MONEY mortgages

Here’s How Long It Will Take to Get a Mortgage

141020_REA_TimeMortgage
Dougal Waters—Getty Images

Banks are asking for a lot of documents these days, so don't assume the process will be speedy.

You’re scrolling the online listings, looking for houses, when — boom — the love of your real estate life pops out from the page. You’ve found the perfect home, with the best imaginable location, layout, size, finishes, and price. You’re ready to buy.

Just one problem: You haven’t started looking for a loan yet. And the seller will only accept offers from pre-approved buyers. Unfortunately, you won’t be able to make that happen by tomorrow.

Getting a loan, even a pre-approval, doesn’t happen overnight. There are key hoops you must jump through. How long should a borrower expect each step to take? And why must you start before you begin your hunt, especially in a competitive market? Let’s take a look.

Step 1: Comparison shopping for loans.

It’s unlikely you would buy a car, piece of furniture, or appliance without shopping around. You definitely shouldn’t take on a 30-year loan without some serious research.

Search for mortgage providers online, and visit a local bank or credit union. Schedule a meeting with a mortgage loan officer, who will pull your credit (more on that below) and give you a reasonable estimate of the interest rate, closing costs and terms you can expect. Then expand your search to other financial institutions, including community banks or other credit unions, or continue looking online, and compare the terms you’re offered from each bank.

Although each lender will look up your credit information, you don’t need to worry every inquiry will hurt your credit score. The Fair Isaac Corporation, or FICO, allows people to “rate-shop” for a mortgage without dinging their credit scores, as long as you do all of your shopping within a 14-day window. Abide by that timeline and the credit bureaus will regard that first credit pull as a “ding” but ignore the subsequent ones.

Helpful tip: When comparing lenders, pay attention to the annual percentage rate (APR), not just the interest rate. The APR covers the “total cost” of borrowing, including loan origination fees and other ancillary costs.

Total Time: 14 days.

Step 2: Get a pre-qualification letter.

Most buyers will require your pre-qualification letter before they’ll even consider your offer — but don’t worry, this step is quick and easy.

Ask any of the lenders with whom you spoke to during your mortgage shopping spree for a pre-qualification letter. These are relatively easy to get and simply give a rough, unverified estimate of the loan size you may qualify to receive. Most lenders will give you a pre-qualification based on your verbal self-reporting of your income, assets, debts, and down payment size.

Helpful tip: You don’t need to take out a loan from the same lender that gave you your pre-qualification letter.

Total Time: one to three days (overlapping with the timeframe for the first step)

Step 3: Get pre-approved.

The pre-approval stage is when lenders verify everything you’ve told them. You’ll need to supply identification documents such as your Social Security card, proof of income, assets, and employment, as well as records of any debts you hold. The lender will pull a credit report.

If you have a simple situation, such as stable employment with no debt, this process can be as short as one to two weeks. If you’re self-employed, own several other houses, have had a previous divorce or bankruptcy, have a pending court case or lawsuit against you, are in the U.S. on a temporary visa, or have other complicating factors, the loan officer may require additional documentation, which can extend the process several weeks or months.

Once you’re pre-approved, you’ll receive a conditional letter stating the exact amount of loan for which you’re approved.

Helpful tip: All else being equal, sellers often prefer to work with buyers who have pre-approval letters, rather than pre-qualification letters, particularly in a competitive market where homes get multiple bids.

Total Time: one week to several months

Step 4: Final loan approval.

Armed with your pre-approval letter, you make an offer on your dream home and it’s accepted. (Hooray!) Next, you’ll need the lender to conduct an appraisal.

In this instance, an appraisal is official verification that you’re buying the home at a reasonable market value. It protects the lender from the risk of loaning an unreasonable sum, such as $300,000 on a house that should be valued at $220,000.

Scheduling a time for a licensed appraiser to visit the property is frequently the longest part, and may take up to two weeks (depending on availability in your area, as well as the flexibility of the seller). Once the appraiser makes a home visit, the approval (or rejection) comes through within a day or two.

Time: three days to two or more weeks

The good news? Now that you’ve passed the appraisal process, you’re ready to close on this loan — and this house. Enjoy the moment, before you have to start packing.

 

To read more from Paula Pant of Trulia, click here.

 

Related:

How do I get the best rate on a mortgage?

Which mortgage is right for me?

MONEY buying a home

When You’re Better Off Renting A Home Than Buying One

141017_REA_RentingOverBuying
Phoenix, Arizona. Dennis MacDonald—Alamy

Today it typically costs less to buy a place than rent one, but exceptions exist. Your situation may be one of them.

