INSPIRATION FOR TODAY:

RISMEDIA, July 10, 2010—(MCT)—The explosion of remodeling shows on TV and makeover spreads in magazines has whetted America’s appetite for glamorous rooms brimming with the latest furnishings, appliances and color schemes. Kitchen remodels are among the most popular, according to a report in the August issue of Consumer Reports and online at consumerreports.org. And the economic slowdown means there are outstanding deals on everything from cooktops to countertops. It also means kitchen designers and building contractors are eager for work and willing to negotiate.

But bargain prices and good looks aren’t everything, said Celia Kupersmzid Lehrman, Consumer Reports’ deputy home editor.

“When remodeling a kitchen, functionality is every bit as important as style. Fortunately there are many products that look good and work well,” she said.

The design of your kitchen is every bit as important as what goes into it, said Jim Spence of Spence & Vaughn Fine Kitchen and Bath in Maitland, Fla.

The most functional design is based on the ‘work triangle’—the relationship between the prep area, the cooking area and the sink, said Spence. Ideally, the distance between them should never be less than four feet or more than nine feet. Of the three areas, the most-used is the sink.

When planning a remodel, determining your budget is one of the first steps. The National Kitchen & Bath Association (NKBA) calculates the average kitchen remodel costs between 10-20% of the home’s value. But obviously, the extent of the makeover determines its cost.

Determining your priorities is another key step, said Phil Johnson, a partner at Spence & Vaughn and a certified kitchen designer. “Do you love to cook? If so, now might be the time to consider professional-style appliances,” he said. “Do you have a large family? Consider how best to accommodate them in your new space. Think about the things you love in your old kitchen—and the things you dislike.”

Johnson recommends the following steps for a successful kitchen remodel:

-Do your homework. Watch TV remodeling programs, clip appealing pictures and articles from magazines, attend remodeling seminars, visit home shows and parades of homes. Consult with a kitchen designer who is a member of the NKBA, who has the training and experience to avoid many of the things that can go wrong with a remodeling project.

-Visit a showroom. Examine the options in cabinets, countertops, appliances, flooring, plumbing and lighting. Decide what you want—and can afford.

-Schedule a home visit. The designer/installer needs to measure the kitchen and adjacent rooms, and make a note of existing walls, doors and windows, electrical supplies, ceiling height, attic access, type of wall construction, plumbing details, etc.

-Finalize the project. The design is refined, construction plans are completed, appliances and supplies are ordered—and the initial deposit is paid.

-Survive the dust, noise and workers. With proper supervision, the disruption can be kept to a minimum. Make sure materials are ordered and on the way before beginning the tear-out. Clear a space in the garage for workers’ tools and supplies and items removed from the old kitchen. And communicate regularly with the designer/installer.

4 rules to keep in mind as you begin to remodel your kitchen:

1. Don’t rush. There are many kitchen products that combine value, performance and good looks. Take time to meet with professionals, browse the Internet and visit showrooms and home centers. Haste can be costly. Changing your mind after the project is started typically adds about $1,500 to the cost of a kitchen project.

2. Size matters. In addition to being expensive, oversized kitchens can be exhausting to work in and keep tidy. A more compact kitchen often functions better. The National Kitchen & Bath Association website, nkba.org, provides guidelines for optimal space between appliances, cabinets and islands.

3. Beware of budget busters. Leave a 10-15% cushion for surprises, such as unexpected structural repairs. Avoid settling for a cheap option, thinking someday you will replace it with something you really want. Chances are that will never happen.

4. Get it in writing. When using a professional for a remodel, the written contract should list each phase of the project; every product, including the model number; and copies of each contractor’s license, and workers compensation and liability insurance to confirm they are current. Call references and, if possible, visit them.

(c) 2010, The Orlando Sentinel (Fla.).

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RISMEDIA, July 6, 2010—The House of Representatives recently passed the FHA Reform Act (H.R. 5072). The bill, sponsored by Representative Maxine Waters (D-Calif.), would give authority to the Federal Housing Administration (FHA) to increase premiums (a.k.a. mortgage insurance) on loans guaranteed by the FHA. It passed by a vote of 406 to 4 and now heads to the Senate for a vote.

The FHA does not make home loans, it insures lenders against mortgage defaults. As a matter of fact, the FHA insures nearly one-third of all new mortgages in the U.S. This is up from just 4% percent in 2006. Due to the high number of mortgage defaults that have occurred over the past few years, the FHA reserves have fallen below the limit allowed by law. The proposed bill hopes to bolster the FHA reserve level.

FHA-backed loans are common among first-time home buyers because, unlike the traditional mortgages of today, FHA loans only require that you have a 3.5% down payment. However, because the down payment requirement is so low, a borrower is required to pay both an upfront mortgage insurance premium at closing (currently at 2.25%, up from 1.75% in April 2010) and an annual mortgage insurance premium, paid monthly.

Currently, the annual mortgage premium is 0.55% of the loan amount, but if the FHA Reform Act is passed, it would allow the FHA to raise the premium up to a maximum of 1.55%. However, FHA Commissioner David Stevens said their plans are to raise the premium to 0.9% next year, not the maximum amount–though the FHA does have the ability to raise it to the maximum amount without additional approval.

