Capital Economics expects housing to improve this year, according to a report released last Tuesday. One of the reasons: loosening credit. The analytics firm notes the average credit score required to get a mortgage loan is 700. While this is higher thans scores required before the crisis, it is the same with requirements one year ago.

Additionally, a Fed Senior Loan Officer Survey found credit requirments in the 4th quarter were consistent witht he past 3 quarters. However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.

Banks are also loosening loan-to-value ratios (LTV), which Capital Economics indicates “the clearest sign yet of an improvement in mortgage credit conditions.” In contrast to a low of 74% reached in mid-2010, banks are now lending at 82% LTV.

While conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November, 8% of contract cancellations were the result of a potential buyer not qualifying for a loan.

Additionally, Capital Economics says, “any improvement in credit conditions won’t be significant enough to generation actual house price gains.” and potential ramifications from the euro-zone pose a threat to future credit availability.

So if you or anyone you know is on the fence about buying a home, I urge you to get back in the game now, before loan standards tighten up again. Feel free to call or email me for a free consultation. If you like this and other articles, please like Kathy Villa Real Estate. We look forward to connecting with you!

Article Source: DSnews.com

• Some potential homebuyers may be discouraged by recent reports of a damaged housing market. However, a lack of applications and activity does not mean buying a home is a bad idea, says the news report, as shrunken house prices and low mortgage rates will continue to provide buyers high affordability.
• Some benefits of owning a home include not having to pay rent to a landlord while making a personal investment. Homeowners also receive federal income tax deductions, which makes a difference over time.
• Current homeowners may decide to refinance to get a better rate, says the report. Homeowners may also benefit from locking in low rates by changing to a fixed interest rate versus an adjustable rate that is subject to change within the market. Be aware that homeowner’s equity and a decent credit score are required for refinancing.

Some buyers are turned down for illogical reasons. For example, if you have investments- even if they’re performing well, an underwriter might deny the mortgage because your portfolio doesn’t fall into the underwriter’s risk assessment model.

One couple was turned down because the husband had worked at his current job for less than a year. Even though he was making more money at the new job than he was before! These buyers were well-qualified. The wife worked several years for one employer and was able to qualify for the loan on her own. So the transaction closed, although two months late.

Generally, it’s more difficult to qualify now than it was a year ago. Most conventional lenders require a 20-25 percent down payment. For the lowest interest rates, your credit scores need to be in the 700 range. You need to have verifiable income and cash reserves in addition to your down payment and closing costs.

You could run into underwriting problems if you’re self-employed, as W-2 income is much easier to verify. Other hurdles are lapses in employment and owning a lot of property. Some lenders won’t lend to buyers who have more than three or four residential properties.

If you’re buying a new home before selling your current home, you’ll need to have 30 percent equity in your current home. This needs to be verified by the lender’s appraiser. Also, the lender will want to see a copy of the cashed check from the tenant for the first month’s rent to verify rental income if needed to qualify.

HOME BUYING TIP: As soon as you’re serious about buying a home, find the best mortgage broker or loan agent that can assist you. Don’t make your selection based on interest rates alone. A good track record counts for a lot. I can refer you a great mortgage broker if you need. -Just ask!

Closing the deal should be your primary goal. If you have to pay 0.25 percent more to assure your transaction closes on time and that you’re not turned down at the last minute, it’s worth it.

Be honest with your loan professional about anything in your financial picture that might impact loan qualification. A good loan agent or broker will be able to assess your financial situation and anticipate what you’ll need to do to satisfy the underwriter.

Be aware that appraisal issues can impact your loan approval. For example, if a previous owner added square footage without a building permit, the additional square footage probably won’t be included as livable square feet.

If the appraisal comes in for less than the purchase price, the lender might not lend you enough to close the deal. Include an appraisal contingency in your contract.

There are more jumbo financing options available now. Adjustable-rate mortgages that are fixed for 10 years and then revert to an adjustable have a starting rate about 0.25% less than a 30-year fixed jumbo. A five-year fixed starts about 0.5% to 0.75% lower, but is riskier.

Bottom line: Because of the risk factor, the lender may want you to have a large cash reserve. Your retirement accounts counts toward this.

1.) Update your old garage door. Garage doors seem like a non-issue, but many times they make up a significant percentage of the front of a home. Because of this, they are one of the first things that buyers notice when they pull in the driveway. Replacing, or even just painting, these central fixtures will do wonders when it comes to instantly impressing perspective buyers and standing apart from your competition. The market has changed drastically since many of us purchased our homes here in town. I frequently hear buyers say that they have crossed a house off their list because of the lack of curb appeal. This issue is especially important to people on busier streets, corner lots, or near a neighborhood eyesore.

2.) Replace old windows. Outdated windows age a home significantly, and you can often upgrade standard windows to vinyl for a reasonable $300 per window. The average home has 8 windows, so this upgrade doesn’t cost nearly as much as you might think and it will make a huge difference to the value perceived by prospective buyers. Key point to remember is that when buyers view a home they love, if they see it has older windows, they consider it a time-consuming and costly headache. First-time buyers have never replaced windows and often dramatically overestimate the cost to cure this issue. By replacing before listing, you can actually save money. A well priced, move-in condition home will sell for far more than one with windows in need of repair.

3.) Assess your floors. If you have hardwood flooring, it’s worth the investment to have them refinished considering buyers put an extremely high value on them. You’ll get the most bang for your buck if they are refurbished. Carpets should be shampooed or replaced if they are stained or look worn. You don’t need to spend large amounts of money on the highest grade or most modern name but something inexpensive and neutral will certainly bring you a return on the investment. Even the smell of new carpet will make buyers set your home apart from the comparables.

