FHA Loan Modifications Hurt Borrowers

On April 1^st of this year, the U.S. Department of Housing and Urban Development (HUD) raised the annual Mortgage Insurance Premium (MIP) by 10 basis points, hoping to strengthen the Federal Housing Administration (FHA) insurance fund and decease FHA’s market share. Moreover, as of July 3^rd, the annual premium no longer cancels at 78 percent loan to value (LTV).

Marianne Collins, executive director and COO of Ohio Mortgage Bankers Association, writes in In Contract magazine that these alterations may make FHA the “loan of last resort.” Monthly conventional Private Mortgage Insurance (PMI) doesn’t have an up-front premium the way FHA does. Additionally, PMI continues to drop off at 78 percent LTV.

A borrower with a 680 credit score and 3 percent down payment would pay much more for a FHA loan requiring a down payment of 3.5 percent than s/he would for conventional monthly private mortgage insurance. Conventional PMI will even be lower at a credit score of 660 and a 5 percent down payment. Due to the lower cost of conventional PMI when compared to FHA MIP, private mortgage insurance companies are “making a huge comeback.”

Collins adds that only borrowers in high risk situations (such as those with low credit scores and brief periods since foreclosures and bankruptcies) have a reason to consider FHA for their financing. This could lead to a high default rate, because higher credit scores are absent to balance out the portfolio. Finally, Collins argues that FHA should do the opposite of what it has implemented: it should reward good credit by offering an insurance premium lower than private mortgage insurance for borrowers with good credit. To view FHA loan requirements, click here. For an additional explanation of FHA mortgage insurance and its changes, watch the YouTube video below.

Distressed Properties Down as Market Recovers

This summer, supply of conventional homes has decreased while demand has increased. But what about foreclosures? According to In Contract magazine, the number of lender-mediated properties, commonly known as distressed properties (such as short sales and foreclosures), for sale in Central Ohio dropped by nearly 50 percent in the first three months of 2013. The inventory of distressed properties fell by 42.2 percent from the first quarter of 2012 to the first quarter of 2013. Meanwhile, distressed property sales increased by 19.9 percent. Perhaps more interesting, the number of closed sales for lender-mediated properties succeeded the number of new listings by more than 10 percent, meaning a good number of distressed properties that have been sitting on the market for awhile have been sold. Nonetheless, the sales mix is “shifting away from distressed properties and back toward traditional homes.” Supporting this claim is the that fact that the sales price of distressed properties has increased by 1.6 percent in the past year, while the sales price of conventional homes has increased by 4.2 percent (averaging $64,000 and $163,000, respectively).

These statistics speak to the market’s recovery, as Central Ohio has witnessed a very active market in the past couple of months. In fact, according the Housing Market Confidence Index released by the Ohio Association of REALTORS, 96% of Central Ohio REALTORS classify today’s market as “moderate to strong,” and all expect it to remain so over the next few months. Home prices and appraisals are largely believed to stay the same, or increase, in the year to come. Interested in buying or selling? Contact me--I would love to help. 

Dublin Irish Festival Fast Approaching!

Overview

Each August, Dublin Ohio hosts its annual Dublin Irish Festival. This three day event is one of the largest irish festivals in the United States, and celebrates Irish music and culture across seven entertainment stages and 29 acres of land dedicated to games, sports, arts and crafts, cultural exhibits, children's activities (held in the 'wee folk area'), shops, and food and beverage stations. Sunday's service will celebrate Irish faith, which begins at 10am and is free with a donation of a non-perishable food item. A pub crawl and 5K race will kick off the event Thursday evening.

Details

This year, the festival will run on August 2nd (4pm-midnight), 3rd (11am-midnight) and 4th (11am-9pm). Gaelic storm will be preforming Saturday and Sunday. Tickets can be bought online for $9 for adults and $7 for students and seniors (tickets cost an additional dollar if purchased at the door). Children 12 and under are free. The festival takes place at Coffman Park (5600 Post Rd. Dublin, OH 43017). About 1300 volunteers help run the festival. Volunteers get free admission to the festival on a different day and a complimentary t-shirt, among other benefits. Don't miss out on this must-see event!

