Needy Borrowers Turn To Government Loans

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Can the Buyer’s Inspector Be Given Access to the Property Before Signing? Q: Is it proper for an agent to allow a buyer’s inspector access to a property prior to the buyer signing a contract? A: This is not an issue of “proper”or “improper.” If you’re a seller, your goal is to market the home.There are many barriers to a sale and if you can remove a buyer worry you’re ahead. In this situation you could, for example,have a written agreement to allow an inspection of the property at the buyer’s expense – provided you receive a copy of the inspection report. There is a potential downside here. State disclosure rules may require you to reveal any material problems with the property. If a home inspector finds a problem or an alleged problem you would then be “on notice” and likely be required to disclose the matter to any other would-be buyer. Some sellers and brokers have a different view and say they will not allow an inspection without a written offer. If a buyer is sufficiently nervous,such a requirement may well result in no offer and thus one less prospective buyer.Also, if the inspection clause requires buyer “satisfaction,” a purchaser may walk away from the transaction without any penalty merely by saying that the inspection result is unacceptable. Q: I got an adjustable-rate mortgage in 2003. I was told I could refinance after two years with no problem to a fixed-rate mortgage. Well, it’s been more than two years and I tried to refinance because my payments for a $55,300 loan are now at $750, I can barely make the payments, and costs seem to rise every six months. My lender will not refinance because they say the house is now appraised at $46,000. What are my options?

A: You have two options. First, speak with other lenders.They may have a different view of your home value and credit.Second, with rising mortgage payments and a declining home value you may be forced to sell; otherwise you may face foreclosure. If talks with lenders do not result in a new loan, your best strategy can be to sell now, before times get tougher. For more information, speak with local brokers about See ASK OUR BROKER, Page 2

Uncustomary design: It may look like a tailor-made kitchen, but this luxurious in-home eatery was built from stock plans. Pre-made plans give homeowners a unique design without the high cost of custom work.

Building from Off-the-Shelf Plans BY BARBARA BALLINGER CTW Features

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ove that big white clapboard house with pillars going up in your area, or that smaller, charming shingled cottage by the sea in your favorite vacation locale? If either was custom designed by an architect to fulfill owners’ wishes and needs, as well as fit into the site they selected and the location’s climate,it probably would cost a lot of money. Not everyone can afford to hire an architect to design a custom home and supervise construction.An architect’s fee to develop working drawings, select materials, appliances, windows, doors, moldings and more, may run between 10 and 15 percent of the cost of the completed home. Chicago archi-

tect Allan J. Grant says many of the custom homes he’s designed in the city and its North Shore suburbs have cost his clients fees between $100,000 to $300,000, depending on the details. Homeowners who seek a more affordable option but don’t want to be limited to a developer or builder’s ready-made offerings have another choice – a quite old one: stock plans.At the turn of the century, Sears, Roebuck and Co. offered plans through its mail-order catalogs.Women’s and home magazines in the early 1900s also published designs reflecting the most modern styles. The results, which still stand today in leafy neighborhoods throughout the country, represent fine examples of Victorian architecture, says Don Gatzke, dean of the School of

Architecture at the University of Texas in Arlington.“They were thoughtfully done, well detailed and gracious,” Gatzke says. Today, entire issues of magazines and books are devoted to plans, and there also are Web sites that offer countless possibilities to choose from – the home equivalent of offthe-rack dresses.The plans are available in a variety of sizes and styles from Spanish Colonial to Southern – think Tara, Craftsman, English Georgian, log cabins, and more. Many include layouts with popular features such as first-floor master suites, interflowing kitchens and family rooms, front porches, columns and palladium windows. Plans are sufficiently detailed for builders

See PLANS Page 2

Needy Borrowers Turn to Government Loans BY CHARLES SCUTT CTW Features Worried about bad credit preventing you from qualifying for a conventional home loan? Got your eye on a farmhouse fixerupper off the beaten path? Eager to own a place of your own after

you’ve completed your stint in the military? While traditional lenders and banks may give you the cold shoulder, Uncle Sam is ready to lend a hand in the form of a government mortgage loan. Government loans are either insured or guaranteed by an agency of the federal govern-

