The Lending Coach

Coaching and teaching - many through the mortgage process and others on the field

VA Loans: Some Specifics and Fee Structures

Veterans Affairs mortgages, better known as VA loans, offer considerable benefits for eligible military veterans, service members and spouses who want to buy a home.

What makes the VA loan so attractive to veterans is that they offer no down-payment loans and more lenient credit and income requirements than conventional and FHA mortgages.

With that said, there is some confusion surrounding what can and can’t be charged to the veteran at closing. The article below will outline some of the benefits of the VA loan as well as the fee structure associated with the loan.

The Specifics

VA loans generally offer more competitive rates compared to conventional financing. In many cases, these loans consistently offer the lowest rates on the market, according to reports by mortgage software firm Ellie Mae.

VA mortgages are made through private lenders and are guaranteed by the Department of Veterans Affairs, so they don’t require private mortgage insurance, known as PMI.

Most members of the regular military, veterans, reservists and National Guard are eligible to apply for a VA loan. Spouses of military members who died while on active duty or as a result of a service-connected disability also can apply.

The Details and Fee Structures

The seller is allowed to pay all of the veteran’s closing costs, up to 4% of the home price. So, it is possible to avoid paying anything out of pocket to close your home purchase.

If you have little or no funds available for closing cost, let your real estate agent know that you are purchasing your home with a VA loan. Your agent may be able to request that the seller pay for some or all of your closing costs.

Also, the VA limits the amount of fees the lender can charge. This is a great benefit to the VA loan.

Fees Not Allowed to be Charged to the Veteran

Some fees are not allowed to be charged, per VA loan guidelines. Here are the specifics:

Attorney Fee

An attorney fee cannot be charges unless it is for anything besides title work.

Escrow Fee/Settlement Fee/Closing Fee

The VA does not allow the veteran to pay an escrow fee. The escrow fee varies greatly and can be quite expensive, so this is a great benefit to the VA loan.

Application Fee

This is a fee the lender sometimes charges up front before the borrower takes an application. This is not allowed on VA loans.

Mortgage Broker Fee

Sometimes charged by mortgage brokers when they broker a loan out to the lender.

Closing Protection Letter (CPL)

The CPL fee is often included in the escrow fee but sometimes charged separately. It is a letter that makes the title company responsible if escrow does not appropriate loan proceeds correctly.

Document Preparation Fee

Fee charged by escrow for preparing final loan documents.

Lock-in Fees

Fees charged by the lender to lock the interest rate.

Courier Fee/Postage Fees

Sometimes there are original documents that need to be hand-carried or sent via overnight service, and can’t be emailed or faxed. In this case, the escrow company will often charge a courier fee to ensure these services are paid for. The veteran is not allowed to pay these fees.

Notary Fees

Fees charged by escrow to send a notary to the borrower for a signing appointment outside escrow’s office.

Termite Report

The veteran cannot pay for a termite inspection or report in all but 9 states in the US.

Tax Service Fee

This fee is paid to the mortgage company to ensure they pay the real estate taxes.

The Fine Print

This list of allowable and non-allowable fees above is not all-inclusive and there may be other fees on your purchase transaction that are not mentioned here. In that case, it’s best to contact your lender to find out if the charge is allowable on VA loans.

Fees That Can Be Charged to the Veteran

VA Upfront Funding Fee

This fee goes directly to the Veteran’s Administration to defray the costs of the VA program. This is not a fee that is generally paid for in cash at closing – usually VA homebuyers opt to finance it into their loan amount. If the fee is wrapped into the loan amount, it does not increase the total amount of cash needed to close the loan.

Appraisal Fee

The appraisal is paid by the veteran and is usually paid at closing.  For more regarding appraisals, go here….

Origination Fee

The VA limits the lender’s compensation on VA loans to 1% of the loan amount. This fee is meant to compensate the lender in full. Fees for items such as processing and underwriting may not be charged if this 1% fee is charged to the veteran.

