• Companies promising to reduce or eliminate credit card balances and other debt for customers no longer will be allowed to charge an up-front fee. The Federal Trade Commission (FTC) recently announced new restrictions to crack down on the debt settlement industry. Beginning Oct. 27, debt settlement companies only will be able to charge a fee once a customer’s debt has been reduced, settled, or renegotiated.
• The new FTC regulations also require debt settlement companies to disclose to customers how long it will take to get results, how much it will cost, and any negative consequences that could arise from the process.
o Although many home renovations improve the look of the property, some may not increase the home’s value, while others actually can make it more difficult for the homeowner to resell. Some renovations, like in-ground swimming pools may discourage a buyer who views it as requiring too much upkeep. While in-ground swimming pools may work in areas with warm climates year-round, like many areas of California, it is unlikely a homeowner will recoup the costs associated with installing it.
o First-time home buyers easily can become overwhelmed with the various loan choices available. Experts recommend first-time home buyers apply for a loan with an interest rate fixed for the duration of time the buyer plans to live in the home. Hybrid loans may be an option worth considering, as they are fixed for a certain period and later change to an adjustable-rate mortgage. This may be a viable option for a buyer planning to stay in the home for just a few years. However, most buyers should consider a 30-year fixed-rate loan.
Interest rates on mortgages are at their lowest levels in nearly 50 years. Rates on 30-year fixed mortgages averaged 4.58 percent this week nationwide and 4.52 percent in the West, down from 4.69 percent nationwide the previous week, according to Freddie Mac. Last year at this time, 30-year fixed-rate mortgages averaged 5.32 percent. It is important to note that rates differ from lender to lender, day to day, and borrower to borrower. Additionally, the rate does not include origination fees or points, which averaged 0.7 percent nationwide and 0.8 percent in the West this week.
While the Federal Reserve has indicated it intends to maintain short-term rates at low levels for now, long-term rates can fluctuate with the market. Since January, the weekly 30-year mortgage rate has ranged from a high of 5.21 percent in April to this week’s low. Many economists believe the rate is more likely to increase going forward, particularly in the second half of this year and into 2011. C.A.R. forecasts interest rates will average 5.6 percent this year.
When applying for a home
loan, one of the factors lenders consider is the percent of the
borrower’s income used for housing expenses, as well as the borrower’s
other non-housing related debt. Although this amount can vary by
lender, typically lenders consider a housing-and-debt to income ratio of
less than 40 percent as ideal.
During
the recession, some companies changed staffers from salaries or hourly
wages to commission-based. This can make financing a home more
difficult as most lenders do not include commission income when
evaluating a borrower’s eligibility for a home loan, unless the
borrower has been earning commissions for at least two years.
When purchasing a home, buyers are strongly advised to request a home inspection prior to closing. However, consumers should note that the primary job of a home inspector is to conduct a visual examination of the physical condition of the house and certain systems within it. Since the examination is visual, home inspectors are not required to remove carpets to ensure the floors aren’t warped, for example, and may not walk on the roof to check for defects. Home buyers should interview home inspectors ahead of time to find out what they will and will not cover as part of the inspection.
While a new home may seem to be free of any defects, many real estate professionals still advise home buyers to hire a home inspector. According to one home inspector, nearly 15 percent of new homes have serious structural problems. Additionally, newly constructed homes can be more difficult to inspect than existing homes. A new home doesn’t have any history. For example, because the plumbing has not consistently been used in a new home, small drip leaks may not be easily detectable. A home inspection can alert buyers to defects, if any are present.
When purchasing a home, buyers are strongly advised to request a home inspection prior to closing. However, consumers should note that the primary job of a home inspector is to conduct a visual examination of the physical condition of the house and certain systems within it. Since the examination is visual, home inspectors are not required to remove carpets to ensure the floors aren’t warped, for example, and may not walk on the roof to check for defects. Home buyers should interview home inspectors ahead of time to find out what they will and will not cover as part of the inspection.
While a new home may seem to be free of any defects, many real estate professionals still advise home buyers to hire a home inspector. According to one home inspector, nearly 15 percent of new homes have serious structural problems. Additionally, newly constructed homes can be more difficult to inspect than existing homes. A new home doesn’t have any history. For example, because the plumbing has not consistently been used in a new home, small drip leaks may not be easily detectable. A home inspection can alert buyers to defects, if any are present.
While a new home may seem to be free of any defects, many real estate professionals still advise home buyers to hire a home inspector. According to one home inspector, nearly 15 percent of new homes have serious structural problems. Additionally, newly constructed homes can be more difficult to inspect than existing homes. A new home doesn’t have any history. For example, because the plumbing has not consistently been used in a new home, small drip leaks may not be easily detectable. A home inspection can alert buyers to defects, if any are present. To find a home inspector in your area, go to one of these websites: www.creia.org or www.ashi.org or /www.nahi.org
Currently, if a homeowner defaults on a mortgage used to purchase his or her home -- known as a "purchase money mortgage" -- the homeowner's liability on the mortgage is limited to the property itself. Unfortunately, the original law did not extend the purchase money protection to loans that refinance the original purchase debt, even if the refinance only was to obtain a lower interest rate.
