8 Kasım 2007 Perşembe

Property Investment

There might not have been more millionaires than those who believe in the policy of “buy cheap and sell dear.” This is especially true in the case of property where a substantial amount of capital gains can be realized when the value of the property or real estate appreciates over time. Property can be implied to mean both movable and immovable property (generally referred to as real estate property or realty). While movable property, also called chattels, such as money, securities and goods can be moved from one place to the other, immovable property such as land and the objects permanently attached to it such as buildings constitute immovable property. There also exists another property called intellectual property which refers to the right over artistic creations or inventions. Immovable properties have the essential characteristic that only the title to the property changes by virtue of the transfer whereas the physical location of it does not change. Property investment is usually referred to as real estate investment or investment in immovable properties or assets. Property or real estate investment is currently booming in the country. The investment in property essentially depends on the risks associated with it, that is to say, even if the venture succeeds when the future stream of income will accrue to the investor and the alternative investment opportunities.
Real estate investment can be attractive if viewed as a business opportunity; it can generate rental income, using it as collateral to secure a loan for a business venture, to offset otherwise taxable income through cash savings on tax-deductible interest rate losses, or simply from the profits garnered from its resale. Investment in property is treated as a long term gain and investment professionals argue that 5%-20% of investment portfolio should be directed towards property or real estate. As a surge in the realty market, online real investment opportunities have also emerged since the last decade. Property investment in India has especially picked up in the last decade and the low price on property in Romania presents a tempting option for intrepid investors willing to take on the risks associated with dealing in property. Property investment is also a lucrative option for investors in Poland and there also have been news about an investment boom in many Latin American countries like Brazil. The Malaysian government, in view of the rise of FDI flows into the country and high GDP growth rates, has announced that capital gains taxes on property deals will be scrapped.
Europe seems to be new destination of rise in property investments with Slovakia, Slovenia and the Baltic states experiencing a rapid rise in property investments. Slovakia was nominated by the World Bank in 2004 for having the fastest improving investment climate. That property investment is commensurate with the growth prospects of the economy can be seen with China, Thailand and Vietnam becoming hotspots of investment in the current years. The German economy is slated to grow at 2.5% annually which will make it one of the leading property investment sites by 2008. Lastly, property investment from the Caribbean islands of St. Lucia and Grenada to plush sea-facing palaces in Dubai is expected to pick up in the coming years with property rates falling and the rising economic growth making it a favorite place for foreigners to invest. With the rise in property investment in the event of falling property prices in many countries of the world, online property investment opportunities have also emerged.

Real Estate Investment

Real Estate Investment is now treated as a major case of capital budgeting by using state-of-the-art investment analysis which incorporates the future stream of income it may generate and the associated risk adjustments. It has been the highlight of the investment literature since the 1970’s when investment theorists extended techniques such as probability, time value of money and utility into its analysis. Real estate is basically defined as immovable property such as land and everything permanently attached to it like buildings. Real property as opposed to personal or movable property is characterized by the right to transfer the title to the land whereas title to personal property can be retained. The investment in real estate essentially depends on the risks associated with it, that is to say, even if the venture succeeds when the future stream of income will accrue to the investor and the alternative investment opportunities. Real estate investment can be attractive if viewed as a business opportunity; it can generate rental income, using it as collateral to secure a loan for a business venture, to offset otherwise taxable income through cash savings on tax-deductible interest rate losses, or simply from the profits garnered from its resale. Notable, in this context is the gains reaped by real estate speculators who trade in real estate futures (by buying and selling purchase options).
Common examples of real estate investment are individuals owning multiple pieces of real estates one of which is his primary residence and others are occupied by tenants from where the rental income accrues. Real estate investment is also associated with appreciation in the value of property thereby having the potential for capital gains. Tax implications differ for real estate investment and residential real estates. Real estate investment is long term in nature and investment professionals routinely maintain that ones investment portfolio should have at least 5%-20% invested in real estate. A Real Estate Investment Trust (REIT) is a corporation or body investing in real estate that has the property to reduce or eliminate corporate income taxes. In return, REIT’s are required to distribute 90% of their income among the investors. These incomes are often taxable. REIT’s provide a similar function as does Mutual Funds provide for stocks in the share market. The key statistics to study about the REIT’s are the NAV (Net Asset Value) and AFFO (Adjusted Funds From Operation). The Indian Government is yet to introduce REIT’s in the country. The government and the SEBI (Securities and Exchange Board of India) are planning to bring in legislations for the smooth functioning of the real estate market in India. with Initial Public Offers (IPO’s) streaming in from various listed real estate companies, it will be the best time to have an REIT which can help capture the current boom in the real estate market. REIT’s provide the opportunity to reap the benefits due to interests in the securitized real estate market. The best benefit that can accrue is the fast and easy liquidation of investments in the real estate market which can be observed in Japan which one of the few economies of Asia along with Hong Kong, Singapore, Malaysia and Taiwan to have REIT legislation in place. J-REIT securities are listed on the Tokyo Stock Exchange and most of the participants are domestic and foreign conglomerates. The legislation for laying out rules for REITs in UK was enacted by the Finance Act of 2006.they have to distribute 95% of their income and have to be publicly listed on a stock exchange which has been recognized by the FSA (Financial Services Authority). In the USA, the REIT’s are required to pay little or no federal income tax but are subject to legislations put forth by the Internal Revenue Code of 1986 whereby they have to distribute 90% of their taxable income in the form of dividends to its shareholders. Increasing demand for REIT stocks will push up the stock prices and entail growth from internal sources which is evidenced by the figures of 2005 where the combined assets of 200 publicly traded REIT companies totaled $500 billion. Various online real estate investment sites have also emerged in the last decade as fallout of the surge in realty business.

Investment Strategy

A well-planned investment strategy is essential before having any investment decisions. A business strategy is generally based upon long run period. Formation of business strategy largely dependent upon the factors such as long-term goals and risk on the investment. As the return on investment is not always clear, so the investors prepare the strategy so as to face the ongoing challenges in investment. A balanced investment strategy is generally required in the process of investment, which possesses long time period and some risk tolerance. In the case, when a strategy is aggressive the chance of attaining a higher goal is higher. An efficient strategy can be obtained from portfolio theory, which shows good estimates on risk and return. Investment Strategy is usually considered to be more of a branch of finance than economics. It is defined as set of rules, a definite behavior or procedure guiding an investor to choose his investment portfolio. For example, investing in mutual funds has recently emerged as a very favorable investment strategy. An investment strategy is centered on a risk-return tradeoff for a potential investor. High return investment instruments such as real estate and mutual funds usually have more risks associated with it than low return-low risk investment opportunities. Return on investment can be calculated on past or current investment or on the estimated return on future investment. Symbolically, it can be expressed as: Vf/Vi -1 where Vf denotes final investment value and Vi is the initial investment value. (“f” and “i” should be noted as subscripts)
Return on investment (ROI) is profitable when Vf/Vi-1>0 and the investment is deemed to be unprofitable when the value of final investment is less than that of the initial investment. ROI is calculated to be 1 or 100% when the value of the final investment is twice the value of the initial investment. Types of investment strategies can be defined as follows: A passive investment strategy attempted to minimize transaction costs. An active investment strategy guide used to maximize returns based on moves such as proper market timing. This usually mean, “buying in the lows and selling in the highs” or buying investment instruments when they are cheap and selling them off when their price appreciates. This strategy, however, is not very beneficial for small time investors. Small time investors can adopt the buy and hold investment strategy to invest in equities, which although volatile in nature, give favorable long run returns. Investing in equity markets for small time investors is associated with the investors holding on for very long periods. In the case of real estate, the holding period extends the lifespan of the mortgage. Notably, in case of this strategy, indexing or buying a small proportion of all the shares in market index or a mutual fund is a purely passive variant of the above strategy. The strategy of value investing, a classic investment strategy propagated by Benjamin Graham simply concentrates on the strategy that an investor buys shares of a company as if he was buying off the whole company without paying any attention to the stock market scenario or any exterior conditions such as the political climate. At the end of the day, if he can buy the stock at less than that its actual future worth to the buyer, the person is said to have discovered a “value investment.” Investment strategies can also denote the investment strategies a national or federal government should follow to bring about economic growth in a country. This can only be achieved by domestic investment as well as significant FDI (Foreign Direct Investment) flows to particular sectors of countries, especially the less developed ones of Asia and Africa. In case of India, infrastructural problems, excessive government intervention, rigid labor laws and corruption are stifling the flow of FDI in the critical sectors. Less developed countries such as those in the Asia- Pacific region and Africa can bring about much needed development in these economies.An investment strategy in mutual funds is probably the best bet for a profitable investment. Mutual funds is defined as a pool of money supplied by different investors and in turn used by the mutual fund company to invest in various assets such as stocks and bonds. However, a detailed research has to be conducted for choosing the mutual fund companies and only those should be considered which have a professional investment manger. This will ensure that the funds get channeled towards the right investments. This also applies for investing in stock markets where a decision to invest should follow a through research about the past and current trends of the stock prices and their Net Asset Values (NAV). Analyses from market researchers about the predicted future trends should also be considered otherwise gains from capital appreciation; capital gain distribution (in case of mutual funds) and dividends might not be realized. Lastly, investment strategies leading to green investments or investments in renewable sources of energy will be the next big thing in the investment spectrum.

