Foreclosure Freeze through the Holidays

Fannie Mae and Freddie Mac are freezing all foreclosure evictions on the mortgage loans they own or back from Dec. 20 through Jan. 3.

"If the property is occupied, our foreclosure attorneys will suspend the eviction to provide a greater measure of certainty to families during the holidays," says Anthony Renzi, executive vice president of single family portfolio management at Freddie Mac.

Most of the large banks, including Bank of America, J.P. Morgan Chase, and Wells Fargo, already observe a moratorium through the New Year, unless the foreclosure involves an investor who chooses not to observe the holiday policy.

Source: CNNMoney, Les Christie (12/03/2010)

5 Steps to Remodeling Done Right

Here are five steps to developing a great relationship with a remodeling contractor.

1. Let the contractor know if you are ready to remodel or just kicking the tires. Gary Palmer, a Charlotte, N.C.-based general contractor, says seeking multiple bids is fine, but don’t waste his or her time by letting the bidding process drag on for weeks.

2. Do your homework. Before seeking bids, develop two files. One should include information, including photos, of what you like. The other should include a list of what you don’t like.

3. Listen to the experts. A good contractor can tell you whether the project is feasible and what the pay off will be.

4. Communicate your budget. Let the contractor know up front how much money you intend to spend.

5. Be realistic and patient. Every remodeling project is messy and all of them are going to be frustrating somewhere along the way.

Source: Charlotte Observer, Barbara S. Russell (10/23/2010)

Four Tips for Setting the right price

It’s a difficult disconnect that makes selling properties a challenge. Successfully marketing a home requires that the price be set carefully -- or it will languish on the market. Among the considerations:

* How many homes are for sale in the neighborhood? The more homes on the market, the more important it is to list at the lower end of the scale. "I want buyers to ask why is this house priced so competitively," said NAR President-elect Ron Phipps of Phipps Realty in Warwick, R.I. "I want the answer to be an offer."

* Take short sales and foreclosures into consideration when pricing. If the competing properties are in lousy condition, they are less of an issue, but if they are well taken care of, yet priced 25 percent below market, they can be a serious factor.

* Negotiate decisively. "Buyers are not interested in back-and-forth negotiations these days," Phipps said. "They are less emotional and more disciplined. They will walk away."

* Cut the price when you have to. If no one shows up for an open house, if no one calls and if there are no offers, then the price is too high. That means it's time to make a meaningful price cut.


Source: The Washington Post, Associated Press (09/18/2010)

10 Reasons to Buy a Home

Time magazine is being overly pessimistic in its recent cover piece that called into question the benefits of homeownership. In fact, now is a great time to buy. And, what's more, tomorrow will be a great time to own, because the fundamental strength of homeownership hasn't changed.

Why is now a great time to buy? Here are 10 reasons:

1. You can get a good deal. Prices are down 30 percent on average. They're at a level that makes sense for people's income.
2. Mortgages are cheap. At 4.3 percent on average for a 30-year fixed-rate mortgage, your costs to own are down by a fifth from two years ago.
3. You can save on taxes. When you add up the deductions for mortgage interest and others, the cost of owning can drop below renting for a comparable place.
4. It'll be yours. The one benefit to owning that never changes is that you can paint your walls orange if you want (generally speaking; there might be some community restrictions). How many landlords will let you do that?
5. You can get a better home. In some markets, it's simply the case that the nicest places are for-sale homes and condos.
6. It offers some inflation protection. Historically, appreciation over time outpaces inflation.
7. It's risk capital. If the economy picks up, you stand to benefit from that, even if you're goal is just to have a nice place to live.
8. It's forced savings. A part of your payment each month goes to equity.
9. There is a lot to choose from. There are some 4 million homes available today, about a year's supply. Now's the time to find something you like and get it.
10. Sooner or later the market will clear. The U.S. is expected to grow by another 100 million people in 40 years. They have to live somewhere. Demand will eventually outpace supply.

Source: Wall Street Journal, Brett Arends (9/16/10)

Investment Property: Four Considerations

Real estate entrepreneur Ryan Moeller offers these four tips for anyone considering a consumer real estate investment:

1. Don’t count on appreciation. Appreciation is a bonus.

2. Watch the loan-to-value ratio. Ideally, the total cost of the purchase, fees, and repairs should be no more than 70 percent of the appraised value of property in good condition.

