MONEY mortgages

As Ben Bernanke Knows, Low Rates Don’t Mean Easy Mortgages

Former U.S. Federal Reserve Chairman Ben Bernanke.
Former Federal Reserve chair Ben Bernanke. Jonathan Ernst—Reuters

The former Fed chairman isn't the only one having trouble taking advantage of rock-bottom interest rates these days.

Yesterday former Federal Reserve Board chief Ben Bernanke drew a lot of you-gotta-be-kidding-me news coverage when he confessed, during a conference panel, that he was recently turned down for a mortgage refinancing.

His point: Maybe bank’s lending standards are a bit too tough these days. Despite very low interest rates and the accommodative Federal Reserve policy he engineered, it’s still not easy for many people to get a mortgage.

The New York Times has a reasonable-sounding theory for why Bernanke, a guy who definitely should be able to make his payments, might have run into trouble. He’s changed jobs recently, which the automated software banks increasingly rely on tends not to like. And these days banks, under close scrutiny from regulators, are less willing to bend when the computer models say no.

Nevermind former super-powered central bankers with million-dollar book deals. What’s it really like out there for everyday home owners and would-be buyers?

“For a lot of borrowers, rock-bottom interest rates are an attractive nuisance—they can’t get through all the hurdles to get them,” says Keith Gumbinger of HSH.com, which tracks data on mortgages. Access to the most affordable mortgages, says Gumbinger, currently starts at a relatively high credit score of 740. In the loosest environment, back when the bubble was blowing up, that number was 680.

According to the Mortgage Credit Availability Index, published by the Mortgage Bankers Association trade group, lending standards have been steadily easing over the past couple years. The index, which gets higher as loans become easier to get, stands at about 116, compared to 100 in 2012. But the MBA also says the index would have stood at above 800 had it been calculated back in 2006. So we are a long way from the old, easy standards.

Gumbinger says today’s standards should be seen in a longer historical perspective. Though they are much tighter than they were during the boom, they aren’t so different from standards seen in the 1980s and mid-1990s.

And people can get loans. The market for jumbo loans, which all but disappeared, is steadily coming back, says Gumbinger, as banks seek to add new loans to their own portfolios, and then cross sell other financial products to the affluent customers who qualify. Some required down-payments have fallen from above 20% to as low as 15%

And Gumbinger says people with a credit score as low as about 600 are often able to qualify for FHA loans.

Bernanke’s problems make for a funny anecdote, and speak to a frustration lots of would-be be borrowers are feeling. But things will likely continue to loosen up. Now that banks have largely gone through the low-hanging fruit of customers with impeccable credit, they’ll have to compete for a pool of somewhat-less-perfect borrowers. According to data from the mortgage software company Ellie Mae, the typical completed loan had a credit score of 727, compared to 742 in spring of last year.

Of course, the really big question is how much easier lending really ought to be. The easy credit of the 2000s created the housing disaster Bernanke spent his time at the top of the Fed racing to fix.

MONEY home improvement

What Your Contractor Really Means When He Says…

Speaking with contractor
Getty Images

Understanding these common contractor phrases can minimize hassle and save you big bucks.

Home improvement contractors talk a good game—sometimes without saying what they actually mean. So until someone invents an app for translating contractor-ese into plain English, here’s a handy cheat sheet of the hidden meaning behind several common contractor words and phrases that every homeowner should understand. (If you have other examples to share, please send them to realestate@moneymail.com.)

When He Says: “I” or “We”
He Really Means: My crew. I don’t actually do the work myself. I spend my time bidding future jobs, organizing them, and sailing my boat.
What You Should Say: “Who will be doing the work, you or someone who works for you?” Unless he says it’ll be him, ask if he will be there at the start of every day to direct the crew, especially if it’s a complex improvement project like a full-house renovation or addition that involves numerous tradesmen. If he says yes, hold him to that promise. If he says no, hire someone else.