Californians who refinance a property currently do not have protection if they default on a mortgage greater than the property’s value. Called a "deficiency" liability, under current California law, the lender can sue the former homeowner for the amount of the deficiency even after taking back the property.
Recent years of low interest rates and aggressive marketing campaigns by lenders have induced tens of thousands to refinance mortgages. Few homeowners realized that by refinancing their mortgage, they were forfeiting their protections and now are personally liable.
Many lenders currently require down payments of 20 percent or more. One benefit of larger down payments is that the borrower owes less money and usually receives better terms on the mortgage loan. If the down payment is less than 20 percent, most lenders require the borrower to purchase private mortgage insurance, depending on the nature of the loan.
Borrowers can determine the down payment required by the lender as part of the pre-approval process. The pre-approval process is typically a free service where a lender evaluates the borrowers’ financial situation and determines the terms of the loan it is willing to offer. Most housing experts recommend that borrowers get pre-approved prior to searching for a home.
Properly staging a home for sale is one of the most essential elements of the selling process. Not only does it help to set a home apart from comparable homes in the area, it also enables buyers to visualize the home’s potential. While staging a home can be something as simple as a fresh coat of paint or something pricier like purchasing new furniture for a room, one essential component that all sellers should utilize is removing clutter. Sellers should work with their REALTOR® to determine the best staging opportunities for a home, including which furniture, household items, and the like should remain in the house, and which ones should be donated or temporarily put into storage.
When searching for a home inspector, consumers should seek recommendations and referrals from their REALTOR®, as well as other recent home buyers. It is recommended that consumers interview at least three potential candidates during this process. Home inspectors are not regulated as closely as other industries; home buyers should consider choosing one that belongs to the American Society of Home Inspectors. The American Society of Home Inspectors requires its members to complete at least 250 inspections. Consumers also should inquire about fees, and whether the inspector is bonded and insured.
Most sellers are sentimental when pricing their home for sale and often insist on listing it at a higher price than it is likely to garner in today’s market. If a home is priced unrealistically, it likely will stay on the market longer, often reducing its appeal and leading home buyers to question its value. Many factors influence home values. To prevent a listing from going stale, sellers must work with their REALTOR® to price the house correctly.
While it may be common knowledge to REALTORS® that the first offer is often the best, some sellers may not feel the same way. Many believe that if the first potential buyer makes an offer close to the asking price, future offers may exceed it. In many instances, this is not the case, and subsequent offers often are for less.
Homeowners planning to remain in their homes for the long term may want to consider adding energy-efficient windows, roofing, and doors as these enhancements recover a large percentage of their outlay. For example, energy-efficient steel entry doors can return more than 100 percent of their average $1,172 cost by helping to reduce energy use.
Many of the luxury amenities once considered necessities among home buyers, such as community clubhouses, dog parks, golf courses, and 24-hour security, are no longer priorities, according to the survey. Repeat buyers also said a swimming pool isn’t a must, but a children’s playground with walking paths are essential.
One of the takeaways from the survey, according to an architect firm, is that buyers nowadays should rethink space. For example, buyers should look for kitchen cabinets that go all the way to the ceiling for added space and efficiency. They also should pass on high-priced focal stairways, opting instead of steps that are tucked away and out of sight.
Buyers also should be on the lookout for dead space. If the dining room or media room is eliminated, at least some of the square footage should be dedicated to secondary bedrooms. The once-standard 10-by-10 bedroom no longer is acceptable to most buyers.
The survey also found that many buyers have transitioned toward green features, such as high-efficiency appliances, insulation, and windows that are not large areas of glass. However, many buyers did not report the use of recycled materials as a necessity.
Other findings from the survey show that large kitchens, with islands, are desirable, as are main-floor master bedrooms, and two-car garages.
To read the full story, click here: www.latimes.com
The Obama administration announced adjustments to the Home Affordable Modification Program (HAMP) and to the Federal Housing Administration (FHA) program to assist homeowners struggling to meet their mortgage obligations. The program adjustments target three groups: Unemployed homeowners who are unable to make their mortgage payments; underwater homeowners; and homeowners behind on their payments who are seeking loan modifications. Visit the Making Home Affordable Web site for more information about qualifications.
Home buyers calculating how much they can afford for a mortgage payment are advised to follow the general ratio used by the Federal Housing Administration (FHA) in determining approval of mortgages—total debt, including the new housing expenses, should not exceed 43 percent of the borrower’s monthly gross income.
Governor signs home tax credit bill
Governor Schwarzenegger today signed AB 183 providing $200 million for home buyer tax credits. The bill allocates $100 million for qualified first-time home buyers who purchase existing homes and $100 million for purchasers of new, or previously unoccupied, homes.
Eligible taxpayers who close escrow on qualified principal residences between May 1, 2010 and December, 31, 2010, or who close escrow on a qualified principal residence on and after December 31, 2010 and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010, will be able to take the allowed tax credit.
This credit is equal to the lesser of 5 percent of the purchase price or $10,000, taken in equal installments over three consecutive years. Under the bill, purchasers will be required to live in the home as their principal residence for at least two years or forfeit the credit (i.e. repay it to the state).
Buyers also must be at least 18 years old and be unrelated to the seller. First-time buyers are defined as those who have not owned a home in the past three years.