Real Estate Information Archive

The mortgage industry is ringing in the New Year with some significant changes, some of which include the following:

Ability-to-Repay Mandate

The CFPB (Consumer Financial Protection Bureau) created the Ability-to-Repay Mandate in order to establish the "gold-standard" for lenders to make sure borrowers are actually qualified to be a borrower.

Lenders will use a specific set of required income, assets and obligation guidelines to determine if potential loan borrowers qualify before ruling them eligible. These new guidelines create the defining standard for what the government considers a “Qualified Mortgage.”

Decrease in FHA Loan Limit

In 2014, the Federal Housing Administration (FHA) has deemed that a mortgage cannot exceed $625,000, down from $729,750 in 2013, which is a decrease of $104,750. Potential home buyers who want to secure a loan larger than $625,000 need to specify "jumbo loan" on their application. Of course, this type of loan will almost certainly require a larger down payment.

Don Frommeyer, President of the Association of Mortgage Professionals, said that while this change shouldn't have a significant impact on most of the country, borrowers seeking homes in areas that have a relatively high average selling price might be scared away from the 20 percent down payment inherent to jumbo loans, compared to the approximately 3.5 percent down payment on a traditional loan.

Caps on Loan Origination Fees

The fees and points associated with a Qualified Mortgage will be capped at 3 percent, starting on Friday, Jan. 10th, 2014.

Tighter Regulations for Self-Employed

The aforementioned changes to the Qualified Mortgage process will also make it more difficult for self-employed folks, who typically don't have to mess with a W-2, to qualify for loans. This is primarily due to the fact that without a W-2, self-employed people face an uphill battle trying to accurately prove their income-to-debt ratio.

For more information, you may visit the National Association of Mortgage Brokers website at: www.namb.org.

The effect of the economy on the real estate market has been talked about frequently over the last couple of years. As with everything else, the downturned economy meant that builders stopped building and houses stopped selling. There is, however, good news for homeowners that were concerned about the value of their home. Research shows residential real estate prices up for 17 consecutive months. According to Property Wire, the latest index shows that the national median home value was up 6% from a year ago.

March of 2012 was considered to be the bottom of the housing crisis. Since then, house prices have risen 23%. While this is still 26% from the peak prices seen in 2006, it gives everyone is the housing industry hope for a complete recovery. A large portion of the increase is due to cash buyers and investors. With foreclosures and short sales still on the market, interested buyers have begun to dwindle the supply again. More confidence in the economy has encouraged homeowners to sell, buy, and build again.

Portland is an area that has seen a tremendous increase in home values. Values peaked in April with a 12% increase over a year earlier. Analysts speculated that the area couldn't continue such rapid growth over the long term, and the rates have started to slow. Increased interest rates are blamed for a portion of the slowdown. Also considered at fault are state laws that affected the foreclosure process. Those legal challenges have now been worked through and the Portland real estate market is continuing to heal and return to normal.

With the news that residential real estate prices up for 17 consecutive months and the knowledge that the Portland area is seeing a slowdown in the rise of home value, these are signals that now is a great time to invest in real estate.

One of the first things people should consider when purchasing a home is an inspection. A certified home inspector will ensure that major components of a home are looked at carefully so that buyers will know whether or not the property they are interested in has major issues. The results of this inspection are very useful when it comes to negotiating the selling price, and can save people a great deal of heartache later down the road.

The American Society of Home Inspectors (ASHI) is a North American organization that serves to promote awareness as to the importance of home inspections. This group’s members adhere to rigid guidelines known as Standards of Practice, which has essentially become the gold standard in the industry when it comes to home inspections.

Some of the things that are usually covered in a home inspection include mechanical items such as plumbing, heating and cooling, electrical wiring and major appliances. Floors, walls, ceilings, doors, windows and the roof are typically examined as well. Inspectors may also look at the amount of insulation in an attic in order to determine if a home would be energy efficient.

