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AUG
27

If you have student loans and want to own a home – whether in the next month, next year or next decade – you need to manage how your student loans affect your debt-to-income ratio and overall credit score to ensure you’ll be approved for a mortgage when the time comes. Here are the main things to keep in mind.

Your Debt-to-Income Ratio

 A debt-to-income ratio is one way lenders measure your ability to manage and meet your monthly loan payments. If you’re applying for a mortgage, a lender will calculate your debt-to-income ratio by adding up all your monthly debt payments, including your expected mortgage amount, and dividing them by your gross monthly income – the amount you earn before taxes and other deductions.

Debt payments include mortgages, auto loans, student debt, credit card debt and any other installment or revolving debt. It does not include other budget expenses such as utilities. Some lenders may not approve you for a mortgage if your debt-to-income ratio exceeds 43 percent.

The Role of Your Student Loans

Let’s say you’re a recent college graduate earning $45,473 annually –  the average for the college class of 2014. Your gross monthly income would be about $3,789. You have a car loan monthly payment of $200 and a credit card payment of another $200. On top of that, let's say you have $30,000 in student loans, about the average amount of debt for graduating college seniors. Assuming this is an unsubsidized Stafford loan at 4.6 percent interest, you may have a monthly payment of $312.

Now, let's say you’re applying for a home loan of $222,261 with a $1,061 monthly payment – the national average. Your total monthly debt payments would total $1,773 and your debt-to-income ratio would be around 46 percent, putting you over the 43 percent threshold and potentially out of luck for buying that particular house. Potentially.

Options to Manage Your Loans

While your car and credit card payments can’t be adjusted without refinancing the auto loan or paying down your credit card balance, any federal student loans have some flexibility. Using the example above, switching your student loan repayment plan from standard to graduated would result in a monthly payment of just $176. That reduces your debt-to-income ratio to 43 percent, potentially increasing your chances of being approved for the mortgage.

It’s important to recognize that the graduated plan assumes your salary will rise in the next few years. Your student loan payments start low with this plan but then accelerate. The last thing you want, is to take on a mortgage that you can’t afford if your student loan payments rise. If you don’t think your salary will increase anytime soon, you may want to check out some other repayment options like income-based plans.

Ways to Elevate Your Credit Score

Student loans can also affect your mortgage approval in that they are an important factor in your credit score. Paying your student loans on time each month is an excellent way to build good credit.  

A lender will use your credit score to not only evaluate whether your mortgage should be approved, but also to determine your mortgage’s interest rate. Borrowers with higher scores are eligible for lower interest rates and more loan choices, while subprime borrowers face higher interest rates, less eligibility for different varieties of loans and possibly even denial of their mortgage request. 

Federal student loans are usually reported to credit bureaus as delinquent after 60 days of no payment; private loans may be classified as delinquent – or even defaulted – after just one missed payment. If late student debt payments are dragging your credit score down, contact your student loan holder to talk about getting your payments back on track. 

You can bring your account current by making all the payments you’ve missed, switching to a different payment plan or temporarily postponing payment and halting any more damage to your credit report. If you’ve defaulted on your student loan, you can rehabilitate your loan back to good standing and remove the default from your credit history – though the delinquency will stay.

If you are planning to take on more student loans and you want to buy a home soon after you leave college, stick to federal student loans and avoid private loans if possible. The flexibility to lower your monthly payments can be crucial to maintaining a healthy debt-to-income ratio and credit score.

Total Deferment

Also keep in mind you can also have your student loan temporarily deferred for about one year. With the deferment, the lender will not factor the amount of the student loan into your debt to income ratio, making it possible for you to purchase more home, providing you can afford to make the payments without stress. 

AUG
21

THE ECONOMY

  • The Consumer Price Index rose slightly in July, but inflation is still not a concern. Inflation leads to higher rates, so no risk of inflation helps rates remain low.
  • The minutes from last month's FOMC meeting showed the Fed is struggling to justify raising policy rates. Expectations of a September rate increase are falling.
  • Problems in China's economy and low oil prices are causing global concern. Mortgage bonds are benefitting from the weakness, supporting lower rates.

