Declining borrowing levels boost sales of new and existing homes. Oct 28, 2004

WASHINGTON - Mortgage rates declined again this week, with 30-year mortgages dropping to the lowest level since early April, providing more of a boost to the housing industry

Rates on 30-year, fixed-rate mortgages averaged 5.64 percent for the week ending Oct. 28, Freddie Mac said in its weekly survey. That was down from 5.69 percent last week and was the lowest level since they averaged 5.52 percent for the week ending April 1
Rates on 30-year mortgages hit a high this year of 6.34 percent the week of May 13 before starting to head lower as markets responded to various signals that rising energy prices were acting as a drag on economic growth.

The lower mortgage rates have spurred sales of both new and existing homes, which climbed in September to the third-highest levels in history. Analysts believe sales for all of 2004 will set records as well.

“Low mortgage rates drove the uptick in sales during September,” said Frank Nothaft, Freddie Mac’s chief economist. “And with mortgage rates at their lowest level in six months, home sales should continue strong through the autumn months.”

For 15-year, fixed-rate mortgages, a popular option for refinancing, rates dropped this week to 5.01 percent compared with 5.07 percent last week. For one-year, adjustable rate mortgages, rates fell to 3.96 percent, down from 4.02 percent last week. Both were the lowest levels since the spring.

The nationwide averages for mortgage rates do not include add-on fees known as points. Thirty-year and 15-year mortgages each carried a 0.7 point fee. One-year mortgages had a 0.8 point fee.

A year ago, rates on 30-year mortgages averaged 6.05 percent with 15-year mortgages at 5.39 percent and one-year ARMs at 3.76 percent.

Group says consumers must ‘learn their score and what it means’

NEW YORK - Americans are woefully ignorant about credit scores, a consumer group found, even though these measures of credit risk affect everything from the interest people pay on mortgages to whether they qualify for insurance.

The Consumer Federation of America said Tuesday that a survey of more than 1,000 Americans found that only one-third correctly understand that credit scores indicate the risk of not repaying a loan. And more than half incorrectly believe a married couple has a joint credit score.

“Now that credit scores are increasingly used by utilities, insurers and employers, as well as creditors, it is essential for consumers to learn their score and what it means,” said Stephen Brobeck, executive director of the CFA, a nonprofit advocacy group based in Washington, D.C.

“The cost of not knowing your score and its significance could be not only denial of credit but also difficulty obtaining needed services and even a job.”

Credit scores are derived from reports kept by major credit agencies, including Experian, Equifax and TransUnion. These agencies track the amount of debt consumers have taken on and whether they pay their bills on time.

The higher a consumer’s score, the more likely he or she will qualify for a good interest rate on credit cards and mortgages. And these scores are increasingly being used for other purposes, such as evaluating potential tenants, setting deposits for utilities and determining the rate on auto insurance policies.

The survey found that a majority of Americans don’t know credit scores are being used for purposes beyond borrowing. And it found that many don’t know how to improve their scores.

Alan Elias, a senior vice president with Providian Financial Corp., a San Francisco-based credit card company, said “the single most important way to protect your score is ensuring that payments arrive on time each month.”

Having a low credit score can cost consumers a lot of money.

The report looked at the likely interest rates consumers would be charged for mortgage loans based on different FICO scores, which are developed by the Fair Isaac Corp. of Minneapolis.

A borrower with a FICO score of more than 720 could expected to be charged a 5.72 percent interest rate, with a monthly payment of $872, on a 30-year, fixed-rate mortgage of $150,000. But a borrower with a score below 560 will likely face a 9.29 percent rate with monthly payments of $1,238.

That’s a difference of nearly $4,400 a year in mortgage payments.

Brobeck said consumers with scores below 600 are typically charged relatively high loan rates, while those with scores above 700 are generally charged relatively low rates. Those with scores above 760 generally get the best rates.

A three-bureau report is available from www.myfico.com for $38.85. Providian Financial credit card holders can receive a TransUnion-derived credit score for free.

Under a new federal law that goes into effect Dec. 1, consumers applying for mortgages will be able to obtain their score for free from lenders. They also will have free access to their credit reports once a year from the major agencies, but there will be a fee for access to scores. The government hasn’t yet set the fee.

HOUSING prices may be taking a pause from their meteoric rise but that’s not making it any easier to lasso a house. Many home buyers still feel priced out of the market and despair of ever saving enough for a down payment. So an increasing number are turning to “zero-down” mortgages, which provide 100% financing.

Zero downs may not be a panacea for high housing prices, but they do eliminate a formidable barrier to owning a house, especially for first-time buyers. Still, only some borrowers qualify for the loans. And the mortgages may pose a special risk if housing prices unexpectedly head south and borrowers are left owing more than their houses are worth. But “zeroes” are increasingly popular because studies show that saving for a down payment is the biggest obstacle to homeownership.

Mike Cherashore recently used 100% financing to buy a two-bedroom, one-bath home with a guesthouse in Inglewood for $450,000. “I didn’t have the cash for a down payment, and I was looking at all kinds of creative ways of getting into a house,” said the pharmacist, who pays about $3,000 monthly for his mortgage.

Similarly, Elizabeth Gallegos didn’t think she could afford the $310,000 for a two-bedroom, one-bath house in Atwater until her real estate agent suggested a zero-down loan. Without such a mortgage, buying the house would have been “impossible,” according to the 31-year-old television-station employee, who pays $1,925 monthly on her mortgage.

Zero downs are a recent phenomenon. Until the 1990s, 100% financing programs were available only to military veterans or through special programs for some municipal employees and low-income buyers. The loans became available to other borrowers when Fannie Mae and other companies that buy mortgages in bulk from lenders began purchasing zero downs.

Of the estimated $1.5 trillion that Americans will spend this year to buy houses, 10% to 15% will be zero-down mortgages, compared with about 5% in 1993, according to Bill Dallas, board director of the California Mortgage Bankers Assn., a Sacramento-based trade group. (The figures do not include VA loans.)

