50 SHADES OF FHA

B&D, FHA style. wikimedia commons pd

B&D, FHA style. wikimedia commons pd

Numbers are the least sexy part of real estate. But let me see what I can do here to pump up the excitement: $98 a month, that’s what Obama’s new mortgage change will mean to the average Portland home-buyer who’s hot for an FHA loan.

FHA loans do help people of limited means slip into comfortable homes. But these loans tend to be turgid with fees. Among the most rapacious of these is the “mortgage insurance premium.” Right now, that fee engorges the purchase cost of your house by 1.35%.

This may not sound like a huge hunk, but whip out your calculator. Actually, let’s ask my smokin’ hot pal Laura D’Andrea (laura@lendersnetwork.biz) to whip out her calculator: She’s a Portland mortgage originator, and would be the first to assure you that size does matter. Taking an average Portland home, here’s the impact of the sleeker, stripped-down mortgage insurance premium (MIP). For a $245,000 house:

With the minimum 3.5% down payment, under the current MIP rate, you’ll pay about $266 each month just for the MIP. But for that same loan approved after January 26, the MIP payment will be $98 less. Over the life of a 30-year loan, that’s $35,280 in your pocket.

That’s $35,280 you could spend buying the house you’re passionate about vs. the house your mother would choose for you.

Now, two things about the MIP still rub me the wrong way. With “conventional” loans, you can slip the sweaty grip of MIP once you’ve paid for 20% of the home. After all, the whole point of mortgage insurance is to make sure the lender can recover its money if you pull a one night stand–and if the home is worth 20% more than the loan balance, the lender should be safe.LD

But FHA plays rough. It’s going to squeeze you tight for the entire life of the loan. So go ahead and take a tumble with this enticing new MIP. But keep that safe word on the tip of your tongue: Refinance!

WHICH REMODELING PROJECTS WASTE THE LEAST MONEY? 

[pd] wikimedia

[pd] wikimedia

The annual home improvement survey is out, and once again the steel door tops the list of home improvements that will lose you the least money when you sell.

Clients often ask me if they should remodel the bathroom or replace the counter tops when they prepare their house to sell. They ask other agents that, too. Which is why the National Association of Realtors publishes an annual study of which home improvements buyers will pay extra for.

Yeah, none. Realtors across the country chime in, and they/we are pretty clear on this: None.

Even the steel entry door is a disappointment, with brokers estimating that buyers will pay $1,122 for your new $1162 door. Fiberglass door? Forget it. The “R” on that “I” is only 71%.

A kitchen remodel, which runs $20,000 to $50,000, nets only about 75% of your cost–at the high end! The cheaper your remodel, the smaller fraction you’ll recoup.

Most of the least-losing improvements are external: Fresh siding, garage doors, and the dearly loved steel entry door are up there. In New England, the door and even a new deck break into positive payback territory! Add two! Surround your house with decks, and make millions!

Additions–family rooms, sun rooms, and garages–are the biggest money dumps. Home office remodels are for chumps. New roofs are a ghastly miscalculation.

Here’s the thing: First impressions matter tremendously–as they should when you’re purchasing a giant consumer product with 1,000 hidden pieces that might or might not make your next 20 years a long, slow dance of regret. …Right?

So yes, no new windows. But wash the heck out of whatever windows you have. No new kitchen, but paint elderly cabinets white. If you add a sunroom ($76,000) plan on half your ROI coming back as pure joy, because it’s not going to come back as money.

If you must, if you really must, you can replace the entry door.

Check out the full list of survey items here.