May 1st, 2014
Zillow is reporting that interest rates for 30-year fixed mortgages fell again this week.
“Last week, rates dipped to the lowest level in seven weeks as weaker-than-expected home sales and continued concerns over geo-political stability in Ukraine kept downward pressure on rates,” said Erin Lantz, vice president of mortgages at Zillow. “This week, we expect more volatility as both the mid-week Federal Open Market Committee announcement and Friday’s jobs report have the potential to move markets.”
Once upon a time, you could find a home, and then apply for a mortgage. Nowadays, the markets are so tight with so few listings, and stiff competition as well, that you need to be pre-approved for your home loan before you can start looking. Additionally, due to new regulations, it takes longer to process all of the documentation.
With online listings and so many real estate resources available to buyers and sellers, it’s easy to quickly get a property in front of the motivated. Buyers aren’t waiting on a call or fax from their real estate agent like they did in the 1980s. Instead, buyers can get push notifications from Zillow or texts from their agents and see homes as soon as they’re listed.
Transactions happen at the same speed. If you’re not approved for a mortgage when you make an offer, the seller risks waiting weeks to see if your loan will go through.
Being pre-approved also helps you be crystal clear on what you can afford.
It may seem like a great idea to transfer ownership of your home to your kids, but it actually isn’t.
For starters, parents often don’t realize the security they’re giving up, especially if they plan to continue living in the home. If one child were to get divorced, the ex-spouse could have a legitimate claim on the home. Creditors can come after the home if your child defaults on a loan or loses a legal dispute. There could be issues if you have multiple children with one wanting to take money out of the equity, and the others don’t. Your child could even sell the property without your permission. Nothing could be more awkward than getting evicted from your home by your own kid. And don’t think it couldn’t happen.
And transferring the home could negatively impact your applying for Medicaid coverage.
A home transfer is not advisable as a wealth-preservation or tax-avoidance strategy if the value of the parents’ estate is within the limit allowed for exclusion by the IRS or state tax authorities. In a case where federal gift tax applies, the rate can be as high as 40%. There can also be state gift taxes.
The tax bite is likely to be far less if the home changes hands as part of a normal inheritance. Talk with a professional to learn all of the impacts to your taxes and lifestyle before you make such a decision.