Prospective home buyers should always include a financing contingency in their offers, especially now that mortgage rates have been moving higher.

Q: We made an offer to purchase a house a month ago and followed your earlier advice by including a financing contingency in our offer. The contingency our agent wrote said that we would make a 10 percent down payment, with the balance of the purchase price “to be financed with a 30-year, fixed-rate loan with an interest rate not to exceed 6.25 percent.” Our offer was accepted, but we have since learned that the best rate we can get today would be almost 7 percent, which would add nearly $200 a month to our payments. Can we cancel the purchase and get our $7,500 deposit returned because we don’t qualify for the 6.25 percent rate required by our contingency?

A: Yes, you should be able to nix the deal and get your deposit back because you cannot obtain the loan terms stated in the financing contingency that you wisely included in your offer. If you had failed to include the contingency, the seller could automatically keep your $7,500 deposit, even though you could not qualify for a mortgage large enough to complete the transaction.

Nonetheless, don’t be surprised if the sellers refuse your request to cancel the transaction and return your deposit – especially if the housing market in the area is slow and the sellers will have to spend several more weeks trying to find another prospective buyer.

Letters from two or three lenders rejecting your mortgage application, or simply other bank documents showing that you can only qualify for a loan that’s higher than the 6.25 rate the contingency calls for should be enough to convince the sellers that they should return the deposit because you made a “good faith” effort to get a loan that meets the terms of the contingency.

If the sellers refuse to cooperate, the same paperwork might persuade a judge to order that your deposit be returned (and that the sellers pay all legal fees), if the issue must eventually be taken to court.

Q: I recently got a mortgage to purchase my first house, and my first payment is due next month. Will my credit score now automatically go up because I’ve proven to a lender that I’m qualified to get a home loan, or will it go down because I now owe a lot more money than I did just a few weeks ago?

A: Obtaining a mortgage and then faithfully making the required payments is a great way to build your credit score, but the improvement won’t necessarily come quickly.

Your credit score is based on several factors, including how much debt you have had in the past and how well you handled payments on those obligations. When you get a new mortgage, the amount of your overall debt soars, and your score may temporarily dip until creditors and credit bureaus alike can determine how well you are able to cope with your higher payments.

The good news is that your credit rating should recover after a few months and then move even higher, provided that you make all the payments on the new mortgage and other debt in a timely manner in the future.

Q: I moved into my boyfriend’s home earlier this year. He owns the house, but I have been sending a check for half of his monthly mortgage payments directly to the lender. Will I be able to claim half of the interest charges when I file my next tax return, even though we are not married and I am not “on title” to his home?

A: Sorry, but your half of the payments you make will not be tax deductible.

Rules published by the Internal Revenue Service clearly state that taxpayers cannot take deductions for finance charges on a property in which they have no ownership interest or no financial liability to pay the money back. You aren’t a co-borrower on your boyfriend’s loan or a co-owner of his house, so you can’t claim any of the interest charges on the loan even though you voluntarily make half of the payments.

In an odd twist, your boyfriend can technically deduct only half of the loan’s annual mortgage-interest payments himself because you’re making the other 50 percent of the payments on his behalf. IRS rules say homeowners can only deduct finance charges that they actually pay and cannot claim finance charges incurred if others make the payments for them.

In short, you can’t claim any of your interest payments because you’re not legally liable for the loan, and your boyfriend can claim only half of the annual finance charges because he’s only making one-half of the payments. Tax-wise, it’s a bad deal for both of you, but certainly a very good one for the IRS.

A good accountant might be able to suggest one or two creative ways for both you and your boyfriend to fully deduct all the interest charges on the loan.