Archive for Homeowner Advice
Paying Off the House in 15 Years
Posted by: | CommentsFrom onlinewsj.com
By Amy Hoak
A growing number of homeowners are choosing to pay down their mortgages at a faster rate–even if it means a substantial jump in their monthly payments.
Between January and June, 26% of homeowners who refinanced chose a 15-year fixed-rate mortgage, according to data from CoreLogic, a provider of financial, property and consumer information. During all of 2009, 18.5% of borrowers who refinanced opted for a 15-year term.
What’s prompting the shift to shorter loans? Historically low interest rates for fixed-rate mortgages.
Homeowners are doing the math and realizing that rates have fallen enough so the increase in payment between a new 15-year mortgage and their current loan is no longer unbearable for their budgets, says Bob Walters, chief economist at online lender Quicken Loans.
The average rate on a 15-year fixed-rate mortgage was 3.86% for the week ending Aug. 26, according to Freddie Mac’s weekly survey of conforming mortgage rates.
A Change in Thinking
The financial situation of those capable of refinancing today is a factor in the shift, Mr. Walters says. These people typically are homeowners with the best credit and the most equity — and, therefore, most suited for a shorter-term loan.
But there might be some other psychology at work. “We’re seeing a different view on debt than maybe we’ve seen in the past,” he says. Today, homeowners are saying, “I really want to pay this off. I’m going to bite the bullet and take the payment and work toward paying this down.”
A 15-year mortgage also acts as somewhat of a forced savings account for homeowners, says Leif Thomsen, chief executive of Mortgage Master, a privately owned lender, given that the higher payments help a borrower pay down the principal at a quicker clip.
This is a huge shift in borrower thinking. “There was a drive a couple of years ago to take out the biggest mortgage that you could and use all of the money you would have otherwise had in the house and put it into stocks and bonds–to think of your house and mortgage as part of your entire investment portfolio,” says Amy Crews Cutts, deputy chief economist for Freddie Mac.
“That worked for people who do investment finance for a living and are good at managing accounts,” she says. “But for the average person, debt is a drag on their psyche as well as their overall budget.” Many Americans have reverted to the goal of paying off their house and getting rid of their mortgage, Ms. Cutts adds.
Doing the Math
Refinancing into a shorter-term mortgage isn’t a strategy for everyone, however.
Choosing a shorter term usually means you’ll get a better rate–and you’ll pay much less interest over the life of the loan–but a shorter time frame ramps up monthly mortgage payments.
For example, with a 4.5% interest rate on a 30-year fixed-rate mortgage of $200,000, you would have a monthly payment of $1,015, including principal and interest, Ms. Cutts says. The monthly payment jumps to about $1,480 with a 4% interest rate on a 15-year fixed-rate loan.
Of course, if the refinancing borrower’s current 30-year loan has a higher rate, the difference between the monthly payments could be lower. Still, you should count on some increase in monthly payments.
In general, Mr. Walters says, those who choose 15-year fixed-rate mortgages are older and have more equity and less debt than other folks. They also earn higher incomes and don’t have some of the added expenses that younger homeowners typically do.
“People who are taking these loans are financially stable and can afford the payments, but at the same time are planning on staying in their home for an extended period of time,” Mr. Thomsen says.
Mr. Walters says you shouldn’t take on a 15-year fixed-rate mortgage unless you have substantial savings, including at least a year’s worth of living expenses in liquid accounts.
Also, he recommends having a debt-to-income ratio below 35%. So if you have a gross salary of $5,700 per month, for instance, your monthly debt–including any mortgage payments, taxes, insurance, homeowners-association dues as well as auto and student loans and credit-card debt–would have to be a max of $1,995 to get a 35% ratio.
