Nervous about buying a house?

Home Buying Tips and Help for Home Buyers

The single most important step that any Raleigh home buyer can take is to contact Ann Davis of FOR Home BUYERs. Ann Davis is the leading Buyers Agent in RTP and one of the top Raleigh real estate agents.

Ann Davis works exclusively for home buyers and helps new buyers work through the complex RTP real estate market. Contact Ann Davis and let her represent you throughout the entire home buying process.

They're a couple in their early 30s -- a computer technician married to a bank teller. They have stable jobs, a down payment in the bank and an intense desire to escape their Charlotte condo for a luxury home in Raleigh North Carolina.

In fact, the couple has picked out their ideal property -- a sprawling ranch-style house on a full acre. Plus they're convinced this is an opportune time to buy.

Still, the couple is racked with doubts and have yet to make a serious bid on the property. Are they crazy to consider buying in so tumultuous a real estate market? Their parents think so and call them often to urge that they hold off.

This couple's situation illustrates the pervasive confusion affecting prospective homebuyers at a time of economic uncertainty, says a real estate broker, who is also the author of "A Survival Guide to Buying a Home."

One manifestation of buyer ambivalence is a common phenomenon: the withdrawn bid.

"People search around and around for the perfect house at a bargain price. When they find it, they're super excited and run to their agent's office to write an offer. But an hour later they tell the agent to tear up their bid," the broker says.

Of course, buyer ambivalence is understandable -- given the economic situation in the country. Turbulence on Wall Street, along with high gas and food prices and job jitters are combining to cause insomnia for many once-confident members of the middle class.

"It's difficult to get a handle on home values now -- or to accurately project what real estate will be worth in the future," the real estate broker says. Even so, he insists that those who get a rock-bottom price on a home in a desirable community will one day be glad they acted now rather than waiting.

Here are pointers for those now contemplating a home purchase:

• Clarify your reasons for making a purchase.

Fear is a powerful force that can restrain people from going forward -- even when they believe it's in their interest to do so. But those convinced that now is a good time to realize a long-held housing dream shouldn't let ungrounded fears inhibit them, says another real estate broker and former president of the National Association of Exclusive Buyer Agents.

"The main thing is to go into a purchase with your eyes wide open, plus every piece of solid information you can obtain," the other broker says.

Keep in mind, though, that there could be reasons why it might be imprudent for you to buy now, including near-term employment prospects or perceived job security.

• Get a strong mortgage lender and RTP home buyers agent on your team to build confidenc e.

It's no secret that home lenders now want to be doubly sure any home loan they originate will be solid. This means you'll need to be unusually well-prepared to answer the lender's request for documents, the other broker says.

"All your paperwork must be in order. I recommend that even before you go look at homes, you sit down with a Ann Davis and get all of your paperwork in order."

Also, more lenders are now demanding proof that the funds you've amassed for your down payment have been in your savings or checking account for some time. That means you'll need to produce account statements showing the money is truly your own, which gives you a stronger stake in the home or real estate property you buy.

If you're self-employed, you can now expect your lender to do a rigorous review of documents related to your business.

But the time you spend documenting your eligibility for the home loan will be worth it if your lender gives you a "pre-approval" letter. This you can use as a bargaining chip when negotiating for the home or real estate property of your choice.

• Take your time choosing a home -- within reason.

Many neighborhoods now have an unusually large number of for sale signs. This huge array of choices gives homebuyers yet another reason to delay commitment to any one property.

"If this is the right time for your family to buy a house, don't let the negative atmosphere around real estate discourage you. Use the abundance of choices to help you get precisely what you want," the other broker says.

Here are some other things to consider when buying a home:

- Do you have a home warranty?

- Is the house on a septic system?

- Does the home feature a custom bathroom design?

- Does the master bathroom feature a custom shower enclosure?

Most Reverse Mortgages Dodge Credit-Crisis Woes

I am considering taking out a reverse mortgage in the near future. Is there any connection with the mortgage problems that have been in the news? Could those problems affect my reverse mortgage in any way? I could use a reverse mortgage to pay off my mortgage balance. I have been to several sessions on reverse mortgages and understand the program. I just want to make sure that all these problems that have been arising in the banking industry will not affect me.
—Marie Bell, San Diego

If you stick with a government-backed reverse mortgage, your payments are guaranteed. And if you take your reverse mortgage as a lump-sum payment, there is no uncertainty. So-called proprietary loans typically offer more flexible terms and aren't backed by the government. But so far payments have continued during the capital crunch.