4.) Paint the trim. If you can’t afford the overwhelming task of painting your entire house, painting just the trim will still make a big difference when it comes to curb appeal. Painting the whole house can be expensive, time consuming and delayed by wether conditions; painting just the trim will give your home a fresher look. Interior trim is equally as important.

5.) Update fixtures. Keep an eye out for sales at home improvement stores and replace outdated lighting, plumbing and hardware fixtures. Simply replacing lighting fixtures and knobs in the bathroom or kitchen can update the entire look of the room. You can find many modern brand name fixtures online on contractor supply websites by searching terms like: sale faucets, sale plumbing fixtures etc.

Sellers should list their home on a Friday

Data for 1.2 million listings in 16 markets nationwide were analyzed over the past 21 months. It was found out that of all listed homes in those 16 markets, those listed on a Friday were 12 percent more likely to sell within 90 days, and homes listed on a Thursday or Friday sold, on average, for slightly closer to list price: 94.4 percent compared with 93.9 percent when homes are listed on a Sunday or Monday. In other words, that’s a $1,000 difference on a $200,000 home.

“Our theory is that since home buyers tend to tour homes on the weekends (Saturday and Sunday have 2.5 times more tours per day than weekdays), homes listed on Fridays are the freshest in buyers’ minds when they’re making their weekend plans. It also seems likely that many home buyers sort their weekend ‘must see’ lists by date listed, going to see the freshest homes first so they have the best chance of getting in on a potential good deal before other buyers,” researchers said about the findings.

“These factors put homes listed on Friday in front of more touring buyers on the weekend. More tours lead to more offers, and more offers leads to a better price and a better chance of selling.”

In one respect, Sunday beat out any other day of the week: Homes listed on Sunday attracted slightly more online page views than the average online.

While the vast majority of homes are listed on weekdays, no one weekday was especially popular, with between 17 percent and 19 percent of homes listed on any given weekday. About 19 percent of homes were listed on a Friday during the time period studied.

That’s not the case today. Price reductions are common. Often a search of the Multiple Listing Service (MLS) will reveal more price reductions in a day than pending sales or sold listings. Now, a price reduction may simply mean that the listing is priced too high for the market.

To be priced right for today’s market, your home needs to appeal to buyers who are looking for a good deal. They are buying into an uncertain future. They are nervous about the direction of home prices. Have they bottomed out? Will they drop considerably from the current level? Will they remain flat for a while? Or will they steadily improve from here?

Most economists agree that if home prices continue to decline, and many believe they will, the declines won’t be as steep as they were in 2008 and 2009. Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley, thinks that we have hit bottom price-wise and are now bouncing along the bottom.

This means that there will be periods where the home-sale market will strengthen- ususally following good economic news- followed by periods of stagnation. Home prices could bounce up and down until a sustainable housing recovery is reached.

According to Rosen, the housing market is now in recovery. But it will take some time before we see price increases, except in areas with strong local economies and employment growth. Buyers need jobs- and confidence that their employment will remain stable- before making large purchases such as a home.

A tip from Kathy: Sellers need to look at their home through the eyes of today’s buyers when they select a list price or price reduction. Today’s buyers are crititcal and, with rare exception, are in no hurry to buy.

Interest rates and home prices are both low, but they don’t appear to be moving significantly higher soon.

Sellers often wait too long to lower their price, even though they are getting zero or minimal showing activity and other homes in the area are selling. In areas where prices are declining, sellers who wait too long to reduce their price may have to reduce it again because the market has changed.

Try to avoid chasing the market by reducing the price on your home after your competitors have dropped their price. Be ahead of the pack and reduce your list price before the competition does to avoid further price reductions.

It can be difficult to price right for a market that is continually changing. Sellers may list at a price that seems reasonable. But after a month or two of preparing the home for sale, they could find that their price is out of date by the time they are ready to submit the listing to the MLS.

Don’t let the sales prices of past listings keep you from making the right decision about where to price your home today. If you discover you are priced too high for the market, it’s usually wise to lower the price by 5 to 10 percent. Most sellers choose a modest price reduction and are disappointed when the showing activity doesn’t pick up.

It’s better to make a bigger, impressive price reduction and complete the sale more quickly, particularly if prices are still declining.

Bottom Line: Sellers who play hard ball and stick firm at a price that’s too high for the market are likely to find themselves playing alone.

Sellers looking to cut costs can make adding crown molding a do-it-yourself project as well. To begin, individuals will need to decide between wood molding and particle board, which can be less expensive. Once materials are decided upon, the molding should be measured, marked and cut to fit into place on the wall, according to Home and Garden Television.

The most difficult part of installing crown molding is properly cutting corners. A power miter saw can help to make these tricky slices more accurate, according to HGTV.  Bob Villa recommends starting out with some foot long test pieces to use as a model later.

Those who want to forgo making corner cutouts can purchase pre-made corner blocks which are ready to install. After pieces are cut, they can be attached to the wall using finishing screws. Gaps can be filled in with caulk so that exterior corners are flush.

If you or someone you know is looking to sell their home soon, please feel free to call or email me for a free consultation.

courtesy of HGTV

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With tightened lending standards, a larger down payment has become more important. In addition to faster loan approval at better rates, putting more down means you could qualify for a larger home equity loan or line of credit. But a home buyer should be careful not to deplete their savings in an effort to make a larger down payment. There needs to be enough savings left to cover financial emergencies.

If you’re finding it tough to save enough for a down payment, you have some options: Set up an automatic savings program or sell things you aren’t using like a boat, motorcycle or extra car. Selling collectibles and other assets you don’t want or need can raise some quick cash; other assets such as stocks or savings bonds are good too. Also, be sure to check with your real estate agent and state government for any down payment programs they may have available.