Aug 21, 2013 | Mortgage Tips
As lenders tighten mortgage guidelines for Worcester County area home buyers, minimum downpayment requirements are increasing.
Several years ago, you could finance a home with nothing down. Today, most conventional mortgages require at least 5 – 10 percent.
Incidentally, these guideline changes have led to an increase in the number of home buyers accepting cash gifts from family.
Gifts are allowed in most cases but the problem is, if you don’t accept the gift in a “lender-friendly” way, the mortgage underwriter could reject it, and negate it.
Three Steps To Success With Your Down Payment Gift Funds
You can’t just deposit a cash gift into your bank account. You have to follow a series of steps and keep records.
- Provide an acceptable gift letter signed by all parties
- Provide documentation of the gifter’s withdrawal of funds via teller receipts
- Provide documentation of the giftee’s deposit of funds via teller receipts
Lenders require these 3 steps for two basic reasons. First, they want to make sure that the cash gift is “clean” (i.e. not laundered). Second, they want to make sure the gift is really a gift and not a loan-in-disguise. It’s why lenders typically require that the loan application be accompanied by a signed, dated letter.
For example:
I am the [relationship to recipient] of [name of recipient] and this letter serves as evidence that I am gifting [name of recipient] [amount of gift] to be used for the purchase of the home at [complete address of property]. This is a gift — not a loan — and there is no expectation of repayment. Signed, [Signature of gifter]
Keep The Cash Gift Funds Separate From Your Other Money
As an additional step, home buyers receiving cash gifts should make sure that gifted funds are not commingled at the time of deposit.
If the cash gift is for $10,000, therefore, the bank’s deposit slip should indicate that a $10,000 deposit was made — nothing more, nothing less. Don’t add a random $100 deposit to the transaction, in other words. The $100 deposit should be a separate transaction.
It’s also worth noting that gifting funds between family members can create both legal and tax liabilities.
If you’re unsure about how donating or receiving a gift may impact you, call or email me directly. If I can’t help you with your questions, I can refer you to somebody that can.
Aug 20, 2013 | Housing Analysis
The National Association of Home Builders (NAHB) reported Thursday that its Housing Market Index rose three points to a reading of 59 for August.
Confidence among builders is likely growing in connection with stronger housing markets and high demand for homes. These conditions are being driven by short supplies of homes for sale in many markets.
Builder confidence in current market conditions rose by three points to a reading of 62, while builder confidence in market conditions within the next six months rose by one point to a reading of 68. Confidence in buyer foot traffic was unchanged from July’s reading of 45.
Readings above 50 indicate that more builders surveyed view housing market conditions as positive rather than negative; there was some concern that the high builders’ confidence reading could trigger the Fed to announce the tapering of its $85 billion monthly purchase of Treasury securities and mortgage-backed securities.
Housing Starts Driven By Apartment Construction
Housing starts rose in July, but were led by the volatile apartment sector rather than single- family homes.
On Friday, the U.S. Department of Commerce reported 896,000 housing starts on a seasonally adjusted annual basis. This reading fell short of expectations of 915,000 housing starts, but exceeded June’s reading of 846,000 housing starts.
Starts for residential buildings with five or more units rose by 20.90 percent year-over-year while construction of one of one-to-four family residential buildings fell by 2.20 percent. Demand for rental properties and a shortage of available single family homes was seen by economists as contributing to increasing multi-family housing construction.
Analysts said that some home builders may be holding back on single-family home construction due to increasing materials and labor costs, but this doesn’t reflect the record level of builder confidence reported in the NAHB Housing Market Index.
Building homes at less than optimum capacity isn’t good news for the shortage of available single-family homes. Rising mortgage rates are also a concern for home builders, as fewer borrowers may be able to qualify for mortgage loans needed for financing home purchases.
Building permits numbers were also released on Friday, and presented a more positive picture than housing starts. July’s reading for building permits issued rose by 2.70 percent in July to an annual reading of 943,000 permits against expectations of 953,000 permits issued and exceeded June’s reading of 918,000.
Building permits issued provide an indication of future housing starts.
Aug 19, 2013 | Housing Analysis
Last week wasn’t kind to stock market investors, but weekly jobless claims fell to an unexpected low of 320,000 new jobless claims filed, the lowest level in nearly six years.
Here is a review of the major events of the week.
Monday: The federal budget for July shows an increase in its deficit to -$98 billion, a deficit increase of $28 billion over June’s figure of -$70 billion. The good news is that the deficit for the first 10 months of the fiscal year is $38 billion less than during the same period of the prior fiscal year.
Thursday: Thursday was a busy day for economic news. The weekly jobless claims report came in lower than expected with 320,000 new jobless claims filed. This was lower than the expected.
While this is a strong sign for the economy that would typically boost stock prices, the markets fell. Analysts cite a good news/bad news scenario in describing what happened. The good news was that jobless claims fell to a new low, but the bad news is that investors feared that this may give the Fed a signal to begin tapering its quantitative easing (QE) program.
The Fed is expected to begin tapering its monthly purchases of $85 billion in treasury securities and mortgage-backed securities as early as next month. The QE purchases are intended to help hold down long term interest rates including mortgage rates.
