Amy Kite - Northern Chicago Real Estate Specialist

Don't be a Woulda Coulda Shoulda

2011-12-06T09:55:00.000-08:00

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So many people are still beating themselves up over “the one that got away” when it comes to the real estate market. They didn't realize that the housing bubble would eventually burst. Many people made the mistake of buying properties at top dollar and never expecting the market to shift. Some people waited too long and didn't act when the market was good, and they are still reeling from those decisions.

The question is will you see the signs of the next housing trend?

Over the last four years, prices have adjusted by a 30% correction nationally. In the Chicagoland area, some corrections have been as much a 50%. We have a high foreclosure rate here. In fact, Illinois has the fifth most foreclosures in the entire nation. The only state above us are California, Arizona, Nevada and Florida.

New home sales are nonexistent in our area. Interest rates are only slightly above record lows. Consumer goods are skyrocketing, and the budget deficit and national debt are staggering. Escalating inflation appears certain. But, all is not lost.

Forget investing in stocks. Forget investing in gold. After four years of plunging prices, the most attractive asset class is housing. That is quoted directly from the senior editor at Fortune magazine.

Where Do I Invest My Money?

There is no question that investing in the housing market right now is a sure fire way to plan for your financial future. Buying homes at rock-bottom prices with low interest rates has never been more possible than it is right now. You might decide that you want to buy a home to live in, but you may also make the decision to start buying investment properties while this market is so good.

If you would have known that this was the best buyer's market, you could have taken advantage of the prices and interest rates. In other words, you should have fixed your cost of housing for years to come. Don't catch yourself being a “woulda shoulda coulda”!

You owe it to yourself and your family to get firsthand, experienced information to see what your options really are today. You may be surprised you can purchase a home to live in or as an investment. As your lifelong real estate consultant, I am here to give you the benefit of my experience and knowledge of our local marketplace. I would love to chat with you about your real estate questions and concerns. I look forward to our phone call.

Are Home Improvement Projects Important For Selling a Home?

2011-11-30T13:21:00.000-08:00

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One of the questions that I get asked the most is what kind of home improvements should a potential home seller make prior to listing their property for sale? The answer is different for everyone, of course, so I wanted to chat for a moment today about the topic of improving your property the right way.

What Should I Improve?

One of the best resources for home improvement information is Remodeling magazine's 2010-11 Cost vs. Value edition. This list gives you a great amount of information on potential home remodeling projects and how much value you will get back for doing them.

Some home sellers make the big mistake of doing remodeling projects that they think are important. For instance, they might add a swimming pool. The problem with a pool is that about half of buyers love them and half hate them! You never know which buyers might be walking through your home.

Instead of guessing at the projects that will give you the best return on your investment, why not go with proven winners? Here are some ideas to get you started:

- Replace your front door: The front door is an important part of your home as everyone sees it when they drive by or stroll up your walkway. This inexpensive project can pay back huge dividends later.

- Replace your garage door: I bet you never considered replacing your garage door, but it has been found to be a great way to update the look of your home and get a monetary return when you sell it.

- Kitchens and bathrooms: These are two of the most important rooms in the house as far as buyers are concerned. Walk through your kitchen and bathrooms to look for remodeling ideas. You might want to add trim to your cabinets, put new knobs on, change your countertops or even add new appliances. (Did you know that granite countertops are more popular and less expensive than Corian?)

- Consider new flooring such as hardwood: You might be surprised at the deals you can get on new flooring!

With the real estate market being the way that it is, buyers want a home that is move-in ready. They don't want a home that “needs work” or “needs updating”. Remember that you are competing with hundreds or thousands of other home sellers. You have to make your home look shiny and ready for its new owners.

As your personal real estate consultant, I can come into your home before you list it (even a couple of years before) to give you ideas on what you can improve to give your home the best resale value in the future. That way, you don't waste money on unnecessary projects. Call me today to schedule!

Did You Know Paying Cash Can Have Big Financial Consequences Later?

2011-11-09T07:21:00.000-08:00

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When most people hear that someone is paying cash for a property, it seems like they are in the lucky minority. Paying cash would appear to be the simplest option on the surface, but did you know that it can have some major financial consequences later on?

