FDR came up with more government-paid jobs — roadwork, infrastructure construction, aesthetic work. WWII, though one of the worst memories and experiences in human history, brought America completely out of its economic funk. Although things are being approached a little differently this time it sounds like we’re going along the same lines. The government is thinking about investing in more public works, providing more govenrment and state relief, and perhaps even some tax cuts.

The article explains everything in a little more detail including exactly what’s being pitched:

Article from CNN Money by David Goldman, dated January 26, 2009

You’ve probably noticed: The Obama administration and Congress are talking about spending an unprecedented sum of money to try to revive the economy.

President Obama and House Democrats laid down the marker with an $825 billion package of spending and tax cuts. The Senate version will be taken up by two committees on Tuesday.

Dozens of proposals. Hundreds of pages of legislation. Billions of dollars.

What are some of the headline proposals, and what is the debate all about? The legislation is a work in progress, but here is an overview.

Infrastructure

The case for: By investing in renewable energy, health care, education and modern construction projects, the Obama administration expects to create between 3 million and 4 million jobs and address key sustainability issues.

The case against: Opponents argue the spending will lead to a rapidly increasing and unsustainable deficit. They also say that a majority of infrastructure projects will take too long to implement.

Construction projects: $90 billion. Fund the rebuilding of crumbling roads and bridges, build clean water and flood control mechanisms and provide funding for mass transit systems.

Education: $142 billion. Rebuild thousands of schools by modernizing classrooms, labs and libraries. The plan would also increase funding for Pell Grants.

Renewable energy: $54 billion. Double production of alternative energy in the next three years. Weatherize low-income homes, modernize 75% of federal buildings and update the nation’s electrical grid with a new, cost-efficient “smart” grid.

Health care records: $20 billion. Modernize the health care system by computerizing all of the nations’ medical records in the next five years.

Science, research and technology: $16 billion. Invest in science facilities, research and instrumentation to create new industries, new jobs and medical breakthroughs. Expand broadband Internet access in rural and underserved areas.

State relief

The case for: As states face budget shortfalls, Obama’s plan seeks to help states pay for Medicaid and unemployment benefits. State fiscal relief will be allocated to prevent increases in state and local taxes.

The case against: Opponents say the bill should focus on job creation that will make an immediate impact the economy. Republicans have specifically criticized a provision that would expand a government matching program for states that provide abortion and contraceptive funding through Medicaid.

Medicaid: $87 billion. Increase Federal Medicaid Assistance Percentage so states do not have to cut eligibility for Medicaid due to budget shortfalls.

Law enforcement: $4 billion for states and municipality funding for law enforcement.

Safety net

The case for: Obama proposed temporary programs to protect those most vulnerable to the effects of the recession.

The case against: As with state budget relief, opponents say the bill is too big and should simply aim to create new jobs. Some lawmakers have said some of the “safety net” spending provisions are wasteful, and many have called the bill unfocused.

Unemployment benefits: $43 billion. Extend through December 2009 emergency unemployment insurance assistance to states. Increase weekly unemployment benefits by $25, and provide incentives for states to expand unemployment coverage.

Cobra: $39 billion. Tax credit for recently laid-off employees to help pay for discounted health care. Obama estimates the plan will help 8.5 million people who recently lost their jobs.

Feeding the hungry: $20 billion. Increase food stamp benefits by 13%, and provide support for food banks, school lunch programs and WIC.

Tax cuts for individuals

The case for: The president proposed the so-called “Make Work Pay Credit” as part of an effort to spend at least 75% of the package in the first 18 months after its passage. Obama hopes that fast-spending provisions like tax cuts will quickly help low- and middle-income workers in need of spending money.

The case against: Opponents say the size tax cuts do not go far enough and on the whole don’t make up a big enough portion of the entire package. Furthermore, they oppose giving tax breaks to people who do not pay taxes.

Middle-class tax cut: $145 billion. Tax cut amounting to $500 a year for individuals and $1,000 for couples. The full credit would be limited to those making $75,000 or less ($150,000 or less for workers filing joint returns).

