Without the wax

What you should know about the market.

2010-03-05T20:52:00Z

• When beginning the house hunt, some buyers go in blindly, not knowing how much house they can afford. Without this knowledge, buyers may find themselves viewing houses that aren’t within their budget. To prevent buyers from spending time viewing homes they may not be able to afford, real estate experts advise home buyers get pre-approved by lenders before house hunting. By providing copies of a recent credit report, W-2s, pay stubs, and bank and brokerage statements to a lender, buyers will have a better idea of the price range they can afford.

• Many financial and real estate advisors also recommend home buyers create long-term budgets to help create guidelines for affordable mortgage payments and long-term homeownership costs. Most experts advise clients to devote no more than 30 percent of their monthly household income toward housing costs, which should include mortgage principal, interest, taxes, and insurance. There are numerous worksheets available online to help consumers calculate how their income, debts, and expenses may affect the amount they can afford each month for the next 15 to 30 years.

What you should know about the market

2010-02-27T19:17:00Z

While accurately pricing a home for sale continues to be the most important factor in whether or not a home sells, homeowners can take steps

to raise the salability of the home. Many professional home stagers and REALTORS® recommend homeowners add furniture to empty

rooms to give the home an inviting feeling. Replacing dark carpeting and paint with more neutral tones also can make rooms look larger and

more appealing to a wider variety of home buyers.

What you should know about the market:

2010-02-21T05:39:00Z

• One of the most important steps a home buyer can take when deciding which home to purchase is to conduct "drive bys" of the house and the neighborhood at various times of the day and on both weekdays and weekends. Taking the extra time to research the neighborhood will help determine if there is too much or too little social activity for the home buyer’s lifestyle; if there are barking dogs in the house next door; and if the home is located on a street with a lot of traffic during commute times.

• A study by Remodeling magazine found the average rate of return on value for an upgrade in a home declined from 87 percent in 2005 to 64 percent in 2009. Taking that into consideration, many real estate experts recommend homeowners remodel instead of adding on to their home. For example, having a large, formal living room and an everyday family room is less desirable than having one multi-use common space So, rather than adding on, most homeowners are better served reconfiguring the existing floor plan or capturing unused basement or attic space.

What you should know about the real estate market

2010-02-06T06:26:00Z

Mortgage rates in 2010 are expected to rise from 2009’s historically low levels. Early last year, the Federal Reserve announced plans to purchase debt and mortgage-backed securities from Fannie Mae and Freddie Mac to lower interest rates for consumers and spur homebuying. As a result, rates on 30-year, fixed mortgages fell to historic lows. However, the Fed’s asset purchase program is scheduled to expire at the end of the first quarter of 2010, and a lack of private demand for mortgage-backed securities could lead to a rise in rates.

The once popular "no down payment" loans which meant borrowers were not required to put down any money on a house to secure a mortgage, now are practically non existent. Instead, most lenders require borrowers to put down at least 10 percent, if not more, to secure a loan.
Down payments not only help protect the lender, they also are beneficial to buyers. For example, the higher the down payment, the lower the loan amount and the lower the monthly payment.

Keep This In Mind

2010-01-30T08:19:00Z

Loans insured by the FHA generally are less expensive to borrowers because of the lower down payment requirements. However, these loans also have fees, such as up-front mortgage insurance. To help the agency raise its cash reserves, the FHA is increasing the up-front mortgage insurance premium from its current 1.75 percent to 2.25 percent. HUD released a Mortgagee Letter today making the premium increase effective in the spring.

What you should know about the market…

2010-01-16T01:10:00Z

• The government is expected to unveil a new program in the next couple of months that, if approved, may reimburse homeowners for up to half the cost of making their homes more efficient. Through the program, homeowners will receive the largest return from simple upgrades like caulking windows, adding insulation, and changing incandescent light bulbs to those that are more energy-efficient.

• To determine which energy-efficiency upgrades are best for their house, homeowners should obtain a home energy audit. Homeowners are advised to hire a contractor licensed by the Building Performance Institute or the Residential Energy Services Network. These contractors have been trained to first test a home to determine the amount of energy it is losing, and then make suggestions on renovations.

KEEP THIS IN MIND

2010-01-16T01:06:00Z

Gov. Arnold Schwarzenegger proposed a new round of $10,000 state tax credits for buyers of new and existing homes in California. To read the full story, click here: www.sacbee.com

Losing a home? A tax bite may be next
You might avoid debt-relief taxes if your lender forecloses on your house and cancels your mortgage. But you could still wind up owing a lot of money to the IRS. To read the full story, please click here: msn.com

Homeowners forced to buy flood insurance after FEMA redraws maps
Tens of thousands of homeowners in Southern California are being forced to buy costly flood insurance because new maps issued by a federal agency say they live in a high-risk flood area. To read the full story, please click here: www.latimes.com

GOOD FAITH ESTIMATES

2010-01-09T15:28:00Z

Although Good Faith Estimates have been in use for many years, there never has been a standard form required of all lenders. Under the new rules, lenders and mortgage brokers are required to give consumers the standard estimate forms within three days of receiving a loan application.

