October, 2009

Also in the news this week, the big winners in today’s real estate market could well be the young people just starting to invest and buy their first homes. First-time homebuyers — most of them between the ages of 25 and 45 — accounted for nearly half of home sales from January through July 2009, according to the NATIONAL ASSOCIATION OF REALTORS®.

George Jaramillo, a 35-year-old business analyst from Atlanta, who recently bought three investment properties calls this a historic time. “It’s a great opportunity to make some gains in the future”, he said

A study by investment company T. Rowe Price points out that investing when prices are low can result in amazing gains. Between 1970 and 1990, the annualized rate of return for the S&P 500 was 11.5 percent.

“We need to be shouting from the rooftops that this is not the time to get out of the market if you’re young,” says Christine Fahlund, a senior financial planner with T. Rowe Price, reminding us all that this is the time to be in the market.

To review, the FHA loan is a partnership between the federal government and lending institutions, the banks, the mortgage companies that make loans – The federal government insures the loans that the institutions make. The FHA loan, in addition to being backed by federal insurance, allows buyers to come to the table with as little as 3.5% down. This is a big help to many, especially today when so many lenders want a full 20%!

These types of loans were originally created back in the Great Depression to help people get into homes, when lenders at that time wanted a 50% down payment!

The main difference with an FHA transaction is that the down payment of 3.5% is a little easier to save for, compared to 5 or 10% down on a conventional loan. The down payment on an FHA can also be a gift from a relative — you are required to have a signed a gift letter saying that you don’t have to pay that money back to them — but you can — so the parents can help their kids out in a wonderful way.

In fact, the walkability quotient of a home may actually make it worth more. According to recent research commissioned by a group called CEOs For Cities, homes close to amenities like schools, libraries and businesses are typically worth more. This study found that houses in neighborhoods where residents don’t have to drive to shops and restaurants are worth from $4,000 to $34,000 more than their isolated counterparts.

Of course, it is in the densest parts of cities, where residents can walk out the door and get very quickly to a coffee shop or a market. But, suburbanites and small town dwellers, too, want to spend less time in their car and more on their feet and developers across the country are trying to give them just that.

It wasn’t too long ago the suburbs meant cul-de-sacs and isolation and all these were considered to be good things. But more and more developments on the edge of town are including retail and commercial space, along with the houses and condos, so residents have options of getting out on foot.

And, there are benefits beyond convenience. There is actually a correlation between body mass and walkability, meaning folks who live where there are things to walk to are typically slimmer. Walkable neighborhoods also promote sociability among neighbors and generally have higher rates of pride and volunteerism in their communities.

Of course, there is also the cost savings of not having to drive a car as often as in less walkable neighborhoods.

When it comes to buying and selling real estate nearly everyone pays attention to things like which place has an updated bathroom. But living in a walkable neighborhood can also do a lot for the value of a home, particularly if this trend of wanting to get out on foot continues and strengthens.

In the meantime, if all the research is true, it seems people in walkabout neighborhoods are going to look better, have more friends and in the end, might make a little more money than everyone else.

Next up? Your mortgage release documents.
If you’ve ever refinanced, you’ve paid off one mortgage and replaced it with another. You’d be amazed at how often there’s no record of that mortgage being paid off. The lender is supposed to file a ‘release’ with your local government, to prove it’s paid off, but sometimes they don’t.

How does that affect you? Well, when you go to sell the place, it will appear that there’s still a big mortgage on it. Usually title companies can clear it up, but it takes time and it could delay your settlement! Sometimes, when the lender files a release with the government, they send you one too. Sometimes they don’t. But if they do, keep it.

And, this advice doesn’t just apply to primary mortgages. If you’ve ever paid off, or shut down a home equity loan, keep anything you get that proves it’s paid off.

And finally, the deed. This is the big one.
If you’re fortunate enough to have actually paid off your house, you’ll get a copy of the deed. It contains critical information about your home — specifically, who actually owns it. Is it all yours? Or does your wife own it too? It will say whether it’s owned as a tenancy in common, or a joint tenancy. This will determine whether you can sell just your part of the place, or not.

The deed also contains the legal description of your property, and other important information. But most important of all, it proves you own the place!

So, if you’ve already put all these documents in a safe place, great. But, if they’re scattered all over the house, gather them up, and put them some place safe.

Someday you might be really glad you did.