NRG Star Construction LLC

Harvard Releases State of the Nation's Housing Report for 2011

2011-06-11T07:06:00.000-07:00

The Joint Center for Housing Studies at Harvard University officially released its State of the Nation's Housing 2011 report on June 6.

The report points out that "While the sharp declines in both home prices and interest rates have left homes in many places more affordable than they have been in decades, stubbornly high unemployment and tightened lending standards have limited the ability of many first-time buyers to capitalize on the situation."

While the report notes the ongoing weakness in housing markets and home prices, it also notes that foreclosure activity was concentrated in just 10% of U.S. neighborhoods last year. One of the problems we face here in southwest Michigan is that the mortgage market views the State as a whole. The great difficulties faced in Detroit, and in the east of the State, leads to the entire State of Michigan being viewed as a 'distressed State'. This makes it more difficult for buyers in the relatively bouyant southwest to obtain mortgage financing.

So, we face a crazy situation whereby housing is at its most affordable in decades but it is extremely difficult to obtain a mortgage to take advantage of the buyers' market.

Not surprisingly, given the difficulty first-time buyers face entering the market, the report highlights the rental housing sector as a bright spot in which consumer demand is on the rise. Specifically, the report indicates that growth in both younger and older households over the coming decade should continue to lift the demand for rental housing as well as for smaller, more energy-efficient homes. When these sectors cannot buy, they become renters.

www.nrgstar.us

Effects of the recession on the construction industry

2011-05-17T08:41:00.000-07:00

The credit crunch has taken an enormous toll on the nation’s economy, especially in the housing sector, where more than 1.4 million construction workers have been idled since 2006.

Factoring in industries that provide materials and services to home builders, the housing slump has been responsible for a total loss of more than 3 million jobs and $145 billion in wages in all housing-related industries.

It is a long raod indeed ............

2011-05-03T06:13:00.001-07:00

Disaster looming in residential mortgages

2011-04-04T06:07:00.001-07:00

Under a plan announced by 6 federal agencies this week, qualified residential mortgages (QRMs) would require a minimum down-payment of 20%. It would take an average family 12 years to scrape together a 20% down payment. First-time home buyers have limited wealth but account for 40% of home-buying activity. They would be the hardest hit by such a rule. FHA, VA and USDA RD loans would not be affected. However, borrowers who cannot obtain such mortgage loans, and who cannot afford to put 20% down on a home, will be expected to pay a premium of two percentage points to offset the increased risk to lenders. This would disqualify about 5 million potential home buyers.

Industry and consumer groups had warned the federal agencies against creating excessive down payment requirements but this advice went unheeded. Making matters worse is the announcement that the number of FHA loans will be reduced, the loan limits will be lowered, and fees will be increased. These changes, combined with the 20% down-payment for a QRM, would make it even more difficult for buyers to afford a mortgage. The agencies have yet to make a final decision. Let’s hope that they rethink the issues and make wise choices.

Why consider a VA Home Purchase Loan? Part Two.

2011-04-02T08:54:00.001-07:00

Lower interest rates

No Private Mortgage Insurance (PMI) is required with VA loans.

Loan origination fee is capped at 1%.

VA funding fee - 10% down -- 1.5%

0% down – 2.15% (first time)

0% down – 3.3% (additional times)

Fee summary

Down payment - 0%

Mortgage Insurance premium – 0%

Loan origination fee – 1%

VA funding fee – 2.15%

Why consider a VA Home Purchase Loan? Part One.

2011-03-30T11:09:00.001-07:00

A VA home mortgage can costs less than a conventional mortgage loan.

Your loan is guaranteed by the government, making your application more attractive to lenders.

The borrower must be willing to certify they intend to live in the home.

VA home loans require 0% down payment.

VA mortgage loan applicants can increase the down payment in order to lower monthly mortgage bills–there is no requirement that the borrower have 0% down.

VA allows a 30-year term.

Interest rates are generally more competitive for VA loans due to the government guarantee. Interest rates may be 0.5-1% lower than for a conventional mortgage but are negotiated with the lender. Interest rates are usually fixed for the term of the loan.

VA mortgage allows you to build-in closing costs, into your mortgage. Closing costs may be paid for by the seller. The VA limits the amount of closing costs. The must be usual and customary.

VA home loans have requirements for income, debt-to-income ratios, maximum loan amounts and other details.

VA allows up to 29% of your income towards housing costs and 41% towards housing expenses and other long-term debt.

Copies of your income tax returns are required to verify your income.

The applicant must have enough income to qualify for both the mortgage payment itself plus other debts including typical home owner expenses like utilities and other payments.

