By Michele Dawson

Home shopping for first-time homebuyers it’s an exciting, albeit nerve-wracking, experience. If you’re like others in the market for their first home, you probably have in mind exactly how your soon-to-be home will look.

But it’s important not to fall into the bad decorating, dingy walls and dirt-bare back yard equals bad-home trap. If you don’t see past the hideous wallpaper, funky light fixtures and avocado green carpeting, you may miss out on a home with great potential.

And, if you’re looking for a home in a seller’s market where homes are being snatched up as soon as they go on the market, you’ll come to realize you can’t be choosy if you want to make a competitive offer.

One of the first things to do is to get pre-approved for a loan and determine the maximum you can afford to offer for a house. Don’t look at homes that are asking for more than 5 percent above your maximum, otherwise you’ll be setting yourself up for disappointment if you find the perfect—but outside your budget—home.

So what to do?

The floor plan of the home is extremely important. If a floor plan isn’t quite to your liking, consider rearranging it or adding on. If you’re looking at an existing home and will need to remodel or expand to suit your needs, the estimated cost of renovation needs to be considered when making an offer.

Also, consider the features of a home:

• Walls. While these are among the easiest to remedy, they also make a huge first impression. If the walls need to be painted, are covered in wallpaper or are painted a color you find distasteful, picture them crisp and clean in the color of your choice—that’s how they could look after you paint them.
• Floors. Like walls, carpet or floor surfaces that are old or outdated can be easily replaced. You could even ask for a carpet allowance in your bid, especially if you’re in a buyer’s market.
• View. Things like old, ugly—even dirty—windows and window treatments can make a view appear less desirable. Those things can be improved, so unless the only view you have is of your neighbor’s clunker on the side of the house, don’t get hung up on what is surely a fixable view.
• Landscaping. Your best bet is a moderately landscaped yard because you can always improve landscaping without spending too much. Worst case, even if you’re looking at dirt, landscaping is one of the easier projects to tackle. Plus you get to design it however you’d like if you’re starting from scratch.
• Closets and garages. You can never have too much storage space, which is why so many newer homes have three-car garages. But if you encounter a converted garage that is now a bedroom or storage room, don’t give up. Converted garages can almost always go back to their original purpose without much cost or labor.
• Kitchen. The most popular room in the house, many homeowners want their kitchen to be large and have modern appliances. Don’t let outdated color schemes deter you because there’s nothing like a fresh coat (or two) of paint to make a kitchen your own. Plus, if you like the rest of the house enough to make an offer, you can give the kitchen a minor spruce-up with some new appliances or a major overhaul complete with new countertops, cabinets, and flooring.
• The exterior. If the home doesn’t have good curb appeal, try to picture it with a fresh coat of paint and revitalized landscaping.
• Pools. If you want a pool, buy a home with a pool already built in. Pools are expensive and you will not get a full return on the cost when you go to sell. Let someone else lose the return. The cost of repairing a pool is less than putting one in, so if you’re looking at a home with an old pool that looks like it’s in bad shape, it’s still a better bet than putting one in later.

When making an offer, consider what you can’t live without, as well as your budget. Also, be sure you hire a professional home inspector to inspect the house. If the home’s systems are in good working order and the house has everything you want except a minor item or two, make an offer accordingly.

Most importantly, keep in mind that unless you’re building your dream home from scratch, you’ll probably never find the perfect home. But seeing past a previous owner’s bad decorating choices to the core of the home and its potential for livability will yield you the home you’ve always wanted. It may take some work, but hey—it’s yours.

Copyright © by Realty Times

Here’s how to determine what’s causing the problem and how much it will cost to fix it.

By Margarette Burnette of Bankrate.com

Many homeowners are perplexed when they see defects in their homes. If there is a water spot on the ceiling, does it mean a few shingles on the roof need to be replaced? Or does an entirely new roof need to be purchased?

Reggie Marston, president of Residential Equity Management Home Inspections in Springfield, Va., says it is important to thoroughly assess any defects in a home. Call in experts as necessary to help decide whether the repair is a major or minor expense, he says.

“Homeowners should have some method of determining the extent of the problem and how to have it corrected,” Marston says.

