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5 nasty surprises that can stop your home purchase cold

2011-06-15T14:07:00.000-07:00

5 nasty surprises that can stop your home purchase cold

Think the keys to your new dream home are as good as yours, do you? Not so fast. In this tough financial climate, some unexpected issues might scuttle the deal.

By Marilyn Lewis of MSN Real Estate

When a seller wants to sell a home and finds a buyer who wants to buy it, you'd think they'd have a deal. What could go wrong?

These days, plenty. In this tough financial climate, there are both longstanding pitfalls and a crop of new ones. At best, these can cost you time or money. Or both. At worst, the home you want could slip from your grasp.

1. The appraisal kills the deal

Even after you and the seller have agreed on a price, the appraiser — the expert assigned by the bank to authenticate the home's value — can ruin everything. (Bing: What are the latest appraisal rules?)

A little background: Your lender needs to know that the home you're buying is worth what you're paying. Banks are touchy on this subject at the moment. They own nearly 1 million foreclosed homes and stand to inherit millions more from defaulting borrowers. Your lender wants to be sure your new home won't be added to this pile.

Appraisers arrive at a home's value in part by comparing recent sales of nearby homes. But falling prices, and foreclosures and short sales in the neighborhood, make these comparisons tough.

Your sale can suffer if the appraiser doesn't know the neighborhood. Walter Molony, spokesman for the National Association of Realtors, says federal rules meant to prevent lenders and appraisers from getting too cozy have unintentionally increased pressure on appraisers, which he says has led to sloppy, hasty and inaccurate appraisals.

Case in point: Bryan Robertson, a Silicon Valley, Calif., agent with Sereno Group, recently had a client with a home for sale in a higher-end San Jose neighborhood. A buyer liked it and offered $1.06 million, not astronomical in this pricey region.
But the out-of-town appraiser said the home was worth $980,000, so the buyer's bank refused to lend more money. The dismayed buyer faced coughing up the difference — $80,000 — in cash or losing the deal.

June 2: TODAY real estate expert Barbara Corcoran explains why first-time home buyers should perform a trial run on mortgages and taxes before signing the contract on a new home.

With home values falling and distressed sales making comparisons difficult, appraisal problems are common:

Three-quarters of Century 21 agents surveyed recently blame low appraisals for buyers' problems getting financing.

In any given month, 10% of the National Association of Realtors' members see a sale die because of a low appraisal.

Another 10% of NAR members report sales were delayed by appraisal issues.

Occasionally, though, the buyer enjoys a silver lining: 15% of sellers agree to drop the price after a low appraisal, the NAR says.

Pre-emptive action: Choose an agent with deep experience in the neighborhood. Robertson, for example, could show the appraiser that several nearby homes of the same size and floor plan had sold for more. The appraiser revised the home's value to the price the buyer and seller had agreed upon.

2. Your lender demands home repairs

In this fussier climate, lenders may hold up a sale if the appraiser points out even minor repairs that need to be done. Bryan Wiley, a senior loan officer with Guild Mortgage Co. in Bellevue, Wash., says that when he worked for another company, he once had to delay a home purchase until window screens could be installed.

BuildersPaintingPlumbingRoofingSheds/EnclosuresSidingTileWindowsThe screens, included in the purchase contract, were nowhere in evidence. The appraiser pointed out the omission, so the bank's rules compelled him to withhold the loan.

"We couldn't get the loan documents out until the builder put up the screens and the appraiser signed off," Wiley says.

There's nothing new in lenders insisting that homes they finance be shipshape. But a few years ago, a lender might let the buyer and seller agree to complete the sale and fix any minor problems later, paying for them out of the seller's proceeds held in escrow. Today's buyers and sellers rarely are given that kind of slack.

Pre-emptive action: To anticipate issues an appraiser might raise, scrutinize the home inspector's report for any potential problems with the property. Also, be certain all conditions listed in your purchase and sale agreement are met.
3. The home has baggage

Remember any boyfriends or girlfriends from your past whom you fell for before realizing that he or she had deep "issues"? Homes can be like that, too. Some come with baggage.

Any surprises usually crop up when a title search is done to clear the way for your purchase.

For example, there's a chance, given all the financial turmoil these days, that someone besides your seller has a claim on the house. For this reason, many deals today "are not clean and easy," says David Townsend, an attorney and CEO of Agents National Title Insurance Co. For example:

A bankruptcy — not uncommon these days — may have produced creditors who have filed claims against the home to get what's owed them.

Your seller may have argued with a contractor who did work on the house years ago. Contractors or suppliers with beefs against the owner can file mechanic's liens against the property, preventing it from being sold until the claim is settled.

Maybe the seller lost a lawsuit and failed to pay — or perhaps didn't know about — a court judgment worth thousands of dollars. You can't buy the home until the debt is satisfied. Ditto for unpaid child support or alimony.
Missing permits are another deal-stopper, Townsend says. Sellers occasionally complete do-it-yourself remodeling and think, "What the heck, I don't need those expensive permits." But they do. Typically, the real-estate agent listing the home makes sure all permits are in order. But sometimes this escapes notice.

Occasionally, buyers are shocked to learn that the boundaries of the property they're buying aren't correct. Maybe the seller built a carport, addition, shed or fence that crossed onto a neighboring property. No one's the wiser until your title search uncovers the error. But you can't buy the place until the error is corrected. The seller may have to tear down the structure or negotiate with the neighbors to buy or sell a few feet of land. These problems can set back your purchase or end it altogether.
Pre-emptive action: Buy title insurance. "We've run into situations where errors have come out of the woodwork years later," Townsend says. With insurance, your claim to your home is protected. Warning: If an insurer declines to insure the title of a home you want to buy, walk away from the deal.

2011-06-09T16:32:00.000-07:00

2011-06-09T16:29:00.000-07:00

Mortgages tumble to 7-month low

By Polyana da Costa • Bankrate.com

Mortgage rates fell again this week as investors grew more concerned about slow economic growth.

The benchmark 30-year fixed-rate mortgage fell 4 basis points this week, to 4.65 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.39 discount and origination points. One year ago, the mortgage index was 4.88 percent; four weeks ago, it was 4.82 percent.

The benchmark 15-year fixed-rate mortgage fell 9 basis points, to 3.79 percent. The benchmark 5/1 adjustable-rate mortgage fell 4 basis points, to 3.35 percent.

The 30-year fixed rate has declined for nine weeks in a row and has not been this low since November, according to Bankrate's survey.

Weekly national mortgage survey

Results of Bankrate.com's June 8, 2011, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:

30-year fixed 15-year fixed 5-year ARM

This week's rate: 4.65% 3.79% 3.35%

Change from last week: -0.04 -0.09 -0.04

Monthly payment: $850.80 $1,203.19 $727.18

Change from last week: -$3.96 -$7.40 -$3.65

Some mortgage experts had not expected another dip in rates this week, but their expectations quickly changed after Federal Reserve Chairman Ben Bernanke offered a gloomy assessment of the U.S. economy during a speech Tuesday.

Bernanke's speech

Bernanke acknowledged that U.S. economic growth is "frustratingly slow," adding the "jobs situation remains far from normal."

Most people already knew that based on recent economic reports. Still, Bernanke's speech immediately affected the mortgage market, causing stocks to fall as some investors pulled out of the stock market and sought safety by investing in U.S. bonds, says Michael Becker of Happy Mortgage in Lutherville, Md.

Early in the week, "it looked like rates were going to rise or stay the same," Becker says. "It's funny how much his words can move the market more than any type of report can."

Jobs report
The recent jobs report also helped keep rates low this week, says Deborah Holloway of Guaranty Mortgage in Melbourne, Fla.

Only 54,000 jobs were added to the economy in May, the fewest in eight months and a far cry from the more than 190,000 jobs that were created in each of the three previous months, according the U.S. Department of Labor. The unemployment rate reached 9.1 percent, up from 9 percent in April.

Even more concerning, according to Bernanke, is that nearly half of the unemployed people have been jobless for more than six months.

Prices, rates low but housing market still slow

The weak housing market hurts the economic recovery, Bernanke says.

"Low home prices and mortgage rates imply that housing is quite affordable by historical standards," he says. "Yet, with underwriting standards for home mortgages having tightened considerably, many potential homebuyers are unable to qualify for loans. Uncertainties about job prospects and the future course of house prices have also deterred potential buyers."

Volatile market

These gloomy economic outlooks, coupled with global economic uncertainty surrounding the debt issues in Europe, have caused mortgage rates to change more often than usual this week, says Dan Green of Waterstone Mortgage in Cincinnati.

"It's been a really bizarre week," he says. "On average, last month, rates changed every four hours and 19 minutes," Green says. "So far this month they are changing every three hours."

Unlike some mortgage experts who say rates will start rising again soon, Green expects rates will continue to decline "until there is explicit reason" to stop the fall. But he advises borrowers to take advantage of the low rates while they are available.

Holloway also says borrowers should lock.

"When they start shooting up they go up very quickly," Holloway says.

Mortgage rates plunge

2011-05-05T11:25:00.000-07:00

   Mortgage rates plunge

Mortgage rates fell this week as investors sought safety, amid concerns of global instability and the still-weak economy.

Find the best mortgage rates in your area.The benchmark 30-year fixed-rate mortgage fell 7 basis points this week, to 4.88 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.35 discount and origination points. One year ago, the mortgage index was 5.12 percent; four weeks ago, it was 5.08 percent.

The benchmark 15-year fixed-rate mortgage fell 9 basis points, to 4.05 percent. The benchmark 5/1 adjustable-rate mortgage fell 13 basis points, to 3.56 percent.
____________________________________________________________
Weekly national mortgage survey:

Results of Bankrate.com's May 4, 2011, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:

                                  30-year fixed      15-year fixed      5-year ARM

This week's rate:             4.88%               4.05%               3.56%

Change from last week:    -0.07                 -0.09                  -0.13

Monthly payment:             $873.69           $1,224.62          $746.46

Change from last week:    -$7.03             -$7.47                 -$12.07
_____________________________________________________________
The adjustable rates fell more than expected this week because one of the lenders surveyed by Bankrate.com revamped its line of mortgage products.

After dropping for four weeks in a row, fixed rates have reached their lowest since Bankrate's Dec. 1 survey, when the benchmark 30-year fixed was 4.71 percent.

"There seems to be a lot of forces coming together to keep rates low," says Dan Green of Waterstone Mortgage in Cincinnati.

Bin Laden's death
One factor that may contribute to keeping rates low for now is the fear of potential retaliation from terrorist groups after the death of Osama bin Laden. The United States kept its official threat level unchanged after the al-Qaida leader was killed in a U.S. raid in Pakistan this week, but security at many airports and subways was heightened.

While the killing of bin Laden itself did not have a direct and immediate impact on rates, the threat of potential retaliation is likely to affect rates, Green says.

"Any unexpected event, especially terrorism threats, tends to have a very deep impact on rates," Green says. "It's bad for the stock markets and good for the bond markets," and that normally leads to lower rates.

That's because during times of political uncertainty, nervous investors tend to pull money out of riskier investments, such as the stock market, and seek safer investments such as Treasury bonds. The higher demand for bonds causes yields to drop. Mortgage rates normally follow bond yields.

"Any time you have concerns or additional threats, you'll see a higher concentration of people investing in higher-quality, safer assets," says Cameron Findlay, chief economist at LendingTree.

Bad news for Europe means good news for mortgages

Another international event that may influence mortgage rates in the United States is the Greek debt crisis, Green says.

"To me, the Greece story is having the biggest impact," in driving investors into the U.S. bond market, he says.

Greece received a bailout of $160 billion last year but continues to struggle with its debt, which represents about 150 percent of its gross domestic product.

Ireland and Portugal also are in deep financial trouble.

While the U.S. economy is bad, the U.S. debt is still perceived as a much safer investment than the debt of some European countries, Findlay says.

"When you are swimming from a shark you don't have to be the fastest swimmer," Findlay says. "You just have to be faster than the guy next to you. As bad as the U.S. economy is performing, it is still performing better than the Greek economy."

Your Home: How to sell in tough times

2011-05-05T10:46:00.000-07:00

Your Home: How to sell in tough times

Peter and Lauren Meyer of Montclair, N.J., had to make dramatic price cuts to nab a buyer. Their starting price in February 2010 was $1.149 million. After 5 price cuts, the home sold in November 2010 for $808,000.

By Amanda Gengler and Elizabeth Fenner
(MONEY Magazine) -- If you're in the market to sell your home, you probably feel you can't catch a break. Nearly five years into the housing bust, when many experts thought the real estate market would at least have stabilized, sales and prices are still dropping in most of the country.

In February existing-home sales tumbled 9.6% from the previous month, and the median price of a single-family home dropped to $157,000 from $163,900 the previous year, according to the National Association of Realtors. (Latest home prices)

You can't count on things turning around soon, either. At the current sales pace, it would take 8.6 months to clear out the 3.5 million existing homes listed today.

With the boost from the recent homebuyer tax credit gone, anyone who decides or is forced to put a house up for sale enters a market where houses often linger a full six months -- even a year -- without any bites.

Put part of the blame on stiff competition: Foreclosures and short sales, which accounted for 39% of sales in February, sell for about 15% less than conventional homes.

"It's dreadful out there for sellers," says Patrick Newport, a U.S. economist at forecasting firm IHS Global Insight.

Fortunately, there is one glimmer of good news. Bargain hunters, too, know that home prices are down some 32% from their peak. In a recent CNNMoney survey, three-quarters said that it was a good time to buy a home. But translating that interest into an actual sale can require some extreme measures.

It's not enough to show buyers your house is a deal: You have to convince them it's a total steal. That means slashing your price, bringing in a pro to pretty it up, and creating a killer website for your home. Here's how to do it right.

Slash Your Price, Bigtime

Sellers are still loath to accept the extent of the toll the bust took on their homes' value, says Tara-Nicholle Nelson, consumer educator for the housing website Trulia.com.

Many also give in to the temptation to list the property above fair market value to see what happens. Big mistake. About a quarter of sellers in the past year initially listed too high and were forced to knock the price lower, according to Trulia.com. Even in cities that have held up well, such as Charlotte, 25% of sellers resort to at least one price cut, and often two.

Think you can always drop the price if your home doesn't sell? Bigger mistake.

"The first 30 days on the market are the most important," says Norwalk, Conn., realtor Elizabeth Kamar. That's when your place attracts the most attention and gets the most showings. The result: You often end up with less than you would have if you priced it right to begin with, says Kamar. So get aggressive right out of the gate.

Undercut your competition. In normal times listings of similar properties in your area would give you a good sense of what your home might sell for. Today there's a big gap between what sellers want and what buyers are willing to pay.

Instead, figure out what you can realistically expect to get by asking your realtor to show you what houses similar to yours have sold for in the past three to six months. If more than a couple of the comparable properties were foreclosures or short sales, look closely at the photos and descriptions of those former listings. Distressed homes should be included in your comps if they are in move-in condition, says Las Vegas realtor Paul Bell.

Once you have a handle on your likely sale price, list your home a bit beneath that, says Rockaway, N.J., agent Ellen Klein. You don't have to undercut by much to attract attention, because that price will probably still be about 10% or 15% below what other homes are listed for. Even if you're competing with lots of foreclosures and short sales, your price should generate enough interest to attract more than one bidder, pushing up the final price to where it should be.

When Dorchester, Mass., realtor Julie Simmons wanted to sell her own home in January, she listed it at $460,000, about $5,000 to $10,000 below what she thought she'd sell for.

"I knew I had to attract attention," she says. Even in a harsh winter, she received four offers in less than two weeks -- and sold for $465,000.
Take out the ax. No bites within 30 days? Make a big move.

"When a property sits, people start thinking it must be listed too high," says Klein. To stimulate interest, make a giant cut -- as much as 10% of the asking price, and even more in an area where prices are still falling. That should be enough to warrant a second look from buyers who passed the first time, and to bring in a new pool of potentials who are hunting in the lower price range.

Last year Montclair, N.J., empty nesters Peter and Lauren Meyer decided to downsize from their seven-bedroom home to an apartment in the same town. They put their home on the market for $1.1 million, more than their realtor suggested. Six months and four price cuts later they pulled it off the market at $889,000.

"At that point we wrestled with lowering the price further, but we were ready to move on," says Peter. The couple relisted their home for $799,000 and it sold for $808,000.

Play hardball. It's okay to reject low-ball offers if a buyer won't budge. But if a buyer is willing to negotiate, push aside feelings of anger or insult and start counteroffering, says Mabel Guzman, president of the Chicago Association of Realtors.

Ideally you'll be able to negotiate within $10,000 to $20,000 of an acceptable offer. Then, "using incentives as carrots and sticks can make it easier to reach an agreement," says Guzman. For example, if your buyer refuses to dicker, you might offer to leave behind the appliances. Or maybe you'd rather take the reduced price but have the buyer agree that you take 60 days, not 30, to move out.
Hire a Stager:

There are people who want to sell, and there are people who have to sell. Kathy and Rex Roberts are among the latter. Based in West Hartford, Conn., the couple, who have two children, have been living in different cities since early December, when Rex, an IT auditor, started a new job in Silver Spring, Md., after a layoff.

Listed that same month, their solidly built three-bedroom 1956 colonial has had no offers, despite two price cuts (it's currently at $389,500). Between rent on Rex's new place and their carrying costs on the house, they're paying a budget-straining $4,000 a month. "We need to sell," says Rex, "but we're not willing to drop the price again."

So in March they tried something new: professional home staging. Staging, increasingly popular with homeowners trying to sell mid-range houses, can extend from simply rearranging existing furniture to repainting, replacing fixtures, and bringing in new furnishings. The goal: to highlight the house's best features while making it as easy as possible for buyers to imagine themselves living there. Veteran real estate brokers interviewed by MONEY say that proper staging can speed the sale and often increase the price too. The key is to get it done right.

Start with an open mind. Staging demands a psychological shift that many homeowners find challenging: thinking of your house not as your home but as a set. That means scrubbing away evidence that you actually live there. Your goal: the homey yet impersonal look of a Pottery Barn catalogue.

Find the right stager. The ASP (accredited staging professional) designation is a plus -- it indicates the stager has gone through some basic training -- but it isn't essential. Get names from realtors or at realestatestagingassociation.com, then review the stager's online portfolio of before-and-after photos. Next, call homeowner references and ask how fast their homes sold after staging and whether they think the work helped.

Establish a budget and ask the stager to work within it. Stagers typically charge $150 to $400 to walk through your home and give recommendations for each room. You can then execute the plan yourself or hire the stager to do it for an hourly fee, usually $100 or so, plus the cost of any new paint or furnishings.

If you make big changes, costs can add up -- but "I can often make a huge difference using what homeowners already have," says Mary D. Brooks, a stager and realtor from Breckenridge, Colo.

As for the Robertses, after getting advice from stager Kara Woods, owner of Stage to Move in Danbury, Conn., they painted their lavender dining room a soft gray and removed excess furniture, among other things; a professional stylist redid the living room (see above). "It's incredible how much bigger and more modern it looks," says Kathy.

These days it's going to take far more than a FOR SALE sign in the front yard and a spot on the multiple-listing service to get potential buyers in the door. That means getting the word out in a creative fashion -- and finding a realtor who is willing to do the same.

"The more eyeballs that get on the listing, the better," says Katie Curnutte of the real estate information website Zillow.com. To do that, you need a multipronged marketing plan of attack.

Create a great site. About 90% of buyers begin their search on the Internet, according to the National Association of Realtors. Make sure your home's online presence has a dozen or two photos: Having 20 instead of five photos will almost double the number of hits you'll get, according to Zillow.com. See the sidebar at right for more ways to keep potential buyers clicking on your site.

Throw money at them. Incentives can perk buyers' interest just as much as price cuts, says Matt Brown, director of business development at ForSaleByOwner.com. In fact, many buyers will agree to a higher price if their upfront costs are lowered, since they often run short on cash.

If you can afford it, offer to cover the buyer's closing costs or pay the first year's property taxes or condo or homeowner association dues. However, those freebies may be practically standard, particularly in areas rife with distressed properties.

In that case, says realtor Guzman, you might be able to bring buyers to the door by tossing in an unusual bonus, such as a $1,000 gift card (throw in one for the buyer's agent as well); a belonging they mentioned loving, such as the pool table or plasma TV; or a $5,000 credit to use in the home as they wish. (You can even pay upfront points so that they can get a lower mortgage rate, if you can swing it.)

