buying a home
While home sales across much of the country have languished in recent months, struggling to pick up speed, a recent report says homes on the higher end of the market are selling with renewed vigor.
According to DataQuick Information Systems, the number of home sales worth more than $1 million increased in each of the 20 cities tracked by the firm last year, with sales jumping an average of more than 18 percent.
The largest gains were seen in San Jose, California, and Honolulu, Hawaii, where sales increased 27.4 and 26 percent, respectively. Even Phoenix, where foreclosures have made up a large part of the market, saw an increase in high-end sales.
Upper-echelon buyers have also benefited by more affordable mortgage rates. Back in 2009, mortgage rates for loans over the threshold set by Fannie Mae and Freddie Mac were 1.8 percentage points higher than standard loans. The current gap is just 0.6 points.
Remember the days when buyers could qualify for a mortgage loan by putting down 3 percent? How about the days when mortgage lenders passed out no-downpayment loans? Mortgage loan financing has changed dramatically since then.
Today, the majority of traditional mortgage lenders are requiring that future homeowners come up with a down payment of 20 percent of their home’s purchase price. That’s a lot of money, especially for the all-important first-time home buyer market. Consider that 20 percent down on a home valued at $200,000 would be a whopping $40,000.
A new proposal, though, could make the 20 percent down payment the new official standard for what are being termed “qualified residential mortgage” loans.
According to a recent report from CNBC, the federal Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. have both agreed on a new rule stating that a 20 percent down payment is the minimum required to have a “qualified” residential mortgage loan.
Banks and lenders that give out loans without requiring a down payment of 20 percent would have to retain 5 percent ownership in the loan if they sell it to investors. The goal is to make banks more accountable for the mortgage loans they pass out.
Of course, the new rule, if it ever becomes federal law, could also make life more difficult for those homeowners who can’t come up with a down payment of 20 percent.
Some lenders might simply reject these homeowners, refusing to do business with anyone who can’t come up with the magical 20 percent down payment. Others might charge higher interest rates and fees to homeowners who lack enough funds for a 20 percent down payment.
One thing is clear; the days of easy mortgage financing are long gone. Today, lenders are more skittish than ever. They want to make sure potential homeowners can afford to make their mortgage payments on time. Part of that is making sure these possible buyers have enough financial stability to come up with a solid mortgage down payment.
What do you think of this new proposal? Would a law requiring 20% down on a home prevent you from buying? Give us your thoughts by clicking the comment link below…
Tags: buying a home, down payment, mortgage loans, mortgages
Simon Constable explains to Kelsey Hubbard how rising affordability of housing will be a key to a turnaround. Plus how to invest in housing without buying a home.
Any thoughts or questions on this video? Use the comment link below to sound off. We’d love to hear from you.
Tags: buying a home, home prices, housing, housing market
Finding the right homeowner’s insurance is a tough job. Here are some basic tips to make choosing homeowners’ insurance an easier task:
- Get past the advertising fluff. When selling your home and buying a new one, your mailbox can fill with solicitations—and one of the front-line offenders are homeowners’ insurance companies. Our quick scan of the latest bunch of mailings reveals quite a few boasting fancy packaging and idealistic images of beautiful homes with magazine-ready design schemes. They’re often printed on pricey paper stock and feature florid writing poetically telling you how they can help you protect your home and all the prized possessions it contains, better than any other company can. Just because a company has the advertising budget for big mailings, doesn’t necessarily mean it’s the best. It’s quite possible you might do just fine with a company that sends you a mailing—but they might do even better with another company that never sends solicitation mailings. Don’t just go with the first thing you see, even if it seems good.
. - Consult your state’s resources. Choosing from a huge array of large national insurance companies can be daunting; that’s why it’s a good idea to start in your state. Your state will likely have an insurance, consumer advocacy or chamber of commerce website offering homeowner’s insurance tips. The benefit to a state site is that it gives you a good idea as to what your insurance covers given your particular state’s weather conditions and home wear and zoning issues. These sites also give information on important state codes; it’s critical to check that the company you’re researching understands these codes extremely well. Finally, many state sites list consumer complaints against particular companies from residents in your state.
. - Make sure the coverage is not only extensive, but appropriate for you. A homeowner may come across a potential company with a good service record and reputation, but that doesn’t mean its ideal for them. Look at the details of what the company focuses on. If a company looks great overall, but they emphasize flooding and water damage in all their marketing materials, it’s not going to be right for you if you live in Arizona—no matter how great a company it is. Make sure the company’s strong points match the needs of your particular home and geographical area.
