Mortgage Refinance Online is Increasingly Popular With Homeowners

Napa, CA – U.S. Housing News — Consumers today are more comfortable using online mortgage applications, as evidenced by a recent survey of homeowners. In 2007, only 37% of respondents said they would apply for a mortgage refinance online. In 2010, 59% said they would apply online.

The Home Buying Institute recently conducted a survey among homeowners who were planning to refinance their homes. We asked them about mortgage refinance online. Specifically, we wanted to know how many people were planning to apply for a loan online, as opposed to doing it in person. More than half of the respondents (59%) said they would to use the Internet to apply for a mortgage refinance loan.

This is a significant increase over a similar survey we ran three years ago. In the summer of 2007, we conducted a survey that asked the very same question: Would you apply for a mortgage refinance loan online? Back then, only 37% of respondents said they were comfortable with online applications — compared to the 59% from this year’s survey. Three years ago, the majority of respondents were reluctant to start the process online. But times have changed.

There are several reasons for the rising popularity of online mortgage applications:

  1. People are more comfortable using the Internet to apply for loans.
  2. There are more websites that allow homeowners to apply for refinancing online.
  3. Most likely, it is a combination of these two factors.

Regardless of the reasons, online mortgage refinance is clearly becoming more popular among homeowners. But how does the process really work? How much of it can be handled online? Is it a real application, or just a lead-generation tool. Here’s what you should know about online mortgage applications.

Online Mortgage Refinance Tips

Applying for a mortgage refinance online is fairly simple. You visit the website of your choice, and then you fill in the appropriate information. After that, somebody from the bank or lender’s office will contact you for more information. But there are several things you need to know before you start applying for loans online. Follow these tips for success:

  • Check your credit score. If you want to secure a low rate on the new loan, you’ll need to have good credit. The higher your FICO score, the lower the rate you can get. We recommend checking your credit at least three months before you pursue a mortgage refinance online, if at all possible. It takes time to boost a FICO score, so find out where you stand today.
  • Use reputable websites. When you apply for refinancing online, you need to be careful which sites you use. We have seen websites that asked for sensitive information like Social Security Numbers, but didn’t even have a basic security system in place. You can reduce the chance of identity theft by using reputable websites owned by banks or lenders you know.
  • Gather your documents. When you apply for a mortgage refinance online, you’re really just starting the application process. You won’t be approved based on the online application alone. You’ll have to follow up with some additional documents. If you start rounding up these items up now, you’ll have a smoother application process. Here’s a partial list of documents to get you started. Ask the lender what else they might need.
  • Consider your equity. Property values have dropped in most parts of the country, resulting from the housing bust that began in 2008. As a result, millions of homeowners are upside down in their mortgage loans. Many more have seen their equity shrink considerably. If you don’t have enough equity, you won’t be able to refinance. You don’t necessarily have to get the house appraised — the lender is going to do that anyway. Just file this away in the back of your mind.

Applying for a mortgage refinance online is a great way to get the ball rolling. It’s also a good way to shop for interest rates, closing costs and loan terms. But you need to be prepared for the process. You can learn more about this subject from the refinancing section of our website.

Fannie Mae and Freddie Mac – Past, Present and Future

Mortgage buyers Fannie Mae and Freddie Mac could be restructured in the near future. We just don’t know how. There are currently dozens of proposals on the table, and a meeting of the minds recently concluded in Washington. Still, the question remains: What should we do with Fannie Mae and Freddie Mac?

These two organizations affect every home buyer in the country. But many people don’t even know what Fannie and Freddie do. Sure, they’ve heard their names thrown around — it’s hard to read a newspaper without hearing about them. But they still remain a mystery to the average American. So we thought it was time to create a retrospective. We call it Fannie Mae and Freddie Mac – Past, Present and Future.

Housing History: The Birth of Fannie and Freddie

fannie mae logoHistory gives us a certain perspective we would otherwise lack. So let’s take a walk down memory lane.

The year was 1938. The United States economy was in terrible shape, in the wake of the Great Depression. Housing was unaffordable for many Americans. So Congress created an organization to make home ownership easier to reach. That organization was the Federal National Mortgage Association — Fannie Mae for short.

The rise of Fannie Mae created what is now known as the secondary mortgage market. Back then (and still today), Fannie Mae purchased mortgage loans from lenders. This increased liquidity within the mortgage market, and made lenders willing to give more loans to more people.