Low-income tax cut: $5 billion. Expand the Earned Income Tax Credit, which is a refundable credit for low-income workers. Furthermore, the Make Work Pay Credit would be refundable, meaning that even tax filers without any tax liability — typically very low-income workers — would receive one.

Child tax credit: $18 billion. Temporary increase in the amount of the child tax credit that would be refundable.

Tax cuts for businesses

The case for: Obama’s plan seeks to help ease the tax burden for small businesses, as well as allow companies suffering losses to get some tax relief by applying losses backwards or forwards.

The case against: Opponents say too small of a percentage of the total package — 2.7% — goes to small businesses. They also say that much of the proposed tax relief essentially amounts to spending, due to the provisions Democrats placed on the tax credits.

Small business write-offs: Obama would increase the amount of expenses small businesses can write off to $250,000 in 2009 and 2010 from the current $125,000 level.

Tax cuts for companies suffering losses: $17 billion over 10 years. Obama would temporarily broaden the “net-operating loss carryback” to five years, up from two years currently. The provision would let companies apply their 2008 and 2009 losses to past and future tax bills so they can get money back on taxes they’ve already paid or would otherwise have to pay.

Like many others have said before, President Obama exudes a type of hope and confidence that this nation sorely needs during a time of economic crisis, political strife, and global turmoil. Not only do we have domestic fears of financial difficulty, increasing unemployment, a rise in foreclosure, but we also have international worries - the fear of tumbling from being the world’s great economy and one of the world’s great leaders.

I believe in Obama and I want to believe in the great future and the in the potential of America in his hands. So I think I speak for many of us when I say that I hope action ensues this great and historical day. I hope that these next eight years will be filled with change for the better and hope for all Americans to become a greater nation than we’ve ever been, and to become a better people in the eyes of the world.

But first thing’s first — as Obama said in his inaugural address this morning - “we must pick ourselves up, dust ourselves off, and begin again the work of remaking America.”

I’ve seen it time and time again. Homeowners want to refinance or pull equity out of their homes thinking their home has only depreciated slightly from $650,000 to $625,000, when in reality its value has fallen to somewhere close to $425,000. So in this post, as hard as it is to accept, I provide some methods to make sure that your idea of your home’s worth is truly as close to reality as an estimation can be without having the educational background or program resources of an appraiser or Realtor.

The information you will need in order to complete this task:

1. Your property’s address
2. A sense of preparation for what may be bad news

There are quite a few online resources you can use to get a value estimate for your home. However keep in mind that though these resources are useful, you need to be able to filter through the information they provide.

The most common way these resources use to estimate your property’s value is the use of “comparables” or similar properties in relatively close proximity that have sold recently. Some resources even allow properties currently being listed to influence the estimate of your property’s value - in cases like these listed values can be difficult to trust. In today’s market sellers that are not in a complete rush to sell their home generally do not list their homes according to its true value. Instead there is a big chance that if the listing is relatively new, the listing is higher than what it’s really worth. On the other hand if the listing is owned by a bank, is a short sale, or is a foreclosure, the chances are the value will be somewhat lower than what its true value is at the time.

Due to the potential inaccuracy that current listings provide, I urge you to only consider the numbers given for properties that have recently sold. Here is a list of websites that provide you with sales in your area:

• Zillow
• Trulia
• RedFin (Bay Area)
• RealEstate.com
• HomeGain

Now the important part…

How to sort through the comparables to find the real value?

When you are provided with a list of comparables from any of these websites, keep in mind that their lists are very generic. They use information that is on public record, which may be outdated and incorrect, and a very general equation to compare properties. They also have no way of knowing what has upgrades you’ve done to your house, or in what bad shape the house next door was when it was sold. Although we can’t know some of these factors either, we can cut down on the chances of a misuse in value. So once you get the lists you have to filter through the properties that are being used to make sure that it truly can be considered a “comparable” for your house.

