MONEY buying a home

Countdown to Buying Your First Home: Our Checklist

Get ready for one of the biggest financial moves you'll ever make: Buying your first home.

First-time home buyers have it tough. The supply of homes for sale is tight, and lenders are tightfisted.

Student debt, at an all-time high of nearly $30,000 per grad, is getting in the way of saving for a down payment, says David Stevens, president and CEO of the Mortgage Bankers Association. But it’s a great time to get your foot in the door.

“Interest rates remain the envy of even your grandparents,” says Keith Gumbinger, vice president of mortgage publisher First, make your finances sparkle.


12 months in advance

Make sure the time is right. Use’s rent or buy calculator to see if you’d really come out ahead, based on loan rates, taxes, and where rents and prices are headed in your area. Nationwide it’s 38% cheaper buying vs. renting.

Clean up your act. Devote this year to saving money and paying down debt. You’ll need at least 3.5% down for an FHA loan, or 10% to 20% for a conventional mortgage. Lenders also like to see job stability, so settle in for now.

Learn what you like. When a home catches your eye—a listing, say, or a photo—pin it to a board on Pinterest. Or try Swipe, a new app from the site Doorsteps, which lets you browse listing photos and mark them pass or save.

Six months out

Look better to lenders. To boost your credit score, order your free credit reports at and fix any mistakes. Pay bills on time, chip away at credit card balances, avoid new debt, and don’t close any accounts or apply for new credit. The average credit score for approved mortgage applicants is 755.

Figure out what you can buy. Use an online calculator like the one at to estimate how much house you can afford based on your income, savings, and debts. That’ll help you research homes and drill down on costs.

Forecast future bills. With an idea of how big a house you can buy, you can do a more detailed budget. Scan listings for property taxes on homes you like. Get a homeowners insurance quote at Call local utility companies for the typical bills. And tack on 1% of the home’s value for yearly maintenance.

Related: Baby on the Way? Time to Make a Budget.

Three months out

Pick your loan. Fixed mortgage rates, now 4.4%, may edge up to 5% this year, forecasts If you are confident this is a starter home, you can save with a 7/1 adjustable-rate loan, now 3.5%. The risk: You end up staying longer than seven years and rates rise sharply. Most—92% of mortgage borrowers—opt for fixed-rate loans.

Prove you’re a serious shopper. Based on your income and credit, a bank will give you a mortgage pre-qualification. “It’s the No. 1 thing you want in your back pocket when you go shopping,” says Svenja Gudell, an economist with Zillow.

Even better in a hot market: Pay a few hundred to go through underwriting upfront.

Find a guide. Look for a realtor who has worked in the neighborhood where you hope to live. And in a tight market like today’s, ask candidates what their strategies are for unearthing listings and handling potential bidding wars.

TIME real estate

London Apartment Sells for Record $236 Million

The development of One Hyde Park is seen in London
One Hyde Park is seen London, May 2, 2014. Paul Hackett—Reuters

The sale makes the 16,000-square foot, two-story penthouse one of, if not the, priciest pieces of real estate on the planet. London has seen a surge in demand from super-rich eastern Europeans as tensions in the region flare

A London penthouse in the city’s famed One Hyde Park housing development for the super rich has traded hands for a cool $236 million, making it the most expensive apartment in London and possibly the world.

The new owner of the 16,000-square foot, two-story penthouse has not been revealed, but London has seen a surge in demand from the Russian and Ukrainian super-wealthy looking for safe places to stash cash amid smoldering tensions and an uncertain future in the region.

The penthouse sold as an empty shell and when fully furnished its value could exceed $270 million, the Financial Times reports. The property is one of four at the One Hyde Park luxury development built in 2011 in Knightsbridge. Previously, the highest-priced apartment at One Hyde Park went to Ukrainian oligarch Rinat Akhmetov for $229 million.


MONEY real estate

When Tapping Your Home Pays

New rules could make reverse mortgages safer. Should you shore up your retirement with one?

