Prudential Pacific Properties

Negotiation Tips

1. Don't get insulted if the seller doesn't accept your offer or comes back with a high counter offer. It's natural for the seller to want to make as much as possible.
2. The members of both parties should feel like winners in the end.
3. Make your counter offer show movement. This demonstrates a willingness to deal.
4. Make sure you understand the priorities of the sellers. Your counters can focus on the higher priorities. Those that carry less weight can be used to compromise.
5. Quantify problems. Repairs or concessions should have a dollar value on them and not be left open ended.
6. Isolate major issues by getting agreement on all other points. This allows the negotiation to be just one item away. Then all energies can focus on the one final obstacle.
7. The earnest money shows how serious you are. Since earnest money is applied to costs at closing, don't scrimp on the earnest money at the time you write the offer.
8. Make sure what you want is put in writing. Count on nothing that is negotiated verbally.
9. Depend on your sales professional for negotiation counsel.

The New Home Spectrum

New construction options fall within a very wide range. Your place within that range will depend on your price range, builder selection, subdivision, desired customization, lot availability, and your preferences.

At one end of the spectrum is the spec house (nicknamed for speculation). The builder, who speculates that the right buyer will come along, plans and starts construction before there is a real buyer. Almost all decisions are made by the builder: what floor plan is built on the lot, how the home is decorated, and what amenities are included. The builder begins construction and sometimes completes the home before there is a buyer. If you buy a spec home before the builder completes it, you sometimes may choose a few items not yet in the home. This home is usually built relatively quickly.

At the other end is the custom home. Here most of the decisions are made by you: what lot to buy, which builder to hire, floor plan, specifications, decorating and amenities. Once these decisions are made, the builder will bid the project based upon cost and availability of materials, subcontractor fees, and the fees to oversee the project. This type of home usually takes longer to build because you are involved in every phase of the project.

In between are many variations. Typically, a builder will have numerous lots in a subdivision and a wide variety of floor plans. You select a floor plan and then view lot inventory. Your choices are made from a builder list of available upgrades, decorations, and amenities. Add-ons or changes in construction details will move this project closer to either one end of the customization spectrum or the other. The more you change the builder's existing plans, the more customized the house becomes and the longer it will take to build.

Sales Professional's Role in New Construction Sales

You may wonder why you need a sales professional when you're buying a new construction home. After all, no one has deeper product knowledge of the homes and specifications than the builder or the builder representative. However, the sales professional working with you provides a very necessary and valuable contribution to the sale. By facilitating builder-buyer communication, the sales professional provides perspective and distance for you to process builder input. The sales professional becomes a go-between.

The sales professional's heaviest involvement comes early in the process when price, terms, amenities, specifications, floor plan, building site, and financing are being decided. Once building actually starts, the sales professional remains involved to solve problems as they arise. The sales professional becomes a buffer between you and the builder while issues get sorted through.

A sales professional's clear head and focus on the right outcome is invaluable. By using the sales professional as mediator, the relationship between you and the builder is preserved.

The sales professional's responsibilities are summed up as:

1. Your advocate when interacting with the builder or builder representative
2. Negotiate with the builder on your behalf
3. Facilitate communication between you and the builder
4. Help solve problems that arise during the project
5. Convey necessary change orders between you and the builder
6. Facilitate timely completion of the home when possible
7. Provide you perspective to judge what are reasonable developments based on the sales professional's construction experience
8. Accompany you on the final walk-through(s)
9. Review the final HUD-1 statement
10. Coordinate and attend the closing

New Construction or Resale – What is Right for You?

The choice between a new or resale home reflects your individual preference, property availability, and financial considerations. Naturally, new homes have great appeal. Everything is fresh and new. The decorating and architecture are fashionable. In some cases you have the fun of choosing colors and amenities. Some builders allow customizing so the new home reflects your taste and style. New homes also have the advantage of current energy saving features. Insulation must be up to current codes. Heating and air-conditioning units usually feature enhanced energy efficiency. Other energy saving amenities include ceiling fans, attic fans, double pane windows, etc. These features increase affordability. Utility costs rank second in monthly cash outlay after your mortgage payment. The older the home the more dated the energy amenities. Utility costs for resales tend to be higher. Greater cash reserves on hand are wise if buying new construction. You will need window coverings, some landscaping, and maybe a fence. These expenses come very soon after your outlay for down payment and closing costs. Resales though may have other amenities that are not typical builder offerings. These could include sprinkler systems, water softeners, decks, pools, hot tubs, etc. A new home will have warranties. Most repairs will be covered during the first year and some even longer. The risk of repairs is greater for a resale. However, you can purchase a homeowner warranty at closing to lower this risk. Since resale homes come draped and landscaped, replacement and enhancement can come later. Lack of these expenses up front make resale homes the preferred choice for many. In addition resales tend to have a lower cost per square foot, compared to new homes in the same location. You may find that you get more for you money with a resale home.

Home Warranty Equals Peace of Mind

Costly repairs, especially during the first year of homeownership, could be a financial burden to buyers who have recently purchased a home. A home warranty (also known as residential service contract) offers freedom from worry over repairs.

A basic policy provides peace of mind to both buyers and sellers. Add-ons to the policy may cover a pool, spa, or other non-essential equipment. After purchasing the initial policy, there is no additional fee until the one-year renewal.

When a covered item needs repair, the homeowner contacts the warranty company who assigns a vendor to fix the problem. Instead of paying out of pocket or contacting the seller to pay for the repair, the homeowner pays a small fee and the warranty company pays the remaining amount. The warranty provides the buyer with a conflict-free remedy to home repair. Ask your sales professional to request a home warranty in your offer. If you are selling your home, consider offering the warranty as a buyer incentive.