Be aware, though, that you must disclose any such gifts or payments when the offer is agreed on, and some lenders will not approve them. If so, you might have to find another incentive that the bank doesn't object to.

Showcase super condition. Yes, some buyers are hunting for foreclosures in rough shape that they can nab for a song. Yet just as many shoppers don't want -- or don't know how -- to put in that sweat equity. So hire an inspector to identify every problem with the home, even seemingly minor issues such as dripping faucets, and fix them.

"If an outlet doesn't work, why get the buyer wondering what else is broken?" asks Beth Foley, an associate broker in Holland, Mich. Tell your realtor to give anyone who tours your home a copy of the inspection report and your list of fixes.

Spread the word online. Having your home listed on a major website like Realtor.com isn't enough. Ask your realtor if you'll get an "enhanced" listing on the site, where your home gets top promotional billing. Many realtors will create a website just for your home. You also want to get your listing on alternative sites like Craigslist or even Facebook.

In 2009, when Karen Mauro put her small, historic two-bedroom Orange County, Calif., home on the market she thought it would be a tough sale. Realtor Lisa Blanc listed the property at $467,500 and spread the word not only through the MLS listing but also with an update on her Facebook page. A Facebook friend of Blanc's passed the info to someone she knew was looking for that kind of house. Within a week, Mauro had an offer for $460,000.

Stay away -- far away. In better times you may not feel obliged to drop everything to accommodate prospective buyers' schedules. Today, if buyers can't get in on their time, they'll skip it, says Summer Greene, who manages realtors in the Fort Lauderdale area. So be prepared to show a perfectly clean home at a moment's notice. And disappear (along with your dog, if possible) for all showings and open houses so that prospects can imagine themselves in your house -- an impossible task when your family is vegging on the couch.

When Betty McCoy began showing her Prairie Village, Kans., three-bedroom Cape Cod - style house, for example, she kept a list of must-do chores -- including emptying wastebaskets, filling the dishwasher, and making the bed and walked out every morning with the place spotless. On the weekend she holed up at a local mall.

"Every time I thought I could go home, a new person wanted to see the house," recalls McCoy. But a few extra hours at the mall paid off in spades. In just a few days McCoy had an offer for her home -- for the full listing price.

Short sales are bargains, but they take forever

2011-05-03T18:48:00.001-07:00

Short sales are bargains, but they take forever

Posted by Lisa Gibbs

In my April MONEY magazine story explaining how to snag a bargain purchasing a short sale or foreclosed home, I reported that the process can be both frustrating and time-consuming. Well, now I have first-hand knowledge of how slow and irksome these deals can be.

Wanting to take advantage of my own advice, my husband and I recently decided that the South Florida market where we live had sufficiently busted to make a cute three-bedroom townhouse nearby a pretty good investment. In February, we made an offer on that townhouse, which was listed as a short sale. Three months later, we don't have a response to our offer, and we've only just started hearing from the bank.

Not that I'm surprised. I heard all kinds of horror stories about short sales taking months when I was reporting my story. Just down the street from me, a house has been on the market for more than a year. The agent handling the sale, Toni Reeder, told me she had a buyer and an offer. But the bank took so long to approve a deal that the potential purchaser got discouraged and ended up buying another house in the neighborhood. So the first house still sits — now with a lower listing price.

Of course, there's more to the short sale mess than lenders dragging their feet. Banks complain of low-ball offers from buyers who aren't really serious, sellers who don't submit their documentation on time, and more. Experts say it's important when shopping for a distressed property to work with an agent experienced in short sales. What I learned is, even if your own agent has experience, you can still get held up.

Let's look at my situation. We made our first offer on Feb. 9. The seller had already moved out and was behind on his payments. It was up to the seller and his agent to submit the offer to the bank, along with a bunch of paperwork his loan servicer would need to approve him for the short sale.

We waited and waited. Nearly two months went by. My agent told me she'd been trying to get permission for our title company to deal directly with the bank — it always goes smoother that way, she said. Finally, she got it. Turned out that the seller apparently had not turned in the correct paperwork. So we started from scratch. We've had to redo much of our own work — the bank wants updated proof we have the cash to buy the home, for example. That's annoying, but at least something is happening.

Each one of these homes — the townhouse I'd like to buy, the other empty house down the street, and the stories I covered in my article — helps explain why the housing market is going to stay depressed for a while. "Short sales are not working at a very big-picture level, and more people are going into foreclosure than really should," says Ray Mathoda, a former IndyMac executive whose firm, AssetPlanUSA, now works with lenders to improve their systems for managing distressed properties. Her experience, she says, is that six out of 10 short sale contracts which get submitted to lenders never close.

This happens for a variety of reasons, she says: The buyer gets frustrated and walks. The seller doesn't get approved for a short sale, perhaps because the lender views it as a "strategic default" (the buyer can afford the payment but wants to ditch a home because it's fallen in value). Fraud. A poor process — the loan servicer loses paperwork, for example. Perhaps the investors who purchased the loan have unrealistic expectations about what the house is worth, or there's a second mortgage holder complicating the situation.

Government programs, such as Home Affordable Foreclosure Alternative (HAFA) should be working better than they are, and they'll have to if the country ever wants to get out of this morass of distressed properties, says Mathoda.

As someone who hopes to have one of the 40% of short sale contracts that successfully close, I have a suggestion from the buyer's perspective. When I see a home listed as a short sale, I have absolutely no certainty that the seller will qualify for a short sale or that the bank will accept anything near the listing price. It would be so much easier if the seller could work with his lender FIRST, before listing the house on the market, to get approved for the short sale and establish a price the bank has agreed to. Then I can make my offer knowing there's a reasonable chance it will be accepted. Maybe I'll even offer a higher price because I can feel confident of a quicker, simpler transaction.

Taking some of the uncertainty out of the process, seems to me, would go a long way toward luring wary buyers from the sidelines and, just maybe, getting our housing market back on track.

'Uneven' housing recovery continues

2011-04-22T12:10:00.000-07:00

'Uneven' housing recovery continues

By Annalyn Censky, staff reporterApril 20, 2011: 12:12 PM ET

NEW YORK (CNNMoney) -- Sales of existing homes increased in March, "continuing an uneven recovery" in real estate, an industry group said Wednesday.

Home sales rose at an annual rate of 5.1 million in March, up 3.7% from February, the National Association of Realtors said Wednesday. However, sales were 6.3% lower than in March 2010.

Government reports released a day earlier showed new home construction and permits for future construction both ticked up in March.

Those reports are not bad, but not great either. Despite slight upticks in home sales and construction, the housing sector is still in the doldrums as supply continues to far outweigh demand for homes.

"Even as buyers scoop up deals of a lifetime, the river of foreclosed properties continues to flow," Douglas Porter, deputy chief economist at BMO Capital Markets, said in a note to investors Wednesday morning.

The median home price slipped 5.9% to $159,600, compared to a year earlier.

Meanwhile, some buyers are still finding it tough to get a mortgage, Lawrence Yun, chief economist for the National Association of Realtors, said in a release. The average credit score to get a conventional mortgage has risen to 760 from 720 in 2007.

"Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago -- before the loose lending practices that created the unprecedented boom and bust cycle," he said.

First-time buyers purchased 33% of homes in March, down from 44% in March 2010. Investors accounted for 22% of sales, up from 19% a year ago.

All-cash sales were at a record high in March, accounting for 35% of existing home sales.

The report was roughly in line with economists' forecasts for home sales to grow at an annual rate of 5 million.

Mortgage rates sneak below 5 percent

2011-04-21T14:55:00.000-07:00

Mortgage rates sneak below 5 percent

Mortgages rates took a notable dip this week as investors got mixed signals in the uncertain economic climate.

The benchmark 30-year fixed-rate mortgage fell 11 basis points this week, to 4.96 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.44 discount and origination points. One year ago, the mortgage index was 5.35 percent; four weeks ago, it was 5.04 percent.

The benchmark 15-year fixed-rate mortgage

dropped 12 basis points, to 4.16 percent. The benchmark 5/1 adjustable-rate mortgage fell 13 basis points, to 3.7 percent.

Weekly national mortgage survey

Results of Bankrate.com's April 20, 2011, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:

	30-year fixed	15-year fixed	5-year ARM
This week's rate:	4.96%	4.16%	3.70%
Change from last week:	-0.11	-0.12	-0.13
Monthly payment:	$881.73	$1,233.76	$759.47
Change from last week:	-$11.10	-$10.01	-$12.18

What would the monthly payment be for you? Use Bankrate's mortgage calculator to find out.

The low rates have surprised some in the mortgage industry, including Rob Nunziata, president of FBC Mortgage in Orlando, Fla.

"We are seeing all the signs of inflationary pressure that will affect rates," he says. "Gas prices are going up, and some foreign countries have raised rates. But I think they are going to stay stable for at least a couple of weeks."

Rising inflation

The Consumer Price Index rose by 0.5 percent in March compared to February, according to the Department of Labor. In February, the index had risen another 0.5 percent from January. Consumer prices have climbed 2.7 percent in the last year.

"Inflation leads to higher mortgage rates," Nunziata says. "If things continue like this, a spike in rates will be inevitable in the next couple of months. I don't think it will be a huge spike though."

U.S. debt warning

Another factor that mortgage experts say could add pressure to interest rates is the rating of the U.S. debt. On Monday, Standard & Poor's changed its outlook on U.S. Treasury bonds from "stable" to "negative" and warned it might downgrade the U.S. debt from its top AAA rating if government officials don't get the country's budget deficit under control.

The threat hasn't caused much panic among investors yet, but a potential downgrade could pull nervous investors from the bond market to invest in the stock market, which would eventually cause a rise in interest rates.

"It remains to be seen what the impact of that would be, but the world needs to see our government can take this deficit seriously and address it in a coherent way," says Steve Majerus, regional vice president of First California Mortgage Co. in Petaluma, Calif. "It is a precursor to rates rising."

Improving job market

But it wasn't all bad news for the U.S. economy this week.

Data released Tuesday by the Department of Labor showed the job market has seen some improvement, which is a sign the economy may be strengthening.

Unemployment rates dropped in 34 states, and 38 states saw job gains in March, according to the department. The rate was unchanged in nine states and Washington, D.C., and rose in seven states.

What's good news for the economy may not be so rosy for the mortgage world.

In theory, a stronger job market reflects a stronger economy that could withstand higher rates. But with more than 14 million people still unemployed, the slight improvement in unemployment figures may not be enough to make a statement yet.

Why I'm not buying Zillow

2011-04-21T14:51:00.000-07:00

Why I'm not buying Zillow

I'm all for rationalization of the ridiculously complex real estate transaction process. But Zillow hasn't provided the answer.

FORTUNE -- I nearly sold my house last fall. My wife had landed a new job, and it looked like we were going to move from Bronxville, NY to Philadelphia, PA. I was pretty relieved when her new employer gave us a reprieve and said we could stay put in New York. At least part of that relief came from the fact that I wouldn't be paying the enormous costs of selling a house, buying another one, and moving. By my calculation, it was going to "cost" us more than $50,000 to make the move, and that's before you even consider the prices of the houses themselves.

Like anyone with an Internet connection and an interest in real estate, I have been a user of Zillow.com for several years now. In an industry as opaque as real estate -- one that's replete with all sorts of screw-the-customer complexity, including title searches -- Zillow has offered a clarity and transparency that real estate agents, for all their "I'm-on-your-side" fakery, never have and never will. But the news that Zillow has filed to go public forces me to admit that I'm not a buyer of this franchise. Despite noble ambition, Zillow is nothing more than real estate porn, and by planning to raise $51.8 million in an IPO, it is merely looking to cash out its beleaguered venture investors, who have to date sunk $87 million into the business.

So what about that business? It looks good on the surface, I guess. Unique users of the site have more than doubled since 2008, climbing from 5.6 million to 12.7 million. Likewise, revenues have their own hockey-stick trajectory, climbing from $10.6 million in 2008 to $30.5 million in 2010. Losses, too, have been shrinking, from $21.9 million in 2008 to just $6.8 million in 2010. All the indicators are headed in the right direction here. So what's not to like?

First, any company that's planning an IPO will start shaving costs here and there in order to make the trends look good. I have no idea if Zillow's technology and development costs should have dropped from $15 million in 2008 to $10.7 million in 2010. Maybe they're just getting better at what they do, which is computerizing the real estate business. But I doubt it. Everything this company does is on the Internet; their technology costs are going to rise again, probably shortly after their IPO.

Second, it appears to me that Zillow has sold out. The original idea, as I recall, was that the site would bring a degree of transparency to an industry that had long resisted it. When I bought my house in 2005, I sat around a table with about 10 other people at the closing who all seemed to know each other -- my lawyer included -- and who talked as if my wife and I were not there before handing us bills totaling about $30,000.

Zillow was supposed to blow that cabal to smithereens. But a giant plank of Zillow's current growth plans seems to involve signing up agents who want to use Zillow as a listing service. I'm guessing the company's executives are too smart to bite the hands that feed them. If you and I don't pay a dime to Zillow, and agents do, you've got to wonder how ardent they remain about disaggregating the whole process so that you and I don't get burned every time.

The Zillow filing claims that lots of people are using their mobile devices (phones, iPads) to access its "proprietary" and "living" database. (That latter term is a new one to me. I am guessing it's just marketing. Who would claim they have a "dead" database?) But who cares how many people sit in their cars and punch in an address on Zillow in order to see the "value" of a house? The fact is that Zillow, which seemingly could have taken a bite out of the action of real estate transactions by scaring the oligopoly into submission, has demonstrably failed to do so. That they are courting real estate agents themselves is as big an admission of defeat as you might ask for.

Did I mention that Zillow has a dual-class stock structure? And guess what? They're not offering you the B shares. Enough said on that front.

Am I angry that Zillow hasn't provided a buyer for me using their proprietary "Make Me Move" function and my price of $850,000? No. (Still, interested buyers, see here.) Or that the current "Zestimate" of my house's value of $479,000 is almost $200,000 below my purchase price of $661,000 in 2005? No, I am not. (That said, I might be happier with the site if it understood the true value of the place.)

What I'm angry about is that Zillow might have been something that it hasn't turned out to be. The process of buying or selling a house hasn't changed at all since they arrived on the scene. The only thing that's happened is that someone else is taking another piece of the action. If you want a piece of that action, go ahead and buy. But there are better ways to bet on real estate than that.

5 credit union perks for the little guy

2011-04-20T16:27:00.000-07:00

Credit union perks for the little guy

Better than a big bank?

At credit unions, every person counts and they want you to know it.

Yes, they do usually offer lower fees and better service than big banks. They also serve up some neglected goodies worth scooping up, including discounts on events and cash-back incentives.

How do they pull this off? By pooling buying power.

Since credit unions are not-for-profits owned by their members, they return savings to their membership. For example, auto loan rates are usually 2 percent lower than they are at banks, says Anne Legg, chair of the Credit Union National Association's Marketing and Business Development Council.

"We have everything that big banks have and more," says Todd Pietzsch, spokesman at BECU, a credit union based in Tukwila, Wash. "But a lot of people don't understand the benefits."
To be sure, credit unions come in all shapes and sizes. Some are community based; others cater to specialized groups like police officers or teachers. Many Fortune 500 companies and universities also are affiliated with credit unions. Perks can be equally generous at all of them, says Legg.

Here's a sampling of the perks being offered at credit unions near you.

Credit unions typically offer lower loan rates.

But what about renegotiating loans if you fall behind? At credit unions, the process is usually simple. "You can do it in one phone call," Legg says. "We look at each independent loan to see opportunities."

Still, there may be restrictions, such as paying down part of your loan. And one downside is that renegotiating a loan can tarnish your credit score.

Find discounts on services, entertainment

With a large membership, credit unions can dish out lots of useful, fun discounts. BECU offers discount on sports tickets, tax preparation software and amusement parks, among other perks.

"We keep offering more every year," Pietzsch says. "It's got to be a quality product, though, that appeals to a broad base."

Based in Richmond, Va., Virginia Credit Union, which currently offers nine discounts on amusement parks, tax preparation and even travel, also offers a mortgage rebate of up to $1,500.

Also, Landmark Credit Union has services aimed at its Hispanic clients, including money transfer services to Mexico for people to send money back home, Ransom says.

Banks aren't the only ones dishing out incentives.

Credit unions offer some juicy ones, too. For example, OMNI Community Credit Union in Battle Creek, Mich., has offered cash-back rebates on checking accounts, savings and car loans.

Other credit unions offer cash incentives. At the time of writing, BECU had a membership program where you could get a higher interest rate on your first $500 in a checking or savings account by signing up for various services like online bill pay.

"Just because you don't have $100,000, we don't treat you differently," says Pietzsch.

Some credit unions also offer generous rewards programs. At Security Service Federal Credit Union in San Antonio, you can use its rewards debit and credit card program for merchandise, charitable contributions, travel or gift cards.

Credit unions are usually family oriented.

"You'll find a product for every lifestyle from the first checking account to retirement products," says Legg.

For example, there's a bevy of kid-friendly accounts. Chicago-based Alliant Credit Union has a Kidz Klub savings account that pays high dividends, includes a newsletter and comes with a special ID card. Affinity Federal Credit Union in Basking Ridge, N.J., has a College Planning Center, where advisers help members create a free financial plan to save for college. Many credit unions also offer college scholarships to members.

Credit union programs aimed at seniors can go beyond just retirement plans. Summit Credit Union in Madison, Wis., has a senior club with free perks like traveler's checks and ID theft recovery services.

Many credit unions also offer wide-ranging financial services, including brokerage accounts, life insurance

2011-04-07T15:05:00.000-07:00

Prices are low! Mortgages cheap! But you can't get one

2011-04-07T14:54:00.000-07:00

Prices are low! Mortgages cheap! But you can't get one

Mortgage rates are low, prices have fallen, and you may want to buy a Manhattan condo such as this unit in the Grammercy 19 building. But banks aren't wanting to lend -- even to good credit.

By Les Christie

NEW YORK (CNNMoney) -- Yep, mortgage interest rates are low, but there's a catch: It doesn't matter how cheap rates are if you can't get a loan.

And these days, only highly qualified borrowers can get financing -- let alone the best rates.

Nearly a quarter of people who apply for loans are turned down, according to the Federal Reserve.

"Good borrowers with one or two blemishes on their credit are being denied credit," said Lawrence Yun, chief economist for the National Association of Realtors.

The denial rates tell only half the story. Many potential buyers aren't even applying for loans because they assume they can't get one.

"A lot of people know it's very difficult to get a mortgage and they're not even trying," said Alan Rosenbaum, CEO of GuardHill Financial, a New York-based mortgage broker.

Who's buying homes? The rich
That shows up in credit scores for loans financed with backing from Fannie Mae and Freddie Mac. The average credit score has risen to 760 from 720 a few years ago. For FHA loans, the average score has gone to 700 from 660. Loans made to borrowers with sub-620 scores are almost nonexistent.

Another factor keeping people out of the mortgage market is that lenders now require much more up-front cash. The median down payment for purchase is about 15%. During the housing boom, it approached zero.

On most loans, banks want 20% down. On $200,000 purchases, that's $40,000, an insurmountable obstacle for many young house hunters. Or, in New York City, where the median home price is $800,000, buyers need $160,000 up front.

Industry insiders say all these factors have reduced the pool of buyers, lowering demand for homes and hurting prices.

"We feel it really reduces the demand for houses," said Mike D'Alonzo, president of the National Association of Mortgage Brokers. "It's an unbelievable buyer's market, but there hasn't been as much activity as you would expect because not as many people qualify for loans."

Jerry Howard, CEO of the National Association of Home Builders said, "You only have to look at the recent sales reports to see what the impact of the credit crunch has had. The statistics speak for themselves."

Sales of existing homes in February, despite very affordable prices, were 30% off their peak, and home prices fell for the sixth consecutive month in January.

Anthony Sanders, director of Real Estate Entrepreneurship at George Mason University, speculates the tougher credit standards may have stripped as much as 30% of the buyers off the market, compared with normal times.

And it's about to get harder for buyers. Federal regulators proposed rules last week that are designed to discourage risky lending but that will also likely further restrict lending.

Banks would be required to keep 5% of some loans, specifically those with less than 20% down payments, on their books rather than selling them all off as securities. As a result, banks make be unlikely to issue loans where less than 20% is put down. So much for first-time buyers.

"We think the new rules are appalling," said the NAHB's Howard. "Only the wealthy will be able to buy homes at low interest cost."

It could also further erode consumer demand for homes.

"It's disturbing," said Lennox Scott, head of John LA. Scott Real estate in the Pacific Northwest. "We're just starting to feel healthier in inventory levels and prices and this is a potential headwind."