It remains cheaper to buy than rent in every one of the country’s 100 largest metro areas, according to new Trulia research. In fact, homeownership nationwide has actually become a sweeter deal, coming in on average 38% cheaper than renting today, compared with 35% one year ago, thanks to falling mortgage rates and rents rising faster than prices.

Just how much cheaper it is to buy than rent varies by area, coming in at 17% cheaper in Honolulu and 63% in Detroit (find the data for all 100 metro areas here). But those figures were calculated assuming the buyer used a traditional 30-year fixed rate mortgage with a 20% down payment. Yet there may be good reasons for financing a home purchase other ways, particularly if you’re a first-time buyer without savings or equity from another home. Or maybe you want to pay all cash in hopes of beating out other bidders in a competitive environment. Are you still better off in most cities buying than renting if you use these non-traditional payment options?

The Pros and Cons of Different Types of Mortgages

Let’s look at how the different payment options play out for a $250,000 home that the owner sells after seven years. To keep things simple, let’s start out ignoring closing costs, home price appreciation, tax benefits, and many other things we do account for when we add these scenarios to our full Rent Versus Buy model, below.

  1. A traditional 20% down, 30-year fixed-rate loan on a $250,000 home would carry a $990 monthly mortgage payment, including principal and interest. After seven years, the unpaid loan balance is $173,291, leaving equity of $76,709.
  2. All cash is just what it sounds like. You pay $250,000 upfront and that’s all equity at the end.
  3. For a 15-year fixed-rate loan, you still put 20% down. The average mortgage rate on a 15-year fixed-rate loan is almost a full point below that of the 30-year fixed rate. But the shorter term means a higher monthly payment of $1,428. The payoff is that the 15-year loan builds equity much faster: $130,507 after seven years.
  4. A 10% down payment loan with private mortgage insurance requires less money upfront. But the higher initial loan balance means a larger monthly payment plus a mortgage insurance premium of $133 per month. Furthermore, the lower down payment and higher loan balance leave equity of only $55,048 after seven years.
  5. A 3.5% Federal Housing Administration (FHA) loan calls for a down payment of only $8,750 but requires upfront and ongoing mortgage insurance premiums. The higher initial loan balance means equity of just $38,748 after seven years. That’s about half what you’d have with a traditional 20% down, 30-year loan.
Understanding the Financing Options
For a $250,000 home Traditional 20% down, 30-year fixed All cash 15-year fixed, 20% down 10% down, private mortgage insurance 3.5% down FHA
Down payment $50,000 $250,000 $50,000 $25,000 $8,750
Monthly payment (incl. mortgage insurance) $990 - $1,428 $1,247 $1,441
Equity at 7 years (no appreciation) $76,709 $250,000 $130,507 $55,048 $38,748
Note: Monthly payment is principal, interest, and mortgage insurance premium. Mortgage rates for the traditional 20% down 30-year fixed (4.30%), 15-year fixed (3.48%), and FHA (4.00%) loans are from the Mortgage Bankers Association for the week ending October 3. We use the same rate for a 10% down payment loan as the traditional 20% down payment rate, based on current rate quotes. Monthly payment includes mortgage insurance calculated for the first year of the loan. For FHA loans, the insurance premium falls over time but remains on the loan; the FHA upfront premium is rolled into the loan balance. For the 10% down loan, we assume insurance gets taken off when equity reaches 20%. All dollar amounts are rounded to the nearest dollar.

When deciding whether buying still beats renting with each of these financing options, the math gets complicated. For starters, the benefits of each option depend on how you would invest your money if you weren’t buying a home – that’s the “opportunity cost.” In addition, other factors, such as whether you itemize your tax deductions, also affect the relative benefits. Our Rent Versus Buy model factors all this in. So let’s see the results.

When Buying Is an Even Better Deal – And a Bad Idea

Remember that buying is 38% cheaper than renting nationally under our baseline model of a 20% down payment 30-year loan, tax deductions at 25%, and staying in the home seven years. Under all five of these non-traditional financing options, buying still beats renting. The gap is widest for the 15-year loan, where it’s 43% cheaper to buy. It’s narrowest for the 3.5% FHA loan, where buying is 25% cheaper.

mortgage type graphic

 

The 15-year loan ends up costing the least versus renting thanks to faster equity build-up and more of the mortgage payment going to principal rather than interest. Surprisingly, all-cash is a worse deal than a traditional 20% down, 30-year mortgage, although that hinges on our assumption about what you could earn if you didn’t tie up your money in an all-cash payment. (Geeks: we’re assuming a 3.5% nominal discount rate.) In addition, if you pay all cash, you lose the tax benefit of deducting mortgage interest. If you assume tax deductions aren’t itemized, there’s no tax benefit of getting a mortgage, which makes all-cash a better deal than a traditional 20% down, 30-year fixed rate mortgage.

