8 tips to help you qualify for a mortgage

Three years ago, homeowners were earning thousands of dollars just from selling their house. Home buyers were qualifying for mortgages that normally wouldn’t quality for a mortgage. It was easy to get a mortgage, because homes were flying off the market before they were listed for sale. Lenders saw dollar signs, so they found a way to help buyers get a mortgage while throwing lending principles out of the window. It’s a different story in today’s housing market. The economy has slowed down, and the free market is correcting the housing sector’s inflated success. Qualifying for a mortgage is harder than it was three years ago, but it’s not impossible.  These tips from Peoplejam may make the process easier.

1. Inspect All Three of Your Credit Reports. Pull your credit reports from Equifax, Experian, and Transunion. Make sure that all of the information is accurate. If you find an account that doesn’t belong to you, submit the necessary form to all three credit reporting agencies to dispute the account.

2. Improve Your FICO Score. Unfortunately, mortgage lenders heavily weight your lending eligibility based on a score that doesn’t accurately measure your financial stability. The FICO score only measures your ability to repay a loan. Improve your score by paying down debt, paying all of your credit accounts on time, and keeping open accounts with a $0 balance.

3. Save for a Down Payment. Buying a house with a 5% to 10% down payment shows you are serious about becoming a homeowner. If you’re looking for a Federal Housing Administration loan, you’ll need at least a 3% down payment. Mortgage lenders are more skeptical about doing 100% financing, because many of these loans are the ones going into default.

4. Increase Your Household Income. Mortgage lenders want you bringing in enough money to realistically pay for the loan. Two income families qualify easier than one income families. Pick up a second job, become a two income family, or start a home-based business.

5. Choose A Realistic Budget. The rule of thumb is a mortgage payment that is 25% of your monthly household income. Choose a price range that fits this criteria. If you make $4,000 a month, then choose a price range that gives you a mortgage payment of $1,250. The term “house poor” comes from people that spend the majority of their income on a mortgage payment. These are the same people that end up filing for foreclosure. Mortgage lenders will tell you that you can afford more than 25% of your household income, but they are the same people that helped the housing market crash.

6. Defer Your Student Loan Repayment. You get six months to defer your student loans before you need to start paying them back. If your student loans are deferred, the mortgage lender doesn’t need to include the debt in your debt ratio.

7. Stick with One Employer. Mortgage lenders like stability. Stick with the same employer for more than two years.

8. Negotiate a Price Lower Than the Appraised Value. The mortgage company will send their own appraiser out to assess the house. If you negotiated a purchase price that is lower than their appraised value, you can consider it instant equity in the eyes of the mortgage lender. You can check out Zillow.com to see the approximate value of the house.

Now is the time to buy, but lenders will no longer hand out loans to anyone. Don’t let this discourage you. Take this time as an opportunity to fine tune your personal finances. Don’t believe the fallacy that you need perfect credit to qualify for a loan. Mortgage companies are closing the doors every day. Countrywide was bought by Bank of America, and IndyMac Bank had their assets seized by the federal government last week. Lenders are looking for responsible borrowers. Your income and your credit history are the most important factors to determine if you qualify for a loan. Once you’re qualified for a loan, you can finally start the fun part of buying a house.

7:14 PM - Aug. 22, 2008 - comments {2} - post comment

Don't become a victim of "mortgage rescue" fraud

For a homeowner facing the frightening threat of foreclosure, the offer seems too good to be true. A “mortgage rescue” company steps forward, claiming to be able to help you save your credit and your home.

In some cases, the “mortgage rescue” company provides phantom help offering to work as an intermediary with lenders, collecting an up-front fee for services it never provides or that homeowners easily could have done on their own for free.

In other scams, the “mortgage rescuer” may offer to pay off the delinquent loan and allow homeowners to stay on as renters, with the possibility of buying the home back later. But the scam artist doesn’t make the payments and homeowners, who have signed over their deed, end up losing the home and any equity they had in it.

“People who are facing foreclosure need to know there are reputable organizations and industry professionals who can help them turn things around,” said Michael Golden, president of the @properties. “A good rule of thumb to remember is if something sounds too good to be true, it probably is.”

Beth Llewellyn, CEO of the Partnership for HomeOwnership, cautions homeowners facing possible foreclosure to be careful of scams, particularly in Illinois’ larger metropolitan areas. Her information for homeowners facing foreclosure can be found online at www.YourIllinoisHome.com, a consumer site for buyers and sellers developed by the Illinois Association of REALTORS®.

“Every time there’s a drop in the market, you’re going to find all kinds of scam artists coming out of the woodwork,” said Llewellyn, who also is a U.S. Housing and Urban Development (HUD)-certified homeownership counselor with over 12 years of experience helping lower-income families achieve homeownership.

Llewellyn suggests that homeowners who find themselves falling behind on their mortgage payments contact their mortgage lender immediately to see if the loan can be restructured or refinanced before they have been delinquent on their payments for three months and formal foreclosure proceedings have begun.

At-risk homeowners are encouraged to contact a HUD-certified housing counselor who can help walk them through their options. Reputable counselors can be found through the HUD website at www.hud.gov or by calling 1-800-569-4287. HUD-certified counselors also can be contacted through the Hope Now Alliance homeowner hotline at 1-888-995-HOPE (4673) or its website at www.hopenow.com.

Homeowners also might want to contact an attorney about their legal options or a local Realtor to get more information regarding fair market housing values.

Illinois did institute tougher guidelines on “mortgage rescue” companies with the Mortgage Rescue Fraud Act in 2007. The law requires that “rescue” companies give homeowners a written contract, which the homeowner can cancel at any time, listing the services they will perform before being paid. In the case of a home sale, a written contract also is required and the “mortgage rescue” company must pay the homeowner at least 82% of the fair market value if the rescue fails.

“If homeowners believe they have been victims of a ‘mortgage rescue’ scam, there are places they can turn,” said Michael Golden.

12:54 PM - Aug. 2, 2008 - comments {0} - post comment

New home builder incentives

This article is by Joshua Ferris who specializes in Orange County New York real estate including new home communities and townhouses.

After the real estate market hit a steady decline in mid 2006, home builders turned to incentives as a way to attract home buyers to their communities and to help differentiate themselves from the competition. When you start looking for a new home be sure to compare builder incentives as much as the communities themselves.

To help you choose, I have created a list of the top 7 new home buying incentives you should look out for:

Military or Civil Service Incentive - As a thank you to the individuals who serve in the military or are veterans of the military in addition to firefighters, police officers, EMTs and hospital staff, national home builder K. Hovnanian is offering $5,000 off the asking price of their homes, for a limited time, to people in these fields. Other large builders also offer similar incentives to teachers and civil service positions.

Lower Asking Price on "Spec Homes" - Depending on your moving situation, this is the golden egg of builder incentives. Most new home builders will construct a set number of homes in their community as "spec" homes or homes built on speculation that people will purchase the homes and move in quickly.

Once these homes are finished the builder won't want to sit on a large inventory of homes so they will offer spec homes with predetermined upgrades included at a lower asking price than if you were to build the home from scratch and add those upgrades.

Incentives Tied to Builder's Mortgage Company - Builders and on-site sales representatives enjoy working with their established banking relationships because they feel it will make the mortgage process easier and less stressful for everyone than if you were to use an outside lender. In this scenario I've seen builders offer to pay closing costs and up to one year of Homeowner's Association fees for buyers who purchase using their mortgage company.

