That helped explain why applications to refinance homes, as opposed to buying them, dropped below 75% of all mortgage applications last week for the first time since June. “Rates above 4.5 percent are certainly high enough to curtail activity,” said Mortgage Bankers Association economist Michael Fratantoni.

The refinancing activity would have dropped still lower if not for homeowners scrambling to refinance before rates spiraled higher still, Fratantoni said.

Current rates are still extremely low, especially in comparison with an average rate of 6% over the past 10 years—not to mention that loans cost well into double digits in the early 1980s. And some signs indicate that increasing numbers of home buyers are overcoming concerns over the sour job market and are taking advantage of the rates.

Analysts expressed surprise over a recent National Association of Realtors report showing that signed contracts to buy previously owned homes jumped by 10.4% in October 2010. It was the third monthly gain since such signings hit a decade low after home-buyer tax credits expired last spring and was “the first piece of good news on the housing market for some weeks,” as Paul Dales of Capital Economics put it.

Contract signings were up in every region of the country except the West, reflecting the exaggerated boom-and-bust cycle in states like California and Nevada.

The REALTORS® report showing higher pending home resales nationally contrasts with sales of new homes, which remain “lousy,” said real estate analyst Mike Larson of Weiss Research Inc., who described the markets as stabilizing, although not in vigorous recovery. “The used-home market continues to capture the imagination of buyers,” Larson said. “They’re seeking out the best values, and right now, that means distressed used homes at attractive—even fire-sale—prices.”

The percentage of loan applications that were for refinancing jumped above 80% in early August and, except for one week in October, remained there until the Mortgage Bankers Association report for the week that ended Nov. 19.

Only once before in recent years had applications for refinancing broken the 80% barrier, Fratantoni of the Mortgage Bankers Association said: in 2003, for one week, when the rate on 30-year mortgages fell below 5% for the first time since the 1950s.

In 2003, a boom year for home loans, the total amount of mortgages issued was about $4 trillion, with about $2.5 trillion of that, or 60%, in refinancing. This year, the mortgage trade group projects that refinancing will account for about $1 trillion, or two-thirds, of a total mortgage market of $1.5 trillion.

For 2011, the mortgage-banking group thinks home loans will total about $1 trillion. Purchase loans are expected to increase a bit, to $600 billion of the total, with loan refinancing at $400 billion, or 40%, Fratantoni said, as rates rise above 5%, by the end of the year.

Of course, refinancing is restrained by more than just rising rates these days. A lot of people who would like to refinance can’t, because their home equity or income has been reduced in the downturn, said Chris George, president of CMG Mortgage in San Ramon, Calif.

What’s more, people with equity remaining are also far less likely to refinance these days to pull out cash for home improvements or other investments, George said. “In ’04, ’05 and ’06, it was all about leveraging your home equity. I would say back then three-quarters or better of the people refinancing were pulling out cash,” George said. “Now it’s the opposite—people are de-leveraging, saving for a rainy day.”

(c) 2010, Los Angeles Times.

Distributed by McClatchy-Tribune Information Services.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Copyright© 2010 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

Detached houses. Not for statistical analysis, trend purposes only. Data compiled from the NRVMLS on 12/02/10. Information deemed reliable but not guaranteed.

But you’ll need to examine what caused you to fall behind on your mortgage and take steps to fix the problem. “You have to look at what were the reasons you didn’t make the payment,” said Davis-Demas. “Was it budgeting? You can modify that type of behavior.”

A foreclosure is a major hit to your credit history and stays on your credit report for seven years.

“Foreclosure is one of the FICO seven deadlies,” said credit expert John Ulzheimer, referring to the dominant FICO credit score. “It’s considered a major derogatory item, regardless of the back story”— whether it’s a job loss, rate reset, underemployment or other reasons.

Your credit score will also suffer “the minute the foreclosure process begins,” said Ulzheimer, founder of 2StepCredit.com, a credit education website. “It doesn’t have to be completed for it to be very damaging,” he said. “The damage will vary based on your scores, but it can damage the score as much as 200 points, especially if your scores are very strong to begin with.”

So, after a foreclosure, your priority has to be rebuilding your credit. You’ll have some time to do so, because mortgage giants Fannie Mae and Freddie Mac impose strict rules on how long it will take before you’re eligible for another mortgage.

For example, borrowers with a prior foreclosure and extenuating circumstances—such as a job loss, divorce or medical issues—must wait three years before they can qualify for a Fannie Mae-backed loan, said spokeswoman Amy Bonitatibus. For all other borrowers, the waiting period is seven years.

