Open Your Front Door With Just One Finger

August 30, 2007 by · Leave a Comment
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Keyless home entry -- all you need is a finger

When you’re out for a run, wearing an outfit without pockets, or just feel like “traveling light”, the last thing you want to do is take your house keys with you.

Thanks to advances in home security technology, now you don’t have to.

It may sound like science fiction, but there are several security companies selling door locks that recognizes fingerprint as a “key”. Powered by simple batteries, biometric locks run can be programmed to remember up to 30 different fingerprint types.

And, for as little as $250 each, fingerprint entry door systems can be a worthwhile investment for the safety-conscious homeowner.

Fingerprint door locks are likely to score high among homeowners who like to impress guests with technology, but there are practical reasons for having a keyless lock, too, including children, forgetfulness, and the freedom to not carry keys everywhere you go.

If it's something you've long wanted, you don't have to wait any longer.

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How Credit Cards May Be Replacing Home Equity As A Funding Source

August 29, 2007 by · Leave a Comment
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Credit card spending is increasing as home equity withdrawals diminish

As mortgage guidelines loosened between 2002 and 2006, homeowners often used their home equity to retire credit card and other consumer debt. They did this by increasing the size of the mortgage and taking “cash out” from their home.

As you’d expect, this type of mortgage transaction is called a “cash out” refinance.

Well, now that mortgage guidelines are tightening, it’s growing more difficult for a homeowner to engage in this type of home loan.

Mortgage lenders are restricting the total amount of equity that can be withdrawn from a home, usually as a percentage of the home’s value.

This may be one reason why the amount of credit card debt is rapidly increasing among Americans.

Throughout May and June, for example, credit card balances increased 12% and 8% respectively even as consumer spending remained relatively flat.

Therefore, we can hypothesize that Americans — unable to “cash out” from their homes — are putting more money on their credit cards and slowly reaching their collective credit limits (upon which the borrowing stops).

When the borrowing stops, spending stops, too, and this has the impact of slowing down the economy.

A slower economy, of course, reduces inflationary pressures and that makes the U.S. dollar stronger to international investors. That strength, in turn, creates buying pressure on mortgage bonds which pushes mortgage rates down for everyone. Naturally, lower rates encourage more borrowing.

Yes, it’s a cycle. And it’s one worth watching.

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What’s The Existing Home Sales Report Got To Do With You? Nothing.

August 28, 2007 by · Leave a Comment
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When the National Association of Realtors

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Chart of the Day: Jumbo Mortgage Rates

August 27, 2007 by · Leave a Comment
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This chart shows how home buyers with jumbo loans — loans over $417,000 — are being impacted by the recent mortgage market uncertainty.

Similar to sub-prime borrowers, rates have jumped higher for jumbo borrowers in the past four weeks.

For some jumbo clients, the expected payment on a $500,000 mortgage increased $508. Rates have climbed 1.500% higher since Agust 1 in some cases.

Note: The chart above does not reflect actual mortgage rates. It is provided by Bankrate.com and it meant to show how jumbo loans are moving in a different direction from conforming, 30-year fixed rate home loans.

For some homeowners, splitting a jumbo loan into two parts may make financial sense — one loan for a conforming-size $417,000 and another “piggyback” loan to make up the difference.

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The Kitchen Table: Activity Epicenter And Family Builder

August 24, 2007 by · Leave a Comment
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The kitchen table serves as a home’s “center” for many families. It’s often the place where the kids do their homework, the parents do their taxes, and a few weekend projects get finished.

It can sometimes seem like the kitchen table is used for everything but meals.

But studies show that busy families can strengthen their relationships if they site down together for a traditional dinner each day.

Getting everyone in the same room at the same can be a challenge by itself. But, if that room is traditionally used as a activity center in the home, it can be even harder to get everyone gathered and sitting still.

A quick trick can reclaim the kitchen table for half-hour: try having a nice table cloth and proper placemats that signal to your family that “it’s time to be together”. Nothing formal is required — just a table cloth bright, bold and different enough to change the kitchen table’s “mood”.

A small amount of formality can slow everyone down and create the perfect atmosphere for having quality family time.

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New Homes “Sold” Is Not The Same As New Homes “Closed”

August 23, 2007 by · Leave a Comment
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New Home Sales do not count contracts cancellations

With tomorrow morning’s New Home Sales report, markets will get a look at the number of newly-constructed homes sold in July.

The figure is expected to be in the 825,000 range. This is lower than June’s 834,000 figure.

But — as always — there is more to the story.

When the Census Bureau reports on New Homes Sales, it only counts the number of new sales contracts written. Specifically, New Home Sales doesn’t measure what happens to contracts after they are signed.

So, for each buyer that rescinds his contract or does not qualify for financing, the New Home Sales data is over-stated by 1.

A “new home sale” may cancel before closing for a multitude of reasons, including:

  • Buyers can’t sell their old homes and can’t get financing
  • Buyers are angry when developers reduce price on similar properties
  • Mortgage products are no longer available for the buyer’s borrowing profile

According to RealEstateJournal.com, cancellation rates were as high as 40% for big builders in November 2006. We can only theorize that the number has since increased as home sales slow overall and the mortgage product menu shrinks.

