Here are some rules for helping your kids to buy a house.  There are many options, and with housing prices so depressed, this may be the perfect time to help your kids become first time homeowners.

By Linda Stern WASHINGTON — In some circles, the graduation gift du jour is a Manhattan apartment, according to a recent New York Times story. Note to my kids: Sorry, we are not in those circles.

Still, it would be nice. Given current market conditions, a compelling argument could be made for helping your kids buy their first home.

“Now is the time,” says Benjamin Tobias, a Plantation, Florida, financial adviser who helped his 29-year-old son and daughter-in-law purchase a home. “We feel that in this area, we are at or very close to the bottom of the housing market, and with low interest rates on top of that, anybody who can should be buying now,” he said.

In addition to the opportunities some see in the real estate market is the financial disparity between the generations. Baby boomers have money to invest, but are turned off by the low interest rates offered on bank savings and the risks posed by stocks and bonds. Many have children coming out of college unable to find the kinds of jobs that would allow them to save up the big down payments many lenders now require. Others are trying to erase past credit problems (or short sales of homes they previously owned) and can’t get mortgages in today’s more careful lending market.

“We get asked this question (helping kids buy a house) so often,” said Mark Rylance, a Newport Beach, California, financial adviser. But he’s seen good intentions backfire on all concerned, so he warns clients about the downside. Buy a house for a deadbeat kid — or even at the wrong time for a solid bill-paying one — and a bad turn in the housing or job market can ruin your credit score, your bank account and your relationship.

If you can afford to help (the most important consideration) and you want to, make sure you set it up in the most advantageous way. There are a variety of financial arrangements that can accomplish this: Parents can lend a down payment (or the entire mortgage) to the child; they can co-sign a bank loan, enter into a shared-equity arrangement with the younger generation or simply hand their kids a sum of money as a gift. They can also buy a house themselves and work out a rent-to-buy arrangement with their children.

Here are some considerations:

Apply due diligence to the deal
Have the house appraised and get the best advice you can about the real estate market in the area where the kids are house shopping. Parents who helped their kids buy a house at the height of the housing market are suffering along with them now.

Rylance has a client who loaned his son $100,000 for a down payment on a $500,000 house, but then life intervened. As real estate values plummeted in Orange County, his son’s family grew. Now the house is too small, but the son can’t move his family because he is seriously under water on the loan — to his father! That would make strategic default pretty messy.

Nail down the legal details
These financial arrangements can maximize tax breaks if they are structured correctly. Get a financial professional to review your arrangement, and perhaps a lawyer to commit it to paper.

Give them a down payment
Anyone can give anyone else $13,000 a year without running into gift tax problems. So a couple can give a couple as much as $52,000.

Make a private mortgage
Well-heeled parents can skip the middle-man banker and make the whole loan; an approach that often benefits the parent and the child. If it’s a long-term loan, the interest rate has to be over 3.82 percent (the Internal Revenue Service adjusts that rate regularly) to make the deal qualify as a loan and not a gift. But that still offers the parents more income than they’d get at the bank and gives the child a low rate and, as the loan is secured by the house, a mortgage interest deduction. A relatively new company, National Family Mortgage, will, for a fee, structure the mortgage and even service it for you, so the child sends her monthly payment to a third party.

This approach has advantages for wealthy parents who want to get money out of the estate. By “lending” the child money and then giving them a separate amount every year (those gift tax limits would apply), they can get money out of their estates.

The disadvantage to this approach is that the mortgage won’t help the child’s credit history. And the child should have some skin in the game, so make sure there’s a down payment that you aren’t providing.

Share equity
Bert Whitehead, a fee-only financial adviser in Franklin, Michigan, is very big on these arrangements. When a client wants to help the next generation buy a house, the client puts up the 20 percent down payment, and the kid makes the payments. After five years (or other agreed-upon period), the home is sold, and the parent and child split the profits. That worked well, years ago, when Whitehead did it with his son. But clients who did this at the peak of the housing boom now find they are sharing debts instead of equities.

Co-sign their loan
That could be all the kids need to get a good mortgage, and that’s what Tobias did for his son — who couldn’t get a mortgage because he’d been on a two-year adventure travel spree. But Tobias’ son now works with him (and the son’s wife has a good job), so he’s confident he’ll be paid back. The problem with the co-signing approach is that you’re on the hook if your child fails to keep up payments. If he’s even late, it can impact your credit score. And if you want to buy another home yourself, you may find the co-signed loan uses up your borrowing bandwidth.

