Which Home Loan is Right For You?

The steady uptick in temperature ushers in more than just pool-side cocktails and barbeques. It’s the start of real estate season, and people are hitting the MLS and local Realtors in search of For Sale signs to lead them to their perfect home.

But before you move from hunter to homeowner, the mortgage industry must be conquered, and you’ll have to get a home loan. The good news is that interest rates on mortgages are dropping, with CNN Money reporting 15-year mortgages with an average rate of 3.11%. The bad news is there are so many loan options available, you may have a hard time figuring out which one is right for your situation.

These short questions can help point you in the right direction instead of taking a stab in the dark. If you’d rather view visuals, New American Funding created an infographic quiz that can help you find the right home loan though a series of short questions.

How’s your credit score?

• More than 640: Conventional Loans are your best bet because you can take advantage of the low interest rates and flexible payments
• Less Than 640: FHA Loans provide easier qualifying guidelines if you’re credit score isn’t great or you can’t afford a large down payment.

How big is the home you’re buying/refinancing?

• Less than 3 bedrooms: If your home is more than $417,000, double check your county’s maximum loan limits. For a lot of house, High Balance Loans or Jumbo Loans are your best option.
• 3+ bedrooms: If your home is less than $417,000, you’ll fall into the amounts of FHA or Conventional Loan limits.

Would you consider yourself a risk taker?

• Absolutely: Adjustable Rate Mortgages (ARMs) give you a lower interest rate for the first 3-10 years, but it will adjust based on the market so if you can stomach the fluctuations, go for it and then go skydiving.
• No way: Nothing wrong with being conservative. Secure yourself with a Fixed Rate Mortgage so you know how much you’ll be paying each and every month.

How old are you?

• Under 35: You’re either a first-time home buyer or a home buying prodigy. Assuming the former, the FHA Home Loan First-Time Homebuyer Program is a great choice for your first loan.
• Over 35: You’re likely old enough to have built up your credit history and put some money way to afford an FHA or Conventional Loan. If you’re over 62, check out Reverse Mortgages.

How much is your household income?

• Less than $150,000: FHA Home Loans provide the best value with the lowest price tag.
• Greater than $150,000: If you make more and have a low income to debt ratio, you can quality for a higher loan amount. FHA and Conventional Loans are both options

How much longer do you see yourself working?

• Less than 5 years: If you’re about to be retired, you may qualify for a Reverse Mortgage. If you’re a stay-at-home parent, find a loan that can be more affordable with just one income.
• More than 5 years: FHA or Conventional Loans are best for the working class, but if you see yourself moving in 5 years, consider an Adjustable Rate Mortgage or a 15 Year Fixed Rate.

Written by: Erin Everhart

Preparing Hardwood Floors for Home Staging

If you have recently listed your house for sale, then there is a good chance you are looking into tips for home staging in order to increase your chances of success when it comes to selling the home. If you’re not, then you should be! After all, there are all kinds of steps you can take to increase the overall appeal of your home to potential home buyers and those who schedule showings. One aspect that many people fail to consider when it comes to home staging, however, is the importance of preparing your home’s floors.

For starters, if you do not already have any hardwood flooring in your home, now would be a great time to have some installed. After all, this is generally thought of as the most appealing type of flooring in homes, especially in areas such as main living spaces and kitchens. You can have this type of flooring purchased and installed for less than you would expect if you shop around and choose the right company, too.

Of course, if you already have hardwood flooring in any space of your home, it is important to ensure that it looks its best prior to that first showing. And while hardwood is extremely appealing, the truth is that it can be very hard to care for. For this reason, it is important to know what steps to take in order to get your floors looking their best for potential buyers.

To begin with, you should start by using a microfiber dusting pad to get rid of excess debris from the wooden floors. This is an important first step to prepare the floors for further cleaning and polishing. Be sure to buy a microfiber cleaning pad, as other types may not be soft enough and could end up scratching your wooden floors. To get debris and dust out of crevices and corners, you may also want to consider using a hose attachment on your vacuum.

Next, choose a floor cleaner that is specifically made for hardwood flooring. Never use a generic disinfectant or other cleaner that is not labeled specifically for use on hardwood. This is because it could cause serious and expensive damage to the flooring this way. Apply small amounts of the cleaner to each area of the floor and rub them into the wood using a microfiber pad.

Once the cleaner is applied, check to make sure that the floors are not too slippery. If the floors are slippery, ensure that any potential buyers you show your home to keep their shoes on when viewing the home to avoid slipping hazards.

Once the floors are shiny and clean, you may also want to consider applying a floor polish to give them an extra shine and protective finish. Most of these come in a wax form, though some cleaners even have the polish built in to save you time and hassle.

Overall, preparing your hardwood floor for a home showing takes time and careful work. However, in taking the time to get your floors looking their best, you will drastically increase the overall appearance of your interior space and your chances of being able to sell your home.

Written by: Erin Devine

Real Estate Forecast 2013: The Housing Market

The housing market will improve moderately in 2013, but nobody will mistake this for a boom. The gains in activity and prices will be a welcome relief, but will leave many homeowners still underwater.