The biggest shift is with the 3.5% down FHA loan, which makes buying only 25% cheaper than renting. In one of the 100 largest metros, Honolulu, buying with a 3.5% FHA loan is actually more expensive than renting. And, with this loan, buying beats renting only by 10% or less in San Francisco, New York, Los Angeles, and several other California metros.

Going further, it’s not hard to come up with realistic scenarios where buying costs more than renting in many local markets. For a millennial with little savings and no Bank of Mom and Dad, an FHA loan might be the only option. If our hypothetical twentysomething is not in a tax bracket that makes itemizing worthwhile and only stays put five years (those young people are restless), buying ends up costing more than renting in 27 of the 100 largest metros. Those 27 include not only pricey coastal markets, but also in markets like Phoenix, Las Vegas, and Colorado Springs. On the expensive coasts, it’s not even close. For instance, in this scenario, buying costs 30% more than renting in Orange County. Thus while an FHA loan might be within reach for many first-timers, in many costly parts of the country, it doesn’t make buying cheaper than renting. Our interactive map shows this for all the 100 largest metros:

 

blogpost map no 2

So, to buy or to rent? Falling mortgage rates and rising rents mean that buying looks even better versus renting than one year ago, especially in California. But buying is not for everyone. If you live in a market that’s a close call, and you plan to stay less than seven years, don’t itemize your tax deductions, or need an FHA loan, buying might not be the clear-cut winner, and could end up costing far more than renting.

 

To see the full post, including rent vs. buy figures for the 100 largest metros as well as methodology details, click here.

To read more from Jed Kolko of Trulia, click here.

Related:

MONEY 101: Should I rent or buy?

MONEY 101: What mortgage is right for me?

MONEY buying a home

Why Firemen Are More Likely to Own a Home than Economists

Firefighters
Many public service workers such as firemen own their homes. Michael Dwyer—Alamy

A new study shows which professions are most- and least- likely to be homeowners. The results may surprise you.

What do firemen, police officers, and farmers have in common? They’re all more likely to own homes today than economists, jewelers, and accountants.

These are the results from a newly released study, done by Ancestry.com, looking at the relationship between profession and home ownership today and over time. The website teamed up with the University of Minnesota Population Center to analyze Census data between 1900 and 2012, creating a century-spanning log to show how ownership changed over the decades.

Looking at the most recent 2012 data, the research found that 79% of policemen and detectives own a home, yet only 64% of economists do. Farmers (81%) and firemen (84%) are in the top ten professions most likely to own a house, ranked above jobs like accountants (76%), and far higher than members of the armed forces (33%). Nationwide, the data shows 64% of the population owns their home.

Another surprising finding: the stereotype of the starving artist isn’t necessarily reflected in the data—at least for some industries. It turns out 63% percent of artists and art teachers own homes, as well as 62% of musicians and music teachers, 63% of authors, and 57% of entertainers. It’s not all roses for the artistic class, though. Just 37% of actors and actresses own a house, and that number sinks to 23% for dancers and dance teachers.

Toddy Godfrey, a senior executive at Ancestry.com, points out that there are both high and lower income professions on the most-likely-to own list, suggesting there isn’t a direct relationship between high wages and ownership. Typically lucrative professions like optometry tend to own, but so do lower-paid trade and public service workers.

“You look at some of the jobs on the top of the list, and they’re clientele based, or teachers, or others who are community rooted,” says Godfrey. He speculates that professions most likely to own “have a long-term connection to the community they live in.” That reasoning may also explain why tradesmen tend to buy instead of rent. Godfrey guesses many of these workers are tied to regional manufacturing, and therefore are more likely to set down roots.

Another trend the data suggests is that temporary and highly mobile workers tend to avoid homeownership. That could explain why so few military service members own houses, as they can be redeployed elsewhere and may choose to move once their service ends.

Finally, Godfrey highlights the fact that while ownership took a hit in the bust, the majority of Americans own their home. That’s up from 32% in 1900, though most of the growth happened pre-1960. “Maybe it’s come down a point in the last few years, but it’s held pretty steady at two thirds,” says Godfrey.That trend has been pretty constant.”

