The pros and cons of buying a home during the holidays

Two weeks ago, we talked about the pros and cons of selling your home during the holiday, so this week we'll talk about why buying your home at the same time presents challenges and opportunities.

The pros

The holiday season can be a good time to find a home. If you are planning to buy a home, but are waiting until the market heats up in the Spring, you might want to reconsider.

Right now, interest rates remain low, but because there is less demand for mortgage loans, you could get an even better rate.

Prices can be lower because sellers may drop their asking price

Fewer buyers = Less competition

Homeowners who keep their homes on the market are motivated sellers

Tax deduction for the current year

Fewer closings = faster transactions

The cons

Of course, there are some disadvantages to trying to buy a new home during the holiday. There's a shortage of inventory—the best homes in your price range may not be available because the seller may choose to wait until Spring. The market is slower because many agents schedule vacations at this time of the year. A blanket of snow can hide defects in the home's exterior and the landscape as well.

If you’re considering buying a new home, this time of year could prove to be advantageous. It could be the best time of year to buy. Talk to your REALTOR® to discuss your options.

How to get a better rate on your mortgage

When you buy a new home, you can reasonably expect that the cost of borrowing will add up to a great deal of money. Anything you can do to shave even tenths of a percent off the percentage rate can potentially save you thousands of dollars over the 30 years you'll carry the mortgage.

There are a number of things you can do to help yourself get a better rate on your mortgage:

Check your credit score

To get an idea of what your credit score is, you can check with free services or at MyFICO.com, which costs around $20. Looking at these reports can give you a general idea of what your score is and how to improve it. If you pull your own scores, make sure to compare them to what your lender is seeing.

Fix any errors on your credit report

Look through your credit report from each company for errors and negative items. Try to fix any errors that you find as quickly as possible. Each reporting agency will have details about disputing information. If the issue is not resolved after filing a complaint, contact the Consumer Financial Protection Bureau.

Pay your bills on time

From time to time, it's easy to put off paying a bill on its due date. It really seems insignificant, especially if you're having trouble making ends meet. Just one late payment, though, can cause your credit score to drop.

Reduce the amount of debt you owe

One of the criteria your mortgage lender looks at is your debt-to-income ratio, which is simply how much debt you are carrying compared with your monthly income. This number affects whether you qualify for a loan and what your interest rate will be.

Keep your old accounts open

Part of your credit score is based on the length of your credit history. It will not hurt to keep an old account open until your mortgage is secured. It may even be beneficial to keep your oldest account open even if your annual fee is due.

Don't apply for any new credit

When you decide that you're going to apply for a mortgage, don't apply for new credit of any kind. Not only can it mess with your debt to income ratios, if you have few accounts or a short credit history, inquiries can have a greater impact on your credit score.

Make sure to discuss your credit scores – and how they affect your mortgage rates – with your lender. They may be able to make other suggestions about how to improve your credit score so that you may qualify for a lower rate, which could save you a lot of money in the long run.

Selling a home during the holidays

The holidays are in full swing. People are busy planning parties, shopping, trying to reach goals for the year, making travel plans. Probably not the best time to sell your home, right?

Not necessarily.

This could be an opportune time to sell your home. Of course, there are some cons to trying to sell at this time of year, but selling now offers you some distinct advantages over waiting until after the first of the year.

1. People looking for a home over the holidays are more likely going to be serious buyers.


2. A lot of sellers take their homes off the market, which means serious buyers have fewer homes to choose from


3. Less competition right now means more money for you.


4. The number of homes on the market will drastically increase after the first of the year. Less demand means less money.


5. Houses show better when they’re decorated over the holidays.


6. Buyers are more emotional during the holidays and tend to spend more money, which means you can get closer to your asking price.


7. Because they are likely to be on vacation, buyers have more time to look at new homes over the holidays and are more likely to come on weekdays.


8. The tax break they receive is a motivating factor for many buyers.


9. Companies traditionally use January to relocate employees who can't wait until there are more homes available in the spring.

It should be noted that there are some drawbacks to selling your home during the holidays. You may prefer not to schedule showings and closings at this time. You may not want to move during this time – not only are schedules hectic, the weather is not always cooperative. Speaking of the weather, if you live in a colder climate, snow and ice cuts down on foot traffic.

If you’re considering selling your home, it could be the best time of year to sell. Talk to your REALTOR® to discuss your options.

