Sale prices in the Providence Metro area increased 6.1 % in the four months ending Feb. 28 compared with the quarter ending Oct. 31, according to the Clear Capital Home Data Index, faster than anywhere else in the nation.  Many people are taking advantage of low interest rates home prices, and the homebuyer tax credit. But many people are finding tighter lending standards are leaving them cold.  Those with less than perfect credit pay a premium for almost everything.

 This week Rich and Steve spoke with Paul Decoste from Advantus Credit Reporting Agency to talk about maintaining a good credit score. Credit scores affect not only what you pay for credit cards, auto loans, mortgages and other credit but insurance companies and potential employers look at credit scores as well . Paul recommended visiting www.myfico.com  to see how different scenarios can affect your credit rating.  According to the website, a borrower with an established good credit history can expect to see their FICO score fall over 200 points if they declare bankruptcy.  That would result in a subprime score requiring a larger down payment and a higher interest rate.  While prime borrowers are presently enjoying rates around 5%, a borrower with a FICO score in the 620 to 639 range can expect to pay about 6.3% interest on a conventional loan with 20 percent down. On a $200,000 loan, that would be over $70,000 more in interest over the life of the loan.

This Week’s Real Estate Insight:

Despite the catchy jingles, freecreditreport.com is only free if you remember to cancel the service in a timely manner. The only site from which to get a truly free report is AnnualCreditReport.com . When you first get to the official site, you must read carefully, so you won’t be diverted to other sites. There is bold red lettering that says: “Start here to view and print your credit report now.” Then you select the state you live in to begin the free-credit-report process

The Rhode Island Association of Realtors reported 395 sales in January, a 9 % increase from January 2009. The median price rose 14 % to $200,000, and days on the market fell 24% to 83.  Condo sales rose 28%, prices remained virtually the same, and days on the market rose 2 percent.  Multi-unit sales fell 21 percent, while price increased 21 percent and days on the market fell 36%. While January is typically the slowest month for home sales, weather has been on our side unlike other parts of the country that have been paralyzed by record snow this season.
 The expanded homebuyer tax credit was intended to help stabilize prices and promote sales, but there are not a lot of buyers out there, and  not many of them are citing the credit as a reason for buying. The housing market remains vulnerable, unemployment is still high, and consumer confidence is falling. Home prices have stabilized in some markets, but there are a lot of people would like to sell but are stuck because their homes aren’t even worth what they paid for it. According to Moody’s Economy.com, nearly one-in-three mortgages are currently in that situation. That’s a major issue for borrowers who owe more than their home is worth. 

This Week’s Real Estate Insight:

The true stimulus effect of both the homeowner tax credit and the home sales they could create this year will be on local economies.  According to the National Association of Realtors, each home sale contributes $63,000 on average to an area’s economy. That includes real estate agent commissions, attorney and title company fees, insurance, and purchases like furniture and appliances.

To qualify for the $6,500 credit, buyers must have owned and lived in the same home for five consecutive years out of the past eight. They must be in contract by April 30 and close before June 30. The home’s purchase price can’t exceed $800,000, and it must be used as a main residence. The income limit for single taxpayers is $125,000; and $225,000 for a married couple.