4 Stats Homebuyers Should Know

To have the most positive and successful homebuying experience, homebuyers should be as educated as possible about the market they are navigating. Knowing what you're getting into in advance will keep you from feeling too frustrated or overwhelmed. Trulia discusses four points that are good to know when searching for your new home:

1) The number of homes you'll lose before you win.
It's completely normal for buyers to lose out on a few homes before they are the prevailing bidder. When you lose a bid, move forward quickly in search of your next opportunity to make an offer. 

2) Average number of offers per listing.
Ask your agent about what is standard, in terms of competition levels, in the neighborhoods, price ranges, and property types you're looking for. In today's hot market, some people experience multiple offers, same-day sales, and above asking price offers. If this is the case where you are looking--you should know about it. 

3) Neighborhood "run rate."
A run rate mathematically tells you what home prices in an area would be in the future if the continued rate of rise continued for a year. While home price increases can be seasonal (with greater increases occuring in the spring and summer months), our market is still recovering from the recession, so it's quite possible that home price increases will continue to rise throughout the year.

4) Inventory rate and direction
How many houses are listed for sale, and is this number increasing or decreasing? If you're a more selective buyer with a long wish list, it may be hard to find your new home in a lower-than-average-inventory market such as the one we're experiencing today. Knowing this, you may have to sacrifice some of your "must haves" or up your budget. It's best to be realistic about what you can and cannot get in a certain area for a specified price. This will help you make well-timed, well-informed, competitive offers.

If you're not currently working with an agent, and would like to know more about these statistics pertaining to where you'd like to live, contact me. It would be my pleasure to help make your home buying experience easier and more enjoyable. 

Calculating Mortgage Affordability

The affordability of mortgage financing plays an important role in a buyer's home search. Moreover, mortgage policies are different now than ever before: while interest rates are lower for accredited borrowers, those with questionable credit face higher rates and more buyers today aren't able to qualify at all. Jack Guttentag, in an article in The Columbus Dispatch, argues that, "mortgage addordability must be calculated three times using three rules...the income rule, the debt rule, and the cash rule. The final affordability figure is the lowest." By coming to three separate conclusions using three different models, home buyers are able to play it safe by assuming they cannot finance more than the lowest figure generated by the three tests.

The income rule: the borrower's monthly housing expenses (the mortgage payment, property taxes, and homeowner insurance premium) cannot exceed a percentage of the borrower's income specified by the lender. To afford more, obtain an additional source of income.

The debt rule: the borrower's total housing expense (the sum of the monthly housing expense plus monthly payments on existing debt) cannot exceed a percentage of the borrower's income specified by the lender. To afford more, repay debt.

The cash rule: the borrower must have sufficient cash to meet the down paymwnt requirement plus additional settlement expenses. To afford more, reduce the down payment and settlement costs, or gain access to an additional source of cash.

Use Guttentag's affordability calculator to see how much you can afford.

What you Need to Know About Home Security Systems

Choosing the best home security system is a big commitment that should not be underestimated. According to the U.S. Fire Administration, 2/3 of fire-related deaths in homes occur when there's no working smoke detector on the premises. Below is some information about what security systems can do (and cost!):

Price. Professionally monitored systems come with an equipment and installation cost ($250-$700) and a monthly monitoring fee ($35-$75), plus the cost of adding additional detectors ($150-$250 each). You can save money by purchasing a DIY system for as low as ten dollars and as much as several hundred dollars. While smoke, carbon dioxide, and motion sensors can be bought on your own, they may be installed incorrectly and do not monitor your home 24/7 the way professional systems do. That is, they may alert you that a fire has started, but they won't tell the police and fire department.

Features. Professionally monitored systems all have a control unit with a battery pack, keypad, and siren. You can also choose additional features such as smoke detectors, carbon monoxide detectors, motion detectors, temperature gauges that can detect a broken furnace and freezing pipes, and water sensors that gauge when your basement leaks. Make sure everyone living in the home is present when the installer explains how the system works, including how to arm and disarm the system. Also, be sure to place a sign in your yard advertising your new system--this is a powerful deterrent to burglars.