Third Party Fees

Companies involved in the transaction other than the lender are called third parties. Examples are title and escrow companies, credit reporting agencies, and appraisers. Their charges are called third party fees. Common fees are title insurance policies, recording fee, credit fee, and flood certifications.

Prepaid Items

Prepaid items are items the buyer has to pay in advance. Lenders require insurance policies and taxes to be paid in advance. Not paying for taxes and insurance can jeopardize the integrity of the collateral for the loan, which is the house.

More Information Available

For more information regarding VA loans and eligibility, don’t hesitate to contact me – as it would be my pleasure to help!

Stop Revisiting Negatives From Past Games

As you probably know by now, one of my favorite mental coaches is Dr. Patrick Cohn of Peak Sports Performance. Dr. Cohn is a sports psychologist out of Orlando Florida.

He’s always preaching about mental toughness – as well as the techniques athletes can use to grasp it.

He sent out an e-mail blast recently that I’ve posted below regarding eliminating negative thoughts regarding past performance – and how to best get past it.

For instance, you whiffed the last two at-bats swinging at balls in the dirt and now you are facing the same pitcher with a runner in scoring position, “Here we go AGAIN!”

Or you walked the bases loaded and are having difficulty with your control and are now facing a hitter that has torched you in the past, “Here we go AGAIN!”

Or your team has blown the lead in the ninth inning the last two games and now you are clinging to a one-run lead in the bottom on the ninth, “Here we go AGAIN!”

This is a common problem among baseball players, but this mindset is based on a misconception. This misconception implies “what happened in the past will continue to happen in the present.”

It is an over generalization to believe the past will repeat itself but many baseball players, in the moment, buy into the “here we go again…” mindset.

When you allow past outcomes to influence your mindset in the present, the pressure heightens, which creates anxiety and tension.

Playing anxious and tight ball is a recipe for athletic disaster and under-performance.

In Action

The San Francisco Giants could have easily defaulted to the “here we go again” mentality after a breakdown against the Texas Rangers.

The Giants started out the first game of a three-game series against the Rangers with a tough game, blowing a six-run lead to lose in extra-innings at home.

To add to the potential pressure, the Giants had lost 10 of the previous 13 at their ballpark.

The San Francisco Giants had to quickly re-focus in Game 2 of their series.

The Giants quickly jumped out to a 5-0 lead but gave up three runs in the eighth inning.

Despite similar circumstances, the Giants fought forward and San Francisco relief pitcher Mark Melancon closed out the game with the bases loaded to secure a 5-3 win over Rangers.

Hunter Pence, who had a pinch-hit home run in the seventh, talked about their “keep attacking” mindset rather than succumbing to the “here we go again” mindset.

PENCE: “It’s very important to continue to send that message of relentless attack. Even where we are and as clouded as it may seem, you still never know. When there’s still a chance in this game of baseball, things can get hot in an instant.”

Knowing there is a chance is a great strategy to keep your head in the game and avoid the pitfall of “here we go again.”

Keeping Your Head in the Game

Knowing you have a chance comes in many forms:

*Knowing there is a chance to still win.

*Knowing there is still a chance to bounce back the next game.

*Knowing there is still a chance to hone your skills and improve your game.

*Knowing you can learn from the past and adjust.

If you can adopt the “there’s still a chance” mindset, you can focus on making things happen in the moment.

Let go of what’s already happened, look for signs to build momentum, and get things moving in a positive direction. Instead, take a trip down memory lane to when you did drive in that run!

 

Rising Interest Rates Aren’t Deterring Buyers

Mortgage interest rates have risen consistently over the last year-and-a-half. At that time, rates for the 30-year fixed were just under 4%. Lately, the average is closing in on 5% percent for a 30-year fixed-rate mortgage.

