by koredesign | Apr 13, 2017 | LLT, News
The greatest challenge for home sellers this year is finding another home to buy, according to a survey by national realtor Redfin. In a March survey of more than 800 Redfin real estate agents, 65.6 percent said that low inventory was the greatest challenge for sellers in their markets.
“It’s a seller’s market, but the catch is, most sellers need to buy as well,” said Eileen Lorway, a Redfin real estate agent in the Boston area. “This is a conversation I have with many clients at our first meeting. We discuss options like ‘seller to find suitable housing’ contingencies for the sale contract, ‘purchase contingent on sale of current home’ options for the buy offer, rental options, stay-with-family options and bridge loans. Sellers who are buying need to think outside the box a little bit. It’s not easy, but we often do end up closing on sale and purchase on the same day.”
“I also encourage sellers who are also buyers to think about selling first. They should consider temporary rental options, or moving in with relatives after they sell. Then they will be able to take the time they need to find their dream house, know exactly what they’ll have to work with financially, and won’t end up adding unnecessary contingencies to offers, which will give them a better chance to get the home,” said Lorway.
Most agents reported that homes were selling faster than this time last year and that competition was more intense. Among respondents, 57.2 percent had already been involved in at least one instance of a home receiving 10 or more offers this year. And only 1.8 percent of agents had yet to be involved in a bidding war.
Despite Intense Competition, Buyers Are Having Success With Less than 20 Percent Down
Half of agents reported that the typical down payment for successful buyers in their market was less than 20 percent, meaning there are other ways to make an offer competitive, like working with a reputable local lender who can guarantee to the seller’s agent that the loan will be approved quickly, and building a rapport with the seller.
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by koredesign | Apr 12, 2017 | LLT, News
So you want to buy house? It will be stressful, but having a plan and collecting the right documents from the start can ease the pain. Here’s a step-by-step guide laying out what you’ll need for a smooth first-time buying experience.
Start saving for your down payment ASAP. Most private lenders require a 20% down payment to secure a mortgage. That means you’ll need over $45,000 for the typical home sold in America today. The requirements for a loan backed by the Federal Housing Authority can be lower, but 20% is still a good rule of thumb since the higher your down payment the lower your monthly mortgage payments and the more equity you start with. Aim to have your down payment in cash when you start your search or at least a plan to get there. Keep in mind that some lenders also require you have funds on reserve after closing, so your down payment should not wipe out every penny you’ve got. A typical ask might be 12 months worth of mortgage payments, how much of that needs to be in cash varies by lender.
Check your credit score six to 12 months in advance. Your FICO score can determine whether you qualify for a mortgage and what interest rate you’ll pay. It’s now easy to pull your score for free. These days you’ll need around a 620 for a lender to consider you at all and a 780 to get the lowest rates. You’ll want to check early because improving your credit will take time. If you have no credit history, for example, lenders like to see at least six months of consistent credit payments before considering you for a mortgage. Recovering from a credit mishap can take even longer, since derogatory marks stay on your credit report for seven years. If you don’t qualify for a competitive rate consider waiting to buy until you’ve improved your credit situation since a better rate can save you thousands of dollars over the life of a loan. How to improve your score will vary, sites like Credit Karma provide personalized tips.
Get pre-qualified by a lender three to six months ahead. The pre-qualification process will tell you roughly how much money a lender will give you. (Note that your lender may pre-qualify you for a larger loan than you are comfortable paying off. No matter how much you qualify for stick to a budget that suits your needs.) Most lenders will make pre-qualification estimates based on information you provide about your income and assets through an online portal, and sometimes a credit check. Unless you are self employed you typically aren’t required to provide documentation at this point. However, it is a good idea to start gathering the necessary paper work early so you can act quickly when you find the right home. This is especially true in markets where inventory is tight, which is the case in many places today. Requests vary by lender but a typical loan application will include something like: two years of tax returns, two years of W-2s, one month of pay stubs and two months of bank and investment statements.
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by koredesign | Apr 11, 2017 | LLT, News
For the past few years, the housing market has been unbalanced. Strong demand and lean supply keep pushing prices higher and higher.
On Wednesday, a fresh piece of data confirmed that trend. The Mortgage Bankers Association’s weekly purchase loan data showed that the average size of a home loan was the largest in the history of its survey, which goes back to 1990.