Fannie Mae enjoyed three decades of being a government-sponsored monopoly. It was the only organization that bought (and sold) loans from banks and lenders. In 1968, Lyndon B. Johnson privatized Fannie Mae to get it off the “government books.”
freddie mac logo
So now you had a private company that received federal support and monopolized a certain area of the American economy. Talk about Frankenstein’s monster!

To “solve” this dilemma, the government created a competitor for Fannie Mae. Thus, the Federal Home Loan Mortgage Corporation — a.k.a. Freddie Mac — was born in 1970.

Fast Forward: Fannie Mae and Freddie Mac Today

For years, Freddie Mac and Fannie Mae were private corporations that enjoyed tremendous profits (from buying, bundling and selling mortgage loans). But that status quo changed in 2008, at the height of the mortgage and credit crisis.

Today, Fannie and Freddie are being managed by the Federal Housing Finance Agency, or FHFA. They were seized by the government in 2008, and placed into a “conservatorship” status. This means that Uncle Sam took over the management (and much of the cost) of running the two organizations. Furthermore, the federal government has pledged unlimited Treasury support to keep Fannie and Freddie afloat.

Freddie recently asked for an additional $1.8 billion in August 2010. Including this request, the two government-sponsored enterprises have soaked up more than $148 billion in government aid since April 2009. They are still posting losses, too, mostly resulting from mortgage defaults. So the government will likely spend more money on Fannie Mae and Freddie Mac in the near future. How much more remains to be seen.

What Does the Future Hold?

The Obama administration is currently seeking proposals on how to restructure Freddie Mac and Fannie Mae. Meanwhile, many people are arguing that we should pull the plug instead. In August 2010, a high-level conference was held in Washington D.C. to discuss the different options for reshaping Fannie and Freddie. There are many ideas on the table, but no singular direction at the moment.

  • On the one side, you have supporters who stress the importance of governmental guarantees on home loans. Their argument is that, without Fannie Mae and Freddie Mac, fewer Americans would be able to buy homes. They say that mortgage rates would be higher, as well.
  • On the other side, you have the opponents who feel that Fannie and Freddie are part of the problem — not the solution. The Home Buying Institute falls into this camp. We feel that these organizations encourage reckless lending, by removing the long-term financial burden from lenders.

Regardless of which camp you fall into, we can all agree on one thing. The system is broken. We cannot afford to spend billions of dollars a year to keep Freddie Mac and Fannie Mae on life support.

Going Local: 68% of Home Buyers Prefer Local Banks Over the Majors

Napa, CA – U.S. Housing News — A recent survey showed that future home buyers prefer to work with smaller, local banks, as compared to the big national banks like Wells Fargo and Bank of America. Among other things, people felt they would get more personal attention and lower rates.

At a time when large banks are increasingly viewed as unscrupulous robber barons, the following survey may come as no surprise. In a recent survey conducted by the Home Buying Institute, 68% of future home buyers leaned toward local banks or credit unions over the big national lenders.

Pie chart, buyer preference
Image permission: You may use this image on your own website. We would appreciate a link back to this story.

Details and Logistics: This web-based survey was conducted between June 14 and August 14, 2010. It was presented to more than 15,000 readers, through the Home Buying Institute website. Participants were asked the “either-or” question shown in the image above, and were then given the chance to provide additional comments about their preference. Of those who responded, 68% said they preferred to work with a local bank or credit union, as compared to the big names like Wells Fargo and Bank of America.

Of those who leaned toward local banks and credit unions, common reasons included:

  • Higher level of trust.
  • The potential for better interest rates.
  • More personal attention.
  • Quicker response time to inquiries, problems, etc.

Note: We are not suggesting that local banks perform better in all of these areas. That was not the purpose of the survey. But the items listed above do seem to indicate widely held consumer perceptions.

This survey comes at a time when popular blogs like the Huffington Post are urging consumers to move their money toward local banks. Are we witnessing a long-term consumer shift, or a short-term response to corporate malfeasance? Time and stock prices will tell.

How to Sell Your House Fast in a Slow Market – A Case Study

Exclusive Report: Our editor-in-chief recently sold his home in a slow market. Within eight days, he had multiple offers for the full asking price. The home went under contract on day nine. This is the kind of home-selling success that most homeowners can only dream of right now. In this article, Brandon explains how we was able to sell his house so fast in a slow market.

