Pros and cons of a life estate

Here is a general overview of the benefits and burdens of a life estate:

Real estate taxes: It is the general rule that the life tenant is responsible for paying all property taxes during his or her lifetime; if the document creating this estate is silent on rent, the life estate holder does not have to pay any rent.

Ordinary repairs, upkeep and maintenance: These are the responsibility of the life tenant; that person lives in the house and it is his or her obligation to preserve the property.

Improvements: This question comes up often. "I, the life tenant, want to make improvements to the house. Who pays for this?"

Ordinarily, a life tenant has no right to make permanent improvements to the home. If they are made, without the consent of the remainderman (i.e., the person who gets the property at the end of the life estate), it is at the expense of the life tenant. However, it is the obligation of the life tenant to make all of the necessary repairs so as to preserve the property.

Homeowners insurance: Unless specifically spelled out in the will, the life tenant is responsible only for insuring his or her interest, while the remainderman has the obligation to insure the remainder interest. Sounds complicated and confusing, but the insurance carriers can assist in resolving this.

Can the life tenant move out and rent the property? The law provides that a life tenant is entitled to both the possession and use of the property. Included in this "use" is the right to rent the property to another, and keep the rent money. However, any such rent would be taxable income to the life tenant.

Can the life tenant sell the interest? The answer is yes, but the potential buyer would get only what the seller has -- namely an interest that would end when the seller dies.

What rights does the remainderman have? The courts seem to treat a life estate as they do tenants. The general principles give the life tenant the right to peaceful possession without interference from the remainderman.

However, if it appears that the life tenant is not properly maintaining the property, he or she would have the right to inspect and make any necessary repairs. This may require court action.

There may be tax consequences of giving a life estate, and you have to discuss this with your own tax advisers.

Keeping your home secure

Keep your Home Secure

At the end of summer owners of lake cottages and mountain retreats find themselves locking up for another year. Unfortunately, many owners do not leave their vacation homes very secure against burglaries.
Although there no fool-proof way to prevent a burglary, making things difficult for criminals is the best defense. These tips apply not only to vacation homes, but to your primary residence as well.

• Make your home look lived in. Add timers to lights so they go on and off in different rooms at different times. Consider leaving a light on over the stove to show that the most-used room is active.
• Secure all entry doors. Using a foot lock to jam doors can delay entry and deter burglars.
• Add motion-detector lights outside your home or put lights on timers. Ensure outdoor lights are mounted higher than someone can reach without a ladder to deter thieves from removing the bulb in order to work in darkness.
• Use a timer to leave a radio playing to sound like someone home. If you have a landline phone, turn down the volume so unanswered rings don’t get attention. With an answering machine /voice mail, don’t give details that the home is closed up for season and check to clear messages regularly.
• Determine what can be seen though open window coverings and close those that reveal too much while leaving others open on the second floor.
• Keep in contact with your neighbors. Inform trusted, local year-around residents of your schedule and of any service schedules. Provide them with contact information and consider leaving key with them for emergency. Ask them to pick up flyers, phone books, newsletters that collect on the front door and driveway.
• Consider installing security system for more peace in mind
• For the greatest security, hirea caretaker to live in the home or management company to check on the home regularly and conduct off-season maintenance /service.

3 keys to qualify for mortgage using cash income

3 keys to qualify for mortgage using cash income

By Tara-Nicholle Nelson
Inman News™

Q: For the past year I have been holding two part-time jobs: one job pays me in cash only and the other pays me with a traditional paycheck. The job that pays me in cash allows me to save about $3,000 per month, which I put into a savings account, so I have quite a bit of cash saved up. I am planning to buy a house within the next year. I would like to use this savings toward my down payment. Will this be questioned or cause me problems?

A: First, you should be very proud of yourself for having the discipline and drive to both work two jobs and to save up such a significant amount every month. But you're smart to ask in advance about how your cash income will be construed by lenders. In terms of your down payment, all funds that have been in your accounts for two months or longer at the time your loan is being underwritten are presumed to be yours by a lender.

Your bigger challenge will arise in the event that you want or need the lender to consider that $3,000 per month in cash income as part of the income that qualifies you for the mortgage. If so, there are several things you'll need to put in place.

First, if this is a part-time job, you'll probably need to be able to document that you've been there at least two years for the lender to allow you to use it to qualify.

Second, be prepared to produce a letter from your employer, known in the industry as a continuity letter, essentially verifying your employment and indicating that your employment is "expected to continue."

And third, as with any sort of income, you will be required to produce two years' worth of federal income tax returns; the bank will average your taxable income from the last two years and use that as the baseline income upon which you'll be qualified. (If you haven't been paying taxes on your cash income, but you will want or need to use it to qualify for a home loan, now's the time to meet with your tax preparer and your mortgage broker and evaluate whether it makes sense to file an amended tax return and pay the appropriate taxes on your income.)

Depending on the specific facts of your situation, your lender might require you to jump through additional hoops in terms of documenting that income; on the other hand, you might not need the income to count for mortgage purposes if you can qualify for a large enough home loan on the basis of your traditionally paid income.

Long story short: Loop your mortgage broker or other lending professional in on your situation, stat, so you can begin the process of positioning and documenting this income to make the most of it in your mortgage application and qualification process.

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com