Wednesday, February 1st, 2012

By Polyana da Costa of Bankrate.com

Getting a mortgage loan has become challenging in recent years. Don’t expect that to change anytime soon.

Lending standards will remain tight in 2012, but that doesn’t mean you won’t be able to snag a mortgage with an attractive rate. Savvy borrowers who understand the rules and
prepare will improve their chances of success.

These tips will help you stay on top of your game as you try to secure a mortgage in 2012.

Study your credit

Good credit is the key to snagging a mortgage in this tight lending environment. Get copies of your credit scores and credit history from the three main credit-reporting bureaus. Study the reports carefully to make sure there are no errors or issues to resolve before applying.

Most lenders require a minimum credit score of 680 to comply with Fannie Mae and Freddie Mac’s guidelines. Federal Housing Administration loans — which are guaranteed by the FHA — allow for lower scores, but most lenders want to stay away from scores lower than 620.

Prepare before you start

Every lender requests certain basic documents when you apply for a mortgage. Don’t wait for them to ask.

Have these documents ready when you walk into the lender’s office: your last two pay stubs, W-2s, income-tax returns and bank statements.

Save these documents and any additional ones the lender requests in an electronic format, so you can easily resend them if anything gets lost.

Know how much you can afford

Don’t rely on your lender to tell you how much mortgage you qualify for and then borrow the maximum amount. Plan your budget, and leave room for unexpected expenses. That’s especially the case when you are buying a house.

Bankrate’s calculators can help you determine how much house you can afford and estimate your monthly mortgage payments.

Shop around

Shopping around for a mortgage should go beyond comparing interest rates. Rates are important, but would-be borrowers must consider points, closing costs and different types of loans. Get estimates from three banks and three mortgage brokers before you
decide which combination works for you.

Time is of the essence

Once you submit your mortgage application to the lender, the clock starts ticking. Make sure you quickly send in any documents requested during the approval process.

For buyers, a delay in closing the loan could kill the purchase and cost them their deposits. When refinancing, a delay could mean losing the interest rate the borrower
originally locked in. Ask for an expected closing date, and follow up with the lender periodically until the loan closes. Keep in mind, some lenders close more quickly than others.

Mortgage approved?
Your credit must stay put until closing

After the lender pulls your credit and says you’ve been approved, don’t assume you’ve won the battle. Most lenders will pull your credit again before the loan closes.

It’s wise to avoid any moves that may affect your credit. Don’t apply for new credit cards or credit lines. Pay your bills on time. Don’t close any accounts. Don’t finance a new car. Stay put until closing.

Consider refinancing with no closing costs

You don’t always have to spend money to save money when refinancing. Many lenders offer mortgages with no closing costs. No, it’s not a free ride. Lenders usually make up for those costs by charging the borrower a slightly higher interest rate. Sometimes the slight increase translates into a few extra dollars in the monthly payment, and the borrower can save thousands in closing costs.

Consider a shorter-term loan

Because interest rates have been at or near rock bottom, short-term loans have  become more affordable for many borrowers.

Those who have a 30-year mortgage with an interest rate of 6% or higher may be able to refinance into a 20-year or 15-year loan while keeping their monthly mortgage payments close to what they pay now. Consider this option even when the short-term loan means slightly higher monthly payments. This is your chance to pay off your
mortgage more quickly.

Receive a gift? Be ready to explain it

Did your parents or in-laws give you a few thousand dollars as a gift to help out with the down payment? If so, congratulations — but make sure you can document and explain
where you got the money.

FHA loans allow borrowers to receive their down payment as a gift from a relative. For
conventional loans, borrowers may receive gifts, but at least a 5% percent down payment must come from their own funds.

Borrowers receiving a gift are required to present a gift letter signed by the donor, and they will need a paper trail of the money transfer. Be ready to present statements to
show where the money came from when it was deposited into your account.

Unless the money is being used for the down payment, avoid receiving large cash deposits in your bank account until your mortgage closes. Any large deposits other than your paycheck will have to be explained to comply with federal regulations.

Be persistent

If one lender rejects your mortgage application, that doesn’t mean all lenders will. Most lenders follow Fannie Mae and Freddie Mac guidelines. In addition, they have their own
internal underwriting guidelines, and some are stricter than others.

Ask why your mortgage was denied. Depending on the reason, you may be able to take some quick steps to improve your credit, or you might just need to try a different lender.

Appraisal isn’t enough? Try again

If the home appraisal your lender received isn’t enough to back the mortgage loan and you think the appraiser is mistaken, try another lender.

You can’t order a second appraisal or pick which appraiser the lender hires, but you can dispute the first appraisal or apply with a different lender.

