Budgeting Your Home Renovation

Whether you are renovating one room or the whole house, it's a good idea to think through the process of creating a budget for your project.

No matter the size of your renovation, it will be a big deal because it's happening under your roof. Starting with a realistic budget can reduce the stress considerably. Determining what you can spend ahead of time on flooring, lighting, painting, and other accessories helps to take some of the pressure off as you shop and compare.

Think big to small. One approach to creating your renovation budget is to first understand the anticipated costs of the must-haves. There are certain fixed costs you can't avoid. Most people have an idea of what they have available to spend on a renovation. So start by thinking about the most expensive things you must have to complete your renovation, such as electrical work or a new roof. Then, subtract those costs from your available funds. The remaining dollars can be broken down to cover finishes and other features.

Pick a must have! Choose one thing you feel you absolutely want for the space, such as some gorgeous tile, and make a few selections around it, such as cabinets. It's an exercise that's helpful in determining what you are dreaming about for the project and, once you understand costs, what things you may decide to compromise on."

Look ahead. When determining what you want to spend on your renovation, consider how much longer you plan to live in the house. Is this a short term home or a 20-year home? If you plan to live in the house only a few more years, make selections you like but consider spending less than you would on a house you plan to live in for many years to come. If you plan to sell, you will want the kind of quality that will entice people to buy your house. Just don't sink your entire savings into it.

Consider the neighborhood. Never spend more on your renovation than your location can support. You don't want the most expensive home in the neighborhood and not be able to recoup your expenses if you decide to sell. Visit with some local realtors and check comparable sales to find out how much homes are worth in your area and what renovations and features most buyers are looking for.

Plan for contingencies. Most remodeling experts suggest padding the budget by 15 percent to cover the unexpected.

Save and splurge. Find ways to cut expenses, such as buying all your appliances from one dealer and requesting a discount or purchasing floor models for less. Then apply your savings to something you've been dreaming about, such as granite countertops.

Indulge in the planning phase. Hours spent researching how you'd like your renovation to look and proceed is time well spent in the long run.

Your Homes Electrical System

Electricity is a mystery to many people, but there are rules that govern how your home's electrical system should work. Every house should have an electrical panel with a main shutoff, whether it’s circuit breakers or fuses. The number of circuits will vary with the electrical loads in the house.

According to the National Electric Code (NEC), 240 volt – 100 amp service is now the minimum standard for residential use. Older homes may need to be upgraded to that standard to accommodate the electric demand common to today's lifestyle. Although older electric systems may be "grandfathered in," most communities require that all new electrical work meet code. That means, among other things, that the system must be grounded; all outdoor outlets, bath outlets, most kitchen outlets and basement outlets must be protected by Ground Fault Circuit Interrupters (GFCIs); and new work in other living areas of the house must be protected by Arc Fault Circuit Interrupters (AFCIs).

Ideally, your wiring should be color-coded to indicate the function of the wires (with black wires being "hot," white wires being "neutral," and green or bare wires being "ground.") But, with old knob-and-tube wiring (common in houses built prior to the 1950's), all of the wires may be black. Always check!

Using too high a fuse can allow the wires to heat up and burn their insulation before the fuse blows. For safety, all fuses or circuit breakers should be correctly sized to the wire they control -- and to the load on the circuit. Wire is assigned a number according to its thickness. That number ("gauge") corresponds to the maximum amps it can safely carry and determines the total wattage that can be used on that circuit. 12-gauge wire should carry no more than 2400 watts, and should be controlled by a 20-amp fuse or circuit breaker; 14-gauge wire, 1800 watts, controlled by a 15-amp fuse or circuit breaker. Unless you can determine the wire size, it's safest to assume any old knob-and-tube circuits to be 14-gauge, to prevent a fire hazard; if you put a 15-amp fuse on the circuit and it starts blowing, don't replace it with a bigger fuse -- unplug something from the circuit or upgrade the wiring.

Many household appliances use so much current that they are required by code to be on "dedicated" circuits (circuits with only a single item on them) to prevent nuisance tripping of the fuse or breaker. For example, a forced-air gas furnace should be on its own separate 20-amp circuit. Although the blower motor, when running, is rated at 1600 watts, a surge of 2200 watts is needed to get it to start spinning. If another appliance draws power from the same circuit as the furnace when it starts, the circuit breaker can trip.

What Are Piggyback Loans?

