Start Your Projects

Summertime is almost here and millions of Americans will be starting home improvement projects.  Whether they're classified as maintenance, updating or energy saving, they should make homeownership more enjoyable.

Remodeling magazine's 2010-11 Cost vs. Value Report suggests that some improvements are a better investment than others.  Front door and garage door replacements are two of the easiest and return the greatest percentage of cost on resale.

Kitchen and bathroom updates transform an older home and instantly give visitors and buyers a fresh impression. Countertops and appliances can be expensive but yield great results.  Painting the cabinets and replacing the hardware is much less expensive to change the look and feel of the rooms.

Energy efficiency enhancements can improve your enjoyment of the home and help save money on utility costs.

• Replace older appliances - refrigerators, ceiling fans, water heaters, air-conditioners
• Add insulation to keep your home cool in the summer and warm in the winter
• Seal air leaks around doors and windows; holes in attics and crawl spaces with caulk, spray foam or weather stripping - more information
• Seal all heating and cooling system ducts - more information

Looking through the eyes of a buyer could show you what features most date your home and could order the priority that you tackle the projects.

5223 Lincoln Shire Court - Dallas_TX_75287

5223 Lincoln Shire Court - Dallas_TX_75287

Not as Flush as You Think

Not as Flush as You Think

You've got $500,000 in liquid assets for your retirement and you're still 15 years away.  All your bills are paid;  have a small mortgage on your home; cars are paid for and great credit.  You're planning on sailing into retirement...or maybe not.

If you want to retire with $100,000 income in today's dollars and expect to live for 25 years after retirement, you'll need to have a net worth of $2,267,130 at retirement age not counting what Social Security may provide.  Your $500,000 will grow to $813,720 in 15 years which will leave you almost $1.5 million short.  You'll need to save $76,442 each year for the next 15 years.

Is this surprising?  Did you even imagine that you were that far away from where you need to be?  It might be a staggering amount to save each year but there is another way...investing.  Probably not in a 5 year certificate of deposit that earns 2.25% or a volatile stock market that seems to go up or down without logic.

Real estate over the long term has proven to be a solid, predictable investment.  With the price corrections in the last three years combined with today's low interest rates make housing very affordable.  Rents are going up in many markets and owning rental property is very attractive.

Step one is to buy your own home and then, start aquiring good rental properties.  A successful strategy includes average price range or lower, in average condition, in predominantly owner-occupied neighborhoods.  Rental homes are more more attractive than alternative investments because they provide high loan-to-value mortgages at fixed rates for 30 years on appreciating assets with tax advantages and reasonable control.

If you would like to explore the possibility of investing in rental property, attend Introduction to Rental Properties, a FREE webinar on Saturday, December 18, 2010 at 10 AM Central Time Zone.  Register Now.

The best Family Gift

The Best Family Gift

A home is a place of your own where you can raise your family, share with friends and feel safe and secure. Other benefits for homeowners include better physical health, higher lifetime income, higher student test scores, and lower teen delinquency.

Reduced prices and low interest rates have placed housing affordability at its highest but rates have started inching up in the past few weeks which will directly result in higher payments.

Credit, debt ratios and income are the limiting factors that could be keeping you from taking advantage of these opportunities. Isn't it time you found out where you stand to buy a home?

The benefits of talking with a qualified mortgage officer and pre-approval are without question. It saves time, money and removes the uncertainty of not knowing. The direct benefits include:

• Amount the buyer can borrow - as interest rates rise, the amount decreases
• Looking at "Right" homes - price, size, amenities, location
• Find the best loan - interest rate is tied to credit score; do you qualify for the best rate?
• Uncover credit issues early - time to cure possible problems; 90% of credit reports have errors
• Bargaining power - helps negotiate price, terms and timing
• Close quicker - verifications have been made; takes less time to close

Call me for a recommendation and a list of what you need to share with a loan officer. It may be the best gift you give your family.

Gift card exp.

I was going through a drawer looking for a card when I found an airline ticket credit voucher for $100 that had expired.  What a waste!  That got me to thinking of all of the gift cards that were given this year and will get tucked away and forgotten that may end up expiring too.

