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

Which mortgage rate is actually better for you?

Mortgage Market Guide, gives us the scoop on how to figure out which mortgage is ACTUALLY cheaper. It's not always the one you think...

Borrowers who shop for mortgages based on the loan's annual percentage rate (APR) often choose costlier mortgage loans without ever knowing it. Using APR as a determining factor when selecting a loan is actually a very poor and unreliable way to comparison shop for the best mortgage, and often leads borrowers into making very costly mistakes.

APR was created to provide borrowers with a way to account for the various costs associated with each mortgage. "In theory, APR is supposed to make it easy to compare a loan with a lower rate and higher fees, to a loan with a higher rate and lower fees," explains Barry Habib, CEO of the Mortgage Market Guide, and a mortgage expert who has appeared on the CNBC, NBC, CNN and FOX television networks. "The problem is that the APR calculation makes some very bad assumptions."

According to Habib, there are four main assumptions that account for the misleading information:

- APR assumes zero inflation. "It's assuming that the value of a dollar today will be the exact same value of a dollar 10, 20 or even 30 years from now," explains Habib.
- APR assumes the mortgage will never be prepaid or paid off. "The average life of a home mortgage is less than six years," states Habib. "Most people are either refinancing or selling way ahead of the 30-year marker."
- APR doesn't consider the value of the money used for fees. "If you spent thousands of dollars in points or fees to get a lower rate, the APR calculation doesn't give any value to the money if it wasn't spent on closing costs," he adds.
- APR does not take tax consequences into consideration. "This can be significant, because higher fees on the mortgage may not be deductible, while the higher interest rate typically is deductible," Habib emphasizes.

"What makes APR even more dangerous is that it can be manipulated," Habib advises. "This can make it worthless."

APR is not calculated on the mortgage amount, but rather on the "amount financed," which is derived from the Truth in Lending statement. Because the amount financed takes into account lender fees, like application fees, points and commitment fees, as well as interim and per diem interest, it gives lenders variables that they can use to raise or lower the final APR value. The amount financed is equal to the mortgage amount less any lender fees, points and interim interest, so the more fees, the lower the amount financed. Monthly payments are then calculated as a product of the amount financed to give you the APR. The lower the amount financed, the higher the APR. Therefore, lenders can easily manipulate the amount financed by assuming a closing on the last day instead of the first day of the month, which would increase the amount financed and decrease the APR.

According to Habib, the best way to comparison shop for a mortgage is to consider three variables: interest rate, mortgage amount and monthly payment. "A qualified Mortgage Planner will be able to help you to determine which loan truly costs less based on the interest rate, loan amount and monthly payment," explains Habib. "The truth is, APR tends to favor lower rate and higher fee loans, which often end up costing the borrower a lot of money in the long run. Unfortunately, a lot of high fee lenders are counting on under-educated borrowers to use APR-based decisions to put more money in their pockets."

Borrowers looking to learn more about selecting the right loan should educate themselves and consult a qualified and reputable Mortgage Planner, a mortgage originator who is educated on how to best counsel borrowers on how to invest in a mortgage wisely. "The bottom line is that borrowers should forget about APR and think twice about those low advertised rates when they're accompanied by higher fees," advises Habib. "They need to look at the big picture, and they need to look at it realistically with an eye on the future. A little homework goes a long way when choosing a mortgage. It can mean the difference of thousands of dollars every time they buy or refinance."

2:37 PM - Nov. 6, 2007 - comments {0} - post comment

What's up with the new FHA loans?

Not long ago, FHA lending was just another government-sponsored program unworthy of political attention or media limelight. Now, with no less than three new reform initiatives, FHA is generating excitement, confusion, speculation, and even venom for political pundits and the media.

