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Why you can’t get the lowest mortgage rates

Five reasons near-record low rates are out of reach for some

CHICAGO (MarketWatch) — Mortgage rates are near historical lows, but the rates lenders are quoting you aren’t as eye-popping as those you see in the news.

. Why is that?

First, remember that mortgage rates are moving constantly, and rate surveys are capturing rates from past points in time. For example, Freddie Mac’s weekly survey collects rate data over the course of a week. Bankrate.com’s survey collects rate data every Wednesday.

By the time results are released, they’re already outdated.

There are other reasons your rate might be higher. Below are five of them.

1. You’re not paying points

Average rates in Freddie Mac’s survey include average discount points paid for the mortgage. But not everyone is willing to pay points.

For the week ending Oct. 27, rates on the 30-year fixed-rate mortgage averaged 4.1%, but that rate required an average 0.8 point to get it. A point is 1% of the mortgage amount, charged as prepaid interest

Unless you’re going to live in your home for a very long time, paying points often doesn’t make sense, said Greg McBride, senior financial analyst for Bankrate.com.

“Where the investment pays off is if this is a loan you’re going to have for a long period of time. You’re making an investment of money now to pay the points to get the benefit of a lower monthly payment for years to come,” he said. “The more years you have of that lower monthly payment, the greater return on that initial investment of points.”

Bankrate’s weekly survey includes as many zero-point loans as possible, McBride said. That’s another reason that rates in Bankrate’s survey are different than those in Freddie Mac’s, he said. The 30-year fixed-rate mortgage averaged 4.33%, but points required to get that mortgage averaged 0.42, according to the Bankrate survey released Oct. 27.

2. Your borrower characteristics mean price adjustments

A credit score on the low side will prevent you from getting the lowest rates. Low levels of home equity will also mean a pricier mortgage rate.

That’s thanks to loan level price adjustments from Fannie Mae and Freddie Mac that have been making it tougher for borrowers to get the best rates for the past few years.

“The further down the FICO realm you go, and the higher the loan-to-value ratio, the more cost for the consumer,” said Cameron Findlay, chief economist for LendingTree.com, an online network of lenders.

Those with credit scores below 700 will have a tough time getting the rates in the low 4% range that everyone has been talking about, McBride said.

Meanwhile, a 20% equity cushion in your home for a refinance, or down payment for a purchase, is what’s needed to get the best rates these days. And if you have a jumbo mortgage, lenders usually want 25% or 30% down for the best rates, McBride said.

However, borrowers who qualify for the newly revamped Home Affordable Refinance Program will be able to snag low rates, even if their equity has taken a severe hit.

3. Your property type means higher rates

For condo-unit mortgages, you need a 75% loan-to-value ratio, or a 25% equity position, to get the best rates, said Christopher Randall, vice president, secondary marketing, at the Real Estate Mortgage Network, a mortgage lender.

And if your mortgage is for a vacation home or investment property, you can also expect to pay a higher rate, McBride said.

4. You don’t have recent proof of income

For the self-employed — who don’t have pay stubs as proof of recent income — the most recent tax returns are what a lender will look at before giving you a mortgage. If business has improved after your past tax return, that’s not going to be of any help as you try and get a mortgage today.

“Business could be off the charts now, but if the tax returns tell a different story, then getting approved or getting the best rates becomes a problem,” McBride said.

5. Your lender isn’t hurting for business

There can be a big disparity in what rates are offered from lender to lender, Findlay said. And it may have to do with how many mortgages they’ve been originating lately.

“Some that are lacking volume will tend to be more competitive,” he said. “Those that have enough volume may say we’re going to keep rates high.”

But the rate isn’t everything, Randall said. When shopping for mortgages, borrowers need to focus on comparing their monthly payments. “People are drawn to the interest rate… but you have to look deeper. Review the documentation,” Randall said.

For instance, it’s possible for someone to get an offer of a very low rate on a mortgage backed by the Federal Housing Administration — that loan also may come with a higher insurance premium, Randall said. That person may be better off taking a conventional mortgage with lower priced private mortgage insurance, even if their interest rate is a little higher, he said.

Some wet basements are easy to cure simply by clearing gutters and by diverting gutter water away from the foundation. But if the problem comes from other sources—water flowing toward the house on the surface, seeping in from underground, or backing up through municipal storm drains—you must take more aggressive action.

Here are eight strategies to keep water out of your basement.

