How To Help Your Home Appraise At Its Fair Market Value

October 3, 2012 by

Home values are rising in many U.S. markets. The S&P/Case-Shiller Index has home values up 1.2 percent as compared to last year, and the government’s Home Price Index shows an increase of 3.7 percent.

This has been partially evidenced by rising median home sales prices nationwide. Versus last year, the median sale price of a new construction home has climbed 17 percent, and the median sale price of an existing home sale is higher by 10 percent.

For home sellers, an improving market means the chance to net more proceeds from a home sale. Or does it?

In this 3-minute piece from NBC’s The Today Show, we hear about the home appraisal process and how it may be limiting the number of home sales nationwide, plus the prices at which homes are selling. 

The interview includes several key insights into the home appraisal process :

  • In a rising housing market, a home’s appraised home value may be lower than its “true” market value
  • Short sales and foreclosures can make a negative impact on a home’s appraised value
  • Consolidation in the appraisal industry has lowered product quality and may be harming valuations

One key take-away from the video is that home owners should provide their home appraisers with as much relevant information as possible — especially information which may not be publicly-available. This includes records of recent “all-cash” sales of comparable homes which were never formally listed for sale.

One in three purchase agreements are canceled because of appraisal issues, according to the interview. Take steps to make sure yours is not among them.

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Simple Tips To Keep Your FICO High

September 11, 2012 by

FICO recipeFor today’s home buyers and refinancing households, the value of “good credit” has never been higher.

Mortgage approvals hinge on your FICO score, as does your final mortgage pricing.

If you’re shopping for a home , therefore, or contemplating a refinance, be aware of how everyday credit behaviors can affect your FICO. Even small events can make a big impact.

Here are some common-sense steps to help improve your credit score.

First, keep a “cushion” on your credit cards.

30 percent of your credit score is linked to “Amount Owed” and a big part of Amount Owed is a raw calculation of (1) What you owe in dollar terms, against (2) How much credit you have at your disposal. The credit bureaus want to see at least 70% of your credit “available”. 

If you can keep your cards at least 70% available, your credit scores should improve.

For example, if all of your credit cards give you access to a combined $50,000 and you are using $10,000 of that available credit, you have 80% of your credit available to you and this is “good”.

Raise your balances to $30,000 and this is “bad”.

Second, don’t make major purchases on credit prior to making a mortgage application. This includes opening a store charge card to save 10 percent or more on a washer/dryer set, for example; or for any other appliance or furniture piece.

The reasons why are two-fold. One, store charge cards are often opened with a limit matching your initial charge, rendering them 100% utilized. This is bad for a FICO, as discussed above. And, two, opening a new charge cards has a negative FICO impact anyway.

Charge cards are associated with high default rates. 

Third, make all of your monthly payments on time — even the ones in dispute. You may not want to pay that $80 wireless phone bill, for example; the one that you think you owe, but remember that Payment History accounts for 35% of your credit score. Even one late payment — or payment in collection — and your credit score can drop.

It’s often less expensive to pay a bill in dispute than to be relegated to a higher mortgage rate. The payment is dispute is remedied today. The payment on that mortgage rate lasts for 30 years.

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Making Coupon-Free Savings At The Supermarket

September 5, 2012 by

The average family puts 10-15 percent of its monthly spending toward food, according to the Bureau of Labor Statistics and Department of Agriculture, with most of that food purchased at a supermarket.

The amount spent on food is less than the typical amount spent on housing each month but what makes food costs different from housing expenses is food costs are not “fixed”.

How much you spend on food each month is up to you and, using savvy shopping tactics plus coupons, you can lower your monthly food spend. Saving money on food leaves money for other purposes including savings, clothing and transportation.

In this 4-minute piece from NBC’s The Today Show, you’ll learn several easy-to-implement methods which can reduce your supermarket bills, as well a few “common sense” tactics you may have overlooked.

Among the topics covered in the video :

  • The importance of shopping with a list, and of avoiding “the inner aisles”
  • The value of generic brands, which are often near-copies of “brand name” products
  • Why you should buy toiletries at a drugstore instead of at a supermarket
  • Using “per unit” prices to compare different-sized packaging of the same product
  • Buying fruit that’s in-season versus fruit that’s out-of-season

Another shared money-saving tip is to shop at grocery store without children. It can be fun for the family to shop together, as noted in the interview, but bringing children to the supermarket is a sure-fire way to raise your grocery bill.