When He Says: “If I were you, I’d skip the permit and save some money.”
He Really Means: It’s a heck of a lot easier for me if you don’t get a permit, because I can disregard building codes, skip a lot of paperwork and inspection appointments, and dollars to donuts, nobody will ever even confirm whether I have a contractor’s license. So, I’m going to play up the permit fees and red tape, both of which are actually minimal.
What You Should Say: “Thanks, but I’d rather pay now than pay later.” Getting the proper permits assures that you won’t have problems when you try to sell the house later on, a situation that can arise if you do certain improvement projects without getting a certificate of occupancy, the town’s final approval on a project that has been fully permitted and inspected.

When He Says: “No problem. We can do that instead.”
He Really Means: I am happy to adjust the project as we go, but I will definitely be charging you for any change you make to the original plans I priced out for you. I’m not mentioning that now because I don’t want to discourage you from making this or other changes, because repricing the job is a hassle I’d rather put off until later, and because in the unlikely case I underestimated some other part of your job, I can make up that cost in the price of the changes if I wait to give them to you at the end.
What You Should Say: “Great, but before we make that change, could you jot down a quick description of the new work and what it’s going to cost me?” If the contractor doesn’t want to execute a formal change order, a simple handwritten notation on the back of the contract will do the trick. Then you can both initial it, and there will be no confusion about what the contractor is doing or what you’re paying.

When He Says: “Hi, I just did a driveway [or insert other job here] in the neighborhood and have a load of leftover asphalt on my truck I need to get rid of, so I will give you a sweet deal to do your driveway today.”
He Really Means: Hi, I’m an unreliable and unprofessional contractor you’ve never met before—or I might even be an out-and-out scam artist—and I’m trying to entice you into making a bad decision with the promise of a big discount. I know that you’d never normally hire a contractor without getting recommendations and doing your due diligence, but I’m hoping to catch you off guard with my surprise approach, winning smile, and promise of huge savings. When you discover my work is shoddy, you’ll also realize you have no idea who I am or where to find me.
What You Should Say: “Thanks, but no thanks.”

MONEY Millennials

How Millennials Stalled the Housing Market Recovery

Wrecking ball hitting brick wall
Steve Bronstein—Getty Images

Millennials already have to deal with hefty debt from college, an iffy job market, and growing up in an era where MTV no longer plays music videos, but now they’re being blamed for holding back the real estate boom. Homebuilder adviser John Burns Consulting published details from a study earlier this month concluding that student loan payments will cost the housing industry 414,000 transactions this year that would have totaled $83 billion in sales.

Ouch. The ivory tower is crumbling at the foundation.

It’s been widely assumed that mounting student debt is eating away at this otherwise buoyant housing market recovery. John Burns Consulting’s study — boiled down to a free one-pager for those that aren’t paying customers that got the more thorough report — attempts to quantify the impact.

How did the adviser arrive at $83 billion? Well, we start with the 5.9 million households under the age of 40 that are paying at least $250 in student loan debt, nearly triple the 2.2 million leveraged college grads in the same predicament back in 2005. We then get to the assumption that $250 earmarked for student loan debt every month reduces the buying power of a potential homebuyer by $44,000. That’s bad, and it’s naturally worse depending on how much more than $250 a month some of these indebted students have taken on to pay back. That’s less money they can commit to a mortgage. John Burns Consulting offers up that most households paying at least $750 a month in student loan have priced themselves out of the housing market entirely.

It gets worse

The study only looked at folks between the ages of 20-40. That’s a pretty sizable lot, especially since 35% of all households in that age bracket have at least $250 a month in student debt. However, even John Burns Consulting concedes that there’s “a big chunk of households over age 40 who have student debt” as well. It’s not likely to be as bad, naturally, but it’s all incremental at this point.

This report also happens to come at a time when the housing industry is starting to flinch after a couple of years of boom and bounce. Right now everything seems great. New home sales data released this past week showed the industry’s highest monthly growth rate in more than six years. However, the near-term outlook is starting to get hazy.