HOUSING NEWS

  • The Homebuilder Index rose to its highest level in almost a decade. Homebuilders view market conditions as favorable and are optimistic about future sales.
  • Housing starts rose to a near 8-year high in July, led by construction of single-family homes. A strong housing market indicates an improving economy.
  • Building permits were down slightly in July, but that follows three straight months of hefty increases. Permits are expected to improve again for August.
AUG
14

When you decide to buy a home, in addition to the cost of the home, you will also have costs that fall into two categories. One category is fees associated with the loan and its processing, the work performed by the title company and its attorney, title insurance, first year property insurance payment, and in some cases fees payable to Surveyors or other service..

 The second broad category are Pre-Paid Items. The Lender will generally require an escrow account be established to capture funds for  payment of property taxes and insurance if your downpayment is less than 20%.

HERE ARE THREE REASONS TO SERIOUSLY CONSIDER ROLLING CLOSING COST INTO YOUR LOAN

  • If you are confident that you will not have to move or sell this home within the next five-years (ten-years would be better, but it's really impossible to see the future)
  • if paying the Closing Costs out of pocket will eliminate your cash reserves. 
  • If your current living arrangement will be significantly improved if you move into this home.
AUG
14

THE ECONOMY

  • The Chinese devaluation of their currency, the yuan, created fear of a global currency war. Traders turned to the safety of bonds, which was good for rates.
  • Global economic weakness has experts questioning if the Fed will be able to raise policy rates in September. A Fed rate hike in 2015 still looks likely though.
  • Our economy continues to show momentum while others are weak. Last month's retail sales improved and jobless claims remain low, supporting Fed action.

HOUSING MINUTE

  • Home prices rose year-over-year in nearly every metro area in the second quarter. Home demand continues to be fueled by rent increases and low rates.
  • Fannie Mae's monthly housing survey found consumers expecting home prices to continue to rise. The survey indicates the housing market is continuing to improve.
  • Smart home technology is already starting to impact buyers' purchase decisions. Features like automated lighting and temperature control are gaining popularity. 

INSPIRATIONAL MINUTE

“ In the realm of ideas, everything depends on enthusiasm; in the real world, all rests on perseverance. ”
— Johann Wolfgang von Goethe

 

JUL
27

 There are a number of things that can be done to prepare for a home inspection.  The buyer or real estate agent should work with the seller to ensure that: 

 

  1. The utilities are turned on
  2. Pilot lights are lit for any heating or cooking appliances that will be inspected
  3. Heating units are accessible
  4. Electrical panels are accessible and unlocked
  5. The attic area is accessible and cleared of stored items
  6. Crawl space entrances are accessible and unlocked, and that they are not screwed or nailed shut
  7. Showers and bathtubs are free of stored or personal items
  8. Sinks and dishwashers are cleared of dishes, and the area beneath all sinks should be free of stored items
  9. Any pets are secured for the inspector's safety
  10. All items and areas to be inspected are readily accessible

 
1.  The utilities are turned on.
      
      Electric, gas and all other utilities should be working so that your inspector can properly test and operate all the systems and components in the home. Some home inspectors may charge a fee to return to the home and inspect anything that they could not properly inspect or test the first time, so don't overlook this!

2.  Pilot lights are lit for any heating or cooking appliances that will be inspected.
     
Home inspectors will NOT light pilot lights for stoves or heating units. These units need to be operational at the time of inspection. Put yourself in the inspector's shoes for this one: would you want to walk into an unfamiliar home and ignite an appliance that may not have been properly maintained or repaired? For an inspector, it's an invitation to a disaster or a lawsuit, and a home inspector WILL NOT take that chance. 

3.  Heating units are accessible.

    This means that the area around the furnace, boiler or other heating appliance is free of stored items and clutter. Your home inspector is not required to (and in most cases WILL NOT) move items away from the heating unit in order to do his or her job.   

4.  Electrical panels are accessible and unlocked.

    All electrical panels and sub-panels should be readily accessible so that the inspector can remove the panel cover and inspect the wiring within. Also, be aware that a home inspector may refuse to inspect an electrical panel if part or all of the panel or distribution box is wet, or shows signs of fire damage or short-circuiting.

