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10 Pieces of Paper You Must Round Up to Buy (or Sell) a Home

by Jessica Hunt with Preservation Properties

Home buyers and -sellers alike often bristle with anticipatory irritation at the mere thought of all the paperwork they expect they’ll have to come up with to do their transaction, above and beyond the basic loan application, contract, disclosures and closing docs. And these worries start way in advance; it’s as though, before they even start visiting open houses, buyers begin to visualize - and dread - spending hours upon hours in the dank catacombs of the Vatican (à la Da Vinci Code) combing through ancient files, seeking some rare and precious artifact documenting their childhood dental history or genealogy.

In some respects, this vision of the experience of obtaining a home loan might not be far off - there are oodles of hoops through which to jump and, occasionally, the loan underwriter requests something sort of bizarre. But more commonly, there’s a pretty finite universe of documents you’ll really need to scrounge up to get your home bought - or sold. Here they are:

  1. ID (e.g., driver’s license, state-issued ID, passport).  Who must produce it?  Buyers and sellers.  Why?  Uh, hello!?!  Lender wants to know that you are who you say you are, buyers, and the title insurance company wants to make sure, sellers, that you actually have the right to sell the home.  Funny enough, this commonly goes unrequested until you get to the closing table, when the notary requests to see it before signing, but some mortgage brokers and even some real estate brokers and agents may ask to see it earlier on.
  2. Paycheck Stubs.  Who must produce it?  Any buyer financing their purchase with a mortgage.  Sellers, usually only in the case of a short sale.  Why? Buyers’ purchase price ranges are determined, in part, by their income. And short sellers have to prove an economic hardship.
  3. Two months’ bank account statements. Who must produce it?  Buyers getting financing; sellers selling short. Why? Buyers’ lenders now require proof of regular income and proof that the down payment money is your own.  Short sellers?  It’s all about the hardship.
  4. Two years’ W-2 forms or tax returns. Who must produce it?  Mortgage-seeking buyers and short selling sellers. Why? Banks want to see a stable, long-term income. They also limit you to claiming as income the amount on which you pay taxes (attn: all business owners!). And in short sales, again, they want documentation of every single facet of your finances.
  5. Updated everything. Who must produce it? Buyer/mortgage applicants. Why? Because things change, and because the time period between the first loan application and closing can be many months - even years! - on today’s market. During the time between contract and closing it’s not at all unusual for underwriters to demand buyers produce updated mortgage statements, checks stubs, and such - and its quite common for them to call your office the day before closing to request a last minute verification of employment!
  6. Quitclaim deed. Who must produce it?  Married buyers purchasing homes they plan to own as separate property.  Married sellers selling homes that they own separately, or joint owners selling their interests separately.  Why? With the Quitclaim Deed, the other spouse or owner signs any and all interests they even might have had in the property over the the selling owner, making it possible for the title insurer to guarantee clear, undisputed title is being transferred in the sale.
  7. Divorce decree.  Who must produce it? Buyers and sellers who need to document their solo status or the property-splitting terms of their divorce. Why? Again, to ensure that the seller has the right to sell.  Recently single buyers might need to prove that they shouldn’t be held to account for their ex’s separate debts or credit report dings.
  8. Gift letters.  Who must produce it? Buyers using gift money toward their down payment.  Why? The bank wants to be sure the gift came from a relative, and is their own money to give.  They also want the relative to confirm in writing that it’s a gift, not a loan - a loan would need to be factored into your debt load.
  9. Compliance certificates. Who must produce it? Usually sellers, but sometimes buyers, by contract. Why? Some local governments require various condition requirements be met before the property is transferred, like some cities which require a sewer line be video scoped and repaired, cities which require a checklist of items be met before a certificate of occupancy be issued (usually relevant to brand new and really old homes, the latter of which are often subject to lead paint concerns) and energy conservation ordinances which require low-flow toilets and shower heads to be installed. Ask your real estate pro for advice about which, if any, such ordinances apply in your area.
  10. Mortgage statements. Who must produce it?  Any seller with a mortgage. Why? the escrow holder or title company will need to use them to order payoff demands from any mortgage holder who has to get paid before the property’s title can be transferred.

By no means is this an exhaustive list.  Agents: what documents do you see buyers and sellers struggle to scrounge up during their home buying transactions?

A Budget Friendly Guide TO Greener Living

by Jessica Hunt with Preservation Properties

Should I Wait To Buy?

by Jessica Hunt with Preservation Properties

Many purchasers have been sitting on the sidelines waiting for home prices to hit bottom. They want to guarantee that they are purchasing at the best possible price. Like them, I also believe that prices still have some room to fall in most markets. However, we disagree that waiting is a good financial decision. The buyer should not be concerned about housing prices. They should be concerned about cost.
The cost of a house is made up of the price AND THE INTEREST RATE they will be paying. Two different pieces of news released yesterday highlight this point.

PRICES

The National Association of Realtors (NAR) released their 4th quarter housing report.  In the release, they reported that home sales rose 15.4% in the 4th quarter over the 3rd quarter. They also showed that prices remained stable during the year:

The national median existing single-family price was $170,600 in the fourth quarter, up 0.2 percent from $170,300 in the fourth quarter of 2009.