Recent inflation data shows that the typical cost of food is rising nationwide. With these tips, perhaps you can lower your bill.

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States With The Highest And Lowest Closing Costs, 2012

August 22, 2012 by

Closing costs by state, 2012

Mortgage rates have been on steady decline since the start of 2012 as uncertainty for the future of the Eurozone and questions about the soundness of the U.S. economy have led investors into mortgage bonds in droves, lowering the 30-year fixed rate mortgage to its lowest point in history.

But it’s not just mortgage rates that are down. Closing costs are, too.

According to Bankrate.com’s annual Mortgage Closing Cost Survey, the average mortgage applicant paid seven percent fewer closing costs in 2012 as compared to 2011, on average. The year prior, costs had increased thirty-seven percent, on average.

A “closing cost” is any fee paid in conjunction with a mortgage settlement that would not be payable if the home was financed with cash. Closing costs for purposes of the Bankrate.com survey include such items as underwriting fees and appraisal costs. County transfer stamps, where required, however, were not included.

Like everything in real estate, closing costs vary by locale. There are some states in which closing costs tend to be high, and other states in which closing costs tend to be low.

The five states with the lowest closing costs for 2012, on average, are :

  1. Missouri : $3,006
  2. Kansas : $3,193
  3. Colorado : $3,199
  4. Iowa : $3,257
  5. Arkansas : $3,325

By contrast, the two most expensive states in which to close a mortgage this year are New York ($5,435) and Texas ($4,619). All figures assume a $200,000 loan size with 20 percent equity and excellent credit.

The good news is that, as a home buyer or refinancing household, you’re often not required to pay the closing costs which are itemized by your bank. When asked, many lenders will offer a low-closing cost or zero-closing cost option.

With low- and zero-closing cost programs, qualifying mortgage rates are raised by a small amount, which increases your monthly mortgage payment. Up-front settlement costs, however, are reduced or eliminated. 

Opting for a low- or zero-closing cost mortgage is a trade-off between upfront costs and ongoing costs. Talk to your loan officer about your options to see which path is best for you.

View average closing costs for all 50 states at Bankrate.com.

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Should You Lease Or Buy Your Next Car? It May Affect Your Mortgage.

August 14, 2012 by

Should you lease a new car, or should you buy one? Like most financial questions, the answer depends on your situation. For some people, leasing a car presents distinct economic advantages. For others, buying a car is the way to go.

There’s plenty of online material to help you choose your optimal path, but this 3-minute piece from NBC’s The Today Show serves as an excellent summary. In it, you’ll learn about the basics of leasing a car, and for whom leasing can be a great fit. You’ll also hear reasons to avoid a lease completely.

The NBC interview makes all of the following points :

  • Leasing allows you to drive a car that may be “too expensive” to purchase
  • Leasing puts you in a new car, with the latest safety features and gadgets, every few years
  • Buying a car means that you have no mileage limits, and can sell at any time

For many people, it concludes, buying a car is preferable to leasing one, with a notable exception being those people who can claim their car or truck as a tax deduction. Be sure to check with your tax advisor if you plan to take that route.

However, for another group — homeowners and active home buyers — leasing a car can invite mortgage approval trouble. This is because a car lease payment is assumed by a mortgage underwriter to be a perpetual debt; one that never reduces or gets extinguished. When a lease is complete, it must be replaced with a new lease, and so on.

Therefore, no matter how many payments remain in a lease, mortgage applicants must use the full car lease payment for purposes of a mortgage approval.

By contrast, for people whom are owners of their automobiles, car payments must only be added to debt ratios if more than 10 car payments remain until the car’s loan is paid-in-full. For homeowners and buyers , this can improve debt-to-income ratios and support a higher purchase price on a home.

There is no firm rule for whether it better to lease a car or to own one. The arguments for both sides are compelling and reasonable. Start with the video, then do your own research. 

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Closing At The End Of August? Plan Ahead For Labor Day Weekend.

August 7, 2012 by

Labor Day ClosingPlanning to make a late-August purchase closing? Keep an eye on your calendar. The last Friday of this month coincides with Labor Day Weekend, which may make for a complicated, end-of-month closing.

If you’re planning to close on, or around, August 31, 2012, plan ahead. Leaving anything to the proverbial last minute could delay your closing by hours in a best-case scenario, and by days in a worst-case.

This is because Labor Day is among the most popular vacation times of the year in the real estate, title and mortgage industries and, as Labor Day approaches, it’s increasingly hard to resolve “issues” related to settlement — not all parties are readily available for resolution.

