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New U.S. single-family home sales soared in December, rising faster than expected to their highest level in eight months.
Early Wednesday, the Commerce Department said sales jumped 17.5 percent last month to a seasonally adjusted 329,000 unit annual rate after a downwardly revised 280,000-unit pace in November. Prices in December were the highest since April 2008, raising cautious optimism for a housing market recovery.
Economists polled by Reuters had forecast new home sales rising to a 300,000-unit pace in December from a previously reported 290,000 unit rate.
Compared to December last year, sales were down 7.6 percent. Overall 2010 sales dropped 14.4 percent to a record low 321,000 units.
Data last week showed a surge in sales of previously owned homes in December, but progress could be frustrated by a glut of homes from an unrelenting wave of foreclosures. The housing market has remained on the margins even as the broader economy shows signs of gaining strength and broadening out.
At December's home sales pace, the supply of new homes on the market fell to 6.9 months' worth, the lowest since April, from 8.4 months' worth in November. There were 190,000 new homes available for sale in December, the lowest in 43 years.
The median sales price for a new home increased 12.1 percent last month from November to $241,500, the highest since April 2008. Compared with December last year, the median price was 8.5 percent, the biggest increase since August.
If one of your goals this year is to make the shift from renter to homeowner, you should begin preparations now for an exciting emotional and financial adventure.
Before you start the home-buying process, make sure you are ready to buy a home where you will live for three to five years or longer, since it can take that long to build equity in a home and recoup your investment costs. Think about your dream home and your dream neighborhood, but recognize that you may need to sift through these dreams to find a community and a home that you can comfortably afford.
Anyone who has watched the news in the past few years should be aware that home prices have fallen in most real estate markets, and that interest rates are at historically low levels — both factors that make buying your first home more affordable.
Here are some tips to get you started on the step-by-step process of buying a home:
1. Check your credit score Lenders base your mortgage qualification on a variety of factors, including your income and assets, your debt-to-income ratio, your pattern of savings and your job stability. But the most important factor in today's tightened credit world is your credit score. Lenders tie the interest rate you must pay to your credit score, so that borrowers with a score of 720 and sometimes 740 and above are the only ones who will pay the lowest mortgage rates. Borrowers with a credit score below 620 may not qualify at all for a mortgage until they can improve their score.
2. Set your housing budget A lender will tell you how much you can borrow, but each potential homeowner should create a simple budget for themselves with income and spending to determine how much they are willing to spend on housing payments. Financial experts recommend that homeowners spend a maximum of about 30% of their gross monthly income on principal, interest, homeowners insurance and taxes. Don't forget to budget about 1% of the home price for condo or homeowner association fees and maintenance costs.
3. Start saving and stop spending Once you have an estimate of your mortgage payment, start saving the difference between that payment and your current rent every month. In addition to building your savings, this allows you to get comfortable with a higher housing payment.
4. Meet with a lender Get pre-qualified for a mortgage loan before you look at homes so you can avoid falling in love with a home you cannot afford. You may be surprised to discover you can afford something pricier than you thought since interest rates are so low. Make sure you ask your lender about your variety of loan options and get an idea of how much cash you will need for a down payment and closing costs.
5. Find a reputable realtor All buyers should have a realtor to represent their interests during negotiations and to help buyers recognize the value in different homes and neighborhoods. Your realtor should be experienced, knowledgeable and familiar with where you want to live. Trusting your realtor is vitally important to buying your first home.
6. Narrow your priorities Decide whether it is more important to you to live in a particular type of home (a single family home with a garage or a condo in a high rise) or in a particular neighborhood. If you cannot find or afford everything you want in your first home, you may need to make some compromises.
7. Choose a neighborhood Some neighborhoods hold onto their value more than others during a housing downturn. Work with a knowledgeable realtor to find a neighborhood that meets your needs - somewhere you will be happy as well as feel safe that home values are stable or rising.
8. Make a reasonable offer If you love a house and don't want to lose it, don't make a low-ball offer. Some sellers are willing to negotiate and others are not. A trustworthy realtor can walk you through the process to make sure you are dealt with fairly.
9. Have a home inspection Never buy a home without having it inspected. Not only are you looking for serious flaws in the home, but you can learn a lot about home maintenance and what to expect in terms of repairing or replacing systems and appliances as an owner.
