Posted Online: Feb. 05, 2013, 10:49 am

Now is a great time to buy or remodel a home

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By Sharon Wren,

For anyone thinking about buying a new home or remodeling, there may be no better time than now, according to Adam Bain, vice president and head of real estate at Blackhawk Bank & Trust.

"The trend has been low and then lower rates. However, I do feel that has come to a stop, and rates will stay stagnant at their record lows for the foreseeable future," he said.

"The low rates are helping consumers afford a home. With the added burden taxpayers will shoulder going forward, the lower rates will keep people buying and refinancing their homes," Mr. Bain said. "Not to mention the risk of negatively affecting a recovering housing market if rates were to increase. The lower rates help maintain our home values."

Before getting too deep in the planning stages of buying or remodeling a home, it's smart to do a little homework, said James H. Huiskamp, senior vice president with Blackhawk Bank & Trust.

"I would tell people to set aside some time to update, or create, a thorough budget based on any changes that they've had in salary, taxes, children, retirement, or any other major differences. This is critical to help plan to see if one can afford the house they are dreaming of, or whether or not they can afford the house they are currently residing in. Sadly, in some instances, this may be the case," Mr. Huiskamp said.

Mr. Bain agreed. "Your bank will calculate a debt-to-income ratio to determine if you can afford a new home or home-improvement loan. An acceptable total debt-to-income ratio is between 36 percent and 40 percent. The lower the ratio, the better chance of qualifying for the loan and the less strain on your budget.

"To calculate your debt-to-income ratio, add up all your monthly debt and contractual expenses, including rent or mortgage payments (include taxes and insurance), credit-card payments, car payments, and other loans. Divide that number by your monthly gross salary, including wages from all jobs, child support received, net rents received or bonuses."

"Because of the uncertainty in the housing market and the low returns on cash, many consumers have chosen to forgo trying to sell their home and (are) investing cash on hand into their current homes," said Mr. Bain. "Due to this, there has been an increase in home-equity loans for the purpose of home improvements.

"Blackhawk Bank & Trust has several equity-loan products that can be used for home-improvement projects. Also, in some cases, we can help in purchasing a 'RENO' (renovation loan), where the bank can fund a percentage of the improvements."

If less-than-stellar credit is a problem, there are programs that can help, said Mr. Bain.

"There are national programs, such as the Hardest Hit Program or FHA loans. However, if people choose to borrow from a local bank, consumers can inquire about in-house products that in many cases are more flexible than a standard 30-year fixed (mortgage). With these in-house products, the consumer can expect to have little higher rates in today's market for shorter terms (balloon or adjustable-rate mortgage products); however, closing costs will be much cheaper."

Signing the paperwork for a mortgage or home-improvement loan can be nerve-racking, but Mr. Huiskamp said he believes waiting too long might be a big mistake.

"It is a huge commitment, and based on the budget that they come up with, it might make more sense for them to rent. The fact is that mortgage rates are at historic lows. History dictates that it won't be long -- certainly within five, 10 or 20 years -- before they are higher.

"If a person can afford the investment of a new home, and feels that their job, or income, is pretty stable, there will be few times in our lifetime where home ownership will be more affordable."

For more information, call (309) 787-4451 or visit

For more information, call (309) 787-4451 or visit