Buy a home and rent it to your kids
That may be a good investment for you, but it doesn’t really do much for your kids, points out Brian Kazanchy, a Morristown, New Jersey, wealth manager. “It doesn’t give them any ownership or upside, and it may also prevent them from building responsibility,” he said.

Do the deal and then stand back
Helping your kids buy a house can be a blessing for all concerned. But being that parent who helps the kids and then spends the next 20 years picking paint colors, moving furniture and walking in at will? Not so much.

Travis Newton, Senior Mortgage Broker

Travis Newton

Branch Manager

WJ Bradley

503.931.4490 Direct

Travis.newton@wjbradley.com

Article by HouseLogic.com
By: Jan Soults Walker
Published March 25, 2011

If testing reveals the presence of lead-based paint in your pre-1978 home, here are a few of the options at your disposal for removing it.

 What does it cost?

According to the EPA, professional lead-based paint removal for the following three options costs about $8 to $15 per square foot or about $9,600 to $30,000 for a 1,200- to 2,000-sq. ft. house. The average removal project costs about $10,000.

Lead paint removal options

Encapsulation. Typically the least complicated and most affordable method, encapsulation involves brushing or rolling on a specially made paint-like coating that creates a watertight bond and seals in the lead-based paint. However, opening and closing your doors and windows eventually may wear off the coating.

Encapsulation products start at about $35 per gallon. Expect to pay $600 to $1,000 to cover surfaces in a 1,200- to 2,000-sq. ft. home (not including labor). 

Enclosure. With this method, the old surface is covered with a new one, such as putting up new drywall or covering windowsills with aluminum or vinyl cladding. If the enclosed surface is ever removed, you’ll have to deal with the exposed lead-containing surfaces underneath.

Removal. A variety of approaches are used to remove lead-based paints, such as wire brushing or wet hand scraping with liquid paint removers. Your contractor may opt to wet sand surfaces, and must use an electric sander equipped with a high-efficiency particulate air (HEPA) filtered vacuum. Another option is stripping off paint with a low-temperature heat gun, and hand scraping.

Forbidden methods of removal include open flame burning or torching, machine sanding without a HEPA attachment, abrasive blasting, and power washing without a means to trap water and paint chips.

Replacement. This more radical strategy calls for taking out the offending surfaces or features and installing new windows, doors, woodwork, and other surfaces.

The do-nothing option

If lead-based paint in your home is in good condition–no chipping or other damage–and no children under the age of 6 live there or visit regularly, you may safely opt to leave the paint untouched. You will need to disclose the presence of the paint if you decide to sell.

However, if the paint is peeling or chipping, or if intact lead-based paint is on window sills and stair rails and children under 6 are present, begin with a cleanup and find out how lead-based paint is regulated by your regional EPA office.

DIY cleanup

Even before lead paint removal occurs, minimize your family’s exposure:

• Clean up paint chips immediately.

• Clean floors, window frames and sills, and other surfaces weekly with warm water and all-purpose cleaner. Thoroughly rinse sponges and mop heads.

• Wash children’s hands often, especially before meals, naps, and bedtime.

• Prevent children from chewing painted surfaces, such as window sills.

• Remove shoes to avoid tracking lead-contaminated soil inside.

For additional information, contact the National Lead Information Center (NLIC).

With four home renovations to her credit, Jan Soults Walker is a devotee of improvements, products, and trends for the home and garden. For 25 years she’s written for a number of national home shelter publications, and has authored 18 books on home improvement and decorating.

Homeowners who use Fannie Mae and Freddie Mac mortgages save thousands of dollars in interest payments each year.

Fannie Mae and Freddie Mac are federally chartered organizations designed to bring global capital to local communities by purchasing and guaranteeing loans made by mortgage lenders.

As a homeowner, there are several ways you benefit from Fannie Mae and Freddie Mac. If your loan is owned or guaranteed by one of them, you pay a lower interest rate. And, when the time comes to sell your home, the pool of buyers capable of getting a mortgage is much wider thanks to Fannie Mae and Freddie Mac. To see how a loan guaranteed by one of the GSEs helps you save money, download our free PDF worksheet.

Homeowners who qualify for a Fannie Mae or Freddie Mac mortgage, called a conventional loan, typically get interest rates that are ¼% to ½% lower than non-Fannie Mae, non-Freddie Mac loans. At times when other mortgage funding dries up, the rate difference between GSE and non-GSE loans has jumped to between 1% and 2%.