3. Maximize annual return. Aim for properties that can be rented for at least 1.5 percent to 3 percent of the purchase price. For example, plan to pay no more than $50,000 for a property that can be rented for $750 per month.

4. Have an exit strategy. Seek properties that are attractive enough to have value no matter what happens to the market – as rentals, for sale to other investors, or for sale to somebody who plans to live there via conventional financing or lease purchase.

Source: BiggerPockets.com, Ryan Moeller (09/01/2010)

Five Reasons Homeownership Trumps Renting

The seemingly endless run of bad housing news is discouraging some potential home buyers from considering a purchase. But the truth is that the advantages of homeownership have very little to do with investment gains. The best things about owning a home have a lot more to do with personal comfort and satisfaction.

Here are five of them:

· Be your own landlord. The bank can only kick you out if you don’t pay; a landlord can be much less dependable – deciding to sell the property or choosing to live there themselves.

· Paying the principal is forced savings. Yes, it’s possible that home prices will fall further. It is also possible that your 401(k) will lose value. But over the long haul, both are likely to enjoy modest gains in value.

· Fixed-rate mortgages never rise – and eventually you pay them off. With mortgage rates at record lows, people who buy now are locking in real bargains.

· Good schools. Family-sized rentals are harder to come by in areas with excellent public schools.

· Spacious properties in pleasant neighborhoods. Sizable homes in attractive communities are almost always owned – not rented.

Source: The New York Times, Ron Lieber (08/27/2010)

20-Year Mortgages Cut Interest Significantly

Buyers with the ability to stretch a little might consider a 20-year fixed-rate mortgage instead of the traditional 30-year, suggests CBS Money Matters’ financial adviser Ray Martin.

Martin points out that a $200,000 mortgage with a 30-year term and an interest rate of 4.75 would have a monthly payment of $1,043 and the total interest over the life of the loan would be $175,600.

The same mortgage with a 20-year term at 4.5 percent would have a monthly payment of $1,265 with total interest over the life of the mortgage of $103,670.

Young home buyers planning to have children will have their 20-year mortgage paid off by the time their kids enter college, a big financial advantage, Martin points out.

Source: CBS, Ray Martin (08/04/2010)

Five Surprising Reasons to Buy a Home Now

ForSaleByOwner.com offers five good reasons why now is a great time to buy a house:

1. Low mortgage rates serve as an equity shock absorber. When buyers borrow at today's record-low rates, they start building equity as soon as they close. That means they can absorb a few ups and downs as the still-recovering housing market gains traction.

2. Houses are in move-in condition. Home owners have continued to spend on maintenance and repair, according to the Harvard Joint Center on Housing. As these houses enter the market, they are in marked contrast to tattered foreclosures.

3. Terrific houses are coming on the market. Foreclosures are finally starting to clear the system, and they are being replaced by some very attractive properties.

4. Appraisal regulations are finally aligned with market realities. Fannie Mae has adjusted its appraisal guidelines, giving appraisers more flexibility to set values that reflect the current market.

5. Plenty of programs. Many programs that encourage middle-class families to buy homes continue to exist, despite market downturns. Buyers who qualify can get a big boost by combining one of these programs with today's low mortgage rates.


Source: ForSaleByOwner.com (07/29/2010)

Renting Unsold Property May Be a Good Move

Home owners who can’t or don’t want to sell their homes in today’s market but must move should consider renting out the property.

Current rents may not be high enough to cover carrying charges, including mortgage, taxes, and insurance. Nevertheless, renting out the property may still make sense if property values rise in the next few years.

Offering a 12-month lease that converts to month-to-month is a good idea, if the owners are considering selling eventually. Include language in the lease that allows a real estate professional to show the home to potential buyers with 24 hours’ notice to tenants.

Source: Money Magazine, Amanda Gengler (07/28/2010)

Seller Financing Can Have Tax Advantages

Offering to hold either a second mortgage or a primary mortgage in either a residential or a commercial sale can be a good deal for the seller.

The primary advantage is deferral of taxes due. Sellers are normally taxed as the principal is received, spreading the tax bill over several years, explains Richard Schank, a financial planner with PTS Brokerage in Mt. Laurel, N.J.

Other advantages can include:

· Support for a higher-than-average price.
· An interest rate that provides a relatively high return on investment.

The safest arrangement includes obtaining a deed in lieu of foreclosure from the buyer, which allows the seller to take back the property if the note isn’t paid in a timely fashion.

