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Lower Mortgage Insurance May Bring More New Homebuyers

The Federal Housing Administration announced in January that it would reduce its annual mortgage insurance premiums by half a percentage point-dropping it from 1.35 percent to 0.85 percent. FHA-backed loans are popular with new homebuyers, and offer downpayment options as low as 3.5 percent of the purchase price, but require mortgage insurance for the life of the loan. Lowering mortgage insurance premiums will not give free reign to irresponsible borrowers; rather, it will help responsible buyers purchase a home. Despite the reduction, FHA premiums will remain 50 percent higher than they were before the housing crisis.

Lower Premiums Will Help New Homebuyers
According to the National Association of Realtors, around 400,000 borrowers were unable to afford a mortgage due to high premiums. The FHA's recent actions will have a direct impact on home affordability for thousands of Americans. Home sales should see a slight uptick; HUD predicts that over the next three years, the reduction will generate around 250,000 new home purchases. And the reduced premiums will save over two million FHA homeowners approximately $900 every year, according to U.S. Department of Housing & Urban Development (HUD) estimates.

Will There Be More Discounts?
After the changes were announced, FHA purchase applications climbed 12.4 percent, according to the Mortgage Bankers Association. But buyers waiting for greater savings should start their house hunt now: According to Julian Castro, secretary of HUD, the FHA will not consider any further fee reductions. The FHA premium reduction applies to loans that closed after January 26, with mortgage terms longer than 15 years. Homeowners looking to take advantage of the FHA's lower premiums should contact an FHA-approved lender.

6 Traits of Successful Home Sellers

The goal for any home seller is to sell a property quickly at the best price for the market. Here are six characteristics that will help home sellers succeed.

1. Realistic Expectations
Real estate agents do not pluck listing prices out of thin air. Every price range they recommend to potential home sellers is the result of meticulous research: of the property, the neighborhood and the current real estate market. Most of the factors that affect a property's saleability-location, interest rates, the local job market-are outside the seller's control. Other things, such as the condition of the home and how it is presented, are within the seller's control. Highly effective home sellers address the things they can control and accept the things they cannot. You might not like what the market is saying, but it doesn’t lie.

2. Flexibility
A flexible home seller is open to suggestions. Listen to your agent and heed his or her advice regarding pricing the home for sale, marketing the property and making it show ready. Flexible sellers are prepared to lower the price if they are not getting any showings. Flexible sellers are prepared to stage and remodel the home if they are getting showings but no offers. Delaying a sale by being inflexible can cost you money in extra mortgage payments.

3. Detachment
Homes sell faster when the seller stops thinking about the property as his home and starts thinking about it as product to be packaged for sale. Sellers who find it hard to emotionally detach from the home often sabotage viewings or reject offers, because they are not ready to leave their home. Be honest with yourself. If you are not ready to sell, don't. If you are, then pack up your emotions and accept that it is time to move on.

4. A Big Picture View
Giving way on price is not the same as giving way on the deal. Effective sellers think about all aspects of the deal. A seller who wants to move quickly may be prepared to lower the price in return for faster closing. Requests for repairs, no matter how galling, should be carefully scrutinized. Would you really want to lose a buyer over a $200 repair bill?

5. Availability
Selling your home is a time-consuming business. You must be available to speak to your agent and make urgent decisions concerning the list price, marketing strategies and any offers that come in. Remember, you can't sell a property if would-be buyers can't see it. Make sure that buyers can view your home at all reasonable hours. No showings on weekends might suit your lifestyle, but it certainly won't suit your buyers.

6. Learning
You don't need a degree to sell your home, but you do need a clear understanding of the home selling process. Sellers who understand how home sales work have a clearer idea of the hurdles buyers must jump to purchase a home and can better pre-empt a buyer's needs. Figure out what escrow means and what happens between the contract and closing. Speak to your agent. Ask him or her to fill you in on the local market, the lending environment and the types of things that buyers are looking for in your neighborhood.

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    Inventory Drops and Home Prices Continue to Increase

    In December, the total housing inventory dropped 11.1 percent. There were 1.85 million existing homes on the market, which is a 4.4 month supply at the current sales pace; in November, there was a 5.1 month supply. With the strengthening economy and sub-4 percent interest rates, the demand for homes from buyers should be increasing, but a tight supply of homes available for sale could cool that demand.