That led me to another thought which was the extended tax credit for members of the military, Intelligence and Foreign Service who have served outside of the U.S. for at least 90 days between January 1, 2009 and May 1, 2010.  This gift card comes from Uncle Sam and could be worth $6,500 to $8,000.
Qualifying buyers have until April 30, 2011 to get a completed sales contract and then, must close it by June 30, 2011.  The bonus that comes with this gift card is that the recapture of the tax credit doesn't apply if the qualified service member receives government orders to move prior to the three year residency period completion.  For additional information, go to IRS.gov.
There's more to finding the "Right" home than driving around looking at houses.  A Residential Finance Consultant can help you make better decisions to help you understand the tax advantages, financing alternatives and investment aspects of homeownership.

Daddy , you are the best

A young couple was looking at a home for the third time and had invited their parents to see it.  The dad had quickly asumed his self-appointed role as tire kicker and was talking about how expensive mortgage rates were compared to what a certificate of deposit was paying.
The next thing you know, he has the kids cornered and says to them "I have a CD coming due and if you'll pay me what I'll be earning, I'll loan you the money to buy the home.  You'll save quite a bit even from the low mortgage rates being offered."  The young couple shouts "Daddy...you're the best!"  Dad goes on to say "and this way, you won't have to worry about all those fees the mortgage company charges."
A third party lender would always record the lien to protect the mortgage but Dad may not because of the relationship with the children.  He might not even ask them to sign a note.  This could affect the interest deduction for the buyers.
Even though the young couple will be making payments on the loan, the mortgage must be a recorded lien to be a qualified interest deduction.  This situation definitely warrants professional tax advice and can be easily remedied by having the title company draw a note and mortgage and filing it with the county tax office.

Equity is Forced Savings

Equity is simply the difference in an owner's unpaid balance and the value of their home.  Amortization and appreciation contribute to the equity over time.  The equity is usually realized when the home is sold but it can also be accessed by a home equity loan or a cash out refinance.
Most people think that it takes years to significantly pay down a mortgage and they're partially correct.  A five percent interest rate on a mortgage takes approximately 20 years to pay down half of the original amount borrowed.
A mortgage is like a forced savings account because each payment is first applied to the interest due on the borrowed money but another part pays down the principal.  On a $188,175, 5%, 30 year mortgage, the first payment of $1,010.16 includes $226.10 principal reduction.  In the first year, the owner would have increased the equity in their home $2,776.24.


In the example below, the buyers paid $195,000 for a home that is estimated to appreciate only 1% per year for 7 years.  With a 3.5% down payment, the equity in the home at the end of 7 years would be $41,921.  55% of the equity would come from amortization; 29% would come from appreciation and 16% from the down payment.
 

The Difference a Day Makes

A man was selling a property which was currently rented but had previously been his home for over two years.  After discovering it had been rented for the last 2.5 years, it was asked if he had planned on taking the principal residences capital gain exclusion.  He said he hoped it would be possible.

When asked if he was aware of the requirement that he must have owned and used the home for two out of the last five years (730 days), he said he knew about it but wasn't sure what it meant.  "In this case, it means the home needs to be ready to sell, priced correctly, sold and closed within six months."
The motivation for the seller was simple...minimizing or eliminating the unnecessary payment of taxes.  If his gain in the home had been $200,000, not qualifying for the exclusion would cost him $30,000 in long term capital gains tax.  It's a big difference and timing is important.
Selling a home for the most money is one thing; protecting your best interests is another.  I help people understand the tax advantages, financing alternatives and investment aspects of homeownership.

Homeownership Worth the Sacrifice

A place you can call your own, to raise your family, share with your friends and feel safe and secure.  These are all strong motivations for securing the American Dream of owning your home.

The motivation is so powerful that buyers are willing to sacrifice to make their dream come true.  According to the 2010 NAR Home Buyers and Sellers Survey, 41% of first-time buyers cut spending on luxury or non-essential items.  They also cut spending on entertainment, clothes and even cancelled vacation plans.

The value of getting their own home was more important than the immediate gratification of things that were considered less important.  Consulting with a real estate professional and a recognized lender can outline a proven plan for the first-time buyer to follow.  45 minutes can provide valuable information to get the facts about the market and the best way to make your dream come true.

