Print written by Steven Hyman on Sunday, June 28, 11:35AM
The tightening lending requirements by the banks have made it very hard for some people to get a mortgage. For others, it's outright impossible. Today the banks are overreacting to the liberal practices they had in the past by requiring almost all loans to be fully documented with tax returns, bank statements and higher credit scores. The only thing they haven't asked for yet, is a copy of your latest physical exam with the meds you're on to make sure you're healthy enough to make payments. But who knows, that may be required next week.
This overreaction has really made it tough for many groups of people who have done everything right and are sitting on a pile of equity. With stock portfolios down and loans for lines of credit hard to find, getting a hold of cash is much harder.
The tough lending standards have really impacted senior citizens. Even though many older couples may own their homes, have 401Ks, and have social security income, they still might not qualify for a loan in today's environment. Recently, I've seen a few well established clients turned down for small loans. A year ago this would have been a no-brainer.
Reverse mortgages
Well there is good news for these people with special type of financing that's offered through U.S. Dept of Housing and Urban Development (HUD). It goes by the long name of Home Equity Conversion Mortgage Purchase Program (HECM) but most people know of it as Reverse Mortgages.
A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that built up over years of home mortgage payments can be paid to you.
I won't go into the lengthy details, but here are some key benefits:
1. To qualify, you must be 62 years of age or older and this must be your primary residence.
But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. Once the property is no longer your primary residence, the loan must be repaid. This can be done by either refinancing the property or selling it.
Here's an example of how this could work for you. Let's say you own your home free and clear, have a small mortgage balance or wish to downsize to a smaller home worth $500,000. With a reverse mortgage, you could borrow up to $232,000 with the balance being your equity. To qualify for this loan, you do not need to show any tax returns or proof of income. No credit score is required either. Your monthly payment for this $232,000 mortgage is $0 — as long as this remains the primary residence for you or your spouse. Let me repeat that, your monthly payment for the life of the loan remains at $0. Once your property is either refinanced or sold, all remaining equity after repaying loan and accrued interest is passed on to you or your heirs. Loan proceeds are not considered income and will not affect your social security or Medicare benefits. One more benefit, all the proceeds are tax-free and federally insured by HUD.
2. With a reverse mortgage, you can borrow the money in a lump sum or small increments through a line of credit as you see fit.
The loan can be used to pay medical expenses, make home improvements, pay for in-home care, supplement your income and much more.
With access to cash limited today and stock prices down, this may be worth exploring. It's always good to have a cash cushion because you never know when unexpected expenses come up.
When it comes to important decisions like this it's wise to talk with your family, your financial adviser and attorney to make sure this is going to work best for your particular situation and your long term goals. One thing you should avoid is anyone trying to sell you an annual annuity because it's not needed and is a large additional expense. It's also a good idea to speak with a few lenders to make sure you are getting the best deal.
Steven Hyman is the Broker & Owner of Century 21 Sunset Properties. He can be reached at 650.726.6346 or at www.century21sunset.com.
digg this
save to del.icio.us
Print written by Amy Le on Friday, March 20, 4:36PM
The S&P/Case-Shiller U.S. National Home Price Index plunged 18.2% during the final quarter of 2008, the biggest annual decline in the closely watched index's 21-year history. Separately, for the month of December alone the Case-Shiller 20-City Composite Index fell 18.5% compared with the previous December, also a record decline.
The seven worst performing cities in terms of year-over-year declines continue to be from the Sunbelt, reporting negative returns in excess of 20%. Phoenix was down 34.0%, Las Vegas reported -33.0% and San Francisco fell 31.2%. Denver, Dallas, Cleveland and Boston faired the best in terms of annual declines down 4.0%, 4.3%, 6.1% and 7.0%, respectively.
Metropolitan Area Home Price Index 1-year change (%)
• Atlanta, GA: -12.1%
• Boston, MA: -7.0%
• Charlotte, NC: -7.2%
• Chicago, IL: -14.3%
• Cleveland, OH: -6.1%
• Dallas, TX: -4.3%
• Denver, CO: -4.0%
• Detroit, MI: -21.7%
• Las Vegas, NV: -33.0%
• Los Angeles, CA: -26.4%
• Miami, FL: -28.8%
• Minneapolis, MN: -18.4%
• New York, NY: -9.2%
• Phoenix, AZ: -34.0%
• Portland, OR: -13.1%
• San Diego, CA: -24.8%
• San Francisco, CA: -31.2%
• Seattle, WA: -13.4%
• Tampa, FL: -22.0%
• Washington, DC: -19.2%
Source: Standard & Poor's and Fiserv
Data through December 2008
Got hot local housing tips or a story you want to share? Contact Amy Le at openingdoorsblog@HomeFinder.com.
