Financing-home loans, Real Estate, The Market

The cost of waiting to buy…

rent_buyI recently read an article in the Washington Post regarding “millennials” and home buying titled “Studies find now is the time for millennials to buy”.

I found it very informative and interesting, so I thought I would share the highlights, weigh in and provide a link to the original article for your viewing pleasure 🙂

Basically, the article sited studies done by Zillow and the Harvard Joint Center for Housing Studies.

Zillow looked at how interest rates and rising home prices will affect purchasing power and discovered (shocker)  that waiting even one year, could cost you more money (approximately $189/month in the DC area) based on the assumption of home prices staying the same and interest rates increasing.

The Harvard Joint Center for Housing Studies looked at why first-time buyers weren’t buying even though affordability is at an all time high.  They looked at 25-34 year olds who do not own a home and looked at how many earned enough to afford a median-priced home in the top metro areas.  The discovery was that in 42 of the 85 metro areas, more than 50% of the renters can afford the monthly payments of owning a home if purchased with 5% down. 

See the Full Article Here

Here are my thoughts:

Affordability IS at an all time high, for all age groups because of the drastically low interest rates that WILL at some point increase.  But for millennials, it may be their greatest opportunity to get in with very little invested and the ability to borrow money at a historically low rate. 

Here is an example of how interest rates effect affordability.  In 1981, the typical house payment was around 31% of a person’s income…in 2010 (even though homes are much more expensive), it comprised around 14% of individuals income.  One reason is because the interest rates in 1981 were around 19%.  In 2010 they were around 5%.  Now the rates are around 4.25%

To illustrate the affect interest rate has on affordability, here is an example:

  • Home Price: $400,000
  • 5% Down: $20,000
  • Loan Amount: $380,000
  • Monthly Payment with a 4% Interest Rate @ 30years: $1814.18 (principal and interest only)

Scenario 1: Home prices decline 5% but there is a 1% rate increase

  • Home Price (same home): $380,000
  • 5% Down: $19,000
  • Loan Amount: $361,000
  • Monthly payment with a 5% Interest Rate @ 30years: $1,937.93 (principal and interest only)…this is a monthly increase of $123.75

Scenario 2: Home prices increase 5% (which is +/- the current rate of appreciation depending on the area) and there is a 1% rate increase as well

  • Home Price (same home): $420,000
  • 5% Down: $21,000
  • Loan Amount: $399,000
  • Monthly Payment with a 5% Interest Rate @ 30 years: $2141.92 (principal and interest only)…this is a monthly increase of $327.74

We live in the monthly payment, because realistically, most of us do not keep our homes for 30 years.  So really the monthly payment and, more importantly, the interest rate will affect us much more than the total home price in terms of affordability. Don’t let marginal price differences cloud this reality.

Of course now may not be an option for some, and everyone needs to evaluate where they are financially and personally and determine what works best for them.  Simply put, for those who are in a financial and personal position where buying makes sense, now is one of the best times to jump in…and simply waiting due to fear or hoping prices will drop, may not be the best over-all financial decision. 

Hope this was helpful and please feel free to reach out with any questions!

Financing-home loans, Real Estate, The Market

Lock Your Mortgage Rate: New Loan Fees Expected Within Days

Article sent from a lender partner: Will and Nancy Jacobs with First Heritage Mortgage in Virginia

Starting soon, nearly all home buyers and refinancing households nationwide will pay higher mortgage loan fees. Congress has made it law.

13 months ago, as part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Congress enacted a one-year cut to FICA payroll taxes.

FICA stands for Federal Insurance Contributions Act. Taxes collected under FICA fund such programs as Social Security and Medicare.

The stimulus plan temporarily lowered tax rates for salaried workers from 6.2% to 4.2%; and for self-employed persons from 12.4% to 10.4%. Effective January 1, 2012, “regular” tax rates were to return.

That is, until late-December 2011. In one of its last moves of the year, Congress passed a temporary, two-month extension to the payroll tax cut, extending it through February 29, 2012. The expected cost to the U.S. Treasury is $33 billion.