Lot Premium Reductions - Like a rare platinum ring, highly desirable lots tend to come with a premium attached. Builders often place premiums ranging from a few thousand to nearly $100,000 on the most desirable lots in the community. Lot premiums are not set in stone and under the right circumstances can be negotiated much like everything else.

Reduced Option Prices - With the average new home buyer spending about 10% of their purchase price on upgrades you should look to get the most bang for your buck with the limited budget you have set for options. When evaluating the standard features list for a community, check into the cost for all of the options you would want in the home and see if the builder is providing special pricing on select options.

Standard Features... and then some! - To make homes more appealing than the standard features list will allow, builders are now including previously optional home upgrades like granite countertops, expanded suites, swimming pools and sun rooms as an incentive to buy in their community.

"Free Gifts" with Home Purchase -  Sometimes it takes more than granite countertops and hardwood floors to make a home stand out. Some builders are going the extra mile and including in-home luxuries like plasma screen tvs and offering car leases to draw in prospective buyers. For soon to be commuters, a two year lease on a new car might be the perfect way to help ease into life in the suburbs

12:40 PM - Jul. 25, 2008 - comments {0} - post comment

Have you considered a VA loan?

Over the past few years, the proliferation of loan programs available often negated the value of a VA loan. The days of “liar loans” are over. Buyer required documentation of income and assets, increased focus on credit scores and declining market policies implemented by Fannie and Freddie have brought VA loans back into vogue. The VA loan program has stayed the course with its loan requirements. Let’s review some of them.

First, eligibility is generally limited to active and retired military personnel, as well as those who served in the National Guard or Reserves. There are other differences from traditional loan programs. The veteran must plan on occupying the home. The types of properties are limited to certain types: one to four family units; condominiums; town houses; and certain manufactured homes. Full documentation is required on all loans. All income must be proven with W-2’s or, if self employed, with tax returns. Employment records must be verified. Simply put, the VA wants to know that the loan that they are guaranteeing has a higher probability of being repaid. There are two other key differences between conventional loans and VA loans; a Certificate of Eligibility and a VA assigned appraisal. Basically, the VA wants to insure that the loan applicant meets their criteria for being considered for a loan and that the appraisal will fairly reflect its reasonable market value.

There are numerous advantages for a veteran to have a VA loan. With few exceptions, no down payment will be required. In addition, no mortgage insurance premiums will be levied. The buyer has a right to prepay without penalties or to assume an existing mortgage. Seller concessions of up to 4 percent are allowed. Loan amounts are allowed up to $417,000 with high cost areas like Alaska, Hawaii, etc. allowed to $625,500. The applicant is only required to prove assets needed for closing. For disabled veterans, property taxes may be reduced as well as VA funding fees.

The VA does not specifically look at an applicants credit score. They do take a hard look at the last two years of payment history. Any judgments and tax liens must be paid as well as any accounts out for collection.

Bankruptcies have to be two years out of discharge. The VA does require a “funding fee” of 2 to 3 percent to be charged for VA loans but, this amount may be rolled into the loan.

One final point, be careful of a VA loan applicant attempting to purchase a foreclosed (short sale) home owned by a Lender. The VA will not approve any repairs to a home prior to the sale to be paid for by the veteran.

While there are significant differences from traditional loans, the elapsed time to get loans approved and closed, are comparable. The key is to work with mortgage professionals who understand the requirements.

2:10 PM - Jul. 7, 2008 - comments {0} - post comment

10 Red Flags for Home Buyers

FrontDoor.com’s Top 10 Red Flags for Home Buyers

1) Mass Exodus from the Neighborhood

Don’t let a home’s curb appeal keep you from glancing down the street. Are there several other homes for sale? Are nearby businesses boarded up or vandalized? Get the scoop from the neighbors. If everyone else wants to leave the street, maybe you should, too - before you’re stuck with a bad investment.

2) Mediocre Maintenance

Three layers of roofing and gutters with plants growing in them are signs the owners aren’t big on maintaining their home. What else did they neglect?

3) Foundation Failures

Check out the yard grading. If the yard slopes towards the house, it could cause water to run down the foundation walls or into the basement, which will be costly to repair. Scour the foundation for damage. Bulges or cracks bigger than 1/3 inch can mean the house has serious structural issues.

4) Bad Smells - Inside or Outside

Take a big whiff of the air inside and outside the house. Do you smell anything funky? If you can’t smell anything but the huge baskets of potpourri all over the house, this could be a red flag.

5) Faulty or Old Wiring

While you’re probably not an electrician, make sure all the switches and outlets in the house function properly. Flickering lights, circuits that don’t work and warm or hot outlets or faceplates are all symptoms of wiring problems.

6) Fresh Paint… on One Wall

New paint can really spruce up drab walls, but it can also hide bigger problems, like water damage, mildew or mold. If the room smells strange or if you see stains or saggy walls or ceilings, have an inspector look for mold and leaks.

7) Locked Doors and Blockades

Ask about any rooms that are “off limits” during your home tour, and arrange to see them later if you’re interested in the house.

8) Foggy or Non-Functioning Windows

Check for water in between double-paned windows and make sure all the windows are functional.

9) Structural Walls or Floors have been Removed

Sure you love the open floor plan, but was the house always open or did the homeowners renovate? If they removed a load-bearing wall without adjusting the framing, it can shift weight to other parts of the house. Hire a structural engineer if you think any renovations are questionable.

10) Bugs!

No one wants a house with a pest problem - be it roaches, mice or worst of all, termites. Be on the lookout for unwelcome creatures as you tour the house. Even if no foes pop out while you’re there, consider a separate termite inspection if you’re thinking of purchasing the property.

The Bottom Line

Always get a professional inspection for the house you choose to buy. Skipping a home inspection is not a good way to cut costs. You’ll end up paying more in the long run when problems arise.

6:50 PM - Jun. 19, 2008 - comments {0} - post comment

FHASecure to help even more families

This FHASecure expansion will help more homeowners who are struggling to keep up with mortgage payments on their high-cost subprime loans. With this expansion of FHASecure, the Administration expects about 500,000 families to refinance into prime-rate FHA-insured mortgages in total by the end of this year.

“Our plan will help hundreds of thousands of desperate families who have no place else to turn for safer, lower cost ways to keep their homes,” said Federal Housing Commissioner-Assistant Secretary for Housing Brian D. Montgomery at a hearing of the House Financial Services Committee. “We want to be able to help families who are in the right house, but the wrong mortgage.”

In August 2007, FHA modified its refinancing program to help creditworthy homeowners who missed payments after their teaser rates reset. Now, FHASecure is expanding its eligibility standards. Homeowners who believe they meet this additional eligibility criteria must fall into one of the following categories:

Borrowers with adjustable rate mortgages who were late on two consecutive monthly mortgage payments or at two different times over the previous twelve months. FHA will require a 97% loan-to-value (LTV) ratio for these borrowers to refinance, the same LTV as FHA’s current standard.

Borrowers with adjustable rate mortgages who were late on three consecutive monthly mortgage payments or at three different times over the past 12 months. FHA will require a 90% LTV ratio for these borrowers to refinance.

With these new criteria, the expanded FHASecure can help additional borrowers access a more viable refinancing option and will offer lenders an alternative to foreclosing on these individuals. Lenders may voluntarily write down the outstanding subprime mortgage principal balances to a 97% or 90% LTV ratio depending on the borrowers’ circumstances. FHA will also encourage lenders to make other arrangements, such as subordinate financing, to “fill the gap” between the existing loan balances and the FHA-insurable loan amount. The refinanced loan amount backed by the FHA would be based upon a new appraisal, performed by an FHA-approved appraiser.