1. Add gutter extensions

If downspouts are dumping water less than 5 feet away from your house, you can guide water farther out by adding plastic or metal gutter extensions.

But extensions aren’t the neatest or most effective long-term solution, especially if you’re likely to trip over them or run over them with a lawn mower. Permanent, underground drain pipe is invisible and capable of moving large quantities of gutter runoff much farther from your house.

For about $10 a foot, a landscaper or waterproofing contractor will dig a sloping trench and install pipe to carry the water safely away.

2. Plug gaps

If you see water dribbling into the basement through cracks or gaps around plumbing pipes, you can plug the openings yourself with hydraulic cement or polyurethane caulk for less than $20.

Plugs work when the problem is simply a hole that water oozes through, either from surface runoff or from wet soil. But if the water is coming up through the floor, or at the joint where floor and walls meet, the problem is groundwater, and plugs won’t do the trick.

3. Restore the crown

If the gutters are working and you’ve plugged obvious holes, but water still dribbles into your basement or crawl space from high on foundation walls, then surface water isn’t draining away from the house as it should.
Your house should sit on a “crown” of soil that slopes at least 6 inches over the first 10 feet in all directions.

Over time, the soil around the foundation settles. You can build it back with a shovel and dirt. One cubic yard of a water-shedding clay-loam mix from a landscape supply house costs around $30 (plus delivery) and is enough for a 2-foot-wide, 3-inch-deep layer along 57 feet of foundation.

4. Reshape the landscape

Since your home's siding slightly overlaps its foundation, building up the crown could bring soil--and rot and termites--too close to siding for comfort: 6 inches is the minimum safe distance. In that case, create a berm (a mound of dirt) or a swale (a wide, shallow ditch), landscape features that redirect water long before it reaches your house.

In small areas, berms are easy; a landscape contractor can build one for a few hundred dollars. On bigger projects, berms make less sense because you’ll have to truck in too much soil. In that case, dig a swale (about $1,000). Once landscaping grows in, berms and swales can be attractive features in your yard.

5. Repair footing drains

If water is leaking into your basement low on the walls or at the seams where walls meet the floor, your problem is hydrostatic pressure pushing water up from the ground.

First, check whether you have footing drains, underground pipes installed when the house was built to carry water away from the foundation. (Look for a manhole or drain in the basement floor or a cleanout pipe capped a few inches above the floor.)

If the drains are clogged, open the cleanout and flush the pipes with a garden hose. If that doesn’t work, a plumber with an augur can do the job for about $600.

6. Install a curtain drain

If you don’t have working footing drains, install a curtain drain to divert water that’s traveling underground toward your house.

A type of French drain, a curtain drain is a shallow trench--2 feet deep and 1.5 feet across--filled with gravel and perforated piping that intercepts water uphill of your house and carries it down the slope a safe distance away.

If the drain passes through an area with trees or shrubs, consider switching to solid pipe to reduce the risk of roots growing into the piping and clogging it. Cost: $10 to $16 per linear foot.

7. Pump the water

If you can’t keep subsurface water out, you’ll have to channel it from the inside.

To create an interior drain system, saw a channel around the perimeter of the floor, chip out the concrete, and lay perforated pipe in the hole. The pipe drains to a collection tank at the basement’s low spot, where a sump pump shoots it out the house.

Starting at about $3,000, an interior system is the best and least disruptive option in an unfinished basement with easy access. It’s also a good choice if your yard is filled with mature landscaping that digging an exterior drainage system would destroy.

8. Waterproof the walls

Installing an interior drainage system gets the water out but doesn’t waterproof the walls. For that, you need an exterior system: a French drain to relieve hydrostatic pressure and exterior waterproofing to protect the foundation.

It’s a big job that requires excavating around the house, but it may be the best solution if you have a foundation with numerous gaps. It also keeps the mess and water outside, which may be the best choice if you don’t want to tear up a finished basement.

The downside, besides a price tag that can reach $20,000, is that your yard takes a beating, and you may need to remove decks or walkways.

5 Steps to Deciding How Much to Offer – or Ask – for Your Home

One of the hardest, most important decisions homebuyers face is how much to offer for their home. And the glut of information on the web about real estate only makes buyers even crazier than the decision itself does. Supply, demand, foreclosure rates, mortgage rates – buyers think they need to run spreadsheets and do fancy math to make a smart offer. And THAT can be super intimidating.

