SayEducate

Lost among the news about the current sub-prime mortgage meltdown is the housing market for second homes. Though the news media is focusing on the problems people are having with their first homes, there is plenty of news not being reported about vacation homes.

Vacation homes are those secondary houses people own at the shore, lake, or other favorite vacation spot. Most are small residences though some owners have lavish estates rivaling their primary home in size and in value. You’ve seen these homes spring up along prime waterfront property over the past two or three decades — houses which dwarf the cottages which once dotted most communities.

If you are already familiar with a particular vacation market, you probably have witnessed a recent trend: plenty of homes are for sale and those that are selling are going for a heavy discount. One of the most stressed markets offering fantastic deals is Miami where a spate overbuilding has forced prices down in a hurry.

For people wanting to come away with a great deal there are some things to consider:

Take Your Time — Finding a vacation home for a very low price isn’t difficult to do. But, pouncing on the first property that comes along can show that you are being too hasty.

Because you’re in a buyer’s market you’ll want to determine a few things first:

• Are you familiar with the area where you want to buy?

• If purchasing a condo, how many units are vacant? There could be a reason why your unit is going for a song — the association managing it could be bankrupt.

• How often do you plan on visiting your second home? Do you plan to rent it out? Would you do better simply renting a home every year instead?

• What are some of the related fees to managing the property — i.e., garbage removal, landscaping, outside maintenance, etc.?

• Based on the information available, will your second home appreciate in value? You may have no plans on selling, thinking that your children will enjoy your home when you are gone. Don’t count on that — they may not be interested in maintaining the property later on.

Financing Your Purchase — many second home buyers tap the equity in their first home to buy their second home. But, you may not want to put your first home at risk by purchasing a vacation home. Consider:

• Will you be able to find financing for a vacation home?

• What rates are being charged? Some lenders avoid second home financing while others specialize in financing vacation homes. Will you have to pay a premium rate in order to finance a second home?

Insurance costs can be a deal breaker especially for homes along the ocean. When Florida and New Orleans were ravaged in 2004 and 2005 by a series of hurricanes, insurance companies jacked up their rates, sometimes three- or four-fold to cover their risks. Can you afford to pay $4000 in homeowners insurance annually on your beach property?

The good news is that many second home markets are likely to be depressed for the next few years, taking the pressure off of you to make a fast decision. Look around, shop around and you’ll come up with a deal that is fantastic and one you can live with for many years.

You’ve found the house that you want, have arranged financing, and are preparing to go to closing. Several years of scraping by has put you in the position to finally switch from being a renter to becoming a homeowner. Nearly every dollar saved has been set aside for the down payment with closing costs also covered.

At least this is what you would like to think.

Future homeowners are sometimes surprised to find that certain ‘garbage fees’ have been added on to their closing costs. Not the fees to pay the lawyer or the lender only, rather typically smaller, but still costly fees which can add up when tallied together.

If you didn’t pay close attention to the initial estimate of fees you were given when you purchased the home, then your closing costs are probably higher than you had expected. A shocking surprise and a possible hardship as well.

By law, mortgage lenders are required to disclose fees charged in connection with obtaining a mortgage. They have three days to get this information to you once you have submitted your loan application.

The fees listed, however, are only an estimate, meaning your costs could actually be higher.

Points and title insurance are two ‘garbage fees’ most consumers know about, but there are also fees for flood certificate, courier, tax service, notary, wiring, and more. Processing and documentation fees are also charged and your local tax jurisdiction may charge a filing fee too. In addition, if you change the type of loan you want after submitting an application, expect to be charged for that too.

To avoid surprises, make sure that your mortgage lender provides final notification of fees prior to closing. Have duplicate fees removed and, if possible, ask if some (if not all) fees would be waived — many lending institutions are now waiving some or all fees in a bid to attract new business.

Enjoying your new home shouldn’t be tempered by fees which can add hundreds of dollars to your closing costs.

Resources

12-step Mortgage Guide

Rate Shopping Sheet

It certainly is a buyer’s market for consumers who want to purchase a new vehicle. With auto sales down year over year compared to last year, many automakers are offering incentives in a bid to move inventory.

Not every model is a slow seller. In fact, if you want to purchase a 2008 Dodge Challenger (pictured), you are out of luck. All of the inventory for this hot, specialty model is spoken for.

So, if you are looking for a new ride what deals are there available to you? Rather than looking at specific incentives (which change frequently) let’s take a look at specific segments to help you the best deals.

Full sized pick up trucks – Across the board, every truck maker is offering incentives. These big, fuel thirsty vehicles are having a difficult time selling, making strong discounts a fact of life. Look for $3-5000 off of most models with discounts approaching $10,000 for some loaded quad cabs.

Sport Utility Vehicles (SUVs) — The larger the SUV, the more likely sales have plummeted. While some automakers are finally cutting production, bloated inventories means that generous rebates and/or financing options are now available to you.

Larger Cars — Again, fuel economy numbers are determining many purchases, slowing down the sale of the largest cars. Big discounts on the Buick Lucerne have priced this car in the mid-size car segment, offering one of the best deals for any large car today.

Midsize Sedans — The most crowded segment in all of autodom as pertaining to the number of competing models, the mid-size car category offers a mixed bag when it comes to deals. Older and slow selling models offer the best deals while the Chevrolet Malibu is selling strong and at full price. Volkswagen, Dodge, Suzuki, and Hyundai probably have some of the best incentives currently available.

Crossovers — Not a car and not an SUV, crossovers are one of the hottest categories today. Offering the room of a SUV with the gas mileage of a sedan, many consumers who need the room are taking a close look at the Ford Edge, Dodge Journey, and competing models to replace their current cars. Are you looking for a good deal on a slow seller? Then consider the Taurus X as one option.

Most small cars are not carrying strong incentives simply because demand for fuel efficient vehicles is strong. Luxury makes such as Mercedes are doing very well, but there are some brands whose inventory is bloated signaling that incentives are available. Some minivans carry incentives too, possibly offering you thousands of dollars off of the sticker price.

When it comes to striking a deal, your choice may be between taking a rebate or choosing cut-rate financing. In almost all cases you would be better off taking the rebate and seeking independent financing elsewhere.

Resources

Auto Purchase Loans

Campus Cars

Smart Money Tips