Investment Strategy

A well-planned investment strategy is essential before having any investment decisions. A business strategy is generally based upon long run period. Formation of business strategy largely dependent upon the factors such as long-term goals and risk on the investment. As the return on investment is not always clear, so the investors prepare the strategy so as to face the ongoing challenges in investment. A balanced investment strategy is generally required in the process of investment, which possesses long time period and some risk tolerance. In the case, when a strategy is aggressive the chance of attaining a higher goal is higher. An efficient strategy can be obtained from portfolio theory, which shows good estimates on risk and return. Investment Strategy is usually considered to be more of a branch of finance than economics. It is defined as set of rules, a definite behavior or procedure guiding an investor to choose his investment portfolio. For example, investing in mutual funds has recently emerged as a very favorable investment strategy. An investment strategy is centered on a risk-return tradeoff for a potential investor. High return investment instruments such as real estate and mutual funds usually have more risks associated with it than low return-low risk investment opportunities. Return on investment can be calculated on past or current investment or on the estimated return on future investment. Symbolically, it can be expressed as: Vf/Vi -1 where Vf denotes final investment value and Vi is the initial investment value. (“f” and “i” should be noted as subscripts)
Return on investment (ROI) is profitable when Vf/Vi-1>0 and the investment is deemed to be unprofitable when the value of final investment is less than that of the initial investment. ROI is calculated to be 1 or 100% when the value of the final investment is twice the value of the initial investment. Types of investment strategies can be defined as follows: A passive investment strategy attempted to minimize transaction costs. An active investment strategy guide used to maximize returns based on moves such as proper market timing. This usually mean, “buying in the lows and selling in the highs” or buying investment instruments when they are cheap and selling them off when their price appreciates. This strategy, however, is not very beneficial for small time investors. Small time investors can adopt the buy and hold investment strategy to invest in equities, which although volatile in nature, give favorable long run returns. Investing in equity markets for small time investors is associated with the investors holding on for very long periods. In the case of real estate, the holding period extends the lifespan of the mortgage. Notably, in case of this strategy, indexing or buying a small proportion of all the shares in market index or a mutual fund is a purely passive variant of the above strategy. The strategy of value investing, a classic investment strategy propagated by Benjamin Graham simply concentrates on the strategy that an investor buys shares of a company as if he was buying off the whole company without paying any attention to the stock market scenario or any exterior conditions such as the political climate. At the end of the day, if he can buy the stock at less than that its actual future worth to the buyer, the person is said to have discovered a “value investment.” Investment strategies can also denote the investment strategies a national or federal government should follow to bring about economic growth in a country. This can only be achieved by domestic investment as well as significant FDI (Foreign Direct Investment) flows to particular sectors of countries, especially the less developed ones of Asia and Africa. In case of India, infrastructural problems, excessive government intervention, rigid labor laws and corruption are stifling the flow of FDI in the critical sectors. Less developed countries such as those in the Asia- Pacific region and Africa can bring about much needed development in these economies.An investment strategy in mutual funds is probably the best bet for a profitable investment. Mutual funds is defined as a pool of money supplied by different investors and in turn used by the mutual fund company to invest in various assets such as stocks and bonds. However, a detailed research has to be conducted for choosing the mutual fund companies and only those should be considered which have a professional investment manger. This will ensure that the funds get channeled towards the right investments. This also applies for investing in stock markets where a decision to invest should follow a through research about the past and current trends of the stock prices and their Net Asset Values (NAV). Analyses from market researchers about the predicted future trends should also be considered otherwise gains from capital appreciation; capital gain distribution (in case of mutual funds) and dividends might not be realized. Lastly, investment strategies leading to green investments or investments in renewable sources of energy will be the next big thing in the investment spectrum.

US States Economies

The United States is one of the largest and most technologically developed countries in the world. The Gross Domestic Product of the country in terms of purchasing power parity of the country has reached at $12.36 trillion (2005 est.). Here in these states economic profiles of United States section we have covered the performance of the individual state economies in the national economy as a whole. There is an extensive coverage on the demography and social indicators, business and economy, natural resources, exports and imports, tourist places, schools, colleges and universities of all the states of United States.
Alabama Economy
Alaska Economy
Arizona Economy
Arkansas Economy
California Economy
Colorado Economy
Connecticut Economy
Delaware Economy
Florida Economy
Georgia Economy
Hawaii Economy
Iowa Economy
Idaho Economy
Indiana Economy
Kansas Economy
Kentucky Economy
Louisiana Economy
Maine Economy
Massachusetts Economy
Montana Economy
Nebraska Economy
Nevada Economy
New Hampshire Economy
New Jersey Economy
New Mexico Economy
New York Economy
North Dakota Economy
North Carolina Economy
Ohio Economy
Oklahoma Economy
Pennsylvania Economy
Rhode Islands Economy
South Dakota Economy
South Carolina Economy
Texas Economy
Tennessee Economy
Utah Economy
Vermont Economy

Top Mortgage Companies

1st financial mortgage
Fairfield Financial Mortgage
Mortgage Broker
Mortgage Lender
Mortgage Lender
GMAC Mortgage
National City Mortgage
Wells Fargo Mortgage
Option One Mortgage
SunTrust Mortgage
American Financial Mortgage
Citi Financial Mortgage
Lenox Financial Mortgage
Liberty Financial Mortgage

Mortgage Company

The term “mortgage” is often used in the same breath as a “mortgage loan.” A mortgage company can be defined as a company specializing in offering mortgage services such as free mortgage quotes, calculators and guides and unmatched customer services such as instant approval of mortgage loan applications. Mortgage is technically defined as a method of using personal or real property as a security for paying off a debt. A mortgage is generally secured against a commercial or residential property where the initial cost of the property is quite hard to bear. In this context, a mortgage loan is a loan obtained for acquiring a plot or residence. Mortgage loans are generally lower priced than other loans as value of the property reduces the risk for the loan provider. In other words, a mortgage loan is secured against the property intended to be bought on the part by the borrower. Mortgage properties usually entail certain restrictions on the use or disposal of the property such as paying any outstanding debt before selling the property. Investing in mortgage properties through loans has become the accepted practice in the developed countries such as the USA and UK. It is also the trend in India where you can avail of a high risk loan by securing your property thereby also getting lower interest rates.Mortgage loans are structured as long term loans based on the formulae of time value of money. The loan amortization period or the rate of mortgages can be reduced by availing of mortgage refinancing options offered by all leading mortgage companies. Mortgage companies can offer both FRM (Fixed Rate Mortgage) and ARM (Adjusted Rate Mortgage) schemes to borrowers. While ARM means that the mortgage rates will not remain the same over the tenure of the loan, interest rates will usually remain stable in case of FRM. Besides, there are several mortgage companies offering loans which entail a bullet payment or a lump sum payment on the amount of the loan otherwise offering reasonable interest rates. Mortgage companies offer the best quality of customer services such as refinancing at a lower mortgage rate, getting a new home mortgage or a home equity loan or second mortgage. As previously mentioned mortgage companies offer a mortgage refinance calculator, which can calculate the refinance rate that you can avail depending on your past refinance circumstances, the property you want to buy and whether it has a good possibility of appreciating in value over time, its location and above all, your credit rating. Mortgage companies do not want to offer high risk borrowers loans even if they exhibit sufficient liquidity in recent times. The key features of mortgage companies can thus be summarized as debt consolidation service, home equity loans, latest mortgage quotes, real estate lending, new home loans and mortgage refinancing. Most importantly, free online loan application facilities giving instant approval can boost the popularity of the mortgage company a great deal. Some of the best known mortgage companies around the world including India are: Countrywide Financial CorporationAmeriquest Mortgage CompanyAvis Mortgage, Inc.CTX Mortgage CompanyICICI Lombard

US Mortgage

The industry presently employs about 7,500 people in this sector. Keeping in view the research report entitled "BPO Opportunities in the US Residential Mortgage Market" by Trinity Business Process Management and Avendus Advisors, the offshore addressable BPO market size for the US residential mortgage ecosystem is in the range of $6 billion to $7.4 billion. According to Trinity's VP - sales and marketing, Francesco Paola, the future growth of BPO will be driven by an increased focus on domain-specific vertical processes that provide not only cost savings, but other long-term benefits in the areas of productivity and capacity management for the client.
Prevailing Interest Rates In The Mortgage Market of USAA brief idea can be given with regards to the interest rates prevailing in the Mortgage market of USA.