Time to restore the flow of credit

2011-03-23T05:47:00.000-07:00

Government regulatory excess, and a general reticence on the part of banks and credit unions, is drastically curtailing lending for viable home building projects. Meanwhile, while builders are finding it tough going to secure the finance necesssary for their building projects, would-be home buyers are finding it equally tough in finding a mortgage that would allow them to purchase a new home.
As the nation’s housing finance system undergoes comprehensive reform in the aftermath of the collapse of secondary mortgage market, the federal government needs to provide a means for a reliable and adequate flow of affordably priced mortgages under all economic and financial conditions.

On the issue of tax reform, lawmakers need to oppose any suggested changes to the tax code that would increase taxes on home owners, renters or home builders.

Curtailing or eliminating the mortgage interest deduction, the capital gains exclusion, the deduction for property taxes, the Low Income Housing Tax Credit and other housing tax incentives would further depress the housing market.

Why consider a RD Home Purchase Loan? Part Three.

2011-03-19T10:47:00.001-07:00

Lower interest rates

No Private Mortgage Insurance (PMI) is required with RD loans.

Loan origination fee is capped at 1%.

RD funding fee can be financed.

Fee summary

Down payment - 0%

Mortgage Insurance premium – 0%

Loan origination fee – 1%

RD funding fee – 2.5%

Closing costs – 3%

Fees and down-payment, therefore, total 6.5% or higher.

Why consider a RD Home Purchase Loan? Part Two.

2011-03-18T09:00:00.001-07:00

Interest rates are generally more competitive for RD loans due to the government guarantee. Interest rates may be 0.5-1% lower than for a conventional mortgage but are negotiated with the lender. Interest rates are usually fixed for the term of the loan. Portfolio loan interest rates may be higher.

RD mortgage allows you to build-in closing costs, the guarantee fee, title services, escrow and other pre-paid costs, as well as repairs or renovation costs, into your mortgage. Closing costs may be paid for by the seller.

RD allows up to 29% of your income towards housing costs and 41% towards housing expenses and other long-term debt.

The applicant must provide proof of a stable and dependable income to demonstrate repayment ability.

No minimum credit score but an applicant must demonstrate a credit history that indicates a willingness to meet obligations as they become due.

Seller concessions are allowed.

Why consider a USDA RD Home Purchase Loan? Part One.

2011-03-16T10:07:00.001-07:00

The United States Department of Agriculture (USDA) offers loan guarantees and direct mortgage loans in designated Rural Development (RD) areas. To qualify for an RD mortgage, the home you want to purchase must be in a designated area.

An RD home mortgage can costs less than a conventional mortgage loan.

Your RD loan is guaranteed by the government, making your application more attractive to lenders.

The borrower must be willing to certify they intend to live in the home.

RD home loans require 0% down payment.

RD mortgage loan applicants can increase the down payment in order to lower monthly mortgage bills–there is no requirement that the borrower have 0% down.

RD allows a 30-year term.

RD loans may extend up to 102.5% loan-to-value. (100% loan-to-value plus the 2.5% funding fee)

What the housing industry needs.

2011-03-13T08:20:00.000-07:00

In order for the housing industry to fully recover from its woes and become the preeminent economic engine it once was, Congress needs to act.

One of the major problems facing the industry today is the lack of credit for aquisition, development and construction (AD&C) loans. Without liquidity in the AD&C loan market, the industry will remain stagnant.

Another problem is the threat of changing and/or eliminating housing tax incentives. Changes to tax preferences, such as the Mortgage Interest Deduction (MID) or Low Income Housing Tax Credit (LIHTC), will amount to nothing more than a tax increase on young home buyers, retirees, and renters.

Finally, the presence of a viable secondary mortgage market backed by the federal government is integral for the housing industry to regain its footing.

Let's see some action, Congress!

Why consider an FHA Home Purchase Loan? Part Four.

2011-03-12T05:41:00.001-08:00

For FHA loans approved before December 31, 2009, there was a loan origination fee equal to 1% of the loan amount. This is no longer the case. FHA guaranteed home loans in 2010 and beyond are not limited to that 1% origination fee. Check with your lender what their loan origination fee is.

Up front mortgage insurance is required with FHA loans, and most borrowers qualify for 96.5% financing. All affected FHA loans with case numbers assigned after April 5, 2010 will incur an Upfront Mortgage Insurance premium of 2.25 percent. The mortgage insurance premium can be rolled into the mortgage.

The annual premium is to be paid monthly and is charged according to the length of the FHA loan, and loan-to-value ratio. Check with your loan officer for payment schedule information for your specific FHA home loan.

Fee summary

Down payment - 3.5%

Mortgage Insurance premium – 2.5%

Loan origination fee – 1% or higher (set by the lender)

Closing costs – 3%.

