The Gorman Blog

Enterprise Bank & Trust to Acquire Gorman & Gorman Home Loans

2013-03-20T06:07:00.001-07:00

St. Louis, March 19, 2013. Enterprise Bank & Trust, the banking subsidiary of Enterprise Financial Services Corp (NASDAQ: EFSC), announced today a definitive agreement to acquire certain assets of Gorman & Gorman Home Loans, a division of F&M Bank and Trust Company, subject to regulatory approval. Mark Gorman, founder and President of Gorman & Gorman, will join Enterprise as President of the Bank’s combined mortgage organization. Also joining Enterprise will be approximately 30 mortgage producers, underwriters and operations staff in St. Louis, Cape Girardeau and Springfield MO.

Scott Goodman, Executive Vice President and head of Enterprise’s mortgage, wealth management and fee income divisions, said, “We made a strategic decision to materially expand our mortgage business as a natural extension of our banking and wealth management businesses. Acquiring Gorman & Gorman’s production organization and partnering with Mark to lead our companywide mortgage operations will immediately vault Enterprise into a significant market position in St. Louis. This acquisition also provides a strengthened management structure and operating platform to expand our mortgage capabilities in each of our markets. Mark’s involvement with the local and state chapters of the Mortgage Bankers Association has established him as a leader in the mortgage industry and we’re delighted that he and his team are joining us.”

Mark Gorman commented, “Combining our organizations presents a tremendous growth opportunity for Enterprise. Together, we’ll have the capacity to deliver a broader product set to clients and expand distribution of those products across the Bank’s footprint. In addition, we’ll better serve our communities with more residential loan options and products for first-time home buyers and historically underserved markets.”

Founded in 1994, Gorman & Gorman has originated more than $2.5 billion in mortgage loans. It consistently ranks among the leading mortgage lenders in St. Louis. In 2010, the firm was acquired by F&M Bank and Trust Company of Hannibal MO.

Terms of the acquisition, which is subject to regulatory approval, were not disclosed. The transaction is not expected to materially affect the Company’s 2013 earnings.

Enterprise Financial operates commercial banking and wealth management businesses in metropolitan St. Louis, Kansas City and Phoenix. Enterprise is primarily focused on serving the needs of privately held businesses, their owner families, executives and professionals.

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Readers should note that in addition to the historical information contained herein, this press release contains forward-looking statements, which are inherently subject to risks and uncertainties that could cause actual results to differ materially from those contemplated from such statements. We use the words “expect” and “intend” and variations of such words and similar expressions in this communication to identify such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, burdens imposed by federal and state regulations of banks, credit risk, changes in the appraised valuation of real estate securing impaired loans, outcomes of litigation and other contingencies, exposure to local and national economic conditions, risks associated with rapid increase or decrease in prevailing interest rates, effects of mergers and acquisitions, effects of critical accounting policies and judgments, legal and regulatory developments and competition from banks and other financial institutions, as well as other risk factors described in the Company’s 2012 Annual Report on Form 10-K. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update them in light of new information or future events unless required under the federal securities laws.

Housing recovery keeps chugging along...

2013-03-03T13:17:00.000-08:00

The nation's housing market continues to signal that the real estate recovery is going strong. Multiple independent reports regarding this important sector of the economy continue to show marked improvement. New homes sales, housing prices and existing home sales have all edged upwards in the past month.

Existing-home sales edged up in January, while a seller’s market is developing and home prices continue to rise steadily above year-ago levels, according to the National Association of REALTORS®. Total housing inventory at the end of January fell 4.9 percent, which represents a 4.2-month supply at the current sales pace. This is down from 4.5 months in December, and is the lowest housing supply since April 2005 when it was also 4.2 months.

National Association of Realtors report that the national median existing single-family home price was $178,900 in the fourth quarter of 2012, up 10% percent from $162,600 in the fourth quarter of 2011.

New-home sales leaped in January versus the previous month to the highest level in 4-1/2 years, government data showed, as steady job creation and record-low interest rates spurred buying. Continued growth of new sales will help to stimulate new construction which is good for the economy and employment. However, only so many new homes can be sold as long as inventories remain tight and construction lags to keep up with demand.

New home sales in January jumped 15.6% from an upwardly revised December figure of 378,000

The “when” decision of marketing a property can make the difference between a listing that moves at the speed of light and one that’s doomed to linger on the market for seasons to come. If you need help to hone in on when you should list your home to sell, check out this report which says now is the perfect time to list a home for sale in the Midwest.

After hitting a four-month high in December of 973,000 units on an annualized basis, Housing Starts dropped by 8.5% in January from December after jumping nearly 16% from November to December.

Prepare for Sequestration Day!

2013-02-28T17:08:00.000-08:00

We are closing in on March 1, which has been widely identified by the media as the sequestration date. What does this mean? The word sequestration means confiscation or seizure of assets. No one is proposing a seizure of assets here. What we are talking about is automatic and severe budget cuts.

The Congressional Research Service has rewritten the dictionary to expand the definition of sequester as... "the permanent cancellation of budgetary resources by a uniform percentage." Moreover, this uniform percentage reduction is applied to all programs, projects, and activities within a budget account. It's a series of automatic, across-the-board cuts to government agencies, totaling $1.2 trillion over 10 years. The cuts would be split 50-50 between defense and domestic discretionary spending.

Will will happen and if it does happen, what affect may it have upon our lives and especially the economy? There has been much speculation as to what could happen if the budget is cut by approximately 10% overnight. These cuts include all discretionary spending from jobless benefits to food inspections to defense.

Not all cuts would happen immediately. For example, if there are furloughs of Federal workers, the furloughs may take 30 days or more to implement. That gives Congress and the Administration more time to come up with a solution.

There is no doubt that dropping hundreds of millions of dollars out of the budget will take some steam out of the economy this year. This could lead to lower rates and oil prices. We just don't think that the cuts will be allowed to take hold all year. With a compromise of some kind, there will be some cuts, but how much remains to be seen.

Because Congress hasn’t passed a formal budget in years, government spending is currently authorized only through late March. That creates yet another deadline for yet another disaster movie sequel, the last one being "Fiscal Cliff". Unless yet another budget deal can be reached, look for "Continuing Resolution" to open in theaters March 27. And watch for the trailer on the next coming attraction, "Debt Ceiling Debacle II," due later this year....