Let’s take a look at the facts and crunch the numbers. You’ll likely find that minor rate fluctuations won’t affect a buyer’s ability to purchase a home

Despite these rising mortgage rates, there’s good news:

  • Rising mortgage rates don’t have to stifle the buyer’s dream of owning
  • In fact, a new study by Redfin shows that rising rates aren’t scaring off many shoppers
  • Rates remain historically very affordable, even if they are a bit higher today

Source: You can find out more here – by reading Erik Martin’s entire piece at The Mortgage Reports

What the research found on interest rates and purchasing patterns

A recent survey of potential buyers by Redfin reveals some interesting findings:

  • Only one in 20 would call off their search if rates rose above 5 percent
  • One in four said such an increase would have no impact on their search
  • Nineteen percent would increase their urgency to find a home before further rate increases
  • Twenty-one percent would look in other areas or search for a more affordable home
  • One-third would slow down their search to see if rates came back down

This means that many buyers understand the environment today – and realize the long-term benefits of home ownership.

How to read the data

Taylor Marr, senior economist at Redfin, says these results are telling.

“Only a small share of buyers will scrap their plans to buy a home if rates surpass 5 percent. This reflects their determination to be a part of the housing market,” he notes.

Marr says buyers are well aware that rising mortgage rates mean slightly higher monthly payments. Yet buyers are willing to make compromises, as they understand that actual wages are higher today, making the purchase more affordable. Also, they know that real estate generally appreciates.  Finally, today’s rates remain very low, compared to historical norms.

“By historical terms, 5 percent mortgages are not that high. A rate below 7 percent is really a good deal on long-term money,” Joshua Harris, clinical assistant professor of real estate at NYU’s Schack Institute of Real Estate, says. “Plus, rents are generally high. So even at 5 percent, many buyers will still be saving money on monthly housing costs.”

What buyers can do now

Most experts recommend the following steps:

Buy now if you can afford it – “While rates are going up, so are home prices in most markets,” says Harris. “The job market is great. Many are seeing wage growth in many sectors. These forces will push rates up and give people more money to spend on a house. So waiting can be a very costly decision if you need a house and don’t want to rent.”

Get your financial house together – start the pre-approval process and get qualified for a loan. “Ask questions and understand the monthly payments you’ll need to make,” suggests Suzanne Hollander, real estate attorney, broker and Florida International University instructor. Will your income be able to cover the principal, interest, taxes and insurance? Will it provide enough money to live the lifestyle you prefer?”

Don’t sweat a minor rate hike – “So long as you intend to hold the home for at least five years, these small fluctuations shouldn’t affect your decision to buy,” Harris adds.

With economic gains outpacing mortgage rate interest rates in many markets, you may be better able to buy a home today than at any time over the last 10 years. Don’t hesitate to reach out to me and find out more!

The Top 5 Down Payment and Mortgage Insurance Myths

For first-time home buyers, it can be more than overwhelming to hear all the stories from friends and colleagues about getting their first home loan.

Many times they are led to some false conclusions.

If they don’t know the real facts about the loan qualification process, it can keep them from taking the necessary steps toward owning the home they’ve been dreaming about.App form

Let me clear up some facts and make sure the correct information is out there.

The Top 5 Down Payment and Mortgage Insurance Myths

Number 1: Borrowers need a 20% down payment

According to the National Association of Realtors, the majority of first-time home buyers believe they need at least a 10% to 20% down payment. However, that’s simply not true with all of today’s different loan types and programs. Across the US, today’s average down payment is generally in the range of 5-10%. Even so, there are loan programs that allow as low as 3% and even a few no-down loan options.

Number 2: Mortgage Insurance (PMI or MIP) is required on all home loans with less than 20% down

Mortgage insurance is generally required by the lender when a borrower purchases a home using conventional financing with less than a 20% down payment. But there are dollar house questionmarkloan programs available that don’t require PMI. VA Loans do not require PMI, for instance. There are other loan programs with possible reduced mortgage insurance, so be sure to check in your mortgage lender to find out what might fit your particular situation.

