5 Tips to Help Buyers Save for a Down Payment

Saving for a down payment can pose one of the biggest challenges for potential home buyers.

Indeed, “a down payment is often the largest single payment a consumer makes in their lifetime and saving for it isn’t easy,” says Corey Carlisle, executive director of the American Bankers Association Foundation. “However, with a few changes, consumers can put themselves on track to make their home ownership dream a reality.”

In honor of American Housing Month, the American Bankers Association Foundation recently featured several tips to help consumers cut their household costs and start saving for a down payment.

Determine how much you need. Find out how much you’ll need for a down payment. From there, create a budget by figuring how much you can realistically set aside each month. Then, you can set a timeline.

Create a separate savings account. Separate a savings account that is just for the down payment. Make monthly contributions automatic.

Find ways to reduce your monthly bills. Check your car insurance, renter’s insurance, health insurance, cable and Internet plan rates. See if there are any promotions that could help you save money by revisiting your contracts.

Investigate state and local home-buying programs. Several state, counties, and local governments offer first-time home buyer programs that offer down payment assistance. Find out if you’re eligible for one.

Celebrate. Set smaller savings goals as you work up to the larger goal. For example, if you need to save $30,000, celebrate — such as with a nice meal — every time you hit the $5,000 saving milestone. “This will help you stay motivated throughout the process,” ABA notes.

Source: American Bankers Association

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6 Packing Hacks When Moving

Moving experts recently shared with realtor.com® some of their most creative tips and tricks for helping home owners pack up their belongings.

Glasses and cups: Insert a stemware into a tube sock to prevent cracks. Also, “pick up wine or beer boxes with cardboard separators to pack glasses and other fragile items — liquor stores give these away for free,” says Mim King, a professional organizer in Minneapolis.

Jewelry: Prevent necklaces and bracelets from getting tangled up by taking a few empty toilet paper rolls or drinking straws. Thread each chain through a toilet roll or straw. Then fasten the clasp.

Plates: Use bubble wrap or insert paper plates in between ceramic ones and then stand them up in a box, suggests Randy Shacka, president of Two Men and a Truck in Lansing, Mich.

Clothing: Slide a trash bag over hanging clothes to make them easier to carry or stack, suggests Wes Taft, co-founder of the mobile app moveCHECK.

Linens: Use towels, sheets, and dishcloths to cushion other objects. For example, roll up wooden and plastic utensils in dish towels, Shacka suggests. “Pack pillows at the top of boxes to add extra cushion and wrap artwork in blankets,” King says.

Electronics: Use the plastic tabs from loaves of bread to secure electronic cords to prevent tangles. “Be sure to label them so you don’t lose track of which cord goes to which piece of equipment,” says Taft. He also recommends snapping a photo of your electronics before unplugging them so you remember how everything connects in your new home.

Source: “Weird Packing Tricks That Actually Work,” realtor.com® (June 24, 2016)

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Yun: ‘Flashing Yellow Lights on Affordability’

The median price of an existing home reached a new record last month at $239,700. That price increase was primarily driven by repeat buyers trading up or downsizing from their current home, according to data from NAR. First-time buyers, meanwhile, continue to be held back by affordability issues.

“We are seeing flashing yellow lights on affordability,” says Lawrence Yun, NAR’s chief economist. “People who are currently renting and want to convert into ownership — major difficulty. Home prices are rising way too fast compared to people’s income and wage growth. … We are facing housing affordability challenges already with low mortgage rates, but what happens when the rates begin to rise?”

Affordability issues are the primary reason why housing hasn’t had a stronger recovery. “While housing should be pushing overall economic growth, it is not, due to the meager activity in home construction, says Diana Olick, CNBC’s real estate correspondent. “Rental demand has been fueling most of the construction activity, but multifamily housing starts are starting to slow, as most of the activity was in higher-priced, urban rentals, where supply is now high.”

“The tight supply of homes on the market continues to constrain sales, while low mortgage rates and job growth help fuel healthy demand,” notes Andrew LePage, research analyst at CoreLogic. “This results in a pressure cooker effect, and the market’s traditional pressure release valve — new home construction — isn’t helping much, given that new home sales are running more than 40 percent below historically normal levels.”