In a perfect world, the appraised value of a home shouldn’t vary drastically from one appraiser to another. But you may find that it does. If you believe the first appraiser is
wrong, try a different lender and hope that lender’s appraiser does a better job.

Seek help

If you are behind on your mortgage or are struggling to keep up with your mortgage payments, seek counseling.

The Department of Housing and Urban Development has counseling agencies throughout the country. Homeowners can receive free foreclosure-prevention counseling from HUD-approved counselors. To find a housing counseling agency near you call 800-569-4287 or visit the HUD website.

 

Wednesday, February 1st, 2012

Rates will likely stay below 5% for at least the first half of the year, industry experts say.

By Amy Hoak of MarketWatch

Mortgage rates should remain low in 2012, especially in the first half of the year, according to the predictions of several industry watchers.

“We may spend the entire year below 5%,” said Greg McBride, senior financial
analyst for Bankrate.com, referring to the average interest rate for a 30-year
fixed-rate mortgage.

Rates may even fall to new lows early this year, particularly if the European debt
crisis hits a crescendo, McBride added.

Already, rates are sitting at record lows. The 30-year fixed-rate mortgage averaged
3.91% for the week ending Jan. 5, according to Freddie Mac’s weekly survey of
conforming mortgage rates. That ties the record for the lowest rates that have been in the history of the survey. In contrast, the highest average was 18.63% set in 1981, according to Freddie Mac.

In general, the financial troubles in Europe, combined with the Federal Reserve’s pledge to keep short-term rates on hold at least through 2013, will keep mortgage rates from rising significantly, McBride said.

Europe’s woes have caused a “flight to quality” among investors, sending their money in
the direction of U.S. bonds, which has the effect of lowering mortgage rates. The Fed’s short-term rate policy also reduces long-term rates, since long-term rates “reflect expectations of where short-term rates will be in the future,” he said.

Lately, consumers have been conditioned to expect low rates. Last year, the 30-year fixed-rate conforming mortgage had its lowest annual average on record at 4.66%, according to Bankrate.

According to Freddie Mac, the 30-year mortgage averaged 4.5% in 2011; the lowest weekly rates on record were posted toward the end of the year.

But whereas rates fell in the second half of 2011, they are expected to rise at least somewhat during the second half of 2012, said Frank Nothaft, chief economist of Freddie Mac.

“Operation Twist is scheduled to remain in effect until June,” Nothaft said. The intent of
Operation Twist, or the Federal Reserve’s Maturity Extension Program, is to push — and keep — long-term interest rates low, which means rates should stay low for the first half of the year, he said. The Fed plan, announced in September, involves buying long-term securities and selling $400 billion in short-term debt.

But the Fed hasn’t made a commitment on whether it will extend the program beyond the June cutoff, Nothaft said.

Economic outlook

An improving economy could also cause rates to rise.

Rates on a conforming 30-year fixed-rate mortgage are expected to average 4.2% in the first quarter of 2012, and should average 4.8% by the fourth quarter, according to Freddie Mac’s forecast.

Meanwhile, HSH Associates, a publisher of consumer loan information, predicts conforming, 30-year fixed-rate mortgages will remain between 3.85% and 4.85% throughout 2012.

“Things appear to be improving domestically. The economy, employment, the housing market are showing signs of warming,” said Keith Gumbinger, vice president at HSH.

While the troubles of 2011 will certainly carry over into the new year, at least some
upward emphasis on mortgage rates is expected “as things start to look a little more rosy,” he said.

But those who aren’t as optimistic about the growth of the economy have different rate forecasts. For example, Fannie Mae’s chief economist, Doug Duncan, expects rates will stay relatively flat all year, with the 30-year fixed-rate mortgage rising to 4.1% or 4.2% at the most by the fourth quarter.

The low-rate environment means that even people who have been improving their credit quality for the past five years may have a shot at scoring some of the lowest mortgage rates in history — and they may add sales to the housing market in the process, Duncan said.

Some mortgage market watchers also think that lenders may be more willing to work with borrowers with good but not great credit in the year ahead, as the housing market and economy show some signs of improvement and lenders look to grow their business.

“I don’t see credit becoming appreciably easier. But I think what you will see is more lenders willing to dip their toes into the waters of 700 and 720 credit-score consumers,” McBride said. “You may end up, as a consumer, seeing more lenders at the table for
those that have good credit scores and not just those who have great credit scores.”

But despite continued favorable mortgage rates, don’t expect great strides in the housing market just yet. The economy is still weak and unemployment is still high — two strong headwinds pushing against housing demand, even though affordability is so high, Nothaft said.

“Consumer confidence is still relatively low. And what a low reading for consumer confidence means is that consumers are nervous about their economic well-being,” he said. “If you’re feeling ill at ease, you will be reluctant to buy something that costs $200,000 to $300,000 and commit to monthly payments for 30 years.”