Number 3: Mortgage Insurance is Permanent

Mortgage insurance is in place to protect the lender when there is less than 20% equity built up. Once more than 20% equity is in place, this insurance can be removed. Believe it or not, PMI will automatically be terminated when the principal balance reaches 78% of the original value. You can also request cancellation sooner in writing if your home value has increased enough (contact your lender for exact requirements and instructions).

For those with FHA loans, borrowers can refinance into a conventional loan to eliminate the insurance when your loan-to-value reaches 80%.

Number 4: Mortgage Insurance Protects the Borrower

Interestingly, many borrowers make the mistake of thinking that PMI is insurance that either protects the home or protects them if they end up in a foreclosure situation.House_key_digital

Actually, mortgage insurance is in place to protect the lender from default on the loan, which enables lenders to help more borrowers get loans. It does not provide protection for the borrower if they go into foreclosure.

Number 5: No Gifts Can Be Used for a Down Payment

It’s common for today’s U.S. buyers to receive cash down payment gifts. First-time home buyers are most likely to receive a cash gift among all buyer types, but repeat- and move-up buyers receive them, too.

The down payment gift rules are (1) the gift must be documented with a formal “gift letter”; (2) a paper trail must be shown for the gifted monies as they move from the giver’s account to the home buyer’s account; and (3) the gift may not be a loan-in-disguise. You can find out more about the specific of gifts from Dan Green at The Mortgage Reports here.

Now that you know more of the facts about down payments and mortgage insurance, let me know how I can help you begin your home ownership journey!

Tom Title Bar

If I Could Go Back, This is What I’d Do….

Oxy team

I’ve shamelessly stolen this from a recent online post – and, would you believe it, I can’t even source it.

Now that I’ve turned 50, the document below rings completely true.  I bet a number of my teammates (and coaches today) would absolutely agree.Tommy batboy

If you are a  high school or college play (or aspire to be), read through this list and learn.  Apply it to what you are doing today…..

Tom Title Bar

The Ever-Changing Mortgage Lending Landscape – Alternative Options Included

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Historically, mortgages in the U.S. were traditionally financed by banks. Interestingly, these institutions also operate other lines of business, like offering deposit accounts, safe deposit boxes, and insurance products.

But today, mortgage lending is anything but old-fashioned, and as buyers are looking to lenders other than banks to fill the void. home loan tiles

Fortunately, these newer financial institutions continue to create innovative mortgages that fit the diverse needs of borrowers, rather than forcing consumers to conform to rigid standards. The end result is more people with the financing to afford the home they need, rather than being shut out of homeownership entirely.

The trend away from banks and toward nontraditional lenders is a relatively recent development that is reshaping the financial landscape in the U.S. This can be seen in a report of the top U.S. mortgage lenders by market share in 2011 compared to 2016. Get this, in 2011, 50 percent of all home financing was underwritten by the five biggest banks in the country.

interest-rateJust five years later, however, six of the top 10 mortgage lenders by volume were considered “non-bank lenders” that focus on home loans almost exclusively.”

Explaining the shift in the mortgage market

Why are more homebuyers choosing non-bank lenders over traditional banks?

Much of the shift has to do with the increasingly strict standards that banks adhere to when vetting mortgage applications. Prospective homebuyers were expected to have stellar credit scores, high income and significant net worth already established before being approved for a traditional loan.

However, this is not the financial reality for millions of Americans. The new lenders can be a better alternative for families that have imperfect credit for one reason or another and just need a second chance.

Secondly, the new mortgage lenders are much more in tune with their customers and provide a far better experience. There is a much greater level of personalization, With the larger banks, on the other hand, customers can just become a number.magnifier-inspection-house

These new lenders have dramatically increased their market share purely on the basis of the superior service and support they provide.

Finally, the speed in which mortgage lenders can close transactions is much quicker than those of traditional banks. There are fewer layers in these organizations decision making can be made at a faster pace.

Traditional banks are not known for their efficiency, and the result for mortgage applicants is a long, drawn-out process of signing paperwork and enduring waiting periods

Many mortgage lenders can close loans in under 25 days, where that is not the case with larger institutions.

