Mortgage rates plummet
The world’s sour economic news is good for US homebuyers who can qualify for a loan.
This post comes from Marilyn Lewis of MSN Money.
Today’s ugly economic news has a slim silver lining: record low mortgage interest rates.
Thirty-year fixed-rate mortgages fell this week to 4.39%, on average, from 4.55% last week, says Freddie Mac. At this time last year the rate was 4.49%.
In a year of exceptionally low mortgage rates, some of this week’s prices broke all-time records:
- The average rate for a 15-year loan hit a historic low — 3.54%, Freddie Mac reports.
- The average rate for a five-year Treasury-indexed hybrid adjustable-rate mortgage also hit the lowest level ever recorded: 3.18%.
For mortgage shoppers, here’s what the downward lurch means:
- Payments on a $200,000 mortgage at today’s 4.39% 30-year fixed rate would be $1,000 a month for principal and interest. At last year’s 4.49% rate, payments on the same loan would be $1,012 — a $12 difference.
- Payments on the $200,000 mortgage with today’s record-breaking 15-year fixed-rate loan — 3.54% — would be $1,434.
These calculations don’t include the fees and points required to buy these rates, which you can find on this Freddie Mac chart. (Meanwhile, run your own numbers using MSN Money’s mortgage calculator.)
“This is the lowest rate on the 30-year fixed in more than eight months,” writes Bankrate, looking back over its own mortgage rate surveys.
Global woes
News reports credit the fears of a double-dip recession, European economic woes and poor new U.S. economic reports for the falling rates.
“Moreover, consumer spending fell 0.2% in June, representing the first decline since September 2009,” said Freddie Mac’s press release.
The economic pressures are the same forces blamed for today’s sharp drop in the stock market.
The New York Times summed up the fears pressing mortgage rates lower: “American indexes fell around 3% as new data heightened fears that the United States may be headed toward a double-dip recession and that Europe’s debt crisis could widen.”
United Press International also links the rate drop to the larger reaction by global markets to dismal economic news. UPI writes: “Frank Nothaft, Freddie Mac’s vice president and chief economist, said ‘signs the economy was weaker than what markets had previously thought’ contributed to the decline in interest rates.”
Rate drop a surprise
Bankrate reports that the drop in mortgage rates was unexpected:
The sharp and rapid decline in rates surprised many mortgage experts. They expected rates to increase even after Congress reached a deal to cut spending and raise the debt ceiling.
“I don’t think anyone foresaw the fact that we were going to get the (rate) improvements that we got this week,” says Jim Sahnger, a mortgage planner for FBC Mortgage in Jupiter, Fla.
- And there was one more scrap of silver lining added to today’s dark economic news: “On a positive note, there were indications that the housing market is firming,” added Freddie Mac’s Nothaft. He points to these indications of a slightly improving real-estate market:
- A trusted home price index from CoreLogic showed prices increasing in June for the third month in a row. It’s the first three-month gain since June 2010.
- Pending sales of existing homes rose in June for the second month, according to the National Association of Realtors. That’s up nearly 20% from the same time a year ago.
Related articles
- 15-Year Mortgage Rates at Record Low (blogs.wsj.com)
Mortgage Options: Patronizing the Family Bank
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Mortgage Options: Patronizing the Family Bank
In a time of choked credit and painfully low CD rates, some home owners and their parents are cutting financial institutions out of the mortgage picture and banking on each other. Read
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Finally, A Sensible Solution to Ensure Affordable Mortgage Rates
Many pundits and policymakers insouciantly throw around the idea that Congress ought to get rid of Fannie Mae and Freddie Mac. Sure, Fannie and Freddie have their fair share of warts — they became insolvent after buying bundles of loans, including exotic, high-risk, and undocumented mortgages that helped stimulate the housing crisis. But getting rid of them could have a devastating impact on housing prices and home ownership in the country. Read
Visit houselogic.com for more articles like this.
Copyright 2011 NATIONAL ASSOCIATION OF REALTORS®
7 Gardening Mistakes to Avoid
By: Oliver Marks
Published: February 10, 2011
Even veteran gardeners make rookie mistakes, like giving plants too much water and too little space. Here are common garden blunders. Consider yourself warned.
It’s easy to misjudge and make a mess out of your landscaping. Here are seven common garden blunders, and how to avoid them.
Mistake #1: Too many changes, too soon
The excitement of buying a new home, plus a stretch of warm spring weather, often creates a passion for yard work. But don’t just do something, stand there! What looks like a spring weed might be a fall-blooming vine; that bare spot in March might reveal tulips in April.
