3 Tips On How You Can Lower Your Closing Costs

1. New Mortgage Disclosure Form

There’s a new form going into effect in the next few months that’s intended to be easier to understand as well as to make sure that every cost related to taking out a new mortgage or buying a home is clearly laid out.

The new form for closing services is called the “Loan Estimate” and separates your closing cost fees into three simple categories: Origination Charges, Services You Cannot Shop For, and Services You Can Shop For, which will allow you to comparison shop for certain mortgage-related services.

2. Shop Around

By understanding your closing costs (made significantly easier and more transparent thanks to the new mortgage form rolling out this year), you can comparison shop certain services such as title insurance and settlement fees and possibly save yourself thousands of dollars.

3. Negotiate with the seller

Sometimes a seller gets stuck on the selling price for their home — and they won’t take a penny less. If it’s still more than you want to pay, it’s possible that the seller may be open to paying the closing costs on the transaction. Psychologically, they feel they are still getting the price they set for their home, while the amount you will actually be spending will be less. Remember the cost of your new home is more than just the sticker price, it’s that amount plus all the associated fees and charges.

For more tips on getting the best deal on your mortgage, check out these sources:

• Housing prices negotiations stalled? Why closing costs are your best bargaining chip (CS Monitor)


• Mortgage Closing Costs You Can Negotiate Lower (Lender 411)


• Five Tips to Keep Your Mortgage Refinancing Closing Costs Low (Total Mortgage)

 

Phew, Short Sales Didn’t Go Over the Cliff

Debt forgiveness act extended through 2013

As negotiations waged in Washington, D.C. regarding how to avoid the looming “fiscal cliff,” it was unclear until nearly the last minute whether the Administration was going to extend the Mortgage Debt Forgiveness Act of 2007 through 2013. 

The statute was enacted in 2007 and means that homeowners who sell their home at a loss — e.g., in a short sale — are not taxed on the amount of their mortgage not repaid (up to $2 million). The statute was set to expire on the last day of 2012 and it was announced in the early days of the new year that it had been extended.

May save underwater sellers $1.3 billion

Short sales were up year over year in the second quarter of 2012 by 12 percent and in the third quarter by 22 percent according to RealtyTrac. The combination of banks not only smoothing the short sale process but also approving more short sales, along with the not inconsiderable financial advantage of not paying taxes on the forgiven debt, proved distinctly appealing to many homeowners with underwater mortgages.

The Congressional Budget Office estimates that extending the Mortgage Debt Forgiveness Act through 2013 could save taxpayers $1.3 billion.

Via RealtyTrac, TotalMortgage, National Association of Attorneys General, and Huffington Post.

2012 Ends On A Record Breaking Note

4 of The Most Expensive Properties Sold In 2012 As experts predict that 2013 will see the over-all housing market continue its slow and relatively rational recovery, a look back at 2012 reveals that for some buyers, slow and rational have nothing to do with their home buying decisions.

$132 million for a ranch in Montana

Stan Kroenke, owner of, among other things, the St. Louis Rams, the Denver Nuggets and the Colorado Avalanche is reported to have dropped well over $100 million on 124,000 acres out west in December of 2012. The addition of the Broken O Ranch brings Kroenke’s total U.S. real estate portfolio to more than 850,000 acres. More information about the ranch can be found on the Bates Land Company’s website, here.

$90 million for a penthouse in ONE57 in New York City

Selling for nearly $5,000 per square foot less than Sandy Weill’s penthouse in 15 CPW (see below), the buyers of this 10,923-square-foot penthouse on the 89th and 90th floors of the towering condominium complex — of dangling crane fame — still managed to set the record for the largest single family real estate transaction in the Big Apple.

$88 million for a penthouse at 15 CPW in New York City

In February a Russian billionaire plunked down almost $90 million for 6,744 square feet for his daughter. While it was still owned by Sandy Weill (former CEO of Citigroup), the apartment was featured in Architectural Digest — see the spread here. That one sale lifted the average price of a home in Manhattan for the first two months of 2012 by more than 20 percent and set the record for the most spent per square foot for a home anywhere in the U.S.A.

$85 million for Aaron Spelling’s former home

At 56,500 square feet, Aaron Spelling’s home was the largest single family residence in America when it was built in 1988. After being on the market for two years, British billionaire and Formula One founder Bernie Ecclestone knocked $65 million off the asking price and snapped it up for his daughter, Petra. For more photos, check out this feature on People.com.

2013 Is Looking Good For the Housing Market

All Signs Point To Continuing Recovery

Lower inventory = higher prices

US News reports that the “supply of homes for sale across the nation has fallen 43 percent,” allowing sellers to raise prices and causing bidding wars among buyers. With pricing corrections underway, home inventories will need to expand again in 2013 to support the continuing recovery.
In Trulia’s “Housing in 2013: What’s In, What’s Out,” worry over home prices finding a bottom is so 2012 — in 2013, the hot topic is when will housing inventories bottom out?

