Live in Austin? You’ll Need to Do An Energy Audit

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Newsflash for you who have lived in your Austin home since the Year One: before you put that home on the market, you must get an energy audit done by an energy professional.

Yes, it’s true, the City of Austin has an Energy Conservation and Disclosure ordinance. If you are an Austin Energy customer, you live in the Austin city limits, and your house is more than 10 years old, you must get an audit done. They check heating/cooling efficiency, amount of air escaping your home, the insulation level, and the window efficiency, all of which require specialized equipment.

This will cost you several hundred dollars, based on the size of your home. Be sure to get quotes from several energy professionals, and get a recommendation from someone who has used an auditor, if possible, before hiring one.

Just like any other aspect of home improvement, you can wait until you decide to put your house on the market before you take action. OR, you can choose to take action early and enjoy the fruits while you are still living in the home. You might go ahead and get an energy audit and get yourself some beautiful new windows. Or, you might decide to upgrade to a more efficient HVAC system and enjoy the savings on your utility bills.

In any case, the city does not require you to make upgrades based on the energy audit. It just requires you to pay for the audit so that potential buyers will understand what might be involved in owning the home in the condition it’s in.

New City-planning Maps for Austin

If you’ve been keeping up with CodeNext, Austin’s evolving zoning ordinances, you know that January’s release of new ordinances without an accompanying release of maps caused angst in the neighborhoods whose inhabitants have spent years trying to keep the  feel of those neighborhoods the same as it has been for decades.

Fitting more people and their activities into the same-sized space requires denser building. Closer together and higher. That is the geometry of the situation.  Totally different feel from vistas and trees, right?

Today, the city released the initial zoning maps. Here is a link to the article in the Statesman: CodeNext zoning maps. You’ll find more links within this article, so study to your heart’s content.

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Cost-savings for Borrowers

I love sending my home buyers who are planning to borrow to an in-person local lender. I love the personal touch. However, in the world of online everything, I do have a great online option for my homebuyers: Keller Mortgage. Keller Mortgage is new, and our Southwest Market Center has been the testing ground. It is licensed only in Texas right now, but will soon expand. The first loans have been closed speedily, with rates equal to, or better than, competitors’ rates.

Keller Mortgage is partnered with Keller Williams agents as a way of producing a product for our clients that is more than competitive. The business model is based on the best of the traditional lender model (talking with actual people) and the best of the internet model (very low brick-and-mortar costs because the loan center is all in one place), plus an advantage of no advertising and marketing costs. This means that Keller Mortgage is able to charge the borrower no fees AND the borrower gets a credit of $1000, which can save the borrower several thousand dollars on a closing. Other lenders may do something similar, but then raise the interest rate on the loan to make up the difference. The Keller Mortgage business model is based on a large volume of loans from the clients of its many agents, as well as the re-sale of the loans after they are closed.

Keller Mortgage is offering other advantages, too, including starting the appraisal process as soon as the home-buying contract is signed. If you decide not to buy the house during your option period, you do not pay the $450 or so for the appraisal; Keller Mortgage does. Also, you can be underwritten for the loan even before a home buying contract is signed, saving you time in the trip through the closing process. (In multiple offers, this can look good to a seller whose home you are hoping to buy!) You can be underwritten in 24 hours from the time you get all the requested documents to the lender.

I have installed the Keller Mortgage app on my phone and I can use it to help you compare rates to make a decision about which lender you are most comfortable using. If I list your home to sell it, a potential buyer using Keller Mortgage for a home loan could financially make the difference for that buyer between being able to buy at your price point or not. It is certainly something to think about.

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AJ Berzsenyi of KW Mortgage explaining the company’s value for clients

H2O

Went on a property tour this morning in the Dripping Springs area. Lenders and title companies often arrange these affairs on a regular basis for real estate agents and brokers who want to see a sample of what’s available ‘this week’.

It was rainy today. Really rainy. Not too many of us on the property tour. But, you know what? I love to tour properties in the rain, whether with clients, or just for my own education. That’s how you know what the drainage issues are. It’s fun to see how drainage problems have been solved, or forestalled, by French drains, dry streams, foundation grading, walls, etc. It’s also illuminating to see what hasn’t been solved: creeks over sidewalks, water running close to the top of a foundation.

