The Oldest And Shortest Written Constitution Of Any Major Government Belongs To The U.S.

In honor of Independence Day, here are 13 little-known bits of trivia about the United States constitution, courtesy of constitutionfacts.com:

1. The first constitution was not known as the Declaration of Independence.  It was called the Articles of Confederation.
2. The U.S. Constitution has 4,400 words. It is the oldest and shortest written Constitution of any major government in the world.
3. There are spelling errors throughout the Constitution, but the misspelling of the word “Pensylvania” above the signers’ names is a notable one.
4. Thomas Jefferson did not sign the Constitution. He was in France during the Convention, where he served as the U.S. minister.
5. The Constitution was “penned” by Jacob Shallus, a Pennsylvania General Assembly clerk, for a fee of $30.
6. The entire Constitution is displayed in public just one day a year — September 17.  This is the anniversary of the day the framers signed the document.
7. Patrick Henry was elected as a delegate to the Constitutional Convention, but declined, because he “smelt a rat.”
8. The oldest person to sign the Constitution was Benjamin Franklin (81). The youngest was Jonathan Dayton of New Jersey (26).
9. When the Constitution was signed, Philadelphia was the nation’s largest city, with 40,000 inhabitants.
10. Because of his poor health, Benjamin Franklin needed help to sign the Constitution. As he did so, tears streamed down his face.
11. The first time the formal term “The United States of America” was used was in the Declaration of Independence.
12. There was initially a question as to how to address the President. The Senate proposed that he be addressed as “His Highness the President of the United States of America and Protector of their Liberties.” Both the House of Representatives and the Senate compromised on the use of “President of the United States.”
13. The word “democracy” does not appear once in the Constitution.

Have a safe and happy July 4th, everyone.

Source
Fascinating Facts about the U.S. Constitution
http://www.constitutionfacts.com/index.cfm?section=constitution&page=fascinatingFacts.cfm

What is YSP?

YSP is an acronym for Yield Spread Premium. This is the rebate that a lender will pay to a mortgage broker in exchange for selling the interest rate above the wholesale par rate.

This is probably best understood by using an example. If the loan amount is $100,000 and the wholesale par rate is 5%, if the loan is sold or the interest rate is sold at a 5.25%, there is a 1 point rebate to paid by the lender to the mortgage broker. 1 point in this case is 1% of the loan amount or $1,000.

There is some controversy related to YSP because there is incentive for brokers based on this rebate to increase the interest rate more than what it “should” be. Consumers are typically not aware of this YSP as it is paid on closing. Basically this means the borrower is paying a higher interest rate than what may otherwise be available to them.

Many mortgage brokers will offer a “no closing cost” loan product and use the funds from the YSP to cover closing costs. When applying for a loan with a mortgage broker, you should as a borrower ask the broker how much the YSP is and use that as a negotiating tool to lower the cost of your interest rate or possibly the origination fees or get some of the closing costs covered.

There are a lot of lenders out there, so you do have the option to be picky. Work with a lender you can trust and ask for references where necessary.

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Reproduced with permission from Brian G. Armstrong. To read more articles by Urban Sotensek , click here  Copyright 2008 Brian G. Armstrong. All rights reserved worldwide.

Get-Rich-Quick - Make Money Fast…Not So Fast My Friend

A get-rich-quick scheme promises that participants can make money fast with basically no skill, effort or time in a very short period of time. The hottest get-rich-quick schemes offer unlimited profits through various easy-money opportunities, but the only person who is gonna make money fast is the author himself.

Some people do get-rich-quick through the lottery, inheritances, business ideas, property, inventions, etc. Knowledge, luck or hard work is required to make money, don’t let anyone convince you otherwise. If these systems worked, wouldn’t everyone be using them? The thought of easy money may be appealing, but success generally requires hard work.