The immediate impact, should the new regulations get adopted, should be minor, according to Steve O'Connor, spokesman for the Mortgage Bankers Association. That's because Fannie, Freddie and FHA loans are all exempt from the requirements and they represent more than 90% of the market right now.

The government, however, wants to reduce the presence of all three agencies in favor of private lenders, and banking experts fears the long-term impact of abandoning the field to mostly private companies.

"For the first time in 100 years," said Howard, "the government is discouraging you. It's saying 'We intend to make it more difficult for you and your kids to buy homes.'"

Foreclosures make up 26% of home sales

2011-02-25T14:30:00.000-08:00

Foreclosures make up 26% of home sales

Home prices are down but sales are up, somewhat contradictory trends.

Home prices fell nearly 6% during the six months ended Dec. 31, sending values to their lowest levels in the post-bubble period, S&P/Case-Shiller reported on Tuesday. On Wednesday, the National Association of Realtors reported that sales of existing homes rose for the third straight month.

"At least it's not a double whammy where both sales and prices are dropping," said Stuart Hoffman, chief economist for PNC Financial Services Group. "Deals are getting done."

That's because 26% of all homes sold last year were foreclosures and short sales, according to a RealtyTrac report released on Thursday. That's down slightly from 2009, but a jump compared to 2008.

Homes already foreclosed on and repossessed by banks, called REOs (real estate owned), sold for an average of 36% less than normal sales, RealtyTrac reported. Meanwhile, the discount for homes sold while they were still in the foreclosure process (short sales) was 15%.

"It's like the post-holiday sales at Macy's where they're trying to clear out unwanted inventory," said Anthony Sanders, a real estate professor at George Mason University.

Where the sales are
Nevada had the highest percentage of distressed sales of any state at 57%. That was, however, less than 2009, when 67% of sales there were foreclosures. In Arizona, 49% of sales were distressed properties; in California, 44%; and in Florida, 36%.

Foreclosed properties sold for the biggest discount -- 50% off -- in New Jersey.

These homes have attracted bargain hunters, including individuals or groups looking to buy and hold properties, according to Hoffman. They hope to buy at such a good price that they can rent out the properties and make a profit.

"These folks are cash investors who are going in and offering very low bids," he said.

NAR reported that all-cash sales went up to 32% of the total, up from 26% a year earlier. It estimated the percentage of investor purchases hit 23%, up from 17% a year ago.

"Unprecedented levels of all-cash purchases -- primarily of distressed homes sold at deep discounts -- undoubtedly pulls the median price downward," said NAR president, Ron Phipps.

These investment opportunities are not going away. Nearly 30% of mortgage borrowers are underwater on their loans, owing more than their homes are worth, according to Stan Humphries, chief economist for Zillow, the real estate web site.

These owners are very vulnerable to foreclosure so the number of distressed properties that will go on sale only the next year or two will probably remained high.

Mortgage & Savings Center

2011-01-31T13:45:00.001-08:00

Mortgage & Savings Center

Overnight Avg Rate	Latest	Last Week
30 yr fixed	4.81%	4.82%
15 yr fixed	4.09%	4.09%
5/1 ARM	3.43%	3.44%
30 yr refi	4.83%	4.84%
15 yr refi	4.10%	4.10%

10 tips to snag a mortgage in 2011

2011-01-31T13:38:00.001-08:00

10 tips to snag a mortgage in 2011

Mortgage lenders tightened their standards after the subprime-mortgage mess, and that won't change this year. But mortgage loans can be had.

Follow these 10 tips this year to secure a mortgage at an interest rate and under the terms that are right for you.

1. Have the right credit score

The best combination of interest rate and points requires a higher credit score than in the past. Before the crisis, the best mortgages came with credit score of 720 or higher. Then the industry went back to basics. Now the best deals often require a 740 credit score.

2. Protect and preserve your credit

Multiple hard credit inquiries will cause your credit score to fall. For that reason, some would-be borrowers are wary of shopping around for a mortgage loan. They worry that if two or more lenders pull credit reports, their scores will go down. But the effect of rate-shopping is more complicated than that.

When mortgage lenders make multiple credit inquiries within a few weeks of one another, those multiple inquiries are treated as one. Yes, it will cause the score to drop. But the hit likely will be minor.

One credit-scoring method treats all mortgage credit inquiries made within 45 days as one inquiry; an older, less-generous method lumps together all mortgage credit inquiries made within just 14 days.

3. Shop around

The interest rate is important, but there are other costs to consider, such as discount points and even the type of mortgage loan. When shopping for best rates, compare combinations of discount points and loan types.

For example, if you estimate that you'll live in the house for eight years before moving, compare the total fees and monthly payments that you would make under three or four different loan deals. Ask yourself how much it would cost to pay zero discount points and get a higher interest rate, compared with paying discount points in exchange for lower rates? What about a 5/1 or 7/1 adjustable-rate mortgage?

You might quickly rule out some options, but at least you considered them.

4. Know your borrowing limit

Whether or not you get an Federal Housing Administration-insured mortgage, let the FHA be your guide to how much debt to take on.

For most borrowers, the FHA caps mortgage payments at 31% of gross monthly income, before taxes. If you earn the median household income of about $4,200 per month before taxes, then your monthly house payment — principal, interest, taxes, insurance and association dues — should be no more than 31% of that, or $1,302.

Some housing counselors say 28% to 30% is a safer number. The FHA limits total debt payments to 43% of monthly income. Total debt payments include first and second mortgages, auto loans, credit cards and child support. Some non-FHA loans let you borrow more, but you don't have to do it.

5. Don't reset your refi calendar to 30 years

When refinancing a 30-year mortgage loan, many borrowers restart from the beginning and schedule payments so they pay off the loan in 30 years. You don't have to do it that way.

When you refinance a 30-year loan that you've had for five years, pay off the new loan in 25 years. Just ask the lender to amortize the loan for the remaining period of the old loan.

6. Consider a no-closing-cost refi

You're fortunate enough to have positive equity, but you don't have a lot of cash lying around. If you think that means you can't refinance, think again. You could refinance the loan yet pay little out of pocket in a no-closing-costs refi.

The lender doesn't eat the closing costs out of a sense of generosity. After all, we are talking about a bank. With a no-closing-cost loan, the bank charges a slightly higher rate. You end up paying closing costs over time, instead of all at once.

7. Small down payment? See the feds

Most lenders require borrowers to have down payments of at least 10% of the home's price. In the case of refinances, lenders want borrowers to have at least 10% equity.

That leaves out a lot of borrowers and refinancers. But there are options for people without much savings or equity.

For borrowers with good credit, the FHA requires a down payment (or equity) of 3.5%.

The Agriculture Department's rural-development program guarantees mortgage loans with zero down payment. Those loans are limited to designated rural areas. The Department of Veterans Affairs offers zero-down mortgages for qualified veterans.

8. Small loan? Act early

This tip is based on the Dodd-Frank Wall Street Reform and Consumer Protection Act and concerns loans of less than $100,000.

New restrictions on how loan officers are paid take effect April 1. The law forbids lenders from basing loan-officer compensation on interest rates or other loan terms. Essentially, a mortgage broker or loan officer can earn more money only by lending more money.

As an unintended consequence, loan officers are likely to chase bigger loans, and they may not want to spend as much time working on smaller loans. For borrowers getting small mortgages, customer service could suffer.

Some loan officers and brokers will be conscientious and will treat customers equally, regardless of loan size. But keep the regulation in mind.

9. Make an extra payment any time of year

Perhaps you've heard that making an extra mortgage payment at the end of each year will shorten the repayment time. That's true. But the extra payment doesn't have to come at year's end. An extra payment is effective any time of the year. The important thing is to pay it consistently.

If money is tight during holiday season, maybe it would feel less painful to make the extra payment after receiving a tax refund, after an annual bonus or at another time of year.

10. Behind on your payments? See a counselor

Delinquent homeowners who receive Department of Housing and Urban Development-certified foreclosure counseling are more likely to keep their houses and not lose them to foreclosure, according to a study commissioned by NeighborWorks America, a national network of community-development and affordable-housing organizations, based in Washington, D.C.

When late-paying borrowers get counseling, they are more likely to get a mortgage modification, which can reduce their payments.

Mortgage rates hit 5 percent

2010-12-17T16:13:00.000-08:00

Mortgage rates hit 5 percent:

Mortgage interest rates rose sharply again this week, touching the 5 percent threshold and presenting more bad news for borrowers.

The benchmark 30-year fixed-rate mortgage rose 11 basis points this week, to 5 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.4 discount and origination points. One year ago, the mortgage index was 5.13 percent; four weeks ago, it was 4.62 percent.

The benchmark 15-year fixed-rate mortgage rose 11 basis points, to 4.37 percent. The benchmark 5/1 adjustable-rate mortgage rose 10 basis points, to 3.95 percent.

Weekly national mortgage survey

*Results of Bankrate.com's Dec. 15, 2010 weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
---------------------------------------------------
30-year fixed 15-year fixed 5-year ARM

This week's rate: 5.00% 4.37% 3.95%

Change from last week: +0.11 +0.11 +0.1

Monthly payment: $885.76 $1,251.30 $782.99

Change from last week: +$11.06 +$9.21 +$9.46
-----------------------------------------------------

This is the highest rate for the 30-year fixed in seven months. On May 12, the 30-year fixed stood at 5.07 percent in Bankrate.com's weekly survey. After that, it fell below 5 percent and stayed there -- until this week. Just six weeks ago, the benchmark 30-year rate was 4.42 percent -- a record low in the 25-year history of the weekly rate survey.

The steep and sudden jump was triggered by signs of an improving U.S. economy, says Peter Ogilvie, president of First Residential Mortgage Corp. in Santa Cruz, Calif.

"We've been getting positive or slightly positive reports that suggest positive movements in the economy, and that will send rates up," he says.

That relationship may seem counterintuitive, but a stronger economy draws investment funds into equities and away from the bond market. Lower demand for bonds means lower prices and, inversely, higher yields -- and interest rates follow the movement of bond yields.

When the dust settled, borrowers faced mortgage rates at least three-eighths to one-half of a percentage point higher than those they may have been quoted last month, Ogilvie says. A rate that's half a point higher on a $200,000 loan adds about $60 to the monthly payment. Bankrate.com's mortgage calculator lets you see what happens to monthly payments when rates change.

Here's a summary of what happened:

•The Federal Reserve held its target federal funds rate unchanged at zero to 0.25 percent Tuesday, but noted in its statement that the "economic recovery is continuing," "consumer spending is increasing at a moderate pace," and "business spending on equipment and software is rising."

•The Fed said it plans to continue buying U.S. Treasuries, a move that has triggered fears of future inflation.
The Fed's words, as well as its actions, have a "significant impact on the market and mortgage rates as bond investors look for any indication of what the Fed's going to do next," says Joe Metzler, a mortgage specialist at Mortgages Unlimited in West St. Paul, Minn.

•President Barack Obama and Congress struck a deal to extend federal income tax breaks for virtually all taxpayers, reduce the payroll tax through 2011, reinstate a smaller estate tax and ease some federal business tax rules. These changes -- and an end to the long uncertainty -- are expected to spur additional spending.

•Retail sales rose 0.8 percent in November, the fifth consecutive monthly increase and better than private-sector expectations of 0.5 percent growth, according to the U.S. Department of Commerce.

•European nations have made strides in the eurozone's debt crisis, a development that prompted investors to leave the security of U.S. Treasuries, causing bond yields and mortgage rates to rise, according to a statement from Freddie Mac.

Metzler says borrowers should focus on current rates and actually take the advice they're offered by experienced mortgage professionals. Both Ogilvie and Metzler report that the rate jump prompted some borrowers to break their holding pattern and finally lock in a higher rate.

Homeowners jumped off the fence nationwide, according to the Mortgage Bankers Association, which reported that refinance applications fell just 0.7 percent last week, despite the rise in mortgage rates.

"If you have a chance to lock now, lock," Ogilvie says. "The chances are, at this point, much better that rates will rise slightly in the near future."

15 n Dorchester, Waukegan

2010-12-17T16:08:00.000-08:00

525 Washington, Lake Bluff

2010-12-17T16:06:00.000-08:00

New Listing

2010-12-17T15:59:00.001-08:00

Housing bust? So what? We still want to own

2010-12-17T15:45:00.000-08:00

Housing bust? So what? We still want to own
The American Dream is still alive and kicking, including within immigrant and minority communities, according to a survey from mortgage giant Fannie Mae.

The housing crisis hasn't quenched the homeownership thirst, the company found. More than 51% of people said the bust did not change their willingness to buy a home and an additional 27% said it actually made them more likely to do so.
"The crisis has not put a dent in the desire to own," said Doug Duncan, Fannie's chief economist, "although it may have changed the reasons that people want to own."

The report, the first close analysis Fannie has taken of consumer attitudes about the rent-or-own decision, found that qualitative reasons -- like having the ability to remodel or to send the kids to a better school -- have overtaken financial considerations as the primary motivators for homeownership.

Some misperceptions about financial benefits may help to keep it high.

"People's attitudes don't always line up with empirical facts," said Duncan.
For example, although trillions of dollars of equity were wiped out by the housing bust and millions of people will lose homes to foreclosure, nearly two-thirds of people surveyed still believe purchasing a house is a safe investment. That could be viewed as a major disconnect.

Buying a home now is a no-brainer:

Also, more than half the public thought buying a home was a good idea financially even if they plan to move out in less than three years. That's actually rarely true because transactional costs like real estate commissions, title insurance costs and mortgage fees take a big cut off the top of selling and purchase prices.

Furthermore, a huge majority, 86% of those surveyed, cite income-tax benefits -- mostly the mortgage interest deduction -- as a big reason to buy. That benefit, however, is very small for most homeowners or even nonexistent.

"Lower-income homeowners, for example, don't itemize," said Duncan, "so there is no tax benefit for them at all."
Broad homeownership hopes:

Fannie found that no matter what their ethnicity or immigration status, Americans generally share similar positive attitudes toward homeownership, even though there are substantial differences among these groups in homeownership rates.

It seems that economic opportunities, not attitudes, account for much of the variation.
Only 44% of African Americans own homes, for instance, compared with 71% of whites, but that disparity starts to vanish among families in stronger financial circumstances. African Americans' homeownership rises to 60% for those earning between $50,000 and $99,000, for example.
The survey findings have implications for Fannie's business model. Non-Hispanic whites are projected to account for just 46% of the population by 2050. Immigration will account for most of the population growth between now and then.
And since, as the report stated, "strong homeownership aspirations exist across races, ethnicities and immigrant groups," Fannie can count on future demand for owner-occupied homes remaining strong, as long as the economy cooperates.

5 lessons from the homebuilders' survival

2010-11-11T07:29:00.000-08:00

Imagine the ultimate MBA course in corporate survival, under the rubric "Navigating the Storm: Lessons from the late 2000s." Believe it or not, the ideal industry for tomorrow's managers to study would be America's beleaguered homebuilders. In the past five years, the housing market has shrunk, both in prices and units, on a scale that's almost inconceivable in any other sector.

In 2005, America's top ten homebuilders, a group that includes Lennar (LEN), D.R. Horton (DHI), Toll Brothers (TOL), and Pulte (PHM), posted total sales of $99 billion. (We're including past figures from Centex, acquired by Pulte in 2009.) By last year, their revenues had dwindled to $23 billion, a drop of 77%. In 2009, the top ten suffered over $5 billion in losses. That's a $15 billion drop from the $10 billion in profits they mined from the boom just five years earlier.

Any major player that weathers a collapse that devastating and emerges ready to rumble when markets rebound is a model for "best practices." Amazingly, not one or two, but every one of the top ten homebuilders survived the lengthy crisis, and most boast the financial strength to grow strongly as the pace of recovery quickens. In fact, the prudence that saved the homebuilders stands in stark contrast with the recklessness that sank great names on Wall Street.

So let's examine five lessons America's managers can glean from this remarkably resilient industry--call it the "Homebuilders' Survival Guide." To get specifics, Fortune spoke to Marty Connor, CFO of luxury homebuilder Toll Brothers. Connor provided detail on how Toll, and the industry in general, managed the most successful downsizing in recent history.

1. Keep leverage low, keep maturities long.

While Wall Street firms built gigantic leverage and borrowed short-term in the flush times, the homebuilders did just the opposite. The idea is to build a fortress balance sheet in strong markets to ensure survival in the inevitable downturns. In 2006, for example, Toll's debt-to-equity ratio was just 56%, meaning that it had almost twice as much in net worth as in loans. "We also used relatively long-term, 10-year financing," says Connor. Many of those loans lasted through the crisis. And, adds Connor, Toll had no problem renewing the debt that matured even in the toughest times--we'll get to why in a minute.

Even today, Toll still has more equity than debt, $2.5 billion versus $2.1 billion, and that's after three years of losses.

2. Limit risk on the investment that can really hurt: Land.

Toll and other homebuilders prefer to "option" land rather than to buy parcels outright. An option gives the developer the right to acquire the property at a fixed price at a future date in exchange for a down payment; but if the market declines, a developer like Toll can walk away and simply lose the option price, always a fraction of a full purchase price.

In 2006, Toll controlled 90,000 lots, with two-thirds under option and one-third through direct purchases. Today, it still owns 30,000 lots, and has just 6,000 under option. So Toll has lowered its land inventory in the crunch not by selling land at a loss, but by cancelling options contracts--at far lower cost. Its rivals follow the same formula. D.R. Horton took just $11 million in options losses in 2009, one-tenth of its write-downs on land that it owns. Those write-downs would have been far higher for all homebuilders if they preferred ownership over lower-risk options in the flush markets.

3. When the market turns, harvest cash.

When houses are selling briskly, homebuilders need to keep buying land--the raw material for construction--to meet the strong demand. But when buyers disappear, they harvest cash by selling the houses that are already under contract without building many new ones or buying more land.

Here's the secret: The extra cash wouldn't exist if these companies went wild with leverage. That prudence also explains why, as Connor stated, Toll was able to renew its loans even during the downturn, albeit at higher interests rates.

Connor explains how Toll budgeted for building houses. He adds that these are hypothetical numbers that reflect the general trends. In good times, Toll might spend $150,000 for land and improvements such as roads and utilities. What's crucial for the future is that Toll generally doesn't use debt to buy the land. Instead, it deploys retained earnings, or its own cash. It does borrow to build the house, which in our example costs $300,000. At the height of the market, that house that cost $450,000 might sell for $600,000.

But during the boom the builders, including Toll, paid too much for land. That $150,000 lot fetched $200,000. Toll still paid $300,000 to build the house. But as prices dropped, the house that cost $500,000 brought less than that. Even so, Toll could sell for enough to repay the $300,000 loan and take out plenty of cash. The reason: It purchased the land not with loans, but with the earnings reaped in the good times--and that highly conservative practice provided plenty of cushion. Says Connor: "Since we don't have to buy much land in the difficult markets, we get to keep most of that cash." Once again, it's that cash harvesting that kept the markets lending to homebuilders.

4. Manage costs like a family business.

Many of the homebuilders started as small family businesses, including Toll. Chairman and co-founder Bob Toll started in the 1960's with a single subdivision near Philadelphia -- he'd pick up spare nails and admonish the forklift drivers to get their vehicles out of first gear.

Hence, they're typically adept at paring costs deeply and quickly. Toll has lowered its workforce since 2006 from 7,000 to fewer than 3,000. The top ten builders have shrunk their headcount from 63,000 to 21,000. "At the peak, a team of five to ten people would handle a single community," says Connor. "Now, that team might cover as many as three communities." Toll also values loyalty, once again, in that family business tradition. "We like to hire back people we laid off," says Connor. "I get calls from headhunters recommending new hires and I say, 'I have 4,000 people I'd prefer to hire first.'"

5. Keep forecasts extremely conservative.

When picking a project, Toll projects that home prices won't rise at all from today's levels, even if the houses won't come onto the market for several years. The "zero inflation" formula means that Toll makes money even if prices stay flat--a scenario that didn't play out in the past few years, but still worked to minimize losses.

Toll also builds a house exclusively after the buyer signs a contract. As a result, the only unsold inventory is the model house used for marketing and the homes left when buyers cancel contracts, something that's happened frequently in the last few years. Today, cancellation rates have returned to the historic average of around 6% for Toll. Even in the worst of times, the "contract in hand" approach kept the count of unsold homes far below the levels that sunk many regional "spec" builders.

