Obtaining a Home Mortgage

California is a wonderful state and Sacramento is a stunning city. Nestled in California's Central Valley, against the Sacramento River, the city is the seventh largest urban area in California. If you are considering moving to the area, you will have access to a wealth of delights, ranging from shopping and dining to amazing natural beauty and more.

First, long before you ever think about applying for a Sacramento home mortgage, you will need to get your financial house in order. This means that you will need to know what your credit report shows.

Thankfully, you can obtain a free copy from each of the three major credit bureaus, Equifax, TransUnion and Experian. Using these tools, you should begin investigating each charge on your report. Often, you will find old accounts, inaccurate items and others that need to be cleared off - the credit bureau can help you accomplish this.

2nd Home Mortgage Loans

If you are looking for a resource that may be able to provide you with additional funds, and you don't want to take out a line of credit, a 2nd mortgage may be right for you. With a 2nd mortgage, you borrow against the equity in your home. There are many lenders ready to compete for your business, and with the internet today you can find the best interest rates in the country in a matter of minutes.

Unlike traditional lines of credit, a 2nd mortgage loan is dispersed in a lump sum payment. When lenders offer you a line of credit, they're banking on the fact that you are going to keep spending and spending until you reach the credit limit. A lump sum can help to ensure that you use the funds responsibly, protecting the equity in your home and reducing the risk of damaging your credit.

Shop Wisely for 2nd Home Mortgage Loans

GETTING PERSONAL: Home Mortgage Tax Deduction Is Tricky

By Arden Dale
A DOW JONES NEWSWIRES COLUMN

NEW YORK (Dow Jones)--Tax trouble will come knocking for many who refinance a home and then try to deduct all of their home mortgage interest.

Many homeowners aren't entitled to the full deduction; it is limited based on debt used to buy and improve the home and it can only be taken for loans the home secures.

Recent tax woes for Kansas Gov. Kathleen Sebelius highlight how easy it is to slip up - and get caught doing so. An improper mortgage interest deduction was one of several mistakes on her recent returns that caused a stir during her nomination by President Barack Obama to head the U.S. Department of Health and Human Services.

Erik M. Jensen, a tax expert and professor at Case Western Reserve University School of Law, said that, indeed, the deduction is "so complicated it makes a specialist's head spin." The rules go on and on, he added, with "provision piled on complication."

Lately, it has triggered audits of taxpayers in California and other metro areas where houses still carry high prices, according to tax advisers.

Many in these cases refinanced homes, milking the equity out of them, and yet continue to deduct mortgage interest fully when they're not qualified to do so, says Claudia Hill, president of Tax Mam Inc. in Cupertino, Calif.

Home mortgage interest is any interest paid on a loan secured by the taxpayer's home. The loan may be a mortgage to buy the principal home or a second personal-use home, a line of credit, or a home equity loan. Qualified mortgage insurance is also deductible as home mortgage interest.

Homeowners who paid $600 or more of mortgage interest on any one mortgage generally get a Form 1098 or similar statement from the mortgage holder that shows the amount paid. This includes certain points and mortgage insurance premiums. How much is deductible depends on the date and amount of the mortgage or mortgages, and how the taxpayer uses mortgage proceeds.

Abe Schneier, senior manager of taxation at the American Institute of Certified Public Accountants uses the example of a taxpayer who bought a home 10 years ago with a $200,000 mortgage, pays off $25,000, and then refinances for $400,000.

The homeowner can deduct interest on the old balance of $175,000 but there is a $100,000 limit on the amount of the new loan that can be added to that. So the total debt for which interest can be deducted is $275,000.

It would be easy enough for the person to make the mistake of deducting interest on the new $400,000 mortgage.

"A lot of people do get this one wrong," says Schneier.

IRS Publication 936 contains a worksheet to determine the limit and outlines rules on the deduction, noting that a taxpayer can write off all of the interest on a mortgage or mortgages if one or more of them fits at least one of three categories:

* Mortgages taken out on or before Oct. 13, 1987 (grandfathered debt)

* Mortgages taken out after Oct. 13, 1987, used to buy, build or improve the home (acquisition debt); but only if throughout 2008 that debt and any grandfathered debt totaled $1 million or less. The interest deduction is limited if the mortgage debt exceeds the fair market value of the home at the time the loan is placed.

* Home-equity debt taken out after Oct. 13, 1987, but only if throughout 2008 the debt totaled $100,000 or less, and didn't exceed the fair market value of the home reduced by grandfathered or acquisition debt. Interest on equity indebtedness is not permitted when calculating the alternative minimum tax.

For home-equity debt, here's an example from AICPA's Schneier: A taxpayer buys a home for $250,000, with a $200,000 loan. If he then takes out an equity loan for $75,000, he can only deduct interest on $50,000 of it if the market value hasn't increased.

If the fair market value of the home has risen to currently $300,000 or more, the interest on the entire equity loan is deductible because it is under $100,000 and the home's fair market value exceeds the acquisition debt by at least $75,000.

(Arden Dale is a Getting Personal columnist who writes about personal finance; she covers topics including tax and estate planning, retirement, investment strategies, and financial needs of small businesses. She can be reached at 201-938-2052 or by email at arden.dale@dowjones.com.

Taken From WSJ.com