Reverse mortgages can help older homeowners with mortgage payments, home maintenance or property taxes, among other expenses. Instead of the borrower making payments to the lender, as with a regular mortgage, the lender makes a payment, or payments, to the borrower. The borrower keeps control of the house and doesn't have to pay back the loan as long as he or she lives there. When the homeowner dies or moves out, the loan is typically paid off by selling the house, and any money left over goes to the homeowner or the homeowner's estate.

Fees are typically steep -- up to 7% of the home's value. The loans are generally limited to people who are age 62 or older, and borrowing limits are capped based on where the homeowner lives. There's a good primer at reversemortgage.org.

The most common type of reverse mortgage is a Home-Equity Conversion Mortgage, or HECM, in which the Federal Housing Administration insures lenders' and borrowers' risk. Those loans, backed by federal-government insurance, are secure. But if you're considering taking out such a loan, try to wait a few weeks: A housing law enacted earlier this year raised the lending limits for the HECM product. On or about Oct. 1, the Department of Housing and Urban Development is expected to announce those limits and start using them, says Peter Bell, president of the National Reverse Mortgage Lenders Association, a trade group in Washington, D.C.

There are also proprietary reverse mortgages -- often with higher lending limits (and, at times, a minimum-age requirement of 60) -- that aren't government-backed but which get bundled and sold to investors. Much of the securitization business had been handled to date by a unit of Lehman Brothers Holdings Inc. Although Lehman's holding company filed for bankruptcy-court protection Monday, the unit that securitized reverse mortgages "isn't part of the bankruptcy filing," Mr. Bell says. "So for the moment, there's no issue."

Still, it is getting tougher to find proprietary reverse-mortgage products. A year ago, there were 15 such products. "As of last week we were down to one or two," Mr. Bell says.

By: Kelly Greene
Wall Street Journal; September 20, 2008

Fixed-Rate 30-Year Mortgages Fall Below 6% on Bailout News

Rates on 30-year fixed-rate home mortgages dropped substantially this week, falling under 6% for the first time since May in the wake of the government takeover of Fannie Mae and Freddie Mac, according to Freddie Mac's weekly rate survey.

The national average for the 30-year fixed-rate mortgage was 5.93%, down from 6.35% and 6.31% a year ago, according to Freddie Mac's weekly survey. The rate is down nearly 0.6 percentage point over the past months.

"This means that the monthly principal and interest payment on a new $200,000 loan is over $76 lower than a month ago," said Frank Nothaft, Freddie Mac chief economist, in a news release. He expects the movement to help spur home purchases and loan refinancing in coming weeks.

Fifteen-year fixed-rate mortgages averaged 5.54%, down from 5.90% and 5.97% a year ago.

Rates fell substantially earlier this week, after news of the government's bailout of Fannie Mae and Freddie Mac.

"Lower rates have occurred at an opportune time, as the July pending sales data from the National Association of Realtors were off 3.2% from June," Mr. Nothaft said. "Refinance applications are up 18% over the past three weeks through September 5th, indicating that refinance activity has already begun to pick up."

The MBA reported that mortgage applications filed are going up.

Wall Street Journal; September 12, 2008

FBI Probes Unusual Incentives for Home Buyers

Investigators Ask Whether Payments Misled Lenders

When home sales began to slow at the start of the downturn, home builders offered buyers incentives -- instead of reducing prices -- to stimulate demand. The incentives included cars, tuition and credit-card payments, and even cash.

Now, federal investigators are questioning whether some of those incentives misled lenders and caused them to write mortgages that were artificially inflated, contributing to today's home-price crash.

Using incentives to sell homes has long been a marketing tool for builders. When properly disclosed and structured, the practice is legal. But the Federal Bureau of Investigation is looking into allegations that home builders, brokers and appraisers defrauded lenders by not disclosing unusually large incentives to buyers, which could have added as much as $100,000 to the price of a home.

Housing analysts say incentive schemes prolonged the housing boom in hot markets like Las Vegas and, consequently, have made the downturn all the more severe.

