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3 Reasons To Buy New Construction in Sea Isle City

Looking over the available inventory of homes in Sea Isle City, I was struck by how affordable Sea Isle City new construction has become. Often many people who come down to Sea Isle City to purchase a vacation home overlook new construction assuming it must be much more expensive.

This however is not always the case, when compared side-by-side new construction can be a favorable purchase to a home several years older. If you are just looking at the initial cost of purchase then new construction can seem more expensive.

The old real estate adage, “You make money when you buy (real estate)…..not when you sell,” is extremely true in this case. Paying a slightly higher price when you buy a new home can lead to a noticeable difference when you go to sell.

In addition to a higher resale vale, new construction offers the chance for you to be the first person to live in and enjoy the home, potentially customize details while it’s under construction, and look at potentially higher than average rents.

3 Reasons To Buy New Construction

#1. Though we intend to own our home in Sea Isle City forever, the reality is the majority of folks own their home for between five to ten years. If you happen to own your own for an average number of years, then you will have the chance for higher resale values.

#2. The opportunity to customize the home while it is under construction appeals to a number of people. For the amount of money you spend on a Sea Isle City home it is nice to enjoy something brand new and built to the way you want.

#3. Brand new homes are often in high demand on the rental market. If you were to rent the home, you would have the chance for highg than average rentals.


Available Sea Isle City New Construction


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Ocean City 2nd Floor condo for Sale 3614 West Avenue SOLD

Contact info:
Ian Lazarus, The Lazarus Team | The Landis Co., Realtors | 609-457-0258

3BR/2BA Condo – Ocean City

3614 West Ave 2nd Floor, Ocean City, NJ 08226

$389,900 SOLD for $345,000 5/2014

Bedrooms: 3 Beds
Bathrooms: 2 Baths
Floors: 1
Parking: 2 Uncovered
Property Type: Condo


Only 3 blocks from the gorgeous beaches. Walk to the great dining & grocery shopping, bike to the boards & great shopping venues or just chill out & watch the world pass you by on your cozy covered porch. This beautiful 3 brm, 2 ba home was completely remodeled in ’06 incl: floor coverings, heating & air cond. sys, cabinetry & appliances. Recently done: interior painting & bamboo flooring in L.R. Contemporary furnishings are included and round out this great opportunity to own a slice of paradise.


Contact info:
Ian Lazarus, The Lazarus Team
The Landis Co., Realtors

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Shore Home Sales Making Comeback

By Christine Bahls, For The Philadelphia Inquirer


For those who have delayed buying a Jersey Shore vacation house for any reason – maybe an allergic reaction to Dodd-Frank mortgage reform, or post-Sandy confusion compounded by flood-insurance phobia – the experts’ counsel is this:

No worries.

“Sandy is past news,” said Marge Swanson, a mortgage consultant with Trident Mortgage in Ocean City. “The lenders are lending. It’s kind of behind us.”


Said Cheryl Huber, an agent with Berkshire Hathaway Home Services Fox & Roach in Ocean City: “Most people have decided that life is too short.”

Maybe not most, but certainly many. New houses are going up, market observers here say, and previously owned houses are moving, with bidding wars in some towns because for-sale inventory is limited.

A condo in Diamond Beach, already under contract for the full price of $799,900, went into a bidding war with multiple offers, said Robert Snyder, an agent with Weichert Coastal who sells in one of the two most popular Jersey coast zip codes, the Wildwoods.

“You see that with people who are trying to move up,” Snyder said, adding that there are not a lot of listings.

In the other most popular zip code, which includes Ocean City, 259 building permits were issued for 2013, up from 152 in 2012.

And in tiny Longport, all 1.6 square miles of it, there were 27 new permits, said Suzy Lawler, an agent with Long & Foster. It may not sound like much, but considering that five out of 10 houses occupy about 4,000 square feet each, they cover a lot of real estate.

All this is not to say Hurricane Sandy is just a memory – it’s anything but. Those new houses, if they are in flood plains, must adhere to new federal rules on elevation, which can require that structures be at least 12 feet above base. And those flood-insurance prices will be elevating, too. But with the U.S. House’s move earlier this month to ensure that annual premiums not rise more than 18 percent, vacation-home buyers will get something of a break – if President Obama signs the legislation. (The Senate passed the measure in late January.)