A small closing issue, therefore, can spiral into a major one when you can’t reach your attorney; or, when the title company is short-staffed, for example. 

For home buyers currently under contract, and for homeowners with a refinance in-process, the best defense at a time like this is a good offense. Get proactive with the mortgage process.

These steps can help your end-of-month closing go more smoothly this month :

  1. Prepay your first year of homeowners insurance, effective your closing date. Provide proof of payment to your lender.
  2. Document and deposit all gifts and retirement withdrawals to be used in conjunction with your closing as early in the process as possible.
  3. If applicable, get Power of Attorney forms signed by all parties, and lender-approved in advance. Don’t leave this for the last week.
  4. When your lender makes requests for paperwork, fulfill the requests within 24 hours, when possible.

In addition, if you’re a home buyer, consider scheduling your home walk-through for as early as can be reasonable. That way, if there’s an issue to resolve, there’s ample time to address it among all parties.

Furthermore, if you have planned vacation time between today and your closing date, make it known to all parties, and make sure to be reachable in the event of emergency by phone and/or email.

Real estate brokerages, title companies and mortgage lenders are notoriously short-staffed as Labor Day approached. Routine tasks take longer than usual. Plan ahead for August 31, therefore. It would be foolish not to.

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Home Purchasing Power Jumps To New Highs

July 10, 2012 by

Purchasing power grows in Q2 2012

With mortgage rates down to all-time lows, you can buy a lot more home for your money. Home affordability is at an all-time high.

According to last week’s Freddie Mac mortgage rate survey, the average 30-year fixed rate mortgage has dropped to 3.62% nationwide. This is down from 4.08% in March, and down from 4.60% from one year ago.

Mortgage rates are “on sale”.

Falling mortgage rates can make one of two changes to the way a home buyer looks at properties. They can either make a given home’s monthly housing payment that much more affordable to a buyer, or they can expand that buyer’s home purchasing power to a higher, maximum price point.

Since July 2011, that maximum price point increase has been significant.

Assuming a principal + interest payment of $1,000 per month and a 30-year loan term, a category that includes 30-year fixed rate mortgages and most adjustable-rate mortgages, here’s a maximum loan size comparison of the last 12 months : 

  • July 2011 : A payment of $1,000 affords a maximum loan size of $197,130
  • July 2012 : A payment of $1,000 affords a maximum loan size of $219,409

With an increase in maximum loan size of more than $22,000 in just 12 months, it’s no wonder that multiple-offer situations are becoming more common — today’s buyers know that low home prices and low mortgage rates are combining to make home buying more affordable than at any time in recent history.

However, the buyer-friendly environment can’t last forever.

First, home prices have started to rise nationwide. Demand for homes has outpaced home supply in many U.S. markets and that leads home prices higher. Second, low mortgage rates can’t last forever.

A recovering economy will lift mortgage rates back above 4 percent, a scenario that will hit home affordability hard.

Home-buying conditions are optimal this season. If you’re in the market for a new home, talk to your real estate agent and loan officer about maximizing your home purchasing power.

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Before Moving, Check Your New Cost Of Living Estimates

June 13, 2012 by

Cost of Living adjustments in a new townWith home values slow to rise and mortgage rates at all-time lows, there’s never been a more affordable time to own a home.

However, there is more to the cost of living than just a mortgage payment. There’s the cost of groceries, gasoline and routine medical care, too.

Not surprisingly, where we live affects our costs.

Big cities are often more expensive in which to live, for example, and local tax laws influence daily costs, too. 

For home buyers moving across state borders, therefore — or even for those moving long distances intra-state — it’s important to know the relative costs in your new hometown as compared to your current one. Your household cash flow depends on it. You can’t know your budget for a home if you don’t know what life in a new town will cost you.

Enter Bankrate.com’s Cost of Living Comparison Calculator.

In comparing the costs of 60 mundane, everyday items, the Cost of Living Comparison calculator can show you how common costs in your current home town compare to costs in your soon-to-be new home town.

The calculator asks for just three inputs — (1) In what city do you live now, (2) To what city are you moving, and (3) What is your current salary — then uses that information to produce a detailed cost comparison.

Some of the Cost of Living items compared include :

  • Ground beef costs
  • Veterinary services costs
  • Dozen egg costs
  • Doctor visit costs
  • Hair care costs

The calculator also includes local mortgage rate differences to help plan for housing, and accounts for median home prices, too.