The FBI wouldn't name individuals or companies under scrutiny, but confirmed that it is looking at cases where the disclosures of incentives "haven't made it all the way to the ultimate lender," says William Stern, financial crimes supervisor for the FBI in Palm Beach County, Fla., and the bureau's former national mortgage-fraud coordinator.

Interviews with real-estate agents, home buyers and former employees at home builders describe an industry where competitive pressures fueled unusually creative giveaways in a last-ditch attempt to prevent price cuts. Home builders hate to cut prices, not only because it reduces profit, but also because their customers who paid full price complain.

In the Las Vegas division of Dallas-based Centex Corp., the home builder paid off car loans, credit-card bills and mortgage payments on existing homes to entice new buyers on homes priced between $350,000 and $550,000. Those payments weren't always disclosed to lenders.

"You weren't buying a house. You were buying a package," says Dana Ellis, who worked as an escrow manager for Centex from 2004 to 2006. To qualify, Centex required the buyer to use the company's in-house mortgage unit to originate the loan, and the loan application included an incentive "addendum" that listed the incentives but wasn't always sent to the lender. "They weren't disclosing any of this. That was on separate paper that was pulled," she says.

In some states these incentives are not available. The state regulators are much more active and enforce laws that prevent home builders from offering buyers incentives that lead to mortgage and financial problems.

In reviewing the hot real estate markets nationwide, one state, North Carolina, is home to four of the top ten hottest real estate markets in the country.

North Carolina, unlike California and Las Vegas, Nevada, does not have "flipper" markets. Also North Carolina has a diverse employment base and many jobs are available is a wide range of industries.

The employment opportunities are vast in North Carolina and are fueling demand for homes and real estate throughout the entire state of North Carolina.

The relocation market in North Carolina, especially Raleigh Relocation opportunities increases demand and results in more consistent pricing levels.

North Carolina has a very strong network of real estate professionals that help homebuyers avoid costly mistakes that can lead to foreclosures and financial difficulties.

Let's examine some of North Carolina's hottest real estate and the proven professionals that help buyers and sellers make good decisions:

Raleigh Real Estate Agency: An exclusive buyers real estate agency that is based in Raleigh, North Carolina and dedicates themselves to representing you through the entire buying process.

Winston Salem Real Estate Agency: Another established real estate agency in the area. The Winston Salem Real Estate Agency provides custom profiles of homes for sale in Winston Salem, Greensboro, Kernersville, and the neighboring Piedmont Triad area of North Carolina.

Greenville Real Estate Agency: Part of Our Town Properties, the Greenville Real Estate Agency is will to help its clients by providing them with tips about buying local real estate, Greenville relocation, and how to handle Greenville real estate mortgages.

In many cases, an exclusive buyers agent could have helped homeowners in Nevada, California, Michigan, and Ohio avoid the many traps that national home builders such as: Centex and Beazer Homes often make available through deceptive marketing incentives.

Centex says that the program was confined to about 50 sales and was shut down in June 2006, about six months after it began. Centex averaged 63 home sales a month for the year beginning April 2006. "These incentives did not reflect standard corporate practice and, once discovered, the practice was immediately halted," Centex spokesman David Webster says. Centex says only one of the loans was government-backed, through the Veterans Administration home-loan program, and the builder has promised to stand behind all of those loans.

Elsewhere, developers offered "sweat equity," or payments for buyers to receive home improvements such as landscaping. "You're basically getting banks to give you a cash advance," says Chip Hickman, the general manager of Easy Street Realty in Las Vegas. He said such programs weren't heavily advertised and were offered by many area builders, although he declined to name them. "It was more sales agents in the model home saying, 'Look, tell me what you need and I got a lot of money to play with.' "

There aren't any strict limits on incentives, but they could run afoul of federal regulations if they cause the mortgage to increase by more than the cost of the incentive. "It's a phantom incentive to mask it in an excessive loan," says Brian Sullivan, a Department of Housing and Urban Development spokesman.

Stronger due diligence by banks might have caught some of these problems. Banks, however, say they relied on professional appraisal companies to insure property pricing. Mortgage-fraud experts say appraisers sometimes cooperated with builders because it was the only way to get business. Appraisers say that determining the value of new homes is more difficult because comparable sales figures are provided by builders.

