5 ticking time bombs in your home

By Christopher Solomon of BobVila.com

There are some maintenance and repair issues that homeowners just hate to deal with — either because they take time, or cost money, or just don’t seem, well, urgent. But some of these problems can become ticking time bombs, poised to explode if they’re not defused early, when they are more like firecrackers than bombs.

Here are some of the top structural and mechanical time bombs in your home that experts say have the potential to blow up and are worth squelching now — before the big boom.

Foundation
Why it’s explosive: Houses settle. But not all settling is the same. “A lot of times people will ignore the cracks in the brick veneer on the outside of the house, even when they get to be a half-inch or more,” says Bill Loden, incoming president of the American Society of Home Inspectors. Even though that brick is often just the “skin” of the house, a crack that large can signal much deeper problems with a moving foundation, Loden says. Caught early, a repair might cost a few thousand dollars. Caught too late, the tab could run $20,000 to $50,000.

Snuff the fuse: Some cracks in your house are essentially cosmetic, the result of natural settling. When is a crack something more? “If you see a crack big enough to put a No. 2 pencil in, you’re looking at a problem,” says Loden, owner of Huntsville, Alabama-based Insight Building Inspection. Other signs of trouble: a tilting chimney or windows and doors that stick or jam, which can be caused by a moving foundation that is twisting their frames. If you suspect foundation issues, hire a structural engineer to evaluate your house, Loden says.

Roof
Why it’s explosive: ”Most people don’t pay any attention to their roof until they see water coming through the ceiling!” says Bill Jacques, outgoing president of the American Society of Home Inspectors  and owner of American Inspection Service in Charleston, S.C. But if you see drips in your living room, the problem is already far gone. A new roof could cost you “probably $8,000 to $10,000,” Jacques says.

Snuff the fuse: “Some people say, ‘I’ve got a 20-year shingle, it’s gonna last 20 years.’ Well, no it’s not,” Jacques says. “I would just recommend that about every five years they have the roof inspected.” One of the telltale signs of a wearing roof is coarse sand pooling at the base of gutter downspouts; the sand is most likely the granules of the shingles washing off. If you see a lot of it, then it’s a good idea to have someone climb higher. If you can safely get on the roof (be careful!) and the surface feels slippery, that’s another sign that the shingle material is coming off, Jacques says.

You can find evidence of additional problems under the roof. Water will usually enter the attic first. Hire an inspector, or look for stains around the chimney and the stack vents, or around other venting pipes that exit the house. Those are places where the metal flashing can fail, says Jacques. Also, look around the attic for wet and, or damaged insulation. Discovering issues early on could mean the difference between repair and replacement — or a few hundred dollars rather than thousands.

Read the entire article here and we will post the rest tomorrow.

Daniel Barli, Esq.

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Hurdles shrink for jumbo loan shoppers

By Donna Rosato - You'll pay more for a big home nowadays, but a big mortgage should be less of a reach.

For the first time in over 20 years, rates on jumbo mortgages -- loans of more than $417,000, or $625,500 in pricier areas -- are at or below rates on conventional mortgages. Jumbo rates usually run one-quarter to one-half of a percentage point higher, but lenders eager for wealthier customers are making deals.

In 2013, Wells Fargo and Bank of America cut minimum down payments to 15% from 20%; some competitors did too.

"It's a good time to be a jumbo borrower," says Guy Cecala, CEO of Inside Mortgage Finance.

Want a large loan?

Big banks have the best rates; you'll need a 740 credit score or higher to snag them, says Keith Gumbinger of mortgage data provider HSH.

Currently, rates for a 30-year fixed jumbo are averaging 4.25%, compared to 4.35% for a conventional 30-year fixed-rate mortgage. For ultralow rates, check out adjustable-rate jumbos: Wells Fargo recently offered a five-year adjustable for 2.375%. Get an ARM, though, only if you expect to move on during the fixed period.

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WHAT IF YOUR HOME DOESN'T APPRAISE?

Written by Blanche Evans

Housing markets are constantly changing, heating up or cooling off. For that reason, bank appraisers are hired by lenders to make sure your home is priced fairly and to current market conditions.