WHAT TO WATCH OUT FOR

• High Yield Investment Schemes
• Lottery Scams
• Data Entry Jobs
• Global International Trading
• Work at Home Jobs - No qualifications, two hours a day, high salary
• Chain Letters - Send X amount to the X people in the list
• Pyramid Schemes - Especially if they claim that they are NOT
• Every paragraph contains is teasing you to read the next paragraph, without ever fulfilling the promises in the previous paragraph
• The writer says that he doesn’t mind sharing this incredible secret with you because there’s more than enough money for everybody
• The advertisement goes on and on for multiple pages but never gets to the point or tells you what it is selling you
• The advertisement starts out with a sad story about how broke the writer used to be and then proceeds to tell you what a big house he has now
• Smiling happy pictures of individuals or families, images of luxury items and money itself
• Job ads that feature a URL that doesn’t work with a free email address

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Reproduced with permission from Urban Sotensek. To read more articles by Urban Sotensek , click here  Copyright 2008 Urban Sotensek. All rights reserved worldwide.

Pre-Approval Letter Defined - Again

I’m starting to see more of a dirty little secret not often discussed in the mortgage and real estate industry. It however is is starting to pop it’s ugly head more than usual and I have a feeling our current market environment has something to do with that.

I’m talking about “Pre-Approval Letters” and what they REALLY mean.

While researching this issue, I came across a post written by Rhonda Porter titled “Pre-Approval Letter Defined.” Rhonda is a top mortgage originator in the State of Washington and in her Blog she wrote a very clear and concise article about Pre-Approval Letters.

Pre-Approval Letters are something hardly ever mentioned in the press, however in the mortgage and real estate community, it is a topic hotly contested and subsequently has caused issues on numerous real estate transactions. On countless occasions, Realtors, builders and clients have received a pre-approval letter and late in a transaction find out the borrower does not qualify. In many cases, the subject borrower has already moved out of their previous home/apartment, the individuals they are buying the home from have done the same and the home they are buying is dependent upon their buyers getting financing to close. In essence, there is a domino effect with many transactions dependent upon the down line escrow to close.

Sound familiar?

Bottom line; borrowers need to understand what their”pre-approval letter” is and:

1. Their Pre-Approval Letter is only as good as their Mortgage Professional (not always the one who gives them the lowest rate/costs).
2. They are selective about the lender and pre-approval letter they accept.
3. Have them read Rhonda’s Blog - “Pre-Approval Letter Defined“

Below are a few other sites related to pre-approval letters:

• Don’t Forget Your Pre-Approval Letter
• Pre-Approval Letter - What Is It Worth?
• Clarifying Pre-Approval versus Pre-Qualification 

Greed, Fraud and Ignorance - The Food That Fueled The Subprime Meltdown

A few months ago, Richard Bitner mailed me, The Mortgage Cicerone his recently finished book, Confessions of a Subprime Lender - An Insider’s Tale of Greed, Fraud and Ignorance.” Truthfully, I thought it was going to be another pulp-sensationalized Housing Bubble book…boy was I wrong!

The further I got into the book, the more I was struck with Richard’s thorough understanding of the subprime mortgage industry and his excellent explanation of how the overly simplistic/optimistic financial models and presumptions of both lenders and investment bankers brought about the current market environment we are now experiencing.

While Confessions of a Subprime Lender - An Insider’s Tale of Greed, Fraud and Ignorance.” is only 195 pages, Bitner will provide you an in-depth and behind the scenes view of what impacted the real estate and mortgage markets.

Bottom line, this book is well written and a “must read” for those people who really want to understand what is currently happening to the mortgage market and its effect on the national economy. In my humble opinion, if you don’t read this book, you are not serious about understanding the industry and market in which you are currently employed.

Enjoy - Larry Gallegos

4th of July Concert and Fireworks at Cauble Park in Acworth

If you live in the Kennesaw or Acworth area, the City of Acworth and the Acworth Business Association will be hosting a 4th July 4th Concert and Fireworks at Cauble Park Friday, July 4. “Cry in the Sun” will take the stage at 4:00 p.m., followed by “Redline” at 6:00 p.m. and then “Flashback” at 8:00 p.m.

Fireworks will begin at approximately 9:30 p.m.

