by LLT | 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 LLT | 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 LLT | 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.
by LLT | Mar 10, 2017 | LLT, News
Home Prices: Not As High As You Think
Home values are rising, and have now surpassed their pre-recession peak.
Unfortunately, that’s scaring some homebuyers away.
If home prices are that high, the logic goes, they’re either overpriced or we’re headed for another downturn.
But according to a new study, “real” home prices are actually still more than 30% lower than they were at the height of the housing boom last decade.
That’s because a number of factors — low interest rates, inflation, and strong income growth — make it as affordable to own a home as it was in 2009.
It’s still a fantastic time to be looking for a first home.
“Real” Home Prices 33.1% Cheaper Than In 2006
Each month First American Title Company publishes its Real House Price Index (RHPI), a gauge of home affordability in the U.S.
It’s a different kind of index because it measures more than just raw dollars.
Most reports — such as the FHFA House Price Index and Case-Shiller — measure average home prices, not adjusted for inflation an not taking into account current mortgage rates.
The RHPI includes these elements, plus kicks in wage growth to determine home affordability on a historical scale.
Results from the most recent report were surprising.
“Real” home prices are nowhere near their peak in 2006, according to the index. In fact, homes are 33.1% more affordable than they were more than ten years ago.
To the everyday home shopper, it may not feel like home prices are that low. After all, prices have risen by about one-third since 2012 and show no signs of slowing down.
But other elements are seriously pushing up affordability.
Mortgage rates are still incredibly low from a historical perspective. In 2006, the 30-year mortgage rate averaged 6.41%. Compare that to today’s rates in the low fours.
And, wages are much higher now.
According to the Bureau of Labor Statistics, hourly wages in the U.S. averaged just over $20 in 2006. That has since jumped thirty percent to $26. What you make has a lot to do with your buying power.
In all, yes, home prices are nominally higher than they were before the housing downturn. But affordability has rarely been better than it is right now.
Continue reading.
by LLT | Mar 9, 2017 | LLT, News
As interest rates surged last week and home prices continue to balloon at a breakneck pace, borrowers are wasting no time applying for home loans — they are hoping to get in before affordability gets even worse.
Homebuyers are also increasingly choosing adjustable-rate mortgages, hoping to save a few more dollars on monthly payments.
Total mortgage application volume rose a seasonally adjusted 3.3 percent last week from the previous week, according to the Mortgage Bankers Association. Volume remains 18 percent lower compared to the same week one year ago.
The weaker volume primarily stems from significantly fewer applications to refinance from a year ago, when interest rates were lower. Refinance volume is off 34 percent annually, but more borrowers rushed in last week, likely fearing rates would move even higher. Refinance volume was up 5 percent for the week, seasonally adjusted.
“Mortgage rates increased last week as remarks by several key Federal Reserve officials strongly signaled a March rate increase,” said Joel Kan, an MBA economist. “This was further supported by a few solid economic data releases, including GDP, inflation and manufacturing gauges.”
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $424,100 or less increased to 4.36 percent from 4.30 percent, with points increasing to 0.44 from 0.38, including the origination fee, for 80 percent loan-to-value ratio loans.
Although mortgage rates do not directly follow the federal funds rate, a Fed rate hike could still make mortgages more expensive. After rising last week, mortgage rates have barely moved this week, which could be a sign of apprehension.
“Combine the past few days of limited movement with the bigger-picture post-election range, and there’s a sense that we’re waiting for a verdict about where we go next,” wrote Matthew Graham, chief operating officer of Mortgage News Daily. “[That] makes the next six business days scary. It’s ultimately next Wednesday that has the biggest potential to push rates higher or lower, but there’s plenty of room for volatility between now and then.”
Next Wednesday is when the Fed announces its decision on interest rates, and an increase is expected.
Mortgage applications to purchase a home, which are less sensitive to weekly rate moves, inched 2 percent higher for the week and are about 4 percent higher than a year ago. Homebuyer demand remains quite high, but there is still a shortage of affordable listings. Because much of the demand this spring is among young first-time buyers, the shortage is even more acute.
Continue reading.
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”.
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