Buying a Home with a Pool

Talking Points …

• As the weather heats up, some home buyers may be considering purchasing a home with a pool.

• If a home that is in foreclosure has a swimming pool that has been neglected, it’s possible that it’s hiding years of neglect, bad siding, algae, and other mysterious damage.

• It can be difficult to estimate what pool repairs may be needed during a basic home inspection. If the home is a short sale, the pool may be sitting for months longer and cost more than the buyer initially estimated.

• On the other hand, a pool may add extra value to the property, as well as years of personal enjoyment. Adding a pool to an existing home generally is not advisable for a buyer who does not plan to living in the home for long term. Dollar-for-dollar, buyers will never recoup the costs of adding this amenity.

More homeowners can get mortgage reduced

Source: San Diego Union Tribune

Chase and Wells Fargo are the latest two banks that have agreed to slash mortgage balances as much as up to $100,000 for certain clients through the state program Keep Your Home California.

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How to be the most attractive home buyer

Source: Fox Business News

As home prices continue to recover and interest rates remain at near-record lows, many houses are receiving multiple offers and to win the bid, buyers need to stand out from the crowd. According to the CALIFORNIA ASSOCIATION OF REALTORS®’ most-recent housing report, the median number of days it took to sell a single-family home decreased to 29.4 days in March.

Making sense of the story

•  Since markets are moving fast, housing experts recommend buyers have their loan pre-approved and their down payment ready before starting their search. With low inventory and demand high, buyers need to know their parameters.

• Multiple offers are become the norm, so buyers need to be ready to compete and do their homework to seal the deal. The longer the negotiations, the bigger the chance a buyer could lose out to someone else who made a better offer.

• Buyers also must be reasonable without being difficult because until an offer is signed, sealed, and delivered, other buyers can make offers on the property.

• Even though it’s a competitive market, buyers should maintain their budget and not pay more for a house than it’s worth. Experts also warn that buyers shouldn’t cut corners like skipping the home inspection.

• To be an attractive home buyer, consumers should plan ahead by checking their credit for accuracy and avoiding making any big purchases or taking on any big debt while house hunting.

• Buyers who spot a good deal on a house shouldn’t wait days to make an offer. Since time isn’t on the buyer’s side, learning how to spot a great deal by researching an area’s home prices is pertinent.

• In this market, cash is king. The more cash a buyer has, the more appealing they are as a buyer. Putting down 20 percent or more also makes a buyer look more financially stable and gives sellers comfort that they’ll qualify for a mortgage.

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Home Warranties Have Limitations

Talking Points …

• Some sellers wonder whether it is necessary to offer a home warranty, especially when inventory is low like it is currently.
• The biggest advantage of a home warranty – which covers breakdowns in major systems – is that it is an incentive many buyers value, particularly if they are stretching to buy and don’t have a lot of money left over for repairs.
•  A home warranty is a relatively expensive form of insurance, and will set back the purchaser several hundred dollars, depending on the coverage selected. Also, there is a service fee for each call, which can be more than $100.
• Home warranties have limitations. They don’t cover static elements like the roof or siding, but do cover operating systems that often fail, like major appliances including garbage disposals, electrical wiring, plumbing, and heating and air conditioning. Some companies allow the homeowner to add riders to cover extras like the mechanical elements of a pool system or hot tub.
• Costs and exclusions vary widely, as do caps on what the warranty company will pay. Some companies also offer less coverage for systems that are near the end of their useful life. As in medical insurance, pre-existing conditions are usually exempted from coverage – and the warranty company makes the call as to whether the condition was pre-existing, as well as to whether the particular system should be replaced or just patched up.

Lenders venturing back into subprime market

In its most-recent foreclosure report, CoreLogic reported 55,000 homes were lost to foreclosure in March, up 6 percent from 52,000 completed foreclosures in February.

