What is important to lenders?

Not every applicant is approved for a home loan the first time he or she applies. For a variety of reasons, even after a lot of hard work, sometimes a loan just can’t be approved. It may have to do with the applicant’s credit or savings history, employment stability, debt structure, or the value of the home. The good news is that a denial is merely a detour, not a roadblock. Purchasing a home takes planning, discipline and hard work! Follow these tips and with our assistance, homeownership is not out of reach.

Establish a consistent record of paying bills on time.

Before making a loan the size of a home loan, most lenders will want to review how you have handled your credit in the past. This includes all credit accounts, including utilities, revolving debt (credit cards, etc.), and installment debt (car loans, student loans, etc.). It is critical for you to bring all overdue bills up to date immediately and begin paying them on time in a consistent manner.

Establish a consistent record of steady employment.

Lenders are more likely to look favorably on an applicant who has been in the same (or similar) line of work for generally two or more years. If you have been working steadily for less than two or more years, expect the lender to ask why. There are many acceptable reasons, including:

• You recently finished school, vocational training, or left the military;
• Your work is typically seasonal and gaps in employment are customary to the industry
• You may have been laid off from your job; or
• Frequent employment changes are normal in your line of work (sales, contract work, etc.), but you have been consistently employed and maintained a consistent level of income over the past 2 years.

You may want to pay off some debt to lower your debt-to-income ratio.

This step will make it easier to qualify for a mortgage loan if your debt ratio is high. Chances are good that if you’re already paying rent, making a mortgage payment will be a smooth transition. Along with the mortgage payment, you’re also responsible for real estate taxes and insurance, and if required, mortgage insurance and homeowners dues. Work with us to determine the monthly payment you can afford based on your income and the standard debt-to-income ratio guidelines.

Establish a consistent savings pattern.

Saving money for a down payment, and still having enough reserves left over to cover two months of expenses in the event of an emergency, is typically the most challenging part of buying a home. While sometimes it is difficult, this is a necessary step to ensure you are financially ready to take the plunge into homeownership.

Misconceptions, misinterpretations and just plain “untruths” are floating about income taxes. Believing them could be costing thousands of tax dollars!

Myth: A Professional Tax Preparer knows all there is to know about taxes so you don't have to know anything them.

Truth: Tax Preparer's/CPA's/Accountants are not uniformly informed about ALL tax laws. Most are able to file a personal income tax and know all the laws and how to apply them to personal income tax.

There are thousands of excellent, hard-working accountants doing a great job. And if you use a tax professional, maybe they have done everything possible to reduce your taxes. But many professional tax preparers are just tax preparers.

They may know how to prepare a tax return in their sleep. They know what numbers go on which form. But that's about all they know.

A good tax preparer is not trained in tax reduction strategies.

The only way you are assured to get the tax deductions you are entitled to, as a Home-Based Business Owner, is to become informed yourself.

Myth: You must "itemize" in order to take Home-Based Business expenses.

Truth: Many people misunderstand the terminology here.

When you "itemize" your income tax you file Form A&B and take such things as medical, home mortgage interest etc. You will only "itemize" if the total of Form A is over the standard deduction (for 2003 taxes…$4,700 single, $9,500 married)

Some people call this filing "long form."

All taxpayers have the opportunity to itemize if it is to their advantage.

Whether you "itemize" or not has NO bearing on your Business.

Myth: You're not making a profit so there is no advantage to filing business income taxes.

Truth: This is so not true! There's many tax advantages to filing a Home-Business tax return and especially so if you are not making a profit. If you also work a job, be it part-time or full time, in addition to your Home-Based business it is especially beneficial to you to file a business tax return.

Expenses incurred in your business can be taken against your job income thus reducing your taxable dollar, which decreases your tax liability.

Myth: Because you work a full-time job your Internet Marketing Business is just a hobby.

Truth: Only another Internet Marketer can truly understand the hours and money spent on what someone else would call a "hobby"!

The rules clearly state you have a business if you meet 8 rules. Four of the most important rules to meet are:

1. Expertise of the taxpayer or his/her advisors. That would mean your expertise in Internet Marketing or those who advise you. If you're learning and actively applying what you learn to your Internet Marketing activities and have a good "handle" on this…you qualify.

2. Time and Effort the Taxpayer puts into ‘running the business’. They just want to make sure you're running a real business, not just engaging in a hobby. How much “time and effort” is enough? The United States Federal Tax Court has ruled that “45 minutes a day, 4 to 5 days a week” qualifies.

I can't see anyone who is in Internet Marketing with a profit motive not qualifying here!

3. The Manner in Which the Taxpayer Carries On the Business Activity. This one is common sense. Do you conduct your business mostly on the telephone, over the Internet and in-home presentations (these are good), or mostly at the golf course, during lunches and at the pub (not so good). Just treat your business like a business.

4. Is the Primary Purpose of your activity to ‘Produce a Profit,” or to ‘Produce Tax Write-offs’? The best way to Pass the profit-motive test, is to have a Business Plan, and That Business Plan should include a table of Income and Expense projections, clearly showing profitability at some point in the future. Note that you are not required to actually produce a profit in order to qualify for home-business tax deductions -- just to show that you have the intent to produce a profit.

If you are doing all this then there is no reason for your business to be considered a "hobby".

Myth: You must make a profit within 5 years to be considered a "business" and file Home-Business taxes.

Truth: That's a generalization. Yes, the government would like to see you make a profit within 5 years but you are not penalized for not doing so. If you are following the above 4 rules and conducting yourself as a business you have nothing to worry about. You are a business and some businesses are not profitable for a number of years.