Tables are available for rent for $40.00. With the table you get 6 chairs and one parking pass. This parking pass will allow you to park at Cauble Park. If you do not have a parking pass, you will need to park downtown and take a shuttle down to the park.

Parking is available at City Hall, the Post Office, and the Acworth First Baptist Church. Shuttles will begin picking people up from these locations at 12:00 p.m. Non-profit vendors will be set up at the park selling food and drinks. Inflatables will also be set up for the kids to enjoy for $1.00 per ride.
This concert and fireworks are free to the public.

How Loan Scams are Committed

Fraudulent loans take on many different forms. The victims may be individuals or financial institutions. Fraudulent loan schemes generally prey on vulnerable consumers. The unemployed, those who have bad credit ratings, or those in immediate need of money for emergencies. Here we’re going to take a look at some of the more common forms of fraudulent loans, and how you can avoid becoming a victim, or even accidentally committing fraud yourself.

Mortgage Fraud

Mortgage fraud is the most common form of loan fraud, and the most costly. The victims can be banks or individuals. And sometimes individuals can perpetrate fraud without even knowing it. “Creative financing” is a term that has been used in the mortgage industry for a long time now. Unfortunately, many times it forces the consumer to commit fraud without even realizing it. Here are a few examples of some things that a mortgage applicant may do which would constitute mortgage fraud:

• Over appraising a property value. Happen to be good friends with an appraiser? Maybe he bumped up your house value by a little bit to help you get a higher selling price. If that’s the case, it’s mortgage fraud.
• Applying for a “stated income” mortgage? Maybe you exaggerated your income a little bit to help get a lower interest rate. That’s not creative financing, that’s mortgage fraud.

Kickbacks, false deposits, lying about residency, lying about employment, repayment of gifts, and many other common activities may be construed as fraud. Unfortunately, some unscrupulous mortgage brokers looking for a quick buck may actively encourage you to engage in fraud, and even convince you that it’s perfectly legal. According to the FBI, mortgage fraud is defined as “any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan.” If you feel that you may be asked to break the law on your mortgage application, at the very least consult your attorney. Ignorance of the law is no excuse, and mortgage fraud is a federal crime.

Mortgage Fraud By Insiders

The mortgage industry is just as competitive as any other industry, and unfortunately many companies are willing to do whatever it takes to make a profit, even if that means breaking the law. A very common form of mortgage fraud comes from mortgage brokers. Whether it’s encouraging clients to lie on documents, or forging documents without their knowledge, insider fraud is very common.

Other Types Of Fraudulent Loans

Other types of fraudulent loans may include applying for a loan with a fake identity, forging loan documentation, or even posing as a financial institution in order to collect a down payment on an alleged loan, and disappearing after receiving the cash.

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Reproduced with permission from Urban Sotensek. To read more articles by Urban Sotensek , click here  Copyright 2008 Urban Sotensek. All rights reserved worldwide.

College Graduation - Should You Go to Europe or Buy House?

Congratulations! You’ve done it. You’ve spent all that time at the library, sweated out those exams and are actually going to walk down the aisle in cap and gown. Not to mention, you have your real first job! You went through the recruitment center at school and someone actually hired you. What an exciting time in your life! Now, what to do with all that graduation cash you’re raking in? Should you buy a Eurail pass and plan a back pack trip to Europe? Or, better yet, should you buy a house?

Wow. Buy a house? Aren’t you too young? That sounds awfully grown up, doesn’t it? Personally, I probably would go to Europe if I were a recent graduate with a fist full of graduation dollars. I never really thought things through when I was young and adventurous. I’m paying for it now. But, if that opportunity had presented itself to me, I would like someone to have made me think twice about it. Besides, the dollar isn’t doing so well in Europe right now. It’s sound advice to which even I would have listened at young age.

