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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127473  
Subject: Re: When can I qualify for a loan? Date: 4/25/2013 10:39 PM
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improvements and maintenance to the house is somewhat counterbalanced by the mortgage interest deduction (I can't take PMI deduction, not that it'd buy much) and equity

Are you sure about the value of the mortgage interest deduction? If you are buying a $200k house with 10% down, you are getting a $180k mortgage. At 3.25%, the first 12 months of that mortgage will generate about $5,796 in deductible interest. The standard deduction for a single taxpayer for 2013 is $6,100 - so your mortgage interest is over $300 short of getting you any value from avoided taxes. And your interest paid in future years is only going to decrease.

Add in your property taxes, an income tax (if your state has one) or sales tax deduction, and some charitable giving, and you might get some benefit. But even if you can deduct $5k over the standard deduction (meaning you had $11,100 in deductions), if you are in the 25% bracket, you will have saved $1,250 in taxes. That's about 0.625% of your home's value. Without any major improvement projects, I spend about 2% of my home's value in maintainence and repairs a year on average. Even if you were only to spend 1%, the tax savings is still $750 short.

AJ
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