Relatively common defects — such as cracks in concrete or worn wooden decks — may offer clues as to whether they can be solved with a quick, cheap fix, or whether they require a long, costly remodel, Marston says.

Homeowners need to use these clues to spend their repair dollars wisely.

1. Cracked concrete
Thin cracks along a concrete foundation could be the result of settling in the concrete and are not necessarily be a cause for concern, says Kathleen Kuhn, president of HouseMaster Home Inspections in Bound Brook, N.J.

However, homeowners need to pay attention to the shape and direction of the divide. Long, horizontal splits in the concrete could indicate pressure from the outside — possibly from saturated soil — that needs to be repaired. “Normal settlement doesn’t generally cause horizontal cracks,” Kuhn says.

Regardless of shape, any cracks that leak water or are wider than one-fourth of an inch (some experts put the limit at one-sixteenth of an inch) should be inspected by a structural engineer immediately, Kuhn says.

Even if a crack appears to be minor, it should be repaired, Marston says. “If moisture gets inside a small crack, it can cause the steel inside to rust, which could cause further deterioration,” he says.

Cost: The cost for a structural engineer to assess a property is about $300, Marston says. If the expert finds major structural damage, the repair would be costly.

“Typical bills range from $10,000 to $30,000,” he says.

2. Worn-out decks
One low-tech way to test the firmness of a wooden backyard deck — assuming it’s safe to stand on — is to hit it hard with your foot and listen to the sound it makes, says Dean Bennett, president of Dean Bennett Design and Construction in Castle Rock, Colo.

“If you hear the board beneath your foot vibrate, the deck is still probably solid,” Bennett says.

Marston says that if the deck is fairly new, it’s probably structurally sound. “When the wood is under five years old, then even if the lumber is discolored and there’s a little cracking, it’s generally not a cause for concern,” he says. “The solution could be as simple as cleaning it, resecuring the nails and adding a sealant.”

Cost: Marston says the cost of a cosmetic repair could range from $200 up to about $1,000, depending on whether the owner makes it a do-it-yourself project or hires a contractor.

If the deck is older than about 15 years, however, it is probably past its life expectancy and should be inspected by an experienced, licensed landscape contractor, Marston says. Replacement costs range from $5,000 to about $20,000, he says.

3. Ceiling water stain
After spotting a water stain, homeowners should consider where the possible source of the stain is, Kuhn says. If there’s a bathroom above the water spot, the leak may be a plumbing issue. That could be a costly repair, she says, because a plumber may need access to an interior wall to repair the leaking pipe.

If the water spot appears to be rainwater coming through the roof, it’s not necessarily a major expense, especially if the roof is fairly new, Marston says. It could simply be a nail that popped through a shingle on the roof, or flashing (which secures pipes to a roof) that hasn’t been caulked properly, he says.

“Those problems are relatively simple to fix,” Marston says. “They usually cost a couple hundred dollars for a roofer to repair.”

Other problems could be more expensive to fix. For example, if the roof is 15 years old and several shingles have blown off, the roof is probably in poor condition and may require a complete replacement, Marston says.

“Most builder-grade asphalt roofs have a life expectancy of 15 to 20 years,” he says.

Cost: New roofs cost from $5,000 to $12,000, depending on their size, Marston says.

4. Inefficient heating and cooling
If a home’s heat source or air conditioning unit isn’t working well, homeowners need to have it inspected by a heating, ventilating and air conditioning (HVAC) professional, Bennett says.

The technician will look for problems and probably will perform general maintenance on the system, which may include cleaning the burners, tightening connections and checking the system controls, Bennett says.

After the heating and cooling unit is repaired, homeowners still need to budget for regular maintenance on their systems to keep them in good condition, Marston says. “If the system isn’t efficient in the first place, it’s probably because the owners didn’t keep it properly maintained.”

Cost: Common problems that HVAC technicians discover, such as defective igniters and fuses, are relatively cheap to fix, Bennett says.

“Homeowners can expect to pay a few hundred dollars for these types of repairs,” he says.

