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It is the way the property is used that determines the type of property it is, not what it looks like.  Based on the intent of the owner, the property could be a principal residence, income property, investment property or dealer property. A principal residence is a home that a person lives in.  There can be only one declared principal residence.  It is afforded certain benefits like deducting the interest and property taxes on a taxpayers' itemized deductions, up to limits.  Up to $250,000 of gain for a single taxpayer and up to $500,000 for a married couple filing jointly can be excluded from income if the property is owned and used as a principal residence for two out of the previous five years. An income property is an improved property that is rented for more than 12 months.  The improvements can be depreciated based on a 27.5-year life for residential property or 39-years for commercial property.  This is a non-cash deduction that shelters income....

The least amount in a down payment is an attractive option when people are thinking of buying a home.  A common reason is to have cash available for furnishing the new home and  possible unexpected expenses. Some people don't have any options because they only have enough for a minimum down payment and the closing costs.  For those fortunate buyers who do have extra money available, let's look at why you'd want to do such a thing. Most loans in excess of 80% loan to value require mortgage insurance to protect the lenders for the upper portion of the loan if the home were to go into foreclosure.  FHA requires an up-front premium of 1.75% of the amount borrowed plus a monthly amount of .85% on the balance.  FHA mortgage insurance premium must be paid for the life of the loan. Mortgage insurance on conventional loans varies depending on the borrowers' credit and the amount of down payment being made.  Unlike FHA, when the unpaid balance reaches 78% of th...

Home improvement loans provide a source of funds for owners to finance the improvements they want to make.   These are usually, personal installment loans that are not collateralized by the home itself.   Since there is more risk for the lender with this type of loan, the interest rate is higher than a normal mortgage loan. In today's market, the rates on home improvement loans could vary between 6% and 36%.   A borrower's credit score will determine the interest rate; the lower the score, the higher the rate and the higher the score, the lower the rate. Smaller loan amounts are under $40,000 with larger loan amounts over $40,000 based on the extent of the improvements to be made.   With all things being equal, a larger loan may have a lower interest rate. Besides the interest rate being higher than a regular mortgage, the term is shorter.   Similar to a car loan, the term can be between five and seven years.   A $50,000 home improvement loan for a bo...

House-hacking refers to buying a multifamily property on an owner-occupied mortgage, living in one unit and renting the others.  If you're thinking about becoming a rental mogul, starting early is an advantage.  Not only will you have longer to accumulate a larger portfolio, you can increase the leverage on the first acquisitions if they are owner-occupied.  Leverage is the use of other people's money to finance an investment.  The higher the loan-to-value, the greater the leverage which can increase the yield. A $200,000 rental property with an 80% LTV at 4.5% for 30 years producing a 16.88% before-tax rate of return would increase to a 23% return on investment by increasing the mortgage to 90%.  A typical down payment on an investor property in today's market is 20-25% but, in some cases, a higher loan-to-value is possible. Owner-occupied, multi-unit properties, two to four units, allow a borrower to occupy one of the units and rent the others out. ...