Read the complete article here: http://online.wsj.com/article/SB10001424052748703669004575458203846437616.html?mod=WSJ_RealEstate_LeftTopNews
July Existing-Home Sales Fall as Expected but Prices Rise
Posted by: | CommentsFrom the National Association of Realtors:
Existing-home sales were sharply lower in July following expiration of the home buyer tax credit but home prices continued to gain, according to the National Association of Realtors®.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, dropped 27.2 percent to a seasonally adjusted annual rate of 3.83 million units in July from a downwardly revised 5.26 million in June, and are 25.5 percent below the 5.14 million-unit level in July 2009.
Sales are at the lowest level since the total existing-home sales series launched in 1999, and single family sales – accounting for the bulk of transactions – are at the lowest level since May of 1995.
Lawrence Yun, NAR chief economist, said a soft sales pace likely will continue for a few additional months. “Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired. Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September,” he said. “However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs.
“Even with sales pausing for a few months, annual sales are expected to reach 5 million in 2010 because of healthy activity in the first half of the year. To place in perspective, annual sales averaged 4.9 million in the past 20 years, and 4.4 million over the past 30 years,” Yun said.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.56 percent in July from 4.74 percent in June; the rate was 5.22 percent in July 2009. Last week, Freddie Mac reported the 30-year fixed was down to 4.42 percent.
The national median existing-home price2 for all housing types was $182,600 in July, up 0.7 percent from a year ago. Distressed home sales are unchanged from June, accounting for 32 percent of transactions in July; they were 31 percent in July 2009.3
“Thanks to the home buyer tax credit, home values have been stable for the past 18 months despite heavy job losses,” Yun said. “Over the short term, high supply in relation to demand clearly favors buyers. However, given that home values are back in line relative to income, and from very low new-home construction, there is not likely to be any measurable change in home prices going forward.”
Total housing inventory at the end of July increased 2.5 percent to 3.98 million existing homes available for sale, which represents a 12.5-month supply4 at the current sales pace, up from an 8.9-month supply in June. Raw unsold inventory is still 12.9 percent below the record of 4.58 million in July 2008.
NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said there are great opportunities now for buyers who weren’t able to take advantage of the tax credit. “Mortgage interest rates are at record lows, home prices have firmed and there is good selection of property in most areas, so buyers with good jobs and favorable credit ratings find themselves in a fortunate position,” she said.
Read the complete report: http://www.realtor.org/press_room/news_releases/2010/08/ehs_fall
The best moves for home buyers and sellers
Posted by: | Comments(Money Magazine)
Plenty of forces, from overly cautious lenders to inaccurate appraisals, are wrecking real estate deals right now. But one of the biggest roadblocks to getting a house sold these days is the disconnect between buyers and sellers.
In general, sellers have gotten more realistic in pricing their homes than they were right after the housing bubble burst, but agents say that many still don’t grasp how much they must concede to close a deal. And buyers are still spraying lowball offers around in hopes that sellers will be desperate enough to bite.
Take such unreasonable expectations, multiply by two, and what do you get? “A standoff,” says Glenn Kelman, CEO of real estate brokerage Redfin.
With the busy summer home-sale season drawing to a close, there’s little time to waste. Whether you’re trying to unload your place or land a new one, follow these dos and don’ts to negotiate the best deal — fast.
Don’t say: “I’ll pay 85% of your asking price and not a penny more.”
Instead: Look for homes that are fairly priced and make a reasonable offer. “Coming in about 10% below list is a good starting place for negotiations now,” says Denver real estate broker Jeff Fogler. Yes, you have the upper hand in most markets, but the average homebuyer is paying only 2.7% below list price (see the chart). Set your expectations accordingly. You can always ask if the seller is willing to bridge a price gap in other ways — for example, by picking up your closing costs (which can run $7,500 on a $300,000 house).
Don’t say: “I haven’t put my own place on the market yet.”
Instead: List your current home before you start shopping seriously for the next one. Because it takes almost three months to move a house these days, sellers are loath to write home-sales contingencies into purchase contracts. You’ll have far more leverage if you’ve gotten rid of your house before you start negotiating: Sellers know there’s less chance of the deal falling apart. (Prequalifying for a mortgage helps too.) What’s more, you’ll know exactly how much money you can put into your new digs.