Top 10 Professions for Home Ownership in 2012

1. Optometrists: 90%

2. Toolmakers and Die Makers/Setters: 88%

3. Dentists: 87%

4. Power Station Operators: 87%

5. Forgemen and Hammermen: 84%

6. Inspectors: 84%

7. Firemen: 84%

8. Locomotive Engineers: 84%

9. Airplane Pilots and Navigators: 83%

10. Farmers: 81%

Bottom 10 Professions for Home Ownership in 2012

1. Dancers and Dance Teachers: 23%

2. Motion Picture Projectionists: 27%

3. Waiters and Waitresses: 27%

4. Counter and Fountain Workers: 28%

5. Members of the Armed Forces: 33%

6. Service Workers (except private households): 34%

7. Bartenders: 35%

8. Housekeepers and Cleaners: 35%

9. Cashiers: 36%

10. Cooks (except private households): 36%

MONEY home financing

If You Still Haven’t Refinanced, Now’s a Good Time (Again)

hand turning over house picture on cards
Mark Hooper—Getty Images

Homeowners who missed the last refinancing boom are being given another chance, albeit not quite as sweet as the last one.

Growing fears over the health of the global economy are sending ripples far and wide. Along with Wednesday’s cratering stock market and worrisome bond yields comes another consequence, albeit one that may carry a silver lining for some: Mortgage rates are at their lowest levels since June 2013.

According to mortgage website HSH.com, the rate on a conforming 30-year-fixed loan has dropped to about 4%, after hovering around 4.25% for most of the summer. That’s still well above the 3.5% some fortunate homeowners snagged back in late 2012, but certainly lower than where many economists expected rates would be today.

What’s behind the drop? “Growing concerns about weak economic growth in Europe caused a flight to quality into U.S. assets last week, leading to sharp drops in interest rates,” Mortgage Bankers Association chief economist Mike Fratantoni noted in a statement. The 30-year fixed rate tends to move in the same direction as 10-year Treasury yields, which fell below 2% on Wednesday morning for the first time in 16 months.

If you are among the homeowners who never took advantage of the historically low rates during the last refinancing boom, now could be your opportunity. Maybe you simply never got around to it (the so-called “failure to refinance” that strikes approximately 20% of homeowners who stand to benefit)—or, more likely, you didn’t qualify then. The good news is, now you might get approved.

“Some people over the last six months may have had things align so they can qualify,” says Keith Gumbinger, vice president of HSH.com. For example, previously you may have had a credit score below 740, the minimum threshold often required for the best rates. Or you didn’t have enough equity in your home; most lenders require a stake of at least 10% to 20%. The median home price nationwide, though, has shot up an average of 42% since its January 2012 bottom, according to the National Association of Realtors. That spike lifted millions of homeowners—nearly one million in the second quarter alone, according to Corelogic—out from underwater loans, meaning they no longer owe more on their mortgage than the place is worth.

Or maybe, like former Fed chairman Ben Bernanke, you’d just changed jobs last time and now have the two-year employment history lenders like to see.

“Is the drop in rates enough to drive a substantial amount of people into the marketplace? No,” says Gumbinger. “But it could open the window to a few stragglers.”

HSH.com offers calculators to help homeowners decide if the savings will be significant enough to make a refi worthwhile. A general rule is that you should aim to shave at least one percentage point off your current rate to benefit, Gumbinger says, although the sweet spot will vary depending on your goals, such as whether you’re aiming for a lower monthly payment or to pay less in total interest over the life of the loan.

Another potential opportunity for savings: refinancing into a shorter loan, such as a 15-year fixed mortgage, which runs about 3.35% today. If you’ve been in your home for a few years, you may find that a 15-year product offers a slightly lower monthly payment, as well as shaves thousands of dollars off the total interest.

Of course, you may be wondering if you should wait in case rates drop further yet. Gumbinger suggests that if you see a deal that works for you today, grab it. “American mortgage borrowers are benefiting from the trouble in the world,” he says. But there’s no telling how long that benefit will continue.

Related:
Money 101: What Mortgage Is Right for Me?
Money 101: How Do I Get the Best Rate on a Mortgage?
Money 101: How Much Will My Closing Costs Be?

MONEY Ask the Expert

What You’ll Pay to Keep Your Power On This Winter

For Sale sign illustration
Robert A. Di Ieso, Jr.

Q: I’m sick of candles, flashlights, and spoiled food. How much do I need to spend for a generator that will keep the power on no matter what Mother Nature throws at us this winter?

A: You’re smart to think about this now because by the time the first storm hits, you may find the local home center cleaned out of generators and face a long wait for an electrician. You have three basic generator options at three different price points, says master electrician Matt Tomis of Fairfield, Connecticut.

1) Portable Generator with Extension Cords

The lowest-cost approach is to simply purchase a portable, gasoline-powered machine, which will run $400 to $1,200 for 5,500 to 6,500 watts. You’ll also need several heavy-duty exterior-grade extension cords, which typically cost $30 to $40 each for a 50-foot cord.

Works for: Your fridge (you’ll have to roll it out of its cubby-hole to connect the cord) and some lamps and other plug-in devices.