However, Marston says that if the unit is older than 10 years and isn’t working properly, it’s probably best to buy a new one. Otherwise, even after it’s been repaired, it probably won’t have the energy efficiency that newer models will have.

New HVAC units cost about $5,000, with high-efficiency models starting at about $10,000, Marston says.

5. Basement wall spots
If a basement wall spot appears to be mold, there’s probably a moisture problem, Marston says.

“Call a soil engineer or home inspector to help determine where the moisture’s coming from,” he says. If water is coming from leaks in the interior water pipes, the repair could cost thousands. However, if the problem is poor water flow around the house, the exterior of the house may just need simple regrading, Marston says.

“The owner could hire a landscaper for a couple hundred dollars to add more shrubs and to make sure the dirt that’s beside the house is 6 inches higher than the level of dirt that’s 10 feet away,” Marston says. This allows water to drain away from the house.

If you live in an arid climate, a wall spot may not be moisture at all.

Bennett, who lives in Colorado, says: “Out west, in our part of country, it’s very dry. We don’t see a lot of water filtration, so we don’t run into mold issues often. So a spot could just be dirt.”

The solution? Soap and water.

Cost: Anywhere from a few dollars to several thousand dollars.

It’s not enough these days to have good credit and a steady job, as lenders are increasingly picky when it comes to loan approvals. Here’s how to make the best impression.

By Bankrate.com

Whether you’re buying a home or refinancing an existing home loan, you’ll soon find out that lenders today are a picky and demanding bunch when it comes to loan approvals. Even well-qualified borrowers are expected to jump through some pretty high hoops to qualify for financing.

But fear not: These tips and suggestions can help you make the best possible impression on the lender of your choice.

Just as job hunters may wonder what top employers want to see on a resume, prospective borrowers may be curious about what lenders look for on a loan application.

The four C’s

The answer may be summed up with a mnemonic called “The four C’s,” according to Greg Gwizdz, national sales manager for Wells Fargo Home Mortgage in Des Moines, Iowa.

• Capacity, which refers to the adequacy of the borrower’s income to cover the interest and principal due on the loan, plus property taxes and homeowners insurance.

• Character, which refers to the borrower’s track record of paying debts, as evidenced by his or her credit history and credit score.

• Capital, which refers to the borrower’s down payment (or equity) as a percentage of the current value of the home.

• Collateral, which refers to the safety and soundness of the home and the value of the home as determined by an appraisal relative to the agreed-upon purchase price.

Mike Mueller, a mortgage broker with Patagonia Finance in San Francisco, uses a quadrant with “income,” “credit,” “assets” and “property” in the four corners, but his point is the same as that of the four C’s: Neither a high income nor an exemplary credit report alone is enough to make your loan application stand out. What lenders like to see is strength and stability in all four areas.

“If you’re strong in all four corners, you’re on a chair,” Mueller says. “That’s pretty stable. In theory, I can take away one of the corners — maybe your credit score has some dings or you need a stated-income loan — but the other corners are still pretty solid, so you have a tripod. That’s not as stable as a chair, but it will still stand up. If you take away another corner, you have a ladder. Ladders don’t work anymore.”

Borrowers who are qualified but whose down payment will be less than 20% of the purchase price of the home must withstand a second level of scrutiny. That’s because mortgage insurers also have to approve such loans, and they have “completely different qualification ratios,” Mueller says. Borrowers in this situation should discuss their options with a loan officer who is familiar with lenders’ and insurers’ guidelines.

Have paperwork in order

Lenders rely not on the borrower’s say-so but on a pile of paperwork to verify and document the borrower’s financial position. At a minimum, most borrowers are required to submit the following:

• One month of paycheck stubs.

• Two years of W-2 forms.

• Three months of bank account statements.

Additional paperwork also may be required:

• If you’re self-employed or earn more than 25% of your income from commissions or bonuses, you’ll need to hand over two years of income tax returns.

• If you’re divorced, the lender will want a copy of your settlement to ascertain how much alimony or child support you’re obligated to pay or are entitled to receive and the duration of those payments.

• If you’ve filed for bankruptcy protection within the past seven years, you’ll need to show your bankruptcy papers.

• If you’ve deferred repayment of student loans, you should provide your deferral agreement as well.