Appraisers use a formula that includes historical trends, pendings, solds, features, amenities and days on market to make sure that your home's current value reflects housing conditions in your market.

Your home's market value has nothing to do with what you paid for it, how much money you need to retire or how much you need to buy your next home. Your real estate agent's market analysis doesn't determine market value - only a range of prices so you can choose a listing price that will help your home sell quickly.

Outside forces such as the economy can cause your home to depreciate. So can allowing your home to deteriorate by not making repairs and updates that keep up with buyer demands.

So what can you do if your home doesn't appraise? You can amend the contract to the appraised price or lose the buyer.

But wait, you may have other options. You can challenge the appraisal.

In some cases, banks use appraisal management companies that hire out-of-area appraisers, or they use low-cost appraisal products like automated appraisals instead of a full professional exterior and interior appraisal.

This is where your real estate professional really earns her stripes. She can determine what kind of appraisal was used to arrive at the home's valuation. If the buyer paid for a full appraisal and only received a drive-by, for example, the appraisal won't reflect your home's interior condition, so your new kitchen won't count.

Your agent can also examine the homes that were used in the appraisal and determine if the comparables are truly similar or not. If not, you have a fighting chance.

Have your agent provide an updated CMA (comparable market analysis.) It could be that new market information is available, such as homes that have sold recently that will help your case.

If the other comparables aren't in your favor, you may have to lower the price so you can proceed to closing.

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Home prices post strongest annual gain in nearly 8 years

Home prices in most metropolitan areas grew significantly in the third quarter, with the national median price rising at its fastest annual clip in nearly eight years, according to the National Association of Realtors (NAR).

During the same period, existing homes sold at the fastest annual rate recorded in more than six years, according to NAR’s latest quarterly report on metro area median prices and affordability.

Despite the robust price growth, NAR estimated that potential buyers still had adequate income in most areas to purchase a home in the third quarter. Nonetheless, market momentum is changing, according to Lawrence Yun, chief economist at NAR.

“Rising prices and higher interest rates have taken a bite out of housing affordability,” Yun said. “However, we have the ongoing situation of more buyers than sellers in the market, so lower sales will help to take the pressure off home price growth and allow them to rise slowly at a single-digit growth rate in 2014.”

The national median existing single-family home price increased by 12.5 percent year over year to $207,300 in the third quarter, the strongest year-over-year gain since the fourth quarter of 2005 when it shot up 13.6 percent, according to the trade group.

In the second quarter, the median price reportedly rose 12.2 percent year over year.

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Reasons you should buy a house before 2014:

If you've been waiting for the best time to buy a home, your wait might be over. In fact, taking a number of factors into consideration, buying a home before 2014 could save you a lot of money.

"There are several reasons why now is the time to buy," says Jim Duffy, a mortgage banker with Cole Taylor Mortgage.

Those reasons include everything from rising mortgage interest rates and home prices, to falling affordability indexes and the fear of inflation, he and other sources say.

So we decided to dig a little deeper into what the future holds. Read on to see what we found.

Reason #1: Interest Rates Will Rise

One problem with historically-low mortgage interest rates is that they have nowhere to go but up. And a few months ago, that's exactly what started to happen after a June announcement by Ben Bernanke, the chairman of the Federal Reserve Board.

Bernanke said that he may begin a slow wind down of QE3 (Quantitative Easing, phase 3). This is the Federal Reserve's program of buying mortgage-backed securities and treasuries from banks in order to encourage the banks to lower interest rates, and as a result, stimulate the economy. Immediately after Bernanke's announcement, there was a sharp rise in mortgage interest rates of anywhere from a half to a full percent, says Duffy.

Duffy says Bernanke has backed off that statement a little since he first made it, and interest rates have settled a bit. But Duffy also says the QE3 program must end, and 2014 is the likely timeframe for that.

"And there's absolutely no doubt that rates will rise once [Bernanke] does that. Rates only have one way to go when the Fed stops buying altogether, and that's up," says Duffy.

Wondering what rates may look like once QE3 does end? Duffy predicts they will be somewhere from 5.5 to 6 percent.

[Are you ready to buy a house? Click to compare mortgage rates from lenders now.]