THE REVERSE MORTGAGE has long been viewed as a last resort for older Americans with home equity but little cash. Now it’s poised to become a mainstream financial strategy—at least that’s what regulators and financial services firms are hoping. But you should be cautious about jumping in.

First, the basics: A reverse mortgage lets you borrow against your home equity once you hit 62. The loan, which can be taken as a lump sum, lifetime payments, or a line of credit, doesn’t have to be repaid until you move or die.

Unfortunately, these mortgages have been riddled with problems—in particular, misleading marketing and inappropriate lending, a 2012 Consumer Financial Protection Bureau report found. In response, new federal rules recently went into effect. The reforms generally reduce how much of your home’s value you can borrow, among other things, and require lenders to make sure that borrowers can cover upkeep.

Financial services companies are also aiming to make these loans more appealing. “Home equity is key to Americans’ retirement security, so it’s crucial to responsibly offer reverse mortgages,” says Christopher Mayer, a Columbia Business School professor and CEO of Longbridge Financial, a startup reverse-mortgage lender that plans to provide broader financial advice too. Boston College professor and retirement security advocate Alicia Munnell is on its board.

Related: What is a reverse mortgage?

Some advisers are touting reverse mortgages as standby credit. Unlike home-equity lines of credit, which can be frozen during a financial crisis, reverse mortgages stay open. Left untapped, your credit line will grow each year by the interest rate you can be charged. “It’s a great way to build a hedge against future needs,” says Coral Gables, Fla., financial planner Harold Evensky, who co-authored a recent study on these loans.

Given the stakes involved, though, you need to approach a reverse mortgage carefully. Here’s how:

Weigh the costs. On a $500,000 home, you might pay $2,500 for mortgage insurance, $3,000 in closing costs, and a $6,000 origination fee, says Edinboro University associate finance professor Shaun Pfeiffer, who co-authored the Evensky study.

The steep upfront costs are all the more reason to take a hard look at your other resources, says Minneapolis financial planner Jonathan Guyton. Do you have a cash-value life insurance policy to tap? Could you trim your spending?

You’ll have to pony up these closing fees even for a line of credit you haven’t used. In that case, is the peace of mind in knowing that you have a sure source of cash and don’t have to sell when stocks fall worth that five-figure sum?

Related: Should you get a reverse mortgage

Be sure you’re staying put. A reverse mortgage makes sense only if you plan to remain in your home for years. Think about how easy it will be to do so as you age and whether you’ll want to move closer to your grandkids. A reverse mortgage may no longer be a last resort, but it’s still a tough call.


TIME housing

Grab That Apartment Before the Rent Spikes

In strong-growth markets like Charlotte, landlords are adopting dynamic pricing strategies similar to the airlines and—meaning the asking rent price for apartments can change by hundreds of dollars in the blink of an eye.

The Charlotte Observer recently took note of how commonplace it’s become for rent rates at large apartment complexes in the city to be dictated by software algorithms that track supply and demand — and then tweak asking prices accordingly. The result is that if a handful of units are scooped up by renters over the course of a weekend, the monthly rental rate for similar units in the complex could soar on Monday, if not sooner.

Rent prices can and do change all the time, occasionally with quick, dramatic swings. During one particularly volatile ten-day period, the Observer tracked the monthly rate for a one-bedroom apartment at one complex as it rose from $982 to $1,307 per month.

Such dynamic pricing strategies have been used by airlines for decades, and online sellers like Amazon are utilizing quick-changing prices to a staggering degree. According to one recent study, Amazon had up to three million daily price tweaks last November, and during the busiest shopping period for the 2014 holiday season, the world’s largest online retailer is expected to change prices on its site six to ten million per day.

Even as several software programs focused on producing algorithms for apartment rent yield management have increasingly been embraced by landlords and apartment complex owners, the fact that a unit’s rental rate can jump by a couple hundred bucks overnight often comes as an unwelcome surprise to renters, especially young people seeking their first place. Even worse, apartment managers are using dynamic pricing as a tool to pressure would-be renters into acting fast, at the risk of losing out or seeing rents soar.