Don’t say: “This is my dream house.”
Instead: Stop imagining the great parties you’ll throw there and gird yourself to walk away if the seller won’t make reasonable concessions. Your ability to abandon negotiations is your most powerful bargaining chip. Given that plenty of other homes are on the market now, finding another place to love shouldn’t be too hard. You might let the seller know that. Nicely.
Don’t say: “You’re offering how much? Forget you!”
Instead: When bidders lob low-balls at you, thank them for their interest — and ask that they come back with earnest offers. “If you become offended, enraged, or unreasonable, you’ve blown any chance at negotiation,” says Warwick, R.I., real estate agent Ron Phipps. These days many buyers are just testing you to see how big a discount they can get. Point the bidder to comparable recent sales that support your list price. (Received several super-low offers? Check the comps to make sure your price isn’t too high.)
Don’t say: “I didn’t know the deck was rotting.”
Instead: Pay a few hundred dollars to get your house inspected before you put it on the market. Then arrange to make any necessary repairs yourself. (In most states the law requires you to disclose to potential buyers any defects of which you’re aware.) “Taking care of any inspection issues upfront helps sellers limit the points that buyers can negotiate on,” says Pat Lashinsky, CEO of the national brokerage ZipRealty.
Don’t say: “It might take us a while to move out.”
Instead: Make sure to tell buyers — especially those who might have children starting school this month — that you’re willing to scram pronto, if possible. That will help you stand out from any short sales in your area, which may have lower list prices but can take months to close. “If the buyers have a strict time limit, they’re going to pay more money to get into a house quickly,” says Ellen Klein, a realtor in Rockaway, N.J. More money plus more speed: That’s what it’s all about.
View original article here: http://money.cnn.com/2010/08/25/real_estate/home_buyers_sellers.moneymag/index.htm
Quest for the perfect credit score
Posted by: | CommentsFrom MONEY Magazine
A major league pitcher dreams of throwing a perfect game. High schoolers eyeing the Ivy League study furiously in hopes of earning 2400 on the SAT. Meanwhile, Chris Peplinski is pursuing his own brand of flawlessness: an 850 credit score.
The 37-year-old stay-at-home dad from Rogers, Ark., has already nabbed 813 on the FICO scale, the credit scoring system most lenders use in sizing up potential borrowers.
That ranks him above more than 82% of Americans and comes with a big payoff: It entitles him to ultralow rates on loans, saving him tens of thousands of bucks over a lifetime.
Nevertheless, Peplinski won’t be satisfied until he hits the maximum: 850. Why? “Your credit score tells a lot about you,” Peplinski explains. “A high score means you’re responsible and in control of your life. You’re trustworthy.”
To reach his goal, Peplinski voraciously reads up on every element that goes into a FICO score, checks his number every three months, and tweaks his behavior to eke out every possible additional point.
Two years ago, he took out a car loan even though he and his wife, Chrissy, had the cash to buy their wheels outright. He figured that adding to his mix of credit might boost his score.
In spite of Chris’s best efforts, landing an 850 may be a quixotic goal — only about 0.5% of Americans manage it, FICO reports. “The 850 score is kind of like a unicorn,” says John Ulzheimer, a credit scoring expert with Credit.com who used to work for FICO. “Everybody talks about it, but nobody’s seen it.”
The reality is that you don’t need to catch the unicorn to catch the best rates. But adopting some of the habits of Peplinski and other members of the 800 club can help you improve your own score.
And that can translate into real money: On a $300,000 30-year fixed-rate mortgage, the most credit-worthy borrowers will pay $14,200 less than those one tier below, $25,600 less than those two tiers below.