Zero downs enable lenders to tap into a market of would-be home buyers who are desirable customers in every way except for savings, according to Doug Perry, senior vice president of Countrywide Home Loans.

“Zero downs created a market segment of individuals who were making a good living and were paying a fair amount of money on rent — as much as it would cost them to buy a house — and were not able to save up any money,” he said.

The wide availability of the loans reflects, among other factors, the increasing reliance of lenders on credit scores rather than income and payment history alone.

“Ten years ago, you would not have had 100% financing loan products,” said Jay Robertson, president of First Capital Mortgage of Santa Monica. “These types of products have helped the real estate market.”

Other than waiving the down payment, zero downs are the same as traditional mortgages. They are available for either 30 or 15 years at both fixed and adjustable interest rates. Some forms of zero down offer 103% financing, which includes the closing costs in the loan amount. A small number of loans impose a prepayment penalty, usually 1% of the borrowed amount.

For consumers, freedom from making down payments is a welcome change from the decades-old tradition of plunking down 10% or 20% in cash to qualify for a mortgage.

The rub is that most, if not all, zero-down lenders prefer customers with pristine credit. Very often, lenders will qualify only those borrowers with a credit score of about 700. Many lenders, in addition, will charge a “risk premium” to the interest rate, often between .25% and .50% of a percentage point, although for most buyers, that extra cost is “not so large as to discourage the transaction,” said Raphael Bostic, a housing economist and professor at USC’s Lusk Center for Real Estate.

Another limitation is that some lenders put a ceiling on the loan amount. Countrywide Home Loans, for example, has a $500,000 to $650,000 maximum, depending on the borrower’s credit rating. Still, the possibility of getting into a house now — the median home price has been hovering around $407,000 for the last three months in Los Angeles County — can make those limitations seem workable.

Inglewood home buyer Cherashore was cautious enough to reject the offer of an adjustable, zero-down loan. Many experts warn borrowers against adjustable loans, especially buyers who plan to stay in their homes for many years, because rates can rise unexpectedly. Cherashore eventually opted for a fixed-rate zero down.

“There are no disadvantages to me to having less equity in the house” than a conventional down payment, said Cherashore, who added that his “very conservative” accountant gave a thumbs-up to the deal.

Still, zero down does not mean no money, he said. When finalizing the sale, he put down $5,000 in a good-faith deposit and had to raise another $10,000 toward closing costs. Now the new Inglewood resident is working two jobs to defray those expenses.

Mortgage insurance is another potential problem with zero downs, because Fannie Mae and other mortgage buyers require home buyers to purchase insurance to protect lenders if a loan is for more than 80% of the home’s value.

Most lenders get around this rule, however, by packaging the zero down as two loans: an 80% mortgage combined with a 20% second loan or home-equity loan, usually at a higher interest rate. Gallegos, the Atwater home buyer, has a 5% interest rate on her 80% loan and a 9.5% rate on the second mortgage.

Yet another, more serious limitation is that not all home sellers will accept the zero down.

Some sellers or their agents may favor bids from buyers who will make down payments over those who will not. Rightly or wrongly, zero downs get the fish eye from some old-school home-sales agents who say they prefer to have buyers with more cash tied up in the sale.

“I don’t think there is anything wrong with them, but it is very hard to get a seller to accept this kind of buyer,” said Diana Walker, a sales agent in the Glendale office of Coldwell Banker.

The reason, she said, is that sellers perceive that a buyer who has the money to make a down payment is more likely to complete the sale. “If I have the same offer from a buyer with zero down and … from someone else who is offering 20% down, there is no question in my mind who is the better risk,” Walker said.

She recalled a client who was attempting to buy a condominium with zero down — with zero results. “She had perfect credit scores, but we could not get one seller to accept her offer of 0% down,” Walker said.

Beyond rejection by sellers with multiple offers, zero downs could backfire on borrowers who experience a string of bad luck, real estate professionals say. In a worst-case scenario, a home buyer loses her job and her income. Her house, meanwhile, has gone down in value, and she is paying more on the mortgage than the house is worth.

Her options are not pleasant: She can give the house back to the lender, damaging her credit severely, or sell the house for less than her mortgage and pay off the remainder herself.

In that worst-case situation, homeowners who made a 20% down payment might be better off, said Tim Doyle, director of government affairs at the Mortgage Bankers Assn. of America, a trade group in Washington.

Even if the house dips nearly 20% in value, he explained, the homeowner who made a down payment could still sell the house and could manage to pay off the entire mortgage and commissions. That would not be possible if the owner had borrowed 100% of the home’s price.

“That 20% of equity is your safety cushion,” Doyle said.

Bostic, the USC economist, said a zero down might make the most sense for a buyer who does not plan to live in the house for a long time in a fast-climbing housing market, “when most of the gain from selling the house comes from appreciation alone.”

In cases where buyers plan to live in the home for a long time, Bostic said, “it may be in the homeowner’s interest to start building in some equity, starting with a larger down payment

Halloween Safety Checklist
As the big spooky day approaches and you gather your costumes and treats, don’t forget to complete a Halloween safety check. There are many simple safety tips you can easily incorporate into your Halloween plans. Start your trick-or-treating tradition off on the right track with these ten tips, and the worst danger you face will be a stomachache from eating too much candy!

Halloween safety
When going down your checklist for the big day of trick-or-treating, here are some extra precautions that should be on your list.