Reason #2: Home Prices Are on the Rise

Interest rates aren't the only thing rising. Home prices are too. For instance, according to a July S&P/Case-Shiller 20-City Composite Home Price Index, in May 2013 home values across the U.S. were up by 12.1 percent from May 2012.

Duffy says that rising home prices, along with increasing interest rates, indicates action is needed by homebuyers. He adds that every uptick of 1 percent in interest rates means 10 percent less buying power.

"So if prices rise by 10 percent and rates go up by one percent, that means your buying power decreases by 20 percent," he says. "That's the argument for buying in 2013 and not waiting till 2014."

Here's an example: Let's use the August 8, 2013 weekly rate of 4.40 percent for a 30-year, fixed-rate mortgage according to Freddie Mac.

If you purchased a home for $300,000 at a 4.40 interest rate today, you would have a monthly payment of $1,502. But, if home values increased by 10 percent, that same house would cost $330,000. And if at the same time interest rates went up to 5.40 percent, the monthly payment would be $1,853. $1,853-$1,502/$1,853=0.189. That's a 19 percent increase in your monthly payment!

Reason #3: Homes Are Still Affordable

The Housing Affordability Index is put out by the National Association of Realtors. And according to the association, it's based on three things: the relationship between median home price, median family income, and average mortgage interest rate.

In January, 2013, the index hit a high, with a "composite" number of 210.7. An explanation of the number is somewhat lengthy. But essentially, a value of 100 means that a family earning the median national income makes enough to qualify for a loan on a home whose value is at the national median as well. So, a value of 210 means that a family earning the median national income has 210 percent - or makes more than twice - of the income necessary to qualify for the same home, assuming a 20 percent down payment. That means that homes are very affordable right now.

However, you should know that the affordability index is sliding. In fact, in May - the last figure posted - it was at 172.7. But Duffy says that's still a great number.

"The affordability factor still being near its all-time high is very important, because that's a percentage of income going out toward housing. And it's higher than it may be next year if housing prices and interest rates both continue to go up," he says.

In short, houses may get less affordable the longer you wait.

Reason #4: To Protect Yourself From Inflation

Let's say you could strike a deal to pay today's prices for your milk, eggs, and gasoline for the next 30 years. You'd probably take that deal, right? It's a hedge against inflation, which is the price of goods and services increasing, and as a result, leaving you with less buying power.

In much the same way, a 30-year, fixed-rate mortgage guards your mortgage against inflation, especially when you get it at today's low interest rates, says Duffy.

"If inflation does take hold, then as other things around the household eat up more and more income, it's going to be very helpful to have a fixed payment for your mortgage so you can control expenses, still put money away, and save for retirement," says Duffy.

And while he says QE3 might have been a concern for increasing inflation, it has not been too much of a worry so far. But that could change.

In fact, a May 2013 report by the global futures exchange firm CME Group gave a 75 percent probability that inflation would exceed 2 percent in 2014, and 3 percent in 2015 - meaning that everything will cost a little more in the years to come.

So, locking in your mortgage payment for the next 30 years might look like a very smart move, since your cost to borrow money will stay the same, regardless of inflation. "Essentially, you're insulating your mortgage payment from inflation, and now's the time to do that," says Duffy.

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Here is the final installment of how can can improve your appraisal:

7) CLEAN UP

Even jaded appraisers can be swayed by a good looking yard. "Tree trimming, cleaning up, a few flowers in the flower beds and paint touch up can all help the appraisal," says Agnes Huff, a real estate investor based in Los Angeles.

That advice holds true indoors, too. "Get rid of all the clutter in your home," says Jonathan Miller, a longtime appraiser in New York. "It makes the home appear larger."

8) GIVE THE APPRAISER SOME SPACE

Don't follow the appraiser around like a puppy. "I can't tell you how many homeowners or listing agents follow me around in my personal space during the inspection," he says. "It's a major red flag there is a problem with the home."

And while you're at it, make the appraiser's job as pleasant as possible by giving your home a pleasant smell. At a minimum, clean out the litter box. Baking some fresh cookies and offering him one or two probably won't sway your appraisal, nor should it. But it couldn't hurt.

You can read the entire 8 tips here and don't forget that we are here to help you through the process.

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