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News from Nick – Issue #5

Nick Slocum — Thu, 29 Jul 2010 14:54:53 +0000

Click here to read the latest “News from Nick” – Issue #5.

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4 Tips to Reduce Your Closing Costs & Fees

Nick Slocum — Mon, 26 Jul 2010 14:53:14 +0000

For Your Clients: 4 Tips to Reduce Your Closing Costs and Fees

By Paige Tepping

RISMEDIA, July 27, 2010–Home mortgage rates are currently near historic lows and have remained at these low levels for several months. As a result, many people are eager to refinance their current mortgage loan to lock in a low rate. For those in an adjustable rate mortgage, timing may never get any better to refinance out of your current mortgage and into a more conservative and consistent 15 or even 30 year mortgage loan.

When deciding to refinance a home mortgage, be sure to understand the refinancing costs associated with doing so and then try to limit them as much as possible.

Refinancing an existing mortgage is very similar to securing an initial mortgage. In fact, your new mortgage will be used to pay off your existing one, so it is just like buying your home all over again. As such, there are certain costs associated with a refinancing, just as there was when the original mortgage was secured.

Closing costs such as broker fees, appraisal fees, title search, inspections and various administrative fees are all part of the fee structure associated with a mortgage refinance.

To reduce your closing costs and any other mortgage-related fees, Howard Bunmore, owner and author of ConsumerLoansDirectory.com offers the following tips:

-Try to refinance with your existing lender. They will want to keep your business and if they know you are looking to refinance, they will be motivated to offer the lowest rate possible and reduce your fees to keep you onboard with them.

-Take a look at your credit report to ensure there are no issues you are unaware of that might detract from you score. A high score will help you secure the lowest possible interest rate and this could save you thousands over the term of your loan.

-Do not hesitate to negotiate your fees. Many mortgage-related fees are controlled by the mortgage company so they have the ability to lower them. Administration fees are especially easy to get waved or reduced.

-Avoid having your closing costs included in your loan balance. Sure, this is a great way to avoid them altogether but the reality is that you will by paying for them each month during the length of your loan and with interest included, you will end up paying a lot more in the long-run than if you had just paid them out of pocket upfront.

For more information, visit www.consumerloansdirectory.com.

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Home Sales & Prices Rise in June

Nick Slocum — Thu, 22 Jul 2010 16:04:46 +0000

“Warwick, RI – July 22, 2010…The number of sales and median price of single family homes increased in June according to statistics released today by the Rhode Island Association of Realtors. Eight hundred and ninety-seven (897) single family homes were sold last month, far surpassing the 667 sales of the previous month. Sales were up 11 percent from the June 2009 level of 805. Median price rose five percent from a year ago to $220,000, and 10 percent from May’s median price of $199,900. With the exception of February of this year which saw a small decline in sales, the number of sales has increased year over year every month for the past 15 months and median price has increased since November 2009. While statistics show that sales volume historically jumps significantly from May to June, it appears that the tax credit originally set to expire in June was also a factor in larger than normal gains from month to month.”

To Continue Reading this Article, click here.

To see Town specific sales statistics comparing June 2009 to June 2010, click here.

Source: The Rhode Island Association of Realtors

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Warwick Named to Money Magazine’s “Top 100 Places to Live in America”

Nick Slocum — Thu, 22 Jul 2010 15:59:25 +0000

The City of Warwick has been named to MONEY Magazine’s list of the top 100 Best Places to Live in America, Mayor Scott Avedisian announced today. Warwick is the only Rhode Island community to earn a place on the publication’s annual assessment of the nation’s cities and towns.

Last year, the magazine examined small towns with populations between 8,500 and 50,000. This year’ focused on all cities with a population of 50,000 to 300,000, and winnowed the initial list of 746 based on several criteria. The remaining communities were ranked on a number of issues, such as median family income; housing affordability; school test scores; quality of life; safety; the number of arts and leisure activities; and weather.

In its description of Warwick, the magazine notes that it “offers a range of homes suitable for singles to growing families. It also has the largest stretch of retail shopping in Rhode Island. Thanks to Warwick’s numerous parks, residents find it easy to spend time hiking, biking, and enjoying the water.”

“In 2006, Warwick was named to MONEY Magazine’s list, and we are very pleased to have earned this distinction again,” Avedisian said. “Our dedicated city employees, the businesses that choose to make Warwick their home, our active non-profit, civic, neighborhood and religious organizations, and numerous volunteers all help to make our city the wonderful place that it is.”

Source: WarwickRI.Gov

Link

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Providence Property Owners Could Face Huge Tax Increase

Nick Slocum — Wed, 21 Jul 2010 16:14:40 +0000

City Council to Vote on July 26

“Warwick, RI – July 21, 2010…The Rhode Island Association of Realtors and the Greater Providence Board of Realtors is working to spread the word about a significant tax hike facing Providence property owners that will be voted on by the Providence City Council on July 26th. If passed, some property owners could see an 88 percent increase in their taxes.”