Accompany your child while trick-or-treating to significantly reduce the risk of possible danger. Well-lit streets in neighborhoods that you know provide the best trick-or-treat route.
Whatever outfit your child chooses, add some reflective tape or use fluorescent colors to make your child more visible to motorists and other trick-or-treaters. Reflective tape is available in most sports, craft, or hardware stores.
Trick-or-treat bags should be light colored and have some reflective tape as well, to make children more visible in the dark.
Give your child a flashlight to play with as she trick-or-treats. It will be exciting for her, and she’ll stand out in the crowd. She’ll not only see but also be seen more easily.
Make sure your child knows that all candy has to be checked by an adult before it is eaten. Even candy that is well wrapped may pose a choking hazard. Younger children may need an adult to hold their treat bags so the temptation to taste just one piece isn’t too great.
Look for flame-resistant labels on costumes, masks, and other Halloween gear. Even if costumes are flame resistant, keep your child far away from any jack-o’-lanterns that get their light from candles.
Although it is funny to see your child in oversized clothing, it isn’t safe. Even older children can trip over a costume they are not used to wearing. Keep oversized costumes above the knee to prevent your child from tripping.
Shoes should be sturdy and fit well. Even if too-big clown shoes will look better with the costume and your child will not be walking very much, it still isn’t safe to put them on.
Masks are designed to look funny or scary, but they are not designed for the best visibility. Make sure your child can see clearly with his mask in place before letting him trick-or-treat. If his vision is impaired in any way, make sure your child has a buddy who will make him aware of things he may not see.
Halloween candy is not designed for really young children. They do not need to eat sugary sweet candy, however, to enjoy Halloween. To make the experience special for little ones, why not make a favorite dinner and talk about all the new things you saw that day? Some parents have even developed a candy-for-toys trade program. The more candy you trade, the better the gift.

It’s tempting to assume that new construction is sound construction, but that’s not always the case. Do your homework. Investigate the builder, evaluate the location, get a thorough inspection and negotiate for the upgrades you want. Many builders offer financing through a preferred lender, which may save you time and money. Investigate your loan options online to compare before you sign up for a loan on-site.

Find a Good Builder* “Arizona, because of demand in most areas, supplies are limited and lotteries in some subdividions are common for the right to purchase”

Look for a developer first. Whether you find one through referrals or through your own research, investigate a developer’s reputation carefully:

Visit other projects (especially older projects) that the same developer built.
Look for durability of construction.

Talk to homeowners in these developments and in the one you’re considering.
Find out how well the builder responds to complaints and follows up on repairs. Some developers have a person or department right on site to handle repairs.

Talk to authorities.
Contact the Better Business Bureau, the state’s regulatory agency for builders, and the county courthouse. Find out if there have been any complaints, disciplinary actions or lawsuits against the builder.

Talk to vendors.
Contact suppliers, subcontractors and lenders. Find out if the builder pays bills on time.
Approve the Location
Evaluate the location, just as you would for a resale home. New-home communities are often built on the developing edge of a metropolitan area, so make sure that a freeway isn’t planned to come through in 20 years. Check with the local zoning and/or planning department and look at their master development plan (if they have one) for any future development activity that might affect you

Choosing the best mover
Rates and conditions vary, so take the time to query several movers before selecting one. If your employer is handling your move through a relocation program, you may have to use a specified mover. But if you’re choosing a mover yourself, take the time to interview several and ask for references before you sign a contract.

What to ask:

How long have you been in business? A reputable mover should be licensed, insured, and have been in business for at least three years.
How many moves do you handle each year? Ask for two recent references, and call the Better Business Bureau to see how many complaints the company has. You want a low ratio of complaints filed versus number of moves completed.
How do you estimate the job? What is your hourly charge? Be sure to ask the charge for travel time, too. For a local move, many movers base the estimate on the hours required times their hourly rate. In most cases, you will be charged for the actual hours worked, regardless of the estimate. For an interstate move, movers base the estimate on the number of pounds you’re moving and the distance between the two cities.
What can change the estimated cost? You might incur additional charges if you’re moving into an elevator building, if access to your home is more than a specified distance from the truck to the door, or if items must be carried up stairways.
What kind of liability insurance do you provide? Your protection from the movers is limited to a certain number of cents per pound. If you want better coverage, get “full value protection,” which covers replacement of the item, minus deductibles.
How does your claims process work? If damage occurs, be sure to document all damages upon delivery. Filing a claim immediately increases your chance of a satisfactory settlement.
What damages are not covered? Movers often do not cover: operating condition of appliances and electronics; missing items not on the inventory list; damages not documented upon delivery, and money, jewelry, and other valuable items. Note that movers may not be held responsible for broken glassware or other fragile items, unless packed by them.
Are there items you will not move? Most movers will not move dangerous or flammable items, such as aerosol cans, paint, propane tanks, or anything that could damage your other possessions if it leaks.
How do I pay for the move? If you are paying for your own move, it is very important to know up front how the mover wants to be paid.
How much notice do you need before a move? Most movers need four to six weeks to plan a move, especially during the busy summer season. If you have less time, some movers can accommodate you with as little as two weeks’ notice

Are you less than perfect about paying your bills on time? Or maybe you pay your rent, utilities and other bills with cash or money orders so you have no credit record.

If that’s your problem, you may still be able to buy a house or condo. Thanks to innovative outreach home mortgage programs from Fannie Mae and other major home loan lenders, if you have a reliable source of income you can probably buy a home.

For example, I talked with a hard-working immigrant Hispanic gardener whose steady income comes from about 30 homeowners. A few of his customers pay him in cash. But most pay by check. Although he has no checking account, he told me how he recently got a mortgage from a major nationwide lender, with the help of a very patient mortgage broker, to buy the three-bedroom house he was previously renting. “I really need a four-bedroom house for my wife and our three kids, but it’s a start,” he told me.

Do you have a steady income?
If you are “credit challenged,” probably because you have no credit or bad credit, you may still be able to buy or refinance a home providing you have a steady income. That’s because mortgage lenders are now under extreme pressure to keep up their home loan origination volume, especially to borrowers without traditional verifiable income sources. Virtually every mortgage lender has a special home loan program for borrowers with credit problems. The interest rate might not be the lowest available, but mortgage money is abundantly available.