In fact, sales are starting to rise again for the big builders, though still at a slow rate. Nishu Sood, an analyst for Deutsche Bank, says that the number of projects or subdivisions owned by the major homebuilders rose 6% over the past twelve months. And those big players, survivors all, are doing what they always do in a recovery: Gaining share from regional builders that typically borrowed too much, too short-term and frequently didn't survive as a result.

Indeed, the longevity of America's homebuilders is practically miraculous. And the rewards for that longevity could be rich.

2010-11-10T17:05:00.000-08:00

Price: $129,900 3bed / 1.1 Bath

Central Air
New window replacements (all except front window)
Kitchen Cabinets
Porcelain Tile in Kitchen
Stainless Appliances (Refrigerator, Stove, Microwave, Dishwasher)
New Countertops
Refinished Hardwood
New Porcelain Tile and Travertine through out bathroom
New Front and Rear Siding
New carpet

National Mortgage Rates & Payment Calculator

2010-11-09T06:33:00.000-08:00

National Mortgage Rates & Payment Calculator

Mortgage Type	Today	Last Week	Change	Graph
15 Year Fixed	3.710%	3.816%	-0.106%	graph
30 Year Fixed	4.311%	4.340%	-0.029%	graph
1 Year ARM	3.059%	3.065%	-0.006%	graph
3/1 Year ARM	3.119%	3.127%	-0.008%	graph
5/1 Year ARM	3.123%	3.134%	-0.011%	graph

National Real Estate Market Snapshot

2010-11-09T06:20:00.000-08:00

National Real Estate Market Snapshot
updated Monday, November 8, 2010
Listing Type Median Price Price Change
from Oct
Homes for Sale $179,900 -0.1%
New Homes $283,000 -0.4%
Foreclosures $154,000 0.0%
1 Year Market Value Change
1 yr
|
5 yr
|
10 yr
|
See more city graphs & data at Zillow.com

Listing Type	Median Price	Price Change from Oct
Homes for Sale	$179,900	-0.1%
New Homes	$283,000	-0.4%
Foreclosures	$154,000	0.0%

3 ways low mortgage rates can work for you

2010-11-04T07:27:00.000-07:00

3 ways low mortgage rates can work for you

By Sarah Max, contributing writerNovember 2, 2010: 5:56 AM ET

(MONEY Magazine) -- Just when it looked as if mortgage rates couldn't fall any further, they did.

Rates on 30-year fixed-rate mortgages (excluding jumbos) hit an average of 4.3% in September, the lowest level since 1953, according to Freddie Mac, and are still hovering below 4.5%.

Fifteen-year rates are even more mouthwatering: 3.8%. Mind you, those are averages. The most creditworthy borrowers can do even better, snagging rates perhaps a quarter of a percentage point lower.

So what's in this for you? A lot, potentially. If you have a credit score of 720 or higher and at least 20% equity in your home, you might use these crazy-low rates to shorten your mortgage term, free up cash, or even add to your real estate holdings, for example.

Whatever you decide, don't wait too long.

Home prices expected to slide another 8%

"The consensus is that rates will gradually move up in the new year," says Frank Nothaft, chief economist for Freddie Mac. Freddie projects that the average 30-year fixed will hit 5% by the end of 2011.

Get mortgage-free relief sooner

It's easy to see why more than a quarter of borrowers today are choosing a 15-year mortgage, according to analytics firm Core-Logic, up from about 9% in 2007. A 15-year lets you save in two ways: You get a rate that's about half a percentage point lower than that of a standard 30-year, plus you can save tens of thousands by retiring the loan in half the time.

Let's say you took out a $270,000, 30-year mortgage at 5.9% when you bought your house in 2005. You're paying $1,596 a month in principal and interest and now have a $250,000 balance.

Let's further assume that you roll $5,000 in refinancing costs into a new 15-year mortgage at 3.8% (so the loan is for $255,000). Your new monthly payment will be a heftier $1,860, but you'll save more than $147,000 in interest over the life of the loan.

What if you can't manage the bigger monthly bite? Refi to another 30-year and simply pay more in months when you're able to, assuming you're disciplined enough to actually follow through with that plan.

Given that few new mortgages carry prepayment penalties anymore, kicking in extra money shouldn't be a problem, says Keith Gumbinger, vice president of mortgage data tracker HSH Associates.

Caveat: If you have only a few years left on your current mortgage, or you plan to move soon, a refi may not pay off. Calculate how long it will take to break even on your closing costs, up to three years is typical.

Improve cash flow

Freeing up cash may be your biggest priority right now. Maybe you're trying to replenish your emergency fund after being out of work, or you have lots of high-interest credit card debt to pay off.

Maybe your twins got into Harvard, and you need to cover some of the tuition out of current income. Or maybe you see enough investment opportunities around that you want to lower your monthly payment and invest the difference.

In those cases, choose a 30-year loan. Using the previous example, if you refinance to a $255,000 30-year at 4.4%, you'll lower your monthly payment from $1,596 to $1,277.

True, you won't save nearly as much in interest as you would with a 15-year. But that's not so bad, says Matthew Keeling, a certified financial planner in Mashpee, Mass., as long as you do something smart with the extra $319 a month you'll save.

Double down on real estate

Do your retirement plans call for moving to a house near the beach or a cabin in the mountains? If you can afford another mortgage payment, you may want to start your search now, while rates are in your favor and prices are depressed. Ditto if you've been wanting to buy a second home or an investment property, says Jonathan Bergman, vice president of Palisades Hudson Financial Group in Scarsdale, N.Y.

Assuming you're buying the place as a true second home, lenders generally charge the same rate they would for a primary residence. But if you intend to rent the place out, even if just for a few years until you retire and you need rental income to qualify for the mortgage, it's considered an investment property.

And mortgage rates on investment properties are running about a half to a full percentage point higher. Still, the numbers are "pretty compelling," says Justin Krane, a certified financial planner in Los Angeles.

New Listing / 525 W Washington Ave Unit 15, Lake Bluff

2010-11-03T16:51:00.000-07:00

The Right Time to Buy or Sell

2010-11-01T07:50:00.001-07:00

The Right Time to Buy or Sell

With winter approaching, many homebuyers and sellers assume now is the time to put real estate matters on hold. That logic may have held true in years past, but in the current market the idea of hibernating for the winter may not be the best decision. Following are a few reasons why right now is the right time for both buyers and sellers to be in the market.

Good Time to Buy
1. Price - The #1 reason qualified individuals are reluctant to buy today is a fear that prices will fall. And they may. But according to arecent story on MSN.com, "it doesn't really matter in the long haul." Housing affordability is near an all-time high, and according to the S&P/Case Shiller Home Price Index, local prices have increased for six consecutive months through August.
2. Interest Rates - Mortgage interest rates are 30% lower than they were four years ago. When you layer today's rates on top of prices that are 30% lower, you get monthly principal and interest that is only slightly more than half of what it was four years ago. That's a big deal.
3. Less Expensive Than Renting - According to the latest Trulia.com Rent vs. Buy Index, it is less expensive to own a home in Chicago than it is to rent. The 50-city index is calculated using the average list price compared with the average rent on two-bedroom apartments, condos, townhomes and co-ops listed on Trulia.com.

Good Time to Sell
1. Buyers Are Serious - It may be fun to drive around and look at open houses on a beautiful summer day, but when the weather starts to turn and people get busy with holiday schedules, kicking the tires on a new home is usually the last thing on someone's mind...unless, of course, they actually need to buy. Sure, there are fewer buyers in the fall and winter, but the ones who are out there are serious.
2. You're Moving Up - The thought of losing equity on a sale doesn't appeal to anyone, but in this market, sellers who trade up have more to gain than to lose. That's because, dollar for dollar, the more expensive home they're buying almost certainly has come down in price more than the home they're selling, which means move-up buyers will actually come out ahead provided they have the finances to complete a transaction.
3. Less Competition - While inventories remain high relative to past markets, the number of homes for sale in the fall and winter is generally about 25% less than in the spring. In addition, the recent moratorium on foreclosures has kept thousands of homes off the market. Those homes will eventually be put up for sale. So if you can capture the last few weeks of fall, you will face less competition than if you wait until next spring.

If you're considering buying or selling, there are many more reasons why it makes sense to do so now. To talk about your specific real estate needs, call or e-mail me today. And please remember that I always appreciate your referrals.

6 ways to ensure a remodeling project pays off.

2010-10-28T14:41:00.000-07:00

6 ways to ensure a remodeling project pays off.

(Money Magazine) -- Just a few years ago you could count on getting the bulk of your money back for almost any home-improvement project you took on. Today merely replacing a toilet seat can feel like throwing caution, and cash, to the wind. According to a study from Remodeling magazine, the average return on value for an upgrade declined from 87% in 2005 to 64% in 2009. But these six new rules will help you maximize your return on your remodeling investment.

Rule No. 1: Repairs get the biggest returns

The smartest money now goes into "undeferring" needed maintenance. That's because while buyers might appreciate enhancements like Jacuzzis and Sub-Zeros, they won't tolerate a house with a leaky roof or antiquated plumbing. "If a property is known to have issues, today's buyers won't even look at it," says Austin real estate appraiser Jim Amorin.

And trying to keep problems a secret can cost you big-time. If buyers discover them during inspection, it's now common practice to ask sellers not only to pick up the tab for the repair but also to pay a penalty to compensate the buyer for the inconvenience of having work done.

So the $20,000 you saved by putting off a roof repair, say, could turn into a $30,000 credit to the buyers at closing, says Amorin.

Rule No. 2: Remodeling beats adding on

McMansions have gone the way of the SUV -- and large additions don't pay off either. "There's been a fundamental shift toward quality over quantity," says Warwick, R.I., real estate agent Ron Phipps.

Having a big, formal living room plus an everyday family room is less desirable than having one multi-use common space. So rather than adding on, you're better off repurposing existing square footage by reconfiguring the floor plan or capturing unused basement or attic space.

Want an eat-in kitchen? Knock down the wall between the kitchen and dining room ($2,000 to $8,000, depending on whether it's load-bearing or contains plumbing). That will instantly create a large eat-in kitchen and give the whole house a more open feel -- without a huge investment to make up at resale.

Rule No. 3: Eco-friendly upgrades can save cash

Some green improvements pay you back long before you sell your house. Install energy-efficient features, such as EnergyStar appliances and extra wall insulation, and you'll see lower energy bills every month.

Add in the federal tax credit of up to $1,500 that lasts through 2010, plus many local rebates and tax incentives (see dsireusa.org), and the work may pay for itself in just five years. Green features are also increasingly a selling point, says Phipps. "Most people in the market right now are first-time homebuyers in their thirties, and they've been raised to care about carbon footprints and being ecofriendly," he says.

The best way to go green is with a while-you're-at-it job: When it's time to replace your furnace, for example, upgrading to super-efficiency might add only $500 (after tax credits), compared with standard new equipment, but it will save you -- and your buyers someday -- $150 or more in annual heating costs.

Rule No. 4: Tech infrastructure trumps cool gadgets

Home electronics seem like a deal, since prices have fallen about 50% over the past three years and continue to drop, according to Stephen Baker, president of industry analysis at NPD Group, a market research firm.

Still, that doesn't change the fundamental problem with expensive built-in technology: Put in a $10,000-plus dedicated home theater today, and something better will come along tomorrow and make your system look as if it's from the Mesozoic Era. With buyers seeking any excuse to low-ball their offers, they're not going to reward you for an out-of-date system.Tech infrastructure is different, however. Anytime you're opening up walls for a construction project, have cabling and Ethernet ports installed. At about $80 a room, it's a low-cost way to provide the capability for whatever technologies come along.

Rule No. 5: Let the Joneses be your guide

During the boom, you could be the first on your block to have a luxury kitchen, spa bathroom, or in-ground pool and count on others following suit. And even if the neighbors never took your lead, there was plenty of equity growth to cover your costs.

Nowadays that fudge factor is gone. "You really have to keep your house's amenities in line with the neighborhood now," says Kermit Baker, director of the remodeling futures program at Harvard University's Joint Center for Housing Studies.

If other houses on the block have real marble countertops, by all means add one to your house, but if everyone still has faux blue-marble Formica from the '70s, you're not getting your money back.

Also, keep your projects design-neutral so they'll appeal to the greatest number of people. Choose neutral colors and traditional electrical and plumbing fixtures unless your house has a modern architectural style.

Rule No. 6: The new payback time is five years

As with any volatile investment, the longer your time frame, the lower the risk. Don't take on a big project if you're likely to move in less than three to five years. There's just too much chance that any money you put in -- aside from necessary repairs or superficial cosmetic work -- could be lost while the housing market continues to meander.

But if you plan to stay awhile, don't delay starting a project. Home improvements are a bargain right now, with contractors bidding 10%, 20%, even 40% lower for the same work than just a year or two ago, says Bernie Markstein, senior economist for the National Association of Home Builders.

Grab them while they're hungry for work and make it clear that you'll be getting multiple bids so they'll be motivated to undercut one another's prices. You'll fulfill the first rule of investing: Buy low. Then hope that when you're ready to move, you can sell high.

Take a bite out of closing costs

2010-10-26T14:33:00.000-07:00

Take a bite out of closing costs
Hold the fees please. How to save if you're buying a new home or just refinancing.
With mortgage rates still as low as they are, financing a house is dirt cheap these days, right?

Not if you pay a fortune in closing costs.

As anyone who has shopped around for a mortgage knows, it's extremely difficult to compare one lender's offering to with that of another lender because the up-front fees vary so much and are not guaranteed. Lenders and their venders can, and sometimes do, add or inflate fees in the eleventh hour of a transaction.

The U.S. Department of Housing and Urban Development (HUD) has been working on regulations that promise to simplify the mortgage process and save consumers as much as $1,000 off a typical mortgage transaction. When such rules will be rolled out, if ever, is still anyone's guess.

With no regulation in sight, borrowers should consider these strategies for keeping their closing costs in check.

Get friendly with your current lender

If you're looking into refinancing, the first call you should make is to your existing lender, who already has critical information about you and your house on file, said Keith Gumbinger, vice president for HSH Associates.

Since you have an existing relationship, a "streamlined" process might be possible. That can save you a lot of extra paperwork and money on everything from application fees to appraisal fees.

Fee-ed Up?

Here are just some of the costs of closing on a mortgage.

Fee Average cost*

Application $272

Appraisal $310

Credit report $28

Document preparation $206

Processing $288

Recording $86

Underwriting $236

*Based on a $100,000 loan. Not every lender surveyed charges all of these fees.

Although fees for title search and title insurance are not determined by the lender, you may also get a break there. If you recently refinanced or took out a loan, you can save as much as 50 percent on title insurance by asking for a reissue rate, which your lender can request on your behalf.
If you're a homeowner shopping for a new house, you should also try giving your existing lender first dibs on the new business. Assuming you've been a good client and your lender originates the kind of mortgage you're interested in, it's possible to get a better-than-market deal, according to Gumbinger.
Get nitpicky about fees...

There are more than a dozen kinds of fees that could show up on your final closing statement, including credit report fees, appraisal fees, document preparation fees, title fees, recording fees and underwriting fees.

All told, fees on a $200,000 mortgage could add up to anywhere from $1,000 to $3,000 – that's not including any "discount" points you pay up front to get the best interest rate. (A "point" is a fee that equals 1 percent of the loan amount.)

Lenders are required to give you a good-faith estimate of your closing costs within three days after you apply for a loan. Some will give you such an estimate even before you apply if you ask for one. Even if it is no guarantee, this written estimate will give you an idea of what kind of fees you can expect to pay, as well as an opportunity to negotiate for a better deal.

"If you're a good credit borrower you can challenge fees if they seem excessive," said Gumbinger, noting that lenders don't control many fees that show up on your statement.

Keep in mind that the good faith estimate doesn't include such out-of-pocket costs as state mortgage taxes, homeowners insurance and property taxes, which you may be expected to pay at the time of closing. In fact, your total tab at closing could be several times more than originally estimated, said Gumbinger.

.. but keep the big picture in view

Closing costs are certainly a consideration for both new loans and refinancing. But it's important to not lose sight of what should be your first priority – getting the lowest rate possible.

Indeed, the difference between paying, say, 6 percent and 5.5 percent on a new loan adds up to nearly $23,000 in total interest on a $200,000 30-year loan. If you have to pay a few hundred dollars in closing costs to get that rate, you can rest assured that it is a worthy investment.

It may even be worth it to pay a point or so up front in order to lock in the lowest rates. Let's say that you'll knock your rate down to 5 percent on that $200,000 loan by paying an extra point ($2,000) up front. Considering that you'll cut $62 off your monthly payment and about $22,000 from total interest by going from 6 percent to 5.5 percent, it makes sense as long as you plan to stay in the house long enough to recoup those up front costs.

In fact, if you're short on cash you might even consider rolling the closing costs into your loan, if that is an option. You'll want to consider how much more you'll pay each month as well as in interest over the life of a loan.

If you roll $2,000 in finance costs into a loan with a 5.5 percent rate, for example, you'll pay an extra $11 a month and about $2,000 extra in total interest. In this case you're still better off than if you had not refinanced at all.

How To Buy a Home at a $100,000 Discount

2010-10-03T14:05:00.000-07:00

How To Buy a Home at a $100,000 Discount

To pare down their growing inventory of properties, Fannie Mae and Freddie Mac are scrambling to unload nearly 150,000 foreclosed homes. And that means 2004-esque deals — like requiring as little as 3% down, offering to pay a portion of the closing costs and arranging special financing and warranties for repairs and renovations.

It's another option for home owners who want to trade up — and an easier way into the market for first-time home buyers, says Dean Baker, co-director of the Center for Economic and Policy Research who studies the housing market.

The best bargain might be the home's price. A SmartMoney analysis revealed that buyers could save $100,000 by buying a Fannie or Freddie home instead of similar fair-market properties just a few blocks away.

And while many of Fannie and Freddie's homes are at the lower end of the market and in less-desirable areas, a SmartMoney.com search of Fannie Mae and Freddie Mac listings revealed that buyers could find properties in good neighborhoods — and for $100,000 less than comparable houses nearby. For example, a five-bedroom, three-bath with a backyard, deck and two-car garage in tony Alexandria, Va., was listed for $445,000, $100,000 less than the average listing price in the area, according to Trulia.com. Four blocks away, a similar non-foreclosed colonial is listed for $639,900.

Or how about a three-bedroom, two-bath in Bergen County's leafy River Edge, N.J for $359,900 -- $85,000 less than the average listing in the area. One avenue over, a non-foreclosed similar home is listed for $474,888.

The downside: Angry neighbors. These types of listings are devaluing nearby properties, says David Howell, realtor and executive vice president at McEnearney Associates, which sells homes in the metropolitan Washington D.C. area. That means in some areas where Freddie and Fannie homes are on the market, buyers could find a better deal on a nearby market-rate home that doesn't require repairs, he says.

Buying a Fannie or Freddie home can be more complex than pursuing an open-market real estate listing — or even a commercial bank foreclosed property. There's a smaller selection of appealing properties — there were just six higher-end homes listed on a recent day in Alexandria, for example — and those tend to sell the fastest. And there's little room to negotiate price.

"Our goal is to recover as much as we can to offset our loss and not to be low balling properties just to move them," says a Freddie Mac spokesman. "We absolutely have no motivation to be leading a downward spiral in home prices."

The three best features of Fannie and Freddie foreclosures that make digging for these deals worthwhile:

Small Down Payment

For its foreclosed properties, Fannie Mae will accept down payments as low as 3% on 30-year mortgages at the same interest rates banks are currently offering. And Fannie Mae doesn't require private mortgage insurance. Compared to a typical bank mortgage, which requires 10% down, plus PMI for buyers with less than 20%, that's a huge savings — an estimated $51,000 up front and upwards of $2,500 per year PMI on a $300,000 mortgage.

It's a tradeoff, though. For buyers with 20% down, mortgage payments on a 30-year mortgage loan at 5% would be $1,288 a month. With just 3% down, the buyer would need to borrow $291,000 and make a $1,562 monthly payment.

Help with Renovations

Fannie and Freddie have fixed big flaws like leaky roofs and damaged electrical work, and they often handle small projects like replacing appliances that are broken or missing, tearing up old carpet, or fixing other damage left by former owners or vandals.

Now, to entice buyers who want to update or upgrade, many of Fannie Mae's properties come with an optional mortgage that includes extra financing up to $30,000 for repairs and improvements. But with a little down payment and the extra amount tacked on, the buyer could end up owing more than the house is worth — especially if home prices continue to drop.