Fixing Broken ARMs
FHASecure is a new federally-insured (temporary) lending program announced by President Bush on August 31, 2007, and released to FHA-approved lenders on September 4. Qualified homeowners seeking payment relief from their adjustable rate mortgage (ARM) may be able to use FHASecure to restructure their loan into a more stable, fixed-rate program, even if they are already delinquent on payments. "Risk Based" fee schedules, which are to be released shortly, will help price these loans appropriately.

Do You Qualify?
To qualify for an FHASecure loan, borrowers must meet the following five criteria:

1. A history of on-time mortgage payments before the borrower's teaser rate expired and loan reset;
2. 3% equity in the home; or cash to compensate (see your mortgage professional to find out about other methods of meeting this requirement);
3. A sustained history of employment;
4. Sufficient income to make the mortgage payment; and
5. The loan application must be signed no later than December 31, 2008.

Even if you do not meet these criteria, you should still contact a qualified mortgage professional because he or she can often provide you with other resources to help overcome your current challenges and reach your financial goals.

The House Takes Initiative
Last month, the House overwhelmingly passed FHA reform bill HR 1852 (The Expanding American Homeownership Act of 2007). The next step is the Senate where a vote is expected within the next few months.

As the bill stands now, there are a number of significant changes that could dramatically impact home lending, including making FHA loan limits as high as $729,750 in high-cost areas, such as California and Florida. It's uncertain if the Bush administration will support the bill in its current form, but it has several features that could easily reshape FHA lending as we know it.

• Lower Down Payments: Authorizes zero and lower down-payment loans for borrowers who can afford mortgage payments but lack the cash for a required down payment. (In fact, options are now available which may help to expand or stabilize certain programs for those who have little to no cash.)
  
  
• Subprime Borrowers: Directs FHA to provide mortgage loans to higher risk (but qualified) borrowers without authorizing unnecessary fee hikes on such borrowers.
  
  
• Reverse Mortgages: Enhances the FHA reverse mortgage loan program to help seniors pay for health and other expenses by removing the loan cap to avoid program shutdowns, raising loan limits, and reducing the maximum fee lenders can charge for these loans.
  
  
• Multifamily Loans: Raises FHA multifamily loan limits so these loans can fully fund construction costs in high-cost areas, and enhances sale of foreclosed FHA rental housing loans to localities so that affordable housing can be maintained in local communities.
  
  
• Higher Loan Limits: Raises the FHA loan limit in each area to the lower of (a) 125% of the local area median home price or (b) 175% of the national conforming loan limit.

Senate's Blueprint for Reform
Read twice and approved by a Senate banking panel on September 19, this is the Senate's version of FHA reform. Again, further steps are necessary before this initiative is to become law. Following are some issues that the legislation is attempting to address:

• Increase loan limits across the board;
• Reduce down payment requirements;
• Simplify FHA requirements for condominiums and housing co-ops;
• Expand reverse mortgage programs;
• Enhance home buyer counseling before and after purchase;
• Establish alternative credit scoring pilot program;
• Enhance fraud protection;

Bottom line
By updating and expanding FHA, lawmakers are clearly invested in removing some of the current limitations in FHA lending. All politics aside, this new flexibility will likely help many homeowners.

5:03 PM - Oct. 29, 2007 - comments {9} - post comment

Keep your finances in order

1. Have your paycheck automatically deposited. Why would you bother getting a check in the mail when you can circumvent the paper trail altogether? Holding the check in hand still gives some of us a sense of security, says Weston - but it's a false sense of security. A paper check may seem less ephemeral but that's an illusion. If you happen to misplace your paycheck, it's likely to take you at least a week to get a duplicate. With direct deposit, you never run into this problem.

2. Take advantage of automatic bill paying. If you've avoided signing up for it because of an aversion to technology, get over it, urges Weston. Even the most conscientious money managers are likely to miss a payment now and again. Once upon a time, this wasn't a huge problem, because banks and other lenders were more lenient, offering grace periods and extensions. But times have changed and the fees and penalties for late payments have soared. Even worse, one missed payment can lower a good credit rating by as much as 100 points, warns Weston. With automatic debit, your bills are guaranteed to be paid on time as long as you have enough money in your account.