Myth: Learning how to reduce you taxes is hard and complicated.

Truth: Average Small Business Owners have plenty of tax reduction strategies at their disposal. You just have to know what they are and how to use them.

Once you learn what deductions are allowed you will know what figures your Tax Preparer/Accountant needs and you can configure your accounting accordingly.

Myth: Accounting and tax documentation for the Home-Business is not for the do-it-yourselfer.

Truth: All Small Business Owners can easily keep their own books using any number of software programs. It is not necessary to have an accountant.

No, you will not have to learn accounting. You will just need to be able to "categorize" and record expenses and sales.

Documentation for the government is very easy if you use a pocket calendar and keep your receipts.

In just 5-10 minutes a day you can have records that will withstand any government scrutiny.

Do You Qualify For Home-Based Tax Deductions?

New changes in the tax laws have made it easier than ever to claim Home Office Deductions and keep more of what you earn.

If your home is a place of business, many of your personal expenses can be deducted as business expenses resulting in lower taxes.

You may be thinking, "I have an Accountant/CPA/Tax Preparer/Tax Software who knows all about tax deductions so I don't have to know anything about them."

There are several reasons why that thinking could be costing you thousands of tax dollars. Some of those reasons are:

• Most Accountants/CPA's/Tax Preparers do not "specialize" in Home-Based Businesses and do not keep up with the ever-changing laws pertaining to them.

• You are ultimately responsible for knowing what you can and cannot deduct as business expenses. Why? YOU are accountable to the IRS for your deductions, not the tax preparer.

• If you pay someone to do your taxes you still need to know what you can deduct so that you can gather all relevant paperwork.

• The most compelling reason: Getting the greatest benefit from your deductions.

To qualify for these deductions you must meet 2 conditions, which most, if not all, Internet Marketers meet.

Condition 1: Do you work as an Internet marketer out of your home (on your "home computer)?

To qualify for deducting expenses related to using a workspace for business in your home, your home must be

• Your "principal place of business " or you must use the space only to earn your business income.

• Use it on a regular and ongoing basis to meet your clients, customers, or patients.

AND

Condition 2: Are you in business to make a profit?

Whether you made a profit or not is immaterial. Even if you lost money but intended to make a profit these deductions are still available to you.

If you answered yes to both of these questions then you do own a Home-Based Business and as such you are qualified to deduct Business Assets, Direct and Indirect Expenses.

Business Assets include business equipment such as computer, fax machines, business furniture such as desk (your dining room table for instance), desk chair and filing cabinets. These are 100% deductible if they are used "exclusively" for business purposes.

If these assets are not used "exclusively' for business the amount you can deduct is proportionally related to how much these things are used in your business. It is possible to deduct a portion of your living room, sofa, DVD player etc if you meet certain conditions.

Direct Expenses are those directly related to conducting your business. This would include office supplies, telephone service,, cellular phones, ISP service, hosting, advertising etc. Direct expenses are generally 100% deductible.

Indirect Expenses include such things as rent on your home, utilities including heating and air conditioning and general repairs such as replacing a roof or repainting the exterior of your home.

These are authorized legal deductions passed into law specifically for Home-Based Businesses by congress.

If you use your home for business purposes, many of your personal expenses can legally be converted into deductible business expenses including utilities such as heat and electricity, cleaning materials, house insurance and property taxes.

Learn all you can about what you can deduct and you will consistently save thousands on your income tax each year.

"I'm proud to pay taxes in the United States; the only thing is, I could be just as proud for half the money." - Arthur Godfrey

This article was posted on February 08, 2004

With all the talk lately about Mortgage Cycling versus Bi-Weekly Mortgages which one is really right for you? Choosing the correct one could literally save you thousands of dollars and shave off approximately 20 years on the life of your 30 year mortgage.

So a little background on the principal of each program needs to be told. Bi-weekly mortgages became popular a few years back when interest rates were extremely high and it made a lot of sense to pay as much on the principal of your mortgage as you can in a systematic way.

The way it works is that your mortgage payments are split in two every month so you end up paying (26) 1/2 payments instead of 12 whole payments which in effect ends up paying one additional month towards your principal.

Doing this ends up saving the average homeowner thousands of dollars on the interest payments over 30 years and shaves off around 7 years of payments. Not bad for back then. But as interest rates started to drop the net effect of savings are not as great now as they were when rates were higher.

But with the discovery of a recent mortgage loophole by Craig Romero, a senior mortgage analyst, Mortgage Cycling was born. Mortgage cycling allows a homeowner to build up 10 times faster then biweekly mortgages and allows you to pay of your 30 year mortgage in 10 years or less.

Mortgage cycling allows a homeowner to build up equity in their home fast using a patent pending technique. So fast that it ends up paying off a traditional 30 year mortgage in just about 10 years.

At first I was skeptical on how powerful mortgage cycling is until I compared using a typical $150,000 loan for thirty years at 7% interest. After running the figures though the difference between a bi-weekly mortgage versus mortgage cycling is dramatic.

                   Bi-weekly        Mortgage Cycling 
Equity 1 year        $1,520            $14,061

Equity 3 years       $4,900            $44,972

Equity 5 years       $8,787            $74,179

Equity 9 years       $18,397           $136,429

No matter the loan amount, interest rates or mortgage term, mortgage cycling showed to dramatically cut down the payment time and interest payments to your mortgage company over the life of the loan.

Imagine what you could do with all that extra money that you can put back in your pocket instead of your mortgage company.

Now mortgage cycling may not be for everyone. But for someone who has the discipline it can be a very effective way of building up the equity in your home and to pay it off extremely fast versus using a standard bi-weekly option.