Archive for May, 2010

Community Reinvestment Act – Impact to Housing Loans

Many of those in the media feel that the Community Reinvestment Act (CRA) is the culprit for the recent real estate market bust. Politicians have even echoed this sentiment from the Congressional podium. What is the Community Reinvestment Act, though, and did it actually contribute to or cause the U.S. housing market demise?

First, it is good to understand the origination of the Act, the planned purpose of the Act and its intended benefits. The CRA followed three other enacted laws that addressed housing discrimination and equal opportunities for housing for all peoples; however, the CRA took it a step further. Previously, banks that had a presence in low income neighborhoods and communities would not lend to their patrons making a low income due to strict lending standards.

The CRA changed all that and made it a requirement to make loans to low income individuals in the low income neighborhoods in which the banks had a presence. Community activists pushed the use of the CRA to banks and banks succumbed under the pressure. Lending standards were lowered and more loans were made to those with low- to medium-income levels. The subprime lending market was birthed.

Banks were being pressured by large groups of community activists to make more loans to the lower income borrowers but were unable, since Fannie Mae and Freddie Mac would not buy them. Eventually, lobbyists successfully pressured officials under the Clinton Administration to lower Fannie Mae and Freddie Mac lending standards to enable even more underprivileged and disadvantaged borrowers to obtain mortgages. Subprime lending grew to astronomical proportions.

By 2000, almost half of all major businesses had an investment portfolio that mirrored risky, subprime mortgages. Simultaneously, home values were climbing and continued to skyrocket until late 2006. Other factors were at play, though, that contributed to the real estate crisis. Corporations were laying off in large numbers. Borrowers were buying homes they couldn’t afford. Homeowners were refinancing to include the equity in their homes to pay for kids’ college, remodeling and vacations. Other borrowers were buying homes at inflated values that would later fall dramatically.

Additional activity that played a role in the mortgage crisis was the predatory lending that arrived on the loan landscape. Stated income loans, sometimes referred to as “liar loans,” became accepted in the home lending industry. All a borrower had to do was state his income and he received a home loan based on the stated income. No documentation was required to verify the applicant’s income; however, after the U.S. Treasury Department took over Fannie and Freddie in 2008, stated income loans were no longer allowable.

As a result of many factors, some that include corporate layoffs, underwater home loans and buyers who were in over their heads in their mortgages, foreclosure signs became the norm in many neighborhoods. They grew like wildfires that couldn’t be extinguished. Home values continue to decline in most states due to the number of foreclosures; although, some are leveling out.

Since Fannie and Freddie securities, which consisted mostly of subprime packages, were traded on the open stock market, the stock market took a huge blow when lenders had to initiate foreclosure proceedings against borrowers who were not paying their mortgages. Securities investors were losing money, big time.

What does all this have to do with the CRA? The initiators of the act had good intentions, to enable those who previously were restricted from obtaining loans to achieve the American dream. It appears that lower lending standards established in 1999; however, further exposed the nation’s overall economy and caused it to become vulnerable. This led to a major meltdown in U.S. economic condition.

Was the CRA to blame? Did it cause all these problems and result in the recent real estate crisis? According to many of its critics, it did. In fact, various CRA opponents say that it has led the nation into the greatest financial crisis since 1929, the start of the Great Depression. Proponents of the law vehemently disagree. They stand by the intent of the law, and insist that it has helped many who would never have owned a home to obtain a mortgage.

Ki’s works as a realtor in the Austin real estate market. His website provides future home buyers with a free searchable database of homes in the Austin MLS. Buyers can obtain comprehensive information on Austin real estate, along with graphs showing historical interest rates.

Bargain Markets for Homebuyers and Investors

Since 2007, foreclosures and short sales have littered the real estate market and drove down the price of property and home values. The upside to the down housing market is that homebuyers and investors can find sweet deals in some of the nation’s most sought after cities.