“I obviously did not like it,” one 24-year-old said to the Charlotte Observer, with regards to the potential for unit rent prices to change from moment to moment. “All complexes, they say it can change really fast. It just makes me feel pressured to make a decision really fast without maybe considering other options or even how safe it is or if it’s really practical.”

Even so, the increased usage of dynamic pricing in nearly all realms of consumer life isn’t all bad for the average Joe. Yes, it can make car hire rates surge during periods of peak demand, and can cause rental rates to soar seemingly out of nowhere. But dynamic pricing can also drive prices lower when demand eases. That can mean cheaper ride-share rates during “happy hours,” and also that by learning about the local rent market and timing it right, one renter can get a way better deal than his neighbor on essentially the same apartment unit. At one complex in Charlotte, rent for one-bedrooms hit $588 per month last May, down from a peak of $806 in February.

This is the way pricing has been done for decades in the airline business, in which there’s always the possibility that you paid hundreds more (or hundreds less) than the person sitting next to you on the plane. The problem is that it’s impossible to really know the precise best time to buy. The other problem for consumers is that, by and large, people think it’s unfair to charge different prices for the same product. They absolutely hate the scenario in which two different people pay dramatically different prices for essentially the same airline seat, or ticket to a baseball game, or apartment unit.

Well, they hate it if they’re the one who was charged more. If they’re the one who worked the system and figured out a way to pay less, then it’s not so bad.

TIME Music

Real Estate’s “Crime” Video Has It All: Undead Skateboarders, Celebrity Cameos and Pottery

A funny video from a seriously talented band

While Funny or Die is best known for making viral comedy videos, the website does make the occasional foray into the world of music — and its latest is the video for Real Estate’s “Crime.”

Directed by Tom Scharpling, the video stars actor Andy Daly from HBO’s Eastbound & Down and Comedy Central’s Review as a stand-in for Scharpling himself.

In the intro to the clip, “the director” explains that he is completely broke and is more than willing to sacrifice his creative vision in order to complete the video. If that means adding a few product placement deals for online pottery sales, a novel about hormonal undead skateboarders, some reminiscences about the good old days and a brief appearance by the Westboro Baptist Church, so be it. For a few extra bucks, “Scharpling” even sold some air time to a Thai restaurant, where the band performs during the video.

Real Estate’s Atlas is out now on Domino. Unfortunately Jared Frankel’s novel Blood Lords is not currently for sale.

MORE: Robyn Gets Ready to Do It Again With New EP: Listen

MORE: Alicia Keys, Kendrick Lamar, Pharrell Williams Star In Video For “It’s On Again”


Budgeting for a New Home, and a Disability

The Crosbys, with son Owen, are eager to move to a bigger home. Kinzie+Riehm

Tim and Jennifer Crosby are ready to trade up from their 2,000-square-foot suburban Orlando home. They’d like more space — maybe even a pool — in a district with better schools for their son, Owen, 7.

Expected cost: $450,000.

With real estate in the area recovering, the Crosbys’ house is worth close to their 2004 purchase price of $268,000.

Between equity of more than 20% and savings, they can foot a bigger down payment; plus, they have $2,000 a month after savings and bills for higher carrying costs. (Combined, they earn $147,000 from his job as a network administrator and hers as a business analyst.) But they’d like to be sure it all pencils out.

“We want to enjoy what we have now without blowing it for later,” says Jennifer, 42.

Related: Baby on the way? Time to make a budget

They’re also dealing with a major unknown: Tim, 43, has Charcot-Marie-Tooth disease, a neurological disorder that could one day affect his mobility.

“I’d like to work into my sixties,” he says, “but don’t know what my condition will bring into play.”