Some people pay cash for a property with the idea that they will later put a home-equity line or second mortgage on the home. About 9% of people paid cash for their properties in 2010, and 2011 is showing that the percentage will be even higher.

When Is Paying Cash a Potential Pitfall?

So what is the problem with paying cash if you plan to take out financing later? The main issue is that you may eliminate any chance you have of deducting the major portion of your interest on the mortgage. How does this happen?

Let's take an example such as this one: Let's say that you purchase a home for $300,000. Your plan is to take out a $200,000 mortgage later. Currently, you can deduct interest on $1 million of acquisition debt. Acquisition debt simply means the amount of debt you have taken on as a result of acquiring the property.

If you opt to pay cash and take out a mortgage after the fact, this establishes your acquisition debt at zero. Later, if you decide to take out a home equity line or second mortgage, your debt will be limited to $100,000 over your acquisition debt. In this case, the acquisition debt was zero which means that it's limited to $100,000.

As you can see, there is quite a difference in being able to deduct the interest on $1 million worth of debt rather than $100,000. If you don't know this in advance, it can be quite a nasty surprise later on. Of course, it's very important to speak with your accountant about the situation before it happens. They can advise you on the best course of action for your specific situation. You can also refer to IRS publication 936 for more details.

Although paying cash seems like the simplest option and would probably put you at in a better situation when it comes to negotiations, there can be consequences later. As a Residential Finance Consultant, part of my job is to point out when you need to speak with your accountant or when you might be making a negative financial decision. Sometimes, you can do more harm than good even when you think you are making the best decision.

For more information or to chat more about paying cash for a home, contact me today. I would love to discuss your unique situation so that I can give you the benefit of my experience in the real estate industry.

Crunching The Numbers: Is Refinancing The Right Thing To Do?

2011-10-26T09:06:00.000-07:00

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It wasn't that long ago that interest rates hit an all-time low and frenzied homeowners went wild refinancing their mortgages. In fact, it was just last winter that home buyer loans were taking longer to close because of the backlog of refinance loans moving through the system. Many homeowners have no idea that there is still a great opportunity to be had right now when it comes to refinancing a mortgage. The key is to understand whether refinancing would be beneficial or detrimental to your current situation.

Is Refinancing Really Still An Option?

According to Freddie Mac Weekly, fixed-rate mortgages are at a low for 2011 already. In fact, the average interest rate on a 30 year fixed-rate mortgage has gone down from 4.6% in July to 4.12% as of October. The 15-year fixed-rate mortgage rates have also decreased from an average of 3.75% in July to 3.37% in October.

Many homeowners felt like they missed out on a great opportunity to refinance last fall, so they are interested in pursuing the opportunity this time around. No one can really predict interest rate fluctuations with total certainty, so waiting too long to refinance could be a roll of the dice. However, not every situation is suited to being a candidate for refinance. That is why it is important to know your numbers and speak with a qualified, experienced mortgage lending professional.

How Do I Know if I Should Refinance?

There are a couple of factors to consider when it comes to refinancing a mortgage. First, borrowers must realize that the points associated with a refinance are normally not considered to be prepaid interest so they cannot be deducted on taxes. Lenders often spread these over the life of the loan for that reason. Some lenders also suggest a par value loan to eliminate points although the mortgage rate will be a bit higher.

In 2006, the rates were so low that some people kept refinancing over and over again. Many of them paid closing fees over and over too, which might have been a bad financial plan in the grand scheme of things.

Look At The Numbers To Plan Your Strategy

The key to knowing whether you should refinance is how long it will take to save enough money on your monthly payment to account for the money you spent up front in fees. For instance, let's use an example of an original loan of $195,000 at 5% for 30 years with an unpaid amount of $189,999. If you pay $1,500 in refinance costs to get a new interest rate of 4.5% over 30 years, you will save $81.07 per month. It will take about 1 year and 7 months to recapture that $1,500.