FHA will insure new, more affordable mortgages in exchange for this equity cushion, which will protect FHA’s insurance fund, and thus the taxpayer, against risk. Currently, FHA’s insurance fund is self-sustaining, meaning that it requires no appropriation of taxpayer dollars because homeowners pay for the product themselves. Further, any new FHASecure loans will continue to meet FHA’s no-nonsense underwriting standards. Lenders will be required to ensure borrowers have the capacity to repay their mortgages; show a reasonable credit history; employment history; and fully document and verify their incomes.

Like all FHA-insured loans, borrowers will be required to pay upfront and annual premiums on their loans, which directly contribute to the soundness of FHA’s insurance fund and protect taxpayers. FHA will also be simultaneously updating the pricing policy for these premiums. The new policy will base premiums on the individual borrower’s credit risk profile. More than 90% of FHA-backed loans are 30-year fixed rate mortgages. Homeowners currently using FHASecure are saving $400 a month on average compared to their previous subprime loans.

“More homeowners continue to turn to FHA to find mortgage terms they can afford. We’re keeping families in their homes while doing what’s in the best interest of future generations who will rely on the safety and soundness of FHA to put a roof over their heads. The modifications to the existing FHASecure product offer a prudent, yet appropriate, way to help more families refinance without putting the government or taxpayers at risk. Consistent with FHA’s historical mission, the changes are designed to help FHA provide additional liquidity and stabilize local real estate markets.”

Since September 2007, FHA has helped pump nearly $68 billion of much-needed mortgage activity into the housing market, $28.5 billion of which was through FHASecure. FHASecure has helped more than 150,000 homeowners who are current or past due on their loans avoid foreclosure, and, with today’s announcement, it is expected to assist 500,000 total families by December 31, 2008.

12:20 PM - May. 18, 2008 - comments {0} - post comment

Mortgage interest rates can be as important as price

Real Estate buyers are usually highly focused on the purchase price of a property according to Ki Gray of Austin Texas. This is a legitimate concern. The purchase price is one of the most important considerations in a real estate transaction. But at the same time home buyers too frequently treat interest rates as a secondary concern. Many buyers will stress over $300 or $400 in negotiations over purchase price. But when told that interest rates dropped half a point, home buyers will often respond with a shrug.

This is frequently because it is easy to understand the difference between paying 200k and 195k for a house. But it's harder to appreciate the difference between an interest rate of 6.5% and 6.0% for a house. But interest rates can have a large influence on mortgage payments. Using a mortgage calculator first let's look at the difference between the mortgage on a 200k and the mortgage on a 195k house assuming a 6.5 percent interest rate.

200k  (6.5%)  Mortgage  $1264.13 per month
195k  (6.5%)  Mortgage  $1232.53 per month

The difference ends up being $31.60 a month.

Now let's look at the difference between an interest rate of 6.5% and 6.0% on a 200k house.

200k  (6.5%)  Mortgage  1264.13 per month
200k  (6.0%)  Mortgage  1199.10 per month

The difference ends up being $65.03 a month or $780.36 a year. A simple half point drop lowered the mortgage payment by 5.4 percent.

Interest rate changes are not that uncommon. We wrote a tool that graphs mortgage rates over time based on the interest rates provided by Freddie Mac. In the middle of 2007 we saw interest rates of 6.7%. At the beginning of 2008, interest rates were down to 5.75%. What is a little more interesting is when we switch the toggle on our tool from the interest rate to the mortgage on a 200k house based on the interest rate for that date http://www.escapesomewhere.com/blogim/mortgage_rates_broker.jpg. From the middle of 2007 to the beginning of 2008, we saw a drop in the monthly mortgage payment on a 200k house drop from $1290 to $1170, a difference of 9.3 percent. This is why when buyers say they are waiting for prices to drop 5%, it might be a good idea to tell them that the actual mortgage they would get on a house has already dropped by more than 5 percent.

In light of all the mortgage issues over the last few years, it highlights why home buyers should shop around for interest rates. All too frequently home buyers will go with the first mortgage person they meet under the assumption that everyone has roughly the same rates and that a half point isn't really that big of a difference. As we have seen above, a half point can make a significant difference in someone's mortgage payment.

11:42 AM - May. 14, 2008 - comments {1} - post comment

Take advantage of the market and buy now

By acting now during the spring selling season families can find a home, complete the sale and move in just before the new school year. Also, there is still time purchase a vacation or second home and enjoy this summer at the shore.

“The advantages of buying a home this spring are crystal clear,” said Turton. “The wisest and most serious buyers are in the market today.”

Even though it is a perfect home buying time, knowing your options, getting prepared and bringing in the right help will make the home buying experience successful.

Following are guidelines from Turton that will help make this the perfect season to buy a home:

- Get a handle on your expenses, plan a budget and start a fund for your down payment. Although it is possible to get a mortgage with only five percent down - or even less in some cases - you can usually get a better rate and lower overall cost by putting more money down.
- Do your homework to determine how big a mortgage you can afford. Your mortgage lender can assist you with this process or you can do the work yourself with online mortgage calculators.
- Retain a good real estate sale associate who is experienced, an excellent negotiator and knows the local housing market. A real estate transaction is complicated and is difficult to complete alone. In most cases, buying a home requires completing disclosure forms, inspection reports and mortgage documents as well as getting insurance policies and taking care of many details. Finding someone who can guide you through this process will help avoid delays and costly mistakes.
- Know what kinds of other professionals you will need to make to complete the transaction. Some of these professionals include a real estate attorney, home inspector, appraiser, title company expert, tax advisor and various environmental inspectors and specialists.
- Determine your closing costs. From homeowners’ and title insurance to well water testing, there are many costs, both large and small, that a homebuyer will be expected to pay at the signing. The sales agent can provide an accurate estimate of these costs, so there are no surprises as the transaction approaches a close.

Remember, while it is a perfect season for home buying, it is important to do things right, so that spring 2008 becomes a memorable time when you buy that dream home.

8:05 PM - May. 6, 2008 - comments {0} - post comment

Things to do to get the best mortgage

“There is an excess of housing inventory right now and that makes it a good time for buyers to get into the market. Lower prices mean lower monthly payments, but before prospective buyers jump in, there are some key things they need to know about getting a mortgage right now,” he says.

6 Essentials to Look For Include:

1. Use a down payment — Consumers will see better loan terms if they can put at least 5% down. “Each 5% increment will help,” according to Brown, “so put as much down as you can and speak to a loan professional for specifics on various scenarios. Zero down payment programs have all but disappeared, although FHA and conforming 3% down programs still exist. Even with a small amount down, buying compares favorably to renting.”

2. Shop the right way for interest rates — “Fees are critical, as they affect your overall cost, so don’t go by interest rates alone,” adds Brown. “An interest rate that sounds higher may include no fees, while another is lower but includes fees that may make the actual financing cost higher, so be sure to have it spelled out for you.” Lenders are required to provide a Good Faith Estimate of all costs, and consumers are advised to check it carefully against the HUD-1 Settlement Statement to make sure there are no “surprise” charges or other fees. MortgageAnswersFast.com provides consumers detailed explanations of how to analyze Good Faith Estimates to ensure borrowers find the lowest total loan cost.

3. Be wary of advertising — The airwaves are full of advertisements trying to entice consumers into a mortgage because the Federal Reserve has cut interest rates claiming “rates will never be lower.” In actuality, long-term fixed interest rates for mortgages are tied to bonds called mortgage backed securities (MBS) and the prices investors are willing to pay for them, Brown explains. “The Fed does not control long-term fixed interest rates for mortgages. There may be some impact on adjustable rates, but seldom to the extent that advertisers would have you believe. So borrowers should research mortgage rates rather than simply believe false advertising claims.”