How would this change affect a new FHA-backed borrower? Could a small percentage increase really translate into big numbers? The answer is yes. Here are two examples of how the new, higher premiums will affect homeowners, calculated using two homeowners with specific adjusted gross incomes (AGI).

Example #1
In this first example, a homeowner with a $50,000 AGI (see AGI chart here) can currently afford the median valued U.S. home of $183,100, based on the rule of thumb that one’s house payment—including taxes and fees—should not exceed 30% of your income. At the current rate of 0.55%, the homeowner should expect to pay $80.92 per month in FHA mortgage premiums.

However, if the premium is raised to 0.9%, this same homeowner would only be able to afford a $175,000 home and would be required to pay a monthly premium of $126.66.

If a rate of 1.5% is applied, this homeowner could only afford a $163,000 home. In the latter example, the monthly premium has increased roughly 2.5 times the current rate–from $80.92 per month to $196.62 per month–requiring the homeowner to lower their purchase power by roughly $20,000.

Example #2
In the second example, a homeowner with a $113,000 AGI (see AGI chart here) can currently afford the median valued Los Angeles metro home of $419,500 and should expect to pay an FHA monthly mortgage premium of $185.54.

However, with the increased fee of 0.9%, the same homeowner would only be able to afford a $402,000 home at 0.9 % and would have to pay a FHA monthly mortgage premium of $290.95 and a $372,600 home at 1.5%. That is a difference of $46,700.

If a rate of 1.5% is applied, this homeowner could only afford a $372,600 home. In the latter example, the monthly premium has increased roughly 2.5 times the current rate–from $185.54 per month to $465.75 per month–requiring the homeowner to lower their purchase power by roughly $47,000.

Like example #1, the decrease in affordability is due to an increase in the FHA annual mortgage premium, paid monthly. In both cases, the premium paid currently makes up 7% of the total monthly house payment. If the rate of 0.9% were applied, that would jump to nearly 12% and at 1.5%, 20% of the monthly house payment would go toward the FHA annual mortgage premium.

“Individual borrowers should be aware of the impact of this change to the FHA program’s annual mortgage premium requirement because less of their monthly payment will go toward the equity in their home,” said Zillow.com Chief Economist Dr. Stan Humphries. “Additionally, as annual mortgage premiums rise, it will negatively affect a home buyer’s purchase power.

Humphries continued, “While additional fees will have some marginal impact on demand for housing, it’s likely to be quite small overall and significantly less than the alternative of higher down payment requirements. Although the latter would do more to lower the risk profile of the FHA portfolio.”

In addition to the FHA mortgage premium increase, the bill calls for a decrease to the portion of the “upfront mortgage premium,” which is paid at closing. Currently, the rate is at 2.25% of the loan value. The FHA plans to cut the rate to 1% if the bill makes it into law. Though helpful, it will not come close to counteracting increase annual mortgage premium.

The bill is awaiting a Senate vote and an effective date for this portion of the bill has yet to be set. The annual mortgage premium increase will only apply to new FHA borrowers.

Methodology
Zillow ran the numbers using two fixed adjusted gross incomes (AGI). We used an AGI of $50,000 to represent the U.S. median home value of $183,000 and an AGI of $113,000 to represent the median home value of $419,500 in the Los Angeles Metro. We then worked backward to determine the 3.5% down payment (current FHA down payment minimum) and loan amount. We plugged that data into the Zillow mortgage payment calculator to get estimated property tax and home insurance numbers.

Finally, to determine how the increase in FHA premiums would affect homeowners, we applied the three percentage rates mentioned above (0.55, 0.9, 1.5) to the fixed AGIs, verifying that the house payment never exceeded 30% of the AGI.

RISMEDIA, January 25, 2010—(MCT)—Americans want smaller houses and they are willing to strip some of yesterday’s most popular rooms—such as home theaters—from them in order to accommodate changing lifestyles, consumer experts told audiences at the International Builders Show.

“This is a traumatic time in this country and the future isn’t something we’re 100% sure about now either. What’s left? The answer for most home buyers is authenticity,” said Heather McCune, director of marketing for Bassenian Lagoni Architects in Park Ridge, Ill. Buyers today want cost-effective architecture, plans that focus on spaces and not rooms and homes that are designed ‘green’ from the outset,” she said. The key for home builders is “finding the balance between what buyers want and the price point.”

For many buyers, their next house will be smaller than their current one, said Carol Lavender, president of the Lavender Design Group in San Antonio, Texas. Large kitchens that are open to the main family living area, old-fashioned bathrooms with clawfoot tubs and small spaces such as wine grottos are design features that will resonate today, she said. “What we’re hearing is ‘harvest’ as a home theme—the feeling of Thanksgiving. It’s all about family togetherness—casual living, entertaining and flexible spaces,” Lavender said.

Paul Cardis, CEO of AVID Ratings Co., which conducts an annual survey of home buyer preferences, said there are 10 “must” features in new homes:

1. Large kitchens, with an island. “If you’re going to spend design dollars, spend them where people want them—spend them in the kitchen,” McCune said. 2. Granite countertops are a must for move-up buyers and buyers of custom homes, but for others “they are on the bubble,” Cardis said.

