ARE YOU PLANNING ON BUYING YOUR FIRST HOME?

If so, and you don’t have piles of money, you should be aware of changes in the lending guidelines and policies of the Federal Housing Administration (FHA), Fanny Mae and Freddie Mac.  These groups help to make homes more affordable and can now make it less costly for first-time buyers! 

One major change is regarding mortgage insurance.  When a buyer borrows more than 80% most lenders will require mortgage insurance that will cover the loan until it is paid down to the 80% level.  FHA-backed loans have not reduced the premiums on this mortgage insurance to 0.85.  This is an estimated savings (for the average homebuyer) of $900 per year and can directly affect the buyer’s ability to purchase as the mortgage insurance premium is calculated into the long-term debt ratios used for mortgage approval.

Fannie Mae and Freddie Mac have also loosened down payment guidelines, allowing some prospective homebuyers to be approved with a down payment as low as 3%.  These are huge incentives to prospective first-time homebuyers, a class of buyers that has seen a marked decrease in the last few years.  Historically first-time homebuyers make up about 40% of the home buying public.  Recently this number has dipped as low as 31%, a huge impact on an industry struggling to recover.

Here are some points to remember when considering a home loan backed by Fannie Mae, Freddie Mac or guaranteed by the FAH:

1.     The 0.85 mortgage insurance premium is still higher than what would be charged by a conventional lender.

2.     Not all borrowers will qualify for a 3% down payment loan.  Prospective borrowers must have enough income to afford the monthly payments (that seems a no-brainer).  The home must be the buyers’ primary residents.

3.     Some of these programs require that the buyer earn less than the median income (not sure if this is location specific or not).

This last item may eliminate some borrowers immediately as their income may be too great, but typical for their area, or, it would not be enough to carry a mortgage on a house in that locale, due to home prices.

Another thing to keep in mind is that traditional lending institutions may have more stringent loan requirements.  This is may have been triggered by the government’s imposition of a “loan buyback” program, where the lender may be required to take back the servicing of the loan because of some snafu in the paperwork, etc.   Regulators are looking into ways to make this scenario easier for banks to navigate, which may ease lending requirements.  Stay tuned.

Remember the lifetime of the loan in considering its final cost.  A longer loan at a lower rate will cost you more in the end, provided you stay in the home for more than the national 3-5 year average. 

In the end, it is still a better scenario for buyers to bring more money to the table.  Buying a home not only provides a place to live, but an opportunity to create equity over time and long-term security.  Mortgage rates on all fronts are expected to continue to be in the lowest ranges in history but home prices are anticipated to rise.  If you are considering your first-time home purchase, now is the time.  Real Estate continues to be one of your best investments.  And you can sleep in it!

Massachusetts Homes Sales Steady Through September 2014 and on Martha's Vineyard too

Several groups publish real estate sales data.
On a national level, the Standard & Poor's/Case-Shiller Index reports on residential sales in 20 cities across the country.  They report that, through the end of September, prices rose 5.6 percent in August, down from the same period last year, which showed a double-digit price increase trend.  This slowdown has been attributed to several factors, but primarily to a return to a slow and steady growth pattern in the economy and therefore in housing as well.
On a more local level, the Massachusetts Association of Realtors and The Warren Group, report that sales in Massachusetts have dropped a bit in September from levels seen in September 2013, while median home prices have stabilized.  The two agencies differ in their actual numbers/percentages, but both report this slowdown in sales and leveling off of the median home prices in Massachusetts.
On Martha's Vineyard, sales for the period January - September 2014 total 260 for single family homes, with a median price point of $585,500 and an average of 225 days on the market.  The same period in 2013 had sales of single family homes totaling 263 with a median price point of $600,000 and 289 days on the market.
Our market seems to be following the state and national trends.
Another factor that we have often seen influencing sales is the election cycle.  With several major state and senatorial seats in contest, many potential buyers and sellers adopt a "wait and see" attitude when it comes to their real estate interests.
Other factors that can impact sales include the international turmoil and accompanying threats to the USA and the spread of the Ebola virus.
Interest rates remain stable and there are some qualification and oversight changes in the works for lending institutions that will take effect in 2015, so we can expect some improvements in the lending field for buyers.  That, and the elections and incoming representatives (whoever they may be), should spur new activity in the New Year.
Plan now to make your real estate ownership dreams a reality.  Call a professional.

7 Tips for Home Sellers Regarding Energy!

From "Ready. Set. Sell. How Energy Efficiency Can Help Sell Your Home"

1. Get a home energy evaluation to spot ways to make your house cooler in summer and warmer in winter.  It will give you a plan for energy efficiency, an attractive selling point.
2. Swap in high-efficiency, compact fluorescent (CFL) light bulbs that will cut your utility bills immediately.
3. Improve insulation which can trim up to 20% off heating and cooling bills, according to Energy Star.
4. Install low-flow faucets and shower heads and save between 25% - 60% on water.
5. Use programmable thermostats to help cut heating and cooling costs by 5% - 15%.  Check out Nest thermostats.
6. Consider investing in solar power to save up to 25% on electric bills and add $20,000 to the value of a home for each $1,000 in annual energy savings.  Massachusetts currently offers some tax incentives to install solar panels.
7. Document your improvements and energy savings so real estate agents can give that info to buyers.

Check out the website NextStepLiving.com for more information.

This article was in the Bay State Realtor magazine, a benefit of being a Realtor.  Hire a professional.

Bottom Line - The Fed study found...

              .....that homeownership is still a great way for a family to build wealth in America.

Buying A Vacation Home? Here Are 6 Important Considerations

Whether your purchase is for personal or investment use, here are some key criteria to consider when assessing your choices.