4. Think about paying more for your house — “It might sound crazy,” Brown says, “but by paying more for your home you might actually wind up paying less for the transaction. Here’s how: instead of negotiating the sale price down by a certain dollar amount, ask the seller to pay for the costs to “buy down” the interest rate on the loan. The monthly payment can be reduced substantially, saving cash flow in the short run while increasing your principal balance in the long term. Seller funds can also be used to buy out PMI,” Brown explains. “Your mortgage professional can help you calculate the actual savings.”

5. Know your PMI options — PMI, or Private Mortgage Insurance, protects the lender from losses incurred after default when foreclosing on a property. If a borrower has less than 20% down on a conventional conforming mortgage, they must pay PMI, with rates that can vary based on credit score. “Borrowers typically pay PMI monthly,” according to Brown, “but there are other options, including lender-paid mortgage insurance, in which premium is added into the interest rate of the loan. There are other options that allow a smaller fee at closing without raising the rate, and sellers can also pay the fee at closing, which sometimes can be a condition of the sale.” For more detail on these sometimes confusing alternatives, he recommends that borrowers check with their mortgage professional.

6. Improve credit scores — Credit scores have always been important, but never more than today, especially for borrowers with less than 20% as a down payment. Small differences in score can mean big differences in interest rates or fees, so consumers should do everything they can to show their credit in its best light. “Do not close out credit card accounts, but instead distribute the balances as evenly as possible and use old cards every few months to keep them active,” Brown says. “Check your credit report for errors and get them corrected, and get rid of liens and charge offs, if you have any, and resolve any late payments. All these will have a quick and positive effect on your credit score.” Even people with great credit scores as high as 720 may pay a penalty based upon recently changed guidelines. “Credit repair is not just for people who have credit problems,” he adds. “Most people don’t realize they can optimize their score using a few simple techniques.”

12:14 PM - Apr. 18, 2008 - comments {0} - post comment

Why now is a good time to buy

About Inventory

FACT: The housing market is undergoing a natural cyclical correction. It’s impossible to ignore the ongoing news surrounding the downturn of the housing cycle. The recent “housing boom,” which lasted from 2001 to 2005, was caused by low interest rates and a rapid increase in property valuations, resulting in high numbers of renters opting to buy. Three factors caused this decade’s housing boom to spiral upward:

1) A run-up in home-price valuations that spurred a high sense of urgency in home buying and selling.
2) Poor lending practices, which caused many home buyers to secure loans that they ultimately couldn’t afford over the long term.
3) Speculative purchases of homes also increased, with buyers investing in real estate with the hope of a quick return on investment.

Like the dot-com bust, the housing market has begun to correct itself after a number of years of unwise purchasing, but unlike what the media would have us believe, a correction in the housing market doesn’t equate to a crash. Unfortunately, the ongoing negative news about the troubled areas in the U.S. has caused a ripple effect, with home buyers and sellers on a national level exercising caution before making a decision. This has caused an overall slowdown in the marketplace.

The National Association of Realtors’ chief economist, Lawrence Yun, projects that nationally, the “median existing-home price will drop about 1.7% this year. This is a small, minor adjustment after a strong run-up in housing prices.”

True, the number of homes sold in 2007 will have dropped from the year before, but 2007 is still among the highest years on record, with numbers of sales for both 2007 and 2008 projected to be even higher than the levels seen in 2002.

However, with homes taking longer to sell, the number of homes on the market has grown. In markets like California and Arizona where homes are taking much longer to sell than the 11-month national average, this has caused a glut in the marketplace.

In the Pacific Northwest, where the inventory of homes on the market ranges from seven to 10.5 months as of November 2007, this equates to good news for buyers who have more homes at more price ranges from which to choose.

About Mortgages

FACT: Low mortgage rates give buyers more house for their dollar.

With the 30-year fixed rate hovering between 6-7%-a 45-year low-qualified buyers continue to have access to incredibly low interest rates. This means that although housing prices have risen, monthly mortgage payments remain reasonable for those who look at real estate as a long-term investment. For example, today if a buyer secured a 6.5% interest rate on a 30-year fixed loan for a $300,000 home (with no money down), the monthly mortgage payment would be $1,896.20. In 1991, the same monthly mortgage payment would have bought a house worth only $230,492 when mortgage rates were 9.25%. In 1982, when the 30-year fixed rate was 14.6%, the same payment would have bought a house worth only $151,657.

FACT: Heavy speculation and overbuilding result in an increase in foreclosures when prices go down.

The media has been focusing on the hardest-hit areas of the country that have seen a dramatic downturn in the market: California, Nevada, Florida and Arizona. Over the past five years, these markets have experienced an abundance of new housing, a rise in investment properties and a rise in prices that was high above the national average.

Now that home prices are starting to drop and stabilize, the areas that went through a building frenzy and experienced the largest price increases are suffering a heavy devaluation in home prices, which in turn has caused homeowners to foreclose on loans.

Those suffering the most in California, Nevada and Florida are far above the national average of foreclosure with one out of every 325, 152 and 282 homes in foreclosure, respectively. Washington, Oregon and Idaho are well below the national average of one in every 617 homes in foreclosures because fewer home buyers in the Pacific Northwest opted for subprime mortgages and because home values have continued to steadily appreciate.

Washington has seen one in 1,072 homes in foreclosure, and Oregon and Idaho have one in 1,275 and 893, respectively.

FACT: Subprime borrowers get a reality check.

Then there are the problems that are affecting subprime borrowers: those who are considered at a higher mortgage risk due to a past history of bankruptcy, delinquent loan payments and low credit scores. During the last number of years, some home buyers in the U.S. qualified only for these riskier subprime loans to fund the American dream.

But, again, unlike the media’s portrayal, the reality is that subprime loans comprise only 9% of total loans nationwide and of those 9%, less than 11% of those subprime ARM and fixed borrowers have defaulted on their loans. The Pacific Northwest stands apart as its own micro-market, with more home buyers qualifying for prime loans. Homeowners in the Northwest have been able to successfully sell their homes for a profit or refinance to pay off their subprime loans.

Real Estate Cycles and Economics

FACT: Over the long-term, real estate has always appreciated in value.

The continuing appreciation of homes in the Northwest is not an anomaly. Real estate has always been one of the most solid investments in the U.S, because, after all, people always need a place to live. Real estate has less volatility than the stock market and over the historical long-term it remains a guaranteed return-on-investment. Take this example from NAR’s Yun: If a buyer were to put down $10,000 for a down payment on a “typically priced home in the United States at a typical appreciation rate of 5%…(he/she) would see a return of $110,300 after 10 years. The same $10,000 invested in the stock market appreciating 10% annually will result in $23,600.”

As history has shown, for those who choose to keep their home for six to 10 years (and not flip for a quick profit) real estate investments do pay off, and pay off well. In fact, what we’re seeing now is a repeat of a housing cycle we’ve seen before. In the early 1980s and 1990s, some areas of the country experienced the worst downturn they had seen in the last 25 years, which were caused by localized economic weaknesses and loss of jobs while on a nationwide average, others, including the Pacific Northwest were barely affected at all. But even those areas that were hit the hardest in the past experienced a historic uptick in prices, and then a continuing long-term appreciation.

3:47 PM - Apr. 12, 2008 - comments {0} - post comment

What to look for when inspecting a home

Being a homeowner comes with its own set of challenges, particularly as it relates to home maintenance. The American Society of Home Inspectors (ASHI) recognizes that geography is a significant contributor to maintenance issues and encourages homeowners to familiarize themselves with common issues in their region.