3. Track your accounts online. If you're on a tight budget and covering your bills requires carefully managing your cash flow, it's time to trade in your checkbook for an online bank account. It will allow you to access your financial information 24 hours a day. In a matter of minutes, you can get an accurate account balance by checking to see which debits have gone through and which are still pending. This will help you avoid bloated overdraft fees. Hint: When you have several payments pending, be aware that many banks now put your largest check through first. Why? Because they stand to make money on overdraft fees if you're remaining balance doesn't cover the smaller checks.

4. Pad your checking account. Worried about exceeding your limit? Commit to building a realistic safety net. Experts have long cautioned people to save at least three months worth of salary in case of calamity. But let's face it: that's just not an option for some us. Instead, try to cushion your bank account just enough to avoid late payments and bounced checks. Weston advises starting out by making $100 of the money in your checking account off limits. This is money you don't spend no matter what, so always remember to subtract it from your available balance before you go on a spending spree!

5. Customize due dates. For many of us, cash flow varies depending on the time of the month. If you're having trouble paying bills that come due long after payday, you may want to consider customizing your due date.

"Most major lenders will work with you to find a due date that's reasonable for you," says Weston. Renegotiating your due date can help you keep a handle on your finances and limit fees.

12:58 PM - Oct. 27, 2007 - comments {0} - post comment

30 year fixed mortgages ARE still available

With support by Genworth Financial, Dr. Wachter released her third quarter 2007 U.S. Mortgage Payment Index, reminding buyers that safe home financing options still exist despite widespread fluctuation in the mortgage market.

"It's encouraging to see that consumers have not been scared off by the 'credit crunch' and 'mortgage meltdown' talk, and are returning to secure, tried-and-true home financing," Wachter said. "This trend emerged in the first half of 2007, and I expect it to continue as home buyers become more informed about their mortgage options and lenders reign in risky products."

Dr. Wachter's Index shows that both borrowers and lenders steered clear of risk and opted for safer mortgages in the first half of 2007. Adjustable-rate mortgage applications dropped 46.9% from September 2006 to September 2007, while applications for fixed-rate loans climbed 30.2% in the same period. Borrowers who put down less than 20% on a home are flocking to insured, single mortgages rather than risky piggyback loans. The number of borrowers using private mortgage insurance jumped 36% in the second quarter, and is up 69% since the outset of 2006.

"There is particularly good news for first-time and low down payment home buyers in the second half of 2007," said Wachter. "Long-term, fixed-rate mortgages are still widely available and affordable, even in today's market. My advice to these borrowers is to stick with a traditional fixed-rate loan with mortgage insurance. That way, they will be sure to keep their payments stable and affordable over time."

Published quarterly by Dr. Wachter, and in association with Genworth Financial Inc., the U.S. Mortgage Payment Index evaluates which mortgage products offer borrowers the best value, comparing payments for various mortgage options. Wachter's third quarter analysis finds that monthly payments on long-term, fixed-rate loans with mortgage insurance remain steady over five years - with one product dropping by 9.3%. Since combination, or piggyback, loans are subject to rate resets, payments can jump as much as 148% in five years.

"By locking in an affordable rate now with a fixed-rate mortgage, new buyers and refinancing borrowers can avoid the payment shock that is imminent for an estimated 2 million American homeowners, as their adjustable-rate loans reset in the coming months," Wachter said.