Selling Your House in a Slow Market

by Brandon Cornett

Chapter 1 – Remembering the Good Old Days

In 2003, my wife and I sold our home in Maryland. Those were the days! It was a classic seller’s market. City planners had placed a limit on residential construction, so there weren’t many homes going up in our area. At the same time, there was a lot of urban “spillover” from Baltimore and Washington D.C. Long-distance commuters were moving into our part of town in droves. This high demand and low supply made it easy to sell a home fast.

Chapter 2 – Selling a House After the Recession

Fast forward five years. We lived in Texas before, during and after the housing crisis of 2008. We didn’t have a real estate bubble like California or Arizona, but we still experienced a major slowdown in market activity. For a while there, it seemed like the only houses that were selling fast were the
short sale properties. All of the regular listings were sitting on the market for months, in most cases.

We wanted to sell our house and move to Napa, California (a long story), but we were concerned about the lack of sales activity in our neighborhood. The one advantage we did have was the rapid population growth of Round Rock, Texas. As the second-fastest-growing city in the nation, our city had a steady stream of new residents and home buyers. But it was still unnerving to list the home for sale in this kind of market. So we took it very seriously.

Here’s what we did to sell the house fast in a slow market…

Chapter 3 – Let the Staging Begin

Many of the people in our neighborhood who were trying to sell their homes had failed to stage them properly. This is a big mistake when trying to sell a house in a slow market. When the inventory is higher than the demand (a buyer’s market), you have to do all you can to make your home stand out. This is where home staging and preparation come into the picture.

We put a lot of time and energy into this step of the process. The out-of-pocket cost was a little over $2,000. That might seem like a lot of money to spend on home preparation, but you’ll soon realize how well it paid off. We landscaped, cleaned, painted, de-cluttered, upgraded, staged … you name it.

Here are some of the things we did to get the house ready to show:

  • Hired landscapers to do a clean sweep of the entire yard. They removed weeds, shaped bushes, trimmed trees, put down fresh mulch, and cleaned up the flagstone path. ($1,500)
  • Painted one of our bold “accent walls” to create a more neutral living room. Painted all scrapes and scuff marks throughout the entire house. ($100)
  • Upgraded the lighting in all three bathrooms. Before this, we had those ugly “Hollywood lights” that mid-level builders often use — basically a white rectangle with naked bulbs. We installed some brushed-nickel light fixtures with frosted glass shades. This gave the bathrooms a more modern look. ($300)
  • We sanded and re-stained the front door. The door faces west, so it had been severely weathered by six years of sunsets. We also painted the iron crossbars. You can see the end result in the yard picture below. ($150)
  • We had the upstairs carpet professionally cleaned. ($150)
  • We had all of the windows cleaned inside and out. ($185)
  • We brought a Pod unit to our house, so we could pack up much of our stuff. This is a great way to de-clutter your home. We removed almost everything from closets, shelves, cabinets, etc. The house seemed larger when it was all done. Staging the home was a lot easier with all of that stuff out of the way.
  • We bought a few pieces of staging furniture for the back patio, and also for the newly created sitting area in the master bedroom. The cost is irrelevant here, because we took those items with us when we moved.

Here are some photos of the interior, after all of the staging was done:

staging the living room

staging the bedroom

office / study

Starting the previous fall, I began to get my grass into shape. This was a challenge, because we had two droughts in a row leading up to this. It’s Texas, after all. I had to de-thatch and aerate the lawn, and give it a good dose of “weed and feed.” When it came out of its winter dormancy a few weeks later, I fertilized again and began watering once a week. This picture shows how healthy the lawn was by the time we listed the home. You can hire a lawn care service to do all of this for you, if you don’t have time.

nice green grass

The above picture also shows how we staged the front porch with some brand-new rocking chairs. The people who eventually bought the house wanted the chairs too. So they obviously had the desired effect.

It bears repeating. If you want to sell your house fast in a bad market, you need to blow people away with the curb appeal. In my case, that involved the grass, the bushes, and the flagstone path that wraps around the house (among other things). Even if you don’t have grass, you have something for people to see when they visit the home. Curb appeal is extremely important. If people have a good first impression when pulling up to your house, they’ll take that impression inside with them. The reverse is true, as well.

Chapter 4 – Pricing the Home

This is where a lot of homeowners fall on their faces, and it can kill your chances of selling the house. You have to price your home based on its value in the current market. Forget about what you paid five, seven or ten years ago. That number is irrelevant. Realistic pricing is always important when selling, but especially when you’re trying to sell in a slow market.