Reparation replaced with prevention

If 2012 was the year of fixing what went wrong with the mortgage industry, 2013 is anticipated to be the year of implementing policy to ensure it never happens again. New mortgage rules are to be announced by the Consumer Financial Protection Bureau in January that are intended to motivate lenders to expand mortgage credit, while preventing a recurrence of the abundance of high-risk loans that precipitated the housing market crisis. Expanded credit is needed to expand the pool of hopeful buyers who qualify for mortgages.

Housing affordability begins to shrink

The record low mortgage rates along with depressed home prices contributed to housing affordability being near all time highs. With 2013 expected to see mortgage rates rise, housing inventory levels drop and home prices increase, housing affordability next year may be a shrinking opportunity.
For more predictions about the housing market in 2013, check out these resources:

• US News — Top 5 Predictions for the Housing Market in 2013
• Trulia — Housing in 2013: What’s In, What’s Out
• Housing Wire — What real estate trends suggest for 2013

Why Your Mortgage Interest Deduction May Go Off the Cliff

Congress Contemplates Making Changes To Major Homeowner Benefit

Happy Centennial to mortgage interest deduction!

Nearly 100 years ago, in 1913, Congress amended the Constitution to allow for the country’s first income tax — and agreed to make all interest payments deductible from this new obligation. A few decades later as the country began to emerge from the Great Depression and the Second World War, more and more Americans were buying homes and the tax deductibility of mortgage interest payments became a significant element of promoting home ownership.

Mortgage interest deduction costs $100 billion a year

As the “fiscal cliff” and huge budget deficit hang heavy on the minds and desks of policymakers in Washington, the mortgage interest deduction is thought to be close to the top of the list of possible solutions to reducing the deficit. The mortgage deduction is both “one of the most cherished in the U.S. tax code… and on eof the most expensive, estimated to cost the federal government $100 billion this fiscal year.” (Los Angeles Times)

Likely to be “adjusted” but not “eliminated”

Experts agree that it is unlikely that a wholesale elimination of the mortgage interest deduction will be approved. It is more likely that the code will be refined to reduce the benefit for high-income households and borrowers. The president of the National Association of Realtors (NAR), Gary Thomas, commented that it has always been the N.A.R.’s position that the mortgage interest deduction is vital to the stability of the American housing market and economy, and we will remain vigilant in opposing any future plan that modifies or excludes the deductibility of mortgage interest.” (The New York Times)

Changing the deduction has bi-partisan support

In a time when there seems to be little upon which Democrats and Republicans can agree, changing the mortgage interest tax deduction seems to be striking the right bi-partisan note. Both President Obama and the former Republican presidential nominee, Mitt Romney, have come out in support of capping the deduction.

Via The American Prospect, The Los Angeles Times, The New York Times.

Will Rising Home Prices Slow Recovery?

The Housing Market Can’t Win For Losing

Home prices have been rising — the S&P/Case Shiller index showed an annual increase of 3.0 percent from last year; Phoenix, AZ showed a whopping 20 percent annual increase in average home prices.

Some experts have begun to express concern that home prices are being driven by investors snapping up good deals to turn them into rentals, which are offering a good return on investment. Paradoxically, as the investors drive home prices up, the anticipated returns on the investment property shrink — meaning the demand from investors will also drop.

Phoenix, with its 20 percent jump in average home prices, is a perfect example — droves of investors swooped in to take advantage of dramatically depressed prices last year, ultimately creating bidding wars and significantly shrinking inventories and driving the double digit price gains.

Nationally, the housing market recovery has been remarkably uneven — on the one hand there is Phoenix, gaining 20 percent, on the other there is Chicago, where the average home price dropped 1.5 percent from last year.

While the investors may be spurring the housing market recovery now, long term recovery will rest on the re-emergence of first-time home buyers. Home owners with steady incomes and long-term home ownership plans will support and stabilize not only the market, but also the neighborhoods where they buy.

Via CBS News, NBC News, US News, and the Chicago Business Journal.

FHA Upcoming Policy Changes

The FHA plans to accelerate its recovery

In the same report, issued by the Housing Administration last week, that showed a negative economic value for its capital reserve fund for the first time in its history last week, the FHA outlined an “Action Plan” to strengthen the fund and speed its economic recovery in the next few years.

The FHA projects that, if no policy changes or other operating changes were to be made, its fund will be positive in 2014 and reach the mandated ratio of 2.0 percent by 2017. With new policies and programs in place, the FHA is expecting the fund will be positive within the year and reach the mandated capital reserve ration by 2014.

Upcoming policy changes outlined by the FHA

• Strengthen assistance programs for delinquent homeowners — the FHA is aiming for payment reductions of at least 20% for FHA-HAMP modifications
• Streamline FHA short-sale process — and reduce the number of traditional FHA REO foreclosures, which are significantly more costly
• Change the FHA premium cancellation policy — premiums will be required to be paid for the life of the loan, a change from the current policy which allows homeowners to let the policy lapse after the home had achieved 22% equity
• Increase the mortgage insurance premium by 0.1 percent
• Accelerate asset disposal programs to sell up to 10,000 distressed mortgages each quarter
• Revise the HECM (reverse mortgage) program to lessen its negative impact on the fund — projected changes include reducing the initial amount borrowers are allowed to draw at loan orgination and reducing the maximum amount of funds available to the borrower throughout the program

Read the FHA’s full report here.