Shares of KB Home KB HOME KBH -1.9778% shed more than 5% of their value on Wednesday after reporting uninspiring quarterly results. Revenue and earnings fell short of expectations, and the same can be said about its number of closings and order growth. Earlier this month it was luxury bellwether Toll Brothers TOLL BROTHERS TOL 0.2346% setting an uneasy tone after posting a year-over-year decline in the number of contracts it signed during the period and an uptick in the cancellation rate for existing home orders.

It gets better

The student debt crisis is real, and the skyrocketing costs of obtaining a postsecondary education naturally open up the debate of its necessity. However, it’s also important to remember that university grads are earning far more than those that don’t attend college.

Source: U.S. Department of Education, National Center for Education Statistics. (2014). The Condition of Education 2014 (NCES 2014-083), Annual Earnings of Young Adults.

The median of annual earnings for young adults in 2012 was $46,900 for those with a bachelor’s degree, $30,000 for those with just a high school degree or credential and $22,900 for those who did not complete high school. Those going on to grad school for advanced degrees — and that’s where student loans can really start to pile up — are at $59,600 a year.

In other words, most college grads, and especially grad school graduates, are typically better off than those that didn’t pursue higher education, even with the student loan albatross around their white-collared necks. The housing industry would be better off if colleges were cheaper or if student debt levels were lower, but the same can be said about purchasing power in general. At the end of the day, debt-saddled or not, the housing industry needs its college graduates.

MONEY

Former Federal Reserve Chair Ben Bernanke Can’t Refinance His Home

Even former central bankers can't get a loan

If you’ve failed to get a loan in this market, don’t feel too bad. Not even central bankers can catch a break–as Ben Bernanke, who chaired the Federal Reserve from 2006 through February of 2014, recently revealed that he has been unable to refinance his home.

“Just between the two of us, ” Bernanke told the moderator at a recent conference of the National Investment Center for Seniors Housing and Care, “I recently tried to refinance my mortgage and I was unsuccessful in doing so,” Bloomberg reports.

The audience laughed.

“I’m not making this up,” Bernanke insisted.

Bernanke also complained that stringent credit standards have made the process for first-time homebuyers excessively difficult, especially as economic conditions have improved. “The housing area is one area where regulation has not yet got it right,” Bernanke said. “I think the tightness of mortgage credit, lending is still probably excessive.”

As of press time, there is no word on whether current Federal Reserve Chair Janet Yellen has been denied for an auto loan.

[Bloomberg]

MONEY buying a home

How to Get Ready to Buy a Home

Checking your credit report and getting pre-approved for a mortgage are key, says Century 21 CEO Rick Davidson.

MONEY home improvement

5 Ways to Refresh Your Bathroom On a Budget

Since bathrooms are typically small spaces, even relatively simple and affordable changes can make a big impact. Here are 5 ways to update an old washroom without breaking the bank.

  • Pick a Pattern

    Capitol Hill by Hyde Evans Design.
    Hyde Evans Design. Courtesy of Porch.

    Hanging wallpaper can be an expensive undertaking. Not only is the paper costly, sometimes the walls need to be professionally prepped prior to application. To lower your costs, consider covering less space. Often you need pattern on only a single wall to achieve the look. Also, since wallpaper is typically sold in standard widths and by the roll, it’s possible to comparison shop numerous retailers for the best price. (Many suppliers can help you calculate how many rolls you need if you provide the wall dimensions.)

    Self-adhesive paper that is designed for high-moisture areas is best for the room, and easiest to apply.

    Pro tip: Really on a budget? Spread out the pattern and use a painted stencil or vinyl stickers that mimic a repeated pattern.

    Cost: Wallpaper starts around $30 per roll but can be as much as $300 (confirm with the retailer how many square feet each roll covers). Vinyl stickers run about $10 per sticker.