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Some homes are slow to sell even in the hottest markets

Source: Los Angeles Times

With full-fledged sellers’ markets underway in dozens of metropolitan areas around the country, new research has found curious statistical patterns emerging: Even in cities where listings get multiple offers within days or hours, significant numbers of homes are sitting on the market for six months, 12 months, or more with no takers. Among the reasons: Mispricing, excessive restrictions on access to buyers and agents, failure to clean or make repairs, and a variety of other marketing bungles.

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Loan qualifications for retirees

Source: The New York Times

Retirees trying to obtain a mortgage may find that a pristine credit history and healthy retirement accounts are not enough. Lenders also are looking for a consistent monthly income in line with their usual debt-to-income standards.

Making sense of the story

·         Many lenders measure income by looking at dividends. Lenders generally want to see a regular annual amount on the tax return paid out over at least the last two years.

·         As far as part-time work, which some retirees decide to pursue, when the borrower applies for the loan, they need to be able to confirm that they are actually employed at that moment. Once the employment situation has been verified, lenders are likely to include the pay as income, but may still require a two-year work history.

·         Social Security income is always counted. Borrowers should be aware that Fannie Mae guidelines allow lenders to increase that income by 25 percent if the beneficiary isn’t paying taxes on it.

·         Some retirees may qualify for a mortgage loan by working with a portfolio lender who does not verify income. The downside to this option is that the interest rates and down payment requirements are higher.

·         Some lenders qualify income-deficient, asset-rich retirees by using a program known as asset depletion. In this situation, the lender takes a fraction of the borrower’s assets, amortizes it, and applies it as income.

The Road Back to Homeownership after Foreclosure or Short Sale

Talking Points …

• Some former homeowners who lost their houses to foreclosure or sold their homes via short sales are beginning to wade back into the housing market. However, some credit concerns due to these events are causing concern for would-be home buyers.

• The road back to homeownership won’t be easy. Traditional lenders that follow Fannie Mae guidelines may not approve a loan after a foreclosure until at least seven years have passed.

•  However, if a buyer can prove the foreclosure resulted from extenuating circumstances that are unlikely to recur, such as a divorce, catastrophic illness, or a layoff, the time period may be reduced to as little as three years.

• Another option is to work with a lender who does not sell its mortgages to Fannie Mae. The waiting period may be less, but the borrower likely will pay above-market interest rates and be asked for a larger down payment.

Housing affordability falls across state

Source: Daily News

During the first quarter, 44 percent of buyers could afford a median-priced home costing $350,490, down from 56 percent a year ago, the CALIFORNIA ASSOCIATION OF REALTORS® reported. Affordability was down from 48 percent in the fourth quarter of 2012.

Are mortgage modification terms worth continuing payments?

Source: Los Angeles Times

A high percentage of homeowners who take part in the Home Affordable Modification Program are unable to maintain their loan mods, data from the Treasury Dept.’s Trouble Asset Relief Program shows.

Fed: Some borrowers shortchanged in foreclosure settlement

Source: Los Angeles Times

Nearly 100,000 troubled borrowers were shortchanged on payments from Goldman Sachs Group Inc. and Morgan Stanley & Co., the Federal Reserve said – money intended to compensate for possible errors and abuses during foreclosure proceedings in 2009 and 2010.

California home prices soar in April

Fueled by high demand and tight inventory, California home sales and prices both experienced strong increases in April, with the median price surpassing the $400,000-mark for the first time in five years, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported.

Making sense of the story

·         The statewide median price of an existing, single-family detached home climbed 6.3 percent from March’s revised median price of $378,960 to $402,760 in April, signaling the first time since April 2008 that the statewide median price has exceeded the $400,000 mark (and was the highest since then). 

·         Sales in April were up 1.3 percent from a revised 417,880 in March but down 3.7 percent from a revised 439,770 in April 2012.  The statewide sales figure represents what would be the total number of homes sold during 2013 if sales maintained the April pace throughout the year.  It is adjusted to account for seasonal factors that typically influence home sales.