Source: Investor’s Business Daily, Jeff Schnepper (07/15/2010)

What to Look for in an Outdoor Kitchen

Outdoor kitchens continue to be one of the hottest trends in home décor, but not all of them are created equal.

Here are some things to consider when evaluating the safety and durability of this attractive yet vulnerable feature:

• Is there adequate ventilation? Extensive outdoor cooking spaces should be carefully designed to keep smoke and odors away from dining spaces.
• Was the installation done by licensed and insured installers? If something does goes wrong — even years later — these professionals will stand behind their work.
• Are the cabinets, countertops, and appliances really weather proof and likely to hold up?

Source: The Plain Dealer (Cleveland, Ohio), Roxanne Washington (07/01/2010)

100 Dollars Can Go a Long Way for a Great Looking Yard

Got a hundred bucks and a free weekend? Then you've got what it takes to invest in some yard care improvements.

"Some of the best upgrades to your yard can be done with a few dollars and a few hours," says Trey Rogers, Ph.D., the Briggs & Stratton Yard Doctor. "When budgets are tight, get creative and do it yourself."

For those who'd like one-on-one advice from Rogers, enter the Yard Smarts Boot Camp. Attendees will learn how to easily take care of their yard, tour amazing green spaces and win a new lawn mower and more. Visit www.yardsmarts.com to enter.

What can you do for $100 right now?

-- Mow the right way. Don't scalp your lawn. Instead, let it grow a little longer, which is healthy for the lawn. When you mow, cut only one-third the length of the grass blade. Cost: About $3.00 for a month of mowing.

-- Apply bark mulch. Few things dress up a yard more than mulch around flowerbeds and trees. Cost: About $3.00 per bag.

-- Fertilize naturally. When you mow, leave a light layer of grass clippings on the lawn as a natural fertilizer. Cost: $0.

-- Maintain your mower. Once a year, change the oil, replace the spark plug and change the filter. Tune-up kits are available and make it easy. Cost: $10-14 for a walk-behind mower.

-- Let nature water your lawn. If water is costly where you live, let nature handle irrigation. If too little rain falls, your lawn may go dormant, but unless you are in a drought situation, it will green up again when the rain falls. Cost: $0.

With the rest of your $100 bill, splurge on some annual flowers to dress up your front doorway, patio or deck.

Source: RISMEDIA, June 29, 2010

Renting Can Be a Good Option for Sellers

Home owners who have been trying to sell their properties for a year or more might consider lease or a rent-to-own option.

A lease option agreement gives the tenant the option to buy at a predetermined price for a rent that is slightly higher than market. In a lease purchase, a buyer commits to buying the property. In exchange, the seller credits a percentage of each payment toward the purchase price.

Either arrangement is likely to attract serious renters who would like to buy the property if they can. In exchange, they’ll take good care of it.

Negotiating these agreements can be tricky, and the owner should always get help from a real estate attorney.

Source: The Wall Street Journal, June Fletcher (06/16/2010)

Mortgage Rates Hit an All-Time Low

Average interest on a 30-year fixed mortgage fell to an all-time low of 4.69 percent this week, down from 4.75 percent a week ago, reports Freddie Mac.

Although rates have held below 5 percent since early May, Michael Fratantoni of the Mortgage Bankers Association notes that demand for purchase loans has fallen in six of the past seven weeks and now is at a 13-year low. Consumers have grown used to low rates, he explains, adding that they balk at buying because they are more concerned about stagnant wages and high unemployment.

Source: Washington Post, Dina ElBoghdady (06/25/10)

Effort to Extend Tax Credit Closing Deadline Gains

The U.S. Senate voted Wednesday to extend the home buyer tax credit closing deadline to Sept. 30, giving an estimated 180,000 buyers who met the contract deadline of April 30 extra time to close the transaction. The extension was added to a bill to pay for jobless benefits, which still must pass.

The NATIONAL ASSOCIATION OF REALTORS® estimates that one-third of qualified applicants have been notified that they will be unable to close by the deadline. The Mortgage Bankers Association says delays are caused largely by the volume of transactions.

The overall bill, once it passes the Senate, must be approved by the House.

Source: Associated Press, Andrew Taylor (06/16/2010)

After foreclosure: How long until you can buy again?

