You probably have heard how important it is to have your financial affairs in order before beginning the process of buying a home.

What does that mean? Besides paying off existing debts and postponing large purchases, it is prudent to do some preliminary legwork by getting preapproved or prequalified for a mortgage before you dive into the house-hunting process.

The difference between prequalification and preapproval for a loan is commonly misunderstood.

Although either scenario puts the consumer in a stronger position as a buyer, being preapproved carries much more weight. It helps your Realtor know how much you can borrow, which enables him or her to show you houses in your price range. It also makes the next step — getting a loan — faster and easier. In today's marketplace, many sellers want to see at least one of these two letters before responding to an offer to purchase the house. Many, if not all, third-party sellers who handle foreclosures and short sales require this to be included in the offer.

Prequalified

When you are prequalified for a home loan, you provide a lender approximate income, current debts and any important details from your credit history.

The lender will use these figures to calculate how much money you may be eligible to borrow prior to application for a loan.

You may be provided with a conditional qualification letter, which determines your likelihood of obtaining a loan. However, all information submitted during prequalification is subject to verification at the time the loan application is submitted.

Because your financial situation has yet to be verified, there is no guarantee of a home loan.

Preapproved

Typically, preapproval means your financial situation has been verified by the lender.

When you get preapproved, you complete a mortgage loan application. In some cases you may have to pay an application fee. After an extensive examination of your financial situation, your lender will commit, in writing, to fund your loan, pending a successful appraisal of the home and a few other conditions.

Additionally, even though you're not obligated to follow through with the loan, pending any changes, lenders must stand behind their written loan commitments.

Having a preapproval letter is as close to a sure thing as you can get in the lending world. It enables you to act quickly when you find the right home and gives you more legitimacy as a buyer.

There are some things that could cause a lender to withdraw from providing a loan after a preapproval letter is issued. Many lenders will re-check a consumer's credit before funding a loan. Abstain from applying for any new loans, including credit cards. An inquiry into your credit could lower your score and significantly affect your interest rate or cause a loan to be denied outright.

Know thy credit

If you haven't done so, secure a copy of your credit report, which lists your financial history, including total debt and whether you pay bills on time.

Checking your credit report regularly is the best way to spot identity theft, credit report errors or other financial missteps that could affect your ability to buy a home.

The Fair and Accurate Credit Transactions Act of 2003 made it possible for consumers to access one free copy of their credit report every year. To request a report, visit www.AnnualCreditReport.com.

For more information, visit TexasRealEstate.com and HAR.com.

If you're a first-time homebuyer, this might seem overwhelming to you.  We are happy to help you sort out any questions or concerns you might have.  Whether you want more information on the process, the current inventory, or the $8000 tax credit, contact us - we are here to help!

The Houston Chronicle put out a list of what we should all be looking for in 2010.  Some things hit home a little more than others, but it is definitely worth knowing if you live or plan to live Neartown.

1.       New Mayor – New Vision:  Annise Parker hits the ground running with some agendas that hit close to home.  She wants to preserve more historic neighborhoods – her own being one of them – by protecting the deed restrictions set years ago.  Mostly, she wants to push the boundaries of high rises closer to neighborhood borders instead of smack dab in the middle.

2.       Washington Corridor Concerns: The nightlife boom on Washington Boulevard has totally changed the dynamic and demographic of this area.  The twenty and thirty-somethings are seeing the potential of this area which is great, but there are also some drawbacks.  The nighttime crowd is great, but a concern for those whose neighborhoods are right behind all of these bars and restaurants, where they might filter through the areas at 2 a.m.; this was the same concern for Montrose residents. 

The parking is a major concern, particularly during happy hour, which is also rush hour.  Back-ups because of people parking right on Washington cause major headaches.  Not to mention those trying to get home, but can barely squeeze past cars parked along the already narrow neighborhood streets.  New Mayor, Annise Parker plans on dealing with parking development for this rapidly growing area.

3.       Make-Over for the Houston Police Department: The HPD is experiencing a major change with a new police chief and aging police force.  Plus, they are dealing with a major investigation concerning thousands of questionable fingerprint cases…WOW!  Mayor Parker realizes that we need a fresh police staff – unfortunately, there’s no quick or cheap way around that.