House hunters are doing “more due diligence, just to see if there was water damage,” said Snyder. And they are asking about elevations, Huber said.

“Buyers are smarter. They know what they are getting into. They want a Shore home,” said Rick Butera, a branch manager for HomeBridge Financial in Bayville, Ocean County. “Before, values were escalating, but Sandy put a damper on it.”

Whatever obstacles a would-be buyer – one who can afford another mortgage – thinks might exist between second-home dream and sand-dune reality are scalable, market observers said. But that buyer will need patience, cash, and a good credit score, because cheap VA or Federal Housing Administration mortgages are not available for traditional vacation homes.

You have to prove you can afford the second home, Butera said – that’s what the Dodd-Frank reform is all about.

“It’s cumbersome, but you can get through it,” he said. And different lenders require different amounts on down payments.

Consumers have noticed, said Chace Gundlach, mortgage-banking regional sales manager for Citizens Bank. “They say, ‘It’s not as easy to get a loan. It’s not just one assets statement; it’s a couple of years’ worth of W-2s.’ ”

Which, apparently, is why so many people are paying cash for their vacation homes: They don’t want the bother.

“Out of 10 buyers, maybe five are paying cash,” Lawler said, “even before Dodd-Frank.” Butera said he is seeing the same on Long Beach Island, as is Gundlach at Citizens’ Avalon branch.

The latest U.S. trend data from the National Association of Realtors, from 2012, showed 46 percent of all vacation homes (purchased primarily for personal or family use, rather than for investment) were paid for with cash.

Where does that leave buyers whose lexicon doesn’t include the words liquid assets?

Crawl before you walk, Butera advised: “Get something that makes sense. Trade up in a few years.”

That something might be a foreclosed property. Opportunities exist, said Gundlach, but the process can be exhausting: Prior owners can get nasty, ripping out bathrooms and kitchens, making the property unlivable.

A property like that needs to be fixed before you can make settlement. If the lender has assumed control, it could be a minimum of six months before it can be purchased.

But in the end, for a house at the beach, it may very well be worth it.

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So you want to buy a short sale?

You’ve found the perfect home for you.  It’s everything  you ever dreamed of, and you’re ready to make an offer.  There’s just one problem – it’s a short sale.  So what does this mean exactly?  It means that the homeowner owes more money on their mortgage than their home is now worth.  Generally the owner is experiencing some kind of financial hardship, so they’ve had to stop making their mortgage payments.  To sell their home as a short sale, they have to show the bank that they owe the payments too that they can no longer afford to stay in the home and would like to sell it.  The bank then reviews their case, and if they agree, the house can go on the market at a reasonable market price.  Often, the bank will “forgive” the debt owed (the difference between the sale price and the amount owing) – but seller beware, some banks don’t do this, and there could be hidden taxes and fees involved.

Ok, I get it, now how do I buy one?

With a lot of patience.  The seller puts the home on the market at a certain price.  That is NOT necessarily the price that the bank is willing to sell it for (sometimes it’s high, sometimes its low).  So first, you make your offer.  Then you wait.  And wait some more.

The seller will review your offer first and either accept or reject it.  Most sellers will accept your offer.  However, this does not mean you now have a contract on the house.  Because after the seller accepts the offer, it then goes to the bank.  The bank review time could be anywhere from a couple of weeks to several months, depending on how busy they are.  So after submitting your offer, you could be waiting 30, 60, or 90 days to hear if the bank will accept it.

The good news is that if the bank DOES accept your offer, the rest of the deal moves forward just like in any other transaction.  Once the bank accepts the offer, it could only be a matter of weeks before you’re moving in.

The one other exception to a regular deal at this point is that the bank generally won’t agree to any repair work that might be needed.  You can still perform an inspection, but the home is usually sold “as is.”

That doesn’t sound so scary.