If cities like Milwaukee, Memphis, Baltimore and the Big D interest you, then you’ll find a honey of a home in any of these metro areas. Though the initial listing price may begin at what properties are currently valued, they are often reduced from 26 to 33 percent. The top ten U.S. cities with the listings discounted the most include the following:

* Milwaukee, WI – 33 percent
* Phoenix, AZ – 31 percent
* Mesa, AZ – 31 percent
* Memphis, TN – 31 percent
* Baltimore, MD – 30 percent
* Jacksonville, FL – 30 percent
* Dallas, TX – 29 percent
* Minneapolis, MN – 29 percent
* Tucson, AZ – 27 percent
* Columbus, OH – 26 percent

Falling in the first quarter by 4.3 percent, Milwaukee home values continue to lose ground, but the number of home listings is huge. In fact, Milwaukee has the most real estate listings of any city in the state. As of April 2010, the average home in Milwaukee was valued at $144,609, which is making buying real estate in this city much more affordable. Add to it a 31 percent reduction on the listing, and you could buy a home there for only $99,780.

Phoenix was on a top ten list in 2008 for being one of the cities hardest hit by the real estate bust. In the first quarter of 2009, property values were still going down, tumbling by almost 20 percent. Economists predict that the city has a looming shadow inventory getting ready to hit the market soon and will drive values down even further. Standard & Poor’s Case Schiller Study showed Mesa home values were on the ever-so-slight rise by last quarter 2009 and into first quarter of 2010. As of April, the average estimated value of Mesa homes is around $133,664.

According to the most recent Clear Capitol market report, the River City was noted with the most sales in the nation of foreclosed property by lenders in the first quarter of 2010. It resulted in an 18.1 percent drop in Memphis home values from year-end 2009. Baltimore and Jacksonville tie for having a 30 percent reduction in the listing price. The median listing prices are $250,000 and $189,900, respectively.

In earlier 2010, foreclosures were still climbing in Dallas; although, at a slower pace than in the recent past. By May, foreclosure filings dropped for the second straight month. That’s good news for Dallas real estate value and could indicate the beginning of a recovery. Minneapolis showed a 24.7 decrease in inventory compared to the same time in mid-April 2009. It looks like the housing market in the Twin City might be leveling out, since new listings are still on the decline. What that means for buyers is that home listing prices could soon be on the rise, so now would be the time to buy.

Median home values for Tucson continue to decline and currently sit at around $192,000. That’s almost a 4 percent drop since January 2010. Housing inventory is about the same as it was this time the previous year. Columbus appears to be leveling out somewhat in median home values staying steady at $159,900 since the beginning of year. That’s still a decline of 5.9 percent from the same time last year, but the inventory is decreasing, so these may be indicators that the market is beginning to level off. The dream of buying a quality, affordable home has become much more attainable. Falling home values, along with reductions in listing prices, lowers the cost to a more manageable price point.

Meanwhile, there are four other markets that did not experience a decline in home values in 2010 that were among those hardest hit nationwide by the housing bust. San Diego and Detroit both showed an increase, along with Los Angeles and San Diego. These cities, along with previously mentioned Phoenix, are now at the top of the list for cities recovering in the housing market.

Ki lives in Austin and helps buyers interested in Austin real estate. There is a lot of information on Austin homes on Ki’s website. His website also has detailed information on Austin real estate. It also provides a mortgage widget to breakdown monthly payments.

Mortgage Rates Near Record Lows

The 30 year rate fell from 4.84 to 4.78 this week. This is the 5th week in a row where rates have fallen. Rates are now flirting with the all time historic low of 4.71 reached in 2009. If it were not for 2 weeks in 2009 today’s rates would be seeing a lot more headlines than they are currently getting. Suffice it to say that rates are very very low right now.

The 15 year dropped from 4.24 to 4.21. The 5 year arm rose from 3.91 to 3.97 while the 1 year arm fell from 4.00 to 3.95. Below are rates from the weeks from Apr 29, 2010 to May 27, 2010

May 27, 2010
30-fixed 4.78 15-fixed 4.21 5 ARM 3.97 1 ARM 3.95

May 20, 2010
30-fixed 4.84 15-fixed 4.24 5 ARM 3.91 1 ARM 4.00

May 13, 2010
30-fixed 4.93 15-fixed 4.30 5 ARM 3.95 1 ARM 4.02

May 06, 2010
30-fixed 5.00 15-fixed 4.36 5 ARM 3.97 1 ARM 4.07

Apr 29, 2010
30-fixed 5.06 15-fixed 4.39 5 ARM 4.00 1 ARM 4.25

Nov 12, 2009
30-fixed 4.91 15-fixed 4.36 5 ARM 4.29 1 ARM 4.46

As we can see rates have steadily being falling through the month of May going from 5.06 to 4.78 since April 29, 2010. So while rates are one thing it’s also helpful to look at actual mortgage payments. We took today’s rates and used a mortgage calculator to translate them into a mortgage payment for a 200k loan. We also did the same thing with rates from May 13th and November 12th 2009.