In some cases, developers gave outsized commissions to real-estate agents who then gave that money back to the buyer. The average commission on a home sale nationally was 5.2% last year, up from 5% in 2005, according to a survey by Real Trends, an industry newsletter.

At the height of the real-estate boom, commissions in Las Vegas regularly reached double digits, real-estate agents say. Kurt DeWinter, a Henderson, Nev., agent, received a $70,000 commission on a $550,000 home from Beazer Homes USA Inc. two years ago. He says he gave half of that to the buyer.

"They didn't care what you did with the money as long as the buyer paid the price they wanted for the house," says Mr. DeWinter, who personally went into foreclosure in that same neighborhood on a $500,000 Beazer home. He says he received a $50,000 incentive from the builder, which he used for his down payment. Beazer didn't return calls seeking comment.

Some builders continue to make generous offers. Wagner Homes Inc., a local home builder, advertises in big capital letters at the top of a flyer "$130,000 commission any way you like it!" for homes in developments like "Dawn Day Fusion," a northwest Las Vegas subdivision that offers homes with Asian-inspired architectural flourishes. New homes listed there in mid-July for $530,000 even though similar model homes in that development sold for $400,000 two years ago.

"A fee that high has got to raise a bunch of flags," says Kenneth LoBene, HUD's Las Vegas field director, because builders typically reduce the price of the home rather than offer such large incentives and because homes in that subdivision have sold for as little as $240,000 in foreclosure auctions. Representatives of Wagner Homes didn't return calls seeking comment. Steve Hawks, a Las Vegas real-estate agent, points to offers like this as one that a commercial lender wouldn't back if properly disclosed. "You find me an institutional investor that's going to buy this loan," he says.

Builders Feel Pinch of Key Omission From the Housing Bill

FHA's Elimination Of Down-Payment Gifts Could Dent Demand

Although a bill aimed at reviving home sales and curtailing foreclosures is about to become law, some of its provisions are proving a drag for the nation's large home builders.

Despite a rally Tuesday, the Dow Jones Wilshire U.S. Home Construction Index, which tracks the stocks of major builders, has fallen about 8.5% since President George W. Bush indicated last week that he wouldn't veto the bill that has been approved by Congress.

There have been months of intense lobbying by the building industry, but analysts say the legislation is a mixed bag for the new-home market. On the bright side, the bill shores up mortgage giants Fannie Mae and Freddie Mac, which should help restore some confidence in the mortgage market. It also provides a $7,500 tax credit to stimulate demand among first-time home buyers.

But for the builders, the bill's elimination of seller-funded down-payment assistance on mortgages backed by the Federal Housing Administration is a big loss -- one that could eliminate as many as one in 10 home buyers from the market, according to an analyst.

Starting in October, buyers using FHA loans can no longer accept down-payment "gifts" that are ultimately funded by the home seller, often a builder. Currently, the FHA allows a nonprofit group to gift the down-payment to the buyer. The nonprofit group is then reimbursed by the builder -- a practice the housing bill would stop.

Seller-funded down-payment assistance, which essentially allows buyers to purchase homes with little or no money down, has been filling the void left when the subprime-mortgage market all but vanished in 2007.

FHA officials have said loans that include the down-payment gifts are incurring higher default rates than FHA loans without the gifts. Builders say the gifts make homeownership possible for low-income buyers who have been unable to save money for a down payment.

Miami-based Lennar Corp. used down-payment assistance on 33% of the mortgages it originated in the second quarter, while Ryland Group Inc. said 18% to 20% of its buyers used down-payment assistance during the first half of the year.

"We believe a material portion of these people won't be able to find alternative mortgage-financing options," says Michael Rehaut, a housing analyst at J.P. Morgan. "This likely will result in an additional segment of demand leaving the market."

The elimination of down-payment gifts could bar as much as 10% of the nation's home-buyer pool and as many as 25% of buyers in lower-priced markets, such as Texas, where the gifts are more prevalent, according to housing researcher Zelman & Associates.

Complicating matters further for the builders, the housing bill would increase the down-payment requirement on FHA loans to 3.5% from 3%. Previous versions of the measure had lowered the down payment to 1.5%.

"There will undoubtedly be some impact, but we believe the buyers will adjust and the market will adjust," says Tim Eller, the chief executive of Centex Corp, which said that 25% of its sales in its fiscal year ended March 31 involved down-payment assistance.

