Beyond the Headlines


FHA to hike premiums on mortgages
The Federal Housing Administration, which is the largest insurer of low-down payment mortgages, announced last week that it will raise premiums by 10 basis points, or 0.1 percent, on most of the new mortgages it insures.

Making sense of the story

  • A borrower opting for a 30-year, fixed-rate mortgage who puts down 5 percent or more will now pay an annual insurance premium of 1.3 percent of their outstanding balance. Someone who puts down less than 5 percent will pay a premium of 1.35 percent.
  • The FHA said it also will raise premiums for borrowers with jumbo loans – loans of $625,000 or more – by 5 basis points, and increase the minimum down payment requirement on these loans to 5 percent from 3.5 percent.
  • Additionally, the FHA said it will require most buyers to pay insurance premiums for the life of their loan. A policy that was put in place in 2001 allowed borrowers to cancel premium payments once their debt fell below 78 percent of the principal balance. One exception will be for borrowers who put more than 10 percent down at the time of purchase.
  • Other new policies include a requirement that any mortgage for an applicant with less than a 620 credit score and debt-to-income ratio above 43 percent must be underwritten manually. Lenders who want to issue loans to these applicants must be able to adequately document why they decided to approve the loans.
  • The FHA also decided to put new restrictions on reverse mortgages, no longer permitting retirees to take such large, upfront payments.

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 In other news …
The New York Times

Growth predicted in home renovations
Homeowners who have been holding off on home improvements, be it a new kitchen or replacement siding, are more likely to call in the contractors in the year ahead.

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The Los Angeles Times

Homeowners facing foreclosures should be wary of scams
If researchers at the nonprofit Center for Responsible Lending are on target when they say the country is only halfway through the foreclosure crisis, many more people are going to be conned out of a great deal of money trying to save their homes.

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Mercury News

Buying a foreclosed house at auction can come with surprises
Buyers should be cautious when buying a house sight-unseen or foregoing a home inspection, as is often the case when purchasing a home at auction.

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The Wall Street Journal

Return of 100 percent financing
Some affluent buyers are getting the keys to their new home without putting a penny down. It’s 100 percent financing – the same strategy that pushed many homeowners into foreclosure during the housing bust.

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Mercury News

As home prices rise, your next credit card could be your house
After years in the doldrums, home equity borrowing jumped last year, reaching its highest level in four years as the housing market rebounded.

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Subprime credit scores on the decline
Designating credit scores below 620 as “subprime,” Equifax found the number of subprime borrowers decreased 2.1 percent from the third quarter of 2011 to the third quarter of 2012. The 2.1 percent translates to about 1 million Americans who rose from the subprime category.

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Talking Points

  • Adding at least one photo to a residential real estate listing can up the final sale price by 3.9 percent.
  • Photos are already fairly established in listings, with roughly 85 percent of online listings including photos. A study on photos in real estate by Florida International University’s Hollo School of Real Estate found that the type of photo also matters.
  • Buyers typically look at five or six photos before making a determination whether to continue looking. To get buyers to stay on the listing, sellers are advised to do the following:
  • Remove large pieces of furniture: Clearing a room of large furniture can make a home seem more spacious.
  • Remember the front door: Sellers should pay special attention to the entrance to the house; pressure clean the sidewalk, plant some flowers, and trim the landscaping.
  • Look for details: Photographers often recommend shooting form the corner of a room with a wide-angle zoom lens to show a room at its largest.
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