May 27
30-year $1046.91
15-year $1500.51
5-year ARM $951.37
1-year ARM $949.07

May 13
30-year $1065.1
15-year $1509.62
5-year ARM $949.07
1-year ARM $957.13

Nov 12
30-year $1062.66
15-year $1515.71
5-year ARM $988.56
1-year ARM $1008.62

So in the last two weeks a mortgage payment has fallen 1.7 percent or $18.19 a month for a 200k loan.

So what do we expect for the rest of 2010? Rates can’t continue to fall forever. In fact I think it is highly unlikely rates will fall below 4.5 percent. So in the short term rates are somewhat unpredictable. If the economy improves rates should increase. If the economy encounters more set backs I would expect rates to fall slightly. Long term though I would expect rates to increase. The general consensus is that 6 months from now rates should be somewhat higher than what we are seeing today.

Ki caters to buyers interested in Austin Tx real estate. He writes about mortgage rates and his site has a free mortgage calculator and a mortgage rate widget.

Foreclosure Rescue Fraud Crackdown

Every aspect of the real estate industry has experienced fraud at one time or another. From homeowners, homebuyers and real estate professionals to lenders, appraisers and title companies, every step of the home buying process has been tainted by fraudulent activity. A greater abundance of it came to light more recently due to the housing market bust. Most once booming markets either diminished significantly or came to a screeching halt as foreclosures began to overshadow the home sales scene.

Subsequently, the flowing streams of wealth enjoyed by many during the housing bubble slowed to a trickle or dried up altogether. The lure of quick money gained through fraudulent activity enticed a number of those still reeling from the market’s blows, who felt compelled to maintain their previous standard of living. Not only has fraud increased in the mortgage process, but debt management companies under the guise of foreclosure rescue have come out of the woodwork to reap the revenues. Fed up by the cases filed in the State’s Attorney General (AG) offices, AGs are fighting back with the help of motivated law makers.

Florida is a prime example of legislation passed due to urging by the state’s attorney general. Some highlights of the Foreclosure Prevention Fraud Rescue Act of 2008 includes a requirement that documentation be provided to the homeowner explaining in detail what will transpire, the homeowner is provided a cooling off period, unfair terms and misrepresentation is prohibited and the homeowner doesn’t pay a dime until the services specified in the contract are fulfilled. All businesses operating in the state and businesses that service Florida residents are subject to the fraud prevention statute. More stipulations regulate anyone performing rescue transactions related to foreclosure.

Referred to the House Energy and Commerce Committee, the Foreclosure and Rescue Fraud Act of 2009, H.R. 1231, would stipulate similar law only at the federal level. It has yet to be released from the committee whose responsibility is to refine, revise and determine if it is worthy of debate before the House of Representatives. Similarly, the Mortgage Foreclosure Rescue and Loan Modification Services Fraud Prevention Act of 2009, H.R. 2666, expanded to cover loan modifications fraud of those facing foreclosure.

Delaware signed its Mortgage Rescue Fraud Protection Act into law on January 1, 2009. In June of 2009, Pennsylvania signed similar bills into law prohibiting unscrupulous foreclosure rescue tactics. Among other things, the laws require full disclosure to homeowners using services for foreclosure rescue and mandate no payment be made to companies providing services until such time that all services agreed-upon in the contract are fulfilled.

New Jersey’s foreclosure rescue bill was released from the Assembly Committee in March 2010. The Texas Attorney General partnered with a state representative for like legislation regarding foreclosure rescue scams in Texas. Illinois’s Mortgage Rescue Fraud Act was passed in January 2007 and was another initiative of a state’s attorney general.