To illustrate, I once received a phone call from a long-time media acquaintance whom I had never met except by telephone. He briefly told me his home loan situation, admitting he “messed up” and had some serious credit problems. I was able to put him in touch with a savvy mortgage broker who arranged a mortgage at “only” 8 percent interest. My media friend was thrilled.

Know your credit report and score
If you’re not sure what is in your credit report, or you don’t know your FICO (Fair, Isaac and Co.) credit score, which most mortgage lenders use to rate your credit, the easiest source to learn this information is at www.myfico.com. For a small charge, you can obtain your credit report, FICO score and suggestions on how to improve your FICO score. At www.equifax.com, you can check your credit reports at all three major credit bureaus for an additional fee.

How do lenders use your score?
Fannie Mae and Freddie Mac, the nation’s largest home loan lenders in the secondary mortgage market, use computerized credit scoring programs to instantly approve mortgage borrowers for home loans up to $333,700.

When these non-human mortgage approval programs were implemented about 10 years ago, I was very critical. But the amazing result has been more, not less, home loan applicants approved when computerized credit scores are used. Furthermore, when a home loan applicant is rejected, a human mortgage underwriter takes a second look to see if an exception can be made for the loan to be approved.

FICO scores range between 450 and 850. The higher your FICO score, the better. A FICO score above 700 is almost always a “slam dunk” approval at the lowest mortgage interest rate. Nationwide, the average FICO score is 678.

Above 620 you will probably be approved for a home mortgage, but maybe not at the lowest interest rate. Below 620, you might get approved but you will surely have to pay a higher than normal interest rate.

Make sure your credit report is error-free
After you obtain your credit report and FICO score, read it. If you discover any errors, contact the credit bureau immediately. If you are unemployed, on welfare, were recently rejected for credit, were a recent credit fraud victim, or were told a collection agency has reported or will report negative credit information about you, you are entitled to a free credit report from the reporting credit bureau.

Residents of Colorado, Georgia, Maryland, Massachusetts and Vermont are entitled to one free credit report annually from each of the three national credit bureaus. Soon, thanks to a new federal law, all U.S. residents will enjoy this benefit. Until then, when writing, phoning or sending e-mail to one of the three national credit bureaus, you will be informed of the cost. The latest credit bureau addresses and phones are:

Equifax, PO Box 740241, Atlanta, GA 30374; phone 1-800-685-1111; www.equifax.com.
Experian (formerly TRW), PO Box 949, Allen, TX 75013-0949; phone 1-800-422-4879; www.experian.com.
Trans Union, PO Box 290, Springfield, PA 19064-0390; phone 1-800-888-4213; www.tuc.com.

Each credit report contains different information because some of your creditors report to all the national credit bureaus, but other creditors report to only one or two. Each credit bureau must include a dispute form so you can correct any errors for correction.

Credit bureaus have 30 days from the date of dispute receipt to verify your complaint. If the credit bureau is unable to verify the information you dispute, that information must be removed from your credit report. When the credit bureau doesn’t receive a response from the creditor, the disputed item must be removed from your credit report. Be sure to follow up and insist on receiving a revised or corrected credit report.

Get pre-approved in writing
After checking your credit report and FICO score, even before shopping for a house or condo, it’s time to apply for a home loan.

Whether you apply with a direct mortgage lender or a mortgage broker who can “shop” your loan application among many lenders to find you the best terms, the first step to buying a home is to get a written mortgage pre-approval letter or certificate from an actual lender.

Don’t accept a mortgage “pre-qualification letter.” That means nothing because the issuer isn’t the actual lender. Instead, insist upon a full credit investigation and a pre-approval letter or certificate from a lender willing to make your loan, subject to reasonable terms such as appraisal of the house or condo you decide to buy.

Conclusion
Even if you have less than perfect credit, one way or another, you can probably buy a house or condo. Your first “starter home” probably won’t be your “dream home or it will” But it will start you on the road to building home equity rather than constructing a pile of worthless rent receipts.
Less than perfect credit will get less than perfect interest rate. But if your rather invest in real estate than the stock market then get you loan approved. Less than perfect credit? you must fill out a loan application, and the lender or mortgage broker will have to shop around for the best deal, the interest rate… You just can’t get over the phone or internet quotes if you don’t have a credit score above 620. If any one says they can, I would run.

If you have any questions please call Manny at 480.695.6485 now…

There isn’t much new from the previous best-seller editions in Robert G. Allen’s “Nothing Down for the 2000s.” Whether you are a beginner home buyer or real estate investor, or a seasoned “old pro” real estate tycoon, Allen’s latest edition is still a great read.

Before continuing with this book review, I must confess what I learned in the original edition of “Nothing Down” earned me substantial profits. I even took Robert Allen’s weekend course when he personally taught it. As I recall, the cost was around $295. Today, his course costs thousands of dollars.

Most prospective home buyers and real estate investors are not fully aware what nothing down really means. It does not mean the property seller won’t receive any cash. Often, the nothing-down seller receives 100 percent cash and walks away with a smile. But nothing down does mean the buyer doesn’t come up with any cash from his/her own pocket.

For example, I recall one nothing-down residence purchase where my community bank made me a 75 percent mortgage loan and I borrowed the other 25 percent on my credit line with the same bank. That is 100 percent financing of which the lender was fully aware. In fact, that bank even featured the fixed-up home in its newsletter as an example of the bank’s community reinvestment.

Having personally bought and sold many properties for nothing down, I shall always be grateful to Robert Allen for teaching me and millions of others about the many benefits of buying real estate for zero cash from our pockets.

If you are looking for a detailed, exciting, thrilling “how to” book about becoming a real estate tycoon with zero cash from your pocket, you will be disappointed by Allen’s latest book. However, if you are realistic and can plod through lots of inspirational go-go material, you will love this new book.