But the fact is, there is a pretty short list of steps you need to take to make a smart offer – one that gets you a great value, but is also likely to be successful at getting the property. (A low offer does not make for a great deal if you don’t get the house!) And most of the same steps apply to sellers trying to set the list price that will lure the most buyers (and net them the most cash)!

Step 1: What do the “comps” say? First things first. When it comes to pricing a home, or making an offer to buy one, the ‘first thing” is the home’s fair market value. Both buyers and sellers should work with an experienced, local agent to understand what the home’s value is. Most agents will do this by offering you a look back at similar properties that have recently sold in the neighborhood – i.e., the comparable sales, or comps.

Ideally, look for comparables that are very recent sales (3 months or less before you’re listing or buying), very similar properties (i.e., same number of bedrooms, bathrooms, square footage; and similar style, condition and amenities). If you do get into contract, these may be the same comparables which will be considered by the appraiser, so looking at them before making an offer can:

(a) provide factual support for a lower-than-asking offer or for the asking price, in a negotiation, and

(b) result in a sale price at which the property will actually appraise, later on - avoiding the common glitch of the deal falling through because the appraisal comes in way below the agreed-upon price.

Also, looking at comps is the first step for locating a home’s seller and prospective buyer in the reality-based universe of current home values. The fact that you bought or refinanced the place at a given value 5 or 6 years ago is entirely irrelevant to what it’s worth today, as is the buyer’s belief that the place was worth $100K less at the trough of the market, in 2009.

Step 2: What can you afford? This step is much more critical for buyers than for sellers. (Unfortunately, sellers, the facts that you need to net a particular amount to buy your next home or pay your existing mortgages or credit card bills off has no relationship whatsoever to the price at which you should list or will sell your home.)

Buyers – it’s a must to make sure that your offer price for any given home falls within the range of what is affordable for you. This includes offering a price within the range for which your mortgage was preapproved, but also includes making sure that the monthly payment and cash you’ll need to close the deal (down payment + closing costs) are affordable in light of the particular house. If, for example, the property will require repairs for which you’ll need to conserve cash, or has HOA dues you hadn’t planned on, you may need to rejigger your offer accordingly.

Step 3: What’s your competition? (And what’s theirs?) This is another step at which it’s critical to check in with your agent. You need to know what level of competition you’ll face – whether you are a buyer, or a seller. As a seller, you can find this out by looking at things like how many comparable homes are listed in your town or your neighborhood in your general price range (your agent will brief you on this). Sellers should also consider what type of transactions their home will be up against – the more distressed properties (foreclosed homes and short sales) with which your home must compete, the more aggressive you must be with your pricing to get your home sold.

The more competition you have, as a seller, the lower you should tweak your list price to attract buyers to come see your home. (And the more buyers come to see your home, the more likely you are to get an offer!)

Buyers should also be cognizant of the competition level they will face for homes. Believe it or not, even on today’s market there are properties and neighborhoods in which multiple offers are the name of the game. Work with your agent to understand the list price-to-sale price (LP:SP) ratio , which lets you know how much under or over the asking price properties are selling for in your target home’s neighborhood; the higher the LP:SP ratio, generally speaking, the less competition there is among buyers.

Your agent can also brief you on:

(1) (1) The number of offers – if any - that have been presented on “your” property (which the listing agent will usually, gladly tell). If there are other offers, you’ll want to make a higher offer to compete successfully against them; and

(2) (2) The number of days the home has been on the market, relative to how long an average home stays on the market before it sells – the longer it has, the more pressure is on the seller, price-wise, and the less competition the buyer is likely to have. (One exception is the sweet spot scenario, when a property that has been on the market for a long time has a price reduction and gets a bunch of offers as a result! )

4. How much do they need to sell (or buy) it? Buyers: Has the listing in which you’re interested been reduced at all? By how much? Has the listing agent informed you that her clients are highly motivated, flexible or have an urgent need to sell?

Sellers – most buyers are not in a high state of urgency to buy these days, given the long-term, high affordability of homes and interest rates, except when they have an urgent personal reason for moving, e.g., buyers who are relocating for work. Of course, all of real estate is hyperlocal, so it’s important to understand how motivated buyers are in your local market, generally speaking, before you set your list price.

· how many homes in your target property’s area have had at least one price reduction,

· how likely a home in the area is to have multiple price reductions.

The higher these numbers are, the stronger of a buyer’s market it is, and the more bargaining power buyers likely have. And if you’re the seller, the higher these numbers are for your area, the lower you may need to price your home to be successful at getting it sold.