At Freddie Mac, those who can prove extenuating circumstances must wait three years before applying for a new mortgage; everyone else must wait five years. But that will change in February, when the waiting period for those whose foreclosure was caused by their own financial mismanagement will increase to seven years.

Fannie Mae and Freddie Mac also have strict rules on the credit score and the size of the down payment required of borrowers with a prior foreclosure.

Here’s what you need to do to rebuild your credit to qualify again for a mortgage:

Pay your bills on time: The FICO score, the dominant credit score used by lenders, gives the greatest weight to payment history, so make sure you consistently pay your bills on time. “Stability is the key,” said Craig Jarrell, president of the Dallas region of IberiaBank Mortgage Co. “Have you demonstrated that you are now capable of owning a home and paying the bills, and have recovered from whatever circumstance caused the original foreclosure?”

Review your credit report: You’re entitled to a free credit report once every 12 months from each of the three national credit bureaus—Experian, TransUnion and Equifax. You should get a copy and check it for any inaccuracies.

To get your free credit report, go to http://www.annualcreditreport.com. “Make sure it is about you and only you,” said Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. “If you find errors, dispute them. If you discover old debts, it will weigh in your favor to satisfy them. Paid late looks better than not paid at all. Make sure that debts older than seven years have rotated off your report, as these could be dragging your score down unnecessarily.”

Check your mortgage: You want to be sure that you don’t still owe anything on your old mortgage. Sometimes proceeds from a foreclosure sale aren’t enough to cover what’s owed on the mortgage, which would leave you owing the difference.

“Make sure there is a zero balance reflected, and if you are responsible for a shortfall, make arrangements to repay the remaining balance,” Cunningham said.

Many lenders are willing to settle that “deficiency judgment” for less than what’s owed because “it’s better than getting no money at all,” Jarrell said.

Apply for credit: In particular, apply for different varieties of credit. “Credit scoring models value having different types of credit,” Cunningham said. “Having some revolving accounts, typically credit cards, and some installment fixed-payment loans, such as a car payment, can improve your score.” But don’t apply for too much credit at once. “This can appear as though you’re desperate for credit and perhaps make lenders less inclined to extend credit to you,” Cunningham said. “Further, too many credit inquiries can have a negative impact on your credit score.”

Don’t fall prey: Watch out for credit repair companies that promise to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job—after paying a fee for the service. “The truth is, that no one can remove accurate, negative information from your credit report,” according to the Federal Trade Commission. “It’s illegal.” Only the passage of time can assure that negative, but accurate, information on your credit report will be removed.

When it comes to repairing your credit, there are no quick fixes, the experts say. What lenders want to see is responsible financial behavior over time.

“Know that time is your friend, as the farther you move away from the financial distress, the less negative impact it has,” Cunningham said. “Follow with responsible behavior with your new credit, and you’ll soon have a solid credit file.”

(c) 2010, The Dallas Morning News.

Distributed by McClatchy-Tribune Information Services.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Copyright© 2010 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

One way to do this is to give your client some advice on choosing homeowners’ insurance once they settle into their new place. It’s a daunting task that your client might ask you about—if they do, or even if they don’t, here are some basic tips to impart to your client to make choosing homeowners’ insurance an easier task:

1. Get past the advertising fluff. When selling your home and buying a new one, your mailbox becomes a sieve of solicitations—and one of the front-line offenders are homeowners’ insurance companies. Our quick scan of the latest bunch of mailings reveals quite a few boasting fancy packaging and idealistic images of beautiful homes with magazine-ready design schemes. They’re often printed on pricey paper stock and feature florid writing poetically telling you how they can help you protect your home and all the prized possessions it contains, better than any other company can. As a REALTOR®, stress the fact that just because a company has the advertising budget for big mailings, doesn’t necessarily mean it’s the best. It’s quite possible that the homeowner might do just fine with a company that sends them a mailing—but they might do even better with another company that never sends solicitation mailings. The boil-down is this: don’t just go with the first thing you see, even if it seems good.

2. Consult your state’s resources. Choosing from a huge array of large national insurance companies can be daunting; that’s why it’s a good idea to start in your state. Your state will likely have an insurance, consumer advocacy or chamber of commerce website offering homeowner’s insurance tips (just an example, find one for New York State at http://www.ins.state.ny.us/hmonindx.htm). The benefit to a state site is that it gives you a good idea as to what your insurance covers given your particular state’s weather conditions and home wear and zoning issues. These sites also give information on important state codes; it’s critical to check that the company you’re researching understands these codes extremely well. Finally, many state sites list consumer complaints against particular companies from residents in your state.