Ki is a real estate broker helping clients interested in the Austin real estate market. There site provides a map based search of homes in the Austin MLS. It also has statistics and homes in the Austin real estate and Cedar Park real estate markets. In addition it provides statistics broken down by the different Austin MLS areas.

The Hard Facts About Hard Money Loans

Hard money loans have been around for quite a while, but just not so much in the forefront as are more traditional loans. There are a variety of uses for hard money loans, and they have evolved in the past several years as to how they are used and what is now required to obtain one. Although they have their advantages, hard money loans also have their limitations. Before applying for one, make sure that you cannot be approved for a more traditional loan. A hard money loan should be your last resort.

What is a Hard Money Loan?

When investors discuss money as it relates to lending, they use two terms to differentiate it – soft money and hard money. Soft money typically refers to a loan with flexible terms. Traditional and government home loans offer a variety of options for a real estate loan. A hard money loan, on the other hand, has rigid, very specific terms. It is loaned for a relatively short timeframe with a specific interest rate not necessarily determined by your credit score. Hard money is also called “private money,” because it often originates from individual investors who possess a lot of money to invest.

Some characteristics that set a hard money loan apart from a more traditional one are high interest rates, a brief approval timeframe and the loan is most often for a short period of time. Low loan to value ratios are also typical of hard money loans. Often no more than 60 percent is approved for the loan. High interest rates are the hallmark of hard money loans, up to 21 percent and higher if the property goes into default. Hard money loans are borrowed for very short periods of time, and can often be obtained within a few days, as opposed to weeks for a more traditional property loan.

Uses for a Hard Money Loan

Hard money loans are most often used for flipping a home, bridge loans and construction loans where the money would only be borrowed for a short amount of time, until the property is sold or refinanced. An investor may find a home that is in need of repair at a very good price. Obtaining a hard money loan may be a way for the borrower to buy the home, repair it and make a lot of money when the property is sold.

A hard money loan is usually not used to finance property over a period of years. Homeowners who have no credit history or experienced a default in homeownership often cannot obtain approval for a traditional loan with a lower interest rate. They will sometimes borrow hard money until their credit score raises enough to be approved to refinance using a traditional loan with a much lower interest rate.

How to Get a Hard Money Loan

If you’ve tried the traditional route to obtain a home loan and failed, you might want to try for a hard money loan. Obtaining approval for one is not as easy as it used to be in some cases. In the past, hard money lenders based the loan strictly on the value of the property. Now, however, many of them require borrowers to fill out credit applications and provide pay stubs and income tax statements. Before applying for a hard money loan, make sure you have access to any income statements the lender may require.

The best way to access a hard money lender is to contact local lending institutions and mortgage companies. Ask them for names of reputable hard money lenders. Most loan servicers are familiar with ones they’ve known over a period of years.

Ki is a realtor operating in the Austin Texas real estate market. He writes about mortgage issues and his site provides a mortgage calculator widget along with several mortgage rate widgets.

Lessons from Greece

Greece, one of the oldest countries on the planet, suffers from one of the oldest problems on the planet: debt. The Greek debt debacle is playing significant havoc on the world’s financial markets. As Carmen M. Reinhart, author of a book on 800 years of world debt crises said on The New York Times Economix blog recently, “Greece casts a long shadow on the European continent because 15 other countries share a common currency with it, the euro.”

What does the euro and Greece’s debt problems have to with the American economy? Far more than we would like, as was indicated by the meltdown in the world financial markets in the first week of May. The “Crash of 2:45” is what the May 6 market plummet is being called and it was a vivid reminder that the finances of the world are intricately connected.

The week following the market meltdowns, the European Union and the International Monetary Fund are bailing out Greece to the tune of $1 trillion. According to the Associated Press, the huge rescue package was more generous than expected and spurred a rebound in the financial markets. But like America’s bank bailout two years, it has been met with as much skepticism as praise.

Simon Johnson, former chief economist at the International Monetary Fund, believes Greece is headed for a deep recession. He believes that the European Union is basing the bailout on numbers that are more rosy than realistic. Not to mention, Greece is hardly the only European country in debt. According to Johnson, Greece owes Germany and France, but Portugal owes Spain. Spain owes Germany and France, and apparently no one wants to think about who or how much Italy owes. This explains why the word “contagion” was so ubiquitous in recent discussions on the European economy.