Although I didn’t keep count, the author explains dozens of nothing-down real estate purchase techniques. Most are easily understandable. I have personally used many of these methods. However, some methods are not easy to understand.

The key to nothing down real estate purchase success, as Allen emphasizes over and over, is to buy from a motivated property seller. Much of the book is devoted to secrets for finding these motivated sellers, such as contacting out-of-town absentee owners and landlords advertising houses to rent in a slow local rental market.

This is one of the very few “must read” books for serious real estate investors. The author has a skill for explaining virtually all the no-cash realty purchase methods. But the book would have been much more valuable by some recent personal examples of the author’s realty no-down acquisitions. However, I understand he now earns so much money from his realty seminars he doesn’t have time to invest in real estate.

Chapter topics include “You Can Still Make a Fortune in Real Estate”; “They’re Not Making Any New Land”; “It’s Time to Pursue Your Passions”; “The Don’t-Wanter Seller: You Pick the Price and the Terms”; “Just How Much Money are You Going to Make”; “Negotiations: The First Person to Mention a Number Loses”; “How to Get What You Want Without Using Cash”; “Short-Term Funds from Hard-Money Lenders”; “Some Great Tips on Buying Law, Refinancing High”; “Using Paper to Achieve Your Investment Goals”; “Seven More Nothing-Down Techniques”; “Greed and Need: Using Partners”; and “Overcoming the 10 Biggest Roadblocks to Your Success.”

This new book has great material presented in a dull way. The publisher is to blame for creating a boring format. Only highly motivated investors will finish reading the book.

Blame the publisher for taking well-written material and making it difficult to read. For home buyers and realty investors who sincerely want to acquire real estate for nothing down, this is a great book. On my scale of one to 10, this new book rates a solid 10.

Buying your first home is like life’s other firsts: exciting—even romantic—and a little bit scary as you wade into new waters. You can ease the process and avoid being ripped off by knowing these eight points—before you take another move toward home ownership.

Know thy agent
Will Rogers, the great American cowboy wit, said “I’ve never met a man I didn’t like.” It’s the same with real estate agents. I’ve never met one that wasn’t friendly, smiling and brimming over with positiveness. Dig deeper to know what you’re getting in terms of loyalty, knowledge and experience. The right agent is a tremendous help—and often a necessity when it comes to finding the right house.

Get references from family, friends and colleagues. Take time to interview at least three agents in person. Ask to see their “activity lists.” These show every property they sold during the past year—you want an agent who’s experienced in the area where you want to live and who deals with buyers in your price range.

A seller’s agent works for and gives complete allegiance to the seller; a buyer’s agent does the same for the buyer. Most states require agents to tell the buyer for whom they’re working. Even in the rush of househunting make sure you find out this important piece of information. A buyer’s agent will point out—rather than gloss over—any flaws with the house or neighborhood, help you negotiate a good deal, explain your other options and be unquestionably on your side.

Tip: The cost will be the same whether you use the seller’s agent or get a buyer’s agent: The two agents will split the commission. BUT a sellers agent will not have your best interest… Buyer’s agent recommended

Don’t go overboard
Buy only what you can afford. Everyone can agree that a four-bedroom, three-bathroom house in mint condition on three lushly landscaped acres with a pool has more appeal than a two-bedroom, one-bath on a small lot. But there’s nothing worse than winding up with such a big monthly payment that you’ve nothing left over for a vacation, the kids’ camp or your retirement. A good rule of thumb: Your total monthly debts, including your mortgage, should not exceed 36 percent of your income before taxes.

Remember that your mortgage payment is only one aspect of what you’ll be paying. Budget for homeowner’s insurance, property taxes, furniture, general maintenance and so on.

Pick the right mortgage
Mortgages are available from banks, mortgage companies and credit unions. You can also get one through a mortgage broker, who will contact several lenders for you to find competitive rates.

Get mortgage information from more than one source, and get the same information from each so you can compare the offers. The Federal Trade Commission (FTC) recommends that in addition to finding out the basic interest rate you ask each lender:

Is the rate fixed or adjustable? When interest rates rise, monthly payments for adjustable-rate loans eventually go up, too.
What is the loan’s annual percentage rate (APR)? This includes the interest rate, points, broker fees and any credit charges you may have to pay, expressed as a yearly rate.
What will points be in dollars? Points are fees paid to the lender or broker for the loan. Ask each potential lender for a quote in the dollar amount (rather than just the number of points) so you’ll know how much you will have to pay.
Is private mortgage insurance (PMI) required? If you make less than a 20 percent down payment, the lender will probably require you to purchase PMI, which protects the lender in case you fail to pay. Find out the exact monthly amount and how long you will be required to carry PMI.

You will also have to choose between a 30-year or 15-year mortgage. A 30-year mortgage will mean lower monthly payments but a higher interest rate. In the long run, you’ll be paying more for your house because you’ll be making more interest payments. With a 15-year mortgage, the monthly bill will be higher but the interest rate lower; thus you’ll pay less for your house because it will be paid off in a shorter period of time.

Have each lender provide you with a written statement of all fees connected to the loan. Then, ask each to reduce one or more of the fees. Use the lowest amount of fees to negotiate with the other lenders to see if they’ll reduce their fees.

Also, check out the FTC’s publication Looking for the Best Mortgage.

Tip: If you have an excellent credit rating, you may qualify for a lower down payment through a special Fannie Mae program: The Flexible 100™ requires no down payment while the Flexible 97™ requires just 3 percent down.

Get a preapproval letter
This gives you substantial leverage: Sellers immediately see you as a serious buyer. Not only will you know the exact price range you can afford, you’ll be able to negotiate a better deal and move faster when you see a house you like. Work with your lender to get preapproval—you’ll need to supply information to verify your income, credit history, debts and assets. The lender will then issue a letter stating that your mortgage is approved for a certain dollar amount for a certain time period. Don’t confuse preapproval with prequalification: The latter is a non-binding estimate of how much mortgage you can afford.