3. Make sure the coverage is not only extensive, but appropriate for you. A homeowner may come across a potential company with a good service record and reputation, but that doesn’t mean its ideal for them. Look at the details of what the company focuses on. If a company looks great overall, but they emphasize flooding and water damage in all their marketing materials, it’s not going to be right for you if you live in Arizona—no matter how great a company it is. Make sure the company’s strong points match the needs of your particular home and geographical area.

4. Familiarize yourself with the claim process. The insurance company might advertise the fact that you can make frequent claims for repairs, but many companies hike up your premium if you frequently file small claims. This isn’t necessarily unethical, as it’s often stated in the fine print, but it could definitely hurt your wallet; that’s why it’s smart to ask up front how both routine/small and catastrophic claims might affect premiums. At the most, asking will ultimately save you money, i.e., you can do a small repair yourself instead of filing a claim for it, and ultimately the money you spend on the repair might be less than the premium hike.

5. Know the condition of your home. It’s impossible to effectively choose homeowners’ insurance unless you know the condition of your home inside and out. For instance, if you have a roof that’s prone to leakiness and not in the best shape, you’ll obviously want to avoid a policy that doesn’t cover this sort of thing. The best way to learn about issues in your home is to get a home inspection of your new home by a certified, reputable home inspector. The home inspector will examine your new home for any potential faults and issues to watch for; this is incredibly powerful ammunition in choosing the right homeowners’ insurance, and can save a lot of money in the event anything goes wrong and you find yourself in the claim-filing process.

Dan Steward is president of Pillar To Post Professional Home Inspections.

For more information, visit www.pillartopost.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Copyright© 2010 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

This uptick in prices leads to a simple conclusion: Sell now if you can. And you certainly can. A fast sale, taking advantage of these numbers, is entirely possible, and can result in a lot of profit and a very happy client. But telling your client to “sell quickly,” without backing it up, can inspire fear and even ire. Instead, give them these methodical, easy tips to selling fast and successfully, taking advantage of a market uptick, without inducing panic or stomach aches.

1. Don’t raise the price. The uptick in home prices doesn’t mean that you should get all excited and raise the price. The trick is to leave your price the same as it was—that will encourage a bidding war. Hearing news about home prices going up, and raising your price immediately as a response to that, is typically not the way to go; the home will likely sell for more as a result of two buyers fighting over your reasonable price, rather than walking away due to a price that’s too high. Remember, the goal is ultimately to get more money, not to have a higher list price.

2. Remain flexible. Selling quickly means making some concessions—and we’re not talking price. It’s those little extras that may inspire a buyer to sign on the dotted line. Obviously, no one has the right to get your vintage grand piano in the deal. But if a buyer wants your stainless-steel fridge with ice-maker, give it up. There’s more ice waiting in your new home.

3. De-clutter. For a quick sale, you may not have time to fully “stage” your home down to the accent pillows and entirely new living room furniture. But you do have time to clear out the clutter. If we saw a home we’d like, we’d look past the clutter, but most buyers won’t. So, before you worry about making your home pretty, focus on making it neat. In a better market, neat is often all you need.

4. Schedule more open houses—and don’t attend your own. When you have a longer time frame for selling, you can schedule open houses at your leisure, but if you want to sell fast, try for as many open houses as you can—and do not attend them, as a homeowner at their own open house often makes a potential buyer too nervous to comfortably look around.

5. Go big—and go local. If you haven’t listed in MLS (multiple-listing service), it’s a good idea, especially if you want to sell fast. The math is simple—more eyes on your listing equals more potential bites. But a lot of people who use the MLS forget that local advertising is important as well. Advertising in local and regional publications—as well as simply putting the word out with friends and family—are often skipped, expecting that the Internet will get the job done on its own.

Dan Steward is president of Pillar To Post Professional Home Inspections.

For more information, visit www.pillartopost.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Copyright© 2010 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

Kathleen O’Reilly of RE/MAX Horizon in Elgin, Ill., reports she recently set a personal record by showing one client 45 houses. The client then made an offer and purchased a home—the first one O’Reilly had shown him. That first home had everything the buyer wanted, according to O’Reilly, but he had to look at 44 other homes before feeling confident he was getting the most for his money.