10. Finalize the details After the contract has been signed, make sure to stay in constant touch with your realtor and your lender to be sure your financing is taken care of along with all insurance needs. A good realtor will have a checklist to make sure everything is accomplished in time for settlement.
The bottom line Buying your first home can be an exhilarating experience, provided you do some research, stay within a comfortable budget and work with reputable professionals who will guide you through the process.
Have you ever dreamed of living in the middle of the San Francisco Bay? Now you have your chance, sort of.
The only privately held island in the bay has officially hit the market for a mere $22 million. The price will get you the right to say you own Red Rock Island near the Richmond/San Rafael bridge.
The 4.114 acre island sits in the middle of the bay and is vacant land that is part of four counties.
The Zillow.com listing for the island does not say whether the owner would be allowed to build on the uninhabited island but $22 million will guarantee you "the mineral rights and bragging rights."
Intrigued by the uniqueness of the real estate, Mission Mission dug into the island's past and found that it once was used by Russian and Aluet fur hunters, who camped on the island, while hunting sea otters in the 1800s.
But perhaps even better is the rumor that pirate gold could be buried on the island
Sea Kayaker and Explorer writes on his blog that on "old charts the island was called Treasure Rock and Golden Rock because of such (pirate) tales."
With a monthly payment of only $90,000, Red Rock Island may be worth the price in bragging rights and cool stories alone.
Most home owners opt to add some upgrades to a new home, which can be rolled into the mortgage opposed to paying for them later on their own. But the choices of what flooring, lighting, or other upgrades to choose can be overwhelming.
Designer Candice Olson, author and host of HGTV's "Candice Tells All," says lighting and extra wiring are key upgrades new home buyers should consider.
"Adding lighting -- or at least the wiring for it -- means you'll be able to have bathroom sconces instead of that one overhead light the builder gives you,” Olson says. “Your flat-screen TV can be where you want it. You'll have a floor outlet for the lamp in middle of the open room. And you won't be ripping out walls later to do all this."
Also, she says home owners shouldn’t forget about the exterior lighting either. "Outside lighting, plus landscaping, will set apart your house from the others in the neighborhood where buyers chose from plans A, B and C," Olson says.
As for flooring, Olson recommends hardwood floors for the main living areas, and cork floors for the basement, since there’s potential for water leakage in basements.
She also says the addition of taller baseboards, chair rails, crown molding, coffered ceilings, built-ins or a banquette also are smart investments for upgrades.
Source: “Decisions, Decisions: Add Character to Your Home With a Few Choice Upgrades,” Chicago Tribune (Feb. 4, 2011) Photo: Illuminated Interiors
Getting a mortgage in today’s lending market isn’t easy and can be a complicated, stressful process for borrowers, according to findings from a national survey by MortgageMatch.com of 1,000 adults.
About 70 percent of Americans say access to affordable mortgages is a serious problem, and that understanding the mortgage process and lenders’ requirements is even more difficult and stressful than getting the mortgage itself or even negotiating the sale price on the home.
Nearly 80 percent of recent home buyers, particularly those earning $50,000 a year or more, say getting a mortgage was much more difficult than they had expected. And nearly a quarter of home buyers said waiting to hear if they were approved for a mortgage was even more stressful than waiting to hear if they landed a job.
Among the survey’s other findings:
10.8 percent report their lender gave them a higher interest rate than what they were originally quoted.
22.9 percent said applying for a mortgage was challenging because documentation requirements from their lender kept changing.
21.6 percent of borrowers said their lender used too much technical jargon.
"Over the past few years, a lot of buyers have had a hard time not only getting a loan but getting through the process," says Sue Stewart, senior vice president at Move Inc., which is the operator of MortgageMatch.com. "This survey is a wake-up call and clearly points to the fact that borrowers want a process that's easy to understand and follow. They don't want surprises and they want to be able to depend on their mortgage lender. For most people, the home buying process isn't about the mortgage -- it's about getting a home."
Now is a good time to buy real estate, according to data from Moody’s Analytics. Home affordability has returned to pre-housing bubble levels or even fallen below the average in many U.S. markets.
In fact, housing affordability by the end of September had returned to or fallen below the average reached between 1989-2003 in 47 of the 74 housing markets that Moody Analytics tracked.