4.       Investigating Arson:  The Heights is haunted with the ruins of 23 buildings set ablaze by an arsonist.  A trial is set for a man charged with responsibility with one fire, and another man is sought for questioning in others.  But it isn’t over.  Houston Heights Association President Chris Silkwood urges his neighbors to be vigilant by constantly watching your surroundings.

5.       Heights Boulevard Playing Host to Art:  James Surls, noted Texas Sculptor will feature three of his pieces, two of which were displayed on Park Avenue in New York and one being made specifically for Heights Boulevard.  The installation is expected to start within the next few months.

6.       Dynamo’s New Digs: A deal is expected to be final between the City of Houston, Harris County and the Houston Dynamo for their new field just east of Downtown.

7.       University Light Rail Project: METRO is planning to buy property and hardware for their next 11 Mile Light Rail Project connecting 3 major universities – University of Houston, Texas Southern University and the University of St. Thomas.  This expansion of the Light Rail will further improve the walkability that makes Montrose one of the 10 Best Neighborhoods in the Nation – or so officials hope it will.

8.       Upgrades in the Heights: Road repairs on Yale and 11^th street, major Heights arteries, are scheduled to take place this year, but improvements don’t stop there.  Some Houston Independent School District facilities are planning on some renovations too – Barrick, Crockett, Field, Helms, Love and Martinez elementary schools, Marshall Middle School and Davis high school will all be getting a face-lift.  Sherman and Crawford elementary schools will be consolidated into one school.

9.       Larger Lock Up Facility? Harris County Sheriff Adrian Garcia wants to put the county to a vote for a larger jail.  Decisions need to be made quickly, Mayor Parker states, as there is a need to either build a larger prison or put some money into it to raise the conditions.

10.   Champions Yet Again! Be on the lookout for Yates High School basketball team, as they are in the running to repeat as Class 4A State Champions.  Not only are they slotted as the No. 1 pick in Texas, but show they may be the team to beat in the Nation as they took down some of the top ranked teams at the Iolani Classic in Honolulu, Hawaii, and the T-Mobile Invitational in Homewood, Alabama over the holiday break.  Go LIONS!!

The Heights, Midtown, Rice Military and Montrose are booming!  These areas, collectively known as Neartown, are bustling with new prospects in the Houston Real Estate Market.  We are experts in these areas (and many more), and if you are interested in moving intown or of putting your home on the market, we are here for you!  Contact us for information pertaining to selling your home or buying, possibly with the expanded government tax credit.  We will be happy to break down the buying or selling process for you!

The Puryear Team jumps at the chance to send important information regarding the Real Estate Market.  Here is some important information regarding FHA Loans.  If you are a buyer thinking about using FHA financing to purchase a home, please read this informative article from the Wall Street Journal.

Souring Mortgages, Weak Market Force FHA to Walk a Tightrope

By NICK TIMIRAOS, Wall Street Journal JANUARY 19, 2010

David Stevens bought his first home almost 25 years ago, paying just 3% down with a loan backed by the Federal Housing Administration. "I had no money in the bank," he says. "If it weren't for the FHA, I wouldn't have gotten that home."

Now, as FHA commissioner, Mr. Stevens has to decide how many others to let through that door. Souring FHA-insured mortgages are threatening the agency's finances. Congress is pressuring him to tighten the easy-money standards that once helped people like him, and he is expected to announce revisions as early as this week.

But raising the credit bar could have a dangerous side effect. In many of the nation's hardest-hit housing markets, the FHA backs around half of all new home loans. If the agency pulls back too quickly, the nascent housing recovery could fizzle, endangering the economy.

The dilemma puts the 52-year-old former mortgage banker squarely in the middle of the debate over how much the government should do to prop up the housing market, and how much risk taxpayers should take on to do it.

"How big a role do we need to play to keep the housing system functioning?" says Mr. Stevens, referring to the FHA. "Overcorrecting in either direction would be a terrible thing to do right now."

Mr. Stevens is finalizing possible revisions to credit standards. Options include raising the minimum down payment, establishing a minimum credit score, increasing the amount that borrowers have to pay for mortgage insurance, and reducing the amount of money sellers can kick in for closing costs.