When you look at this example, you need to consider your future plans. For instance, if you plan to look for a new job in another state within the next year and a half or so, it probably won't make sense to refinance. However, if you plan to raise your family in this house and live there for another 10 years, then refinancing is probably a great idea in that situation.

When refinancing, it is not just about the numbers. It is also about planning for the future with some forethought. If you don't love your current home or you plan to upgrade to a larger place, it might make better sense to buy a new home instead of refinancing. There is no “one size fits all” approach to this.

Don't Forget About The Mortgage Insurance Premium

Another important point to note is that the Mortgage Insurance Premium for FHA loans has increased. This is yet another number to keep in mind as you decide whether refinancing will be of benefit to you. It could cause your payment to be higher which might negate the effects of a refinance.

In the end, speaking with a mortgage professional is the best route to take when trying to figure all of the numbers associated with refinancing. You might not know all of the pertinent facts and figures, but a good lending professional certainly will. As a real estate professional, I have connections with some of the best mortgage loan officers in the area. Give me a call so that I can refer you to someone who will be glad to do all of those calculations for you!

Ten Amazing Aspects of FHA Loans That Blow Conventional Loans and Cash Transactions Out the Door

2011-09-13T07:40:00.000-07:00

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There is a plethora of home mortgages being underwritten by Fannie Mae and Freddie Mac – and the good news is that for those who avail those loans, there are many advantages. So much so, that buyers who otherwise might have chosen to go with a cash transaction or a conventional loan may very well choose an FHA one. Here are ten amazing reasons why FHA loans are a very smart choice for now and later – for you and those around you.

NUMBER TEN
Self-Employed Buyers May Qualify
Traditionally people who are self-employed have a hard time obtaining financing because of the strict adherence to “two years regular employment” guideline that underwriters follow. As long as the applicant can provide adequate documentation that demonstrates their consistent ability to earn, the previous two years of tax returns to corroborate that information and a current profit/loss statement, the underwriter will most likely approve.

NUMBER NINE
No More Mortgage Insurance Payments After Five Years
For homebuyers opting to purchase HomePath Properties, there is HomePath financing and that does not always require a mortgage insurance premium. Any homeowner will share that one of the biggest chunks of their payment after the principal and interest is the PMI. A very good advantage for FHA loans is that in five years if the balance of the loan is less than 80% of the original sale price, the mortgage insurance premium can be released. This is ideal for families currently struggling in this economy but hope to bounce back soon and would be able to manage higher payments a bit down the line and can catch up on the loan amount due to bring it down to less than 80%.

NUMBER EIGHT
The Ability to Accept Gift Monies Toward the Home
Conventional loans do not have the provision of allowing gift contributions toward the purchase of a home. With an FHA, as long as it is not coming from a person or entity with a vested financial interest in the selling of the property, you can accept a gift contribution. This could come from family, friends, your employer, a labor union – even a charity. Many couples are now starting up bridal registries to help them obtain a new home with the help of cash gifts for this purpose.

NUMBER SEVEN
Financing for Renovations Built Into the Loan
Through a unique provision called the 203K loan, FHA borrowers are able to roll the costs of all approved renovations on the home being purchased or refinanced. There are some guidelines to follow, such as making sure a qualified professional General Contractor is hired to do the work. Also, loan officers will likely survey the property before and after, through an inspection. But the benefit of being able to move in to a home that you can renovate to make perfect is available.

NUMBER SIX
Six Months of Mortgage Payments Rolled Into a 203K Loan
A top concern of people considering renovating a property as part of their purchase is where they will live during construction. The 203k loan accommodates living expense for the duration of renovations; up to six months of mortgage payments can be rolled in to the loan. When you factor in a half-year of mortgage payments being financed into the mortgage, this gives an opportunity many people cannot afford to lose because by the end of the construction period, their home will be worth more AND they will have been able to afford the mortgage payments during that time.

NUMBER FIVE
Broader Qualifying Ratios Allow Leeway For Borderline Borrowers
Conventional loans have strict guidelines as to the income to debt ratio. Given the economic downturn currently being experienced, many prospective homebuyers are stuck in a rut because of having one or two credit cards plus a car payment. With FHA loans, there is lenience in this aspect that allows homebuyers to get into homes without having to pay off a few of those debts first.