  • Frame Your Mirror

    Donald Drive by Rossington Architecture.
    Rossington Architecture. Courtesy of Porch.

    Every bathroom deserves a beautiful mirror. It will create a larger sense of space, and reflect light into the room, making it appear brighter. Yet often homes include builder-grade mirrors that are plain and lack a frame. You can upgrade such a mirror fairly easily by creating a frame around it to give it a custom look. Or take your existing frame and spray paint it for a pop of color.

    Pro tip: If your bathroom lacks space, consider replacing your existing mirror with a wall-mounted medicine cabinet.

    Cost: Use primed molding trim from the hardware store, which will be able to cut it to size. Trim is sold by the linear foot; expect to pay around $20 for an 8-foot long piece.

     

  • Add More Lighting

    City Glamour by NB Design Group, Inc.
    NB Design Group. Courtesy of Porch.

    A bathroom loses its functionality when it lacks quality lighting (and you lose your ability to gauge what you really look like). For the best results, you’ll want lighting overhead and on either side of the mirror. Make sure the fixtures are using the correct bulbs. If you choose to upgrade your fixtures, consider chandeliers and pendants, which can add elegance to a bathroom, particularly if your ceiling is tall. Just make sure any new fixtures are bathroom approved, and properly installed by an electrician who understands the correct UL listing for lights being installed in a wet zone.

    Pro tip: the best light for the bathroom is a cool, bright white or daylight bulb with a high color rendering index (CRI). This type of bulb will most accurately reflect natural daylight.

    Cost: Pendants and sconces can range from $50 to $500 and higher. Be sure to factor in the cost of hiring an electrician.

  • Freshen the Hardware

    East Hampton by Benco Construction.
    Benco Construction. Courtesy of Porch.

    Bathroom fixtures including hooks, handles, faucets and soap dispensers can be quickly and easily replaced and will give the space an updated feel. Most bathrooms look their best when all of the metals match in color and finish. Thus the sink faucet should generally coordinate with the shower and bathtub faucets; cabinet pulls, hooks, shelving brackets and towel racks also should have a similar style. What doesn’t need to perfectly coordinate: bathroom door knobs, which should generally match the door knobs of nearby rooms.

    Consider hanging new fixtures such as shallow shelving or towel racks or bars to make the space more functional.

    Pro tip: most fixtures are sold in coordinating families, which are ideal if you don’t have time to shop around or the desire to play interior designer.

    Cost: Expect to pay between $100 and $200 for a new sink faucet or a shower faucet. New cabinet pulls run from about $4 to $10 per item.

  • Brighten Your Surfaces

    Country Elegance by Walker Woodworking.
    Walker Woodworking. Courtesy of Porch.

    Time and limescale damage the glow of your sink, shower, toilet or tub. Return the items close to their original brightness by using an over-the-counter product to remove accumulated calcium or rust deposits from ceramic surfaces. Look for a cleaning solution, like this product from Lowe’s , that specifically targets calcium, lime and rust.

    If you are looking to replace the tile in your bathroom and consider yourself fairly handy, try adding a glass mosaic tile on a backsplash to create an accent.

    Pro tip: If elbow grease isn’t brightening your toilet, consider replacing the toilet with a newer model. If it was made before 1990, a new low-water use toilet may lower your water bill.

    Cost: A cleaning product to remove built-up calcium deposits runs about $10 per gallon. A new toilet starts at around $100.

    More from Porch:

    What You Need to Know Before Buying a Historic Home

    Insulation Projects: DIY or Hire A Professional?

    Anne Reagan is the editor-in-chief of home website Porch.com.

MONEY buying a home

Rupert Murdoch Wants to Sell You Your Next Home

News Corp. has acquired Move Inc., putting Murdoch's business in the thick of the online listings war.

UPDATE—3:28 P.M.

