Owners, Renters Agree: Owning a Home is a Smart Decision

A substantial majority of both home owners and current renters agree that owning a home is a smart decision over the long term. That’s according to the results of a National Association of Realtors® survey of 3,793 adults conducted online by Harris Interactive.

The American Attitudes About Homeownership survey found that in today’s challenging economy, 95 percent of owners and 72 percent of renters believe that over a period of several years, it makes more sense to own a home. In addition, an overwhelming majority of home owners are happy with their decision to own a home – 93 percent of owners surveyed would buy again.

“Home owners and renters agree that home ownership benefits individuals and families, strengthens our communities, and is integral to our nation’s economy,” said National Association of Realtors® President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “The results of this survey illustrate just how important issues related to home ownership are to people in this country.”

The survey uncovered some differences between home owners and renters, as well. While more than half of owners are “very” or “extremely” satisfied with the overall quality of their family life, only one-third of renters report the same levels of satisfaction. Similarly, 43 percent of home owners are very/extremely satisfied with their community life, compared with 30 percent of renters.

A majority of renters – 63 percent – said that it was at least somewhat likely that they would purchase a home at some point in the future. Among this group, young adults (18-29 years old) have the strongest aspirations for home ownership; only 8 percent of young adults said that it was “not at all likely” that they would purchase a home at some point in the future.

In today’s market, many aspiring home owners are faced with worries about job security and creditworthiness. Among renters who are very or extremely likely to buy a home in the future, three out of five consider confidence in job security and creditworthiness to be an obstacle.

One point of agreement between renters and home owners was support of the mortgage interest deduction (MID). Seventy-four percent of owners and 62 percent of renters say it’s “extremely” or “very” important that the MID remain in place.

“At a time when the middle class is under increasing economic pressures, both home owners and renters agree that the mortgage interest deduction should not be targeted for change,” said Phipps. “Given strong public support of and aspirations toward owning a home, we need to keep policies in place that support and encourage responsible, sustainable home ownership for our future.”

This survey was conducted online within the U.S. and fielded October 6-20, 2010. A total of 3,793 adults, 18 and older were surveyed, including 1,880 home owners, 1,115 renters, and 798 young adults. All samples came from the Harris Poll online database and were weighted for age, sex, race/ethnicity, education, region and household income to be representative of the U.S. general population of adults 18 and older. Propensity score weighting was also used to adjust for respondents’ propensity to be online. Results are available online at www.realtor.org/statsanddata/homeownership/attitudes_homeown.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

New Lending Guidelines Benefits Young Borrowers

Under Fannie Mae's new lending guidelines, which will take effect Dec. 13, securing a mortgage will become easier for some borrowers and more difficult for others.

These new rules will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment. Freddie Mac is also considering similar new guidelines, according to spok esman Brad German. Borrowers previously were required to contribute a minimum 5 percent down payment from their own funds, with additional down payment money permitted from a gift.

These new rules are "definitely going to help upgrade buyers and young couples who for whatever reason don’t have enough money and are getting some from their families," said Edward Ades, the owner of broker Universal Mortgage. The gift rules apply only to single-family principal residences and cover mortgage amounts in excess of 80 percent of the property’s value. The loan balance also has a limit of $729,000 in high-cost areas like New York City and $417,000 in other areas.

At the same time, Fannie Mae is cracking down on debt-to-income ratios, with the maximum ratio for those seeking a conventional mortgage set to drop from 55 percent to 45 percent under the new guidelines. Fannie Mae is also increasing its scrutiny of payment histories on revolving debt, and buyers who have missed a payment will have 5 percent of the total balance added to their ratios.

Under the new rules, borrowers who have gone through foreclosure will be excluded from obtaining a Fannie-backed loan for seven years, an increase from the previous limit of four years.


The "Tricky" New World in the World of Credit Scoring

 Do you know your credit score? As important as this number is most of us don't really pay attention to it until we're about to borrow a lot money. 

Well, according to Smart Money magazine, until recently, a credit score of 680 was considered pretty good which basically meant you paid most of your bills on time, "got dinged" slightly when you went shopped for a refi, but had a good enough credit record to get a loan at the best rates. 

Not anymore. These days 680 is second-tier says Smart Money. Now, you need a credit score of 720 to get large loans on the best terms. That includes one of those 0% interest credit cards with the longest promotion or a jumbo mortgage. It adds that 40-point difference between 680 and 720 will cost you thousands of dollars over the life of a typical loan.

According to Smart Money, there's not much wiggle room either, and that lenders place borrowers into brackets. That means someone with a score of 719 is in the same bracket with someone who has a score of 690.

Informa Research Services says that one point could cost more than $600 over the life of an average 36-month car loan, or $2,500 over the life of a 15-year home equity loan.