Real estate value: $243,000
Retirement savings: $189,500
Cash: $80,000
Cash value of life insurance: $23,000
Stocks/other investments: $15,500
TOTAL ASSETS: $551,000

Student loan: $50,000
Mortgage: $180,000


Fix retirement first. The Crosbys save $16,000 a year for retirement. At that rate, they’ll have around $1 million in today’s dollars by their mid-sixties, estimates Jacksonville financial planner Carolyn McClanahan.

A great start, but not enough to maintain their lifestyle in the best of circumstances — and definitely not if Tim has to leave the workforce before 67. (The disability insurance he has through work will replace only 60% of his income.

McClanahan wants them to stash $8,000 more a year, preferably in Roth IRAs.

Related: Don’t let divorce wreck your finances

Downscale the dream. Figuring a 20% down payment, a 30-year mortgage on a $450,000 house adds $650 to their monthly nut, not including higher taxes, insurance, utilities, and maintenance. Adding the higher retirement contributions, along with $3,000 a year that McClanahan would like them to save for Owen’s college, the Crosbys will nearly erase their monthly surplus.

McClanahan would rather they dial back their budget to, say, $350,000, so that they can …

Speed-pay the debt. McClanahan wants the Crosbys to get a 30-year mortgage, but put their leftover funds each month toward the debt. Erasing the loan early will reduce their retirement income needs and give them leeway if Tim is forced to retire early.

Plus, it’s a “backdoor college savings plan,” she says. “If you can’t fund tuition through cash flow, you can use a HELOC to help.”

MONEY Investing

When Wall Street Becomes a Landlord

First the pros snap up cheap houses. Then come new ways for you to invest in them. Be careful.

The stronger-than-expected housing recovery — a 20% rebound since 2010 — owes a lot to the investors who swept into recession-ravaged cities and scooped up distressed homes.

Nowhere has that been truer than in the suburbs ringing Atlanta, where rampant overbuilding and economic woes produced a flood of foreclosures.

At the same time, the local rental market couldn’t absorb all the displaced owners. That combination proved irresistible to mom-and-pop investors, whose all-cash purchases stabilized the market: Atlanta home prices rebounded from a 12.7% decline in 2009 to flat in 2010.

Related: Cities where the real estate deals are

Then Wall Street came to town. This second wave of housing investors is spending billions to flip foreclosures into single-family rentals. In January one in every four homes sold in Atlanta went to a large investor, four times the national average, says RealtyTrac.

“They’re coming from all over, even out of the country,” says Atlanta agent and property manager Scott Goeber.

In June 2012 the Atlanta office of real estate manager Waypoint Homes was “me and my cellphone,” says regional director David Zanaty. By last fall he had hired 50 people and bought 600 homes, and hoped to own 1,500 by March.

Large investors are swarming local markets. Real estate powerhouse Blackstone has spent $8 billion to buy 43,000 homes nationwide. American Homes 4 Rent has spent $3.5 billion on 21,700 homes.

Now these buying sprees are being converted to investments.

Since December 2012, four single-family home real estate investment trusts, similar to REITs that own apartment buildings or shopping centers, have opened up to individual investors. American Homes 4 Rent’s AMERICAN HOMES 4 R COM USD0.01 'A' AMH -0.7026% is the largest; most recently Waypoint merged with the home-rental division of Starwood Property to form Starwood Waypoint Residential Trust STARWOOD WAYPOINT COM USD0.01 SWAY -0.4914% , a REIT that owns close to 5,800 homes.

Plus, a new breed of bonds, which bundle rents from single-family homes, is being peddled to institutional investors, such as pension managers or mutual funds. Last October, Blackstone rolled out a $479 million bond backed by 3,207 homes in five states. Deutsche Bank estimates that another $5 billion in home rental bonds will hit the market this year.

So far investors have not been enthusiastic. Some of Blackstone’s bonds are selling below the offer price, and most of the REITs have underperformed their index. The business model is too new, says Brad Thomas, editor of iREIT Investor.

The biggest firms expect to generate 5% to 7% a year in return from rents, according to a Bank of America report. But that hinges on keeping down the cost of maintaining far-flung homes.