Increasing Seller's Property Value

Understand first of all that there IS a difference between price and value. Price is the amount you are asking for the property. Value is buyer perceived, and this perception of value is influenced by many factors such as location, features, condition, comparison to other purchase option, etc. By attending to details that can have a positive impact on the value, sellers can significantly increase their chance of attracting qualified buyers willing to pay the asking price.

Some tips to achieve a positive impact on value are:

• Perceived size impacts value, even more so than actual square footage. Open floor plans make a room feel bigger than larger spaces with smaller rooms. Showing property that is furniture free, or at reduced clutter, helps to make the space feel bigger.
• Vacancy increases sale-ability. Property is easier to show and easier to sell, and quicker to take possession of when it is vacant at the time it is offered for sale. Evidence of problems to take possession of the property -- such as encroachments, or tenants who wont allow buyer tours -- negatively impact value. Vacancy also helps the buyer walk through the property imagining ownership. Sellers should remove personal trinkets and family pictures as well as being conveniently absent during a buyer tour.
• Cosmetics are important.
  • Fresh paint will always add more value than it costs.
  • Clean or new carpet/flooring adds more value than it costs.
  • Landscaping adds more value than it costs. At the very minimum, make the entrance area neat.
  • If you can, add some colorful flowers and new sod.
• Take care of the obvious! The spot on the ceiling from the roof leak takes thousands of dollars from the perceived value and the offer price.
• Condition affects value. Do a seller's home inspection to identify and fix the problem BEFORE closing. No point holding up your check a few extra days; plus a failed buyer's inspection could cost you the sale. Buyers will often bargain down your asking price to accomodate for property condition and repairs.
• If you can, remodel/update the kitchen and master bathroom. These two areas have a big impact on home buying decisions.
• Strategic renovations impact value and your bottom line. Don't spend more money to renovate the place than you can recapture in value on the sales price.

Your Home and Your Retirement

Many retirees are planning to access home equity, hoping it may make the difference between a comfortable retirement and just getting by. This article considers some of the strategies for tapping home equity, such as moving to a more affordable residence or obtaining a reverse mortgage.

Before You Start:

• Talk with your spouse or partner about using your home to help finance retirement. Are you in agreement?
• Consider whether your plans are realistic. For example, ask yourself whether you could really downsize to a smaller home.
• Begin looking into the cost-of-living implications that would be associated with moving to a different part of the country.
• Check your most recent retirement account statement to determine whether you're already contributing the maximum amount.

Your Home and Your Retirement

Unlike earlier generations of retirees, who paid off first mortgages and retired at the family homestead, today's Baby Boomers are looking to capitalize on home equity to enhance their retirement savings. Popular strategies for tapping home equity include downsizing to a smaller house or condominium, relocating to an area where the cost of living is more affordable, and taking out a reverse mortgage.

Regardless of which strategy you choose, it's important to be realistic about what your house may be worth when you retire. Although housing prices have escalated considerably during the past few years, a variety of factors may cause them to level off or decline at some point in the future. Home equity may add value to a diversified portfolio, but relying too much on your house to fund your retirement could work against you if the real estate market in your area cools considerably.

Making a Move

Selling your existing home and relocating to a more affordable house or condominium may be a reasonable option if you have considerable home equity and the shift won't negatively affect your lifestyle. As part of your research, remember to investigate the overall housing costs in your desired area. For example, real estate values and property taxes typically vary considerably by locale, sometimes even within the same state. Additionally, before relocating to a new area, you might want to spend significant time there to make sure it is compatible with your lifestyle and interests.

When calculating your home's sale price as part of the retirement income equation, be sure to use realistic assumptions. Real estate prices have risen at above-average rates in recent years (see table on average annual rise in home prices, below), and there is always the potential that they may level off or even decline in the future. When planning your retirement income, remember the importance of diversification -- owning a portfolio of stocks, bonds, and cash investments in addition to home equity -- to help guard against market swings in any one area, including real estate. Of course, there are no guarantees that a diversified portfolio will protect against overall financial losses, but a diversified portfolio can position you to potentially take advantage of gains in several financial sectors.

Finally, when selling your home, consider that the first $250,000 in capital gains ($500,000 if you sell jointly with a spouse) is not subject to federal taxation if you lived in the house for two years or more.

A Reverse Mortgage: A Tool for Staying Put

Tapping home equity doesn't necessarily require relocating. A reverse mortgage may be a solution if you have significant home equity and a desire to stay in your existing home. With a reverse mortgage, you receive a source of income by borrowing against your home's equity. Payouts are tax free and may be taken as a lump sum, a line of credit, or an annuity-like payment schedule.

To qualify, you and other owners (such as a spouse or partner) must be at least 62 years of age. You must own your home outright or be able to retire an existing mortgage with the money you receive from the reverse mortgage. As long as the reverse mortgage is in effect, you are responsible for maintaining your home, and for paying taxes and insurance. The loan plus accrued interest is due when you die or sell the house.

When evaluating a reverse mortgage, be sure to consider the fees, which may be substantial. You may have to pay a loan origination fee of between 6% and 8% of the value of your home, in addition to servicing fees assessed over the term of the mortgage. Because of the relatively high fees, many experts recommend a reverse mortgage only if you plan to remain in your home for the long term. Also keep in mind that the amount you owe tends to grow over time, as interest (which is usually based on a variable, rather than fixed, rate) accrues on amounts that are gradually paid out. Over time, a reverse mortgage can completely exhaust the value of your home, leaving little if any assets left over for your heirs.

Payout Alternatives

Study payout options associated with a reverse mortgage carefully to determine whether one may work for you.

Payout Option	Advantages	Drawbacks
Lump sum	You receive a considerable sum.	Interest accrues on the entire amount.
Line of credit	You have the flexibility to draw only as much as you need.	Fees may outweigh the benefit if you draw only a small amount.
Annuity-like schedule	You may receive a source of income for as long as you remain in your home.	Payments are not indexed to inflation.