NUMBER FOUR
Credit Score Limitations Are Less Strict
FHA is more tolerant of credit challenges than conventional loans and at a time when many Americans are struggling financially, the excellent credit scores required for super low interest rates or even application approvals are next to impossible. Most FHA loans are approved for people with credit down to 640, the typical minimum FICO score needed in most conventional banks – and a few lenders entertain scores lower than 600 with extenuating circumstances.

NUMBER THREE
As Much As 6% Seller Contribution Toward Closing Costs Allowed
These days many buyers are cashing in on the soft market by engaging in negotiations that end up in sizable seller concessions. With an FHA loan, sellers can contribute as much as six percent toward the closing costs of the transaction – though the norm these days averages around 3 to 3.5%. This is conveniently rolled in to the transaction, allowing the buyer to enjoy additional cash flow and focus on other aspects of the move.

NUMBER TWO
Loans Are Assumable –Locked-In Interest Rates Pass On
With the market as hard as it has been for sellers the past several years, any feature that provides an advantage to the seller is paramount. Assumable loans mean that when the buyer goes to sell the home the original interest rate will be passed on. The new buyer will simply assume payments on the loan. At a time when we know the interest rates are at an all-time low and that they will go back up again, this is a huge benefit.

NUMBER ONE
A Down Payment Almost Six Times Less Than Conventional
The number one reason to obtain financing through an FHA loan is that the down payment requirement is only 3.5%. Many prospective homebuyers have no idea that the minimum necessary down payment is not 20% and that they can still qualify for a home even if they don’t have that much dispensable cash available. The difference adds up to thousands more dollars and the difference between being able to own a home or not.

How To Say “I Do… Want a New Home” – Bridal Registry for Homes

2011-08-29T08:30:00.000-07:00

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Who knew that there would be anything like a bridal registry that has a new house on it? Well, believe it or not, there is. In fact, it does not boil down to only newly married couples who can enjoy monetary gifts by friends, family and other associates – rather it can go as far as anyone graduating, expanding their family or going through another major life transition that entails buying a home for the first time ever. The most obvious application would be, of course, through a bridal registry so that is what we will talk about most in this article.

FORGET THE MARTINI MIXER, GO FOR A MORTGAGE PAYMENT

Yes, we all have those obscure wedding gifts that end up in the deep recesses of shelves that see more dust than a human hand – but it doesn’t have to be that way. If a couple registers with a bank, setting up an account specifically for the purpose of allowing their loved ones to sock away some cash toward their down payment, they can end up with one very seriously perfect wedding gift altogether. After all, what good is a Lennox crystal bowl display set if you don’t have the space to display it in?

NOT EVERYONE CAN GIVE THIS GIFT THAT LITERALLY KEEPS ON GIVING

Here’s the thing though – not everyone can contribute to this fund. Unless the person gifting cash toward the aspiring homeowners’ down payment is a family member, close friend, an employer or even a labor union – it can’t be legitimately done. There is a complete rundown on this here on the official HUD (Housing and Urban Development) website. The government has clearly indicated that anyone who has an interest in the sale of the property is not eligible to make a contribution toward another’s down payment. This includes people and/or groups such as builders, real estate agents, investors or sellers.

HOW TO GET STARTED SO YOU CAN START PLANNING YOUR NEW LIFE

Setting up a gift registry to accommodate cash gifts toward your new home is fairly simple. First, contact your lender to let them know of your intentions. This will not only keep them in the loop of your plans from the start but it will also allow them to communicate any specific requirements or let you know of any details their lending policy dictates for such a provision. Next, set up a savings account at your bank and assign a name to it so it is easy for your loved ones to identify the account and so that it remains transparent for mortgage officials to see. This benefit is available to anyone who chooses to finance through an FHA mortgage loan and is not limited to just newly married or about-to-be married couples. Individuals who may be in the market for a first-time new home for other reasons ranging from getting a new job in a new city to transitioning from graduate school can take advantage of this benefit. In fact, any first-time homebuyer obtaining FHA financing is eligible.