Make sure to check the following information with the provided comparables:

1. Location
   Is the comparable’s location relatively close to your home? It is generally required to only consider comparables that are within 0.5 to 1 mile from your home. If your home is located in an area where neighborhoods, districts, and economic conditions vary from block to block, then you will have to take this into consideration when using the comparables in your area.
2. Bedroom / Bathroom
   Does the comparable have as many bedrooms or bathrooms as yours? Online resources will usually provide you with comparables that have 1-2 more or fewer bedrooms and bathrooms. It is easiest and most accurate to use properties with the same bedroom and bathroom breakdown as your home to come to a true value. Appraisals sometimes do include properties that have one more bedroom or one less bathroom, but appraisers know how to subtract the value accordingly, an ability we aren’t really capable of doing accurately.
3. Square Footage
   Does the comparable home have about as much square footage as yours? The difference in the comparable’s square footage and your square footage can vary from 50 square feet to 300 square feet. If your home is on the smaller side, e.g. <1,000 sq.ft., then it is essential to consider properties that are only 50-100 square feet larger or smaller than your home. If your property is on the larger side, e.g. >2,000 sq.ft. then it is okay to use comparables that are 200 or even 300 square feet larger or smaller than your house. How flexible you can be when comparing square footage can depend on your home’s size - use logic and you’ll be able to figure it out.
4. Miscellaneous
   Other items that you should remember to compare: Does the comparable have or doesn’t have (in comparison to your home):
   - Swimming Pool
   - Garage (how many cars does it fit?)
   - Landscaping
   - Solar Piping
   - Recent Renovations
   - New Roof

So as you can see there are many things that must be taken into consideration in order to get an accurate idea of how much your home is worth. But hopefully with this information you’ll be able to grasp a better idea of your home’s estimated value!

If you want to get an official appraisal done on your property expect to pay about $300-400 for a condominiu, townhouse or single family residence - more if you’re getting a larger property such as a multi-family appraised. Keep in mind that if your appraisal requires income-evluation as well it can cost an additional $50-150. If you would like to get a commercial property appraised it is common to see appraisal invoices reach over $1,000.

Real estate loans. Almost whenever you buy a house, invest in a property, refinance, or take cash out of your house, you are on the path of obtaining a mortgage. I can go into the process of a mortgage - how it works, the steps, what to expect - but that is not what this article is about.

This article is dedicated to everyone that has ever been confused about all the different ways to pay your closing costs. You hear it on the radio: “No points! No closing costs!” Everywhere you look it sounds like loans are being handed out for free left and right. But in reality money is never free, at least not on this world! So here is the real information about your real options in paying your closing costs; you have three choices.

The first is to roll your costs into your loan balance. This option adds whatever amount is due for closing costs on top of your loan balance. Whether you are purchasing or refinancing your house, closing costs can be added into your mortgage principal. On a positive note it usually does not make much of a difference when it comes to your interest rate, unless your loan-to-value ratio increases past 80%. It does however result in a slightly higher monthly payment.

For example: You are buying a house for $400,000. You are getting a loan for 75% of the purchase price or $280,000. Closing costs are always estimated to be 2-3% of your purchase price, so let’s use 3% in the worst case scenario, or $12,000. Let’s also say that your interest rate for a 30 year fixed mortgage is 5.000%. If you were to pay your closing costs out of pocket, like in the 3rd option below, your monthly payment would be about $1,500. However because you are rolling the closing costs into your loan and increasing your principal balance from $280,000 to $292,000, your monthly payment increases to about $1,570.

Considering how much money you’re not paying out of pocket at that very moment, in the same transaction, a $70 monthly increase is not too dramatic. But it still, without a doubt, an increase in your mortgage payment.

The second is to roll your costs into your interest rate. Unlike with Option 1, with this option you will not see your principal balance increase, but you will see your interest rate increase. Your interest rate is not only dependent on your personal and financial qualifications. It also reflects a “rebate.” A rebate is essentially another method for your loan officer to be paid in addition to whatever fee he or she charges you up front. The rebate is paid by the lender and is built into the interest rate. The higher the interest rate, the more rebate the loan officer receives. I’m sure I will write another article to explain the finer points of rebates, so stay tuned! In this particular situation closing costs can be paid with these rebates. Rebates are calculated by points or percentages. A 1 point rebate is 1% of the loan amount, just like when you pay 1 point to the loan officer or bank, you are paying 1% of your loan amount. If you increase the interest rate enough there may be enough rebate to cover some or all of the closing costs involved with obtaining the mortgage. Unfortunately there is no calculator that can determine how much of a rebate each interest rate will provide, or how much the interest rate needs to increase to provide a certain amount of rebate - every lender has their own rates, their own investors that ultimately determine the interest rates and their correlating rebates. Similarly every day provides you and me with new interest rates and new rebates, so it’s an ever changing process.