Real estate advocates needed to help with "The Digital House Hunt"

2013-02-25T16:23:00.000-08:00

Google and The National Association of Realtors collaborated to uncover trends and insights around digital media usage among home shoppers, whether they were looking for an existing home, a newly constructed home, or an apartment. Together, Google's research and NAR’s Profile of Home Buyers and Sellers results tell a cohesive story about today’s uber-connected home shopper. The name of the report is "The Digital House Hunt."

Over the past decade, our world, and particularly the world of house hunters has become increasingly digital. Consumers are going online at a rapid pace to look for information to support their buying decisions. They watch “how-to” videos on YouTube, they read review sites, they look up specific brands on search engines, and even research on the go with their smartphones and tablets.

Google calls this idea ZMOT, or the Zero Moment of Truth; the idea that shopping is no longer about showing up in a store, or in our cases at a brokers’ office or an open house, seeking advice or counsel on what to buy or how much they should pay. Today there is a new, empowered consumer generation that does its homework ahead of time at this new and critically important Zero Moment of Truth.

The story is no different for home shoppers. Real estate professionals know that their customers are uber-connected and informed. Here are some highlights from the research:

90% of home buyers searched online during their home buying process
52% turn to the web as their first step
68% of new home shoppers use mobile application during the research process
Google real estate related searches on mobile devices grew 120% percent year-over-year
36% of new home shoppers utilize a mobile device while watching TV
YouTube is the top video research destination for home shoppers
Shoppers will perform an average of 11 searches prior to taking action on a real estate site
Finding an agent and agent related searches on YouTube grew 46% year-over-year

Per the ZMOT handbook, “at the Zero Moment of Truth, today’s shoppers bounce back and forth at their own speed in a multichannel marketplace. They switch devices to suit their needs at any given moment. They search; go off to look at reviews, ratings, styles and prices; and then search again. They see ads on TV and in newspapers and online. They walk into local stores to look at products. They talk to friends, over the back fence and on social media. Then it’s back to ZMOT for more information.”

While home shoppers are also using more sources than ever during the home buying process, the interesting statistic is that 87% of buyers also use a real estate agent. In fact, the use of real estate agents are just as high as it has ever been. "The Digital House Hunt” has presented a new arena for agents to address concerns and answer questions. It is giving the chance for Realtors to become “neighborhood advocates” in a new digital world.

How to decide when you should buy a house

2013-02-24T13:11:00.000-08:00

While much homeownership “suitability” analysis focuses within the area of qualification and affordability, there are also other “non-financial” questions with regard to suitability. While these considerations may not make or break a deal, these issues of suitability in regard to a prospective home purchase shouldn't be overlooked:

Is this house in the right location? Location may be important with regard to commuting to jobs and activities. With higher energy costs and increased traffic in urban areas, commuting takes on a higher level of significance.
Is the home large enough for my present and future family and is this where I want to raise them? This issue requires not only the analysis of family size and school districts, but also the proximity to activities and other services.
Is this the home I would like to retire in? For those whose children are older, the question of retirement comes into play. For example, does the house require major maintenance that you don’t have the ability to take on during retirement?
Does this home have the amenities my family desires? For example, do I want a big yard for children to play in or for other enjoyment? Do I want a big kitchen and dining room in order to entertain?
If I were to leave quickly, how marketable or rentable is this house? The best “buy” which is most affordable because it is in the middle of the country may not be the best choice for those who need to be mobile.

We could go on and on regarding the choice of the home and location. However, we can’t ignore the financial aspects of suitability. These include–assessing the house with regard to meeting your financial needs in the future.

For example the cost of the housing payment after taxes represents an important issue with regard to affordability. Part of the reason this home may be affordable is because of the tax deduction. However, if you are not paying taxes because of other deductions, you may not receive most of the benefit of the home purchase.

This may be especially true for those who are self-employed and may use their status to “write-off” much of their income. The future becomes an issue when the status of your income and deductions change. If income is to rise, then the home actually will become more affordable in the future, both because you have more income and because the tax deduction may become more important.

If you are employed and will get the benefit of a tax deduction, you can make the home more affordable on a monthly basis right now by increasing your withholding exemptions on your IRS Form W-4 which is filed with your employer. This will lower your tax withholding on a monthly basis and can make more income available each month to help you afford the payment.

Another financial issue with regard to suitability involves whether future changes may make the home more or less suitable. For example, the payments of adjustable rate mortgages may change in the future and this possibility must be taken into account when purchasing and financing a home. When short-term rates rise, so do the payments on adjustable rate mortgages, especially if the start rate is very low. This is called a “teaser rate.” Basically, if your payment were to rise by $200 to $1,000 per month, depending upon the size of the loan, could you afford the increase?

There are additional issues with regard to the future suitability of home ownership–

Will the long-term appreciation of the home help you finance debts at a lower-monthly cost than you are paying now? Debt-consolidation loans using the equity in a home have been very popular in the past for a nation that seems to be very dependent upon the use of credit. Of course, the use of this equity means that it cannot be used for other purposes such as retirement.
Will the home require major maintenance in the near- or long-term? The purchase of “fixer-uppers” may be very suitable for those who are handy or have liquid assets for contractors. For others, having a home in need of maintenance can be a psychological and financial burden.
Will my situation change in the future? Retirement, job changes, increases and decreases in income and family size. All of these are relevant to analyze.

Qualification, affordability and suitability. All relevant questions to answer before you purchase your next home. Never hesitate to give us a call or check with your lender to discuss your options.

Things to consider when applying for a home loan

2013-02-21T10:04:00.000-08:00

You have gotten approved for a home loan and now you are just waiting to make it to the closing table. Make sure you don’t throw your loan approval into jeopardy, make sure to consider the following while getting a home loan.

The Impact of Large Purchases

Lenders looks carefully at the debt-to-income ratio and a large payment such as a car lease or purchase can greatly impact those ratios and possibly prevent you from qualifying for a home loan. Additionally, the new purchase(s) of furniture or major appliances will increase your debt load, and could disqualify you from the loan or deplete your funds to close.

The Impact of Moving Assets from One Bank Account to Another
These transfers show up as new accounts and can complicate the application process, as you must then disclose and document the source of funds for each new account.

Make Sure to Let Your Lender Know if You Change Jobs
Your employment terms are an important aspect of qualifying for a home loan, if you change employers we will need to update your file to reflect the changes. Additionally, a new job may involve a probation period which may need to be satisfied before income from the new job can be considered for qualifying purposes.

Consult With Your Insurance Agent Soon
Feel free to shop for the best home insurance rate you can get. Just make sure you do it early during the process so your records can be updated in time for a smooth closing.