To set the asking price for our house, we looked at the recent sales data for our area. We weren’t too concerned with listing prices — we wanted to know what homes were actually selling for in our neighborhood. We reviewed data for the previous six months, with a special focus on the more recent sales. To be honest, we could have priced it higher and still brought in buyers. But we were trying to sell it fast in a slow market. So we erred on the more conservative side. We wanted people to see it as a true value, so we could avoid all of the price haggling. It worked.

Chapter 5 – Marketing the Home

If you want to sell your home fast, you need to put it in front of the largest possible audience. The easiest ways to do this are to (A) list it on the Multiple Listing Service and (B) put it on There are plenty of other ways to market your house. But these two methods will put in front of thousands of buyers, virtually overnight. We did this, and we also put it on

The more pictures you can include with your listing, the better. This helps you in two ways. First, it helps you weed out the buyers who simply won’t like your house — and there will always be such buyers. You don’t want to waste your time showing the property to people who are looking for something different. So be transparent from the start. Use plenty of pictures. This also helps you create interest among buyers who are seeking a house like yours. We took about 20 pictures of the house, inside and out. This allowed us to show off the home staging and curb appeal we worked so hard on.

We also created a flyer that people could pick up as they walked into the house. It pointed out some of the features they might not have noticed otherwise. Examples: The downstairs is wired for sound, with two speaker locations in the kitchen and entryway. The surround system in the media room conveys with the property. The pool is a saltwater pool, which is easier on the skin and eyes than regular chlorine. You get the idea. Don’t assume that people will know these sorts of things — tell them! To sell your house fast in a slow market, you have to convey everything that’s great about your home. And I mean everything.

Chapter 6 – Success!

So, was all of this effort worthwhile? I think so. But I’ll let the results speak for themselves. Within eight days of listing the home, we had multiple / competing offers for the full asking price. We accepted one of the offers the very next day.

We were also able to choose our buyers, which is a big deal. We chose the buyers with the strongest financial picture. It’s common for buyers to lose their financing at the last minute, as the result of some extra scrutiny on the lender’s part. This was a major concern for us. So we went with the buyers who seemed to have their ducks in a row.

Planning to sell your house in 2011?

Our success can be attributed to the three P’s of home selling. Price, preparation and promotion. We realized the importance of these things in the beginning, and we worked hard to get them right. We priced the home realistically. We prepared it well. And we promoted it through high-visibility channels. Two out of three is not good enough. You need to get all three of these things right.

So there you have it. How to sell your house fast in a slow market. It worked for us!

Thousands of Countrywide Customers Will Get Refunds for Overcharges

Countrywide Home Loans overcharged thousands of customers before it was acquired by Bank of America (BOA). And now, following one of the largest FTC settlements ever, Bank of America is being required to pay refunds to former Countrywide customers. Technically, Bank of America will pay the money to the FTC, which will then disburse refund payments to more than 200,000 former customers of Countrywide.

Most of the overcharged customers were struggling with their payments at the time, and facing foreclosure as a result. Some were filing for Chapter 13 bankruptcy, as well. According to the FTC, Countrywide charged these people a variety of fees that were excessive in nature. The settlement and refunds only apply to customers whose mortgage loans were handled by Countrywide before it was acquired by BOA (in July 2008).

“Life is hard enough for homeowners who are having trouble paying their mortgage,” said FTC Chairman Jon Leibowitz. “To have … Countrywide piling on illegal and excessive fees is indefensible. We’re very pleased that homeowners will be reimbursed as a result of our settlement.”

Here’s what is truly despicable about all of this. Countrywide was one of the biggest subprime lenders during the housing boom. This means they gave mortgages to people who normally wouldn’t qualify for a loan — people with bad credit, high debt ratios, and shaky income. They did this by using a variety of “creative financing” strategies, such as the option ARM loan and the infamous stated-income loan (soon to be illegal).

In other words, Countrywide gave loans to people who had no business taking on mortgage debt. After all, the lender could simply sell the loans into the secondary mortgage market to limit their own risk. When such borrowers (predictably) fell behind on their mortgage payments, Countrywide cranked up the profit machine again, by levying huge fees.

From the FTC announcement: “Countrywide’s loan-servicing operation deceived homeowners who were behind on their mortgage payments into paying inflated fees — fees that could add up to hundreds or even thousands of dollars.”