For example: This is the same situation as the first example. You are buying a house for $400,000, you are obtaining a loan for 75% of the purchase price or $280,000. If you were to pay out of pocket or add closing costs onto your principal balance your interest rate would be 5.000%. However because we don’t want to see our balance increase we need to get more rebate from our interest rate - so our interest rate increases to 5.500%. The initial monthly payment would have been about $1,500. With the rate increase your monthly payment would become about $1,590.

The third option is to pay your closing costs out of pocket. This is the most straightforward and most practiced option. You pay the closing costs out of pocket. Instead of rolling your closing costs into your balance or into your rate you forgo the ability to use that money for investments and other things, and instead you put the money towards your closing costs.

What do I recommend? The way that you are going to pay your closing costs really depends on your current situation. Let me share some situations under which you’d use certain ways to pay :

• Option 1 - Rolling costs into the loan
  You bought your house 10 years ago at $200,000. Your house is now currently worth $400,000. You initially put down a 20% down payment, and so obtained a loan for $160,000. Over the 10 years you’ve paid down some of the principal and now have a remaining balance of $100,000. You decide you want to refinance your house because your current interest rate is still at 8.000% from years ago. So you roll your closing costs into your mortgage and increase your balance from $100,000 to $105,000. You obtain an interest rate of 5.000%. So while you could have seen a monthly payment of about $540 you will see a monthly payment of about $565. Still makes sense - you lowered your interest rate and the monthly payments are not much higher for not having paid for the refinance transaction!
• Option 2 - Rolling costs into your interest rate
  You bought your house 10 years ago for $250,000. It is currently worth $350,000. At the time you put a down payment of 20% and obtained a loan for $200,000. 10 years ago you got an interest rate of 8.000% for a 30 year fixed. Now your loan balance is a little lower, $150,000, and you want to take advantage of the mortgage market and lower your rate to the norm of 5.000%. However you don’t want to pay closing costs out of pocket and you don’t want to see your hard-earned money going towards monthly payments just to see your principal increased once again. So instead your roll the closing costs into your interest rate and now the rate has increased to 5.500%. Initially you would have seen a monthly payment of about $805. But with the rate increase you will see a monthly payment of about $851. Taking into consideration that your original monthly payment at 8.000% was almost $1,470, a small increase in your interest rate is still saving you a lot of greenbacks.
• Option 3 - Paying out of pocket
  These cases are a bit more straightforward. You may be rate-sensitive and don’t want to see all the money you’ve put into your monthly payments just disappear by increasing your balance. There are plenty of reasons to pay out of pocket and there are plenty of reasons to build the closing costs into your loan. It really just depends on your particular situation and what you need at this time.

Tip: If you’re purchasing your home you have one more option than the previously mentioned three. You can have your Realtor negotiate to have the sellers pay for all your closing costs, in which case you won’t have to pay a dime! I’ve seen it done time and time again with my most trusted and capable Realtors, so know that it is possible and it is absolutely an option. This is probably the only true way of really not having to pay your own closing costs - though keep in mind that sellers paying for your closing costs generally means that you won’t be able to bargain as much on the sales price. ]]> http://simpluxe.com/blog/?feed=rss2&p=42 http://simpluxe.com/blog/?p=38 http://simpluxe.com/blog/?p=38#comments Mon, 19 Jan 2009 10:52:39 +0000 EllenC http://simpluxe.com/blog/?p=38 According to Money Magazine and its sources:

The housing implosion is nowhere near over. In 75 of the 100 top  U.S. cities, prices are expected to fall in the next 12 months according to Fiserv Lending Solutions.

It’s chilling to think that our nation’s economic crisis and our own financial circumstances can get much worse than it already is, and yet somehow that’s the conclusion from all the predictions. This article starts off with the few cities that are predicted to see some appreciation, albeit minimal. It continues on with its list to go through the other more unfortunate cities that are predicted to see more depreciation in this coming year.