Why flood insurance rates are rising

As a homeowner, you may have noticed two developments concerning flood insurance recently:

1. You now have to buy flood insurance


2. It's really expensive

This is not due to your insurance company raising rates because they are paying for damages caused by Hurricane Katrina, Superstorm Sandy, or Midwest flooding in 2012. It is due to the Biggert-Waters Insurance Reform Act of 2012. The Act made sweeping changes to the National Flood Insurance Program and they just kicked in last month. At the point that Congress passed the new law, NFIP was $18 billion in debt.

How does it affect homeowners?

Biggert-Waters phases out flood insurance subsidies on hundreds of thousands of older homes. This means that premiums will necessarily skyrocket. Homes sold after Biggert-Waters passed in July, 2012, or those whose policies lapse, will see their premiums immediately go up to the non-subsidized actuarial rate.

Part of the Act raised what's known as the base flood elevation (BFE) for certain areas, which means that some homeowners who never had to carry flood insurance now have to. If your home is now in a high risk zone, you may have to raise your home by putting it on pylons, which could cost tens of thousands of dollars, but will not significantly increase the value of the home.

Homeowners who have properties in the new FEMA flood zones could experience flood insurance premium increases of 500-1000%. Mortgage payments in effect double when seeing that kind of increase. This means that property values go down. Owning a home along the nation's coasts and river valleys becomes less attractive. Building a new home in these areas becomes almost impossible.

Reaction to Biggert-Waters is gaining momentum as homeowners realize exactly how it affects their homes’ value and premiums. If you find that your premiums have risen, talk to your insurance representative.

Moving truck driving tips

Many people choose to rent a moving truck rather than hiring professional movers in order to save money when they move. Make sure to review all safety information with the rental business before driving the truck.

Here are some guidelines for safe truck driving.

Drive defensively

Practice these basic driving habits so others know your intentions and to help prevent accidents.

• Check the mirrors for other vehicles frequently.


• Never tailgate. Trucks require more time and room to stop.


• Never use the passing lane on the interstate.


• Allow more room and more time for lane changes.


• Watch sharp turns. Trucks are longer and wider than cars, so they need more turning area.


• Always use your turn signal to let other drivers know your intentions.


• And, of course, always wear a seatbelt!

Vehicle safety

• Make sure to familiarize yourself with the truck before hitting the road.


• Never drive if you are over-tired.


• Avoid medication and never drive under the influence of alcohol.


• Bring a friend or family member to help with the driving.


• Stop every two hours or so to prevent fatigue.


• Stop regularly for coffee or soda and a snack, or just to stretch your legs.

Backing up

• Avoid backing up if you can. If you must back up, have someone direct you from the side at the rear.


• If you're towing anything, it's best to NEVER back up.

Save money on fuel

• Obey the speed limits.


• Gradually build to the desired speed.


• On the highway, keep a consistent speed and don't attempt to pass.

Parking

• Set the emergency brake every time you park.


• Turn the wheels away from the curb with the truck faced uphill; toward the curb when facing downhill.


• Look for "drive-through" parking spaces to avoid backing.


• If you're stopping at a hotel, always park in well-lit areas. Lock all doors and padlock the safety chains if you're towing anything.


• At road stops and restaurants, park where you can see the vehicle.

Stopping

• Allow at least five vehicle lengths between you and the vehicle ahead of you.


• Brake earlier than you think you need to.


• Ease off the accelerator when stopping to avoid shifting cargo.

Avoid height-related accidents

• Know the height of the vehicle you're driving.


• Be aware of low canopies, overpasses, bridges, tree branches, parking garages and signs prohibiting truck traffic.


• Don't use the drive-through at a restaurant. Park the truck and walk in.

Does checking your credit hurt your score?

One of the myths surrounding personal credit scores is that checking your own credit reports and scores will make your score go down. That myth has been around for nearly as long as credit reporting agencies.

This myth hurts home buyers because it discourages them from checking their credit report in order to know what’s in it. If your report has erroneous information, at worst it could result in you being turned down for a loan. At best, it could cost you thousands of dollars by paying a higher interest rate than you should.

The simple fact is that checking your own scores does not affect them in any way. It’s what’s known in the industry as a “soft” inquiry. When you make the request, it will show up in your report, but it does not affect your score.

A “hard” inquiry from any potential creditor can adversely affect your credit score because it represents potential new debt that doesn’t yet appear in your credit report as an account. One piece of advice: If you have a friend who works at a bank or car dealership, don’t have them pull a credit report just so you can see it. If you don’t have a long credit history, this hard inquiry could affect your score enough to cause a problem.