Fees and down-payment, therefore, total 11% or higher.

Why consider an FHA Home Purchase Loan? Part Three.

2011-03-08T09:53:00.000-08:00

Applicants must submit to a credit report. Your credit score, payment history and job history may all be contributing factors in the FHA loan application.

Applicants who have a minimum decision credit score of less than 500 are not eligible for FHA mortgages.

Generally speaking, to get maximum financing on typical new home purchases, applicants should have a credit score of 580 or better. Those with credit scores between 500 and 579 are, according the FHA guidelines, "limited to 90 percent LTV". In other words, you will need a 10% deposit.

Part Four to follow.........

Why consider an FHA Home Purchase Loan? Part Two.

2011-03-06T08:21:00.001-08:00

FHA mortgage terms may allow you to build-in closing costs into your mortgage. Typical closing costs for FHA home loans are around 2% or 3% of the total mortgage.

FHA mortgage loans should take up no more than 29% of your monthly income. Copies of your income tax returns are required to verify your income.

FHA home loans have requirements for income, debt-to-income ratios, maximum loan amounts and other details.

The applicant must have enough income to qualify for both the mortgage payment itself plus other debts including typical home owner expenses like utilities and other payments.

The FHA allows you to use 29% of your income towards housing costs and 41% towards housing expenses and other long-term debt.

Why consider an FHA Home Purchase Loan? Part One.

2011-03-04T07:35:00.001-08:00

There are many reasons for homebuyers to investigate an FHA home purchase.

It’s generally easier to qualify for an FHA home mortgage. Your loan is guaranteed by the government, making your application more attractive to lenders.

However, there are lots of rules that apply.

Applicants must be lawful residents of the USA and be of legal age to sign a mortgage.

The borrower must also be willing to certify they intend to live in the home.

An FHA home mortgage can costs less than a conventional mortgage loan.

FHA home loans only require a 3.5% down payment, and that money can come from a variety of sources including HUD down payment assistance grants.

FHA mortgage loan applicants can put more money on their down payment in order to lower monthly mortgage bills–there is no requirement that the borrower must only pay the 3.5% minimum.

The down payments must be made by the buyer. The seller is allowed to offer concessions such as paying closing costs or other expenses related to selling the home, but the seller is prohibited from contributing a down payment.

Lack of available financing for new construction continues to get worse.

2011-02-24T16:58:00.000-08:00

In a recent survey of construction companies, with annual sales varying anywhere from $500,000 to $33,000,000, approximately 40% stated that A,D & C finance ([land] acquisitions, development and construction) was harder to get than the same time last year. Last year was not exactly a boom year.

The reasons given for this situation were that banks and other lending institutions are:

lowering the loan-to-value (or loan-to cost) ratios
not making new loans
reducing the amount they are willing to lend
requiring personal guarantees or collateral not related to the project
increasing the interest rate
increasing the spread of interest above prime
increasing points
increasing out-of-pocket payments of interest
increaing other fees
increasing paperwork
increasing pre-sale or pre-lease requirements
are refusing to make 'relationship loans'

The one thing that is most definitely NOT increasing is the availability of much needed finance for home builders.

Not surprisingly, almost 70% of respondents stated that they are putting a hold on land acquisition and/or development until the availabilty of finance improves. The majority (58%) also stated that they were putting a hold on single-family construction for the same reason.

Worthy of note, NRG Star Construction is still anticipating breaking ground on its new condominium development this spring.

http://www.nrgstar.us/

Banks seek higher mortgage down payments

2011-02-23T07:45:00.000-08:00

The downpayments demanded by banks to buy homes have ballooned since the housing bust, forcing many people to rethink what they can afford and potentially shrinking the pool of eligible buyers.

The Obama Administration has called for gradually raising downpayments to a minimum of 10% on conventional loans. And mortgage data show that private lenders are already pushing sharply higher the required downpayments. The median downpayment in nine major U.S. cities rose to 22% last year on properties purchased through conventional mortgages. That percentage doubled in three years and represents the highest median downpayment since the data were first tracked in 1997.

For now, borrowers who can’t afford such amounts are flocking to alternative programs, such as loans for veterans or those backed by the Federal Housing Administration or the USDA. Such mortgage loans accounted for 50% of all lending last year. However, borrowers often pay higher interest rates and must pay private mortgage insurance, driving their monthly payments higher.

http://www.nrgstar.us/

Optimism in the housing market?

2011-02-20T10:21:00.000-08:00

At long last, there appears to be some optimism among prospective home purchasers. However, this is heavily tempered with concerns they have regarding selling their existing home in the current market, and/or the difficulty in securing credit for a home purchase — even when they are well-qualified. Those home-owners willing to sell in a down market are faced with the challenge of finding buyers pre-approved for a mortgage. Adding to these concerns is the severe difficulty that builders face when trying to obtain finance for land acquisition, development and even for construction.

