What's changed in the economy that could get you that home you've always wanted that you thought you couldn't afford?

5 Advantages Move-Up Buyers Have in a Down Market

RISMEDIA, May 1, 2009-Potential home buyers who aren’t eligible for the $8,000 first-time home buyer tax credit because they currently own a home actually have what could be an even bigger advantage - the opportunity to buy a new home that is bigger and better than they could have just a year or two before. “Now may be an ideal time for any family looking to upgrade from their starter home to one more suited to their current or future needs,” said Joe Robson, chairman of the National Association of Home Builders and a home builder from Tulsa, Okla. “Buyers are able to get more home for their money by taking advantage of current prices and interest rates, along with the bargaining power that comes from the large number of homes on the market.”

Here are the top five reasons current home owners should consider upgrading to their dream home:

1. Interest rates are at historic lows, which means you can buy more house than you could a year ago - for the same monthly mortgage payment.

2. Prices have come down. Even if your current home is worth less than during the last housing market peak, your dream home is likely more affordable too.

3. There are plenty of homes on the market right now, both new construction and existing, giving you lots of choice-and negotiating power.

4. You can move in to your new home faster, as many builders either have completed homes in inventory or they can start work right away due to the production slowdown.

5. You may have outgrown your home, but it’s probably someone else’s ideal starter home. With the $8,000 tax credit expiring Nov. 30, now is the time to market your home to first-time buyers.

The current housing market offers unprecedented opportunities for first-time and move-up buyers alike. For more information on the $8,000 first-time home buyer tax credit, go to www.federalhousingtaxcredit.com.

5 Recommendations for Navigating Today’s Mortgage and Housing Markets

RISMEDIA, April 3, 2009-”There are five distinct strategies that can help home owners, buyers, and sellers successfully navigate today’s turbulent mortgage and housing markets,” said Gibran Nicholas, chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.

1. Understand and Utilize the New Tax Credits. Many home owners are not aware that the latest government stimulus package gives them a special tax credit of up to $1,500 for making certain home improvements. Also, if you are buying a primary home and you have not owned a primary residence in the last 3 years, you may qualify for the new $8,000 first-time-homebuyer tax credit. “Although you can’t use the credit to help with your down payment, the credit can be claimed on your 2008 tax returns if you buy the home in 2009,” Nicholas said. “This means that even if you buy the home after you file your taxes on April 15, you can simply file an amended 2008 tax return and the IRS will send you a refund check for $8,000.”

2. Consider Paying Points for Your Mortgage Transaction. Mortgage “points” are upfront fees that you pay in order to lower your mortgage interest rate. One point is equal to 1% of the loan amount. “In the past, it almost never made sense to pay points in most situations where you were refinancing your mortgage,” Nicholas said. “However, enormous changes have taken place in the mortgage securitization process. Wall Street investors are demanding higher upfront fees for borrowers with credit scores below 740, and mortgage lenders don’t have as much flexibility when pricing loans. This means that the interest rate savings can be very significant when you pay upfront points.”

“If you are buying a home, negotiate into your purchase contract for the seller to pay points on your behalf,” Nicholas said. “In addition to the significant interest and payment savings you will enjoy, you will also receive a tax deduction this year for points paid by the seller on your behalf. If you are selling a home, offer to pay points for potential buyers as part of your marketing efforts. This will make your home more affordable for potential buyers and help your listing stand out from the glut of available inventory in today’s market.”

3. Carefully Structure Your Real Estate Short Sale Transaction. A real estate short sale is when a home owner sells their property for less than what they owe on the mortgage, and the lender gives their permission to do this by forgiving the difference and/or releasing the mortgage lien on the property. “Short sales are very common in many markets because of negative home owner equity due to the steep decline in house values,” Nicholas said.

“If you are selling your home as part of a short sale transaction, make sure to negotiate for a release and full satisfaction of the mortgage from your lender. Depending on the laws of your state and your individual circumstances, lenders may be able to wait a year or two for you to improve your financial situation, and then file a deficiency judgment against you to try and recover the money that you still owe them. The only way for you to avoid this risk is to have the lender not only release the mortgage lien, but also agree in writing to a full satisfaction of the mortgage.”

If you are a buying a home as part of a short sale, Nicholas advises you to take steps to make sure the deal is closeable. “It is estimated that approximately 30% of short sale listings are not closeable deals because the lender simply won’t approve it. In most of these cases that aren’t closeable, the first or second mortgage lender is expecting home sellers that have money to contribute something to the deal. One way to avoid getting caught up in the middle of this is to have your Realtor verify the status of the seller’s hardship package with their lender.”

4. Utilize the Special Options Available for Seniors Age 62 or Older. “If you are 62 or older, you could use a reverse mortgage to buy a new home without making any monthly mortgage payments,” Nicholas said. “This is a fantastic opportunity if you are contemplating a move but are worried about trying to sell your current home into a down market. Additionally, reverse mortgages can be used to supplement your retirement income that may be declining due to unfavorable economic or financial market conditions.”