Keep Financial Info Easy to Access
Important paperwork such as W-2 forms, divorce decrees, Form DD-214, Certificate of Eligibility, tax returns, etc., should not be shipped with your household goods to your new residence. Duplicate copies sometimes take weeks to obtain which could delay the closing of your loan.

Be extra vigilant paying bills on time
If you are buying a home or refinancing a loan, make sure to be extra vigilant about paying all bills on time, even if you are disputing one.

Responsiveness is Key
You may be requested for documentation or information that you didn't necessarily need to provide the last time you received a home mortgage. If your loan officer or loan processor requests supporting documentation in regards to your loan application, make sure to supply it in a timely manner. Responsiveness can help insure a timely, smooth loan closing.

Should you itemize your tax deductions?

2013-02-15T14:09:00.000-08:00

As we prepare to move into tax season, homeowners may have some questions about what is best in terms of claiming the standard deduction or itemizing. Here is some information from H&R Block that may help clarify.

Standard Deduction
The standard deduction is a fixed dollar amount that reduces the income you’re taxed on. Your standard deduction varies according to your filing status. In 2012, the standard deduction is:

$5,950 if you’re filing as single or married filing separately
$11,900 if married filing jointly or qualifying widow(er)
$8,700 if you qualify to file as head of household

Your standard deduction increases if you're blind or age 65 or older.

About 2 out of every 3 returns claim the standard deduction. The standard deduction:

Allows you a deduction even if you have no expenses that qualify for claiming itemized deductions
Eliminates the need to itemize deductions, like medical expenses and charitable donations
Let’s you avoid keeping records and receipts of your expenses in case you're audited by the IRS

Itemized Deductions
Itemized deductions also reduce your taxable income. For example, if you're in the 15% tax bracket, every $1,000 in itemized deductions knocks $150 off of your tax bill.

You might benefit from itemizing your deductions on Form 1040, Schedule A, if you:

Have itemized deductions that total more than the standard deduction you’d receive
Had large, uninsured medical and dental expenses
Paid mortgage interest and real estate taxes on your home
Had large, unreimbursed expenses as an employee
Had large, uninsured casualty (fire, flood, wind) or theft losses
Made large contributions to qualified charities
Had large, unreimbursed miscellaneous expenses

However, your itemized deductions might total less than your standard deduction. If so, you can still itemize deductions rather than claim the standard deduction. You might want to do this if you'd pay less tax. This can happen if you itemize on your state return and get a larger tax benefit than the federal tax benefit you’d lose if you didn’t claim the federal standard deduction.

Before 2010, if your adjusted gross income (AGI) from Form 1040, line 38 was more than certain amounts, some of your itemized deductions were limited. However, for tax years after 2010, the IRS removed this limitation. You can deduct the full amount of your itemized deductions.

This information is solely advisory, and should not be submitted for legal, financial or tax advice. Any and all financial decisions and actions must be done through the advice and counsel of a qualified attorney, financial advisor and/or CPA. Copyright© 2012 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

Home, auto & construction industries turning the corner...

2013-02-10T11:39:00.000-08:00

In predicting the state of the economy for this year, most analysts seem to be forecasting another lackluster year of recovery. However, we are not sure that all the pieces are not in place for the economy to have a stronger year. Why do we think this could be the case?

In the past months we have heard the term five years repeated again and again. For example, recent first time unemployment claims fell to a level not seen in five years. Housing starts were also the strongest seen in five years.

Car sales are the strongest we have seen in five years and helping lift retail sales as well. American household formulation has also increased to a point not seen in....you guessed it, five years. Even states and local governments have started hiring again with this sector expected to add jobs for the first time in several years.

We are not saying that there are not potential roadblocks. Even if the Federal budget negotiations are resolved, a solution will translate into a shrinking Federal workforce. The European debt crisis is far from over and there are many homes in the "shadow inventory" awaiting foreclosure.

Yet, for the first time in five years we can say that the positives outweigh the negatives. Lets hope that consumers and businesses feel exactly the same way in this regard.

Record year for housing affordability, rates & home prices

2013-02-06T15:24:00.000-08:00

The National Association of Realtors has announced that the national housing affordability index was a record high for the year 2012. NAR projects the housing affordability index to average 160 during 2013, which means on a national basis that a median-income family would have 160 percent of the income needed to purchase a median-priced existing single-family home. Conditions vary widely, with the highest buying power in the Midwest, where the typical family is well positioned.

The higher the index, the greater the household purchasing power. Based on the relationship between median home price, median family income and average interest rate, the index is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home. This scenario assumes a 20 percent down payment and 25 percent of gross income devoted to mortgage principal and interest payments.

According to mortgage-lending services provider Ellie Mae, the average mortgage interest rate in 2012 was 3.90%. The average down payment a borrower paid was 21% and the 30 year mortgage was the most popular type of loan product which was issued.

Total home sales in 2012 were the highest in five years, while the annual price rose the most since 2005. For all of 2012, the preliminary median existing-home price was $176,600, up 6.3 percent from $166,100 in 2011, and was the strongest annual price gain since 2005 when the median price rose 12.4 percent.

New household formation helping fuel new housing starts

2013-02-02T11:42:00.000-08:00

A big growth in new household formation is expected fuel housing starts in the new year that will outpace the apartment boom, according to forecasts by Freddie Mac’s Chief Economist Frank Nothaft. Freddie Mac is forecasting growth of new households in 2013 that will provide a big boost to housing starts this year.

This increase in household formation is contributed to the movement of adult children who are moving out of their parents' homes. Many adult children took up residence with their parents during the deep financial crisis and recession of 2007-2009. This kept many Americans from leaving their parents' nests and drove others back into them, putting a sharp brake on the pace at which new households formed.

That expected growth also will likely drive down apartment vacancy rates to 10-year lows and outpace the boom in new apartment construction. Unemployment is expected to improve slightly in 2013 and the job and income gains will also help jump-start more household formation. Builders also are preparing to take advantage of a growing trend of parents and children building new homes to live together.

This has been a big change from a year ago, when some analysts worried that the looming ‘shadow inventory’ would keep the housing sector mired in economic depression. Instead, the housing market is healing, is contributing positively to GDP and is returning to its traditional role of supporting the economic recovery.

The lower inventory of homes for-sale is conversely good for the job market too. More jobs in the broader economy fuels more housing demand. Rising home prices lately from low housing inventories is helping to increase homebuilder confidence. As homebuilders are more comfortable about the direction of housing market, they will hire more workers and start on more homes.

