Page 27 of 77

Mortgage Rate Update – February 2022

February 14, 2022 / Tom Bonetto

a gift with red ribbon in between red balloons with percentage symbols on a white background

It’s been a wild ride for mortgage rates so far in 2022.

Since January 3^rd, rates are up nearly a full percentage point.

The most recent reading of 7.5% inflation, coupled with the Federal Reserve’s statements of rate hikes and balance sheet reduction have really impacted the bond markets, including mortgage-backed securities and mortgage rates in general.

When you couple that with the Federal Housing Finance Agency increasing it’s mandatory fees for financed 2^nd home transactions and extremely tight housing inventory here in the west, it’s a bit of tough sledding out there right now for would-be borrowers.

To put this in perspective, mortgage rates are now where they were in May of 2019.

Let’s take a look at the reasons…

Inflation and Mortgage Rates

Inflation in the United States picked up its pace once again, accelerating to an annual 7.5 percent in January, the highest rate in 40 years and above analysts’ expectations, according to data released by the Bureau of Labor Statistics (BLS).

Warning Sign Labelled Inflation with Arrow

January’s acceleration in the Consumer Price Index (CPI), which reflects inflation from the perspective of end consumers, marks the eighth straight month of prices rising faster than 5 percent year-over-year and a faster pace than December’s 7.0 percent pace.

Per Tom Ozimek of the Epoch Times: “Not only is January’s annual pace of CPI inflation the highest since February 1982, when it hit 7.6 percent, it is also far above the Federal Reserve’s target of 2 percent as reflected in a separate but related inflation gauge, pressuring policymakers to tighten loose monetary settings to knock some of the wind out of surging prices.”

When inflation rises, the value of mortgage-backed bonds decreases. This causes these bonds to become a less attractive investment. So, interest rates must rise to keep investors buying. Higher rates on mortgage bonds translate to higher consumer mortgage rates…and that’s what we are seeing today.

The Federal Reserve

Markets are in a state of increased nervousness as the Federal Reserve is changing its focus to a much tighter stance. Fed leaders have failed in their assessment that the inflation we are seeing is “transitory”…and are now in panic mode.

The Fed has also announced an end to quantitative easing—the central bank’s program of buying Treasury securities—and has signaled a rapid pivot to quantitative tightening (QT), the sale of Treasury securities from the Fed’s bloated portfolio.

Brian McCarthy of the Epoch Times states, “Markets are right to be unsettled by the Fed’s shift in interest rate policy, which has been effected with all the deftness of a dozing driver yanking the steering wheel, as he awakens to the expanding headlights of an 18-wheeler bearing down on him on a dark country road.”

Essentially, The Federal Reserve has bungled their management of inflation and now have to make severe changes to offset the damage. This brings market instability and increased mortgage rates.

2^nd Homes and Mortgage Rates

Mortgage interest rates and fee structures are increasing for second home financing, thanks to the Federal Housing Finance Agency (FHFA).

The FHFA has announced targeted escalations to Fannie Mae and Freddie Mac’s upfront fees for second home loans.

Picture of Sandra Thompson — FHFA Acting Director Sandra Thompson

In a statement, FHFA Acting Director Sandra Thompson said the fee increases are to provide better access to mortgages for first-time and low-income borrowers, as well as strengthen Fannie Mae’s and Freddie Mac’s balance sheets.

For mortgages on 2nd homes, they will now look nearly identical to investment properties in terms of rates and fees.

Essentially, this appears to be the FHFA’s attempt at revenue redistribution. They will be charging more for 2nd home financing in order to facilitate increased participation in first-time and low-income borrower programs.

You can find out more on this here…

The New Normal

Mortgage rates hit their highest level since before the pandemic began this week. Rates are up over .75% since the beginning of January and up over 1% since their all-time lows last year.

Clipart of Percentage Signs with One Red Percentage Sign

“The normalization of the economy continues as mortgage rates jumped to the highest level since the emergence of the pandemic,” Sam Khater, Freddie Mac’s chief economist, said in the report. “Rate increases are expected to continue due to a strong labor market and high inflation, which likely will have an adverse impact on home buyer demand.”

Essentially, the rates that were seen last year (2.75% for a 30-year fixed mortgage) just aren’t available today…and borrowers need to be willing to accept that fact.