The recent boom in the national housing market may have lulled many Baby Boomers into believing their home equity will be enough to see them through a comfortable retirement. If you're among those who intend to rely on a home's value -- either through downsizing, relocating, or obtaining a reverse mortgage -- make sure that your plans include realistic projections. And remember that maintaining a diversified portfolio of other types of investments can potentially help balance out your overall pool of financial assets.

The Average Annual Rise in Home Prices: Compare Recent Years with Historical Averages
	2000-2004	1975-2004
New York	10.65	6.81
Ohio	4.28	4.81
Texas	4.39	4.15
California	14.46	8.51
U.S. Average	8.17	5.78
Source: Office of Federal Housing Oversight, OFHEO House Price Index, 2004 data as of September 30 (most recent available).

Summary:

• Strategies for accessing home equity may include selling your house and moving to a smaller residence, relocating to a community where the cost of living is more affordable, or obtaining a reverse mortgage.
• Because real estate values may potentially level off or even decline, it's important not to rely too much on the value of your home to finance your later years. Consider using home equity to supplement a diversified portfolio that includes stocks, bonds, and cash investments.
• Accessing home equity by selling your house may have the greatest appeal if you are able to find alternate housing without significantly compromising your lifestyle.
• A reverse mortgage may work for homeowners who have considerable home equity and want to remain in their current residence. Payout options typically include a lump sum, a line of credit, or an annuity-type schedule of payments.
• When evaluating reverse mortgages, review the fees and overall cost of borrowing (total interest paid over time), which may be considerable.

Checklist:

• Read the fine print before signing any type of reverse mortgage, paying particular attention to details about fees and expenses.
• Reinvigorate your traditional retirement saving initiatives by maximizing contributions to your workplace plans and/or IRAs.
• If a reverse mortgage will make it impossible for you to pass along the full value of your home to an heir or heirs, consider revising your estate plan accordingly.
• Don't base long-term financial plans on the assumption that your home will maintain or surpass its current value.

Documentation for Your Lender

When you apply for mortgage financing, you must provide the following documentation to the lender before your loan is granted:

• Name and address of landlord(s) for the past two years (if eligible).
• Proof of all income from the past 24 months (tax returns, pay stubs).
• Previous two years' W-2 forms.
• Copy of most recent year-to-date pay stub for all applicants.
• Proof of all deposit accounts, checking, savings, money market, IRA and brokerage accounts.
• Three months most recent statements for deposit accounts, stocks, bonds, etc.
• If you chose to include income from child support/alimony, copies of court records or cancelled checks showing receipt of payments.
• Legible sales contract signed by buyers and sellers (if you have already purchased a home).

Name, address, account number, monthly payment and current balance for:

• Installment loans (including student loans, auto loans, mortgage loans).
• Revolving charge accounts (home equity, credit cards).

If you are self-employed or paid by commission:

• Previous two years Federal Income Tax Returns with all schedules.
• Year-to-date profit and loss statement and balance sheet.
• Corporate tax returns and all schedules.

If you have filed bankruptcy in the last seven years:

• A copy of petition and discharge, handwritten explanation of the reason for bankruptcy, evidence of excellent credit since the bankruptcy.

Your Personal Decision to Buy

To understand the rent vs. buy decision, analyze your personal situation. The first variable is your current rent. The decision to buy rests on the advantages accumulated beyond the term of your lease. You should estimate the annual rent increases that you will have to pay if you rent longer than one year. Then factor in your renter's insurance. While renter's insurance is on contents, this amount will offset some of the insurance that you will pay as a homeowner. Normally utility costs are not factored in unless you are in a unit where the landlord pays all or some of your utility bills.

When calculating the buy side of the decision, factor in the purchase price. You should calculate an appreciation rate for the property based on a percentage of the purchase price. This will have to be an estimate because it is a future event. Consider also the savings rate that your down payment would earn if you continued to rent and left this money in savings.

Estimate the number of years you expect to own the property. This figure will be personal. If you are starting your career or are in a job where you expect advancement, then it is likely that you will sell the property sooner than later. Typical reasons for selling include changes in marital status or family size, anticipated job transfer, and upward or downward employment growth.

Consider the yearly expenses in owning a home. You will need the interest rate and term of the mortgage, annual property taxes, and estimated annual maintenance. An older home will require more maintenance than a newer one. Finally, the loan expenses when you purchase, and homeowner's insurance and selling costs when you finally liquidate the property are factored in.

To calculate the financial advantages of buying vs. renting, go to www.FinanCenter.com and click on Home Center.

Don't Overlook Consumer Fraud In Foreclosure Mess

Realty Viewpoint: Don't Overlook Consumer Fraud In Foreclosure Mess

by Blanche Evans

If you're confused about why banks are being given federal bailouts while homeowners in foreclosure aren't, here's something interesting to consider.

According to an index that tracks active criminal and civil mortgage fraud cases, there's a cause and effect relationship between foreclosure and fraud.

Foreclosure filings rose 57 percent in March from a year ago, says RealtyTrac, and a five percent gain from February. That's more than 234,000 homes in some stage of foreclosure.

In tandem, the Fraudblogger Index for the first quarter of 2008, compiled by MortgageDaily.com, says there's been a jump in mortgage fraud cases filed, from 600 in the fourth quarter 2007 to 713 in the first quarter 2008.

It's a scary trend, as it represents over one billion dollars in active fraud cases tracked.

What's surprising is that the injured parties in the majority of cases aren't consumers, but banks defrauded by homebuyers, mortgage brokers, real estate agents and appraisers.

The good news is that active fraud cases are down nearly $800 million from the first quarter of 2007, but the bad news is that foreclosures largely due to fraud will continue throughout 2009. The number of cases is going up because through the first half of 2007, the industry was still involved in bad underwriting.