To continue reading the article, click here.

Source: The Rhode Island Association of Realtors

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How much mortgage can you afford?

Nick Slocum — Tue, 15 Jun 2010 13:55:46 +0000

By knowing how much mortgage you can handle, you can ensure that home ownership will fit in your budget.

Homeownership should make you feel safe and secure, and that includes financially. Be sure you can afford your home by calculating how much of a mortgage you can safely fit into your budget.

Instead of just taking out the biggest mortgage a lender qualifies you to borrow, consider how much you want to pay each month for housing based on your financial and personal goals.

Think ahead to major life events and consider how those might influence your budget. Do you want to return to school for an advanced degree? Will a new child add day care to your monthly expenses? Does a relative plan to eventually live with you and contribute to the mortgage?

Still not sure how much you can afford? You can use the same formulas that most lenders use, or try another of these traditional methods for estimating the amount of mortgage you can afford.

1. THE GENERAL RULE OF MORTGAGE AFFORDABILITY

As a rule of thumb, you can typically afford a home priced two to three times your gross income. If you earn $100,000, you can typically afford a home between $200,000 and $300,000.

To understand how that rule applies to your particular financial situation, prepare a family budget and list all the costs of homeownership, like property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as day care costs.

2. FACTOR IN YOUR DOWNPAYMENT

How much money do you have for a downpayment? The higher your downpayment, the lower your monthly payments will be. If you put down at least 20% of the home’s cost, you may not have to get private mortgage insurance, which costs hundreds each month. That leaves more money for your mortgage payment.
The lower your downpayment, the higher the loan amount you’ll need to qualify for and the higher your monthly mortgage payment.

3. CONSIDER YOUR OVERALL DEBT

Lenders generally follow the 28/41 rule. Your monthly mortgage payments covering your home loan principal, interest, taxes, and insurance shouldn’t total more than 28% of your gross annual income. Your overall monthly payments for your mortgage plus all your other bills, like car loans, utilities, and credit cards, shouldn’t exceed 41% of your gross annual income.

Here’s how that works. If your gross annual income is $100,000, multiply by 28% and then divide by 12 months to arrive at a monthly mortgage payment of $2,333 or less. Next, check the total of all your monthly bills including your potential mortgage and make sure they don’t top 41%, or $3,416 in our example.

4. USE YOUR RENT AS A MORTGAGE GUIDE

The tax benefits of homeownership generally allow you to afford a mortgage payment-including taxes and insurance-of about one-third more than your current rent payment without changing your lifestyle. So you can multiply your current rent by 1.33 to arrive at a rough estimate of a mortgage payment.

Here’s an example. If you currently pay $1,500 per month in rent, you should be able to comfortably afford a $2,000 monthly mortgage payment after factoring in the tax benefits of homeownership.

However, if you’re struggling to keep up with your rent, consider what amount would be comfortable and use that for the calcuation instead.

Also consider whether or not you’ll itemize your deductions. If you take the standard deduction, you can’t also deduct mortgage interest payments. Talking to a tax adviser, or using a tax software program to do a “what if” tax return, can help you see your tax situation more clearly.

7 Steps to Take Before You Buy a Home

Nick Slocum — Fri, 11 Jun 2010 17:31:40 +0000

By doing your homework before you buy, you’ll feel more content about your new home.

Most potential homebuyers are a smidge daunted by the fact that they’re about to agree to a hefty mortgage that they’ll be paying for the next few decades. The best way to relieve that anxiety is to be confident you’re purchasing the best home at a price you can afford with the most favorable financing. These seven steps will help you make smart decisions about your biggest purchase.

1. DECIDE HOW MUCH HOME YOU CAN AFFORD

Generally, you can afford a home priced 2 to 3 times your gross income. Remember to consider costs every homeowner must cover: property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as day care if you plan to have children.

2. DEVELOP YOUR HOME WISH LIST

Be honest about which features you must have and which you’d like to have. Handicap accessibility for an aging parent or special needs child is a must. Granite countertops and stainless steel appliances are in the bonus category. Come up with your top-five must-haves and top-five wants to help you focus your search and make a logical, rather than emotional, choice when home shopping.

3. SELECT WHERE YOU WANT TO LIVE

Make a list of your top-five community priorities, such as commute time, schools, and recreational facilities. Ask your REALTOR® to help you identify three to four target neighborhoods based on your priorities.

4. START SAVING

Have you saved enough money to qualify for a mortgage and cover your downpayment? Ideally, you should have 20% of the purchase price set aside for a downpayment, but some lenders allow as little as 3.5% down. A small downpayment preserves your savings for emergencies.