“If a toilet breaks, you’ve got to send someone to fix it,” Thomas says. “It’s difficult to do that efficiently. In an apartment complex, a property manager can walk the building.”

Related: Dreary outlook for formerly hot housing markets

And REIT investors shouldn’t count on big price gains. “It’s unproven how their asset value will grow in a more normal market,” says Forward Real Estate Long/Short manager Ian Goltra.

Plus, the REITs have been plowing capital into buying homes, not paying big dividends. And yield is a big reason to own REITs, notes Goltra. Top apartment REITs currently pay more than 4%. The highest available yield in a single-family rental REIT is 1.2%.

“It’s early days,” says Goltra. “For now, they’re too risky.”


Dreary Outlook for Formerly Hot Housing Markets

To sort out what you can expect in real estate this year, MONEY zeroed in on four markets: upscale neighborhoods, new investor favorites, booming growth cities, and once-busy areas that have quieted down. Whether your local real estate market is heating up or cooling off, here’s what you need to know about buying, selling or renovating your home.


During the past couple of years investors swooped in to snatch up deals in cities clobbered by the crash, driving up prices. But with that low-hanging fruit gone, these markets are now cooling off. In 2014 they should see less impressive price hikes and far more homes for sale. And if rates rise, these areas could get even flabbier, since last year’s price jumps put many homes out of reach for locals.

Related: 10 Fastest Growing Cities

How you’ll know: Your first clue is the amount that area home values increased in 2013. Look at’s Trends page: Anything over 15% is in the pocket. A big jump in the number of homes for sale is another giveaway. (Think Sacramento, which saw December available listings spike 58% from a year earlier.) Check the page’s Total Listings column to see whether your area has had a similar increase.


Take your time. While most of these areas aren’t quite a buyer’s market, you’ll have more choices and power than last year, so don’t rush into a place you don’t love.

Ask for extras. You may want to build in a clause that says your offer is contingent on your ability to get financing or to sell your current home.

Bid low. When markets start to slow down, sellers get nervous — and pliable, says Los Angeles agent Connor Maclvor. Ask your realtor to send you listings where the price has been cut. Those sellers are the most eager, says Maclvor; set your bid at 8% to 10% under asking.


Court bargain hunters. A year ago Phoenix sellers could price above similar listings and still get 10 bids in the first week, says agent Greg Markov: “Not anymore.” Now you want your house to look like a deal, he says.

Check current asking prices for comparable homes, then price your house near the bottom of the range. Two weeks and still no offer? Cut it by 5%.

Max out your listing. Choose an agent that offers pro photos. Homes that have them sell faster and for up to 3% more, according to Redfin. Go beyond, Trulia, and Zillow by posting your house on Craigslist. Make sure that your agent is promoting it on Facebook, Twitter, and Pinterest.

Creating a video for your listing (or to post on YouTube) is another option; 12% of sellers tried it last year, says NAR. If you go that route, walk the camera through the home, since buyers want to see the layout, says Princeton, N.J., broker Henderson.

First impressions count. With more competition for buyers, the focus on curb appeal and staging is back. Be sure your front yard looks neat, pressure-clean the roof, and repaint your front door. Inside, eliminate all clutter. A professional stager can suggest paint colors and lighting and furniture arrangements that will help your place look its best; a two-hour consultation typically costs $150 to $400, according to contractor referral site


Don’t panic. This isn’t another bust: Your home will still appreciate. In fact, CoreLogic predicts that prices in last year’s hottest 20 markets will rise at an average annual rate of 3.7% through 2018, vs. 3.1% nationwide. Keep those numbers in mind if you’re thinking about remodeling. Smaller projects that bring your home in line with your neighbors’ will pay off, but you’re unlikely to see big enough gains to justify a massive renovation.


Rent This Sewer! Satirical Signs Mock San Francisco Real Estate Prices

Scot Hampton

Gentrification hits a whole new low.