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A few decades ago, before the age of gift registries, no one would have dreamed of asking (albeit subtly) for others to help pay for their new home. But now, even etiquette gurus like Anna Post (great-great-great-granddaughter of Emily Post) have deemed the practice not only acceptable but also practical. So, go ahead and invite a LOT of people to that wedding of yours and move in to a gorgeous new home to start of your long and happy life!

Get Into a Bigger, Better, Nicer House Now – Before You Regret Not Taking the Opportunity

2011-08-18T08:03:00.000-07:00

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Trust me. This is THE time to buy a house. If you don’t believe me, read what I have to say about why it is the best time to make a move – literally. There are obvious reasons that we all know about that are mentioned on a daily basis in news reports, talked about by industry analysts and are a part of the daily buzz among consumers. But there are not-so-obvious reasons too. Read on to find out exactly why now is the best time that we’ve seen in a long time to get into a bigger home, a better home or a new one if you have never owned until now.

Low, Low, Lowwwww Interest Rates and Housing Prices

This goes without saying. EVERYONE has heard of the colossally low rates we’re seeing in the mortgage industry right now. This goes for all types of mortgages too. The best opportunity is to capitalize on a rate that will lock down the low rates and reduce your monthly payment significantly.

When you factor in low interest rates with the low housing prices we’re seeing in the market these days, then the savings REALLY kick in.

Down Market = Great Time to Move Up Into Something Better

While everyone is waiting for the market to improve, interest rates will continue to rise. When the rates do end up climbing again, it will directly translate to higher monthly payments. Seizing the opportunity that lies in obtaining financing for a low-priced home is just about the best financial decision you can make for the long-term.

The single most important thing you can do these days is to heed these mortgage rates. As we see with the stock market volatility and US debt-ceiling situation, everyone holds their breath and expects rates to begin to skyrocket soon after. But having an interest rate that is low can actually buy you more house today so eventual rising rates is something to be concerned about because those rates will definitely rise. And at that point, are you going to be able to afford the house that you really want?

Here’s How Buying Up Works – Clearing Misconceptions

In a down market with a $200,000 house, by selling it now you will take a ten percent discount which means you’re leaving $20,000 on the table for your new home. But here is the part that most unsure people toying around with the idea of moving up tend to forget: you are moving into a larger home and it will probably be worth more. If the home you are moving into is a $300,000 home and that home also took a ten percent discount, which would have been $30,000, then that means you have a $10,000 gain. AND you get to live in a better home.

ALSO, CONSIDER THIS: On that $300,000 home, assuming a fixed interest rate of 4.5% over the course of 30 years, if the payment is $1,520.06, when you increase the rate by just a half percent, the payment jumps up to $1,610.46. Conversely, if you increase the price of the home, the payment goes from $1,520.06 to $1,596.06. What this means is that a half percent change in interest is the same thing as a 5% chance in price. The same concept applies to different variables. A one percent change in interest rate is about the same thing as a ten percent change in price.
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It’s very simple. If you can, if you want or even if you are just thinking about it – now is the single best time that many of us will ever witness in our lifetimes to buy a house at unprecedented low prices and historically low interest rates. Just think about how you might feel if you miss the boat on this one.

Knowing What To Do When You Get An Offer On Your Home – Surprising Insight

2011-08-02T06:32:00.000-07:00

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Just because it is a buyers’ market out there right now does not mean that sellers have to walk away selling for pennies on the dollar, right? Well, no. But it does means that sellers have to be savvy and aware without making costly mistakes that could end up in regret. So what are you supposed to do when you get that lowball offer? Laugh in their face? Nope. Here is some insight as to what you ought to be doing when someone shows some interest in your property.

Reject or Don’t Reject That CRAZY Low Offer?

You have to give it to them. Buyers these days sure know who’s court the ball is in. But that doesn’t mean you as a seller have to quit the game. Let’s face it. As long as the market leans heavily toward buyers as it does these days, you are going to see some very low, and very crazy offers. So what do you do when you get an offer on your home that is as much as 25% lower than your asking price? No, you don’t laugh at them and send them off. Rejecting their offer will only close a door that you might not want to slam shut.