“If (borrowers) have student loans that are going to be deferred for at least 12 months, that may help them qualify, so they would want to bring the account numbers for those loans,” says Candis Duke, national operations officer at Metrocities Mortgage in Sherman Oaks, Calif. Student loans are counted as debt, but deferral of repayment may strengthen the borrower’s application.

No big changes after you apply

Well-qualified borrowers can still knock themselves out of the loan process if they violate certain rules, the most important of which is: Don’t make any substantive changes to your financial position after your loan application is submitted.

Here are some more precautions for the wise:

Don’t increase your debt burden. “The biggest error we see borrowers make is that they will file their application, they will be prequalified, they’ll have picked out their home, and they’ll be all excited — and they’ll go and buy furniture, cars, boats, and they will ramp up their debt. And since credit is often rerun before closing, that additional debt now causes them not to qualify,” Duke says.

Don’t open new credit accounts, even just to transfer a credit card balance. “If you transfer a balance to a new zero-interest card, your FICO score will drop because all of a sudden you have more credit,” Mueller says.

Don’t challenge the lender’s requests for more documents. Asking “Why do you want to know?” or refusing to provide certain documents may arouse suspicion that you have something to hide. Hand over as much documentation as possible at the start so your application can be considered quickly, Gwizdz says. Prevarication is pointless because the lender’s verification process will turn up whatever truths you’ve failed to disclose.

Don’t float your interest rate unless you can afford higher monthly payments. “If your rate isn’t locked and rates go up, your debt-to-income ratio will change,” Mueller says. Depending on the lender’s guidelines, higher payments could prevent you from qualifying for the loan for which you’d applied.

Don’t change your employment. “Right before closing, every lender verifies that the borrower is still employed in the same position,” Duke says. A job change is less likely to derail your loan if you stay in the same industry, expect to earn at least as much income and don’t have a gap between jobs.

Don’t delay payment of your bills or rent. Paying what you owe is important, but it’s not enough. You also have to pay on time, Gwizdz says. Rent doesn’t show up on your credit report, but most lenders will check with your landlord because rent payments are a good indication of how reliably you’ll pay your mortgage.

Don’t skip your mortgage payment. Some homeowners don’t bother to make what they believe will be their last payment on their existing mortgage, because they know that loan will be paid off when they sell their home or refinance that loan. That’s a huge mistake, Duke says, because a late payment can destroy your credit score. If you need to refinance an ARM that’s scheduled to reset, try to apply for your new loan at least 30 days before the reset takes effect to avoid the higher payments.

Don’t overextend yourself. If your monthly rent is $1,000 but your new mortgage payment will be $3,000, that’s a huge payment shock, Gwizdz says. All else being equal, your loan is more likely to be approved if the increase in your monthly housing cost is more modest.

This story was reported and written by Marcie Geffner for Bankrate.com

The streamlined rules are intended to help borrowers avoid foreclosure.

By Michele Lerner of Bankrate.com

Homeowners struggling to sell their homes in a short sale are getting some relief, thanks to the federal government’s Home Affordable Foreclosure Alternatives (HAFA) program.

Up to now, many short sales — in which the lender accepts a sale of the property for less than the full amount owed — have taken months to complete. Sometimes, the complex and lengthy process has failed, resulting in foreclosure.

HAFA establishes streamlined short-sale rules and provides incentives for borrowers and lenders to work together to avoid foreclosure. The rules — in effect between April 5, 2010, and Dec. 31, 2012 — also are intended to speed up the short-sale process.

“The streamlined short-sales process will definitely help homeowners,” says David Liniger, Re/Max International chairman and co-founder.

Before HAFA, homeowners often listed their home for sale without an idea of what the lender would accept.

“A lot of sellers and their Realtors have not been able to sort out the problems with short sales and have given up on the process because, even after sending in the correct paperwork, they have sometimes waited three or four months for their lender to respond,” Liniger says.

Under HAFA, borrowers receive pre-approved short-sale terms from the lender before putting the home on the market.

Lisa Matykiewicz, a Realtor and certified distressed property expert in Gilbert, Ariz., says the updated short-sale rules establish an easy-to-understand process with defined steps that “make it easier for everyone to understand.”