But remember! We’re all in this together - so don’t let this news get you down. There is hope on its way - just give it some time to work.

Article from CNN Money, Money Magazine - Dated May 8, 2008

The housing implosion is nowhere near over. In 75 of the 100 top U.S. cities, prices are expected to fall in the next 12 months according to Fiserv Lending Solutions.

The S&P Case/Shiller Home Price Index, which tracks 20 of the largest housing markets, showed prices plummeting by 12.7% in the 12 months ending February. That’s the biggest fall since the index began tracking prices in 2000.

Meanwhile, foreclosure filings more than doubled in the first three months of 2008, spiking 112%. So far this year 156,463 families have lost their homes to repossessions. Many markets won’t hit bottom till late 2009 or even 2010.

Pity the residents of Stockton, Calif., whose homes are likely to lose more than half of their 2006 value. But if you happen to live in Texas, congratulations: The housing tornado passed you by.

McAllen, TX	$109,000	23.3%	4.0%	23%
Rochester, NY	$121,000	20.1%	2.7%	5%
Birmingham	$156,000	29.4%	2.7%	20%
Syracuse	$126,000	29.5%	2.6%	27%
Buffalo/Niagara Falls	$105,000	24.5%	2.4%	14%
New Orleans	$158,000	43.7%	2.2%	49%
Scranton	$128,000	41.1%	2.2%	8%
Baton Rouge	$170,000	38.3%	1.9%	14%
Grand Rapids	$124,000	8.3%	1.9%	37%
El Paso	$134,000	51.9%	1.8%	32%
Wichita	$114,000	17.8%	1.5%	9%
Tulsa	$128,000	18.8%	1.4%	5%
Fort Worth/Arlington	$134,000	17.4%	1.4%	16%
Indianapolis	$114,000	12.0%	1.3%	11%
Houston	$150,000	25.1%	1.2%	11%
Dallas	$161,000	15.8%	1.2%	14%
Gary, IN	$125,000	25.6%	1.1%	12%
Albany, NY	$200,000	64.1%	0.9%	10%
San Antonio	$152,000	39.6%	0.8%	22%
Greensboro, NC	$151,000	17.8%	0.6%	256%
Omaha	$136,000	17.7%	0.6%	71%
Little Rock	$128,000	28.4%	0.5%	405%
Louisville	$133,000	20.7%	0.5%	17%
Columbia, SC	$145,000	28.1%	0.3%	16%
Oklahoma City	$134,000	29.8%	0.3%	16%
Austin	$186,000	28.9%	-0.1%	-6%
Raleigh/Cary, NC	$236,000	26.4%	-0.2%	62%
Charlotte, NC	$205,000	27.8%	-0.5%	15%
Kansas City	$148,000	19.4%	-0.6%	22%
St. Louis	$134,000	31.7%	-0.8%	22%
Lake County, IL	$260,000	30.4%	-0.8%	N.A.
Pittsburgh	$144,000	18.1%	-1.3%	1%
Memphis	$124,000	8.7%	-1.5%	28%
Richmond	$226,000	61.4%	-1.8%	72%
Milwaukee	$220,000	35.7%	-1.8%	53%
Atlanta	$205,000	16.0%	-2.3%	52%
Youngstown, OH	$87,000	2.8%	-3.0%	3%
Nashville	$154,000	34.8%	-3.3%	28%
Allentown, PA	$247,000	58.9%	-3.3%	52%
Akron	$143,000	5.2%	-3.8%	15%
Toledo	$122,000	1.9%	-4.0%	12%
Cincinnati	$166,000	7.4%	-4.2%	9%
Cleveland	$145,000	1.2%	-4.3%	11%
Columbus, OH	$155,000	5.7%	-4.4%	17%
Dayton	$125,000	7.7%	-4.4%	10%
Knoxville	$144,000	35.6%	-5.2%	39%
Minneapolis/St. Paul	$235,000	15.9%	-5.6%	71%
