by koredesign | Mar 17, 2017 | LLT, News
Here are 3 reasons why
Much of the commentary surrounding the Federal Reserve’s decision Wednesday to raise the Fed Funds rate by 25 basis points has been about how this is likely to increase mortgage rates, have a negative effect on home affordability, and potentially derail the still-wobbly recovery of the US housing market.
Respectfully, [we] disagree, and think the Fed’s actions might actually be good for the housing market for several reasons.
First, there will be an effect on consumer psychology: having now seen the Fed raise rates in 2017, and with two more rate increases considered very likely, potential homebuyers will get off the fence and into the market, in order to buy a house before rates go any higher.
Best case, this will increase the number of homes purchased in 2017; but in any case, it will almost certainly pull home sales that might have occurred later in the year into the spring and summer, which will have a stimulative effect on the economy.
Second, lenders will very likely loosen some of the ridiculously tight lending standards that have prevented millions of credit-worthy borrowers from getting mortgages.
This will happen partly just due to higher mortgage interest rates, which will provide a bit of a cushion for lenders to take on a little more risk. And higher rates will also drastically reduce the number of refinance loans being issued, which lenders will try to offset by doing more purchase loans.
Finally, the 25 basis point hike was actually significantly lower than the 75 to 100 basis point hike that most industry analysts had expected, which means it’s possible that today’s hike won’t cause mortgage rates to rise significantly from current levels, which are already the highest they’ve been in several years.
In this scenario – motivated buyers, relaxed lending standards, and marginal mortgage rate increases, coupled with what appears to be strong wage and job growth – the spring-selling season could be the strongest one we’ve seen in many years.
Read the full article.
by koredesign | Mar 16, 2017 | LLT, News
The Federal Reserve raised its benchmark interest rate Wednesday, launching into what investors expect to be a more rapid series of increases that will help ward off the threat of inflation but also raise costs for indebted American households.
Fed officials voted nearly unanimously following a two-day policy meeting in Washington to raise the key interest rate for overnight lending by a quarter-point, from a range of 0.5 percent to 0.75 percent to a range of 0.75 percent to 1.0 percent.
“The simple message is the economy is doing well,” Fed Chair Janet L. Yellen said in a news conference after the announcement.
The Fed left its plan for interest rate increases essentially unchanged, expecting a total of three hikes this year and three more next year.
The Fed’s decision is meant to head off the prospect of rising inflation, which erodes savings and could destabilize the economy. But higher interest rates will also increase the payments made by Americans who borrow money to finance mortgages, auto loans and credit card purchases.
Some argue that, by raising rates too quickly, the Fed risks choking off progress for the poorest Americans just as they dig themselves out of the recession. But others say that a delay risks inflating asset bubbles in the market or letting inflation get out of hand — something market watchers call “falling behind the curve.”
“The Fed still has their foot on the monetary accelerator almost to the floorboard. They have to take that foot off,” said Steven Rick, chief economist at CUNA Mutual Group. “We’re concerned that maybe they are behind the curve.”
Economists have argued that higher rates could also frustrate the ambitious goals of the Trump administration, which aims to spur exports and boost the economy to growth rates not seen in years.
President Trump came into office with sweeping plans for the economy, including slashing corporate taxes, cutting regulations and boosting spending on infrastructure. If these policies materialize, they are likely to boost economic growth and spur inflation, potentially forcing the Fed to hike rates more quickly to keep up.
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by koredesign | Mar 15, 2017 | LLT, News
You got the pre-approval, found a home, and had your offer accepted. Congratulations! All you need to do now is sit back and wait for closing, right? Well, not exactly. As Lenny Kravitz once crooned, “It ain’t over till it’s over”.
Sure, the odds are reasonably good that nothing major will go wrong. But that doesn’t mean things can’t go wrong. A financial misstep now could change your mortgage terms and interest rate, or even get you denied altogether—even if you’ve got a closing date on the books. To make sure that doesn’t happen to you, avoid these less-than-savvy money moves.
1. Moving money around
If you’ve been storing up cash reserves, do not—we repeat—do not move that money out of savings and into stocks while you wait to close.
Why would someone do this? Well, maybe you’d like to make some extra cash off those reserves—besides, the money is just sitting there anyway, right?
Wrong. It’s serving a real purpose: showing your liquidity. Moving money around can wreak havoc on your loan approval.
“You’d think that isn’t a big deal, but we’re counting how much money you have going into closing,” says Casey Fleming, mortgage adviser and author of “The Loan Guide: How to Get the Best Possible Mortgage.”