The usual way of discussing housing problems is misleading. Foreclosures, short sales, shadow inventory, upside-down mortgages are all symptoms. The fundamental problem that we have is an excess supply of housing units.

The normal housing vacancy rate for owned property (single family houses and condos not in the rental market) is around 1.5 percent nationally. Our high was three percent, but we are now down to 2.1 percent.  Rental properties are normally about seven to eight percent vacant. (Local norms may be higher or lower.) We reached a peak of 11 percent rental vacancy a few years ago, but have improved to 8.6 percent in the latest observation.  Despite recent gains, we still have too many houses for the current level of demand.

(Data note: these data are a little soft. They do not exactly match vacancy information from other sources, such as the decennial census. They should be taken as a general magnitude, not high fidelity information.)

The improvement we've seen recently results from a simple phenomenon: construction of new fewer housing units has been less than the growth of demand. Last year total units (single family houses plus the number of apartment units) ran just over 600,000. This year we’ll probably build about 750,000 units. At the peak of construction in 2005 there were 2.5 million units built. We need about 1.5 million new units per year to accommodate population growth, the desire for vacation homes as well as demolition of old units. That, too, is a soft number. The true annual need may be 1.4 million or 1.6 million, but it was never 2.5 million nor 0.6 million.

Our recent underbuilding has been the greatest aid to housing recovery. It did not act as fast as we might have expected (as fast as I actually had expected), because the recession slowed population growth, from both a smaller birth rate as well as less net migration from abroad. In addition, the population we did have used fewer housing units per person, as adult children moved back in with their parents. Slow improvement in the job market means slow movement of kids away from their family homes, but even though slow, the movement is in the right direction.

It’s too early for housing starts to get back to normal—and we certainly will not see above-normal construction anytime soon. But 2013 will probably see over one million total housing starts. This will be a substantial percentage gain over 2012, but remember that a 30 percent gain from diddly squat is still not too far away from diddly squat.

Home prices will rise in 2013, but only modestly. The most recent data suggest that national average housing prices are rising by roughly five percent annual rate. That’s too optimistic a projection for the next few years, however, because there are many owners of multiple underwater properties who will sell as soon as they don’t have to lay out cash. That increased number of houses on the market will limit price hikes.

Business cycles aside, there is not much reason for housing price to appreciate by more than three percent plus inflation, or about five percent in this current environment. Periodic booms and busts will push price gains above or below trend, and a change in tax laws that favors or disfavors real estate will cause one-time price changes. Ten-percent appreciation expectations are fanciful on a long-run basis.

Businesses in the home construction supply-chain should prepare for a nice increase in sales volume in 2013, which will bring the usual boom-time challenges: finding good workers, ensuring an adequate supply of product from vendors, securing the working capital needed to grow production. (See my article on vendor performance and my video about working capital for growing businesses.)

Apartment investors (and landlords of single family homes and condos) will find that their little boom does not strengthen much further. Rents have risen so much that owning is becoming cheaper than renting in many cities. Add in the expectation of price appreciation and we’ll soon see renters itching to buy their own homes. Times will not be hard for landlords, but they should not project further gains beyond what they secured in 2012.

Written by: Bill Conerly

Six Money Saving New Year's Resolutions

“I will pay less tax” may sound like a good New Year’s resolution, but it may not be possible in 2013... Besides, resolutions should be manageable and concrete. Here are six that will save you money in 2013 and beyond.

1. I Will Consider Taxes Before Signing Agreements: Most agreements you sign in business have a tax angle. Many in your personal life do too. Settlement agreements resolving litigation, a sale agreement for a company or real estate, a lease for office space, an option to buy property, or a license agreement to use property can all have a tax impact. Consider taxes before signing and negotiate what you can.

2. I Will Pay Attention to Every Form 1099:  Each one of these slips of paper bears your Social Security Number and will be matched to your tax return. Their importance is increasing. It’s almost January when the ubiquitous forms show up in the mail so get ready. Pay attention to these forms–the IRS does. 

3. I Will Keep Good Records:  Good records make any tax matter vastly easier. Keep proof you timely mailed returns, protests, correspondence, etc. So you can prove when you sent it, send it certified, FedEx or other approved provider that proves timely mailing and receipt. 

4. I Will Consider Taxes Before Hiring “Independent Contractors”: Few consumers consider whether the plumber doing a one-time task is an employee or independent contractor. But if you’re in business and have continuing relationships with workers, consider whether an independent contractor relationship will stand up. 2013 could be a big year for reform.

5. I Will Handle Tax Notices Promptly: Many tax lawyers and accountants find that many clients do not deal with problems promptly. Often, tax professionals could achieve a better result if they were brought in earlier. Whenever possible, be prompt. When you need an extension, get it in writing.

6. I Will Run Numbers: Often, there’s no way to know if you’re getting a tax benefit from a deduction without running numbers. Whether you prepare your own return or have a preparer, running numbers will help you make better and more informed decisions. Multiple scenarios are especially helpful with AMT.

Whatever your New Year’s resolution, 2013 promises to be a year with major tax developments.