Secrets of score strivers
FICO, the Minneapolis company that produces the scoring model, divulges the five factors that determine your magic number — your payment history, the amount you owe on credit lines and loans, the length of your credit history, how much new credit you’ve applied for, and the types of accounts you’ve had — plus what percentage of your score each factor represents.
But as for exactly how many points you’ll gain or lose for, say, taking on a mortgage, being late on a bill, or charging credit cards up to the max? That’s proprietary information: “It’s a black box,” says FICO spokesman Craig Watts.
Mystery feeds obsession. Much the way fans of TV’s Lost met up online to postulate theories on the show’s ending, some credit score aficionados passionately debate their hypotheses on message boards like the FICO Forums at myfico.com. Others use themselves as guinea pigs to discover which moves will nudge a score up or down.
While most people could tell you their number only from the last time they got a loan — if at all — true FICO fiends know their score as well as they know their spouse.
Of the score strivers MONEY interviewed, most check their score obsessively, at least every few months — at a cost of $50 or more a year. They also fixate on their credit reports, upon which the scores are based.
Leland Lim, a 41-year-old doctor from the Bay Area, is vigilant about scanning these for errors that might drag down his number. “It took me three years to get a derogatory entry on one of them corrected,” says Lim, who now earns an 806.
As for what makes an 800-plus score, these self-made experts basically say the same thing FICO does: Payment history is the single most important factor.
Read the complete article here: http://money.cnn.com/2010/08/24/pf/perfect_credit_score.moneymag/index.htm
Reduce Your Carbon Footprint
Posted by: | CommentsFrom RealtyTimes.com
By: Carla Hill
The Summer season gives many homeowners excellent opportunities to reduce their carbon footprint, an increasingly pressing issue in American households, where energy consumption has reached new heights.
According to Abcnews.com, “On average, every American is responsible for about 22 tons of carbon dioxide emissions every year, according to statistics compiled by the United Nations. That is far above the world average of 6 tons per capita. Thus, experts say there’s lots of ways to reduce your carbon footprint inexpensively by taking some simple steps at home.”
But how do I know what my contribution to the problem is? The Nature Conservancy, the leading conservation organization working around the world to protect ecologically important lands and waters for nature and people, has an online calculator that can be very helpful.
And to help ease the strain on the environment, consider picking up a these seven simple “go green” habits.
1. Turn up the AC. Even a few degrees can make a big difference in the amount of energy used. If your house is empty all day, then turn the temp up even more until you get back home.
2. Reduce, Reuse, Recycle. Summertime is famous for backyard barbecues. Reduce your footprint by using reusable plates and cups!
3. Buy local food. When you buy local, you are drastically reducing the amount of emissions put into the environment to ship your food to your local store.
4. Keep tires inflated. This is a simple tip that increases your gas mileage, which means you use fewer fossil fuels in the long-run.
5. Late Sprinkler. Water the lawn during the early morning or late evening, before the heat of the day evaporates the water before it can quench the plant’s thirst.
Read complete article here: http://realtytimes.com/rtpages/20100816_carbon.htm
Real Estate Outlook: Federal Reserve Weighs In
Posted by: | CommentsFrom RealtyTimes.com
By: Kenneth R. Harney
The U.S. Congress asked Federal Reserve Board chairman Ben Bernanke a key question last week: Where do you and your colleagues believe we’re headed in terms of the national economy?
Bernanke’s reply: There are bumps and potholes on the road to recovery, but the Fed “expects continued moderate (economic) growth, a gradual decline in the unemployment rate (to about 7 percent) and subdued inflation” over the next couple of years.
No sooner had Bernanke delivered his testimony than some of those “bumps” in the road popped up: The Commerce Department reported new housing starts dropped by 5 percent in the latest month, and the National Association of Realtors reported existing home sales down by a similar percentage.
But keep in mind the central point Bernanke was making in his forecast: Troubled though it may look with any single statistical report, the fact is the national economy continues to grow – by about two and a half percent on an annual basis – and many elements of the economy are better off this year than the were the year before.