Buyers typically spend around 15 minutes inside a home when they are looking at it. In order to see every component of a house, individuals would need to spend around two hours or more in the home. Not only that, but accessing the roof or attic would require the use of special ladders that not many people have access to.

Sellers could also benefit from having a home inspection performed on a property they are placing on the market. That’s because inspectors provide homeowners with a report that outlines deficiencies. After examining this report, homeowners could make any needed repairs before the property is offered for sale, thereby increasing the amount they could ask for the home as a result.

Home inspector qualifications vary from one state to the next, and not all inspectors check the same components of a home. As a result, consumers should obtain a list of items to be checked so they can make sure that all the important elements of the home are looked at by the inspector they choose.

When it comes to buying a home, people are often tempted to stretch themselves financially a bit in order to purchase a home they are in love with. In some cases, financial stretching for buyers can actually be a smart move, while in others, it could be disastrous. Buyers who are thinking of stretching themselves should carefully consider a number of factors in order to make the right decision.

Those who are stuck between a more expensive home that meets their needs and a less expensive one that could need extensive remodeling can sometimes benefit from stretching. That’s because the cost of the remodeling project could just be more than the price difference between the two homes. Not only that, but it could help new homeowners avoid the hassle that’s associated with remodeling as well.

The average homeowner sells approximately every five years. Rather than buying a larger home a few years down the road, it could be better to buy one now. That way, the home can be paid for sooner, and families can eliminate the hassle of moving to a bigger home whenever their situation calls for it.

Financial stretching could pay off with a larger mortgage deduction on their federal taxes. As a result, some consumers could wind up getting a refund when they otherwise might have owed money to the government.

Financial stretching for buyers also has its drawbacks. For example, those affected by seasonal unemployment could find it difficult to make their mortgage payments whenever they are laid off. Likewise, individuals who are already struggling to keep up with their monthly bills could find themselves having even more difficulty making ends meet if they stretch beyond what they can reasonably afford.

Individuals who are not planning to keep their home long may also lose out if they stretch themselves financially. Since the housing market constantly fluctuates, buyers may need to hold onto their properties longer than they did in the past if they are to notice any real financial gain as a result of their real estate investments.

Financial stretching for buyers has its advantages and disadvantages. Only after carefully weighing all of the options should individuals decide to stretch themselves. That way, they can avoid the financial pitfalls that could come with doing so.

One of the easiest ways to for people to trim money from their household budget is to save on energy consumption. Even those who are in great financial health can still benefit from these energy saving tips in order to improve their economic situation even further.

Low flow showerheads and toilets will more than pay for themselves in only a short while. House Logic claims the average family can save 15,000 gallons of water per year, for an annual savings of around $200.

Green Energy Solutions recommends fiberglass insulation to save money on heating and cooling bills. They estimate that new insulation could result in a savings of around 20% for most homeowners.

Switching from regular to fluorescent light bulbs can result in a savings of around $6 per year for each bulb, according to Energy Star. They also last up to ten times longer, so homeowners won’t have to replace them as often either.

Upgrading to a new dishwasher can reduce energy costs, since newer models tend to be more efficient than older ones. Those who cannot afford to upgrade could still enjoy energy savings simply by cleaning and maintaining it properly.

Programmable thermostats make it easy to turn the temperature up or down whenever a home is not being occupied. As a result, most consumers can expect to save around $150 per year on their heating and cooling bills according to AOL real estate.

Adding weather-stripping is one of the best energy saving tips because it is inexpensive and easy to do. Energy Star reports that this accounts for around 30 to 40 percent of all heating and cooling loss, yet the materials needed to weather-strip a home can be purchased for under $5 at home improvement stores.

Homeowners who install a new ceiling fan can save money year round, because these fans help push warm air downward in the winter, while circulating cool air in the summer. All that’s needed is to simply change the direction in which the fan operates in order to enjoy the benefits year round.

Finally, a tankless water heater costs around 20 percent less to operate than a conventional water heater does. Not only that, but one can be expected to last up to ten years longer, which means consumers can save on the cost of replacing these units as well.