Low housing inventory good for builder and job markets

2013-01-31T10:14:00.000-08:00

A record-low inventory of homes for sale is holding back the number of "would be homebuyers" to put contracts on existing homes. This is a sign that a stronger "sellers' market" could be building across the country. Realtors blame a lack of supply rather than the lack of demand for the recent pullback in pending sales. While buyer foot traffic easily outpaced seller traffic, the lack of affordable homes available for first-time buyers are limiting pending and existing home sales.

With more housing demand comes more jobs in the housing sector, especially in construction, an industry still languishing in the wake of the bust. Every new home built keeps, on average, three people employed full-time for a year. The National Association of Home Builders estimate that single-family housing starts could generate more than 300,000 jobs for the economy this year. As builders get more confident about the housing market, they will ramp up construction. And rising home prices lately from low housing inventories is helping to increase their confidence.

The reasons for the low supply are varied, and the low numbers are in fact feeding on themselves. If potential buyers can't find something to their liking, they will probably not list their homes for sale. As a result, home prices are now rising more and faster than most analysts predicted due to this short supply. Healthy housing market gains are historically driven by increasing employment and income, not by lack of supply; the latter leads to price bubbles.

As demand picks up, builders are facing lot shortages and the challenge of finding new lots to support increased building. "No one has developed land in six years," Megan McGrath, MKM Partners home building analyst, told USA Today late in 2012. Builders are now "running to catch up." The shortages of lots are driving up prices. Ninety percent of builders nationwide are reporting a rise in lot prices, according to a survey by John Burns Real Estate Consulting.

Developers are also increasing the supply of multi-family apartments, even as single-family rentals continue to gain market share. Continued uncertainty in the housing market, tighter mortgage underwriting and weaker consumer wealth continues to force many Americans to rent while the foreclosure crisis has forced others.

Appreciation returns to our nation's housing market

2013-01-28T15:15:00.000-08:00

Economists say this could finally be the year that housing lifts us out of the doldrums. Just over half of economists surveyed by CNNMoney identified a housing recovery as the primary driver of economic growth for 2013.

It has been a long time, as the economy worked off the excesses of the boom and cleared out the inventory of homes that should never have been built or were “sold” to people who could not hope to afford the payments. But now the inventory of houses for sale — both new and used — is as low as it has been in decades. Home prices are rising in most markets. Sales have picked up, though they are still low by historical standards.

Home sales rebounded to the strongest level in five years in 2012, as home building bounced back to levels not seen since early in the recession. Near record low mortgage rates, rising home prices and a drop in foreclosures have combined to bring buyers back to the market.

The mortgage rates and years of depressed home prices have also combined to create the most affordable housing market on record. Veros Real Estate Solutions has announced that analysis of its data shows compelling evidence that the national real estate market has hit bottom and is now in a full recovery. According to the company’s real estate market forecast for 2013, the housing market is showing improvement nationwide and it is expected that the top 100 metro areas in the U.S. will see an appreciation of 1.2% this year.

Aiding the climb in home values is the effort by lenders and the government to help Americans stay in their current home after loosing home equity from the housing collapse. More than 6 million mortgage modifications and other kinds of housing assistance have taken place between April 2009 and November 2012, undoubtedly helping firm up home prices.

Moody’s reports that the “shadow inventory” of homes with foreclosures pending and homes already owned by banks but not on the market is declining. It voices hope that banks “are finally putting behind them the operational and regulatory issues that plagued them in the past and are taking the steps necessary to address their backlogged foreclosure inventory.”

CoreLogic confirms its first MarketPulse report of the year that "Housing was clearly one of the past year's biggest surprises. Even without significant gains in income, housing mounted an impressive recovery in 2012." The report sites that 2012 was the first year in recent memory not beset by any major economic shocks like the Japanese tsunami, lingering effects of the Great Recession in 2010, or the sovereign debt crisis resulting in a credit rating downgrade for the U.S. in 2011.

Housing markets gaining traction with consistent improvements

2013-01-26T11:38:00.000-08:00

For the last couple of years we have had an economic recovery of sorts. At times the recovery has seemed to be lacking spark as we occasionally hit a mini-slump. Last year the slump hit as we approached mid-year and the European debt crisis worsened.

The economy bounced back from this mini-slump but it slowed the momentum of the recovery over the year. We need the recovery to gain momentum. Momentum is what will enable us to shift into a higher gear. The question is--are we headed into another lackadaisical recovery year or are we going to gain this elusive momentum?

There are still potential speed bumps out there such as Europe and our own government's mishandling of every financial deadline. On the other hand, other speed bumps seem to be smaller. For example, last year you heard about the massive shadow inventory of homes about to be foreclosed upon. Last year we also demonstrated that an improving real estate market will absorb this inventory.

The pace of new home starts tells us that we finished the year with momentum in place with regard to the housing markets. Every speed bump removed or lowered enables us to move faster. Economic growth continues to be decent while the threat of the fiscal cliff has hovered over the economy. This could mean that momentum is being achieved. Hopefully this is the first step to be moving downhill for a while. It is tough to slow down when you are moving downhill...

The importance of representation in a real estate transaction

2013-01-24T07:52:00.000-08:00

Whether you’re buying or selling real estate, it’s important to choose representation that meets your needs in the transaction.

1. Buyer’s agency

When you’re buying a home, you can hire an agent who represents only you, called an exclusive buyer’s representative or agent. A buyer's agent works in your best interest and owes you a fiduciary duty. You can pay your buyer’s agent yourself, or ask the seller, or the seller’s agent, to pay your agent a share of their sales commission.

If you’re selling your home and hiring an agent to list it exclusively, you’ve hired a selling representative--an agent who owes fiduciary duties to you. Typically, you pay a selling agent a commission at closing. Selling agents usually offer or agree to pay a portion of their sales commission to the buyer’s agent. If your seller’s agent brings in a buyer, your agent keeps the entire commission.

2. Subagency

When you purchase a home, the agent you can opt to work with may not be your agent at all, but instead may be a subagent of the seller. In general, a subagent represents and acts in the best interest of the sellers and sellers' agent.

If your agent is acting as a subagent, you can expect to be treated honestly, but the subagent owes loyalty to the sellers and their agent and can't put your interests above those of the sellers. In a few states, agents aren't permitted to act as subagents.

Never tell a subagent anything you don’t want the sellers to know. Maybe you offered $150,000 for a home but are willing to go up to $160,000. That’s the type of information subagents would be required to pass on to their clients, the sellers.