First Dibs

Buyers who plan to live in their Freddie Mac-purchased home will get to see properties for at least the first 15 days they're on the market — before the listing opens to would-be landlords. Many bank-owned foreclosure properties are snatched up by cash-stocked investors who can wait out the downturn to sell later at a profit.

And Fannie and Freddie homes can be seen inside and out — unlike some regular foreclosure listings. Consider bringing along a contractor when you view the home to help spot areas that need repairs and provide pricing. (Most contractors will do this for free.)

"It gives families who want to buy a home to live in the opportunity to look and bid without competition from cash-rich investors," says a Freddie Mac spokesman

.

310 Lake Gillian Way,ALGONQUIN 60102::

2010-09-28T12:25:00.000-07:00

New bank owned listing 310 Lake Gillian Way,ALGONQUIN

Price $99,900

5 questions to ask before renting out your home

2010-09-28T12:14:00.000-07:00

5 questions to ask before renting out your home

Relocating? Tax considerations — not to mention the stress of being a landlord — come into play when you contemplate taking on an investment property.

By Michele Lerner of Bankrate.com

Will bad credit sink your mortgage?

When homeowners suddenly have to relocate, they face the dilemma of whether to sell their home or keep it as an investment property. The recent nationwide drop in housing values complicates the decision.

Homeowners should weigh several factors before deciding whether to sell now or rent and wait for the market to recover, experts say.

“Relocating homeowners need to shift their thinking and recognize that the property is no longer their home; it is an investment,” says Joseph Himali, principal broker of Best Address Real Estate in Washington, D.C. “The decision to sell or rent should depend on whether keeping the home is the best use of their investment dollars.”

Here are five questions to ask when deciding whether to sell a property or rent it out.

1. How much equity do you have?

Homeowners with significant equity should sell, unless their home is a desirable rental and they want to take on the challenges of being a landlord, says Diane Rule-Enos, a registered financial consultant with The Patriot Financial Group in Beverly, Mass.

“Even if you have to sell at a price that is lower than what it was worth a few years ago, if you have equity, it is a much less risky choice to sell,” Rule-Enos says. “The higher-risk decision is to deal with renters who may not pay the rent and who may damage the property.”

Real-estate expert and author Robert Irwin, who lives in California, takes the opposite view.

What's the lowest rate you can get?

“Homeowners with significant equity usually have lower mortgage payments, so they are more likely to have positive cash flow when renting the property,” he says.

For homeowners who owe more on their mortgage than their home is worth or for those with little equity, the decision to sell depends first on whether they have cash to bring to settlement. If not, they can attempt to negotiate a short sale with the lender or hold onto the property and hope its value will increase.

2. What’s the local market prognosis?

Irwin recommends that homeowners ask a real-estate agent about local market trends and research home values online.

“Homeowners should make the calculation to determine how long it will take to reach the break-even point in terms of gaining enough value to make a profitable sale,” Irwin says. “That calculation should be made on as local an estimate as possible.”

Irwin says homeowners should look past national and statewide trends and focus on the health of their neighborhood's housing market.

“Some areas are already increasing in value by 5% or 6%, while others will take years to see positive price improvements,” he says.

Himali says employment is the primary driver of real estate. In areas where employment is steady, housing likely has stabilized.

Lessons for landlords

Tips any landlord should know before renting to someone.

3. What’s the state of the rental market?

Irwin recommends consulting with a real-estate agent who specializes in rentals to estimate rental rates and how long it will take to find a qualified renter.

Homeowners should know that rent is based on market rates, not the amount they need to cover their mortgage payments.

“Homeowners who choose to rent need to be financially prepared for the possibility of negative cash flow, vacancies and the chance that the renters will stop paying the rent,” Rule-Enos says.

4. What are the costs of owning investment property?

Owners who become investors must continue paying principal and interest on their mortgage, property taxes, homeowners insurance, homeowners association fees, and maintenance and repair costs.

Homeowners who hire a property manager must weigh an additional expense. Himali and Irwin estimate property managers charge 8% to 12% of the gross monthly rent.

“The first calculation to include should be a fee for a property manager, because the last thing anyone wants is to have to be on constant call for maintenance issues, especially if they are not local,” Himali says.

Of course, many of these costs are tax-deductible for landlords. Owning a home as an investment property changes owners’ tax liability in ways that may help or hurt them. Talk to a tax professional for more guidance.

5. Are you ready to be a landlord?

Irwin says the emotional cost of being a landlord includes handling tenant complaints, maintenance problems and even the possibility of eviction. The application process should include a background check by the landlord.

“Landlord-tenant laws vary from state to state, so it’s very important to either hire a professional who knows the laws or to make sure you have a thorough knowledge yourself,” Himali says.

In the final analysis, homeowners must weigh the emotional and financial costs of being a landlord against the potential for profit. A real-estate agent can create a statement of estimated net profit or loss based on the potential sales price.

*New Foreclosure Listing

2010-09-08T19:11:00.001-07:00

310 Lake Gillilan Way Unit 310, Algonquin

Mortgage Basics

2010-09-08T12:28:00.000-07:00

Mortgage Basics

Adjustable or floating rate, 15-year or 30? How much mortgage can you afford? These are just a few of the many questions home buyers will find information on in this report.

Before You StartTake a fresh look at your household budget to determine how much you can spend on a mortgage each month.

Request free copies of your credit report. (You're entitled to receive a free one annually from each of the nation's main credit reporting agencies.)

Familiarize yourself with all of the variables generally associated with financing a home, such as interest rate policies, terms, points, fees, etc.

1 Financing the American Dream

Buying a home is the biggest financial investment most of us will ever make. As with any large project or goal, it requires dealing with a variety of complex issues. The best approach is to divide the process into manageable tasks. The following deals with the first steps of gathering your records, determining what you can afford, and understanding mortgage options.
2 Put Your Own Financial House in Order

Before you go looking for a home, you should determine how much home you can afford. Most lenders will prequalify you to borrow up to a certain amount. Prequalification allows you to focus in on a realistic price range and makes you a more attractive buyer. Whether or not you want to prequalify, eventually you'll need to complete a loan application and it may take some time to gather and assemble the required information.

It's also a good idea to review your credit report. Contact local lenders to determine which credit bureaus they use. Then contact the credit bureaus and request a copy of your credit report (in most states, credit bureaus are required to provide individuals with a free copy of their report). Review your report to ensure that all information is correct. If you have past credit problems, don't lose hope. Be prepared to present a rationale for each slipup, and demonstrate an improvement in your ability to pay bills on time.

3 How Much Mortgage Can You Afford?

The Federal National Mortgage Association (Fannie Mae) is a government-sponsored organization that purchases mortgages from lenders and sells them to investors. Two income-to-debt ratios established by Fannie Mae are standard requirements for conventional mortgages. The first requirement is that monthly mortgage principal and interest payments (P&I), plus insurance and property taxes, cannot exceed 28% of the buyer's gross monthly income (some exceptions may apply to increase this limit to 33%). The second requirement limits total monthly debt payments (housing, credit cards, car payments, etc.) to 36% of gross monthly income. In addition to these requirements, you may have to pay 10% to 20% down on the total purchase price to qualify for a conventional mortgage.

Mortgage Rates and Minimum Incomes Needed to Qualify

Interest Rate Monthly Payment Minimum Annual Income

4% $454 $21,770

5% $510 $24,479

6% $570 $27,340

7% $632 $30,338

8% $697 $33,460

9% $764 $36,691

10% $834 $40,017

11% $905 $43,426

12% $977 $46,905

Mortgage companies use ratios to analyze your mortgage payment. The above example shows the monthly payments of principal and interest, and income needed to qualify for a $95,000 mortgage at various interest rates, amortized on a 30-year schedule, assuming a payment ratio of 25%.

Source: National Association of Home Builders, Economics Division.
4 Types of Mortgages

How much house you can buy also depends on your mortgage's term and interest rate. The term is the length of time (usually 15 or 30 years) over which payments will be paid. The rate can be fixed (meaning it doesn't change over the loan's term) or adjustable (it fluctuates with market conditions). Thirty-year fixed-rate mortgages remain the most popular. The longer term lowers the monthly payment, while the fixed rate provides stability over the life of the loan. Given relatively low interest rates, these mortgages are attractive to buyers planning to stay at least six or seven years in their new home. The drawbacks are low principal payments in the early years, and the risk that market rates will decline over the term. However, if your credit history is sound and you have sufficient income, you can usually refinance your mortgage when rates decline.

A 15-year term lowers the interest rate, reduces total interest payments, and increases principal payments. But it also increases monthly payments. If you can't afford the higher payments now, you might opt for a 30-year mortgage. If there are no prepayment penalties, you can make additional principal payments as your income increases. Making just one extra monthly payment a year will pay off a 30-year mortgage in less than 22 years and can save tens of thousands of dollars in interest costs. If you plan to stay in a home no more than three years, you might want an adjustable-rate mortgage (ARM). ARMs offer initial rates that are lower than fixed mortgages. At some point, usually after the first year, rates are tied to market conditions and are subject to potential rate increases. Most ARMs include a cap on rate increases in any given year, as well as over the life of the loan. Some ARMs offer initial rates at least 2% below fixed rates and limit increases to 1% annually and 5% to 6% over the life of the loan. Many home buyers are attracted by the affordability of an ARM during the initial period. However, you should be confident that your future income will be sufficient if both interest rates and your monthly payments increase.
Another popular mortgage involves a balloon payment. A balloon is a lump-sum payment that pays off the loan in full after a fixed period of time. Generally the rates on balloon mortgages are 1/4% to 3/4% less than on 30-year fixed mortgages, but during an initial period of between 3 and 15 years, payments are similar. After this period, the remaining outstanding principal balance is either due in full or subject to refinancing. This is a good option for home buyers who plan to sell before the final payment is due. But because property values fluctuate, you may not be able to sell when you want. You may also face higher payments if you are forced to refinance at a higher rate, and there is also a risk that you may not be in a position to refinance when the balloon becomes due.

Three Steps to Finding the Right Mortgage

Estimate how long you expect to live in the house. If the answer is less than three to five years, consider an Adjustable Rate Mortgage (ARM), which typically starts out with a lower rate. If you plan to live in your new home longer than five years, a fixed-rate mortgage offers protection against rising interest rates.

Shop around for mortgage rates. Banks, credit unions, and mortgage companies all offer mortgages. Compare at least six lenders in your area.

Add up all the costs for each lender. Include fees, points, closing costs, etc., to arrive at the total mortgage cost for each lender.
5 Interest Rate Points

Points are interest paid in advance to reduce the rate on a loan. One point is equal to 1% of the mortgage amount. The general rule is that 1 point is worth 1/8 of 1% off the loan rate. The decision to pay points for a lower rate is based on how much the seller is willing to contribute to points, how long you plan to stay in the house, and how important lower payments are compared to higher closing costs. You will need to calculate the long-term value of points based on these factors, keeping in mind that points are generally tax deductible in the year paid.

6 Other Alternatives

If you cannot afford a conventional mortgage, there are a variety of alternatives. An anxious seller will sometimes offer owner financing. Federal Housing Administration (FHA) loans offer down payments as low as 3%, but may require the buyer to purchase mortgage insurance. (The FHA is a government agency responsible for insuring affordable housing mortgages.) The Veterans Administration (VA) offers no-money-down mortgages to qualified veterans of the U.S. military. Finally, there are local affordable housing advocates that offer low-cost, low down-payment loan alternatives. For further information, contact the FHA, VA, Fannie Mae, or your local mortgage lender or real estate broker.
Summary

The first step in acquiring a home mortgage is to gather the information you'll need to include in a mortgage application.

Review your credit report by ordering a copy from the credit bureaus used by local mortgage lenders.

Prequalifying for a mortgage lets you know how much you can afford and makes you a more attractive buyer.

Conventional mortgages limit housing costs to 28% of gross income and total debt payments to 36% of gross income.

Mortgage terms are usually 15 or 30 years. The longer the term, the lower your monthly payment, but the higher your overall interest costs.

Thirty-year loans often permit additional principal payments. One additional monthly payment per year will reduce a 30-year loan to 22 years.

Interest rates are fixed or variable over the term of the loan. Variable rates may be best for buyers who plan to sell within three years.

Generally speaking, one point is worth 1/8 of 1% off the loan rate.

A balloon payment is a lump sum payable at the end of a specified term.

Points and interest on mortgages or home equity debt are usually tax deductible.

5 ways financial reform affects you

2010-09-07T13:43:00.000-07:00

5 ways financial reform affects you

Recent changes may make it safer to get a mortgage – and potentially, much harder, too. As rule making continues to play out, here’s what homebuyers should know.

By Luke Mullins of U.S. News & World Report

Although the financial-reform legislation won’t upend the conventions of buying or selling a home, it will precipitate key changes in the mortgage market. Even after all of the new rules are implemented, most consumers will still encounter the same figures — real-estate agents, mortgage brokers, home inspectors — who have long defined the homebuying process.

But the legislation, which President Barack Obama signed into law July 21, includes some specific provisions that, while perhaps less visible to house-hunters, will have a profound effect on the type of mortgage that buyers end up with.

“The interface with a broker or a lender won’t change,” says John Taylor, president and CEO of the National Community Reinvestment Coalition. “It’s just what the broker and lender is offering will be screened to protect the consumer from getting bad loans.”

Here is a look at the main real-estate-related provisions of the financial-reform legislation and what they mean for you:

1. Repayment evaluation. The massive home-price swings in recent years were linked in large part to consumers’ ability to obtain mortgages they often couldn’t afford. The legislation addresses this issue by forcing lenders to ensure that mortgage applicants have the financial wherewithal to repay a loan before lenders grant it. Taylor calls this provision a “critical” step in the creation of a safe mortgage market.

“Had that standard been in place [in the years before the housing boom], we would have avoided in great part the foreclosure crisis,” he says.

2. Incentive structure. During the run-up to the housing bust, brokers in some cases received increased fees for putting borrowers into risky, subprime mortgages — which often carried higher interest rates — says Julia Gordon, senior policy counsel for the Center for Responsible Lending. The reform legislation bans financial incentives based on a loan’s interest rate, as of April 1, 2011.

“You can’t make more [money] if you somehow talk [the borrower] into a higher-rate loan,” says Gordon, who adds that the law “takes aim at some of the underlying bad incentive structures that created the problem.”

3. Risk retention. A key shortcoming of the mortgage market’s “originate and distribute” model was that brokers passed off a loan’s risks when it was sold on the secondary market. As a result, mortgage originators and lenders had less incentive to ensure that the loans they sold were of sufficient quality.

The new law, however, requires firms selling mortgage-backed securities to hold on to at least 5% of the credit risk for all but the safest home loans. By compelling these companies to bear a portion of the risk themselves, the provision is designed to ensure that mortgages are underwritten more soundly.

5 ways financial reform affects you

2010-09-07T13:41:00.001-07:00

::Mortgage interest rates continue to fall::

2010-09-06T17:09:00.000-07:00

::Mortgage interest rates continue to fall::

Loan type

+/- Rate

30 Yr Fixed 4.49%

15 Yr Fixed 3.92%

30 Yr Fixed Jumbo 5.33%

15 Yr Fixed Jumbo 4.84%

Loans are the cheapest they've been in decades, and even rates on jumbo loans are dropping.

Mortgage interest rates dipped again this week to their lowest level in more than 50 years, and even upper-bracket borrowers are getting better rates than they've seen in years.

The average 30-year fixed-rate mortgage fell to 4.44 percent, down from 5.29 percent last year at this time, according to a weekly survey released Thursday by Freddie Mac. The average 15-year mortgage was at 3.92 percent, down from 4.68 percent last year.

There's been particularly good news for upper-bracket buyers and borrowers in recent weeks, as well, as getting a jumbo mortgage has gotten slightly cheaper and easier.

And that seems to be showing up in the market. Pending sales of upper-bracket houses rose in July, making the high end the only price category to show an increase, according to the Minneapolis Area Association of Realtors.

Data from bankrate.com puts the average 30-year fixed rate mortgage at 4.57 percent, while the average 30-year jumbo mortgage is at a record low 5.27 percent. That's down .07 percent from the previous week.

Loans above $417,000 are considered jumbo in Minnesota, and in recent weeks the spread between rates on jumbo loans and smaller ones has narrowed.

Randy Reichert, area manager in the private mortgage banking division at Wells Fargo Homes Mortgage, said that a year ago the spread was more than a full percent, but has fallen to about a half percent, making it more attractive to buy or refinance higher-priced houses.

"The good news now is that the spread has narrowed and rates have come down," he said.

Brian Call, president of Rubicon Mortgage Advisors in Edina, said he's aware of at least a few wholesale lenders who have re-entered the jumbo market or have increased lendable loan-to-value ratios.

::The 6 phases of a foreclosure::

2010-07-22T08:12:00.000-07:00

If you or someone you know is facing possible foreclosure, you should know what to expect.

By Jean Folger of Investopedia

Many people have either gone through foreclosure, a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership of the property, or know someone who has.

RealtyTrac released its U.S. Foreclosure Market Report on April 15 for the first quarter of 2010. The report calculates foreclosure filings, including default notices, scheduled auctions and bank repossessions, and showed that 932,234 properties were involved in the first quarter. That was a 7% increase from the last quarter of 2009 and a 16% increase from the first quarter of 2009. An astonishing one in every 138 U.S. housing units received a foreclosure filing during the quarter. If you or a loved one are facing foreclosure, make sure you understand the process. While it varies from state to state, there are normally six phases of a foreclosure.

Phase 1: Payment default

A payment default occurs when a borrower has missed at least one mortgage payment. The lender will send a missed-payment notice indicating that it has not yet received that month's payment. Typically, mortgage payments are due on the first day of each month, and many lenders offer a grace period until the 15th. After that, the lender may charge a late-payment fee and send the missed payment notice.

After two payments are missed, the lender may send a “demand letter.” This is more serious than a missed-payment notice; however, at this point the lender is probably still willing to work with the borrower to make arrangements for catching up on payments. The borrower would normally have to remit the late payments within 30 days of receiving the letter.

Phase 2: Notice of default (NOD)

A notice of default is sent after 90 days of missed payments. In some states, the notice is placed prominently on the home. At this point, the loan will be handed over to the lender's foreclosure department in the same county where the property is located. The borrower is informed that the notice will be recorded. The lender will typically give the borrower another 90 days to settle the payments and reinstate the loan. This is referred to as the reinstatement period.

Phase 3: Notice of trustee's sale

If the loan has not been brought up-to-date within the 90 days after the notice of default, a notice of trustee's sale will be recorded in the county where the property is located. The lender must also publish a notice in the local newspaper for three weeks indicating that the property will be available at public auction. All owners' names will be printed in the notice and in the newspaper, along with a legal description of the property, the property address and when and where the sale will take place.

Phase 4: Trustee's sale

The property is placed for public auction and will be awarded to the highest bidder who meets all of the necessary requirements. The lender, or firm representing the lender, will calculate an opening bid based on the value of the outstanding loan, any liens and unpaid taxes, and any costs associated with the sale. Once the highest bidder has been confirmed and the trustee's sale is completed, a “trustee's deed upon sale” will be provided to the winning bidder. The property is then owned by the purchaser, who is entitled to immediate possession.

Phase 5: Real-estate owned (REO)

If the property is not sold during the public auction, the lender will become the owner and will attempt to sell the property on its own, through a broker or with the assistance of an REO asset manager. These properties are often referred to as "bank-owned." The lender may remove some of the liens and other expenses in an attempt to make the property more attractive.

Phase 6: Eviction

The borrower can often stay in the home until it has been sold either through a public auction or later as an REO property. At this point, an eviction notice is sent demanding that any people vacate the premises immediately. Several days may be provided to allow the occupants sufficient time to remove any personal belongings, and then typically the local sheriff will visit the property and remove the people and any remaining belongings. Belongings may be placed in storage and retrieved later for a fee.

The bottom line

Throughout the foreclosure process, many lenders will attempt to make arrangements for the borrower to get caught up on the loan and avoid a foreclosure. The obvious problem is that when a borrower cannot meet one payment, it becomes increasingly difficult to catch up on multiple payments. If there is a chance that you can catch up on payments -- for instance, you just started a new job after a period of unemployment -- it is worth speaking with your lender. If a foreclosure is unavoidable, knowing what to expect throughout the process can help prepare you.

::8 most overrated home projects::

2010-07-20T11:40:00.000-07:00

If you're considering remodeling your home, it may be best to skip these upgrades.

