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As lenders tighten mortgage guidelines for Mount Holly home buyers, minimum downpayment requirements are increasing.  Several years ago, you could finance a home with nothing down. Today, most conventional mortgages require at least 10 percent.

Anecdotally, guideline changes have led to an increase in the number of home buyers accepting cash gifts from family.

Gifts are allowed in most cases but the problem is, if you don’t accept the gift in a “lender-friendly” way, the mortgage underwriter could reject it, and negate it.

You can’t just deposit a cash gift into your bank account. You have to follow a series of steps and keep records.

1. Provide an acceptable gift letter signed by all parties
2. Provide documentation of the gifter’s withdrawal of funds via teller receipts
3. Provide documentation of the giftee’s deposit of funds via teller receipts

Lenders require these 3 steps for two basic reasons.  First, they want to make sure that the cash gift is “clean” (i.e. not laundered).  Second, they want to make sure the gift is really a gift and not a loan-in-disguise.

It’s why lenders typically require that the loan application be accompanied by a signed, dated letter.

For example:

I am the [relationship to recipient] of [name of recipient] and this letter serves as evidence that I am gifting [name of recipient] [amount of gift] to be used for the purchase of the home at [complete address of property].

This is a gift — not a loan — and there is no expectation of repayment.

Signed,
[Signature of gifter]

As an additional step, home buyers receiving cash gifts should make sure that gifted funds are not commingled at the time of deposit. If the cash gift is for $10,000, therefore, the bank’s deposit slip should indicate that a $10,000 deposit was made — nothing more, nothing less. Don’t add a random $100 deposit to the transaction, in other words. The $100 deposit should be a separate transaction.

It’s also worth noting that gifting funds between family members can create both legal and tax liabilities.  If you’re unsure about how donating or receiving a gift may impact you, call or email me directly.  If I can’t help you with your questions, I can refer you to somebody that can.

One month after the federal homebuyer tax credit’s official expiration, the New Home Sales report turned in its worst showing ever.

In May 2010, for the first time in 11 months, the inventory of unsold new homes crossed the 8-month marker, posting an 8.5 month supply overall.

Additionally, new homes sales volume fell to 300,000 units nationwide — a drop of 32% and its lowest level since the Commerce Department started tracking data in 1963.

Now, universally, the press is referring to the May New Home Sales report as “poor“.  A closer look, however, shows that may not be the case.

For one, we have to keep New Home Sales in perspective as a percentage of overall home sales. Yes, there were just 300,000 new homes sold in May, but there were also 5.66 million “existing” homes sold.

New Home Sales, therefore, accounted for just 5 percent of the total housing market — a very small percentage.

Another reason why the weak New Home Sales data isn’t so awful is that, when New Home Sales stall, it actually benefits home buyers.  Excess supply puts a strain on sellers which, in turn, gives buyers a tremendous amount of leverage in negotiation.

When home inventories are high, builders are more apt to appease their customers in hopes of making a sale.  For Palmyra home buyers, this can result in buying a better product at a lower price.

Especially with builder confidence plummeting.

Since February 2009, housing has shown steady gains. There’s been both peaks and valleys across units, inventories, and prices, but overall, the market is improving.  Philadelphia’s existing housing stock, some of it relatively new, represents incredible bargais for home buyers. However in other parts of the country where much of the housing stock is newer, May’s New Home Sales data shows how now may an opportune time to “buy new”.

NBC’s The Today Show hosted Consumer Reports for its take on mattresses. Some of the results may surprise you.

At 7 minutes, the video is long, but it’s stuffed with helpful comfort tips, including the scientific reason why a mattress should be replaced every 8 years or so.  Some of the other advice includes:

• How to reduce morning aches and pains with proper pillow choices
• Why “hot sleepers” should stay away from memory foam
• How to properly test a mattress in the store before you buy it

After its testing and a series of interviews with consumer and industry workers, Consumer Reports also concludes that — for a queen-sized bed — a $1,000 list price is going to give you “a lot of bed”; there’s little need to spend more.  And, furthermore, because mattress prices are usually negotiable by half-off or more off, you could buy that $1,000 mattress at a significant discount.

More than 70% of people successfully negotiate lower mattress prices.

