Real Estate Information Archive

Adding green technology into a home can help home owners save in a long run but some home owners may not be able to afford the costly upfront investment. Several tax credits are available to help home owners--and buyers--save on green updates.

Here are two main tax credits available for those interested in making energy efficient improvements to their homes:

1. Wind, Solar, Geothermal and Fuel Cell Tax Credit: This tax credit is available for both existing homes and new construction. Home owners can receive a credit up to 30 percent off the cost of their improvements between Jan. 1 and Dec. 31 of this year. The following green updates qualify: Geothermal heat pumps, solar panels, solar water heaters, small wind energy systems, and fuel cells.

2. Qualified Energy Efficiency Improvements: This credit gives a 10 percent tax credit for purchases that were "placed in service" between Jan. 1 and Dec. 31, 2011. According to the National Association of Home Builders: “The maximum credit for a taxpayer for all taxable years being $500, and no more than $200 of such credit may be attributable to expenditures on windows. This rule means that taxpayers who have claimed $500 or more of this tax credit in prior years, particularly 2009 and 2010, can no longer participate in the program."

Learn more about what upgrades are eligible as well as how to apply.

Source: “Facts on the Energy-Efficiency Tax Credit,” National Association of Home Builders (September 2011)

It’s not easy to get a loan these days, say housing experts. Even home buyers with excellent credit are struggling to get approved for a loan, as home lending standards have tightened to some of their strictest level in decades.

Tightening credit is affecting home sales and hurting the housing industry’s recovery, economists note, as more borrowers face increased scrutiny in qualifying for a loan at the best rates. To get the lowest interest rates, home buyers are having to come with higher credit scores and larger down payments than just a few years ago, as well as having to show steady employment, verify assets, and even explain new credit cards and small bank account deposits, USA Today reports. Banks hope the higher standards will lead to fewer future defaults.

Higher Credit Scores, Larger Down Payments

Through June, single-family home loans bought by Freddie Mac boasted an average down payment of 29 percent and an average FICO credit score of 751. In 2007, average down payments were 23 percent and FICO scores averaged 707.

Federal Housing Administration loans, which tend to be a lure for buyers without large down payments, are also being issued to buyers with higher credit scores than in the past. From January through March, FHA loans went to borrowers with an average credit score of 704, up from 631 four years ago.

In an analysis recently done by Zillow of 3.6 million loan inquiries, it found that prospective borrowers getting the best loan rates had average down payments of 28 percent. Three years ago, prospective borrowers averaged down payments of less than 24 percent, according to Zillow.

"It used to be anybody with a pulse could get a home loan. Now you have to be an Olympic athlete," Guy Cecala of Inside Mortgage Finance, told USA Today. "The pendulum has swung too far."

Source: “Tight Standards Make Mortgages Tough to Get,” USA Today (Sept. 14, 2011)

The Obama administration is expected to allow more home owners to take advantage of current low interest rates by expanding its two-year old refinancing program, the Home Affordable Refinance Program. 

To a joint session of Congress on Thursday, President Obama vowed to help “responsible home owners” refinance their mortgage so that they could reduce their monthly mortgage payments.  It’s “a step that can put more than $2,000 a year in a family’s pocket, and give a lift to an economy still burdened by the drop in housing prices,” Obama told Congress last week. 

The Home Affordable Refinance Program was originally designed to help home owners who could not qualify for loans from private companies. Fannie Mae and Freddie Mac would then offer loans at lower rates to borrowers with mortgage debts up to 125 percent of the value of their homes. 

Through the end of June, the companies had refinanced only 838,000 mortgages through the program with critics mostly blaming the low number on falling home values and strict income requirements that reduced the number of eligible borrowers. 

The Obama administration announced late last week that they plan to issue new guidelines for the program in the coming weeks, The New York Times reported. 

Source: “White House Plans Effort to Refinance Mortgages,” The New York Times (Sept. 9, 2011)

The U.S. Senate Banking, Housing, and Urban Affairs Committee recently approved legislation to reform the National Flood Insurance Program, which is set to expire on Sept. 30.

The Flood Insurance Reform and Modernization Act would extend the program through 2016, forgive its $18 billion debt, and enable the Federal Emergency Management Agency to increase rates by up to 15 percent per year. Additionally, the NFIP would have to build up and maintain a reserve fund, enforce the mandatory purchase requirement, and allow for the transition of properties to newly mapped flood zones. The measure now moves to the full Senate.

The U.S. House version of the bill would enable rate increases of 20 percent per year but does not forgive the NFIP's debt. Moreover, the House bill would cover business interruption and additional living expenses as optional provisions. If the Senate passes the measure, it will have to confer with the House quickly to reauthorize the program before its expiration.

American Insurance Association Vice President for Federal Affairs Tom Santos said, "AIA and its member companies commend the Senate Banking Committee for passing a NFIP reform and reauthorization bill out of committee that contains a long-term extension and makes necessary reforms to the program that will put it on a path toward a more sound financial footing and provide the ability to charge risk-based premiums." AIA expects the Senate measure to put the NFIP on better financial footing by enabling it to charge risk-based premiums. "Given the inclement weather and severe flooding throughout the country, it is especially critical that this program be reauthorized and extended so that no home or business is without the ability to receive coverage. With more than 5.6 million policy holders dependent upon the NFIP for their protection against floods, we hope the full Senate will now move to enact these important reforms," Santos said.

Source: "Senate Committee Passes Federal Flood Insurance Reform Legislation," Insurance Journal (09/08/11)

Mortgage rates this week are averaging at or near historic lows, Freddie Mac reports in its weekly mortgage market survey. 

"Weaker economic data reports eased upward pressure on mortgage rates this week and kept them at or near all-time record lows,” says Frank Nothaft, Freddie Mac’s chief economist.

Here’s a closer look at rates for the week: 

• 30-year fixed-rate mortgages: averaged 4.22 percent this week, holding steady at last week’s average. Last year at this time, 30-year rates averaged 4.32 percent. Late last month, 30-year rates had reached a new record of 4.15 percent. 
• 15-year fixed-rate mortgages: averaged 3.39 percent this week, dropping from last week’s 3.44 percent average. Last year at this time, 15-year rates averaged 3.83 percent. 
• 5-year adjustable-rate mortgages: set an all-time record of 2.96 percent this week. This is the eighth consecutive week that the 5-year ARM has fallen and it is down from last week’s 3.07 percent average. A year ago, the 5-year ARM averaged 3.54 percent. 
• 1-year ARMs: averaged 2.89 percent, dropping from last week’s 2.93 percent average. A year ago at this time, the 1-year ARM averaged 3.50 percent. 

Source: “Mortgage Rates Remain at or Near Historic Lows,” Freddie Mac (Sept. 1, 2011)

The Obama administration is expected to announce a new mortgage relief program next week to help struggling home owners stay in their home and reduce the number of foreclosures, Reuters reports.

While the exact details of the proposal are still unknown, analysts are speculating that President Barack Obama is likely to announce a plan that would help more borrowers to refinance loans, allowing them to lower their monthly payments and ward off possible foreclosure. 

The refinancing plan will reportedly apply to loans backed by government-owned Fannie Mae and Freddie Mac or the Federal Housing Administration, allowing more home owners who have been unable to refinance due to poor credit, owing too much above their home’s current value, or unemployment, to take advantage of current low interest rates. 

Other lawmakers who have pushed for such a move have argued that by lowering home owners’ monthly payments, it would free up cash for other spending, which will help stimulate the overall economy. 

Source: “White House Could Unveil Mortgage Plan Next Week,” Reuters (Aug. 31, 2011)