Learn More About Countrywide Refunds

If your mortgage loan was serviced by Countrywide Home Loans before July 2008 (and you went through default, foreclosure or bankruptcy at the time), then you may be eligible for a refund through this settlement. According to the FTC’s settlement fact sheet, you don’t need to do anything. They will send notices in the mail to all customers who are eligible for the refund. See the video below for details.

Countrywide, Bank of America, and Reasons to “Shop Locally”

Still not shocked by this corporate malfeasance? Try this one on for size. Countrywide also created a subsidiary to hire out lawn-mowing services, for properties that were in default. They marked up these services by upwards of 100%, and then passed the marked-up fee to the defaulting homeowners.So let’s recap. Countrywide gave loans to many people who were ideal candidates for foreclosure. Then they charged these people excessive fees for missing payments. Lastly, they charged them seriously marked-up fees for lawn mowing, property inspections and other services. Let me remind you that Countrywide is now part of Bank of America.It’s something to consider, the next time you’re in the market for a mortgage loan.

87% of Home Buyers Plan to Use an FHA Home Loan

The Home Buying Institute is conducting a survey to measure the popularity and usage of FHA home loans. The first phase of the survey revealed that most home buyers plan to use an FHA home loan to finance their purchase.

The survey was presented to more than 12,000 readers, through the Home Buying Institute website. Of those who responded, 87% said they were planning to use an FHA loan to finance their home purchase.

FHA usage indicator
Chart: Most home buyers surveyed are planning to use an FHA loan. Image permission

Definition: An FHA home loan is a mortgage loan that is insured by the Federal Housing Administration, which is part of HUD. This insurance protects lenders from losses resulting from borrower default (when the borrower stops paying). With this kind of protection, the lenders bear less risk. Loans must meet certain requirements established by FHA to qualify for insurance.

Survey Details: Phase one of this survey was presented to more than 12,000 visitors to the Home Buying Institute website, over a one-month period. The first question in the survey was: “Do you plan to use an FHA loan when buying a home?” Eighty-seven percent of respondents said yes, they were planning to use an FHA home loan.

Reasons for Using an FHA Loan

Those who answered “yes” to the first question were then asked about their primary reasons for using an FHA loan. Here are the results of that follow-up question:

  • 53.8% said they wanted to use an FHA home loan for the smaller down payment. *
  • 19.2% said they thought the overall qualification process would be easier.
  • 13.5% said they previously had trouble qualifying for a conventional loan.
  • 7.7% said they had low credit scores.
  • 5.8% felt their income was too low to qualify for a regular loan.

* Borrowers who use FHA loans can put as little as 3.5% down. Conventional loans typically require a larger down payment. According to our survey, this is the biggest motivator for home buyers.

Reasons for using FHA loans
Chart: For the 87% of respondents who said they planned to use an FHA loan, these were the primary reasons given. Image permission

This survey suggests further growth in the FHA’s market share, which has already grown considerably in recent years. In the first quarter of 2010, almost half of all home buyers used an FHA loan to purchase a home. Brandon Cornett, publisher of the Home Buying Institute, expects that number to rise:

“Each month, we receive more than 200 email questions from home buyers. The frequency of FHA questions has increased steadily since the end of 2009. That’s what prompted the survey. The down-payment priority is not very surprising, when you think about it. A lot of people lost their savings during the recession, so they’re not in a position to plop down ten to twenty percent on a down payment. FHA loans have also been in the news a lot lately, due to various program changes. All of these things point to a continued rise in FHA usage.”

FHA Fact Sheet: In response to this survey, we have created an easy-to-read fact sheet about FHA home loans. It explains the pros and cons, the eligibility requirements, and the basic steps needed to apply. You can download the fact sheet for free, in Acrobat PDF format, on this page.

Reasons for Not Using the Program

Of those who said they did not plan to use an FHA loan, the following reasons were given:

  • 57.1% said they did not know enough about the FHA program.
  • 28.6% said they had excellent credit and enough saved for a down payment.
  • 14.3% said they tried to use an FHA loan before, but got turned down (reasons not given).

Related coverage from this website:

Summary of changes to the FHA program (2010)

Minimum down payment could rise to 5%

Image permission: You may use any of the graphics in this article to write a news piece of your own, provided that you cite the source. A link back to this page would be appreciated.

H.R. 4173 to Eliminate Stated-Income Mortgage Loans

Austin, TX – U.S. Housing News — The current version of the financial reform bill (H.R. 4173) would eliminate certain types of high-risk lending practices. For one thing, it would outlaw stated-income mortgage loans and make income-verification mandatory.

income verificationEver since the mortgage crisis began in 2008, fewer banks have been offering stated-income mortgage loans. That number could soon shrink to zero, if House Resolution 4173 becomes law.

