Real Estate Articles

A NH Real Estate Transfer Tax Primer

The following article by Attorney David Beliveau was published by the New Hampshire Bar Association.

Tax Law: Amended Last Year: A NH Real Estate Transfer Tax Primer

By:

The New Hampshire real estate transfer tax (NH RSA 78-B) – a tax on the transfer of New Hampshire real estate – is $0.75 per $100 of the full price of or consideration for the real estate for the purchaser and the seller (meaning half of the total tax is paid by the purchaser and half by the seller).

The tax, collected by the NH Department of Revenue Administration (DRA), requires filing DRA forms PA-34, Inventory of Property Transfer; CD-57-P, Declaration of Consideration Real Estate Purchaser (Grantee); and CD-57-S, Declaration of Consideration Real Estate Seller (Grantor). The law changed last year in the case of real estate transfers to revocable trusts and LLCs. [Read more…]

Package delivery is a headache for landlords, condos

The explosion of online shopping has created a big headache for landlords and condo associations – what should be done about the deluge of packages being delivered to residents?

Staff at large apartment buildings often strain under the effort to accept, sort and deliver hundreds of packages. Smaller landlords and condo associations are striving to figure out the best policy: Should packages be left outside, where they are vulnerable to weather and theft? Is there a better, workable way to get them to tenants and unit owners?

Camden Property Trust, a huge landlord with 59,000 apartment units in 10 states, recently announced that it was banning package deliveries altogether. Camden tenants must now pick up packages at a post office, or else have them shipped to their workplace or to the home of a friend or relative. [Read more…]

If you own real estate, you need a will

Anyone who owns real estate needs to have a will that indicates what should happen to the property if he or she suddenly passes away.

You might assume you know who would inherit the house, but without a written will, the inheritance would be decided by state-law rules that might not be exactly what you’d expect.

Even if the house ultimately goes to the person you want, the lack of a will might mean that ownership of the house remains in legal limbo for an extended period of time. This can create unnecessary complications when it comes to paying property taxes and arranging for continued utilities and insurance coverage. If you have a mortgage, it can create even bigger headaches. [Read more…]

Buyer sues although property was purchased ‘as is’

A buyer who discovered that her new house was contaminated with mold can sue the seller, even though the house was purchased “as is” and the seller specifically said there might be mold in it, according to the Wisconsin Court of Appeals.

Catherine Fricano bought the house from a bank that had acquired it in a foreclosure. The house had sustained serious water damage, and before selling it, the bank twice paid for mold remediation and repair work.

The bank’s contract with Fricano said that the house was being sold “as is,” that it might have had mold in it in the past, that it might currently have mold in it, and that the bank made no guarantees whatsoever about the condition of the building. The bank also said that since it had acquired the home through foreclosure, it had “little or no direct knowledge about the condition of the property.” [Read more…]

Tax break for selling land next to your house

You probably know that if you make a profit when you sell your house, you can usually avoid paying capital gains tax. In most cases, you can avoid the tax on profits of up to $250,000 (or $500,000 for a married couple).

But did you know that if you sell your house in one transaction and a vacant parcel of land next to your house in a separate transaction, you can also get a tax break?

In many cases, you can combine the two sales and treat them as a single sale subject to the $250,000 or $500,000 exclusion.

That’s true if you sell the adjacent parcel within two years before or after you sell your house, and if the parcel was originally part of your residence and wasn’t used for a separate business or rental purpose.

Beware of this ‘trap’ in commercial insurance

Many commercial insurance policies contain what’s called a “protective safeguards endorsement.” This gives the property owner a break on its insurance premiums if the owner protects the property through a fire alarm, automatic sprinkler system, fire safety service contract, or other method of preventing harm.

Sounds like a good idea, right? It can be … but the trick is that these endorsements typically say that the owner must maintain the system in good working order at all times, or notify the insurance company right away if there’s a problem the owner can’t control. Otherwise, the insurance company won’t pay for any losses.