Home buyers take note, your next house could come courtesy of the Murdoch empire. On Tuesday, the Australian billionaire’s News Corp announced it was buying Move Inc., the real estate listings company that owns Move.com, Realtor.com, and other online listings websites, for $950 million.

While Move is hardly the market leader among listing websites—competitors Trulia and Zillow account for 71% of traffic to ComScore’s real estate category—it long claimed to be the most accurate. Thanks to an agreement with the National Association of Realtors, the company’s sites have partnerships with more than 800 multiple listings services, which provide real estate listing information as soon as a home comes on the market. Zillow and Trulia have previously been dinged for out-of-date information, and Zillow CEO Spencer Rascoff raised eyebrows when he appeared to suggest that fixing stale listings wasn’t one of the company’s top priorities. (Zillow has stressed that the CEO’s statement was taken out of context, and emphasized their constant effort to improve listings.)

But despite Move’s data advantage, and recent ad campaigns stressing its superior accuracy, taking on Trulia and Zillow has been an uphill battle. That battle became even more difficult in July, when Zillow purchased Trulia for $3.5 billion, creating an online real estate behemoth. News Corp’s entrance into the market may finally give Move the marketing muscle to fight back. News Corp. CEO Robert Thomson signalled the company’s dedication to Move’s business, stating that the acquisition would make “online real estate a powerful pillar of our portfolio.” He also indicated the company will strongly support Move’s brand. “We intend to use our media platforms and compelling content to turbo-charge traffic growth and create the most successful real estate website in the U.S.,” said Thomson.

A News Corp-powered Move might ultimately be a boon for homebuyers by reducing Zillow/Trulia’s hold on the online listings market. When Zillow’s purchase of Trulia was first announced, some worried the new company would have more leverage to charge real estate agents higher advertising fees, and that this charge might be passed on to the consumer. More robust competition may give agents more options for online advertising and reduce Zillow/Trulia’s bargaining power. However, other experts believe the News Corp. acquisition will have little real effect on consumers. Jonathan Miller, CEO of Miller Samuel Inc, told MONEY the Move acquisition is unlikely to be felt by your average house hunter.

“I think what you’re seeing is [the housing market] improve,” said Miller. “There’s more focus on the housing sector, there’s a lot of cross branding opportunities with News Corp. and their holdings with real estate, but I don’t see it having any real impact on transactions. I don’t think the consumer is going to see this.”

MONEY home improvement

This Simple Trick Makes Taking Out the Trash Easier

Taking out garbage
Corbis

You may be tempted to send your trash can to the curb if it isn't functioning well. But now that new bins often run more than $100, first try this trick to improve your current can's performance.

If you haven’t shopped for a new trash bin recently, you may not know that they’ve apparently gone high-end, with prices running as high as $150. Yet sometimes removing a trash bag from even a fancy garbage can feels like a wrestling match. It seems like the bag is stuck in the can. Turns out it’s not that you overstuffed the bag, or loaded it with brick—it’s air pressure. When a filled trash bag is in the garbage can, the sides of the bag create air pressure within the can, making it difficult to remove the bag.

Fortunately, a simple solution exists. Watch this video to learn the trick. I’m sure there are many other ways you’d rather spend $100 that don’t involve your trash.

 

 

More from Porch:

This Outlet Will Change The Way You Plug In

Open House Tips That Help You Sell Fast

 

Anne Reagan is the editor-in-chief of home website Porch.com.

MONEY home improvement

How $10,000 to $100,000 Transformed These Homes

These homeowners made every corner count with impressive top-to-bottom remodels. Here are the before-and-after photos, and the project's cost, favored by the editors' of This Old House magazine in their Search for America's Best Remodel Contest.

For the full gallery of all 20 homes, as well as additional photos of the projects shown here and more comments from the homeowners, click here for the original story at thisoldhouse.com.

MONEY buying a home

The Surprising Feature Millennials Insist on When Buying a Home

Century 21 CEO Richard Davidson explains what young, single home buyers value in a new house.

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