Non-Prime Lending Options

The need for non-prime products is growing, as conforming loan rules have tightened.  Working with a lender that can only provide standard, conventional products will limit a legitimate and legal funding resource for many customers.

Approved_pagadesignA bank statement loan or a loan on a non-warrantable condo are examples of “non-prime” products.  A bank statement loan, among other things, can support the private business owner who has significant expense associated with their business and can still satisfy credit and ability to repay. These are individuals who will not qualify under the conventional guidelines of Fannie/Freddie but still have the ability to service a mortgage on time.

For investors, there are products that utilize the rent from the property to qualify for a loan. In this option, the debt coverage ratio measures the ability to pay the property’s monthly mortgage payments from the cash generated from renting the property.

Lenders use this ratio as a guide to help them understand whether the property will generate enough cash to pay the mortgage expense.

The debt coverage ratio is calculated by dividing the property’s month net operating income (NOI) by a property’s monthly debt service. The monthly debt service is the total of the mortgage principal and interest payment, taxes, insurance, and any HOA fees.

Contact The Right Lender

When you are shopping for you lender, make sure that he/she has a wide variety of products available and takes the time to understand your individual needs. That will make all of the difference – and it would be my pleasure to help!

Tom Title Bar

Summer Baseball and Scouting: A Primer for Players and Parents

If you don’t follow The Arizona Diamond Report and Ron Benham, you really should. Ron is one of the “go-to” guys on the prep baseball scene here in Arizona and beyond.

His site exists to give college coaches a reliable source of player information. The majority of the area’s MLB scouting personnel also frequent The Diamond Report.

His site is one that I visit regularly, and I recommend that you do, too.

His recent blog post is called Here Comes the Summer: A Primer for Parents and Players”. It’s a must read – please do click on the link and read the entire piece.

With that said, here area a number of key items that stand out to me – and I really hope players and parents follow this advice:

Players

First off, if you expect to get much bang for your buck at these tournaments, you will hopefully have been communicating with colleges beforehand. If not, you won’t be on a follow list, and you generally become background noise.

This is so cliché, yet at the same time so true: You never know who’s watching.

Even at an event that has few to no college coaches, there may be someone in attendance who can have an impact on your future. The baseball world is a small place, with relationships that stretch across the country. Don’t make the fatal mistake of taking pitches off.

Catchers: I say this every year, and yet this remains one of my biggest pet peeves. Please show me your arm in between innings. You may not have a live game opportunity to flash that hose, but in between innings we are paying attention. Chuck that rock like your life depends on it.

This also goes for infielders. We don’t see you in pre game like in high school, so in between innings show off that cannon.

Please run out ground balls. It’s amazing to me that in an event that is supposed to be a “showcase” , I continually see players half-assing their way down the line as I stand there stop watch in hand. Running times are a vital piece of the evaluation process, don’t ignore this.

Body language is another incredibly important piece of the puzzle. Remember, baseball is a game of failure. Players that fail in MLB 70% of the time are called All Stars. The key is how you respond to failure. Throwing your helmet, tossing your bat in disgust etc, are sure ways to get your name crossed off by coaches.

Pitchers: it’s inevitable that you will encounter an umpire with a postage stamp sized strike zone. It happens in college too. However, the worst thing you can do is to react negatively to a questionable strike zone. Treat it like it is a part of the game and show that you are in control of the situation. 

Act like you are serious about the game. College coaches have a job to do. Their job is to win baseball games. They are looking for players who can help them do that. If you look like you are not a serious player, coaches can’t treat you seriously. Don’t goof off in the dugout. Many of you look like you are only out there to hang out with your buddies and have a good time. Play the game and conduct yourself like you mean business.

Parents

It’s amazing to me how things have changed in regard to ballpark decorum. I watch the way parents interact with their players during games and I just shake my head.