A buyer who delayed a purchase might find solace in the fact that prices have not increased. However, the other news released yesterday paints a different picture.

INTEREST RATES

The Primary Mortgage Market Survey was released by Freddie Mac which showed that the 30 year fixed rate mortgage was at 5.05%. Frank Nothaft, vice president and chief economist of Freddie Mac said:

“Long-term bond yields jumped on positive economic data reports, which placed upward pressure on mortgage rates this week…As a result, interest rates on a 30-year fixed-rate mortgage rose to the highest level since the last week in April 2010.”

So prices have remained stable but interest rates have risen dramatically in the last 90 days. What does that mean to a buyer looking to purchase a home this year?

The price is the same. It just costs more.

Let’s show you what the news means:

By sitting on the sidelines for the last 90 days a purchaser lost:

$89.44 a month
$1,073.28 a year
$32,198.40 over the thirty year life of the mortgage
If you buy a $340,000 home, double all these numbers.

Bottom Line

Even if prices fall another 10% this year, the cost of a home will increase if interest rates go up more than 1%. Buyers should not worry where prices are going. They should be concerned where costs will be later in the year.

What is a Green Mortgage

by Jessica Hunt with Preservation Properties

Energy-efficient mortgages (EEM), also known colloquially as green mortgages, are still relatively unknown among homeowners. Perhaps it’s due to a lack of information, or perhaps even due to mismanaged marketing, but green mortgages, started by the Federal Housing Administration in 1995, are a great way to improve one’s home, finances, and health.

Few homeowners know that energy-efficiency upgrades can get them tax credits. Fewer know that with an energy-efficient home, they lessen their carbon footprint and contribute more to making their communities sustainable. An EEM makes both of these possible.

The New York Times reports that less than one percent of all mortgage loans are green mortgages, quoting industry stakeholders. Over the past few years, more and more people are getting concerned about the energy performance of their homes. Environmentalists and industry stakeholders alike hope that green mortgages increase to prop up the already weak mortgage market.

What’s Covered by an EEM?

An energy-efficient mortgage is a loan homeowners take out to improve the energy efficiency of their homes. Proceeds from these loans can be used to purchase upgrades such as double-paned windows, geothermal water heaters, modern HVAC systems, radiant heat barriers, and improved insulation. Even the installation of solar roof panels can be financed with a green mortgage.

The Department of Housing and Urban Development (HUD) website states that an EEM “means comfort and savings.” An energy-efficient home benefits from lower maintenance costs and additional savings on energy costs, giving the homeowner additional cash derived from lower utility bills. This extra cash can be used for housing expenses. The HUD argues that if homeowners have more cash, then they have more purchasing power to acquire a better, newer, and more comfortable home.

On the Rise

In its Environmental Certification Report released February 2010, Greenworks Realty reports that the uptake of environmentally certified new homes in Seattle were increasing, selling faster and getting more share of the realty market. Greenworks Realty, founded in 2002 as the first full-service real estate brokerage based in the U.S. to focus on the green real estate market, based their data on the Northwest Multiple Listing Service (NWLS).

Melissa Tracey, writing for REALTOR Magazine, cites the Greenworks Realty report along with a report by the Earth Advantage Institute. The institute’s report culls data from the Regional Multiple Listing Service of Portland, where the same thing happened: The uptake of environmentally certified homes — new and existing — increased.

The U.S. government is very aggressive in promoting energy efficiency among homeowners. The website of the US Department of Energy is a rich trove of information for saving money and energy at home. The site posts information about rebates for Energy Star-certified appliances and even instructions for conducting one’s own energy assessment.

The site also offers a downloadable PDF containing energy-saving tips. In it, you’ll find relevant and vital information about energy efficiency, as well as data showing how much an average American household spends on heating and cooling alone.

The HERS Report

Filing for an EEM is a positive option, considering the rising costs of fuel and maintenance. But how does one get an EEM?

One of the requirements of an EEM is a Home Energy Rating System (HERS) report, written by a licensed Energy Rater.

Akin to the mileage rating of a car, the HERS report evaluates an individual home’s energy efficiency. A licensed Energy Rater, either hired by the buyer, seller, lender, or the real estate agent, inspects the home and factors in insulation, appliances, window types, local climate, and utility rates to create a report covering the following:

  • Overall Rating Index (ORI) of the house
  • Recommended energy-efficiency upgrades
  • Cost estimates, projected annual savings, and life expectancy of upgrades
  • Improved Rating Index (IRI) after the upgrades
  • An estimate of the annual total energy cost of the home before and after the upgrades

The HERS report also includes how much money can be spent in upgrading the energy efficiency of a property.

Advantages of Green Mortgages

Homeowners who have green mortgages get to qualify for larger loans for better properties. With regular mortgages, homeowners can only qualify for a maximum allowable monthly payment of 29% of their total monthly income. Compare this to the maximum allowable monthly payment for a green mortgage: up to 33% of their total monthly income.