5.  The attic area is accessible and cleared of stored items.

     The attic of a home is a very important area. By inspecting the attic, a home inspector can diagnose the causes of roof damage or premature roof failure, mold, ice dams, and many other problems with the home. This area should be readily accessible. Your home inspector needs to be able to get into the attic, first of all. Scuttle holes, walk-up accesses and pull-down stairs should be unobstructed and free of stored items so that an adult male can enter freely. If access to the attic is gained through a closet ceiling, then the closet area should be free of clothing and other stored items in order to allow the inspector to place his ladder there and climb into the attic. 

    In the attic area, be sure that all areas of the attic are visible and accessible. Remember - a home inspection is a visible evaluation of the home....if it is not visible, it cannot be properly inspected.  

6.  Crawl space entrances are accessible and unlocked, and that they are not screwed or nailed shut.

     Another important area of the home is the crawl space. Let's face it...nobody likes to go down there. Crawl spaces hold all kinds of unsavory things: rodents, snakes and spiders, not to mention plumbing, electrical and structural components that are rarely seen. So it stands to reason that the crawl space is one of the least maintained areas of a home, but one of the most important.  Be sure that your inspector can gain access to the crawl space to view the floor structure, wall structure and any plumbing or electrical components in that area of the home. If you contact a home inspector and they state that they do not inspect crawl spaces, look for another home inspector. But be aware that your inspector is within his rights to refuse to enter a crawl space if the area presents an obvious health hazard such as standing water, leaking sewage, evidence of rodent activity, evidence of snakes or other life or health-threatening situations. 

7.  Showers and bathtubs are free of stored or personal items.

    One aspect of the plumbing inspection is running water into tubs, showers and sinks in order to look for leaks and obstructions, and to ascertain that the plumbing fixtures are in good working order. Obviously, if the tub is full of clothes or other items, your inspector will not run water into it and will not be able to properly inspect the plumbing components.    

8.  Sinks and dishwashers are cleared of dishes, and the area beneath all sinks should be
     free of stored items.

    A home inspector needs to be able to see and freely inspect the plumbing and drainage components for sinks, dishwashers and garbage disposals. Be sure that the inspector is able to access these areas so that YOU can be sure that everything is in good working order. 

9.  Any pets are secured for the inspector's safety.

     Even chihuahuas can turn into Cujo when a new person shows up in their home. You, or the home seller, may think that the dog is not a threat, but bear in mind that the dog doesn't know the home inspector, and the home inspector doesn't know the dog. Unfamiliarity can sometimes breed contempt: the dog has never seen the inspector and may view him or her as a threat. Your inspector is there to sniff out problems in the home, and may not have an extra half-hour to gain Fido's trust. It is always best to tie or otherwise secure any pets during a home inspection. An important note about cats; cats may not pose a threat to the inspector but cats love running out of the house and getting into the attic. Nobody want to spend hours looking for the lost cat. Please secure them too.

10.  All items and areas to be inspected are readily accessible. 

    This may seem redundant, after discussion about crawl space accessibility, attic accessibility, etc. But it bears repeating. 

    Home inspectors will not normally move items out of the way to inspect systems or components, and most inspectors will take pictures of obstructed areas to document that there were items in the way at the time of inspection in order to absolve themselves from litigation issues. So if an area is not accessible and visible, the home buyer is ultimately the person who is short-changed after paying several hundred dollars for an inspection.  In my experience, home inspectors are very qualified in general...rarely have I encountered

JUN
3

The latest daily real estate market news collected on a single page

CoreLogic’s Home Price Index Report showed:

  • A 2.7 percent increase in home prices month over month in April 2015.
  • A 6.8 percent increase in home prices year over year in April 2015 (from April 2014).
  • A foreof a 1.1 percent increase in home prices month over month from April 2015 to May 2015.
  • A foreof a 5.3 percent increase in home prices year over year from April 2015 to April 2016.

Zillow Mortgages reported:

  • The 30-year fixed mortgage rate is 3.78 percent, down one point from last week.
  • The 30-year fixed mortgage rate was 3.74 percent for most of the week before rising today to its current 3.78 percent rate.
  • The 15-year fixed mortgage rate is 2.93 percent.
  • The 5-1 adjustable-rate mortgage rate is 2.8 percent.