That means the owner must be extremely careful about maintaining its systems. Also, the owner must be extremely careful about not letting a tenant do anything to compromise the systems. If a tenant is allowed to make minor alterations without the owner’s approval, for instance, how will the owner know if the tenant does something that unintentionally affects a sprinkler system?

These endorsements can be a money-saver, but property owners need to think long and hard about the potential negative consequences.

More parents buy condos for their children in college

A growing trend is for parents to buy a condo for their college-age children to live in, instead of a dormitory. This gives the child more luxurious accommodations (and encourages an environment conducive to studying instead of all-night partying), while creating the possibility that the parents can sell the property at a profit in four years.

There are other financial benefits, too. For instance, suppose that instead of paying the college for room and board, you give the money to your child. You can give your child up to $14,000 a year without paying gift tax, and a married couple can give up to $28,000. Your child can then use the money to pay you rent for the condo. Voilà! You’ve created a rental business that provides tax breaks.

As long as you’re charging your child full market rent, you can deduct your mortgage interest payments as a business expense. You can also deduct other operating expenses, such as insurance, utilities, condo fees, cleaning costs, maintenance and repairs. You may also be able to take a deduction for depreciation. [Read more…]

How to understand your APR

Many mortgage shoppers are confused about the difference between a loan’s interest rate and its APR, or annual percentage rate. Understanding APR can be extremely valuable, because it can allow you to compare different loans more effectively and figure out which one is truly best for you.

But you’ll also want to understand the limits of APR, and why a loan with a better APR might not necessarily be a better loan given your specific circumstances.

Interest rates are simple – they’re the cost of borrowing money. All other things being equal, a loan with a 4% interest rate is better than a loan with a 5% interest rate.

But the problem with mortgages is that all other things are seldom equal, because different lenders charge different amounts for closing costs and other expenses. That’s where APR comes in. APR is designed to compare the true cost of a loan when these other expenses are taken into account. [Read more…]

Multi-generational families are facing zoning problems

A growing number of families want to live in a home along with elderly parents or “boomerang” grown children – but they may run into problems with the local zoning board.

Some 18% of Americans now live in a home with more than one adult generation, and that figure is growing. In many cases, what families want is a home with an “in-law” apartment – one that has a separate entrance, separate kitchen, and separate utilities. The idea is that the family can live together, but the elderly parents or grown children can nevertheless have a measure of independence.

Home builders say there is strong demand for this type of arrangement. The problem is that such structures are often banned by zoning laws in residential neighborhoods. [Read more…]

Congress extends homeowner credits for energy improvements

Congress has extended a number of tax credits for homeowners who make energy-efficient improvements to their home, as long as the equipment they install is certified by the manufacturer as qualifying for the programs. The credits fall into two categories:

(1) Traditional improvements

You can get a credit for 100% of your expenses for central air conditioners, electric heat pumps, and a variety of water heaters (up to $300); natural gas, propane, and oil furnaces and hot water boilers (up to $150); and furnace air circulating fans (up to $50). [Read more…]

New rules if you buy real estate from a foreign owner

Did you know that if you buy real estate in the U.S. from a foreign owner, you may have to withhold a big chunk of the sale price and send it to the IRS?

This is required by a law called FIRPTA (the Foreign Investment in Real Property Tax Act), which is designed to make sure that foreigners who sell U.S. property don’t skip off without paying taxes.

In the past, a buyer generally had to withhold 10% of the sale price and send it to the IRS. Effective February 15, 2016, the withholding rate has gone up to 15%. [Read more…]

‘Underwater’ homeowners may get mortgage principal reduced

Some 33,000 homeowners across the country will be eligible to have the amount of their mortgage principal reduced under a plan recently unveiled by the Federal Housing Finance Agency.

This is a different plan from the government’s better-known HAMP and HARP programs. HAMP (the “Home Affordable Modification Program”) focuses mainly on reducing monthly payments rather than forgiving principal, while HARP (the “Home Affordable Refinance Program”) is designed to help underwater homeowners refinance their loans. [Read more…]

Can landlords refuse to rent to tenants with a criminal record?