By Melinda Fulmer of MSN Real Estate

In these uncertain times, remodels are more about wringing day-to-day enjoyment out of your house than simply boosting its resale value. But not every project delivers on its promise of luxury and enjoyment.

Some delightful-sounding home improvements can be problematic or overly expensive or simply wind up collecting dust while you're still paying the tab. And some are destined to become white elephants, in the same kitschy category as that 1970s wet bar, sauna or intercom system.

MSN Real Estate consulted with contractors, designers and other home-improvement gurus — as well as homeowners themselves — to come up with a somewhat subjective "honey-do" list that's better left undone.

1. Whirlpool bath

This upgrade, which had become synonymous with luxury in years past, is now on the most endangered list, contractors say.

"We're taking out these bathtubs and making (walk-in) showers out of them," says Fred Spaulding of Quality Home Improvements in Kingwood, Texas.

Indeed, while they became a standard feature in many upscale homes, a hefty percentage of people who have these big whirlpool tubs report never having the time or inclination to soak in them, in part because of the noise and amount of water required to fill them and keep them warm.

"In almost four years, I have never used it," says "sisb" on a home and garden forum.

2. Room additions

These days, the name of the home-improvement game is conversion, or using existing space in a new way, says Don Van Cura, a Chicago-area remodeling contractor who sits on the board of the National Association of the Remodeling Industry.

"The biggest thing I've seen a change in is less room additions," Van Cura says. "Before, it had to be bigger and more, more, more. Now we are seeing more people taking advantage of attic or bedroom space."

Dining rooms are becoming home offices. Basements are becoming family rooms, and there are a lot more unpermitted (and some legitimate) attic-to-bedroom conversions, contractors say.

Forking over an average of $82,756 to build a new family room from the ground up — including foundation, framing, drywall and electric — is more expensive, architects and designers say, than converting your basement. And the addition recoups only 65% of its value at resale, according to Remodeling Magazine's 2009-10 Cost vs. Value Report. That basement remodel, on the other hand, costs just $62,067 on average and recoups 75% of its value.

3. 'Versailles' kitchens

In contrast with Europe, Americans — with their comparatively shorter history — just love anything that looks old and ornate.

If you look at European design books or websites, you'll find page after page of simple, streamlined modern looks. Here, our McMansions boast elaborate Tuscan villa-style kitchens with ornate cabinetry, hardware and tile.

"People will go into hock finding themselves surrounded by $150,000 of polished granite and fancy French or English cabinetry," says TV home-improvement veteran Bob Vila, who coaches people through remodeling projects on BobVila.com.

They'll wind up saying, 'I'm still paying on that and what the hell pleasure am I getting out of it?' Going overboard with any aspect of home remodeling can be a mistake."

Indeed, upscale kitchen remodels carried an average price tag of $111,794 last year, according to Remodeling Magazine, but recouped just $70,641, or 63%, of their value at resale, a decline from the 2008-2009 survey.

4. Marble counters (or other porous surfaces)

Marble is a luxurious material that has been long-favored in kitchen and bath remodels. But it is losing its luster.

Sure, it has a lovely, natural look and a rich history in castles and palaces, but it requires more pampering and attention than a spoiled princess, experts say. Marble can scratch more easily than other surfaces, get burned by hot pans and stain easily, just like limestone and other porous materials. That, coupled with a price between $50 and $100 per square foot, should persuade you to leave it to the museum.

Indeed, while much attention has been focused on the drawbacks to granite countertops, contractors say it and other nonporous surfaces such as man-made quartz counters are better long-term picks than marble, limestone or even heavy poured concrete, a trendy surface that can crack as the cabinets underneath shift over time.

"It's very dependent on well-built cabinets below it," Van Cura says.

5. Deck off the master bedroom

Now here's a project that seems really luxurious, promising views and fresh air along with your morning coffee. Of course, the coffee maker is downstairs or on the other side of the house, so for most people this winds up being one of the most underutilized living spaces, says Stewart Davis, design director of CG&S Design-Build in Austin, Texas.

"90% of the folks we talk to never go out there," Davis says.

Yet it's not an inexpensive project, costing at least $10,000 and requiring regular waterproofing and other maintenance.

6. Elaborate home theaters

Just as McMansions are falling out of favor, so are rooms that serve just one purpose.

With so many nice home-theater packages containing surround-sound speakers, amplifiers, bass modules, media centers and other controls and costing $3,500 or less, you can turn your flat screen in any family room into a home theater, instead of shelling out $20,000 or more for the whole shebang, including cinema seating, tacky red carpeting, projector, Blu-ray player and big screen.

And there's no guarantee that the next buyer will want the "Metropolitan Opera meets bordello" look of many theater rooms.

Another plus to updating your family room's acoustics instead: If you work with what you have, you're not bringing in a lot of new synthetic material, Vila says, and therefore don't have to deal with all of the outgassing, or release of fumes, from these materials.

7. Hot tub

This bubbly oasis seems relaxing and luxurious and is certainly much cheaper to install than a swimming pool, but many homeowners find that its upkeep, heavy energy use and repairs become a burden when compared with the time they actually spend using it.

Moreover, it gobbles up backyard space that could be used for seating, an outdoor kitchen or garden, designers say. And like the movie "Hot Tub Time Machine," it almost transports your backyard décor back to the 1970s or '80s.

Some homeowners weighing in on these fiberglass tubs on gardening websites actually wound up using them as raised beds for gardening, rather than forking over the bucks to rip them out or get them working properly.

If you simply must have it, the better option might be to buy a portable unit. That way, you can take it with you or stash it out of sight when marketing your house.

8. Overly complicated home automation

It's hard to tell people to stay away from something that sounds smart and could save them on their home-energy costs. But it's easy to go too far with home automation, the centralized control of audio, video, lighting, heat and household appliances, experts say.

"You shouldn't aspire to that without knowing that maintenance for that kind of system might be costly," Vila says. "Obsolescence is a matter of fact."

Indeed, "montalvo," a homeowner on a home-remodeling forum who spent $100,000 on a system that controlled everything from audio and video to lighting, security and temperature in his 7,100-square-foot California home, said the convenience continued to cost him even after he built his home.

"It entails significant monitoring, maintaining, repair and replacement costs," he said in a recent post. "For the first two years, the system's installer was at our house several times a month, doing reprogramming, system upgrades, etc."

While some simple radio-frequency lighting systems can be installed for about $2,000 to $3,000, says Brian Scott, president of San Diego Automation, the wiring and equipment involved with more comprehensive systems can cost tens of thousands of dollars. And even software-based solutions are not without costs on the back end, as people feel the need to upgrade.

Scott's firm is now installing wireless systems for audio, video and lighting that are controlled via an Apple iPad. But just as many iPod users have traded up to an iPad, so, too, may many homeowners feel the need to upgrade to the next generation of controllers.

"It will evolve," Scott says. "But it's more about having all the features -- the latest and greatest."

The best advice for people without a big budget or the patience to learn the intricacies of a big system is that old acronym KISS: "Keep it simple, stupid."

::Don't fall victim to a lying home seller::

2010-07-15T13:39:00.000-07:00

Don't fall victim to a lying home seller

Be a smart homebuyer and don’t take sellers at their word. If they're holding something back, it could cost you.

By Amy Hoak of MarketWatch
Buyers beware: In a tough real-estate market, it's tempting for sellers to stretch the truth or lie by omission on their disclosures, and cover up minor — but material — problems with a home in order to close the deal. That makes it even more essential for buyers to do their due diligence before closing, including having a professional home inspection and even chatting up the neighbors to make sure they discover all essential facts about a place before buying it.

"When times are tough, people get tougher," said Mike Crowley, broker of Spokane Home Buyers in Spokane, Wash. "Verify that they're telling the truth."

Seller disclosures vary from state to state, but generally require documentation of material problems with the home, such as leaks in the roof, past or present flooding issues, pest problems, presence of structural issues, lead paint, mold problems, electrical problems and water or sewer issues.

"Each state has its own disclosure requirements, and municipalities within the state have specific requirements," said Edward A. Mermelstein, a real estate attorney with Edward A. Mermelstein & Associates in New York.

"Then there's a slew of disclosures that are not required by the state that an experienced broker or attorney would know about and ask about," he said. For example, in some areas, including Florida, there recently has been a high incidence of faulty drywall used in home construction, he said. If it's possible that defective materials were used in the home a buyer is considering, they should demand that be disclosed.

What are homes selling for in your neighborhood? Find out

Sellers are expected to fill out disclosure documents honestly, answering questions about the property to the best of their knowledge. They also aren't supposed to conceal any defects of the home, said Neil B. Garfinkel, a real-estate attorney with Abrams Garfinkel Margolis Bergson, in New York.

But as a buyer, don't take sellers at their word. If they're holding something back, it could cost you.

Burden of proof

Sure, if sellers do fib — and it can be proved that they knowingly weren't upfront about something — a wronged buyer could sue for damages.

"If a purchaser who has children is buying a home and the seller knows there has been lead (paint) discovered in the home, God forbid a child gets sick, and you're going to have a serious lawsuit on your hands," Mermelstein said.

The tricky part is coming up with proof the seller had knowledge of the problem and opted to lie. Proving this kind of fraud can be tough, said Benjamin D. Clark, president of the National Association of Exclusive Buyer Agents. And sometimes the legal costs aren't worth pursuing the case.

That's why you're better off catching discrepancies before closing, when a seller is still willing to negotiate in order to finalize the deal, he said.

Still, sometimes, a buyer can be successful in proving a defect was omitted from disclosures or covered up, and receive compensation to fix the problem after closing — without having to go to court, Crowley said.

As an example, he referenced a case in Colorado. At an open house the buyers attended — and at the walk-through before closing — candles and cookies scented the home. But when the buyers moved in, there was a strong smell of cat urine throughout the house. They called their attorney, a strongly worded letter was written, and the sellers provided money to replace padding and carpeting, Crowley said.

Crowley suspects the buyer could have easily proved a cover-up in court. "The people weren't willing to gamble. They did pay for it."

Michelle McLean also discovered an issue after purchasing a home in Vernal, Utah. It had a septic tank, but she found out only after closing she was required to hook it up to the city's sewer line. Clark said the fact could have been specified within Utah's standard seller disclosures.

McLean contacted her real-estate agent, and the seller ended up paying for the hook-up.

Catch before closing

You'll have a much easier time getting problems taken care of prior to the completion of the sale. Get a professional home inspection to reveal issues, but don't stop there.

The more information you can request, the better off you are, Garfinkel said. "It puts you in a better position to avoid those kinds of problems," he said.

Before closing, Clark and a client of his discovered there was a history of sewer problems at one particular home, which the seller didn't disclose. The seller was confronted about it, and he spent between $5,000 and $7,000 to get it repaired.

"We talked to the neighbors," Clark said, and one of them indicated that a tenant moved out of the home due to plumbing issues. "We hired a plumber because of that tip, to snake the sewer line with a camera. A lot of connections were broken, parts had cracked and fallen in," he said. Roots interfered with the line as well.

Talking with neighbors that surround the property will often help turn up any big problems with a home or uncover property boundary disputes, Clark said.

All of this isn't to say that most — or even many — sellers lie on their forms, or that the disclosures aren't useful to buyers.

"In my mind, the two benefits of those forms are that a buyer gets information from sellers, but also buyers are reminded of the things that might be on a property," said Ralph Holmen, the National Association of Realtors' legal counsel. "It's like a checklist of things to investigate."

Remember, too, that when you're buying an existing home it's important to have realistic expectations, Crowley said. Know what you're getting into, but understand that sellers might not know about a particular problem in the home. And there's nothing to say that things won't pop up right after you close.

"If you have unreasonable expectations, you will always find something to be disappointed with," Crowley said. "There's always going to be a surprise with a used home. My water heater went out the first week."

::7 sins of first-time renters::

2010-07-13T14:07:00.000-07:00

::7 sins of first-time renters::

Ready to get your own place? Whether you're moving out of the dorms, taking a summer internship or starting a new job, you'll want to avoid these costly mistakes.

Ah, your first apartment. It may be smaller than a closet with a next-door neighbor who likes to blast Celine Dion into the wee hours of the morning, but hey, it's a space to call your own. Whether you're moving away from college or out of Mom and Dad's house, getting your first real place can be a liberating — and nerve-wracking — experience.

Trust us, there are worse situations you can find yourself in as a first-time renter than tight spaces and annoying neighbors. Moving into your own apartment may be one of the biggest financial steps you've taken thus far in your life. In this rite of passage, you're committing to stay put for a long time while shelling out a pretty penny on rent, utilities and furniture. So, naturally, you want to do it right. We detail seven sins that can threaten your financial soul — and your sanity — upon moving into your own space. Avoid these missteps for a smoother transition, whether you're a first-timer or a seasoned renter.

1. Underestimating the cost

The first item of business when looking for a place to live: How much can you afford to spend on housing? Use this handy calculator to help you tally your monthly expenses and see how much money you'll have left to spend on rent. Then, find out how much apartments cost in your desired neighborhood by browsing newspaper classified ads or online rental sites such as Move.com or Craigslist.org. This will help you determine if you can even afford to make the move, and whether you'll need a roommate (or two) to split the costs.

But rent isn't the only cost for which you have to budget. Don't forget to anticipate your "startup" expenses when you first move in. For example, you may need to pay an application fee for the apartment (say, $50), a security deposit (usually equal to one month's rent), your first month's rent, a deposit to turn on the electricity (maybe $75), a deposit to turn on the gas (another $75), fees to get your cable and telephone turned on, a deposit for any pets you may have, and maybe even a fee for a parking space. And let's not forget the cost of furnishing your new pad and stocking it with life's essentials (yes, you really do need soap). All in all, it can cost you upward of $4,000 in your first month at your new apartment, according to research firm Twentysomething Inc.

One note of caution: Don't rely on your credit cards to fund your move-in expenses. You don't want to start out your new life of independence by being chained to ruthless interest payments. Once you get into debt, it's hard to break away.

Once your startup expenses are covered, don't forget to account for other monthly expenses that come with your new space, including gas and electricity bills and garbage and water fees. And if you're moving from campus housing where your phone service, cable TV and Internet connection were either free or cut-rate, remember to factor real-world prices into your budget. Consider this, too, if you're moving into a place by yourself when you're used to splitting costs among roommates or living free under Mom and Dad's roof. Make it easy on yourself to keep track of your expenses by setting up a budget. (Get additional first-time budgeting tips on MSN Money.)

2. Not getting your priorities straight

Before you embark on an apartment hunt, write down a list separating your needs from your wants. Needs are those things without which you just can't live. For example, my husband and I own just one car, so for us, proximity to work or to public transportation is a need. Wants, however, are those things that would be nice to have, but you could live without for the right price. For example, you may want a gym or a first-floor unit, but they may not be deal breakers.

Sorting out your needs and wants will help keep you from making a choice you may regret later — say, snagging an apartment with a great city view but having to suffer a grueling commute to work. Remember, your first place isn't going to be perfect, so you need to know which things you can let slide beforehand. Besides, you can always move up to a better apartment when your lease is up. Learn more about what to consider when looking for a new apartment.

3. Not seeing the apartment before moving in

It's a good idea to take a look at the place you plan to call home before you arrive on moving day and discover your sofa won't fit through the front door. If possible, this means you should inspect the actual apartment you'll be moving into — not a model. Bring a measuring tape and try to visualize your furniture in the space. You should also take note of the number and location of phone and cable jacks and electrical outlets.

Don't be afraid to put the apartment through its paces. Turn on the faucets and flush the toilet to make sure the water is running properly (and that it isn't brown). If the power is on, turn on the lights, oven, air conditioner and other appliances to make sure they work. Tune in to the surroundings — is there a lot of traffic or neighbor noise, or any strange smells? Are the building's hallways, common areas and parking lots clean and well-lit? Are there enough washers and dryers in the laundry room? And don't forget to check out your cell phone's reception from inside the apartment.

You also should inspect the space for damage and request that serious problems be fixed before you move in your stuff. Then, on moving day, go through the apartment with a pen and paper — and a fine-toothed comb. Write down every defect, no matter how small, date and sign your list, make a copy of it and give one to your landlord. You don't want to be held liable for pre-existing damages.

4. Failing to read the lease

A lease is a legally binding contract between you and the landlord, spelling out each of your rights and the rules you must abide by while living in the space. This means it's written in that kind of legal-speak that causes your eyes to glaze over and your mind to go numb. But it's worth your while to f-o-c-u-s and read it all the way through or you may find yourself on the hook for different fees, penalties and restrictions after you've signed on the line. Don't worry about digesting it all on the spot. In fact, you should take it home to read through before you sign, advises consumer advocate Clark Howard. "If you don't understand something, put question marks next to the item and get an explanation," he says.

Every lease will include some basic information, such as the address of the apartment, the length of the lease (say, six months or one year), the amount of rent due, the amount of the security deposit, and the signatures of the landlord and all tenants. That's all pretty straightforward, but there are additional clauses that could have a big impact on your wallet and your lifestyle. Keep an eye out for penalties for late rent, policies for owning pets, what utilities the landlord pays and which ones you're responsible for, policies on painting or altering the apartment, protocol for what to do if something breaks or needs repair, penalties for moving before your lease term is up, policies on subletting and having roommates or even stipulations for having roommates of the opposite sex. I once even had a lease that specifically prohibited owning a piano or organ.

Also, make sure you know what happens to your lease agreement at the end of the term. Usually, your contract will become a month-to-month arrangement, but read the fine print ahead of time to be sure and to learn how much notice is required before moving out. Pick up a copy of "Every Tenant's Legal Guide" from Nolo Press to learn more about your rights and responsibilities as a renter.

5. Not asking about utilities — or forgetting to turn them on

On occasion, eating takeout by candlelight may be romantic. But doing it every night, storing your garbage on your balcony and taking cold showers every morning is just plain sad. So before you move in, make sure you ask your landlord specifically what utilities you're responsible for paying — and for turning on. Some apartment buildings, for example, will provide the garbage and water service as part of your rent but leave you to arrange your own gas and electric service. Others may require you to handle everything. And don't forget the extras, such as a phone line, Internet service and cable TV.

Once you know what you need, find out whom to call. Your landlord should be able to provide you with the names and numbers of the local utility companies. Call them at least one week before you move in and arrange to have your service turned on the day before your arrival.

6. Going without renter's insurance

Unless you have enough money saved to replace everything you own in case of theft, fire or other disaster, you need renter's insurance. Sure, your landlord probably has insurance, but it only covers the building and the infrastructure — not the stuff you keep in your own unit, says Doug Culkin, executive vice president of the National Apartment Association. You may not think you own much of anything of value, but once you tally up the cost of all your clothes, furniture, computer, software, entertainment system, microwave and CD collection, renter's insurance can add up to a real bargain. Besides, some landlords may require renter's insurance before you move in.

Expect to pay $150 to $250 a year, or $12 to $21 a month. You may pay more or less depending on your neighborhood and level of coverage. You can get quotes from several companies online at InsWeb.com or NetQuote.com, but check with your auto insurer first to see if you can get a discount for having more than one policy with the company. (Read MSN Money's "The basics of renter's insurance.")

7. Forgetting basic items to make a home

If you've never lived on your own before, you're bound to be short a few essentials. For example, I didn't realize when I moved into my first place that a shower curtain wasn't included. I also thought I had planned ahead by packing a bunch of canned food to subsist on for a couple days before my roommate (with the car) moved in — only to realize she was bringing the can opener, too. Oh, and then there's the time I lived in an apartment for a month without a couch — cozying up for a night of watching my favorite TV show on a metal kitchen chair just wasn't the same. Hopefully, you've already thought of the big stuff, like seating, bedding, a dresser, etc. (Learn more about how to furnish your new place on a budget.)

But you'll need some smaller basics, too. In addition to the aforementioned shower curtain and can opener, don't forget to bring a waste basket (and liners), lamps, dinnerware, bookshelves, a full-length mirror, cleaning supplies, sponges, towels, bathroom rug, flashlight, vacuum, broom and dustpan. Plus, invest in a small toolkit with a hammer, pliers and screwdrivers so you can hang pictures and assemble your new furniture. For more help on what you'll need, print off these apartment checklists from About.com.

You might want to share the cost of outfitting your new place with your roommates. One person can buy the DVD player, for example, while another picks up a vacuum. This is better than splitting the cost of a single item because then there's no question about who owns it when one person moves out. Get more financial tips for living with roommates.