Try this instead: Live with your land for a year. Observe how many hours of sunlight each part of your garden gets. Test the pH of your soil to determine if acid-loving or alkaline-loving plants will be happy in that particular patch of heaven. Observe when your lawn greens up in spring and becomes dormant in late summer.
The money and time you save by watching and waiting will be your own.
Mistake #2: Too much togetherness
Trees and shrubs that look properly spaced when you plant them will crowd each other and compete for water, sun, and nutrients in a few years. If you’re lucky, you can transplant some bushes; if you’re not, you’ll have to throw away starved shrubs.
Try this instead: Before digging, read spacing instructions. Give trees plenty of space–you can always fill in later. Stagger bushes and plants and create two rows, which will create more breathing room. The results will look absurdly sparse at first. But live with it. In a few years, your shrubs will fill empty spaces without suffocating each other.
Mistake #3: Planting without a plan
Planting new garden beds without a long-term landscape plan is like pouring a house foundation without blueprints. Your haste results in a waste of time, money, and muscles.
Try this instead: Draw a simple sketch of your yard–what’s there now and what you might add later, such as patios, outbuildings, and pools. Bone up on the trees and shrubs that grow best in your soil and climate. Go online and click around landscaping sites that help you pick plants and design beds.
Visit your local nursery or home improvement center where design staff can answer questions and make suggestions. Or hire a professional landscape designer to create a starter plan for as little as $250 to $500. Find a professional at the Association of Professional Landscape Designers or the American Society of Landscape Architects.
Mistake #4: Neglecting the root of it all
Even the hardiest plants need a little help putting down roots in new locations. Sprinkling the foliage doesn’t nourish the roots, the plant’s nerve center. You must deliver water to the root ball below the ground, or your plants will be stunted and short-lived.
Try this instead: Place the hose at the base of new bushes, trees, and plants and let the water trickle out for 20 to 30 minutes, twice a week (more during hot spells), for 4 to 12 weeks. Or snake a soaker hose ($20 for 50 feet) through your beds, which will deliver slow and steady water to roots.
Mistake #5: Forgetting the sun
Too many gardeners pick plants based only on looks, not the growing conditions plants require and the conditions that exist. Rookies will plant sun-loving perennials under an old oak tree or sun-shy hostas in the open. They look great for about a week, and then die.
Try this instead: Observing the spot where you’re going to put the plant and estimating the amount of sun it gets over the course of a day during the growing season. To translate that into the language on plant labels, use this key:
| Full Sun | 6 hours a day or more |
| Part Sun/Part Shade | 3 to 5 hours |
| Full Shade | Less than 3 hours |
Mistake #6: Over-watering
An automatic irrigation system is a luxury that keeps your landscape hydrated throughout the growing season with almost no effort. Unfortunately, auto-watering can bring disease, root rot, and a premature death to plants; it also wastes water.
Many gardeners set watering timers for 15 to 20 minutes each morning, which wets the surface but doesn’t soak deeply to nourish roots of large trees and shrubs.
Try this instead: Water for 40 to 60 minutes only two to three times a week. Check with the company that maintains your irrigation system for local recommendations. A deeper soak also helps lawns develop deeper root systems.
Mistake #7: Budget blunders
Your landscaping can fall victim to construction bulldozers that park on lawns and dig too closely to trees and shrubs. New construction also demands rethinking your landscape plan to accommodate additions.
Unfortunately, many home owners don’t include landscaping in their construction budget. They end up with a beautiful new family room, screened porch, or solarium, and a few lonely azaleas planted around the foundation as an afterthought.
Try this instead: Allocate 10% to 20% of your construction budget to the landscape—both hardscaping and plants. If your construction spreadsheet can’t stand another line item, make a plan to landscape–in stages, if necessary–as soon as possible after construction is completed.
Oliver Marks is a former carpenter and newspaper reporter who has been writing about home improvements for 16 years.
“Visit Houselogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.”
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French Drain Design: What You Need to Know
Image via Wikipedia
By: John Riha
Published: June 9, 2011
Feeling soggy? A French drain removes excess surface water so you won’t need hip boots to cut the grass.
Which end is up?
The two ends of a French drain system are:
- The drain field, or high end, where excess ground water enters the drain pipes
- The drain exit, or lowest point, where water leaves the system
A French drain needs a slope of no less than 1%. That means from the highest point of the drain field all the way to the drain exit, the system should slope at least 1 inch for every 8 feet of length.
