Suddenly, Private Mortgage Insurance is back in vogue. If only by default.

The story background is well-documented in this Bankrate.com article from 2002. The article is five years old, but it still raises some salient points.

What the article doesn’t highlight is that second mortgages such as home equity loans are typically sold to Wall Street, bundled in with sub-prime and “near-prime” loans.

Today, as the number of buyers for these higher-risk loan pools shrinks, some mortgage lenders have stopped offering second mortgages in order to reduce their overall lending risk.

PMI payments tend to be higher than their piggyback counterparts, but The Tax Relief and Health Care Act of 2006 narrows that gap using tax deductibility. The act grants itemized deductions for some private mortgage insurance (PMI) and government mortgage insurance (MIP) expense premiums paid in 2007.

For all loans originated in the 2007 calendar year, mortgage insurance is tax-deductible provided that two tests are met:

1. The homeowner’s household income is $100,000 or less in 2007
2. The home loan is for a primary or secondary residence

For households earning more than $100,000, the deduction is phased out to the tune of 10% per $1,000 of additional income until it reaches 0% at $110,000

So, if a single person earns $90,000 in 2007 and buys a home using MI, the MI expenses are tax-deductible in 2007. However, there’s a catch! Because the tax code is due to expire December 31, 2007, there is no guarantee that the MI will be tax-deductible in 2008.

As always, talk with your tax professional about how tax deductions work and whether you qualify for a PMI deduction.

As the number of mortgage products continues to shrink, PMI will continue to grow in popularity. The graphic/poll above will shift, too.

“If only I knew what my street was like before I bought the house!”

Ignore the statewide statistics, forget the city figures.  Phooey to the neighborhood.  Reinforcing the notion that all real estate is local, meet Street Advisor, the definitive guide to America’s many streets.

Unfortunately, there just hasn’t been enough helpful information catalogued just yet to make Street Advisor a powerful force.  That doesn’t mean you can’t be the first, of course. 

Participate in the Local Expert program, or just share what you for the fun of it. Leave comments about your block’s restaurants, upload photos of the streetscapes, and write about recent real estate sales activity.  As Yelp is to local businesses, Street Advisor is to, well, streets. 

Stop by and add to your street’s official Street Advisor review.

Money Magazine recently listed their 2007 Top 100 Places To Live with Middleton, WI topping the list.

The full Top 10 list, in order:

1. Middleton, WI
2. Hanover, NH
3. Louisville, CO
4. Lake Mary, FL
5. Claremont, CA
6. Papillion, NE
7. Milton, MA
8. Chaska, MN
9. Wallingford, PA
10. Suwanee, GA

How did Middleton get to number one?  The formula seems to make sense:

• Good education system
• Low crime rates
• Short commutes to work
• Good air quality

Number 100 on the list?  Cottonwood Heights, Utah.

June’s Existing Home Sales reported weaker than expected and dropped from prior levels, according to the National Association of REALTORS. 

Because our country (A) loves to discuss real estate, and (B) loves statistical headlines, expect tomorrow’s newspapers to emblazon one (or both) of these data points on the front page:

• Home sales are down 3.8% from May 2007
• Home sales plummet 11.4% from one year ago

Those are two of the negative points from the NAR report. 

There were positives in the report as well, but they’ll likely get buried deep in the newspaper coverage.

For example, homes are more affordable today than they were a year ago.  Mortgage rates for “A” paper home buyers (i.e. strong income, assets and/or credit rating) are slightly lower today in June 2006. 

Additionally, the number of homes on the market dropped in June which led to, in part, an increase in the median home sale price.

We bring the up today because it’s important to remember that real estate is not a national news story — it’s hyper-local.  That’s why newspaper headlines need to be taken with a grain of salt.

Your home is a part of your neighborhood and that has its own “real estate market”.  Just like on any street in America, your street has good buys and outright lemons listed for sale.  What’s happening on the national scene has absolutely nothing to do with what’s happening in your backyard.

Unfortunately, this is a truth that remains largely untold. 

Prospective pool of buyers can be frightened by negative headlines like the ones we’ll likely see tomorrow morning.  Fewer buyers means less demand for homes, placing additional downward pressure on the housing market.

If you own a home and somebody else depends on your income, consider that the leading cause of home foreclosures is not “adjustable rate mortgages”.

As cited many times over (including by a Harvard law professor), the answer is medical bills.

Even for the insured, medical expenses can dramatically impact a family’s finances and push it into bankruptcy. 

Over one million families discovered that sad fact in 2004 and medical bills have not gotten any cheaper, says the Bureau of Labor Statistics.

Death is another major cause of foreclosure. 

When a family’s primary wage-earner dies, the secondary wage-earner is now obligated to pay the family’s monthly obligations and that may include a mortgage payment.  Sadly, that income may not be enough to cover the bills.

A strong life insurance policy can offset bills, ease transition periods, and even pay off the home’s remaining mortgage obligation. 

Whether you’re a first-time buyer or a seasoned investor, consider protecting yourself and your family with adequate medical and life insurance coverage, as well as taking preventative health care steps. 