The following mortgages are featured in the new Index for September. The first amount reflects the payment in month one, the second amount reflects the payment in month 61:

- 30-year Fixed with monthly mortgage insurance: $1,400 / $1,270 (drops 9.3%)
- 30-year Fixed with Single Financed Premium mortgage insurance: $1,306 /$1,306 (no change)
- Combo: 30-year Fixed and HELOC: $1,321 / $1,428 (rises 8.1%)
- Combo: 30-year Fixed and Closed-End Second: $1,327 / $1,327 (no change)
- Combo: 10/1 Interest-Only ARM and HELOC: $1,196 / $1,303 (rises 8.9%)
- Combo: Pay Option ARM and HELOC: $714 / $1,771 (rises 148%)

12:47 PM - Oct. 23, 2007 - comments {0} - post comment

New HUD rules proposed

According to the Wall Street Journal online, in 2004 the administration backed down amid fierce opposition from the housing industry and members of Congress from both parties. After spending two years trying to “simplify, improve and lower costs associated with obtaining home mortgages,� the Department of Housing and Urban Development tabled its proposed rule “due to the significant number of questions raised.�

The renewed emphasis on loan disclosure is prompting some head shaking among consumer groups, who say at least some of the current problems could have been avoided if HUD had succeeded in overhauling the rules. While parts of its original proposal were heavily criticized, there has long been widespread agreement that the paperwork borrowers receive when they reach the settlement table is opaque and confusing.

“Home buyers, particularly among those taking out subprime loans, all too frequently find that when they show up at the settlement table…their loan terms are different from what they understood,� said Allen Fishbein, Consumer Federation of America’s director of housing and credit policy.

Now, the administration plans to revive the proposal as one way to prevent a recurrence of some of the problems roiling the housing sector. The White House says it will announce new rules this fall. Mr. Bush, in a radio address this month, said his administration “is working on new rules to help our consumers compare and shop for loans that meet their budgets and needs.�

Those efforts, along with the administration’s overall response — which also includes helping distressed homeowners refinance through the Federal Housing Administration and private lenders — are expected to be discussed at a House Financial Services hearing today where HUD Secretary Alphonso Jackson, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke will testify.

HUD has long agreed the settlement process is confusing but has been stymied in its efforts to make changes that would affect a huge, powerful industry that has grown up around the current rules. After its original proposal in 2002, HUD was deluged with more than 40,000 letters. In February 2004, Sen. Wayne Allard (R., Colo.) told Mr. Jackson — who was then the nominee to head HUD — that he couldn’t support his nomination because of the proposed changes.

One month later, Mr. Jackson pulled the rule, saying the agency would “re-examine� and repropose it. HUD held a series of roundtables in 2005, but the issue moved to the back burner, administration officials said.

Brian Montgomery, assistant secretary of HUD, said the agency knows borrowers need better information and is working to improve disclosure. “If we can help consumers understand the fine print, we can help prevent them from getting in over their heads in the first place,� he said in a written statement.

The biggest change is expected to be to the Good Faith Estimate, a document given to borrowers that lists costs such as title insurance, appraisals and other fees. The administration wants a more explicit detailing of mortgage-broker fees and loan terms, such as whether the interest rate increases or is there is a prepayment penalty.

At the same time, HUD plans to drop one of the more controversial aspects of the original proposal: allowing banks to handle the settlement in a single package at a set price, according to a HUD document. HUD viewed the provision as a way to bring down costs, but it ran into stiff opposition from smaller businesses, such as title companies and appraisers, who feared they would be squeezed by big banks and forced out of business.

The housing industry is bracing for HUD’s revised proposal — in particular, mortgage brokers, who are barraged with criticism in the current housing crisis. Members of Congress, consumer groups and others have accused mortgage brokers of steering individuals, including those with good credit, into subprime loans with higher interest rates that benefited them financially.

Brokers often receive fees from the lender when the borrower agrees to pay a higher interest rate than he or she qualifies for. The higher the rate, the higher the fee for the broker, though some lenders cap the amount they will pay. HUD is expected to require more explicit disclosure of broker compensation so borrowers clearly understand the relationship between broker and lender.

President Bush singled out the industry in a speech last month, saying his administration “will soon issue regulations that require mortgage brokers to fully disclose their fees and closing costs.�

Mark Savitt , president-elect of the National Association of Mortgage Brokers, said his industry already provides adequate compensation information. “I don’t know of anybody else in our industry where you completely disclose every dime you make in a transaction, so I don’t know what more we could disclose,� he said.