Construction. You should allow three hours for a professional to install your new security system, unless you are building a new house, in which case the wires can be run through open walls. Another option is to go wirelessly by installing a battery-powered monitoring device in touch with a remote cellular network. However, wireless systems are easier to disable than wired ones.

Benefits. After installation, tell your insurance company about your new alarm system. Some insurance companies, such as Liberty Mutual Insurance,  offer discounts on homeowners insurance for customers with home security systems. Some companies will shave up to 20% off of your yearly premium if you have an electronic alarm system. According to the National Association of Insurance Commissioners, a basic security system can pay for itself in three years with an average national premium of $800.

Looking for more? Full home automation complexes can monitor just about everything. In addition to the features listed above, an automation complex can adjust your home's temperature,  turn lights on and off based on room occupancy, and water your plants when soil becomes dry. The elderly can get a wearable "panic button" should the person ever fall or need assistance. These amenities come with a cost: expect to pay around $5,000 more for a complete automation system.

Going out of town? Check out my previous post on how to secure your home while you're away. If you want to be as safe as possible, you could hire a professional house sitter. They charge $15-$50 per visit, and will often look after pets as well. If you don't have a neighbor you can trust to water your plants, bring in the mail, or take out your garbage, a professional house sitter can do these tasks instead. Also, they can act on emergencies. Be cautious when hiring house sitters: ensure they have clean backgrounds, good references, and insurance.

For a list of top home security systems, click here.

Protecting Your Home While You're Away

Your home is most likely your biggest investment; protecting it is essential. Did you know that, according to the US Department of Justice, American homes are victims of burglary about every 15 seconds, and the average homeowner suffers a lost of nearly $2000 in stolen goods or property damage. The key to protecting your home when you're gone is to make it look as if you are actually home. There are many ways to accomplish this.

1. Light. Keep some lights on (consider using light switch timers). 30-45 minutes before it gets dark is a realistic time for such lights to switch on. Also light the porch and yard with a time controller and/or motion sensors. Ensure nearby streetlights are functioning; if not, contact your electricity company and request a repair.

2. Noise. Soft noise may help deter burglars. Connect an analog type TV, radio, or burglar deterrent CD recording with a schedule-able player with timers.

3. Stay on schedule. Draw the blinds as you typically do to keep appealing household items out of view. Have your lawn mowed and yard cared for as you normally do. Don't get off schedule with clipping hedges, sweeping sidewalks, etc. Pruning shrubs also gives burglars less hiding places and opportunities to coverup signs of a break-in.

4. Doors. Lock exterior doors securely, and install deadbolts. Thick cylinder locks are pick-resistant. If you have any hollow doors, replace them with solid ones (wood or steel-wrapped wood-core doors). If you have glass next to your door, install a protective barrier of quarter-inch Plexiglas over existing glass. Use safety latches on windows. In double hung windows and sliding doors, install locks that wedge and bolt.

5. Use your neighbors. Ask a trusted neighbor to watch your home while you're gone, pick up your mail and newspapers, and take trash cans out on the appropriate day. Offer to do the same for them. You can request that the post office hold your mail and cancel deliveries while you're away, but you may still get flyers in your mailbox and on your front door from solicitors. You could also form a neighborhood crime watch to report suspicious activity, with the help of your local police department.

6. Alarm system. Invest in a good alarm system. You could even buy an alarm company sign, regardless of whether you have that company's product. Some systems directly connect from your house to the police.

7. Avoid publicity. Don't advertise that you are out of town (think of facebook, twitter, etc.) Simply notify a neighborhood friend. You can inform the police, but your address may be hacked, stolen, or sold to thieves and robbers. For that reason, many websites don't recommend notifying the police of your absence. You also don't want to advertise new purchases (don't put the box for your new flat-screen TV on the curb for all to see).