On average, homeowners who have GSE loans save $17,000 over the life of a 30-year loan. Since 30 million Americans have a GSE-backed loan, that adds up to more than $500 billion in savings for U.S. homeowners.

GSEs stabilize the market

Despite the financial advantage the GSEs create, not everyone supports their mission. Some critics worry that Fannie Mae and Freddie Mac are taking on too much financial risk by guaranteeing mortgages in the current economic climate. Others believe the GSEs should be purely private entities, functioning without an implied or explicit government guarantee at all.

Falling home prices and rising unemployment have challenged the GSEs. When the subprime mortgage crisis hit and expanded into the prime market, there was a sharp decline in home prices and a sharp increase in mortgage delinquencies and foreclosures. The crisis put extreme financial pressure on both Fannie Mae and Freddie Mac.

By mid-2010, the two companies had required $145 billion of taxpayer support. However, without those funds, the GSEs would have gone under, putting an end to the steady flow of funds into the U.S. mortgage market.

“Absent the engagement of the government through the GSEs and FHA, what was a bad situation would have been catastrophic for the housing market, and potentially catastrophic for the broader economy,” says Nicolas P. Retsinas, director of Harvard University’s Joint Center for Housing Studies and Freddie Mac board member.

Today, the GSEs remain one of the few reliable sources of home mortgage funding, along with mortgages insured by the Federal Housing Administration. In 2010, 80% of U.S. home loans were bought, or guaranteed, by Freddie Mac and Fannie Mae.

Loan limits

Congress sets a maximum Fannie Mae and Freddie Mac maximum loan limit. Homeowners who need to sell find that there are more borrowers for homes priced at or below the GSE maximum loan amount, which is $417,000, or up to as much as $729,750 for some high-cost areas.

It can be hard for buyers to find lenders willing to lend more than the GSE loan limits because lenders have to hold such loans in their bank portfolio in the current financial situation. Until the recent financial crisis, lenders were able to sell mortgages above the GSE limits to companies that turned them into private mortgage-backed securities.

Until the summer of 2008, the nationwide loan limit was $417,000, far too low to be of use to many homeowners and prospective homebuyers in California and other high cost areas, says U.S. Representative Brad Sherman (D-Calif.), who has proposed legislation raising the loan limits permanently to $729,750.

“Buyers in high cost areas, such as Southern California, are at an extreme disadvantage simply because of where they choose to work and live,” he says. “For the overall economy to recover, every part of the housing market needs to improve, including high cost areas.”

Higher loan limits can also help homesellers. If the limits correspond to market values, buyers can use less-expensive GSE loans, so the number of buyers who can afford your home increases. With more potential buyers, competition for individual properties increases. With more competition, the value of the property can increase.

In the final analysis, the benefits of the GSEs outweigh the cost. Their long track record of making mortgages available in all markets benefits homeowners, communities, and the nation as a whole.

Jeannette Bernay has been in the real estate industry for over two decades. She lives in western Washington State on an 8-acre lot shared with her two horses, twp dogs, and three cats.

What: The Housing Authority of Yamhill County is hosting a class for first time homebuyers called ” The ABC’s of Homebuying.” To sign up contact Megan Ramos mramos@hayc.org (503) 883-4300.

When: This Saturday, March 12th 9:00am – 4:00pm

Where: Housing Authority of Yamhill County, 135 NE Dunn Place in McMinnville, OR 97128. Located just off Hwy 18 near the Red Lion; see map below.

More Info: Find important homebuyer information and learn about the process of buying on Bella Casa’s website.

By: Lisa Kaplan Gordon, Published: December 29, 2010

Basic electrical tools will save you money on simple repairs and should be in every home owner’s toolbox. Electrical tools fall into two categories: test and repair.

Test the power

Electrical testers are useful to determine if, where, and how much electricity is flowing–good and easy information to collect before you call an electrician.

Circuit tester: This plugs into an electrical outlet to test the presence of electricity, aka whether an outlet is “hot.” It’s a good tool to help you determine whether the lamp is broken or the outlet isn’t working. Make sure you test the tester on an outlet you know is hot, so you can trust its accuracy on others. Cost: $4.

Multimeter: One meter checks several electrical properties–AC or DC voltage, current, resistance–to help diagnose malfunctions. They’re digital or analog, and can test switches, batteries, and power sources. Cost: $15 digital; $10 analog.

Battery tester: Digital or analog meters are great for testing that drawer full of loose batteries. Cost depends on the types and sizes of batteries it tests. Cost: $15 for a household battery tester with an LCD display; $7 analog.