    Supply shortage causes home prices to increase. And according to the National Association of Realtors' economists, home prices and rents are outpacing wages, making it difficult for buyers to save for a down payment. The national median existing-home price reached $208,500 in 2014, the highest it’s been since 2007, and a 5.8 percent increase from 2013. What's more, every region of the country saw home prices increase. In the Northeast, prices rose by 3.2 percent from a year earlier, while the Midwest reported a climb of 5.3 percent. Prices in the South increased 6.6 percent from December 2013, while in the West, prices were up 5.6 percent.

    Home Sale Numbers
    December closed out the year with 5.04 million sales, a 3.5 percent increase from December 2013. December was also the third month in a row where sales climbed above year-over-year levels. However, sales for all of 2014 were still 3.1 percent below 2013. Existing-home sales were up in the West in December; sales climbed 9.8 percent month-over-month and 2.8 percent year-over-year. The South also saw gains in their real estate market, with sales climbing 3.8 percent from November to December and 7.4 percent from a year earlier. Existing-home sales fell in the Northeast by 2.9 percent, but the news wasn't all bad as sales are still 3.1 percent higher than a year ago. In the Midwest, sales declined both month-over-month and year-over-year, falling 3.5 percent and 2.7 percent, respectively.

    First-time Buyers Decline
    The number of first-time buyers making purchases last year fell to the lowest level in almost three decades, according to a NAR survey. For all of 2014, first-time buyers accounted for 29 percent of the market, tying their percentage for 2013. In December, first-time buyers represented 29 percent of all buyers, down from 31 percent in November but up from 27 percent in December 2013. Economists with NAR are optimistic that first-time buyers will be better represented in the market in the coming year. The Federal Housing Administration recently reduced annual mortgage insurance premiums, which will make buying a home more affordable for new homebuyers.

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      A Note From Barb Trousdale

      Barb Trousdale, Broker, Owner, REALTOR

      Barb Trousdale
      Broker, Owner, REALTOR

      What a month! It’s been a great season for the skiers and snowmobilers among us, but I know many (including me) are looking forward to spring.

      2015 is turning out to be a fantastic year for real estate; we’ve helped many Buyers and Sellers accomplish their goal of moving already and we’re only two months into the New Year!!

      We are gearing up to have a booth at the Annual Home & Garden Show, which is sponsored by the Home Builders and Remodelers Association and will be held on April 18th & 19th at the Champlain Valley Expo. Please make plans to attend and stop by to say “Hi.” You’ll want to see the “tiny home” we’ll be sponsoring; one of the newest rages in some parts of the country.

      Please contact us if we can assist in helping you determine market value of your current home or just want to see what’s currently available in your favorite town. We have an easy way of setting up a search that will automatically send you listings any time a new one comes on the market, and it involves little to no effort on our part.

      Until next month, stay warm and keep your eyes open for that first robin of the season; a sure sign that warmer temps are on the way!

       

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        A Loan with a Down Payment Option as Low as 3%

        In December, Fannie Mae and Freddie Mac launched Home Possible Advantage, a program that makes it possible for buyers to purchase a home with a smaller down payment. Through the program, low- and moderate-income buyers can qualify for loans with down payments as low as three percent. The program will open up the housing market to responsible buyers who do not have enough saved for a large down payment. Any risk of default is lessened by strong underwriting standards.

        The Specifics
        Home Possible Advantage mortgages are available as 15-, 20- and 30-year fixed-rate mortgages, with a maximum loan-to-value ratio of 97 percent. Mortgages can only be used to purchase single-unit properties. But the program isn't just for homebuyers; homeowners can also use the program to refinance their current mortgage, as long as that refinance is no-cash out.

        Who Qualifies?
        The Home Possible Advantage program is available to all buyers, not just first-timers. But there are several restrictions for buyers. First, you must live in the home you purchase; the program cannot be used to buy rental properties. Second, if you are a first-time buyer-a borrower who has not owned a residential property in the last three years-you will need to participate in a borrower education program, like Freddie Mac's CreditSmart. And lastly, if your Home Possible Advantage mortgage is underwritten manually by a lender, you must have a credit score of 660, or 680 for refinances. If you have a weaker credit score, you can use Freddie Mac's automated underwriting system, Loan Prospector. This system considers a loan based on multiple factors; a weak credit score won't necessarily disqualify you if you have a number of other positive factors.

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          The Tax Perks of Homeownership

          The Tax Perks of Homeownership

          Uncle Sam favors homeowners. Whether you own a starter home, a condo, a single-family residence or a cooperative apartment, you can enjoy tax breaks simply by being a homeowner-and the tax perks continue even when you sell your property.