Once you get preapproved for a mortgage, avoid taking on any serious new debt and make timely payments on all existing debts. Otherwise you risk degrading your credit rating partway through the buying process.

Tip: If you’re charged a preapproval fee, negotiate to have it refunded at the closing.

Lock in your interest rate
Once you get what you think are the best terms possible, ask for a written rate lock. It will include the interest rate, how long the lock-in will last and the number of points to be paid. A lock-in protects you from a rate increase if rates go up during the time your loan is being processed.

Play it close to the chest
If you fall in love a house, keep your feelings to yourself. Don’t let the seller or the seller’s agent know. Handing over that bit of information will empower them to hold out for the asking price. Keep in mind that there’s always another house at the right price.

Tip: Visit at night and on a weekday. Most people look at homes on weekends in the daylight; before you buy, find out what the neighborhood is like at other times. Is it quiet? Noisy? Full of traffic? Dead as a doornail? Also, drive the surrounding few blocks in each direction from the house, to make sure there aren’t unsavory areas or unexpected industrial sites nearby.

Negotiate
Before making an offer, ask the agent for a Comparative Market Analysis (CMA). The CMA lists the addresses of recently sold homes in the same neighborhood, with the date sold, the price and the number of bedrooms and bathrooms. Your offer should be comparable and not necessarily based on the seller’s asking price.

Then, insist that the contract include two types of escape clauses: a financing (or mortgage) contingency and an inspection contingency.

If you make an offer but then are ultimately turned down by lenders, the financing contingency will release you from the contract. You’ll also get back your earnest money (your deposit).
If a professional inspection finds damage or structural flaws in the house, the inspection contingency will release you from the contract and your deposit will be returned. Usually you can also opt to use the inspection contingency to negotiate for repairs to the house or for a lower selling price. There are different types of inspection contingencies; work with your agent to put the type you want into the written offer you make on the house.

Tip: Never use an inspector recommended by the seller’s real estate agent.

Watch out for predatory lending
Every once in a while, the FTC issues a warning about unscrupulous lenders. Signs of trouble:

Being asked to include false information on your loan application.
Being asked to sign a blank form.
Being pressured into borrowing more money than you need or can afford.
Being promised one thing but delivered another. If you get new numbers or new terms at the closing, ask for an explanation. Tell your lawyer you are prepared to walk away.

The bottom line is that “Knowledge is power.” Written a long time ago by the English statesman Francis Bacon (1561-1626), it’s as true today as then. Make it your personal mantra.

Recently a mini subdivision of upscale homes was built in a desirable neighborhood in the Oakland Hills of northern California. The homes in the project were reasonably priced. They sold quickly, some to buyers who were moving from older homes in the same area.

The appeal of a brand-new home is obvious. You get to be the first person to occupy the property. It hasn’t been messed up by negligent owners or botched up by bad remodeling. And in most cases, the maintenance and upkeep will be minimal, at least for a while.

New homes aren’t always free of problems, however. One couple bought a new home in a subdivision and found it was plagued with water issues. The roof leaked, windows leaked, and in some places, water penetrated right through the exterior stucco.

Know your home builder
Your new home is only as good as the builder’s reputation. You may want to look at several-year-old homes built by the same builder to find out how well they have held up over time. One couple found out that their builder’s weakness was drainage systems by talking to owners of other homes built by the same builder. Check with the Better Business Bureau and the Contractor’s Licensing Bureau to find out if the builder is in good standing with both.

Municipal building codes
Don’t assume that a new home has been built correctly just because a municipal building department was involved. Typically, the building of a new home is governed by requirements set forth by the local building department. Municipal inspectors routinely inspect after various critical stages of the construction process. Even so, the building code is not uniformly enforced.

For example, in the City of Oakland, the building code requires adequate ventilation of the areas underneath the living areas of a house. Yet, many new homes in the area lack ventilation, which can result in condensation, mold and dry rot.

Don’t rely solely on municipal building inspectors to inspect your new home. Even though the home is new, you should have it thoroughly inspected by a home inspector and/or engineer.

Home inspections
Before an inspection, try to get your hands on as much of the construction-related documentation as you can. Ideally, you’d like copies of the soils or geotechnical report, the structural calculations and the architectural plans.

In addition, it’s helpful to have copies of the inspection letters that were written by the project engineer to the building department indicating that the various phases of construction—like grading, and foundation and drainage installations—were done properly.

If you’re having an engineer inspect the property, have him review the construction-related documents. File these documents in a safe place. They will provide documentation of the construction process when you decide to sell.

Check the paperwork
Many new homebuilders require that you write your offer on a purchase contract that was drafted by the builder’s attorneys. These contracts often don’t provide a contingency for the buyers to complete inspections. An inspection contingency can and should be included as an addendum to the contract.

Some new home projects don’t permit representation by buyer’s agents. Those that do may require that your agent accompany you the first time you visit the project. If buyer representation is not permitted, you may want to hire an attorney to review the builder’s contract before you sign it.

Before you close on your new home, make sure that you understand what the builder’s liability is to you for construction defects. Ideally, the builder should have a formalized written procedure for handling complaints.

The closing: Many new home developments have Covenants, Conditions and Restrictions (CC&Rs). Make sure you understand these before the deal is closed.

