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My friend said you can’t get a jumbo mortgage anymore — is that true?

Despite poor Jim Cramer’s recent bout of hysteria (see the “no idea how bad it is out there” clip here ) banks are still writing mortgages.

Really.

First, a little tutorial on some phrases used in the mortgage market — a bank lends you money to buy your home, and you put your house up as collateral on the loan. That’s a mortgage.

Now the bank does not really want to sit around with the Jones mortgage at 21 Elm Street and the Smith mortgage at 23 Main Street, etc., cluttering up its desk, so it resells those mortgages to people who bundle, or pool, them together.

In order to help home-buyers, the federal government helps that bundle and resale process through an agency called the Federal National Mortgage Association. That’s Fannie Mae.

Because the federal government — at least in this instance — doesn’t want to subsidize rich people, there are limits to the size of the mortgages it uses Fannie Mae to help. Smaller mortgages that fit, or conform, under these limits are called conforming loans. Bigger mortgages that do not are called non-conforming or jumbo loans.

The limits are re-set every year; this year, the line between conforming and non-conforming is around $400K for a one-family house.

But just because a jumbo mortgage isn’t supported by Fannie Mae doesn’t mean that other institutions — banks and other financial institutions — won’t package and resell them.

In fact, they still are. What people are saying when they say, “they’re not issuing any jumbo mortgages” is that fewer financial institutions are supporting them, so the prices are going up — rates on jumbos are pushing near 7%-8% as of this writing.

But you can still get one.

I’m thinking of moving to Queens — what are some elementary schools worth looking at?

Let’s try to throw a wide net here  –

There’s a lot of praise for 122 in Long Island City, which has a gifted program; 18 in Queens Village, which has a gifted program; 144 in Forest Hills and 101 in Forest Hills Gardens; 26, a school that pushes diversity in Fresh Meadows; PS 214 in Flushing; PS 130 (which only goes through 3rd Grade) in Bayside.

I’m buying a new construction condo. Should I get a buyer’s agent, or will skipping an agent save me money?

I replied to this question on wired new york today, and I’ve gotten good feedback on my answer, so here’s the reprint:

Buyers’ agents will tell you that having an agent gives you someone to shepherd the process — your lawyer is your advocate, but at $1,500 or so per transaction, they’re not going to be able to spend that much time chasing around the pieces of your deal and still make money. I do think that’s the service an agent performs — getting you through the closing — and that it’s valuable. The more complicated question is what that service costs you.

Argument #1 is that buyer’s representation is free. I had a senior Stribling agent tell me the other day that he hooked a lot of buyers by explaining that the developer expected to pay out a brokerage commission anyway, so that as long as it was built into the deal his services to his buyers were free. Now, “look at what you get for free” is one of the great sales propositions of all time, so it’s no wonder that this guy was wearing a Brioni suit.

Argument #2 is that buyer’s representation costs money. Obviously, if skipping an agent gives you a sliver of negotiability on the deal, then your agent “costs” you whatever percentage of negotiability you would get back. If you are buying into a building that is offering 2.5% to buyers’ agents, and you could recapture that premium if you didn’t have an agent, then the decision to use a buyer’s agent costs you 2.5%, and you might, or might not, decide those services are worth it.

Now here’s the tough part: No one alive knows whether argument #1 or #2 is right. There’s no control group — no one has done the same real estate deal both with and without an agent, and reported back on whether they had different experiences and different pricing.

My best attempt at trying to size up whether you need a buyer’s agent is that if you’re looking at a hot building, where you know other people haven’t gotten pricing concessions, and you’re a less experienced buyer, and you’re a terribly busy person, you probably want an agent. If you’re looking at a building which is a little less in demand, where you know other buyers have gotten pricing concessions, you’re a more experienced buyer, and you have a little more time to dedicate to the deal, you probably don’t want an agent.

I know that’s kind of like saying that light is both a wave and a particle but unfortunately, that’s true.

Great real estate info, but not enough about mortgage rates! What’s going to happen in the short-term?

We are currently seeing rates bounce a little around 6.75% (please don’t write me from Iowa, 30-year-fixed rates are higher here.)

You can get a discount on an adjustable-rate mortgage, but in general, the spread is not favorable. At the current time, I would recommend getting a fixed unless an ARM is absolutely the only way to get the home you want, and you’re in an employment situation (e.g. an associate in a large law firm) where you can predict that your income will rise with time.

In the short-term, it looks like rates will stay where they are or possibly rise, so locking in isn’t a bad bet.

(As an agent who has looked at the long-term history of interest rates, I still consider any rate under 8% “favorable”).