Lax underwriting helped encourage homebuyers to use mortgage products like no-doc loans where they didn't have to provide proof of the sources of their incomes.

That's how the fraud is being uncovered. As loans go into default, lenders are investigating the files.

Sam Garcia, founder of Mortgage Daily, estimates that one-fourth to one-third of these buyers committed some sort of serious fraud against the lender by lying about their ability to repay the loan. And that doesn't even count the less serious fraudsters -- like those who borrowed downpayments from friends or family and didn't tell the lender.

Wow! Any way to quantify that? "I get my sense of it from the rating agencies, the source for bad data in the files," says Garcia, "It will take two years to clean itself out."

In 1998 we went through a mini-subprime meltdown, recalls Garcia. But investors' appetite for buying mortgage-backed securities other than those guaranteed by Freddie Mac and Fannie Mae didn't go away.

This time, it's different, says Garcia. "From loan origination to securities, it's annihilated. We won't have the ability to jump back into risky loans for quite a while."

That's a relief

How to Improve Curb Appeal

How to Improve Curb Appeal A great follow up article regarding this mornings post.

"Honey, Stop the Car!" The Importance of Curb Appeal

This is probably one of the most important aspects in Staging and Selling a home.  You must draw that person out of the car, unto the sidewalk and up to the front door.  Color, landscaping, walkway, driveway, neighbors... all give a feel to the home.  In order to show the home to a global buyer, it must look pristine from the street to the doorknob.

If a home is taking longer to sell than the average there may be a good reason. What is the first thing you notice when you drive up to the home? How does the home make you feel?  Do you want to get out and see it? How does it look compared to the other homes in the neighborhood?  These are questions you need to ask yourself when preparing your home for sale.

Well, you can't change the neighborhood, and you probably didn't budget for a complete front yard makeover.  So what can you do?

Here is a start:

Walk across the street or as far way as you can.  View your home by at least 3 angles such as the right side, front and center and left side. Now take a really good look at it.

#1. Can you see it?  This sounds funny but if you can't see your home, you can't sell it. Trees and shrubs are great and should be trimmed so that you can still see the house.  I usually suggest trimming trees up to the rain gutter line or the top of the highest window.  Shrubs should follow a same line as the bottom of a window trim. If a lot of trimming needs to be done, do it several weeks before so that the plants have a chance to recover.

#2. How is the paint?  Is it a neutral color?  Does it flow with the rest of the homes on the street?  Painting your house bright Blue will attract attention for sure, but not when you are selling.  Remember, with global buyers... neutral is key here.  Start with the trim if you can't paint the whole house, especially around the front door and front porch. It can be as simple as painting the front door a different color.  That can be a quick and easy fix.

#3. How is the driveway?  Are there cracks, oil stains, garbage cans?  The driveway is the largest hard area near the home, the material and look of the driveway and garage have a huge impact on curb appeal.  Clean it up and clear everything off.

#4.  Is your walkway to the front door defined?  Does it lead buyers to the front door or front entry? Make sure people know where your front door is, and then work on drawing people toward the front door. If the front entry area has a patio, create an outdoor sitting area.

#5.  How is the landscaping? Make sure that the grass is well watered, edged, and mowed. Flowers, flowers and more flowers. These little pops of color make us happy and cheerful.  Add some pots near the garage and plant away.

Curb appeal is really part of the whole package, which means the small details are as important as the big picture. A manicured front yard means a manicured home in a buyer's eyes.

Finally, don't forget to tidy up. Remove the garbage cans, hide the hose, pick up the paper, etc. Curb appeal means a place that looks neat and clean, the kind of place you'd like to live.

Does It Matter Why Rates Are Low?

Does It Matter Why Rates Are Low?

by Peter G. Miller

If you are a first time home buyer, you have a lot to learn.

First Time Buyers' Dos And Don'ts

by Broderick Perkins

If you are a first time home buyer, you have a lot to learn.

The time is now!

Home Buyers, the ball is in YOUR court!

Real Estate has never been better to purchase a home. This is your time! There are countless numbers of homes on the market right now and Sellers are anxious to negotiate. There is no need to worry or postpone buying your home. This is the best time for you and the odds are in your favor that you will find the best home, get the best price that you are willing to offer with the best terms.

What makes it YOUR time? Glad you asked.

The economy is good, interest rates are low and you have a feast of homes on the Real Estate market right now to choose from. This Real Estate market right now, is like Christmas morning for a Home Buyer… lots of goodies out there for you to choose from and you are in the driver’s seat. There are a lot of homes for sale.

The smart Home Buyer will start right now, find the best home, get the best price with the help of the best Realtor and get the best loan. Make sure that the Realtor and the Lender are experienced…if not, it could cost you in the long run. Those two people can make it or break it for you so you want to do your homework and make sure that you’ve got someone who is looking out after your best interests!

Have you ever heard…”a day late and a dollar short?” Putting off buying a home in this Buyer’s Real Estate market is not in your best interest. Don’t wait until interest rates go up, or the correction in the Real Estate market turns upward. Get your piece of the American Dream, now!

If you are a First Time Home Buyer, I can’t stress how important it is for you to jump in and get that house or condo. Stop throwing away your money in rent.

Those considering buying a second house, this is a great time to hop on the train and get the Dream Vacation home or Investment property that you’ve always wanted. Perhaps, you are interested in a 1031 exchange. Great negotiating terms are out there.

Run, don’t walk…the ball is in the Home Buyer’s Court! Do you know a Home Buyer who needs that extra push? Help them by suggesting they take the opportunity to contact Prudential Pacific Properties

Homeowners Insurance

Ready to buy a home? One of the lender’s conditions for loaning you money is that you buy a homeowner’s insurance policy, also called hazard insurance. You must bring proof to closing that you have insurance in effect and that it’s paid for 12 months, or your loan won’t close.

