Chance Gates' Blog

The Pro:

Think about buying a home for $100,000 and collecting $1200 a month or an income of $14,400 per year, you need to deduct expenses such as Taxes and Management fees. Now you hold the property for at least five years or so and capture the appreciation. The original purchase must be cash, no loans. Any upkeep must come from the IRA and all income goes into the IRA. The rate of return could be wonderful.

The Con:

Granted, since prices have fallen (make that “collapsed” in some areas), I think that housing is a more attractive investment today than it was back at the height of the boom. If nothing else, you’re getting the same sticks and bricks at a lower price.

It must be noted that owning real estate within an IRA can be a hassle. Most people don’t have enough dough in their IRA to buy enough properties to diversify properly. (Financing a purchase for an IRA is possible, but complicated.) And since there are limits ($5,000 this year, plus $1,000 if you’re 50 or older) to how much you can contribute to an IRA in any year, you could run into problems if the cost of property maintenance and repairs exceeds the amount of cash you have in your IRA or that you’re allowed to put in.

That said even with incentives designed to spur demand, such as the $8,000 first-time homebuyer credit, it’s still somewhat unclear  how long it will be until we see a sustainable turnaround. And given how the last boom turned out, you have to wonder how robust the upturn will be.

But even setting that issue aside, you still have to deal with the other difficulties  about owning real estate in an IRA. One more thing you might want to consider is that real estate isn’t the most liquid investment around. That could be a problem if you need to raise cash from your IRA in a hurry

All in all, you can get enough of the diversification benefit and return potential that real estate has to offer by investing in REITs or mutual funds that specialize in REITS or other forms of real estate.

Not that it’s not an interesting idea. Just like anything, it probably makes sense for some and could be disastrous for others.  Please when ever thinking about investing in Reno/Sparks real estate talk to your account.

The question that keeps arising when a client approaches me about buying a home is “what information should I have ready for when I apply for a loan?”.

So to help people out who are getting ready to enter the Reno/Sparks real estate market here is a checklist for you.

Your Residence History:

_____  Your previous addressed for the past two years

_____  The length of time you’ve lived in each place

_____  If you currently rent, your landlord’s name and address (12months)

Your Employment History:

_____  The names and addresses of all your employers for the last two years

_____  The dates you worked at each place of employment

_____  If there have been any gaps in your employment and why

All Outstanding Loans and Credit Cards:

_____  The creditor’s name and address

_____  Your account number

_____  The current total balance you owe and months left to pay

_____  The amount of the monthly payment

Savings, Checking or Investments Accounts

_____  The name and address of each financial institution

_____ Your account number

_____  The current balance or value

Real Estate You Currently Own ( For Each Property)

_____The property address

_____  The estimated market value

_____  The outstanding loan balance(s), the name and address of  the                     mortgage company(s) and your account number(s)

_____ The amount of the monthly payment ( including taxes, insurance and                    HOA dues)

_____  The amount of your monthly rental income (if applicable)

Personal Propert You Own:

_____  The net cash value of your life insurance

_____  The make, year, and value of your automobiles

_____ The value of your furniture, jewelry, or other personal property

Read more at http://chancegates.com/tag/mortgage/

Where as national new home sales may be suffering the local Reno-Sparks Association of Realtors reports that 346 home sales closed in Washoe County.  This is a 49% increase in real estate transaction from the same month a year earlier.    http://chancegates.com/2010/02/27/new-ho… This completely contradicts the national new home sales entry   This is a great reason why when searching for answer on real estate that a person should watch the local markets not the national ones.

Current homeowners buying a house between Nov. 7, 2009, and April 30 and who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight can qualify for the $6,500. It seems less is known about the repeat buyer credit. This incentive was added when the original $8,000 tax credit for qualified first-time buyers, which expired Nov. 30, was extended.

Houses purchased for $800,000 or less are eligible for repeat buyers. Single buyers with incomes up to $125,000 and married couples up to $225,000 may receive the maximum tax credit for both repeat and first-time purchases. The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Buyers earning more than the maximum are not eligible for the credit. If a binding written contract to purchase is in effect April 30, the purchaser will have until July 1, 2010 to close.

The 2009 credit for first-timers helped jump-start the sagging home market in the summer and fall, data show. Walt Molony, a National Association of Realtors (NAR) spokesman, said two million existing-home sales in 2009 could be attributed to the $8,000 first-time buyer credit. Although it is too early to measure the credit’s effect on sales so far this year, Molony said NAR chief economist Lawrence Yun believes it will add 1.5 million sales to the tally.

The repeat-buyer credit was added to appease builders, who said the original did not offer enough time to purchasers of new houses, which take at least six months to build, to close on them. New homes accounted for only 7% of the tax-credit-based sales, Molony said.

The National Association of Homebuilders’ Donna Reichle said, “We hear builders saying they are getting inquiries, but that’s all so far. According to our economists, it’s way too early,” Reichle said. “If you look back at the passage of the original $8,000 credit and impact on housing starts, it took a couple of months, and that was in the spring as well.”