To recoup those costs, Congress has turned to Fannie Mae, Freddie Mac and the FHA.

Each entity has been ordered to collect news fees on each new mortgage is backs, and has been told to forward said fees to U.S. Treasury directly. There’s no “workaround” allowed or forgiveness applied — each new loan is subject to the payment.

The rules are listed on page 17 of the law’s final draft, in a section unambiguously titled “Title IV — Mortgage Fees and Premiums”.

According to the law :

*  Fannie Mae and Freddie Mac must collect an average fee of no less than 10 basis points (0.1%) per new loan

The FHA must raise its monthly mortgage insurance premiums 10 basis points for all new loans

The expected cost to consumers is no less than $10 monthly per $100,000 borrowed. Some analysts, however, expect Fannie Mae and Freddie Mac to collect more than is minimally required. This could add an additional $30-50 to your monthly mortgage payment per $100,000 borrowed.

Therefore, if you’ve been shopping for a home or for mortgage rates , take advantage. Within days, lenders are expected to start collecting Payroll Tax Extension fees from mortgage applicants — a move that will cost you money.

Lock today to avoid the big fees. Save yourself money.

Financing-home loans, Investing, Real Estate, The Market

Looks like the FHA loan limits will go back to $729,750

Logo of the Federal Housing Administration.
Image via Wikipedia

Looks like the FHA loan limits will go back to $729,750, not Fannie Mae or Freddie Mac limits though at this point.  It isn’t a done deal yet…the president still needs to sign it into law but this is a good sign!  See article below.

NOVEMBER 18, 2011
Congress Increases the Ceiling on Size of Mortgages
By ALAN ZIBEL
WASHINGTON—U.S. lawmakers moved Thursday to increase the maximum size of loans that can be guaranteed by the Federal Housing Administration.
Congress passed a broad spending bill that included a provision to restore to $729,750 the maximum size of mortgage that can be backed by the FHA, giving some borrowers the option of putting less money down to obtain a mortgage in expensive cities.  FHA-backed loans currently account for a third of new mortgages for home purchases and can be made with down payments of as little as 3.5%, compared with the 20% industry standard.  The bill goes next to President Barack Obama to be signed into law.
The loan limits fell to $625,500 on Oct. 1 in expensive markets like New York, San Francisco and Washington. They declined in around 250 counties for loans guaranteed by mortgage-finance companies Fannie Mae and Freddie Mac, and in around 600 counties for FHA-backed loans. In some cases, the FHA loan limits fell below those of Fannie Mae and Freddie Mac.
The housing lobby pushed for Congress to reinstate loan limits for Fannie, Freddie and FHA, citing concerns that any steps to raise borrowing costs might be too much for fragile housing markets to bear. Limits for Fannie and Freddie loans were not restored.  Sen. Robert Menendez (D., N.J.) said that restoring the loan limits will benefit the housing market at a time when it is weak. Doing so, he said, “won’t cost taxpayers a dime” and will benefit the housing market in many other parts of the country besides those cities.
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Tim McLaughlin
Senior Vice President, Secondary Marketing

Weichert Financial Services
225 Littleton Road, Morris Plains, NJ 07950

Homes for Sale, Investing, Real Estate, The Market

Internet Home Valuations…fact or fiction?

Margin of error-visual
Image via Wikipedia

I can’t tell you how often I hear people talk about what they want to offer on a home or what they want to sell their home for based on a website like zillow.com’s home value tool.  Unfortunately, these sites are notorious for giving inaccurate information regarding home values and have actually been reprimanded over it. They now have to disclose their margin of error on their site.  There is of course no “exact science” to pricing and appraising a home; however those sites are not able to take into account market trends, differences in homes such as upgrades, the difference between foreclosures/short sales vs. regular sales (and if they constitute the “norm” in a particular area), specific locality factors, etc that only a human would be able to do.  It can’t pick and choose the correct comps like a human would be able to do, it just pulls everything in a specific mile radius that has the same bedrooms and bathrooms which is wildly inaccurate especially in areas like ours (Northern VA and DC) where home values often vary between neighborhoods and even between streets within a very small vicinity.  Only a person who is familiar with an area can actually evaluate the comps on a more granular level and help you determine a range for an appropriate offering or listing price.  People are not perfect either but are at least able to analyze the data with a more keen understanding of the local market area and the variables that affect a particular home’s value.