Take the Commerce Department’s housing starts number: That five percent decline was mainly the result of a big drop in starts of new rental apartment units – not a drop in starts of new single family houses, which were stable.
In fact, the Commerce Department survey found that permits pulled by builders for future construction on single family homes were actually up in three out four of the major regions of the country.
Analyzing the government’s data, Bernard Markstein, senior economist for the National Association of Home Builders, was encouraged – and predicted increases in both starts and sales over the coming several months.
The latest sales report for existing homes from the National Association of Realtors also had some bright spots: Sales in June were 10 percent higher than they were in the same month the year before.
Even median prices of all homes sold were up slightly, and that’s despite the fact that one third of sales were “distressed” in some way – REOs, foreclosures or short sales.
And remember: virtually all economists – including those at the Fed – had forecast lower home sales for the months immediately following the expiration of the tax credit programs.
Read complete article here: http://realtytimes.com/rtpages/20100726_realestateoutlook.htm
From RealtyTimes.com
by Phoebe Chongchua
It’s not a lot of time, but a three-month homebuyer limited tax-credit extension will help some. “I think it was one of relief by lots of homebuyers who had loans and real estate transactions in the pipeline and couldn’t close by the June 30th deadline. The extension gives them the opportunity to finish up their deals and close by September 30th,” says Lucien Salvant, National Association of Realtors spokesperson.
“We estimate up to 180,000″ will benefit from the extension. However, if you don’t currently have a loan application in, it’s too late to take advantage of this federal housing tax credit. “You had to have a valid contract by April 30th,” says Salvant.
But Salvant says that shouldn’t discourage interested buyers because the market is ripe with other opportunity. “The good news for people who didn’t take advantage of the tax credit is that the inventory is still plentiful, although it’s reduced significantly from what it was a year ago, prices are affordable, and the interest rates are the lowest they’ve been since the 1950s.” The low interest rates are, of course, a magnet for attracting buyers. However, Salvant says that while this is a good time to buy, he notes that the lending market isn’t operating the way it did before the housing crisis. This, he says, should make people understand that buying a house is a good option if you plan to stay in it a while—not play the flipping gamble, hoping for a quick profit.
“The average is about seven years. Homeownership is an investment in the future, not for a quick turnaround, which a lot of people abused in the earlier part of this decade,” says Salvant.
Salvant notes that the housing market’s recovery is being hampered by uncertain unemployment conditions which are causing some potential buyers to wait, possibly for more breaks.
But Salvant says don’t count on more tax incentives. “We have asked Congress now for three different tax credits and we’ve gotten them. The purpose of the tax credit was to give a quick start to the housing economy which was coming apart and sinking fast. We think it really helped. Now, it’s time for the housing market to stand on its own two feet,” says Salvant.
Read complete article here: http://realtytimes.com/rtpages/20100716_taxcredit.htm
Small Room Decorating Tips
Posted by: | CommentsFrom RealtyTimes.com
by Carla Hill
A small space doesn’t have to lack style. In fact, with the right pieces of furniture, accessories, and splashes of color, your small space can make a big impression.
The first order of business is to embrace the light. No, we’re not talking about going “new age spiritual.” By that we mean playing up any windows. This allows the grand scope of the outside to come into your space. And that’s a big, big world out there! Natural light also has a way of opening up spaces. To frame the light, consider using complimentary curtains. Blinds can be too heavy, but curtains add a frame to your natural picture.
And unless you live in northern Alaska during the equinox, you are going to need some alternate lighting. Use this opportunity to really play up your design. Lamps don’t need to be boring. Consider modern chandelier fixtures, retro shades and lamps, and sleek and modern recessed lighting.
Next, keep the colors bright. Heavy, dark colors absorb light and can make a small space seem even smaller. If you are drawn to a passion red or a deep ocean blue, then use these fabulous colors as accents in artwork and accessories, such as throw pillows. Another color tip? Consider keeping it all in the same hue. This works particularly well if you are a fan of patterns. A highly contrasting pattern can jar the eye. As an alternative, use similar hues to work in cohesion.