Whether the E.U. package will contain the debt crisis from spreading across Europe is something that only time can prove. It does, however, indicate Europe’s commitment to back the euro and stabilize the markets. Just the announcement of the rescue package caused the Dow Jones industrial to make its biggest comeback in a year.

The world certainly felt the repercussions of U.S. recession, so it’s no surprise that Americans should suffer some from Europe’s financial crisis. Perhaps this recent market scare was a healthy reminder to Americans that the economy is still fragile. For those with investments, Mint.com believes this is a good time to review those investments with Europe’s likely long-term troubles in mind. If recent improvement in the economy was bringing back some bad personal spending habits, then Greece’s debt problems are a good reminder to stay out of debt.

Escapeso real estate helps people interested in investing in the Austin real estate market. Their site provides a search (without registration) of the Austin MLS. One can search for properties in the general Austin real estate market or drill down to search for West Lake Hills homes or other neighborhoods.

The Subprime Story

As past and present bankers from Goldman Sachs, JP Morgan, Bears Sterns and Washington Mutual sit on the hot seat in front of Congress, Americans have to be collectively scratching their heads. What exactly are these guys guilty of? And, why won’t any of them own up to any wrong doing?

As the Congressional Financial Crisis Inquiry Commission continues to grill bank executives about the role each institution played in the recent economic crisis, a theme seems to be emerging: The banks did nothing illegal. Moral obligations aside, the path to the financial meltdown was paved in greed, but probably not criminal acts.

The story starts with the rise in popularity of subprime lending, which is loans to borrowers of questionable credit worthiness. Once restricted by usury laws, subprime lending began to build after government deregulation in the 1980s. According to “A Short History of Subprime” published on Allbusiness.com, subprime lending was originally the purview of mortgage lenders like The Money Store and Countrywide Home Loans. It wasn’t until the late 1990’s that more traditional lenders began to take an interest in these types of loans.

Starting in 1998, the smaller mortgage banks began to be acquired by larger banks, with Washington Mutual buying Long Beach Financial Corporation. By 2001, both Citigroup and Chase Manhattan Mortgage Corporation had acquired smaller lending components. While this was happening in the banking industry, the housing market was taking off with historically low interest rates and unprecedented increases in home prices.

The building of the economic perfect storm was rounded out by what the article referred to as “subprime securitizations by Wall Street firms and the willingness of investors to buy those securities” starting as far back as the mid-1990s. According to the Federal Reserve Bank of Dallas, banks needed to be able to back these risky non-traditional loans in non-traditional ways. Most traditional, prime rate mortgage loans are funded by bank customer deposits.

This is where it gets tricky, but not illegal. The proliferation of subprime loans began to be funded by what is called government sponsored enterprises, better known as Fannie Mae and Freddie Mac. The loans were pooled together, government guaranteed and then sold to investors. This worked well, until the loans got riskier and beyond the government sponsored enterprises.

The rise of residential mortgage backed securities grew through the mid part of the decade as banks began to be more creative in pooling and packaging these loans to investors. Credit ratings for these investment packages were irrationally rosy, giving investors a sense of security in these investments based on very risky loans, all teetering precariously at the top of an inflated housing market.

The story is all too well known now: The housing bubble burst, borrowers began to default on the risky loans, and investors opened their prettily packaged securities to find nothing inside. Americans were left holding the bag, while bankers seem to still be laughing all the way to…well, their own banks.

For the moment, the Congressional grilling seems to be doing nothing more than causing some uncomfortable moments for the Wall Street elite. As the Federal Reserve and Congress grapple with new banking regulations, Americans seem to want the bankers to share in the responsibility for the economic crisis. They may or may not have done anything illegal, but it does feel like they did something wrong.

Ki works as a broker in the Austin real estate market. His site has a map based search of the Austin MLS. It also provides general information on Austin real estate and the great hills neighborhood.