Diana Walton

281.923.1118

MAY
26

Residential rents in the United States grew 4% year on year in April, overtaking home values growth which was at an annual rate of 3%, the latest data shows.

It means that rents grew at their fastest pace in two years in April, and surpassed home value growth in 20 of the 35 largest US housing markets, according to the data from real estate market report firm Zillow.

Rents reached $1,364 and home values reached an average of $178,400 and growth in home values is expected to slow further in the second half of the year as the for sale housing market stabilizes.

The switch comes after years of rapid home value increases and has been boosted by the improving economy. The Zillow report points out that US home values peaked in 2007, and then crashed during the recession between 2008 and 2010. Since then, they have risen rapidly, returning to their peak levels in many markets.

Home values have both risen and fallen over the past decade, but rents have been steadily rising. Indeed, rental growth has been outpacing home value growth for several months in some of the nation's hottest markets.

In San Francisco, rents started rising faster than home values in July 2014, and have been growing faster ever since on an annual basis. In Boston, annual rental growth has outpaced home value appreciation since August 2014.

The report points out that low mortgage rates have helped make buying a home much more affordable than renting. On average, US home buyers can expect to spend about 15.3% of their income each month on a typical house payment. Renters can expect to spend about 30% on a monthly rent payment.

‘There are tremendous incentives to get into home ownership these days: mortgage access is improving, interest rates are low, and home values remain below prior peaks,’ said Zillow chief economist Stan Humphries.

‘But it will be increasingly difficult for many renters to realize these benefits as this country's growing rental affordability crisis continues to worsen. More income going to rent means less going to savings for a down payment and other costs, keeping renters renting longer and feeding into the high demand that is contributing to rising rents in the first place,’ he explained.

‘This cycle will be difficult to break, and is a symptom of the imbalances that still exist in the housing market as we struggle to get back to normal. New construction and rising wages will help, but neither is coming very quickly,’ he added.

Over the next year, home value growth is expected to slow even further, to 2% annually, according to the Zillow home value forecast. In 2014, home values rose 4.9%.

MAY
18

Many prospective homeowners want to know, what is an FHA loan? What are the advantages over other types of loans? For many potential home buyers, an FHA loan presents you with several advantages over a traditional mortgage. The FHA is a government-backed program that attempts to give home buyers a leg up on the mortgage market. Here are a few aspects of an FHA loan.

Government Guaranteed

The most important aspect of an FHA loan is that they insure the loan against default. This means that if you cannot pay off the loan, the FHA will repay the lender. Therefore, it represents a very low risk opportunity for the lender. With this type of guarantee, mortgage lenders can provide mortgages to many people that they otherwise would not. It helps people with lower credit scores and those who do not have enough income to qualify for the mortgage that they need. It opens the door for almost anyone to own a house.

No Restrictions

Unlike many other loan programs out there, there are no restrictions on who can get an FHA loan. You still have to display a certain level of creditworthiness, but you do not have to be a part of a certain group to qualify. For example, you do not have to be a veteran in order to get an FHA loan. You simply walk into your local mortgage lender and ask to apply for an FHA loan. Most lenders work with the FHA to provide loans in every market. Therefore, the access to this type of loan is unparalleled in the industry.

Low Down Payment

Another way that FHA loans help buyers is with a reduced down payment. With this type of loan, you can realistically expect to put about 3.5 percent down on the house. With a regular loan, you might be required to put down as much as 10 to 20 percent. This can add up to a substantial amount of money and eliminate many potential buyers. If you think you do not have enough money saved up for a down payment to buy a house, an FHA loan is definitely something that you should consider.

Upfront PMI

With FHA loans, they will charge you an upfront fee to cover mortgage insurance. Their closing costs can be lumped into the loan, so you have to be careful to see what you are paying. In some cases, this fee can actually add up to more than PMI with a normal mortgage would. The upfront mortgage insurance premium usually works out to about 2.25% of the loan amount. On a $100,000 loan that works out to $2250 in mortgage insurance. 