For your more detailed mortgage questions, two good places to start are bankrate.com (which sells advertising to mortgage lenders, but has a lot of good personal finance editorial copy) and mtgprofessor.com (which is run by a former Wharton professor, and can help you make decisions by showing you what your different alternative paths are.)

I just read The New York Times article on fair housing, can my broker really not tell me whether a listing is in P.S. 234?

Because I was a child in metropolitan Little Rock when that city underwent tumultous integration (more stories on that later) fair housing is one of my very favorite subjects in the whole world.

Unfortunately, Sunday’s New York Times article by Vivian S. Toy put across the idea that agents — in pursuit of fair housing — can say very little.

And it’s true that you can’t ask your agent to speak in code. It is widely accepted, for instance, that a seller doesn’t put “walk to church” in an ad, because that could be seen as discriminating against non-Christians.

I don’t know whether I believe the same logic translates to school districts, however. In the Times article, Neil Garfinkel, who is counsel to the Real Estate Board of New York, stated that agents shouldn’t mention school districts because they’re a coded way of mentioning race.

Well, my first thought is that it would actually be a giant leap ahead in the fight against racism if racial references actually had to be coded. The current racial discrimination suit against an agent of the Corcoran Group alleges that the agent handed potential homebuyers maps with areas red-lined and said, this is where the white areas are.

For the record, Pam Liebman, CEO of Corcoran, has expressed hope the company would be vindicated and has expressed “zero tolerance” for this sort of thing.

But honestly, it’s a long, long way from discrimination through steering with maps (or what I grew up with, discrimination through violence) to discrimination by telling homebuyers or sellers that a home is in P.S. 234, widely considered to be one of the top school districts in Manhattan.

Also, the makeup of 234 is public information (remember the whole your tax dollars thing?)

It’s available from the New York City Department of Education here . The stats show that 234 is 70.75% white, 16.57% Asian/Pacific Islander, 6.34% Black, 6.20% Hispanic.

If that is not an acceptable level of diversity, we as an entire community — agents and homebuyers and people not in the market, people with kids and people without kids — need to do something about it.

Also, in case you were wondering, the cachement area for 234 is roughly south of Canal Street to Liberty (in other words, Tribeca with the southern edge expanded) running roughly from Broadway to West. (There is a decent map on www.insideschools.org) It’s possible to catch some parts of the Financial District, too, so no matter what your broker says, call the city to check on your zoning.

You can call them about discrimination, too, for that matter: 311.

I received a letter offering me a certified copy of my deed for $120, should I buy it?

Umm, no.

Last month I got two copies of this letter, one telling me that I could buy a copy of “this important document” for $120, one offering me the relatively low price of $65. (I liked the idea that I could “save” $55″ by answering the second letter; great scam technique, huh?)

But keep your wallet in your pocket; this letter is half right and half wrong.

A deed is an important document; it proves that you own your house or condo.

However, once a deed exists, it is recorded — essentially, put into the County Clerk’s records. By the time the County Clerk has your deed, you

a) probably also have a copy, because after your attorney recorded it, he or she put your copy into that giant package of paperwork you got sent after closing;

and b) can get another copy, if you need it, by dealing with the County Clerk. In Westchester, deeds cost $5; in Nassau, 65 cents (not 65 dollars) per page; in New York City, according to assemblywoman Audrey Pheffer , $4 per page.

A house I’m looking at has radon problems. Buy or pass?

On first glance, radon is a scary — it’s one of those invisible gas things, but also, according to the EPA, the second-largest cause of lung cancer in the United States.

Radon occurs as uranium, which occurs naturally in the soil, breaks down. There is more radon in the soil in the Northeast and Midwest, but there is some everywhere.

The trouble occurs when it gets trapped in your house. So for starters: open the windows. What your mom said about fresh air is really right.

Next, do a test with a radon canister. You can pick up a cheapie at a hardware store.

If you get worrisome results, you’ll want to have a real tester come out.  If they find levels above four picocuries per liter of air, then you need to get a venting system installed — which should run you around a thousand bucks.

Bottom line: buy the house and remediate the problem. Oh, and if you are a smoker, quit!

We’re priced out, what trade-offs can we make?

If you’re like most people, it’s extremely unlikely that money is going to come falling out of the sky. I have developed a theory called “The Four Cs of Real Estate” that basically indicates that if Cost is too much for you, you have three tradeoffs:

* Condition. You can buy or rent an apartment that is less beautiful than you otherwise would have hoped. I am reminded about this because someone asked me about having a rent-stabilized apartment in Manhattan, which I did from 1990 to 1996, and my bathroom ceiling fell in. More than once.