Recent college graduates can qualify for a home loan, but it depends on a few things. A big hurdle is a down payment. There are 100% financing opportunities out there, but they aren’t as readily negotiated as they formerly have been. What better graduation gift to ask for than a home down payment? Also, I’d be willing to bet that Aunt Ginger may be more generous with her checkbook if she knows you’re saving to buy a house and not a keg of beer. Typically, you need to have 3% of your home purchase price saved, and can negotiate for the seller to pay some if not all of the closing costs. So, if you were buying a $100,000 home, you should have about $3,000 in your bank account. That’s a good starting point.

How’s your credit? Like most college kids, do you already have a credit card in your name? I hope you’ve been paying it on time. Good credit is a pre-requisite for any mortgage these days. You aren’t too young to establish good credit. If you have none, open a credit card, put your gas on it each month, and then pay it off each month. Before you know it, you will have established a good credit history. Most of you already have taken these steps.

Typically, a mortgage lender will approve a recent college graduate for a loan if their new income supports their debt, the aforementioned items aren’t an issue and they are on the job by the day of closing. In fact, if you have a contract for employment, you may even be able to close on a home loan prior to starting your new job, but you better have a solid contract and plans to start very soon (providing your first pay stub after closing is common)! In addition, you will also have show evidence to your lender that you’ve been in school for the past few years. Typically a copy of your diploma will suffice. If you don’t have one of those nifty wallet sized copies, you can bring your actual diploma to your lender and have it photocopied. (I’ve had to unroll them from their packaging tube and gingerly lay them out on the copy glass, careful not to mar them).

There are many arguments to why buying a home is smarting then renting. You aren’t “throwing away” money in rent, you’re investing for your future, and if your loan program is one that lets you rent out a bedroom to a buddy, you can actually put a little cash back into your pocket. And if you are able to put a little moola aside quickly, maybe deferring that European trip isn’t such a bad idea after all!

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Reproduced with permission from Kristin Abouelata. To read more articles by Kristin Abouelata, click here  Copyright 2008 Kristin Abouelata. All rights reserved worldwide.

Is Your Loan Approval Letter “Firm” or “Conditional?”

Knowing whether your loan approval commitment letter is firm or conditional can spare you from numerous unpleasant surprises when you are closing on your home.

In the real world, loan commitment letters are like handshakes: some are firm and some are soft. When going through the mortgage loan process, you’ll need to know which type of commitment you have and how it affects your home purchase transaction.

A Firm Commitment

A firm loan commitment is a lender’s unqualified promise to provide you with a stated amount of debt under specified terms. The firm commitment letter has an end-date; if you don’t fund the loan within that period, the offer expires, and the lender may charge you for the cancellation. Once that commitment expires, all bets are off. If you still want the loan, you need to re-apply. And it’s likely that the new loan will look different from the old one, particularly with respect to the interest rate.

Home sellers prefer to entertain offers from buyers who have a firm loan commitment. Because you and your lender are motivated to close on the firm commitment, it adds another layer of assurance for the seller that the deal will actually go through.

Conditional commitment problematic

A conditional commitment letter states that a lender will offer the loan as long as certain conditions are fulfilled. Loans are always conditional in the early stages, but the conditions are cleared progressively as the loan moves through underwriting and processing. Conditional commitments are problematic when the requirements aren’t met in a timely manner. Ultimately, this can lengthen escrow, or even cause a sale transaction to fall through.

In some states, language on the sale documentation specifically limits your rights if there are conditions on your loan commitment. The seller may be able to declare that you’re in default of the agreement, for example, if you don’t properly disclose the specifics of the conditional financing. When you’re in default, you stand to lose your deposit and other out-of-pocket expenses.

Handling your loan commitment

First, review your commitment letter and decide if you have a firm or conditional commitment. If it’s firm, you can focus your attention on other aspects of your transaction. If it’s conditional, request a list of conditions and do what you can to fulfill them.

The conditions you can’t control are those related to the appraisal. Lenders today are extremely cautious about the amount that they’ll lend relative to the home’s value. It’s possible to see that the appraisal is subject to underwriting review-which means that the lender can override the appraised value. If you see this condition, open the discussion with your lender immediately. You’ll want to know how and why this override would be enforced.