New REO listings

2010-07-09T17:25:00.000-07:00

1220 Arbor, Highland Park:::$159,900:::

New REO listings

2010-07-09T16:24:00.000-07:00

10575 Wing Pointe, Huntley:::179,900:::: 3 Bed /2.1 Bath

New REO listings

2010-07-09T16:21:00.001-07:00

1220 Arbor, HighLand Park::159,900:::

Buy your next home from Uncle Sam

2010-07-09T16:08:00.000-07:00

Buy your next home from Uncle Sam

As a result of rising foreclosures, some Americans will buy their next home from the U.S. government.

By Eric Fox of Investopedia

Rising foreclosuresAmericans who are brave enough to buy a home despite persistent predictions of a double dip in housing may want to contact the federal government, as the recession and financial crisis have turned Uncle Sam into one of the largest owners of real estate in the United States.

The housing bust has led to an unprecedented number of foreclosures in the U.S. In May, 322,920 foreclosure notices were filed against homeowners, and more than 3 million homes have been seized over the last five years from delinquent borrowers.

While most homebuyers may assume that banks are the only source of foreclosures, the U.S. government also owns many residential properties because of its role in buying and guaranteeing mortgages. Many of these properties are held because of the conservatorship established in 2008 over the government-sponsored enterprises popularly known as Freddie Mac and Fannie Mae.

Freddie Mac is furiously attempting to dispose of these homes, and has been fairly successful; the company's average holding period for real estate is less than one year. The company markets the homes through HomeSteps, where buyers can search by state and city.The Federal Home Loan Corp., or Freddie Mac, owned approximately 45,000 multifamily and single-family homes at the end of 2009. The company put a gross value on these properties of $5.13 billion. Freddie Mac obtained these properties by being the highest bidder at foreclosure auctions when the properties were used as collateral for loans owned by the company, or when owners just transferred the property to Freddie Mac without going through foreclosure.

Fannie Mae
The Federal National Mortgage Association, or Fannie Mae, is also a large owner of foreclosed property. The company owned more than 86,000 single-family homes at the end of 2009, with a value of $8.5 billion. These homes are concentrated in states that were ground zero of the housing bust, with 28% of its inventory in California, Nevada, Arizona and Florida.

Fannie Mae also markets these homes intensively, and sold 123,000 in 2009. The company's official website to sell homes is called HomePath, where buyers can look up inventory near their location.

Other agencies
Another source of homes owned by the government is the Department of Housing and Urban Development. HUD obtains its properties through foreclosure auctions on Federal Housing Administration-insured loans. HUD has a website at hud.gov/homes.

Next up is the Federal Deposit Insurance Corp., which owns its inventory through its role in seizing failed banks. The FDIC owns single-family homes but also has a large number of other properties, including industrial and commercial properties and raw land.

The Veterans Affairs Department and the Agriculture Department also play roles in financing and guaranteeing home loans, so both own single-family home and other properties. Buyers can look for their dream home through these agencies as well.

Buyer beware
Buyers shopping for homes from the government should be aware of the disadvantages of the process. Many agencies offer properties "as is," with no warranties on their condition. There is also little flexibility on negotiating the terms of the contract if the government accepts your offer. Fannie Mae, for example, does not accept offers for houses that are contingent on a buyer selling a currently owned home.

::How to choose a mortgage broker::

2010-06-15T13:11:00.000-07:00

::How to choose a mortgage broker::

You need to find someone who will work with you to find the right mortgage. We'll tell you how to tell whether you need one, where to look and how to tell whether the one you find is the right fit.

Among the many daunting aspects of buying a home — especially for the first time — and one of the most confusing is figuring out the mortgage process. How do you choose a mortgage broker? Where do you look for one? And what questions do you ask?

A mortgage broker is an independent contractor who pairs up borrowers (you) with lenders by scouring available loans to find the one that best fits your needs. A mortgage banker, by contrast, sells you the loans of one bank or lender. Some say the obvious usefulness of a mortgage broker has evaporated in the last two years, as the nationwide mortgage debacle has largely swept the market clean of the variety of mortgages once available and has left banks and mortgage brokers to sell essentially the same, fewer kinds of products.

But there’s still a place for mortgage brokers, say Eric Tyson and Ray Brown, authors of "Mortgages for Dummies." "If you're on the fence about using a mortgage broker, take this simple test: If you're the type of person who dreads shopping and waits until the last minute to buy a gift, a good mortgage broker can probably help you and save you money." Brokers might also have more options for people who have less well-established, or blemished, credit.

In the market? Browse listings and find your dream home

Of course, you still need to choose one wisely. "A good mortgage broker should be surveying the landscape of available mortgage loan programs so that they can match you with the mortgage loan for your situation. And just like in any profession, there are people who are good at it, and people who are terrible," Tyson says.

Where to find them

Where do you even look for a good mortgage broker? You could simply ask friends, but you don't know what you're getting.
"Ideally, get recommendations or referrals from other people you respect," such as a tax adviser or a real-estate professional who does a lot of business in your area and has a reputation to uphold, Tyson says. Even then, "Never blindly accept someone's lender recommendation as gospel," Tyson and Brown write in their book. The reason? People in the real-estate trade may simply refer you to people who "scratch their backs and may not offer the best mortgage loans." What to do? "Whenever somebody recommends a specific mortgage lender or mortgage broker, always ask why," the authors say.

Another place to look is the website of the National Association of Mortgage Brokers, which lets you search for members in your area who have agreed to the association's stringent ethics code. Find one that displays the Lending Integrity Seal of Approval. It's a designation issued by the NAMB that not every member has, says Jim Pair, president of the 8,000-member group.

Here's another rule of thumb: Don't respond to solicitations from mortgage brokers, says Jack Guttentag, a professor emeritus of finance at the University of Pennsylvania who runs the Mortgage Professor website. Why not? "Poor brokers must constantly solicit, whereas good brokers enjoy referrals from previous customers," Guttentag writes.
How to vet a broker

So now you think you've found a broker. But how can you be sure she is perfect for your needs?

First, see if the broker is registered with your local Better Business Bureau, Pair says. Ask the BBB if any complaints have been lodged against the broker.

Next, check with Pair's organization, the NAMB, to see if the broker has any advanced certifications that will prove useful. For those who do extra training and testing, the NAMB offers designations such as "certified residential mortgage specialist," Pair says.

Third, sit down and interview the broker. Here's what you should ask:

"The first question you should ask is 'How long have you been doing this?'" says David Reed, author of "Decoding the New Mortgage Market" and "Mortgage Confidential." Adds Tyson, "Were they selling cars two years ago?"

"I would also ask, 'What other real-estate agents do you work with?'" Reed says. That shows whether the broker is trusted by agents in your prospective neighborhood to get deals closed.

Ask how many lenders the broker works with, Tyson and Brown write. Some mortgage brokers represent only one or two inconsequential lenders — not the kind of broad representation you need in order to find the best mortgage.

"Ask the loan officer, 'Do you offer FHA (Federal Housing Administration) loans?' If you get the answer yes, you've got yourself a candidate," Reed says. If the broker says no, "I'd interview some more people." Those FHA loans are a first-time homebuyer's haven; they're how many people get into a house, he explains. But Reed says many mortgage brokers are not qualified to issue an FHA loan because there are certain requirements that many brokers can't meet.

The best brokers act like financial planners, Guttentag says, taking into account your total financial situation and goals when trying to match you to a mortgage. How do you know he is doing that? Listen to what the broker says, Guttentag writes. He should be reluctant to give blanket answers, but "indicates what the answer to your questions depends on, e.g., whether you should pay points depends heavily on how long you expect to have the mortgage." A good broker will also point to the specific tools — spreadsheets, calculators — that he will use to answer questions about your situation.

That said, "The reality is that very few mortgage brokers have personal finance training, and that's not to denigrate the profession, it's just reality," Tyson says. "People should be educated before they put themselves in the hands of any real-estate person."

Finally, ask yourself, "Does this person speak to me in plain English? Or are they using a lot of jargon? If you can't connect with a mortgage broker, then that's a red flag," Tyson says.

Get it in writing

There are points in the mortgage-hunting process when you can get promises put down in writing. It's always a good idea.

A good mortgage broker will guarantee the lender fees that are first presented to you in the (required) good-faith estimate, Guttentag explains. Ask if the broker guarantees that lender fees won't be higher at closing, and get that in writing.

A good broker also will seek out the best prices for third-party charges such as title insurance, though the broker will likely not guarantee such third-party fees.
Instead, you should ask the broker, "What are your fees?" Reed says – and get that in writing, too.

A frequent cause of complaints about mortgage brokers is that they don't keep would-be homeowners well-informed about the process.

Formalize the lines of communication. "Negotiate an agreement with the broker on both the type and frequency of communications," Guttentag advises. That way, the broker will stay in touch — even to tell you there's no news.

You should also feel as if every step of the process is being fully explained to you and that you aren't being rushed, Pair says. Is your broker not giving you the love? Talk to him, or drop him.

New Foreclosure listing

2010-06-10T10:41:00.000-07:00

::16 ideas to help you drum up money for a down payment::

2010-06-10T10:34:00.000-07:00

16 ideas to help you drum up money for a down payment

Coming up with a big pile of cash to buy a home may seem daunting, especially if it’s your first. Here’s expert advice on the many ways you might be able to make it happen, along with 4 dead-end options to avoid.

By Marilyn Lewis of MSN Real Estate

Read: Help for first-time homebuyersIf you’re hoping to buy a home to take advantage of cheaper prices and low mortgage interest rates, your first question may be: "Where do I find money for a downpayment?

Below is a list of workable ideas and those to avoid. We gathered expert advice from Bill Banfield, director of capital markets forQuicken Loans; Jeffrey J. Belonger, manager with Infinity Home Mortgage Co.in Cherry Hill, N.J.; and EJ Hawkins, counselor withClearPoint, a national nonprofit credit counseling service.

Check with your bank or mortgage broker that the source of your down payment is approved in your loan’s rules.

Ask real-estate agents about state and local housing incentives, grants and loans and what local lenders offer.
Some down-payment ideas are safer than others; a few have toxic consequences to your taxes or retirement savings. Study your options carefully and review your plan with a certified public accountant or a nonprofit housing counselor approved by the Department of Housing and Urban Development(find one here or call 1-800-569-4287).
Keep a paper trail of every move so you can document, for your lender or the tax man, each income source, asset sale and transaction.
Be wary of mortgage fraud. The scam you’re most likely to encounter is when a mortgageprofessionalsuggests inflating the price of a house in order to kick back cash to you for closing costs. It sounds tempting, but you’d be getting fleeced by overpaying for the house and you could face jail time if you participate. Report crooked players to your state attorney general’s office (find yours here).

Here is a list of ideas for scraping together your down payment.

Low-risk sources of cash
1. Pull from savings: The time-honored way to fund a home purchase is to set aside money each month. Use an automatic electronic transfer through your bank or credit union. Choose an account that that earns the most interest possible while letting you access the money. Review account types and learn how to "ladder" certificates of deposit by reading this article.

2. Liquidate miscellaneous assets: Sell your nice car, buy a beater and apply the difference to your down payment. Sell your boat, motorcycle, collectibles or other assets. Use your tax refund. Call in money that people owe you.

3. Sell stock options: If stock options are part of your compensation, selling them might earn you cash. Contact your human-resources department to learn the rules.

4. Sell taxable investments: Sell stocks, mutual funds, bonds and other taxable investments before touching money held in tax-deferred retirement accounts, such as 401(k)s and IRAs, which require you to pay significant penalties when you sell.

5. Cash in a life-insurance policy: So-called permanent life insurance policies (not "term" policies but "universal" or "variable universal life" or "whole life" policies) grow in value as you pay into them. When enough value has accumulated, you can take cash out or borrow against them. Talk with your insurance agent to learn your options.

Caution: If you no longer need the insurance, this could be a nice source of ready cash. But first-time homebuyers usually are young, have children and need the protection of insurance; withdrawing money from a policy could reduce or eliminate your death benefit, leaving your family in financial trouble if you die. You also can lose coverage if you borrow against the policy but don't pay it back. Ask your insurance agent to outline the pros and cons. Call your state's insurance commissioner's office if you have questions.

Friends, family and employers
6. Use a gift: Some mortgages – loans insured by the Federal Housing Administration, for example – let you apply gifts from immediate family members toward your down payment. You’ll need a "gift letter" from the person who gave you the money, verifying that it doesn’t have to be repaid. Be prepared for the lender to ask for copies of checks or wire transfers.

7. Try your employer: Some corporations, universities and local and state governments have programs to provide employees with down-payment assistance. Check with your human-resources department. For example, in South Dakota, 19 employers participate in a state-sponsoredEmployer Mortgage Assistance Program that lets employees take out a 2% interest rate second mortgage for $600 to $6,000 to cover closing costs and down payment. Each year, the city of Baltimore and state of Maryland contribute as much as $6,000 to 100 city employees to help them buy homes within the city. These programs are meant to help keep valued employees in their jobs and closer to work.

8. Enlist a partner: A co-owner can help by sharing costs, including the down payment, and by signing on to be responsible for repaying the loan if you can’t quite qualify for a mortgage. A lender can explain the details.

Investigate government programs
9. State grants and loans are a potentially useful but constantly changing pool of down-payment money distributed through local and state agencies. Usually, these require a government-insured FHA mortgage. Funds are usually claimed quickly and programs expire or change frequently. Act early to be considered, or add your name to a waiting list. Find programs near you using HUD’s state listings: Click your state’s name, then click "assistance programs."

Caution: Don’t get roped into paying for "help" to obtain government grants and loans. Scammers and middlemen offer to guide you or qualify you for a fee, but you’ll get safer, cheaper advice from a HUD-qualified housing counselor'

Negotiate – with everybody
If you can save or even eliminate closing costs – which run roughly $5,000 to $8,000, depending on where you live – you can free up precious cash for your down payment. Although a seller can’t fund your down payment, the law lets buyers accept help with closing costs. Using an FHA loan, you can accept up to 6% of your home's purchase price toward your closing costs, although the FHA plans to drop that to 3% later this summer. Conventional loans limit the help you can accept to 3% of the price if your down payment is 10% or less; it's 6% with a down payment of more than 10%. Your seller, lender or real-estate agent can help with closing costs. These parties occasionally will kick in to help a cash-poor buyer get a deal done. Here’s how:

10. Your lender: Buyers occasionally persuade lenders to forgo part of their "origination" fee and contribute it toward theclosing costs, Hawkins says. The lender gets a smaller fee but the deal still puts money in the lender’s pocket. Another option: The lender might be willing to sell you a higher interest rate in exchange for helping you. In this case, the lender rolls the closing costs into your interest rate and you pay them as part of your monthly mortgage payment instead of as an upfront chunk of cash.

Caution: Depending on how long you keep the home, paying a higher interest rate than necessary could, over a loan’s lifetime, cost more than the down-payment help is worth. Find a nonprofit housing counselor to help you calculate if this is worthwhile.

11. Your seller (including builders): Buyers have a lot of leverage with sellers today, at least in some parts of the country. ("The Mortgage Professor," Jack Guttentag, explains seller gifts here.)

Ask your real-estate agent to help you search for sellers who are offering to cover closing costs.
Propose that the seller help with closing costs when you’re negotiating price.
Sellers sometimes will sweeten the deal by purchasing discount "points" that lower your interest rate, letting you use more of your cash for the down payment. Each point costs 1% of the loan amount and can be used to reduce your rate by 0.125 to 0.25 percentage points. (If your mortgage was for $150,000, the seller might buy one point, for $1,500, potentially lowering your interest rate from 5.25% to 5%.) This would lower your monthly payment from $828 to $805.

Caution: Pushing a seller too hard to lower the price and make other concessions could ruin the deal. Be prepared for the seller to ask for a higher purchase price in exchange. Then the question is: Will the appraiser find the home worth the higher price?

12. Seller financing: Infrequently, a seller may be willing to act as your banker. It might be possible to strike a no- or low-down-payment deal with a seller who owns the home free and clear. But if the seller has a mortgage, you’ll need to qualify for a loan just as you would with a bank, including a down payment.

14. Your new employer: Your leverage with an employer is never better than when you are first signing on. Depending on the company and how badly your skills are needed, you might be able to negotiate a contribution toward your down payment as part of your benefits package, as a signing bonus or in place of a relocation allowance.13. Your real-estate agent: Agents don’t like to admit it, but occasionally some will give up a portion of their several-thousand-dollar commission to keep a sale from falling through. Approach this conversation with tact and care.

Tap your retirement savings
Yes, you can cash out retirement accounts. But don’t do it. The ground lost in saving for retirement isn’t worth it. Also, the Internal Revenue Service penalties for removing cash from a tax-protected account before you retire are steep.

15. Tap your IRA. There’s an exception to penalties on withdrawals from retirement accounts that lets first-time homebuyers withdraw up to $10,000 from an IRA to use as a down payment on a home purchase.However, here are two less expensive (but still ill-advised) ways to leverage your retirement savings:

Caution:

Remember to declare the income on your taxes (you were excused from paying tax on it when you put it into the IRA, remember?)
Be sure to chat with your accountant before doing this.

16. Borrow from your 401(k): Most companies let employees borrow from the balance of their401(k) accounts. Rules vary but, generally, you can extract as much as half of the vested amount in the account, up to $50,000. As you repay it, the money, including the interest, goes back into your 401(k). The plan administrator at your workplace can outline the specifics, including how long you’re given to repay the loan.

Caution:

As long as you repay the loan, you won’t be taxed on the money until you withdraw it in retirement; unlike a mortgage loan, the interest you pay on this loan is not tax-deductible.
As with the IRA withdrawal, this is considered a bad idea (financial writer Liz Pulliam Weston calls it one of "The 3 worst money moves you can make") because it sets back your retirement progress.
If you leave the employer for any reason before repaying the loan, you’ll have to repay the entire thing at once. Don’t say we didn’t warn you.

Dead-end options to avoid
You may have heard from friends and family about other strategies. Chances are, changing rules or interest rates have made them less effective. Don’t waste much, if any, time pursuing these:

1. Peer-to-peer lending: Websites such as Prosper.com and Lending Club essentially create a marketplace for people to directly lend and borrow money. The idea is that the lenders reap interest, borrowers get cash and the site collects fees. But Prosper, for one, has not funded one down-payment loan in the last year. CEO Chris Larsen speculates that's because piling a down-payment loan on top of a mortgage is unwise and unlikely to attract Prosper lenders.

2. The American Dream Downpayment Act was a federal program of grants up to $10,000 to first-time buyers, but no longer is offered.

3. Private nonprofit gift programs: Until late 2008, a special category of seller-funded nonprofit programs was able to channel up to 6% of the purchase price of a sale as a "gift." Federal law now prohibits seller-funded down-payment assistance, which means that programs run by AmeriDream, the Nehemiah Program, GAP, Homes for All and RealtyAmerica have all been closed4. Section 8 homeownership vouchers: Low-income buyers may be able to get help through this federal program, but you and the property must meet the qualifications. "The unfortunate part of the program is that there are too many variables involved," Hawkins says. "In all my (10) years in real-estate and financial counseling, I’ve only seen it used one time.

4. Section 8 homeownership vouchers: Low-income buyers may be able to get help through this federal program, but you and the property must meet the qualifications. "The unfortunate part of the program is that there are too many variables involved," Hawkins says. "In all my (10) years in real-estate and financial counseling, I’ve only seen it used one time."

:::Should you buy a home that's been vacant?:::

2010-06-08T13:32:00.000-07:00

Should you buy a home that's been vacant?

It may seem like a great deal, but be aware of possible expensive repairs lurking inside.

By Marcie Geffner of Bankrate.com

A for-sale house that's been vacant may look like a bargain, but buyers should be cautious, because expensive problems often lurk inside homes that have been unoccupied for some time.

A home can become vacant due to a marriage, job relocation, death or other life event. But vacancies today are more often due to a bank foreclosure or short sale in which the lender accepts less than the mortgage balance. It's these bank-owned properties — sometimes called "real estate-owned," or REOs — that tend to be "problem homes," says David Tamny, owner of Professional Property Inspection in Columbus, Ohio, and 2010 president of the American Society of Home Inspectors in Des Plaines, Ill.

Vacant homes can suffer from a wide variety of ills due to neglect, deferred maintenance on the part of the previous cash-strapped homeowner, and vandalism, Tamny explains. Broken water pipes, stolen copper wiring, damaged appliances and mold are but a few examples of the potential problems that may await buyers of these homes.