Eligibility requirements
The HAFA guidelines apply to lenders that voluntarily participate in the Home Affordable Modification Program (HAMP). The Department of Housing and Urban Development says more than 100 servicers have signed up to participate in HAMP, covering more than 89% of mortgage debt outstanding in the country.

To be eligible for HAFA, homeowners must first apply for a loan modification through HAMP. Owners who do not qualify for a loan modification or miss payments during the initial loan-modification period qualify for HAFA.

Other HAFA requirements include:

• Property is principal residence.
• Mortgage originated before Jan. 1, 2009.
• Mortgage is owned or guaranteed by Fannie Mae or Freddie Mac.
• Borrower is delinquent or default is foreseeable.
• Homeowner demonstrates hardship.
• Borrower’s total monthly housing payment exceeds 31% of gross income.
• Unpaid principal does not exceed $729,750.

According to HAFA rules, lenders now must offer a short sale in writing to the borrower within 30 days if the borrower does not qualify for or complete a loan modification. Borrowers then must respond within 14 days to the lender’s short-sale agreement.

“I think it’s great that the lenders in this program have to offer a short sale before going to foreclosure,” Matykiewicz says.

When a purchase offer is made, borrowers must submit the sales contract to the lender within three days, along with the buyers’ mortgage pre-approval and the status of negotiations with other lien holders on the seller’s property.

Finally, lenders must approve or deny the contract within 10 days.

HAFA rules also state that lenders must release borrowers from the obligation to repay the difference between the sales price and the loan amount. No deficiency judgments are allowed for a first or second loan.

Other incentives
In the past, short sales were especially difficult for homeowners with more than one loan on their home, since the home sale typically repaid only the first mortgage. HAFA’s financial incentives include a payment of up to $3,000 for second mortgage holders.

“Second trust lien holders are often owed five or 10 times that $3,000 payment,” Liniger says. “But if the property goes to foreclosure, the second trust holder is not likely to get any money at all. This at least guarantees they get something.”

Other HAFA financial incentives include $1,000 to loan servicers to cover administrative fees, up to $1,000 for mortgage investors who agree to share short-sale proceeds with second lien holders and $1,500 to the homeowners for relocation.

“The moving expense allocation acts as an incentive for them to stay in the property until the short sale goes through,” Liniger says. “Owner-occupied properties are usually in better condition than vacant homes.”

Smaller remodeling projects mean more return when you sell

By Diana Lundin – sponsored by Move, Inc

When it comes to remodeling your home and getting the best bang for your buck, improving the exterior of your house may be your surest bet for recouping your money when you sell.

Six out of the top 10 remodeling projects listed in Remodeling Magazine’s 2009-10 Remodeling Cost vs. Value Report are all related to outside improvements. National Association of REALTORS® President Vicki Cox Golder says the results of the national survey highlight “the importance of a home’s first impression.”

According to the report, which surveys Realtors across the country, an improvement as simple and inexpensive as replacing a steel entry door for about $1200 can bring you back nearly 129 percent of your investment when you sell.

An attic bedroom costing $49,350 returned $40,990, a roughly 83 percent cost recoup, while a deck addition returned a little more than 80 percent of the average $10,635 spent on it.

One reason cited for the dominance in outdoor projects is cost. In a down economy, homeowners are eyeing their bottom line and each of the exterior improvements comes in at less than $15,000. And exterior improvements mean enhanced curb appeal, something any real estate agent would say is key to a home’s appeal to buyers.

Midrange outdoor projects in the report’s top 10 are a deck addition, vinyl siding replacement, wood and vinyl window replacements and steel and fiberglass door replacements.

Another factor for outdoor improvements is energy efficiency. Under the American Recovery and Reinvestment Act, homeowners can receive tax credits for weatherizing their houses, which includes upgrading windows, roofs and siding. Those upgrades save money for homeowners while also making their homes more attractive to buyers.