This bill, currently called the Restoring American Financial Stability Act of 2010, will result in sweeping reforms of the financial-services industry. It includes an enormous list of reform measures, affecting everything from debit cards to mortgage loans. The current version of the bill is well over 1,000 pages, a testament to its far-reaching scope.

The differences between the House and Senate versions still have to be resolved, but final passage of the bill appears likely. According to the Washington Post: “Crucial differences … must be resolved in a House-Senate conference committee, which is expected to begin meeting soon after the Memorial Day recess.”

Most of the media outlets have been focusing on the new restrictions for derivatives trading. That kind of thing is off the radar of the average home buyer (most of whom don’t even know what a derivative is). But there are also some major changes being proposed that would affect the primary mortgage market. In short, there will be fewer mortgage products available.

Stated-income mortgage loans are first on the chopping block. These are also referred to as no-doc loans. This is where the lender allows the borrower to simply “state” his or her income, instead of verifying it through documentation.

At the height of the housing boom, from the mid 90s to early 2000s, there were many lenders offering stated-income mortgage loans. These were the days of easy credit that produced a wide variety of “exotic” mortgage products. But most lenders stopped offering such loans after the bubble bust in 2008. If the bill passes, such loans would be outlawed entirely.

H.R. 4173 Would Eliminate the Stated-Income Mortgage (Sensibly)

Section 1074 (b) of the Restoring American Financial Stability Act states the following:

“No creditor may make a loan secured by real property [i.e., a mortgage loan] unless the creditor, based on verified and documented information, determines that, at the time the loan is consummated, the consumer has a reasonable ability to repay the loan … and all applicable taxes, insurance, and assessments.”

The bill also outlines the steps mortgage lenders must take to verify a person’s ability to repay. They must review the borrower’s credit history, current income, current financial obligations, and debt-to-income ratio. To verify the borrower’s income, the lender must review IRS W-2 statements, tax returns, bank records, and payroll receipts / pay stubs.

Of course, all of this can be filed under ‘R’ for Responsible lending. This is the kind of verification process that should take place, across the board. But during the heyday of housing mania, many lenders created “side doors” for people with bad credit and/or shaky income. The stated-income mortgage loan is a prime example of this look-the-other-way mentality.

If this bill becomes law, we can finally say good riddance to such reckless lending practices. At least until the next round of exotic mortgages come onto the scene.

In Round Rock, Texas, Real Estate Values Bring Growth

Austin, TX – U.S. Housing News — Every few years, a little-known city or town will start to get national attention, followed by rapid growth. Someone in the media will “discover” the place and write about it favorably. This puts it on the radar of folks who are looking to relocate. And before you know it, you have a population bubble. Such is the case with the Round Rock, Texas real estate market, as of 2010.

Couple in neighborhoodIn July of 2009, the Census Bureau reported that Round Rock, Texas was the second-fastest growing city in the United States. New Orleans was #1 in terms of growth, but that city is in a different category altogether.

So you could say that out of all the cities in the U.S. that didn’t suffer a hurricane-fueled exodus, Round Rock is the fastest growing.

Rankings aside, we are talking about some serious growth. The population of Round Rock grew by 8.16% from 2007 to 2008, and the rate of growth has slowed only slightly in subsequent years.

So what’s driving this growth, and how does it affect the Round Rock real estate market? These are questions worth asking, because they make for a good case study in housing markets and population trends. Here are some of the factors that are attracting people to this Central Texas location:

Round Rock at a Glance

Home prices. By and large, Texas avoided the housing bubble that recently burst over the rest of the United States. From the late 90s to the early 2000s, much of the country was swept up by housing mania. Fueled by speculation (and a touch of lunacy), home prices shot up across the nation. But not so in Round Rock, Texas. Appreciation in that city could be described as slow and steady. As a result, the Round Rock real estate market is one of the most affordable in the country. For now, at least.

Bedroom community. Round Rock is located about 15 miles north of Austin, the state capital and the Live Music Capital of the World. And Austin has plenty to offer, from restaurants to recreation. Homeowners in Round Rock have the convenience of living close to Austin, without the cost of living in the city.