“At ASHI, we work closely with our members to identify maintenance issues and track regional defects that plague homeowners,” said Brion Grant, 2008 ASHI president. “By discussing these issues in real time and sharing valuable information, our members are able to stay on top of their game and identify potential problem areas that others may miss.”

While some maintenance issues, such as poor drainage, leaky roofs and old plumbing are common to all areas of the country, others are driven by geography, climate, weather conditions and the quality of the contractor who built or renovated the home. Below is a snapshot of prevalent maintenance issues homeowners should look for. Homeowners who need help evaluating these issues can contact an ASHI Certified Inspector:

Regional Defects in the Northeast

Framing issues are a top concern in the northeast region of the United States, particularly underframing, which is the presence of undersized and/or over-spaced beams in a home’s framework.*

Fire retardant-treated (FRT) plywood, often found in attics, is an issue in newer homes in the Northeast, especially in town homes. When the plywood reacts to high temperatures it becomes structurally unsound and can crumble, which can be a safety hazard for anyone inspecting or walking on a roof.

Faulty HVAC systems, in older homes with modern heating equipment, are a common problem for homeowners in the Northeast. Condensation can form in older chimneys that weren’t designed for low-flue gas temperatures and cause water stains, efflorescence and deterioration of the chimney. In extreme cases, the chimney may even collapse.*

Regional Defects in the Southeast

In this warmer region, roofs are top-of-mind for inspectors and homeowners alike. The sun and heat deteriorate materials more quickly than in other parts of the country. Roofs that typically have a 30-year life expectancy may only last 15 years in Florida.

Termites are also a big issue in this region. In the Southeast, the rule of thumb is that if your house is 20 years old, you probably have termites, or you’ve had them in the past. Homeowners should be on the lookout for subterranean termites and flying dry wood termites.

Regional Defects in the Midwest

Water intrusion is a common issue for homeowners in the Midwest. Wood rot is very common in trim and siding. The prevalence of basements in this region also makes it a hot spot for water intrusion.*

Plumbing issues are also prevalent. It’s not uncommon to see water heaters serving as both a furnace and water heater. Issues arise, however, when plumbers forget to attach venting fixtures or drains when new water heaters are installed.*

Decks are another area of concern. This widely enjoyed add-on can be attached incorrectly when built by eager Do-It-Yourselfers.

Regional Defects in the Northwest

Moisture intrusion impacted by drainage systems, exterior flashing components and exterior grading is a top concern in the Northwest, particularly as it may result in wet basements and crawl spaces.

Topography also impacts homeowners in the region. Because of heavy rainfall, homeowners who live in houses built on slopes should contact a geotechnical engineer, or similar expert, to identify potential settlement issues.*

Regional Defects in the Southwest

Homes in the desert Southwest also suffer from specific maintenance issues caused by the sun, particularly issues with the longevity of roofs, vinyl windows and siding.

Upward structural pressure caused by water build-up under the foundation is also an issue in the Southwest, a result of expansive soil.

“Our goal is to empower homeowners and give them the opportunity to understand their home and common maintenance issues affecting their region,” said Grant. “Many of these issues, if left unexamined, could undermine the condition and possibly compromise the safety of the home and its occupants.”

6:39 PM - Apr. 4, 2008 - comments {0} - post comment

Make that move hassle free

The closing is finally done and you're ready to move. Here's some great tips from The Move Advocate  to make sure it's hassle free:

1. Make sure that your moving quote is based upon a visual survey.
One of the biggest mistakes that people make when booking a move is assuming that a phone quote is guaranteed. The only way to obtain a binding quote is to have your household goods visually surveyed by a moving company. Make sure that you get the quote in writing.

2. Read all documents before signing.
Once you have been provided a written quote, make sure you read before signing. The quote should document weight, distance, and services to be rendered. If you have verbally discussed any special services make sure that those needs are reflected in the estimate.

3. Make sure you have adequate valuation coverage.
Standard coverage for interstate moves, which all carriers are required to provide, is 60 cents per pound. This amount will be inadequate if an expensive item, such as a plasma television, is damaged in your move. Additional insurance can be purchased through the carrier or through your home insurance policy.

4. Use a reputable mover for your move.
The number of choices available for your move is enormous. Make sure that you are using a reputable mover who is licensed, bonded, and insured. A reputable mover will not ask for a deposit up front and will have moving trucks with their own company name on them.

5. Make sure the mover can contact you.

If you are planning to have your phone disconnected the day of your move, make sure that the moving company has your cell phone number or another way to reach you. This is also applicable for your new residence.

5:59 PM - Feb. 20, 2008 - comments {0} - post comment

Buyng now can be a smart move

The American Homeowners Foundation has some ideas about why now could be the best time to buy a home.

Although much of the housing market is in a slump, this is still a good time for most to buy a home.

Even though many economists are predicting further drops in home values in most areas, today is still an excellent time for most of us to buy a home. The direction of area home values won’t make much difference to homeowners who will both buy and sell in the same area, and other important factors very much favor buying a home now.

Most move up buyers buy their next home in the same area. Whether overall home values in that area are going down, up, or holding their own, other homes in the area will be similarly impacted. Current local home values and any future changes in those home values, whether negative or positive, will therefore have the same effect on a home they might buy as they will have on their current home when they sell it. For that reason the direction of housing values in any given area is of small consequence relative to other factors for those homeowners, who should not let declining values get in the way of buying their next home.

If you are a prospective first time buyer in one of the few appreciating markets, buying sooner rather than later certainly makes sense. Similarly, if you live in an area where home values are falling and plan to relocate to another area where prices are rising, that is a good reason to buy and sell (or sell and buy) as soon as you can, before the gap widens further.

Holding off on a home purchase due to current market conditions may make sense in some cases only for a much smaller group - prospective first time buyers who live in an area where further home price declines are likely. The same is true for those living in the relatively few areas where homes are appreciating and who plan to relocate to other parts of the country where home prices are still falling. Unfortunately some homeowners now owe more money on their mortgage than their home is worth because of dropping home values. They may be unable to afford to sell at this time regardless of local market conditions unless they have sufficient savings to make up the difference.

There are several reasons that today is a particularly good time to buy a home for most of us. The selection is as great as it will ever be, mortgage rates are still relatively low by historical standards, and costs of any desired remodeling/upgrades are a lot less because of the downturn in new home construction and the resulting glut of building supplies.

With inventories of homes for sale at all time highs in many places, there’s a much greater chance that you’ll be able to find a home that’s ideally suited for your needs. That’s a very big plus because homeowners spend an average of nearly a decade in their home before they sell it. The shortage of inventory and high home prices that existed up until 2005 forced many buyers to make many compromises on home features at that time. No doubt many of them wish that some of the nicer homes for sale in their neighborhood today had been available at that time. Today’s home buyers will have to make far fewer, if any compromises, and many will be able to pay less for a home that’s much better suited to their needs.

If today’s home buyers decide to make some upgrades and improvements to their next home they can usually do it for substantially less than it would have cost several years ago. The rate of new home construction has dropped precipitously, and prices of many building materials have dropped substantially as a result. Prices for oriented strand board, which is used for exterior wall sheathing, roof sheathing and subfloors, is down 40% from late 2005, according to the National Association of Home Builders. Lumber used for framing floor and roof joints retreated 24%, in cost according to NAHB. Drywall prices are down 35% from late last year, according to United States Gypsum Company.