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ment, such as the Federal Housing Administration, Department of Veterans Affairs, Rural Housing Service or Farmers Home Administration. The federal government does not actually lend the money for loans offered through these agencies to qualified borrowers. Instead, it

provides mortgage insurance to lenders that are approved to fund government loans. “Government loans have more liberal underwriting criteria and, in many cases, more favorable pricing than conventional loans,”

See LOANS, Page 2

LOANS CONTINUED FROM PAGE 1 says Gary Acosta, former chairman of the National Association of Hispanic Real Estate Professionals,Washington, DC. That equates to an easier path to homeownership for many borrowers with lower incomes, poorer credit or special circumstances such as the need to live in an undeveloped rural area. Many of these government loans offer attractive features, like lower interest rates, little or no cash down payments, zero penalties for loan prepayments, and longer loan terms. According to Yamila M.Ayad, a broker with Mission Home Loans, Inc., San Marcos, Calif., the best candidates for government home mortgage loans are veterans, borrowers with limited or no credit histories and first-time buyers. “The FHA is still the best source of mortgage capital for borrowers with limited traditional credit.This is because the FHA allows borrowers to use things such as utility bills and cell phone bills to show credit responsibility in place of traditional credit like credit card payments,” says Acosta, who adds that FHA loans are available to any U.S. citizen. “Also, lenders typically do not like to lend on rural properties or farms, so government loans are very common in these areas,” Acosta says. VA loans, on the other hand, offer competitive rates and have minimum income requirements,

PLANS CONTINUED FROM PAGE 1 to use when constructing the house, though buyers may need to make changes depending on the site, its soil, personal needs, climate and local building codes. Most companies have designers and architects on staff that will adapt plans, though they charge for this service. Just how many homeowners go this route may surprise you. More than 160,000 plans are sold a year, according to Thomas Roedoc, who purchased Architectural House Plans, three years ago and operates it from Sausalito, Calif. His company offers about 160 different plans from architects nationwide.The price of his plans average $1,000. One of its most popular is its Maple Forest, which measures 2,749 square feet and has three bedrooms and two bathrooms. If homeowners want to make changes, he suggests they hire a local engineer or designer. Homeplans, St. Paul, Minn., stocks a database of 10,000 different plans from architects and designers from around the country and Canada and markets the designs through its 16 different magazines and on its Web site. Bruce Krause, director of offline media for Homeplans, says that the company’s best-sellers measure around 2,000 square feet, feature an open plan, three bedrooms and two or two-and-a-half bathrooms. His company’s plans are avail-

making them ideal to eligible veterans, active-duty personnel or surviving spouses, says Ayad. Government loans can serve a number of important functions, but they can be a little slow and labor intensive, which is why a number of lenders no longer provide them, says Acosta. In other words, be prepared to wait longer to obtain loan approval and funding.That means that the offer you make on a home may lose out to an offer by a buyer who is pre-qualified for a conventional mortgage, which can be funded much faster. What’s more, FHA and VA loans exclude buyers from having to pay “non-allowable” fees typically charged by lenders, title companies, escrow companies and settlement agents.The seller, in turn, has to pick up the tab for these fees, which may make them less willing to negotiate with you on the price. Additionally, home appraisal inspections on VA and FHA mortgage loans are more cumbersome and costly than for conventional loans. And the sky’s not the limit with a government loan, either. Ayad says that FHA loans, for example, have relatively low maximum mortgage amounts, which vary depending on the county of the property you’re looking to purchase. “Government loans are designed to primarily assist lowto moderate-income individuals, so maximum loan amounts can be limiting in high-cost states like California,”Acosta says. Furthermore, as the mortgage

market has become more sophisticated, government market share has decreased measurably, he says. “For example, several years ago,VA loans were the only loans in the marketplace that allowed 100-percent financing,” says Acosta.“Today, 100-percent loans are readily available in the conventional market.” If you’re considering a government loan,“get all of your paper work in order and make sure that you are not behind on any money owed to the federal government such as income taxes or student loans,”Acosta says.“Being delinquent on money owed to the government could make you ineligible to receive a government mortgage.” Acosta notes that changes may be in the works for future FHA loans.The US Department of Housing and Urban Development has recently submitted a number of proposed changes to Congress that request modifications to FHA guidelines. These proposed modifications would allow for higher loan amounts, higher loan-to-value ratios and essentially make FHA loans more relevant in today’s changing market. Many conventional lenders such as banks, savings and loan institutions, and credit unions offer government mortgage loan programs. For more information, visit: www.fha.gov www.homeloans.va.gov www.rurdev.usda.gov/rhs

