Things That Make a House a Good Home: Top 10

tipsforahomeBuyers spend a lot of time looking at our properties online, touring homes on the Sunday open house circuit, and talking to our local Chico real estate agents. They’re laser-focused on finding the best home that meets their needs. The problem is, buyers sometimes don’t take the long view of a property.

And, they’re only looking at a home as a potential buyer and not as someone who, years down the road, may also have to sell the property. Given that homes are such a big investment, there should be a little inside your head, picking away at your options and decisions.

As the home buying market starts to heat up again, here are ten things you should consider when choosing your next home.

1. Location, location, location
Perhaps nothing is more important than the three L’s, and there’s a reason why it’s said three times.

Location is extremely important when it comes time to sell. You can have the worst house in the world with the ugliest kitchen and bath. But put it on a great block or in a good school district, and your home will be coveted.

Location location location matters on so many different levels. At the highest level is the town where the house is located, then the school district, then the neighborhood and the block — right down to the location of the lot on the block. Keep all of this in mind when shopping. Also remember that while real estate markets rise and fall, no one can take a great location away from you.

2. The school district
The school district is right up there on the list of what’s most important to many buyers. It’s not uncommon for buyers to start their search based solely on the school district they want to be in. Parents want their kids to go to the best school, which can drive up prices of homes in those districts. Even though you might not have children, buying a home in a good school district is always smart. If the schools are desirable, homes tend to hold their value. As a homeowner, you should always be aware of how the schools are doing, not unlike being aware of your roof’s condition, the neighborhood development or city government.

3. The home’s position on the lot
Where the home sits on the lot in relation to the street or the overgrown oak are key elements in picking out a home. In the case of a condo, an end unit vs. an interior unit is a key consideration. You may have chosen the most beautifully renovated home in the best school district and figure all is good. But if the main living areas are shaded by a neighbor’s extension or the master bedroom looks into the neighbors’ family room, you may have a location problem. Light or privacy may not be a hot button for you, but chances are, they might be concerns for a future buyer.

4. Crime
It’s a good idea to check the latest crime figures for a neighborhood. It can give you a good snapshot about the number and severity of crimes over a time period. So much information is online nowadays that when you find your perfect home, a quick Internet search on the area should provide you with the much-needed information.

Most municipalities post their police blotters or crime statistics online these days. Don’t freak out if you notice more crime than what you’d have expected. Crime, especially petty crime, is everywhere. If you’re new to the area, consult with your real estate agent if you have concerns.

5. Walkability
More than ever, ‘walkability’ is becoming a key factor in the search process. There are entire websites, apps and algorithms that help people figure out how walkable their future home is. As a matter of fact, Zillow even has a Walk Score for most homes. As people get out of their cars and slip into their Keds, they want a home in a walkable neighborhood. People put high value on the ability to walk to a store, school, work or public transportation. The more we move away from cars and the more we see invested in public transportation over the coming decades, the more of a huge value-add walkability will become.

6. The neighborhood’s character
You may have found the absolute most perfect home, on the best block, in the best school district and on a great lot. But there could be circumstances outside your control that may give you pause — specifically, the character of the surrounding neighborhood.

Check out the area late at night, early morning and in the middle of the day. See if there are any odd weather or traffic patterns and try to observe some of the neighbors. You may even go so far as talking to some neighbors. It’s important to walk around, open your eyes and ears and make sure there isn’t anything you’re overlooking. That next-door neighbor practicing drums in the garage at 9 p.m. could be a source of immediate neighbor conflict. Go into it with eyes wide open.

7. Don’t buy the best house on the block
Simply put, avoid buying the best house on the block because there may not be any room for your investment to grow (unless you physically have the house moved to a better neighborhood). It’s better to buy the worst house on the best block, because you can improve the house to add value to an already great location.

8. Is it a fixer-upper?
If you’re buying a fixer-upper, make sure you understand what you’re getting into. Did you set out to buy a home that needed work? Or does the home just happen to be in the most desirable neighborhood, the block of your dreams?

Do your homework upfront. If you want to build an extension or add another story to the property, make sure it is within local zoning or building codes. Have the property inspected so that you know exactly what you’re getting yourself into. Sometimes, what appears to be a simple kitchen needing cosmetic work turns out to be a huge project. Ask yourself repeatedly if your life can support a home renovation. Not only does a renovation take money, it takes time, energy and emotional stress.

