All those "record-low" mortgage rates have you watering at the mouth to buy a home or refinance your current one? Mortgage lenders adjust their rates based on perceptions of risk, so unless you can show you're a low-risk borrower, you are unlikely to qualify for a rate that matches those seen in all the advertisements and headlines.
Consumers who want to try for the lowest rates available need to consider these basic factors:
Credit Score: The ideal borrower has a FICO score of 740 or higher. That puts you in the best place for pricing. According to MyFICO.com, borrowers with scores of 760 to 850 could qualify for an annual percentage rate of approximately 3.95 percent on a $500,000 30-year fixed-rate mortgage, while those with scores of 620 to 639 qualify for 5.53 percent.
Points: The lowest rates usually are decreased by paying a fee called a point, or 1 percent of the loan amount. You need to buy points in order to get the best rates at many banks. In Freddie Mac's recent weekly survey on mortgage rates, points have averaged 0.7 percent on loans in the last year. Points might make sense depending on your financial situation and how long you expect to stay in a home. So ask for a zero point quote, too, and compare.
Down Payment: Borrowers who put down at least 25 percent are more likely to obtain "attractive pricing" at most banks. Lenders offer different breaks on rates if equity is higher, so you should ask what is available.
Loan Length: A lot depends on how long you plan to live in a home. If you're likely to move in a few years, an adjustable-rate loan with a low interest rate fixed for, say, three to five years, and adjusted afterward, might work best. Also, rates on 15-year fixed-rate loans are lower than those on the 30-year — 0.77 percentage points, on average, last year.
Property Type: If you're buying a duplex or a four-unit building, your rate will almost certainly be higher. Condominiums may also have a rate premium, especially if they are newer or your down payment is below 25 percent. Lenders charge more if you are not planning to live in the home. Commercial properties like apartment buildings have the highest rates, as they are considered riskier.
Borrowers may also be able to reduce their mortgage rate when they enter into a "lock-in" agreement with a lender. Lenders typically offer a lower rate for a shorter lock period.
Lenders typically agree not to change an offered interest rate for 60 days, but borrowers confident of a quick closing may be willing to accept a 45-day rate guarantee, or even a 30-day lock, in exchange for a small discount, because the transaction's speed helps the lender reduce its risk.
Borrowers must make sure, too, that they consider the entire cost of a home, looking carefully at monthly payment calculations. About a third of homeownership costs are in addition to the mortgage — among them property taxes, insurance, maintenance and repairs.
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Home Inspections: Deal Breakers or Makers?
A home inspection is simply a visual examination of a house's overall condition. The home inspection report describes a house's physical shape and identifies what might need crucial repair or replacement. Although what's covered in a standard report can vary by inspector, typically the status of the following will be included:
- heating system
- central air conditioning system
- interior plumbing and electrical systems
- roof
- attic
- visible insulation
- walls
- ceilings
- floors
- windows
- doors
- foundation
- basement
- all structural components.
A home inspection is not an appraisal, which determines market value, and it's not a municipal inspection, which verifies local code compliance. Inspectors won't survey inaccessible areas of home; they don't do any kind of destructive testing — only non-invasive visual assessments. The report won't include the condition of every nail, wire or pipe in the home. The report also does not guarantee a home's components will never fail or need repair in the future.
So, what are the deal breakers of a home inspection? That depends entirely on you. What is and is not a deal breaker depends on each person's preferences and needs. For example, an inspection that identifies damaged floor joists might be a deciding factor for one person who feels the problem is too expensive or time-consuming to fix.
However, the same trouble with joists might be absolutely acceptable for another client who has resources to fix the issue. A home inspector does not tell a customer whether or not to buy a house. Rather, it's his or her job to provide all the available information so home buyers (or sellers) can make the decision that's right for them.
If you're thinking of buying a house and a home inspector finds problems with it, this doesn't automatically mean you shouldn't buy it. The findings simply mean you now know what you're getting into. If the plumbing needs to be replaced in six months, at least you won't be surprised when it happens. If major problems like this are found, the seller may agree to make the repairs. Of course, no house is perfect. It's quite normal for a residence to have some glitches. It just depends on how many faults you're willing to deal with before you walk away from the sale.
Home inspections differ based on the person or organization conducting them. The American Society of Home Inspectors (ASHI), for example, is not required to check for wood-destroying organisms or diseases harmful to humans, including mold or moldlike substances. Many inspectors offer services to check for these things, although some will charge an additional fee.
Besides having the right things covered in an inspection, you should also make sure you hire the right person for the job. Unfortunately, there's no surefire way to vet an inspector's complete history. However, there are a number of steps you can take to make an informed decision.
Consult your real estate attorney or ask friends, business acquaintances or professionals who understand the housing industry for a recommendation. If you already have someone in mind, ask the inspector for professional references and call the people on this list with specific questions about the inspector and the services provided. Before you hire someone, make sure you're comfortable with him or her first. Have a conversation ahead of time and review sample reports to make sure you can understand them.
Besides checking with ASHI, there are other reputable resources such as the National Association of Home Inspectors (NAHI) and the National Association of Certified Home Inspectors (NACHI).
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Could Your Shaky Personal Finances Get You Fired?
