Banks are increasingly telling borrowers that if they want to buy a home, they need to come with a higher down payment. Banks are requiring higher down payments in order to help mitigate the bank's risk as home prices continue to fall. Plus, banks say larger down payments discourage delinquencies.
The Obama administration last week called for gradually increasing down payments to a minimum of 10 percent on conventional loans that can be bought or guaranteed by Fannie Mae and Freddie Mac.
The median down payment in nine major U.S. cities rose to 22 percent in the fourth quarter of 2010 on properties purchased through conventional mortgages--the highest in median down payment since the data started being tracked in 1997, according to a Wall Street Journal and Zillow.com analysis.
In the late 1990s, median down payments once averaged 20 percent in the nine metro cities Zillow analyzed, but in 2001 started inching downward as banks began requiring little or no down payment in some cases during the housing boom.
Now banks want more, believing that the more a buyer has invested, the less likely they are to default.
Borrowers who can’t afford the higher down payments are seeking assistance elsewhere, such as loans for veterans or those backed by the Federal Housing Administration (which require 3.5 percent down payment), or loans by the United States Department of Agriculture for rural areas.
President Obama is targeting the tax deduction for mortgage interest payments and charitable contributions made among high-income earners.
The proposed budget cuts call for taxpayers in the 33 percent and 35 percent tax brackets to be limited in deducting charitable contributions and mortgage interest payments at the 28 percent rate. The deduction would affect households with taxable income of $250,000 or more. The White House says the move would bring in $321 billion within 10 years.
"NAR will remain vigilant in opposing any plan that modifies or excludes the deductibility of mortgage interest," National Association of REALTORS® President Ron Phipps has said in opposing any MID cuts. (Get the latest news on MID and NAR’s stance at REALTOR.org.)
Home warranties can be attractive to home owners or buyers who are looking at purchasing a property. These service contracts can cover all of a home’s major systems, such as the furnace or air conditioner, and will cover needed repairs if the appliance breaks or damaged.
Some sellers are offering a home warranty to try to lure buyers.
But not all home warranties are the same. Experts say you should carefully weigh costs, policy allowances, and customer feedback before making a decision so that you ensure you’re getting the best deal. Home warranties cost about $250 to $500 a year.
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Posted on Fri, February 11, 2011 by KCRAR
NAR: Secondary Mortgage Market Needs Improvement
The National Association of REALTORS® welcomed the Obama Administration’s call for an orderly transition from the current form of the secondary mortgage market to a new structure that would enable Americans to achieve affordable, sustainable mortgages.
“NAR believes that we cannot have a restoration of the former secondary mortgage market with entities that took private profits while pushing losses onto the taxpayer. The new system must involve some government presence, outside of FHA, USDA, and the Department of Veterans Affairs, to ensure a continued flow of capital to housing markets during economic downturns when large lenders flee the housing market,” NAR President Ron Phipps said in response to the plan released today by the Obama Administration for reforming the housing finance market.
“As the leading advocate for home ownership, NAR recognizes that the existing system failed and that changes are needed to protect taxpayers from an open-ended bailout. We believe there must be a certain level of government participation to provide middle-class families access to affordable mortgages at all times and in all markets,” Phipps said.
A system that is dominated by a few large banks that are “too-big-to-fail” would inevitably involve huge taxpayer risk of another bailout. “An efficient and adequately regulated secondary mortgage market must make available to consumers simple yet safe, reliable mortgage products like the 15- and 30-year fixed-rate mortgages,” Phipps said.
NAR believes that the size of the government’s participation in housing finance should decrease if the market is to function properly, but notes that when private capital fled the marketplace during the recent financial crisis, government backing of residential mortgages was critical in sustaining the housing market. “Without government support, the financial crisis could have been far worse,” Phipps said. NAR’s economists estimate that a retreat of capital from the housing market will negatively impact the economy; because for every 1,000 home sales, 500 jobs are created for the country.
Home sizes continue to shrink across the country as families look to downsize and move closer to the city.
"A McMansion was a trophy--often times a house with five or six bedrooms when you only needed two," says Scott Phillips, a real estate agent with Keller Williams in Cleveland.
The median home size in 2008, the most recent year for data, is 1,825 square feet, according to the National Association of REALTORS®. First-time buyers are buying even smaller at 1,580 square feet.
Phillips says home owners aren’t just downsizing but they are also moving closer to the city.
"People like to live where they're closer to the amenities, the parks, night life, grocery stores," he says.
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