Farmington Hills, MI	$175,000	-7.5%	-5.9%	N.A.
Poughkeepsie, NY	$260,000	50.8%	-6.8%	35%
Chicago	$279,000	29.2%	-6.8%	9%
Virginia Beach	$236,000	90.1%	-7.1%	33%
Cambridge, MA	$417,000	10.7%	-8.5%	57%
Detroit	$120,000	-6.3%	-8.6%	41%
Peabody, MA	$365,000	10.4%	-8.8%	9%
Sacramento	$330,000	23.3%	-8.9%	210%
Seattle	$430,000	61.9%	-9.0%	58%
Worcester, MA	$257,000	13.5%	-9.2%	102%
Springfield, MA	$195,000	33.6%	-9.5%	241%
Jacksonville	$197,000	47.7%	-9.6%	130%
San Diego	$522,000	31.3%	-9.7%	175%
Salt Lake City	$229,000	59.9%	-9.8%	18%
San Francisco	$840,000	40.7%	-10.1%	175%
Wilmington, DE	$259,000	50.9%	-10.3%	145%
Boston	$363,000	13.4%	-10.5%	57%
Albuquerque	$174,000	50.7%	-10.5%	23%
Denver	$254,000	4.5%	-10.8%	23%
Philadelphia	$200,000	50.0%	-11.1%	29%
Providence	$275,000	32.0%	-11.6%	107%
Oakland	$595,000	27.7%	-11.7%	266%
Baltimore	$264,000	64.7%	-12.5%	92%
San Jose	$750,000	38.7%	-12.5%	347%
Hartford, CT	$249,000	29.1%	-12.6%	51%
Bethesda, MD	$460,000	54.9%	-12.9%	118%
Ventura County, CA	$577,000	42.7%	-13.1%	240%
Tacoma	$283,000	64.3%	-13.2%	68%
Washington, DC	$408,000	49.2%	-13.2%	42%
New York City	$471,000	43.5%	-13.2%	3%
Bakersfield, CA	$255,000	73.0%	-13.6%	391%
Stamford, CT	$562,000	32.8%	-13.9%	66%
New Haven	$260,000	36.3%	-14.2%	83%
Fresno	$276,000	62.1%	-14.3%	285%
Nassau/Suffolk, NY	$465,000	40.2%	-14.4%	N.A.
Portland, OR	$306,000	62.3%	-14.7%	100%
Camden, NJ	$220,000	50.9%	-14.9%	11%
Santa Ana, CA	$669,000	52.4%	-15.2%	290%
Newark	$419,000	38.1%	-15.4%	-5%
Sarasota	$230,000	38.0%	-15.5%	458%
Edison, NJ	$358,000	36.0%	-15.8%	0%
Honolulu	$625,000	95.3%	-16.2%	129%
Los Angeles	$528,000	67.7%	-16.8%	261%
Stockton, CA	$341,000	17.8%	-16.8%	379%
Tucson	$217,000	54.5%	-16.9%	14%
Riverside, CA	$340,000	49.9%	-16.9%	299%
Tampa	$200,000	52.1%	-17.1%	281%
West Palm Beach, FL	$305,000	46.1%	-17.6%	435%
Las Vegas	$277,000	60.8%	-18.3%	2%
Phoenix	$237,000	60.9%	-18.3%	9%
Orlando	$245,000	62.5%	-21.0%	399%
Fort Lauderdale	$309,000	56.1%	-22.2%	450%
Miami	$329,000	94.8%	-24.9%	370%
USA	$206,000	32.7%	-9.7%	65%

1. Plymouth, MN
2. Fort Collins, CO
3. Naperville, IL
4. Irvine, CA
5. Franklin Township, NJ
6. Norman, OK
7. Round Rock, TX
8. Columbia/Ellicott city, MD
9. Overland Park, KS
10. Fishers, IN
11. Olathe, KS
12. Highlands Ranch, CO
13. Parsippany/Troy Hills, NJ
14. McKinney, TX
15. Carrollton, TX
16. Cary, NC
17. Eagan, MN
18. Richardson, TX
19. Hunter Mill, VA
20. Allen, TX
21. Abington, PA
22. Troy, MI
23. Piscataway, NJ
24. Apple Valley, MN
25. Sully, VA

Why not buy a house and have an in-law in it to make some extra money every month? Who knows, if one day you don’t need the extra income you can always give your rebellious teenager their own living space.