Moody’s Economy.com chief economist Mark Zandi says the credit will boost sales “modestly,” however, by 300,000, with one-third trade-up buyers. “I don’t expect the credit to be extended again,” Zandi said. “Each time it is extended, it becomes less effective and thus more costly.”

David Krieger, senior vice president and general manager of Coldwell Banker Preferred in Philadelphia, says he believes that “a very large increase in our listing inventory in January is a result of the $6,500 credit.” Still, the $8,000 first-time credit remains the chief reason his company’s home sales were 33% higher last month than in January 2009, he said.

Typically, repeat buyers are better off financially than first-timers, so a lot of repeat buyers realize from the start they don’t qualify for the credit, Weichert Realtors agent Alec Schwartz said. “What they do realize, and what is getting more sellers to list, is that they understand that there are plenty of first-time buyers who qualify for the $8,000 credit out there, and they have a much better chance of selling their house and buying a new one than before,” said Schwartz, Liv Mansfield’s agent.

This is also true in the region’s new-home market, said Wayne Norris, regional sales manager for Hanley Wood Market Intelligence. “Builders have experienced increased activity in recent months” attributable to the $6,500 credit and “the fact that many potential buyers were able to sell their houses” to those taking advantage of the first-time buyer credit,” he said. The sense of urgency to make the tax-credit deadline and fears of rising interest rates will push new-home sales higher in the spring, Norris said.

(c) 2010, The Philadelphia Inquirer.

In the Reno/Sparks real estate market, I’m finding most of the  houses being sold for less than $200,000  are getting multiple  offers submitted on the property.

RISMEDIA, February 12, 2010—Thirty-year fixed mortgage rates on Zillow Mortgage Marketplace are currently 4.81%, down six basis points from 4.87% at this time last week. The 30-year fixed mortgage rates hovered at or below 4.80% for most of the past weekend and neared 4.75% on Monday.

Zillow’s real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers through the site, and reflect the most recent changes in the market. These are not marketing rates or a weekly survey.

The rate for 15-year fixed home loans is currently 4.27%, while the rate for 5-1 adjustable rate mortgages is 3.70%.

The volume of mortgage requests in the past week fell 9.4% from the prior week. Of last week’s requests, 34.7% were for refinance loans, 63.5% were for purchase loans and 1.9% were for home equity loans. The prior week, 34.5% of requests were for refinance loans, 63.5% were for purchase loans and 2.1% were for home equity loans.

RISMEDIA, February 10, 2010—Home values across the country declined again in the fourth quarter of 2009, as the Zillow Home Value Index fell 5% year-over-year, and -0.5% quarter-over-quarter, to $186,200. That marked the 12th consecutive quarter of year-over-year declines, according to the fourth quarter Zillow Real Estate Market Reports. Despite home value declines seen across most of the country throughout 2009, some markets experienced what appeared to be a bottom in home value declines, or even increases in home values during the year. However, the fourth quarter of the year brought signs that the fledgling recovery of home values in many of these markets is slowing again. If the declines are sustained, the result will be a “double dip” in home values, defined as two periods of sustained declines in home values separated by a brief period of stabilization or recovery.

One in five, or 29 of the 143 markets tracked by Zillow, showed at least five consecutive month-over-month increases in home values during 2009 before beginning to flatten or fall again in the second part of the year. These markets include the Boston metropolitan statistical area (MSA), the Atlanta MSA and the San Diego MSA.

Home values in an additional 29 markets, including the Los Angeles and New York MSAs, increased on a month-over-month basis each month throughout the fourth quarter. However, the rate of increase slowed from November 2009 to December 2009 in 21 of those markets, and several appear likely to experience several months of sustained decline in early 2010.

The percent of single family homes with mortgages in negative equity was essentially flat from the third to the fourth quarter, changing from 21% in Q3 to 21.4% in Q4. This comes after a decrease in negative equity from the second quarter’s 23%.

The number of homeowners losing their homes to foreclosure across the country reached a peak in December, with more than one in every thousand homes being foreclosed–a number not reached since Zillow began recording national foreclosure data in 2000.

“While we have seen strong stabilization in home values during 2009, there are clear signs that they will turn more negative in the near-term,” said Zillow Chief Economist Stan Humphries. “What we saw in mid-2009 was a brief respite from a larger market correction that has not yet run its course. The good news is that, for those markets that will see a double dip in home values before reaching a definitive bottom, this second dip will not be a return to the magnitude of depreciation seen earlier, but rather will look more like a modest aftershock of the earlier downturn.

“The recent stabilization owed a lot to policy support in the form of tax credits, lower interest rates and increased Federal Housing Administration lending. The remaining correction in home values we’ll see in the first half of this year is a function of market fundamentals, such as the increasing flow of foreclosures, high levels of inventory in the market and a probable decrease in demand as the impact of the tax credit wanes and mortgage rates rise. While the next few months are likely to bring further home value declines in most markets, we do expect to see a national bottom in home prices by the middle of this year. Thereafter, home values are likely to bounce along the bottom with real appreciation remaining negligible for some time.”

