Types of Lenders

Today’s choices include banks, mortgage brokers, home builders, and Internet lenders.  Each has its advantages and disadvantages, and rates vary from lender to lender. 

Typically, most lenders do not keep money on hand but instantly sell conforming loans to third parties like the Federal National Mortgage Association or the Federal Home Mortgage Corporation.  The most common source of home lending is a retail financial institution or credit union.  They offer specific loan products and handle their own direct financing by taking consumer deposits and lending them to home buyers.

Mortgage brokers, on the other hand, act as the middleman and do not fund the loans themselves, but handle the mortgage financing for the borrower.  Most earn their fees directly as a percentage from the lender and some from the borrower, or a combination of both.  Since mortgage brokers have access to a wide variety of lenders they are usually on top of the latest rates, fees and lending practices.

Home builder financing is common in new developments where there is a single builder.  The builder carries the construction costs until the homes are built.  The builder works with a lender to set-up financing for the buyer and finances the construction costs.  The buyer does not make mortgage payments until the property is finished. 

The popularity of finding a mortgage on the Internet mortgage has grown in recent years.  Many lenders offer competitive rates and the convenience of tracking your application through the approval process.  Some can save you a significant amount in closing costs, since everything is automated and the time to get approved can be shortened.

Must Do Maintenance

The quickest fix is to not have the problem in the first place.  Here’s a checklist of items every homeowner should get to regularly.

  1. Test your garage door opener monthly to ensure that it reverses when it hits an obstruction or when its sensor beam is interrupted.
  2. Vacuum the clothes dryer’s exhaust duct at least once a year. 
  3. Replace furnace filters quarterly, or as recommended by the furnace manufacturer.
  4. Test all ground fault circuit interrupter outlet monthly.  Press the test button and use a voltage tester to make sure the power goes off.
  5. Clean leaves and debris from the condenser of a central air conditioner seasonally.
  6. Once a year, vacuum the refrigerator coils underneath the appliance.
  7. Have the fireplace chimney inspected and cleaned annually.
  8. Inspect window and door caulking and weather stripping yearly.
  9. Replace the batteries in smoke detectors yearly.  And remember, even recent hard-wired smoke detectors have backup batteries that must be replaced.  If you have never checked yours, do so.

Extended Tax Credit for Home Buyers

The popular first-time homebuyer tax credit that was scheduled to end last November has been extended.  President Obama signed a bill that extended the $8,000 tax credit for first-time homebuyers for 7 months.  An additional incentive for the housing industry is for homeowners.  The $6,500 tax credit will benefit some existing homeowners who are also buyers and whose primary residence has been owned, used, sold, or being sold within at least 5 consecutive years of the previous 8 years.  The legislation is part of a bill that also extends unemployment benefits.

Reportedly, the credit would be available for people earning up to $125,000 a year and couples making up to $225,000 per year.   This is an increase from the current income limits of $75,000 and $150,000, respectively.  The extension of the first-time homebuyer credit lasts through June 30, 2010.  Buyers must sign a contract by the end of April 2010. 

The tax credit applies to homes purchased for less than $800,000 before April 30, 2010.  If you sign a binding contract to purchase a home by April 30th, you would need to close on the transaction before June 30, 2010.  It works kind of like a gift certificate that can be redeemed for cash.  You simply file a form with the IRS right after you buy your home, and the IRS will send you a check for the full amount of your credit.

There are many creative ways of structuring your home purchase transaction in ways that maximize the benefits of the credit.  Here are a few examples:

*The credit applies to 1-4 unit homes as long as you live in one of the units as your primary residence (you could live in one unit and rent out the others). 

*If two unmarried individuals buy a home, and only one of the individuals qualifies for the credit based on their income or past home ownership status, the individual who qualifies for the credit can claim the full credit.  In the case of married couples, both spouses must qualify for the credit.

*The credit applies even if you have co-signers on your mortgage loan.  The incentives come at a good time for the housing industry as they will not only cause more homes to sell but will also have an impact on related industries.  One of the areas that will get a secondary benefit is going to be the home improvement industry.  When someone buys a home they will often put additional work into it to make it their own.  They will paint, put up wallpaper, and hang curtain rods. 

*What does this mean to consumers?  When they saw that home prices had dropped, there was a fear in the market and consumers were waiting to see other people get involved—get back into the market.  Now, as consumers are pushed off the fence with these incentives we will see a strengthening of the housing market as a direct result and people are going to get re-engaged.

Economists with the National Association of Realtors estimate that approximately 2 million people will take advantage of the tax credit this year.

Tips for Safe Online Shopping by Cameron Huddleston, Kiplinger.com

1)      Never shop online from a public Wi-Fi connection.  Hackers can tap into Wi-Fi connections at hotspots, such as coffee shops, airports and hotels, to capture your personal information.  If you must use public Wi-Fi, you can download for free the AnchorFree Hotspot.  Shield to hide your IP address while you’re online and protect your computer from snoopers.  Also, never use a public computer to shop or check accounts online. 

2)      Shop online only at known retailers.  Don’t let a search engine pick a site for you because it could be bogus.  Even if you’re using a site that you think is legitimate, look for security labels, such as VeriSign and Cybertrust, and for https://to appear in the url on pages that prompt you to enter personal information.  Also consider downloading McAfee’s free SiteAdvisor, which tests sites for dangerous downloads, spamming and more.

3)      Don’t click on pop-up ads, Hackers recently have posted bogus ads with malicious software on legitimate sites (NYTimes.com, for example). 

By Cameron Huddleston, Kiplinger.com