5. How much do you want to buy, or sell, the place? Step #4 was about taking the motivations of the folks on the other side of the bargaining table into account when formulating your offer and your list price. This step is all about you – what’s your level of motivation? Now, buyers, you certainly shouldn’t offer a price way above what the place is worth (see Step #1) just because you really, really want it, unless you have the cash to throw around. But within the range of the home’s fair market value, it may make sense to move higher within that range if you are highly motivated to get that particular property.

Sellers: think of your list price as the most powerful marketing tool at your disposal. if you really want or need to sell, get aggressive about setting your price as low as makes sense for your your home's value and local market dynamics to attract qualified buyers and help your home stand out against all the competition.

Is it time to clean? Not for todays busy families. Between work, children's activities, and vacation plans, even the most leisurely days don't seem long enough to get everything done at home.

There's a solution for busy times! Just as your body needs a "minimum daily allowance" of vitamins and minerals, an organized home needs a minimum of maintenance and attention to keep running smoothly?

Think of this as a Magic Minimum: a short list of essential household tasks. It's a bottom-line list of chores and activities necessary to keep things running at a basic level. With a working Magic Minimum plan, the household stays afloat, even when time is short.

What's on the list? Every family has slightly different needs, but most Magic Minimum checklists provide for these functions:

1. · basic accounting chores: bank deposits and bill-paying
2. · meals and menus: clean dishes, grocery shopping
3. · laundry: necessary clean clothing
4. · home management: once-a-day pick-up, weekly cleaning of bathrooms and kitchen

To make your own Magic Minimum plan, list the rock-bottom essential maintenance chores necessary to keep the household clean, fed and on time.

A sample checklist might look like this:

Every day:

1. · Load and run dishwasher
2. · Tidy kitchen
3. · Run one load of laundry, fold and put away
4. · Family pick-up time

Every week:

1. · Review checkbook and pay bills
2. · Shop for groceries
3. · Vacuum living areas
4. · Clean bathrooms

Next step: delegate! Assign one or more minimum chores to each family member. Every family member has a stake in keeping the household functioning, so everyone should be expected to help with the chores. Working together, everyone will be free for family fun in record time.

Finally, post your Magic Minimum list in a public place. One time-honored choice is the refrigerator door, but use whatever area is central to your family.

The written list aids accountability, because everyone knows what must be done before anyone can leave for a trip to the water park.

Give your household a Magic Minimum to maximize your family's opportunities for good times!

Home prices: Up or Down?

Hey, does anyone want to buy a house?

Anyone? Anyone?

No? Perhaps not.

Home sales haven't exactly fallen off a cliff at an annualized pace of 5.36 million so far this year, according to the National Association of Realtors. But nor are houses flying off the shelves, or rather, out of the multiple-listing services.

The reasons for not buying a house vary from nonbuyer to nonbuyer, but some intriguing trends can be found in the fourth-quarter Fannie Mae National Housing Survey, which asked 3,004 people a series of questions about housing, homeownership, the economy and their personal finances.

Here are some of the highlights:

· 65 percent of respondents agreed that now is a good time to buy a house.

· 26 percent believe home prices will go up in the next 12 months.

· 52 percent believe home prices will stay the same.

· 19 percent believe prices will go down.

· 39 percent expect rents to go up, on average by 2.8 percent, or $28 per $1,000 of monthly rent.

· 64 percent believe buying a home is a safe investment. (In 2003, that figure was 83 percent.)

· 84 percent believe owning a house makes more sense than renting.

· 28 percent of renters say renting is more sensible.

· 79 percent cite schools and safety as reasons to buy a home.

· 73 percent of delinquent borrowers and 42 percent of renters say their income isn't enough to pay their expenses.

A few comments, courtesy of Fannie Mae Chief Economist Doug Duncan:

More Americans believe that housing prices will remain stable over the next year. We also are seeing encouraging signs in the positive attitudes toward homeownership among younger Americans, despite the severe impact of the housing crisis on Generation Y. But most respondents to our survey continue to lack confidence in the strength of the economic recovery, and they are less optimistic about their ability to buy a home in the years ahead. This sense of uncertainty is weighing on the housing recovery today and reshaping expectations for housing for the future.

Outdoor and Indoor Fall Home Maintenance Tips

Fall Home Maintenance Tips

October 25, 2010 - Fall is, for many, the most enjoyable of all the seasons. One reason for this time of year's popularity is its short time span. As the temperatures steadily decline and days get shorter, the cold winter days get closer and closer.
While you are out enjoying the fall colors, pumpkin farms and Halloween activities, take some time to prep your home - both indoor and outdoor - for winter with the below fall home maintenance tips!

