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persfi/poteshman/–“/dt1st/jc2nd Applying for a mortgage can be a complex, expensive and emotionally-charged experience. To make the process go more smoothly, you may want to consider the following steps before applying for a mortgage. One of the first things the bank will request is a credit report. Good credit is critical to securing a mortgage, and lenders place a great deal of credence on the information they find in your credit report. That’s why you should make every effort to be sure that the information in your credit report is correct. Often, consumers assume that their fiscal responsibility has resulted in a clean credit report and are surprised to learn that mistakes on credit reports are all too common. Occasionally, incorrect entries are caused by mispostings due to similar names. You should be particularly wary if you have a common surname such as “Jones” or “Smith,” or if you are a “junior” or “senior.” In addition, a dispute with a merchant over a billing error or returned or damaged merchandise may remain on your credit report long after the problem has been resolved. By getting a copy of your credit report before applying for a mortgage, you will know what creditors have reported, be prepared to explain any discrepancies, and have time to correct any errors. To request a copy of your credit report, contact one or more of the major credit bureaus: Experian (800-392-1122); Equifax (800-685-1111); and TransUnion Corp. (312-408-1050). You’ll be charged a nominal fee (unless you’ve been denied credit in the last 60 days). The lender who reviews your mortgage application will be looking not only at how much you owe, but also at the potential amount of credit available to you. In fact, for the purpose of calculating your debt, some lenders consider the minimum monthly payment that would be due on each outstanding credit account, regardless of whether or not the account is active. The lender’s rationale is that it is possible that, at some point after you obtain your mortgage loan, you could potentially use these accounts to run up debt that could affect your ability to make your mortgage payment. The best way to avoid the risk of having too much credit available to you is to identify credit cards or lines of credit that you don’t use and notify those creditors that you wish to close the accounts. Be sure to ask the creditor to indicate on your account that it was “closed at the customer’s request.” This notation makes it clear that the account was not closed by the creditor for “adverse” reasons. You should allow 60 to 90 days for creditors to close your accounts and notify the credit reporting agencies. Once you apply for a mortgage, you’ll need to submit a great deal of paperwork. To pave the way for a timely response to your lender’s request for employment verification, you may want to alert your human resources or payroll department in advance to elicit their cooperation in completing and returning the information promptly. Other items you may be asked to produce include: the names, addresses, and phone numbers of previous employers, W-2 forms, your last two paycheck stubs, copies of your bank statements, account numbers and balance information for each of your credit cards and any outstanding loans, and copies of your tax returns from the last two years. You also may be required to provide verification of other income, such as Social Security benefits, interest and dividends, rental income, and alimony that you want the bank to consider in qualifying for the loan. Moving deduction Would you like to claim a tax deduction for some of your unreimbursed, job-related moving expenses? Here is how to determine if you qualify. The first step in qualifying for the deduction involves a distance test. To meet this test, the location of your new job must be at least 50 miles farther from your previous residence than the distance between your previous job and your old residence. For example, if the distance between your former job and your former residence was 10 miles, the distance between your new job and your old home must be at least 60 miles. If you had no former place of work, the distance from the old residence to the new principal place of work must be at least 50 miles. In addition to satisfying the distance test, you must meet a full-time work requirement at the new location. The requirement differs depending on whether you are self-employed or an employee. If you are an employee, you meet the full-time work requirement if you work at least 39 weeks during the 12-month period after relocating. The requirement for self-employed workers is more stringent. You must work full time in the general area of your new principal workplace for at least 39 weeks during the first 12 months and a total of at least 78 weeks during the 24-month period after relocating. Under current tax law, you are allowed to write off those moving expenses that the Internal Revenue Service (IRS) classifies as “reasonable.” These qualifying expenses include the basic cost of moving your family’s belongings to your new home, as well as the family’s trip to your new home. Expenses you incur for packing and transporting your family’s furniture, personal effects, cars, and other belongings from your old home to your new home are deductible. You may also deduct costs you incur for transportation and lodging (but not meals) while you and your family are en route to your new home. Other expenses associated with relocation such as pre-move house-hunting trips, meals in transit, temporary housing, and expenses incurred in selling, purchasing, or leasing a residence in connection with a move were previously deductible within certain limits, but no longer qualify as deductible expenses. Mel Poteshman, CPA, is president of Poteshman Consulting International & Co., a West Los Angeles-based business consulting firm. Serving the Los Angeles business community, PCI & Co. provides general business, real estate and international trade advisory services.

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