According to a recent study by the Society for Human Resource Management, some 83% of HR professionals think personal financial challenges have at least some impact on employees' performance. Those same HR professionals aren't blind to economic reality — 80% of them believe employees at their organizations are facing more financial challenges than they were five years ago.
Though the consequences are unpleasant, the logic is fairly straightforward: If someone can't maintain control of their own financial situation when their personal money is on the line, what would make them motivated to be a better steward of the company's money belonging to nameless and faceless shareholders?
That said, at most companies, having personal money troubles are not a fire-able offense. But if your performance is slipping, the odds are slim that your boss will pick you for the next available role of increasing responsibility. If the company also has reason to believe money troubles are behind your performance slippage, you can expect significantly tighter scrutiny on whatever areas you do have any individual discretion over.
Is it fair to have career troubles just because you're having money troubles at home? Probably not, but speaking frankly, whether it's "fair" or not doesn't really matter. It is what it is.
If you are having money troubles, the first step toward regaining control is to stop trying to put on flashy displays of wealth you don't really have. You're neither fooling nor impressing anybody by showcasing your spending, and your employer already knows what you make. Spending money faster than your boss knows you're earning it is a major red flag and can actually invite more scrutiny, not less.
Even in less instantly obvious ways, taking control of your finances is largely a matter of understanding — and making tough choices — on how and where you spend your cash. Brown-bagging your lunch can easily save you between $20 and $40 a week versus eating out, and home-brewed coffee instead of a couple daily cups from the coffee shop can have a similar impact.
No matter how you choose to cut back, doing so will help you take control of your finances. And with control over your finances, you'll gain the opportunity to stop the career death spiral that otherwise threatens to turn some short-term cash flow issues into a serious long-term problem.
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Home Prices Fall More Than Expected
According to the closely watched S&P/Case-Shiller composite index, U.S. single-family home prices fell more than expected in November, highlighting the continuing struggle of the housing market to make a meaningful recovery.
Like most measures of the economy, the S&P/Case-Shiller home price index is not perfect. However, it has a critical shortcoming that almost no one talks about.
We already know the data comes in on a bit of a lag. The data doesn't hit the database until the public filing after closing. But the closing may be months after the agreement between buyer and seller (and the banks that provide financing). Ultimately, the lag can be a long time (sometimes up to six months) between when a price is agreed upon, the mortgage is secured, the closing occurs, and the sale is recorded and available for public use.
The Case-Shiller index is based on closings. However, four to eight weeks from contract to closing is major lag. November home price data reflects September or October prices at contract, which is the more relevant measure for a home buyer or seller. In other words, it would be inaccurate for users of the Case-Shiller data to assume the monthly index data reflects monthly market prices without some additional lag.
Furthermore, the time from contract to closing may vary depending on the city, which would make the Case-Shiller indices even more problematic. Those using such data as the Case-Shiller index data need to be aware of exactly what the data is really saying.
The long-awaited housing recovery is beginning to blossom, according to industry experts taking a look at recent existing-home sales.
Paul Dales, chief economist at Capital Economics, says "it is clear that a housing recovery is now well underway."
Lawrence Yun, chief economist for the National Association of Realtors (NAR), concurs with Dales' assessment, saying "The pattern of home sales in recent months demonstrates a market in recovery."
The evidence: home sales have been on the rise for the past three months, posting a 5 percent increase in December.
In addition to the 5 percent increase in December, NAR reported a 1.7 percent annual increase in existing-home sales in 2011, a total of 4.26 million homes for the year.
Housing inventory is on the decline and fell to its lowest level since March 2005 last month, according to NAR. Approximately 2.3 million homes are available for sale currently.
"The inventory supply suggests many markets will continue to see prices stabilize or grow moderately in the near future," Yun said.
However, listed inventory is only part of the equation, and according to CoreLogic's latest numbers, shadow inventory stands at about 1.6 million.
Regardless, Dales believes sales will rise this year. "Housing still won't contribute much to GDP growth over the next few years, but at least it will no longer subtract from it," Dales says.
Homeowners need to be proactive in making energy-efficient home renovations. Here is a list of easy check-ups every homeowner can do to optimize the energy efficiency of their home:
Windows and Doors
Holes in windows and doors allow conditioned air to leak from your home and allow outdoor air to infiltrate, which can tax your heating and cooling systems and raise your energy bills. Caulk around windows and doors where there are gaps. Also caulk areas where plumbing lines or electrical wiring extend to the exterior of the home.
Floor and Wall Insulation
Insulation acts as a barrier to heat movement and helps keep any home cooler in the summer and warmer in the winter—all while using less energy. Making sure insulation is used at potential gaps such as around an attic stairway or over the attic access door is important as well.
Shedding a Little Light on a Simple Solution
By replacing traditional incandescent light bulbs with compact fluorescents, you can use up to 75% less energy on lighting alone. A wide assortment of CFLs is now available for almost any type fixture found in a home.
Appliances and HVAC Systems
Your major household appliances are a good place to focus on to make your home more eco-friendly. Start by changing the filters of your HVAC systems regularly and consider upgrading older appliances to take advantage of newer, more efficient designs.
Buy a Programmable Thermostat
This energy-saving step can have a positive and noticeable impact right away. Programmable thermostats are fairly easy to install and once they are set up a homeowner can adjust them as the weather changes. For every degree that a thermostat is set back, you may realize a savings between 1-3% on your heating or cooling bills.
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