Duane Duggan's Real Estate Blog

Homebuyers Move off the Fence as Mortgage Rates Drop Yet Again

If you’ve been considering buying your first home or moving up to a larger home, conditions have once again turned in your favor. According to Bankrate.com's weekly national survey, mortgage rates hit yet another record low, with the average 30-year fixed mortgage rate falling to 4.12 percent. The average 30-year fixed mortgage has an average of 0.29 discount and origination points.

Meanwhile, the average 15-year fixed mortgage retreated to 3.34 percent, while the jumbo 30-year fixed mortgage slid to 4.55 percent. The average 5-year and 7-year adjustable mortgage rates dropped to 3.02 percent and 3.24 percent, respectively. All of these are record lows.

This most recent drop in rates was just announced by Ben Bernanke and the Federal Reserve, along with a pledge to keep short-term interest rates on hold until late 2014. However, given the continued volatility in the market, along with the unpredictable nature of a presidential election year, if you’re considering a home purchase or a refinance, act quickly to take full advantage of low rates.

Bankrate points out just how significant these historic rates really are. Think about this: The last time mortgage rates were above 6 percent was November 2008. At the time, the average 30-year fixed rate was 6.33 percent, meaning a $200,000 loan would have carried a monthly payment of $1,241.86. With the average rate now at 4.12 percent, the monthly payment for the same size loan would be $968.72, a difference of $273 per month for anyone refinancing now.

Here are other important specifics from Bankrate's national weekly mortgage survey:

• 30-year fixed: 4.12 percent - down from 4.25 percent last week (avg. points: 0.29)
• 15-year fixed: 3.34 percent - down from 3.45 percent last week (avg. points: 0.30)
• 5/1 ARM: 3.02 percent - down from 3.09 percent last week (avg. points: 0.31)

If you’d like to take advantage of these incredible market conditions, remember to do the following before embarking on your home search:

• Make sure your finances are in order and your credit is in good shape.
• Research homes in neighborhoods you’re interested in online first to help narrow your selection. This will save time when viewing homes in person, allowing you to place a bid faster.
• If you need to sell your current home first, contact a real estate professional right away to find out what repairs/improvements you might need to make before putting your home on the market.

What You Need to Know Before Refinancing

During his State of the Union address on Tuesday, President Barack Obama called on Congress to approve new legislation that would give all homeowners who are current on their mortgages the opportunity to refinance at record-low mortgage rates.

While details of the program have yet to emerge, the new legislation - in theory - is designed to give responsible homeowners a reasonable chance to refinance without running into roadblocks from lenders. This would also give homeowners an opportunity to take advantage of today’s continued, record-low interest rates.

According to CoreLogic, a company that tracks national mortgage activity, an estimated 28 million homeowners could cut the interest rates on their loans by more than one percentage point if they could refinance. If you’re one of the many homeowners considering a refinance, here are some important facts you need to know first. Be sure to consult with your real estate agent and/or financial advisor, as well.

1. Make sure you are in good standing on your mortgage. As the President emphasized, refinances will be considered for those homeowners who have a good payment history and are current on their mortgages. If you’re currently underwater, a refinance is probably not an option for you. Consult your real estate professional about other options, including loan modifications and short sales.
2. Check your current credit score. Refinance candidates need to demonstrate steady income and good credit. Make sure your credit rating is up to snuff and see what immediate measures can be taken to improve it if it’s not.
3. Examine how much longer you plan to live in your home. If you are planning to put your home on the market in the near future, refinancing probably doesn’t make sense. You need to make sure you’ll be living in your home long enough to recoup the closing costs of the refinance.
4. Consider the length of the loan. Where you’re at with your current mortgage can play a significant role in your decision to refinance. If you’re close to retirement, for example, and your loan is almost paid off, refinancing could result in extending the life of your loan, ultimately costing you more. Also, if you're several years into a 30-year mortgage, your goal should be to refinance into a 15- or 20-year mortgage instead. Otherwise, you’re extending the number of years in which you’ll pay interest. Your refinancing goals should be short-term and long-term savings.
5. Find out the costs involved. Before you plunge into a refinance, find out the costs involved. Weigh these fees against the money you will save (contingent upon how long you plan to stay in your home) to make sure refinancing is the right step.