Ideally, you should present your purchase offer with a firm handshake, not a flimsy one. If that’s not possible, take action to firm up that handshake as soon as you can.

Before You Rush To Make Bi-Weekly Mortgage Payments…

Before paying down your mortgage balance with extra principal payments, be sure to plan carefully.

The biggest risk in lending for banks is that you will suddenly stop paying your mortgage.  In that event, the banks hope that you owe them as little as possible against the value of the home. 

That way, your mortgage balance is covered in full and paid off in a discounted sale via foreclosure.

The fear of foreclosure is why lenders are eager to take your dollars and to help you increase your equity position through bi-weekly payments and other systems. 

When banks encourage you to pay down your principal balance, their hope is that you will voluntarily decrease their risk in lending to you.

Important to remember, though: your interest rate is determined by the risk that you represent to the bank.  When you pay down your mortgage balance with extra principal payments, your risk to the bank decreases. 

However, do you think that the bank will call you to offer you better interest rates now that your risk is lower?

Therefore, before paying extra principal dollars, consider some of your alternatives first:

• Save for college
• Establish an emergency fund
• Fund a retirement plan
• Invest in stocks or bonds
• Pay down credit card debt
• Pay down installment loans

There are many more options, of course, but just remember that you have choices.  Once you give the money to the bank on your first lien, you can’t get it back without a refinance.

FHA and Down Payment Assistance - It’s Truly Gifted

If you qualify for an FHA loan to buy a home, traditionally you should be prepared to come up with 3% of final sales price in out of pocket funds to put down on the transaction. It’s a requirement. You can’t really get around it in on a home loan purchase. You can finance 97.75% of the loan amount, but you still have to have the remaining 1.25% of the aforementioned to put toward closing costs. Anyway you look at it, you need 3%.

Well, all is not forsaken. There is another way to come up with the 3% that doesn’t require hawking grandma’s pearl necklace or selling your 2nd car. There are down payment assistance programs out there to lend a helping hand. They can be considered a “gift”, and they are available for FHA loans that are single family and 1-4 unit dwellings. The two big names are AmeriDream, Inc. and The Nehemiah Program, and they provide these gift funds to qualified homebuyers.

How much in gift funds can be made available to you? 1% to 6% of the final contract sales price or a flat gift amount not to exceed 6% of the final contract sales price. And, in addition to the gift from AmeriDream or Nehemiah, the seller can contribute between 1% and 6% of final sales price toward the borrower’s closing costs. So, here’s the big secret, you can basically obtain an FHA loan with little or no down payment if you qualify.

How is this scenario possible? Well, it all depends on the deal you’re getting on the house. Basically, the seller is financing the down payment gift by not netting as much on the sale of the home. The seller or the lender also must pay the “down payment processing fee”, so your closing costs are going to go up $350-500. But, if you are buying a home below the lender’s appraised value, it can work!

Here’s an example. Say John and Susie Homebuyer have excellent credit but no cash to put down on a property. They are working with a great realtor who finds a home for sale that’s worth $120,000, but it’s generally acknowledged the seller will accept around $100,000 for it. The closing costs will run about $4500 (including the gift processing fee) and John and Suzie must invest $3,000 (3% of $100K) of their own money in the transaction per FHA guidelines. So, John and Suzie offer the seller $107,500. The seller agrees to participate in the Down Payment Assistance program and contribute $3,000 toward the buyer’s closing costs. This contribution becomes the “gift.” In addition, the seller agrees to pay $4500 in closing costs. The seller nets $100,000 from the transaction as anticipated, and the buyers pay the 3% down payment via a “gift” from AmeriDream or Nehemiah. The appraisal comes in comfortably above asking price and everyone’s happy.

The down payment assistance programs mentioned are large and respected community development programs, and they are a great deal for homeowners if they qualify and the seller agrees to contribute. With sellers willing to make sales concessions lately, it’s an excellent market for AmeriDream or Nehemiah. It’s critical that your realtor understand that you want to utilize these programs when you negotiate. Make sure they are aware of it and if need be, have your loan officer and realtor communicate with one another prior to house hunting. It’s also useful to have your lender prepare a good faith estimate for you prior to making an offer on a specific home so you can make sure all your numbers work and the offer is worded correctly with all the proper forms attached. And the good news is the programs still work with some of the competitive first time homebuyer programs out there like Tennessee Housing Development Agency with below market rates (but you don’t have to be a first time homebuyer).