3. Energy-efficient appliances, high-efficiency insulation and high window efficiency. Among the “green” features touted in homes, these are the ones buyers value most, said Cardis. While large windows had been a major draw, energy concerns are giving customers pause on those. The use of recycled or synthetic materials is only borderline desirable.

4. Home office/study. People would much rather have this space rather than, say, a formal dining room. “People are feeling like they can dine out again and so the dining room has become tradable,” Cardis said. And the home theater may also be headed for the scrap heap, a casualty of the “shift from boom to correction.”

5. Main-floor master suite. This is a must feature for empty-nesters and certain other buyers, and appears to be getting more popular in general. That could help explain why demand for upstairs laundries is declining after several years of popularity gains.

6. Outdoor living room. The popularity of outdoor spaces continues to grow, even in Canada. The idea of an outdoor room is even more popular than an outdoor cooking area, meaning people are willing to spend more time outside.

7. Master suite soaker tubs. Whirlpools are still desirable for many home buyers, but they clearly went down a notch in the latest survey. Oversize showers with seating areas are also moving up in popularity.

8. Stone and brick exteriors. Stucco and vinyl don’t make the cut.

9. Community landscaping, with walking paths and playgrounds. Forget about golf courses, swimming pools and clubhouses. Buyers in large planned developments prefer hiking among lush greenery.

10. Two-car garages. A given at all levels; three-car garages, in which the third bay is more often than not used for additional storage and not automobiles, is desirable in the move-up and custom categories.

RISMEDIA, July 3, 2010—FHA Pros, LLC, a national FHA condo approval service, has developed a list of facts speaking to the top misconceptions associated with FHA loans in order to help home buyers better navigate an already confusing market. FHA loans are mortgages issued by qualified lenders and insured by the Federal Housing Administration (FHA).

“We have seen home buyer interest in FHA loans go from practically zero three years ago to upwards of 87% today,” said Christopher Gardner, founder and president of FHA Pros, LLC. “Despite this rapid rise in popularity, many buyers still do not fully understand the benefits of these loans, and we believe it’s time to change that.”

1. FHA loans are not only for lower-income borrowers. FHA loans are available to everyone. There is no maximum income restriction associated with FHA loans, but borrowers do need to substantiate income and assets by submitting proper documentation. This requirement ensures that borrowers are well-vetted and truly able to afford their future homes.

2. FHA loans are not only for first-time buyers. Many people believe FHA loans are available only to first-time home buyers, but this is not the case. Whether borrowers are making their first home purchase or their fifth, they can look to FHA loans as a home financing option.

3. FHA loans are not just small loans; in fact, loan amounts can be as high as almost $800,000. The government recently raised the maximum loan amount from its original cap of $362,790 to $793,750 as a way to help stabilize the housing market. The amount a buyer can borrow varies from county to county though. Later this summer, condo buyers interested in FHA loans can visit www.checkfhaapproval.com to instantly identify FHA-approved condo associations and review maximum loan amounts for a given location.

4. FHA loans are not affiliated with the section 8 housing program. While both programs are administered by the U.S. Department of Housing and Urban Development (HUD), FHA loans have nothing to do with low-income subsidized housing. FHA loans are simply mortgages insured by FHA. This insurance provided by the federal government allows lenders to lend more freely by assuring them that they will be repaid in the event of default. Most traditional lenders, including Wells Fargo & Co., JP Morgan Chase and Citigroup are able to provide FHA loans to their customers.

5. FHA loans are often more affordable than conventional loans. While FHA loans typically offer the same interest rates as other loans, borrowers benefit from a much lower down payment of as low as 3.5%.

6. FHA-approved condo developments are more desirable to buyers. With 87% of home buyers indicating that they plan to use FHA loans, condo associations that are not FHA approved are missing out on a significant pool of prospective buyers. Under rules in place since February 2010, an entire condominium development must now apply to HUD and be granted FHA approval before a buyer can purchase a unit in an association with an FHA loan or before an existing unit owner can refinance into an FHA loan.

Due to the general unwillingness of today’s lenders to extend credit with respect to conventional loans, many borrowers find that FHA is their best bet. Lenders don’t mind lending when the federal government (FHA) assures them of repayment.

Homeowners associations (HOAs) should note that although FHA-insured mortgages might be easier to obtain, they are not “risky” loans, due in large part to the strict “full documentation” requirements placed on borrowers. Individual buyers or sellers can initiate the approval process or current owners can encourage their HOA to apply.

7. FHA loans are assumable. In addition to lower down-payment and credit-qualifying requirements as compared to conventional loans, FHA loans are assumable. This means that when a seller with an FHA loan sells his or her property, the loan and its financing terms (interest rate) can be transferred to the new buyer. This unique feature will certainly make a property more valuable in times of rising interest rates.

“Now, more than ever, buyers and sellers need to understand the options available to them when it comes time to buy a home,” continued Gardner. “At FHA Pros we have worked with countless HOAs, attorneys and individuals to easily and efficiently navigate the historically tricky FHA-approval process.”