In other words, tomorrow’s New Homes Sales data is somewhat irrelevant to the overall U.S. housing market. It only measures contracts being written, not contracts being closed.

The Census Bureau even acknowledges this on their Web site.

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Why Private Mortgage Insurance (PMI) Is Suddenly Popular

August 22, 2007 by · Leave a Comment
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Suddenly, Private Mortgage Insurance is back in vogue. If only by default.

The story background is well-documented in this Bankrate.com article from 2002. The article is five years old, but it still raises some salient points.

What the article doesn’t highlight is that second mortgages such as home equity loans are typically sold to Wall Street, bundled in with sub-prime and “near-prime” loans.

Today, as the number of buyers for these higher-risk loan pools shrinks, some mortgage lenders have stopped offering second mortgages in order to reduce their overall lending risk.

PMI payments tend to be higher than their piggyback counterparts, but The Tax Relief and Health Care Act of 2006 narrows that gap using tax deductibility. The act grants itemized deductions for some private mortgage insurance (PMI) and government mortgage insurance (MIP) expense premiums paid in 2007.

For all loans originated in the 2007 calendar year, mortgage insurance is tax-deductible provided that two tests are met:

  1. The homeowner’s household income is $100,000 or less in 2007
  2. The home loan is for a primary or secondary residence

For households earning more than $100,000, the deduction is phased out to the tune of 10% per $1,000 of additional income until it reaches 0% at $110,000

So, if a single person earns $90,000 in 2007 and buys a home using MI, the MI expenses are tax-deductible in 2007. However, there’s a catch! Because the tax code is due to expire December 31, 2007, there is no guarantee that the MI will be tax-deductible in 2008.

As always, talk with your tax professional about how tax deductions work and whether you qualify for a PMI deduction.

As the number of mortgage products continues to shrink, PMI will continue to grow in popularity. The graphic/poll above will shift, too.

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Like The Fed Funds Rate, The Fed’s Discount Rate Does Not Control Mortgage Rates

August 21, 2007 by · Leave a Comment
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The Federal Reserve lowered the Discount Rate Friday and that has no direct bearing on mortgage rates

Friday, the Federal Reserve lowered its Discount Rate by 0.50% in an effort to preserve liquidity among our nation’s banks.

This has nothing to do with mortgage rates that people like you and I get for our homes. Well, not directly at least.

The Discount Rate is the rate at which banks borrow money from the Federal Reserve. It is different from the Fed Funds Rate which is the rate at which banks borrow from each other.

After the adjustment last week, the Discount Rate now stands at 5.750%; the Fed Funds Rate is 5.250%. Note that the Fed “charges” more than other banks because it wants to be the “lender of last resort”.

And last week, it was.

When the Fed lowered the Discount Rate Friday, it signaled that it was concerned for the nation’s banks and their liquidity. A reduced Discount Rate strengthens the system by lowering bank operating expenses and increasing capitalization.

The Fed also extended its normal payback period from one day to 30 days. The additional 29 days buys extra time for banks to rebalance their books through asset sales or debt issuance.

On Friday, mortgage rates fell in response to the Discount Rate announcement, but not because the two are related.

Inflation devalues mortgage bonds and the Fed’s move signals that inflation pressures may be subsiding. When the inflation is falling, mortgage bonds improve in price and these higher prices yield lower rates.

This is why mortgage rates dipped. Not because the Fed lowered the Discount Rate, but because what the lowering signaled about the economy.

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Hurricane Dean Threatens Gas Prices Nationwide

August 20, 2007 by · Leave a Comment
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As Hurricane Dean charts a path through the Gulf of Mexico, let’s not forget that Mexico and Venezuela are the #3 and #4 importers of crude oil to United States, respectively.

Because of the storm, many Mexican oil fields and facilities will be forced to operate at reduced capacity. In addition, rough waters will likely delay crude oil shipments by tanker; vessels will not be able to navigate the Caribbean Sea and the Gulf.

With 20 percent of our nation’s imported oil threatened by Hurricane Dean, expect gasoline prices to increase in anticipation of shorter supply. If the storm causes extensive damage, expect that prices will increase again, after the fact.

If you drive your car a lot, it may be best to fill it up early Monday morning to get the lowest prices of the week.

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How Artwork Can Accent Your Home And Tell A Story

August 17, 2007 by · Leave a Comment
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Original art brightens a home and bring a personal touch to your space.

One common method of buying art is to find an empty wall space — especially near a doorway or in a main room — and purchase artwork to fill that space.

If the wall space is large, look for a painting, print or piece of “pop art“; with floor space, a sculpture may be a better choice.

In smaller areas, a series of small pieces stacked or staggered can really accentuate a room, too.

Of course, you can always hunt for artwork with no particular location in mind and then find a place to place it later.

Shopping for art can be fun in its own right. Versus large galleries, local art fairs and small galleries usually feature pieces from a host of different artists with many different styles.

If you have a chance to meet the artist personally, ask about his/her works of art and any “stories” that may describe or define it. You’ll not only hear some interesting tales, you’ll also get a good story to retell to house guests.

Take your time when buying art for your home — purchase something that you really like. Art should not be about impressing guests; it should be about a very personal object that speaks to you without saying a word. Or, maybe, it will do both.

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