Infrastructure. It recently got a lot easier to drive to Austin from Round Rock. In fact, you don’t even have to drive. A brand-new MetroRail began running in March of 2010, and it links Austin to several stations located near Round Rock. Several new toll roads have also made north-and-south transportation a lot easier.

Media. In 2008, Money magazine listed Round Rock as the seventh-best American small city in which to live. In March 2010, Forbes magazine published a list of ten cities where the recession is easing the most. The Austin / Round Rock metro area tied for first place, along with the Washington DC.

This kind of coverage has put the city on the radar of relocation-minded people from all over the United States (especially Californians who cashed out before and during the bust).

Family Friendly. This phrase gets tossed around quite a bit in marketing pieces, but Round Rock truly measures up. The city offers solid schools, plenty of parks and rec, and one of the lowest crime rates in the country.

Attention home buyers: If you have questions about buying real estate in Round Rock, Texas, you can visit our main website. There, you’ll find hundreds of tutorials on the home-buying process.

Changes to FHA Loan Program – And a New Fact Sheet

Austin, TX – U.S. Housing News — If you’re having trouble keeping up with all of the changes to the FHA loan program, you’re not alone. We receive at least one email per week from confused home buyers, regarding the FHA changes they’ve heard about. So we decided it was time to compile all of the recent FHA program changes into one place. We have also created a fact sheet about these loans, and you can download it here.

FHA Home Loans, Defined

The Federal Housing Administration (FHA) is an agency of the federal government. It falls under the Department of Housing and Urban Development. The FHA’s primary mission is to insure mortgage loans made by approved lenders within the United States and its territories. The FHA does not lend money directly to home buyers. Rather, it insures loans by lenders in the private sector. This kind of government backing encourages lending to a wider segment of the populace (including people who wouldn’t otherwise qualify for a home loan).

Changes to the FHA Program

So why have there been so many FHA changes in recent months? These changes are primarily designed to strengthen the FHA’s capital / cash reserves. These reserves dipped to an all-time low recently, following the housing and mortgage crisis of 2008 – 2010. This severe loss in capital was the result of high numbers of mortgage defaults and foreclosures (i.e., bad loans). The FHA insures many of the mortgage loans made by lenders within the private sector. When those loans started defaulting in record numbers over the last couple of years, the FHA’s capital reserves became severely depleted.

Toward the end of 2009, FHA commissioner David Stevens said: “I don’t want to leave the impression that the reserves are adequate … There are real risks to the FHA and we are aggressively addressing those real risks with real reforms.” He explained that the FHA is going to change the way it does business, mainly by reducing the risks it has endured in the past.

So how does all of this translate into action? Here are some changes to the FHA loan program that have already been implemented:

  • Borrowers who use FHA home loans are required to pay an upfront mortgage insurance premium. In 2010, this premium was raised from 1.75% of the purchase price to 2.25%, an increase of 50 basis points. This increases the amount due at closing.
  • The FHA has also requested permission from Congress to raise the annual mortgage insurance premium. This would offset some of the upfront insurance costs, described above. Overall, it would increase the cost of the loan.
  • In the past, the FHA has not had any hard and fast rules about credit scores. It was mostly left up to the lenders. But this will change in 2010. Going forward, borrowers must have a FICO credit score of at least 580 to qualify for the 3.5% down payment. Borrowers with scores below 580 will have to make a down payment of at least 10%, which is a significant difference in upfront costs.
  • Another big change to the FHA loan program has to do with seller concessions. HUD has reduced the amount of seller concessions from 6% to 3%. This means sellers will not be allowed to contribute as much money toward the buyer’s closing costs (when an FHA mortgage is being used).

Possible Changes in the Future

The down payment situation may change again in the near future. There is currently a proposal in Congress to raise the down-payment requirement to 5% across the board. As of May 2010, this bill (H.R. 3706, the FHA Taxpayer Protection Act) was still in a committee status. No voting has taken place yet. We are watching this closely, and we will report back if and when the proposal becomes law.

Download Our FHA Reference Sheet

We recently published a reference sheet on the FHA home loan program. It includes some of the changes mentioned above, as well as other helpful information for home buyers. If you are thinking about buying a home with one of these loans, you will find our fact sheet helpful. Learn more here

Disclaimer: This news story contains time-sensitive information about changes to the FHA home loan program. Future changes and modifications could make portions of this article obsolete. Please make note of the publication date for this story. If you want the most current information available, you can visit the news release section of the HUD website.