Benigno Herrera, a 70-year-old man in Austin, Texas, was turned down when he tried to rent an apartment recently. The reason? He had a drunk driving conviction on his record – from 36 years ago.

Cases like Herrera’s are coming up much more frequently, and raising legal questions about how far landlords can go in using criminal background checks to screen potential tenants.

The issue is reaching a boiling point for two reasons. One is that it has simply become much easier for landlords to perform these checks. In the past, landlords had to hire an investigator or go through local court records, but today, they can often just perform a simple computer search. [Read more…]

Average apartment rent was up 4.6% last year

The average rent in the U.S. was $1,180 a month at the beginning of 2016, up 4.6% from a year earlier, according to a company called Reis, Inc. that tracks such trends.

Rents dipped in 2009, following the recession, but they have been growing steadily ever since.

Demand for apartments is high, since the rate of homeownership in the U.S. is about as low as it’s been at any time in the last 30 years. [Read more…]

Be careful if you buy the furniture along with the house

A surprising number of home buyers make an offer for a house that includes some items of the seller’s personal property – they want to keep certain furniture, pieces of artwork, a pool table, a boat at the dock, etc.

There’s nothing wrong with this, but it does create some complexities that you should be aware of.

For instance, lenders typically won’t include the value of the “extras” in a mortgage loan – it’s simply too much trouble to foreclose on a sofa. So if you’re paying $300,000 for a house, and the price includes furniture that the lender thinks is worth $15,000, you’ll only get a mortgage for $285,000 – you’ll have to pay the rest out-of-pocket. [Read more…]

FHA mortgage loans may be easier to get

A new Federal Housing Administration initiative will make it easier to qualify for a mortgage loan through the FHA. This is good news for borrowers with lower incomes or an imperfect credit history, since FHA loans are often available to people with credit scores as low as 580 and down payments as low as 3.5 percent.

Here’s the background: As part of its crackdown after the housing bust, the federal government adopted rules saying that if Fannie Mae or Freddie Mac bought a loan that went into foreclosure, and it turned out that the lender had made some error in the initial paperwork years ago – even a fairly minor or technical one – Fannie or Freddie could force the lender to take the bad loan back. [Read more…]

New, easier forms help mortgage shoppers

One reason many potential homebuyers have always found mortgages to be intimidating is that lenders send them lengthy, complex “disclosure” forms that are confusing and hard to understand. This can make it more difficult to figure out exactly what you’re getting into, and whether one mortgage product is really better than another.

Starting a few months ago, though, the federal government has been requiring new, simplified forms to make shopping for a mortgage easier. The new forms make it much less complicated to understand your costs and obligations, and to engage in comparison shopping.

In the past, mortgage applicants received two separate forms after applying for a loan – an early Truth in Lending Statement and a Good Faith Estimate. At closing, they got two more forms – a final Truth in Lending Statement and a HUD-1 Settlement Statement. [Read more…]

Sometimes, it makes sense for only one spouse’s name to be on the mortgage

Most married couples who buy a home take out a mortgage together. Frequently, they need both spouses’ income in order to qualify. But in a surprising number of cases, it can make sense for the couple to own the home jointly, but for only one spouse to obtain the mortgage.

Here are some advantages to this arrangement: [Read more…]

New tax break for rich unmarried homeowners

You can deduct your mortgage interest on your income taxes, but there’s a limit – you can only deduct the interest on up to $1 million of mortgage debt used to buy the property, plus $100,000 in home equity loans.

In a recent California case, a wealthy unmarried couple jointly owned a home that had a $2 million mortgage. They got into a dispute with the IRS over whether the $1 million limit applied to them jointly or individually.

The U.S. Tax Court initially sided with the IRS, and said the $1 million limit applied per home. But a federal appeals court in San Francisco overruled that decision. It said the $1 million limit applied per taxpayer, at least where the two taxpayers weren’t married. Therefore, the couple could deduct the interest on the entire $2 million mortgage. [Read more…]

Be careful with ‘expense clauses’ in commercial leases

It’s common in commercial leases for the tenant to pay a portion of the landlord’s property taxes and other expenses incurred in maintaining the property. Typically, the tenant’s portion is calculated as a pro-rata share, based on how much space in the building the tenant occupies.