10 Money-Saving Tips for 2012

When it comes to improving your financial picture, small steps can yield big gains. Whether you’re saving for a down payment or dealing with increased expenses having just moved into a new home, the following tips from SWparents.com are great ways to save money in a variety of areas. Start today and you’ll quickly notice the positive impact on your bottom line:

1. You’ve probably heard this since you were a kid, but really…turn off all lights when you leave a room. Train your kids—usually the worst offenders—to do the same.
2. Have an honest conversation with yourself: If you haven’t used your gym membership in more than six months, cancel it. You can always rejoin and probably take advantage of a better deal when you do. Some gyms will even offer to “freeze” your membership, allowing you to pick back up after a certain period of time.
3. Save Starbucks and the like for a special treat. If you buy a $4 coffee five days per week, that’s $80 per month. Record your coffee-buying expenses for a month and see what your own personal damage is…then adjust accordingly!
4. Ditto for lunch. Even grabbing a burger at a fast-food chain adds up. Start packing your lunch instead. An easy way to accomplish this is by cooking extra at dinner or on the weekends, then packing lunch-sized portions in advance. If you’re banking on making lunch during the morning rush, odds are you’ll run out of time and end up buying lunch instead.
5. Do everything you can to increase your credit score. You will save tens of thousands of dollars in interest from any loans you have simply by having a better credit score.
6. Call every company you have monthly bills with and ask exactly what you are paying for each month. You will be surprised how many hidden fees are mysteriously added to your bills. You will never know this unless you ask.
7. Consider paying interest-bearing loans twice a month instead of once a month. You might be able to knock thousands of dollars off your total bill. Arrange automatic payments with your bank on the first and the 15th of each month.
8. Don’t leave the water running while brushing your teeth or shaving in the shower.
9. Odds are you can reduce your cable bill. With the plethora of options for on-demand and online viewing, chances are you no longer need 200 channels and three DVR boxes.
10. Buy anything and everything you can from second-hand stores. Second-hand doesn’t have to mean poor quality. In fact, most people donate items to these outlets because they are unused or hardly used, making it wasteful for them to be disposed of. Utilize this strategy with kids, who grow out of clothing and shoes at a rapid rate. Many teens also love shopping at second-hand stores where they can get the most bang for their buck, along with vintage or retro items.

Renovating? Why Building Codes are Critical

We’ve all heard horror stories about the remodeling project that needs to be torn down or redone because it didn’t live up to code. While many believe that investigating building codes is too confusing, time consuming and costly, the consequences of not getting the necessary permits before starting a construction project are both upsetting and expensive.

Securing a building permit before you start planning a renovation can also prove critical should you sell your home in the near or distant future. Potential buyers could request proof of permit for that room above the garage you added. Not having one is a risk most buyers wouldn’t want to absorb.

Building codes were designed to set public-safety standards for things like construction, maintenance, use and occupancy. Codes address all aspects of construction, including structural integrity, fire resistance, safe exits, lighting, electrical, energy conservation, plumbing, ventilation, and correct use of construction materials.

In order to make a change to your property, you need a permit that states your renovations coincide with all applicable building codes. Permits may be needed to cover projects such as the installation of foundations and sprinkler systems, the addition of a porch or deck, changes to driveways and room additions. These codes are modified often, and established and enforced by government officials or politicians. Enforcement tactics can include denying permits, occupancy certificates, or imposing fines.

Codes vary with location—each state, county, city and town can have their own specialized codes for things like electricity, plumbing, construction and fire. Typically, each code or permit requires separate inspections and inspectors. Inquire with your city hall to find out the correct department and process for securing permits.

Some homeowners avoid securing a building permit to avoid a potential increase in property taxes should the renovation result in an increase in the assessed value of the property. However, the extra precautionary step is vital and ensures you won’t suffer from repercussions such as hefty fines, or having to tear down your new deck due to improper construction or zoning. Taking the time to check on your local building codes and obtaining a permit will help ensure your renovation project goes smoothly.

As a Member of the Top 5 in Real Estate Network®, I have a wealth of real estate and homeownership information that may be of help to you. Feel free to contact me any time to learn more about this important information, and be sure to forward this article on to any friends or family that may be interested as well.

4 Ways Your Credit Card Agreements Could Change - for the Better

Do you remember the last credit card you signed up for? More importantlyhe , do you remember the actual contract? While credit card agreements outline such essential information as costs, features, and terms of the product, they are often long, complicated, and written in legalese. Unfortunately, key information about interest rates, fees, billing, and payments is often surrounded by legal fine print.