Some Perspective

With that said, today’s mortgage rates are still extremely low relative to historical norms.

Take a look at this chart, showing average mortgage rates since 1972 (courtesy The Mortgage Reports):

Rates in the 3% to 5% range are very, very low compared to those in recent history.

This means that although rates might not be in the 2% range (as they were at times last year), today’s mortgage rates are clearly are advantageous to borrowers.

Would you like to find out more? Contact me to discuss your current situation and how you might be able to take advantage of today’s market. It would be my pleasure to help you!

Athlete Parenting Tips: Maintain a Strong Relationship With Your Child

February 7, 2022 / Tom Bonetto

Chalkboard with "Dont be the Same. Be Better!" Written on It

I’m linking today to an article by Jack Perconte that’s designed specifically for parents of athletes.

It’s absolutely true that parents have the best intentions for their kids. They look for ways to help their young ones reach their full potential with what they believe to be solid advice for their athletes.

However, without realizing it, parents can sometimes use words and actions that hinder their child’s development.

Jack Perconte

After playing major league baseball, Jack Perconte has taught baseball and softball since 1988 and has offered valuable coaching training. He has helped numerous youth players reach their potential, as well as having helped parents and coaches navigate their way through the challenging world of youth sports. Jack is one of the leading authorities in the areas of youth baseball training and coaching training advice.

The Article

Here’s the link to Jack’s article – and for parents of athletes, I highly recommend that you read the entire piece.

A few key takeaways…

Ensure the physical and emotional health of the child is a top priority

Realize that sports are only games and one aspect of many aspects of a child’s life, and not the most important one

Always remember that it is the player’s, not the parents’ career

After a tough game, say, “Hang in there, we’ll figure it out.” We is a powerful word that will let your child know you are there to help, and they do not have to figure out the lack of success on their own.

Always point out little signs of improvement, even if it is not showing up in game results.

More Athlete parenting tips

Give the player a little time to sulk after the game, but do not allow throwing things, swearing or negative comments about themselves or others. Most players will come around after a short time and a good meal. Try to get the player’s mind off his or her performance as soon as possible, and only return to it later if the player brings it up.

Tell the player you believe in them, and they should believe in themselves. Stay positive with the player and have patience. However, do not overdo the praise. They will recognize false praise and tune it out or get upset.

Young Boys Baseball Players Throwing a Ball to Second Base

Watch for exhausted players. Players who play too many games in a day or week become physically and emotionally drained. Overdoing it is more common these days because of the greater emphasis on travel teams. Give the players a few days away from the game to rest and clear their minds.

In Conclusion

There’s so much more in Jack’s article, so please do read it in it’s entirety.

Key Trends in Today’s Real Estate Market

January 31, 2022 / Tom Bonetto

aerial photography of buildings under blue and white sky during golden hour

As we move into 2022, one thing is clear…today’s real estate market is one for the record books.

The exact mix of conditions we have today creates opportunities for both buyers and sellers.

Home values are appreciating at rates we have not seen since the housing boom nearly 15 years ago.

At the same time, there is a general shortage of homes for sale across the nation. This has led to prevalent bidding wars, as homebuyers struggle to purchase a home before prices go even higher.

Let’s take a look at today’s real estate market and how it will affect you as a home buyer (and seller).

4 Main Developments

Home Price Appreciation

Shortage of Available Homes

Purchase Competition and Bidding Battles

Rise in Home Equity

Let’s take a closer look at these 4 factors…

Home Price Appreciation

Over the past year, we have seen incredible home price appreciation throughout the US. According to the most recent Home Price Index (HPI) from CoreLogic, national home prices have increased over 18% year-over-year!

This creates a great opportunity for current homeowners to tap into that equity via a cash-out refinance to make other investments or pay off more expensive consumer debt.

It is not at all unexpected that rising home values are a big part of why real estate remains one of the top investments. For potential sellers, it also means it is a great time to list your house to maximize the return on your investment.

Shortage of Available Homes

In 2021, the number of homes available for sale fell to an all-time low. In recent months, however, inventory levels gradually began to trend up.

According to the latest Monthly Housing Market Trends Report from Realtor.com, newly listed homes have grown by nearly 5%. This isn’t fantastic news for buyers, but the trend is heading in a positive direction.