In Gilbert, like may other cities in Arizona, the real estate market today looks more like California’s than at anytime in the past 30 years. Homes are selling fast. Prices are going up quickly, which is a problem for Appraisers. Buyers are bidding up home prices and sellers are least likely to help buyer pay closing costs. In some cases buyers are agreeing to pay even more than the appraised value of the home…
Will the market last?
We are already seeing news reports of a softer market in California and Nevada and other markets. Conventional wisdom says interest rates will go up after the election….
” We are looking for more product to sell” says broker, Manny Caballero of Encompass Realty. His company has a large inventory of Approved Buyers, than a large inventory of listings, which are going quickly. One of the major reasons Encompass Realty has more Approved Buyers is because of their business model that provided mortgage interest rates that no other lender can match in Arizona or else where.
The mortgage is one if that the most important thing in this market. What we mean is, if you have Underwriting Approval than just Pre-Approval, goes a long way in negotiating to purchase. And for the borrower means an average savings of $ 30,000. This savings is reflected in a smaller payment per month and little or no out of pocket cost in obtaining a loan.
If you would like more information on selling your home, or in the market to purchase property or your personal home, then we recommend Manny Caballero and his associates at Encompass Realty. Their number is 480-990-0823 or visit them on the web http://www.encompassrealty.com

What distinguishes an old house from an historic house? More than just price.

“We have people stop all of the time and say it’s their favorite house in Salem,” said Tami. That hasn’t always been the case.

“There were nine apartments in this house, and it was in horrible condition,” said Tami. “Then in 1993, skinheads threw a firebomb into the basement window and killed two of the tenants.”

After a second fire further damaged the building, neighbors bought the house and started the long process of renovating the 3,900-square-foot house.

“It’s a miracle that some of this stuff is still here,” said Tami, who bought the house in 1996 when the house was in its final stages of renovation. “The banisters were hidden in a wall and leaded glass doors were in a loft in the garage.”

Now that the house is for sale, its history seems to be as much a selling point as its pocket doors, wood floors and thick molding.

“We have a couple flying in from California to see it tomorrow,” said Tami. “They told their Realtor they wanted a house with character.”

Historic or just old?
Although individual states and cities often have their own designations for historical property, the National Register of Historic Places is the official list of “places worthy of preservation.”

There are currently about 78,000 listings of historic areas and properties on the register, and about 1,500 new ones are added each year, according to Paul Lusignan, a historian with the register.

A building may be considered historic if it is associated with trends in history, a historically significant person, or a type of architecture or construction method. The Bingenheimers’ house, has been on the register since 1987 because, among other reasons, its neighborhood is one of the oldest in the city.

Of course, the definition of historic is constantly evolving. “Now we’re getting into the postwar suburbs,” said Lusignan. Arapahoe Acres in Englewood, Colo., has been added to the register because its 1950s houses were thought innovative at the time. And two California neighborhoods designed by Joe Eichler are currently being considered, according to Lusignan.

To add a property or area to the register, a homeowner, neighborhood or other “interested party” must research the property’s history and submit a nomination form to a state’s historic preservation office. Once approved by the preservation office, the nomination goes to an advisory committee and, finally, to Washington D.C. for review by the National Register.

Anyone can submit a nomination, said Christine Curran, National Register Coordinator for Oregon, but the owner must consent to initially having the property listed on the register.

Once, a property is on the register, however, it’s there to stay.

Perks and pains of preservation
Bragging rights and a nifty plaque aren’t the only perks of owning historic property.

Historic property that generates income, such as a bed and breakfast, is eligible for a 20-percent federal tax credit for rehabilitation costs. In some states, federal grants are available to homeowners of historic property who need help paying for such things as a new roof or cracked foundation

In Oregon, homeowners can apply for a special assessment program, which freezes the value of their home for property tax purposes for 15 years. The Bingenheimers’ house, for one, is assessed at $57,450 and will continue to be assessed at the value for another five years even though the house is on the market for about $385,000.

In exchange for the tax relief, the Bingenheimers are obligated to open their house to the public for four hours once a year. “We don’t mind at all,” said Tami. “We like to show it off.”

The National Register is an honorary program with very few rules governing what owners can and cannot do with their property, said Lusignan. But local governments may require that owners of get approval for changes made to the home’s exterior and, in some cases, the interior.

Staying true to the period can add months to the project and in some cases double the cost, according to Ralph Gillis, of Gillis Previti Architects in New York. Windows and doors need to be custom-made, brick needs to be matched and fixtures need to be replicated.

“You are using construction techniques that not everyone knows how to do,” said Gillis.

Plus, not everything is worth preserving, said Michael Litchfield, who is currently working on his third edition of “Renovation,” to be published by Taunton Press in 2005.

Lead paint, drafty windows, coal-guzzling furnaces, sparse bathrooms and tiny kitchens, he said, belong in the history books.

Have your increased and/or updated your Home (Hazard) Insurance Policy?

3,925 died in fires in 2003 – many more than in all natural disasters combined

October 3, 2004 – Americans underestimate their risk of fire, a new survey from the National Fire Protection Association (NFPA) has found. Choosing from a list of disasters, 31 percent of those surveyed said they felt most at risk for tornado, while only 27 percent named fire as the highest risk, followed by hurricane (14 percent), earthquake (9 percent), flood (9 percent) and terrorist attack (5 percent).

But among all those disasters, fires are actually more common – and many times more deadly. Fire departments responded to 1.6 million fires in the United States in 2003. While tornadoes average 70 deaths a year, fires killed 3,925 people in 2003, most of them in the home.

Fires also cause significant property damage, especially when compared with other disasters. In recent years, property damage from tornadoes averaged just over $1 billion and from hurricanes just under $3 billion. But the cost of fire damage? More than $12 billion in 2003, up 19 percent from the previous year, due primarily to the $2 billion in losses in the southern California wildfires

NFPA commissioned the survey on fire preparedness on the eve of its annual Fire Prevention Week (FPW), which starts Oct. 3. This year’s theme is “It’s Fire Prevention Week: Test Your Smoke Alarms.” FPW emphasizes testing smoke alarms because most people do not test as often as they should and as a result one out of five home smoke alarms is not working. To conduct the survey, Harris Interactive questioned a representative sampling of 1,014 adults by telephone from Sept. 9 to 12.