Construction labor costs are down as well, as many home builders have decided to become remodeling contractors until the market for new homes improves. The remodeling market has also slowed down somewhat. With many home builders recently reinventing themselves as remodeling contractors, price competition in that market is very intense today. Only a few years ago you were lucky if half the contractors returned your call, and a few actually showed up and subsequently gave you a proposal. That has changed dramatically.

“When we remodeled our kitchen and bathrooms several months ago every contractor we called showed up, and their bids were very competitive,” said American Homeowners Foundation President Bruce Hahn. “Many of them were ready to start immediately, and none of them balked when we told them we wanted them to sign a comprehensive contract specifying all of the details of the project,” he added. (Note: Judging from the continuing number of complaints regarding remodeling contractors, the competition has yet to drive incompetent and/or dishonest contractors out of the business.

Lastly, mortgage rates are still competitive by historical standards. Although lenders have become more particular about who they will lend to, and the gap between mortgage interest rates for those with excellent credit and those with marginal credit histories has widened, mortgages with 30 year fixed rates are still affordable for a majority of home buyers. If you are looking down the reset barrel of an adjustable rate mortgage on your current home, you will also be able to resolve that problem and avoid the higher mortgage reset interest rate with a fixed rate loan on your next home.

The bottom line: Trying to employ market timing in real estate entails many of the same risks as attempting market timing in the stock market, as many real estate flippers who flocked to the market in the middle of this decade learned the hard way. Despite all the current doom and gloom in the housing market, it’s still a great time for most of us to buy a home!

6:13 PM - Jan. 18, 2008 - comments {0} - post comment

Thinking of buying a new home?

Joshua Ferris of is a broker in Orange County, New York who specializes in new home sales. He's got some great tips to look for if you're considering purchasing a brand new home.

Buying a new home is great! You get to choose where your home will be built, add a sunroom here, third garage bay there and before you know it you are moving into your dream home. With all the options to choose from it is very easy to overlook crucial elements to your new home buying experience that could cost you greatly in both time and money.

1. Choosing upgrades with the lowest ROI or too many upgrades, period.

This is truly the most common mistake made by new home buyers who don't consider the resale value of their home in the future. When buying a new home be sure to stick with the essential upgrades like two sinks in the master bathroom, high quality cabinetry and above all else, top quality padding under the carpeted areas.

2. Not examining your lot choice thoroughly enough.

A recent United Feature Syndicate by Lew Sichelman highlights some very important aspects to choosing a lot for your new home to be built on. Among them are: terrain, noting that people psychologically feel more secure looking down at the street rather than up, location and lot shape which can affect your surroundings including the possibility of facing the rear of a neighbor's home.

3. Finding communities first, vitals second.

When you are buying a home you have to shop differently than you would if you were buying a car or shopping for clothes. To save yourself much heartache and frustration, be sure to hammer out your lifestyle requirements before even searching for a community to build a home in. For example, if you commute to New York City and have school age children you would want to find a school district that you approve of in an area with multiple mass transit options (train, bus, highway) and then locate new home communities within close proximity to both.

4. Overlooking the "inspection" clause in builder contracts.

A dirty little secret in the new home industry is the fact that some builders, national builders included, send out contracts with a clause stating that they don't allow home inspections by an independent, third party home inspector until after you close on and own the home. They offer to do a walkthrough of the home with you before you close but chances are, unless you are a licensed home inspector with many years of experience, you won't notice any red flags beyond the superficial.

5. Not using a buyer agent.

When looking for a new home, be sure to find a buyer agent who specializes in new homes. There are numerous important steps when buying a new home that a new home buyer agent will be prepared to work with such as price negotiation, lot choice, researching future development around the community and the pros and cons of building materials your builder will use in the construction of your new home. At present, the buyer agent's services are paid for out of the builder's marketing budget.

6. Using the builder endorsed financing company out of convenience.

Many large builders have their own in-house financing company and they often offer incentives on their products by tying in the use of the incentives to financing through their in-house lender. In some instances you will find that the builder's in-house lender financing and incentives will cost you more money in the long run than if you had financed your purchase through an outside lender. Rule of thumb: Always check your financing options with the builder's in-house lender, a mortgage broker and a loan officer for a direct lender before committing.

7. Believing everything you read in advertisements.

If it looks too good to be true, it probably is. Always verify everything you read in real estate advertisements including newspaper ads and the community's standard features list. Aside from the obvious typographical errors that occur I have also seen blatant false advertising. For example, I have seen new home community literature advertising the community's short "less than an hour" drive to New York City despite the fact that it would take at least 90 minutes on a good day from that community. Buying a new home is a wonderful, dazzling experience that will cater to your every need. By using reasonable care and professional guidance you will enjoy many great years in your new home and reap substantial rewards from your diligent buying efforts when selling your home in the future.

3:18 PM - Jan. 2, 2008 - comments {0} - post comment

Check health care costs before relocating

Specifically, about three in four (76%) adults planning to relocate after retirement said that they consider the cost of healthcare as important or very important in their decision.

In the survey, "cost of healthcare" ranked number three of five, behind "overall cost of living" (92%) and "climate" (81%), but just ahead of "ease of transportation" (69%) and "proximity to friends and family" (49%).

Costs Vary Greatly by Region

Overlooking the cost of healthcare and health insurance can have real consequences for retirees. Costs can vary widely from one area of the country to another. Insurance premiums, Medicare health plans, Medicaid, and long-term care rates can change exponentially. For instance, an average annual premium for a Medicare Supplement insurance policy in New York could be $3,700. If the same policy holder moved to Phoenix, the premium for the same Medicare Supplement plan could be as low as $1,200.

"Too many times, people considering retirement and relocation don't give any thought to how it could affect their healthcare and insurance costs," said Longevity Alliance President Steve Zaleznick. "As retirees grow older, those costs grow larger, so choosing a region that makes those costs affordable is a key component of a sound retirement strategy. And they need to remember if they move again later, they may find healthcare costs increasing if they move back to their home state."

Five Tips for Before You Move

1. Call your current insurer once you've identified the area to which you'd like to move. Ask about how the move would impact your current health insurance plan: Is it available? Is there a cost difference? Are there other plans available that are not available in your current location that might better fit your needs? This is especially important for Medicare beneficiaries who may find a very different selection of Medicare Supplement plans, Medicare Advantage, and Medicare Part D prescription drug plans available.

2. Contact a broker who represents a variety of insurance companies and plans and can identify the available options for you. A different insurance company may have a similar or better plan for about the same or even a better price. Get health insurance quotes from at least two different companies to see how rates and benefits compare.

3. Ask about Medicare Advantage in your new location if you are Medicare eligible. It is usually a lower cost option than a Medicare Supplement Plan and may be the right option for you.

4. Investigate health care costs you will be paying for yourself so that you'll be able to budget well for things insurance doesn't cover. Find out about physician fees, hospital costs, routine exam prices, the cost of any maintenance drugs you take, and the cost of dental care to name a few.

5. Plan for long-term care by finding out about the average cost in your new location. If you have long-term care insurance, check to see if your daily benefit is adequate. If not, check into the cost of supplementing your policy with an additional policy. If you have not yet bought long-term care insurance, get quotes from at least three different companies to compare benefits and cost. And use a company that specializes in long-term care insurance.

The Retirement and Relocation study was conducted online within the United States on behalf of Longevity Alliance between September 17 and September 19, 2007 among 1,509 adults ages 40+, of whom, 381 are likely to relocate when they retire. Results were weighted as needed for age, sex, race/ethnicity, education, region and household income. Propensity score weighting was also used to adjust for respondents' propensity to be online.