What it won’t power: No hardwired equipment, meaning it doesn’t plug-in, such as the heat or ceiling lights. “And no sensitive electronic device, such as a TV or computer, because emergency generators produce dirty power, meaning it’s prone to mini-surges, sags, and spikes that can damage your equipment,” says Tomis. (If you want to safely plug in electronics, you would need to invest in what’s known as an inverter generator, which runs $2,000 to $4,000.)

Inconvenience factor: High. You need to keep plenty of gas on hand (with gas treatment added to keep it from going stale), and you need to start the generator each month all year round and run it for a few minutes to keep it at the ready. Then when an outage strikes, you have to wheel out the generator, pull-start it, and run your cords—taking care to keep the generator 10 feet from the house to avoid letting carbon monoxide inside. You may also want to chain the generator to a tree if you think someone might take it in your area.

Total cost: $600 to $1,400.

2) Portable Generator with Transfer Switch

This approach combines a slightly more powerful gasoline-powered portable generator with a minor electrical rewiring project that allows you to jack the generator right into the side of your house and run certain, pre-selected household circuits. Figure the stronger 6,500 to 7,500 watt machine will run $600 to $1,500, plus you’ll spend $1,200 to $1,500 for the electrical work.

Works for: Your electrician will help you choose circuits for hallway and kitchen lights, heat, hot water, microwave, refrigerator, and sump pump—and tell you exactly what size generator you need to power them.

What it won’t power: Unless you spring for an inverter generator, the electricity still isn’t clean enough to safely operate computers, televisions and other delicate electronics. Also the portable generator isn’t powerful enough to operate your air conditioning, something you may care about if you live in a warm climate.

Inconvenience factor: Moderate. Similar to the first, less expensive option, you need to wheel out your gasoline powered generator (which you’ve been starting monthly all year long), keep fresh gas handy, and lock it for security. But attaching it to the house inlet is far simpler than running extension cords.

Total Cost: $1,800 to $3,000.

 

3) Automatic Whole-House Generator

Your best yet priciest option is a natural gas or propane powered generator that’s large enough—and produces clean enough energy—to run every single circuit in your house, and automatically takes over when you have a power outage. You’ll pay around $11,000 to $15,000 for one fit for a 3,000 square foot house, including the generator, wiring, and gas-line connection, or perhaps $22,000 to $26,000 for a large manor house.

Works for: The clean, steady power can run everything in your house—plus all of your neighbors’ phone chargers.

What it won’t power: Even with all of your electronics up and running, this generator can do nothing, of course, about phone, cable, and Internet service interruptions.

Inconvenience factor: None. There’s no gasoline to buy, no pull-cord to yank on, and the unit even starts itself every week and conducts a self check. You can even get a text if there’s any problem that requires a visit from a technician. Of course that convenience comes at a price.

Total Cost: $11,000 to $15,000.

 

Got a question for Josh? We’d love to hear it. Please send submissions to realestate@moneymail.com.

MONEY Face to Face

Here’s What to Say When a Nosy Friend Asks How Much Your House Cost

what to say when someone asks how much your house cost
mattjeacock—Getty Images

Keep these three responses in your back pocket to get you off the hook.

More than 3 million homes have been sold in the U.S. so far in 2014, according to the National Association of Realtors. And if you’re among those who recently purchased, you’re likely still celebrating and decorating your new digs.

Before you’ll have even hung pictures on the walls, however, you’ll surely have to deal with this awkward question from some prying family member, friend or neighbor: “How much did you pay for this place?”

People pose the question for different reasons. For example, it may be that your friends from the city are thinking of moving to the suburbs, and want to get a sense of what they could get for their money, says clinical psychologist and financial coach Eric Dammann.

Or it may simply be good old-fashioned competition.

“A lot of times nosy questions have to do with low self-esteem and how we measure up,” says Dammann. “From childhood on, we’re always comparing ourselves to other people. In adulthood, one of the ways to compare ourselves is money.” In such cases, sharing numbers may heighten tension and envy between friends.

Assuming the person who’s asking is someone you know—as opposed to a nosy neighbor over the hedgerow—you probably have a sense of what’s motivating the question, and whether you feel comfortable answering. If you don’t feel comfortable, you shouldn’t feel pressured to divulge. Here are three ways you can avoid revealing what you paid, without leaving the person feeling dissed:

USE YOUR SPOUSE FOR BACKUP: “Jim and I decided that we wouldn’t talk about the price.”

One option is to use a non-disclosure pact with your partner as an excuse, says Laurie Puhn, a professional couples mediator and author of Instant Persuasion: How to Change Your Words to Change Your Life. This takes a bit of the pressure off you, laying some of the blame instead on your partner (who is hopefully not present in the moment). Also, your unified front will seem more impenetrable to a pushy pal.