Repair the problem

Linemen’s pliers: These pliers grip, twist, and cut heavy wire and cable; they also can do double-duty to hammer nails or wire staples. Cost: $30 for 9″ pliers.

Long nose (needle-nosed) pliers: These skinny and grooved pliers have snipping blades that reach into small places to snip and bend the end of wire. Cost: $20 for 5″ pliers.

Wire stripper: This plier-like tool cuts through and strips plastic or rubber insulation around cable and wire. Cost: $12 for a 6″ stripper.

Insulated screwdrivers: Flathead and Phillips head screwdrivers come with insulated tops that protect against electrical shocks up to 1,000 volts. Cost: $40 (2-piece set; 4″ Phillips and flat).

Electrical tape: This plastic vinyl, ultra-sticky tape covers and insulates wire. Cost: $4 (3/4-inch, 66 ft.)

Lisa Kaplan Gordon is a HouseLogic managing editor and reviewer of As Seen On TV products for the Consumer Ally section of WalletPop.com.

1. Raise your deductible. If you can afford to pay more toward a loss that occurs, your premiums will be lower.

2. Buy your homeowners and auto policies from the same company. You’ll usually qualify for a discount. But make sure that the savings really yields the lowest price.

3. Make your home less susceptible to damage. Keep roofs and drains in good repair. Retrofit your house to protect against natural disasters common to your area.

4. Keep your home safer. Install smoke detectors, burglar alarms, and dead-bolt locks. All of these will usually qualify for a discount.

5. Be sure you insure your house for the correct amount. Remember, you’re covering replacement cost, not market value.

6. Ask about other discounts. For example, retirees who are home more than working people may qualify for a discount on theft insurance.

7. Stay with the same insurer. Especially in today’s tight insurance market, your current vendor is more likely to give you a good price.

8. See if you belong to any groups—associations, alumni groups—that offer lower insurance rates.

9. Review your policy limits and the value of your home and possessions annually. Some items depreciate and may not need as much coverage.

10. See if there’s a government-backed insurance plan. In some high-risk areas, such as the coasts, federal or state governments may back plans to lower rates. Ask your agent.

Credit scores range between 200 and 800, with scores above 620 considered desirable for obtaining a mortgage. The following factors affect your score:

1. Your payment history. Did you pay your credit card obligations on time? If they were late, then how late? Bankruptcy filing, liens, and collection activity also impact your history.
2. How much you owe. If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it’s a good thing if you have a good proportion of balances to total credit limits.

3. The length of your credit history. In general, the longer you have had accounts opened, the better. The average consumer’s oldest obligation is 14 years old, indicating that he or she has been managing credit for some time, according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.
4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.

5. The types of credit you use. Generally, it’s desirable to have more than one type of credit — installment loans, credit cards, and a mortgage, for example.

For more on evaluating and understanding your credit score, visit www.myfico.com.

Title insurance protects the holder from any losses sustained from defects in the title. Here are five other things you should know about title insurance.

1. It protects your ownership right to your home both from fraudulent claims against your ownership and from mistakes made in earlier sales, such as mistake in the spelling of a person’s name or an inaccurate description of the property.

2. Your mortgage lender is going to require it. Title insurance protects the lender and the secondary markets to which they sell the loans from defects in the title to your home and property. It ensures the validity and enforceability of the mortgage document. Title defects could include mistakes made in the local property office, forged documents and claims from unknown parties. The amount of the policy is equal to the amount of your mortgage at its inception. You pay a one-time fee as part of your closing costs. If you are purchasing a home, you should also purchase an owner’s policy which provides coverage up to the purchase price of the home you are buying. In some states it is customary for the seller to purchase the owner’s policy on your behalf.

3. It’s a one-time cost usually based on the price of the property.

4. Discounts on premiums are sometimes available if the home has been bought within only a few years since not as much work is required to check the title. Ask the title company if this discount is available if you are refinancing.

5. Even new construction needs coverage. Even though the home is new, the land isn’t. A title search will uncover any existing liens and a survey will determine the boundaries of the property being purchased. In addition, a builder may have failed to pay subcontractors and suppliers. This could result in the subcontractor or supplier placing a lien on your property. Again, lenders want to be sure the property has clear title, and they are insuring the correct property. Purchasing an Owner’s Policy will protect you against these potential problems and pay for any legal fees involved in defending a claim.

Local Title & Escrow Companies

Here are additional articles and tools to help you determine if buying a home is right for your current financial circumstances:

Mortgage Calculator

Articles about the Basic Principals of Buying a Home

Articles about The Process of Buying