It’s really not.  It takes patience and can be frustrating, but if you have the time to wait you could end up with a really good deal.  Of course, this was Short Sales 101 – there’s more details to go into when you get a little more serious.  Here are a few questions you should know about the short sale home/owner that you’re going to be buying from:

  1. How many mortgages are owed on the house? Generally, if a home has more than 2 mortgages (such as a first mortgage, second mortgage, and HELOC), the short sale can get messier because there are more people to pay off.
  2. Has the home received an offer before? If it has, that could be good news.  Often, a short sale listing will have already gone through the offer process with another buyer, who just got sick of waiting and walked away.  If it has, that can usually cut your wait time in half to get a response from the bank.
  3. Is there a professional short sale negotiator involved?Some real estate brokers are experienced in short sales by now, and handle the bank negotiations themselves.  Others, however, hire a short sale negotiator to do it.  If that’s the case, there may be an extra charge involved for you where they’re asking to split the cost of the negotiator.  You’ll want to find that out right away, as the cost can easily climb over $1000.

Side note: Short sales are completely different from bank-owned properties.  For some reason, people mix these up a lot.  A bank-owned sale is just that – bank owned.  The homeowner is already out of the picture, the bank has repossessed the home, and it’s more like buying a house in a regular transaction (bank owned homes will also be sold as-is).

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South Jersey homes selling despite recovery ups, downs

A recovering economy and still-low mortgage interest rates have the residential real estate market moving at a steady pace, if not thriving, for much of the region. Prices have increased in some areas and fallen again in others.

Carlo Losco, owner and president of Balsley Losco Real Estate, said home prices have stabilized or increased in the sub-$500,000 range on the Atlantic County mainland, where most of the homes his company lists are located. He said this is because there is now a relative shortage in that range of saleable homes, or owner-sold homes not in default and not in need of major renovations.

“We find that they are holding their prices, and we have definitely seen a solidification — if not an increase — in the willingness of people to pay more than they were one or two years ago,” he said. “I believe that is going to continue.”

Losco said things aren’t so rosy for homes on the upper end of the spectrum. Homes priced at $1 million and above have yet to recover fully from the 2006 burst of the housing bubble, he said, but things are trending toward stabilization or price gains across the board.

While his company sells relatively few homes on the islands, Losco said, the supply of saleable homes there is likewise limited, especially on Absecon Island and in Ocean City. This, coupled with a post-recession increase in assets for the second homeowners who drive much of the island market, have meant brisk business there as well.

Linda Magarick, an agent with Berkshire Hathaway HomeServices Fox & Roach, said it’s a buyer’s market on Absecon Island, where she sees the bulk of her sales. Homes prices on the island have dropped in all ranges, leading to steady sales to those looking for second homes.

“There’s a lot of pent-up demand for real estate after Sandy,” she said. “Now they’re really ready to come in, and they’re more comfortable with their incomes, and they’re ready to buy a second home.”

Magarick said the low prices mean good opportunities for homeowners looking to trade up.

Keller Williams realty agent Tracy Neri said sales volume has increased lately in North Wildwood, where the bulk of her homes are listed.

“It seems like, all of a sudden, people are purchasing more than they had recently,” she said.

Homes aren’t moving quite as fast offshore in Cape May County, but the market has been consistent. Diane Walker, of Coldwell Banker James C. Otton Real Estate in Cape May Court House, said she sold about 170 homes both last year and the year before.

She said home prices are close to or a hair lower than where they were a year ago, when her average Middle Township single-family home sold for just under $200,000. It’s too early to get a bead on sales volume just two months into the year, Walker said, but she hopes for a busy spring.

“I’m optimistic about the spring,” she said. “The prices, the interest rates are still low. It’s encouraging buyers to come out and get a deal.”

On Tuesday, the Federal Housing Finance Agency reported that home prices in the region were mixed for the fourth quarter and all of 2013.

Cape May County home prices rose 4.7 percent in the fourth quarter, leaving them up 0.3 percent for the year.

Atlantic County home prices fell 2.5 percent in the quarter and were down 1.8 percent for the year. In Cumberland County, where only annual data is available, home prices were 0.8 percent lower at the end of 2013 than a year ago.

FHFA tracks same-home sales using Fannie Mae and Freddie Mac data, considering purchases and refinancings in the region.

Nationwide, prices of homes that sold increased 7.7 percent for 2013.