Source: “New Warning Lights for Rising Home Prices,” CNBC (June 23, 2016)

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Kennewick Makes #14 in the Top 20 June Markets

Here They Are: The Top 20 Markets for June

The overall residential housing market is heating up this summer, but a markets in a few cities across the country are in a league of their own, notes Jonathan Smoke, realtor.com®’s chief economist.

Realtor.com®’s research team identified the hottest markets by factoring in which ones had the most views per listing on its website and saw the quickest inventory movement. In these markets, homes are selling 20 to 38 days faster than the rest of the U.S.

Once again, California dominates this month’s list, but eight other states are also represented (Texas, Colorado, Indiana, Ohio, Michigan, Washington, Massachusetts, and New Hampshire). Seasonality is a big factor in this month’s rankings, Smoke notes.

“This is a peak time for people to be buying vacation homes in Michigan, because the weather is perfect,” Smoke says. “California markets tend to be fairly consistent—we don’t see huge changes.”

Source: “America’s 20 Hottest Real Estate Markets for June 2016,” realtor.com® (June 23, 2016)

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FAA Finalizes Rule for Commercial Drones

Using a drone to capture listing photos and videos or inspect properties is about to become significantly easier now that the federal government has finalized its long-awaited regulations over the commercial use of unmanned aerial systems.

The final rule issued Tuesday by the Federal Aviation Administration paves the way for people who obtain a remote pilot certificate to operate drones that weigh less than 55 pounds, as long as the aircraft remains within visual line-of-sight. Earning the certificate will involve passing a test of aeronautical knowledge at an FAA-approved testing center — but it will not require applicants to have formal flight training.

The FAA has, until now, required people wishing to operate drones commercially to obtain a so-called Section 333 waiver, and the agency has limited those waivers to people with a pilot’s license. That constraint has stood in the way of real estate professionals and others wishing to use drones in their businesses, despite the growing availability and decreasing cost of lightweight, remote-controlled aircraft equipped with cameras.

The new FAA regulations, which take effect in August, follow requests from industry groups, including the National Association of REALTORS®, for regulators to develop a framework that would allow people without specialized training to use drones for purposes other than a hobby. NAR sent multiple letters to the FAA during the rulemaking process and testified before Congress in support of the use of drones in the real estate industry.

“We’ve worked hard to strike a responsible balance that protects the safety and privacy of individuals, while also ensuring real estate professionals can put drones to good use,” NAR President Tom Salomone said in a statement. “That effort just took another big step forward. The rules will help more real estate professionals take flight, making the efficiency and innovation that drones have to offer available to a much broader base of operators.”

Although the new regulations eliminate the requirement that drone operators hold a pilot’s license, they contain a host of restrictions intended to protect people on the ground. Beyond requiring the operator or another visual observer to be able to see their drone while it is in operation, the regulations prohibit flying inside buildings or flying over people who are not connected with the flight. In addition, drone flights will be permitted only during daylight or twilight hours, drones must not fly faster than 100 miles per hour, and operators must be at least 16 years old.

The regulations will permit drone operators to obtain waivers from the FAA for some of the restrictions if they are able to demonstrate that their proposed flight will still be able to operate safely.

Meanwhile, NAR is calling for the FAA to develop less-restrictive rules for drones under four pounds. NAR also believes the FAA should come up with guidelines that would permit drone flights to go beyond visual line-of-sight, which is particularly important for aerial photography of large buildings or expansive tracts of land.

“We’re entering a new stage of drone use in real estate, and no doubt there will be additional questions and challenges ahead,” Salomone said. “NAR will continue educating its members on issues important to the safe, responsible use of drones so they can grow their business and better serve their clients.”

—By Sam Silverstein, REALTOR® Magazine

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The Best Choices for Pet-Friendly Flooring

If you’re looking for pet-friendly flooring, you can’t go wrong with porcelain tile. A recent article from This Old House points out that not only is porcelain tile moisture-proof, it’s also not prone to scratches.

Concrete can also be a good flooring choice. Epoxy grout (tile) or an epoxy finish (concrete) can help minimize the upkeep further.