However, even though we are experiencing small gains in the number of available homes for sale, inventory remains a challenge in most states.

This would still be considered a “seller’s market”, giving current homeowners a good deal of control if/when they decide to put their house up for sale.

Purchase Competition and Bidding Battles

Today’s low supply combined with high demand creates a market with buyer competition and bidding wars.

Purchasers are being forced to become aggressive to make sure their offer stands out from the crowd by offering over the asking price or waiving some contingencies.

multiethnic businesswomen checking information in documents

The number of offers on the average house for sale broke records last year. As a matter of fact, last year’s Confidence Index from the National Association of Realtors (NAR) stated that the average home for sale received at least five offers!

For buyers, the best way to put a convincing offer together is by working with your local real estate professional. That agent can act as your trusted advisor on what terms are best for you and what is most appealing to the seller.

Rise in Home Equity

The final key trend we see in today’s real estate market is the rise in home values and equity. One key thing to consider:

The equity in a home does not just grow when a homeowner pays their mortgage — it also increases as the home’s value appreciates.

Due to this increase in appreciation, homeowners across the country are seeing record-breaking gains in home equity.

This is clear when looking at CoreLogic’s recent reports that indicate homeowners with mortgages (which account for roughly 62% of all properties) have seen their equity increase by 19.6% year-over-year!

Again, this has produced a great opportunity for current homeowners to tap into their home equity. They can do this with a cash-out refinance to make home improvements, other real estate investments, or pay off higher balance consumer debt.

In Conclusion

If you are considering purchasing a home, conditions are a bit challenging because of low inventory, but the rewards can be substantial, as the housing appreciation is expected to continue into 2022!

Contact me to discuss becoming a homeowner or pulling out some equity in your current home, as it would be my pleasure to help you!

Major Pricing Increases Coming on Second Home Mortgages: Fannie Mae and Freddie Mac

January 24, 2022 / Tom Bonetto

Mortgage interest rates and fee structures are increasing for second home financing, thanks to the Federal Housing Finance Agency (FHFA).

The FHFA has announced targeted escalations to Fannie Mae and Freddie Mac’s upfront fees for second home loans.

Here’s their announcement:

Upfront Fee Adjustments for Second Home Loans to Take Effect

For second home loans, upfront fees will increase between 1.125 percent and 3.875 percent, depending on the loan-to-value ratio.

Why The Change?

Essentially, this appears to be the FHFA’s attempt at revenue redistribution. They will be charging more for 2^nd home financing in order to facilitate increased participation in first-time and low-income borrower programs.

“These targeted pricing changes will allow the Enterprises to better achieve their mission of facilitating equitable and sustainable access to homeownership, while improving their regulatory capital position over time,” said Thompson.

“Today’s action represents another step FHFA is taking to strengthen the Enterprises’ safety and soundness and to ensure access to credit for first-time home buyers and low- and moderate-income borrowers.”

In short, it looks like second homeowners will be footing the bill and helping fund first-time buyer and low-income borrower programs.

illustration of woman analyzing financial line graphic

What Does it Mean?

For mortgages on 2^nd homes, they will now look nearly identical to investment properties in terms of rates and fees.

Traditionally, 2^nd homes had similar rates and fees relative to primary residences. Here are a few sample scenarios prior to the FHFA’s move…assumptions: 760 credit score, 20% down (80% loan-to-value):

Primary residence or 2^nd home

Interest Rate – 3.5%
Points – $0

Investment Property – single family residence

Interest Rate – 4.5%
Points – 1.5 (1.5% of the loan amount)

After April 1^st,, here’s what we can expect:

Primary residence

Interest Rate – 3.5%
Points – $0

Second Home or Investment Property – single family residence

Interest Rate – 4.5%
Points – 1.5 (1.5% of the loan amount)

These rates/fees are just examples to show the differences in between primary residences and 2nd home/investment properties. Of course, rates are subject to change daily.

wallet with coins banknotes and credit card for payment

Also, these increases are for loans purchased by Fannie Mae and Freddie Mac on/after April 1^st, 2022 – and most lenders will need to have these increases in place for loans closing in March.

For example, under the new plan, the buyer of a second home with a $300,000 mortgage loan amount and loan-to-value ratio of 65% will pay an additional fee of $4,875 if their mortgage is acquired by Fannie Mae or Freddie Mac, per the National Association of Home Builders.