Sacrifices made to Purchase Home by First-Time Buyers
Cut spending on luxury items or non-essential items	41%
Cut spending on entertainment	23%
Cut spending on clothes	26%
Cancelled vacation plans	15%
Earned extra income through second job	9%
Sold a vehicle or decided not to purchase a vehicle	6%
Other	5%
Did not need to make any sacrifices	45%
NAR 2010 Profile of Home Buyers and Sellers – Exhibit 5-6

Everything Except the Down Payment

It's one thing to have the down payment and not qualify because of credit scores but in today's tough financial environment, it may be even more frustrating to have good credit, income and job stability without the down payment.

The 2010 NAR National Housing Pulse Survey states that 79% of respondents identified the down payment and closing costs as obstacles to homeownership.  73% express a lack of confidence in getting approved based on a concern that banks have made it too hard to qualify for a home loan.

Most buyers depend on the savings or the proceeds from the sale of a previous primary residence for the down payment.  The savvy agent can recommend some other legitimate sources such as a gift from a relative or friend that doesn't have to be repaid.

Another frequently overlooked source of down payments could be the buyer's IRA.  If neither buyer has owned a home within two years, each may withdraw $10,000 from their own IRA to be used to buy a home.  The money must be applied within 120 days from the withdrawal.  The 10% penalty normally associated with early distributions is avoided but it will be subject to income tax since it was exempt the year it was deposited into the IRA.

Full disclosure of the source of the down payment needs to be made to the lender.

Sources of Down Payment First-Time and Repeat Buyers	All Buyers	First-Time	Repeat
Savings	66%	74%	57%
Proceeds from sale of primary residence	23%	1%	42%
Gift from a relative or friend	18%	27%	8%
Sale of stocks or bonds	7%	6%	8%
401k/pension fund including a loan	7%	8%	6%
Loan from a relative or friend	6%	9%	3%
Inheritance	4%	4%	3%
Individual Retirement Account	3%	3%	3%
Equity from primary residence buyer continues to own	2%	*	3%
Loan or financial assistance from source other than employer	2%	3%	1%
Loan from financial institution other than a mortgage	1%	2%	1%
Proceeds from sale of real estate other than primary residence	2%	*	2%
Loan or financial assistance through employer	1%	1%	*
Other	4%	5%	3%
National Association  of REALTORS® Profile of Home Buyers and Sellers 2010

Annual Homeowner’s Advisory

An annual physical is an important proactive approach to personal health and an annual homeowner advisory can be just as beneficial for you and your finances.

Regardless of whether you're moving, knowing the values of homes similar to yours that have sold recently allows you to keep your hand on the pulse of the market.  It should be interesting to know how many homes in the area have sold, their time on the market and how much current inventory is available.

Even though mortgage rates are starting to creep up, it may be the last opportunity to refinance your home to lower your monthly housing costs.  I can provide a simple analysis showing your monthly savings and how long it will take to recapture the cost of refinancing.

A powerful strategy might be to continue making the higher payment from your current mortgage on the newly refinanced mortgage in order to pay the principal down faster.  It will build equity faster and shorten the term of your fixed rate mortgage.

Maybe you'd like to know how much extra you'll need to pay on your mortgage each month to get it paid off by a certain date.  I can quickly calculate that amount and send it to you.

Don't forget to call whenever you need a recommendation of a painter, plumber or other workmen.  We're constantly evaluating service providers based on work done on the homes we're selling.

Contact me if you want information on any of the following:

• List of properties sold and available near subject
• Refinancing analysis to lower your cost of housing
• Estimate to pay off the home within a specific period of time
• Repairmen and contractor recommendations
• Information on rental property opportunities

These services are being offered so you'll consider me your real estate professional, and think of me when you buy, sell or hear of someone who does.

REALLY?

Home prices have come down 20, 30, 40% or more in the last three years and mortgage rates are lower than they've been in 50 years and you still haven't bought a home.  Really?