A client of mine actually recently sent me a this article and (believe it or not) it supports my point :).  I found it pretty interesting…view it HERE

Happy house hunting or selling!

area info, Dining, DIY, Financing-home loans, home for rent, Homes for Sale, New Listing, open houses, Real Estate, The Market, Things to Do

Washington DC Open House-Chevy Chase-Sunday, October 30, 2011, 1-4pm

2908 LEGATION ST NW, WASHINGTON, DC 20015

4 br, 2.5 bath Cape Cod in sought after Chevy Chase.  This home sits on a quiet residential street, boasts an open floor plan, spacious living room with fireplace, airy sunroom, renovated kitchen with breakfast bar, finished lower level perfect for an in-law suite, and private hot tub just outside the back door. Close to Metro, Garage Parking and long driveway!  Metro Bus stops & shops/restaurants of Connecticut. Ave.

Come visit!

Financing-home loans, Real Estate, The Market

Foreclosure Process and information

Sign of the times - Foreclosure
Image via Wikipedia

Judicial and Non-Judicial Process Summary

Mortgage Judicial Foreclosure

1) Borrower Defaults

2) File Complaint (Initiate Law Suit)

3) Record Lis Pendens

4) Court Hearing Date set for Sale

5) Advertise the Sale

6) Sell to highest bidder Buyer pays cash at sale.

7) Buyer receives Certificate of Sale

8 ) Period of Statutory Redemption (Right of Redemption)

9) Sheriff’s Deed Conveyed to Buyer Evict Mortgagor

10) Possible Deficiency Judgment

Trust Deed Non-Judicial Foreclosure

1) Borrower Defaults

2) Beneficiary authorizes Trustee to proceed with Foreclosure

3) Record Notice of Default

4) Period of Equitable Redemption Trustor can reinstate

5) Advertise the Sale

6) Sell to highest bidder Buyer pays cash at sale.

7) Trustee conveys Trustee’s Deed to Buyer

8 ) Deficiency Judgment Unlikely

Title Theory vs. Lien Theory: In a Title State, the lending institution holds title to the property in the name of the borrower through a Deed of Trust. In a Lien State, the deed stays with the borrower (mortgagor), and the lender (mortgagee) places a lien on the property using the mortgage instrument. Generally, foreclosure in Title States occurs through a non-judicial proceeding, while Lien States are conducted via judicial methods; however it varies with each state.

Both Washington DC and Virginia are Title States.  A Trustee’s sale is the only type of allowable foreclosure sale in DC and is more common than a Sherrif’s/Judicial sale in Virginia.  Please note: There is NO right of redemption once the property has been foreclosed (meaning the bank becomes the owner) in either of these jurisdictions.

area info, Investing, Real Estate, The Market, Things to Do

BRAC-133 in Alexandria VA (Mark Center)-Infrastructure Impact

Location map Alexandria, Virginia
Image via Wikipedia

In an article written by: Dak Hardwick and Don Buch for the Cameron Station Compass

BRAC-133”, scheduled to be fully open and operational by September 15, 2011, will bring approximately 6,400 DOD personnel to the West End of Alexandria. As this building is owned by the federal government, it is not subject to local zoning rules and regulations. However, over the past two years, various citizens’ groups and the City of Alexandria have been working to help mitigate the impact of BRAC-133 as a consequence of its being located in a semi-residential area with a limited transportation infrastructure.

Short/Mid-Term Road Improvements — If you’ve been in the Seminary Road/Beauregard Street area recently, you’ve probably seen some ongoing road construction. The City of Alexandria is undertaking some minor road improvements, including a “triple left” from westbound Seminary onto southbound Beauregard in an effort to alleviate some of the BRAC-bound traffic. Construction of several additional improvements will begin in late winter 2011/early spring 2012 and are expected to take two to three years to complete.

