Interest rates are still low, causing some homeowners to wonder if they should refinance their current home loans. Watch this video by David Bach, best-selling author on money, to understand a refinance, how it can help reduce a monthly mortgage payment, and when it’s worth doing.
Protecting your residence from damages caused by natural disaster, theft, and other perils is key for the peace of mind and financial security of homeowners. First-time buyers may wonder what criteria makes for an adequate insurance policy. Understanding the types of available coverage and possible exclusions to that coverage are critical. Replacement coverage — The insurance policy should reflect a dollar amount that can pay for the cost of rebuilding and refurbishing the house if it is completely lost. As the homeowner, you can rely on the insurance company to calculate a replacement cost estimate or you can hire a home builder to provide an estimate based on their assessment. HomeGain Blog explains the three types of coverage:
- Guaranteed Replacement Cost Coverage – The insurer will pay for all rebuilding costs.
- Extended Replacement Coverage – The insurer will pay for rebuilding costs up to about 125 percent of the insured value of the home. For example, if the home is valued at $250,000, the insurer will pay up to $312,500 toward rebuilding it.
- Inflation Guarantee (or Guard) – This feature guarantees that the insured value of your home keeps pace with inflation rates in the marketplace.
Liability coverage — The insurance policy should reflect coverage for third party claims that can come in the form of an injury that someone incurred while on the premises or damages caused to neighbors’ properties. Coverage for valuables– Assets like jewelry and artwork are not typically covered by standard policies. Take inventory of your personal valuables, determine their value, and then buy extra coverage.
First-time homebuyers often scrutinize housing floor plans. But the architectural style of the home is also key, not only giving the property its character but also dictating layout. Front Door’s video spotlights the ranch, which emerged in the 1940′s and became a predominant design for new construction during suburban growth through the 1970′s. The ranch is considered quintessentially American and yet fits today’s modern style of the open floor plan that is sought after by older residents as well as families with young children.
Underwriting is getting back to basics with the “ability-to-repay” rule, adopted last month by the Consumer Financial Protection Bureau and effective January 2014, reports The New York Times. The new rule is being established for the purpose of protecting borrowers from risky lending practices. Kathleen Day, a spokeswoman for the Center for Responsible Lending, says that the rule “sets standards for what’s a safe loan and what isn’t.”
Essentially the rule requires lenders to document the borrower’s job status, income and assets, debt, and credit history. “Qualified mortgages” are those that lenders have issued after complete documentation of the borrower’s ability to pay back the loan. The CFPB also requires the following for a “qualified mortgage,” reports Reuters:
- Mortgage features or fees do not exceed more than 3 percent of the loan amount.
- The borrower’s debt ratio does not exceed 43 percent of their income.
Higher-priced loans or jumbo loans that exceed $417,000 may have more difficulty qualifying for the safe status. This could mean that lenders will respond by tightening their standards for issuing them. For more information on how the new rules will affect you, consult your mortgage advisor.
Split-level homes became popular between 1950 and 1970, growing out of the ranch style to meet the demand of Boomers’ growing families. Some households love the split-level and others disdain it. Watch this Front Door tutorial on rethinking the architectural floor plan that lends itself to budget-friendly upgrades like remodeling the kitchen or adding windows.
Many families who purchase homes receive help from their close relatives. In fact, the National Association of Realtors found that 25 percent of buyers who were surveyed relied on cash gifts from family members to close on their properties from July 2011 to June 2012.
The Internal Revenue Service has raised the 2013 cash gift threshold to $14,000, meaning that an individual can give up to that yearly limit to another person without having to pay gift tax, reports Forbes. Married couples can jointly gift up to $26,000 to each adult child, his or her spouse, and their children. Gifts that exceed this $14,000 limit count against the lifetime exclusion of $5.12 million or $10.24 million for married couples. A couple with one married child who has two children can, for example, gift up to $104,000 and not get hit with the gift tax.
Lenders do scrutinize cash gifts, so homebuyers should follow specific guidelines and understand possible tax consequences. Here are some basic rules to consider, furnished by The Mortgage Reports:
- Write a gift letter for the lender that includes the exact dollar amount of the gift, subject property address, relationship of the gifter to the giftee, and a note that the gift is not a loan.
- Ensure a clear paper trail by documenting the receipt and application of gift funds.
- Understand gift tax rules and how they may affect your situation by consulting with your tax advisor or the IRS.
If you lost your home to foreclosure or sold it short in 2012, understanding the possible tax consequences when filing is important. TurboTax offers general guidelines on how the IRS treats forgiven mortgage debt. Fortunately, the typical household will not be liable to pay taxes on cancelled debt under $2 million for the fiscal year 2012, provided that the property is a primary residence. Consult with your financial advisor or accountant for more details.
The housing market is getting a spring in its step as winter begins to come to a close. The search for homes starts up in earnest in January, peaks in March, and continues through August for most regions around the nation, reports Forbes. But local markets can reflect their own unique rhythms, notes Trulia chief economist, Jed Kolko.
Trulia’s data reflects the following trends, based on its online search history for properties throughout the U.S. from January 2007 to December 2012:
- March and April are, generally, the peak months for search activity.
- May sees a slight decline, followed by a second peak in June and July.
- December and November post the lowest levels of activity.
- January is the peak month for Hawaii, as February is for Florida.
- June, July, and August are the hottest months for the South and a few states in the Northwest and northern New England.
- September, October, November, and December are the slowest times for all states.
Buyers who are looking for houses in the slower months of the market may be at a slight advantage over those who purchase in the spring or summer, since winter sellers are typically more motivated to unload their properties. January is considered an ideal month to make an offer. Homeowners, on the other hand, tend to get closer to asking price by marketing in the spring. According to Time.com, buyers feel that they are in a financially stronger position after recovering from holiday shopping and receiving tax windfalls.
Are you embarking on a kitchen remodel or choosing a custom counter top for your new construction home? The choices are many. Watch this HGTV video for tips on paring down the selection to the surface that works best for your lifestyle.
Homeowners can expect to earn back a larger percentage of the money invested in home improvement and remodeling projects for the first time since 2006, according to remodeling.hw.net. The 2013 national average cost-value ratio went up to 60.0%, which is a three-point increase over 2011-2012.
The Pacific region led the way with an average cost-value ratio of 71.2%, credited to strong resale values. West South Central, South Atlantic, and East South Central followed, primarily because construction costs were lower in these regions compared to the rest of the nation. But return on investment for remodeling really depends on the type of project that is undertaken.
Homeowners might expect to retrieve higher percentages with the following projects, according to House Logic.
- Steel entry door– National average: $1,137; value at resale: $974; 85.6% of investment recouped
- Fiber-cement replacement siding — National average: $13,083; value at resale: $10,379; 79.3% recouped
- Wood deck — National average: $9,327; value at resale: $7,213; 77.3% recouped
- Garage door — National average: $1,496; value at resale: $1,132; 75.7% recouped
The Joint Center for Housing Studies of Harvard University credit the upswing in home improvement projects to retiring baby boomers, who are retrofitting their current homes to age in place. In 2011, homeowners over 55 accounted for over 45 percent of all remodel spending. Additionally, the more than one million distressed properties that sold in 2011 added $10 billion to home improvement sales, according to Eric S. Belsky, managing director of the Joint Center. Belsky anticipates even more spending this year with the approximately “three million…foreclosures and short sales in the pipeline.”