Start with your exit strategy
Select a location on your property for the drain exit. The goal is to move water away from your house and foundation, or from the soaked part of your yard, to a drier area.
Good locations for drain exits:
- A grassy slope that’s exposed to the sun for most of the day. Grasses help absorb moisture and the sun aids evaporation.
- A spot closest to your problem area so you can keep the system as short as possible, saving costs.
- The street, so it can be carried away by your municipal storm drain system. But check with your local building department first.
Don’t locate the drain exit:
- Where runoff is directed toward a neighbor’s yard.
- Where the water could run onto a sidewalk or driveway and turn to ice during freezing weather. Directing drainage toward pavement often is a violation of building codes.
- Where runoff could cause erosion, such as a dirt slope with no protective vegetation.
Connecting to an existing drain line
Some houses have rain gutters that empty into an underground drainage system, which ties into a municipal storm drain. Your French drain can tie into this system also.
Local codes might require a backflow valve that prevents water from backing up onto your property if a clog occurs downstream. Expect to pay about $500 for a plumber to install this device.
No acceptable exit point
If you can’t find a good place for your system to drain, you’ll need to empty your system into a dry well. A dry well is a vertical hole, typically about 4 feet deep and 1 foot in diameter, that’s filled with gravel. A dry well lets excess water be absorbed by the surrounding soils.
Determining proper slope
If your yard is sloped, it may be easy to spot the high point (drain field) and low points (drain exit) for your system.
If you’re not sure, use a line level to determine slope:
- Pound a stake into the problem area and another at a possible exit point.
- Tie a mason’s string to the stakes.
- Put a line level on the string. Pull the string taut and level.
- Measure the distance from the string to the ground at the stakes, and calculate the drainage slope.
Remember, you can add some slope when you install your system by digging the trench progressively deeper.
Using a professional to determine slope
A surveyor, civil engineer, or landscape contractor will use a tripod-mounted transit level to help you determine the slope you’ll need for your system and possible exit points. Expect to pay $150 to $250 for the service.
Route around roots and utilities
- Plan to route your drain line around large trees to avoid cutting roots. Roots usually extend to the “drip line” of the tree—the outmost edge of its branches.
- Call 811, the Call Before You Dig hotline to have the location of underground utility lines marked on your property. You want to check not only in areas where the drain will live but also where you might dig a dry well. This is a free service.
John Riha is a HouseLogic managing editor. He’s been a residential builder and was the executive editor of Better Homes and Gardens magazine. He’s hand-built a French drain system and notes, “it’s a heck of a lot of digging.”
“Visit Houselogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.”
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Keep Backyard Pests from Eating Your Greens
Image via Wikipedia
By: Theresa Klisz
Published: April 21, 2011
Backyard pests–squirrels, rabbits, moles–can destroy your landscaping and lawns. Here’s how to get rid of the ravenous critters.
Rabbit rascals
Calling cards: Ravaged vegetables, beheaded borders and flowers (especially tulips), and gnawed trees, such as red maple, honey locust, and evergreens.
Protection: Install 2-ft.-high fences that extend to the ground or below ($50 for 100 ft. of galvanized poultry fencing). Surround young tree trunks with plastic tree guard cylinders ($10).
Change habitat: Eliminate piles of brush, barricade cozy spots under sheds, and flatten back-lot debris piles where rabbits nest. Ivy, wisteria, and periwinkle will curb the munching, and fragrant herbs like thyme and lavender will turn them away.
Squirrely pests
Calling cards: Bumps in the night because they nest in your attic; power loss due to frayed wires; missing vegetables and flower bulbs; quickly emptied bird feeders.
Protection: Plug house entry places, such as gaps around utility pipes, broken windows, and uncapped chimneys. Cover wires with plastic pipe that will rotate, causing the squirrel to fall ($2.50 for a 2-ft. section). Sandwich bulbs underground between two layers of wire mesh ($175 for 100 ft. of 24-inch wire mesh).
Change habitat: Trim tree branches 6 to 8 ft. from buildings so squirrels can’t jump onto your roof. Switch to squirrel-proof tilting bird feeders ($25 and up) or domed feeders that close when weight limits are exceeded. Don’t plant oak trees–acorns are squirrel caviar.
Gopher/mole problems
Calling cards: Dirt mounds, lawns pocked with ankle-breaking holes, power loss due to damaged underground utilities; weakened trees due to gnawed roots; missing plants.