In the absence of down-payment gifts, Mr. Eller says, his company can put buyers on a savings plan. In addition, he says that not everyone who uses down-payment assistance is necessarily unable to come up with a down payment.

Mr. Eller also is hopeful that a tax-credit provision in the legislation will help stimulate demand. "We know that this is no silver bullet, but it will have some stimulative impact," he say.

The tax credit mirrors a similar program in the 1970s that Mr. Eller says allowed him to buy his first home, a condominium outside Chicago. But unlike the credit Mr. Eller used in 1974, the credit proposed in the current housing bill has to be paid back over 15 years, making it more like an interest-free loan.

And a home buyer would typically collect a credit after they file their taxes. That may not help buyers who need a cash infusion -- like a down-payment gift -- at the time of the sale.

It is possible that builders could use their mortgage businesses to lend the tax credit to buyers at the house closing, and then be reimbursed after the buyer files their taxes. But that puts the builder at risk if the buyers default on these loans -- a risk the builder's mortgage units aren't necessarily designed to deal with.

"The primary purpose of the builders' mortgage subsidiaries is to get mortgage origination fees," J.P. Morgan's Mr. Rehaut says. "They don't want to take on default risks."

On a brighter note, builders say the housing bill could boost higher-end sales by raising the conforming-loan limits on Fannie- and Freddie-guaranteed loans and FHA loans to a maximum of $625,000 in some high-priced areas.

But many of those higher-end sales will depend on whether buyers can sell their current homes, often to first-time home buyers, which is why builders say the tax credit will help the overall market.

"First time home buyers can help bring back stabilization" in the market, Centex's Mr. Eller says. "It's a very large cohort, and they can have a big impact."

By: Michael Corkery
July 30, 2008

HUD Chief Is Optimistic on Housing Accord

The White House’s new point man on housing said Wednesday he was “very optimistic” the Bush administration and lawmakers could reach an agreement on a huge package to backstop the flailing mortgage market.

“Something can be worked out,” U.S. Housing and Urban Development Secretary Steve Preston said in his first interview since taking over the agency this month. “I don’t know if it will be, but something can be worked out.”

Mr. Preston’s comments on housing are significant because the White House has threatened to veto sweeping legislation to address the housing crisis. Legislation is pending in the Senate. The House passed a separate bill in May.

Both bills would allow hundreds of thousands of qualified homeowners to refinance into affordable, government-insured mortgages. The bills would overhaul supervision of Fannie Mae and Freddie Mac and give HUD more flexibility to operate its mortgage-insurance division, known as the Federal Housing Administration.

Senate Democrats Wednesday were trying to resolve procedural fights before they could pass their version of the legislation, with Senate Banking Committee Chairman Christopher Dodd (D., Conn.) blasting Republicans for delaying a final vote on the measure. Democrats had hoped to pass the measure this week, but a final vote appeared likely to slip until after the July 4 recess. Still, the legislation is expected to pass easily, potentially with enough votes to overturn a veto.

The Bush administration has wavered on the bill, praising provisions to boost supervision of Fannie Mae and Freddie Mac but raising concerns about some of the new spending, such as $4 billion in grants for localities to buy foreclosed property.

White House spokeswoman Dana Perino said Wednesday the White House was “nearer to having something we could work on.”

Mr. Preston characterized the policy discussions as “a turning point in the history of our mortgage markets, and what government’s role should be, and how we are going to enable governmental institutions to fulfill that role.”

The roles of Fannie Mae, Freddie Mac and FHA have surged in recent months as homeowners have looked to government-backed programs for more funding. Previous sources of funding for mortgages, notably the market for certain securitized loans, have dried up in recent months amid a broader credit crunch.

One provision of the Senate bill that Mr. Preston said still concerns the Bush administration is the possibility that it could prevent HUD from charging different premiums to homeowners based on the amount of risk the homeowners pose to HUD’s insurance program. Mr. Preston said this could prevent some homeowners from qualifying for FHA insurance and could require fees for all homeowners to increase. Some Democrats have countered that allowing risk-based pricing could penalize financially strapped lower-income borrowers.

Mr. Preston said he was hopeful these issues could be settled.

Looking ahead, House and Senate lawmakers have ramped up negotiations to resolve their differences. Sen. Dodd and Sen. Jack Reed (D., R.I.) met Tuesday afternoon with House Financial Services Committee Chairman Barney Frank to go over differences in the bills, though details of their talks were kept private.

