Gunning Daily News
December 20, 2011 5:10 pm
Q: Is it true some lenders grant loans based on very little documentation?
A: Not too long ago, they offered in abundance what are called “stated income loans," more commonly referred to as “no doc” or “low-doc" loans, mortgages that require no documentation or little documentation to verify the borrower’s income and assets. In return, the borrower, who must have very good credit, make a big down payment—generally 25 percent or more—and pay a higher interest rate.
Given current market conditions and the sub-prime debacle, these loans have become more difficult to find, cost more, and are mainly funded by hard money lenders who do not conform to bank standards.
The loans are common among self-employed borrowers who have difficulty substantiating all of their income and service industry employees, such as waiters and hair stylists, whose pay is hard to pinpoint exactly. Borrowers also may use no-doc loans when they derive most of their income from commissions or when they have very complicated income structures.
In reality, calling the loans “no-doc” and “low-doc” are misnomers. Some “low-doc” loans require plenty of documentation, such as tax returns and profit-and-loss statements. Even “no-doc” loans require a credit report and a property appraisal.
December 20, 2011 4:40 pm
According to REALTOR.org, 77 percent of home buyers had a home inspection prior to purchasing their home. That means the majority of home buyers are making smart decisions before buying. But let’s say you have just received the results of your home inspection—now what? With all the excitement of the house purchase and the new move, many homeowners make the mistake of putting the results of their home inspection aside, thinking they will make necessary repairs later. However, they should be doing the opposite, as home inspection results are a great starting point for making necessary repairs.
Don’t take any chances with electrical systems. According to the American Society of Home Inspectors (ASHI), problems with electrical systems are the second most common type of problem reported nationwide. Your home inspection report should include a thorough check of your home’s wiring, circuit breaker, water heater, appliance hook-ups and lighting fixtures. Be particularly cautious if you have an older home that may have been designed under an outdated electrical code that is no longer up to par. Even if no major electrical problems show up on your report, installing safety devices such as a ground fault circuit interrupter (GFCI) or arc-fault circuit interrupter (AFCI) as a precaution is always a smart move.
Issues with home safety reported in your inspection should never be overlooked, and many things—radon, lead paint and asbestos—should be removed before your family moves in.
If your home inspector found problems with the frame or groundwork of your house, these problems should be addressed immediately. Problems like a leaky roof or basement may seem like something that can be dealt with later, but once mold or mildew sets in, it can be problematic to remove, and the future potential for water damage could set you back thousands of dollars. It’s always a smart idea to re-roof and repair and seal any cracks in your infrastructure before you begin to move your things into your new home. Areas of entrance—windows, doors and garages—are places that require special attention, as they are the most common areas that let in damaging moisture.
Don’t forget that your home inspection report is a great point of negotiation. You may be able to ask for a lower price or request that some of the major repairs—such as a faulty wiring system or leaky roof—be made on the seller’s dime before you move in.
December 20, 2011 4:40 pm
The holiday shopping season is in full swing, and thus far the numbers are impressive. According to a recent comScore report, in the first 39 days of the season, U.S. consumers spent close to $25 billion on online purchases, which represents a 15% increase over last year.
For consumers who did not take advantage of deals on Black Friday or Cyber Monday, they still have time to find the right gift at a good price. Some last minute shopping and gift ideas from the experts at DealTaker.com include:
• Buy online, but do it fast. Many of the large merchants offer standard shipping for Christmas Eve delivery if customers order on or before December 20. Additionally, some stores continue to offer rush delivery for orders placed today, December 21, and even tomorrow, December 22. The one downside is that free shipping is no longer available.
• Purchase an electronic gift card. Electronic gift cards are purchased exclusively online and are delivered electronically to the recipient via email or to a smartphone. Most major retailers offer this option, and the "card" can be delivered to an inbox or a phone within hours, rather than days. This option is great for those last minute Christmas Eve purchases.
• Send flowers. Some merchants will provide holiday delivery for orders on or before December 23. A beautiful arrangement of flowers can provide recipients with a holiday decoration that they are not forced to stow away at the end of the season.
• Give seats to a favorite event. Almost everyone has a sporting event, concert, or theater production that they wish they could attend, and most last-minute shoppers can easily find these tickets online. Event tickets can be mailed or paperless and make a great gift that will last past the holiday season.
• Opt for a magazine subscription. Most people would be happy to receive a subscription to their favorite magazine about a hobby or interest. Shoppers can visit sites such as Magazines.com to find the best magazine based on recipient, personality or price. Shoppers can also select to have a gift notification emailed directly to the recipient.
December 19, 2011 4:58 pm
In this tough economy, more and more individuals are looking at the potential long-term investment of rental property to provide a supplemental revenue stream and/or tax shelter. Like anything that appears too good to be true, beware of rental rehabs.
Mark Fitzpatrick of Lenox Home Loans (lenoxhomeloans.com) recently blogged that if you’re planning on rehabbing to rent, or purchasing investment property and are planning to take advantage of traditional bank financing, it’s important that you have your ducks in a row so the closing of the deal goes as smoothly as possible.