Storage is also key in a small space, especially when it comes to functionality. If you have a large collection of books or movies, then a sleek media cabinet or shelving unit can keep clutter managed. Ottomans that double as storage are a great place to store toys! Keeping clutter to a minimum is a great way to make a small space appear bigger.
Lucite, glass, and mirrors. Oh my! Our eyes fall softer on, and sometimes passes right through, these items. Transparent and reflective surfaces can give the appearance that the room is less full. As in the world of graphic design, negative space (where no design elements are found) can be a powerful way to play up your other design features. Many furniture stores offer great options in tables, dresser, and even chairs! A mirror is not just for the wall anymore. Play up the idea of expansion by using mirrored objects all around your room!
Read the complete article here: http://realtytimes.com/rtpages/20100722_smallroom.htm
The many shades of green in remodeling
Posted by: | CommentsFrom ChicagoTribune.com – Complete article here: http://www.chicagotribune.com/classified/realestate/ct-home-0604-local-scene-improvement-20100604,0,4956294,full.column
Home improvement season has begun in earnest, as evidenced by the number of Dumpsters parked outside residences and major appliances waiting for the scrap truck.
Spending on home remodeling projects is expected to rise almost 5 percent this year, and that would be the first annual spending increase since 2006, according to data recently released by Harvard University’s Joint Center for Housing Studies.
But since the last uptick in remodeling, it’s not just styles that have changed. It’s eco-awareness. In an era of reduce, reuse, recycle, “green” homeowners are looking for ways to discard what they don’t want without it taking up space in a landfill. And with some research, they’re finding alternatives.
“I’m getting so many calls, which is awesome,” said Deanna Davies, director of marketing and procurement at Habitat for Humanity’s ReStore in Elgin.
Habitat’s ReStores, run by various independent affiliates of the national charity, accept donations of working appliances, furniture and building materials from consumers, contractors and retailers looking to winnow their overstock. The goods are then sold in the stores to the public at substantial savings that can equate to 50 percent of retail prices. All proceeds are used to build and renovate homes for needy families.
During a recent week, the Elgin ReStore accepted drop-off donations from 53 consumers and four companies. It also made seven residential pick-ups.
ReStore volunteers also have been known to help deconstruct a kitchen to get the cabinets out intact.
But a commitment to recycling parts of a home involves some dialing, and consumers shouldn’t expect that one charity will take it all. For instance, the Elgin ReStore won’t take used toilets, but toilets are one of the biggest-selling products at the Chicago Heights ReStore.
“The porcelain part of the toilet never wears out,” said Chris Hanson, president of the board of directors for Habitat for Humanity Chicago South Suburbs. “Sinks, vanities and even light fixtures. How much does it ever wear out? You take it down and bring it here.”
Meanwhile, another volunteer-driven nonprofit called Rebuilding Together picks up donations and stores them in its warehouses with the intent of using the materials to renovate the homes of low-income homeowners. Sought-after donations include kitchen cabinets, major appliances and some plumbing fixtures.
What it doesn’t take includes doors and windows because the dimensions need to be too exact. “We love to recycle,” said Jeff Ruge of Rebuilding Together Aurora. “It’s a passion we have but it doesn’t always work out that way.”
Roofers are now getting in on the recycling action, too. Owens Corning, a shingle manufacturer, recently opened Chicago-area recycling centers in Forest View and Lemont for asphalt shingles as part of a national alliance with Heritage Environmental Services. A third recycling site will open in Chicago Heights later this month.
During Forest View’s first week of operation, 50 tons of asphalt from 16 homes was recycled into road paving materials rather than sent to a landfill.
Owens Corning plans to take the program national after research found that half of homeowners value the capability to recycle shingles and would make decisions about which roofing contractor they use based on that ability, a spokesman said.