Rainy weather when house-hunting also makes you super-aware of which roads are likely to be impassable in a storm. A phone app I like to use is ATXfloods.com. Shows me a map of all the low-water crossings in the area and which have been closed. Especially important in the hills!

It’s helpful to go house-shopping in the rain so that you can see if there are drainage issues.

By the way, I saw some properties on the market in Dripping Springs this morning that ranged from perfectly charming to gorgeous.

Ideas For Getting Into the Home-buying Market

Hello, First-time Home-shoppers, Parents of First-Time Home-shoppers, and Friends of People Who Don’t Have a Lot of Money to Spend!

On Friday, I met with a lender for Guild Mortgage, Joani Wilson, and she gave me the run-down of Austin-specific programs and area loan types that benefit people who are figuring out how to buy a home in the hot Central Texas market.

Joani Wilson and her borrower booklet

A USDA loan (United States Department of Agriculture) has income requirements on the borrower, as well as property location requirements. This is a loan oriented toward middle-income borrowers. USDA loans are meant to keep rural areas developed and thriving, so that is why there is a property location requirement. The maps on the USDA website linked above will be your first stop to see if a property qualifies for this type of loan. 100% financing is available and the seller is allowed to contribute up to 6% of the amount of the loan toward closing costs, so a buyer could make the purchase with virtually no money up front.

There are also various down-payment assistance programs in the area, so it is possible to get into a home using various FHA (Federal Housing Administration), VA (Veteran’s Administration) , and even conventional loans coupled with the DPA program.

Down payment assistance in Austin

Hill Country Home Down Payment Assistance Program for any area in Travis County

From the website:

  • Per FHA guidelines, all homebuyers qualifying for down payment assistance with credit score of 660 or higher will receive 4% of the original loan amount to be used for down payment and closing costs, which includes lender compensation of a 1.5% origination fee.
  • Per FHA guidelines, all homebuyers qualifying for down payment assistance with credit score ranging between 640 and 659 will receive 5% of the original loan amount to be used for down payment and closing costs, which includes lender compensation of a 1.5% origination fee.
  • The origination fee can be paid by the borrower or the seller.
  • This assistance is a gift/grant and does not require repayment at any time.

Southeast Texas Housing Finance Corporation (known as “SETH”)

Right now, from the website:

  • Current Rate / Offerings Lock Rate FICO     DPA     Effective Date 
    GOVERNMENT
    Option 1– FHA 5.50% 660 w/6% 3/9
    Option 2a– FHA 5.00% 660 w/5% 12/15
    Option 2b– FHA 640 or 660 w/Manual UnderWriting 640 or 660 w/4%
    Option 2c– FHA w/Manual UW 640-659 w/3%
    Option 3– FHA 4.875% 660 w/4% 4/10
    Option 4a– FHA 4.50% 660 w/3% 4/10
    Option 4b– USDA-RD, VA  640
     CONVENTIONAL-FREDDIE MAC
    Option 5– HFA Advantage 5.125% 640 w/4% 3/22

Texas Department of Housing and Community Affairs 

I enjoyed visiting with Joani because she is so enthusiastic about her job, and she obviously enjoys figuring out how to get people into homes.

 

 

Surveying: Up Close and Personal with the Land

If you have ever had the pleasure of driving on a midnight-darkened road out in the countryside, you know the feeling of not being able to see the next curve, the next deer that will collide with your car, or the depth of that ravine just off the edge of the road. It is a risky venture and you have to use all your senses on hyper-alert setting to get to your destination.

Not having any idea where property lines are, where the utilities run, where there is an oil-pipeline easement, or a neighbor’s driveway encroaching on your land is a bit like that drive through the dark. Obstacles can rise up before you and whip the living daylights out of you before you know what happened. THAT, my friends, is the reason civilization invented surveyors. Before you take out that fence, build that pool, or pave that driveway, you really, really need to know the facts about your property.

Here is a good blog on the topic ’10 reasons to have your property surveyed’. If you are buying property using a loan from a bank or mortgage company, they want to protect their investment by having an up-to-date survey before they will let you borrow that money. If you are buying property with cash, you could skip that survey step, but I don’t recommend it.

