Why 2014 is a good year to buy a home


If you didn’t buy a home in 2013, you may be kicking yourself now. Home prices climbed nationally an average of 13.6 percent in the past 12 months, according to Tuesday’s release of the Standard & Poor’s/Case-Shiller 20-city home price index.

Don’t make the same mistake in 2014, suggests Benjamin Weinstock, real estate attorney and partner at the firm Ruskin Moscou Faltischek in Uniondale, N.Y.

Market forecasters predict that 2014 will be another year of gains for the real estate market, even though the rapid pace of sales in 2013 cooled off a bit at the end of the year. On Dec. 30, The National Association of Realtors said its pending home sales index, based on contracts signed last month, rose 0.2 percent in November, below the 1 percent rise forecast.

Home prices are expected to rise about 5 percent next year, says Weinstock. Higher mortgage rates will dampen the pace of both sales and price gains, but not bring them to a halt. The average rate on a 30-year fixed mortgage is expected to rise from 4.5 percent to 5 percent in the next year.

Even aside from expected price gains, buying a home is almost always a good investment in the long run, says Weinstock. Tax benefits are not to be overlooked.

“When one rents, at the end of the year he or she has a pile of 12 cancelled rent checks,” Weinstock says. “However, the homeowner has a pile of 12 cancelled mortgage checks that are nearly fully tax deductible in most cases.”

(Source: CBS Moneywatch)

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The best home loan for your credit score


If your credit is damaged, with a FICO score from 620 to 680, you’ll have trouble getting a mortgage. If it’s poor – 580 to 620 – more trouble. If it is toxic – below 580 – you’re looking at a real struggle. And yet, it can be done, under the right conditions, and with the right lender and loan officer helping you. Here are the three best loans for borrowers in these three credit-score categories, with pros and cons for each. First, though, ask yourself: Is it smart to go further in debt when you’re already over your head? Maybe it’s best to put your financial life back on track before you purchase real estate.

FICO score: 620-680

Fannie Mae

You’ll need at least a 620 FICO score for a less expensive “conventional” mortgage, backed by Fannie Mae or Freddie Mac, the government-controlled corporations that dominate the market. Lenders follow Freddie’s and Fannie’s rules but also set their own score requirements. For some, a 620 score is enough. Others demand higher. Most lenders offer conventional mortgages but look carefully for a lender’s representative willing to take the time and effort to help a low-score borrower qualify.

Pros: Cheaper than other options for low-score borrowers.

Cons: A lower credit score makes it more difficult to borrow. You’ll pay a higher interest rate. You’ll probably need to put 20% down with a score this low.

FICO score: 620-680

Freddie Mac

Freddie Mac’s requirements are similar to Fannie Mae’s.

Be prepared, with any loan, to explain why your credit score is low. Prove that you suffered a one-time hardship over which you had no control – illness, for example, or job loss you didn’t cause. If your score is low because you’re just chronically late paying bills, you can probably forget it, says Eric Mitchell, vice president at Priority Financial Network, a direct lender based in Calabasas, Calif.

Pros: Cheaper than other options for low-score borrowers.

Cons: You’ll pay a higher interest rate. Find a lender representative who will take the extra time to work with your application. You’ll probably need to put 20% down with a score this low. With a down payment smaller than 20%, you’ll have to buy private mortgage insurance.

FICO score: 620-680

Federal Housing Administration

With a lower credit score, the FHA may be your best bet. The FHA’s requirements are more lenient than those of most other lenders. This year, 42% of FHA home-purchase loans (PDF) went to borrowers with credit scores between 620 and 680. The average credit score was 693. FHA borrowers made down payments of 4%, on average.

Pros: FHA-backed mortgages are easier to obtain; most lenders offer them. Down payments can be as small as 3.5%. 

Cons: FHA loans are becoming more expensive. When mortgage insurance is taken into account, an FHA mortgage can be more costly than a conventional loan. Mortgage insurance is required, in addition to homeowners insurance, for as long as you have the loan.

FICO score: 580-620

Department of Veterans Affairs

A credit score in the 580 to 620 range puts you in what mortgage banker Eric Mitchell jokingly calls the “demilitarized zone.”

“There are options, but man, it’s tough,” Mitchell says. “Very few will go below that 620 DMZ. One of them is the VA.”

Ask friends or your VA representative for lenders offering VA loans. The Department of Veterans Affairs guarantees mortgages for qualified active or retired U.S. service members or spouses who meet certain criteria.  Borrowers’ scores typically are at least 620 to 640, but the VA can lend to veterans with scores of 570 or lower who qualify because of exceptional circumstances, such as having been wounded in combat.