More underwater homes than ever are now showing positive equity in the Portland, Oregon area. A real estate data firm known as Corelogic reports that 8.1 percent of Portland-area homes were under water in the second quarter of 2013, as compared to 12.2 percent during the first quarter. Similar decreases were reported nationwide, with 14.5 percent of all homes across the country now showing negative equity.

One reason for the increase in home values is the fact that foreclosure rates are on the decline. CNN Money claims that foreclosure filings during August 2013 were the lowest in nearly eight years. They credit rising home prices and fewer underwater borrowers for the fact that foreclosure rates are on the decline across the country. That’s because underwater borrowers are at a higher risk of foreclosure should they suffer an undue financial hardship while occupying their property.

The number of foreclosures peaked in September 2010, and the market has seen steady decreases since that time. During the month of August, there was a slight increase in foreclosures over July; however, when compared to figures from August 2011, there was a 25% decrease noted. This number is also around 60% lower than the highest numbers recorded since the housing market crashed around eight years ago.

Even though property values have increased, many people still have very little equity available in their homes. Approximately 10.3 million homeowners have less than 20 percent equity, which essentially makes them unable to buy a new home as a result. These homeowners may be stuck for now, but if home prices continue to rise, they could be able to sell in only a short while. Basic laws of supply and demand would then lead to even higher home prices, because these individuals would also be able to purchase a new home rather than holding onto the one they have.

It is important for all homeowners to understand indoor air quality and mildew elimination. The primary cause of indoor air quality problems for homeowners is indoor pollution sources that release gases and particles into the air. Although it’s an uncommon problem, homeowners may experience inadequate air flow problems in the home due to poor ventilation that can increase pollutants. High humidity and temperatures may also be factors.

The ventilation of outdoor air is important for homes because it can help filter out indoor pollutants that may already be in the home causing adverse health effects to its inhabitants. The two forces must work in tandem to create optimal air quality and mildew reduction.

To improve air quality, homeowners must adopt the following strategies:

1. Air Cleaners - Air cleaners can be effective solutions to air quality and mildew issues in the home, depending on how well pollutants are collected from indoor air and the amount of air it filters at a time. Maintenance of the air filter will directly impact the effectiveness of the air cleaner. Whatever the pollution source may be, (air conditioning unit, oven or stove, refrigerator, etc.), the air cleaner must be able to absorb its pollutants more effectively than the source's output.
2. Improved Ventilation - Improved ventilation increases indoor air quality and mildew removal. According to the United States Environmental Protection Agency, "Most home heating and cooling systems, including forced air heating systems, do not mechanically bring fresh air into the house. Opening windows and doors, operating window or attic fans, when the weather permits, or running a window air conditioner with the vent control open increases the outdoor ventilation rate. Bathroom or kitchen fans that exhaust outdoors remove contaminants directly from the room where the fan is located and also increase the outdoor air ventilation rate."
3. Source Control - Air quality and mildew reduction in the home must be managed by controlling the source of indoor pollutants. Although compact and powerful, table-top air cleaners may not completely remove source pollutants because of their size. In some cases, the source of indoor pollutants may have to be removed while using an air cleaner.

Using these strategies, all homeowners will be able to effectively maintain a healthy standard of living, indoor air quality and reduction of harmful indoor toxins.

It is common for potential homeowners to decide between buying a pre-existing home or new construction. With so many variables presented in favor of both options, it is difficult to discern which type of home is suitable for new owners. Explored are the exciting positives and potential pitfalls new homeowners may face when making a purchasing decision that impacts their future.