3. Disclosed dual agency

In many states, agents and companies can represent both parties in a home sale as long as that relationship is fully disclosed. It’s called disclosed dual agency. Because dual agents represent both parties, they can’t be protective of and loyal to only you. Dual agents don’t owe all the traditional fiduciary duties to clients. Instead, they owe limited fiduciary duties to each party.

Why would you agree to dual agency? Suppose you want to buy a house that’s listed for sale by the same real estate brokerage where your buyer’s agent works. In that case, the real estate brokerage would be representing both you and the seller and you’d both have to agree to that.

Because there’s a potential for conflicts of interest with dual agency, all parties must give their informed consent. In many states, that consent must be in writing.

4. Designated agency

A form of disclosed dual agency, “designated agency” allows two different agents within a single firm to represent the buyer and seller in the same transaction. To avoid conflicts that can arise with dual agency, some managing brokers designate or appoint agents in their company to represent only sellers, or only buyers. But that isn't required for designated agency. A designated, or appointed, agent will give you full representation and represent your best interests.

5. Nonagency relationship

In some states, you can choose not to be represented by an agent. That's referred to as nonagency or working with a transaction broker or facilitator. In general, in nonagency representation, the real estate professional you work with owes you fewer duties than a traditional agency relationship. And those duties vary from state to state. Ask the person you’re working with to explain what he or she will and won't do for you.

Housing isn't the only sector of the economy improving

2013-01-18T10:13:00.000-08:00

While housing has finally stirred and this sector is now contributing positively the U.S. economic recovery, we don't want to give you the impression that it is "all about housing." Statistics released by the auto industry in the past few weeks show that pickup truck sales are expected to outpace the broader U.S. auto market this year helped by a recovering housing market.

The beginnings of a recovery in the housing market should drive pickup sales in 2013, said Ford economist Ellen Hughes-Cromwick, citing a Census Bureau figures showing a sharp increase in people setting up new households. GM Treasurer Jim Davlin also said he sees the housing market recovering this year, which should help the truck market.

The Mortgage Bankers Association reports its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, surged 15.2 percent in the week ended Jan 11.

However, what is important here is that the auto industry is reacting to the same fundamentals as the housing industry. Lower jobless rates, increased household formulation and stronger consumer confidence. It is important to understand that a real economic recovery must span over the entire economy, not just one sector or another.

For example, the health sector has been stronger than other sectors during the past few years. Adding housing and autos to the recovery makes it broader based and can help move us to a virtuous cycle. More people buy cars and that increases manufacturing jobs. Lower unemployment enables others to purchase cars and houses. Again, regardless of the political troubles surrounding a possible fiscal cliff and debt ceiling crisis, the consumer is waking up which is a good sign for 2013.

Homeowners fared well in the last minute Fiscal Cliff deal

2013-01-15T14:08:00.000-08:00

Everyone has now had time to catch their breath and absorb the details of the Fiscal Cliff legislation quickly passed on the first day of 2013. It appears U.S. homeowners have fared well, as the Senate and House preserved multiple "real estate friendly" tax breaks. Several items that were due to expire were extended and some past tax items were reinstated.

Mortgage insurance deduction extended

The American Taxpayer Relief Act of 2012 extends a law that expired at the end of 2011, which allowed for the deductibility of mortgage insurance (MI) premiums. The law now applies to fiscal years 2012 and 2013. Mortgage insurance, in general, describes an insurance policy which protects lenders against loan default.

The law dictates that eligible borrowers who itemize their federal tax returns and have an adjusted gross income (AGI) of less than $100,000 per year can deduct 100% of their annual MI pre miums. The tax break covers private MI as well Federal Housing Administration (FHA) MI and Department of Veteran Affairs (VA) and USDA Rural Housing Service fees.

In 2009, about 3.6 million taxpayers claimed the MI deduction.

Short sale forgiveness tax exemption extended

One of the more watched provisions of the fiscal cliff was the Mortgage Forgiveness Debt Relief Act of 2007, which was set to expire on Dec. 31. The fiscal cliff deal extends it for another year, meaning homeowners who experience a debt reduction through principal forgiveness or a short sale are exempt from being taxed on the forgiven amount. The amount extends up to $2 million of debt forgiven on the homeowner's principal residence.

A short sale is often used as an alternative to foreclosure because it mitigates additional fees and costs to both the creditor and borrower. The law, which was passed in 2007 with a 5-year sunset provision, will now be in effect until Jan. 1, 2014.

Capital gains tax rate exclusion modified

Another win for housing is a provision tied to the government's plan to increase the capital gains tax rate from 15% to 20% for individuals who earn more than $400,000. While in theory, this is harder on higher-income homeowners, there appears to be a silver lining through an exclusion.

The law "states that only gains of more than $250,000 for individuals ($500k for households) are subject to taxes on the excess portion of capital gains." Point being, in order for an individual homeowner to be impacted by the increased capital gains tax rate they would need to have an adjusted gross income above $400,000 and gain more than $250,000 from the sale of the property.

Since this exclusion threshold remained intact, the impact of the capital gains tax increase is limited regarding the sale of principal residence for homeowners.

Mortgage Interest Deduction and Green Tax Credits untouched, extended

While it was rumored to be altered, the Home Mortgage Interest Deduction (MID) remained unchanged. Additionally the $500 in Tax Credits Available for Certain Energy-Efficient Home Improvements were reinstated as well.

Affordable home improvement ideas for the New Year

2013-01-12T08:52:00.000-08:00

We knew reports of the death of American home ownership were greatly exaggerated (nod to Mark Twain), and now we’ve got the numbers to prove it. A just-released survey by Better Homes and Gardens magazine, says the vast majority of people polled believe owning a home is a smart financial move and a source of pride. Here are some ways to increase your home’s value and comfort on an affordable budget:

Get the Kitchen You Want for Less

Enjoy the best of today’s popular kitchen remodeling trends without busting your budget. Here are 6 ways to get your out-of-date kitchen current — and in some cases more functional — for less. Read more

11 Ways to Create a Welcoming Front Entrance for Under $100

Wouldn’t it be nice to approach your home’s entrance with a grin instead of a grimace? Take our tips for beating a clear, safe, and stylish path to your front door. Read more

Laminate Kitchen Countertops: Perfect Fakes; Low Cost

Replacement laminate kitchen countertops offer durability and big style at a relatively low cost, and are worthy contenders for your kitchen retrofit dollars. Read more

7 Home Improvement Projects for $1,000 (or Less)

Americans still think buying a home is one of the best decisions they’ve ever made. Here are some ways to increase your home’s value and comfort for less than $1,000. Read more

Budget-Friendly, Easy Bathroom Makeovers

Need a bathroom makeover but can’t afford to flush cash down the drain? Here’s how to spruce up your bath without getting soaked. Read more

Visit houselogic.com for more articles like this.