Fitzpatrick says taking the time to plan ahead for your traditional bank loan before you get into a deal will help hugely when you want to exit the deal. He says the following are the three biggest “gotchas” he sees when financing investment property for real estate investors:
1) Inadequate reserves. Reserve funds, i.e. cash in the bank, are not typically required if you’re refinancing a property you live in, but it’s a different story with investment properties. Plan on the lender asking you to document reserve funds of up to 6 months worth of principal, interest, taxes, and insurance for each financed investment property you own, according to Fitzpatrick.
2) Cashing out after your rehab. It used to be that you could buy a beat-up property for cheap, rehab it, and immediately transact a cash-out loan to get your investment and profit out of the deal. Not so today. Fitzpatrick says Fannie Mae guidelines require you to own the property for at least six months before you can do a cash-out loan. So make sure to account for this in your numbers, or consider financing the purchase and repairs with hard money.
3) Inadequate equity. Fitzpatrick says Fannie Mae limits the max loan-to-value for investment properties to 85%, but when you take into account pricing and bank overlay guidelines, the effective max loan-to-value for an investment property is actually around 70% to 75% right now (sometimes 80%), depending on the scenario.
If you want to learn more, Fitzpatrick offers a number of other points as well as regular articles on financing issues through the lenoxhomeloans.com site.
December 19, 2011 4:58 pm
In early 2011, the Census Bureau released a statement noting that the national average for vacant homes in the U.S. rested at over 11 percent, placing more pressure on the housing market. Selling a vacant home is more difficult than selling a furnished one, in any market. A vacant home—regardless of how nice the property—can seem eerily empty and lacking in character and warmth. However, if you are trying to sell a vacant home—whether it’s a second home or a space you were unable to sell before moving to a new location—there are a few key tips that can make the process easier and help provide a quicker selling time, and a better selling price.
Attention to Detail. Once furniture is removed from a space, even the slightest imperfections become apparent. An older carpet that was once disguised by modern furniture is now blaringly out-of-date. Nail holes in the entryway or a dining room in need of a fresh coat of paint are now obvious. Spend extra time fixing up any noticeable damages, repainting, and caulking, getting new carpets, pressure washing and fixing up anything in need of repair.
Freshen up. It’s amazing how quickly an empty house can begin smelling stale and musty. Before a showing, throw open windows and doors to allow for fresh circulation, and consider some mildly scented candles or air fresheners. Remember; nothing too overpowering.
Amp your curb appeal. Since the house may be lacking inside in terms of character, make sure the exterior packs a punch. Not only should you clear clutter, children’s toys, and debris from your yard but you should also keep grass neat and repair those broken fence posts. For even better results, consider planting new flowerbeds, upgrading that tired front walk or even hiring a landscaper.
Consider staging. Statistics show a well-staged home spends 50% less time on the market. Even if you have moved all your furniture out, you may want to consider hiring a staging company that offers furniture rental. These professionals can make an empty space into a scene of warmth and comfort, removing the burden of decoration from your shoulders and easing anxiety.
Remember, potential buyers are not just looking for a roof over their head. They are looking for a place to start a new chapter in their life. You want to show them everything your property has to offer. Since vacant homes often sell for considerably less—typically 15-20 percent lower than the asking price!—taking extra precautions is worth it.
December 19, 2011 4:58 pm
All of the different types of insurance coverage can make shopping for car insurance confusing and stressful. Below is a basic breakdown of the different varieties of auto insurance, and how you can save a few bucks.
If you're in an accident, this protects you from liability you might face from the other parties in the accident. It's divided into two areas; bodily injury and property damage.
Bodily injury covers medical bills, loss of income and legal bills. If you don't have enough liability coverage, you might have to dip into your savings to pay off big bills from lawsuits.
Property damage covers damage to physical property like homes and storefronts, and vehicle repair or replacement costs for any other parties in the accident.
Damage to your car is covered under auto insurance. Like liability it's split into two sections; collision and comprehensive coverage.
Collision covers repairs or replacement of your car because of a crash, up to your car's actual cash value. The cash value is your vehicle’s value after taking into account depreciation and wear and tear.
Comprehensive coverage is for damages to your car for things other than accidents, such as storms, vandalisms, or collision with an animal.
Underinsured/Uninsured Motorist coverage covers you in the event you're in accident, and the other party has no or very little insurance.
Medical Payments coverage covers medical expenses that may result from a covered accident.
Personal Injury Protection helps cover medical expenses—as well as any loss of income or child-care expenses—you might face while healing from an accident.
To determine your premium, determine the coverage limit; the higher it is, the more you pay in premium.
If you lower your coverage limit, you'll play less premium, but you'll pay more out of pocket if you're ever in an accident that exceeds the limit.
Another way to lower your premiums is upping your deductible, which is the amount you pay if you make a claim for an accident. If you have a higher deductible, you have a lower premium.