Print written by Amy Le on Friday, March 20, 2:49PM
Lately, it seems like every time I turn on the television or open a newspaper there's another big company announcing plans for massive layoffs. And for many people, the headlines have become their reality. I personally know a handful of people who lost their jobs this year and a handful more who are concerned they are the next to be let go. With a cloud of uncertainty looming over our heads, it's no wonder most people aren't out spending on big ticket items like cars and houses.
But for some retailers, waiting out the economic downturn isn't the answer. To help lure consumers off the sidelines, some retailers have decided to up their promotional antics by offering 'risk-free guarantees.' I'm sure you've all seen the Hyundai ads by now. HYUNDAI AD: 'Now, finance or lease any new Hyundai, and if you lose your income in the next year, return it to us with no impact on your credit.' Hyundai recently tacked on extra guarantees to the promotion. If you lose your job, they'll cover your loan payments for up to three months. Meaning, you keep the car.
Toll Brothers' mortgage protection plan
The executives over at Toll Brothers Inc., a luxury home builder, must have been watching these ads too. Earlier this week, the company announced a promotion they're calling their 'mortgage protection plan.' But unlike the Hyundai promotion, you can't give back the house if you lose your job. If you do get laid off, Toll Brothers will cover your mortgage payment — up to $2,500 for six months. The mortgage insurance may also cover up to six months of principal, interest, homeowner's insurance and real estate taxes. Toll Brothers, however, won't pay your mortgage if you're self-employed or own part of the company, or if you lose your job due to misconduct, disability or hospitalization.
The policy is also set up to pay out a percentage of a household's lost income if there are multiple borrowers. For example if one spouse loses their job and contributes 50% to the household income, the mortgage protection plan would pay 50% of the couple's housing costs.
To be eligible for the insurance payouts, homeowners need to have worked at least 30 hours a week and been continuously employed for 12 consecutive weeks before losing their job. Another stipulation of the Toll Brothers' promotion is that the mortgage insurance policy is being offered to people who only finance their homes through the company's TBI Mortgage unit.
Now if Toll Brothers can just guarantee that your new home won't be worth less in six months, then this would be a deal too good to pass up.
Got hot local housing tips or a story you want to share? Contact Amy Le at openingdoorsblog@HomeFinder.com.
Print written by Amy Le on Wednesday, February 18, 10:41AM
As more abandoned buildings and foreclosed signs dot the streets of neighborhoods across the country, two U.S. metro areas have been hit hardest by the housing market meltdown. Forbes.com recently reported that Las Vegas edged out the Detroit for the title of America's most abandoned city.
Atlanta came in third, followed by Greensboro, N.C., and Dayton, OH. Their rankings, a combination of rental and homeowner vacancy rates for the 75 largest metropolitan statistical areas in the country, are based on fourth-quarter data released Feb. 3 by the Census Bureau. Each was ranked on rental vacancies and housing vacancies; the final ranking is an average of the two.
Metro declines and growth
Rapid industrial decline over the last decade has paralyzed the economic growth of cities like Detroit and Dayton. Others, like Las Vegas and Orlando, are mostly victims of the recent housing down turn. Boston and New York are among the lone bright spots, while Honolulu is the nation's best with a vacancy rate of 5.8% for homes and a scant 0.5% for rentals, according to Forbes.com.
Forbes reports that empty neighborhoods are becoming an increasingly daunting problem across the country. The national rental vacancy rate now stands at 10.1%, up from 9.6% a year ago; homeowner vacancy has edged up from 2.8% to 2.9%. Richmond, Va.'s rental vacancy rate of 23.7% is the worst in America, while Orlando's 7.4% rate is worst on the homeowner side. Detroit and Las Vegas are among the worst offenders by both measures — the Motor City sports vacancy rates of 19.9% for rentals and 4% for homes; Sin City has rates of 16% and 4.7%, respectively.