“You don’t want to come off as dishonest,” says Puhn. “So discuss in advance with your husband or wife what you’re going to tell other people, and in the moment, use your partner as an ally.”

KEEP IT LIGHT: “How much did we pay? More than I would have liked!”

A joke can do double duty, diffusing tension and tacitly conveying that you’d prefer not to respond. While this response is more subtle, “most people will pick up on the cue,” says Dammann.

Still, since it’s not direct, you might want to change the subject quickly.

An easy way is to use your joke as a jumping off point for a conversation about the real estate market. For example, “I just read that the price of existing homes year-over-year has been on the rise for 30 consecutive months. Can you believe that? And there’s so much competition in our little town—our realtor was telling us about a house that got four offers after the first open house!”

TELL THE TRUTH: “I’m sorry, I’m not really comfortable talking about the cost.”

If your friend really presses you, you don’t need to be dodgy. Just be honest. This comes off as authentic, since you’re talking about your feelings. And you’re putting the questioner in a bind—by pushing for a response, he or she knows that he will be making you even more uncomfortable since you’ve already said so.

Keep in mind that if your friend really wants to know what you paid, there are other ways of finding out, since real estate transaction information becomes public record. But that doesn’t mean you need to discuss the cost. “Just because you’re asked a question doesn’t mean you have to answer it,” says Puhn.

MONEY Budgeting

Guess Which U.S. City Is the Most Expensive

141014_REA_EXPENSIVELIVING
Nikreates—Alamy

Hint: It's not NYC.

On average, American households spend the largest share of their annual expenditures on housing. The average family spends $16,887 on housing per year, equating to 33% of the average household’s annual expenditures. But how much do those expenses vary from city to city, and which places are the most expensive?

Well, the Bureau of Labor Statistics recently released a report (link opens PDF) detailing Americans’ average annual expenditures on housing and related items. And contrary to popular belief, New York City is not the most expensive city to live in. Two U.S. cities have overtaken it.

A breakdown of housing costs

The BLS took a deep dive into all the costs of housing, rather than simply comparing the cost of rent or average mortgage payments. Their analysis also took into account utilities (electric, water, and natural gas), household furnishings and equipment (textiles, furniture, floor coverings, appliances, and the like), housekeeping supplies, and other household expenses. What they found was that average annual expenditures on housing were far higher in both Washington, D.C., and San Francisco than in New York.

most-expensive-city-no-longer-nyc_large
Source: Bureau of Labor Statistics.

The data is current as of 2012, and housing costs in the District of Columbia and San Francisco have risen since then. In D.C., the rise in housing costs is being led by the redevelopment and gentrification of the downtown area, which in turn is being triggered by the high relative number of government and government-related jobs, particularly in the defense contracting sector. Baby boomers are also moving from the suburbs into the city.

In San Francisco, housing costs have always been high, but they’re spiking because of a confluence of factors. The continued boom in technology companies in Silicon Valley — most notably Apple, Google, and Facebook — means that a growing cadre of high-paid employees want to live in the area. Add in a longtime lack of housing development in the city, and you have a rise in housing prices that has become a contentious issue in the San Francisco Bay area as longtime renters are priced out of the city. TechCrunch’s Kim-Mai Cutler provides a great, in-depth piece on San Francisco’s housing problem.

The difference in annual housing costs between the two most expensive cities and the national average is a staggering $10,000. Excluding New York City, the difference between the two most expensive cities and other major U.S. metropolitan areas is over $5,000 annually. If you’re thinking of moving, it’s smart to compare costs carefully before moving to one of the most expensive cities in the U.S.

National differences in housing cost

While the above data is just from major U.S. cities, we have other data from the Bureau of Economic Analysis showing the real value of housing dollars in each state compared with the national average.

real-value-of-housing_large

You can see that generally, coastal states are more expensive than non-coastal states, as many people enjoy living near the ocean. You can also see that the Northeast on average is more expensive than the rest of the country except for California. These high costs, coupled with better weather and low to no income taxes, are why many retirees move south to Florida, Texas, etc.

If considering moving to a more expensive city, you should be sure the benefits will be worth the extra expense. For instance, while I pay a high cost of living to live in New York City, the quality of life that I get in the city makes it well worth it, in my opinion. While New York state is ranked poorly in terms of the happiest states in the U.S., New York City is ranked in the top quartile by happiness among U.S. cities, according to the Gallup-Healthways Well-Being Index.

The most important thing is to live in a place where you are happy. While the main determinants of happiness are the same for everyone, the specifics vary. Be sure that an increased cost of living comes with an increased quality of life.