USA
Mortgage Type Tenure Interest Rates % Loan To Value Ratio Max Tenure Of Loans

Fixed Rate Mortgage 15 Years/30 5.36/6.05 80% 30 Years

Floating Rate Mortgage 1 Year 3.79


US Mortgage ProcessIn USA the process through whichMortgage are secured by the borrowers are called origination. Herethe borrower submits an application anddocumentation relating to his/her financial history to the underwriter. Presently Many banks are now offering "no-doc" or "low-doc" loans in which the borrower is required to submit only minimal financial informations.Such type of loans carry comparatively higher interest rate and are available only to borrowers having excellent credit. Sometimes a third party is involved called the Mortgage Broker. Loans are sometimes sold in the open market to larger investors byoriginating mortgage company. There are some companies, called correspondent lenders who sell all or most of their closed loans to these investors, by accepting some risks for issuing . Some times they offer niche loans by higher prices which the investor does not wish to originate. A brief idea can be given with regards to the interest rates prevailing in the Mortgage market of USA.
The US mortgage banking BPO market in IndiaThe US mortgage banking BPO market in India is expected to grow very fast. It approximately $ one billion over the next five years from the existing $150 million.

Banks In USA : Credit for Real State

United States being one of the most developed nation in the world. The financial market, particularly the banking practices in the country has experienced more competitive environment in the recent years. Here we have covered the list of the banks operating in the United States. This list is given in an alphabetical manner.
Adams Bank & Trust
Alberta Treasury Branch
Allied Irish Bank - New York
Ambient Capital Group
American Savings Bank California
American Savings Bank Hawaii
AmSouth Bank
Amvest Financial Group, Inc.
Anytime Banking Center
The Apple Creek Banking Company
Apollo Trust Company
BankAmerica Corporation
Bank of Boston
The Bank of Fruitland
Bank of Galveston, N.A.
Bank Of Grand junction.
Bank of Hawaii Economic Research Center
Bank of Holland
Bank of New York
Bank of the San Juans
The Bank of South Carolina
Bank of Stockton
Bank of the Commonwealth
Bank of Upson
Bank One
Bank United
Black River Country Bank
Board of Governors of the Federal Reserve
Bridgehampton National Bank
Broadway Bank
Brookwood Associates, Inc. - Investment Bank
Busey Bank
Business Clearing Bank AC
BZW Barclays Global Investors
California Federal Bank
Canandaigua National Bank and Trust Co.
Capital One Bank
The Carlsbad National Bank
Carroll County Bank and Trust Company
Cashmere Valley Bank
Central California Bank
Central National Bank
Central Progressive Bank
Central National Bank
Centura Bank
Chase Manhattan Bank
Citizens and Farmers Bank
Citizens Guaranty Bank
City National Bank
Citywide Banks
Commercebank
Community First Bank & Trust
Community National Bank
CompuBank
CitiBank
Citizens Federal Bank
CivicBank of Commerce
Coldwell Banker
Colonial Bank
Commercial Real Estate Financing
Community Savings Bank
Compass Bank
Cornerstone Bank
Cowen & Company
Credit Union Land's Home Page
Crestar Bank
Datek Online
DeepGreen Bank
Deposit Guaranty National Bank
Dime Savings Bank of Williamsburgh
D&N Bank, fsb.
Dollar Bank
Douglas County Bank and Trust.
Dresner Investment Services
East Boston Savings Bank
Eastern Bank
East West Mortgage -
El Dorado Savings Bank -
Enterprise National Bank of Sarasota -
ESL Federal Credit Union -
EurOrient Investment Group (EurOrient)
Falmouth Co-operative Bank
Farmers & Merchants State Bank
Farmers & Merchants Union Bank
Farmers Trust & Savings Bank
Federal Reserve Bank of Cleveland
Federal Reserve Bank of Minneapolis
Federal Reserve Bank of St. Louis
Fidelity Deposit and Discount Bank
Fifth Third Bank
First American Bank Texas
First American Bank & Trust Co.
Firstar Bank
First Bank
First Bank of the United States
FirstBanks of Colorado
First Community Bank
First Consumers National Bank
First Federal
First Federal Capital Corp.
First Hawaiian Bank
First National Bank of Brookfield
First National Bank in Brookings
First National Bank of Jeffersonville
First National Bank of Midwest City
First National Bank of Northern California
Heritage Bank & Trust Company, Lafayette, Indiana
Heritage Commerce Corp
Heritage~One Financial
Hibernia National Bank, Hibernia Corporation
Hudson Valley Bank
Humboldt Bank Online
Huntington Bancshares Inc.
IBM Rocky Mountain Employees Federal Credit Union
Independence Federal Savings Bank
Inter-American Development Bank
IWA + Community Credit Union
James Monroe Bank
J.P. Morgan
Joseph Charles & Assoc., Inc. Investment Bankers
KeyBank
Keystone Financial
Kaw Valley State Bank and Trust Company
La Jolla Bank
LaSalle Bank - The Bank That Works
Lexington State Bank
Marine Midland Bank
Marquette Savings Bank
Mellon Bank
Mercantile Bank
The Merchants Bank
Merchants National Bank
Merchants & Farmers Bank
Mid Am Inc.
MidCity Financial Network
Midlantic Bank
Mid-State Bank
Monticello Banking Company
Morgan Stanley Dean Witter
National Bank of Blacksburg
National City
National InterBank
NationsBank
NAVY FEDERAL CREDIT UNION
nBank!
Nevada First Holdings, Inc./Intra Credit Investments Ltd.
NORWEST Corporation
The Northern Trust
North Federal Savings Bank
Northwoods State Bank
Oak Brook Bank
Old Point National Bank
Old Second Bancorp -
Oscar Gruss & Son Inc.
Owensboro National Bank
Pacific Coast Savings
Pacific Mercantile Bank
Parchman, Vaughan & Company, LLC
Pennsylvania Capital Bank
People's Bank
Perpetual Savings Bank
Philippine National Bank, New York Branch
Pioneer Bank of Duluth Minnesota
Pioneer Savings Bank
Plaquemine Bank & Trust Company
PNC Bank Online
The Polish Bank - atlasbank.com
Popular Bank of Florida
Presidential Savings Bank
Providian Bank
Provident Bank of Maryland
Ravalli County Bank
Raymond James Bank, FSB
Red River Bank
Regions Bank
Riverside Financial Group
Rosemount National Bank
Royal Bank
Salem Five Cents Savings Bank
San Angelo Banking Center
Santa Barbara Bank & Trust
Savings Bank of Rockville
Security Bank - New Auburn
Security First National Bank
Security First Network Bank
Slavitt Ellington Group
SouthTrust Bank
Spirit Bank
Stanford Fiduciary Investor Services, Inc.
Star Bank - 24 Hour Bank Without Boundaries
State Bank of Alcester
State Bank of Cokato
State Street Bank and Trust
Stearns County National Bank
Sterling Payot Company
Stillwater National Bank & Trust Company
Stissing National Bank
Success National Bank
SunTrust Banks Inc.
Superior Federal Bank
Texas Bank
THOR TRUST
The Warwick Savings Bank
The Wilton Bank
Tomoka State Bank
Treasury Bank
Trust Company Bank Ltd.
UMB Bank
Union Bank
Union Bank & Trust Company
Union Trust Company
United National Bank
United Valley Bank
University Federal Credit Union
USAccess Bank
USABancShares.com
U.S. Bancorp
USTrust of Boston
Valley First Credit Union
Valrico State Bank
Vine Street: Investment Banking for the Middle Market
Wachovia Bank
Warren-Boynton State Bank
Watertown Savings Bank
Waukesha State Bank
Webster Bank
Wells Fargo Bank
Western Security Bank
West Suburban Bank
Winona National & Savings Bank
Women and minority-owned banks in the U.S.
Woodsdale Capital Partners, Inc.
Yolo Community Bank

Do you have what it takes to be a landlord?