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Buying a Home? Now May Be the Best Time

BY Philip van Doorn|02/20/14

NEW YORK (TheStreet) — A new report from RealtyTrac sheds light on a rapid increase in the cost of owning home, which means that if you’ve been waiting to make a purchase, it might be best to make a move right now.

Before the collapse of the U.S. housing market in 2008, the conventional advice for a first-time homebuyer was to save up money for a down payment and purchase a home “as soon as you can squeak by.” That changed during and after the housing crisis, as mortgage loan interest dropped and purchase prices in many parts of the country went down by over 50%.

But now the market is changing again. For one thing, long-term interest rates rose during the second half of 2013, although rates have pulled back a bit so far this year, and are still quite low on a historical basis. But the Federal Reserve will likely finish winding down its “QE3” bond purchases this year, which should put significant upward pressure on long-term rates, and home prices are continuing to rise. According to RealtyTrac’s housing affordability analysis released on Thursday, the estimated median monthly payment for a three-bedroom house purchased during the fourth quarter rose 21% from a year earlier. That estimated payment includes mortgage loan principal and interest, taxes, insurance and maintenance, less the estimated income tax benefit from deducting the mortgage interest from the borrower’s taxable income.

RealtyTrac’s analysis reflected an average 10% year-over-year rise in home prices for the 325 U.S. counties included in the study, along with “a 33 percent increase in the average interest rate for a 30-year fixed rate mortgage as reported by Freddie Mac in its Primary Mortgage Market Survey.”

That’s a huge change, year-over-year. Of course, the situation differs by region, but RealtyTrac’s figure provides plenty of food for thought.

“The monthly cost of owning a home is still less than renting in the majority of markets, but the cost of financed homeownership is becoming dangerously disconnected with still-stagnant median incomes, driven not by shoddy underwriting practices this time around but by investors and other cash buyers who are not tethered to the typical affordability constraints,” said RealtyTrac vice president Daren Blomquist in the firm’s press release.

“One simply needs to look at the minimum income needed to qualify for a median-priced home in some markets to realize the extent of the disconnect between prices and incomes,” Blomquist continued. “For example, in Los Angeles County, the minimum qualifying income needed to purchase a median-priced home is at more than $95,000, up from about $68,000 just a year ago.”

More scary figures. What do they mean to you? If you have been saving up for a down payment and looking forward to buying a home, you had better test the waters now. There’s no harm in gathering information and seeing what’s available. You may be pleasantly surprised.

Wells Fargo (WFC_) and JPMorgan Chase (JPM_) are responding to the decline in home refinancing activity during 2013 by lowering their underwriting standards, making it easier for many people to qualify for a loan. Wells Fargo — the nation’s leading mortgage originator by volume — has lowered its minimum FICO score for borrowers applying for loans insured by the Federal Housing Administration to 600 from 640. Do you qualify for an FHA loan? If you do, you will be able to make a much lower down payment than you would make for a conventional loan. Meeting with a mortgage lender at a bank can answer that question.


JPMorgan Chase “plans to lower LTV standards in certain markets for both jumbos and conforming mortgages to portfolio on balance sheet,” Deutcshe Bank analyst Dave Rochester wrote in a note to clients on Feb. 11. A jumbo mortgage loan is one with a balance of more than $417,000, which cannot be sold by a lender to Fannie Mae (FNMA) or Freddie Mac (FMCC).  A conforming loan has a balance lower than $417,000 and meets underwriting criteria allowing a bank to quickly sell the loan to Fannie or Freddie.

In many parts of the country, there is a much healthier balance between home prices and salaries, and you may also still be able to find foreclosure or “fixer upper” bargains.

According to BankingMyWay, the average interest rate for a 30-year fixed-rate mortgage loan in the United States is 4.39%, increasing from 4.22% last week, while the average rate for a 15-year fixed-rate loan is 3.55%, up from 3.42% last week.  Those rates are still quite low on a historical basis, although they are up significantly over the past year.

Along with considering “buying less house than you want,” in order to save money and make a purchase in the face of rising home prices and rising interest rates (as well as paying lower taxes and lower insurance premiums), you may also want to consider a 15-year loan rather than a 30-year loan.  Most of the coverage of the housing market and expenses focuses on 30-year loans, but you can save a bundle if you consider a shorter term.