If I were to design a baseball field, it would have dark shades from dugout to dugout to prevent parents from placing their chairs right next to the on-deck circle. Unfortunately, virtually all the fields in the summer are wide open, and mom and dad have been sitting there for tournaments for the better part of a decade.

If you insist on being that close to the action, please try not to interact with your son during the game. He doesn’t need coaching. He doesn’t need you to break down the pitcher for him.

Your player should be mature enough to ensure that he has proper hydration for the game, so you shouldn’t have to hand drinks and snacks to junior in the dugout. It’s just a really bad look.

Don’t be that parent who constantly complains about balls and strikes and questions every call on the field. We will find out who you are and who belongs to you.

Finally, acting like a fool during a game puts unneeded stress on your young player. Baseball is a very difficult game to play. It becomes almost impossible when a player is nervous or stressed out. Don’t contribute to this.

The Latest on Interest Rates for 2018 and 2019

The Federal Reserve lifted the federal funds rate last month by a quarter percentage point to a range of 1.75 percent to 2 percent. The Fed has indicated that there will most likely be two more rate hikes this year.

Most financial experts expect the Federal Reserve to raise rates at least 3 times in 2019, as well.

Mortgage interest rates don’t necessarily move in step with the federal funds rate, as they are more closely tied to the 10-year Treasury Bond. So, borrowers today looking to get a mortgage aren’t directly affected by the latest Fed hike.

However, the federal funds rate does contribute to the longer-term trends of the 10-year Treasury, and long-term fixed mortgages as a result.

With the Fed likely lifting rates multiple times over the next couple of years, the trend for long-term mortgage rates is up. 

Many experts are forecasting that mortgage rates could move near the 6% range sometime in 2019.

Why is the Federal Reserve raising rates?

Well, it’s a bit complicated, but there are some very good reasons – and they are all designed to help foster stable, economic growth.

‘Quantitative Tightening’

Between 2009 and 2014, the US Federal Reserve created $3.5 trillion during three phases of what was called “Quantitative Easing”.  It was the Federal Reserve’s response to help reduce the dramatic market swings created by the recession about 10 years ago.

This seems to have helped the economy avert disaster, but their impacts were far from ideal. Nonetheless, the economy slowly lifted off as consumers rebuilt their balance sheets and asset values rose.

Today, the Fed is slowly reversing this stimulus program. They’re raising short-term rates and shrinking their bond and mortgage back securities portfolio.

The consensus thinking is that the Federal Reserve members fear that inflation will take hold if they keep interest rates artificially low.

Historically, when the bonds owned by the Fed mature, they simply reinvested the proceeds into new bonds.  It essentially keeps the size of the balance sheet stable, while having very little impact on the market.

However, when quantitative tightening began in October of 2017, the Fed started slowing down these reinvestments, allowing its balance sheet to gradually shrink.

In theory, through unwinding its balance sheet slowly by just allowing the bonds it owns to mature, the Fed can attempt to mitigate the fear of what might happen to yields if it was to ever try and sell such a large amount of bonds directly.

Essentially, the Federal Reserve is changing the supply and demand curve and the result is a higher yield in the 10-year treasury note.

Inflation and Interest Rates

Inflation is beginning to inch up as the labor market continues to improve. Most indicators suggest inflation has been climbing in recent months. If you look at both the Producer Price Index and the Consumer Price Index, you will see the trends.

This is a general reflection better economic data, rising energy prices, and increased employment.

Rising inflation is a threat to government bond investors because it chips away at the purchasing power of their fixed interest payments. As mentioned earlier, the 10-year Treasury yield is watched particularly closely because it is a bedrock of global finance. It is key in influencing borrowing rates for consumers, businesses and state and local governments.

Positive labor and economic news keeps coming in (as predicted over the last 6 months), and the prospect of inflation will put pressure on bonds and interest rates.

What It All Means

So, it is safe to say that we will continue to see pressures in the bond market and mortgage interest rates overall. These increases do look to be gradual for the time being, but consistent and into 2019, for sure.