It's not exactly life on easy street. Difficult tenants, costly repairs and falling rents can eat into your profit. Here's how to know if you're up to the job Owning rental property can be a nightmare -- or a good way to steadily build wealth.
The difference between a profitable investment and a disaster, experienced landlords say, is often the amount of work an investor is willing to put in. Not everyone is cut out to screen tenants, track down overdue rents and field middle-of-the-night repair calls.
We'll discuss the details of finding good rental properties in a future column. For now, let's talk about the temperament and skills needed to be a successful landlord.
Adjust your expectations Ignore those late-night infomercials, the ones that promise huge returns with no money down. Experienced landlords agree that the upfront costs are usually higher, and the returns lower, than those promoters would have you believe.
Lenders typically expect down payments of 20% to 25% for rental property, said Bill Moore, co-founder of Landlord.com, and some lenders want as much as 40% down. Your loan will be more expensive than a typical residential mortgage, as well, because lenders believe investors are more likely to walk away from a rental than they are from their own home.
"Lenders charge interest rates that are anywhere from one to two [percentage] points more on a rental-property loan than they would on an owner-occupied home," said Moore, whose Web site provides education and information for property owners.
You do have some alternatives:
Specialty lenders. Some lenders are willing to accept smaller down payments in return for a higher interest rate.
Seller financing. Sometimes current owners are willing to be your bank. In other words, you'd make your loan payments to the person from whom you buy the property. Your interest rate and down payment may be less than if you had used a traditional lender.
Owner-occupied loans. You can usually get a less expensive loan if you're willing to live in one of your units, a technique that often helps first-time buyers qualify for bigger homes in better neighborhoods than they might otherwise be able to afford.
How big a loan can you get? Lenders usually will take into account 75% of the rent you could charge for units in determining how much they're willing to lend you, said Robert Cain, publisher of the Rental Property Reporter newsletter.
If you bought a duplex and rented each side for $1,000, for example, the lender would consider 75% of that total -- $1,500 -- in determining how much you could borrow. If you rented one side and lived in the other, $750 would be added to your monthly income to come up with the size of your loan.
Consider, but don't overweight, the tax advantages Remember, too, that you'll be getting special tax breaks. What you spend on upkeep and repairs for a rental is typically tax-deductible. You also get a break for depreciation, which is an allowance for the wear and tear over time on your property. You may even be able write off up to $25,000 in losses each year if your modified adjusted gross income is under $100,000.
But you shouldn't count on tax breaks to help you make a profit, experienced landlords caution. They typically look for properties that will rent for more than the monthly mortgage, insurance and tax payments, to ensure they have enough cash to cover needed maintenance and repairs.
You may also need to adjust your expectations about profit. A good return from rental real estate is anything more than 10% annually, and many small landlords will find they earn less, even after the property's rising value is taken into account.
Maintenance, repairs and the occasional empty unit eat into profit, landlords say. A major repair, falling rents or a costly eviction can be a disaster for your bottom line.
So far, Peter Berardi has found good tenants and hasn't had a vacancy in his two-family rental, located in a nice, tree-lined neighborhood in Hartford, Conn. But the accountant and controller for a small company says he still figures his return, including appreciation, has been about 7.5%.
"Most people keep very simple records, and think they're getting a great return" because they only look at appreciation or cash flow, Berardi said. Being an accountant, however, Berardi knows how to factor in all costs -- mortgage payments, taxes, insurance, maintenance and repairs among them.
Still, Berardi, 41, says he's happy with his investment, which he expects to help support him in his later years. Once the property is paid off, most of the rent can be used to supplement his income.
"I'm setting myself up for a good retirement," Berardi said.
Find good tenants Not everyone is so delighted with being a landlord.
Scott and his wife bought a duplex in Lakewood, a suburb of Cleveland. Strapped for cash, they rented the upper unit to the first couple who showed up on their doorstep.
"We knew we probably should [run a credit check]," Scott said, "but we needed the rent money to pay the mortgage."The couple turned out to be the tenants from hell. When the husband wasn't punching the wife, he was punching holes in the walls with his fist or an ax. The couple sold drugs, stole Scott's tools and had screaming arguments in the middle of the night -- right over the heads of Scott's two children. They also stopped paying rent.
The tenants were eventually evicted, but so were Scott and his family. They had fallen so far behind in their mortgage payments that the lender foreclosed.
"Now, when anyone talks about being a landlord, I say, 'Don't do it,' " Scott said. "It's just not worth it."
Other landlords say such disasters can be prevented by putting in more work up front.
"The key is screen, screen, screen," Carolyn, a landlord in Houston, wrote recently on the Start Investing Community. "Verify references, ask questions."
In addition to running credit checks, Carolyn calls previous landlords to ask whether the tenants paid their rents on time and kept their apartments clean. She believes such diligence is one reason she's only had to evict once in seven years.
Credit checks can be done for less than $10, said Cain, who offers such a service on his Web site. A more complete report, which includes a public records search for lawsuits, previous evictions and criminal convictions, can be had from tenant-screening companies for about $20. Cain takes the extra step of making sure the phone numbers applicants list for their employers and previous landlords actually match the publicly listed numbers. That can help ensure the applicant isn't simply directing him to a friend who's been instructed to provide a phony reference.
Cain, who currently owns six rental properties, said he's never had an eviction in nearly 20 years of being a landlord. He's convinced the difference between profit and loss is such advance screening.
"I always tell people there are only two times a landlord gets into trouble," Cain said. "When he's in a hurry, or when he feels sorry for someone."
You can, of course, hire a property manager to do all this for you. The manager can also handle the repairs, tenant disputes, midnight move-outs and neighbor complaints, all for a flat fee or a portion of each month's rent. Some landlords have had good experiences with property managers, while others feel that no one cares as much about their investment as they do.
Such an arrangement also can eat up 10% of your rental income, which could consume much of your profit, depending on the property.
Get your hands dirty Indeed, the more tasks you hire other people to do for you, landlords say, the less you'll earn from your investment.
Berardi said his returns would probably be higher if he didn't need to pay professionals to do most of the work around his rental, other than cutting the lawn.
"But I'm just not handy," he confessed.
Mike, a landlord in Orange County, Florida, is just the opposite. Mike paid $15,000 for his first rental in 1993, a shabby three-bedroom townhouse desperately in need of repairs. The rental income more than covered his costs, and he sold the property this year for $98,000.
Mike estimates he did 90% of the fix-ups himself, using skills he learned as a volunteer for Habitat for Humanity, which builds houses for the poor.
"I would advise people considering buying rentals to try this to learn what really goes into building a house," Mike wrote in an e-mail interview. "So when you have a repair job, you can make an educated decision if you can do the repair yourself."
Get educated If you're still interested in being a landlord, you have one more task ahead: learning the landlord-tenant laws in your area. Potential landlords should educate themselves thoroughly on their rights and responsibilities, Cain said, exercising particular caution when it comes to rental agreements.
A poorly worded or outdated form, for example, can make getting rid of a problem tenant expensive, if not impossible.
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Preferred format:HTMLPlain TextLearn more about newsletters"Professional bad tenants know the law . . . and landlords can be so stupid," Cain railed. "They won't spend 50 cents for a new form but they'll spend $2,000 for an eviction."
Local landlord associations can provide up-to-date forms, education and legal help. Other resources are available at the Small Property Owners of America Web site.

5 tips for wisely tapping your home equity

Millions of Americans are using home-equity loans and lines of credit for splurges. That's risky. But for better investments, these loans can make sense. Bankers love it when you borrow against your house. That's reason enough to be wary of home-equity lending.
Yet millions of Americans are buying lenders' pitches that our homes are a good source of funds for whatever our little hearts desire, from Super Bowl tickets to exotic vacations to investments in stocks and bonds. That lust for cheap cash has turned home-equity lending into the fastest-growing, and very profitable, area of consumer loans.
Mainstream home-equity lending soared 33% last year according to SMR Research, with new borrowing at nearly quadruple the level of just five years ago. The amount we owe on home-equity loans and lines of credit, $719 billion, now exceeds the balances on our Visas, MasterCards and other general-purpose credit cards.