Consumer Reports acknowledges that there’s no “#1 mattress”, per se, because mattresses are a personal fit in terms of both firmness and size.  With respect to durability, however, most will last for years.

Wednesday , in its first meeting in 5 weeks, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged.

The Fed Fund Rate remains within its target range of 0.000-0.250 percent.

In its press release, the FOMC said that, since April, “the economic recovery is proceeding” and that the jobs market “is improving gradually”. Business spending “has risen significantly”, too, with the exception of commercial real estate.

Today’s statement is the 8th straight press release in which the Fed shows optimism for the U.S. economy, dating back to June 2009.  Since that time, the Fed has terminated all of the programs it created to support the economy through the economic crisis.

The recession is widely believed to be over.

And, although the Fed’s statement acknowledged economic growth, it did highlight lingering threats, too.

1. Employers are still reluctant to hire new workers
2. European debt concerns could spill-over to the U.S.
3. Bank lending is contracting

Also, as expected, the Fed re-affirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period”, citing that “inflation has trended lower” recently.

Mortgage market reaction has been positive thus far. Mortgage rates in New Jersey are slightly improved post-FOMC.

The FOMC’s next scheduled meeting is August 10, 2010.

In 2009, the median size of new homes started was roughly 2,100 square feet. This figure was down from 2,200 square feet between 2005-2007 which, itself, was down from 2,350 in 2004.

Homes are getting smaller across the United States.

But, as compared to the nation’s largest homes, the shrinking is laughable. The Biltmore Estate, built in 1895 by George Washington Vanderbilt II, measures 175,000 square feet — 83 times the size of a typical home today.

The Biltmore Estate in Asheville, North Carolina is the largest home in the country and, meanwhile, another Vanderbilt-built property built in 1895 checks in at number two. The Breakers, in Newport, Rhode Island, measures 165,000 square feet and cost $150 million to build in today’s dollars, adjusted for inflation.

Both homes are open to the public.

The next three largest U.S. estates in terms of square footage are:

• Oheka Castle in Huntington, New York (109,000 square feet)
• Winterthur in Winterthur, Delaware (96,582 square feet)
• Meadow Brook Hall in Rochester Hills, Michigan (88,000 square feet)

Hearst Castle, arguably the most famous “large home” in the country, measures 60,645 square feet and ranks 7th.

See the complete list of Largest Historic Homes In The United States, including their build date and architecture style, on Wikipedia.

In May 2010, Retail Sales at non-store retailers — a category that includes Amazon and eBay — topped $29 billion, up 16 percent from May 2009. Clearly, Americans are doing an increasing amount of shopping online.  And we’re paying our bills online, too.

But how well are we protecting our identities?

In this 5-minute piece from NBC’s The Today Show, you’ll learn the basics of online fraud and methods to minimize the likelihood of identity theft.  Furthermore, the tips go beyond the basic “choose a challenging password”.  For example, you’ll hear about:

• Why you shouldn’t pay bills from a coffee shop
• Who might be hiding behind an unprotected public wifi network
• The dangers of storing credit card numbers with an online retailer

And, although, at one point, the interviewee goes over the top with respect to spyware and anti-phishing prevention, the point being made is a good one — you can’t be too careful with your online financials and common sense goes a long way.

The Federal Open Market Committee begins a 2-day meeting today, its fourth scheduled meeting of the year, and fifth overall.

The FOMC is the monetary policy-setting part of the government and its primary tool for that purpose is the Fed Funds Rate.

The Fed Funds Rate is the dictated rate at which banks borrow money from each other and, since December 16, 2008, the Federal Reserve has voted to keep the benchmark rate within a target range of 0.000-0.250 percent.

This is the lowest Fed Funds Rate in history. A rate near zero-point-zero percent renders borrowing by business and consumers cheap which, in turn, promotes investment and growth.

There’s no expectation for the Fed to change the Fed Funds Rate after it adjourns tomorrow, but that doesn’t mean consumers in Mount Holly should expect mortgage rates to remain unchanged, too.

To the contrary, mortgage rates tend to be volatile when the FOMC is meeting.  This is because the FOMC issues a press release after each meeting and in that press release, it comments on the economy’s unique threats, strengths and weaknesses.

