stuff on a payment app in early 2022 before they ever hear about this and guess what’s coming to them in 2023? That’s right! A 1099 and they must claim it as income. Many people are bordering a couple of different tax brackets, and this might come as a surprise in January 2023, or it might exclude some people from certain deductions because now they make too much. I think this is very important information but very few people seem to be aware of what is happening next year. Now you know. Stay safe and have a happy new year.  

Gregory S. McKinney Mineola Texas

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