So, who says you can’t get 100% financing anymore?

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Reproduced with permission from Kristin Abouelata. To read more articles by Kristin Abouelata, click here  Copyright 2008 Kristin Abouelata. All rights reserved worldwide.

Can’t Find Your Cash? You Probably Ate It Or Drank It.

In a study of 2,036 U.S. adults commissioned by Visa USA, nearly half of all Americans are losing track of their money. 

An average of $45 in cash is “lost” each week in what Visa dubs “mystery spending”, Visa’s version of “I know I had this money in my wallet but I can’t figure out what I spent it on.”

Averaged out over the course of a year, mystery spending accounts for $2,340 — enough to fund a Roth IRA or other investment plan.

According to the study, events most likely to cause “mystery spending” include:

• Out for a night on the town (58 percent)
• Grocery shopping (55 percent)
• Out with children (50 percent)
• Shopping during a sale (40 percent)
• Shopping with friends (33 percent)

How people spend money isn’t the point of the survey but it does raise an interesting point about how careless we can all be with our dollars. 

On one hand, we wonder how will we fund retirement, or pay for college, or send our children to tennis lessons.  On the other hand, we aren’t even aware of how much cash we’re spending and where we are spending it.

For example, if the average American saves the $2,340 annually at 8% instead of “mystery spending” it, that money could grow to $31,000 in 10 years, $91,000 in 20 years, and $204,000 in 30 years.

Being aware of your money is the best way to control it.

Source
Half of All Americans Say They Lose Track of $2,000 In Cash Each Year
September 10, 2007

First Time Home Buyers - 5 Myths About FHA Loans

FHA loans are a great tool that allows many potential first time homebuyers with past credit problems to break into the housing market. Prices are low and seller concessions are high in the today’s real estate buyer’s market. However, many of the subprime mortgage 100% financing deals are gone. FHA is the only way for many prospective buyers to get a mortgage. Also hundreds of thousands of homeowners who bought homes over the past few years using those subprime mortgages are now facing interest rate increases of 3 to 5 percent or more! Five minutes of watching business news lately will easily explain why these people don’t believe they still have any mortgage options left.

Here are 5 myths about FHA loans that prevent many from trying.

1. FHA loans take longer to get approved.

The truth is that in today’s world of automated underwriting and paperless processing, FHA loans take no longer than conventional loans to close if you are being helped by a loan officer who understands FHA loans.

2. FHA loans require a lot of extra paperwork.

The documentation required for an FHA loan is almost exactly the same as that required for a conventional loan. FHA requires only a few extra documents more than a conventional loan, and the extra documents that FHA requires take little extra time and are there to protect you during the process.

3. FHA loans cost more than conventional loans.

FHA loan interest rates are based upon the same market factors that conventional rates are based on. As a matter of fact, even when considering the FHA mortgage insurance premiums added to your payment, FHA loans are often less expensive than conventional mortgages for first time borrowers and borrowers with past or even present credit problems.

4. FHA required mortgage insurance is too expensive.

All mortgages above 80% of the value of the property being financed require mortgage insurance which pays off a portion of the loan if the borrower defaults. Prior to the invention of mortgage insurance programs, lenders all required 20 percent down payments to obtain a mortgage. FHA’s mortgage insurance program does require a 1.5% upfront mortgage insurance payment which is automatically added to your loan, and .50% per year which is divided up and added to your monthly payments. This is actually very inexpensive compared to conventional mortgage insurance rates which take effect October 1, 2007 which can require almost 3% per year in mortgage insurance to be added to the the typical borrower with lower credit scores!