10:28 AM - Oct. 21, 2007 - comments {0} - post comment

To buy or not to buy....

This article from the Wall Street Journal on-line expresses many of the frustrations today's buyers face.

t’s not a decision to be taken lightly. Prospective home buyers who aren’t likely to be in their homes long enough to weather the downturn could end up “under water” — owing more on a mortgage than a home’s market value.

My husband Gerry faced a similar decision 16 years ago. He started shopping for homes in early 1991, after the late ’80s housing-market implosion. Gerry was sitting on $50,000 in a low-interest savings account and older friends whom he respected were urging him to invest in a house. Prices were still declining from the bust and interest rates on a fixed 30-year mortgage were hovering around 9.5% — not bad when compared with double-digit rates in the ’80s.

Gerry’s parents urged him to wait — they felt home prices would go a lot lower than the $120,000 listed for three-bedroom, one-and-a-half bath homes he had his eye on in our central New Jersey community. Because Gerry was such a diligent saver, he had a substantial down payment and didn’t worry so much about being underwater on his mortgage.

We talked it over and despite his parents’ concerns, Gerry decided to buy a home. Because he intended to stay put for at least seven years, he decided not to worry about where prices were heading. It worked out: After eight years, when he sold the house to buy his father’s home, he walked away with about $75,000 in profit.

So how likely is it that Gerry’s scenario will play out for today’s would-be home buyers? It’s tough to say, since the housing market is facing a downturn that is steeper than we experienced in the early ’90s.

Indeed, recent data on the housing market paints a stark picture. Home prices are declining in many regions nationwide. Last month the National Association of Realtors projected, that existing-home sales will fall 6.8% this year, while new-home sales are likely to fall 19%.

At the same time, foreclosures are soaring. According to data provider RealtyTrac, foreclosure filings are up 93% in July from the previous year — or one foreclosure filing for every 693 households.

Foreclosed homes are hitting many housing markets already saturated with unsold inventory. Inventories of homes for sale in July rose 5.1% to 4.59 million, or about 9.6 months of supply at the current sales pace. A six-month supply of homes for sale is generally the norm in a balanced market.

For homeowners trying to sell, the news is expected to get worse. Wall Street has been burned by bad subprime loans and is curtailing new investment in mortgage lenders. As a result, consumers without stellar credit may be unable to get mortgages at reasonable rates.

All of these factors combined are expected to continue to weigh on home prices.

So what does this all mean for buyers sitting on the fence?

If you’re unsure whether you’re ready to buy, first consider your outlook. Conventional wisdom says that homeowners who are likely to be in a home for at least seven years will see prices rise. If you’re going to want to (or have to) sell the home in the next three years — when some markets may still be suffering the mortgage mess fallout — consider renting.

It’s true, renting has its own costs. But you won’t pay closing costs, real-estate agent fees and myriad other expenses incurred when buying, owning and selling a home. Renting also may allow you to save for a larger down payment, potentially eliminating the need to pay for private mortgage insurance when you’re ready to buy.

If the only way to afford the home you want is to finance it with an adjustable-rate mortgage, I’d be wary of buying now. Some readers over the years have taken me to task for being overly conservative by recommending fixed-rate mortgages. ARMs worked for many during the housing boom, when home-price appreciation built enough equity to allow homeowners to refinance. Amid the bust, many ARM holders are finding they can’t refinance because they’re underwater with their mortgages. Sadly, many are losing their homes in foreclosure because they used ARMs to buy homes they really couldn’t afford.

If your finances are solid and you can afford the home you want with a conventional mortgage — and you’re buying for long haul — the time may be right. And for some buyers, the market is secondary to the reality of family life — the impending arrival of a new baby may be the deciding factor to whether now is the “right time” to buy. (One big factor in Gerry’s decision to buy a home was the desire to start building our lives together.)