A couple of years ago, we had surveyors come and map the boundaries of our property so that we could see which trees are ours and which are our neighbors’. We have many live oaks which are a treasure and must be properly cared for to help them outwit Oak Wilt. And we needed to see which storm damage is ours to trim. It is one thing to understand a plat on a piece of paper and quite another to translate that into lines on the ground, through creeks, under brambles, and across expanses of tall grass.

Prickly Pear
Why surveyors wear boots and jeans

Our survey was done in February, but no matter the time of year, here’s what surveyors wear: long-sleeved shirt to protect from brambles and prickly pear, hat to protect from sun and branches, heavy boots to wade through wetlands and deflect rattlesnakes. We have all these on our property, for sure.

Here are some pictures of a few of our survey stakes. Our property line crosses the creek several times, but then, the creek has likely changed course since the land was subdivided from a ranch. One part of our property is on the neighbors’ side of a natural boundary; looking at the patch of ground, you’d swear it belongs to the next house over, but nope, it’s ours.

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Interesting Interest

I asked a broker friend what he thought my topic should be for this day, and he suggested that I should re-visit the extreme home loan rates of the 1980’s and 1990’s. I remember those days, so I got excited about the suggestion and here we are.

Interest rates of 20% or more sounds crazy today, but there was a time when it was reality, and we all took notice when someone found a home loan at only 18%. In a nutshell, the cause of such high interest rates was the Fed’s response to mounting inflationary pressures through the 70’s and 80’s. It kept raising the rates at which banks could borrow money, which trickled down to consumer-oriented loan rates.

The economy was not as global then. A global economy tends to keep a lid on prices because there is always someone willing to do the job or make the gizmo for less, somewhere on the planet. A more insular economy means that prices respond to internal national pressures for higher wages and more expensive products. Rising prices mean inflation. The way the Fed cooled down rising prices in the 80’s was to put a lid on the economy through making the cost of borrowing money to do business higher.

We haven’t seen the super-high interest rates in decades because, due to the different structure of the economy now, inflation hasn’t been much of a threat.

I found one blog associated with a commercial website that did a great job of explaining the 20th Century history of home loans.

In the early 1900’s, a typical loan structure was 50% down, and a 3-5 year payment on interest only followed by the entire principal due at the end of that time. Needless to say, you had to be pretty wealthy to afford a home.

summer home in walpole
Circa 1915. You needed a lot of cash to build this home!

In the 30’s, because of the Great Depression, there wasn’t much money to loan and not very many people could afford a home loan anyway. The federal government decided that more people should be able to buy homes and that this was a good way to promote the health and welfare of families, thereby promoting the health and welfare of the nation. The government gave birth to the Federal Housing Administration, which gave birth to 30-year mortgages and amortization.

Freese ranch house being built.
Home under construction in about 1940. A home loan was entirely possible by then.

The great story of mortgages and increase in homeownership in the U.S. goes on through the 70’s, 80’s, and 90’s in which the government and private institutions invented more ways to make money available to those institutions to lend to consumers. There have been perilous instruments such as ARMS and wraparound loans and subprime mortgages that helped some consumers get and keep the homes of their dreams, but created nightmares for many others who defaulted on their loans.

In times of high inflation, it makes sense to borrow money, even at a high rate of interest, to buy the most expensive house you can because the money you are using to pay back the loan is worth less and less as inflation rises. With the relatively flat rate of inflation we’ve been experiencing for some time, this strategy makes no sense, since you are paying back money that is worth about the same as the money you borrowed in the first place.

So, what’s with our gently rising interest rates now? Compared to the past, the current home loan rates of approximately 4 to 4.25% still seems pretty small, don’t they?

Here are a few more websites that are themselves a few years old that I found helpful in explaining the 1980’s that I still remember.

http://www.pbs.org/newshour/making-sense/what-led-to-the-high-interest/

http://www.theglobeandmail.com/real-estate/the-market/remember-when-what-have-we-learned-from-80s-interest-rates/article24398735/

http://www.economist.com/blogs/freeexchange/2010/03/volcker_recession

And, I can’t recommend enough this easy read on the modern history of home loans:

http://bebusinessed.com/history/history-of-mortgages/