In addition to the upfront mortgage insurance premium, you will also have to pay a monthly amount for mortgage insurance. In most cases, this is about 0.55% of the loan amount. Therefore, you have to consider your options carefully with this type of mortgage. You will save in some areas and pay more in others. Compare your options and decide if an FHA loan is right for you.

APR
20

Summer is hot, and if your home isn’t prepared for the warmer weather, your utility bills can increase significantly. Rather than spending a fortune over the next few months, why not take steps to prepare your home and make it more efficient? Here are some steps to help:

1 Find and fix air leak
To prevent your air conditioning bill from skyrocketing this summer, find the leaks in your home and plug them up. Look around your windows and doors and in the attic for any air leaks. You might need to add more weather stripping around your doors and windows. In your attic or basement, there’s a chance that holes have formed in your insulation, allowing air to leak out. In such cases, you’ll need to call a professional to insulate the areas that need it. This project needs to be handled by an insulation pro because certain types -- especially loose fill and blown-in insulation -- are hazardous to your health if ingested.

2 Upgrade your thermostat
Another way to keep your air conditioning bills down this summer is to upgrade your thermostat. If you live in an older home, there’s a good chance your thermostat is outdated and wasting energy. Now is the time to upgrade to a programmable thermostat. These devices save at least 10 percent every month on your bill, and they also help cool your home efficiently. Set it as high as possible when you leave your home during the day to cut costs. Then, when you come home, you can turn it down to cool things off. There are some types of programmable thermostats that adapt to your patterns and can adjust as needed as well.

3 Repair or replace windows
Windows are one of the greatest sources of air leaks and heat, which can dramatically increase your utility bill during the summer. Make any necessary repairs to your windows. And, because hollow metal allows air to get through easily, replace outdated aluminum frames with wood alternatives whenever possible. You should also think about replacing single-pane windows with their double-pane alternatives. This makes your windows more energy efficient because double-pane windows reflect sunlight better and insulate your home. There are even Energy Star-certified windows that are known to cut down energy costs by almost 15 percent.

4 Change air filters
Summertime is the best time to think about changing your air filters. HVAC air filters build up a lot of dust and grime over the winter when your heater is running. When spring and summer roll around, you need to change them out so the HVAC system runs more efficiently and keeps your air conditioning costs down. Clean air filters help your air conditioner work smoothly; a dirty air filter keeps cold air from getting out, which makes your A/C work harder to push the air out. So save some money and do this easy task in half an hour or less.

5 Clean air vents
Along that same vein, your air conditioning will work harder if the vents are dirty and musty. Vents cool every room in the house when the cold air pushes through the filter and into the vents, releasing cold air in a room. If the vents are covered in dust and grime, less air comes out, and there’s a chance the dust and dirt comes with it. So don’t let your room get covered in dirt or make your A/C unit work overtime. Hire a professional to clean your ducts and vents for between $250 and $450. It can significantly lower your cooling bills during the summer and prevent extra cleaning.

6 Add ceiling fans
Another way to cut down on cooling costs this summer is to find an alternative. Rather than keeping the A/C on all day, why not turning on the ceiling fan? If you don’t have a ceiling fan in a room, you can always have one installed. The cost to install a ceiling fan averages between $150 and $300, but adding one could add up to a lot of savings over the summer. Ceiling fans push down cool air while pulling up hot air into the ceiling. They use a lot less power than air conditioning units and will pay back their initial cost quickly in what you save on the utility bill every month. You’ll be able to turn the thermostat up without feeling a real change in temperature. Fans create a chilly effect in the room that will leave you feeling cool and comfortable on a warm day.

7 Update light fixtures
One other way to keep your costs down is to replace all of your hot incandescent and fluorescent bulbs with their CFL and LED alternatives. Incandescent and fluorescent bulbs give off a lot of heat, which contributes to the internal temperature of the house. Rather than spending extra money to cool your home, why not spend some money on bulbs that give off no heat? CFL and LED bulbs are just as bright, and they are energy efficient and emit no heat when they’re on in a room. This means the internal temperature of your house won’t be affected when they’re on and you can turn more on. Although they cost more upfront, they’ll pay back quickly in how much you’ll save every month on both the electric bill and cooling costs.

 

Source: HomeAdvisor.

APR
13

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