The Good Faith Estimate form requires lenders to combine all of the bank’s fees into one “origination charge,” enabling consumers to compare one lender’s fees with another’s. Lenders are prohibited from increasing the origination fee from the estimate. Some additional charges, including title services and recording charges, can increase by as much as a combined 10 percent. Estimates for other charges, such as homeowner’s insurance and other services provided by third parties selected by the borrower, aren’t subject to such limits.
A finance professor emeritus at the University of Pennsylvania’s Wharton School recommends that borrowers focus on two items as they shop: the interest rate and the “adjusted origination charge,” which includes any points paid to lower the rate.
Another change includes the HUD-1 form used by settlement firms in closings. The new HUD-1 includes a comparison of the estimated and final costs, as well as a summary of the loan terms.

To read the full story, please click here

KEEP THIS IN MIND

2010-01-01T20:17:00Z

• A short sale is when the lender agrees to accept less than the amount owed on the mortgage instead of foreclosing. Many homeowners and REALTORS® have expressed their frustrations in the short-sale process, criticizing lenders for the amount of time it takes to process and approve a short sale. The CALIFORNIA ASSOCIATION OF REALTORS® listened to members’ concerns, worked with other industry groups, and responded by helping to create provisions to streamline the short-sale process.

• The HAFA program simplifies and encourages short sales and deeds in lieu of foreclosure. It will permit pre-approved short sale terms before a property is listed; release borrowers from future liability for the debt; provide financial incentives to borrowers, servicers, and investors; and prevent servicers from attempting to reduce real estate commissions established in the listing agreement as a condition for short sale approval.

• Under terms of the program, the borrower and/or listing broker have three business days to submit an executed purchase offer and related documents to the servicer on a short sale, and the servicer has 10 business days to respond to an executed purchase offer.

• The servicer also will determine the minimum net proceeds for a short sale. If an offer presented to the servicer by the borrower or listing broker meets the net proceeds requirement, then the servicer must accept it.

• The program currently is available only for non-Fannie Mae- or Freddie Mac-owned loans up to $729,750 and is scheduled to take effect April 5, 2010. However, C.A.R. expects that many lenders will choose to implement it before the deadline.

To read the full story, please click here: latimes.com

What you should know about the market…

2009-12-19T21:17:00Z

• Many homeowners have been enticed lately by mortgage interest rates hovering near 5 percent, leading some to think about refinancing their home. The first step owners should take is to have their property’s value assessed and to contact a REALTOR® to find out what similar homes are selling for in the area, as opposed to their listing prices. If there have been a high number of foreclosures in the neighborhood, chances are property values have declined.

• Most lenders today will not complete a home loan refinance unless the owner has at least 20 percent equity in the property and proof of income. However, homeowners who are underwater—those who owe more on the mortgage than the home is worth—still may qualify for a home refinance. Some federal programs allow homeowners to refinance their mortgage up to 125 percent of the home’s value.

• Some home loans include prepayment penalties, meaning the homeowner has to pay a penalty for paying the loan off earlier than the original loan terms. Prepayment includes refinancing, as the original loan is paid off through the refinance. If the fees are equal or close to the amount the owner would save with a refinance, then refinancing the home may not be the best option.

KEEP THIS IN MIND

2009-12-12T19:58:00Z

Historically, the FHA has played a critical role in propping up the housing market by insuring lenders against default after the mortgage market failed. Currently, the agency guarantees approximately 30 percent of all home loans and 20 percent of refinancings. In the past, the FHA has resisted raising down payments or insurance premiums, fearing it would be shutting out qualified borrowers and stunting the housing market’s recovery.

• The FHA is hoping that the proposed changes, including requiring that borrowers bring more cash to the closing table, will ensure that borrowers are less likely to default on their loans. Officials at FHA have yet to determine how much cash will be required.

• Up-front cash can include down payments as well as other payments. Currently, FHA borrowers can put down as little as 3.5 percent. One lawmaker has introduced legislation that would require FHA borrowers to put down a minimum of 5 percent.

• The agency also currently allows sellers to provide up to 6 percent of the home’s value toward closing costs or down payments. Secretary of Housing and Urban Development (HUD) Shaun Donovan has said he wants the maximum permissible level to be lowered to 3 percent, in line with industry norms.

• The FHA has decided “for the time being” to raise its minimum credit score requirements for new borrowers. The new requirements have yet to be determined. Presently, borrowers with credit scores as low as 500 may qualify for an FHA loan.