Protection: Install mesh fencing 18 inches deep with one-half inch or smaller openings (25 sq. ft. for $175). Trapping is the best way to eliminate gophers and moles. Scissor-jaw or choker-loop traps will snag star-nosed and hairy-tailed moles ($15 for two). Gopher traps look like a twisted mess, but they quickly snap and trap ($15 for a pair). Both can be cleaned and reused.
Change habitat: Since they like easy-to-tunnel, well-watered lawns, try compacting soil and cutting down on irrigation. But moles and gophers are so adaptable that habitat changes won’t keep them out, just slow them down.
Deer disturbance
Calling cards: Flowering plants nibbled to the nubs; leaves torn from plants from ground level to 6 ft.; 2-inch gouges on tree trunks; hoof prints that resemble a broken heart.
Protection: Fencing at least 8 ft. high; homemade and commercial repellents that taste and smell bad; barking dog.
Change habitat: Replace tasty fruit trees with spruce and pine. Swap lilies for ferns and rosemary. Add switch grass and ribbon grass–they’ll avoid these ornamentals. Bonus: Works for bunnies, too.
Theresa Klisz lives in Northern Virginia and was a general-interest features editor and writer for a national wire service. She serves on her community association board of directors.
“Visit Houselogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.”
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The Value of Home Maintenance
By: John Riha
Published: March 9, 2010
Regular home maintenance is key to preserving the value of your house and property.
“It’s the little things that tend to trip up people,” says Frank Lesh, former president of the American Society of Home Inspectors and owner of Home Sweet Home Inspection Co. in Chicago. “Some cracked caulk around the windows, or maybe a furnace filter that hasn’t been changed in awhile. It may not seem like much, but behind that caulk, water could get into your sheathing, causing mold and rot. Before you know it, you’re looking at a $5,000 repair that could have been prevented by a $4 tube of caulk and a half hour of your time.”
Maintenance affects property value
Outright damage to your house is just one of the consequences of neglected maintenance. Without regular upkeep, overall property values are affected.
“If a house is in worn condition and shows a lack of preventative maintenance, the property could easily lose 10% of its appraised value,” says Mack Strickland, a professional appraiser and real estate agent in Chester, Va. “That could translate into a $15,000 or $20,000 adjustment.”
In addition, a house with chipped, fading paint, sagging gutters, and worn carpeting faces an uphill battle when it comes time to sell. Not only is it at a disadvantage in comparison with other similar homes that might be for sale in the neighborhood, but a shaggy appearance is bound to turn off prospective buyers and depress the selling price.
“It’s simple marketing principles,” says Strickland. “First impressions mean a lot to price support.”
Prolonging economic age
To a professional appraiser, diligent maintenance doesn’t translate into higher property valuations the way that improvements, upgrades, and appreciation all increase a home’s worth. But good maintenance does affect an appraiser’s estimate of a property’s economic age—the number of years that a house is expected to survive.
Economic age is a key factor in helping appraisers determine depreciation—the rate at which a house is losing value. A well-maintained house with a long, healthy economic age depreciates at a much slower rate than a poorly maintained house, helping to preserve value.
Estimating the value of maintenance
Although professional appraisers don’t assign a positive value to home maintenance, there are indications that maintenance is not just about preventing little problems from becoming larger. A study by researchers at the University of Connecticut and Syracuse University suggests that maintenance actually increases the value of a house by about 1% each year, meaning that getting off the couch and heading outside with a caulking gun is more than simply a chore—it actually makes money.
“It’s like going to the gym,” says Dr. John P. Harding, Professor of Finance & Real Estate at UConn’s School of Business and an author of the study. “You have to put in the effort to see the results. In that respect, people and houses are somewhat similar—the older (they are), the more work is needed.”
Harding notes that the 1% gain in valuation usually is offset by the ongoing cost of maintenance. “Simply put,” he says, “maintenance costs money, so it’s probably best to say that the net effect of regular maintenance is to slow the rate of depreciation.”
How much does maintenance cost?
How much money is required for annual maintenance varies. Some years, routine tasks, such as cleaning gutters and changing furnace filters, are all that’s needed, and your total expenditures may be a few hundred dollars. Other years may include major replacements, such as a new roof, at a cost of $10,000 or more.
Over time, annual maintenance costs average more than $3,300, according to data from the U.S. Census. Various lending institutions, such as Directors Credit Union and LendingTree.com, agree, placing maintenance costs at 1% to 3% of initial house price. That means owners of a $200,000 house should plan to budget $2,000 to $6,000 per year for ongoing upkeep and replacements.