9. Will the home hold its value?
A good real estate agent who’s been working the neighborhood for some time can vouch for the long-term value or investment potential of the property. But be sure to find ways to add value, or at least be certain the home will hold its value.

The market may be strong when you purchase, but ask yourself, “Am I in a seller’s market?” “What would happen to this property if the market changed tomorrow”? Check out the median home value in the neighborhood as it compares to neighborhoods around it. The Zillow Home Value Index gives you one, five, and 10-year snapshots of how home values have gone up or down in neighborhoods and cities.

10. Taxes, dues and fees
Many people overlook the monthly fees associated with homeownership. Nearly every property will have taxes, and any sort of planned community or homeowners association (HOA) will have regular assessments.

Be sure that the amount of property tax and assessments are clear from the get-go. If in doubt, go to city hall or do research online. If you’d be buying into a condo complex, be sure to get your hands on the meeting minutes, financials of the HOA and the condo documents. Any mention of changes coming down the pike? Does the HOA seem well funded? It could take one quick $10K assessment to immediately affect property values if you need to turn around and sell your new home. And any uncertainty about the building, its integrity or the financials could scare off buyers when it’s time to sell.

Give us a call, or text when it’s time to find the right home in Chico.

Short Sales Not Subject to State or Federal Income Tax for Cancellation of Debt

short_saleShort sales in California are generally not subject to state or federal income tax for cancellation of debt. The Franchise Tax Board (FTB) issued a letter on December 4 stating that, as nonrecourse obligations, short sales in California are not subject to state income tax for cancellation of debt. The FTB’s position conforms with the federal treatment of short sales stated in an IRS letter dated September 19. These letters will provide welcome relief for short sale sellers given that the tax break for a qualified principal residence under the federal Mortgage Forgiveness Debt Relief Act of 2007 will expire at the end of this year, and similar protection under California law already expired in 2012. The FTB letter includes transactions that closed in 2012 but, as always, sellers should consult with their own tax professionals.

According to the recent FTB letter, “a California taxpayer would not have cancellation of indebtedness where the taxpayer was involved in a short sale pursuant to CCP section 580e.” Section 580e of the California Code of Civil Procedure (CCP) generally protects borrowers from owing a deficiency after a short sale of a residential property with one-to-four units, including both first and junior trust deeds. Exceptions include fraud, waste, cross-collateralized loans, and borrowers that are corporations, LLCs, or limited partnerships. For more information, C.A.R. members may refer to our legal article on Short Sale Deficiencies.

As with the IRS letter, the FTB letter states that even if no cancellation of debt income is owed, a taxpayer may nevertheless have capital gains to the extent that the outstanding debt exceeds the tax basis for the property. A principal residence, however, is generally excluded from capital gains tax up to $250,000 for single taxpayers and $500,000 for married couples filing joint returns (under 26 U.S.C. § 121).

Brokers and Agents: What Are The Differences?

agentWhat is a real estate broker? What is a real estate agent? What is a Realtor®, or a salesperson?

These titles can get confusing, so let’s look at the differences between these terms and the role these professionals can play in a real estate transaction.

Real estate agents are people who help you buy or sell your property. They hold licenses issued by a state. Agents can only sell real estate under the supervision of a broker and must collect the commission from the sponsoring broker. The broker is legally responsible for the actions of the agent.

Brokers are licensed by the state to collect fees and oversee negotiations for a purchase. The broker has earned a higher-level license and may or may not have more experience than an agent. Brokers can manage a real estate office, work on their own or work in an office under another broker.

Realtors are brokers and agents who belong to the National Association of Realtors (NAR), usually via a local board. NAR has trademarked the word, which is why it’s capitalized. Members abide by a code of ethics over and above the requirements of state law.
None of these licenses and designations by themselves can guarantee that any particular real estate professional is the right person to do the job for you. Many other factors weigh in: personal chemistry, location and experience, for example.

Who’s on your side?
If you want your real estate agent to work for you, then it is important to understand their incentives and conventions, and the rules and laws under which they work. Some of these are universal, but real estate laws vary by state. Additionally, agents are individuals who can maintain various perspectives on their profession. If you want to be clear on the relationship you will have with your agent and the role they will play for you, ask them to clarify their position and which considerations they will take into account during the buying or selling process.

The “Law of Agency” says that the agent or broker’s fiduciary responsibility is to the client. In legal terms, the client may be the person who pays the commission, or in states with assumed buyer’s agency, the buyer may be the client. That means the agent you think is working for you, the buyer, may have a primary responsibility to the seller.

