It’s time for your annual check-up. The good news is that for this one, you won’t have to don one of those revealing hospital gowns—and you may walk away with a healthier pocketbook. We’re talking about a homeowners insurance check-up, a task you should complete once a year, ideally around renewal time. This will ensure your policy still provides the right level of coverage for your family, and your premium isn’t costing you more than it should.

Remember, homeowners insurance is essential. The coverage is designed to protect your home and its contents, as well as shield you from liability for accidents and such on your property. Block out an hour of your time, call an insurance agent, and get answers to these three important questions.

Today’s mortgage broker is a different breed from those of the housing bubble days. Here’s why — and when — it makes sense to use a mortgage broker.

Banks have been tightwads when lending money, and consumer eligibility requirements are tougher than ever for mortgages or refinancing. In this difficult environment, a mortgage broker can tailor a loan that suits your needs. And, thanks to new Federal Reserve rules, you’ll be protected from predators.

Mortgage brokers, middlemen who connect loan applicants with lenders, got a bad rap during the mortgage crisis, when the housing bubble and easy mortgage money attracted unscrupulous characters to the profession. Some steered consumers toward inappropriate loans that made them money. That changed in April 2011, when the Federal Reserve issued rules amending Regulation Z (Truth in Lending Act), which state:

Brokers are only compensated based on the mortgage loan amount, not on a loan’s terms and conditions. (This eliminates an incentive to put borrowers into expensive loans.)
They receive compensation from the borrower or the bank. (Previously, both borrower and lender may have compensated the broker.)
They must choose loans in the consumer’s best interest.
Most brokers represent six or seven lenders, and shop competitively amongst them. If you work directly with a bank, you’ll have access to its products alone. A mortgage broker can help mitigate potential headaches by handling every aspect of the process.

“Good mortgage brokers act as financial advisers,” says Dave Donhoff, an independent financial adviser in Kirkland, Wash. “They’ll analyze your needs, and locate the best loan for you. They may also get better rates, because they work with different lenders.”

Licensing

Before the financial crisis, it was relatively easy to become a mortgage broker, but things have changed. Each state has its own supervisory group, and a majority of licenses are handled by the National Mortgage Licensing System (NMLS), which was established in 2008, to improve supervision of the industry.

“A licensed broker must now have 20 hours of education, pass a state and national test, and undergo fingerprinting and background checks,” says Donald Frommeyer, president of the National Association of Mortgage Brokers (NAMB).
Consider going with a broker if:
You want someone to support you through the process.
You’re a less-than-desirable loan candidate (low credit score, spotty work history, self-employed).
You want flexible terms (lower down payment, mortgages with terms other than 15- or 30-year).
You don’t have time to shop around.
However, if you meet the higher standards that banks currently require, including a credit score over 740, a steady income, no debt, and assets in the bank, you can go directly to a bank. But you may not receive the personalized attention that mortgage brokers offer.

Costs of using a broker

Brokers get paid either:
By the borrower, through upfront origination fees
By the lender, with the bank paying a percentage of the loan amount
“There’s no common standard in fee-setting, but the average fee for brokers is around 1% to 2.5% of the loan amount,” Donhoff says.

Frommeyer, who has been in the business for approximately 35 years, says that brokers can generally get you a better interest rate, about 0.25% below what banks offer. How may this play out? On a $200,000 loan at 4.25%, for example, you’ll pay $983.88 per month, with total interest payments of $154,196.72. Bump the rate to 4.5%, and you’ll pay $1,013.27 per month, with total interest of $165,813.42. You’d save $352.68 annually — which equals $10,580.40 over 30 years — and an additional $11,616.70 in interest over the course of the loan with the lower rate.

To find a mortgage broker, get recommendations from friends, REALTORS®, or search the NAMB database to find a certified professional near you. Check licensing with the NMLS. A good broker can take the headaches out of the mortgage loan process.

A tool in the fight to stave off more foreclosures and help rally the housing market gets jammed by debate.