There are resources online to help you determine what coverage is necessary, but the best place to start for this highly personal discussion is with your personal financial planner.

Life is a series of surprises and it’s never too soon to be prepared.

(Image courtesy: NCSALL)

As homeowners insurance premiums rise across the nation, Bankrate.com writes a helpful story on ways to keep your premiums down.  The tips may surprise you.

Some of the highlights include:

1. Don’t think a series of small claims is better than one big claim.  The smaller clains are more expensive to process for an insurer and may result in higher premiums for your home.
2. Don’t lie about your history of claims — similar to CARFAX, homeowners have a “record” that track prior filings and getting busted is only a database search away.
3. Higher credit scores can lead to lower premiums because homeowners will higher scores tend to make fewer claims.
4. Your driving records impact your premium calculation.

The article also provides a fair amount of myth-busting so it’s worth a read.  A few minutes could save you some good money on your home insurance.

(Image courtesy: Spot Lite Magic & Costumes)

The Bureau of Labor Statistics says that the average American family spends $614 a month on automobiles.  This includes finance payments, gasoline, repairs, and insurance.

Let’s relate that $614 per month to home buying.

Based on a 6.500 percent, fully-amortizing mortgage payment, that same $614 yields an equivalent of $97,000 in additional home purchasing power.

With an interest only home loan, it balloons to $113,000.

In other words, if your lifestyle does not require the full-time use of an automobile, you may want to consider trading in your car in for a larger and/or upgraded home.

For the temporary use of a car after a trade-in or sale, of course, you can phone a local car rental agency, or ask a friend to borrow (and be sure to fill up the tank as a courtesy).

You can also try priceline.com’s Name Your Own Price feature which makes cars available for a fraction of the “standard” rental cost — sometimes as low as $10 per day.

Credit “piggybacking” used to be a handy way to boost a person’s credit score in order to help them get a home loan approval.  Starting in September, it’s going the way of the Dodo bird.

Piggybacking involves linking one person’s strong credit rating to another person’s weak credit rating.

By adding the latter as an authorized signer on the former’s credit cards, the weaker credit scores are pulled higher because of better payment histories and lower debt-to-limit ratios.

Recently, credit repair companies began paying people with good credit several hundred dollars monthly to “rent” their credit to people with poor credit scores. 

The agencies charged the low credit scoring group up to $1,000 for the service, promising (and delivering) an increase to their FICO.  Outed by Kenneth Harney in April and under pressure from credit scoring stakeholders, the practice will soon be halted. 

Beginning in September, credit agencies will protect their scoring methods from gamers of the system.

There are no records documented how many people have abused piggybacking and credit scoring loopholes.

The change will negatively impact people that legitimately use authorized accounts, including children and spouses. There are an estimated 41 million people in that category. 

There are also close to 2 million people that only have authorized accounts in their credit history.  For these people, their credit history is about to go blank.

Source
Can you ‘piggyback’ on a credit score?
Liz Pulliam Weston
MSN Money, June 18, 2007

(Image courtesy: David L Nelson)

The NBC Today Show recently ran a Home Staging series that’s worth watching.  Hosted by Barbara Corcoran, the trio of 5-minute pieces resemble HGTV Reality Shows but carry much more insight and “everyday tips” that ordinary folks can use.

The video clip above is look at a home on Long Island that, as Barbara called it, is “the worst house on the block”.  You can’t help but feel bad for the agent whose name is on the For Sale sign.

Of course, the story has a happy ending — the home is now under contract.

Watch all three home staging clips via YouTube:

• Home staging with a $100 budget
• Home staging with a $500 budget
• Home staging with a $5,000 budget (see clip above)

“People don’t want to put the money in,” Barbara says. “They’re thinking about taking the money out.” 

This series of videos shows how that line of thinking can actually reduce your profits.

Square footage of a home is a matter of debate — a homeowner measures it one way, a real estate agent another way, and an appraiser a third way. 

The local tax assessor has his own method, too.

So, who is right?

Until 2003, they all were!  That’s when the NATIONAL ASSOCIATION OF REALTORS® Appraisal Committee defined the term “square footage” to include the following:

Finished square footage on each level of the home, measured from the exterior-facing surface of outside-facing walls.

The committee defined “finished” as an enclosed area that is suitable for year-round use and includes walls, floors and ceilings.

Seems basic enough, but there were some added notes and exceptions:

1. An opening to a floor below (e.g. vaulted ceiling, open-air living room) is not included.
2. Stairs are counted as square footage and are added to the floor from which they descend
3. Finished areas must have a ceiling height of 7 feet to be included (except under duct work or beams in which case the requirement is reduced to 6 feet, 4 inched)
4. If a room is sloped, at least half of the room must have the minimum 7-foot height in order to be included
5. “Detached” finished areas are only included if they are connected to the main structure by another finished area.   Detached garages, therefore, are excluded.

Even with the standard defined, the Appraisal Committee’s approach to square footage is still just a guideline; no states have formally adopted it as a standard for appraisers, tax assessors and other real estate industry players.

Until then, the debate will continue.  Despite the “official” guidance.

(Image Courtesy: Gables at Copper Creek)