Don't rush to pay off that mortgage

You've got better things to do with your money, like saving for retirement, building an emergency cushion or even living it up a little. You normally don't think of people who prepay their mortgages as being wasteful or careless.
But a recent study suggests these households blow more than $1.5 billion a year, or $400 per household, by accelerating their mortgage payments instead of contributing more to their retirement accounts.
The research found that at least 38% of those who were making extra payments on their mortgage were "making the wrong choice." Instead, these households would get back 11 to 17 cents more on the dollar by putting the money into a workplace retirement plan like a 401(k).
The study, titled "The Tradeoff Between Mortgage Prepayments and Tax-Deferred Retirement Savings," was conducted by Clemens Sialm of the University of Michigan's Ross School of Business, Gene Amromin of the Federal Reserve Bank of Chicago and Jennifer Huang of the University of Texas at Austin using Federal Reserve data.
If anything, I think the study underestimates how many people make a mistake by prepaying their mortgages. It didn't look at folks who were accelerating their mortgages while carrying higher-rate debt, or who failed to have an emergency fund, or who didn't have adequate life, health or disability insurance.
Most people, in short, have much better things to do with their money than to pay off a low-rate, tax-deductible loan.
The urge to be free of debt It's not that I don't understand the impulse to speed up the day that you own your home free and clear. There's something psychologically satisfying about knowing the bank can't take your castle.
Besides, the numbers can seem pretty impressive. Let's say you have a 30-year, $250,000 mortgage at 6% interest. Your monthly payments are $1,498.88. By paying an extra:
$100 a month, you could save nearly $52,000 in future interest and pay the loan off 4½ years early.
$250 a month, you could save nearly $100,000 in future interest and pay the loan off nine years early.
$500 a month, you could save nearly $144,000 in future interest and pay the loan off almost 14 years early.
So who wouldn't go for that, right? Indeed, the study estimated that almost one in six U.S. households (16%) pay extra on mortgages each year.But anyone who really understands money would realize that the savings aren't all they're cracked up to be.
For one thing, mortgages tend to be some of the cheapest money you can get, and, as mentioned earlier, the interest is often deductible. If you're in the 25% federal tax bracket, that 6% interest rate may be costing you as little as 4.5% if you itemize. (Your tax break depends on the amount of interest you pay and the total of your other itemized deductions.) Even if you don't get any tax break at all on your mortgage, though, the rate is still dirt cheap compared with that on most other loans.
Furthermore, those seemingly impressive interest savings are way in the future, where their value will be substantially eroded by inflation. For example, $50,000 in 25 years would be worth less than $24,000 in today's dollars, even at a moderate 3.1% inflation rate.
Contributions to a workplace retirement plan will get you a lot further ahead, for a variety of reasons:
Most workplace plans have matches, typically 50% of every dollar you put in up to 6% of your pay. If you're not contributing enough to at least get the full company match, you're leaving free money on the table (and missing out on an immediate 50% return).
You save taxes on the money going in. Federal tax brackets range from 15% to 35%; there are also federal tax credits when lower-income folks make retirement contributions. When the money comes out, you'll owe taxes, but most people's tax rates fall in retirement compared with when they're working.
Your money can earn better returns in the market compared with paying off low-rate debt. Based on historical returns, a mix of 60% stocks, 30% bonds and 10% cash would earn an average of more than 8% a year in most 20- to 30-year periods, according to market researcher Ibbotson Associates.
The study didn't mention Roth IRAs, but they're another account you should take advantage of if you possibly can. You don't get a tax break up front, but the money comes out tax free in retirement.Even if you're contributing the max to your retirement accounts, though, your next step shouldn't be making another mortgage payment.
Establish priorities You need to look first at all your other debt. Chances are if you have any, it's accruing at a higher interest rate than what you're paying on your home loan. That's especially true for credit card debt: It makes no sense to save less than 6% by prepaying a mortgage when you're paying 15%, 20% or even more on your plastic.What if you're free of other debt, you can start to tackle that mortgage, right?
Not quite. There are other threats to your financial security you need to address, especially:
Financial inflexibility. Fewer than three in 10 households have enough savings to withstand even three months of unemployment. Half say they live paycheck to paycheck at least some of the time, according to a survey commissioned by the Consumer Federation of America. Having an emergency fund equal to at least three months' expenses (plus access to a home equity line of credit) can make the difference between a rough patch and financial disaster; that should be your priority after saving for retirement and retiring high-rate debt. Then there's the issue of:
Inadequate insurance. If you have people financially dependent on you -- a spouse who needs your paycheck to pay the mortgage, or minor children -- you need life insurance, and usually plenty of it. (You can use MSN Money's Life Insurance Calculator to see exactly how much.) In addition, you need adequate health insurance, since medical bills are a factor in half of all bankruptcies.
Also crucial: long-term disability insurance, which most Americans don't have. Fewer than 30% of all workers have long-term coverage, according to the U.S. Bureau of Labor Statistics. Yet our chances of disabling accident or injury are pretty high: At age 30, for example, you have more than a 50% chance of being disabled for three months or longer before you turn 65, according to the Council for Disability Awareness. One in seven U.S. workers are disabled for five years or more, and disabilities cause 50% of all mortgage foreclosures. Wouldn't it be ironic if you skipped disability coverage to prepay your mortgage, then wound up losing your house? The bottom line: If you have access to long-term disability coverage at work, buy it.
OK, so what if you're maxing out your 401(k) and Roth IRAs, sitting on a pile of emergency cash and insured up the ying yang? I still wouldn't necessarily attack that mortgage. If you have kids, for instance, you might want to be tucking more away into a 529 college savings plan to make sure they aren't saddled with students loans, as too many young graduates are today.Again, assuming the money is invested prudently in a mix of stocks, bonds and cash, you should make a much better return than what you can get prepaying your mortgage, and the money is tax-free when used for college.
You've got to live a little There's a final, much more subjective issue to address. Some of the folks I've run into who are determined to pay off their mortgages early are what I've come to consider "oversavers." They're putting aside prodigious amounts for all kinds of future goals, but spending precious little today. Sometimes they're even straining family relationships by their single-minded focus on being debt-free as early as possible.
That might be OK if any of us were guaranteed long, healthy lives. The reality is that no one is, and we need to strike a balance between saving for tomorrow and living today. The person who's set on paying off a mortgage in as few years as possible, even if that means skipping vacations and the occasional dinner out with the spouse, is just as out of balance as the person living on credit cards.
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Preferred format:HTMLPlain TextLearn more about newslettersAll that said, I'm not one of those pundits who insists that no one should ever pay off a mortgage. I think retiring the home loan by the time you retire is a good goal. Just make sure it takes its proper place with all your other goals -- and that you get to live life a little along the way.

Why you need a home down payment

My wife and I just got married and we'd like to buy a house soon. We've been setting aside money for the down payment but we have quite a way to go -- we'd need about $70,000 to make a 20% down payment in our area. We're wondering whether we should just go ahead and buy a house now with no money down, or wait until we've saved the 20%?
Lenders are making it a lot easier to buy a house without the traditional 20% down payment, but you're going to pay a lot for that option. If you borrow more than 80% of the home's value, you'll usually have to pay private mortgage insurance, which protects the lender if you default on your loan. That tends to cost 0.5% to 1% of the loan value, up to $3,500 per year on a $350,000 home, or $5,000 on a $500,000 home. It's money that doesn't go toward your principal or interest.
Another option is to piggyback two loans. If you take out one loan for 80% of the cost and another for 20% (or for 15% and pay 5% in a down payment), you can avoid private mortgage insurance. The interest on both loans is generally tax deductible, but the rates on that second loan are quite high -- now running in the low- to mid-9% range.
If you wait to amass the 20% down payment, you can avoid these extra costs, qualify for a lower-rate loan and keep your mortgage payments much lower, which gives you a lot more flexibility in the future.

8 big mortgage mistakes and how to avoid them

You can borrow too much or prepare too little. You can misjudge terms or overestimate your credit. With so much at stake, it’s no wonder so much can go wrong. Applying for a mortgage can be a daunting experience.
It's not enough that you're agreeing to take on the biggest debt of your life, one that represents two to three times your annual income. You're also confronted with piles of paperwork, flurries of fees and a tidal wave of terms, from amortization to title insurance, whose meaning is fuzzy at best.
"Whether it's a professor at Stanford or a ditch digger," said San Francisco mortgage broker Leon Huntting, "most people don't understand the loan process."
In this confusing and pressure-filled atmosphere, it's easy to make some mistakes. Here are some common ones that lenders and mortgage brokers see, and what you can do to prevent them.
Not fixing your credit Mortgage brokers say they're confounded at the number of buyers who apply for a mortgage with their fingers crossed, hoping their credit will allow them to qualify for a loan.
Before you even think about applying for a mortgage, obtain copies of your credit report and your FICO credit score. Your FICO score is the three-digit number that's used in 75% of mortgage-lending decisions. You can order your FICO score on the Web for a fee of $14.95, which includes a copy of your credit report.
Doing this at least six months in advance should give you plenty of time to challenge any errors on your report and ensure that they're removed by the time you're ready to apply for a loan. You can also see the legitimate factors that are hurting your score and do something about them, such as paying off an overdue bill or paying down credit card debt

