When buyers and sellers look for common negotiating grounds, it’s common for the buyer to request home improvements to be made prior to the sale.

The request may be phrased in any number of ways:

• “The hardwood floors are warped and we think the seller should pay for it.”
• “There is a leak in the plumbing that needs to be fixed to prior to moving in.”
• “The roofing reached the end of its life. It needs to be replaced.”

The seller may agree to meet the buyer’s demands, but making repairs to a home fixture, such as a roof, isn’t convenient while a person still occupies a home.

And this is how the “repair credit” gets introduced into the contract. A repair credit is a dollar amount granted from the seller to the buyer to be used to cover the costs of the requested repair(s).

For a seller, repair credits offer a way to “pay for” the handyman work without actually going out of pocket; all of the funds for the buyer are taken directly from the home sale’s proceeds instead of from a bank account.

Unfortunately, when granting the repair credit, many sellers go about it in the complete wrong way, putting their buyer’s ability to acquire home financing for the purchase at risk.

That’s because — as a rule — lenders do not allow concessions for home repairs to be line-item credited on the final settlement statement.

This is for two reasons:

1. The lender has no way of knowing that the repair will actually be made by the buyer
2. The lender has no way of knowing whether or not the repair is actually needed

Put the two together and it raises the red flag we call “Fraud Alert”.

The correct way to offer a repair credit is to reduce the home’s sale price by the amount of the credit and make that the new purchase price. In the end, the seller goes home with the same amount of money.

Mortgage rates have held in a very tight range over the past few months, but little by little, they are inching higher.

Mortgage rates are not picked from thin air. Just like stock prices, they are based on facts, opinions, and psychology.

There is a lot of news and data to interpret but, for the first time since last Fall’s precipitous decline in rates, psychological factors are now the driving force.

Mortgage bonds recently pushed through a “barrier” that should place continued pressure on mortgage rates to increase. In the last two years, mortgage prices have crossed this barrier just one time.

Trends tend to last for extended periods of time in the mortgage business and, for now, the trend is not your friend. If you’re shopping for a mortgage, today would be a good day to lock.

Each month, the Commerce Department releases a statistic titled “Housing Starts” that measures residential construction activity.

This morning, the Commerce Department released April’s Housing Starts data (PDF) and the headline data reflected a 2.5% increase in new construction.

Markets had anticipated a 0.8% decrease. This coincided with a decrease in available homes, as shown on the graph at right.

Housing Starts details the number on residential units on which construction started in the reported month.

Housing Starts can provide terrific guidance on the future direction of our economy for several reasons:

1. Home construction creates jobs in the construction industry
2. Home builders spend dollars on raw materials, fixtures and appliances when building a home
3. Home buyers spend money on furniture, electronics and services (i.e. movers) after buying a home

So, as more homes are built, more jobs are created, and more money is pumped back into the economy.

A hot Housing Starts number can predict strong economic growth 6-9 months out on the horizon and that is one reason why economists watch it intently.

Another reason Housing Starts matters is because the Federal Reserve is inflation-wary.

It has stated many times that growth is strong but that housing is dragging down overall growth to a more comfortable level. The housing sector, it believes, will create a gradual economic slowdown.

Today’s data may prove otherwise.

In response, expect mortgage rates to rise today on inflation concerns.

According to RealtyTrac, one out of every 783 homes in the United States filed for foreclosure in April. This is down one percent from March, but up 62 percent from one year ago.

If you are struggling to pay your mortgage and have not yet entered foreclosure, the best thing to do is to call your lender and notify them of your difficulties.

There is no need for a long sob story — just the facts will do.

Remember: foreclosure is a difficult and expensive proposition for mortgage lenders and they want to avoid it just as much as you do. Often, they’ll help you craft a payment plan to get current on your loan(s) — but they have to hear from you first!

Anything you can do to preserve your credit rating serves you well in other areas of your financial world including credit card interest rates, auto loans, and insurance payments.

Bad situations happen to people who otherwise have good credit all the time. Don’t let a temporary problem destroy your credit or threaten your home.

No one benefits from drastic action taken against you, so give the lender a call and work things out to everyone’s satisfaction.