Facing heightened pressure from the White House and Congressional Democrats, Federal Housing Finance Agency Acting Director Edward DeMarco doubled down last week on his opposition to allow Fannie Mae and Freddie Mac, the agencies he regulates, to reduce the principal on underwater mortgages.

Is DeMarco bypassing an effective tool that would not only help home owners get out from under crushing debt but also fuel the embryonic housing recovery?

A moral hazard

Reducing the principal on underwater mortgages is one of the more controversial policy proposals to combat the housing crisis. In fact, it’s considered by some to be a moral hazard.

On one hand, with millions of home owners still underwater, principal reduction can help prevent even more foreclosures. On the other hand, forcing banks and the GSEs to reduce principal might encourage home owners able to make their monthly payments to purposefully default in order to qualify for a principal reduction. In addition, some believe that helping folks who may have overextended themselves on their mortgage isn’t the best solution.

A measured approach

Policymakers should encourage principal reductions, but the decision on when to use it is best left to the lender and borrower.

Some Senate Democrats are pressuring DeMarco to reconsider his position for Fannie- and Freddie-backed loans. Sen. Tim Johnson (D-N.D.) urged the FHFA director to take additional steps to help families stuck in high-interest mortgages, and Sen. Robert Menendez (D-N.J.) said the FHFA has displayed a “dismal lack of initiative” in combatting the housing crisis.

The president’s top housing official, Secretary of Housing and Urban Development Shaun Donovan, points out that banks already allow principal reduction on loans. “If banks are doing that with their own portfolios, I think it shows they have clearly made the decision that it protects their own investments,” he said during a Senate Banking Committee hearing last week.

After all, borrowers who have their principal reduced are more likely to keep making their monthly payments.

To help spur a change in FHFA’s policy, the Obama administration upped the financial incentives for administering principal reductions, which are already part of the Home Affordable Modification Program (HAMP).

But DeMarco believes other tools, like rate reductions and longer loan terms, are better than principal reduction. He also argues that FHFA’s role is to minimize American taxpayers’ losses since the government had to bail out Fannie and Freddie in 2008.

But what he doesn’t seem to realize is that prudent principal reduction would prevent millions of foreclosures, benefitting taxpayers, home owners, and lenders over the long term. Reducing the principal on a mortgage makes more economic sense than allowing the home to be foreclosed on. Foreclosures hurt everyone: the lender, the owner, and even neighbors who live near vacated properties.

Principal reductions shouldn’t be mandated for all underwater mortgages. But it’s an important option for home owners and lenders trying to stave off a foreclosure. And with Fannie and Freddie owning or guaranteeing 60% of mortgage loans, taking principal reduction off the table will do nothing to help the housing market and the rest of the economy bounce back.

Do you think Fannie Mae and Freddie Mac should allow principal reductions?

By: Dona DeZube

If you own a condo, or hope to buy one someday, changes in FHA’s mortgage program could end up costing you — and further crimp the housing market.

More and more condo sellers and buyers are being shut out of the housing market. That’s because of tougher condo qualifying rules for FHA loans — on top of an already tough lending market.

You may not realize it, but buyers can’t use an FHA loan to purchase just any condo. You have to buy in a condo community that’s been vetted by FHA and approved — and your condo board has to re-certify every two years.

Since FHA insures about one-third of consumer mortgages, the lack of FHA financing is contributing to depressed or artificially low condo values. All this adds up to more unnecessary uncertainty for the housing sector.

Why is FHA important?

Credit-worthy buyers like FHA because they can become home owners with a 3.5% down payment compared with having to put down up to 20% for a convention loan. An affordable down payment option is especially important when you’re a first-time buyer.

The lack of FHA mortgages has hurt the condo market from South Florida to California. Between December 2010 and September 2011, only 2,100 of the 25,000 condos (that’s 8.4%) nationwide whose approvals expired were able to renew their approval, FHA Spokesman Lemar Wooley told housing columnist Ken Harney.