2013 is the year to "Go Green"

2013-01-05T11:32:00.000-08:00

Adding a few simple tasks to your remodeling plan could lower your home’s energy bill, get rid of some of the annoying hot and cold spots in your house, and make your home less hospitable to mold and other allergens. Here are some simple ways to make remodels and additions more energy efficient from the standpoint of energy usage and conservation of resources.

6 Green Kitchen Remodeling Tips

Turn your kitchen remodel bright green with these six resource-conserving tips. Read more

Green Kitchen Countertops: 3 Eco-Friendly Choices

Save money over granite and be kind to your home planet. How? Pick a green kitchen countertop material when you remodel your kitchen. Read more

Low-VOC Paint Protects Health, Pocketbook

Low-VOC paints are kind to your health, and they won’t break the bank, either. Learn more about these eco-friendly ways to brighten a room. Read more

Green Bathroom Remodeling

If you want to make sure your bathroom remodeling project is as green as possible, here’s how to save energy, conserve resources, and protect your budget. Read more

Why Your Green Home Improvements Aren't Paying Off

Forget big savings on your energy bills if you make green home improvements. Instead, choose green retrofits and home improvements that offset rising energy prices. Read more

Green Kitchen Flooring: Linoleum and Cork

Linoleum flooring and cork flooring are natural, sustainable kitchen floor options that look sharp, fight germs, and last almost as long as you do. Read more

5 Ways to Get Green Kitchen Cabinets

What makes for green kitchen cabinets? Your cheapest and greenest option is to revamp the ones you already have. Otherwise, think sustainable and fume-free. Read more

8 Tips to Make Your Remodel More Energy Efficient and Your Home Healthier

As long as you’re remodeling, why not cut your utility bill and make your home a bit healthier? Read more

Green Roofs: A Guide to the Options

Environmentally friendly roof choices can save you money on heating and cooling costs and benefit your entire neighborhood. Read more

Need a 2013 Resolution? Get a hold of your budget...

2013-01-03T10:13:00.000-08:00

This is the era of fiscal responsibility. In the past few years we have seen a shift in the thinking of the average American. This shift has been caused by a reaction to the recession and a revaluation of assets, especially real estate and stocks. For most Americans, there is more work to be done. With the New Year upon us, it is time to make a few “financial resolutions.”

Get control of spending. The holidays are over and the tab is coming due. Less of us are over-spending on gifts this year. However, regardless of whether you have overspent or not, taking control of your spending habits is a “year-round” job—not one that calls for restraint only during the holidays.

Start with the formulation of a budget. List your fixed expenses (ones that can’t change) first and then variable expenses. For example, you can’t change the cost of your social security taxes or your car payment. But you can change how much you spend on entertainment or cigarettes every month.
Now ask yourself a very important question. Which variable expenses can be reduced? Certainly you probably guessed that we would suggest you stop smoking. Here is a habit that costs you every month and in the long-run is likely to increase your cost for health care as well.
Don’t stop there. Look hard at the fixed expenses. Can you reduce some of these as well? For example, could you refinance your mortgage? How about shopping for lower-cost car insurance or raising your deductible? For many, health insurance costs are taking up a larger part of their monthly budget. Can this cost be reduced?
The final step is to follow the budget. That means assessing what you spent each month and making monthly adjustments. If there are extraordinary expenses such as house maintenance, did you budget for these?

Get control of your debts. Of course, the largest fixed expense for many Americans is their monthly payments for debts. Credit cards, car loans and mortgages all come under the “debt” category. The money you save by reducing spending should be put to work doing two things. The first thing is reducing debts because this will make more money available for saving in the long run.

It is important to note that paying off your debts is a science. You should not undertake this task randomly. Here are a few rules:

The earlier you pay off debts, the more benefits you will receive. It is the same concept of saving. The earlier in life you save, the bigger the payoff in the end. The earlier you pay off debts, the greater the debt payoff benefits.
Start with smaller debts first. In the “debt roll down” method, you pay off the smallest first and then use the savings to pay off the next largest debt. When you have finished paying off consumer debts, then you can work on the mortgage if you own a home. With the savings of hundreds or even thousands of dollars per month on consumer debts, you will be surprised at how quickly you can pay down a mortgage. You should also pay off the mortgage last because the mortgage is tax deductible while consumer debts are not.

Start saving. The second use of the money you are not spending is to start saving. You should start by making sure you are making full use of your 401K or other retirement plan. This is important not only because of the need to save for the long-term, but also because you receive a tax benefit for this saving. Think of it this way. If you are in a 30% tax bracket, the government is making a contribution of $300 for each $1,000 that you put into your plan.

Yes, you should also save for emergencies and contingencies. That is what makes budgets work. Remember, you are not saving for the next big purchase. You are saving for true emergencies such as having to replace a roof or medical situations.

The formula is clear. Spend less and use the savings to pay down debt, save for retirement and save for contingencies. Together this is a winning formula which will serve you well not only this year, but for years to come. You can use this formula to achieve long-term goals such as a comfortable retirement or purchasing your first home...

As we fall off the Fiscal Cliff.... Happy New Year!

2013-01-01T00:03:00.000-08:00

While Congress does its best to ruin the Holiday cheer, Americans are still busy celebrating. This celebration included purchasing gifts for others and homes for themselves. Aside from the threat of fiscal cliff chaos, Americans are feeling better about the economy and after years of austerity they are spending again.

For the month of November, state-by-state unemployment rates decreased in 45 states plus the District of Columbia and had no change in five states. From November 2011, 43 states and the District of Columbia have recorded unemployment rate decreases.

We understand that we are still a long ways away from a strong economy and there are still potholes we must navigate around in order to keep the recovery marching forward. However, there are plenty of reasons to be optimistic at the start of this new year.

The most important reason to be optimistic is the improving state of the real estate market as existing and new home sales continue to increase. What a difference a year makes in this regard. Last year at this time we were listening to market prognosticators telling us about how long it will take to overcome the shadow inventory hanging over the market. Some said it would be decades before the market recovered. Meanwhile, the population of our country has been increasing for years and we have not been building enough homes to house this population growth.