Outdoor Fall Maintenance Tips

1. Clear debris out of you window wells, gutters, downspouts, and storm drains. This will allow the water to properly drain, minimizing standing water and stalling the freeze and thaw expansion process that often occurs during colder months.

2. Make sure the weather stripping on your windows and doors fit and is in good condition.

3. Clean your windows. Sparkling clean windows let in lots of sunlight that will help chase away winter's doldrums.

4. Look for broken or cracked glass and damaged screens or storm windows. Also, check for loose putty around glass panes.

5. Remove garden hoses from spouts, drain and store for the winter.

6. Check painted surfaces for water damage or mildew.

7. Insulate outdoor faucets, pipes in unheated garages, and pipes in crawl spaces with materials such as rags or newspapers.

8. Keep rodents out. In the winter months, all kinds of critters will be looking for a cozy spot. They don't need a lot of space to get into or under your home. Make sure all exterior vents are screened, and that there are no gaps underneath garage doors. Pet doors are another favorite access point for rodents.

9. Make sure your snow shovels and/or snow blower are in good shape. Check your shovel handle for possible cracks or breaks. Have the routine maintenance performed on your snow blower.

10. Fall is also the time to remove window screens and store in a safe place such as your basement or garage. Install storm windows to insure proper heating efficiency.

Indoor Maintenance Tips

1. Get your heating system checked by a professional.

2. Replace your furnace filter.

3. Clean out any dust that has accumulated in vents to reduce exposure to indoor pollutants and cut down on winter colds.

4. Make sure you have proper insulation in both your attic and basement. While checking your insulation, if you see any dark, dirty spots, it may indicate you have air leaks coming into your home.

5. Remove hair from drains in sinks, tubs, and showers.

6. Test all smoke alarms and clean dust from the covers. Replace batteries as necessary.

7. Test all ground-fault circuit interrupters, especially after electrical storms.

8. Check your home around windows and doors for air leaks. An easy way to check for leaks is to move a lighter around the window or door frame and see if the flame moves with a breeze. If you find a leak, you can caulk it or you may have to replace the wood frame. Repairing these leaks can save you money on your energy bill during the cold months.

9. Don't ignore your hose bibs and learn the location of your pipes as well as how to shut off the water. If your pipes end up freezing, you'll have a better chance of preventing a burst if you can quickly shut water off.

10. Clean and reverse ceiling fans. Reset fans for the winter routine by giving fan blades a thorough dusting, and then switch them to a clockwise spin in order to push warm air downward from the ceiling.

If you’re thinking about remodeling your kitchen, or finishing your basement, you probably want to get your investment back when you sell your home. But when it comes to payback value of home improvements, some are definitely more profitable than others. As a general rule, kitchen and bathroom projects usually get a nice return on investment, typically 90% or more.Things like adding rooms or finishing basements tend to pay back the least.Finishing a basement usually returns less than 50%, so it’s not a project likely to show profit at selling time.

There are a number of factors that go into determining how well a project will pay back. Payback value depends a lot on the current market conditions in your area. If the market is hot and homes are selling fast, you can expect a higher payback value than you would get in a slow market.

The type of project you do and how it fits in with other homes in the area can have a big influence on payback too. If you put your money into the wrong type of improvement, you won’t get your money back. But if you're smart about what you do, you can make money. The payback will be better on improvements that are in demand and conform to neighborhood standards. Adding a second bathroom in a neighborhood where most homes have two bathrooms will give a high return on investment. Building a large addition that makes your home twice as big as the other homes on the block probably won’t pay back very well. Likewise, the popularity of a project will factor into how much it pays back. An improvement heavily customized to your wants and needs won’t pay back as well as something more common to other homes in the neighborhood.

Another factor to consider is the cost of the improvements. If you can do the work yourself, you can save significantly on the cost of the project and greatly improve the chances of getting a good return on the investment.

The list below is compiled from several published surveys and shows typical payback for some popular remodeling projects:

• Kitchen remodeling – 90%
• Add a bathroom – 90%
• Bathroom remodeling – 80%
• Install central heating – 90%
• Install central air – 75%
• Add a deck – 70%
• Replace windows – 70%
• Add a room – 55%
• Build a pool – 45%
• Finish a basement – 40%