Foreclosure re-sales across the country remained high, making up more than one-fifth (20.3%) of all U.S. home sales in December. Foreclosure re-sales also made up the majority of sales in several MSAs, including the Merced, Calif. MSA (68.3%), the Las Vegas MSA (64%) and the Modesto, Calif. MSA (62%). Additionally, 28.5% of home sales nationwide sold for less than what the seller originally paid.

Several markets across the country showed positive longer-term appreciation. Home values increased year-over-year in 27 of 143 markets and remained flat in 15.

The Boston MSA was the largest area with year-over-year appreciation, despite its more recent downturn in home values. The area’s Zillow Home Value Index rose 1.9% in 2009. Home values in the Boston area rose for eight months in 2009, which outweighed the recent declines.

The Nevada Rural Housing Authority launched a new $25 million bond program.  To try and help thaw the frozen market for buyers of manufactured housing in Northern Nevada.

The bond program provides $4500 for first time purchasers.  This money doesn’t need to be repaid, and is available in communities with less than 100,000 people.

A 30 year loan with the down payment assistance would carry a fixed rate of 5.357%.  If a borrow opts out of the down payment assistance the 30 year loan would carry a fixed rate of 4.875%.

Either way, purchasers who have signed a contract by 4/30/2010 and close by the end of June may still qualify for the $8,000 federal tax credit  to first time buyers.

The Federal Housing Administration will raise the minimum down payment for its least credit-worthy borrowers, the agency announced Tuesday.

The change is among a number of major changes the FHA is making to ensure its long-term financial soundness.

Borrowers with credit-rating scores below 580 will be required to put down at least 10 percent. Those with a credit score above 580 will be able to continue to put down only 3.5 percent. The changes are intended to shore up the agency’s finances.

The FHA also will increase its upfront mortgage insurance premium from 1.75 percent to 2.25 percent. The agency is expected to seek congressional approval to raise annual mortgage insurance premiums, paid by borrowers over the life of the loan, above the current 0.55 percent maximum. The amount it will seek has yet to be announced.

For more information on the FHA changes, inlcuding a summary of all changes, visit

 chance at ballard-company.com

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• Harder to get an Uncle Sam mortgage  money.cnn.com)

As credit card companies continue to hike rates and continually change the terms and conditions of your account, it is crucial for credit card users to make the most of their credit. The following tips will help you get on track to using your credit card wisely.

1. Pay on time. Paying your credit card account on time helps you avoid late fees as well as penalty interest rates applied to your account, and helps you maintain a good credit record. A good credit record leads to a higher credit score, which helps you qualify for lower interest rates. Know the date your payment is due. If your bill is due at an inconvenient time of the month- for example, if it’s due on the 10th and you get paid on the 15th- contact your credit card company to see if they will change your billing cycle to fit your cash flow.

2. Stay below your credit limit. If you go over your credit limit on your card, your card issuer could charge a fee and increase your interest rate to a higher penalty rate. To avoid this, keep a record of your spending or check your balance online. Also, be aware that some merchants (for example, hotel and car rental companies) put a “hold” on your credit card based on their estimate of the amount you will charge. This can reduce your available credit until the final charge is processed.

3. Avoid unnecessary fees. Credit card companies not only charge late payment and over-the-limit fees, but also fees for cash advances, transferring balances, and having a payment returned. Some companies charge a fee when you pay your bill by phone. Pay attention to the transactions that trigger these fees. If you need a cash advance, withdraw enough so that you don’t have to take a second cash advance and incur a second fee later in the month. Read your credit card agreement to learn more about the fees that your credit card company charges.

4. Pay more than the minimum payment. If you can’t pay your balance in full each month, try to pay as much of the total as you can. Over time, you’ll pay less in interest charges- money that you will be able to spend on other things, and you’ll pay off your balance sooner.

5. Watch for changes in the terms of your account. Credit card companies can change the terms and conditions of your account. They will send you advance notices about changes in fees, interest rates, billing, and other features. By reading these “change in terms” notices, you can decide whether you want to change the way you use the card. For example, if cash advance fees increase, you may decide to use a different card for cash advances. If you have a card with a variable rate or if you have an introductory rate that is ending, be aware that credit card companies are not required to send you a notice about raising your interest rate. Interest rates are listed on your monthly bill. Read your bill carefully and take note of any changes.

For more information, visit www.federalreserve.gov.

When applying for a home mortgage it is a requirement that a borrower has at least  3 different forms of  “non-traditional” credit over a minimum of 12 months.

According to the Federal Housing Administration “non-traditional” credit is the credit extended  by a landlord, utility company or a cell phone company.

A mortgage lender will either ask for a “Verification of Rent” from a landlord or need 12 months of canceled checks to prove that rent has been paid on time.  Some lender will request proof beyond the 12 months,  so be prepared.  By the way cash receipts will not work.

The utility companies have a “12-month letter of credit”.  Which is basically a list of payment history including the date and payment amount.  If a homebuyer is obtaining these via the internet it is vital that the name, address and company name are on the statement.

There are other forms on non-traditional credit that are harder to prove.  Please remember that all mortgage lenders sets and terms vary.