In September 2010, the ratio of home prices to annual household income had fallen to 1.6--below the historical average of 1.9 between 1989 and 2003. The ratio peaked in 2005 at 2.3.
"Based on incomes, this is as affordable as it gets," says Mark Zandi, chief economist at Moody's Analytics. "If you can get a loan, these are pretty good times to buy."
Some of the most undervalued markets include Cleveland, Detroit, Las Vegas, Atlanta, and Phoenix.
But those cities also are facing high rates of foreclosures and more borrowers defaulting on their mortgages that could decrease values further in those cities before they start to improve, Zandi says.
In Phoenix, for example, "it's become cheaper to buy than to rent,” Jon Mirmelli, a real estate investor in Scottsdale, Ariz., who rents out foreclosed homes, told The Wall Street Journal. "But the question is: can you qualify for a loan?"
Getting a mortgage is no simple task: It's a complex and time-consuming process, and perhaps one of the most significant events of our lives, at least in financial terms. Here are ten potential pitfalls to avoid:
1. Not checking your credit: Long before you begin searching for a mortgage, you should know where you stand in the credit score department. After all, a bad credit score can bump up your mortgage interest rate several percentage points or leave you with no approval at all. Be sure you check your credit early on (several months in advance) in case any changes need to be made to get it back up to snuff.
2. Applying for new credit alongside the mortgage: In this same vein, be sure to avoid applying for any other type of credit before and during the mortgage application process. Whenever you apply for new credit, you're seen as a greater credit risk, at least initially. If you happen to apply for a credit card or auto loan around the same time you apply for a mortgage, your credit score might get dinged enough to kill your eligibility or bump up your interest rate.
3. Failing to look at the total housing payment: A mortgage payment consists of principal, interest, taxes, and insurance (PITI). A common mistake made by prospective home buyers is not factoring in their property taxes and insurance premium into their overall mortgage budget. The debt-to-income ratio (DTI ratio), used to determine if a borrower will qualify for a certain mortgage payment, is calculated by dividing the proposed cost of PITI by gross monthly income. A $1,200 homeowner's insurance policy would add $100 per month to an escrowed mortgage payment.
4. Not seasoning your assets: The bank or lender will want to see that you can actually pay your mortgage each month. But without seasoned assets, those that have been in your own account for at least a couple months, you could be out of luck entirely. Some borrowers seem to think they can transfer funds from a relative's account days before applying, but this simply won't fly once the underwriter uncovers the paper trail.
5. Job hopping: Another key to mortgage approval is steady employment and income. An underwriter will want to know that the income you bring in every month is consistent and expected to continue into the foreseeable future. So don't jump from job to job too much before applying for a mortgage. If it's in the same field, it shouldn't be a deal killer, but a career change will lead to problems. If you're thinking about jumping ship, wait until you've closed your mortgage first.
6. Not getting pre-approved: Good preparation is the key to a good mortgage. Before shopping for a home, make sure you can actually qualify for financing by getting a pre-approval. A mortgage pre-approval is more robust than a simple pre-qualification because the bank pulls your credit and looks at your income, assets, and employment. Your DTI ratio will also come into play to ensure you know exactly how much you can afford. With this pre-approval, you will also get a written commitment from the lender that will show home sellers you're serious about the purchase.
7. Not shopping around: But just because you're pre-approved with one bank doesn't mean you need to obtain financing from them. Be sure to shop around with multiple banks and lenders and even consider a mortgage broker. A broker can shop your rate with a number of banks concurrently and find you the lowest rate with the best terms. Don't be one of the many consumers who obtains a single mortgage rate prior to applying. Comparison shop as you would for anything else you buy. And don't forget to factor in closing costs!
8. Chasing exotic loan programs: Shop around for the lowest rate and closing costs, but not at the expense of your mortgage. Anything that sounds too good to be true most likely is. If the payment seems too low, you might be paying interest-only or even negatively amortizing, meaning your mortgage balance is growing each month. It's best to keep it simple and go with a loan program you can get your head around, like a fixed-rate mortgage.