Using the average rates listed above, with a loan balance of $200,000, the monthly principal and interest payment for a 30-year fixed rate mortgage with an interest rate of 4.39% would be $1,000.34.  Total interest payments over the life of the loan would come to $160,121.  If you borrow $200,000 for 15 years at the national average rate of 3.55%, your monthly payment would be $1,434.68, with total interest for the life of the loan coming to $58,242.29.

That could be a bitter pill to swallow.  You would pay $434.34 more each month, in order pay off the home 15 years earlier, while saving a total of $101,878.21 in interest.  That’s quite a bundle of savings, not to mention 15 years’ less pressure to come up with the monthly payment.  How can you afford the 15-year loan? In addition to considering “buying less house than you want,” you might drive your old car for several more years, or make other sacrifices that might seem painful.  A careful examination of monthly expenses might shed light on discretionary items that could be cut, or reduced.

You may think something like this: “There’s no way I am staying in this house, even for 15 years, so I might as well just go with the lower payment.”  OK, that makes some sense, but not much, if you can afford the 15-year loan.  This is because your payment with the 15-year loan is much more heavily weighted toward principal and away from interest, meaning that if you sell the home after five years, you will have built up much more equity than you will have built up with a 30-year loan.  If you can swing the 15-year loan, it will be worth it.

These figures provide food for thought, but they do not include property taxes and insurance, which are escrowed for most mortgage loans, meaning the lender or loan servicer pays these bills for you, while collecting an additional amount each month to cover those items.  So you must factor those items in.  Do not rely on your real estate agent for proper estimates of property taxes and homeowner’s insurance.   Go to the county tax office for an estimate of annual property taxes based on the amount you expect to pay for the home.  Go to an insurance agent for an estimate on the cost of homeowner’s insurance.  You may also be required by the lender to carry flood, windstorm or other hazard insurance, depending on where the property is located.

The point of all of this, even if it doesn’t apply to your circumstance, is to provide food for thought, since mortgage loan interest rates are likely to continue rising, and property prices are continuing to recover.  You, or someone you know, may need to “think outside the box” and make a move toward home ownership now, before it’s too late.

Don’t assume that a 30-year mortgage loan is the only way to go. And if home prices continue to rise significantly after you buy, think twice before “cashing out” through a home equity loan.  Becoming debt-free is another goal to consider.

— Written by Philip van Doorn in Jupiter, Fla.

Philip W. van Doorn is a member of TheStreet’s banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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REAL ESTATE: Repaying Home Equity Loans


Borrowers who opened home-equity lines of credit at the height of the housing bubble should brace for stiff increases in their monthly payments.

Helocs, as they’re known, were aggressively marketed from 2004 to 2007, and now the bills are coming due. These equity lines typically have a 10-year period during which the borrower can use the line of credit and pay only interest. At the end of 10 years, the borrower must begin paying both interest and principal on the outstanding balance, which could add up to hundreds of dollars more a month.

The bulk of the resets are expected from 2015 to 2017, but about $30 billion in outstanding Helocs will reach the end of the interest-only period this year, according to the Office of the Comptroller of the Currency, which regulates banks. Balances due to reset will rise to an estimated $52 billion in 2015, $62 billion in 2016, and $68 billion in 2017.

recent report from Moody’s Investors Service offered an example of the coming payment shock for borrowers: A homeowner with a $40,000 Heloc balance and a $210,000 mortgage at 4 percent will see a monthly increase of nearly $300 — to $1,389 from $1,103 — when the equity line converts into a 10-year amortizing loan, assuming an interest rate of 3 percent.

The shock will be even worse for borrowers with equity lines that require balloon payments after the interest-only period; they will owe the balance in full.

Fearing another wave of delinquencies, the comptroller’s office is prodding lenders to assess their level of Heloc risk and be proactive about reaching out to these borrowers.

Homeowners with equity lines nearing the end of their interest-only period shouldn’t wait around in the meantime. “Borrowers should raise their hand very early and expect to be helped,” said Allen J. Jones, a managing director of RiskSpan, a mortgage consulting firm in Washington.