When the FOMC speaks, Wall Street listens.

The words of the Chairman Ben Bernanke’s press release will be dissected and analyzed.  A single mention of higher-than-expected inflation levels, or better-than-expected growth, and traders will rush to dump their bond positions in favor of equities.

This has a negative effect on mortgage rates.

Conversely, if the Fed is dour on the economy, mortgage rates may fall.

We can’t know for sure what the Fed will say or do tomorrow afternoon so if you’re floating a mortgage rate and wondering whether to lock, the safe choice is to lock prior to 2:15 PM ET Wednesday.

Mortgage rates may be dropping, but mortgage costs are not.

According to Freddie Mac, the average required discount points on a conforming mortgage rate are higher by 0.1 percent since early-May.

A “discount point” is prepaid mortgage interest; an up-front fee paid by a borrower in exchange for a lower mortgage rate. In most cases, discount points are tax-deductible.

Tax-deductible or not, though, rising costs are rising costs and Freddie Mac glosses over it.  In its weekly press release, the government group offers mortgage rate comparisons to weeks prior, but doesn’t do the same for required points.

The press fails to mention discount points entirely.

An increase of 1/10 percent in discount points costs homebuyers and refinancing households in Philadelphia and  Mount Holly an extra $100 per $100,000 borrowed.

The hike reminds us that there’s more to a mortgage than just its rate — costs matter, too.  And if you’ve only been watching the headlines, you would have missed how costs are rising.

Single-family housing starts plummeted to a one-year low in May, just 30 days after soaring to a 20-month high.  It’s no wonder home builders are confused.

Against a revised April figure, Housing Starts fell 97,000 units in May, a figure representing almost one-fifth of the total market size.

It’s the worst showing for Housing Starts since May 2009, a surprise to builders and economists alike.

Furthermore, single-family Building Permits plunged in May, too — down 10 percent from April. A permit is a certification from local government that authorizes home construction.

Housing permits are a precursor to Housing Starts with 82% of homes starting construction within 60 days of permit-issuance. Fewer permits, therefore, directly reduces the number of new homes coming to market in the coming months.

For home buyers in Philadelphia and the surrounding suburbs this should create a sense of urgency. More so in the suburban areas and in new Jersey since the housing stock in Philadelphia is based more on the existing stock than new construction.

Home prices are based on supply and demand and supply appears to be falling about the same time that economists predict a surge in home demand.  It could spell rising home prices and a complete loss of negotiation power with home sellers.

For now, though, home affordability remains high with properties cheap and mortgage rates near all-time lows. If you plan to buy a home later this year, the May 2010 Housing Starts data may be a reason to move up your timeframe a bit.

As its June 30, 2010 closing deadline approaches, the federal home buyer tax credit is back in the news. What that means for Mortgage professionals is an incredible amount of stress because they have so many pending applications and so little time. What it means for real estate professionals is a tremendous amount of stress because the mortgage and title people keep taking so long. And what it means for consumers is a tremendous amount of stress because their transactions might not make the deadline.

To remedy that the National Association of REALTORS and others have been pushing for an extension to that  deadline, and the government has responded, creating immediate national headlines.

Unfortunately, the headlines are misleading.

Contrary to what you may have read (or heard), the federal home buyer tax credit has not been extended past June 30, 2010. At least not yet. And here’s why there’s confusion.

Look at these headlines from earlier this week:

• Senate Extends Date On Home-Buying Tax Credit (Philadelphia Inquirer)
• U.S. Senate Approves Extension Of Home Buyer Tax Credit (NASDAQ)
• Senate Approves Home Tax Credit Extension (Reuters)

Now, nothing above is factually incorrect, but each neglects a key piece of the country’s law-making process — it takes more than the Senate to pass a law. For a bill to become a law, it must pass the Senate and the House of Representatives and then it must be ratified by the President.

To date, we’ve only cleared just one of those 3 steps.

This means that the federal home buyer tax credit has not been formally extended. As of now, it’s still in discussion.  Ultimately, though, if the extension does pass, it’s expected to extend the closing date deadline for Mount Holly home buyers beyond the original June 30, 2010 date into September 2010.

Homeowners must still have been in contract as of April 30, 2010 to claim up to $8,000 in federal tax credits.