7 home-buying traps

First-time home-buyers face an unfamiliar road and risk purchasing the wrong place at the wrong time. Here's a guide to the potholes. Buying your first home is an exercise in faith. You don't really know what you're getting into, you're awash in unfamiliar terminology and everyone you meet seems to have strong (and utterly contradictory) ideas about which way the housing market is headed.
You may not be able to avoid every home-purchase mistake, but you can keep your regrets to a minimum by avoiding the following traps:
Blindly using your agent's inspector Your agent may recommend a home inspector because he does a good job -- or because he keeps his mouth shut about problems that could torpedo the sale.
Yes, it's terrible to have to be so suspicious, but this is a big investment you're making. A good home inspection can keep you from buying a money pit. You can ask your agent for a recommendation, but get referrals from other recent buyers and try to interview at least three potential candidates before making your choice.
Few states regulate home inspectors closely, so real-estate columnist Ilyce Glink recommends you choose someone who belongs to the American Society of Home Inspectors, which requires its members to complete at least 250 inspections (or 750 if they don't have other licenses and experience). Ask about fees (which typically range from $300 to $700) and whether the inspector is licensed, bonded and insured, said Glink, author of "100 Questions Every First-Time Home Buyer Should Ask." Make sure you get a detailed, written report and, if at all possible, accompany the inspector so you can discuss the findings while they're still fresh.
Taking advice about what you can afford Your agent, your broker and your lender don't know what you can afford. At best, they know the underwriting guidelines for various loans, which are designed to minimize the lenders' losses, not ensure that you'll maintain your financial health.
As I wrote in "8 big mortgage mistakes and how to avoid them," lenders know that you'll do whatever it takes to pay your mortgage, even if that means shortchanging your retirement, forgoing vacations and piling on credit card debt. You need to be the one to set limits on how much you want to borrow and how you borrow it. In general, limiting your housing costs -- including mortgage, property taxes and homeowner's insurance -- to 25% of your gross income will ensure you have enough money left over to cover other goals, like retirement savings.
Getting a 'temporary' loan I'm hearing this potentially dangerous advice more often now that so many markets are spiraling out of the reach of first-time home-buyers: Get a mortgage with a low payment now, then refinance in a few years when your income is higher. This is the way some brokers and lenders are hawking adjustable-rate mortgages as well as their more exotic cousins, interest-only and flexible-payment loans.
There are a couple of problems with this advice. The first and most obvious is that no one can predict where interest rates will be five years from now. If they're substantially higher, you will have just passed up the opportunity to lock in rates when they were near generational lows. If your payment has been rising with those rates, you may not be able to afford your home even if your income is higher.
The other problem if you opt for one of the exotic mortgages is that you may not be building any equity in your home. If prices drop, you may owe more on your house than it's worth, which is going to make refinancing pretty tough unless you can come up with a ton of extra cash.
More experienced homeowners who are disciplined about money might be able to handle a trickier mortgage.
The better advice for first-time home-buyers may be to opt for a loan that will remain fixed at least as long as you plan to be in the home. If you plan to move after five years, for example, a good choice might be hybrid loan that remains fixed for five years before becoming an adjustable-rate mortgage. If you'll be in the home for a decade or more, or aren't sure how long you'll be there, you might want to opt for the security of a 30-year fixed-rate loan.
"You're locking in your housing costs for the next 30 years," said real-estate investor Gary W. Eldred, author of "The 106 Common Mistakes Homebuyers Make (and How to Avoid Them)." "If interest rates go up, your payment stays the same, and if they go down, you can refinance." Before you decide on a mortgage, spend some time in MSN Money's Home Financing Decision Center and educate yourself about the options.
Opening or closing credit accounts Both can hurt your all-important credit score, the three-digit number lenders use to help gauge your credit-worthiness. That can result in your getting stuck with a higher interest rate or losing the loan you want all together. (Read more about credit scores at MSN Money's credit rating Decision Center.)Real-estate columnist Tom Kelly knows how important credit scores are, but didn't think much about the ramifications when he applied for a new credit card while in the process of applying for a home-equity line of credit. That, plus his wife's closure of a few other accounts, shaved more than 30 points off the couple's credit score.
It was "really bad timing," Kelley said. "The lender for our proposed line of credit basically said, 'What have you guys been doing?' after our application had been filed and the new FICO scores had arrived."
Failing to investigate the neighborhood "One common mistake is not looking at the property and the neighborhood at various times," said Dick LePre, senior loan consultant for RPM Mortgage in San Francisco and author of the RateWatch newsletter. "Look at it during the day, the late afternoon when kids tend to cluster, at night and on both weekdays and weekends."
This ongoing inspection can reveal good news, bad news or both. You may find your home is on a popular shortcut for commuters or near the gathering place for local kids, but only for a few hours a day.
"Something which you construe as a problem might only happen one day a week or at a certain time of the day," LePre said.
He also recommends quizzing a few neighbors about what they like and don't like, and about which direction the neighborhood seems to be going.
"Find out if there are any 'crazies' on the block," he said. "If there is empty space nearby, ascertain what the zoning is for that empty space. Is the next block over ... zoned commercial? Do you want a McDonald's as a neighbor?"
Buying when you're not ready Buying a home is a great way for the average person to build wealth over the long run, but it's not for everyone in all circumstances.
If your finances are uncertain or your job prospects are up in the air, you might want to wait. Renting is also a better option if you're planning to move in a year or two.
Not buying when you are ready All that said, you shouldn't let fear or uncertainty keep you on the sidelines if you're otherwise ready to buy a home.
Eldred notes in his book that the media have been decrying the high cost of housing and predicting price peaks at least since the 1940s. Although prices have fallen in various cities at various times, the overall trend has been upward.
Eldred recommends being cautious if your market is showing signs of weakening, such as:
Properties staying on the market longer.
A widening gap between the costs of owning and the costs of renting.
Even then, don't put off a purchase if you're able to stay put for several years -- long enough to ride out any downswings.
"In five or 10 years, prices will be higher than they are today," Eldred predicted.

Speed your home sale with these fast fix-ups

Small expenditures of money or time on carefully targeted projects can improve your chances of selling quickly -- and ensure you get the best price possible.
You don't have to spend a fortune renovating your house to ensure a quick sale at the best price. Some of the most effective fix-ups are also the cheapest.
Spending just $400 to $500 on fresh landscaping, for example, can boost your home's value by $1,600 to $1,800, according to a survey of real estate agents conducted by HomeGain, an Internet real estate service. Spend another $300 on cleaning and de-cluttering your home, the survey found, and you could add another $2,000 or more to the sale price.
To pinpoint the projects that make the most sense, start by touring your property with fresh eyes, as if you were a prospective buyer. Drive or walk up to your house and see how it appears from the street. Walk through the front door and take a look around. You might ask a trusted friend to help you spot problems, clutter and weird smells that you've long since stopped noticing. Keep a pen and pad handy to list the projects that need to be done.
On the outside Here are some suggestions for the exterior of your home:
Start at the sidewalk. Landscaping makes a huge difference in how people perceive your home. Whack back overgrown bushes and trees so your house is visible from the street. Plant colorful annuals in the flowerbeds. Keep the lawn green and trimmed, even if you have to hire a gardening service or a local teenager to help.
Revive a tired exterior. Painting exterior doors and window trim can freshen your home's look without the huge expense of a complete exterior repainting. Shine or replace worn door knockers and hardware. Replace or remove torn screens or damaged storm windows. Make sure exterior lights are working and have fresh bulbs -- some buyers like to cruise by your home at night to see how it looks.
Remove outside clutter. Get rid of anything that blocks pathways or clutters up side yards, back yards and patios. This includes toys, excess furniture and tools.
Clean your windows. You want your home to look as light and bright as possible. Dirty or spotted windows drag down a home's appearance.On the inside Once inside, inspect your floors, your walls, your kitchen, your bathrooms and your closets -- because your buyers will. Here's what to tackle:
Dig out the dirt. You can do it yourself or hire a crew for a day, but a deep cleaning is essential for a good first impression. It's also key to keep up the cleaning as long as your house is on the market, which will probably mean a daily dusting and vacuum session. Bathrooms and the kitchen should be kept spotless.
Banish bad smells. Air out your home by throwing open the windows at least once a day (or, in bad weather, by running all your exhaust fans). Don't cook smelly or greasy foods, which linger in the house. If you have cats, clean the litter box at least once a day. Use potpourri or bake cookies before buyers visit to give your place a "homey" smell.
Remove inside clutter. You need to move anyway, so why not get a head start and make your home look larger by packing away at least one-third of your stuff? Stowing away knickknacks, mementos and family pictures helps depersonalize your home, which is actually a good thing: You want potential buyers to picture themselves living in your home instead of being distracted by your personal effects. Consider renting a temporary storage space rather than stuffing your packed boxes in your closets or garage, which will make them look smaller.
Organize what's left. Tidy closets and pantries look bigger and more appealing.
Fix your floors. Real estate agents say buyers really notice the condition of floors. Hardwood should be polished and carpets shampooed or, if they're in bad shape, replaced. Repair any broken tile or linoleum.
Brighten your walls. If you've painted or wallpapered in recent years, you may be able to get away with just washing your walls. Otherwise, consider repainting your rooms in neutral colors.
Beware the big projects What about bigger projects, such as a kitchen update, a new roof or upgrades to an electrical system? Generally, you won't get your money's worth from these projects, but here's what you should consider:
Remodeling is for buyers, not sellers. Major renovations usually don't pay for themselves, let alone add enough value for you to make a profit. So why would you want to go through the hassle and the expense right before you move? Concentrate instead on smaller fixes with bigger impact, and let your buyers remodel to suit themselves.
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Beware of deferred maintenance. Buyers expect your home to be in decent shape. That means a roof that doesn't leak, paint that isn't peeling and household systems (heating, cooling, electric and plumbing) in good repair. If you've neglected your home, you face a tough choice. You're unlikely to recoup much of the cost of your repairs in the form of a higher sales price, since buyers are unlikely to pay you a premium for maintenance you should have been doing all along. Yet not making the fixes may turn off buyers altogether. Talk with an experienced real estate agent about which projects you should tackle before listing your home.
Consider a pre-sale inspection. Hiring your own inspector before you put your home on the market can alert you to problems you didn't know about, giving you a chance to fix them before they complicate -- or ruin -- a potential sale. If the repairs are expensive, you may face the same difficult choice described above. But that's better than being surprised once your home is in escrow.