What is proof? Your policy declarations page, which shows the time your insurance went into effect, the policy period, and the cost for 12 months. So bring either your whole policy or just the declarations page to closing. In addition, you’ll need a receipt or letter from the insurance company to prove you’ve paid the bill.

It's Just Protection

The reason the lender requires insurance is to protect his interest if catastrophe strikes. For example, if your home is destroyed by fire, he knows the mortgage will be repaid from the insurance proceeds.

But even if you didn’t have a lender, you should insure your home. It’s a major investment that contains all your worldly possessions. Just imagine what it would cost to replace them.

You also need to protect yourself against lawsuits if someone is injured or worse on your property. Let’s say you hire a neighbor kid to help you clean debris from the roof after a windstorm and he falls off and breaks an arm and ankle. If his parents are the type to file a lawsuit, perhaps claiming his future athletic career just ended, you could find yourself needing an attorney and fighting for your very house and retirement savings.

Where It Is

So how do you find the insurance to protect yourself and all you own? Many companies offer homeowner’s insurance. You will need to research and follow through on it prior to closing your home purchase.

• Ask family, friends, and co-workers for insurance company references. Also ask what their experience has been. We’ve all heard stories about someone making a claim against a policy only to find their rates shooting up or the policy cancelled.
• Contact your state insurance office, which may have helpful consumer materials including information on consumer complaints.
• Explore online sources of information describing ways to save on your homeowner’s policy. Discounts are given for many reasons, including having smoke and burglar alarms and having more than one policy with the same company — auto insurance, for example.
• Know what insurance you need. The experts agree on these basics:

1. Your best bet is guaranteed replacement cost coverage, not an actual cash value replacement policy.  An actual cash value policy covers the value at a depreciated rate.
2. Ask about and understand the personal property protection offered. You may be able to get a personal property replacement guarantee as part of your basic policy. If not, ask if the company offers that feature as an add-on, called a rider. Again, the value of your used possessions is less than the cost of replacing them.
3. The amount of liability coverage you need depends on your personal worth and circumstances.  The more you’re worth, which is to say the deeper your pockets, the more you have to lose if you’re sued. Some experts say you need coverage equal to double your assets. There are excess-liability policies available for those who need the protection.
4. Some possessions may need to be insured on separate riders. Say, for example, that you inherited a collection of antique tea cups that appraise at $50,000. They need a separate rider.
5. Standard homeowner policies do not insure against floods, earthquakes, hurricanes, or wildfires, among other things. If your house is in a flood plain, your lender will require flood insurance. Otherwise, specific hazard insurance is up to you and will require riders separate from your basic policy.

Buyer's Tip: You need to do research and buy homeowner’s insurance far enough in advance that it is in effect by closing day and you have proof in hand.

Choosing your home type

Home! Home, sweet home — it’s a lovely image, isn’t it? Parents relaxing after a hard day’s work. Kids doing homework or playing in the yard. Maybe a cat in the windowsill, a dog in the yard. Isn’t that what it’s all about?

Well, it’s not that simple.

The fact is, there is no single ideal home because there isn’t just one type of homebuyer. Some of us are single, some have spouses but no kids, and some would gladly forgo the yard (and the attendant yard work) for a balcony with hanging plants and a panoramic view. Home ownership, like love itself, is a many-splendored thing.

Condos, Co-ops, and Townhomes, Oh My

There are, of course, thousands of types of homes, but the vast majority fit into one of several broad categories. Depending on your particular situation, it may be best to focus on one of the following:

Single-family detached

It can be anything from a 100-year-old handyman’s special to a designer home in the poshest planned community in town. Yet whether it’s a starter home or a starter castle, it is, by definition, a single house on its own parcel of land.

As the owner of a single-family detached home, you get to make all decisions (within reason) regarding exterior style, yard improvements, and household rules (parking, pets, late-night noise, etc.). The flip side, of course, is that you also get to pay for all repairs and routine maintenance.

Condominium

Condos, too, take many shapes and forms (attached townhouses, warehouse lofts, high-rise apartments, etc.), but all adhere to two basic principles: 1) Each owner owns the interior of their unit — “from the paint in,” as they say — and a portion of everything else from the roof and exterior walls to any communal  facilities. And 2) All owners pay dues to fund a homeowner’s association that handles maintenance, common-area repairs, insurance, and unpleasant surprises.

For some buyers — singletons, for example, and couples without kids — a condo can be an excellent choice. They tend to be more affordable (lower construction costs, shared expenses), require less maintenance (someone else cleans the gutters and mows the lawn), and often have amenities (a pool or fitness center, perhaps) that few of us could afford on our own. The downside? More noise, less privacy, and possibly less appreciation when you’re ready to sell.

Co-op

It’s short for co-operative apartment, and although they’re not common (except in high-cost, high-density areas like New York City), they are an option. They typically resemble condominiums, but instead of owning their own unit, co-op owners become shareholders in the corporation that owns the entire property. The corporation (through a board of directors) assesses monthly dues, manages the property, and pays the mortgage and other bills.

More to the point, perhaps, shareholders get to vote on all major decisions, including who gets to live in the co-op. In other words, your fellow owners can turn down prospective buyers based on everything from financial concerns to perceived reputation (although, by law, they can’t discriminate). In other words, getting out (i.e., selling) can be just as difficult as getting in.

A Word About Townhouses

The term “townhouse” or “townhome” isn’t a legal one, but rather a decorative one. Simply put, it refers to homes that are individually owned (along with the land beneath them), but that also share common walls with one or more neighboring homes. From inner-city row houses (think Rocky) to downtown duplexes to golf-course villas, they occupy a sort of middle ground between condominiums and single-family detached homes.