Requesting a copy of your own credit report will not affect your credit scores. An inquiry will be added to your report as a record that you requested it. This type of inquiry is sometimes called a “soft” inquiry because it is shown only to you. Therefore, you can check your own credit report as often as you like with no effect on your credit scores.

You can request your own scores from any number of sites for a minimal cost. Ask your REALTOR® to recommend where you should make a request.

Seven things that kill your home sale

Your home can be immaculate, in a great neighborhood and priced right. But when a prospective buyer walks in, they can be persuaded to turn and walk out. Obviously, they're motivated; otherwise they wouldn't have wasted the trip.

If your home has any of following six problems, you may see the buyers turn on their heels and head in the direction of the next property. Two of them, you can't do much about. The others can be fixed, but the cost ranges from not much to quite a bit.

Seven deal-breakers for homebuyers

The backyard isn’t family-friendly

The back yard is something that potential home buyers give great consideration to when buying a home. They imagine cookouts, landscaping, gardens, kids playing and tire swings. If it doesn't match up to their expectations, it's a deal breaker... and there's not much you can do about it.

Mold

You can try to cover it up but it's going to be found in the inspection if you have it. Fixes range from a new piece of drywall behind the bathroom sink to calling out a remediation crew. Don't hide it, especially if you've spent the money to have it removed.

Foundation problems

A crack in the foundation can cause a myriad of other mostly cosmetic, but costly, repairs, from repairing drywall to doorframes. Many buyers walk away from foundation problems. Most lenders require foundation problems to be repaired before closing. And even a fixed foundation can be a deal-breaker because potential homeowners are worried about the damage that it has caused.

Personal belongings

Your sense of style and taste may not appeal to the potential buyer. Ask your REALTOR® about staging your home for sale. He or she will have some suggestions about what should be put in storage until you complete the move. For higher end homes, you may want to consider hiring a staging consultant.

The house is dirty or smelly

Pets, mildew, smoke... these are all turn-offs to potential buyers. Permanent smells and stains, if they aren't a deal-breaker, may mean you'll have to drop the price on your home because the new owner will have to pay to have it cleaned or do it themselves... which can be a big undertaking.

Pest infestation

This is especially true of termites. The damage they can cause is not always immediately apparent. A certified termite inspector knows what to look for and how to eradicate them.

Location

You can have the perfect house, the right number of bedrooms, a great kitchen, plenty of storage space, a clean inspection and a perfect back yard, but if the location is horrible, your house is going to sit for a while.

What is eminent domain, and should I be worried?

One of the things that property owners must be concerned with is eminent domain, which is defined as "the right of a government or its agent to expropriate private property for public use, with payment of compensation."

City, county, state and federal governments can claim eminent domain for any number of reasons. For example, if your property is impeding a road expansion, it may make the claim in order to make the land available for public use.

If you receive notification that a government entity is considering an eminent domain designation on your property, there are two things you should know:

1. They have to pay you fair market value for it.

2. Their offer will be on the low end of fair market value.

Eminent domain power can and has been abused. There can exist a conflict of interest when a developer lobbies a city government for a redevelopment project, only because it plans to construct new buildings for office, retail or housing in order to line their pockets.

The first thing you need to do when faced with eminent domain is hire an attorney who specializes in the area.

1. Agency with the interest in your property will hire an appraiser to inspect and appraise your property.


2. Agency makes an offer, usually a low one.


3. If you don't accept their offer, and are unable to negotiate a fair deal, they will schedule a public hearing. The agency has to prove their case that acquiring the property is necessary for the public good.


4. They will file a complaint against you in Superior Court, and you will be served a summons which requires a response.


5. They will deposit "probable compensation" and file a motion for prejudgment possession with the Court. At this time, you may object once again. If their motion is approved, they may take possession of your property within 30 days.


6. At this time, your attorney will obtain appraisal reports from appraisers and other experts to establish your property's fair market value. These reports are filed with the Court and presented to the agency who filed for eminent domain.


7. Mediation - the two parties come to an agreement, if one can be reached.


8. If you can't come to a compromise, they are forced to make a final offer.


9. If you still do not accept the offer, a trial will be held to determine fair market value of your property and hear any other issues.

Your rights as a property owner vary by your home state. You need to be informed of those rights and the process. For instance, depending on your home state, you may be able to recover attorney fees from the agency who filed the case. Do your homework. Most importantly, hire a successful attorney who specializes in eminent domain cases.