Mortgage Rates For The 5 and 1 Year ARM Hit All Time Lows

The 30 year rate fell from 5.00 to 4.93 this week. In a time where the news is filled with stories about inflation fears we are seeing mortgage rates steadily decline. This is the 5th week in a row where rates have held steady or fallen. Its also the lowest we have seen rates in 2010.

The 15 year dropped from 4.36 to 4.30. This is only slightly above the all time low of 4.27 for the 15 year fixed mortgage.

The 5 year arm dropped from 3.97 to 3.95 which is an all time low for the 5 year arm. The 1 year arm fell from 4.07 to 4.02. Oddly enough even though the 1 year arm is at an all time low this week its a pointless option because the 5 year arm is lower than the 1 year arm.

Below are rates from the weeks from Apr 15, 2010 to May 13, 2010

May 13, 2010
30-fixed 4.93 15-fixed 4.30 5 ARM 3.95 1 ARM 4.02

May 06, 2010
30-fixed 5.00 15-fixed 4.36 5 ARM 3.97 1 ARM 4.07

Apr 29, 2010
30-fixed 5.06 15-fixed 4.39 5 ARM 4.00 1 ARM 4.25

Apr 22, 2010
30-fixed 5.07 15-fixed 4.39 5 ARM 4.03 1 ARM 4.22

Apr 15, 2010
30-fixed 5.07 15-fixed 4.40 5 ARM 4.08 1 ARM 4.13

Oct 29, 2009
30-fixed 5.03 15-fixed 4.46 5 ARM 4.42 1 ARM 4.57

As we can see we are not seeing wild jumps in mortgage rates like we saw last year. But we are seeing a slow but steady decline in rates for all 4 mortgage products.

In addition to rates it also interesting to look at mortgage payments. We took today’s rates and used a mortgage calculator to determine mortgage payments for a 200k mortgage. We also did the same thing with rates from April, 29 2010 and rates from October, 29 2009 (6 months ago).

May 13
30-year $1065.1
15-year $1509.62
5-year ARM $949.07
1-year ARM $957.13

Apr 29
30-year $1080.98
15-year $1518.76
5-year ARM $954.83
1-year ARM $983.87

Oct 29
30-year $1077.31
15-year $1525.9
5-year ARM $1003.88
1-year ARM $1021.7

As we can see rates are lower but not vastly lower. Compared to two weeks ago a mortgage payment would be $15.88 lower (1.46 percent). So there is a savings but its not huge. Moving forward I still think rates have more room to move up than down. With two of the four mortgage products at all time lows there is not that much room to move farther down. While I don’t see alot of movement for the next few weeks overall I would expect rates to be substantially higher 6 months from now.

Ki works as a realtor in the Austin Tx real estate market. He writes about the mortgage industry. His site has a free mortgage calculator and a mortgage rate widget.

Five Bad Home Improvement Ideas

When considering adding value to a home, you consistently hear from the real estate industry that updated bathrooms and quality kitchens stand out in a home sale. Those are proven sale closers. There are certain other improvements you can make to your home that will beautify it or create convenience for your family. When it comes time to selling, however, those improvements may do nothing to increase the value of the property and may even turn off potential homebuyers.

Over-the-Top Renovations

Au contraire mon frère, not all renovations will raise the value of your home. Just `cause it’s bigger doesn’t mean it will be perceived as better by future homebuyers. Unless your home is located in Beverly Hills or some other very posh neighborhood, don’t install the bathroom with the supersized steam shower, imported Italian marble and several different spray heads … unless you have the money to do it for your own pleasure and enjoyment only. That kind of improvement doesn’t typically do anything to increase the value of the average home.

On the other hand, if you updated an old bathroom, you could see an increase of several thousand dollars to your home’s bottom line. Real estate professionals suggest that homeowners pour over local home listings to see what amenities are the standard in your area, then upgrade your home to meet it. If you overdo it, however, you may not recoup your investment.

Swimming Pools

If you think installing a swimming pool in the back side of your home will draw hoards of homebuyers clamoring to make offers on your home at sale time, you’d be wrong. Some may consider it a perk, but others may perceive it as a pain with all the maintenance it will require. Homeowners have even paid to have their swimming pools buried to create more yard space. If you shell out the expense to build one, don’t expect your home’s value to budge. The only exception to building a swimming pool is if you live in states where they are considered the norm.