Overall, despite a slight glimmer of hope and renewed optimism by some buyers, builders' confidence has not improved over the past four months.

At NRG Star Construction LLC we have been very pleased with the amount of interest shown our Ambleside Condominium project in Mattwan, MI. However, as with the majority of property developers in these troubled times, the greatest problem is that many potential purchasers lack the 20% deposit required by most mortgage lenders. As such, we are diligently working towards obtaining HUD and USDA approval so buyers will be abl to access FHA, VA and Rural Development mortgage loans. These loans require either zero down or a most achievable 3.5% deposit.

http://www.nrgstar.us/

FHA Announces Mortgage Insurance Premium Increases

2011-02-19T09:07:00.000-08:00

On Feb. 14 the FHA increased its annual mortgage insurance premium (MIP) by 25 basis points on both 30-year and 15-year mortgages. The change is seen as "imperative" to ensure that FHA can continue to assist in the financing of home purchases during periods of economic stress. In the example provided by HUD of the size of premium increases awaiting FHA borrowers this spring, the monthly payment would increase by $33 on a home purchased for $163,000 with a downpayment of 3.5%. The upfront MIP will remain unchanged at 1.0% of the loan amount.

http://www.nrgstar.us/

Michigan Housing Index Improves 17.8% in December.

2011-02-14T09:36:00.000-08:00

A statewide survey of Michigan homebuilders showed modest improvement at the end of 2010. A recent forecast predicted a 16.5% growth in the number of building permits in 2011. It would appear that we are seeing the beginning of a modest upward trend in housing.

The Michigan Housing Index (MHI) reflects the number of homes currently under construction and in the planning stages, as well as an evaluation of likely future construction.

The MHI in December 2010 represented the highest index rating since May 2010.

One major highlight of the recent MHI was evidence that the majority of consumers continue to seek smaller, less costly and more energy efficient homes, such as those available from NRG Star Construction in their Ambleside Condominium project, scheduled to commence spring 2011.

http://www.nrgstar.us/

Even though this is good news for the Michigan construction industry, one should consider the fact that the total number of new building permits issued in 2010 was still 72% below the 30-year average for single-family home permits.

Probably the most encouraging sign in 2010 was the fact that nearly 94,000 people across Michigan returned to work during the year. Additionally, the average price for single family homes also saw a modest 7.9% increase compared to December 2009.

Kalamazoo population shift

2011-02-13T08:30:00.000-08:00

From 2005-2009, Kalamzoo County's population between the ages of 20-24 showed a 35% increase. Why is this significant for the county? These 20-24-year-olds are geographically mobile and they can usually choose where they live and work. Generally speaking, they will go where the work is, and to an area that caters to their lifestyle. A deeper labor pool attracts new business and with it, more jobs. This bodes well for the near future and for the housing market in particular.

These are the home buyers of the future. In modern jargon, they are the 'pending familes'; people who will one day get married and start families of their own. These are the future first-time home buyers that are critical in getting the housing market going again. Without new home buyers entering the housing market, the market will remain stagnant for longer. That Kalamazoo County is witnessing the expansion of this age group is an important factor in the slow emergence from the Great Recession.

All we need now are banks willing to lend again on terms that are attainable to first-time buyers.

http://www.nrgstar.us/

Emerging trends in home designs

2011-02-12T10:23:00.000-08:00

Smaller homes with lower prices and more green features will become more popular. Here are a few of the salient statistics gleaned from recent surveys:

* 52% of builders expect to build smaller homes in 2011, compared to what they built in 2010.
* 59% of builders say their models will be priced lower this year than in 2010.
* 74% said homes will be smaller by the year 2015.

Homes will be much 'greener' within the next four years. Living rooms will be merged with other spaces in the home, although living rooms may well vanish entirely to save on square footage in many new homes by the year 2015. The family room is likely to increase as an overall share of floorspace, while entry foyers and dining rooms are likely to shrink by 2015.

Features that are likely to be included in the average new home of 2015 include a great room comprised of kitchen, family room and living room; a walk-in closet in the master bedroom; a laundry room; ceiling fans; a master bedroom on the first floor in homes with two stories; and a two-car garage.

The most commonplace green features in 2015's new homes are likely to include low-E windows; engineered wood beams, joists or trusses; water-efficient features such as dual-flush toilets or low-flow faucets; and an Energy Star rating for the whole house.

NRG Star Construction designs incorporate all of these features already. Why wait until 2015?

http://www.nrgstar.us/