Asked which kind of disaster they feel most prepared for, the highest percentage of respondents (31 percent) said they felt most prepared for fire. Their answers to other survey questions suggest they are prepared – but not prepared enough. Ninety-six percent have smoke alarms, a new high for the nation. But only one-fourth have developed and rehearsed a plan for escaping their home in a fire, a goal of public education efforts such as FPW.

The survey also points to other challenges. Small communities, poorer households and less educated households had lower rates of smoke alarm ownership. Only 8 percent of people whose smoke alarms went off responded as recommended – assuming there was a fire and leaving the house immediately. If most people have not practiced escape and do not react to fire by immediately starting to escape, then many will not escape in time.

“Fire remains a major cause of death, injury and property damage in this country,” said NFPA President James M. Shannon. “We can prevent many of these losses. It’s not enough to have a smoke alarm. You should make sure it’s working and you should be prepared to get outside fast if it sounds.”

According to NFPA’s recent report, Fire Loss in the United States During 2003, fire occurs in a structure an average of once every 61 seconds. A civilian is injured in a fire every 29 minutes, and dies in one every 134 minutes. And four out of five fatal fires occur in the place where people feel most safe: the home.

Deaths from fire overall have been declining steadily over the past two decades. In 2002, fire deaths dropped sharply. In 2003, the death rate returned to previous levels, jumping 16 percent overall and 18 percent for deaths from fires in the home, according to the report.

In its 82nd year, FPW is formally proclaimed by the President of the United States each year and is officially sponsored by NFPA.

NFPA has been a worldwide leader in providing fire, electrical, building, and life safety to the public since 1896. The mission of the international nonprofit organization is to reduce the worldwide burden of fire and other hazards on the quality of life by providing and advocating scientifically-based consensus codes and standards, research, training and education.

10/06/04) The quality of drinking water in the United States is among the best in the world. The nation’s Lead and Copper Rule has successfully reduced levels of lead in drinking water throughout the country. Blood lead levels in children have decreased significantly due to this rule and other actions taken to reduce lead exposure.

EPA’s drinking water data, which includes state reporting of 73,000 water utilities from all over the country, demonstrate that lead in drinking water is not a widespread problem. In the limited cases where it is a concern, the Agency is working with states, which have primary responsibility for implementation, compliance and enforcement, to notify the public and ensure that lead levels are reduced by controlling for corrosion, and when necessary, replacing lead service lines.

If there are any utilities that have violated federal law by providing false, incomplete or misleading data on drinking water quality, EPA or the state will pursue appropriate penalties under federal and state law.

Over the past several months, EPA has undertaken an unprecedented review of the implementation of the Lead and Copper Rule, including collecting monitoring data, reviewing state programs, and conducting expert workshops. Within the next few weeks, EPA will reiterate and clarify the guidance to states on how utilities can improve implementation of the Lead and Copper Rule.

Release date:10/06/2004

bipartisan majority of the U.S. House of Representatives has agreed to co-sponsor a key tax provision already passed by the U.S. Senate that would give a much-needed financial boost to millions of current and future homeowners.

The Mortgage Insurance Fairness Act (H.R. 1336), introduced by Representative Paul Ryan (R-WI) and Representative William Jefferson (D-LA), would make private and government mortgage insurance tax deductible and save consumers hundreds of dollars annually by allowing a write-off of monthly mortgage insurance premiums.

The deduction is limited to individuals and families earning less than $100,000 per year and is part of an omnibus tax bill passed by the Senate in May. To date, 220 members of the House of Representatives from both sides of the aisle have co-sponsored the deductibility legislation.

“This bill, if passed, will go a long way to help homeowners and potential homeowners who simply want to own a piece of the American dream,” said Marc H. Morial, President and Chief Executive Officer of the National Urban League. “I urge Congress to do what it needs to do to make the goal of affordable homeownership a reality for each and every American.”

Other groups supporting the proposal include the National League of Cities, Consumer Federation of America, Citizens Against Government Waste, National Education Association, Fraternal Order of Police, National Taxpayers Union, National Council of La Raza and the International Brotherhood of Teamsters. A complete list of supporting groups is attached.

“This initiative has widespread support across the political spectrum,” said Suzanne C. Hutchinson, Executive Vice President of the Mortgage Insurance Companies of America (MICA). “It would help make housing more affordable for low and moderate income families.”

Private mortgage insurance (PrivateMI) is a critical factor for low and moderate income families and minorities seeking to become homeowners. PrivateMI is a credit enhancement allowing borrowers to qualify for a mortgage with less than the traditional 20 percent down payment. The people who use mortgage insurance are policemen, firemen, teachers, and veterans who live in every community throughout the country.

Recent figures show that, nationwide, mortgage insurance covered more than half of all mortgage purchase loans made to African American and Hispanic borrowers and 54 percent of loans to borrowers earning below the median household income for their area.

“This measure would provide tax relief to millions of Americans,” noted John Berthoud, President of the National Taxpayers Union. “The bill enjoys broad support from groups on both the right and left because, while it would provide much needed tax relief, it also helps further a worthy aim – the expansion of homeownership opportunities,” he concluded.

Rate Trend: Sideways to Higher

This week’s economic releases features the payroll figures on Friday. This is the report many investors are awaiting to determine where the economy is heading.

The market leading up to Friday’s report may show signs of gains, but don’t be fooled. In all likelihood, rates will end the week higher when the market draws to an early close on Friday and remains closed in observance of Columbus Day on Monday.

One note of caution, if rates do in fact close at a high on Friday this is a major indication that October may be an extremely volatile month and we may even challenge the high rates set back in June. But this should be good news, for loan professionals that understand how to “time” the market to increase profits.

As professionals you need to constantly monitor the market to protect your pipeline and your profits from mid-day price increases and identify golden locking opportunities when they reveal themselves.