You can still make a good percentage of your money back by remodeling kitchens and baths but don’t go overboard. A minor kitchen remodel in a midrange house priced at $21,410 gives you back about $16,775 or about 78 percent of its cost when you sell. A major remodel  at $57,215 returns $41,260 or 72 percent.  In an upscale home,  a major kitchen remodel at $111,800 gives you about 63 percent of your investment while a bathroom costing $52,300 would give you a little more than 61 percent.

Home offices and sunroom additions only add about half of their construction costs when you sell.

If you want to claim the first-time buyer credit, you’ll have to hurry.

By Marcie Geffner of Bankrate.com

The clock is ticking on the federal homebuyer tax credit.

Homebuyers still have time to buy a home and meet the deadlines, but they will need to act soon and be proactive throughout the transaction.

The homebuyer tax credit is worth 10 percent of the home’s sale price, up to $8,000 for buyers who haven’t owned a home in the previous three years and up to $6,500 for buyers who have owned and occupied a principal residence for at least five consecutive years during the eight-year period that ends on the day the new home is purchased.

Here are some tips for last-minute buyers:

• The buyer must enter into a binding contract to purchase the home on or before April 30 of this year. The term “binding contract” isn’t defined in the homebuyer tax credit law and may be subject to interpretation. Generally, the term refers to an agreement that’s signed by both parties and has a deposit in escrow, according to Randi Bennett, an escrow officer at First Centennial Title Co. of Nevada in Reno.
• The purchase must close within 60 days after the binding contract deadline. In this context, that means June 30, not June 29, according to the Internal Revenue Service. The discrepancy between 60 calendar days and two months occurs due to a financial fiction that every month equals 30 days.
• Certain U.S. military, foreign service and intelligence service personnel have an extra year to claim the homebuyer tax credit. These buyers must enter into a binding contact on or before April 30, 2011, and close on or before June 30, 2011.
• Buyers should be “upfront with their Realtor about their must-haves and their wish list,” says Allyson Bernard, owner of Real Estate Professionals of Connecticut. Buyers who aren’t realistic could find themselves up against the deadline with fewer houses from which to choose.
• Harsh weather may be “a help or a hindrance,” Bernard says. Buyers who are willing to trudge through snow to find a house may have an advantage over buyers who wait until the weather improves.
• Contract contingencies allow buyers some breathing room to take care of big items such as financing, inspections and the sale of their current home, Bernard says. But contingencies shouldn’t be an excuse to delay once the deal is pending.

“If you run into a problem and you no longer want to buy that house, it’s great that you had those contingencies to protect you, but you may not have time to find another property,” she says.

• Anecdotal reports suggest that some buyers have included a tax-credit contingency in the purchase contract. Whether that’s a necessary protection to make sure the deal closes on time depends on the situation and local practices. Either way, buyers should read the contract to make sure the closing will occur before the deadline.
• Buyers should get preapproved for a mortgage, because glitches such as a mistake on a credit report or a lender’s request for tax returns that must be retrieved from the IRS can cause a delay, says Patti Ketcham, owner of Ketcham Realty Group in Tallahassee, Fla.

“You don’t want to wait until the last minute, because you could end up shooting yourself in the foot over something that’s no one’s fault, but you just run out of time,” she says.

• Buyers also should allow extra time in case the mortgage lender requires a second appraisal, which can delay final loan approval.

“The appraisal process in residential lending is going through some painful changes. It is not uncommon to have a mortgage lender require more than one appraisal,” Ketcham says.

• Buyers should line up homeowners insurance as soon as the house is under contract. Homeowners insurance is usually routine, but some states have special disaster-related issues. A big storm, earthquake or fire can trigger a moratorium on new policies.
• Buyers should be aware that short sales, in which the seller needs a lender’s approval to sell the home for less than the loan balance, are typically subject to lengthy delays. For instance, one typical requirement is that the final closing statement must be sent to the bank for final approval. That can take five to 10 business days, Bennett says.

It’s an unfortunate irony for homeowners who have experienced a financial hardship, but Ketcham suggests that buyers who want to claim the tax credit should set some firm deadlines or avoid short-sale homes.

“If the home they fall in love with is a short sale, they need to have a very serious talk with their Realtor with the calendar in front of them and say, ‘If we don’t have an answer by this date, we need to look for another house,’” she says.