A new way to pay off your house

Accelerator loans, common in Australia and the U.K. but new to the U.S., use special accounts that encourage borrowers to apply all extra money toward their mortgages. The savings can be big. A different type of home loan, called a mortgage accelerator, has migrated to the United States. It uses home-equity borrowing and a borrower's paychecks to shorten the time until a mortgage is paid off, potentially saving tens of thousands of dollars in interest expense.
Not to be confused with biweekly programs that shorten a mortgage through extra payments, the mortgage-accelerator program is based on an approach common in Australia and the United Kingdom, where borrowers deposit their paychecks into accounts that, every month, apply every unspent dime against the mortgage loan balances.
In Australia, more than one-third of homeowners use mortgage-accelerator programs. In the U.K., it's about 25%. In the United States, the two firms now offering these mortgages are Macquarie Mortgages USA, which calls the program the Macquarie Asset Manager, and CMG Financial Services, whose offering is called the Home Ownership Accelerator.The premise is that borrowers finance a purchase or refinance existing property using home-equity lines of credit. Borrowers then directly deposit their entire paychecks into the credit accounts. Monthly expenses, other than mortgage payments, are funded by draws against the lines of credit, whether those are through automatic bill payments, checks, cash withdrawals or credit cards. Even if borrowers end up not paying anything extra on the principal during a month, they still capture some interest savings because the average balances are less than they would have been with conventional loans.
Here's how it works As an example, let's say your mortgage payment on a conventional fixed-rate mortgage is $2,000 and your monthly net income is $5,000. With the mortgage accelerator, even if you spend the $3,000 difference, your average mortgage balance for the month is $1,500 less than it was with the conventional mortgage.
That's because the entire $5,000 is deposited in the loan account and you made draws of $3,000 for living expenses spread over the month. At a 7.75% loan rate, that saves you about $10 in interest expense that month. Now, $10 here and $10 there does add up over time, although both loan programs have annual fees of $30 to $60, but the accelerator part of the mortgage lies in having all your net pay going against the mortgage and an assumption that you have a positive monthly cash flow -- meaning you don't spend as much as you make. A simulation calculator on CMG's Web site has stock assumptions that you may have 10%, 20% or even 25% of your net pay left over each month that you can apply to your mortgage balance. The Macquarie site has a calculator, too.
Help for the undisciplined Of course, all borrowers already have that money available with a conventional mortgage and without the cost of refinancing. A borrower would simply need the financial discipline to use all that money as an additional principal payment.
For the undisciplined, the mortgage-accelerator program makes the additional principal payments automatically. That's the real hook to this program: Unless you spend the money by drawing against the line of credit, your paycheck goes toward paying off the house.
Where a mortgage-accelerator loan program gives a homeowner additional flexibility, however, is in having a line of credit available if there is an emergency need for cash. If you make additional payments on a conventional 30-year fixed-rate loan, you can't borrow that money without taking out a home-equity line of credit or a home-equity loan. With the mortgage-accelerator program, you already have the line in place. That gives homeowners confidence that they can be aggressive in paying their mortgages and still have money readily available if a financial emergency crops up.
Homeowners could cobble together a payment plan similar to a mortgage accelerator on their own by taking out a conventional home-equity line of credit, but a mortgage product specifically structured for this approach to consumer finances has advantages.
Mortgage-accelerator loans have interest-only minimum payments during the first 10 years, although that goes against the idea of paying off a mortgage as fast as you can. After 10 years, the line of credit decreases by 1/240 each month over the remaining loan term (20 years multiplied by 12), forcing principal repayment until the loan is paid off.
Another argument for this approach to financing is that your idle cash is saving you the mortgage interest rate versus earning a low passbook-savings rate. Though short-term investing alternatives that pay higher rates do exist, the savings are automatic with the mortgage-accelerator program.
Now for the fine print A home-equity line of credit is a variable rate, and the interest rate will fluctuate with changes in the underlying pricing index. Lifetime caps limit a homeowner's exposure to higher interest rates, with CMG's Home Ownership Accelerator limiting that risk to 5% over the starting rate. The Macquarie Asset Manager loan program has a lifetime interest cap of 21%.
As of November, CMG's program is available in more than 20 states, and Macquarie's program is available in about two dozen, with availability in a half-dozen more states on a correspondent lending arrangement.
Brooke Barnett, an "ownership accelerator specialist" at Rancho Funding, a San Ysidro, Calif., mortgage broker that offers the CMG loan program, calls the program ideal for financially savvy homeowners who spend less than they make each month.
The savvy part -- being able to earn the mortgage interest rate on idle cash instead of the low rates paid on checking and savings accounts -- attracts customers who take a big-picture view of their finances. Money that isn't going toward expenses is reducing the balance on the mortgage and, by doing that, reducing the interest expense.
Barnett suggests that a Home Ownership Accelerator loan could also be used in lieu of taking out a reverse mortgage. With enough equity in the property, a homeowner could avoid minimum payments over time using negative amortization up to the amount of the home-equity line of credit.
Closing costs on a mortgage-accelerator loan are about equal to the closing costs on a conventional 30-year fixed-rate mortgage. Like any refinancing decision, those costs are a factor, and the longer you plan to be in the house the easier it is to justify refinancing your mortgage loan.
The lenders expect homeowners to be less rate-sensitive about these accelerator mortgages because of the interest savings available through the program. The product is new enough in the U.S. market that it will take some time to validate that expectation.
Interest savings are still available the old-fashioned way by making additional principal payments on a conventional fixed-rate mortgage. Bankrate.com's mortgage payment calculator allows you to make additional-principal-payment assumptions on your mortgage, and you can then compare the interest savings against the results of the calculators offered by Macquarie and CMG.
By Don Taylor, Bankrate.com

Don't bite off too much house

The classic formulas for mortgage affordability could lead you to disaster. Here’s how to get a better handle on what you really can afford. Thirty years ago, first-time home buyers were often encouraged to stretch as far as they possibly could to buy a house. Back then, that advice made some sense.
Today, it can be a recipe for disaster.
A too-big house payment can, at the very least, leave you with too little money for other goals: retirement, vacations, college funds for the kids. At worst, it can leave you vulnerable to foreclosure and bankruptcy.
What's more, you can't count on your real estate agent, a mortgage loan officer, your friends and family or an Internet calculator to know what you can really afford. That's a decision you have to make yourself after reviewing your finances, your future obligations, your goals and your gut.
Yet many first-time buyers are still being pushed into mortgages that are bigger than they can handle, based on old-fashioned advice.
Here's what's changed in the 30 years (or more) since your parents bought their first house:
Inflation. Rapidly rising prices in the 1970s and early 1980s meant you could count on hefty annual raises. Today, you can't rely on double-digit income boosts to make your mortgage payment less of a burden each year.
Two-income couples. A generation ago, single-income families were more common. If the breadwinner lost a job, the other spouse could go to work to save the house. With more two-income families needing both paychecks to make the mortgage payment, there's no one on the sidelines to take up the slack -- unless you put the kids to work.
The lending industry. Thirty years ago, it was pretty tough to get a mortgage for more than you could really afford. Today, it's fairly commonplace. More lenders have loosened their criteria, knowing that the vast majority of their borrowers will do whatever it takes to pay their mortgage -- even if it means trashing the rest of their financial lives.
Retirement. A much bigger proportion of the workforce was covered by traditional, defined-benefit pensions 30 years ago -- which means they didn't have to save massive amounts of money on their own to have a decent retirement. Today, the onus is typically on you to carve enough out of your budget to fund 401(k)s and IRAs.
Let's get real So how much should you spend on a house? The traditional way to calculate that is to add up all your income and make sure that your housing expenses -- mortgage payment, homeowners insurance and property taxes -- don't exceed a certain amount of that total. The traditional limit, still used by many lenders, is 28% of gross monthly income. Some financial advisers recommend capping your outlay at 25%; others suggest stretching to 33% or more.
These limits, by the way, apply only if you don't have a lot of other debt. Most lenders don't want more than 36% of your total income to go toward mortgage and other debt payments. If your total debt would push you over that figure, most lenders will reduce the size of the mortgage for which you qualify. Here's how the varying limits translate. The figures assume you earn $45,000 a year and that you would pay $480 in homeowners insurance and $2,000 in property taxes annually. (In reality, those figures would fluctuate with the value of the home you buy.) This also assumes a 30-year loan at 5.5% interest and a big enough down payment that you'll avoid private mortgage insurance, or PMI.