As the economy improves, children are moving out on their own and creating more demand. This demand creates more economic growth. Are we at the start of the virtuous cycle we have been waiting on for years? Time will tell, but we start this new year with more optimism about our chances, regardless of whether our government leaders decide to help our recovery or throw more roadblocks in the way.

Many Americans need to lower their debt payments soon...

2012-12-29T10:23:00.000-08:00

In the past few years there has been a strain on the budget of the average American. For some, equity in homes has fallen as overall debt payments have been rising. In the meantime, the price of gas, food and medical costs are increasing. It is no wonder that for many Americans credit scores are falling and default rates are going up on all types of financing from mortgages to credit cards.

There is a way out of this dilemma for the average American. The solution will require prudent fiscal management and planning, things that many of us are not used to implementing. The first step towards fiscal sanity and achieving the American dream of a comfortable retirement is to lower or eliminate all debt payments.

How debt is broken down to calculate an individual's credit score.

Lowering or eliminating one's debt payments can also be a daunting task when someone is drowning in debt. Loans dictate payment for 30 years or more and that may as well be forever. The person may be straining to make minimum payments; but, if he or she adhere to certain financial principals, one can turn what seems an insurmountable task into one that will pave the way to success. What are these principals?

First, it must start now. A dollar of debt paid down today is worth many dollars of debt paid down ten years from now. It is the same concept as saving money. Thirty years from now, a dollar saved today will be worth many times more than a dollar saved 10 years from now. This concept does not mean a person has to put thousands of dollars toward debts in the first month. Even small payments today will save thousands later on.

Second, understand that all debt is not equal. What are the differences in debt? For one, mortgage debt is tax deductible and consumer debt is not. This does not mean that someone should obtain as much mortgage debt as possible because it is free. If someone borrows $1.00 and the government gives back $0.25, the person still owes $0.75. What it does mean is that if the person has a significant amount of consumer debt and a significant amount of mortgage debt, it makes sense to concentrate on consumer debt elimination first.

The importance of concentrating on consumer debt elimination is because consumer debt is typically easier to attack than mortgage debt and gains are easier to achieve. This is because consumer debt is paid out over a shorter period than mortgage debt. Take a look at the following example:

Loan Type	Balance	Monthly Payment
Mortgage Loan	$200,000	$1,500
Consumer Loan	$10,000	$500

In this situation the person can achieve one-third of the reduction in payment of the mortgage loan ($500 vs. $1,500) by paying off one-twentieth of the size of the loan ($10,000 vs. $200,000). While paying off a $10,000 loan is not easy, it is much easier than paying off a $200,000 loan! When the effect of taxes is added, the benefits are multiplied. If one does have equity in his or her home that can be used to pay off consumer debts it may position for the elimination of mortgage debt in the future.

A careful analysis of debts will show the most efficient way to pay them off. Even consumer debts can be paid down in a way that will have a person debt-free in a fraction of the time. For example, consider someone with the following debts—

Loan Type	Balance	Monthly Payment	Months Left
Auto Loan	$30,000	$700	60
Credit Card	$8,000	$200	48
Consumer Loan	$4,000	$200	20

If the smallest loan can be paid off first, the savings can then be applied to the credit card. When the credit card is also paid off in approximately 30 months, the savings can be used from both payoffs ($400 per month) to apply to the car. By the time this restructure example is finished, the $1,100 per month savings can be applied to a mortgage, cutting down the term drastically. There are programs designed to automate this process to achieve maximum efficiency.

If you would like more information about these alternatives for a client, never hesitate to contact Gorman & Gorman Home Loans, a division of F&M Bank and Trust Company. Of course, one also has to make wise decisions in the future regarding taking on more debt. The key towards retiring comfortably is reducing debt and/or becoming debt free and not letting debt overload happen again!

Housing sector improving despite looming Fiscal Cliff fears

2012-12-27T14:25:00.001-08:00

The sales of new homes rose to an annual rate of 377,000 in the month, up 4.4% from October, and up 15% from year-earlier levels, according to the Census Bureau. It was the highest rate of new-home sales since April 2010, when sales were inflated by a temporary $8,000 tax credit for home buyers.

This report comes after recent news from data analysis firm CoreLogic that home prices have posted their biggest annual jump in more than six years. The housing sector continues to recover, showing signs of a comeback in the once-battered housing market.

For the month of November, new home sales increased 4.4% to 377,000. This marks the higest reading for the report since April 2010. Year-over-year, new home sales are up 15.3% as the housing market continues to improve.
The New Home Sales report shows the number of newly constructed homes with a committed sale during the month.

Steady price increases are helping fuel a housing recovery. They encourage more homeowners to sell their homes. And they entice would-be buyers to purchase homes before prices rise further. Home values are rising in more states and cities.

Rates on home loans are near record lows, while rents in many cities are rising. That makes home buying more affordable, pushing up demand. And more people are looking to buy or rent a home after living with relatives or friends during and immediately after the Great Recession.

Stronger sales are reducing home inventories. as the number of available homes is at the lowest level in 10 years, according to the National Association of Realtors. The combination of low inventory and rising demand pushes up prices. Sales of previously occupied homes jumped to their highest level in three years.

From July to September, the economy grew faster than previously thought increasing from 2.7% in the second reading to 3.1% in the final GDP reading. This is the fastest growth since the fourth quarter of 2011 when the economy grew at a 4.1% rate. Gross Domestic Product is a measure of the total production and consumption of goods and services in the U.S.

Housing is providing the economy a boost with the increase in home sales and consumer spending, according to the Federal Reserve’s Beige Book. Nine of the Fed’s 12 regional banking districts show growth. Meanwhile, a rise in home prices is helping to lift consumer confidence. The Beige Book notes that the housing market was showing considerable improvement in most areas.
As a result of the strengthening housing sector, consumers are beginning to feel more positive about homeownership. Even more so than they were even six months ago, a recent survey by Trulia revealed. Millennials, consumers ages 18 to 34, are often the most skeptical, as they’ve grown up during the years of boom and bust -- but of those polled, 93% plan to buy a home at some point.

Housing appears to be improving in most parts of the country, despite the looming “fiscal cliff” and fears of tax increases and spending cuts.

How falling off the "Fiscal Cliff" will effect your home mortgage

2012-12-21T11:03:00.001-08:00

With the budget negotiations going on did anyone in America think that Congress would not go down to the wire before coming to an agreement? There was hope earlier this week that a deal would be made soon, but then a stalemate determined that talks wouldn't resume until after Christmas. Whether we were optimistic that an agreement would be coming or not, the fact that it would not come early was of no surprise to anyone.