Proactive maintenance strategies
Knowing these average costs can help homeowners be prepared, says Melanie McLane, a professional appraiser and real estate agent in Williamsport, Pa. “It’s called reserve for replacements,” says McLane. “Commercial real estate investors use it to make sure they have enough cash on hand for replacing systems and materials.”
McLane suggests a similar strategy for homeowners, setting aside a cash reserve that’s used strictly for home repair and maintenance. That way, routine upkeep is a snap and any significant replacements won’t blindside the family budget. McLane’s other strategies include:
Play offense, not defense. Proactive maintenance is key to preventing small problems from becoming big issues. Take the initiative with regular inspections. Create and faithfully follow a maintenance schedule. If you’re unsure of what needs to be done, a $200 to $300 visit from a professional inspector can be invaluable in pointing out quick fixes and potential problems.
Plan a room-per-year redo. “Pick a different room every year and go through it, fixing and improving as you go,” says McLane. “That helps keep maintenance fun and interesting.”
Keep track. “Having a notebook of all your maintenance and upgrades, along with receipts, is a powerful tool when it comes to sell your home,” advises McLane. “It gets rid of any doubts for the buyer, and it says you are a meticulous, caring homeowner.” A maintenance record also proves repairs and replacements for systems, such as wiring and plumbing, which might not be readily apparent.
John Riha has written six books on home improvement and hundreds of articles on home-related topics. He’s been a residential builder, the editorial director of the Black & Decker Home Improvement Library, and the executive editor of Better Homes and Gardens magazine. His standard 1968 suburban house has been an ongoing source of maintenance experience.
“Visit Houselogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.”
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Escrow Accounts: What’s the Deal?
By: Susan B. Weiner
Published: October 22, 2010
Does your escrow account ever cross your mind? Probably not. But forgetting to monitor it can lead to lost money and a big headache.
Escrow accounts: lenders love them; you might not
As handy as they are, you’ll find some significant hitches:
- You lock up your money before your tax and insurance payments are due, since your lender is taking the money out each month, often long before the tax payment is actually due.
- Your lender usually doesn’t have to pay you interest on your escrow account—it varies by state.
- Your lender may screw up paying taxes or insurance, and even though it has to fix mistakes, you have to make the time and effort to follow up.
- There may be tax advantages to timing your property tax expenses—but you can’t do that if you’re paying a flat fee in escrow each month.
But your lender may insist on an escrow account because it:
- Helps guarantee your insurance and taxes will be paid.
- Ensures your lender will get the first claim on your house if you default, ahead of the local government.
In fact, your lender may do you the honor of charging you a flat fee for opting out of an escrow account, or it will add 0.25% to 0.5% to the loan amount if you decline to use an escrow account.
How to manage your escrow account
Your lender has to give you an annual escrow account statement and refund any available balance when you sell your house or refinance your mortgage. Check your escrow account statement carefully:
- Make sure everything adds up. “If I have my escrow statement, my property tax bill, and my homeowner insurance declaration page, and everything matches up, then I’m fine,” says Debbie Siegel, president of Westchester Mortgage in Newton, Mass.
- Check the size of the escrow account. Lenders are allowed to keep a reserve of no more than two months in payments in most states, and in some situations it’s even less. Your REALTOR® or lawyer can give you the skinny in your case.
- Contact your lender in writing if you find a problem in your escrow account. If your lender missed an insurance payment, it should pay any late fees as long as your mortgage payments are current, according to the U.S. Department of Housing and Urban Development. If your insurance is canceled as result of your lender’s late payment, you can sue your lender.
- Know your rights. Your lender must acknowledge your letter within 20 days and try to fix your problem within 60 days. If you’re still not satisfied, file a complaint with HUD.
Don’t worry, however, if your escrow account balance is temporarily negative. It’s probably due to a recent increase in your taxes or insurance. Your lender will pay your taxes and insurance, although you will need to reimburse your lender for the shortfall.
A final word: Usually basic home owners insurance will be paid out of an escrow account. If you have extra coverage for your original Matisses, for example, you may need to pay that premium directly to your insurer.
Susan B. Weiner has written on financial topics for Bottom Line/Personal, Financial Planning, Wealth Manager, and other national publications for more than 15 years. She learned firsthand that when your house combines two lots, your escrow account may initially fail to pay the tax bill on the second lot.
“Visit Houselogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.”
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