The FHA, created in 1934 to heal the U.S. housing market during the Great Depression, traditionally has helped first-time home buyers and underserved segments of the market. It doesn't lend money to home buyers, but insures lenders against default on loans that meet FHA criteria, collecting fees for that backing. For decades, thanks to a stable housing market, it turned a profit for taxpayers.

When the housing market was booming, subprime lenders drew away many of the borrowers who traditionally used FHA-backed loans by offering even more favorable terms. Unlike the FHA, subprime lenders didn't require borrowers to document their incomes. The FHA saw its share of the mortgage market fall to 2% in 2006.

But when the subprime market collapsed, mortgage brokers began steering borrowers into FHA-backed loans. Politicians and policy makers encouraged the FHA to refinance at-risk borrowers into fixed-rate loans. Suddenly, the FHA had an enormous chunk of the market. Average credit scores of FHA borrowers dropped sharply at first. In last year's third quarter, the FHA insured 25% of mortgages, according to Inside Mortgage Finance, a trade publication.

"We should not play this large a role," Mr. Stevens says. "It's not healthy for the mortgage-finance system, it's not healthy for the economy, and it's certainly not sustainable for the long term."

The FHA, which is part of the Department of Housing and Urban Development, isn't as nimble as private mortgage insurers. It must get approval from Congress for some major decisions. "They don't have the horsepower that they should, especially given the size of their operations," says Ann Schnare, a mortgage-industry consultant.

In testimony before Congress last month, HUD Secretary Shaun Donovan acknowledged that the FHA "we inherited" was "not properly managing or monitoring its risk. Credit and risk controls were antiquated. Enforcement was weak. And our personnel resources and IT systems were inadequate."

Mr. Stevens knows the industry well. He is the first FHA commissioner in nearly two decades to bring extensive private-sector experience to the job. During the 1980s, he was a top salesman of complex adjustable-rate mortgages for World Savings Bank, a California thrift. He went on to hold senior jobs at housing-finance giant Freddie Mac and at Wells Fargo & Co.

When Mr. Stevens arrived in July 2009, the FHA didn't have anyone in charge of monitoring risk, including whether certain loan products or lenders were exposing the agency to excessive losses.

In his second week on the job, Mr. Stevens suspended the FHA license for Taylor, Bean & Whitaker Mortgage Corp., one of the nation's top lenders, amid concerns that the company was originating too many bad loans. Taylor Bean closed its doors the next day. In November, he hired the agency's first chief risk officer and five Ph.D. economists to help evaluate risk. That same month, FHA cut off Lend America, another major lender, which also closed.

But there are still signs of trouble. At about 30 FHA-approved lenders with at least 1,000 loan originations, more than 12% of loans are in default two years after origination, nearly double the national average at the end of November. Last Tuesday, HUD's inspector general served subpoenas on 15 of those lenders as part of an examination of the practices of lenders with high default rates.

The percentage of FHA-backed loans that defaulted after borrowers made just one payment—typically an indication of poor underwriting or fraud—has started to fall, but not as fast as needed to avoid future loan losses. FHA-insured mortgages made in 2007 and 2008 are largely responsible for the agency's precarious position, with default rates approaching 24%.

FHA officials concede that the agency offers today's easiest underwriting standards.

 “ Twenty percent down ought to be the minimun to get FHA to hold a loan. Little or nothing down encourages speculation, walk away buyers, and drives up prices to unsustainable levels, while the taxpayer and more prudent citizen pays the price. ” —Khan Singh

Mr. Stevens, nevertheless, lashes out at critics who say the FHA is repeating the mistakes of subprime lenders. At a conference in November, Robert Toll, chief executive of luxury-home builder Toll Brothers Inc., referred to the FHA as "the new subprime" and "a definite train wreck" that will soon need a bailout, according to a transcript of his remarks.

Mr. Stevens, in an interview, called the comparison "ludicrous," and said Mr. Toll has "no clue" about the agency's finances.

The agency is required by Congress to hold enough capital in reserve to cover 30 years of projected losses. An independent audit said reserves at the end of September exceeded projected losses by just $3.6 billion, about 0.5% of the $685 billion in loans outstanding, down from 3% a year earlier. Congress requires the agency to maintain a 2% capital-reserve ratio.