Hardwood flooring – particularly oak, hickory, or Brazilian cherry – can also be a good options for pets. “Prefinished wood floors with a factory-applied aluminum oxide top coat resist scratches and dings best,” This Old House notes. “A matte penetrating-oil finish can disguise scuffs and is less slipper – just touch up nicks with a stain pen or putty.”

Vinyl and linoleum also can be a good low-maintenance option. However, frequent pet accidents eventually can become an issue with these flooring types since they are glued-down.

Some of the worst options are laminate (it can be prone to moisture damage and noisy with pet feet) and carpets and rugs (prone to staining).

Source: “Ground Rules for Dog-Friendly Flooring,” This Old House (June 2016)

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Average Time to Close: 45 Days

Daily Real Estate News | Thursday, June 16, 2016

For home buyers financing a home purchase, they should expect about 45 days to close, according to the latest Origination Insight Report from Ellie Mae. Last month the average closing time was 44 days.

VA loans rose from 48 days in April to 49 days in May, according to the report.

The closing rate for all loans in May rose to 70 percent. Purchase closing rates were 75 percent and refinancing closing rates rose to 67 percent.

Borrowers’ continued to have high credit scores. For conventional loans, 82 percent of the borrowers had credit scores over 700. On the other hand, only 39 percent of borrowers with FHA loans had credit scores higher than 700.

Overall, mortgages for home purchases are accounting for more originations. Purchase mortgages rose to 62 percent of all closed loans in May, marking the first time since August 2015 it reached over 60 percent.

Source: “Ellie Mae: Purchase Mortgages Now Make Up More Than 60% of Closed Loans,” HousingWire (June 15, 2016)

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Down Payment Aid Programs Save Buyers $17k

Down payment assistance programs can help home buyers save big over the lifespan of a loan. On average, qualifying home buyers can save $17,766 over the life of the loan, according to a new report of 513 counties nationwide released by RealtyTrac and Down Payment Resource.

The total savings breaks down to an average of $5,965 on the down payment for a median-priced home, and an average savings of $11,801 on monthly house payments over the life of the loan for a median-priced home, according to the report.

“Saving for a down payment can be difficult for prospective first-time homebuyers given the absence of substantial wage growth in recent years combined with the burden of student loan debt many are struggling under,” says Daren Blomquist, senior vice president at RealtyTrac. “Even just a 3 percent down payment requires 14 percent of annual wages on average across the 513 counties we analyzed, and in 67 counties a 3 percent down payment requires more than one-fifth of annual wages.

The study shows that the following markets are where buyers who use down payment assistance programs have the biggest total dollar savings compared to buyers not using down payment assistance: Kauai County, Hawaii ($80,148 total savings over the life of the loan); Placer County, California, in the Sacramento metro area ($78,539); San Francisco County, California ($77,411); Orange County, California in the Los Angeles metro area ($74,268); and Shasta County (Redding), California ($70,806).

“Home ownership programs not only help buyers overcome the initial cost of purchasing a home, but also produce a compounding positive impact on the home owner’s saving and wealth-building capability,” says Rob Chrane, CEO at Down Payment Resource. “In fact, these programs are now the last frontier in the fight to preserve home ownership affordability. Rates are never going to be substantially lower, and home prices continue to trend higher.”

Source: RealtyTrac

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Defaulting HELOCs: A Growing Concern

In 2004, millions of home owners tapped into the equity of their homes through home equity lines of credit. Their 10-year grace periods are now done and they’ve had to start paying. And that’s why HELOC delinquencies are now suddenly soaring.

In March, second-lien HELOC delinquencies – those behind a mortgage on a property — climbed 87 percent compared to a year ago, Black Knight Financial Services’ reports.

Delinquencies may continue to climb too. HELOCs taken out in 2005, 2006, and 2007 comprise 52 percent of all active lines of credit. In 2005, there were about 850,000 home equity lines; 1.25 million in 2006 and 2007. The grand financial total from just those three years: $192 billion.

The increases in HELOC delinquencies are the first annual rises since June 2012, Black Knight notes. An 87 percent spike in delinquencies among 2005 HELOCs over the past 12 months have been attributed to most of the recent spike.

Source: Black Knight Financial Services and “A Decade After the Bubble, Home-Equity Line Delinquencies Jump,” MarketWatch (June 6, 2016)

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