That’s why the Consumer Financial Protection Bureau (CFPB) launched the Know Before You Owe project, a program designed to provide better consumer transparency in several areas, such as credit card agreements, so that consumers could have a better understanding of the prices, risks, and terms involved before signing on the dotted line.

According to the CFPB, there are an estimated 514 million credit cards in circulation in the United States. Americans used their credit cards to spend an estimated $1.9 trillion in 2010, and credit card debt is estimated at $700 billion dollars. The CARD Act, which was signed into law more than two years ago, was passed to make credit card costs more reliable—with less risk of unexpected rate increases or other charges.

But despite this progress, a recent study by J.D. Power found that roughly two-thirds of cardholders say they don’t completely understand how their cards work. And, as indicated in a recent CFPB report on credit card complaints received by the Bureau from July 21 to October 21, 2011, difficulty understanding the terms of their cards is a contributing factor in many consumer complaints.

With this in mind, the CFPB has created a prototype credit card agreement that is shorter, written in plain language, and explains key features upfront. This prototype is scheduled to be tested with the Pentagon Federal Credit Union to get on-the-ground consumer feedback before it becomes official.

Here are the four key improvements the CFPB prototype offers:

• Shorter: The CFPB’s prototype is shorter – its word count is about 1,100 words, while the industry average for a credit card agreement is around 5,000 words.
• Clearer: The draft credit card agreement has an easy-to-read layout and is written in plain language. It is organized into three simple sections: costs, changes, and additional information.
• More consumer-friendly: The simplified agreement explains the prices, risks, and features of the credit card upfront, as opposed to burying it in fine print.
• Consistency: The prototype establishes standard definitions for legal terms like “card” and “balance transfer” that are contractually necessary but largely uninformative to consumers. These definitions are based on standard industry usage and practices and will be housed online where consumers can readily access them. For consumers who do not have Internet access, the definitions will be available from their issuer in printed form. According to the CFPB, doing this allows for a plain language document that clearly explains to consumers how the credit card works.

For more information about Know Before You Owe, and to view a copy of the prototype credit card agreement and the database, visit www.consumerfinance.gov.

Must-Know Holiday Safety Tips

While this time of the year is packed with joyous moments and festive activities, holiday-related mishaps can happen in the blink of an eye. According to the national nonprofit Home Safety Council® (www.Homesafetycouncil.org), many popular decorating traditions—from lighting candles to hanging lights—can put you and your guests at risk.

Adhere to these safety guidelines from the Home Safety Council to help keep yourself and your loved ones out of harm’s way:

• Keep candles at least 3 feet away from anything that can burn, including decorations, wrapping paper, curtains, linens and upholstery.
• Place candles where they cannot be easily knocked down, and make sure they’re out of the reach of pets and young children.
• To eliminate the risk of an open candle flame, use battery-powered candles whenever possible, especially when you combine candles with greenery or other decorations.
• Check for red or green UL marks on all light strings and extension cords. The green holographic UL mark means the light strings should only be used indoors. The red holographic UL mark indicates the light strings can be used both inside and out—and can withstand conditions related to outdoor use.
• Follow manufacturer's guidelines for stringing light sets together. As a general rule, UL recommends using no more than three standard-size sets of lights together.
• Hang or mount light strands carefully to avoid damaging the cord's insulation.
• Plug outdoor decorations into outlets protected by Ground Fault Circuit Interrupters (GFCIs) to prevent shock.
• When replacing a light bulb, be sure to use the correct bulb size (wattage) that is right for the fixture.
• When climbing up to hang lights or decorations, avoid the temptation to stand on a chair and get the ladder out instead.
• When using a ladder outdoors, be sure to place the ladder on level ground and open it completely, making sure all locks are engaged.
• Use the 4-1 rule for extension ladders: for each 4 feet of distance between the ground and the upper point of contact (such as the wall or roof), move the base of the ladder out 1 foot.
• Keep your body centered on the ladder and gauge your safety by where your belt buckle should be. If your buckle passes beyond the ladder rail, you are overreaching and at risk for falling.
• Stand at or below the highest safe standing level on a ladder. For a stepladder, the safe standing level is the second rung from the top, and for an extension ladder, it's the fourth rung from the top.

Considering a Home Equity Line? What You Need to Know

A form of revolving credit where your home serves as collateral, home equity loans must be carefully considered, especially in today’s market, to make sure the benefits outweigh the costs. Therefore, before applying for a home equity loan, discuss the idea with your real estate agent and review the following considerations from the Federal Reserve Board. While an equity line can be a great way to fund a college tuition or pay off a big debt, such as medical bills, it can also put your home on the line should you find yourself unable to repay.