But be careful: This pro-rata share can be calculated in two ways – as a percentage of the leased space in the building, or as a percentage of the leasable space in the building.

The “leasable space” method is better for the tenant. If a building has 100,000 square feet, and the tenant occupies 5,000 square feet, the tenant will pay 5% of the total expenses, no matter how much of the rest of the building is vacant. [Read more…]

Extended family may help with a mortgage

People who live with members of their extended family – or have boarders living with them – may have an easier time getting a mortgage, under new rules from Fannie Mae.

Previously, if you applied for a mortgage, only your own income could be counted to see if you qualified, even if you had family members or others living with you who contributed to your housing payments on a regular basis.

Now, however, under Fannie Mae’s “HomeReady” program, the income of extended family members who live with you can be considered on your mortgage application – even if the family members don’t sign the loan and aren’t legally responsible for the payments. [Read more…]

More homes are being sold ‘rent-to-own’

A growing number of homes are being sold on a “rent-to-own” basis.

Here’s how it works: The potential buyer agrees to lease the home for a period of time, usually two years. The buyer also puts down a deposit (often called an “option consideration”), which is typically two to three percent of the home’s market value. At the end of the lease term, if the buyer decides to purchase the property, the deposit is credited toward the purchase price. If the buyer changes his or her mind, the seller keeps the deposit.

A typical agreement doesn’t set out the future purchase price in stone, but instead says that the current market value will be adjusted according to some measure that reflects the general trend of real estate prices in the area. [Read more…]

Deducting your home office can affect you when you sell

If you work at home, the home office deduction can be a great way to turn part of your house into a tax break. But you should be aware that it can also trigger a tax bill when you sell the property.

Here’s some background on how the deduction works, and how it affects home sales:

The deduction is available if you have a space in your home that you use regularly and exclusively for work. If you use a room for work only occasionally, or if you use it regularly for work but your children also do homework there in the evening, you probably don’t quality. You also wouldn’t qualify if you use the room to manage your investments but not to operate a business. [Read more…]

If you’re thinking of buying a home in another country…

Some well-off people are thinking of buying a vacation or retirement home abroad, now that the dollar is strong and the real estate market has become depressed in many parts of Europe and elsewhere.

If you’re considering such a move, be aware that the rules of real estate can be very different in other parts of the world. [Read more…]

IRS explains mortgage interest deduction for multiple owners

As a general rule, you can deduct home mortgage interest on your federal income taxes, as long as you itemize deductions. This sounds simple enough, but it can get complicated if a home is owned by more than one person. Recently, the IRS provided an explanation of how this works.

According to the IRS, the key question is how much interest each owner actually paid in a given year – not what percentage of the home each owner owns. That means, for example, that if you own a home jointly with a child – so you each own 50% – but you paid 100% of the mortgage interest, you can deduct 100% of the interest payments on your taxes.

Of course, that also means that your child can’t deduct any of the interest on his or her own taxes. [Read more…]

Co-signing a student loan can hurt your credit score

Many parents who co-sign a private student loan for a child don’t realize that it can affect their own credit score if they later apply for a mortgage.

Having parents co-sign loans has become more popular lately, because it can make it easier to get a loan approved or to get a lower interest rate. Some 94% of private student loans were co-signed in the last academic year, up from only 77% six years ago. [Read more…]

Condos lag in housing upturn

The recovery in the housing market has produced higher prices for single-family homes along with all-time record-high apartment rents. But condominiums have been late to the party.

The median sale price for an existing single-family home in the U.S. is now back up to what it was in 2005-2006, before the housing crisis. But the median sale price for an existing condo is still more than $15,000 below its earlier peak. [Read more…]

Do I really need title insurance?

A home is the largest purchase most families ever make. The vast majority of people wouldn’t hesitate to buy homeowner’s insurance to protect their investment against fire, theft, tornadoes, and so on. Title insurance protects people against losing their home in a different way – through discovering that they don’t actually have all the ownership rights they thought they did.