In that case, the agent must put the interests of the seller above yours, and even above the agent’s own self-interest. This can restrict the flow of vital information, such as how eager a seller is to sell, from reaching you.

One way to avoid this is to hire a buyer’s broker. In states with assumed buyer’s agency, you must consent to this relationship, or the seller may yet become the client. An exclusive buyer’s agent may be your best chance at 100 percent loyalty.

In the real world, there are also incentives, and a real estate agent has some competing incentives. In the short term, any sale sooner rather than later means a commission sooner rather than later for the agent. Yet in the long term, referrals are where most agents get their leads. In other words, they want to make sure their clients are happy with the price, house and service, so they recommend the agent and build their reputation in a community. And in any case the agent only makes a commission when the deal closes, so there is incentive to get the two parties to agree.

The buyer has influence over which incentives an agent responds to. Find your agent through referrals and recommendations. Once you have picked your agent, commit to them for a time, be honest about your expectations and give feedback about the search progress. If your agent knows that you will eventually buy a house using them in the process, then your agent will invest attention, time, effort, knowledge and money.

Dual agency
Dual agency exists when one agent represents both the buyer and the seller. It can also exist when the listing and buyer’s agents work in the same office. This is tricky because the buyer’s agent’s allegiance is torn between the buyer and the brokerage.

In the case of one agent representing both parties, the agent can provide information about the property to the buyer, disclose all defects in the property, disclose the financial qualifications of the buyer to the seller, explain costs and procedures, compare financing alternatives and provide comps to both parties.

What the agent cannot disclose to clients under dual agency is more complicated. The agent cannot disclose confidential information about the clients without permission. Nor can the agent recommend to the buyer the price the seller will take other than the listing price. Conversely, the agent cannot recommend to the seller a price to accept or counter.

Some states prohibit dual agency. Many states require a written disclosure in the case of dual agency. The only upside to this setup is that because the agent is earning on “both sides” of the deal it’s possible they will take a lower total commission, which could benefit the buyer in terms of the overall price paid. But don’t ignore the issue: Pay attention to whose side the agent is representing. It may not be yours.

The buyer’s agent
Some agents specialize in representing buyers and are not primarily obligated to the seller. Note the word “specialize.” These agents could end up as dual agents; however, if the company they work for listed a home you are interested in buying, a buyer’s agent’s fiduciary responsibility is to you, not the seller. Unlike traditional ways of doing business, you may or may not sign an exclusive contract, and the agreement may state you are liable to pay a commission to the agent even if you find a home through other channels. Read contracts carefully to see if you have to pay the agent a commission if you find a FSBO (for sale by owner home) or other house by yourself. A buyer’s agent can be paid by either the buyer or the seller.

Exclusive buyer’s agents
Exclusive buyer’s agents work for real estate companies that never represent sellers or list properties for sale. By utilizing the services of an exclusive buyer’s agent, you can avoid conflicts of interest that may arise if a buyer client becomes interested in a property that is also listed for sale by a traditional buyer’s agent.

A quick guide to agents and brokers
Real estate broker: Licensed by each state to act as an agent for principals in real estate transactions. A broker can be an individual or a large company or franchise.

Associate broker: Individual who has a broker’s license but works under another broker.

Real estate agent: Licensed by the state to act as an agent for buyers or sellers but must work under broker supervision.

Dual agent: Represents both the buyer and the seller in the same transaction. Dual agency must be disclosed upfront to both parties in order to be legal. It is not allowed in some states.

Buyer’s agent or buyer’s broker: Represents the buyer in a transaction. A buyer’s agent, under an agreement with the buyer, acts solely on behalf of the buyer. Buyer’s agents will disclose to the buyer known information about the seller that may be used to benefit the buyer. Buyer’s agents have duties of loyalty, confidentiality and obedience to their buyer clients. By law, buyer’s agents must represent, advise, negotiate and advocate on behalf of their buyer clients.

Exclusive buyer’s agent: Represents only the buyer in all transactions and works for a company that never represents sellers or lists property for sale.

Seller’s agent or listing agent: Represents the seller in a transaction. A seller’s agent, under a listing agreement with the seller, acts solely on behalf of the seller. A seller can authorize a seller’s agent to work with subagents and/or buyer’s agents. Seller’s agents will disclose to the seller known information about the buyer that may be used to the benefit of the seller. Seller’s agents have duties of loyalty, confidentiality and obedience to their seller clients. By law, seller’s agents must represent, advise, negotiate and advocate on behalf of their seller clients.

