Spring Cleaning Your Finances

Winter’s over and spring is (finally) upon us! For many of us, the warmer weather also means spring cleaning.  This year, CNN Money offers consumers some helpful tips to help you spring clean your finances.

The CNN experts suggest: “Consolidate accounts to boost your odds of earning higher interest and lower your fees, and be sure to shred old financial documents you no longer need.”

This video is available on CNN Money’s website, as well as their Youtube channel.

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OK to Flip that House, says FHA

CNN is reporting that the Federal Housing Administration has some good news for real estate flippers–the investors who buy homes on the cheap so that they can quickly resell in order to turn a profit.

The news report said this of FHA: “In an effort to help stabilize housing prices and unload some of the foreclosures that are flooding low-income communities, the mortgage insurer extended a waiver of its anti-flipping regulations through 2012.”

The waiver, which was issued in 2010 and expired at the end of December, suspended regulations that prohibited the agency from insuring mortgages used for purchasing homes that are bought and resold in less than 90 days.

Acting FHA Commissioner Carol Galante explained: “This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight.”

The ban was first initiated as a preventative measure against predatory flipping, in which homes when homes are quickly resold at inflated prices to unsuspecting buyers.  However, the extension of this waiver through 2012 may offer help to many low-income communities that continue to struggle.

Foreclosures have been especially problematic in many low-income neighborhoods, causing declining property values and surges in crime and other “social ills.” In such neighborhoods, “Real estate flippers often rehab these damaged homes before reselling them, improving conditions for neighborhoods.”  FHA mortgage insurance plays a crucial role for many low-income communities.  In fact, many of the loans in these communities could not be issued without FHA backing.

CNN reports that in order to qualify for the waiver, certain conditions must be met:
  • The transaction must be “arms length” with no other relationship between seller and buyer.
  • If the new sale price is 20% or more above the previous selling price, the lender has to document and justify the increase and meet other conditions, such as making sure the home has been inspected.

The report states that, “Since the waiver went into effect in February of 2010, the FHA has insured more than 42,000 loans to purchase homes that were being resold within 90 days. These totaled more than $7 billion in mortgage principal.”

Take Your Heart Out of Your Home Sale

For most people, your home is far more than just an investment.   Your home is filled with memories and because of that, it’s PRICELESS.  When it comes time to sell however, sentimental value doesn’t always match up with your home’s market value. Here’s a video from CNN Money, cautioning sellers against the pitfalls of relying on emotions in determining the asking price.

 

Tips for Buying Your First House

Buying your first home can be exciting, nerve-wrecking, and everything in between.  Preparing and educating yourself before you get going into high gear can go a long way to alleviate any potential headaches now or 10 years down the road.  Courtesy of CNN Money’s all-knowing housing market experts and real estate gurus, here’s a few helpful hints for you first time home buyers out there.

 

 

 

Taking Out a Reverse Mortgage

More and more homeowners are starting to consider taking out a reverse mortgage.  A reverse mortgage could convert the equity of your home into cash, but don’t sign up unless you fully understand the costs.   CNN Money recently offered their take on what to keep in mind when considering a reverse mortgage.

Cashing in on Rental Property

CNN Money recently ran an article about the real estate market’s brightest spot:  the rental market.  Demand is up and rent prices are rising and, “It’s partly because those foreclosures have turned more than 4 million former homeowners into renters, but also because many other prospective homeowners, worried about losing their jobs or housing prices falling a lot further still, are reluctant to buy now.”  CNN put together their tips for figuring out whether or not investing in rental property is worthwhile for you and what exactly you need to know.

Why Now?  According to the article, “Many factors make this a great time to invest. Mortgage rates are at a 40-year low, and homes in many areas are ultra-cheap. Meanwhile, demand for rentals has risen in more than 500 cities, according to recent Census data. That, in turn, has enabled landlords to charge more.”

Today’s average investor plans to hold on to their property for at least 10 years, according to the National Association of Realtors.  Assuming you can hang on for that long, your chances at solid gains are good, especially if you are financing the purchase.   The catch, however, is being able to hold on to the property for that long without needing to use the equity.

Financing may be tricky also.  As CNN reports, “Most banks now require a down payment of at least 20% to 25% and evidence you have enough cash to cover six months’ worth of mortgage, tax, and insurance payments.”

How do you find a good deal?  To start, it’s important to work with an agent experienced with rentals, someone who will be able to accurately assess how the property will fair in the rental market.  Try to stick with investment properties that are close by and easily accessible to you, in a neighborhood that is familiar to you.

The experts at CNN Money point out that, “While prices on multifamily dwellings haven’t dropped as much as they have on single-family homes, don’t ignore plexes: Intake from a few rents instead of just one will boost your cash flow; a single vacancy won’t hurt as much; and you could benefit from economies of scale for things like appliances and painting.” Avoid stricter financing requirements, like a bigger down payment, by sticking to buildings with 4 units or less.

Once you’ve found potential income properties, make sure the numbers work out.  You should make sure your rental income will at the very least cover your loan payments plus an additional 20% to cover any repairs, vacancies, property management, etc.   The last thing you want is to be caught off guard by one empty month, so you should, “Assume your mortgage rate will be at least a half-point higher than rates on owner-occupied properties. Factor in insurance and property taxes, and bank on a 5% vacancy rate.”