Buy a Home Now or Pay More Later?

10-11

With mortgage rates creeping up toward 5% as 2013 draws to a close, potential home buyers have some decisions to make — and soon.

A laundry list of economic issues, including inflation, consumer credit, and rising home prices has the U.S. housing market on the way to making a clean break from the days of the 3.50%, 30-year fixed-rate mortgage for the foreseeable future.

The danger for potential homebuyers isn’t that mortgage rates are nearing 5.00%; the real threat is that rates could go higher, to 5.50% or even 6.00% in 2014.

Think of it this way:

Buyer A snares a $300,000 fixed-rate, 30-year mortgage at a 5.00% interest rate, with the following payments:

• Monthly payment = $1,610.46

• Total payment = $579,569.69

• Total interest = $279,769.69

Buyer B grabs a $300,000 fixed-rate, 30-year mortgage, at a 6.00% interest rate, with the following payments:

• Monthly payment = $1,798.65

• Total payment = $647,515.44

• Total interest = $347,515.44

Buyer B will pay about $67,746 more for having a 6% mortgage rate, compared to a 5% rate, over the life of the loan.

Rates currently stand at 4.20%, according to Freddie Mac’s weekly mortgage rate survey.

While rates have been in decline the last few weeks, the big picture shows a general rise in rates to between 4.00% and 4.50% before the end of 2013. Which raises this question for potential homebuyers: Should you jump off the fence now, with rates still fairly reasonable, or do you wait and risk having to deal with mortgage rates as high as 5.00% or 6.00% in 6-to-12 months?

Here are some factors to consider:

Rates will likely rise — and soon: “Most people agree it is only a matter of time before rates hit 5%,” said Peter Grabel, a mortgage loan originator at Luxury Mortgage Corp. in Stamford, Conn. “The housing market has clearly turned the corner in most areas. I think a year from now people will look back and realize that this was a great buying opportunity.”

The Federal Reserve will stop “tapering”: For the last five years, the Fed has embraced a policy of low interest rates, primarily by buying up securities in the U.S. mortgage market. But all indications say the Fed will ease off on those purchases, thus driving interest rates up even further. “Rates in the 3% range are gone forever because the Fed will soon be pulling out of their mortgage backed securities purchasing program,” said Tim Lucas, editor-in-chief of the mortgage website MyMortgageInsider.com. “When the Fed stops buying, demand for these securities will fall dramatically, and rates will jump back up to typical levels. Once the unemployment rate nears 6.5%, the Fed could stop buying these securities, sending rates higher. We’re at 7.3% unemployment now, with positive economic signs at every turn.”

Home values are rising: The longer you wait to buy a home in this real estate market, the more expensive the purchase price will likely be. That’s because U.S. home prices are on an upward trend. CoreLogic, an Irvine-Calif.-based data analysis firm, estimates that U.S. home prices have risen 12.4% from August 2012 to August 2013.

The autumn buying season is underrated:  Some mortgage professionals advocate buying now, not just because rates are reasonable but because there is less competition in the residential real estate market compared to the busier spring and summer buying season. ”Next to spring, fall can be the best season to buy a home, although this year the economic climate is different from recent years,” said J.D. Crowe, senior vice president at Georgia-based Southeast Mortgage. “During the past few years there has been a large inventory of homes. This year the reverse is true and we are experiencing a housing shortage. But fall is still a good time to buy a home, as you can take advantage of year-end tax breaks and the fall weather makes it an ideal time to move.”

Of course, the perfect time to buy a new home is when you are financially and emotionally ready for that obligation — likely the biggest financial investment of your life.

“Life events drive real-estate decisions — birth of baby, better school, death, divorce, parent moving in, illness, kids off to college, work relocation, unemployment, raise, bonus, hurricane — all the good planning on the buy side can wipe out the best of decisions when someone has to sell in a ‘bad’ market, said Diane Saatchi, a Long Island, N.Y., real estate broker. “Because of this, my advice to would-be buyers is to buy when they need and can afford to, as timing rarely makes a difference in personal real estate.”

(Source: Realtor.com)

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Keys to Negotiating the Autumn Housing Market

10-10

So, you’re finally off the fence and ready to buy a home before prices — and mortgage rates — rise any further. Here’s what you need to know about jumping into the market at this time of year.

Know Your Market: The bottom line is that different markets behave differently during the fall. According to Zillow’s August Real Estate Market Reports, national home values rose 0.4 percent from July, marking the third consecutive month in which monthly home values rose more slowly than the month prior. However, markets in California, Las Vegas and Minneapolis are still seeing an extremely brisk pace of home value appreciation (2 percent or higher). As we exit 2013’s selling season, we will start to see a slowdown in home value appreciation.

Selection Is Limited: Many frustrated sellers who weren’t able to unload their properties during the busy peak spring/summer buying season may take their homes off the market, particularly as the holidays approach and the action comes to a screeching halt. This means you can expect the selection to be even more limited than it currently is in some markets.