able in different formats and prices: on bond paper for $500 to $1,000, in reproducible designs that can be changed for $650 to $1,100, and in CADD files that cost between $1,100 and $1,700.To make additional changes, homeowners will pay between $800 and $1,500, says Krause. Hanley Wood, based in Washington, D.C., may be the biggest player. It publishes 24 plans magazines with approximately 15,000 plans, 52 home plan books, and operates two Web sites. Its average plan costs about $900, and the company offers customization services, with an initial fee of $50, which will be deducted from the final costs if the project proceeds.The company is receiving more queries on Craftsman and mountain/log-style homes, says Jennifer Pearce, associate publisher of Hanley Wood’s magazine consumer group. Some architects sell their plans directly to the public. For the last 11 years, architect Robert Knight has offered a portfolio of 20 small houses averaging 1,500 square feet under the umbrella,“Lucia’s Little Houses,” which is named for his wife. While the appeal for most home owners is the tremendous cost savings, the appeal for architects and designers is the additional source of income for selling multiple copies of the same plans they’ve developed, something they can’t always do when they’re designing a custom house.

If you choose to go this route, be cautious that you’ve selected a plan that truly meets your needs and pocketbook and comes with sufficiently detailed drawings so it can be built, even if it needs to be adapted here and there, says Gatzke. It’s also important to know that the cost to build the plan will vary dramatically, based on the builder or contractor you choose and your choice of materials, detailing, appliances, and equipment.“The identical house can be built for $75 to $250 a square foot,” Roedoc says. If you’re not sure what size and style you want, buy several plans magazines or books and drive around your neighborhood to see which houses appeal, says Gatzke.Take photos, make lists and your dream house will emerge. If you never proceed with building, that’s fine, too – you’re not alone. Many who buy plans never build, says Kim Garretson, editor of LivingHome.com, an online home magazine.“This is also a dream business. Some people may think they’re going to do so. Others just like having the plans, unfurling them on their coffee table, and talking about how they’re dreaming of building something,” he says. The bottom line is the same: Most houses start with a dream.

© CTW Features

© CTW Features

Ask Our Broker CONTINUED FROM PAGE 1

market values in your community.

Q: What does it mean when a property is zoned as “agricultural” land.

A: Most communities today attempt to control land usage.The theory is that central government planning will produce better land use patterns than the marketplace, a notion which is worthy of discussion given that we have urban sprawl and terrible traffic in so many areas. “Agricultural”usage typically means that the highest and best use for a property under zoning rules is restricted to farming activities.You can’t use the property for townhouses or condos; you can’t put in steel mill or an auto factory.Alternatively, one attraction of agricultural zoning is that property taxes often are extremely low. If you don’t like how the property currently is used, have an attorney take a look at zoning rules – there may be a lengthy series of allowable uses. If the current rules are unattractive, you can apply for an exception or seek to have the property re-zoned.

Q: We have a shared family cottage owned by myself and three siblings. There was never an agreement drawn up as to how the cottage is to be shared. Can one sibling sell their share outside the family? A: The first question that needs to be asked is how title is held.You certainly don’t have a “tenancy by the entireties” – that’s a form of ownership reserved for married couples. You could have a “tenancy in common,” where individual interests may be sold separately. In that case, an owner may well sell off a share. Each of the four owners needs to decide that they have common interests that need to be committed in writing.Why not an agreement allocating usage – say 13 weeks annually for each owner with a rotating order of usage each year? Why not a right of first refusal so that current owners will have first dibs in case another owner wants to sell? As a practical matter, it’s very difficult to sell a partial interest in an individual home because any buyer would want to know about their usage rights and cost liabilities.At the same time, any partial owner might demand the sale of the entire property in a suit for “partition.” This would likely result in an opportunity to buy the interest of the one family member who wants to sell. For details, speak with an attorney or legal clinic. © CTW Features Need real estate advice? Peter G. Miller, author of “The Common-Sense Mortage,” would love to hear from you. Send your questions to [email protected] 0