To read the full story, please click here:
washingtonpost

What you should know about the market…

2009-12-05T21:06:00Z

Homeowners who lose their homes to foreclosure should wait three to five years before trying to qualify for a home mortgage insured by the government, depending on the borrower’s circumstances, and assuming they have re-established a record of paying bills on time. Foreclosures can remain on credit reports for up to seven years, likely increasing the interest rates the consumer pays, and making it more difficult to receive approval on a new mortgage loan.

Keep this in mind

2009-11-27T23:24:00Z

• Mortgage rates currently are below 5 percent, and should remain low for the next few months, partially due to the Federal Reserve’s ongoing purchase of mortgage-backed securities. However, if the economy quickly turns around and inflation fears resurface, rates could rise to as high as 6.5 percent, slowing demand and pushing down home values.

• According to one analyst, the market will remain tilted in favor of buyers over the next year, but that power gradually will be reduced as conditions in the housing market continue to improve.

• Some home sellers are postponing listing their homes until the market recovers. However, timing the market is difficult, so homeowners thinking of selling should carefully weigh their options. Although existing homeowners are not required to sell their current home to qualify for the credit, those who plan to rent out their current residences should be aware that many lenders require borrowers to show they are financially capable of paying two mortgages, or show rental income for at least six months.

• Homeowners can reduce their energy bills by lowering the thermostat setting on their water heater. Most manufacturers set water heater thermostats at 140 degrees Fahrenheit, but most households don’t need water hotter than 120 degrees. Households with water heaters older than 12 years should consider replacing it with a new unit. This year and next, the federal government is offering a tax credit of 30 percent of the cost of qualified water heaters, up to $1,500.

What you should know about the real estate market...

2009-11-21T19:47:00Z

• Industry estimates find that half of all homeowners who lose their homes to foreclosure have no contact with their loan servicers. Homeowners at risk of default or those who already are behind on mortgage payments are advised to contact their servicer at the first sign of trouble. Consumers should request to speak with someone in the home retention dept., and expect a long wait time.

• When working on a loan modification, short-sale, or repayment plan, servicers likely will ask the homeowner to explain the reasons they can no longer make their mortgage payments. Borrowers should be honest and realistic. The servicer also will need to verify the borrower’s current income, unemployment benefits (if any), household expenses, tax returns, property taxes, hazard and flood insurance premiums, and condo or HOA dues.

• Whether the loan servicer requests it or not, borrowers should include a letter authorizing the servicer to speak with their REALTOR®, another family member, or perhaps their attorney, as this can help speed up the process.

Buying a condo

2009-11-12T18:58:00Z

Should you buy that condo?

Purchasing a condo often is the first step in the homeownership process, and can be a good opportunity for first-time buyers. However, as more homeowners living in community developments with homeowner associations find themselves in trouble, many are not paying their dues. As a result, residents who do pay their HOA dues are seeing increases in their monthly bills or unexpected special assessments. This is especially true for communities that do not have enough funds in reserves to pay for property maintenance and repairs. Buyers considering the purchase of homes in community developments with HOAs are advised to closely monitor the homeowner association’s financial health. — The Wall Street Journal

KEEP THIS IN MIND

• Buyers are advised to request all financial documents relating to the homeowners’ association during the home inspection period. In most cases, buyers receive these documents one to two days before closing, or find they are incomplete. Financial advisors recommend that buyers work with their REALTOR® to ensure the documents are received in a timely manner—preferably with at least three days to review.

• When reviewing the financial documents, buyers should note that two-thirds of the association’s budget should be operating expenses such as water, lights, elevator maintenance, and landscaping; the rest should be set aside in a reserve fund for long-term maintenance and repairs.

• If the expenses exceed revenues due to foreclosures, unpaid dues, or other reasons, buyers should ask the association’s manager or board of directors what its plans are to make up for the shortfall, and whether the association expects an assessment or higher dues. It also is important to note if the financial deficit will be made up with shorter pool hours, or a reduction in landscaping and other community amenities, as these could affect not only the comfort of the community, but also the future marketability of the property.

• While the financial health of a homeowners’ association is an important factor in the purchasing decision, it shouldn’t deter home buyers from purchasing condos. Many first-time buyers purchase condos to enable them to become homeowners. Typically, condos are more affordable than single-family homes, offer community amenities, and may allow a buyer to purchase a home in a highly desirable area where they otherwise could not afford.

• Although not required, it is becoming more common for associations to hire outside firms to look at all long-term anticipated repairs and replacements within communities over a period of 30 years, add up the costs, and create a payment and maintenance schedule. The monthly dues charged to each owner should reflect the amount of money needed to pay for the necessities.

• Associations ideally should save enough money over time to pay for every contingency, such as roof leaks, pipe bursts, sidewalk cracks, and the like. However, most associations often deplete reserve funds to pay for operating costs and other expenses. Although the percentage of funding necessary varies by the age and size of a community, in general, buyers should be concerned if funding is below 40 percent, as it could result in a special assessment in the future. To read the full story, please click here: wsj.com