MONEY home improvement

5 Easy Home Improvements for Less than $1,000

Not every worthwhile upgrade requires years of savings. These ideas will enhance your home without breaking your bank account.

It’s understandable if you, like many Americans, associate home improvement projects with money flying out your door. After all, the average bathroom remodel tops $16,000, according to Remodeling Magazine’s 2014 Cost Vs. Value Report. Replacing your windows runs $8,000 on average. Kitchens and master bedroom projects usually run many times that amount.

Turns out, though, that some smaller projects can add instant curb appeal, make living in your abode more pleasant, and come with a manageable price.

Here are some simple enhancements to consider.

  • 1. Update lighting.

    kitchen
    Courtesy of Porch

    Remember that good modern lighting can make a room look larger and warmer. Thus switch out any old-fashioned fixtures and update them with new energy efficient models. To find stylish replacements, home retailer websites will update you on the latest lighting trends, such as copper or bronze fixtures. Pendants or chandeliers in attractive metals and designs can change the look and feel of a room more than you might think.

    Expected cost: Fixture prices vary widely, and can range from $20 to $1000. If you need to hire an electrician, you may want to choose less expensive lighting to offset your costs. Simply spray painting your current fixtures can cost as little as $20.

  • 2. Remake your entrance.

    Front porch with columns
    Courtesy of Porch

    One of the best ways to improve the look of your home from the street is to make your front entrance livelier and more attractive. Replacing the front door is an obvious way to achieve that goal. Perhaps try a new solid door with contemporary fittings or locks. Or update your existing door with paint and new handles (keep in mind you may still need to budget for a handy man even if you’re only switching the knobs).

    If your front door is in good condition and you simply want to spruce up the porch, potted plants, a new exterior light, new house numbers and a new rug can instantly add charm, and be done quickly.

    Expected cost: a new front door will run about $1,000 (a fiberglass door will likely run more). Expect to pay around $30 to $100 for supplies if you paint it instead.

     

  • 3. Modernize the bathroom.

    bathroom counter
    Courtesy of Porch

    Since bathrooms are generally small rooms, $1,000 can go a long way. For example, you can replace the toilet and sink- plus pay a plumber to install them- for less than $1,000. You’ll find the best prices on discontinued models. Another possibility: painting the room, which can typically be done in one weekend. If you like to DIY, and have a plain, frameless mirror, called a builder’s grade mirror, try updating it with a frame or learn how to tile.

    Expected cost: New toilets and sinks can be found for around $100 to $300 each. Vanities run about $500 to $900.

  • 4. Hire professional cleaners.

    Bedroom
    Courtesy of Porch

    A thorough cleaning not only enhances the look of your home, but also makes living it in more pleasant. While you can certainly do it yourself, there are good reasons to sometimes hire a professional. Carpet cleaners, for example, use high tech and powerful machines that suck out more dirt and water than you could get with a hand-held version. As for windows, they can be difficult to clean yourself when they’re in hard-to-reach locations, tempting you to skip some. Professional pressure washers can clean moss and mold off of driveways and walkways, making them cleaner in appearance and safer for walkers.

    Expected cost: Professional carpet cleaners can do the job for around $200 to $500, depending on the size of the area. Professional pressure washing machines can be rented for $100 to $200, or you can hire someone to tackle the job for less than $1000.

  • 5. Decorate the walls.

    shelves
    Courtesy of Porch

    A room can feel much larger if you add some wall decoration. Aim to use your walls from the floor to the ceiling, giving the eye a reason to move up and down, tricking it into thinking the space is larger than it is.

    Adding decor such as open shelving gives you a place to pop in splashes of color and decorative or meaningful objects. Try installing simple shelves in a symmetrical pattern, or moving your artwork from one room to another. If you’re lacking items to hang, take a vintage piece of fabric and stretch it over a canvas, or frame bits of your favorite designs on paper. Both are easy, inexpensive ways to add pizazz to your home.

    Expected cost: Expect to pay anywhere from $20 – $100 for a single shelf or decent-sized frame from a big box retailer.

  • Related:

    More from Porch:

    Spring Bulb Planting 101

    October Maintenance Guide

    4 Ways to Create a Party Perfect Kitchen

     

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

MONEY Housing Market

Cities Where the Housing Market Heats Up In the Fall

Autumn colors on North Shore of Big Bear Lake.
Autumn colors on North Shore of Big Bear Lake, where housing searches pick up in the fall. Brent Winebrenner—Getty Images/Lonely Planet Image

The start of the slow season for home search in most of the country began last month. But autumn is prime time for shopping in certain regions, mostly vacation areas in the mountains and forests.