The fall in stock prices on Thursday and Friday suggested that fear of the Fed ending QE is more compelling than the lowest number of new jobless claims since October 2007.
Freddie Mac reported that the average rate for a 30-year fixed rate mortgage remained unchanged at 4.40 percent with 0.7 percent in discount points. The average rate for a 15-year fixed rate mortgage ticked upward by one basis point from 3.43 to 3.44 percent.
Discount points fell from 0.70 percent the prior week to 0.60 percent last week.
The average rate for a 5/1 adjustable rate mortgage (ARM) rose from 3.19 to 3.23 percent with discount points unchanged at 0.50 percent. The 5/1 ARM provides an alternative to higher fixed rates for borrowers seeking lower mortgage rates and payments.
Friday: Included Housing Starts for July, which came in at 896,000 as compared to expectations of 915, 00 0 and June’s figure of 846,000 housing starts. Building permits issued in July came in at 943,000, and surpassed June’s reading of 918,000 building permits.
Increasing home values, buyer demand and a short supply of available homes were seen as motivating factors for builders to construct more homes.
Looking Ahead
This week’s schedule of economic news is set to include the Chicago Fed’s National Activity Index on Tuesday. The FOMC minutes will be released on Wednesday along with Existing Home Sales.
Thursday will bring Weekly Jobless Claims, Freddie Mac’s survey of mortgage rates and the FHFA home price index. Friday will finish the week with a New Home Sales report.
Aug 16, 2013 | Around The Home
August means it’s time to get your children ready for school once more. Picking out backpacks, going clothes shopping and finding all the right school supplies can be hectic enough.
However, when you’ve moved and your children have to start all over in a new district, there’s even more to worry about!
Summer fun can make the sunny months fly by. It’s easy to forget that with the beginning of school comes excitement and anxiety for your little ones — especially if they’re starting out somewhere new.
So help them get adjusted with the back-to-a-new-school strategies below.
Explain Why You’ll Be Moving
Whether you’re moving states or just school districts, it’s best to give your children as much notice as possible and explain to them the reason for the change. They’ll need time to get used to the idea and say goodbye to friends.
Be Positive
As the first day draws near, be positive about what they’ll experience. School will be a place where they’ll learn new things and make great friends.
Become Involved
Think about joining the PTA, so you can learn about what’s happening in the school, meet teachers and be able to discuss policies and issues with your children.
Stick To A Routine
A new school is going to hold a lot of unknowns for your little ones. So it’s best to keep a consistent routine at home. This will help children know what to expect and feel they at least have some control in their own space.
Tap Into Their Feelings
Your children might be excited or sad about the new change and they’ll need someone to release all of this positive or negative energy upon. Just listen and be sure not to minimize their feelings. They’ll need an understanding ear throughout this adjustment.
Encourage Participation
While it’s always important for your children to focus on their schoolwork, they would also benefit by joining some sort of club, group or team. The sooner they make friends, the more settled they’ll feel.
Moving to a new Worcester County area school can be tough on your children, which in turn makes it tough on you.
If you can set aside the time to prepare for the first weeks, talk positively about their upcoming experiences and take the time to really listen to your children, then adjusting to the new environment can be a smooth transition for all.
For more helpful tips on adjusting to a new home and neighborhood, please feel free to contact your trusted real estate professional today.
Aug 15, 2013 | Around The Home
So you want to renovate your home, but you don’t have the cash at the moment for the project and you don’t qualify for a home equity line of credit?
What can you do to get the money you need to upgrade your property?
Here are a few creative solutions to the problem, so that you can find the money you need to fund your renovations.
Take In A Renter
If you have a spare bedroom or a basement suite, you can rent out your home for a while to help you save money toward the renovations. Taking in a renter can be a great way to earn extra money, but it is important to interview your prospective tenants to make sure that you are renting to someone trustworthy and compatible.
It is also a good idea to make a rental contract so that you and your tenant can be sure that you are on the same page if any conflicts or confusion arise.
Get Rebates And Financing From Your Utility Company
Since the government is pressuring utility companies to reduce their energy use, there are a lot of financial incentives out there for renovations that increase your home’s energy efficiency.
Some utility companies will offer you a loan for the money or rebates on your costs if you are making green upgrades. You might be able to pay off the balance of the loan over the long term as part of your monthly utility bill.
Sell Your Unwanted Stuff
Another way to raise some extra cash for a home renovation can be to sell the extra items that are taking up space in your attic or garage. Try selling them online, or directly to your relatives and friends.
Most families have all sorts of valuable items that they never use, from treadmills to bikes to couches to clothing and kid’s toys. Not only will selling off the things you don’t use make you some extra money, it will also give you more storage space in your home to work with when you are remodeling.
Put In Some Sweat Equity
Why not cut down the cost of your home renovation by doing as much of the work as you can on your own? For most tasks you don’t have to be a professional contractor, you will likely be able to do with the instructions that you can find online.
This can save you thousands of dollars on remodeling costs. However, you should still use a professional for any of the skilled and potentially dangerous tasks, such as installing wiring.
These are just a few ways that you can cover the costs of renovating your Worcester County area home without a home equity loan, so why not get started right away? For more useful property tips, call your trusted real estate professional today.