How large a mortgage can $45,000 a year get you
If share of income devoted to housing is:
The monthly cash requirement is:
Less: taxes and insurance …
… leaves cash needed to pay the mortgage …
… and translates into this loan amount
25%
$938
$207
$731
$128,745
28%
$1,050
$207
$843
$148,470
31%
$1,163
$207
$956
$168,372
33%
$1,238
$207
$1,031
$181,582
*If gross income is $45,000 a year. **$480 a year for insurance, $2,000 for taxes. *** Assumes a 30-year, fixed-rate loan at 5.5% interest.
As you can see, the percentage of income used has a huge effect on how much house you can buy.
Fixing a glitch in the calculators
Most Internet mortgage calculators use the 28%-of-total-income figure. If you want to see how much mortgage you could afford under other scenarios, adjust your income by using the following multipliers:
Income converter to make online calculators work better

Income converter to make online calculators work better
Share of your income* devoted to housing:
Multiply your income by:
25%
0.9
28%
1
31%
1.11
33%
1.18
* Gross income
Then, use the calculators.
Your own math is more important The best way to figure out how much house you can afford is to do your own math.
Figure out how much money you need to contribute to various goals, such as your retirement and your kids' college educations.
Estimate how much your house is going to cost you in maintenance and repairs each year (figure about 1% to 3% of the home's total value annually, depending on its age and condition -- see "The hidden costs of homeownership" for more details). Then see how much of your remaining income is eaten up by your housing costs (including insurance and taxes), and see how you feel about that.
All that math making your head hurt? Here's the short version: You'll probably be most comfortable using the 25% lid. You may want to go even lower if:
You plan to have children. Kids can be expensive, and many couples discover they want to have the option of one partner staying home, or working part-time, once kids arrive. That's tough to do if you need every penny of both incomes to make ends meet. If you really want to be conservative, do your calculations based on the income you think you'll have post-baby.
You have an expensive hobby, like travel. Most homeowners are willing to put their wanderlust on the backburner to buy more house. If that's not you, buy less house.
Your income varies considerably. Most American workers have variable incomes, thanks to the prevalence of overtime pay and bonuses. If yours swings wildly from year to year, though, consider basing your calculations on your average earnings over several years or (even more conservative) on the minimum you expect to make.
You may think you can't possibly limit your housing expenses by that much, especially if homes cost a lot where you live. You do, in fact, have plenty of alternatives.
However, you can stretch further if:
You're absolutely debt-free. No credit card debt, student loans or car payments -- and none anticipated in the near future? You probably can handle a bigger nut.
You don't have to worry about retirement. Many teachers and civil servants have terrific pensions -- so good that to be sure they'll be fine, they just have to throw a few bucks each year into an IRA or deferred-compensation plan.
You're pretty sure your income will climb steeply in coming years. Fresh out of law school and doing a few years in the public defenders' office? If private practice is your goal and you don't want to wait to buy a home with the bigger income that's coming, stretching now can work out okay.

7 creative ways to buy your first house

A pricey market poses big challenges for first-time buyers. Though some are daring, one of these options might be for you.
So you want to buy a place of your own but can't figure out how to pull together the necessary cash and financing? If you're willing to think creatively, there are several offbeat ways to buy your first home.
The fixer upgrade When you can't afford what you want, look for what you can afford and use it as a stepping stone.
Case in point: Jamie Carroll, 46, and her husband bought an $80,000 two-family house about six years ago. They renovated, sold it and invested in a $200,000 two-family place in a nicer town. In a few years, they'll repeat that process and buy their dream house in the woods of Massachusetts.
Their first house was far from ideal, but the down payment was only $5,000, and the rental income allowed them to pay for repairs without incurring more debt. After the sale, they walked away with more than $30,000. Ditto in their new home, but the rental income is higher, so they'll save more toward their next purchase -- enough so that they can buy the new house and keep the rental property as an investment.
Pros: There are plenty of lower-priced houses out there in need of repair, and the income from a tenant can help both with repair costs and mortgage payments. Even in overheated markets, there's little likelihood that the value of homes at the low end will suffer in a slump.
Cons: This method isn't for the impatient or the status conscious. To save money, the couple did many repairs themselves, and it will be almost 10 years before they can settle into their dream house. Just be careful not to buy a place where the cost of repairs will eat up any profits you might make when you sell.
The shared load If buying your own property is prohibitive, consider buying into a dwelling with shared ownership. There are several options here, with varying levels of complexity and commitment. One of the most common uses a legal form of ownership called "tenants in common."
Case in point: In 1991, when the average San Francisco one-bedroom apartment was selling for about $250,000, freelance writer Sharon Fisher paid $170,000 for a one-bedroom in a tenants-in-common building with five other units. "I couldn't have bought real estate without this," she says.
Fisher eventually sold her TIC share for a tidy $420,000 when her building went condo. However, she says it would have sold for less if it had remained a TIC, and she would most likely have had to pay the buyer's legal fees.
Pros: Buying into a TIC is less expensive, and this form of joint ownership does a better job of protecting the rights of individual owners (as in the case of unmarried partners who want to buy property together).
Cons: Joining a TIC can be legally and financially complicated, and the details vary from state to state. Some TICs may restrict when you can sell and impose other conditions. And though you own your own place, you need people skills: Tenants negotiate noise, repairs, who puts out the garbage, etc.
Find out more about tenancy in common here.
The friendly option If you don't want the legal hassle of setting up a TIC, it's possible to buy a property with a friend you trust, sharing the mortgage and the title. This form of ownership is called joint tenancy, and it's the way most married couples hold property.
Case in point: In 2003, Bryan, 34, bought a three-bedroom house with a buddy for $299,000. They each put down $10,000, and they rent out the third bedroom to a friend, which helps cover costs.
Pros: The two are only paying slightly more than they would in rent, while they're building equity and the house is appreciating.
Cons: The legal particulars of joint tenancy vary from state to state, so you'll need to check with a lawyer. Under joint tenancy in many states, any owner can force the sale of a house or transfer ownership rights without the permission (or even knowledge) of the other owners. The costs and all decisions about maintenance and financing are shared equally, which is fine so long as everyone agrees.

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The instant neighborhood Cohousing has its origins in Europe and is practically like buying a neighborhood along with your house. Residents own one of a group of small homes clustered together and share ownership of the land.
In 1992, Tom Moench and his family bought a small (1,150-sq.-foot) 3-bedroom house for $157,000 in a cohousing development on Bainbridge Island, Wash. A similar private home would have cost about $185,000 then, or 17% more, Moench estimates.
Pros: In many cases, property prices are lower than market. And though houses tend to be smaller, residents share ownership of the common facilities. "We had a 5,000-square-foot common house, with guest rooms and dining rooms where you could entertain large groups," Moench says. Residents may cook meals together or swap babysitting time.
Cons: Cohousing is largely a blue-state phenomenon with vaguely utopian overtones, but it's slowly spreading throughout the country. You need a high tolerance for meetings, because many decisions have to be made jointly by the owners. When selling your property, there may be some restrictions, and the buyer has to want to join a communal setting.
Find out more about cohousing here.
The parental plan Saving enough for a down payment usually requires some kind of a sacrifice, so don't rule out living with family.
Case in point: Saddled with hefty school loans and about $25,000 in credit card debt at the end of their medical residencies, Sonya Cottone, 37, and her husband decided to move in with his parents for a year to pay off their plastic and save for a down payment. "People thought we were crazy," she says. "But it worked out really well."
Pros: Can you say super savings? Within 15 months, the Cottones had paid off their credit cards and saved enough to put $50,000 down on a four-bedroom colonial in Long Island. "And we're all still speaking to each other," she jokes.
Cons: Mixing family and finances can be a stress cocktail. To diffuse tension, Cottone says, discuss money and expectations up front (everything from paying rent to doing chores). And though your savings will make you feel flush, "don't see it as extra," Cottone says. Stick to your savings strategy or you'll be living with Mom and Dad for years.
The no-money-down Hail Mary It can be tough to save enough cash for a down payment, but in certain circumstances you can finance your way around it.
Case in point: Kerrie, 36, bought a small two-family home in Brooklyn for $560,000 last February. "I didn't put any cash down," she says. "I did an 80% mortgage and a 20% second loan. I used my $30,000 in savings for renovation."
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Preferred format:HTMLPlain TextLearn more about newslettersIt's a risky strategy, but it worked for Kerrie because a) the property was undervalued and b) she knew that a basic overhaul would bring it up to market value, which it has. In a year, Kerrie plans to refinance her adjustable-rate mortgages and get a 30-year fixed mortgage. Meanwhile, her upstairs renter offsets part of her costs.
Pros: You can buy a house without any upfront cash.
Cons: You need to have nerves of steel (in case property values drop) and be willing to live in contractor hell for a few months. And if your credit is less than stellar, this may not be an option at all.
The susu-super saver This simple saving strategy goes by different names in different communities, but the method is the same. Members of a "susu" contribute a fixed amount each week or month for a certain period (e.g. $200 a month for 10 months). At regular intervals, one member gets a specified payout in cash. .
Case in point: Laverne, a single mother in her 50s, has participated in over a dozen susus over the last 20 years. Right now she's in a 26-week susu in which each member will get $7,000.
Pros: Although the amounts are small, usually under $10,000, a disciplined saver could participate in several susus to fund a down payment.
Cons: Only communal pressure and the honor system ensure that everyone gets their turn (and that folks don't default). And your money doesn't earn interest.
But wait, there's more In the course of excavating all these options, I came across a wide array of federal, state and local programs designed to help first-time buyers and low-income buyers purchase a home. For example, you may be able to borrow from your 401(k) or take money from an IRA (you escape the 10% early withdrawal penalty, but not income taxes). The Federal Home Loan Bank sponsors programs that match savings, $3 for every $1 put aside. There are loan subsidies for buyers in rural areas and in inner cities, too.
The best place to start is with your state's housing finance agency. Find out more about what these agencies offer here. To find your own state's housing finance agency, click
http://www.ncsha.org/section.cfm/4/39