For example, if your car requires $3,000 in repairs after an accident and your deductible is $500, you will have to pay $500 out of pocket, and the insurer will pay the rest, $2,500.
You can lower your premium in other ways including safe driving, and avoiding traffic tickets and accidents. If you have children on your policy, their good grades can lower the premium.
When purchasing any large item, it’s always a good idea to shop around first. The Internet makes it easy to get multiple quotes, and you can tweak the various coverage and deductible levels to get different premium options.
December 19, 2011 4:58 pm
The Internal Revenue Service notes that by planning ahead, low- and moderate-income workers can take steps now to save for retirement and earn a special tax credit in 2011 and the years to come.
The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.
Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2011 tax return. People have until April 17, 2012, to set up a new individual retirement arrangement or add money to an existing IRA and still get credit for 2011. However, elective deferrals must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees. Employees who are unable to set aside money for this year may want to schedule their 2012 contributions soon so their employer can begin withholding them in January.
The saver’s credit can be claimed by:
• Married couples filing jointly with incomes up to $56,500 in 2011 or $57,500 in 2012;
• Heads of Household with incomes up to $42,375 in 2011 or $43,125 in 2012; and
• Married individuals filing separately and singles with incomes up to $28,250 in 2011 or $28,750 in 2012.
• Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. Though the maximum saver’s credit is $1,000, $2,000 for married couples, the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.
A taxpayer’s credit amount is based on his or her filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs. Form 8880 is used to claim the saver’s credit, and its instructions have details on figuring the credit correctly.
In tax-year 2009, the most recent year for which complete figures are available, saver’s credits totaling just over $1 billion were claimed on just over 6.25 million individual income tax returns. Saver’s credits claimed on these returns averaged $202 for joint filers, $159 for heads of household and $121 for single filers.
The saver’s credit supplements other tax benefits available to people who set money aside for retirement. For example, most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.
Other special rules that apply to the saver’s credit include the following:
• Eligible taxpayers must be at least 18 years of age.
• Anyone claimed as a dependent on someone else’s return cannot take the credit.
• A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.
• Certain retirement plan distributions reduce the contribution amount used to figure the credit. For 2011, this rule applies to distributions received after 2008 and before the due date, including extensions, of the 2011 return. Form 8880 and its instructions have details on making this computation.
December 19, 2011 4:58 pm
Secondary mortgage market. Market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages; plays an important role in getting money from those who want to lend to those who want to borrow.
December 19, 2011 4:58 pm
Q: Are there ways to save money when adding new space to my home?
A: The direction in which you build can make all the difference. Experts say building up is normally less expensive than building out on the ground level. Adding an expensive wing or addition requires a new foundation. It is less costly to extend plumbing and other mechanical systems upward, as opposed to installing new ones. So using the “air rights” over your house may be your best bet.
December 16, 2011 3:54 pm
In the dead of winter, when staying warm and cozy can mean making the heater work overtime, many homeowners look for home improvements that will keep energy bills from soaring. Handyman Connection, a network of home repair and remodeling contractors in North America, has released a list of green home improvement projects that help save energy use any time of year.
"There are a lot of things you or a professional handyman can do around your home to help cut back on energy use," said Scott McKenzie of Handyman Connection. "That's something that will benefit both your budget and the environment."
Small Do-It-Yourself Jobs
Not all green projects are major undertakings. There are simple ways for you or a professional handyman to make your home more energy efficient.
• Switch out light bulbs with compact fluorescent bulbs throughout the house.
• Install occupancy sensors so lighting will come on when people are in the room and automatically turn off when they leave the room.
• Clean or replace furnace filters once a month.
• Clean the air conditioner filter regularly.
• Add insulation to hot water pipes.
• Install a water filter and quit buying bottled water.
• Replace your showerhead and faucets with low-flow versions. This won't reduce water pressure but water consumption and energy costs can be reduced by up to 50%.
• Insulate the water heater and turn it down to 48 degrees and cut your water-heating bill in half.
• Install ceiling fans.
• Weatherize your windows and doors with caulk, weather-stripping and sealants. The average home can lose 30% of its heat or air-conditioning though the windows.
• Replace the thermostat with a programmable one with a timer.
Bigger Home Improvement Projects
Home remodeling projects are the perfect opportunity to make your home greener. If you don't have the knowledge, tools and time, hire a reputable home improvement company.
• Replace standard toilets with high-efficiency toilets. These newer models use 20% less water, and dual-flush, water-saving toilets can save you about 20% on your monthly water bill.
• Install a new gas water heater with a timer if your current water heater is more than 10 years old.
• Insulate your roof, walls and attic with natural insulation.
• Put in a whole-house fan.
• If you have an attic, put in a solar attic fan to vent hot air out.
• Install solar panels.
• Replace windows with modern energy-efficient windows.
• Avoid formaldehyde-based particle board when putting in new cabinets.
• Take out wall-to-wall carpeting and put in wood flooring. Carpeting traps dust mites and allergens; carpet mould is one of the leading causes of respiratory problems.
For more information, visit www.handymanconnection.com.