Here’s what you do: you counter offer. What’s the worse that can happen? You could end up at the same spot you were on the day you received the offer and knew that it was too low to accept. OR, you could just end up with a buyer who was playing the field and trying to test the waters to see how low you’d be willing to go. Believe it or not, a lot of times buyers are interested in your house and would pay more if you just asked them. Here’s the real kicker: you will never know until you open that dialogue. So even if you get an offer that is bordering an insult – try them. It could very well end up in a successful sale.

Tale of a Missed Opportunity

Here’s an example of a recent transaction that was salvaged with a bit of intuition, and a little patience:

One of the homes listed recently was shown some interest by a buyer who made an offer that was twelve percent lower than the list price. Negotiations happened; but nothing solid came to the table and the buyers walked away. It wasn’t even a week later when the seller got their second offer; only this time it was almost 25% less than the asking price. After negotiations that went on for a month, the seller was able to settle on a figure that came within 3% of the asking price. Now THAT’s the power of bargaining!

There are two lessons here: First, before rejecting an offer too quickly it might be a good idea to negotiate. And second, no matter how low an offer might be – it definitely pays to negotiate with open dialogue to see where all parties are willing to meet.

Don’t Worry, Be Very Happy You GOT an Offer

One thing to remember is that since there is far more inventory than there are buyers in most markets these days, a lot of times offers don’t even come in for some sellers. So if you do get an offer on your property, be sure to entertain it, no matter how low or insulting it may seem. You never know whether another buyer will be interested in your property or whether this one really wants your property and would be willing to come up to a fair amount.

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Until the market changes or shifts toward sellers, buyers are going to try to get as much as they can get in their transactions. Your biggest defense is to counter offer anything that is not acceptable and give them a chance to mull over your offer. You’d be surprised at how many deals are being made on both sides of the fence.

Fannie Mae Extends AWESOME Incentives on HomePath Properties

2011-06-30T12:26:00.001-07:00

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It’s no secret that with our economy the way it’s been lately we all try to stretch each dollar. So when you are getting ready to buy that new home, it’s a great idea to include HomePath properties in your search. You cannot go wrong with the absolutely incredible offers that go along with this incentive to get more Americans into new homes. Here’s what you stand to gain:

Lower Closing Costs – Savings That Add UP!

While three and a half percent does not really sound like a huge number, it sure as heck is when you look at what that percentage is coming out of. So that’s why with a lower closing cost requirement of just 3%, you can start thinking about getting that brand new flat screen projection TV to go along with your new home. With FHA financing the minimum closing costs requirement remains 3.5%. The difference can be as much as $1500 for an average sized family home that sells in most markets these days.

Getting An Appraisal Is NOT Your Problem

The incentive does not stop at a lower closing costs amount. Appraisals are not required to be paid by the buyers. As if it wasn’t already the best time to be on the buying side of the fence – now, if you’re the one writing a check, you can expect to be using a little less ink than if you buy your home on November 1st onwards.

Monthly Mortgage Insurance – WAVE It Goodbye!

Yes, that’s right. WAIVED monthly mortgage insurance is one of the best aspects of this incentive program and it adds up to enough money each month that you can pretty much bet you’ll have fun deciding what to do with it. Put it in savings, the kids’ college fund or your IRA. Dreaming about next year’s vacation? A little saving discipline and you can be on your way to some sunny place next winter with the money you saved on mortgage insurance.

Some Good Things Come With Rules

Does this sound too good to be true? It’s not. But there are a couple rules of the game. First, you have to be purchasing a property that you intend on living in. So this deal won’t work for those people who have a place somewhere else but want to be able to spend time on the beach in their second home in the summers. As long as this is your primary residence, you’re good to go.

The second rule is that properties that are financed through the Fannie Mae HomePath properties incentive – have to be processed by a Realtor. The good news is that there are lots of Realtors out there. The bad news is that you will need to spend some time looking for one who knows what they are doing with HomePath property financing. Folks, if you find a HomePath house you like, go for it! It’s worth it.