FHA officials say they have enough cash to cover the current level of losses, and that the agency risks running out of money only if home prices take another big dive. "We've learned from recent history that the market is fragile, and we have to plan for the unexpected," Mr. Donovan, the HUD secretary, said last month.

But some analysts say the agency's assumptions about home prices and foreclosures are too optimistic.

"FHA is, at best, running on empty, and probably is facing a negative capital situation," Ms. Schnare, the industry consultant, told a congressional panel last month. If the agency were to run short of cash to cover projected losses, it likely would have to ask Congress for money for the first time ever.

The bad-loan problem stems, in part, from controversial programs that allowed home builders and other sellers to fund down payments for home buyers through nonprofit groups. After a lengthy effort, the FHA prevailed on Congress to shut the programs down in October 2008, but the damage already was done. The FHA's independent audit concluded that were it not for such programs, the agency's capital-reserve ratio would have stayed above the 2% mandated by law.

In another troubling practice, by late 2007, institutional investors were identifying at-risk mortgages in their portfolios and refinancing the borrowers into FHA-backed loans, thereby offloading their risk onto the agency. "It was an unintentional bailout of financial institutions," says David Lykken, a partner at Mortgage Banking Solutions, an Austin, Texas, consulting firm.

One of the raft of measures Mr. Stevens is considering to protect and replenish the agency's reserves is raising the minimum down payment. The current minimum of 3.5% is far lower than what private lenders offer, making FHA-backed loans one of the last low-down-payment options left. Last year, through August, nearly seven in eight new FHA-backed loans carried down payments of less than 5%.

Home builders are worried. "It would be a game changer for the industry" if down payments were raised, says Eric Lipar, chief executive of LGI Homes, a Texas-based builder of entry-level homes.

Not everyone believes that such low down payments are good. In markets where home values are still falling, buyers who put little money down could see their equity wiped out quickly. The FHA is "just manufacturing more upside-down homeowners by the truckload in Arizona, California, and Nevada," says Brett Barry, a Phoenix real-estate agent who specializes in selling foreclosed homes.

If the agency were to raise down payments sharply in those markets, price declines would become a "self-fulfilling prophecy," says Mr. Stevens. "If you stop lending, you're going to perpetuate the declines."

Mr. Stevens says first-time buyers are key to clearing inventory in markets such as Las Vegas. James Smith, a 42-year-old air-conditioning repairman, might not have been able to buy a $188,000 home out of foreclosure recently in Henderson, Nev., were it not for the low FHA down payments. To make the 3.5% payment, he used around $4,300 of his own money and borrowed the rest from this father-in-law.

"It was actually a great thing," he says. He repaid his father-in-law after receiving an $8,000 tax credit for first-time home buyers. Mr. Smith, who earns around $50,000 annually, makes monthly payments of $1,466.

Mr. Stevens says he expects to get heat from industry and consumer groups no matter what he decides to do to tighten credit standards.

Even as the FHA considers how to scale back, some members of Congress are pushing it to expand its role. In 2008, in the midst of the credit crisis, Congress temporarily raised the maximum FHA loan from $362,790 to as high as $729,750 for the most expensive housing markets. Lawmakers have introduced a bill to make that increase permanent.

"A $500,000 loan in Massachusetts is like a $300,000 loan in Nebraska," says Massachusetts Democratic Rep. Barney Frank, who favors raising limits to $800,000 in the most expensive markets. "All we're trying to do is control for geography."

Mr. Stevens argues the expanded limits should stay temporary, in keeping with the FHA's traditional focus on first-time buyers.

The FHA says the loans it is guaranteeing these days will turn a profit because the credit profile of its borrowers has improved. The average credit score for FHA borrowers has risen to 681, from 630 two years ago. The median U.S. score is about 720. Much of the improvement came as the FHA's lenders raised their own credit standards.

Mr. Stevens, for his part, is painfully aware of how far the housing market is from recovery. He listed his northern Virginia home for sale last fall and already has slashed the asking price by $100,000, to $1.4 million. Before Christmas, he pulled the five-bedroom colonial off the market with plans to relist it later this year. He says he wants to live closer to Washington. "The commute is very hard," he says, "and the hours are very long."