Higher prices have a few different effects on the market. Buyers have to make tradeoffs on the kinds of homes they can afford, or may be shut out of ownership altogether.
They may also adjust their borrowing. Larger mortgage sizes may reflect not just more expensive properties, but also more leveraged ones.
The 20% down payment is a relic: the median down payment in 2016 was 10%. For first-time buyers, it was 6%. First-timers and other buyers of less-expensive homes are more leveraged now than they were at the height of the housing bubble a decade ago.
Home loan sizes aren’t the only things that have changed in the years since MBA started its survey. Back at the start of the survey, the median mortgage size was only about 3.3 times the median annual income. It’s now over five times as big – though buyers get bigger homes and lower interest rates.
Here’s a look at some housing market characteristics for select years.
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by koredesign | Apr 10, 2017 | LLT, News
Nationwide, families with small children typically spend seven years in their home.
U.S. homeowners that bought a two-bedroom home in 2009 and wanted to upgrade to a three-bedroom home in 2016 could expect to spend an additional $447 per month on their mortgage.
Move-up buyers in many large Midwest markets could expect to stretch their dollars further. In Chicago, Cincinnati and St. Louis buyers can expect to spend roughly $150 more on mortgage payments each month by upgrading from a two-bedroom to a three-bedroom home.
In hot, coastal markets, move-up buyers could expect to spend upwards of $500 extra each month – and in notoriously expensive Los Angeles, San Francisco and San Jose, more than $1,000 – on mortgage payments when moving from a two-bedroom to a three-bedroom home.
Growing families and households looking for more space this home-shopping season probably already anticipate paying more each month for that larger home. But just how much their monthly mortgage payments rise depends largely on where they’re looking to live and how much more space they want.
Nationwide, families with small children typically spend seven years in their home, according to the U.S. Census Bureau. And because many move-up buyers are just those kinds of people – households looking to expand – we defined “move-up buyers” as households that have spent seven years in their home. This means that the family purchased a home in 2009 and was looking to expand and purchase another home in 2016.
The average American family moving from a typical two-bedroom U.S. home to the median three-bedroom home in the same ZIP code last year could expect to pay $447 more on their monthly mortgage payment, or about $5,364 per year. The premium on an additional bedroom also increases with the size of the house. For example, upgrading from a one-bedroom home to a two-bedroom home would equate, on average, to an additional $192 per month on the mortgage payment. Move-up buyers nationwide moving from the median three-bedroom to the typical four-bedroom home could expect an even steeper increase in monthly costs – $614 more per month.
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by koredesign | Apr 7, 2017 | LLT, News
Millennials are finally entering the market, at least according to Ellie Mae’s recent Millennial Tracker, which shows millennials accounting for 86 percent of all closed loans in February.
Results of the Tracker also point to millennials’ overall time-to-close tightening, hitting just 44 days for the month—the shortest average time-to-close for this demo since March 2016. According to Joe Tyrell, EVP of Corporate Strategy for Ellie Mae, this is likely due to technology that allows lenders to automate some of their processes.
“Purchase loans are increasing, indicating that Millennials are continuing to enter the first-time homebuyer market,” Tyrell said. “In addition, we saw time to close decrease from 49 days in January to 44 days in February, which indicates that our lenders are seeing more efficiency as they embrace mortgage automation.”
Broken down by loan type, time-to-close was tightest on VA loans, which decreased from 57 to 41 days from January to February. Purchase loans dropped from 46 to 42 for the same time period, FHA loans dipped from 47 to 43, and refinance loans decreased from 58 to 52.
On a market level, the most millennial purchases by percentage were seen in Texas, with Odessa, Midland, and Beaumont-Port Arthur coming in at the top. Odessa was one of the top markets in February as well.
Overall, millennial purchases are on the incline, up 2 percent from January, as are FHA loans, which increased from 35 percent to 36 percent. Conventional loans remained stable, making up 61 percent of all loans for February. Refinances fell, however, dipping to 14 percent of all millennial loans—down 2 percentage points over the month.
Also falling for the millennial demo in February were FICO scores, dropping from an average of 724 in January to 723 over the month. Millennial scores peaked in August through October of last year, when they averaged 726. FICO scores were higher on conventional loans (747) than on FHA loans (690) and VA loans (745).
According to past iterations of the Millennial Tracker, millennial women—particularly those who are single—are more likely to choose FHA loans than their male counterparts.
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