. - Familiarize yourself with the claim process. The insurance company might advertise the fact that you can make frequent claims for repairs, but many companies hike up your premium if you frequently file small claims. This isn’t necessarily unethical, as it’s often stated in the fine print, but it could definitely hurt your wallet; that’s why it’s smart to ask up front how both routine/small and catastrophic claims might affect premiums. At the most, asking will ultimately save you money, i.e., you can do a small repair yourself instead of filing a claim for it, and ultimately the money you spend on the repair might be less than the premium hike.
. - Know the condition of your home. It’s impossible to effectively choose homeowners’ insurance unless you know the condition of your home inside and out. For instance, if you have a roof that’s prone to leaking and not in the best shape, you’ll obviously want to avoid a policy that doesn’t cover this sort of thing. The best way to learn about issues in your home is to get a home inspection by a certified, reputable home inspector. The home inspector will examine your new home for any potential faults and issues to watch for; this is incredibly powerful ammunition in choosing the right homeowners’ insurance, and can save a lot of money in the event anything goes wrong and you find yourself in the claim-filing process.
We welcome your questions and comments. Just use the comment link below to contact us. Your email address will never be published on this website.
Home prices in most major metropolitan areas are starting to stabilize. A report from the National Association of Realtors (NAR) showed that 78 markets in the U.S. experienced price gains in the fourth quarter of 2010 over the previous year. Existing-home sales were up as well, rising 15.4% to an annual rate of 4.8 million from 4.16 million in the third quarter of 2010.
This wasn’t a total improvement over 2009 — prices are up 0.2%, however the fourth quarter of that year saw an annual rate of 5.97 million sales, largely due to the first-time home buyer tax credit — but it’s certainly progress.
Here’s what this means for the average consumer:
A Slow Improvement
These are not great gains, and in fact, only half of the markets saw improvements, which means half did not. But it does mean we’re inching in the right direction, and we should continue to see more growth as the year goes on.
A Heads Up for Buyers
If you’re in the market for a home, you need to be paying attention to these numbers. “If I were thinking about buying, I would want to have some perspective about where prices were headed. If they’re starting to accelerate, you might want to act. If there’s been a decline, you have to realize there are opportunities out there to shop and find a real bargain,” says Jed Smith, the managing director of quantitative research at NAR. Chasing the bottom is never a good idea — no one knows when it will hit– but if you’ve been holding out and prices have shown signs of increasing in your area, you probably want to get serious.
Another Chance for Sellers
If you’ve been waiting to put your home on the market — or you had it on, but took it off because it just wasn’t moving — we may be inching toward a time when you can put it up for sale and recoup at least some of the value it lost during the recession.
It’s Not a Store-Wide Sale
Real estate is extremely local, not just by state or city but by neighborhood, and in some cases, even by block. That means you really have to track your immediate area if you want to follow prices and sales data carefully. You can find out hyper-local information by contacting us, or if you’re not in our service area, from a local real estate agent in your area, one of the perks of working with one to find a home. But this national data from NAR tells you one thing: You’re not going to find bargains in every market. “Everyone thinks everything is on sale. It really isn’t, and if you’re going to make a realistic offer, you need to take into account whether prices are going up rapidly, stabilizing, or going down in your specific area. If prices are going up, a low-ball offer isn’t going to work. If they aren’t, you need to recognize that it might be a good time to buy a house,” says Smith.
The Economy Is Improving
The jobs situation, in particular, is looking better. We’re adding jobs slowly — too slowly for the kind of rebound we need — but these NAR figures are promising. The unemployment rate in any given area tends to correlate very closely with home prices, explains Smith. “When the economy is generating jobs, and there are areas where jobs are being generated, home prices in those areas tend to be headed up. When the economy is holding constant, prices tend to be relatively stable. And where there are job problems, prices may be weak or headed down in some cases.”
In NAR’s release about these new numbers, Lawrence Yun, the association’s chief economist, says the housing recovery will mean faster job growth. He projects that 150,000 to 200,000 jobs will be added to the economy in 2011 from an anticipated 300,000 additional home sales.
Tags: buying a home, home prices, home sales, nar, selling a home