Yesterday, we reminded you that weather expert report an Arctic front to come through the greater Houston Area tomorrow, Jan. 6, and there is a freeze advisory until Sunday, January 10th at noon.  This is nothing to ignore, these temperatures are record lows for our area and Houstonians should take the necessary precautions to winterproof your property.  With that being said, please think about the living things too; your pets and plants need protection during these colder than usual temperatures.

Some chance of rain is associated with the front so there could be rain mixed with some sleet on Thursday morning, which means bitter cold temperature indexes.  “Temperatures will drop through the day on Thursday, starting out at about 50 degrees and ending up at about 25 degrees,” states the Fort Bend Now publication.  “It also appears that subfreezing temperatures are likely all day on Friday.  High temperature for Saturday is only expected to get to about 38 degrees.”  YIKES!!!

Here are some more Freeze-ready tips for all of our friends, family and neighbors with pets and plants:

Pets:  Consider bringing outdoor pets inside – especially dogs.  The cold weather along with the winds can be deadly to pets if they do not have proper shelter.  If you have a garage, it is better than nothing, but be sure there is a warm area for them by putting blankets and pillows on the ground.  Seal any drafty cracks around doors or windows.  Make sure pets have constant source of water; bring in their water and food bowls to ensure that do not freeze.

Plants:  Sensitive plants should be covered and heavily mulched.  Plants can be covered with plastic or bed sheets to keep the chill off, but the covering should be removed as the weather warms up and the sun comes out to prevent the plant from heating up and burning the foliage.  Move any potted plants indoors.

Houston weather experts predict some freezing weather this week, in particular, Thursday.  The Puryear Team wants to be sure our friends and family all around the greater Houston area take the necessary precautions to ensure your Houston home is safe from this kind of weather.  In addition to reading our first article in our December newsletter, here are 10 tips to get your home winter weather ready.  You'll be a lot less comfortable in the coming months if you haven't prepped Home Sweet Home for Old Man Winter.

1. Clean those gutters  
Once the leaves fall, remove them and other debris from your home's gutters -- by hand, by scraper or spatula, and finally by a good hose rinse -- so that winter's rain and melting snow can drain. Clogged drains can form ice dams, in which water backs up, freezes and causes water to seep into the house.  As you're hosing out your gutters, look for leaks and misaligned pipes. Also, make sure the downspouts are carrying water away from the house's foundation (at least 10 feet away from the house), where it could cause flooding or other water damage.

2. Block those leaks
One of the best ways to winterize your home is to simply block obvious leaks around your house, both inside and out, experts say. The average American home has leaks that amount to a nine-square-foot hole in the wall, according to EarthWorks Group.

First, find the leaks: On a breezy day, walk around inside holding a lit incense stick to the most common drafty areas: recessed lighting, window and door frames, electrical outlets.

Then, buy door sweeps to close spaces under exterior doors, and caulk those drafty spots.   Outlet gaskets can easily be installed in electrical outlets that share a home's outer walls, where cold air often enters.

Outside, seal leaks with weather-resistant caulk. For brick areas, use masonry sealer, which will better stand up to freezing and thawing. Sealing small cracks will be beneficial; they could get bigger, and you will prevent small insects from entering your home.

3. Insulate yourself
This will cost a little money, but you get the money back quick. Adding insulation to the existing insulation in the attic will definitely be worth it!  Regardless of the climate conditions you live in, you need a minimum of 12 inches of insulation in your attic.  A simple trick to delineate whether you have enough: go into the attic and if you can see the ceiling joists you know you don't have enough, because a ceiling joist is at most 10 or 11 inches.

A related tip: If you're layering insulation atop other insulation, don't use the kind that has a paper backing, or kraft face finish, because it acts as a vapor barrier, and can cause moisture problems in the insulation.

4. Check the furnace

Throughout the winter you should change the furnace filters regularly (check them monthly). A dirty filter impedes air flow, reduces efficiency and could even cause a fire in an extreme case. Toss out the dirty fiberglass filters; reusable electrostatic or electronic filters can be washed.

It's a good idea to have furnaces cleaned and tuned annually. Costs will often run about $100-$125.