Piggyback loans, which fell from the forefront during the housing downturn, are making a comeback as home values start to pick up.

Piggyback mortgages – when a borrower takes out a second mortgage in the form of a home equity or line of credit – accounted for 3.8% of the loans originated in 2012, compared to 1.7% of the loans for 2010.

The loans were commonly used by borrowers who wanted to avoid paying for mortgage insurance but didn’t have enough money for a 20% down payment. Some of these loans were taken out to finance home improvements; others were part of a subprime product known as an 80/20 mortgage, in which 80% of the purchase price was covered by a first, adjustable-rate mortgage, and the remainder by a second mortgage with a higher interest rate.

Piggybacks went away because values dropped so dramatically, so many of the banks that offered second mortgages out there lost everything.

As the market stabilizes and continues on its current path, we will see a reemergence of banks offering second mortgages, just as we’ve seen a reemergence of jumbo loans.



Piggyback can be a great product if used properly.



In the case of piggyback mortgages, it could make perfect sense for someone who might be short on the down payment, but can rather pay off the second mortgage rather than going with skyrocketing mortgage insurance.

Best Loan Options for Buying a Home

If you’re in the market to buy a home, take advantage of rates while they’re still low.There are realtor and builder signs up everywhere, but what’s it going to take to get into one of these homes?

Like many young couples, buying your first home is a rite of passage as adults. Sometimes that big step in life isn’t always easy.
Many consumers need a little help and it often starts with the type of loan you choose. What is the best loan option for most consumers today?

There just might be a way to ‘Save a Buck’ with FHA loans.

Jack and Sara March went with an FHA loan and here’s why.

“[It was] just how easy it was to be approved for; the whole process and the down payment. The down payment was a lot lower than your standard loan. You don’t have to put the 20 percent down,” Jack March says.
Instead FHA loans only require 3.5 percent; a much more realistic and affordable option for many families.
March says, “That was just a lot easier for us to come up with the down payment.”

Professionals say FHA loans are a very popular option right now because Fannie Mae is in the process of eliminating their three percent down payment and for most consumers FHA is the only hope of owning a home.

What is seen in the industry is that a consumer who may have a lower credit score perhaps they’re a young buyer who hasn’t had time to build credit or someone who had a bankruptcy and their credit score was impacted by that tend to get a better rate on an FHA loan than they will on a conventional loan.
So if you’re in the market to for a home loan, FHA may be the way to go.

It’s the best with down payment assistance and is the lowest down payment option available.

The "Real Story" on Short Sales

With the exit of a few big firms from the short sale facilitation arena, they have not only left a hole in the market, but they’ve also allowed for some terrible misconceptions to spread across our profession.

Unfortunately, the reasons these firms gave out as to why they have stopped short sales have caused lots of misinformation to circulate. Here is the “THE REAL STORY” as to what the law for facilitation is.

The Law as of today:

Exemption for Real Estate Broker/Agent - Section 7-1-1001 was amended to add subparagraph (6) below went into effect July 1, 2013:

(6) A real estate broker or real estate salesperson not actively engaged in the business of negotiating mortgage loans; however, a real estate broker or real estate salesperson who directly or indirectly negotiates, places, or finds a mortgage for others shall not be exempt from the provisions of this article;

Exemption for Attorneys still in effect - Section 7-1-1001(5) HAS NOT CHANGED as of August 19,2013:

(5) A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney's representation of the client, unless the attorney is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator;

There has also been concern that the Georgia Department of Banking and Finance (DBF) has changed its position and interpretation. That is simply not correct. You may search the DBF website for the only change relative to short sales --- which is the addition of (6) above. It is my understanding that DBF has been providing telephonic and email clarification since this became a hot topic back in August.

However, the operative word other law firms are hanging their hats on is “negotiating”. The law firms still doing facilitation, including Dickason Law Group, only facilitates the flow of information from the seller to their bank pursuant to the attorney’s role in title clearance. They do not represent the seller and they do not negotiate anything. This role has been reviewed and approved by Rod Carnes, the head of the Georgia Department of Banking and Finance. Dickason Law Group now has 9 full time facilitators, a dedicated closing team with 3 closers, and an account manager specifically for short sales. The existing firms doing facilitation without negotiating view the exit of the larger firms as an incredible business opportunity.