What does this mean for sellers?

If your condominium doesn’t have FHA approval and your condo board can’t or won’t get it approved or re-certified, buyers can’t use an FHA loan to purchase your home. When one-third of condo buyers are looking at only 8.4% of the condos on the market (instead of your unapproved condo), your value is going to nose-dive.

What does it mean for buyers?

If you’re considering buying a condo with an FHA loan, the rules limit your choices. You’ll have to confine your home search to approved condominiums. Since all other FHA condo buyers are doing the same thing, you’ll compete with more buyers for the approved condo you want. More competition means you’ll likely end up paying more when you buy.

FHA condo approval rules too tough

Bottom line: The rules driving condos away from FHA approval are unrealistic given the current housing market and economic conditions.

If more than 15% of your neighbors are more than 30 days late paying their condo fees, your building can’t get approved. Since condo associations don’t report late payments to credit bureaus, home owners association (HOA) dues are often the last bill paid. Right now, 30,000 U.S. community associations have delinquency rates above 20%, according to the Community Associations Institute. If an association is in good financial shape, then having 15% of owners paying 30 or even 60 days late shouldn’t be a huge issue.

No more than 50% of the homes in your condo building can be rentals and any units a bank owns (like foreclosed units) count as rentals. That’s problematic in today’s economy, but there’s no data to support the idea that having 50% owner occupancy is good or bad. It would make more sense for FHA to look at the overall health of the condominium association.

No more than 25% of the building can have mixed-use commercial space. Connecting jobs to housing reduces transportation costs and saves energy, so removing this rule makes sense from an environmental standpoint.

Your condo’s board members have to certify the condo meets state and local laws pertaining to condominiums and don’t know any reason that home owners might become delinquent on their dues in the future. If it turns out not to be true, they could be fined $1 million and sent to jail for 30 years. That potential punishment frightens condo board members — many of whom are volunteers — who then decide not to apply for FHA approval or re-certification.

The FHA rules are wrong for buyers, for sellers, and for the housing market. First-time, credit-worthy home buyers need to be able to buy condos using FHA’s 3.5% down payment. Empty-nesters looking to downsize into condos deserve access to safe, affordable FHA loans, too. If sellers can’t sell their units to a whole segment of buyers (those using FHA), the price they can get for their home will fall.

Unit we move new owners into some of the millions of condos now sitting vacant, the housing market can’t recover.