Prior to the policy change, the same buyer would pay no additional fee for the comparable mortgage.

Dissenters

“With the nation in the midst of a housing affordability crisis and many more workers electing to telework, this is exactly the wrong time for federal regulators to be raising fees on homeownership and second homes,” Chuck Fowke, chairman of the NAHB, which has spoken out against the fee increases.

close up of mans mouth with crooked teeth

The National Association of Realtors (NAR) chimed in, as well: “Fannie Mae and Freddie Mac will face greater risks as the market is waned off of the extraordinary federal support during the pandemic, and these changes may help them to support the maximum access and affordability possible for the market in a sound manner,” said NAR President Leslie Rouda Smith.

“However, we are concerned that any fee increases that exceed necessary levels in the current environment will harm affordability and access for consumers. REALTORS® believe any excess revenues gleaned from the fee increases must be used to support homeownership opportunities in underserved communities, expanding affordability and access in a safe manner.”

In Conclusion

Unfortunately, get ready to pay more for your second home.

As always, mortgage rates for second homes will depend on a borrower’s credit score and down payment. With current mortgage rates on the rise during the first part of 2022, some market watchers are even forecasting that the new fees could increase interest rates to nearly 5% for second home purchases late this spring.

If the new mortgage interest rates aren’t to your liking for 2nd homes, you always have the alternative lending market to explore. There are other options out there!

Do reach out to me to find out more, as it would be my pleasure to help you!

First-Time Buyers: Facts Young Home Buyers Should Know

January 24, 2022 / Tom Bonetto

joyful young couple dancing after moving in new purchased apartment

As we all know, there’s a good deal of anxiety out there for first time home buyers. Home ownership is a major investment and isn’t something to be taken lightly. This one of the most important financial decisions one can make…and it will have a long term effects in building wealth.

It is never too early to start planning for your financial future, including that first home purchase.

There are some serious benefits to home ownership, to be sure (and you can find out more on that here…).

However, there are a few things that young homebuyers frequently fail to consider when starting the home buying process.

Let’s take a look at these key facts…

The Home Buying Process Begins With Mortgage Pre-Approval

Before you start looking for that dream home, would-be buyers need to have a good understanding of their overall financial position. This means having financial information readily available, such bank, savings, and investment statements.

You might want to check your credit score via a free, online site. While it won’t give you the exact score, it will give you a good idea of what to expect. More on that here…

It’s important to konw that mortgage interest rates tend to be higher with lower credit scores, which can dramatically affect the total costs associated with a new home purchase.

In general, saving for a down payment is sometimes viewed as one of the biggest obstacles for homebuyers, but that does not have to be the case. There are a wide variety of down payment options available – from 0% to 20%+! You can find out more on that here…

Home Ownership Becomes Less Affordable the Longer You Wait

With mortgage rates starting to rise along with home prices appreciating, putting off buying a home now could cost you much more later.

a couple taking a selfie with their new home key

Sam Khater, Chief Economist at Freddie Mac, recently noted, “As the economy progresses and inflation remains elevated, we expect that rates will continually rise in the second half of the year.”

Most experts also forecast interest rates will rise in the months ahead, and even the smallest increase can influence your buying power. So, if you have been on the fence about buying a home, there really is no time like the present to purchase one.

Do you think you might be too late and have missed out on purchasing? Not at all! You can find out more on that here.

Know What You Can Afford and Your Mortgage Options

Some young homebuyers are unsure they can actually afford a mortgage payment for a home that suits their growing needs.

Fortunately, there are a multitude of options! For example, the Federal Housing Administration (FHA) loan for first-time buyers (and a minimum 3.5% down payment). Or a VA loan backed by the Department of Veterans Affairs (if you qualify), along with other home loan programs available to you.

a couple walking through the door while carrying boxes

What’s more, many buyers may be able to afford more home than you think. It’s important to work with a mortgage professional who can help analyze the different programs to find one that suits your individual needs.

Knowing how much home you can afford and understanding the current market when starting the process are musts—and could be just what you need to stop renting and start buying.

Would you like to find out more? Contact me to discuss your current situation and how you might be able to take advantage of today’s real estate market. It would be my pleasure to help you!

The Lending Coach

Page 27 of 77