          Your mortgage interest will seriously reduce your tax bill.
          Owning a home comes with serious tax breaks, and none bigger than the relief you get on your mortgage interest payment each month. For most homeowners, this is a huge deduction, since the bulk of the mortgage repayment goes toward interest in the early years of a loan. All that interest is deductible, unless your mortgage loan exceeds $1,000,000. However, the longer you live in your property, the less you'll get from this tax break. By the end of your mortgage term, you are paying more toward the loan's principal than the interest-and the principal is not deductible.

          The home equity mortgage tax break allows you to debt shift.
          The IRS lets you take out up to $100,000 additional mortgage debt against your home equity and deduct the interest from your income tax. Significantly, you can use the loan for any purpose-not just home improvements. This lets homeowners "debt-shift" to receive preferential tax treatment on their debts. Suppose, for example, you have a credit card balance of $15,000 at 14% interest. None of that interest is deductible. But if you own a house and take out a home equity loan for $15,000, you can pay off the credit card debt and all of the interest on your home equity loan is automatically deductible.

          You can deduct the mortgage origination fee.
          If you paid points to get a better interest rate on your home loan, you're in luck: the IRS lets you deduct the points in the year you paid them. Because origination fees of 1% or more are common, this can add up to quite a savings. What's more, discount points and loan origination fees are tax deductible to the buyer, even if the seller pays them at closing.

          Property taxes are tax deductible on your primary residence and vacation homes.
          Property taxes are fully deductible from income tax as an itemized expense on Schedule A. It does not matter if the property in question is a primary residence, vacation home or rental.

          Profits on a home sale are usually tax-free.
          Homeowners who have lived in their main residence for at least two of the five years before they sell do not pay tax on the first $250,000 of profit from a home sale. You have a profit if you sell the house for more than it cost. Profits in excess of $250,000 ($500,000 for married couples who file a joint return) are reported as a capital gain on Schedule D. As a bonus, you can add the cost of any improvements you make, such as a new roof or patio, to the original purchase price, reducing your taxable profit. On the downside, the tax man does not let you write off a loss if you sell your primary residence for less than what you paid.

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            3 Things to Think About Before Downsizing

            3 Things to Think About Before Downsizing

            Downsizing is a personal choice that many people face as children move out of the house. This often leaves a couple alone in a home that is bigger than they need. The benefits of living in a smaller home are many, but there are also drawbacks. Here are some important questions that will help to determine whether a smaller home is the answer. 1. How much will it cost? While a smaller house will often mean lower mortgage payments, taxes and utility bills, this does not represent the total cost of downsizing. One of the side effects of a smaller home is less space. This could mean renting a storage space for things that can not be easily sold or discarded. Hidden costs such as replacing furniture and homeowners/condo fees also exist. 2. What affect will downsizing have on others? Most people who are considering downsizing are doing so because a large home no longer fits their current lifestyle. This usually happens when children have moved out, which leaves a lot of extra space in the home. In today's economy, it is not uncommon to have "yo-yo" children. Will the new, downsized home, be able to accommodate these children who move in and out multiple times before they get on their feet? 3. Is downsizing a long-term solution? Will you need to provide care for an aging parent or will you or someone in your family face a health crisis? Just because a home is smaller does not mean that it is amenable to handling specific needs. Wide doorways to accommodate walkers and wheelchairs as well as a first floor bedroom and easy to reach cabinets should be considered. Without these, a home could need extensive remodeling.

             

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              6 Design Tips to Make Space in a Small Kitchen

              With all of the different kitchen gadgets out there, it can be really easy to fill up even the largest of kitchens. A smaller kitchen requires that every bit of space be well organized so items don't end up stacked on the counters—especially when counter space is limited. With a little creativity and patience a small kitchen can accommodate all your stuff with room to spare. Here are some ideas to create more space in any kitchen.

              Cabinets that Reach the Ceiling
              There is a lot of wasted space above traditional kitchen cabinets. Having cabinets go all the way to the ceiling adds another level of storage. If changing the cabinets isn't an option, use the top of the cabinets to store rarely used items, like large bowls or small appliances. Just make sure to dust and clean up there so dirt doesn't pile up.

              A Hanging Pot Rack
              Going upward is often a great way to create more space. Pots and pans can be awkward when put in a drawer or on a shelf. Every time you need to use a pot, it's always the one on the bottom. Not only does a hanging pot rack eliminate this problem, it leaves shelf space open for something else.

              Add Extra Shelves
              You can buy shelves at most stores with kitchen departments. More shelves makes it easy to stack the small plates above the large plates. Or use them to stack small food items on top of each other. Extra shelves are great for using the height in your cabinets, which might otherwise be wasted space.