5. FHA loans have very restrictive guidelines.

In fact, the exact opposite is true in many respects. Although FHA loans have lower maximum loan amounts than conventional mortgages, they don’t have the income restrictions placed on Fannie Mae and Freddie Mac community lending products. Getting an FHA loan with limited or no credit history, or credit problems is much easier than obtaining a conventional mortgage. FHA allows for manual underwriting. This means that if the automated underwriting system does not approve your loan, an underwriter can actually look at your file and determine if common sense dictates that you would be able to afford the mortgage. The underwriter can approve your loan even if the automated system turned it down. Manual underwriting is common for FHA loans and very rare for conventional loans. In addition, if interest rates go lower, FHA loans allow for a streamlined, no requalifying refinance process.

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Reproduced with permission from Carl Pruitt. To visit Carl Pruitt’s website, go to http://fhaloanadvice.com/index.php/about/  Copyright 2007 Carl Pruitt. All rights reserved worldwide.

 

Investing In Your College Student’s Housing

 

For parents with children in college, or nearing college age, this video from NBC’s Today Show is worth watching.

Investing in collegiate housing is not for everyone, but if the angle interests you, don’t forget to purchase an accompanying personal liability insurance for injuries that may occur on-site.

Note: There has been some depreciation since this video was produced fall of 2007.

Why Medical Bills Are More Dangerous To Homeowners Than ARMs

If you own a home and somebody else depends on your income, consider that the leading cause of home foreclosures is not “adjustable rate mortgages”.

As cited many times over (including by a Harvard law professor), the answer is medical bills.

Even for the insured, medical expenses can dramatically impact a family’s finances and push it into bankruptcy. 

Over one million families discovered that sad fact in 2004 and medical bills have not gotten any cheaper, says the Bureau of Labor Statistics.

Death is another major cause of foreclosure. 

When a family’s primary wage-earner dies, the secondary wage-earner is now obligated to pay the family’s monthly obligations and that may include a mortgage payment.  Sadly, that income may not be enough to cover the bills.

A strong life insurance policy can offset bills, ease transition periods, and even pay off the home’s remaining mortgage obligation. 

Whether you’re a first-time buyer or a seasoned investor, consider protecting yourself and your family with adequate medical and life insurance coverage, as well as taking preventative health care steps. 

There are resources online to help you determine what coverage is necessary, but the best place to start for this highly personal discussion is with your personal financial planner.

Life is a series of surprises and it’s never too soon to be prepared.

(Image courtesy: NCSALL)

How Much Is Starbucks Costing You Each Year?

Have you ever wondered how much your coffee habit is costing you?

Courtesy of software developer Hugh Chou, use the Coffee Calculator to calculate how much you pay for coffee each year, and how much money you forgo in savings because of it.

Did you know:  If you buy a $1.87 grande drip coffee from Starbucks every working day instead of drinking free coffee in your office, you’ll forfeit more than $6,000 over 10 years’ time?

Compounding the problem?  Very few of us take our coffee “plain”. 

If you prefer the grande, sugar-free vanilla, non-fat latte, well, you’d best check out the savings for yourself.

The next time you wonder where you’ll find money for a downpayment on a new home, or pay for lawn care, or a car repair, begin the planning process by studying the dollars you spend on non-essential items. 

Starting with specialty coffee.

All Real Estate Is Local: Or Why National News Programs Are Misleading

This is just a quick reminder to ignore national news stories about real estate.  It may sound like strange advice, but real estate is a highly local phenomenon. 

The “national scene” is comprised of data from:

• 50 states, with
• More than 30,000 incorporated cities, and with
• An innumerable number of neighborhoods

It also combines data from:

• Single family residences
• 2-4 units
• Condominiums/Co-ops

In other words, throw a dart at a map of the United States and the street on which the dart lands is in the same data set as the street on which you live.

Like I said, ignore the national statistics — focus on your local statistics. 

Unfortunately, getting local real estate statistics is not always easy.  The best place to start is by asking a real estate agent, a title company representative, or somebody else that has access to (and knows how to interpret!) raw real estate data for your neighborhood.

By talking to professionals that are “in the market” every day, you’ll get a much more reliable opinion than from national news sources.