Wednesday, February 1st, 2012

It’s not peak selling season, but these smart strategies will help you make sure your home looks good even when the weather is dreary.

By Jerold Leslie of TheStreet

The fall home-selling season is a lot like the college football season — both normally end around Thanksgiving, but a smaller postseason keeps going long after that.

“It used to be that spring and summer were the hot times to buy or sell houses, but people are much more mobile now. If you want to sell your house these days, you don’t
necessarily have to wait until spring to put it on the market,” says Brad Knapp, a National Association of Realtors regional vice president and an agent with Henkle Schueler & Associates in suburban Cincinnati.

True, most would-be homebuyers and sellers in colder climates still call it quits from late November until late February or so.

But Knapp says consumers who face job relocations, divorces or other situations
requiring an immediate move keep the market humming all winter long.

“There are fewer buyers and sellers in the marketplace during the winter, but they’re
all serious buyers and sellers,” he says. “They all have a sense of urgency or they wouldn’t be in the market at all.”

But how can a would-be seller attract a buyer when there’s ice on a home’s walkway, snow covering the flower beds and little natural light to make a place look bright?

Here are five things Knapp says homeowners must do if they want to heat up the chances of selling a property this winter:

1. Set a realistic price

House hunters expect discount prices in the winter, because they know that any
homeowner who lists a property during the period really needs to sell. So Knapp
recommends that sellers list their homes at realistic prices to begin with —
without any extra “air” for haggling.

“We’ve been in a buyers market for so long now in most of the country that buyers are trained tolowball,” he says. “The best way to avoid that is to price a home accurately in first place.”

2. Advertise with snow-free pictures

If possible, you or your agent should commission your home’s advertising photos before it snows. If that’s not feasible, make arrangements to have a photographer come out the first time the snow melts — even if it’s just a brief winter thaw.

You can also have a photographer digitally alter photos to take out snow, but proceed with caution. Too much digital editing can open you or your agent up to allegations of deceptive advertising.

3. Maximize curb appeal

You always want your home to have good “curb appeal” — a nice appearance that’s apparent from the moment a would-be buyer pulls up to the curb — but winter snow and gloom make that tough.

To make the most of your home’s wintertime look, Knapp recommends making sure all autumn leaves and any dead tree branches are gone. Keep your home’s driveway and paths free of snow and ice and put a nice, clean doormat in front.

“You home might not have the same beautiful landscaping that it does in June, but you can at least make sure the property looks halfway decent,” Knapp says.

4. ‘Stage’ the interior for winter

A good real-estate agent or professional home stager can help you make your home’s interior look warm and friendly no matter how dreary it is outside. Knapp says you should start by decluttering the home, putting as much stuff as possible away — preferably in offsite storage — to make your home look clean and roomy.

Also remove all family photos, sports memorabilia and the like so would-be buyers can picture themselves — not you — living in the home. And don’t go overboard with holiday decorations if you’re listing your home in December.

“It’s OK to put up a Christmas tree, but you might not want the fake reindeer and Santa Claus in the yard this year,” Knapp says, adding that you should take all decorations down by Jan. 2.

Additionally, make sure to fix broken windows, squeaky doors or anything else that needs repair long before any showings.

Lastly, Knapp recommends baking cookies or an apple pie shortly before house hunters
arrive. This will give your home an inviting smell when would-be buyers come in from the cold.

5. Have good interior lighting

You always want your home to look as bright as possible to potential buyers, but sparse winter sunlight can make that a real challenge.

Maximize all available lighting by having your home’s windows professionally cleaned — inside and out — before you put your place on the market. Don’t forget the storm windows.

Also consider replacing 40-watt bulbs with 75- or 100-watt versions — and put all lights on before every showing. “I know that’s going to drive up the electric bill, but you want to make sure there’s plenty of light,” Knapp says. “You don’t want an agent who’s not familiar with the home showing it to a client and having to paw around to find the light switches.”

 

Wednesday, February 1st, 2012

 

Winter’s doldrums got you down? Grab a screwdriver and a hammer and fight back with easy home repairs that’ll raise spirits and get your house ready for spring.

Accomplishments — even little ones — go a long way toward a sunny outlook. Fortunately, there are plenty of easy, quick home repair chores you can do when you’re mired in the thick of winter. For max efficiency, make a to-do list ahead of time and shop for all the tools and supplies in one trip. On your work days, put the basics in a caddy and carry it from room to room, checking off completed tasks as you speed through them.