“What I’m seeing,” said Ritter, “is that buyers have read a lot about foreclosures, short sales and how desperate sellers are. They feel there is this fabulous deal out there, a mansion with all the bells and whistles, and they are going to get it for $210,000. They are convinced the next house they look at will be a better deal, and with so much inventory now on the market, they keep looking and looking.”

How can buyers find their way in the current marketplace, with its shifting home prices and an extensive inventory that includes many distressed properties? Here’s some advice on how to speed up the process from experienced real estate professionals at RE/MAX.

-Do enough looking to get to know your local market. Mark True, an agent with RE/MAX Rock Valley in Oregon, Ill., thinks buyers benefit by looking widely, but are sometimes tripped up by inflated expectations. “Especially in a smaller market like ours, the inventory is limited even if it is large by historic standards. Each local market has its own character, and buyers must adjust their expectations accordingly. Otherwise they continue looking for a home that doesn’t exist,” he advised. At the same time, True urges buyers to do a fair amount of looking because it gives them an understanding of the market and the confidence to make a decision.

-Let your emotions help you. Too often today, buyers aren’t letting themselves fall in love with a home, according to Deborah Cassidy of RE/MAX Showcase in Lake Forest, Ill. “They are only looking at price and condition, and that contributes to their uncertainty because they always feel there’s a better deal out there,” she said. “Leaving emotion out of the equation makes it difficult for buyers to commit to a purchase.”

-Decide if a distressed property is really right for you. Foreclosures and short sales offer buyers great value when it comes to price per square foot, but these properties tend to have their own limitations, according to Dan Firks, an agent with RE/MAX of Naperville in Naperville, Ill. Foreclosures often, though not always, have serious condition issues and are almost always sold “as is,” meaning the seller won’t do anything to address those issues. As a result, buyers may need to carry out extensive repairs after purchasing. Short sales, while usually in better condition, can take months to get to the closing table, and in at least some cases these transactions eventually fall apart because the lender, seller and buyer can’t agree. “Buyers must decide if they have the patience and flexibility to pursue a short sale and the skills or resources to deal with repairing a foreclosure,” advised Firks.

-Don’t focus too heavily on price. Firks gently urges buyers not to become totally focused on searching out the best possible price because, “when they do that, they may fail to consider the other benefits of purchasing—the tax deductions they’ll get when they own rather than rent, the amazingly low mortgage interest rates currently available and the benefits of living in a home and a community that fit their family,” he said.

-Be ready to negotiate. According to Kathleen O’Reilly of RE/MAX Horizon, Elgin, buyers can miss out on a great home if they don’t initiate a negotiation. “When buyers find a home they like, I encourage them to make an offer at a price they are comfortable with, even if it is well below the listed price,” she said. “At worst, the seller won’t negotiate, but in this market that is unlikely. Sellers don’t want a viable buyer to walk away. If a negotiation is initiated, it often ends up in a place that makes the buyers happy because in this market sellers have to do most of the compromising.”

-Get plenty of advice but trust the professionals. The current housing market is complex and can be confusing. Sarah Ritter of RE/MAX Properties, Western Springs, urges buyers to realize that not all the advice they get has equal value. “I want buyers to talk to their friends and family about a potential purchase, but at the same time, that advice should be taken with a grain of salt because unless the advice comes from a local real estate professional—a lender, agent, inspector or appraiser—it won’t be grounded in detailed knowledge of the current market.”

-Don’t let negative comments about the housing market scare you off. Those who mean well may wish to warn you about the downside risks of the housing market, according to Mark Zipperer of RE/MAX Edge in Chicago. “However, buyers shouldn’t lose sight of the many positives in the current market, such as the fact that home affordability is at its highest in decades and that investors are flocking into the market to snap up bargains in all-cash purchases,” Zipperer said. He urges buyers to keep their eye on the numbers that directly impact them—property prices, interest rates and how those translate into monthly payments.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Copyright© 2010 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

Detached houses. Not for statistical analysis, trend purposes only. Data compiled from the NRVMLS on 11/02/10. Information deemed reliable but not guaranteed.

Detached houses. Not for statistical analysis, trend purposes only. Data compiled from the NRVMLS on 10/23/10. Information deemed reliable but not guaranteed.

Detached houses. Not for statistical analysis, trend purposes only. Data compiled from the NRVMLS on 10/23/10. Information deemed reliable but not guaranteed.