However, the lower your downpayment, the higher the loan amount you’ll need to qualify for, and if you still qualify, the higher your monthly payment. Your downpayment size can also influence your interest rate and the type of loan you can get.

Finally, if your downpayment is less than 20%, you’ll be required to purchase private mortgage insurance. Depending on the size of your loan, PMI can add hundreds to your monthly payment. Check with your state and local government for mortgage and downpayment assistance programs for first-time buyers.

5. ASK ABOUT ALL THE COSTS BEFORE YOU SIGN

A downpayment is just one homebuying cost. Your REALTOR can tell you what other costs buyers commonly pay in your area-including home inspections, attorneys’ fees, and transfer fees of 2% to 7% of the home price. Tally up the extras you’ll also want to buy after you move-in, such as window coverings and patio furniture for your new yard.

6. GET YOUR CREDIT IN ORDER

A credit report details your borrowing history, including any late payments and bad debts, and typically includes a credit score. Lenders lean heavily on your credit report and credit score in determining whether, how much, and at what interest rate to lend for a home. Most require a minimum credit score of 620 for a home mortgage.

You’re entitled to free copies of your credit reports(https://www.annualcreditreport.com/cra/index.jsp) annually from the major credit bureaus: Equifax(http://www.equifax.com), Experian(http://www.experian.com), and TransUnion(http://www.transunion.com). Order and then pore over them to ensure the information is accurate, and try to correct any errors before you buy. If your credit score isn’t up to snuff, the easiest ways to improve it are to pay every bill on time and pay down high credit card debt.

7. GET PREQUALIFIED

Meet with a lender to get a prequalification letter that says how much house you’re qualified to buy. Start gathering the paperwork your lender says it needs. Most want to see W-2 forms verifying your employment and income, copies of pay stubs, and two to four months of banking statements.

If you’re self-employed, you’ll need your current profit and loss statement, a current balance sheet, and personal and business income tax returns for the previous two years.

Consider your financing options. The longer the loan, the smaller your monthly payment. Fixed-rate mortgages offer payment certainty; an adjustable-rate mortgage offers a lower monthly payment. However, an adjustable-rate mortgage may adjust dramatically. Be sure to calculate your affordability at both the lowest and highest possible ARM rate.

6 Tips For Buying a Home in a Short Sale

Nick Slocum — Thu, 10 Jun 2010 15:07:29 +0000

By preparing for a real estate short sale, you can emerge with a great home at a favorable price.

When sellers need to sell their home for less than they owe on their mortgage, they’re shooting for a short sale. Short sale homes can sometimes be bargains, but only if you do your homework, stay patient, and remain unemotional during the sometimes lengthy and difficult short sale process.
Here are six tips for protecting yourself emotionally and financially when bidding on a short sale.

1. GET HELP FROM A SHORT SALE EXPERT

A real estate agent experienced in short sales can identify which homes are being offered as short sales, help you determine a purchase price, and advise you on what to include in your offer to make the lender view it favorably. Ask agents how many buyers they’ve represented in short sales and, of those, how many successfully closed the transaction.

2. BUILD A TEAM

Ask agents to recommend real estate attorneys knowledgeable in short sales and title experts. A title officer can do a title search to identify all the liens attached to a property you’re interested in. Because each lienholder must consent to a short sale, a property with multiple liens, like first and second mortgages, mechanic’s and condominium liens, or homeowners association liens, will be harder to purchase.

A title search may cost $250 to $300 up front, but it can help weed out less desirable properties requiring multiple approvals.

3. KNOW THE HOME’S FAIR MARKET VALUE

By agreeing to a short sale, lenders are consenting to lose money on the loan they made to the sellers to purchase the home. Their goal is to keep those losses as low as possible. If your offer is dramatically less than the home’s fair market value, it may be rejected. Your agent can help you identify the price that’s good for you. The lender will determine whether approval is in its best interest.

4. EXPECT DELAYS

There are two stages to a short sale. First, the sellers must consent to your purchase offer. Then they must submit it to their lender, along with documentation to convince the lender to agree to the sale.

The lender approval process can take weeks or months, even longer if the lender counteroffers. Expect bigger delays if several lienholders are involved; each can make a counteroffer or reject your offer.

5. FIRM UP YOUR FINANCING

Lenders will weigh your ability to close the transaction. If you’re preapproved for a mortgage, have a large downpayment, and can close at any time, they’ll consider your offer stronger than that of a buyer whose financing is less secure.

6. AVOID CONTINGENCIES

If you must sell your current home before you can close on the short-sale property, or you need to close by a firm deadline, your offer may present too many moving parts for a lender to approve it.

Also, consider ordering an inspection so you’re fully informed about the home. Keep in mind that lenders are unlikely to approve an offer seeking repairs or credits for such work. You’ll probably have to purchase the home “as is,” which means in its present condition.

This article includes general information about tax laws and consequences, but isn’t intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.