·         The available supply of homes for sale was essentially unchanged from March, but was down markedly from a year ago.  The April Unsold Inventory Index for existing, single-family detached homes was 2.8 months in April, down from 2.9 months in March, and down from 4.2 months in April 2012.  The index indicates the number of months needed to sell the supply of homes on the market at the current sales rate.  A six- to seven-month supply is considered normal.

·         Increased market competition has significantly driven down the time on market compared with a year ago.  Homes sold more quickly in April, with the median number of days it took to sell a single-family home decreasing to 27.9 days in April, down from 29.4 days in March and down from a revised 48 days for the same period a year ago.

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Lender Fees - Watch Them Carefully

Talking Points …

• In addition to a down payment, borrowers also have to set aside money for closing costs, which can run into the hundreds or sometimes thousands of dollars.

• Lenders charge all manner of fees, some of which are negotiable, while others are not. Lenders are required to itemize all fees required to close the deal, so borrowers should review them carefully.

• Lenders may charge borrowers to cover items such as credit reports, appraisals, documentation, and administrative costs. The total expense will vary depending on the particulars of the situation.

Fee-laden FHA mortgages cost more than privately insured loans

LA Times: On April 1, fees for low-down-payment mortgages insured by the Federal Housing Administration (FHA) rose for the third time in two years. The hike in fees serves a two-fold purpose: to help shore up the FHA’s sagging mortgage insurance fund, which is dangerously low; and to reduce the government’s footprint in the mortgage market.

Making sense of the story

• The FHA has always been the first choice of low down payment-borrowers who couldn’t meet the private sector’s more rigid underwriting standards. And, as the housing market descended, the FHA picked up the slack as private insurers backed out of the market.

• As of April 1, the FHA raised its annual premium by 0.05 percentage points to 0.1 percent, depending on the loan amount and the loan-to-value ratio. That increase is in addition to an earlier increase of 0.1 percentage points in the annual fee instituted in April 2012, as well as the hike in the upfront mortgage insurance premium, to 1.75 percent of the loan amount, up from 1 percent.

• Lenders require insurance, either private or government-based, on mortgages in which there is a down payment of less than 20 percent. Such loans are considered more likely to default than those in which borrowers have more of their money on the line.

• Currently, the FHA will allow borrowers to cancel PMI coverage once their loan-to-value ratio reached 78 percent of the original loan balance, and the borrower has made payments for five years. Starting June 3, the FHA will require borrowers to pay the premium as long as the loan is in force. In other words, the only way to stop paying PMI is for the borrower to refinance or otherwise pay off the loan.

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FTC finds an estimated 25.6 million Americans fell victim to fraud in 2011

The Federal Trade Commission has released a statistical survey of fraud in the United States during 2011, which showed that an estimated 25.6 million adults – 10.8 percent of the adult population – were fraud victims.

While fast-growing online commerce has benefitted consumers with greater choice and convenience, the survey indicates that, as of 2011, the Internet was also the place where consumers most often learned about fraudulent offers.  The Internet category, which included email, social media, auction sites and classified ads, was followed by print advertising, and TV and radio.  Most consumers bought fraudulent items via the Internet; telephone purchases ranked second.

The survey asked consumers about 15 specific categories of fraud, and two general categories, and of the specific categories the top 10 were:

• Weight-loss Products (5.1 million estimated)
• Prize Promotions (2.4 million est.)
• Unauthorized Billing for Buyers’ Club Memberships (1.9 million est.)
• Unauthorized Billing for Internet Services (1.9 million est.)
• Work-at-Home Programs (1.8 million est.)
• Credit Repair Scams (1.7 million est.)
• Debt Relief (1.5 million est.)
• Credit Card Insurance (1.3 million est.)
• Business Opportunities (1.1 million est.)
• Mortgage Relief Scams (800,000 est.)