With that said, home prices are increasing nationally at nearly 6%, so the increase in interest rate will be more than offset by the increasing value of one’s home!

Secondly, home buying power is still extraordinarily high, despite rising home prices and rate hikes. Find out more about that here.

In reality, now is a fantastic time to purchase. Contact me for more information, as it would by my privilege to help you.

A Great Hitting Lesson – An Analysis

Two of my favorite and “go-to” mental guys in the baseball world are Dr. Ken Ravizza and Tom Hanson. I’ve mentioned them before – and I’d highly recommend that you read their book, Heads-Up Baseball 2.0.

I’ve worked with Ken for 30 years…he’s made me a better teacher of the mental game and helped me help players become better at being what I call ‘present moment guys’ – Joe Maddon

You can also go here to learn more about them and their other content.

Their latest article has to do with a great hitting lesson that they were a part of – and here’s the link to the complete post. I’d invite you to check it out in full.

The Anatomy of a Great Hitting Lesson

Here are a few key highlights:

Yesterday I, witnessed what I considered to be an outstanding hitting lesson.  I’ll take a few moments now to explain what made it so powerful.  The bottom line:  The player came in feeling frustrated, a bit lost, and out of sync with himself.  He left feeling excited, renewed, re-connected with what makes him good, and highly confident.

Before the first swing was taken, the coach took the time to connect and listen to the player. “What’s been going on?”  “How have you been feeling?” “WHAT have you been feeling?”  Questions like that… and then he took the time to hear the player’s responses, and ask follow up questions.

This put the player at ease, made him feel respected, and gave the coach essential information. The dialogue made it less likely that the coach would pile additional thoughts on top of what the player was already thinking.

Here’s the secret sauce to the whole thing: The player likes, respects, and trusts the coach. Contributors to this are all of the elements listed above that address how the coach relates to the player, plus the coach is a “learner” who is open-minded and always looking to get better (as opposed to a “knower” who has all the answers.

“It’s the relationship, stupid” is a worthy mantra for coaching.  Not a buddy, like “lets catch a movie after the lesson,” but a respectful, adult-to-adult relationship.  As Joe Maddon said: “With a great relationships, anything is possible.  With poor relationships, almost nothing is.”

Home Buying Power Still High, Despite Rising Prices and Rates

I’m receiving calls and questions all the time regarding mortgage qualification and home buying in today’s changing interest rate and price appreciation marketplace.

Your home buying power is the result of several variables – but there’s great news today when you consider increased income and historically low mortgage rates.

I’m linking today to an article by Amy Hale of The Mortgage Reports that really nails the answer. Go here for the entire article – and I’ve highlighted the key pieces below.

Are home prices really that high?

It might seem like home prices just keep rising, but according to the historical numbers, today’s housing is actually very affordable. “Real” home prices—those adjusted for income and interests rate changes—are currently 32.5 percent below their housing boom peak from 2006.

Home buyers still hold the power

According to the latest First American Real House Price Index, which aims to measure overall housing affordability by considering changes in income, interest rate and actual home prices, consumer home buying power is still strong.

“While unadjusted house prices have been on the rise since the end of 2011, nearly a seven-year run, consumer house-buying power has also increased by 14.3 percent over the same period,” said Mark Fleming, First American’s chief economist.

“House-buying power, how much one can buy based on changes in income and interest rates, has benefited from a decline in mortgage rates since 2011, and the more recent slow, but steady growth of household income.”

Buying power is actually up significantly from 2011 because real wages have actually increased over that time – household income has risen nearly 20% over the last 7 years. Also, mortgage lenders have relaxed some of the tight requirements and ratios for qualification. This combination makes it a great time for buyers and borrowers.

The real story on home prices

Overall, “real” home prices aren’t even close to their historical peak. In fact, according to Fleming, they’re currently 32.5 percent below July 2006’s prices and 9 percent lower than in January 2000.

Don’t let sticker prices fool you. American home buying power is still high. Want to get in on the market? Reach out to me for some answers, as it would be my privilege to help!

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