By: Gavin Mathis

Published: January 6, 2012

What do you do when your family outgrows your house, or when the quirks you once

found charming about the place just aren’t livable anymore? A few years ago, the  answers were easy. With house values climbing an average of 50% from 2001 to 2005 and lenders handing out big checks to nearly anyone who asked, you could quickly unload a too-small house and use the profits to help pay for a larger one. Or you could borrow against that growing equity to fund a big home-improvement project, with the full expectation of making your investment back someday when you sold. Flash forward a few years, and the rules of real estate have changed.
In this marketplace, with home equity shrinking and banks reluctant to lend, is it smarter to move or improve? Here’s some advice to help you decide.
Moving has gotten harder
With median housing prices down 25% since their peak in 2006, some 15 million homeowners—almost one in four—owe more on their mortgages than they could get from a buyer, according to Celia Chen, senior director of Moody’s Economy.com. And even folks who bought before the big run-up and can afford to sell at today’s lower prices still face steep odds trying to unload their homes with the glut of inventory on the market (36% more lawns wear For Sale signs now than a few years ago).
There was an uptick in units sold in early 2009, leading some economists to predict that the market has begun to rebound, but selling a house is likely going to remain difficult for a while.
Still, there can be an advantage to trading up now: If your house has curb appeal and a good kitchen—and you price it right—offers will come. You may not turn a big profit, but once you sell, you become a buyer in this buyer’s market. That means you’ll find what you’re looking for and pay less for it than a few years ago.
To analyze your trade-up options, check local listings to ballpark the price you could realistically get for your home and what you’d have to pay for the next place. Then contact a bank to see if, based on those figures and your financial situation, you’re likely to qualify for the new mortgage. Or do your research online: Investigate home values at online real estate sites and how much of a mortgage you’d qualify for at bankrate.com.
Improving has gotten easier
The economic slump has actually made renovating the home you already own a bit easier. The construction-industry slowdown has lowered the cost of some building materials: Plywood is down 46%, for example, framing lumber is down 42%, and drywall is down 25%, according to Bernard Markstein, senior economist for the National Association of Home Builders. Many contractors are also charging less for labor, to compete for the smaller pool of available jobs. What’s more, you won’t have to wait months for a contractor to show up—chances are he’ll be able to start in a matter of days.
Of course, you’ll still need to come up with cash to pay for the project. And the news is good there, too: As a general rule, improving costs less than trading up. Figure somewhere between $100 and $200 per square foot for new construction or a major remodel, depending on the scope of the project and labor costs in your area. (For help with budgeting and financing, see “Budgeting for a Remodel”) A two-story addition with a family room, bedroom, and bathroom costs a national average of $165,796, according to Remodeling Magazine’s 2010-11 Cost vs. Value Report.
Now more than ever, though, you need to make sure that you invest your money wisely. In other words, will your $75,000 kitchen remodel increase your home value by $75,000—or by anything close? For guidelines, check out the Cost vs. Value Report, which gives national average cost and payback figures for 35 popular remodeling projects.
To assess what’s right for your particular house, let your neighborhood be your guide. If there’s any chance that you’ll move within the next 10 years (and in this economy, who can be sure?) keep your improvements in line with those of other houses on your block, or you risk losing the money when you sell.
The most important considerations haven’t changed
Your house isn’t just your largest investment, of course, it’s also the place where your family lives. Financial considerations aside, the question of whether to move or improve should be decided by the things you cannot change about your current home: the school district, the amount of traffic on your street, the size and layout of your yard, your commute, the ease of access to markets and malls, and your neighborhood quality of life. If you love the spot, improving makes sense. But if a different location would be an improvement in its own right, then trading up could be the way to go.

By: Gavin Mathis

Published: December 9, 2011

By: Matt Dornic

Published: November 9, 2011

Candidates be warned: Voters may make housing the make-or-break issue of the 2012 presidential election.

Without a widely supported federal plan to address the nation’s housing crisis, U.S. home owners, builders, and the hundreds of thousands of Americans employed in real estate-reliant industries should keep a close eye on GOP hopefuls and President Obama as the 2012 election cycle moves into full swing. Consistently ranked among top concerns for voters, housing may just be the issue to make or break a candidate’s White House run.

With less than a year remaining before Americans elect the nation’s next president, the housing slump has become a hot source of political ammunition between opponents. But not one has unveiled a real plan to address the ailing market. This could be for one of two reasons: Either prospective Republican nominees have failed to develop their housing platform or because, like Mitt Romney, they don’t intend to intervene.

Either way, housing-related criticism is being lobbed not just at the Obama administration and its imperfect programs, but also at the GOP candidates.

Case in point is a new ad campaign, created by the Democratic National Committee and targeting frontrunner Mitt Romney. Using audio of the former governor saying, “Don’t try and stop the foreclosure process — let it run its course and hit the bottom,” the commercial highlights one piece of a quote from an interview Romney gave to the Las Vegas Review-Journal’s editorial board last month.

Although some might argue that Romney’s quote was taken out of context, his “Believe in America Plan for Jobs and Economic Growth” barely touches on housing and instead focuses on tax cuts, less business regulation, and new energy initiatives.