First, Mr. Jones said, they should review the terms of their equity line. “Know what you owe,” he said. “If you have any questions, call the servicer. Ask them to tell you exactly when your payment is going to change.”

Then, if you have doubts about your ability to make the new payment, find out what your options are. Do you have enough equity in your home to refinance out of the Heloc? If not, Mr. Jones suggests asking for a forbearance plan. “Just like with loan modifications, there can be a modification to a Heloc,” he said. “All lenders will look at this differently from the perspective of the borrower’s situation, but it starts with the borrower understanding where they are.”

A number of unknowns make it hard to predict whether the coming Heloc bulge will be a drag on the housing market, said Jeffrey C. Taylor, the managing partner of Digital Risk, which provides mortgage services and risk analytics to lenders. For one, it’s uncertain how many Heloc holders already defaulted on their loans and are out of the system. It is also unclear to what extent lenders are trying to get ahead of the problem. And are borrowers financially prepared for the resets?

“Do they realize they have a situation where their payments could triple?” Mr. Taylor said. “Are we going to see people having challenges making those payments? As 2014 plays out, we’re going to start to hear more about all of this.”

Bank of America, Wells Fargo and JPMorgan Chase hold the bulk of the Helocs, the Moody’s report said. But 15 regional banks are seen as having greater exposure because of their high concentration of Helocs relative to their assets. At the top of the list are TCF Financial, American Savings Bank, First Horizon National and RBS Citizens Financial.

A version of this article appears in print on February 9, 2014, on page RE6 of the New York edition with the headline: Repaying Home Equity Loans. Order Reprints|Today’s Paper|Subscribe

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4 Tips for Vacation Home Buyers

If you’re thinking about making an offer on a second home in the Jersey Shore market – perhaps a property that’ll become your eventual retirement place – here are four things to keep in mind:


  1. Never forget that the key to vacation homes is location, location, location.Sure, this is a cliché, but that doesn’t make it wrong. Before making an offer on a home, get to really know the area by visiting several times to explore the neighborhoods and check out the amenities.

    Aside from exploring during peak seasons, we recommend spending time in there after the crowds clear out. “Different seasons bring different vibes to the area,”. “Not only that, but some of the local stores and restaurants may only be open seasonally. You’ll want to be familiar with what the area has to offer during the off-season.”

    Craig Venezia, author of “Buying a Second Home: Income, Getaway or Retirement,” suggests focusing your search on destinations that are no more than two hours from your primary residence.

    “If you have to drive more than two hours, you won’t go there nearly as often as you think you will,” he says. In addition, Venezia notes, the farther away your vacation home is, the harder it’ll be to check on it or visit to take care of necessary repairs.

    2. Assess the property’s true rental potential.Beaches tend to be the most desirable locations to pick up rental income when you’re not staying in your vacation home, according to the National Association of Realtors.

    If  you think you’ll want to turn a place you’re considering into a rental property, check with the town and, if appropriate, the homeowners association, to be sure short-term rentals are allowed — before making an offer.



Be certain, too, that the home you’re considering has the amenities renters expect.

3. Add up all the costs for buying and maintaining the vacation home. Mortgage rates are sometimes a bit higher for second homes than primary residences, according to Walter Molony, economic issues media manager for the National Association of Realtors.

That’s especially true if you’ll be counting on rental income to qualify for the mortgage.

In that case, the lender will view your vacation home as investment property. Not only will you probably be required to pay a higher mortgage rate than normal, you may be asked to come up with a down payment of 25 percent or so, according to an article by CNN Money’s Sarah Max.

You’ll have better luck getting vacation home financing through smaller regional banks.

Renting a home to offset your costs will also mean paying additional fees, like the cost of professional property management. Managers, for instance, charge 10-15 percent of the rental rate to market the property, process tenant applications, manage payments and maintain the place.

4. Before making a bid, sleep on it. Purchasing a vacation home is often the first step toward fulfilling a retirement dream. Too often, though, this emotional desire causes buyers to rush into making offers.

That’s especially true in today’s buyer-eat-buyer vacation home market.