How could such a thing happen? There are a number of ways.

For instance, it might turn out that the person who sold the property didn’t have the complete ability to sell it, because someone else had a legal interest it. An example would be if the seller were divorced, and hadn’t realized that his or her ex-spouse had to sign off on the sale for it to be valid. Even though you bought the house in good faith (and even if the seller acted in good faith), someone else would still have a legal claim to the property. [Read more…]

People without credit scores could soon qualify for a mortgage

The company behind the FICO credit score – which is used in about 90% of consumer lending decisions – has introduced a pilot program to give “alternative” credit scores to millions of people who don’t currently have one.

This could ultimately allow these people to qualify for mortgages that they can’t get today.

Some 53 million Americans currently don’t have credit scores. Sometimes this is the result of a negative event such as a bankruptcy or foreclosure, but often it’s simply because the person doesn’t have a history of relying on credit. [Read more…]

Be careful when negotiating via text message or e-mail

If you agree to buy or sell a property in a text message, instant message, or tweet, is that a binding contract?

Not in California, which just enacted a law saying these types of “ephemeral” messages can’t amount to a contract for a real estate sale unless the parties sign a written agreement afterward. [Read more…]

How to tell if you’ll owe capital gains tax when you sell your home

Most people who sell their home don’t have to pay capital gains tax, even if the value of the home increased substantially while they owned it. But some people do owe tax, so if you’re thinking of selling, it’s important to know whether you can escape the IRS.

Here are the rules:

As a single person, you can generally exclude up to $250,000 in gain from a home sale. If you’re married and file jointly, you can generally exclude up to $500,000 in gain. [Read more…]

What do women want? In real estate, maybe not what you think

A recent survey by the National Association of Realtors is challenging stereotypical notions of what’s important to men and women when it comes to buying a home.

The survey asked single men, single women and married couples what house features were “very important” in their decisions about what to buy. [Read more…]

Short-term rentals (such as Airbnb) can create tax issues

If you lease your home to someone for a week or two through Airbnb, HomeAway, FlipKey, or some other short-term rental service, do you have to report the income on your taxes?

Maybe! The answer can be complicated.

In general, the key question is whether you lease your home in this way for more than 14 days a year. If you do, then you have to report all of your rental income on your federal income taxes.

That’s true even if you lease the home for less than 14 days at a time – so if you lease it for a week in February, a week in June, and a week in September, you will have to report all the income. [Read more…]

Should divorcing couples sell their house?

Aside from child custody, the most emotionally charged issue in a divorce is usually who gets to keep the house. For most couples, a house is their most valuable asset, and it has an enormous symbolic value as well.

But while couples often fight over who gets the house, keeping the house isn’t always the smartest plan. In some cases, the better route is to jointly sell the property, split the proceeds, and then buy or rent a smaller home. Most people going through a divorce would be wise to at least consider this option.

As an example, let’s say Jason and Elaine are getting divorced and deciding what to do about their house. [Read more…]

20% of homeowners don’t refinance when they should

About 20% of U.S. homeowners fail to refinance their mortgage when interest rates drop enough to make it worthwhile, according to the National Bureau of Economic Research.

This is a huge mistake. The median total of lost savings for these families is currently about $11,500 in present-value terms, the Bureau found

What is a ‘turnkey’ home?

About one out of every 150 real estate listings now uses the word “turnkey” to describe a home. But what does the word mean?

Unfortunately, there’s no clear answer. In many cases, a “turnkey” property means that the house comes with everything in it – furniture, rugs, art, window treatments, even the dishes and silverware. This type of listing is most popular with houses in resort areas that are being sold as vacation properties, since the buyer may already have a primary home and not want to bother having to outfit a second one.

But some sellers use the word “turnkey” simply to mean that the property has recently been renovated and doesn’t require any major repairs. So be sure to clarify what the seller has in mind when you see this term in a listing.

Hot now: Solar panels, in-law apartments

The biggest trends in new homes right now are built-in solar panels and separate apartments for aging relatives.