You might not be able to afford a condo in San Francisco’s tech-inflated real estate bubble, but what about a sewer, mailbox, or bus stop? Photographer Scot Hampton created satirical For Rent signs that show just how ridiculous the rental market in the city is.

Rent out a garden penthouse studio (also known as a street side planter) for just $7350! It’s light and airy—and exposed to the elements. A basement one-bedroom is cheaper at $3500 and it has “arched interiors” but you’ll have to live like the Teenage Mutant Ninja Turtles. Requires the use of a ladder for entry.

The photo essay is a commentary about gentrification as much as it is about homelessness and the need to adapt urban space into a livable environment. While the tech industry calls the homeless “degenerates,” the population living on the streets of the city is increasing. It’s only too easy to imagine people trying to make homes in the spots Hampton shoots.

TIME Games

Monopoly’s “House Rules” and What America Thinks of Capitalism

Hasbro's latest gimmick acknowledges that people play Monopoly in ways that fight the ruthless principles of the game.

You may have heard the news that Hasbro is planning to change Monopoly. It’s not. The game maker is polling fans on Facebook about a list of widely used unofficial “house rules,” some of which will be included as options in a new edition of the game. They’re already options, of course; if you play Monopoly, you probably use some of them. You didn’t need Hasbro’s permission, and you still don’t. (Confession: until today I did not realize that having to go around the board before buying properties was not an actual rule to begin with.)

As a marketing gimmick, this is old news for Hasbro, which is trying to again to sell new copies of a game that is already in closets from coast to coast. (Remember last year, when the company killed the poor iron.) But the house rules under consideration, as listed by Hasbro, are pretty interesting for what they tell us: People don’t like Monopoly very much.

OK, that’s not entirely true. In sheer terms of longevity, sales, and cultural reach, Monopoly is one of the most popular board games of all time. But there’s clearly a love-hate thing going on here. Yes, it’s about family, friends, and fun. It’s also about endless, exhausting game sessions, bad feelings, and watching yourself slowly be utterly destroyed by losing everything you have.

So people have modified the game–and they’ve done so mostly in ways that are directly at odds with the game’s principles and what the game says about the market. Old-school Monopoly is a fight to gain dominance in an economy of tightly limited resources. No one helps you out; no one ever gets a raise.

But most of the “house rules” are about adding windfalls, softening blows, and providing chances for losers to turn things around. Running out of funds? Maybe you’ll land on the Free Parking jackpot or roll snake eyes! Income not keeping up with rising housing costs? Let’s double the salary for passing Go! Can’t afford a property? Make a deal with another player and own the property collectively! (In one deliciously anarchic rule, “Break the Bank”–a new one on me–players seize half the bank’s assets at the start of the game and grab at it in an Occupy Monopoly free-for-all.)

In other words, the ways players have customized the game over the decades suggests that people aren’t totally comfortable with harsh, sink-or-swim capitalism, even in the form of a game with play money that has no real-life consequences. (Especially, maybe, when the person you are sending to the poorhouse is your mom or your nine-year-old son.)

I’ll grant you I’m reading a lot into a board game here. But Monopoly is a game that practically begs to be read into. It’s a game popularized during a depression and named after a predatory business practice; it encourages Darwinian competition but also makes it sound vaguely shady. (Why do players spend that much time in jail, anyway?) And it was believed to be inspired by The Landlord’s Game, a didactic turn-of-the-century game designed to protest the exploitation of tenants. It’s not only moralistic games like Chutes and Ladders that have messages built into their play; hell, we have a game called Life that literally says that the object of living is to end your days with the most money.

There is something for economic liberals in the way people have modified Monopoly: left to their own devices, average Americans will inject massive amounts of fiscal stimulus into the economy and create a pool of tax-and-fee revenue for redistribution. And I suppose there’s something for conservatives here as well: all these feel-good palliative measures, money for nothing, and attempts to cushion the blow for losers in the end only prolong the suffering and the inevitable outcome, which is that one person must win and the others must be bankrupted.

If you don’t like that, you’ve got to play a different game.

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