Are they a good idea? It depends on your tastes and interests. Like detached homes, most provide a yard (although usually quite small); like condos, they often provide communal amenities (e.g., a swimming pool, tennis courts), but with the same noise, privacy, and stylistic issues. And, assuming you’ll sell someday, be aware that, all things being equal, townhouses generally appreciate more than condos, but less than detached homes. However, they are usually cheaper than a detached home.

Understanding Points, Rates and Fees

Not only do you have to understand what type of mortgage you should choose, you have to understand the costs associated with your mortgage. All of these costs will be paid upon closing your mortgage.

Purchase Points

Purchase points, also known as a "buy-down" or "discount points," are an up-front fee paid to the lender at closing to buy-down or lower your interest rate over the life of the loan. Each point is equal to one percent of your total loan amount. If you have a $100,000 loan, one point would equal $1,000. The more points you buy, the lower your interest rate, but the more money you'll need at closing.

How do you decide whether you should buy points and if so, how many? Well, the decision should be based on how long you plan on living in your home and what you can afford to pay each month toward your mortgage. If you plan on living in your home for more than five years, it's probably a good idea to purchase points. The longer you live in your home, the more you can save on interest over the life of the loan.

Interest Rate

When you get a mortgage, you are charged an interest rate.this is the rate which the lender charges you for using their money to buy a home. It determines how much your monthly payments will be. Generally speaking, the higher the interest rate, the higher your monthly payment.

Mortgage interest rates change constantly.daily, even hourly. If you speak to a lender and are quoted a specific interest rate, that's not to say you'll necessarily get that rate when you close on your loan. Not unless you formally lock-in that rate with the lender.locking in an interest rate will guarantee you get your loan with a particular interest rate. Lenders will allow you to lock in for 15, 45 or 60 days. But the longer you lock in, the more expensive it will be, since it's more of a risk to lenders.

Fees

There are always fees associated with getting a mortgage, these fees cover the cost of processing and underwriting the loan. These fees can include charges for ensuring the title to the home is free and clear; paying for a land survey; or paying for a home appraisal which gives you the estimated value of the property (lenders require an appraisal to close on your mortgage).

Deciding which mortgage to get may depend on what each lender does because different lenders may charge different amounts. Some may charge lesser closing fees to lure you in, but may charge you a higher interest rate, which means you may pay more in the long run. But everyone has different needs.you may or may not be able to afford to pay more at closing and are willing to pay more over the long term.

Before it comes time to close, do your homework, make sure there are no hidden fees, and ask your lender lots of questions so that you understand all the costs involved with your mortgage.

*Please consult your tax advisor.

http://realestate.yahoo.com/info/guides/understanding-points-rates-and-fees;_ylt=AoHSMjtL.QCiBzV82vZEUTnX4JF4

Are There Any Questions I Should Be Sure to Ask Before Making An Offer?

When you are buying a home, there are many problems that the seller is obligated to disclose. For example, in most states, it is illegal to withhold information about major physical defects on the property, and according to the Residential Lead-Based Paint Hazard Reduction Act (U.S. Code §4852d), anyone selling a house built prior to 1978 must disclose all known lead-based paint and hazards in the house. But, these disclosures don't always paint the entire picture of the home. Here are six questions you may want to ask that can offer additional insight about the prospective home before you make a final decision.

1) Why is the seller selling the house?
This question may help you evaluate the "real value" of the property. Is there something about the house the seller does not like? If so, you may be able to adjust the purchase offer accordingly.

2) How much did the seller pay for the home?
This question can, in some instances, help the buyer negotiate a better deal-maybe even get the seller to carry part of the loan. However, it is important to remember that the purchase price is influenced by several factors, like the current market value and any improvements the seller may have made to the home. The original purchase price might not have anything to do with the current value of the house.

3) What does the seller like most and least about the property?
By asking the seller what he or she likes most and least about the property, you might get some interesting information. In a few cases, what a seller likes the most about a home might actually be something the buyer is looking to avoid. For example, if the seller describes his house as being in a "happening neighborhood," the buyer might consider this a negative factor because the area may be too noisy or busy for his or her taste.

4) Has the seller had any problems with the home in the past?
It is also a good idea to ask the seller if he or she has had any problems with the home while living there. Has the seller had problems with a leakage from the upstairs bedroom in the past? If so, even if the leak has been corrected, the floor and walls around the bathroom might have been damaged. You should also check that these items were repaired properly.

5) Are there any nuisances or problem neighbors?
Use this answer to find out about any noisy neighbors, barking dogs, heavy airplane traffic or even planned changes to the neighborhood, such as a planned street widening. This may give you insight on why the seller is really moving.

6) How are the public schools in the area?
Because the value of a neighborhood is usually greatly influenced by the public schools in the area, finding out the buyer's perception can give you some insight about the quality of the area's schools.

Knowing all you can about a prospective home, not only helps you decide if it's the home of your dreams, but what offer to make as well.

Want to Invest in Real Estate But Not Live In It?

Turn on any financial news program and at some point you'll hear the experts extolling the virtues of diversification. Real estate has long been considered a conservative, long-term strategy to growing wealth. While some seasoned real estate investors make it look easy, to be successful, beginners should follow some basic principles.