Interest Rates
Home equity lines of credit typically involve variable rather than fixed interest rates. In such cases, the interest rate you pay for the line of credit will change, mirroring changes in the value of the index. Because the cost of borrowing is tied directly to the value of the index, it is important to find out which index is used, how often the value of the index changes, and how high it has risen in the past. See if your lender will allow you to convert from a variable interest rate to a fixed rate during the life of the plan, or let you convert all or a portion of your line to a fixed-term installment loan.

Fees and Costs
Many of the costs associated with setting up a home equity line of credit are similar to those you pay when you buy a home, such as: paying for an appraisal; an application fee; up-front charges, such as one or more "points;" closing costs, including fees for attorneys, title search, mortgage preparation and filing, property and title insurance, and taxes. Make sure the investment you make to establish the home equity line isn’t more than the amount you actually draw against the line—otherwise, the initial charges would substantially increase the cost of the funds borrowed.

Repayment Plan
Before taking out an equity line, create a realistic plan for paying it back. Some plans set a minimum monthly payment that includes a portion of the principal (the amount you borrow) plus accrued interest. But, unlike typical installment loan agreements, the portion of your payment that goes toward principal may not be enough to repay the principal by the end of the term. Other plans may allow payment of interest only during the life of the plan, which means that you pay nothing toward the principal. If you borrow $10,000, you will owe that amount when the payment plan ends. Whatever your payment arrangements are, when the plan ends, you may have to pay the entire balance all at once.

Selling or Renting?
If you sell your home, you will probably be required to pay off your home equity line in full immediately. If you are likely to sell your home in the near future, consider whether it makes sense to pay the up-front costs of setting up a line of credit. Also keep in mind that renting your home may be prohibited under the terms of your agreement.

As a Member of the Top 5 in Real Estate Network®, I have a wealth of real estate and homeownership information that may be of help to you. Feel free to contact me any time to learn more about this important information, and be sure to forward this article on to any friends or family that may be interested as well.

3 Tips for First-Time Investors

There isn’t a worker in America who doesn’t know he or she should be saving money—especially given today’s economic conditions. Whether you're saving for a home down payment, college tuition or a retirement nest egg, investing in the future is a wise financial decision. Understandably, the two most pressing questions usually are: “How much can I afford to save?” and “What is the best way to make my money grow?”

Financial experts agree that long-term investing is the surest way to build savings—and also that you do not need a lot of money to get started. What is critically important, however, is that you save on a consistent basis.

There are classes you can take, books you can read, and experts you can consult in order to learn the finer points of investing. To begin with, however, there are three fundamental steps you must take:

1. Determine your savings goals. You need to know what your savings goals are in order to figure out how to get there. Let’s say you want to retire at age 65 with the same standard of living you have now. You can find retirement calculators online to help you determine how much money you will need in order to reach that goal.

2. Evaluate the stock market. Guaranteed investments and savings bonds are great for reaching short-term goals. They generally return about 2% to 5% at best. But if you have some time to reach your goal, investing in the market will likely be your best approach. Averaged out over the last 25 years, despite some trying times, DOW returns have paid around 9% or 10%. Here’s the difference: Over 25 years, a $10,000 investment at a 3% rate of return will grow to $26,000. A 9% return will give you $86,000.

3. Understand that time is money and plan accordingly. To be successful at saving money, it must be approached as a long-term plan—get-rich-quick schemes rarely, if ever, work. Therefore, the earlier you start to save, the more money you will have down the road. In these scenarios, assume a 10% rate of return compounded annually:

• Begin investing $100 per month at age 30 until you reach age 65. At that point, you will have about $345,000 in investments. You will have put in $42,000 over the 35 year span. The other $303,000 is from the growth of your money over time.
• Begin the same $100-per-month saving plan at age 20. At age 65, you will have about $916,000. You will have invested $54,000. The other $862,000 is from the growth of your money over time.

How to Repair Your Credit Post Bankruptcy

From losing a job to losing a home, many Americans have suffered the slings and arrows of the recession over the past few years. This has forced many to make the difficult decision of filing for bankruptcy. While bankruptcy is the least desirable option when in financial distress—leaving a large scar on your credit rating for 7-10 years—it is often the only one left.