Too perfect

Here's an interesting tidbit. Lenders actually prefer you to have a score of 720 than a perfect score of 850. Why? Well, if you have a perfect score, they probably don't make much money off of you. Smart Money says that lenders believe someone with a score of 720 is most likely to repay their debts and least likely to default. At the same time, they're more profitable than people with a perfect score of 850, because they're also likely to carry a balance or incur fees - and therefore, to generate profit for the lender.

The change in what was considered a good credit score apparently happened after the market downturn of 2008 and began when Fannie Mae and Freddie Mac settled on the 720 threshold for the best pricing. Because most mortgages are backed by Fannie or Freddie, the major lenders decided to keep the same threshold.

Obviously, reaching a credit score of 720 is harder than 680, especially with more people out of work and unable to pay their bills. In fact, to have a 720 score, according to Smart Money, you would need low balances on credit cards and a 15-year credit history. You may have been late on a couple payments over the last two years but that's it.

Even someone who regularly pays on time could drop from the mid-700s if he applied for several new credit cards recently. Even those who haven't missed a payment but carry balances that are more than 30% of their credit line could be in jeopardy along with those who have a short credit history but pay on time.

According to John Ulzheimer of Credit.com, if you are right on the edge of 720, you need to be careful because a small differences such as one extra credit inquiry - like when a lender looks up your credit score before approving you for a loan, or if a prospective employer pulls your credit report without telling the credit bureaus it's strictly for employment reasons - could put you under. He says the same thing could happen if you suddenly use more of your available credit because of a large purchase, so make sure you pay it off quickly.

As difficult as it sounds to maintain a 720 credit score, there are some folks who have a near perfect score. According to FICO, the company that designed our current credit model, they are out there.

Craig Watts, senior manager for Public Relations for FICO, told MainStreet.com that while most people score in the middle-to-low 700s on their credit scale, less than 1% of the U.S. population or one million people, do, in fact, net a full score of 850.

Watts says they tend to be more conservative and a little older. Ulzheimer says you don't need a perfect score to get the best benefits. He says anyone a score above 760, is able to get the same benefits as those with perfect credit.

A score of 760 isn't easy to achieve either. MainStreet.com says that to reach the top tier you have to master not just the basics — maintaining positive payment history and a low debt to credit ratio, but you must pay attention to the details as well. If you want to be among the elite in credit scores, this is what MainStreet advises you to do:

• Have a long and impressive payment history and a clean record
• Maintain a diverse set of accounts, such as mortgages, car loans, revolving credit lines and credit cards
• Have a "well-aged" credit report with a long and stellar credit history 
• Have a very limited number of credit inquiries on record, so don't be tempted toopen a new store credit card just to get 10% off.

Fred Yager/consumeraffairs.com



Vote Yes to Question #1 on November 2.

The General Assembly has already passed the plan to cap Indiana property taxes twice. If voters approve the caps on Election Day they become part of the state constitution and, therefore, will be considered permanent.

The intitiative calls for property taxes to be capped at 1 percent of a home's value. For farms and apartments, the cap is 2 percent and for business, 3 percent.

The WISH-TV Indiana 2010 Election polls finds that 65 percent of likely voters support the caps with 25 percent opposed. It's a slight increase in support. 3 weeks ago our poll showed 62 percent in favor and 24 percent opposed.

Governor Mitch Daniels first called for the caps and their placement on the 2010 ballot is expected to help Republican candidates but, based on our numbers, a lot of Democrats support them, too.



7 Good Reasons Why FSBO's Need A Realtor.

In boom times, FSBOs (For Sale By Owners) have a much easier time listing and selling their homes (though they often leave money on the table for lack of experience in pricing and marketing). But these days, FSBOs face an absolute nightmare when it comes to selling their home.

Here are six reasons you might consider using the next time you talk to someone on the fence about hiring an agent:

1. I can sell their house for more money. The typical FSBO home sold for $153,000, the typical salesperson-assisted sold for $211,000 (NAR report, 2009). Enough said on point #1.

2. I do this full-time. Often FSBOs don't recognize how many hours a real estate salesperson spends selling a home. 

3. I have the market knowledge to price the home competitively. Setting the right price is listed as the third most difficult problem FSBOs have in selling their own homes, according to a study by NAR.

4. I understand how to complete all the contracts, forms and disclosure statements required. FSBOs list this as their #1 difficulty in selling their own home.

5. I can be objective about the house, as well as negotiate and overcome buyer objections. FSBOs typically can't. Owners have emotional attachments to their homes. Balancing offers and counteroffers, as well as handling the contingencies that usually occur, can be overwhelming and scary for FSBOs.

6. I can help buyers locate the best financing. I have experience in helping buyers locate a lender and select between fixed, adjustable, or balloon mortgages. The complexity of mortgage financing alone may be enough to convince the FSBO to hire an expert: You! Not everyone fits into the same credit/mortgage category.

7. I can offer my clients ancillary services which include mortgage (mentioned above), insurance, home warranty and title services.