BRAC Transportation Management Plan — DOD and the City of Alexandria have been working on an extensive Transportation Management Plan (TMP) that offers a variety of traffic mitigation efforts. There will be frequent peak period shuttles from five different Metro stations. That includes service between the King Street station and Mark Center every ten minutes on a service open to public ridership.

Long Term Transportation Improvements — In early February, the Virginia Secretary of Transportation announced plans to pursue a new HOV ramp from the northbound HOV lanes of I-395 to westbound Seminary Road (reversing at evening rush hours). The estimated cost of this project is approximately $80 million. Although some questions remain about the exact scope and scale of the project, the Alexandria City Council has endorsed the proposed ramp and is currently working with the Virginia Department of Transportation (VDOT) to move it forward as expeditiously as reasonably possible.

As many would expect, this project may also significantly affect Real Estate Values and requirements in the Alexandria Area, most pronouncedly on the West End of the city.  The demand both for homes to purchase and to rent near the new center will undoubtedly increase as this project moves forward.

area info, home for rent, Investing, Real Estate, The Market

Repealed Landlord Law! Yea NAR!

Congress passed legislation last week that repeals a provision in the small business legislation enacted last year that requires landlords to report any work done on investment properties totaling $600 or more, and to provide 1099 forms to vendors that provided the services.

Realtors® fought against this provision, arguing that the amount of paperwork generated would be onerous to landlords and any real estate practitioners employed by landlords. Lawmakers finally agreed that the provision was an example of overreach by Congress that was not intended to burden small property owners and managers.

Even President Obama agreed back in November of 2010, “It just involves too much paperwork, too much filing.”

Decorating, DIY, House and Home, Real Estate, The Market, Tips and Tricks

Give your home more value to buyers with landscaping

California State University Northridge Botanic...
Image via Wikipedia

Weichert Insights:

Landscaping really does make a difference – both positively and negatively. Not only does a well-landscaped home have a higher perceived value than one with a plain lawn, but one with a minimal landscaping effort actually can detract from a home’s value. Luckily, landscaping projects don’t have to cost a lot and should be seriously considered by any homeowners planning to put their home on the market.  Here are a few tips to get you started on developing a landscaping plan:
•    Start by measuring your property and then sketching out a basic layout, including all of the areas where you would like to add landscaping and make improvements. Once that is done, you can add costs to each and see how much can reasonably be accomplished given your budget.
•    Be practical when deciding on your plan. While they might not sound glamorous, sensible improvements such as irrigation, fencing, lighting, equipment storage, privacy, and security can protect your property value far more than a formal garden with walls and water features.
•    Consider enlisting the help of a professional who can help you best allocate your landscaping dollars. Ask your friends and neighbors for recommendations, especially those whose yards you admire.

Financing-home loans, Real Estate, The Market

FHA – Seasoning requirements

HUD has published the final version of its predatory lending rule established to combat “flipping.” Flipping is the term used to describe the resale of a recently acquired property for an artificially inflated value. Under the new rule, recently flipped properties are not eligible for FHA mortgage insurance.

Some of the other features of the rule include:

  • Only the owner of record may sell a home to an individual who will get an FHA mortgage. It cannot involve the sale or assignment of a sales contract.
  • Resales occurring 90 days or fewer after the purchase of the property are not eligible for FHA insurance.
  • Resales occurring between 91 and 180 days after purchase will be eligible only if the lender obtains an additional independent appraisal based on a resale profit percentage threshold established by the FHA. Lenders may prove that the increased value of the property is due to rehabilitation.

In areas where flipping is a problem, HUD may require that lenders provide additional documentation to sup-port the value of the property. This would supersede the 91–180 day rule shown above.

Make sure you are working with an agent who is aware of these rules if you are seeking an FHA loan..you could end up in default if you find out too late in a transaction to purchase a home that meets this criteria.  Also verify any additional risk layering that your specific lender may use to protect themselves that adds additional requirements to the above noted.

Hope this helps!