How to Sell a House in 2010 – Special Report

Austin, TX – U.S. Housing News — It’s a buyer’s market in most cities across the country. So if you want to sell your house, you need to go the extra mile. You can start by focusing on the three P’s of home selling.

Reader Question: “I’m trying to sell my house, but it’s been on the market for a long time. A few people have looked at it so far, but only one person made an offer. That deal fell through because the buyer could not get their financing. Now the home is back on the market. How do I sell my house quickly in this kind of economy?”

soldThis is a common question among homeowners right now, and it’s easy to understand why. Housing inventories are high, buyers are having trouble getting loans, and foreclosures are dragging down property values. This is the recipe for a buyer’s market, and that’s exactly what we are seeing in most cities across the United States.

So let’s revisit the question at hand. What does it take to sell a home in this kind of environment? What steps must a homeowner take to get it right? In short, you must go through the same steps that have always worked. You just have to do them better. This is what separates the houses that sell quickly from those that stay on the market for months.

But let’s get specific. Here’s how to sell a house in a buyer’s market.

Pricing, Prepping and Promoting – The Three P’s

When a person can’t sell a house, it’s usually due to one of the following reasons. Let’s call them the three P’s.

1. Pricing — If the home is priced too high based on current market values, it will be less likely to sell. This is one of the biggest mistakes sellers are making right now, and it has a lot to do with our economic downturn. Home values have declined over the last few years, in almost every city in America. But some homeowners don’t realize this, so they base their asking price on the amount they paid for the house a few years ago. Others homeowners are simply in denial and refuse to accept the market reality. Either way, it leads to an overpricing situation. And that’s the number-one reason why homes don’t sell.

You (or your agent) should review comparable sales in the area for the last three months. This will tell you what people are willing to pay for your house. Buyers today are more savvy about listing prices, and they’re on the lookout for overpriced properties. Some will make a reduced offer for such a home — others will dismiss it entirely. This is not the kind of scenario you want. If you want to sell your house in a buyer’s market, you need to price it accordingly.

2. Prepping — Up the street from where I live, there’s a home for sale. The sign on the yard says “Priced to Sell.” The house has been on the market for about eight months now. It might be priced to sell, but it’s clearly not prepared for the market. The front yard is a jungle. The shutters are in desperate need of a paint job. And based on what a local agent has told me, the inside is just as bad — outdated, ill prepared, and unimpressive.

Pricing is the most important factor when selling a house, but preparation comes in second. If you want to sell a house in a buyer’s market, you need to make it outshine similar homes for sale. This means staging, painting, cleaning, landscaping, and updating the fixtures and features. Compare these small expenses to the extra mortgage payments you’ll make if it doesn’t sell, and the path becomes clear.

3. Promoting — Let’s assume you’ve set a realistic asking price, and you’ve worked hard to make the home look its best. What’s next? Now is the time for marketing. You must promote the home in every way possible, in order to bring in qualified buyers.

Remember, there are fewer buyers right now, as a result of soaring unemployment and tighter lending standards. Your audience has shrunk. This means you must market the home more effectively, to bring in as many buyers as possible. At a minimum, you should list the house on the Multiple Listing Service (MLS). You should also put it on at least one of the big real estate listing websites. It helps to have a yard sign too — simple but effective.

Old advice … with a new twist. The three P’s have always been important when selling a house. But in a buyer’s market such as 2010, you have to go the extra mile in all three areas. You must price the home competitively, prepare it for the market, and then promote the heck out of it. This will bring in the highest number of buyers, which is the first step to getting an offer. This is how to sell a house in a buyer’s market.

How to Sell a House in 2010 – Lessons from the Field

You can learn a lot from the folks who deal with these challenges for a living. Here’s what real estate agents across the country are saying about this subject:

  • San Antonio real estate agent Matt Stigliano reiterates the pricing point: “A bad price can label a home with the dreaded ‘overpriced’ stigma very quickly — and that stigma is hard to wash off.”
  • Joe Manausa, a Tallahassee real estate broker for Century 21, talks about the importance of online visibility: “To successfully market a home on the internet, the home must be positioned on a highly trafficked real estate web site where … home buyers are shopping.”
  • The folks at McMillin Realty also stress the importance of property photos: “The more photos of your home are associated with the listing, the longer time buyers will spend looking, and they will be more likely to come see your home.”
  • 512 Developing, an Austin home builder, explains how shoppers become more picky in a slower market: “In a transition from a sellers to a buyers market, buyers become much more sensitive to things like dated light fixtures and other things that you might over look.”