Ideally, your condition tradeoffs are things you don’t find terribly serious (dumpy 70s bathroom) rather than things that make you truly crazy (complete lack of light).

Capacity. You can get an apartment or a house that is smaller than you’d ideally like. You can create more rooms by remodeling the attic (though that increases your heating bills), converting the dining room, refinishing the basement, or discovering the wonders of a Murphy bed.

Of course this will raise all sorts of clutter and storage issues (we have four storage units in three zip codes). Don’t let those apartment therapy people make you feel bad, they have a summer place in the Hamptons.

Convenience. I came up with this because “cneighborhood” is too hard to say — but living on the fringes of the neighborhood you want, or going for an up-and-coming school district, will save you money.

A lot of time and energy go into predicting whether a neighborhood will gentrify. One of my favorite indicators, as I mentioned in the April issue of Glamour: new coffeehouses and boutiques can be good signs of an upswing.

For more about the Four C’s, or to buy Diary of a Real Estate Rookie, click here.

What are the pros and cons of condos vs. co-ops?

Historically, in New York City, most of the apartment buildings were co-operatives, and condominiums were bought as pied-a-terres (second homes) by non-New Yorkers.

Now, however, we’ve reached an interesting point: half the inventory on the market is condos, and half co-ops. So how to choose?

Pros of condos:

* Generally newer construction, with a higher level of finish and amenities. The NYC luxury market (think $2mm and above) is cycling so quickly that at this point, a six-year-old kitchen looks dumpy.

* Easier or unlimited subletting, so if your job takes you to London, your apartment can still generate income to cover some of its costs.

* Easier resale as your buyers do not have to go through a stringent board approval process.

Cons of condos:

* Danger of part-time neighbors (we live in a condo and it’s tough to make friends; the people to our left are here only on weekends; the people on our right are here only during the week)

* Less control over the community (more renters in the building — they tend to be more transitory and louder)

* Since they tend to attract buyers that like “new-new-new,” the appeal of a condo building can fall off pretty quickly once it’s ten or twenty years old — it’s like the way a new car depreciates quickly once you drive it off the lot

* 421(a) tax abatements (not all condos have these, but many new ones do) wear off. This causes your taxes to rise, sometimes dramatically, as you own the apartment. Also, the building’s underlying value for tax purposes will reset in the future — which could cause another tax shock

Pros of co-ops:

* Generally cheaper — currently the market discount is running 20% to 30% per square foot;

* Quieter environments — since homeowners have to pass a board to get in, hard-partying twenty-year-olds are generally not a problem;

* Tighter communities — if, for example, you have young kids, it can be easier to find a co-op with other families with young kids in it.

* Since they tend to be older buildings, co-ops have often stabilized in terms of market appeal and don’t tend to depreciate over time in a buyer’s eyes — in a sense, they already have

Cons of co-ops:

* Longer lead time to re-sell — it might take you six months to sell instead of three, because you have to build in time for the board to review — and possibly reject — your first buyer;

* Tighter community can mean more stringent rules — you may need board approval for even simple renovations, for example; you may need to get your handymen bonded with $1 mm worth of insurance to do even fairly basic work.

* Financial stringency. Higher down payment requirements and income tests limit pool of potential buyers; also, many wealthy buyers who would qualfy do not want to undergo the financial proctology a strict board package requires.

What is the 80/20 rule for co-ops? Why do I need to pay attention?

When you own a condominium, you pay your real estate taxes — either directly or through your mortgage lender — and deduct them on your income tax. It’s pretty simple.

But when you own a co-op, you pay “maintenance” — which is an aggregation of charges to the corporation. It covers the salaries that get paid to your super and your doormen, plus roof and boiler maintenance. It also covers things you want to deduct from your taxes — like your share of the building’s real estate taxes, and your share of the interest on the building’s underlying mortgage.

According to the Internal Revenue service, the stuff you would ideally like to deduct from your taxes is completely legitimate if at least 80% of your co-op’s income comes from its shareholders. (This is known as “good” income.)
Twenty percent of the co-op’s income is allowed to be “bad” income – say from the lease of commercial spaces to retail tenants.

But if your co-op breaks the 80-20 rule — say 21% of the corporation’s yearly income comes from leasing a ground-floor site to a dry cleaner — you lose all your tax deductions. Sad!

One way for a co-op to stay within bounds is to increase the money it makes from the shareholders — in other words, to raise the monthly maintenance charges. So if you’re looking at a co-op in a hot commercial area, have your lawyer double-check the building’s financials. You don’t want to be in the position of buying into a building that has to raise its “good” income — because the source of good income is going to be you!