It typically costs $10,000 to $20,000 to retrofit an existing house with solar panels, but builders are increasingly putting them into new homes. Buyers can then choose to purchase the system or lease electricity from the builder.

Buying the system costs more upfront, and the full cost might not be reflected in a mortgage appraisal. But doing so can save money in the long run, especially since homeowners who generate more power than they need can often sell it to an electric company for a credit. [Read more…]

Banks in battle over condo fees, homeowners association dues

Did you know that 63 million Americans now live in condominiums and communities subject to a homeowners association? That’s up from just 10 million as recently as 1980.

The surge in community living is creating thorny legal issues when homeowners default on both their mortgage and their community dues, fees and assessments. Specifically, who can foreclose on the property, and who gets the money first, the bank or the community association?

The answer depends on the state, and often leads to conflicts between state laws, federal regulations, and condo documents.

About half the states have laws that say that community associations have priority over a mortgage lender, so if the property is sold, the condo or homeowners association gets paid first. But these laws vary widely. [Read more…]

Veterans can save on mortgages with a VA home loan

Active and retired service members can often get a great deal on a mortgage with a loan guaranteed by the Department of Veterans Affairs.

The VA doesn’t make loans, but it guarantees them for lenders, and in return lenders offer better terms on the loans. Not all lenders offer VA-backed loans, so it’s worth looking around for one that does.

The biggest advantages for borrowers are (1) no down payment in most cases, (2) no private mortgage insurance, and (3) frequently, lower rates.

Loans without a down payment are available in most of the country for loan amounts up to $417,000. In certain high-cost areas, the limit can go up to $625,500 (or even more in a few places). [Read more…]

How lenders have tightened standards in the past decade

Percentage of new mortgages by credit score (rounded):

2004                2014

780+                11%                 30%

700-779           43%                 44%

640-699           26%                 24%

620-639           7%                 2%

Below 620       13%                 0%

 

Home buyers get more help

A number of recent changes in the law and in the way that lenders do business are making it easier for people to buy a home and get a mortgage. Taken together, these changes suggest that things are moving back in a direction favorable to purchasers – after a decade in which laws and lending policies have repeatedly tightened things up.

This is a big shift. According to the Urban Institute, a Washington, D.C. think tank, some 1.2 million additional home loans would be made each year if lending rules and practices returned to their historical norms. [Read more…]

U.S. announces plans to loosen mortgage lending

Federal regulators recently announced a number of initiatives to loosen mortgage lending. Their view is that the current standards, adopted years ago in response to the financial crisis, were an overreaction, and the current tighter rules are choking off a housing recovery.

Here’s the background: After the housing bust six years ago, the government wanted to prevent another round of risky loans that led to foreclosures. So it required that lenders insist on higher down payments if they want to have Fannie Mae or Freddie Mac buy or guarantee their loans. And if lender wants to sell a loan to someone other than Fannie or Freddie, it has to require a 20% down payment or else keep part of the risk itself. [Read more…]

More homeowners want to combine two units into one

What can you do if you live in a condo, townhouse or multifamily home, and you need more space but don’t want to move?

For a growing number of people, the solution is to buy the unit next door, tear down a wall, and create a single, larger unit. Recently there’s been an uptick in the number of people combining two small condos into one larger one, or converting a two- or three-family home into a single-family home.

If you’re considering such a move, there’s a lot to keep in mind.

First of all, you’ll need to make sure such a project is allowed. In a condo, you’ll probably need permission from the board or homeowners association. If you’re turning a multi-family home into a single-family home, you’ll need to make sure this is okay under the local zoning rules. [Read more…]

How to keep out competitors if you lease retail space

Most stores that lease space in a mall or other commercial area would like a guarantee of “exclusive use,” meaning that the landlord won’t also rent space to a competing business.