Separately, Mr. Preston said he has ordered an internal review of the way the agency awards contracts, an issue that dogged his predecessor, Alphonso Jackson, amid allegations that contracts were improperly awarded. Mr. Jackson has denied wrongdoing. At his recent Senate confirmation hearing, Mr. Preston said he would report back to the Senate Banking Committee on the results of his internal inquiry.

Raleigh Voted # 1 City For Young Homeowners

Youthful spirit and economic vitality go hand in hand. Communities with large concentrations of young adults are more likely to prosper, according to a new bizjournals study. The correlation is driven home by the study's comparison of metropolitan areas that skew young or old.

Group No. 1 consists of the 11 major markets where more than 25 percent of all residents are 18 to 34 years old. Group No. 2 contains 14 metros where fewer than 22 percent are young adults. Here's how they match up:

-- The young markets have been experiencing population growth of 2.1 percent per year since 2000. That's seven times the growth rate of 0.3 percent for the old markets.

-- The annual rate of job growth is 1.9 percent in the young metros compared to 0.4 percent in their older counterparts.

-- Personal income is climbing at a median pace of 3.4 percent per year in the young markets. The corresponding figure is 2.8 percent on the old side.

It's clear that having a high percentage of young adults can be an indicator of economic success. It tells marketers where to concentrate their efforts, entrepreneurs where to start businesses, and college graduates where to look for work. Raleigh is also the number one city for Raleigh Web Design, Web Design Raleigh, SEO Raleigh, Web Development Raleigh and Raleigh Web Development.

But which markets offer the best prospects for people in the 18-34 age range these days? Bizjournals sought the answer by analyzing growth patterns, income levels and other key statistics to rank the nation's 67 largest metros as BEST PLACES FOR YOUNG ADULTS. These are the five places currently offering the best job opportunities for young adults:


-- 1. Raleigh: This is the only market to finish in the top 10 in three key categories: population growth, job growth, and the percentage of young adults with college degrees. Raleigh is also blessed with a relatively low cost of living.


-- 2. Austin: Twenty-nine percent of Austin's residents are between the ages of 18 and 34. That's the heaviest concentration of young adults in any major metro.


-- 3. Washington: The District of Columbia can be an expensive place to live, but paychecks for workers in their 20s and 30s are among the highest in the nation.


-- 4. Las Vegas: The economy has slowed in Las Vegas in recent months, yet it remains the national leader in job growth since 2002, averaging 4.9 percent per year.


-- 5. Phoenix: The unemployment rate for 18- to 34-year-olds in Phoenix is 5.4 percent. That's three full percentage points below the U.S. average for the same age group.


Rounding out the TOP TEN in bizjournals' rankings of employment prospects for young adults are Salt Lake City, Charlotte, Seattle, Orlando and Houston. Bizjournals analyzed 67 major metropolitan areas, searching for qualities that would appeal to workers in their 20s and early 30s. THE FORMULA gave the highest marks to places with strong growth rates, moderate costs of living, and substantial pools of young college-educated adults with jobs.


The Sunbelt dominates the upper echelon in the national rankings. Eight of the 20 best markets for young adults are in the South, and seven are in the West.


Four of the five remaining slots are occupied by Eastern communities, while Minneapolis-St. Paul is the only Midwestern metro to make the top 20. The competition to attract new and recent graduates to these labor markets is intensifying, partly because young adults are getter choosier. "College-educated young people are looking for greater control over where they live," concluded a 2006 study by The Segmentation Co., a national research firm that surveyed 1,000 adults between the ages of 25 and 34. All of these respondents held college degrees and had lived in at least two communities since leaving school.

Quality-of-life issues are of prime importance to these mobile young workers. They told The Segmentation Co. that they're looking for places that offer strong professional opportunities, have good schools, and are affordable and clean. The same factors were important components of bizjournals' 10-part formula, which analyzed each market's job-growth rate, education levels, and median rents, among other indicators.


The least desirable market for young adults, according to bizjournals, is New Orleans, sitting dead last in 67th place. New Orleans, which is still struggling to recover from the damage inflicted by Hurricanes Katrina and Rita in 2005, has the worst long-term rates of job and population growth in the study.