Even once they emerge from a bankruptcy, many are still confronted with a long-term impact on their credit rating, making it nearly impossible to find credit at a reasonable cost. According to the credit experts at ApprovalGuard.com, many creditors will not lend to you for one to two years. When you finally begin to qualify again, you will typically be categorized as “extra high risk,” which is often accompanied by lower credit limits and very high interest rates.

The good news is that nothing in credit is forever. The effect of a bankruptcy on your credit score can start to diminish the day your case is closed. Here are some important post-bankruptcy strategies to follow:

• Plan your credit recovery. Take it slow and easy and do it right; don’t exceed what you can afford.
• If your credit report contains inaccuracies about debt that was discharged through your bankruptcy, contact the creditor or the credit bureaus to request a correction.
• If your problem was over-spending, create a written budget and STICK to it.
• To re-establish a strong credit profile, you need a good history of payments from credit cards and installment debt, such as autos, student loans or a home loan.
• The rebuilding process requires you to use credit responsibly. Use only a small portion (30% or less) of your available credit line and ensure you make a payment every month.
• If your problem was related to medical bills, seek out a solution for insurance.
• Learn more about how credit works through the Internet, counseling services or a service like ApprovalGuard.com.
• If you didn’t have enough savings to survive a setback, get serious about savings for an emergency fund. In the current economy, you need at least 12-16 months.
• When you start to re-establish your credit, consider a “secure” credit card. Such cards are usually backed by your savings account or money you place in escrow to cover 100% of your credit line in case you don’t make your payment.
• You may be able to apply for a home loan in as little as two years after the discharge of your bankruptcy, however, expect to pay higher fees and interest rates. I can offer you more specific information based on the particular details of your situation.

As a Member of the Top 5 in Real Estate Network®, I have a wealth of real estate and homeownership information that may be of help to you. Feel free to contact me any time to learn more about this important information, and be sure to forward this article on to any friends or family that may be interested as well.

FHA loan limits are changing in Boulder County!  As of 10-1-2011 they are dropping from $460,000 to $402,500!  Not a step in the right direction considering you can't buy a single familiy home in Boulder for under $300,000.

If you are thinking of buying a home using FHA financing and need the higher limit, do it now!

As you probably know, there are a lot of issues on the table in Washington that stand to affect homeowners as well as home-buying and -selling consumers. One such issue involves a growing debate over the future of the Mortgage Interest Deduction (MID).

Introduced along with the Income Tax in 1913, the MID allows homeowners who itemize their taxes to deduct mortgage interest attributable to their primary residence and second-home debt totaling $1 million, and interest paid on home equity debt up to $100,000. Though the MID is a popular tax deduction for millions of U.S. homeowners, it has become a controversial topic in recent years. Many feel that the MID helped contribute to the housing bubble in the mid-2000s.

Lawrence Yun, the chief economist for the National Association of REALTORS® (NAR)—the largest professional association in the country—took part in a panel hosted by the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institute, and the Reason Foundation. Held in Washington, D.C. this past July, the "Rethinking the Mortgage Interest Deduction" forum provided Yun with a platform to emphasize that any changes to the MID, now or in the future, could threaten the progress made in stabilizing the housing market, and potentially erode home prices and values.

“NAR firmly believes that the mortgage interest deduction is vital to the stability of the American housing market and economy,” said Yun during the forum. “The MID facilitates homeownership by reducing the carrying costs of owning a home, and it makes a real difference to hard-working, middle-class families.”

According to HouseLogic, having a tax deduction for mortgage interest makes owning a home more affordable because the deduction lowers the amount of tax you pay. U.S. Census data shows 37% of homeowners with mortgages spend more than 30% of their income for housing. Saving on these costs is critical for homeowners as it allows them to allot funds for savings and other expenses.

Therefore, while policy makers are considering eliminating the MID, Yun believes that such a move would lower the homeownership rate in the U.S.

“While we must ensure that the conditions that led to the artificially inflated homeownership rate of the bubble years do not resurface, we also need to create the conditions for sustainable homeownership,” he explained.

Reducing or eliminating the MID is a de facto tax increase on homeowners, who already pay 80-90% of U.S. federal income tax, said Yun, adding that that share could rise to 95% if the MID is eliminated.

Yun also asserted that it’s a misconception that only the wealthy benefit from the MID, when in reality it benefits primarily middle- and lower income families. Almost two-thirds of those who claim the MID are middle-income earners and 91% of people who claim the MID earn less than $200,000 per year.