5. Get your ducts in a row

According to the U.S. Department of Energy, a home with central heating can lose up to 60% of its heated air before that air reaches the vents if ductwork is not well-connected and insulated, or if it must travel through unheated spaces. That's a huge amount of wasted money, not to mention a chilly house. (Check out this audit tool for other ideas on how to save on your energy bills this winter.)

Ducts aren't always easy to see, but you can often find them exposed in the attic, the basement and crawlspaces. Repair places where pipes are pinched, which impedes flow of heated air to the house, and fix gaps with a metal-backed tape (duct tape actually doesn't stand up to the job over time).

Ducts also should be vacuumed once every few years, to clean out the abundant dust, animal hair and other gunk that can gather in them and cause respiratory problems.

6. Face your windows

Now, of course, is the time to take down the window screens and put up storm windows, which provide an extra layer of protection and warmth for the home. Storm windows are particularly helpful if you have old, single-pane glass windows. But if you don't have storm windows, and your windows are leaky or drafty, you should update them to a more efficient window.

Of course, windows are pricey. You should budget to replace them a few at a time, and in the meantime, buy a window insulator kit. The kit is plastic sheeting that's affixed to a window’s interior with double-stick tape. A hair dryer is then used to shrink-wrap the sheeting onto the window. (It can be removed in the spring.) It's temporary solution and it's not attractive, but it's inexpensive (about $4 a window) and it's extremely effective.  You can get these kits at any home improvement store.

7. Don't forget the chimney

Ideally, spring is the time to think about your chimney, because chimney sweeps are usually busy at this time of year obviously, so if you don’t want to wait, plan in advance.

Don't put off your chimney needs before using your fireplace, however, a chimney should at least be inspected before use each year; you never know what might be lodged in there – anything from tennis balls to animals!

Ask for a Level 1 inspection, in which the professional examines the readily accessible portions of the chimney, most certified chimney sweeps include a Level 1 service with a sweep.

Woodstoves are a different beast, and should be swept more than once a year. A general rule of thumb is that a cleaning should be performed for every ¼ inch of creosote wherever it may be, because if it's ash, then it's primarily lye a component that was once used to make soap, and it's very acidic. It can cause mortar and the metal damper to rot.

Another tip: Buy a protective cap for your chimney, with a screen; it's probably the single easiest protection, because it keeps out foreign objects (birds, tennis balls) as well as rain that can mix with the ash and eat away at the fireplace's walls.

One other reminder: make sure your chimney's damper closed when the fireplace isn't in use.  This will help keep the cold air out.   And for the same reason, woodstove owners should have glass doors on their stoves, and keep them closed when the stove isn't in use.

Check out Chimney Safety Institute of America’s Web site for a list of certified chimney sweeps in your area.

8. Reverse that fan

Reversing your ceiling fan is probably the simplest tip that people don't often think of. By reversing its direction from the summer operation, the fan will push warm air downward and force it to recirculate, keeping you more comfortable. How do you know the fan is winter friendly? As you look up, make sure the blades turn clockwise.

9. Wrap those pipes

A burst pipe caused by a winter freeze is a nightmare. Prevent it before Jack Frost sets his grip: Before freezing nights hit, make certain that the water to your hose bibs is shut off inside your house (via a turnoff valve), and that the lines are drained.  In climates where freezing nights aren't commonplace, you can install Styrofoam cups with a screw attachment to help insulate spigots. 

Next, go looking for other pipes that aren't insulated, or that pass through unheated spaces -- pipes that run through crawlspaces, basements or garages. Wrap them with pre-molded foam rubber sleeves or fiberglass insulation, available at hardware stores. If you're really worried about a pipe freezing, you can first wrap it with heating tape, which is basically an electrical cord that emits heat.

10. Check those alarms

This is a great time to check the operation -- and change the batteries -- on your home's smoke detectors. Detectors should be replaced every 10 years, fire officials say. Test them -- older ones in particular -- with a small bit of actual smoke, and not just by pressing the "test" button. Check to see that your fire extinguisher is still where it should be, and still works.

Also, invest in a carbon-monoxide detector; every home should have at least one.

If these chores seem overwhelming to you, try calling a professional or visit www.1800contractor.com.  Just type in your zip code and the work you want done in the search bar.  The site will pull up contractors in your area that specialize in that work.