Subagent: An agent who writes an offer for the buyer but who is not the buyer’s agent. The subagent owes allegiance to the seller.

Transaction broker: A mediator who has no allegiance to either party and is hired to help the buyer and seller reach an agreement.

Single agent: Represents either the buyer or the seller in a transaction, but never both.

Realtor®: A member of the National Association of Realtors (NAR), the national trade association of Realtors that sets standards and ethics. A real estate agent does not have to be a Realtor.

Realtor–Associate: Some boards of Realtors™ use this term for salespersons or agents affiliated with member brokers.

GRI, CRS, CRB: Advanced designations earned by agents who have met certain continuing education and performance requirements. The acronyms stand for Graduate REALTOR Institute, Council of Residential Specialists, and Council of Real Estate Brokerage, respectively. There are many, many designations agents can earn; these are just a few.

12976 Sellick Ranch Road Chico Ca

Just a quick drive to downtown Chico, this high quality home was built in 2006 with extreme attention to detail and thought. Property is just 3 miles from Shasta Elementary school. It has 9 acres of 12 year old almond orchards that produce significant income (see financials). Entire property on automatic built-in backup in case of power outage. Huge 30×50 insulated shop (with lift) has easy access in front or rear. 40 year roof is brand new as of 2013. Property has 2 wells, 3 car garage, dual system air conditioner (2005), raised foundation, garden area, planters all on automatic watering, RV parking, and room for horses. Home features acacia cherry, hand scraped flooring, brand new carpet, travertine stone, premium blinds, wine closet, water softener, water conditioner and so much more. A downstairs master features walk in closet, jacuzzi bath, double sinks. Come see this and prepare to be impressed.

Schedule a showing today for 12976 Sellick Ranch Road in Chico!

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New Changes for Homebuyers

mortappGood news for Chico homeowners who may have lost their home due to the recession, as many of you may not need to wait the usual 3 years to buy again, and be able to qualify for an FHA loan after 1 year.

If you or someone you know lost their home to foreclosure or short-sale as a result of the loss of income, and if you have reestablished your credit, FHA’s new guidelines will allow you to buy a home again up to 2 years before their usual timeline.

There are some ‘hoops’ you have to go through but if you lost a job or your hours were cut during the recession, which resulted in at least a 20% loss of income. Regardless you may qualify for an FHA loan much sooner than you had expected to wait.

In regard to mortgage rates, the trend is still up though we’ve had a nice rally today. Keep in mind that rates are usually dependent on the economy but the low rates we saw in the spring were due to the Federal Reserve Board subsidizing the lower rates by buying back mortgage back securities.

As you may know rates have been rising since May in the anticipation of the FED slowing their purchases. This tapering could be announced as early as September 18th when the FED meets again. If the date is announced when they will start tapering, expect rates to continue to rise over the coming months. We’ll see but regardless, the trend for rates is up.

More questions on financing. Give us a call and we’ll be glad to recommend a local Chico professional.

Bonds, Rates and More!

mortgageThose who are looking into buying a home or are waiting for interest rates to come back down may need to keep the current housing and interest rate market in perspective as you wait for the right opportunity.

This has been a huge week for the bond market, as there has been a tremendous amount of news that has created a lot of volatility in the bond market. You may already know that interest rates have been rising since mid May, as rates on fixed rate loans have increased 1.25% since that time. The rates were artificially low because the Federal Reserve Board (FED) has been pumping a minimum of $85 billion a month into the market by buying mortgage back securities and treasury bonds, which have kept rates at record lows and even at today’s rates, they are still artificially low. Rates started climbing a few months back just from the FED announcing they may consider tapering this off a bit in 2013. That announcement, even though they said they would only ‘consider’ tapering sent the bond markets into a tailspin and rates increased 1% in less than a month.

The news this week shows the economy is continuing to improve, albeit slowly as hiring in the workplace is stabilizing and increasing. Unemployment claims decreased this week to the lowest level in 5 years, which caused yesterdays rates to rise almost a 1/4%, only to see today’s non-farm payrolls increase less than expected so rates improved a bit today.

The TREND is for rates to continue to increase in the long run. So, if rates rose dramatically by just the mention of tapering of their buying mortgage bonds, what is going to happen when they actually commit to the tapering process, which has to happen as this can’t go on forever without some serious economic consequences down the road? And, rumor has it that the FED will announce the start of the tapering at their next meeting on September 18. If this is announced next month, expect rates to continue to rise, which means a higher house payment on your purchase or a refinance that may no longer be feasible as the benefit is no longer worth the cost.