The online Cost of Living calculator is based on data from the ACCRA. On the ACCRA website, a similar cost comparison report sells for $5. At Bankrate.com, you can get the data for free.

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Planning For A Memorial Day Closing

May 4, 2012 by

Memorial Day ClosingsPlanning to close on your home at the end of May? Plan ahead. Memorial Day is coming and the holiday may delay your closing.

Memorial Day marks the unofficial start of summer and the 3-day Memorial Day weekend is a popular vacation time in real estate-related industries.

Real estate agents tend to take time off because fewer of their clients are actively home shopping on a holiday weekend; mortgage lenders are closed because banks don’t operate on a federal holiday; and, title agents are often away from the office because the former two groups aren’t working.

But what’s supposed to be a 3-day weekend is actually a 4.5-day one. This is because many people leaving for a Memorial Day vacation will not go to work on the Friday before the holiday, and then getting back into the “work groove” on Tuesday can be a half-day affair.

Therefore, if you’re under contract to buy a home , or to sell one; or if you have a refinance in progress that’s expected to close at month-end, there are some steps you should take to get pro-active with your closing. If you’re going to lose 4-and-a-half days at the end of the month, you’ll want to try to make those days up while the month is still young.

Here are 3 quick tips to speed up your closing and approval.

First, get your homeowners insurance policy picked out. Do your comparison shopping, select an insurer, and then prepay your first year of insurance, effective your closing date. Pay by check and not credit card, if possible, to avoid harming your credit score.

Provide your proof of payment to your lender immediately.

Next, if you’re using a Power of Attorney, have your documents signed by all interested parties and submit them to your lender for review. Don’t assume that your attorney’s Power of Attorney documents will be acceptable to a bank — banks require specific verbiage. If the documents are rejected, make the requested fixes and resubmit.

Banks do not compromise on Power of Attorney letters.

And, lastly, if you’re accepting gifts or using retirement funds for your downpayment, be sure to have your paperwork reviewed and on file with your lender as soon as possible. Do not wait to withdraw funds until just before closing, either. Have everything in the proper checking account at least one week in advance, and ready for your closing.

There are other steps you can take, too, to make sure your end-of-May closing goes smoothly and they all amount to “preparedness”.

When you’re asked for paperwork, provide it quickly. When you’re asked to sign a document, sign it on the same day. When you’re needed to attend a home inspection or an appraisal, do it during your first available opening.

Just leave as little as possible to the “last minute”, and everything should go well.

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Smart Ways to Use Your Tax Refund

April 11, 2012 by

What will you do with your income tax refundIf you are expecting a large tax refund this year, what will you do with it?

It might be tempting to spend this large windfall on shopping, eating out and other fun things.

However, a tax refund is also an opportunity to gain some financial headway and set you up in a better situation for the future.

Here are a few smart ways to use your tax refund this year:

Create an Emergency Fund

If you are currently living from paycheck to paycheck, you are treading water on the surface of your finances and any unexpected disaster can pull you under and cause you to start drowning in debt.

If your car breaks down, you lose your job, or you get ill or injured, you will need to borrow money to get your head above water again and this can take you on a downward spiral which is hard to get out of.

It is essential to have an emergency fund of at least six to eight months of savings to protect you for the unexpected situations which might arise in life.

Use your tax refund to get this savings account started and then slowly build it up more by adding a percentage from every paycheck.

Pay Off Your Credit Cards

Another very smart thing to do with your tax refund is to pay off any high interest debt which you have accumulated.

Credit card debt is draining your finances every month with high interest payments, so it should be the first debt that you pay off.

If you think about it, paying off a credit card charging interest at 18% or more is the same as buying a high-flying investment that gains at least 18% on the same amount of money.

The difference is that by paying down expensive debt, you actually are guaranteeing yourself that return on investment.

You can also contribute it towards paying down student loans, car loans and any other debt you might have.

Make Home Improvements

If you already have an emergency fund and you have paid off your credit cards, spending your tax refund on home improvements can also be a smart way to invest the money.

Renovations can help to increase the value of your property when you eventually resell it, especially when you upgrade the most important rooms such as the kitchen and the bathroom.

Also, green renovations such as adding sealed windows or energy-efficient appliances can save you money in the long run on your utility bills.

These are just a few clever ways that you can use your tax return to set yourself up for the future.

Do you have any other good ideas that you’d like to share?

 

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