Financing a home after foreclosure is possible for most homeowners. Those who default on their mortgages due to economic hardships, such as job loss, may receive approval for another mortgage in as little as two years, while it may take more than seven years for strategic defaulters to be approved.

• Lenders utilize several methods in determining whether to grant mortgages, including the amount of money borrowers have saved; employment histories; and payment history.

• According to the chief economist with the Mortgage Bankers Association, lenders may be more willing to finance a mortgage for a borrower who defaulted on their mortgage as a result of factors beyond their control.

• Some homeowners who strategically default—intentionally not meet their mortgage obligations although they have the financial means to do so—assume they can raise their FICO scores by paying their others bills on time. However, most future loan underwriters will scrutinize their records very closely, and if they determine the borrower strategically defaulted on their previous mortgage, the repaired credit score will not overshadow the walkaway.

• Although not impossible for strategic defaulters to finance another home purchase, it likely will be more difficult. Lenders may ask for down payments of 30 percent or more to provide sufficient collateral to enable the bank to recoup most of its money in a foreclosure. These borrowers also may be charged higher interest rates, even above the levels other borrowers with similar credit scores would receive.

For more information, see article

(Source: CAR & CNNMoney.com, 06/04/2010)

How to Help a Family Member Buy a Home

Helping someone close to you buy a low-cost property – $50,000 or less – is a fairly straight-forward transaction, although it may require specific legal advice, says Charles Carter, an attorney and a consultant at Haint Blue Realty in Mount Pleasant, S.C.

Carter suggests that buying a property outright, using the gift exclusion ($13,000 for singles; $26,000 for married couples) to pay for a down payment and closing costs and then giving the recipient a 30-year mortgage on the remaining amount at 5 percent interest is a good way to go.

There won’t be any gift taxes. And the mortgage holder may later cancel the mortgage and gift what remains on the loan as another annual gift-tax exclusion.

Source: McClatchy-Tribune News Service, Charles Carter (06/03/2010)

Fannie Tightens Interest-Only Requirements

Fannie Mae announced Friday that it plans to require borrowers using interest-only mortgages to put down 30 percent of the sale price.

Fannie Mae also said it will only buy adjustable-rate mortgages underwritten to require that borrowers could afford the loans even if interest rates reset to the higher of either:

1. The loan’s initial interest rate plus two percentage points.
2. The cap, the maximum the interest rate can rise.

"Our goal is to make sure consumers can sustain their mortgages and remain in their homes over the long-term, while helping our lender partners offer a range of mortgage products for qualified borrowers," says Marianne Sullivan, senior vice president of Single Family Credit Policy and Risk Management at Fannie Mae, in a prepared release.

Source: CNN Money.com, Les Christie (04/30/2010)

Service Members Get Extra Year for Tax Credit

Members of the U.S. military, foreign service and intelligence communities have another year to purchase a home and claim the home buyer tax credit.

Any service member who is or has been on extended duty for 90 days or more between Jan. 1, 2009 to April 30, 2010, has until April 30, 2011, to sign a sales contract and until June 30, 2011, to close on the property. Both the $8,000 first-time and the $6,500 repeat home buyer tax credits are included in the extension.

The rule that requires buyers to repay the credit if they move out of their home within three years has also been waived for qualified service members if they receive government orders to move.

Source: The National Association of Home Builders (04/26/2010)

How Delinquencies Impair Your Credit Score

Fair Isaac, which developed FICO scores, used a comparison between two people to explain how mortgage delinquencies affect credit scores.

Fair Isaac derived these numbers from a theoretical calculation based on hypothetical borrowers – one with an initial score of 680 and one with an initial score of 780. FICO scores range from 300 to 850.

The hypothetical person behind the 680 score had six credit accounts, while the person with the 780 score had 10. The consumer with the 780 score had no missed payments other than the mortgage; the 680 example had two late payments before they failed to pay the mortgage.

After a mortgage delinquency, the two scores would look like this:

• After 30-day delinquency, 680 score drops to 620 to 640; 780 score declines to 670 to 690.

• After 90-day delinquency, 680 score falls to 595 to 610; 780 score goes to 645 to 665.

• After foreclosure, short sale, or deed-in-lieu, 680 goes to 575 to 595 and 780 drops to 620 to 640.

• After bankruptcy, 680 drops to 530 to 550; 780 declines to 540 to 560.

Source: CNN, Les Christie (04/22/2010)