Suffice it to say that if you’re looking to buy or refinance, you may be better off getting it done now than in 6-12 months from now. Even the pundits in the media think housing prices will continue to rise another 10-13% over the next 12 months. Again, nobody knows for sure but the trend is up for rates and values.

Say Goodbye to 3.50% – 30 Year Rates

chico property taxesBarring another recession, it appears the low rates where we saw fixed rate loans hit a low of 3.25% to 3.50% are not coming back, and this has been expected.

The low rates we have experienced over the past several years have been subsidized by the Federal Reserve Board, as they try and stimulate the economy out of the doldrums it has been going through for the past 7 years. The low rates and up until last year, the falling home values have allowed many new homeowners to buy a home with a payment that often was less than what they were paying for rent.

It allowed current homeowners the opportunity to refinance their homes into much lower rates and getting a much lower mortgage payment, allowing them to use the savings to pay off consumer debts or for those who didn’t have much debt, to be able to allocate more toward their retirement contributions or just to increase their savings for future contingencies. Some homeowners have opted to get a 15-year mortgage, as they strive to have a home paid off in half the time.

With the economy improving, albeit at a very slow pace, the ‘market’ is fearing the ‘Feds’ are going to wean us off the low rates by doing less subsidizing of the securities they have been buying to artificially keep rates low. The result has been a 3/4% increase in mortgage rates over the past 30 days. Which way rates go from here is unknown but most believe we will not see rates again in the mid 3% range. Time will tell.

In the meantime, homes that are priced right are still selling with multiple offers. The higher rates though are causing many homeowners to rethink how much of a home they can afford as their affordability decreases as rates, and subsequently, mortgage payments continue to rise.

Are we heading toward another housing bubble as we did in 2006? Not quite. Most home seekers have learned their lesson or saw the pain of what other homeowners went through, trying to keep up with a payment they couldn’t afford. So, since 2009, buyers are being much more conscious of how much they can really afford, and make sure they can still stay out of excessive consumer debt, and be able to contribute to their retirement or savings accounts, as well.

So what should you get out of this if you are thinking about buying a home? First, it’s still a great time to buy even though values and rates are increasing. Just don’t let your emotions trump your logic as you weigh the pros and cons of buying the right home. Stay within your means. If you’re a first time home buyer, it’s probably not going to be your dream home. Buy something affordable, build up some equity and eventually you’re going to sell it and buy a nicer home, as you’re going to have a bigger down payment and hopefully, your income has increased as well.

Investing in Chico Real Estate Investment: 3 Tips

imageYou probably want to accumulate wealth in real estate based on risk you are taking, while minimizing the amount of time you need to spend attending to the property. Right? In order to accomplish this, you need to make some smart choices upfront when buying Chico investment property. Your goal should be to strive to get as close as possible on as many of these optimal scenarios as possible:

Pays a Fair Cash-on-Cash Return
When you buy property you are taking money out of your liquid financial assets – stocks, bonds, CDs – and investing it into a very illiquid asset – Chico real estate. You were earning a rate of return on your financial assets, such as 4 percent or 6 percent, and you should strive to earn a fair cash-on-cash rate of return on your real estate. To do this, you need to pro forma your deals and buy cash flow-positive properties that earn you decent returns – not those prize properties that are negative, negative, negative.

Isn’t Too Risky an Investment
All real estate is extremely high risk. Development of real estate, land, private real estate funds, fixer uppers, etc., all have much higher risk profiles than just simply buying a nice established cash flow investment property. In many of those investments, you will never see a dime of your money again because there are just so many things that can go wrong! So if you want to own real estate, consider simply taking fee simple title in your own name – or an entity you wholly own – to the properties you purchase. In addition, you must do the proper due diligence, analyze, test, review reports, etc., to make a lower risk real estate decision.

Does Not Require a Lot of Time or Managing
Some properties, even in Chico just require way too much time and management to make them smart investments. Examples include vacation rentals, low quality properties in bad areas and marginal properties. Nice boring properties rented for as long as possible to decent credit profile tenants seem to take the least time to manage. In addition, treating your tenants fairly and with respect goes a long way towards keeping good relations with them; and reducing your hassles when there is an issue you need to address. And believe me — there will be issues!

It’s the nice, boring, wholly owned, in good shape, cash flow-positive properties that are the best investments. They are out there for your picking, but it’s not as simple as finding a property on the MLS and buying it.