              A Hutch
              The cabinets in a small kitchen will fill up fast, so supplementing with a hutch or buffet can be a lifesaver. What goes into the hutch will depend on where you have space to put it. If it is in the kitchen, it can be great for food or dishes that are used regularly. But if it ends up in the dining room, storing your lesser used items such as canned goods or fancy dishes would be a better option.

              A Lazy Susan
              Corner cabinets can become a waste of space. A Lazy Susan makes a great use of space because everything is accessible. It may seem like more stuff can be piled into a normal shelf, but it gets way too frustrating to dig things out all the time. A Lazy Susan makes the corner shelf more usable because everything is easy to find.

              Over the Sink Cutting Board
              Having a cutting board that sits over your sink can give you a little more counter space. This comes in handy when you have run out of counter space and need to chop something up quickly. The edges of the cutting board are made so that it fits perfectly in the sink and is pretty solid. It's nice to have the option of putting out the cutting board to create a bit of space that wasn't there before.

              If remodeling your kitchen isn't an option, using some of these design tips can make your small kitchen seem larger.

              4 Ways to Save on Energy Costs

              There are plenty of things that you can do to improve the aesthetics and functionality of your home, but it's just as important to make improvements that will save you money. We all want to find more ways to save money and starting with your home is the perfect choice.
              1. Upgrade Appliances
              Investing in new, energy-efficient appliances may cost you money now, but over time it will save you money. An old appliance can be a drain on your wallet. It uses more energy, and may need constant maintenance. If an appliance needs repaired, it's time to seriously consider replacing it with something new and energy-efficient.

              2. Weatherproofing
              Weatherproof your home and see savings on your monthly energy bill. Windows and doors that are well sealed do not let cold in or heat out. Find where drafts can come in and use weather-stripping or caulk to fill gaps. Covering drafty windows with shrink-wrap film can save on heating costs. For significant energy savings consider adding additional insulation to your attic.

              3. Change Air Filters
              For best performance, filters in your home need to be changed regularly. Dirty filters make your heating and cooling system work harder, which wastes energy and lowers indoor air quality. Mark on your calendars when it's time to change the filters.

              4. Lower the Temperature
              Most people lower the thermostat when they're not home to save on heating costs, but checking the temperature on their hot water heater is something they might not think about. It's necessary to have hot water for showers, cleaning, and doing laundry, but the temperature on your hot water tank may be higher than it needs to be. The recommended temperature is 120 degrees to prevent scalding and to save energy.

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                5 Real Estate Predictions for 2015

                Expect the home-purchase market to strengthen along with the economy in 2015, according to Freddie Mac's U.S. Economic and Housing Market Outlook for November.
                 
                "The good news for 2015 is that the U.S. economy appears well-poised to sustain about a 3 percent growth rate in 2015 -- only the second year in the past decade with growth at that pace or better," says Frank Nothaft, Freddie Mac's chief economist. "Governmental fiscal drag has turned into fiscal stimulus; lower energy costs support consumer spending and business investment; further easing of credit conditions for business and real estate lending support commerce and development; and consumers are more upbeat and businesses are more confident, all of which portend faster economic growth in 2015. And with that, the economy will produce more and better-paying jobs, providing the financial wherewithal to support household formations and housing activity."
                Freddie Mac economists have made the following projections in housing for the new year:
                 
                1.       Mortgage rates: Interest rates will likely be on the rise next year. In recent weeks, the 30-year fixed-rate mortgage has dipped below 4 percent. But by next year, Freddie projects mortgage rates to average 4.6 percent and inch up to 5 percent by the end of the year.
                 
                2.       Home prices: By the time 2014 wraps up, home appreciation will likely have slowed to 4.5 percent this year from 9.3 percent last year. Appreciation is expected to drop further to an average 3 percent in 2015. "Continued house-price appreciation and rising mortgage rates will dampen affordability for home buyers," according to Freddie economists. "Historically speaking, that's moving from 'very high' levels of affordability to 'high' levels of affordability."
                 
                3.       Housing starts: Homebuilding is expected to ramp up in the new year, projected to rise by 20 percent from this year. That will likely help total home sales to climb by about 5 percent, reaching the best sales pace in eight years.
                 
                4.       Single-family originations: Mortgage originations of single-family homes will likely slip by an additional 8 percent, which can be attributed to a steep drop in refinancing volume. Refinancings are expected to make up only 23 percent of originations in 2015; they had been making up more than half in recent years.
                 
                5.       Multi-family mortgage originations: Mortgage originations for the multi-family sector have surged about 60 percent between 2011 and 2014. Increases are expected to continue in 2015, projected to rise about 14 percent.
                 
                Source: Freddie Mac

                 

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