Pros: No money down. Easier to qualify. Sellers can contribute to closing costs. Higher debt levels allowed.

Cons: Available only to military veterans.

FICO score: 580-620

Agriculture Department

One of the best options for low-score borrowers is a USDA Rural Development Guaranteed Housing loan. These fixed-income mortgages have terms of 30 to 38 years. Here are the rules. You can have an income of up to 115% of the median income of your area.Check your income eligibility here.

This program is meant for rural areas but the department has a broad definition of “rural.”

Pros: No down payment. Borrower qualifications are looser than for conventional loans through Fannie Mae and Freddie Mac.

Cons: Not available everywhere. Few lenders offer USDA mortgages.

FICO score: 580-620

Federal Housing Administration

If you can’t get a VA or USDA mortgage, the FHA is your best bet in the 580-620 score range. Borrowers with scores of 580 and above can get an FHA-insured mortgage with a down payment of 3.5% of the home’s purchase price. Just 1.6% of FHA mortgages this year were to borrowers with scores between 580 and 620, so be sure to find a loan rep experienced at working with low-score borrowers.

Pros: Requirements are more lenient and interest rates are low. Down payments are as low as 3.5%. Most lenders offer FHA mortgages.

Cons: FHA loans are becoming more expensive. FHA’s mortgage insurance – required in addition to homeowners insurance – makes these mortgages pricier than conventional mortgages.

FICO score: Below 580

Subprime or ‘nonprime’ lenders

These loans don’t qualify for government backing, which makes them considerably more expensive. Nonprime lender Citadel Servicing Corp. in Irvine, Calif., for example, makes fixed- and adjustable-rate mortgages for borrowers with FICO scores as low as 500. For scores of 550 and lower, rates run from 9.75% to 11.25%; market rates are hovering between 4% and 4.5%. Your rate depends on the points you pay and the size of your down payment. Down payments range from 35% to 60% of the loan amount.

To find a subprime mortgage, work with a broker who has earned the certified mortgage planning specialist designation. Ask for references. Watch for “bait and switch” tactics, in which you’re reeled in with an attractive offer but terms are later changed. Financial Firebird Corp., which says it tries to screen out predatory lenders, maintains a national directory of bad-credit mortgage lenders and brokers.

Pros: Mortgages are available for borrowers with scores below 580.

Cons: High down payments, high costs and difficulty locating credible lenders. Expect to pay at least 40% down, Mitchell says. That’s $160,000 on a $400,000 home, for example.

FICO score: Below 580

Federal Housing Administration

The FHA makes a few mortgage loans – less than 2% of its loans this year – to borrowers with scores below 580. You must have a solid explanation why your credit is this low. If you’re one of the lucky few to get a mortgage at this score, be prepared to make a 10% down payment.

Pros: Most lenders offer FHA mortgages. Requirements are more lenient and interest rates are lower. You should find a loan rep with deep experience helping low-credit-score applicants.

Cons: Higher down payment. The FHA makes few loans to borrowers with scores this low.

FICO score: Below 580

Family and friends

Your best option with a score this low may be a friend or family member who is willing to loan you money to buy a home. Learn how to borrow from friends and family.

Pros: No outside qualifications to meet. Terms decided between you and your lender.

Cons: Borrowing money puts your closest relationships in jeopardy. It can be a bad idea. Instead, take the time to dig out of debt and cure your credit. If you must, use a lawyer or a third party such as National Family Mortgage, which specializes in facilitating loans between family members and friends.

(Source: MSN Real Estate)

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How to choose a house color that works


Painting your exterior is a great way to boost your curb appeal.

When it comes to improving your house’s curb appeal and resale value, there is no more cost-effective strategy than a good paint job. Well-chosen colors can disguise architectural flaws and maximize strong points, turning gloomy, forbidding houses into stately, welcoming homes and modest bungalows into inviting, substantial-looking dwellings.

Conversely, a house painted in unattractive, inappropriate colors is not only unappealing but can also damage the aesthetic appeal of your neighborhood and, with it, your relationships with your neighbors. Unlike painting interiors within the privacy of your home, painting your house’s exterior, painting your house’s exterior is a public act that can have long-term consequences.

By now, everyone has probably heard the cautionary tales of well-intentioned but clueless homeowners who, in an attempt to create a cheerful, jaunty effect, douse their homes with coats of unrelieved pink or aquamarine, creating garish eyesores that detract from the appeal of the entire neighborhood.

This is not to say that bright colors can’t be used, of course; intense, vibrant shades have a place in exterior decor. But before you decide on a color scheme, you need to ask yourself some questions.