There’s Room to Negotiate: Was there a home you saw and loved a few months ago? Is it still on the market? If it hasn’t sold after one of the hottest real estate summers since the economic downturn, you likely have room to negotiate. While some buyers will pull their homes off the market, others who have been holding out for the best possible price may now be ready to come down. While some homeowners are determined to get a set price, others may simply want out at this juncture.

Check Maintenance Areas: Fall is the ideal time to check things such as gutter drainage and the general upkeep of the yard. How does everything look? Does anything need repair? Visit the home on a rainy day and see for yourself. Then go inside and check out the furnace, looking for drafts, leakage issues and other possible structural/maintenance problems. If they’re apparent, determine how much money it’s going to take to get everything up to snuff and factor that into your offer, adjusting your price accordingly.

(Source: AOL Real Estate)

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Fannie, Freddie ease lending crunch during shutdown

10-09

Fannie Mae and Freddie Mac have relaxed rules that would have kept banks from approving mortgages during the government shutdown. Typically, Fannie and Freddie require lenders to verify a borrower’s income with the Internal Revenue Service before closing on a mortgage. But last week, some lenders reported that they could not approve the mortgages because the shutdown had severely curtailed the IRS’s operations.

The government-backed mortgage giants have since said lenders could continue to issue new loans even without the IRS’s confirmation.

Borrowers who apply for mortgages will still need to sign an income verification request with the IRS. But verification can wait until after the government shutdown ends, and lenders can use other means to verify a borrower’s income.

Wells Fargo, the nation’s biggest mortgage lender, had originally said all mortgage applications would have to wait until the shutdown ends. But now it is telling underwriters they can move mortgage applications through the pipeline without the completed IRS verification, said Tom Goyda, a spokesman for the bank.

Some banks, however, may be more cautious, according to David Stevens, president and CEO of the Mortgage Bankers Association. Stung by a flood of defaults after the housing bubble burst, lenders are especially wary of borrowers who claim earnings from self-employment or who supplement their wages with freelance work, consulting or other less-thoroughly documented income sources.

n cases like those, said Stevens, lenders may seek to verify the information on a borrower’s 1040 by asking for a copy of their bank statement from the month they deposited their 2012 tax refund or copies of the check they sent to the IRS to pay their taxes.

A small percentage of lenders — perhaps 10% or fewer — may decide that lending without the IRS income verification is too risky, said Stevens. If a mortgage defaults, Fannie or Freddie could force the lender to shoulder the losses.

“There’s less appetite for risk, after the fiscal crisis,” said Stevens. And that could be enough to scare some lenders into waiting until the shutdown ends.

(Source: YAHOO! Homes)

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Kitchen Face-Lifts for All Budgets

10-08

Painting or resurfacing cabinets is an affordable way to update the look of any kitchen.

Your cupboards are tired, your countertops are chipped and your appliances were purchased during the Carter administration. There’s no doubt your kitchen could use a makeover, but that won’t come cheap.

According to the 2013 Remodeling Cost vs. Value Report, the average upscale kitchen remodelnow rings up at $107,406. Even a “mid-range” major kitchen update averages $53,931.

For those who don’t have a cool 100 grand to spend on a kitchen redo, there’s hope. Here’s how kitchen designers from across the country would breathe new life into a tired kitchen with considerably less cash.

If you have $20,000

Mark Brady, owner of Mark Brady Kitchens in Simsbury, CT, says you can stretch your budget if you plan wisely. He’d begin by painting and refacing cabinets. New lighting, including under cabinet lights, will make a big impact. A new sink, backsplash and an appliance or two can help revive a dated kitchen. Adding a kitchen island or opening a wall to another room for light and connection might also be on Brady’s to-do list.

“I’d do any of the above, but money probably wouldn’t allow it all to be done,” he said.

If you have $10,000

Jennifer Visosky, principal designer for Grace Home Design in Jackson, WY, is enthusiastic about the big design changes you can make for $10,000.

She advises focusing on a new backsplash, countertops and lighting. Cabinet faces can be painted, and interesting cabinet pulls can be purchased. Want to really shake up the look of the room? Visosky suggests hanging some wallpaper.

If you have $5,000

Amy Hart Key, business manager for Reico Kitchen and Bath in Charlottesville, VA, says $5,000 could go a long way toward updating your countertops and sink. If you’re happy with those aspects of your kitchen, she suggests updating some or all of your appliances.

If you have $1,000

A small budget, well spent, can still have a big impact.

“I recommend that you make the cabinets functional by adding rollouts to your existing cabinets,” said Robin Rigby Fisher, a certified master of kitchen and bath designer in Portland, OR. “The Container Store sells these at a very good price. You want to make the kitchen functional first.”

Fisher also suggests adding new cabinet hardware. Just be sure to measure the distance between the existing drilled holes and buy the same size replacement pulls.

Absolutely no cash to spend on a kitchen redo? Don’t despair. Brady reminds homeowners: “De-junking is free, and a good cleaning goes a long way, too.”

(Source: YAHOO! Homes)

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