5. Carefully Interview Your Mortgage Professional. With all the noise, confusion, fear and misinformation in today’s market, it is more important than ever for you to work with a Certified Mortgage Planning Specialist who has the training and experience to guide you through the home buying or refinancing process. The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way.

Treasury Announces New Plan to Aid Mortgage Holders (Update2)

By Rebecca Christie and Jody Shenn

April 28 (Bloomberg) -- The Obama administration unveiled a new program to help borrowers with second mortgages stay out of foreclosure, offering cash to servicers, investors and borrowers who modify loan terms.

The goal is to assist homeowners who seek help repaying second liens such as home-equity loans, the Treasury Department said in a statement today from Washington.

When combined with existing efforts to help with first mortgages, today’s announcement means servicers, lenders, investors and borrowers can now receive $12,000 in incentive fees for modifying mortgages, as well as additional reimbursement based on the size of the loan and current payments.

The administration also announced a plan to revive the Hope for Homeowners program, a mortgage-modification effort that so far has attracted little interest from lenders and borrowers. To improve results, the government will now provide a $2,500 incentive fee to loan servicers and also require them to consider whether that program is appropriate for any mortgage they rework.

“Ensuring that responsible homeowners can afford to stay in their homes is critical to stabilizing the housing market, which is in turn critical to stabilizing our financial system,” Treasury Secretary Timothy Geithner said in the statement.

Housing Initiatives

The administration has offered a series of initiatives in an effort to stem the collapse in home values and the rise in foreclosures. Funding comes from $75 billion already set aside by the administration for housing. That includes $50 billion from Treasury’s Troubled Asset Relief Program, supplemented by $25 billion from Fannie Mae and Freddie Mac, the government- backed mortgage-finance companies.

Mortgage delinquencies increased to a seasonally adjusted 7.88 percent of all loans in the fourth quarter, the highest in records going back to 1972, according to figures from the Mortgage Bankers Association in Washington. Loans in foreclosure rose to 3.3 percent, up from 2.04 percent a year earlier.

Obama’s overall plan to reduce foreclosures by modifying mortgages targets as many as 4 million homeowners. As many as half of the participants in the mortgage-modification program may be eligible for the second-lien assistance, administration officials said.

Congressional Action

The administration also intends to urge action by Congress to make Hope for Homeowners easier to use and more accessible, the administration officials said. The program is primarily aimed at borrowers who are “underwater,” owing more on their mortgages than their homes are worth.

No other legislative changes are required for the administration’s revised housing plans to take effect, the officials said.

The new measures may ease mortgage investors’ concerns that the biggest banks and servicers would be tempted to rework too many loans under the program in order to bolster their home- equity portfolios, Laurie Goodman, an analyst at Amherst Securities Group LP in New York, said in a telephone interview.

“Certainly, it appears that the Treasury has listened to first-lien investors,” Goodman said. Today’s announcement “goes a very long way toward addressing their objections,” she said.

Second-Lien Program

The second-lien program should be up and running in about a month, the officials said. They estimated that about 75 percent of all U.S. mortgages are managed by servicers that already have agreed to participate in the government’s modification programs. Servicers are administrators in the relationship between lenders and borrowers.

The mortgage initiative offers subsidies to servicers and lenders, including bond investors, to help lower borrowers’ housing payments to 31 percent of their income. Because modifications are voluntary, the Treasury is offering incentive fees to encourage participation in the program.

The $12,000 in possible incentive fees has several components. Many of the fees are paid over time, as an incentive for borrowers and servicers to strike deals that will last.

When modifying first mortgages, servicers can receive $1,000 up front, and $1,000 per year for three years. If the mortgage being modified is eligible and not yet delinquent, they can also receive $500, for a maximum possible total of $4,500.

Reducing Principle

Then borrowers who make their new payments can get up to $1,000 per year for five years, up to a total of $5,000. This money is paid to the lender or investor who holds the first mortgage, and it reduces the borrower’s principle.

When a second mortgage is also modified, the servicer on that mortgage can get a $500 up-front fee, plus $250 per year for three years, for a maximum possible total of $1,250. The borrower also is eligible for an additional $250 per year for five years, again paid toward the principle on their primary mortgage.

Investors also will benefit from other government assistance.

The Treasury announced today that second-mortgage holders will be given a subsidy to reduce the borrower’s interest rates to as low as 1 percent. Alternatively, the lien holder could receive as much as 12 cents on the dollar to retire the debt. There also are incentives in place for first-mortgage holders.

In the case of a sample borrower with a $250,000 interest- only first mortgage with a 6 percent rate, leading to housing expenses equal to 40 percent of the borrower’s income, the government may pay about $2,625 annually to help reduce those payments for five years, according to an Amherst Securities Group report in February.

If that borrower also had a $43,942 second mortgage with an 8.6 percent rate, the government may bear half of the $2,336 annual cost of reducing the payment for five years under the plan announced today, according to data released by the Treasury.

To contact the reporter on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net

Tips for the Spring Selling Season

If you're staging your home for sale, don't neglect your garden.