“There is this feeling that you have to buy now because prices are low and mortgage rates are low,”. “But you don’t want to be in such a rush that you jump in prematurely. You really want to take your time and do your due diligence.”

So proceed with caution. You’ll want to be confident that the home will not only suit your needs today, but in the future. It’s a good idea to consider the age-friendliness of the property, since you may be living in the place years from now when it might not be quite as easy to, say, handle flights of stairs. Then, they waited for the right properties to hit the market before pouncing.

Now it’s just a matter of time before they’ll kick up their flip-flops in their ideal retirement home.

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5 Questions Every Homeowner Should Ask their Lender

Getting a mortgage can mean keeping track of a lot of moving parts. Savvy shoppers know to ask lenders about interest rates, closing costs and how much they can borrow.


But even seasoned buyers may not know to dig a little deeper. Here’s a look at five key things homebuyers often forget to ask mortgage lenders:

What’s the Annual Percentage Rate? Interest rates get advertising attention, but you need to pay equally close attention to the annual percentage rate (APR). The interest rate, or note rate, is stated on the mortgage note and is used to calculate your monthly payments. But it may not reflect the overall cost of borrowing.

Let’s say Lender X offers you a 30-year fixed rate mortgage at 4.5% interest. Lender Y offers the same mortgage for 4.25%. This would seem to be a no-brainer. But we’re missing some key information, namely all the other costs associated with the loan, from closing costs and origination fees to mortgage insurance and more. Lender Y may have the lower rate, but this loan could cost you more in the long run if their costs and fees are higher.

That’s why you need to look at the APR, which factors in those costs beyond just your interest rate. It’s also why lenders are now required to disclose APR. Otherwise, they could hide fees and charges behind an incredibly low — yet ultimately misleading — interest rate.

Do I Have to Escrow Taxes and Insurance? Homeowners paid on average about $800 per year for homeowners insurance in 2008, the most recent year for which data is available, according to the Census Bureau. The average property tax bill that year was $1,200. A lender may require you to escrow funds to cover those bills. Instead of writing a $1,200 check at year’s end to pay those taxes, a lender will have you split that total into 12 equal payments.

Your mortgage payment would include that month’s portion of your property tax and homeowners insurance bills. The money sits in an escrow account until your lender pays the bills on your behalf. Some homeowners would prefer to pay those bills all at once rather than part with a portion each month. Whether you have to escrow funds can depend on where you live, your loan-to-value ratio and other factors.

Is There a Prepayment Penalty? These have gone out of vogue in the mortgage industry. But you really don’t want to be the exception. Ask lenders if there’s any financial penalty for paying off the mortgage early. A clause like this could potentially impact your ability to refinance or even sell the home. The good news is government-backed loans like FHA and VA loans don’t allow prepayment penalties as a rule. Fannie Mae doesn’t purchase mortgages with prepayment penalties, and Freddie Mac will follow suit beginning next month.

Is There Anything I Shouldn’t Do Before My Loan Closes? Don’t confuse loan preapproval with loan approval. Lenders will double-check financial information, employment status, credit scores and other important metrics before giving your loan a green light. Don’t change jobs if you can help it. Don’t move lots of money around, or suddenly make big deposits. Save your furniture-buying spree for after your loan closes. Any changes to your credit or your overall financial stability can spell major trouble for your credit file. If you absolutely have to make a major change, be sure to update your loan officer as soon as possible.

Who Will Service My Loan? It’s kind of jarring for some first-time homebuyers, but you may not send your mortgage payment to the lender that originated your loan. Many lenders sell their loans and the right to service them. Companies are legally required to notify you regarding these kinds of changes. The mortgage servicer will receive your monthly payment and manage your escrow account for taxes and insurance. This is also the entity you’ll turn to if you run into problems paying your mortgage on time. This isn’t uncommon or a harbinger of trouble. Loans and servicing rights get sold all the time. But it’s important to know who will be responsible for processing your payments and ensuring your bills get paid on time.

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Four Bold Housing Predictions for 2014


1. U.S. home values will increase by 3 percent
2. Mortgage rates will reach 5 percent by the end of the year
3. It will be easier for borrowers to get a mortgage in 2014
4. Homeownership rates will fall to their lowest point in nearly two decades