There will be consequences that come from waiting until the last second to come up with a deal. How does the IRS prepare for the next year not knowing what the tax rates are going to be? Every company in American depends upon the IRS to give it instructions. The uncertainty extends beyond general tax rates. There are a host of government programs and tax write-offs that hang in the balance.

For U.S. citizens who own homes and have mortgages there are a number of issues that are part of the legislation related to the "fiscal cliff:"

The Home Mortgage Interest Deduction. This is a target of being limited from what it is now because it is one of the biggest breaks in the U.S. tax code. Limiting the Home Mortgage Deduction would raise revenue for the U.S. Government.

The Mortgage Debt Forgiveness Act. This impacts distressed homeowners who sell their home in a "short sale" or allowed to reduce their principal mortgage balance. The difference between what is owed on a mortgage and the price at which a homeowner is allowed to sell his or her home is considered taxable income. The same is true when the principal balance of a mortgage is reduced. That tax liability was waived under the Mortgage Forgiveness Debt Relief Act of 2007, which expires at the end of this month.

Qualified Mortgage Rule. While this is not part of the "Fiscal Cliff" discussions, the “qualified residential mortgage rule” is due to be published next month. Any loan that’s not a ‘qualified mortgage’ will have huge litigation risk associated with it and banks will charge much higher interest rates on those loans. Banks and lenders are exiting the mortgage business because of the high losses from defaults on loans made during the housing bubble and risks of further losses through regulation and litigation. If legislators don’t give safe harbor to banks that are complying with these rules, there will be more tightening of lending requirements.

Interest Rates hang in the balance. The nature of the solution will go a long way toward determining what kind of year 2013 is for interest rates. Falling off the fiscal cliff and into recession would almost guarantee another year of dismal interest rates for savings accounts, money market accounts, and other deposits. Mortgage and refinance rates would remain low, though in a recession loan approval would be harder to come by.

The uncertainty of these issues could stay in purgatory if Congress and the President come up with a compromise that is a temporary solution. In other words, if they "kick the can down the road" on housing issues, it could have a negative impact on one section of the economy that has been recently showing life.

What we all should be looking for here is compromise. There is not a single side that will win the other side over. Each will have to contribute to the compromise with significant concessions. The true winner of the compromise will be America and especially the American economy. There is no denying the fact that we have come a long way from the depths of the recession and there is more work to be done.

Homebuilders benefit as home prices & affordability strenghthen

2012-12-15T10:23:00.000-08:00

The excess of supply of homes built during the last housing boom has finally been reduced to a level where builders will have to ramp up construction next year, according to the National Association of Home Builders. The Census Bureau recently reported that the homeowner vacancy rate fell to 1.9% in the third quarter, down from a 2.9% peak in 2008.

The drop in the vacancy rate shows “we have run out of this excess inventory,” economist Patrick Newport told Source Media. “It’s a great reason for feeling good about the housing market next year. The builders are going to have to start ramping up at a higher rate than they are now,” the Global Insight economist said.

A JPMorgan Chase Bank economist pointed out in a recent research report that household formation “accelerated” last year, sparking a 659,000 decline in the number of vacant units. “So homebuilding can be expected to increase substantially over the next year as a larger share of the increase in demand for housing units is met by new construction,” according to senior economist Robert Mellman.

The Federal Housing Finance Agency (FHFA) House Price Index (HPI) bases its index on the purchase price of houses with mortgages owned or guaranteed by Fannie Mae or Freddie Mac.

While home prices are creeping higher across the country, low rates are helping to keep affordability conditions favorable in housing. Mortgage rates have fallen so far that the monthly cost of owning a home is more affordable than at any point in the past 15 years and is less expensive than renting in a growing number of cities.

According to the National Association of Home Builders/Wells Housing Opportunity Index, home prices nationally are now at approximately the same level as in June 2004 and are 15.9 percent below the peak in prices reached in April 2007.

The latest rise in the Case-Shiller index was the second straight quarter of year-over-year improvement, while the monthly annual reading has climbed for four months in a row, with six straight month-over-month increases. The 3.6% increase from a year earlier is more than three times the rise in the previous quarter and was the biggest jump in prices since the second quarter of 2010.

FHA fees going up again to avoid need for bailout

2012-12-12T13:18:00.000-08:00

The Federal Housing Administration (FHA) plans to raise its fees for borrowers obtaining FHA mortgages next year in order to help avoid a taxpayer bailout, the Obama administration has announced.

The FHA, which insures home loans, faces a $16.3 billion deficit due to a rise in delinquencies over the last few years, particularly among loans that originated during the housing bubble from 2007 through 2009. FHA says it plans to raise its premiums on loans it guarantees by 10 basis points, which equates to about $13 per month extra to borrowers’ costs. This fee is also known as a Mortgage Insurance Premium (MIP). The funds collected from borrowers helps protect the investor in the case of default on the loan.

Additionally, the FHA plans to increase short sales on loans it guarantees, in an effort to avoid more borrowers foreclosing on their properties. FHA is a big contributor to first-time home buyer funding. It insures about 1.2 million residential loans, which is about 15 percent of all U.S. home loans.

The number of loans it insures has increased dramatically over the last few years. In 2006, FHA insured just 5 percent of the all U.S. home loans. FHA is federally mandated to maintain a 2 percent capital ratio—a target it has yet to reach in four years. Its current ratio is negative 1.44 percent, according to a recent audit of its finances.

In order to avoid higher fees, anyone looking to purchase a home using a low down payment FHA mortgage should get a loan application started now. Also, borrowers currently with an FHA loan should consider doing a streamline refinance soon to take advantage of current fees and interest rates before they go up.

For those who qualify, the FHA Reduced MIP Streamline is a fast and easy refinance. Complete this online form to see if you can take advantage before the cost of getting an FHA loan rises.

With the FHA short on insurance funds, it is having to take measures to protect this program. Expect insurance premiums to increase soon, both upfront and annually. The FHA believes this will strengthen its capital position but not limit access to credit for qualified borrowers. But after a certain amount of time, the borrowers no longer need to pay insurance premiums, even though FHA-backing remains in force for the life of the loan. That's going to end soon too.

Currently, once the principal balance on an FHA loan reaches 78% and the borrower has made a minimum of 60 payments, the borrower is free from paying the premium. New homebuyers who plan on using FHA for financing should expect to still see the insurance payments remain due on the loan until the house is sold or can be refinanced into a conventional mortgage.