Is your home an imposing mansion or a charming cottage? Is it surrounded by leafy trees or native rock formations?

The landscape, the size and style of the home, the presence of permanent elements such as brick or stone work and the color schemes of the surrounding houses must all be considered when choosing the ideal exterior paint. The need for harmonizing colors with nearby houses is particularly pronounced for those who live in cozy neighborhoods with houses in close proximity to each other; those on more isolated, spacious lots can choose from a wider range of shades but still need to consider landscape and natural features.

Fortunately, technological advances have made the color-selection process easier than it used to be. If you’re having trouble deciding, many paint companies offer easy-to-use apps that can help you view your house in a rainbow of different shades.

The ‘three-color rule’ and beyond

The “three-color rule,” a time-honored tenet of house painting, calls for using one color for the siding, a deeper or lighter variation for shutters and trim, then a third, bolder color for accent features, such as lanterns, flower boxes and front doors.

As useful as the three-color rule is, it isn’t written in stone; tweaking it slightly can result in a fresh, contemporary look that is still harmonious and attractive. For a modern twist on the rule, paint the shutters and window trim an entirely different color from the siding and employ a third, vibrant color sparingly, in selected accents.

For example, a Colonial-style home in classic white could receive an eye-catching update with precisely-painted shutters in a regal mulberry or lavender shade, paired with cerulean blue on the front door. The resultant look is fresh, original and pleasing because the blue door echoes bluish-purple tones in the palette used for the shutters. In addition, the door’s contrasting shade gives a visual clue that this is the entryway, thereby acting as a colorful “Welcome sign.” A final reason for the combination’s success is that the blue is used over a much smaller space than the lavender; the colors don’t “fight.”

Working with Mother Nature

You can choose to harmonize with natural features surrounding your house. If your home is set against a luxurious backdrop of hardwood and fir trees, you can complement the foliage — and make your house stand out at the same time — with a delicate but rich shade of light green. Adding white around the window trim and eaves completes the look, while adding crispness and definition.

Even seasonal landscape features can provide cues — if your Japanese maple reliably turn scarlet or russet in fall, or if your lilacs produce a springtime riot of light purple, picking a coordinated accent color can further intensify the dramatic effect.

Size and style matter

The proportions and the style of your home can also affect your color choice. A sprawling house in a very dark color can look unwelcoming and forbidding; midrange neutral colors such as light sage greens, pale, inviting blues and delicate golds are better choices. Because of the classic lines of Colonial- and Greek Revival-style houses, white — or a light neutral — is the usually the most flattering option for the body of the house; more exotic pigments can be employed as accents.

When it comes to paint porch trim such as balusters, railings, pillars and columns, paler colors are more inviting than darker shades. White, in particular, signals stability, freshness and value.

Cottage-type homes are particularly well-suited to whimsical treatments. You can draw from the floral palette of a traditional cottage garden, with its hyacinth blues, dusty pinks and daffodil yellows. The key to this look is employing the unifying influence of white, with neatly painted, snowy trim on windows and eaves.

Permanent elements

Permanent elements – those unchanging specifics of your house such as a rooftop or facade – can also help dictate color choice. The flecks of blue-green in your shingles, or the tone of your brickwork, can be echoed by your primary shade to grant cohesiveness to the whole.

If your facade is limestone or other natural-looking rock, you must pick colors for shutters and windows that blend in organically with the materials. Painting or staining the door a glowing copper, bronze or another earth tone can provide just the right warm, rustic accent. 

Now that you’ve selected the proper colors, you can beautify the exterior of your house in a way that will have the whole neighborhood talking. And saying, of course, only good things.

(Source : MSN Real Estate)

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5 ways 2014’s housing market will be different


The housing market continued its uneven recovery in 2013 and will enter 2014 closer to normal than it was a year earlier. Consumer optimism is climbing back: InTrulia’s latest survey, 74 percent of Americans said that homeownership was part of achieving their personal American Dream — the highest level since January 2010. Even among young adults (18- to 34-year-olds), many of whom struggled through the recession and are still living with their parents, 73 percent said homeownership was part of achieving their personal American Dream, up from 65 percent in August 2011.

Rising prices in the past two years have been great news for homeowners, especially for those who had been underwater, and the real estate industry has benefited from higher prices and more sales volume.

 At the same time, the effects of the recession and housing bust still sting: the barriers to homeownership remain high, and a few markets — mostly in Florida — still have a foreclosure overhang. Plus, the housing recovery itself brings its own challenges, including declining affordability and localized bubble worries, especially in Southern California.