A few key items for new homeowners to consider when buying a pre-existing home or new construction are:

• Location and neighborhood – Depending on the liveliness of the neighborhood, choosing an older home is best when looking for a more established community and culture within the epicenter of an urban area. More established areas also tend to have more diversity of people, from single renters to older homeowners and families. Newer constructions mean less established neighborhoods that are typically located on the outer reaches of urban areas. Commuting to and from work, school and general purpose shopping centers is also a consideration.
• Price and energy efficiency – Costing less than new construction homes, pre-existing houses often cost less per square foot. Prices for pre-existing homes also tend to be more negotiable. However cost effective these established houses may be, new constructions offer more overall energy efficiency. Updates to building materials and technology that regulate in-home energy consumption make new construction homes less wearing on the pocketbook.
• Living space, design and customization – For many new homeowners, customization is a key factor when buying a pre-existing home or new construction. Picking a new wall color, installing custom wiring for stereos and televisions, creating walk-in closets and bathrooms are all viable options when owning a new construction home. These items may be limited or altogether excluded when owning a pre-existing house due to the established construction and wiring system. New homes also tend to promote a more efficient use of space than many established homes.
• Maintenance – Maintaining an established home may pose difficulties if its previous owner was not diligent with upkeep. Newer homes have fewer maintenance issues but still need to settle into their newer foundations.

The prospect of becoming a new homeowner is thrilling and all new owners should be aware of the many factors when buying a pre-existing home or new construction as outlined above.

Home price gains arelooking to slow according to a recent study that examined the health of the national housing industry. Data compiled from nearly 400 metropolitan areas, which comprises more than 80% of the United States housing market, suggests that the double digit price increases are expected to slack by upwards of 6.5% by the end of March 2014.

The study, derived from data supplied by CoreLogic Case-Shiller indicates that home prices had jumped more than 12% from July 2012 and July 2013. Several factors have fueled that impressive growth including record affordability, an improving job market, and comparatively small inventories of new and existing homes on the market. Some areas are certainly doing better than others, however.

The study highlights those five states that have seen the most impressive growth in housing prices over the previous 12 months and include: Nevada (27% increase), California (23.2% increase), Arizona (17% increase), Wyoming (16.4% increase) and Oregon (15% increase).

However, home price gainsare looking to slow during the second half of the year, according to the data. Dr. David Stiff, chief economist for CoreLogic, cites historical seasonal demand levels, which finds most people nesting during the holidays as opposed to house hunting, and rising mortgage rates as the leading causes for the temporary damper on the housing recovery.

Despite the anticipated slowing, Stiff and others are confident that the housing recovery has resiliency. He notes that in those areas where prices have taken a southward trajectory, he anticipates that they will reverse direction by the year’s end. Additionally, short shrift was paid to the idea that the nation was headed for yet another housing bubble in the face of impressive housing gains.

“Housing prices remain 26% below their peak nationally and are even lower in some metro areas,” said Stiff in dismissing the fear.

Just about everyone took a hit when the housing bubble popped and the federal government was no different. As proof, the Federal Housing Administration has racked up more than three billion in losses associated with insuring nearly a fifth of all home loans during the time that the housing market was in free fall. In an effort to recoup their losses, the agency has instituted a new mortgage insurance policy that makes low down payment options from private lenders for first-time homebuyers an increasingly attractive option.

For the past couple years, the FHA has been slowly nudging up the costs of homeownership by periodically raising mortgage-insurance premiums however, in June of this year they instituted a policy that can significantly raise the long term cost of buying a home by requiring that borrowers maintain mortgage-insurance coverage over the entire life of the loan. Previously, this requirement was lifted after 22% of the value of the home was paid off and the risk of default was significantly lowered.

With these new provisos in place, exploring low down payment options from private lenders for first-time homebuyers can potentially save thousands of dollars off the total cost of the loan. As always, FHA loans are attractive because of their 3.5% low down payment requirements and the ability of those parties with less-than-stellar credit to obtain financing.

That being said, for those with the financial wherewithal to pony up the additional funds for a down payment that are mandated by private lenders, typically between 5% and 10%, a conventional loan from a private lender may be the most affordable entry into home ownership due to the increasing costs associated with an FHA loan.

It has been estimated that a first time homebuyer would stand to save more than $13,000 over the FHA borrower after a decade of steady payments. With private lenders looking to reassert themselves in the housing market, their entry provides low down payments options from private lenders for first-time homebuyers as a way of countering costly fee hikes associated with getting an FHA loan.