Keeping Cool This Summer

The Problem:

Despite the fact that nearly 90% of American houses have central air conditioning, certain rooms still heat up. Ductwork often doesn’t extend to attics, garages, and home additions. Sunrooms bake in the direct sun, and 5-level-split homes are traditionally hard to cool: that top floor can be quite uncomfortable on hotter days.

The Solution:

Room air conditioners. They come in multiple styles, sizes and prices. Today, systems are more efficient, and there are more options. 4 main types prevail:

1) Window Units. Designed for double hung, casement, and sliding windows. $120-$700.

• Pros: the most affordable option, easily installed, can be removed in the winter. Greatly improved (smaller and lighter): can be a good buy for your money.
• Cons: block a window’s view, can be loud.

2) Wall Units. More or less window units installed in an outside wall. $400-$1000.

• Pros: no blocked window 
• Cons: more expensive, may require professional installation, cannot be removed in the winter (cold air might seep in).

3) Portables. Similar to dehumidifiers. $250-$700.

• Pros: Don’t require installation, can be placed anywhere, and can be moved from room to room. Nice for renters wanting to cool small areas.
• Cons: Less efficient, louder and more expensive than window units. Heavy. Regarded by an editor with Consumer Reports as “the air conditioner of last resort.”

4) Ductless split air conditioners. Two appliances—an air handler installed in the wall and a condenser installed outside and connected to the handler through a 2-3 inch hole in the wall. $1500-$6000.

• Pros: very efficient, quiet, powerful, and unobtrusive. More than one room can be cooled, as one condenser extends to more than one air handler. Individual controls allow you to zone different rooms.
• Cons: The most expensive option, requires professional installation.

Regardless of the type of air conditioner you get, room size is important to consider. Oversized air conditioners can cool a room before they can dehumidify it, making the room clammy and uncomfortable.

BTU (British Thermal Unit) by square foot guide:

100-300 square feet -> 5,000-7,000 BTU model

300-500 square feet -> 8,000-12,000 BTU model

500-1000 square feet -> 14,000-18,000 BTU model

+10% if room is unusually sunny

-10% if room never receives direct sun

Click here for a Btu Calculator

Putting the 'Beach' in Beach Home.

While the Midwest isn’t exactly on the ocean, it does sport a number of lakes that are home to costal-inspired getaways. HGTV magazine lists a number of decorating tips that can help you create your tropical retreat regardless of your distance to the beach.

Let as much light in as possible. Linen curtains are heavy enough to block the sun when needed, but their loose weaves allow light to filter in. Linen can also be used for your bed’s headboard.

Use soothing colors (nothing too dark) on walls and for furniture. White furniture, countertops, cabinets, and bedding/couch cushions are easily complimented by soft shades of blue, green and brown to achieve a serene look. Using coastal patterns (fish, sailboats, anchors, etc.) is a great idea for throw pillows. Blue and green tile and backsplash should be paired with white bathrooms and kitchens. Wide plantation shutters (also in white) compliment this color scheme. As for the home’s exterior, grey stone siding (with white trim and a light blue door) is classically coastal.

Rattan chairs provide a naturally woven look. Using thick rope can also achieve this image, and is quite versatile. A ball of thick rope can be used as a door stop, the base of a lamp, or the border of a picture frame or mirror. Big woven baskets can be used to hold pillows and blankets, or could be used as a laundry basket.

Distressed finishes (think whitewashed mirror frames, consoles and tables) mimic driftwood. These antique finishes make furniture look slightly weathered. A burnt oak stain can also be used to achieve an aged, washed ashore look.

Decorate with art. Take advantage of shells and coral—a capiz chandelier makes a wonderfully beachy fixture. Sea glass makes for nice knobs, drinking glasses, and decorative bottles. Coastal art (beach and seaside scenes) is a quick way to turn a house into a beach house. You can also use furniture as art—consider putting a sailboat bed in a child’s room, with a lamp that looks like a lighthouse and nautical flags hanging on the walls. Striped rugs are nautical additions to any room.