3:14 PM - Dec. 22, 2007 - comments {0} - post comment

Thinking of building a new home?

Eric Bramlett of One Source Realty in Austin, Texas has the following tips for anyone thinking of building a home and hiring a contractor to do it.

When you decide to build a home rather than to buy a home, or when you make the decision to remodel the home you already have, you most likely intend to get the job done with the help of contractor. Unfortunately, contractors have earned a somewhat bad reputation because some have failed to live up to their contracts or provide the quality of work homeowners expect. In order to keep yourself from being disappointed by your contractor, it is important that you follow these simple tips.

Tip 1: Ask Your Friends and Family

The single best way to select a contractor is to ask around. If your friends or family members have worked with a contractor who did a good job for them, you should put that contractor high on your list. The more recently the friend or family member hired a contract to work on their home the better. After all, if a contractor just did a great job a few months ago, he or she is likely to still be able to provide the same level of service.

Tip 2: Check References

Of course, you may not know anyone who has recently purchased real estate or who remodeled their homes. If this is the case, you won't have much of a starting point when choosing a contractor. Therefore, it is essential to check the references provided by the contractor. Ideally, you should check into references for finished jobs as well as for jobs in progress. This way, you can check out real estate in varying levels of completion in order to determine the quality of the work.

Before you buy the services of a contractor, you should also talk with some of the references. Ask the references important questions, such as:

• How well did the contractor stay on schedule?
• How happy were you with your real estate when the job was completed?
• Did you feel as if the contractor listened to you when you ran into a problem?
• Were your concerns easily resolved?

Talking with past clients is an excellent way to get an idea of the type of work the contractor does as well as his level of commitment to customer satisfaction.

Tip 3: Check the Contractor's License

If you are going to buy the services of a contractor, you certainly want someone who is properly educated. Before you sign a contract and buy materials for the job, check with your state's Contractor's State License Board. By checking with the board, you can confirm whether the contractor is licensed and you can also find out the contractor's areas of specialty.

When checking on licensing, ask the contractor for his or her pocket license as well as another form of identification. Then, check the license against the other form of identification in order to make sure the names match up. Because it is illegal for a contractor to use another contractor's license, a reputable contractor will have matching identification.

Tip 4: Make Sure the Contractor is Insured

As the buyer, you shouldn't be expected to buy insurance to cover the job. Rather, the contractor should have insurance in place. Check to make sure the contractor is insured against property damage, worker's compensation and personal liability. Ask for a copy of the certificate of insurance to verify coverage, as this will protect you if something goes wrong while on the job. Deciding to buy real estate in order to build your own home or to remodel your current home can be an exciting time in your life. Make sure you do your homework before selecting a contractor in order to prevent your dream from turning into a nightmare.

8:54 AM - Dec. 20, 2007 - comments {0} - post comment

Housing Predictor predicts price drops

Home prices are forecast to drop in the overwhelming majority of markets in all 50 states. Housing Predictor independently tracks more than 250 local housing markets in all states and regularly reports changes in each market place to keep visitors up to date on local market conditions.

Some markets, especially in highly populated states, which experienced all time record high appreciation during the real estate boom will see prices plummet at double digit levels in 2008. While others will see less depreciation. The loss in average home values is expected to be the worst since the 1930's, according to Housing Predictor analysts.

The deflation being experienced in most of the nation's housing markets is a result of low mortgage interest rates, overly creative financing provided by mortgage companies and massive mortgage fraud on the part of both mortgage brokers and some home buyers. The series of issues has stalled home sales in the majority of the country after prices in many areas reached all-time highs and has resulted in sales activity of less than a third of the number of sales in 2006.

All real estate markets are local in nature with their own regional economic and political influences, which drive the local market place. Some areas in the Pacific north-west and in southern states will experience less deflation in 2008.

Housing markets that cater to second home and vacation buyers may have already bottomed out in areas of Florida and Idaho. However, Florida also has one of the highest rates of foreclosures in the nation, due in part to over building in the Miami condo market. Miami has seen more new condominium projects constructed in the past few years than ever before in the city's history, and many other projects have been canceled or put on hold until market conditions improve.

3:01 PM - Dec. 6, 2007 - comments {0} - post comment

Is Bigger Really Better? Lot sizes and house prices

June Fletcher, a reporter with the Wall Street Journal Online, has the following article discussing lot sizes:

Question: My wife and I live in Silicon Valley, and we're looking to trade up to a single-family home from our condo. In terms of future capital appreciation, is it better to purchase a newer, larger home on a tiny lot (3,000 square feet and under) or is it better to buy an older, smaller home with a larger lot (8,000 square feet-plus) with room to expand? Most new homes in the Valley are built on very small lots.- Tony Lee, San Jose, Calif.

Tony: Remember that old song, "Give me land, lots of land in the country that I love?"
There's a reason the cowboys sang it.

From the standpoint of flexibility, it usually makes sense to go for the most land you can get. And that's doubly true in Silicon Valley, where lots are scarce and vacant land suitable for building often sells for more than $1 million an acre. Older homes can be remodeled and expanded; but that's not really a possibility if you have a dinky lot.

"You can change the size of the house, but you can never change the size of the land," says Don Orason, a San Jose real-estate agent.

But when it comes to appreciation, there's no real difference. Orason pulled up statistics for two homes in the 95148 ZIP code that recently sold: Both with four bedrooms, two and one-half baths and about 1,900 square feet. The first, 3430 Chemin De Riviere Drive, is 7 years old and sits on a 3,484-square-foot lot. It sold in July 2004 for $721,000 and again in August of this year for $863,000 - a 20% price gain. The second residence, 3710 Slopeview Drive, is 25 years old and has a 10,018-square-foot lot. In July 2004 it sold for $720,000, and it sold for $870,000 in June of this year. That's another 20% gain.

Lot size shouldn't be the sole or even a major factor in deciding which home you should buy - unless, of course, you want a big backyard for pets and/or kids. Instead, look at the quality of school districts (important for resale value, even if you don't have children), views, convenience to shops and work and neighborhood amenities. These things aren't easy to quantify and compare, but they matter a lot to your future happiness.

So do your feelings about remodeling: Does the thought of living in the chaos of an older home during remodeling make you want to tear out your eyeballs? Then a newer home on a smaller lot may be the better choice for you.

I've said it before: Don't think of your house primarily as an investment. Think of it as your home. Find a neighborhood that fits, a house you love, and a fixed-rate mortgage you can afford - and forget about trying to game the market. If you're happy where you are, you are far more likely to stay there awhile - which is, of course, the best way to maximize your investment.

12:35 PM - Dec. 2, 2007 - comments {0} - post comment

Sub-primes will be back

The next generation of subprime mortgages, however, will look much different than the loans issued during the height of the housing boom in the first half of the decade that are now causing so much trouble, mortgage professionals say.

"So long as we have a policy position in this country of maintaining or further increasing homeownership rates there is going to be subprime lending," said Mark Fleming, chief economist with First American CoreLogic, a provider of mortgage-risk management and fraud-protection technology.

"We have been very successful in increasing homeownership rates. One of the ways we've done that is by creating liquidity and offering credit to people who we traditionally wouldn't have 20 years ago - the subprime borrower."

Fleming was one of 4,300 mortgage professionals who recently traveled from around the country to Boston for the industry's annual convention, where participants did a lot of reflecting on the lead-up to the credit crunch this summer and the housing slump pervading many of the nation's real-estate markets.

Many are looking to the Federal Housing Administration to step into the subprime void. Several proposals in Congress would expand FHA lending authority, allowing it to come to the rescue of subprime borrowers struggling with their current mortgages.