Wall Street Journal article by Sara Lin - Dated January 16, 2009

Brooklyn, N.Y. | $1.9 million

Four-story brownstone of 2,776 square feet in the Park Slope neighborhood, with a garden-level studio rental.

Details: On tree-lined Park Place, near Seventh Avenue, this 1883 brownstone on a 100-foot-deep lot has northern and southern exposures. The rental unit opens to a large backyard and has original tin ceilings, woodwork and a decorative mantle over a nonworking fireplace. Owner’s unit is a five-bedroom triplex with six fireplaces (all nonworking), two baths, and a powder room.

Walking Distance: Restaurants and shops on Fifth and Seventh Avenues, as well as subway-station entrances, are one block away.

Caffeine Fix: Gorilla Coffees, less than two blocks away.

Today’s Forecast: Party cloudy, 21 degrees.

Source: Esther Hickman & Annie Rose, Brown Harris Stevens Brooklyn; ehickman@bhusa.com, arose@bhusa.com

San Francisco | $2 million

Two-unit Victorian house of 1,660 square feet in the city’s largest Liberty Hill neighborhood, less than a block from Mission Dolores Park.

Details: This turn-of-the-century house - converted in 1920 into two one-bedroom units of about equal size, each with an office and a bathroom - last had a renovation in the 1990s. The downstairs unit has beige Spanish tile flooring and crown molding, with French doors leading to a backyard on the 114-foot-deep lot. The upstairs unit, which the owners rent nightly to tourists, features glass walls and marble countertops.

Walking Distance: Two blocks to shops and eateries of 18th Street.

Caffeine Fix: Dolores Park Cafe is around the corner.

Today’s Forecast: Sunny, 69 degrees.

Source: David Glenn, Pacific Union, Christies Grand Estates, 415-345-2587; david.glenn@pacunion.com

London | $2.2 million (1.5 million pounds)

Victorian turn-of-the-century two-story town-home with two units in the Bolton Gardens neighborhood of Chelsea.

Details: On a cobblestone street, the 1,130-square-foot home is loosely divided into two flats, each with one bedroom and one bathroom. The ground-floor unit, slightly smaller, has a kitchenette and a single garage (a luxury in London).

Walking Distance: The Boltons, a city square with gardens and a church, is around the corner. Less than 10 minutes away: the London Underground and Fulham Road with shops, eateries.

Caffeine Fix: Paul, a French bakery on Fulham Road

Today’s Forecast: Light rain, windy, 50 degrees

Source: Ed Mead, Douglas & Gordon, Chelsea Office, 44-20-7225-1225

Sorry I couldn’t make the San Francisco and London pictures appear in my post but you can view the images in the link below!

View more pictures of properties listed above.

This article is dedicated to everyone that has ever been confused about all the different ways to pay your closing costs. You hear it on the radio: “No points! No closing costs!” Everywhere you look it sounds like loans are being handed out for free left and right. But in reality money is never free, at least not on this world! So here is the real information about your real options in paying your closing costs; you have three choices.

The first is to roll your costs into your loan balance. This option adds whatever amount is due for closing costs on top of your loan balance. Whether you are purchasing or refinancing your house, closing costs can be added into your mortgage principal. On a positive note it usually does not make much of a difference when it comes to your interest rate, unless your loan-to-value ratio increases past 80%. It does however result in a slightly higher monthly payment.

For example: You are buying a house for $400,000. You are getting a loan for 75% of the purchase price or $280,000. Closing costs are always estimated to be 2-3% of your purchase price, so let’s use 3% in the worst case scenario, or $12,000. Let’s also say that your interest rate for a 30 year fixed mortgage is 5.000%. If you were to pay your closing costs out of pocket, like in the 3rd option below, your monthly payment would be about $1,500. However because you are rolling the closing costs into your loan and increasing your principal balance from $280,000 to $292,000, your monthly payment increases to about $1,570.

Considering how much money you’re not paying out of pocket at that very moment, in the same transaction, a $70 monthly increase is not too dramatic. But it still, without a doubt, an increase in your mortgage payment.