But as foreclosures continue to plague the nation and with approximately 23% of mortgage-holding home owners underwater (as of second quarter 2011), surely some of the presidential hopefuls are addressing the housing sector, right? Here’s what we know about the candidates:

AP reports that Gov. Rick Perry’s fix for housing is to emphasize job creation. A spokesman for the governor said the “immediate remedy for housing is to get America working again. Creating jobs will address the housing concerns that are impacting communities throughout America.”

Like Romney, it seems that Herman Cain’s answer is passive. “We need to get government out of the way,” he said at last month’s debate in Las Vegas.

So far the most thoughtful position came from Newt Gingrich. The former Speaker of the House told Fox News’ Greta Van Susteren that small banks and removal of needless regulations may be the answer to the mortgage crisis.

”You have to repeal the Dodd-Frank bill because … it dramatically regulates the banks,” Gingrich said. “It sends a signal to the regulators to tell them not to make the loans, not to roll over the money — and in effect, it encourages foreclosures and encourages the bank actually seizing the property.”

“The minute you do that — literally, the minute you do that — it’s going to be easier for people to work their way out. You’ll have a dramatic decline in foreclosures,” he added.

Rep. Michele Bachmann has contributed virtually no plan to address the issue. Her strategy has been one of deflection, saying only that “[the White House] has failed you on this issue of housing and foreclosures. I will not fail you on this issue,” during the same debate.

But now, less than a year from the 2012 elections, a passive or low-profile approach to housing woes won’t sit well with voters. Candidate positions on housing will be important considerations to nearly seven of 10 Americans (69.6%) in the 2012 presidential and congressional elections, according to a national survey on housing from Move, Inc.

Look for housing to take center stage as the race for presidency really heats up in the next few months. And don’t be surprised if the first candidate to the finish line is the one who takes housing head on.

How important are housing issues for you in the 2012 presidential election?

By: Dona DeZube

Published: October 14, 2011

If you’ve been wondering if you should be renting rather than owning, consider this expert’s view.

If the constant media drum beat of negativity toward home ownership has you wondering if you’re crazy for buying a home instead of renting, you’ll feel better after reading Liz Davidson’s Forbes Magazine blog, The Next Mortgage Crisis.

Davidson, the CEO of financial education company Financial Finesse, argues that renters set themselves up for financial failure in retirement:

“Today, there’s another mortgage crisis in the works — that is, NOT having one — choosing to rent when you can afford to buy; choosing to forgo building equity in a home as a major source of retirement security — something that may be more necessary now than ever before with a soft stock market and low interest rates.”

Her cautionary tale compares the consumer who buys a $300,000 home and has a $1,500 monthly mortgage payment with the consumer who rents.

If rents rise at the pace of current inflation (3.2% a year) the renter will pay $900,000 for housing over 30 years, while the home owner will pay $540,000 because his payment continues to be $1,500 a month.

If his house appreciates 1% a year, the home owner heads into retirement with $100,000 in equity in addition to the $300,000 he paid for his house. The home owner does have to keep paying housing expenses like property taxes and insurance, but the monthly mortgage is paid off.

Meanwhile, the renter has paid nearly twice as much to keep a roof over his head for 30 years, has given up $400,000 in retirement assets, and has to continue paying rent during retirement.

Becoming a nation of renters will bring on a future financial crisis, Davidson predicts:

“If Americans don’t recover soon from their pessimism around home ownership, we predict another fallout from the financial crisis will surface many years from now when a nation of renters tries to retire. They won’t have equity in their homes. Their paychecks will be stretched to the limit, not leaving room for saving and investing for retirement and other financial goals such as college funding. Instead of their expenses reducing through retirement, they will look straight down the barrel of increased rent payments for the rest of their lives.”

I know everyone isn’t suited for home ownership. But for me, home ownership is a ticket to an affordable retirement and the reason I can tell my high schooler she can go to college anywhere that will take her, and why I can look forward to a last pit stop at a really nice nursing home on my way out of this world. I can’t imagine trading that security for the short-term freedom of a rental home.

Are you sorry or happy you choose to buy your home? Could you see yourself going back to renting?