By JUNE FLETCHER

The cherry blossoms are in full bloom in my hometown of Washington, D.C., marking the beginning of the spring home selling season.

If you, like me, are preparing to put your home on the market, that means that you not only have to stage your home's interior to impress potential buyers, but you have to spruce up your yard, too.

Although many sellers in my market hope that a drift of daffodils will clinch a deal, in truth, plants can hurt a home's curb appeal as much as they can help it. For instance, a drift of wild, weedy onions hidden in the grass can make a newly mowed lawn smell like a gas station restroom; trees planted too close to a house mask its best features and conjure alarming visions of weekends on a rickety ladder, cleaning gutters.

That's not the impression you want to make on buyers who fantasize about lounging on the patio, not messing with pole pruners. So here are some tips for staging your yard for sale:

• Baby the lawn. Find a high-quality weed killer with lots of micronutrients as well as nitrogen, phosphorus and potassium with pre-emergent herbicides (organic ones use corn gluten) to kill growth before it starts. Send your soil to your county or state's extension service, an agricultural resource center that you can find through the USDA's Web site, to have its pH levels tested; spread lime on your lawn if the pH level is below 6.0, or an acidifying agent like gardener's sulfur if it is above 7.0. And set your mower high (about three inches) to reduce the grasses' stress and cut down on the need for water.
• Trim the overgrowth. Prune any branches that touch the house, cover a window or block a path. To reduce mold growth, keep plant material at least a foot away from siding.
• Splurge on mulch. The new mulches that retain color throughout the season cost about a dollar a bag more than traditional mulch, but good first impressions are worth it. Although I normally use chipped mulches because they last longer, I plan to use a finely shredded texture this spring for its superior visual appeal.
• Edge your flowerbeds. There's no easier way to make your yard look neat and groomed. Don't bother with the plastic edging; simply tie a string between two sticks and follow the line with a sharp, flat-ended spade pushed about four-to-six inches into the soil.
• Powerwash everything. Cobwebs, mold and dirt accumulate on decks, patios, fences, trellises, eaves, windows and siding over the winter, but can be blasted away in an afternoon with a power washer. Just be sure not to get the water under the siding courses or in soffit vents, where the moisture can cause damage.
• Plant annuals. Perennials are wonderful if you're building a long-term garden, but they are expensive and tend to have short blooming seasons. For color and impact, place low-care annuals like impatiens, petunias and geraniums in beds. Potted flowers and hanging baskets can brighten dull spots in your yard, draw attention to features you want to emphasize or flank an entrance—and you can take them with you when you move.
• Plant a garden. If you have a sunny corner, a small raised bed with decorative veggies such as rainbow-stemmed Swiss chard and bush beans, or fragrant herbs like sage and rosemary, can suggest your yard is useful as well as pretty. (And hey, the Obamas did it.) But stay away from plants, like corn, that suggest a barnyard, or are prickly and prone to spilling out of bounds, like summer squash and pumpkins. If you must have tomatoes, choose pretty, bush-style cherry tomatoes rather than the regular vining varieties which need to be caged and are prone to unattractive wilts and fungal attacks.
• String a hammock. Nothing suggests that the living is easy (and your yard is low-maintenance) as much as a hammock. If you don't have two trees close enough to string one between them, spring for a hammock stand.
• Create conversation areas. To draw attention to a birdhouse, sculpture or other attractive feature in your yard, arrange two colorful side chairs and an end table facing it. When you have an open house, place a book and a small glass of water with yellow food coloring on it to suggest lemonade (don't use the real thing, or you'll attract bees).

Write to June Fletcher at fletcher.june@gmail.com

More Homes in California Are Selling

By STU WOO

California's housing-market slump showed hints of improvement in March, with sales of existing single-family homes increasing 64% from the prior-year period and median home prices rising month-to-month for the first time since August 2007, according to a trade group report.

California's inventory of unsold homes in March fell to a three-year low of five months, according to a report released Monday by the California Association of Realtors. That compares with 12.2 months of inventory the group reported for March 2008.

The state saw sales of 522,980 existing single-family homes in March, compared with 319,290 in the year-earlier period, the report said. Home prices remained sharply down from a year ago: The March median price of $253,000 was up from $247,590 in February 2009 but down 39% from March 2008 levels.

Stimulus efforts helped the state's home sales in the month, said Delores Conway, a professor at the University of Southern California's Marshall School of Business. Some Californians benefited from about $8,000 in credit for first-time home buyers from the federal economic-stimulus plan, and some from an additional $10,000 credit from a state stimulus measure. Depressed prices of houses are luring first-time buyers, she added.

But the March improvements are partly statistical, Ms. Conway added, because the number of sales in March 2008 was especially low. And California's unemployment rate, one of the nation's highest at 11.2%, may also delay any housing-market recovery by resulting in more foreclosures, she said.

Another concern is the recent ending of moratoriums on foreclosures by Fannie Mae, Freddie Mac and some big lenders. That is expected to lead to a new increase in foreclosures in California and elsewhere over the next few months.

Write to Stu Woo at Stu.Woo@wsj.com