Understanding Real Estate Representation

Nick Slocum — Thu, 10 Jun 2010 13:28:27 +0000

Whether you’re buying or selling, it’s important to choose representation that meets your needs in the transaction.

You have choices when selecting representation in a real estate transaction. Here are five tips for understanding which type of legal relationship with a real estate professional, called an agency relationship, will best protect you when you buy or sell a home.

1. Buyer’s agency

When you’re buying a home, you can hire an agent who represents only you, called an exclusive buyer’s representative or agent. A buyer’s agent works in your best interest and owes you a fiduciary duty. You can pay your buyer’s agent yourself, or ask the seller, or the seller’s agent, to pay your agent a share of their sales commission. (Typically they are paid by the seller)

If you’re selling your home and hiring an agent to list it exclusively, you’ve hired a selling representative–an agent who owes fiduciary duties to you. Typically, you pay a selling agent a commission at closing. Selling agents usually offer or agree to pay a portion of their sales commission to the buyer’s agent. If your seller’s agent brings in a buyer, your agent keeps the entire commission.

2. Subagency

When you purchase a home, the agent you can opt to work with may not be your agent at all, but instead may be a subagent of the seller. In general, a subagent represents and acts in the best interest of the sellers and sellers’ agent.

If your agent is acting as a subagent, you can expect to be treated honestly, but the subagent owes loyalty to the sellers and their agent and can’t put your interests above those of the sellers. In a few states, agents aren’t permitted to act as subagents. (Rhode Island Being One of Those States)

Never tell a subagent anything you don’t want the sellers to know. Maybe you offered $150,000 for a home but are willing to go up to $160,000. That’s the type of information subagents would be required to pass on to their clients, the sellers.

3. Disclosed dual agency

In many states, agents and companies can represent both parties in a home sale as long as that relationship is fully disclosed. It’s called disclosed dual agency. Because dual agents represent both parties, they can’t be protective of and loyal to only you. Dual agents don’t owe all the traditional fiduciary duties to clients. Instead, they owe limited fiduciary duties to each party.

Why would you agree to dual agency? Suppose you want to buy a house that’s listed for sale by the same real estate brokerage where your buyer’s agent works. In that case, the real estate brokerage would be representing both you and the seller and you’d both have to agree to that.

Because there’s a potential for conflicts of interest with dual agency, all parties must give their informed consent. In many states, that consent must be in writing.

4. Designated agency

A form of disclosed dual agency, “designated agency” allows two different agents within a single firm to represent the buyer and seller in the same transaction. To avoid conflicts that can arise with dual agency, some managing brokers designate or appoint agents in their company to represent only sellers, or only buyers. But that isn’t required for designated agency. A designated, or appointed, agent will give you full representation and represent your best interests.

5. Nonagency relationship

In some states, you can choose not to be represented by an agent. That’s referred to as nonagency or working with a transaction broker or facilitator.

In general, in nonagency representation, the real estate professional you work with owes you fewer duties than a traditional agency relationship. And those duties vary from state to state. Ask the person you’re working with to explain what he or she will and won’t do for you.

Other web resources

More on hiring a real estate agent (http://www.nolo.com/legal-encyclopedia/article-30016.html)

More on real estate agents’ roles (http://www.dllr.state.md.us/license/mrec/mrecrep.shtml)

By: G. M. Filisko
Published: March 29, 2010

G.M. Filisko is an attorney and award-winning writer who zealously protected her clients’ interests as a lawyer. A frequent contributor to many national publications, including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Other Important Factors to Consider

Is your agent an “Accredited Buyer’s Representative”
What other designations or additional training do they have that may help them to serve your needs more efficiently?
Do they use buyer agency contracts and lock you in to working with them?

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Walkaway? Don’t expect to buy again soon.

Nick Slocum — Wed, 09 Jun 2010 20:26:09 +0000

Walking away from a mortgage you can still afford to pay has consequences; everyone knows that. Your credit score is shot and it can be impossible to get credit. Some homeowners, no doubt, believe that the credit score hit is worth getting out from a deeply underwater mortgage.

After default, they reason, they can raise their FICO scores by paying all their bills on time and eventually finance another home purchase.

Don’t count on it.

While homeowners who default due to economic hardship, such as a job loss or divorce, normally must wait two to five years before buying a home again, walkaways may face double that time. “It could be well over seven or eight years before [walkaways] are able to obtain a mortgage to buy a home again,” said Jay Brinkmann, chief economist for the Mortgage Bankers Association. “Credit scores are only one component of a complete credit decision,” he said. “[In these cases] credit scores are not a good indicator of their willingness to continue to pay their mortgage.”

Strategic defaulters might also be charged higher interest rates, even above the levels other borrowers with similar credit scores would receive.

Source: CNNMoney.com, Les Christie, (05/28/2010)

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