You need to do some hard work, research, read up, and make smart, educated decisions to acquire the best real estate investments! Let us help you with this.

Search for Chico Investment Property

Chico Property Taxes on the Rise

chico property taxesAfter 6+ years of falling property values, the real estate market is once again on the rise. This started around March 2012, and with the low interest rates and decreasing home inventory, most of California is experiencing a sellers market as multiple offers are the norm on most homes for sale. Values have risen anywhere from 10-30% during this time, depending on your location.

Now the question is, what is going to happen to everyone’s property taxes?

To summarize property taxes in CA, one needs to look at Prop 13 which was passed by the voters in the late 70′s. The result of this measure was to insure that property taxes were based on the purchase price of the property and not necessarily the current value. The measure limited the county’s take at 1% of the purchase price plus any local bonds and assessments the voters agreed upon. Any future increases would be limited to 2% per year. So if you bought a home for $200,000, the most the assessed value could be the following year would be $204,000 even if the value of the home had increased by 10%. This brought some stability to the property taxes, especially needed for those on fixed incomes.

Prop 8 allowed the homeowners to get their property taxes decreased if the value of the home declined below the appreciated assessed values, which happened to many homeowners over the past 6 years. For example, If you bought a home for $200,000 in 2004 and saw the value of your property decrease to $150,000 in 2010, your new property taxes should have been based on an assessment of $150,000, essentially lowering your taxes by 25-30%. Your maximum assessment in 2010 is supposed to be $225,000, based on 6 years of 2% increases. The good news is your property taxes in 2010 will be lower than when you bought the property.

Here’s what you need to know. The 2% maximum rule doesn’t apply for the lower temporary property taxes, so don’t get used to what you’ve seen over the past few years. Your future property taxes will rise as fast as the appreciation you see on your property until it catches up with the current 2% annual increase from the purchase of your property. So, if you bought a home in the last 10 years and saw a big decrease in your property taxes because of lower values, be prepared for a proportionate increase in them commensurate to the increase in the value of your property. Eventually, if you keep the house long enough, you will ‘catch up’ to the assessment you’re supposed to be and then you will go back to the 2% maximum increase.

So, many homeowners who have seen a big decrease in their property taxes should expect to see a 10-20% increase in their upcoming tax bill that they will receive in October. But, homeowners should be thrilled that their home values are finally on the mend.

Pros and Cons of FHA Financing for Your Next Home

mortgageSince the Great Depression of the 1930s, the U.S. government’s Federal Housing Administration (FHA) has provided a form of mortgage insurance to back loans made to Americans who would not otherwise qualify for a home loan. Over the years, FHA-insured loans have allowed consumers all across the country to become homeowners. The program allows borrowers to become buyers with a low down payment, typically as low as 3.5 percent. Today, the program is under pressure and some worry that soon these loans may fall out of favor.

After the subprime loan crisis began in 2007 and subprime lenders left the market, FHA loans became the primary method for lower income homeowners to qualify for a mortgage loan. Overnight, the FHA’s share of the market skyrocketed from around 4 percent of all loans to over 15 percent of all new loans and 30 percent of new home purchase loans.

Many believed that this would put undue stress on the agency and lead to higher delinquencies and losses for the agency. A study released by the Federal Reserve Bank of New York and New York University in July 2012 estimated that 30 percent of the loans originated by the FHA between 2007 and 2009 would be delinquent within 5 years.

The FHA has maintained that it is loaning money to people who are more creditworthy than in the past. However, last month (April), the agency increased the mortgage insurance premiums it charges consumers who take out FHA loans. FHA mortgage insurance traditionally remained an expense for borrowers until the loan amount due fell below 80 percent of the total value of the property. Lenders call that calculation the Loan-to-Value or LTV ratio. Next month (June), the agency will make another change that will require FHA borrowers to pay mortgage insurance premiums for the life of the loan.

Some say this will add thousands of dollars to the price of a home for FHA borrowers. Others point to the fact that most people refinance into new loan products about every 7 years, which would allow FHA borrowers to refinance into a conventional loan and possibly avoid mortgage insurance premiums long before their home was paid off.

FHA insures loans written by FHA-approved lenders who set their own rates and fees, so the only way to know for sure if an FHA loan will meet your needs is to talk to a qualified lending professional. While these government-insured loans are going through some changes right now, they are still likely to serve the needs of many homeowners in the years ahead.