This is the DBF site with it's Mortgage Law and Rules:

http://dbf.georgia.gov/mortgage-laws-and-rules

The only change in the law with respect to short sales is the addition the amendment providing an exemption to real estate agents.  See DBF site:

http://dbf.georgia.gov/sites/dbf.georgia.gov/files/related_files/document/ChangestoGRMA-2013LegislativeSession.pdf

Tips for the Home Buying Process

As the housing market continues to rise and interest rates remaining attractive, first-time homebuyers are looking to purchase. Buying a home can be an easy and enjoyable process if well prepared.

Buying a home should not be a frustrating process. To be prepared and confident in the process, a mortgage applicant should know, roughly, what their credit score is before applying for a home loan. The difference between good credit score and an unappealing one is the interest rate offered to an applicant. All home buyers and investors want the lowest interest rate possible; the best way to ensure a low monthly payment on a mortgage is to apply for a loan when your credit score is strong. To reach a good credit score the individual must prove that they paid, on time, a range of financial obligations. If the applicant has missed a few large or important payments in the past, such as a car payment or credit card minimum payment then a credit risk will present itself causing the lender to raise the interest rate.

Once the credit check process is completed the applicant should know their mortgage rate and amount they may borrow. From this point he or she can filter their property and judge how much to spend in relation to a comfortable monthly payment. A good rule of thumb is to find a home no more expensive than the homebuyer's annual income times three. This way the homebuyer is not purchasing something that is not difficult to afford nor is there a great possibility of a large loss of equity in a market down cycle. With foreclosure rates declining, lenders are eager to hold the current market trend positive.

Katz Mortgage Team offers a number of tools and useful information to first time homebuyers on their website!

Fall Housing Trends

Good news for both home sellers and buyers when it comes to opportunity at the end-of-the-year.

While it is still a sellers market, homebuyers are can take advantage of low mortgage rates while lenders are showing forgiveness for those who foreclosed in previous years.

If you are in the market to buy or sell a home, consider these current housing trends:

Home prices cool off. The summer sizzled, and so did the housing market. It's likely we will see it cool down just a bit over the upcoming months. The upside is that potential homebuyers can take their time and not be rushed or pressured into a sale due to the fear of climbing prices.

Banks are loosening up the reins. With rising mortgage rates, homeowners aren't rushing out to refinance like they once had. Homebuyers are now the lender's target audience and they are doing whatever it takes to get their business. Underwriting standards are expected to loosen in coming months as lenders turn their attention towards buyers

Distressed buyers are making a comeback. The Federal Housing Authority is now making it possible for people who were troubled by foreclosures or short sales to make another go at trying to buy a home. The three-year waiting period to apply for a loan has been shortened to one year if the buyers can demonstrate that a reduction in income or a job loss was the reason they lost their previous home.

Potential borrowers must have all their documentation showing they lost at least 20 percent of their income for six months, but that they've been able to pay their bills on time for at least one year.

Mortgage rates stabilize. Mortgage rates spiked this past summer, but it is likely that they will level out as the Federal Reserve will keep rates low and keep pumping the economy with cheap money.

Hurry! 3% Down-Payment Deadline Coming Soon!!

Homeowners who wish to put 3% down on their home take note: Fannie Mae has announced that beginning on November 16th, they will increase the minimum down-payment requirement on conventional loans from 3 to 5%. Homebuyers who wish to purchase a house with 3% down still have time to obtain a Fannie Mae-backed loan but need to act fast; they need to be pre-approved by November 15th, and the loan must close by March 31st of next year.

On November 16, Fannie Mae will implement scheduled changes to its automated underwriting system (DU or "Desktop Underwriter"). DU is used by lenders to approve loans, and several of the changes will make it harder for some borrowers to qualify. These include tougher debt ratio calculations, removal of interest-only options; and stricter requirements for down payments, increasing the minimum amount from 3% to 5% of the loan balance.

While increased down payments could deter some buyers, there are still significant Fannie Mae advantages over FHA: they have no upfront mortgage insurance costs, and 5% down Fannie loans also have lower PMI costs than either FHA or current 3% down loans.

Helpful Answers Regarding FHA “Back to Work” Program!

What is the FHA Back To Work - Extenuating Circumstances program?
The FHA Back To Work - Extenuating Circumstances program is the FHA's "second chance" for mortgage applicants who have experienced financial hardship as a result of unemployment or severe reduction in income.

Can I use the Back to Work as a first-time home buyer?
Yes, you can use the program as a first-time buyer.