Housing affordability is over 180, an all-time high when 100 is considered good and you're still renting.  Really?  Are you waiting for it to get  to 200?  Do you think prices and rates are going to get lower?  Really?
You know it's costing you more every month to rent than to own.  Tax savings, appreciation and principal reduction lower the monthly cost of housing and yet you'd rather let your landlord benefit...Really?  Have you heard that the average homeowner has 41 times greater net worth than a renter?  Do you think it's a coincidence?  Really?
And have you heard that most people want a place of their own; a place to raise their family; to share with their friends; to feel safe and secure.  So, you'd rather go home after working hard all day to your landlord's home.  You'd prefer to invite some friends over to your landlord's home for dinner next weekend.  Really?
You haven't checked out whether you can actually take advantage of the best buyer's market ever.  You haven't invested thirty minutes to find out the facts as they apply to you and your situation.  Really?  You're basing a decision on national news, chat rooms and Facebook.  Really?
Every market is different.  Every buyer is unique.  If you want a home; if you have a down payment; if you have good credit, you owe it to yourself and your family to explore the possibilities...but with a real estate professional; someone who can really show you the reasons and really give you options.

Mortgage Myths

• "It's impossible to get low down payment loans." - UNTRUE! 
  FHA down payments are only 3.5% and VA is 0%.  In some areas, there may be some 100% USDA loans available.
   
• "It takes perfect credit to get a loan." - UNTRUE! 
  There is a relationship of better rates to better credit but many issues on a credit report may be explained.  The way to know for sure is to speak to a reliable lender.
   
• "If I've had a bankruptcy or foreclosure, I can't qualify." - UNTRUE!  Credit history following a short sale or foreclosure is very important and there can be extenuating circumstances.  It only takes a few moments with a reliable lending professional to find out if your individual situation will allow you to qualify.
   
• "Getting pre-approved is expensive." - UNTRUE! Usually, the only expense to getting pre-approved is the cost of the credit report which could be around $35.  The advantage is that you will know that you qualify for a particular mortgage amount.
   
• "I should wait to qualify until I find a home." - UNTRUE!  The best interest rates are only available for the highest credit scores.  It can take time to qualify for a mortgage especially if there are issues that need to be corrected.  It is to your advantage to start the qualifying process early in your home search.
   
• "All lenders are the same." - UNTRUE! Reliable lending professionals will explain the entire process before collecting fees, quote fees up-front, have competitive products, do what is necessary to get the loan approved and close at the locked rate and terms.  Ask for recommendations from recent borrowers.
   
• "Adjustable rate mortgages are more expensive than fixed rate mortgages." - UNTRUE! Adjustable rate mortgages can be less expensive than fixed rates if the buyers' circumstances warrant it.  There are many variables and you need to be aware of them before deciding which type of loan to finance your purchase; the ARM may provide the cheapest cost of housing.

Buyers and Sellers need solid information to make good decisions.  The agent who represents you in the sales may be the BEST recommendation for a reliable lender.  The mortgage plays an enormous role in determining the overall cost of housing and you need solid information to make good decisions.

Supersize a VA Loan

Since 2004, the maximum VA loan is the same as the maximum FNMA mortgage which is currently $417,000.  Occasionally, a Veteran wants a loan in excess of that amount.  If the Veteran will put a 25% down payment on the excess amount, a lender will loan the other 75%.

ExampleSales Price                                                         $475,000
Maximum VA Loan                                              $417,000
Excess Amount                                                   $ 58,000
25% Required Down Payment on Excess              $ 14,500
Adjusted Loan                                                    $460,500

VA loans are eligible for veterans of the military with a certificate of eligibility.  A Veteran can get a 100% loan up to the maximum VA loan amount and the seller can pay their closing costs which would allow a Vet to get into a home with no down payment and no closing costs.  The VA Funding Fee can be rolled into the mortgage or paid by the Seller.
When the Vet sells the home, their VA loan is assumable at the existing interest rates but does require qualification of the new buyer.  The benefits would be a possible lower interest rate and lower closing costs.
There's more to finding the "Right" home than driving around looking at houses.  A Residential Finance Consultant can help you make better decisions to help you understand the tax advantages, financing alternatives and investment aspects of homeownership.

Home Inventory

Recently, a homeowner had a burglary and part of the insurance claim was denied because they didn't have proof of purchase or a current inventory of their personal belongings.  This is something that could happen to anyone.  Even if you had an inventory but it was several years old, it could cost you money.
Some homeowners who have placed an insurance claim for losses say that they realized something was missing months after they had filed.  The inventory can actually serve as a guide to make sure you get compensated for all of your loss.
The best proof of purchase is to have a receipt for the item.  The reality of the situation is that most people don't keep receipts.  The next best item is to have an inventory and the more details like pictures, the better.
Contact me for a Home Inventory.  Once you get it completed, put it somewhere safe so you'll have it when you need it.  Saving it in the "Cloud" like  Microsoft Office Live is convenient because you can acess it from any computer with Internet access.