• Learn all you can. Before committing your cash, you should have a fundamental understanding of real estate. For example, be aware that, in general, investment properties are not liquid investments. Barring exceptional circumstances, real estate does not sell at a moment's notice. It could take days or months to sell a property, depending on the strength of the market in a particular region.
• Consider cash flow. You'll need to have enough capital on hand to cover any short-term losses due to vacancies between tenants.
• Start small. Look into buying a single family home or a duplex. Leave large apartment buildings and commercial properties to the pros.
• Inquire at the local Chamber of Commerce about companies relocating into or out of the area. Company movement is one indicator of demand for rental and/or office space.
• Find a property that will be in demand. Look for a moderately priced home with three or four bedrooms, two bathrooms, and a garage that sits on a quiet street.
• Research the property. The most common way first-time investors lose is by failing to investigate a property thoroughly. Look beyond the front door. Investigate the reputation of the school district, the crime rate, and plans for expanding a nearby highway or developing vacant land. Ask a Prudential Northwest Properties associate about the area, its history, and how fast (or slow) properties are moving.
• Inspect the home you're considering for signs of water damage, such as stains on the ceiling and crinkling or gathering wallpaper; open and close every door and window; and check all electrical sockets by plugging in an appliance. Get an independent home inspection, roof inspection and termite inspection. Unexpected repair costs can eat away resale profit. Because even the best inspection can't always predict problems, try to set aside some of the rental income for unexpected repairs.
• Spend time driving the streets of the neighborhood noting the condition of other properties. Are lawns maintained? Are roofs in good shape? Are homes kept up?
• Be ready to make fixes quickly and respond to the renter's needs. If you're not prepared to be a hands-on landlord, consider hiring a property management firm. Remember, investing in a property is much different than living in one, and while emotion and attachment can be prime motivators when it comes to homes, it is return on investment that counts when investing in real estate. 

Now is a Great time to buy a Home!

If you’re ready to buy a home and can afford it, now is a great time to buy. Mortgage interest rates remain very low. In many areas, buyers have a lot of inventory from which to choose and long-term homeownership continues to be one of the best ways for the typical American to build wealth.

Don’t let all of the negative media attention about the “mortgage meltdown” keep you from pursuing your homeownership dream. Mortgage industry woes are primarily limited to subprime loans and other types of creative and comparatively risky financing products. While the mortgage industry stalled briefly to reconsider its more exotic loans, there is plenty of conventional financing available for qualified homebuyers. Interest rates remain at historically low levels – still less than 7% for the typical, 30-year fixed-rate mortgage.

Indeed, the market has changed. It’s gone from a frenzied seller’s market to calmer buyer’s market. In fact, buyers haven’t seen a market this strong in years. When the national median home price dropped for the first time on record, the decline made huge albeit misleading headlines. For starters, there is no such thing as a national real estate market. All real estate markets are local and driven by local factors that include the local economy, housing supply and demand factors and other attributes like geography.

The slight decline followed years of unprecedented steep home price appreciation and the reality is that only a handful of markets experienced price declines. Corrections in markets that experienced exorbitant home price appreciation were expected and signal good news for buyers. According to 2007 third-quarter National Association of REALTORS® (NAR) statistics, the vast majority of the nation’s metropolitan areas showed rising or stable home prices with most areas experiencing modest gains.

Right now there are many homes from which to choose and in most areas buyers don’t have to deal with the harried and hurried competition of multiple bids. The changing market has also changed the inventory landscape to include fewer speculative sellers and a larger share of serious and motivated sellers.

Prospective homebuyers have some time to shop inventory and thoroughly compare home types and prices, amenities, neighborhoods, commutes and other important real estate-related features. And buyers have stronger price negotiation power as sellers compete for their attention by offering concessions or other incentives.

While all real estate markets have ups and downs, Americans continue to consistently build wealth through homeownership. According to the NAR:

·        One average, the value of a home doubles every 10 years. During the past three decades, home values have increased an average of 6.6% per year.

·        The average homeowner today has 36 times the wealth of the average renter. Homeowners are essentially paying themselves when they pay their mortgages and this means they’re building equity. Homeowners also benefit from some real estate-related tax write-offs like mortgage interest.

·        Sixty percent of the average homeowner’s wealth is their home’s equity. For homeowners who’re in their homes for the long-term, home equity typically is their single largest source of wealth.

Because every market is different, it’s a good idea for potential homebuyers to contact a local real estate specialist to learn more about what’s happening in his or her community and real estate market. The bottom line in real estate doesn’t change – if you’re ready to buy and can afford to make a long-term homeownership commitment, it’s always a good time to buy!

How Much Can You Afford?

If you're like many first-time homebuyers, chances are you've been spending your weekends driving around visiting open houses and new model homes. This is a great way to get a feel for what you want. The problem is that what you want isn't always what you should get.

Before you start touring homes for sale, it's important to start off with a budget so you know how much you can afford to spend. Knowing what mortgage payment you can handle will also help you narrow the field so you don't waste precious time touring homes that are out of your reach.

Where to begin

The key factor in figuring how much home you can afford is your debt-to-income ratio. This is the figure lenders use to determine how much mortgage debt you can handle, and thus the maximum loan amount you will be offered. The ratio is based on how much personal debt you are carrying in relation to how much you earn, and it's expressed as a percentage.

The ideal ratio

Mortgage lenders generally use a ratio of 36 percent as the guideline for how high your debt-to-income ratio should be. A ratio above 36 percent is seen as risky, and the lender will likely either deny the loan or charge a higher interest rate. Another good guideline is that no more than 28 percent of your gross monthly income goes to housing expenses.

Doing the math

First, figure out how much total debt you (and your spouse, if applicable) can carry with a 36 percent ratio. To do this, multiply your monthly gross income (your total income before taxes and other expenses such as health care) by .36. For example, if your gross income is $6,500:

	$6,500	(Gross monthly income)
x	.36	(Debt-to-income ratio)
=	$2,340	(Total allowable monthly debt payments)

Next, add up all your family's fixed monthly debt expenses, such as car payments, your minimum credit card payments, student loans and any other regular debt payments. (Include monthly child support, but not bills such as groceries or utilities.)

	Minimum monthly credit card payments*:	____________
+	Monthly car loan payments:	____________
+	Other monthly debt payments:	____________
=	Total monthly debt payments:	____________

*Your minimum credit card payment is not your total balance every month. It is your required minimum payment -- usually between two and three percent of the outstanding balance.