“With savings, we count that as 100%, but with stocks we only use 70% of the value because stock prices can change,” he says. “So, if you have $100,000 in savings and you move that into stocks, suddenly you only have $70,000 from an underwriter’s perspective.”
You’ll need enough cash to cover the down payment, closing costs, and at least three months of mortgage payments. (Yep, that’s right, we said three months.) If the stock deduction dips your assets too low, you could be looking at a denial.
2. Taking a leave of absence from work
Lenders are relying on your being willing and able to work after they approve your loan—after all, it’s the only way to prove you’ll make those monthly payments.
We know stuff happens, and sometimes you have to take a leave of absence. But don’t risk it unless it’s completely necessary—or unless you’re prepared for your mortgage to get delayed or denied.
“Once, two weeks before closing, the borrower went out on medical leave because her back hurt,” Fleming says. “We had to wait for two more paychecks to prove she was back at work.”
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by koredesign | Mar 14, 2017 | LLT, News
Down Payment Resource reports that in January, 65 percent of first-time home buyers only put down a zero to six percent down payment, a decrease from 66 percent in December. Among all buyers whose transactions closed in January, 62 percent of those who obtained a mortgage made a down payment of less than 20 percent, the same percentage as in December.
However, the percentage increased for other types of loans. According to Ellie Mae Origination Insights Report, average down payments for January included (1) all loans, LTV 78 percent, 22 percent average down payment; (2) FHA Purchases, LTV 96 percent, 4 percent average down payment; (3) Conventional Purchase, LTV 80 percent, 20 percent average down payment; and (4) VA purchase, LTV 98 percent, 2 percent average down payment.
There are some new programs targeted to homebuyers who do not have adequate money for down payments on a home. Overlooked and disadvantaged communities may also soon benefit from these funds. “Last year, more homes were sold in America than any year since 2006. Yet the housing recovery is bypassing dozens of communities and millions of Americans,” according to the Down Payment Resource, a service that tracks approximately 2,400 homebuyer programs.
By giving buyers an incentive to choose a home in languishing neighborhoods, these programs are catalysts for change, according to Rob Chrane, CEO, Down Payment Resource. “New owners invest in their communities, stimulating growth and community revival. Down payment assistance can leverage a minor investment into turning communities around and putting young families on a path to homeownership.”
Funds for down payments are available through federal programs like the Treasury Department’s Capital Magnet Fund and TARP’s Hardest Hit Fund that may be able to help. In addition, state housing finance agencies are launching new down payment assistance programs to bring the housing recovery to overlooked urban and rural neighborhoods.
In addition, innovative state and local housing finance agencies are the key to turning federal initiatives into local opportunities that improve lives and build communities. The Wisconsin Housing and Economic Development Authority and the Tennessee Housing Development Agency are just two of a number of agencies pioneering the targeted application of down payment assistance to communities and neighborhoods that need it the most.
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by koredesign | Mar 13, 2017 | LLT, News
There’s a mismatch in the housing market. Demand is rising, yet homebuilders don’t have the capacity to create the supply the way they did in the boom years. They haven’t banked as much land, they haven’t filed the permits and they’ve become increasingly short of labor—one possible byproduct of the Trump administration’s crackdown on illegal immigrants. In fact, the nation is probably short about 700,000 homes on an annual basis. That explains why new home sales have been somewhat disappointing.
It also explains why sellers in many markets are now in prime position. According to Realtor.com, in December and January the supply of existing homes was 3.6 months, something that hadn’t happened since January 2005. In Seattle, for instance, the average time a house stays on the market is 36 days, compared with the national average of 90 days. In Dallas-Ft. Worth, it’s 42 days, according to Realtor.com. Combine that with the prospect of higher-priced mortgages thanks to the Federal Reserve’s decision to begin lifting interest rates and it makes buyers a little more motivated. “We’ve seen home sales surge because buyers are beginning to realize there is this expectation that mortgage rates will rebound: you might as well get in now,” says Bernard Baumohl, chief global economist at The Economic Outlook Group. He says prices are rising at twice the rate of inflation and more than two times the rate of average hourly pay. That’s bad news on the affordability front for first-time buyers who are trying to get onto the first rung of the housing ladder.
But it’s great news for empty nesters and other homeowners looking to downsize. Even better, there’s less of a supply constraint because developers have targeted the boomer market by building high service, luxury condominiums in major markets. And why not, says Peter Wells, a partner at Real Capital Solutions, which is developing a luxury condo tower in suburban Dallas: “When [boomers] sell their big place, they’re cash rich and it becomes all lifestyle driven.” Spring is a traditional time for buying and selling homes, and this season stands to be a busy one.
Read the full article.
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