More Affordable Than Ever

The Housing Affordability Index reached a record high of 192.3 for February, 2011. Two contributing factors to the Index are the price adjustments homes have experienced in recent years combined with the unusually low mortgage rates make this an outstanding opportunity for buyers who can qualify.
Before the housing bubble burst in 2006, the index average for the year was 108. The high prices and higher interest rates restricted many buyers from purchasing. As the market started to deteriorate, which resulted in declining values and lower interest rates, the index started to rise.
The opportunities are not being seized by buyers and some real estate professionals feel that it's because there is confusion in the marketplace. Buyers are uncertain whether they would qualify and whether now is a good time to be purchasing a home.
All markets are different and every situation is unique. The only certain way to determine would be to investigate your individual situation. You owe it to yourself and your family to visit with a real estate professional who can show you the real cost of housing and recommend a lender.
The National Association of Realtors releases the index at the end of each month with a two month lag time for compiling the information. When the index is at 100, a median income family can afford a median price home. As the index increases, housing affordability increases.

Cash-In Refinance

Here's an interesting thought. Instead of pulling money out of your equity when refinancing your home, consider putting some cash into your equity. The strategy would be to get a considerably lower rate and a shorter term than 30 years. It will pay off your mortgage sooner, build equity faster and save lots of money in interest.
If you have some extra cash available, this might be very atteractive compared to what your are earning currently on those savings.
In the example below, the current mortgage is at 5% for 30 years with payments of $939.44. The owner can refinance for 15 years at 3.875%. If he puts $30,000 into the refinance, his payments will be slightly more than the current $1,011.06 but the mortgage will be paid off in 15 years. At that same point, if he keeps the current mortgage, his unpaid balance will be $101,572.88.
In order to have the same payments as the mortgage he is refinancing, he'll need to add $39,764.68 to the refinance.
If you have a goal to get your home paid off and you have some funds available, a Cash-In Refinance may be just the strategy for you.

 

Not So Fast Buyers!

One of the challenges buyers are having with financing may be their own understanding or lack thereof.
In a recent survey done by research firm Ipsos for Zillow, a surprising number of incorrect answers to true or false questions were given by prospective buyers.
Over 3/4 didn't realize how the mortgage rate was determined for a borrower thinking that annual income was the most important factor. Other considerations lenders do evaluate are credit score, debt-to-income and loan-to-value ratios.
A variety of myths seem to have influenced some of the common answers such as interest rates are set and released once a day; FHA loans are for first-time buyers only; prequalification commits the lender; lender fees are not negotiable and adjustable rate mortgages always go up.
Buyers' misunderstanding of actual mortgage practices may give some insight into why more of them are not taking advantage of the greatly reduced prices and incredibly low mortgage rates.
While getting solid information about mortgages and being pre-approved from a lender are very important, it is only one step in the home buying process. Success in buying a home in today's unique market should begin with a real estate professional that will coordinate all of the different parts of the transaction including mortgage, title, insurance and inspections.

Buy now or Wait?

Uncertainty as to whether prices will continue to fall has to be one of the most common causes of buyer procrastination.  Paying too much wouldn't be a smart thing but price isn't the only factor to consider.  Interest rates have as much effect on housing costs as price.
A small increase in mortgage interest rates can offset a significant drop in home prices.  If the price of the home were to come down by 5% but the interest rates were to go up by .5%, the payments might be close to the same.
In the example below, if the price of $175,000 home went down 5% but the interest rate went from 4.75% to 5.25%, the payments would actually be $4.98 more at the cheaper price.  If while the buyer was waiting for the home to decrease 5% and the interest rate increased by 1%, the payments would actually go up by $55.30.
Then, of course, there is always the possiblility that the price of the home doesn't go down but the rate does go up by 1%.  The payments would be $104.58 more per month, each and every month for as long as you have the mortgage on the home.
As a Residential Finance Consultant, I can provide solid information that will help you make better buying decisions.  A home is a place to feel safe and secure, to raise your family, share with your friends and an investment.  It's an investment in your marriage, your family and your future.  You owe it to yourself to check out the real numbers in your market because every market is different.