Simply put, you can purchase a property for CASH (some folks can) and then, you get a loan AFTER. The loans are treated like Purchase Loans so there is NO CASH out restrictions and you get the benefit of PURCHASE "loan to values."If you pay cash, in order to get "cash out" later, you need to wait 12 months from the date of closing. It's a wonderful strategy for those who used CASH to obtain the best price and close fast...to put their money to work again. It can be a wonderful financial strategy.
For W2 employees, this area of the Federal Tax Returns, more commonly known at "1040's - Schedule A Line 21-with form 2106 Attached," can be a deal killer when qualifying for a home mortgage.Sure, everyone likes to pay less to Uncle Sam, but there ARE consequences. Mortgage guidelines require 2106 Expenses be deducted "dollar for dollar" against your base income. Let's say you make $75,000 per year. Should you have 2106 expenses of $10,000, your NEW adjusted income to qualify for a mortgage is now $65,000. Sure, you can save some money NOW, but you could limit your future purchase options or eliminate your ability to refinance your current mortgage. If you have any questions, calling BEFORE you FILE your 2013 Taxes would be better than AFTER. Don't let your current goal (pay less taxes) stop your future goal (home ownership/refinance).