The second is to roll your costs into your interest rate. Unlike with Option 1, with this option you will not see your principal balance increase, but you will see your interest rate increase. Your interest rate is not only dependent on your personal and financial qualifications. It also reflects a “rebate.” A rebate is essentially another method for your loan officer to be paid in addition to whatever fee he or she charges you up front. The rebate is paid by the lender and is built into the interest rate. The higher the interest rate, the more rebate the loan officer receives. I’m sure I will write another article to explain the finer points of rebates, so stay tuned! In this particular situation closing costs can be paid with these rebates. Rebates are calculated by points or percentages. A 1 point rebate is 1% of the loan amount, just like when you pay 1 point to the loan officer or bank, you are paying 1% of your loan amount. If you increase the interest rate enough there may be enough rebate to cover some or all of the closing costs involved with obtaining the mortgage. Unfortunately there is no calculator that can determine how much of a rebate each interest rate will provide, or how much the interest rate needs to increase to provide a certain amount of rebate - every lender has their own rates, their own investors that ultimately determine the interest rates and their correlating rebates. Similarly every day provides you and me with new interest rates and new rebates, so it’s an ever changing process.

For example: This is the same situation as the first example. You are buying a house for $400,000, you are obtaining a loan for 75% of the purchase price or $280,000. If you were to pay out of pocket or add closing costs onto your principal balance your interest rate would be 5.000%. However because we don’t want to see our balance increase we need to get more rebate from our interest rate - so our interest rate increases to 5.500%. The initial monthly payment would have been about $1,500. With the rate increase your monthly payment would become about $1,590.

The third option is to pay your closing costs out of pocket. This is the most straightforward and most practiced option. You pay the closing costs out of pocket. Instead of rolling your closing costs into your balance or into your rate you forgo the ability to use that money for investments and other things, and instead you put the money towards your closing costs.

What do I recommend? The way that you are going to pay your closing costs really depends on your current situation. Let me share some situations under which you’d use certain ways to pay :

• Option 1 - Rolling costs into the loan
  You bought your house 10 years ago at $200,000. Your house is now currently worth $400,000. You initially put down a 20% down payment, and so obtained a loan for $160,000. Over the 10 years you’ve paid down some of the principal and now have a remaining balance of $100,000. You decide you want to refinance your house because your current interest rate is still at 8.000% from years ago. So you roll your closing costs into your mortgage and increase your balance from $100,000 to $105,000. You obtain an interest rate of 5.000%. So while you could have seen a monthly payment of about $540 you will see a monthly payment of about $565. Still makes sense - you lowered your interest rate and the monthly payments are not much higher for not having paid for the refinance transaction!
• Option 2 - Rolling costs into your interest rate
  You bought your house 10 years ago for $250,000. It is currently worth $350,000. At the time you put a down payment of 20% and obtained a loan for $200,000. 10 years ago you got an interest rate of 8.000% for a 30 year fixed. Now your loan balance is a little lower, $150,000, and you want to take advantage of the mortgage market and lower your rate to the norm of 5.000%. However you don’t want to pay closing costs out of pocket and you don’t want to see your hard-earned money going towards monthly payments just to see your principal increased once again. So instead your roll the closing costs into your interest rate and now the rate has increased to 5.500%. Initially you would have seen a monthly payment of about $805. But with the rate increase you will see a monthly payment of about $851. Taking into consideration that your original monthly payment at 8.000% was almost $1,470, a small increase in your interest rate is still saving you a lot of greenbacks.
• Option 3 - Paying out of pocket
  These cases are a bit more straightforward. You may be rate-sensitive and don’t want to see all the money you’ve put into your monthly payments just disappear by increasing your balance. There are plenty of reasons to pay out of pocket and there are plenty of reasons to build the closing costs into your loan. It really just depends on your particular situation and what you need at this time.

Tip: If you’re purchasing your home you have one more option than the previously mentioned three. You can have your Realtor negotiate to have the sellers pay for all your closing costs, in which case you won’t have to pay a dime! I’ve seen it done time and time again with my most trusted and capable Realtors, so know that it is possible and it is absolutely an option. This is probably the only true way of really not having to pay your own closing costs - though keep in mind that sellers paying for your closing costs generally means that you won’t be able to bargain as much on the sales price.