Can I use the Back To Work program as a repeat home buyer?
Yes, you can use the program as a repeat home buyer.


Can I use the Back To Work program for an FHA 203k construction loan?
Yes, you can use the program for an FHA 203k construction loan.


Does the FHA Back To Work program waive the traditional 3-year waiting period after a foreclosure, short sale, or deed-in-lieu?
Yes, the program waives the agency's three-year waiting period. You no longer need to wait three years to apply for an FHA loan after experiencing a foreclosure, short sale or deed-in-lieu.


Does the Back To Work program waive the traditional 2-year waiting period after bankruptcy?
Yes, the program waives the agency's two-year waiting period. You no longer need to wait two years to apply for an FHA loan after experiencing a Chapter 7 or Chapter 13 bankruptcy.

Which types of "events" are covered by the FHA Back To Work - Extenuating Circumstances program?
The program can be used by anyone who's experienced a pre-foreclosure sale, short sale, deed-in-lieu, foreclosure, Chapter 7 bankruptcy, Chapter 13 bankruptcy, loan modification; or who has entered into a forbearance agreement.


How do I apply for the program?
You can apply for an FHA Back to Work - Extenuating Circumstances mortgage with any FHA-approved lender. The mortgage approval process is the same for any other FHA-insured mortgage.

Learn About The New FHA "Back To Work" Program!

The FHA's primary role is as an insurer of mortgage loans made by FHA-approved lenders. The FHA insures loans in all 50 states, all U.S. territories, and in the District of Columbia. Since its inception, the group has insured more than 34 million loans which makes the FHA the world's largest insurer of mortgages.

FHA mortgage insurance is available for any loan which meets the following two conditions

Must be made by an approved FHA lender

Must meet the minimum standards of the "FHA Mortgage Guidelines".

The minimum standards of the FHA mortgage guidelines are generally very straight-forward. The more well-known rules require mortgage applicants to show a minimum credit score of 500; to make a down payment of at least 3.5% on a purchase; and to verify income via W-2 or federal tax returns.

Loans failing to meet FHA mortgage guidelines do not get insured and the Federal Housing Administration has been steadily tightening its requirements since last decade's housing downturn.

On August 15, 2013, though, the Federal Housing Administration moved to relax its guidelines for borrowers who "experienced periods of financial difficulty due to extenuating circumstances".

Dubbed the "Back To Work - Extenuating Circumstances Program", the FHA removed the familiar waiting periods that typically followed a derogatory credit event.

If you've experienced any of the following financial difficulties, you may be program-eligible

Pre-foreclosure sales

Short sales

Deed-in-lieu

Foreclosure

Chapter 7 bankruptcy

Chapter 13 bankruptcy

Loan modification

Forbearance agreements


Contact us today to find out if you qualify, www.katzmortgageteam.com

Moving Tips

Consider moving mid-week! It is typically less expensive to move during the week than during the weekend. Weekends are definitely the busiest days of the week for moving. Try to take time off work if possible.

Get multiple estimates!

Try to get at least three estimates from moving companies in person. On-line estimates might be appealing but be cautious. There is the possibility that the price might increase on moving day when they see the amount of items that you actually have. At that time it will be too late to find another moving company and you might be stuck paying extra.

Protect yourself from identity theft!

Make sure you change your address with your accounts online and with the post office. This is especially important when it comes to financial and medical information. Moving can be a stressful time and sometimes people may be too tired or distracted to handle important documents. Sometimes those documents get tossed into the garbage. Since you never know who may be going through your old mail, it makes good sense to get a paper shredder and use it for all of your mail that you think might even possibly have sensitive material!

Pack smart!

When you start packing up items from your home, start with the rooms in the order that upsets your daily routine the least. For example, your garage, basement, and living room should be the first to pack up. The last ones would be the bedrooms, bathrooms, and kitchen. If you have fine china or expensive glassware, it’s well worth the money it to buy foam envelopes designed specifically for the purpose of packing dinnerware. Using these special envelopes will ensure that you don’t experience heartbreak and grief when you get to your new home only to find great-grandmother’s china broken to smithereens.
Get a bucket and fill it with cleaning supplies. Use these in the home that you’re leaving or the new place you are moving into.


Lastly, see if you can turn moving into a party! Invite a small group of good friends to come during a 2 hour time frame to drop in and help load a couple of boxes into the moving truck. Order a pizza and open a bottle of wine – and spend some time hanging out!