1. Keep costs within your budget.  Get pre-qualified for a loan before looking for that dream vacation home - unless you are paying cash.  Consider these ongoing costs that come with a second home and how much ongoing income you will need to  meet these obligations.  These are costs incurred whether you rent the home or not.

• Monthly mortgage
• Real Estate Taxes.
• Municipal assessments
• Maintenance
• Homeowners insurance
• Flood insurance (see my earlier article on this!)
• Furnishings
• Caretaker
• Emergency fund
• Travel costs for you to visit the property

2.  How often are you going to use it?  Is it a 2 hour drive, a one hour ferry ride or a combination that will make it difficult to arrange for that amount of time.  Are family and friends a consideration in deciding on a location?  If so, where are they coming from?  Is the house suitable for use in the "shoulder" seasons?

3.  Let's talk location.  If the beach is important to you - the house you select should be close enough that you can get their.  Additionally, if that is the paramount reason that someone would want to rent your property, make sure it fills that bill.  Beach is not the only consideration.  Think about transportation to and from the house, to town, to other recreational activities.  Don't buy a house out in the woods, far from everything, unless you are using it to write the next great American novel and need the solitude!

4.  Maintenance.  The lawn will still need to be mowed even if you are not here.  And, do you want to spend your vacation time mowing grass?  Painting trim?  Winterization?  Some areas have homeowner associations who will let you know if you are not keeping your property up to par, but you can't depend on that - you'll want/need a caretaker.  Many areas of vacation homes have a proliferation of property managers.  Get recommendations though, because the last thing you want is the call that water is pouring out of the windows of your vacation home!

5.  Income Potential.  Find out about the rental market.  What is the vacancy rate?  What will it cost you to list your property on one of those vacation rental sites?  Can you handle the calls and money or should you hire a local professional?  If so, what will they charge?  A local rental agency can give a realistic price range/date range for the rental of your property and provide some other useful services, such as meeting and greeting your tenants and handing over and collecting keys.  All of this effects your bottom line, so don't be too easily swayed by the weekly rental number and remember, you are opening your home to people you don't know.  Be prepared.

6. Selling Out or Trading Up.  A second/vacation home is not usually a forever home, so gaze into your crystal ball and think about where you want to be in 5 years or 10 or whatever number and gauge how this property will fit into that plan.  Will the property hold its value or are the kids hoping you'll pass it along to them.  And consider the tax consequences.  There could be capital gains taxes, depreciation recapture, etc.  You need to factor this into the decision to buy that second home.

Your real estate professional is here to assist you in making this important decision and in answering these important considerations.  A summer home can be yours - happily!

Disclose Encroachment

Disclose Encroachment

How does a listing agent know when to disclose property line problems?

MAY 2014 | BY BRUCE AYDT

Q: A neighbor’s fence cuts into the seller’s lot. As the listing agent, should I disclose that?

A: Article 2 of the Code of Ethics requires REALTORS® to avoid “exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. REALTORS® shall not, however, be obligated to discover latent defects in the property.”

The Code of Ethics and Arbitration Manual discusses “pertinent” facts: “Absent a legal prohibition, any material fact that could affect a reasonable purchaser’s decision to purchase, or the price that a purchaser might pay, should be disclosed . . . if known by the REALTOR®.”

Included in the concept of pertinent facts is a fact that may affect “the potential purchaser’s ability to resell the property at a future date.” The encroachment of the neighbor’s fence onto the property of the listing clearly may affect what a reasonable buyer may decide to purchase in that the title to the property has some “flaw” or “cloud.” The encroachment may also affect the buyer’s ability to sell the property in the future unless the encroachment is resolved.

Unless the seller can work with the neighbor to resolve the problem, that encroachment is likely a pertinent fact that should be disclosed to a prospective buyer. Most likely this sort of encroachment would also be required to be disclosed on a seller’s disclosure statement, whether the disclosure statement is required by law or by practice. Even if the encroachment is considered “minor,” it may still be considered pertinent by a hearing panel in an ethics complaint. As in any question of disclosure, the best practice to stay within the Code is “when in doubt, disclose.”

I've had this question raised many times, regarding several different topics, and it always comes back to the question "If it would impact a buyer's decision to purchase the property, it should be disclosed."  And the Golden Rule with a twist - wouldn't you want to know if you were the buyer?

Your Secret Credit Score

So, you’ve been diligent; paying your bills on time; checking your Free Credit Score periodically.  Everything looks great and you’re ready to buy a house.  You’re confident and you make an offer on the home of your dreams.  You meet with your mortgage broker and fill out all the paperwork to apply for that mortgage, confident that your good credit score is going to put you in that house at a great rate.

Surprise!

Your mortgage broker sends you a commitment letter with terms you don’t understand.  How could they be asking you for more information, and offering you a higher rate than you expected?

You have a secret credit score.

That free credit report you get so easily is not the credit report that your mortgage lender will see.  And now you have only a short period of time to “fix it”, if you can! 

How to avoid this?  Get your mortgage broker (or friendly banker, if you’re early in the purchase process) to run your credit and review it with you.  You’ll see things there that you may have time to dispute and correct.  The credit bureaus have a process for disputing charges and things like duplicate accounts, mixed identities, etc., but you’re going to have to direct that process.  There was a recent news article about this process and the lax attention and zero responsibility that the credit bureaus have for correcting bad information on you.

Also, if your credit report is “pulled” too many times, it lowers your score!

Unfair - yes!  So, be proactive and protective of your credit health.  Review your real credit score/report and get on with making your real estate dreams a reality!