9. Forgetting to lock your rate: Keep in mind that a mortgage rate means very little if it's not locked-in. If you're happy with your rate, lock it. Mortgage rates change daily and sometimes several times daily. All those mortgage quotes you obtain are just quotes until you actually tell the bank, lender, or broker to "lock it in." Once locked, your rate is guaranteed for a certain period of time, be it 7 days, 15 days, or a month. But never assume your rate is locked until you get it in writing!
10. Not reading your loan documents: Finally, it's your responsibility to read and accept the terms of your new mortgage. Sure, it might be a pain to go through all the loan documents at signing, but it's a bigger pain to sign up for something you don't want or agree with. Take the time at closing to ensure you understand everything you're signing, and thereby agreeing to. And don't be afraid to ask questions! Otherwise, you could wind up with a mortgage with predatory terms and no place to turn.
provided by
Colin Robertson is the author of several finance websites aimed at helping consumers save money, including The Truth About Mortgage and The Truth About Credit Cards, which includes his popular credit score range.
Every state in the USA except for Hawaii had snow recently, and the nation is a long way from springtime – which is traditionally the busiest time of year for residential real estate sales. Most of the country is still within the deep freeze of winter weather, and very few LGBT buyers are in the mood for looking at houses while trudging around in slush and slipping on icy walkways.
But LGBT buyers and sellers do need to start looking ahead in order to prepare for the 2011 real estate market. This year promises to be a pivotal one as the general economy gains momentum and the real estate sector leads the way in that recovery. Here are some highlights of what to expect in the coming months, based on current market data, housing trends, and the predictions of many experts within the industry.
Interest Rates on Mortgage Loans
The best news for both buyers and sellers is that mortgage interest rates are near the lowest levels they have been since banks started keeping historical records on mortgage data. That means that in 2011 it is possible to take out a home loan and get a mortgage that would make several generations of parents and grandparents jealous.
To put today’s rates into perspective it is worth pointing out that during the past 50 years there were many times when Americans paid extra points to get a loan that was lower than seven percent. In fact many people were thrilled to get a loan that was under 10 percent. By contrast, rates on reliable fixed-rate loans today have been hovering slightly above or below 4.5 percent and are a bargain by any historical measure.
But they are not expected to last forever, and the Fed has been wrestling with inflation for months while artificially keeping rates down in order to stimulate the economy. Once the economy appears healthy enough to handle it, rates will likely start going up and may never come down this far again – so those who want to take advantage of them need to act now. By next year these phenomenal rates and exceptionally attractive low monthly payments may be a relic of the past.
The Foreclosure Market
The Massachusetts high court recently reversed two foreclosures, taking the homes back from the lenders who had repossessed them and returning them to the original homeowners. Justice Ralph Gants, writing for the Massachusetts Supreme Court, explained that the banks had “failed to make the required showing that they were the holders of the mortgages at the time of foreclosure.” In the wake of the so-called “robo-signing” scandal – which exposed the fact that lenders were foreclosing without reviewing documents or showing enough legal proof – the courts may hear thousands of similar cases in 2011.
It is much too soon to predict the outcome or impact of those decisions. But many real estate, mortgage finance, and legal experts do anticipate that the unprecedented high volume of foreclosures will drop off dramatically as lenders double check their paperwork. Especially following those landmark cases in Massachusetts, mortgage companies want to ensure that they are not breaking the law or risking an expensive lawsuit from a wronged investor or homeowner.
What that means in practical terms for LGBT buyers and sellers is a return to normalcy. While there will still be foreclosures, calming down the frantic pace of processing them will help prevent the rapidly plummeting prices seen over the past 2-3 years. In lieu of these developments, LGBT buyers may want to avoid the foreclosure market for the time being, as volatile legal issues get resolved. Meanwhile LGBT home sellers can expect more price support and fewer unexpected negative surprises in the market. That will enhance home values – or at least hold them steady so that they don’t continue a precipitous decline.
The Overall Real Estate Climate
Economist Christopher Thornberg – who was one of the only experts to accurately predict the real estate crash – was recently quoted in the Los Angeles Times. He summed up today’s real estate market rather well when he said, “Prices went from stupid-high levels to levels that made sense again.”
LGBT consumers should not expect the real estate market to come roaring back in Roaring 20s style. Those days of ridiculous price inflation and constant flipping of houses for higher profits – supported by toxic assets and predatory lending practices – are gone for good. But by the same token they should trust that the worst is over and real estate is not a scary place to invest for those who use common sense.