Why Square Footage Is A Matter Of Debate, or The Difference Between Guidance and Law

Square footage of a home is a matter of debate — a homeowner measures it one way, a real estate agent another way, and an appraiser a third way. 

The local tax assessor has his own method, too.

So, who is right?

Until 2003, they all were!  That’s when the NATIONAL ASSOCIATION OF REALTORS® Appraisal Committee defined the term “square footage” to include the following:

Finished square footage on each level of the home, measured from the exterior-facing surface of outside-facing walls.

The committee defined “finished” as an enclosed area that is suitable for year-round use and includes walls, floors and ceilings.

Seems basic enough, but there were some added notes and exceptions:

1. An opening to a floor below (e.g. vaulted ceiling, open-air living room) is not included.
2. Stairs are counted as square footage and are added to the floor from which they descend
3. Finished areas must have a ceiling height of 7 feet to be included (except under duct work or beams in which case the requirement is reduced to 6 feet, 4 inched)
4. If a room is sloped, at least half of the room must have the minimum 7-foot height in order to be included
5. “Detached” finished areas are only included if they are connected to the main structure by another finished area.   Detached garages, therefore, are excluded.

Even with the standard defined, the Appraisal Committee’s approach to square footage is still just a guideline; no states have formally adopted it as a standard for appraisers, tax assessors and other real estate industry players.

Until then, the debate will continue.  Despite the “official” guidance.

(Image Courtesy: Gables at Copper Creek)

How To Answer “How Much Home Can I Afford?”

Home shoppers know to consider the impact that a new home will have on their household budget and that is called keeping your eye on the ball. 

Unfortunately, most shoppers are keeping their eye on the wrong ball.

The proper way to answer the “How Much Home Can I Afford” question is to think in terms of monthly payment and not in terms of a home’s listed sale price.

When a shopper considers affordability in terms of purchase price, he negates the monthly payment impact of:

• Real estate taxes
• Condo/management fees
• Homeowner’s insurance
• Mortgage insurance (if applicable)
• Downpayment

A hypothetical $300,000 home could have a combined payment as low as $1,800 or as high as $3,000, depending on the factors listed above.

In addition, mortgage rates change daily, so that can swing the payments either direction, too.

A smarter way to answer “How Much Home Can I Afford” is to determine a target monthly payment and then work backwards. 

This way, each home is considered for its overall holding costs (i.e. mortgage, taxes, related fees) instead of its sticker price. 

How “Repair Credits” To The Buyer Can Sabotage Your Home Sale

When buyers and sellers look for common negotiating grounds, it’s common for the buyer to request home improvements to be made prior to the sale. 

The request may be phrased in any number of ways:

• “The hardwood floors are warped and we think the seller should pay for it.”
• “There is a leak in the plumbing that needs to be fixed to prior to moving in.”
• “The roofing reached the end of its life.  It needs to be replaced.”

The seller may agree to meet the buyer’s demands, but making repairs to a home fixture, such as a roof, isn’t convenient while a person still occupies a home. 

And this is how the “repair credit” gets introduced into the contract.  A repair credit is a dollar amount granted from the seller to the buyer to be used to cover the costs of the requested repair(s).   

For a seller, repair credits offer a way to “pay for” the handyman work without actually going out of pocket; all of the funds for the buyer are taken directly from the home sale’s proceeds instead of from a bank account.

Unfortunately, when granting the repair credit, many sellers go about it in the complete wrong way, putting their buyer’s ability to acquire home financing for the purchase at risk. 

That’s because — as a rule — lenders do not allow concessions for home repairs to be line-item credited on the final settlement statement. 

This is for two reasons:

1. The lender has no way of knowing that the repair will actually be made by the buyer
2. The lender has no way of knowing whether or not the repair is actually needed

Put the two together and it raises the red flag we call “Fraud Alert”.

The correct way to offer a repair credit is to reduce the home’s sale price by the amount of the credit and make that the new purchase price.  In the end, the seller goes home with the same amount of money.