Here are some things to consider if you’re negotiating over such a right in a lease:

What’s the use? The “use” you have in mind should be described in detail, to avoid problems later. For instance, if an ice-cream-cone shop also sells some ice-cream cakes, does that mean that the landlord can’t also rent space to a bakery? If a coffee retailer has “exclusive use,” does that mean that a sandwich shop can’t also sell coffee? [Read more…]

New problem when getting a loan to remodel a home

Some homeowners are running into a big problem when the take out a mortgage (or refinance a mortgage) to pay for a remodeling project. The problem occurs if the remodeling is so extensive that the owners temporarily move out while the work is being done.

Generally, lenders give better terms and rates to homebuyers who plan to stay in a home as their primary residence, as opposed to investors who plan to quickly remodel a home and “flip” it to a new owner. Investor loans are riskier, so lenders typically require a larger down payment and a higher interest rate. To qualify for better terms, buyers who plan to stay put often have to prove that they’re actually living in the home – which they can’t do if they’ve moved out during remodeling. [Read more…]

New rules for credit scores may help many people get a better mortgage

The company behind the most widely-used credit score in America has announced three major changes to how it calculates consumers’ scores – and they could potentially help millions of people to get a better rate on a mortgage.

The so-called FICO score is used throughout the lending industry. A new version – called FICO 9 – has now been introduced, and it includes these changes:

(1) A limited credit history is less of a problem. Currently, if people don’t have much of a history of borrowing money – because they’re young and just starting out in life, or because they have simply chosen not to rely heavily on credit cards, auto loans, etc. – this is treated as a negative. Such people usually get lower credit scores because they haven’t established a track record of handling credit wisely. [Read more…]

One-third of existing home sales are now in cash

Some 33% of sales of existing homes (as opposed to brand-new homes) are now cash-only deals, according to a survey by the National Association of Realtors.

The number of sales in which the buyer doesn’t take out a mortgage began to increase a few years ago during the recession, because well-heeled investors were purchasing large numbers of distressed properties with the goal of rehabbing and flipping them.

But according to the survey, in the last few years investors have been joined by a new group of cash purchasers – retirees. These older folks are selling their homes and using the equity to downsize, or are flush from the stock-market boom and are buying vacation homes or condos as an investment. [Read more…]

Fannie Mae will continue to back larger mortgages

Fannie Mae and Freddie Mac, the quasi-government entities that insure or repurchase a high percentage of mortgages in the U.S., will continue to back mortgages as large as $417,000 – and as large as $625,500 in some high-value areas.

That’s the word from the new director of the Federal Housing Finance Agency, which oversees the two mortgage giants.

This is good news for buyers who want to take out larger mortgages. Mortgages of more than Fannie and Freddie’s maximum amounts are usually considered “jumbo” loans, and borrowers typically have to meet much higher standards and face many more restrictions. [Read more…]

FHA plans to reduce mortgage insurance for many borrowers

One of the simplest ways for a first-time homebuyer to obtain a mortgage is with a loan insured by the Federal Housing Administration.

The FHA doesn’t make loans, but it insures them for lenders. This makes lenders much more willing to offer a mortgage, because if the borrower defaults, the FHA will be on the hook.

FHA loans often require a down payment of as little as 3.5 percent, and can be obtained in many cases by people who have iffy credit or who have a bankruptcy or foreclosure in their past.

The catch is that borrowers have to pay mortgage insurance. Actually, they usually have to pay two types of insurance – an upfront payment of 1.75 percent of the loan amount (which can be rolled into the loan), and a monthly payment that depends on the length of the loan and the amount of the down payment, but can be as much as 1.35 percent annually. [Read more…]

How to buy a vacation home with friends or family

Sales of vacation homes have been rising sharply lately. Across the country, the number of vacation homes sold last year was up 30% from the year before, according to the National Association of Realtors.

Vacation homes now account for 13% of all home sales. The median price last year was $168,700. Interestingly, most vacation home buyers are under age 45.

Many people have long dreamed of owning a second home, but buying one can seem like a big stretch. One solution is to join forces with friends or family and purchase a home together.

This can be an ideal solution – you get to use the home for part of the year, just as you planned, but you can also share the cost, the maintenance work and the expenses with others. [Read more…]