What to look (and listen) for

In each room, look around and take stock of what needs fixing or improving.
Focus on small, quick-hit changes, not major redos. Here are some likely
suspects:

1. Sagging towel rack or wobbly toilet tissue holder. Unscrew the
fixture and look for the culprit. It’s probably a wimpy, push-in type plastic
drywall anchor. Pull that out (or just poke it through the wall) and replace it
with something more substantial. Toggle bolts are strongest, and threaded types
such as E-Z Ancor are easy to install.

2. Squeaky door hinges. Eliminate squeaks by squirting a puff of powdered graphite ($2.50 for a 3-gram tube) alongside the pin where the hinge turns. If the door sticks, plane off a bit of the wood, then touch up the paint so the surgery isn’t noticeable.

3. Creaky floor boards. They’ll shush if you fasten them down better. Anti-squeak repair kits, such as Squeeeeek No More ($23), feature specially designed screws that are easy to conceal. A low-cost alternative: Dust a little talcum powder into the seam where floorboards meet — the talcum acts as a lubricant to quiet boards that rub against each other.

4. Rusty shutoff valves. Check under sinks and behind toilets for the shutoff valves on your water supply lines. These little-used valves may slowly rust in place over time, and might not work when you need them most. Keep them operating by putting a little machine oil or WD-40 on the handle shafts. Twist the handles back and forth to work the oil into the threads. If they won’t budge, give the oil a couple of hours to penetrate, and try again.

5. Blistered paint on shower ceilings. This area gets a lot of heat and moisture that stresses paint finishes. Scrape off old paint and recoat, using a high-quality exterior-grade paint. Also, be sure everyone uses the bathroom vent when showering to help get rid of excess moisture.

6. Loose handles or hinges on furniture, cabinets, and doors. You can probably fix these with a few quick turns of a screwdriver. But if a screw just spins in place, try making the hole fit the screw better by stuffing in a toothpick coated with glue, or switching to a larger screw.

Safety items
You know those routine safety checks you keep meaning to do but never have the
time? Now’s the time.

7. Carbon monoxide and smoke detectors. If you don’t like waking up to the annoying chirp of smoke detector batteries as they wear down, do what many fire departments recommend and simply replace all of them at the same time once a year.

8. Ground-fault circuit interrupter (GFCI) outlets. You’re supposed to test them once a month, but who does? Now’s a great time. You’ll find them around potentially wet areas — building codes specify GFCI outlets in bathrooms, kitchens, and for outdoor
receptacles. Make sure the device trips and resets correctly. If you find a faulty outlet, replace it or get an electrician to do it for $75 to $100.

Another good project is to replace your GFCIs with the latest generation of protected
outlets that test themselves, such as Levitron’s SmartlockPro Self-Test GFCI ($28). You won’t have to manually test ever again!

9. Exhaust filter for the kitchen stove. By washing it to remove grease, you’ll
increase the efficiency of your exhaust vent; plus, if a kitchen stovetop fire breaks out, this will help keep the flames from spreading.

10. Clothes dryer vent.  Pull the dryer out from the wall, disconnect the vent pipe, and vacuum lint out of the pipe and the place where it connects to the machine. Also, wipe lint off your exterior dryer vent so the flap opens and closes easily. (You’ll need to go outside for that, but it’s quick.) Remember that vents clogged with old dryer lint are a leading cause of house fires.

11. Drain hoses. Inspect your clothes washer, the dishwashers, and the icemaker. If you see any cracks or drips, replace the hose so you don’t come home to a flood one day.

12. Electrical cords. Replace any that are brittle, cracked, or have damaged plugs. If you’re using extension cords, see if you can eliminate them — for example, by replacing that too-short lamp cord with one that’s longer. If you don’t feel up to rewiring the lamp yourself, drop it off at a repair shop as you head out to shop for your repair materials. It might not be ready by the end of the day. But, hey, one half-done repair that you can’t check off is no big deal, right?

Monday, January 30th, 2012

As the first month of the year trots onward, so do home buyers. They posted increased activity levels compared to the same week in 2011. Seller activity slowed compared to last year, however. Inventory declines effectively positioned many local markets into a more balanced state – particularly toward the end of last year. Increased seller activity in the coming months could slow or even reverse that trend. Don’t fret. Not only is an increase in new listings perfectly normal for this time of year, but improved absorption rates and seller concessions could begin to stew into seller confidence.

In the Twin Cities region, for the week ending January 21:

  • New Listings decreased 8.2% to 1,092
  • Pending Sales increased 29.0% to 730
  • Inventory decreased 23.2% to 17,822

For the month of December:

  • Median Sales Price decreased 6.5% to $145,000
  • Days on Market decreased 2.1% to 141
  • Percent of Original List Price Received increased 1.7% to 90.6%
  • Months Supply of Inventory decreased 33.7% to 4.7

Click here for the full Weekly Market Activity Report.

From The Skinny.

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