The savings incurred from lower utility expenses begins on Day One, as the installed features — such as geothermal water heaters and improved insulation — use less energy. Other energy-efficiency measures, such as radiant heat barriers and double-paned windows, increase the occupants’ comfort.

The resale value of the home itself increases once it is environmentally certified, as it has both improved comfort and energy-saving features. Owners of existing homes obviously benefit from an EEM, since they are increasing the resale value of their existing property and, at the same time, saving money instead of using it for maintenance and improvements.

An EEM is not a loan made separately; it goes in combination either with your existing mortgage or in applying for a new mortgage loan. If an individual homeowner qualifies for a regular mortgage, then automatically he/she qualifies for a green mortgage. The payment for the green mortgage and the regular (or refinanced) mortgage is combined, so a borrower needs to only make a single mortgage payment every month.

Pick the EEM Just for You

There are three types of green mortgages. So far, all green mortgages have been designed for individual homeowners; no commercial version of an EEM exists for small and large businesses. Lenders offer the following types:

  • Conventional EEMs are guaranteed by Fannie Mae and Freddie Mac. Borrowers who are applying for conventional EEMs can get as much as 15% of their home’s appraised value.
  • FHA EEMs are not as flexible as conventional EEMs, but FHA EEM borrowers benefit from FHA financing. Home owners can borrow up to 5% of a home’s appraised value, but not more than $8,000.
  • VA EEMs are for current and former military personnel. These EEMs allow borrowers to get up to $6,000 for upgrades when buying an existing home. A VA EEM does not factor in the appraised value of the prospective property.

Sustainability as an Issue

Sustainability has definitely become one of the factors in the increasing interest in green homes. The past years have seen spikes in fuel prices and rising costs of energy. The current economic downturn has also affected interest in new homes, with an increased number of mortgages going underwater.

Energy efficiency does more than lessen utility bills; an environmentally certified home is also a healthy home. Improved insulation and modern HVAC systems lessen exposure to pollen, dust, and other air contaminants. The longevity of a house is extended by improved insulation and radiant heat barriers, protecting wooden structures from moisture and termites.

All these improvements lessen a household’s impact on the environment, and thus directly contribute to creating a sustainable community.

The American Council for an Energy-Efficient Economy considers energy efficiency and renewable energy as twin pillars of sustainable energy. In this respect, an energy-efficient home is definitely a model of sustainable energy, as it uses less energy to maintain and may even use renewable energy through solar and wind power.

Tax Incentives for Green Homes

Owners of environmentally certified homes can benefit from tax breaks for Energy Star-certified appliances and energy-efficiency upgrades. According to the Energy Star website, there are federal tax credits for some Energy Star-certified products.

Homeowners can enjoy tax credits for their energy-efficiency upgrades and appliances. For example, by installing an advanced, main air-circulating fan, homeowners may qualify for a 30-percent tax credit. Installing bulk insulation, such as batts, rolls, blow-in fibers, rigid boards, expanding spray, and pour-in-place polyurethane foam will get homeowners additional tax credits, if they install the insulation themselves. Solar water heaters and solar panels also qualify for tax credits.

Kim Vatis, writing for NBC Chicago, says homeowners with energy-efficient properties can get as much as $500 tax credits.

With the current financial crisis and the increasing awareness on sustainability, green mortgages will continue to flourish, leading to more energy-efficient homes and communities.

 

(This article is brought to you by Blue Planet, Green Living)

How to Care For Wood Countertops

by Jessica Hunt with Preservation Properties

Wood countertops are beautiful, relatively affordable, and more sustainable than other options. The biggest catch is they require regular care. Follow these simple steps to keeping your wood counters looking their best for years to come.

Tips to Longer Lasting Counters:

  • Wash wood countertops immediately after using especially when it comes to moisture containing stains, scraps and spills.
  • Oil wood countertops once a month with a high quality mineral oil. Only mineral oil is food safe and won't turn rancid like cooking oils.
  • Avoid contact with vinegar, which is acidic enough to dissolve the glue holding the wood together.

 

Oiling Your Countertops—What You Need:

  • Food safe mineral oil
  • Sand paper (120 & 180 grit)
  • Lemon Wedge
  • Salt
  • Hydrogen Peroxide
  • Two rags

 

Instructions:

1. Stain Removal
Remove any stains using a fresh lemon. Cut in half, and rub the stained area with the cut side. Salt can be added for extra abrasion. If that still doesn't work, try adding 1 tablespoon hydrogen peroxide to a cup of warm water and dab it on the stain.

2. Clean Thoroughly
Use a sponge to wipe down the entire surface with a non-toxic cleaner. Let dry.

3. Sanding
Sand the surface lightly (with the grain) thoroughly with 120 grit sandpaper. Sand again with 180 grit sandpaper until the wood is smooth.

4. Applying Oil
Drizzle food-grade mineral oil liberally onto the counters and rub in well with an old cotton rag. Allow the wood to soak in for 20-25 minutes.

5. Wipe Clean
Wipe clean with a clean rag and enjoy your renewed surface.

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Contact Information

Preservation Properties
439 Newtonville Avenue
Newtonville MA 02460
Office: 617.527.3700
Fax: 617.527.2050