To continue with the above example, let's assume your total monthly debt payments come to $750. You would then subtract $750 from your total allowable monthly debt payments to calculate your maximum monthly mortgage payment:

	$2,340	(Total allowable monthly debt payments)
-	$750	(Total monthly debt payments other than mortgage)
=	$1,590	(Maximum mortgage payment)

In this example, the most you could afford for a home would be $1,590 per month. And keep in mind that this number includes private mortgage insurance, homeowner's insurance and property taxes. To determine the price of home you can afford based on this amount, use a home affordability calculator.

Exceptions to the 36 percent rule

In regions with higher home prices, it may be hard to stay within the 36 percent guideline. There are lenders that allow a debt-to-income ratio as high as 45 percent. In addition, some mortgage programs, such as Federal Housing Authority mortgages and Veterans Administration mortgages, allow a ratio higher than 36 percent. But keep in mind that a higher ratio may increase your interest rate, so you may be better off in the long run with a less expensive home. It's also important to try to pay down as much debt as possible before you begin looking for a mortgage, as that can help lower your debt-to-income ratio.

http://realestate.yahoo.com/info/guides/how-much-can-you-afford;_ylt=AheeBP4v8FwG33yhCMz7d2jT4JF4

6 Things to Keep in Mind When Looking for Mortgage Financing

RISMEDIA, March 26, 2008-There are six critical things prospective home buyers need to do in this sometimes confusing market, says Kansas City mortgage expert Bruce Brown, founder of the website http://www.MortgageAnswersFast.com.

“There is an excess of housing inventory right now and that makes it a good time for buyers to get into the market. Lower prices mean lower monthly payments, but before prospective buyers jump in, there are some key things they need to know about getting a mortgage right now,” he says.

6 Essentials to Look For Include:

1. Use a down payment — Consumers will see better loan terms if they can put at least 5% down. “Each 5% increment will help,” according to Brown, “so put as much down as you can and speak to a loan professional for specifics on various scenarios. Zero down payment programs have all but disappeared, although FHA and conforming 3% down programs still exist. Even with a small amount down, buying compares favorably to renting.”

2. Shop the right way for interest rates — “Fees are critical, as they affect your overall cost, so don’t go by interest rates alone,” adds Brown. “An interest rate that sounds higher may include no fees, while another is lower but includes fees that may make the actual financing cost higher, so be sure to have it spelled out for you.” Lenders are required to provide a Good Faith Estimate of all costs, and consumers are advised to check it carefully against the HUD-1 Settlement Statement to make sure there are no “surprise” charges or other fees. MortgageAnswersFast.com provides consumers detailed explanations of how to analyze Good Faith Estimates to ensure borrowers find the lowest total loan cost.

3. Be wary of advertising — The airwaves are full of advertisements trying to entice consumers into a mortgage because the Federal Reserve has cut interest rates claiming “rates will never be lower.” In actuality, long-term fixed interest rates for mortgages are tied to bonds called mortgage backed securities (MBS) and the prices investors are willing to pay for them, Brown explains. “The Fed does not control long-term fixed interest rates for mortgages. There may be some impact on adjustable rates, but seldom to the extent that advertisers would have you believe. So borrowers should research mortgage rates rather than simply believe false advertising claims.”

4. Think about paying more for your house — “It might sound crazy,” Brown says, “but by paying more for your home you might actually wind up paying less for the transaction. Here’s how: instead of negotiating the sale price down by a certain dollar amount, ask the seller to pay for the costs to “buy down” the interest rate on the loan. The monthly payment can be reduced substantially, saving cash flow in the short run while increasing your principal balance in the long term. Seller funds can also be used to buy out PMI,” Brown explains. “Your mortgage professional can help you calculate the actual savings.”

5. Know your PMI options — PMI, or Private Mortgage Insurance, protects the lender from losses incurred after default when foreclosing on a property. If a borrower has less than 20% down on a conventional conforming mortgage, they must pay PMI, with rates that can vary based on credit score. “Borrowers typically pay PMI monthly,” according to Brown, “but there are other options, including lender-paid mortgage insurance, in which premium is added into the interest rate of the loan. There are other options that allow a smaller fee at closing without raising the rate, and sellers can also pay the fee at closing, which sometimes can be a condition of the sale.” For more detail on these sometimes confusing alternatives, he recommends that borrowers check with their mortgage professional.

6. Improve credit scores — Credit scores have always been important, but never more than today, especially for borrowers with less than 20% as a down payment. Small differences in score can mean big differences in interest rates or fees, so consumers should do everything they can to show their credit in its best light. “Do not close out credit card accounts, but instead distribute the balances as evenly as possible and use old cards every few months to keep them active,” Brown says. “Check your credit report for errors and get them corrected, and get rid of liens and charge offs, if you have any, and resolve any late payments. All these will have a quick and positive effect on your credit score.” Even people with great credit scores as high as 720 may pay a penalty based upon recently changed guidelines. “Credit repair is not just for people who have credit problems,” he adds. “Most people don’t realize they can optimize their score using a few simple techniques.”

Brown is quick to recommend loan officers that are Certified Mortgage Planning Specialists (CMPS) as they can best help consumers sift through the myriad details of a loan transaction. “This means they are certified by the CMPS Institute,” he says. “Getting the right mortgage is much more than just getting a loan, because it has impact on wealth-building, retirement and other strategies in personal finance. CMPS professionals are trained in all of these, so they make a great choice for borrowers who want to understand how to use their mortgage to become financially more secure.”

Bruce Brown is a Certified Mortgage Planning Specialist, the founder of MortgageAnswersFast.com, the president of First Security Mortgage Company, and has appeared on the KC Fox affiliate’s real estate features as the “Purchase Pro.”