House hunting is largely considered a seasonal sport, with springtime ranking as the best time to play. March typically kicks off the busy season, which extends through Labor Day, and is when the largest number of buyers circle, and the most homes go up for sale.

But depending on where you are house hunting, you may not realize that autumn can be an excellent time to buy and sell. Instead of slowing down in the fall, many regions of the country buck the national trend and experience high levels of activity, according to a new report on the seasonality of house hunting. The research reveals the cities where home buying and selling peaks, as well as significantly slows, during this time of year.

Fall Slow Down

Home shopping majorly slows in many warm climates and beach areas during the fall months. For example, in September and October Hawaii and Florida see a 10% dip below their annual averages. When looking at major metro areas, search activity drops the most in the South and Southwest. In the Cape Coral/Fort Myers, Florida, area, for example, it declines 18% in September and October compared to the annual average. Searches plummet 12% in Austin, Texas, and Phoenix, Arizona. In Charleston, South Carolina, hunting goes down 11%.

Big vacation destinations that see search activity slow include Punta Gorda, Naples/Marco Island and Key West.

The study also found that college towns have some of the lowest rates in the country for home searching during the autumn season – making it all the more important to lock in your housing before classes begin. College Station/Bryan, Texas, Columbia, Mo., and Iowa City, Iowa, are three university towns that see a big reduction in activity during this time of year.

Bucking the Trend

There are several areas of the country where activity actually picks up in the fall, and autumn is the busy season. These regions are typically near ski resorts in mountain and forest areas.

The county of Lincoln, NM, which is close to winter resort Ski Apache, sees a 16% jump in search activity during the fall when compared with the annual average. The area around Ellsworth, ME, known for a fun winter carnival, boasts 13% more searches.

Big Bear/Lake Arrowhead, a ski region located east of Los Angeles, also has a high number of house hunters in the fall, presumably preparing themselves for fun weekend days on the slopes and dinners by bustling fireplaces.

Other parts of the country don’t necessarily see a large increase in the fall, but instead chug along at their same springtime pace. This pattern emerges in some New England metro areas, including Peabody, Mass., and Worcester, Mass. Search activity in San Francisco also doesn’t change much in the fall, possibly because it includes some of the warmest months for the City by the Bay.

To read more of Katie Morell’s work on Trulia.com, click here.

 

How do you know if it makes sense to itemize?

MONEY mortgages

Wells Fargo Settles Charges It Refused Mortgages to Moms

A woman walks past teller machines at a Wells Fargo bank in San Francisco, California.
Wells Fargo promised to enact new Temporary Leave Underwriting Guidelines and educate their loan officers. Robert Galbraith—Reuters

A woman says a mortgage loan officer told her, "Moms often don’t return to work after the birth of their little ones."

Wells Fargo Home Mortgage agreed Thursday to pay $5 million to settle allegations that its home loan officers discriminated against pregnant women and women on maternity leave out of fear that the mothers would not return to work, potentially jeopardizing their ability to repay the loans.

Six families alleged that loan officers employed by Wells Fargo, the biggest provider of home loans, made discriminatory comments during the mortgage application process, made loans unavailable to them, and even forced mothers to end maternity leave early and return to work before finalizing the loans. One of the six complainants was a real estate agent who alleges he lost a commission due to discrimination against one of his clients.

Lindsay Doyal, one of the women who filed a complaint with the Department of Housing and Urban Development, says that she was denied a mortgage despite providing several letters from her employer confirming that she intended to go back to work, the Washington Post reports. Doyal says she received an e-mail from a Wells Fargo loan officer that said, “moms often don’t return to work after the birth of their little ones.”

Since 2010, HUD has received 90 maternity leave discrimination complaints, 40 of which have been settled, with a total of almost $1.5 million going to loan applicants. The families in the Wells Fargo case will receive a total of $165,000, and Wells Fargo will create a fund of up to $5 million for other affected mortgage applicants.

“The settlement is significant for the six families who had the courage to file complaints, and for countless other families who will no longer fear losing out on a home simply because they are expecting a baby,” HUD Secretary Julián Castro said in a statement. “I’m committed to leveling the playing field for all families when it comes to mortgage lending. These types of settlements get us closer to ensuring that no qualified family will be singled out for discrimination.”

Wells Fargo promised to enact new Temporary Leave Underwriting Guidelines and educate their loan officers.

“We resolved these claims to avoid a lengthy legal dispute so we can continue to serve the needs of our customers,” Wells Fargo said in a statement. “Our underwriting is consistent with longstanding fair and responsible lending practices and our policies do not require that applicants on temporary leave return to work before being approved. The agreement resolves claims related to only five loan applications from a period when Wells Fargo processed a total of approximately 3 million applications from female customers.”

[Washington Post]

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