When shopping for homes where the market is weak, consider buying a newly built home. Home builders are hoping to lure buyers with discounts of as much as 20% and other valuable incentives, such as granite countertops, luxury appliances and in-ground pools. The National Association of Home Builders reports that 56% of builders are offering financial incentives, up from about 45% a year ago.

The best deals will often be found where home price declines are the worst. But given the severity of the conditions behind the current downturn, the regions that saw the most heady gains during the housing boom — particularly Arizona, California and Florida — may take more time to rebound. In other areas of the country, most notably Detroit, the local economy is contributing to home price declines. In these areas it’s particularly important to know whether you’ll need to sell quickly or not.

There are markets where home prices continue to show steady growth, including Seattle, Atlanta and Dallas, according to Standard & Poor’s. If you’re shopping in these regions, you’ll find the best values if you prove yourself to be a qualified buyer who can quickly close the deal. That means getting your mortgage pre-approved, where you have a written guarantee that you’ll get the loan for the amount you need. Also it would help to avoid placing contingencies on the sale, such as the need to sell an old home before closing on the new one.

There are enough contingencies in the market right now without adding too many more.

12:10 PM - Oct. 9, 2007 - comments {0} - post comment

A short course in radon

The following article is by Carl Brahe of Inspection Perfection.

Radon is a difficult issue for homebuyers and sellers, real estate agents and home inspectors. The Surgeon General says that radon is the second leading cause of lung cancer. The EPA sets an average level as the recommended maximum allowed in residences. HUD and FHA have regulations about warnings that must be issued to homebuyers and mortgagees. We must adhere to these guidelines. 

There is no doubt that decaying radon will damage lung cells. The exact levels and circumstances that are required to cause lung cancer are not known. Currently, scientific studies have not been performed to accurately establish danger levels. Existing studies have not had access to accurate, long-term data and are sometimes contradictory. Accurate data on health effects of radon exposure at normal household levels may not be established for many years.

The practical reality is that several of our government agencies have accepted an arbitrary maximum radon level that we must respect. These government regulations make it a liability issue. This level, 4 pCi/l (pico curies per liter) is what we have learned to fixate on, but what matters to real people is how to prevent radon from harming us.

We live with radon. It’s a fact. The EPA estimates that as many as a third of all Colorado homes have radon that exceeds their recommended maximum. Environmental radon is relatively high in the whole state. The first step is to decrease exposure as much as possible.

Sealing gas entry points always makes sense. The places that leak gases into your home are a source of energy loss. Moisture can also enter through these routes around pipes and other things that penetrate the foundation, as well as expansion joints, sumps and cracks. If leaks above ground are sealed and leaks through the floor are ignored, a chimney effect may be created and radon levels can increase.

The tighter you seal your house the more important ventilation becomes. The air inside our homes can be more “polluted” than the air outside. Besides gases, like radon, that are drawn into a house, everyday living creates indoor air pollution from activities like cooking, cleaning and using gas, or wood, burning appliances. Natural ventilation, like opening a window, is easiest but may not be feasible because of heat loss. The tighter the house is sealed, the less passive ventilation exists from leaking doors and windows, etc.

Passive ventilation for crawlspaces and/or foundation slabs can sufficiently reduce radon. This may be ventilation grating at the ends of a crawlspace relying on natural air movement. Ventilation pipes inserted under, or through, the foundation ending above roof level may also provide sufficient reduction. A wind turbine is sometimes used to draw air from under foundation or crawlspace.

The most popular method of controlling radon may not always be the best. There are inexpensive ways to control radon that we never hear about. According to Industrial Hygienist Caoimhin Connell, even burning a candle can provide airborne particles that unattached radon daughters may attach to, reducing radon risk.