Interest rates are dirt cheap. The selection of homes for sale is excellent. Prices are reasonable, and housing is affordable. So 2011 should be a great year for buying and a much better year for selling – with an optimistic outlook that will continue to improve as the overall economy strengthens.
To find real estate and mortgage professionals dedicated to support of the LGBT community, visit www.GayMortgageLoans.com and www.GayRealEstate.com, or call toll free 1-888-420-MOVE (6683).
Financial experts suggest that borrowers should apply for a new mortgage loan, or refinance their home loan when the time is right for their individual needs, rather than attempt to time the market. While risk takers may be enthusiastic about waiting until the last minute to lock in a low mortgage interest rate, most homeowners and homebuyers prefer to observe general mortgage market trends and focus more intently on their own finances.
Predicting a specific mortgage rate for a particular time is pretty nearly impossible, but real estate market observers have identified a few trends that they anticipate will impact the mortgage market in 2011:
1. Mortgage rates will slowly rise throughout the year The Mortgage Bankers Association (MBA) anticipates that rates will rise slightly in 2011, hovering around 5 percent and increasing to about 6 percent in 2012. Holden Lewis of Bankrate wrote this past fall that economists had predicted a rise in mortgage rates by the third quarter of 2010. At the end of 2010, mortgage rates began to climb out of the 4 percent range and slightly above 5 percent. While any increase in mortgage rates is unwelcome to homeowners who want to refinance or to buyers, a 5 percent mortgage rate is still historically in the low range of interest rates.
2. Overall demand for mortgages will decrease The MBA predicts that total mortgage originations for 2011 will decline to less than $1 trillion, driven by subdued economic growth and a lack of consumer confidence.
3. Mortgage refinancing applications will drop Mortgage refinancing has represented a large portion of all mortgage applications in any given week this year, with the refinancing applications accounting for about 80 percent of all mortgages written this year. The MBA predicts that refinancing activity will drop below 40 percent of mortgages in 2011 and decline further to 26 percent of mortgages in 2012. Not only will rising mortgage rates reduce the demand for refinancing, but the pool of qualified homeowners will shrink. Homeowners who could qualify are likely to have done so in 2010, and others have difficulty obtaining a loan approval because of reduced equity or credit or income challenges.
4. Mortgage applications for a home purchase will become a greater part of the market The MBA predicts that stabilizing home prices and modest increases in home sales will increase the number of applications for a mortgage for a home purchase.
5. Jumbo loan mortgages will be more attractive In 2009 and earlier in 2010, mortgage rates for jumbo loans (loans over $417,000 in most housing markets and above $729,750 in high-cost housing markets) were far higher than mortgage rates for conforming loans. The higher rates prevented homeowners from refinancing and kept some purchasers out of the market for more expensive homes. In the Q4 of 2010, mortgage rates on jumbo loans decreased, which will likely spur refinancing applications and purchase applications for the high-end housing market.
6. All-cash purchases will become a larger part of the market Lawrence Yun, chief economist of the National Association of Realtors, says that all-cash purchases represented about a quarter of all existing home purchases in the last four months of 2010. He anticipates all-cash purchases to continue to represent a significant portion of the market in 2011.
7. The mortgage loan process will remain slow and complex Holden Lewis at Bankrate says even if the number of loan applications drops, lenders anticipate that the time between application and closing will continue to take as much as 60 days. In fact, many lenders recommend a loan lock of 60, 75 or even 90 days to ensure that the loan process will be complete within the lock period. One issue is simply the new level of documentation and verification that is required for a loan approval. Another issue that slows refinancing applications is the existence of a second mortgage or a home equity line of credit, which must be re-subordinated to the first loan when refinancing. Getting a lender to agree to keep the home equity loan in the second position can be time-consuming.
The bottom line While these general mortgage trends may impact the real estate market overall, each homeowner or buyer considering applying for a mortgage should meet with a lender to determine the cost and availability of a loan that meets his or her needs.
“In our view it’s the richness of diversity – like a colorful tapestry, that makes the world and our
neighborhood such a wonderful place.” ~ Jeffery Adolph Hammerberg & Merlin Parker Denver, CO
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