Home Office Renovations

Although, a home office is often an amenity appreciated by those shopping for a home, it should be built with frugality in mind. Overhauling an office doesn’t pay off when it’s time to sell your home. Don’t steal usable space from another living area to create a home office. Instead, make sure the space can easily be converted back into a bedroom or other living space if needed. If you decide you just have to have the built-in Curly Maple wood shelves, know that you will only recoup around 50 percent of your cost at sale time.

Unique Builds

Home magazines are always coming up with clever and creative ways to change the look of your living space. Some are exotic and outlandish, but they can pique your interest. Tempted to put a classic disco ball with lights in your bedroom, a constellation ceiling in your family room or a peaceful Koi pond in your back yard? Avoid making outlandish changes to your home or changes that will be perceived as adding work for a future homeowner. Don’t be tempted to incorporate these ideas into your own home, unless you don’t plan on selling anytime soon. Homebuyers may not share your enthusiasm.

Roof Renovations

If your roof needs repair, don’t hesitate to have the work done. It will be one less issue you’ll have to deal with when listing your home. If in your pursuit to list your home you think replacing your roof with cedar shakes or clay tiles will increase the value, think again. Although they have the ability to make your home stand out, they probably won’t inspire homebuyers to pay more for them. So, unless you have the money to burn, keep it simple when preparing your home to be listed on the real estate market.

Ki has been an investor in the Austin real estate market for several years. The website has an Austin home search for listings in Austin, Texas. It also has general statistics covering Austin real estate along with several neighborhoods in Barton Creek.

Private Mortgage Insurance Basics

Keep in mind that when you buy a home and don’t have 20 percent down, you may be required to pay for private mortgage insurance (PMI). PMI gives homebuyers the ability to buy a home with as little as three to five percent down. It also provides loan servicers assurance that, should your mortgage go into default and your home is foreclosed upon, the loan will be paid for. Those are the advantages, but there is a dark side to PMI.



A good example of this involves a recent bout Bank of America experienced with the Massachusetts Attorney General’s office. In November 2009, Bank of America acquired Countrywide Mortgage loans. Countrywide was already under scrutiny due to questionable mortgage tactics regarding the removal of PMI on mortgages paid below 80 percent of the original loan. Qualified homeowners were requesting that PMI be removed, but Countrywide was not complying. Bank of America settled and no further court action was initiated by the state.



Some things you may not know about PMI are that the IRS allows it as a deduction on your federal taxes if you qualify, you can legally require a mortgage company to remove the PMI and you can decide which PMI company to use. The primary requirement for deducting PMI on your federal taxes is that your adjusted gross income (AGI) fall at or under $100,000 if you are married filing jointly. To claim the full deduction, the maximum AGI for those married filing separately is $50,000. You cannot claim a deduction for your PMI if your AGI exceeds $109,000.



Congress passed a law in 1998 called the Homeowner’s Protection Act (HPA), which addresses changes regarding the lawful use of PMI. Generally, this law applies to residential property and requires lenders to remove PMI if the principle of the loan equals 80 percent of either the appraised value when the loan was obtained or the original purchase price at closing. There are some considerations to keep in mind. You must be current on your home loan in order for the PMI to be terminated, and you must have been current throughout the previous year.



Under HPA, lenders are required to automatically terminate PMI once your loan is paid down to 78 percent. Again, you must be current on your payments. Another requirement of HPA is that lenders are required to provide specific disclosures to homebuyers on closing. Some specifics include the borrower’s right to request that PMI be canceled, the date on which the request may be submitted and the lender’s responsibility to automatically terminate PMI.





Another thing most borrowers don’t know about PMI when obtaining a home loan is that you do not have to use the PMI company referred to you or suggested by your lender or real estate professional. Shop around and compare prices to get the best deal.



You will have to put forth some effort to work PMI to your greatest advantage, but if you do, you’ll come out way ahead and pay far less than if you depend solely upon your lender to do the job.

Ki is an investor and broker working in the Austin real estate market. His site provides a graphical search of homes in the Austin MLS. It also has profiles of different areas in the Austin real estate market and graphs showing historical mortgage rates.