From boom to bust
Detroit rose to fame as an automobile giant when Henry Ford built his first Model T automobile in 1904. William Durant, the Dodge brothers and Louis Chevrolet quickly followed, elevating Detroit to prominence as the nation's automobile capital. Although many of these factories have since relocated, Detroit still remains the hub for General Motors, one of the world's largest car makers. Many economist blame rapid suburbanization, outsourcing of manufacturing jobs and a lack of economic diversity for the city's precipitous decline.
While Las Vegas is uniquely different from Detroit, it is still yet to be seen if the 'Entertainment Capital of the World' will be able to fully recoup from the housing market bust and regain its title as the fastest growing city in the country.
Read more about Detroit and Las Vegas housing market.
Print written by Frank Schulte-Ladbeck on Monday, March 30, 7:33PM
As of February 1, 2009, home inspectors in Texas began using a new property inspection report. This new form reflects changes in a home inspector's standard operating procedure as defined by the state, but it is also meant to clarify what a home inspection entails (i.e. what you can expect from your home inspector). To help consumers understand how this will impact them, I thought I'd give a summary of the more significant changes in the report.
The first major change to the property inspection report can be found in the opening paragraph. The old form had a readable opening, but it took some careful reading from consumers to fully understand. In the new report, we have a longer introduction written in fairly clear terms. But the most significant change is in how items are reported. We use to state that an item was 'in need of repair' (this was indicated by checking the 'R' box); however, consumers were confused by the fact that we checked this box when an item did not need to be repaired. Sometimes a home inspector may have been indicating that there is a feature that we consider important, like a GFCI outlet in the kitchen, but the outlets in the kitchen worked. Now inspectors are looking for AFCI breakers for the bedrooms.
This is a nice safety feature, but it should be up to the consumer of the report to decide to have these installed. That is the main point. By stating 'in need of repair,' there was an impression that an item had to be fixed, but this was never the case, and the new introduction makes that statement clear. A buyer cannot force a seller to make a repair. They never could. These details should be part of the negotiation process.
The new indicator is 'D,' which means that an item is deficient. We have to understand that an existing home may have been built well for its time, but we are finding new and better ways to improve the construction of our homes and a home inspection report should inform you of those changes. This fact should be important to a consumer in any state. Home inspectors are not always stating what needs to be repaired, but they mean to give you guidance.
The next significant change is the list of items inspected. Actually, there are no new parts of the home being inspected, but where a home inspector's findings are listed has been refined. Under 'Structural Systems,' we now have the heading 'Stairways.' These were placed under 'Walls' in the old report, but the awkwardness of listing issues there has been cleared up by giving it a separate section. Along these lines, you will find some clarifications in the 'Appliances' section. 'Other Built-in Appliances' and 'Whole House Vacuums' have been moved to the optional systems part of the report. These sections were rarely used in the old report. In the 'Appliance' section, you will also see that bathroom vents are now handled under 'Mechanical Exhaust Vents and Bathroom Heaters.' Bathroom heaters were typically examined by home inspectors, but there was no clear space to write our observations down, so this change helps us find that information in a consistent location.
The 'Optional Systems' section has the two additions mentioned, and the only other change is the name of some sections are now more inclusive of what is being examined. That means we now look at 'Gas Supply Systems,' 'Private Water Wells' and 'Private Sewage Disposal Systems' (septic).
The biggest change to our inspection process comes in the 'Plumbing' section. Home inspectors had a loose way of inspecting this system when compared to the new requirements. We have to report on static water pressure, which should be between 40 to 80 psi. This is the acceptable range for everything in your home to work well. Before, we just looked at functionality and signs of pressure issues. Inspectors now have to check the exact pressure. We also need to look if there are ways to reduce the pressure when it is too high. I reported on the location of the meter and main shut off valve in my reports when I saw how some buyers were not sure where these could be. This is now a standard practice for all inspectors.
While the new changes mean that home inspectors will be refining how they evaluate your home, the basis of the home inspections conducted in Texas remains pretty much the same. I believe that these changes will be good for the industry, making the information more transparent for home buyers and sellers who are dependent on these inspection reports.
Frank Schulte-Ladbeck, is a Houston-based Professional Real Estate Inspector
Equal Housing Opportunity