One of the most effective systems for reducing the concentration of unattached radon daughters is a ceiling fan, or air circulating fan; sometimes coupled with an ion generator. Positive ion generators work best. The fan mixes the air, and the charged particles are attracted to the surfaces of walls, furniture and floors, and other airborne particles where they are deposited, thus removing them from the breathable air, insuring they are not deposited in our lungs. 

A Casablanca type ceiling fan can reduce radon by up to 95%.If a 50% reduction of radon levels is sought a ceiling fan, or circulation fan, can be used alone. If a reduction of 80% + is desired a fan with a positive ion generator can be used. This combination has been tested world wide with consistent radon reduction of up to 95%. This can be an inexpensive radon system costing far less than the most accepted remediation today – sub slab depressurization, or suction.

Radon is released from the soil. There can also be other gases, naturally occurring, or resulting from man made pollutants. The place where I grew up is a gigantic toxic waste site. The soil is very sandy. The water table is close to the surface and pollutants have traveled throughout the area in the ground water. There are dry cleaner solvents, metal cleaning solvents, insecticides, herbicides and biological warfare agents that release gases that migrate to the surface. I doubt that people who live there ever give a thought to the gases migrating into their homes, but it seems like gases besides radon could have negative health affects. This is an argument for positive pressure in our homes.

Arguments against include: systems are noisy and have the potential for extinguishing pilot lights. Expense is also mentioned as a reason for not using this method. The possibility of moisture intrusion is cited. The result of my crude, home testing makes me think these factors may not be such a deterrent.   My office is in a walk out basement. It is consistently colder than the upper level that tends to be too hot year round from passive solar. The summer time radon level with windows open is 4-5 pCi/l. It goes to 9 – 22 pCi/l with the windows closed.

I removed a ceiling vent for the furnace and taped a 4” computer-cooling fan in its place. The radon level immediately dropped to 3 pCi/l. This level has remained steady through winds and rainstorms that usually elevate levels. It is true that it is a little noisy. I will replace it with a vent with a built-in booster fan that is made to be quiet and operate at various speeds.

The computer fan was $12. The booster vents I found run from $35-50. This little computer fan has also helped equalize the temperature between the two levels. A fan designed for this purpose should increase comfort even more, allowing higher speeds to move more air. From my subjective point of view, it seems like I have more energy and tire less quickly since installing the fan.

Sub Slab Depressurization (SSD) is the most common and accepted method for radon reduction. It provides about the same percentage reduction of radon as a fan/ ion generator, but cost significantly more. EPA estimates systems cost from $800-2500. Operating costs are from $50-200/year.

This method uses a vacuum fan to suck air from beneath the concrete floor. A variation is power vents for crawlspaces. In some cases, a vapor barrier will be applied to the crawlspaces with a vacuum fan that sucks air from beneath the center of the plastic barrier. A fan may also be used to suck air from cement block foundation.

This method may not work as well where the soil has heavy clay content preventing air from flowing. Defects and expansion joints may interfere with proper function. Improperly installed systems may increase concentrations of radon gas. Pumps may become noisy. System costs, operating and maintenance costs are relatively high.

Another technique that increases comfort while decreasing radon is the fresh air heat exchanger, also called Heat Recovery Ventilation (HRV). This device pulls fresh air from outside through a heat exchanger that is warmed by inside air as it passes through the exchanger to be vented. These devices lose about 15% of the heat used to warm the fresh air. As houses are being sealed tighter for energy savings, it becomes more important to bring in a constant supply of fresh air to maintain a healthy indoor air quality.

Making the house even more airtight might make up the heat loss without the indoor air pollution that occurs when a house is sealed too tight without ventilation. The EPA estimates installation costs of $1200-2500 with an annual operating cost including heat loss of $75-500.

10:32 AM - Sep. 19, 2007 - comments {6} - post comment

Yesterday's rate discount

Ty Mann, our trusted lender of many years, just sent us this email regarding interest rates and yesterday's Fed rate reduction...

10:28 AM - Sep. 19, 2007 - comments {0} - post comment

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