Lenders using new criteria to determine credit risk in mortgage loans

A low credit score doesn't necessarily result in an automatic turn down for a mortgage loan.

Mortgage lenders are looking for borrowers who are good risks, even though they may have little or no credit history. Lenders are now looking at additional criteria, some that they may not have considered a few years ago, in order to find new home buyers who are good risks, even though their credit score may not show it.

Those most likely to gain from this new way of looking at financial history include young adults and new immigrants. They are more likely to be approved without being subjected to extremely high interest rates because their scores are not high.

This "non-traditional" data that lenders are now looking at when considering home loan applications includes:

Information in public records, including property records and professional licenses. A license indicates that a person is a better risk because they have a steady income and commitment in the community.

Rental payment is another category that reporting agencies have begun to consider. Late payments could be an indicator of future behavior.

Utility payments and cell phone bill payment history can also be an indicator of whether a person with little or no payment history takes paying their bills seriously.

The takeaway for many is that even though you may have little credit history, or may have a score that falls somewhere between bad and good, you may be able to secure a loan from a mortgage lender. The first thing you need to do is talk to a lender to see what you qualify for and what a loan will cost. A mortgage lender will also be able to tell you how to improve your scores so that you can get a better rate.

What the government shutdown means for home buyers and sellers

With Congress unable to come to an agreement, we've got a situation known as a partial government shutdown. The last time this happened was in 1995 when there was a shutdown that lasted for 21 days.

Many agencies, such as NASA, have furloughed non-essential personnel. Still others are operating at full capacity, including the military and TSA. There are many, including Housing and Urban Development, which are operating with skeleton crews.

Early reports stated that the Federal Housing Administration would stop processing loan applications. This is not the case. The first contingency plan issued by HUD mistakenly stated that FHA would be unable to endorse any single-family loans and that staff would be furloughed.

The announcement sent a panic through the real estate market. After noticing the error, HUD issued a statement saying that its Office of Single Family Housing will continue to endorse new loans even in the event of a lapse in appropriations.

The FHA is funded through multiyear appropriations. There will be some reductions in staff and furloughs, but it will be able to operate. Because the department will be short-staffed, there could be some delays, but the paperwork will be processed. Multi-family operations, however, are funded on a year-by-year basis. During a shutdown, condo projects would be put on hold because the FHA will not be able to underwrite them.

It is unknown at this time how much of a delay we can expect in single-family loan applications or what the long-term impact of a lengthy shutdown will be. In its statement, HUD said that it does not expect the impact on the housing market to be significant, provided the government shutdown is brief.

How unemployment affects mortgage rates

When Federal Reserve Chairman Ben Bernanke announced last week that the Fed would not curtail its bond buying program, the mortgage industry breathed a sigh of relief. Rates dropped slightly after the announcement.

Interest rates had been rising steadily since May, when Bernanke said the Fed was considering trimming the stimulus program, which pumps $85 billion into the American economy every month.

According to Zillow.com, after declining to a low of 3.21% in December 2012, the national average for a 30-year fixed-rate mortgage was recently 4.44%, more than a point higher less than a year later.

What the Fed said

Although pundits and politicians paint these numbers as rosy, the Fed's announcement as a barometer of the nation's economy isn't quite as positive. Here are the highlights:

1. The Fed will maintain its plan to keep short-term rates at record lows at least until unemployment reaches 6.5 percent.


2. It doesn't project the unemployment rate to reach that level until the end of 2014 or beyond.


3. The Fed predicts that inflation will start to rise next year, to somewhere between 1.4% and 2%. Currently it's about 0.8%.

The Fed's announcement assured the mortgage industry that the stimulus would continue for at least a year. But the announcement said, in a nutshell, that the economy is still not improving as quickly as it would like.

Why the Fed's announcement matters

As it stands now, this is a manipulated market, according to a piece on Bankrate.com. (link to http://www.bankrate.com/finance/mortgages/mortgage-analysis.aspx) One analyst was quoted as saying that rates are probably headed to 5 - 6%, once the Fed cuts back on its stimulus efforts and lets the market decide where mortgage rates should be.

What it means for home buyers

The announcement has a definite effect on the environment if you're looking to buy, sell or refinance your home.

Loans are still cheap... for the time being. We're not likely to see the rates go as low as they were late last year, but for the foreseeable future, rates are likely to drop a bit. If the economy continues to improve as anticipated, rates will keep inching up.