Barring any economic crises, the housing market should continue to normalize. Here are five ways that the 2014 housing market will be different from 2013.

 1. Housing affordability worsens

Buying a home will be more expensive in 2014 than in 2013. Although home-price increases should slow from this year’s unsustainably fast pace, prices will still rise faster than both incomes and rents. Also, mortgage rates will be higher in 2014 than in 2013, thanks to the strengthening economy and to Fed tapering. The rising cost of homeownership will add insult to injury in America’s least affordable markets; in October 2013, for instance, 25 percent or less of the homes listed for sale in San Francisco; Orange County, Calif.; Los Angeles; and New York were affordable to middle-class households. Nonetheless, buying will remain cheaper than renting. As of September, buying was 35 percent cheaper than renting nationally, and buying beat renting in all of the 100 largest metros. However, prices and mortgage rates might rise enough to tip the math in favor of renting in a couple of housing markets — starting with San Jose, Calif.

2.The homebuying process gets less frenzied

Homebuyers in 2014 might kick themselves for not buying in 2013 or 2012, when mortgage rates and prices were lower, but they’ll take some comfort in the fact that the process won’t be as frenzied. There will be more inventory on the market in 2014, partly because of new construction, but primarily because higher prices will encourage more homeowners to sell — including those who are no longer underwater.

 Also, buyers looking for a home for themselves will face less competition from investors who are scaling back their home purchases. Finally, mortgages should be easier to get because higher rates have slashed refinancing activity and pushed some banks to ramp up their purchase lending. Moreover, the new mortgage rules taking effect in 2014 will give banks better clarity about the legal and financial risks they face with different types of mortgages, hopefully making them more willing to lend. All in all, more inventory, less competition from investors and more mortgage credit should all make the buying process less frenzied than in 2013 — for those who can afford to buy.

3. Repeat buyers take center stage

This past year was the year of the investor, but 2014 will be the year of the repeat homebuyer. Investors buy less as prices rise: Higher prices mean that the return on investment falls, and there’s less room for future price appreciation. Who will fill the gap? Not first-time buyers: Saving for a down payment and having a stable job remain significant burdens, and declining affordability is also a big hurdle for first-timers. Who’s left? Repeat buyers. They’re less discouraged by rising prices than either investors or first-time buyers because the home they already own has also risen in value. Also, the down payment is less of a challenge for repeat buyers if they have equity in their current home.

(Source : MSN Real Estate)


U.S. postpones 2014 hike in mortgage fees


It’s a Christmas miracle! Planned fee increases that would have added to the cost of millions of mortgages will be postponed.

Currently, borrowers seeking loans backed by Fannie Mae and Freddie Mac are set to pay higher upfront fees starting April 1.

The fees, ordered by the Federal Housing Finance Agency earlier this month, are meant to help safeguard banks against risky borrowers who might default.

But housing experts say they will add thousands of dollars to the cost of all mortgages insured by Fannie and Freddie, with the biggest hits taken by borrowers with less than perfect credit histories.

On Friday, the incoming chief of the FHFA, Mel Watt, said he intends to postpone the fees — and perhaps even cancel them — until more analysis is done. The FHFA oversees Fannie Mae and Freddie Mac.

Watt, a former Democratic member of Congress, has been confirmed to his post by the Senate and takes office on January 6.

In a statement, Watt said he intends to “evaluate fully the rationale” for the fees and their impact on Fannie and Freddie and the “availability of credit.”

The mortgage industry has been bracing for substantial increases in the price of loans in 2014.

“If these [policies] had been implemented, it would have increased borrowing costs dramatically,” said David Stevens, CEO of the Mortgage Bankers Association.

The hit for individual borrowers would depend on the amount of the home purchase being financed, according to Brian Koss, executive vice president at Massachusetts-based lender Mortgage Network.

Borrowers would have paid a fee when they took out the loan, or they could have effectively rolled the higher fees into their interest rate, raising monthly mortgage payments by as much as a quarter percentage point.

Even with the reversal, however, mortgages will probably get more expensive over the next few months anyway as the Federal Reserve cuts back on its purchases of mortgage backed securities, a program designed to keep interest rates low.

Stevens, the mortgage industry representative, said the proposed increases made little sense. Defaults on mortgages made in recent years have been much lower than on those made before the housing crash.

As a result, Fannie and Freddie are flush with profits, so much so that they have already returned almost all of their $187 billion taxpayer-funded bailout.

“The GSEs are making a lot of money,” said Stevens. “There’s no rationale for the increases.”

(Source : CNN Money)

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