The FHA, which provides government-backed mortgage insurance on low-down-payment loans, is in a good position to address the subprime market, Fleming said, even though the growth in private-investor-backed subprime lending "directly cannibalized the FHA business. FHA went down and subprime went up."

That said, subprime mortgages backed by nongovernment investors will also return - albeit with greatly different lending standards than in recent years, some in the industry say. Translation: It won't be the "Old Wild West" again, where mortgage money came easily for all types of borrowers, said Thomas P. Cronin, vice chairman of Clayton Fixed Income Services, a credit-risk management firm.

"But it (subprime lending) will come back in a mature and rational fashion, as markets tend to do," Cronin said.

Rebound still a ways off

Certainly, that return isn't happening just yet. According to data from Clayton, nonconforming securitizations were down 82% between December 2006 and August 2007. Nonconforming loans are those that can't be purchased by government-sponsored mortgage agencies Fannie Mae or Freddie Mac, which are limited to buying loans of $417,000 or less.

Jumbo loans, those above the limit, and most subprime loans rely on the private-securities market for liquidity.

"[Subprime] volumes are way off from where they were even a year ago," said Steve Nadon, president and chief operating office of Option One Mortgage Corp., during a MBA panel discussion. But Nadon thinks that the subprime market will indeed return. "Will we serve as many borrowers as before? Maybe not," he said.

Hard-working people with limited income or blemished credit histories deserve and need access to credit, but the terms should be fair, said David Beck, policy director for Self-Help, a community-development lender that makes fixed-rate loans to credit-blemished borrowers. Self-Help's affiliate, the Center for Responsible Lending, is a vocal policy organization with a mission to protect homeownership and eliminate abusive financial practices.

"It used to be the problem was access to credit. Now it's the terms of credit," Beck said.
"There's a line between providing fair access to credit and taking advantage of people."

To start, Beck said prepayment penalties should be prohibited on subprime loans. He also thinks that there should be more of an effort by conventional lenders to figure out which of these subprime borrowers eventually could be moved into prime products.

Subprime lending shouldn't dry up completely, it's the "abusive products" that should dry up, Beck said. Before putting a borrower into a loan with an interest rate maybe one percentage point above the prevailing conforming rate, Self-Help spends a fair amount of time with clients to make sure they can make the monthly payments, he said.

While FHA reform might help some of these borrowers, it's hard to say how much, he said.

Regaining investor confidence

For subprime products to come back to the market with any significance, it's necessary to first build up the confidence of those who invest in them, Fleming said.

Some investors have been beginning to return in the past couple of weeks, Fleming said. He expects that the prime jumbo loan market could be the first to make a return to some kind of normalcy, but there is a long way to go before the nonconforming market could be considered stable.

How will the confidence be fully regained? For one: "We have to do a better job of making sure a high percentage of the loans aren't headed for default to begin with," Cronin said. As such, subprime mortgage products need to be redefined, he said. As people got caught up in the euphoria of home-price appreciation, "we got away from balanced credit decisions," said Michael McQuiggan, CEO of Tri-Emerald Financial Group, a mortgage lender and processor, during the MBA panel discussion.

"People that probably shouldn't have had those homes in the first place had gotten away with it for years because of home-price appreciation," Cronin said. Suddenly, when they couldn't refinance those loans, problems started surfacing and foreclosures became imminent.

Now, there has been a shift back to basics across the entire mortgage lending spectrum, using more reasonable assessments of what buyers can afford, Fleming said. People now need better credit scores and a larger down payment to get a mortgage, in addition to documenting their incomes and proving where they work, he pointed out.

For those in the mortgage industry, there should be a return in focus to the writing of quality loans - not just doing a large quantity of them, Nadon said. And perhaps part of the lender's mission should also be helping subprime borrowers graduate into prime loans, he added.

Beyond that, there have been calls for more transparency in the market, and suggestions that the risks of investing in mortgages should be completely understood at the outset. "We need to sort out in the industry how we assess risk and provide signals as to how risky these things are," Fleming said.

Plus, investors and lenders also need to be more responsible in how they approach leverage, Cronin said.

It was leverage, after all, that exacerbated investor losses, Doug Duncan, chief economist of the Mortgage Bankers Association, said during a briefing with reporters earlier this week.

"Subprime was clearly the trigger, but it was the old standard that leverage works well when asset values are going up to increase return on equity; but when asset values are going down, it works adversely to exhaust equity," he said.

2:01 PM - Nov. 24, 2007 - comments {0} - post comment

Live the dream - find that place in the country

Curtis Seltzer, land consultant, gives us some ideas on how to finally achieve the dream.

You catch yourself staring at the napkins on your kitchen table in Suburb, USA early on a Saturday morning. The week's stress is over; another begins on Monday.

You say to yourself, "I need a piece of the country."

How do you start? Here are some tips to get you started:

- Pick a target county. Decide what you want to do and where you want to be-mountains, beach, small town, farm, woods. Then drive in that direction. Purposeful wandering around orients you. It's quality time.
- Choose a county that's no more than a four-hour drive from your principal residence. Three's better than four, and two's best. Unfortunately, prices are more expensive closer in. Buyers get more for their money at $2,500 per acre four hours away than $10,000 per acre within a two-hour drive. Convenience costs.
- Find a local lawyer. This is your first step. You want a person who has been practicing for a while in that county and does real-estate work. Your lawyer's knowledge and advice at the outset will focus your search and save you money.
Start your lawyer's billable clock with your first question. These are extremely productive dollars. You are buying both information and friendship.
- Ask about the different parts of the county, prices, building and zoning regulations and pending projects that might affect you.
- Ask for recommendations-lenders, real-estate agents, surveyors, appraisers, excavators, contractors, consulting foresters and anyone else you might need.
- Drive around the areas your lawyer suggests. Do this before you contact a real-estate agent with listings.
- Subscribe to the county newspaper. It will carry ads from local brokers and For Sale By Owners (FSBOs). Get a feel for local politics and issues of current concern.
- Check online listings. See what's being offered locally at sites like these: www.landwatch.com; www.realtor.com; www.landandfarm.com; www.elandusa.com; www.landsofamerica.com; www.houses4sale-online.com; www.rliland.net; and www.unitedcountry.com. Buyers can search by state (and often by zip code or county) and property type.
- Take a Land-Wanted ad in the local paper. State what you prefer in terms of acreage, improvements and location. Don't include your price range. Have replies sent to "Land Buyer" at a local post-office box. Pay your lawyer to forward them to you with comments.
- Put the word out. As you interview individuals your lawyer has recommended, tell them what you're seeking. Property may be available through personal contacts.
- Visit listed property with a real-estate agent.

- A buyer is most protected in this process by working with an exclusive buyer agent (EBA at www.naeba.org), or, if none are available, an agent who agrees to represent you, the buyer, in your search and purchase. An EBA never works for sellers. Agents who are members of the Realtors Land Institute (www.rliland.com) have training and experience in rural land sales. Look for the designation, Accredited Land Consultant (ALC). Good agents know how to help a buyer without compromising their obligation to the seller who is paying their commission.
- Auctions. Good deals are sometimes available when property is auctioned without reserve. An absolute auction means property is sold for the highest bid, no matter how low. Buyers must thoroughly research such properties before bidding. Contingencies are not accepted on auction sales; buyers are buying property "as is."
- Patience, persistence and research. You don't need to swing at the first pitch…unless it's exactly what you want and priced right.

7:21 PM - Nov. 20, 2007 - comments {0} - post comment

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