The risks for buyers are front and center since the number and percentage of vacant for-sale homes has increased during the housing slump. More than 2.2 million for-sale houses in the U.S. were vacant in 2008, according to the U.S. Census Bureau. That figure was more than double the 1 million vacant for-sale homes in 2000. Vacant homes exist throughout the country, but the percentage of vacancies in 2008 was higher than the national average in the South, Midwest and West, and lower in the Northeast.

Turned-off utilities limit home inspection

Homebuyers typically hire a professional to conduct a visual inspection of the home and prepare a report on its condition. That's a wise precaution, but not even a well-qualified and thorough home inspector can see inside walls. Nor can an inspector assess the condition of a home's plumbing, electrical wiring, heating-and-cooling system or major appliances if the water, gas or electricity has been shut off.

Team 4: Vacant Houses A Burden For City, Residents

"Buyers often don't understand that if there is no electricity, they are going to get a very limited inspection," Tamny says. "You could end up with a lot of surprises if you don't have those systems turned on prior to the inspection."

Swimming pools, which naturally are more common in such states as California, Arizona, Nevada and Florida — where foreclosure rates have been high -- are also a special concern if a home has been vacant. Some inspectors won't include a pool as part of a basic inspection. Others will include the pool, but again, it may be impossible for the inspector to check out the equipment if the utilities have been shut off.

"You probably will have to accept the pool (as-is because) it's unlikely that you'll be able to get the whole thing up and running just for the purpose of an inspection and then shut it back down," Tamny says. "You could have thousands of dollars in repairs."

As-is home purchase can be risky:

Some banks have procedures in place that allow prospective buyers to turn on the utilities, but the buyer may be required to pay a deposit to the utility company and put his or her own name on the account, even though he or she doesn't own the vacant home. That inconvenience may prompt some buyers to forgo parts of the home inspection that can't be performed unless the utilities are on.

That can be risky, because unanticipated repairs can cost thousands or even tens of thousands of dollars, and the buyer typically will have no recourse with the bank. That means the buyer will be stuck with whatever problems the house has.
"Buyers are attracted to a house because it's discounted from what it sold for a number of years ago and they are hoping to get a bargain. They don't always understand that sometimes the problems make up the difference between the cost of the house and what they are getting for a discount," Tamny says.

Vacancy may affect homeowners insurance:

Homebuyers also should know that insurance companies may decline to issue a homeowners insurance policy until the agent looks at the vacant home, says Dick Luedke, a spokesman at State Farm in Bloomington, Ill. The agent's once-over isn't the same as a professional home inspection, but it can mean extra expense if the home is in poor condition.

"If the home is uninsurable, we wouldn't write the policy. If the problems just increase the risk of the potential of a future claim, then that might increase the premium," Luedke says.

A homeowners insurance policy also may require a vacancy endorsement, again at an extra charge, if the home will continue to be vacant for more than 30 days after the sale. If the vacancy is due to major repairs, a dwelling-under-construction rider may be necessary as well.

::Managing Debt and Credit::

2010-06-03T13:10:00.000-07:00

::Managing Debt and Credit::

Think about your ability to stop using credit on a regular basis and what changes you might be willing to make to improve your financial outlook.

1)Managing Debt and CreditCredit was once defined as "Man's Confidence in Man." But in fact, the definition of credit today is more like "Man's Confidence in Himself." Using credit today means you have confidence in your future ability to pay that debt. Forty years ago, your parents may have paid cash for their homes and their cars, a largely unheard-of event today. If they borrowed money at all, chances are it was from a relative or friend, and not a financial institution.

Today debt and instant credit are part of our everyday lives. The convenience of instant credit, however, has taken its toll. Many individuals use credit cards to spend more than they earn, and a few of these people actually build themselves a debt prison from which some never emerge. On the other hand, those who never use credit can be denied a loan or credit when they have a justifiable need or use for it. Using credit establishes a history of financial responsibility: Until you establish a credit history, your chances of qualifying for an important loan, such as a mortgage, are greatly reduced.

What is the balance between using credit wisely and staying out of overwhelming debt? Let's look at the facts and some pros and cons.
2)Installment DebtDebt comes in many forms, and most types help us in our daily lives -- when used responsibly. Most people cannot buy a home without some financial help, and many cannot buy a car (especially a new one) without some sort of financing. The money borrowed to purchase large-ticket items is called installment debt: The debtor pays a portion of the total at regular intervals over a specified period of time. At the end of that time period, the loan with interest is paid off.

Installment debt allows you to purchase items at a competitive interest rate: for example, 5% to 7% for a 30-year home mortgage and 8% or 9% for a car loan. The loan is paid back on an amortizing schedule, monthly payments of a fixed amount that remain constant over the life of the loan. At first, most of the monthly payment consists of interest. In later years, principal begins to be paid down.

Installment debt is easily budgeted and the debt is eliminated on a predetermined date. Even for those who may actually have the cash to purchase the desired item, installment debt can make financial sense if you can earn a higher return (after taxes) on your investment of cash than you must pay on your installment debt.

3)Revolving CreditA revolving line of credit, also called "open-ended credit," is made available to you for use at any time. Examples of revolving credit are credit cards such as Visa, Mastercard, and department store cards. When you apply for one of these cards, you receive a credit limit based on your credit payment history and income. When you use the credit line, you must make monthly minimum payments based on the total balance outstanding that month. Some lines of credit will also have an annual account fee.

While revolving credit is a convenient way to borrow, it can also become an endless pit of minimum payments that barely cover the interest due. Many cards charge annual rates of interest of 18% or higher. As you pay off your debt, the minimum payment is also reduced, thus extending your payoff period and, consequently, the interest you pay. Paying just the minimum due on a $2,000 credit card loan could mean making monthly interest payments for 10 or more years!

Revolving credit, in addition to being convenient, eliminates the need to carry a lot of cash and can help establish you as a creditworthy risk for future loans. The itemized monthly statements also can help you track your expenses. But some people can easily yield to the temptation that the convenience of credit cards offers. Impulse buying, failing to compare costs, and purchasing large items you can't afford are all downfalls brought on by always available purchasing power. Spending more than you earn in any given period is a dangerous practice at best, but doing it over an extended period of time can be financial suicide.

4)Using Credit WiselyTo use credit intelligently, start by examining the terms of the card(s) you are currently using. Keeping track of your cards, their rates, and your current balances will help you to be aware of how you use credit cards. Increased competition in recent years has led some credit card companies to offer enticing features to attract new cardholders, including no annual fees and low interest rates for an introductory period. (And credit card companies sometimes will give their introductory rates to existing cardholders so that they won't transfer their balances to another credit card company.)

5) Eliminating Credit Card DebtIf you think you may have too much credit card debt, begin to address it by honestly evaluating your spending habits. Examine your existing expenses to analyze how your money is spent. You will most likely be able to identify the problem areas where you are more likely to spend too much or too readily with credit cards. Then, based on your current spending practices, create a realistic budget to pay off your credit card debt in the shortest time possible while not adding any more debt to it. For assistance, you may want to turn to your financial advisor, who can help you to allocate your resources wisely to address your credit card debt.

6) The Role of DebtToday, carrying installment debt is almost a fact of life. Mortgages, car loans, or small-business loans (to name a few) are part of almost everyone's life. On the other hand, carrying credit card debt is usually not a good idea. At interest rates of 16% and up, it's hard to justify keeping savings that could pay off that 18% department-store credit card in the bank at 2%.

Debt and credit play increasingly important roles in our lives. As the aging Baby Boomers get closer to their peak earning years, many are realizing the need to reduce debt and increase savings. Even though analyzing your spending habits and creating a budget to address your debt may seem a little overwhelming, the simplicity of the philosophy of the Depression era still stands: Never spend more than you earn. Once you have come to grips with this basic fact, managing your debt will become far easier and more rewarding.

Summary

*Installment debt means the loan is paid off in a specified period of time by making predetermined payments periodically.

*Revolving credit is a line of credit that is instantly available through use of a credit card (and sometimes a check).

*As you pay down your debt in a revolving line of credit, the minimum payment is also reduced, thus extending your payoff period and, consequently, the interest you pay.

*Spending more than you earn in any given period is a dangerous practice at best, but doing it over an extended period of time can be financial suicide.

Checklist

*Remove high-interest-rate credit cards from your wallet or purse to reduce the temptation to use them unnecessarily.

*Read the fine print on all account statements to understand how your fees and payment amounts are calculated.

*Prepare to transfer balances from accounts with temporary low interest rates that are scheduled to rise soon.

*Use the savings from your debt reduction initiatives to set more money aside for important short- and long-term financial goals.

::::How to Avoid a Bad Co-op or Condo::::

2010-06-01T13:35:00.000-07:00

How to Avoid a Bad Co-op or Condo

by Steve Viuker
Co-ops and condos can be a good option for first-time homebuyers. They are also attractive alternatives for people who own a house but want to downsize because they don't need the space anymore. But while co-ops and condos generally cost less than free-standing houses and require less upkeep, there are still some potential pitfalls.

First, some definitions: When you buy a condominium, you get a deed and title to an apartment and contribute funds for the upkeep of common property such as the grounds, building exterior, lobby and elevators. Condo owners pay real estate taxes and in general can rent or sell as they wish.
With a co-op, you are buying stock in the company that owns a building. You don't actually own any real property, but the stock entitles you to a lease for a unit in the building. As with a condo, you contribute funds for the upkeep of common grounds, but your monthly fees also cover the real estate taxes and insurance for the building, among other things. Co-op boards also can restrict your ability to sublet your unit.

In either case, you are living at close quarters with other people in the building and may be subject to rules and policies you don't like, such as no pets or mandatory carpeting. Just as important, you will be co-mingling your finances with everyone else in the building, since co-op and condo owners may have to foot the bill if their neighbors fail to pay their monthly fees. It can also be harder for you to sell your unit if others in the building default on their mortgages.

For this reason, lenders take a close look at the ownership structures and finances of co-ops and condos -- and you should, too.

Ed Fusco, an attorney based in the Park Slope section of Brooklyn, N.Y., says, "Banks ... want evidence that the sponsor doesn't have a controlling interest and also that the building is owner-occupied. Often, in a new conversion, the units aren't completely sold and banks will put restrictions of loans."

For example, he says, a bank would be reluctant to finance the purchase of an apartment in a 25-unit building if only two units are sold and the rest are in the hands of the sponsor, since these remaining units might eventually be rented, rather than sold.

Fusco says this dates back to the last real estate downturn in the 1980s. Back then, sponsors who owned too many units and got into financial trouble often stopped paying the maintenance, causing the building to default on the underlying mortgage. When the underlying mortgage gets foreclosed, then everyone in the building stands to lose his or her apartment, including the banks that have those apartments as collateral.

These days, in many new conversions, the sponsor will approach banks and make deals upfront. Many times applicants can get a mortgage anywhere they want but must at least apply for one with the lender specified in the building's offering plan.

If you're buying a co-op, getting a mortgage is just the first step; you may also need to be approved by the co-op board. Even in today's market, when many banks are tightening their lending criteria, getting past the co-op board can be much tougher.

Barbara Fox, a Manhattan-based real estate broker, cautions, "Buying an apartment, and in particular a co-op in New York, is a cumbersome and personally invasive process. Your net worth and investments are stripped down to almost the penny."

Fox says that while other cities have co-ops, New York instituted a system that is "similar to joining a private club. Early on, when the co-op concept came into focus, the people who were living in these very expensive apartments wanted to be able to know that they could control who was living next door to them."

But another reason for the scrutiny is that "the board needs to know that a buyer will be a constructive entity; most important to the board is the status of your finances."

Jonathan Raboy, real estate agent at Citi-Habitats, tell the story of a client who was unable to buy an apartment on Manhattan's West Side because the co-op board -- not the bank -- felt his finances didn't pass muster. "The board there required an extremely low debt-to-income ratio, and although my client was a professional and had a good ratio, it at the time was more than this board would have liked to see," he says. Before his client could satisfy the board, another prospective buyer came along and outbid him.

Although board approval is waived for an apartment owned by the building's sponsor, the downside is that, in New York at least, the buyer has to pay the seller's transfer tax and certain other fees.

Ideally, you should know as much about a buildings finances as the board knows about yours. "You need to be comfortable with the financials of the co-op," says Steven B. Schnall, the president of New York Mortgage Co. "And you need your realtor and attorney to help you assess that. If the building is only 20% owner-occupied, it still could be a sound building financially."

In an older building, one thing to look for is the reserve fund. "An older building will need repairs sooner than a new building will," Schnall says. "You need to be sure the building is reserving for future capital improvements."

Some other things to be aware of: An older co-op that has paid down its underlying mortgage significantly might have lower maintenance. On the other hand, Schnall says many new condos have tax abatements, which can keep your real estate taxes down for a certain number of years.

After foreclosure: How long until you can buy again?

2010-05-28T10:08:00.000-07:00

After foreclosure: How long until you can buy again?

Walking away from a mortgage you can still afford to pay has consequences; everyone knows that. Your credit score is shot and it can be impossible to get credit.

Some homeowners, no doubt, believe that the credit score hit is worth getting out from a deeply underwater mortgage. They may owe, say, $500,000 when their house value is only valued at $350,000. And, they figure, there's no way it will ever be worth what they owe so it's better to get out from underneath the burden.

After default, they reason, they can raise their FICO scores by paying all their bills on time and eventually finance another home purchase.
Don't count on it.

While homeowners who default due to economic hardship, such as a job loss or divorce, normally must wait two to five years before buying a home again, walkaways may face double that time.

"It could be well over seven or eight years before [walkaways] are able to obtain a mortgage to buy a home again," said Jay Brinkmann, chief economist for the Mortgage Bankers Association.

"Credit scores are only one component of a complete credit decision," Brinkmann said. "[In these cases] credit scores are not a good indicator of their willingness to continue to pay their mortgage."

But future underwriters will scrutinize their records very closely, and if they find no precipitating factors leading to the defaults -- no job loss, no health issues --the repaired credit score won't overshadow the black mark of a walkaway.

"If you made a strategic decision to default on paying your mortgage, it will work against you," said Bill Merrell of the National Association of Review Appraisers and Mortgage Underwriters.

Merrell, who teaches underwriting, said banks are looking at several factors in determining whether to grant mortgages: the amount of money borrowers have in the bank; employment histories; payment history.

However, banks may be far more lenient if the default resulted from factors somewhat beyond the borrower's control, such as from local economic problems. "They'll give you more consideration if it's job related," he said. But, he added, banks look at strategic defaults "very negatively."

That said, it's not impossible to get a loan. Banks still want to make interest payments, so they might be willing to gamble with a walkaway.

"It might be a little more difficult for them to borrow, but [banks'] drive for market share -- to profit from making loans -- will trump that caution," said Keith Gumbinger, of the mortgage information publisher HSH Associates. "I don't think we'll see a full denial."

It's hard to foresee the state of mortgage lending six or seven months from now, let alone seven or eight years into the future. So lenders may look at applications from one-time strategic defaulters and say, "Yes, they walked away but it's a whole different market now," according to Gumbinger.

Even so, lenders may require more from borrowers who walked away than those who didn't.

"To the extent they could get a mortgage," said Brinkmann, "they can count on needing a heavy down payment."

The lenders may ask for 30% down or more. That would provide enough collateral cushion that the bank could get all or most of its money back in a foreclosure.

Strategic defaulters might also be charged higher interest rates, even above the levels other borrowers with similar credit scores would receive.

:::Mortgage rates are back near record low::::

2010-05-27T15:51:00.000-07:00

Mortgage rates are back near record low

:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
Unexpected benefit of turmoil in Europe and markets: Mortgage rates near record low...
A home sits for sale with a reduced price sign, in Bedford Hts., Ohio, Thursday, May 27, 2010. Mortgage rates have fallen to the lowest level of the year as European turmoil caused investors to pour money into the safe haven of U.S. government securities.

WASHINGTON (AP) -- Turmoil in the stock market and the European debt crisis are making life easier for American homebuyers and families looking to refinance: Mortgage rates are inching closer to a record low.

The window of opportunity may close soon. Home loan rates will rise if investors grow more confident and shift money out of the safety of government bonds, which influence mortgage rates.

For now, though, rates are tantalizingly low. The average 30-year fixed-rate loan sank to 4.78 percent this week, the lowest this year and barely above the record of 4.71 percent set in December. And 15-year loans are at their lowest rates in two decades.

"Strike now," suggested Greg McBride, senior financial analyst at Bankrate.com.

Some homeowners are doing just that. Applications to refinance surged this week to the highest level in seven months, the Mortgage Bankers Association said.

Anxiety over the European crisis has caused global investors to snap up Treasury bonds, which they view as much safer than other investments. Treasury yields have fallen as a result, taking mortgage rates down, too.

When the crisis eases, and especially if the American economy recovery stays on track, expect investors to move out of bonds and back into stocks. That would make mortgages more expensive.

"If the economy finally really shows sustained improvement, rates are definitely going to go up," said Fred Chamberlin, a consultant with Alpine Mortgage Planning in Eugene, Ore.

He suggests that homeowners looking to refinance move fast and not hold out for even lower rates. "If you want the bottom, the only way you're going to know it is when you've missed it," Chamberlin said.

Refinancing isn't right for everyone who qualifies. It typically costs several thousand dollars in fees. Experts suggest calculating how long it will take to recover those fees with the lower loan rate.

As cheap as mortgages are these days, the number of loans being taken out to buy homes remains at its lowest point in more than 13 years. One reason is that a special tax credit for homebuyers expired last month. Many people had rushed to sign contracts by then.

Another obstacle: trouble qualifying for a mortgage. Borrowers need solid credit and a down payment of at least 3.5 percent. Banks tightened lending standards after millions of borrowers fell into default and foreclosure during the housing bust.

"They're really looking with a magnifying glass," said Steve Mevorah, a loan officer with Icon Mortgage Inc. in Las Vegas. "They're trying to make sure that they are flawless loans."

Analysts had expected mortgage rates to rise when the government ended a program designed to bolster the housing market. Instead, they fell because of fears that Greece would default on its debt.

Also keeping rates low is the government's decision last year to provide unlimited support through 2012 for Freddie Mac and Fannie Mae, which buy mortgages and package them into securities and help keep rates low.

Investors "are very comfortable with the guarantee that is in place," notes Credit Suisse mortgage strategist Mahesh Swaminathan. "That, for all practical purposes, is very strong government support."

Since the financial crisis ended, mortgages of all types have become more affordable -- from the 30-year fixed to adjustable varieties.

The premium that borrowers pay to take out "jumbo" loans for more expensive homes has dropped by a full percentage point since late 2008, to just 0.8 percent, for instance.

!

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15 n Dorchester, Waukegan

525 Washington, Lake Bluff

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National Real Estate Market Snapshot

National Real Estate Market Snapshotupdated Monday, November 8, 2010Listing TypeMedian PricePrice Changefrom OctHomes for Sale$179,900-0.1%New Homes$283,000-0.4%Foreclosures$154,0000.0%1 Year Market Value Change1 yr|5 yr|10 yr|See more city graphs & data at Zillow.com

1 Year Market Value Change

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New Listing / 525 W Washington Ave Unit 15, Lake Bluff

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310 Lake Gillian Way,ALGONQUIN 60102::

5 questions to ask before renting out your home

*New Foreclosure Listing

Mortgage Basics

5 ways financial reform affects you

5 ways financial reform affects you

::Mortgage interest rates continue to fall::

::The 6 phases of a foreclosure::

::8 most overrated home projects::

::Don't fall victim to a lying home seller::

::7 sins of first-time renters::

New REO listings

New REO listings

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Buy your next home from Uncle Sam

Buy your next home from Uncle Sam

As a result of rising foreclosures, some Americans will buy their next home from the U.S. government.

::How to choose a mortgage broker::

New Foreclosure listing

::16 ideas to help you drum up money for a down payment::

16 ideas to help you drum up money for a down payment

Coming up with a big pile of cash to buy a home may seem daunting, especially if it’s your first. Here’s expert advice on the many ways you might be able to make it happen, along with 4 dead-end options to avoid.

:::Should you buy a home that's been vacant?:::

::Managing Debt and Credit::

::::How to Avoid a Bad Co-op or Condo::::

After foreclosure: How long until you can buy again?

:::Mortgage rates are back near record low::::

National Real Estate Market Snapshot
updated Monday, November 8, 2010
Listing Type Median Price Price Change
from Oct
Homes for Sale $179,900 -0.1%
New Homes $283,000 -0.4%
Foreclosures $154,000 0.0%
1 Year Market Value Change
1 yr
|
5 yr
|
10 yr
|
See more city graphs & data at Zillow.com