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

Category: Mortgage (Page 1 of 41)

The Temporary Rate Buydown – A Great New Option

A unique offering is now available – a temporary rate buydown – to lower your interest rate and monthly payment in years one and two of your new mortgage. 

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This is a negotiated cost to be paid by the seller or builder – and your loan rate is reduced for an initial period.

This temporary rate buydown lowers your monthly payment and leaves more cash on hand each month. That difference is yours to save or put to good use around your new home.

There are no surprises…the rate buydown is adjusted each year by a set amount. It diminishes gradually until it settles at the original rate with no reduction of mortgage payment at the end of the initial period.

Buydown Example

Here’s an example of a $400,000 mortgage amount with a two-year and one-year buydown option.

Assuming an interest rate of 6%, the principal and interest payment would be $2,398.20 on a 30-year fixed mortgage…

And here’s what those payments would be with the buydown options:

As you can see, the savings are quite significant – nearly $500/month in year one and an overall savings of nearly $9,000 in years one and two!

Reach Out To Me For More

This temporary rate buydown is available on Conventional, FHA, VA, and USDA loans.  You can contact me here and I would be happy to run multiple scenarios for you, as well.

Investment Property Analysis Tool

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A brand-new investment property analysis tool is now available…and it would be my pleasure to help run some numbers with you.

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Did you know that two-thirds of individual’s net worth comes from real estate?  That’s according to Kiplinger – so owning property is a great way to build wealth. 

But what about owning an investment property? 

Based on data from Fannie Mae and Freddie Mac, about one in every six or seven purchases are for an investment property.  So building wealth via investment property income and appreciation is a pretty popular strategy.

So how can you better evaluate the decision to enter the investment property market?

Whether you’re a realtor helping clients make this decision or a buyer interested in purchasing yourself, I have a new and unique tool that will calculate the return on an investment based on area-specific appreciation, rental rates, and costs to buy and sell. 

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This is a fantastic way to do some analysis on would-be properties.

Important metrics such as cash-on-cash return, as well as the compounded annual return over time, are easily illustrated to help you make better decisions on selecting the best opportunities in this market. 

A Sample

Here’s a sample with the following assumptions – 3 unit property, purchase price $725K, monthly rents of $3,900, 30-year fixed mortgage at 6.99%, 25% down payment:

Assuming this buy-and-hold transaction over 9 years, here’s the cumulative cash return:

Here’s the annual return…

But what’s most relevant is the Annual Average Compounded Return, so you can measure this return versus other investments:

In Conclusion

As you can see, this is an extremely helpful tool to help analyze a particular income producing property to determine whether is a good investment or not!

Reach out to me today so I can share this exciting new tool with you.

Mortgage Rates 2022 – Current vs Historical Trends

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Mortgage rates have essentially doubled since the beginning of this year. Historically, however, interest rates have often been higher — sometimes much higher — than they are today.

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The average 30-year mortgage rate over the last fifty years is just under 8%. So even though today’s mortgage rates have jumped to the 5% range, they’re still a good deal by comparison.

I’m linking to an article from Peter Miller of The Mortgage Reports that’s a must read in order to gain some good perspective on what’s happening in today’s marketplace.

2022 Mortgage Rate Chart

Mortgage interest rates fell to record lows in 2020 and 2021 during the Covid pandemic.

However, inflation has now surged to four-decade highs, causing those rates to rise quickly this year.

Historical Chart

Despite this increase, today’s 30-year mortgage rate is still quite a bit below average from a historical perspective.

Freddie Mac — the main industry source for mortgage rates — has been keeping records since 1971. Between April 1971 and August 2022, 30-year fixed-rate mortgages averaged 7.76 percent.

Here’s the average mortgage rate by year since 1974…

Mortgage Rate Outlook

As Freddie Mac explained on August 4:

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“Mortgage rates remained volatile due to the tug of war between inflationary pressures and a clear slowdown in economic growth. The high uncertainty surrounding inflation and other factors will likely cause rates to remain variable, especially as the Federal Reserve attempts to navigate the current economic environment.”

With that said, it’s not easy to predict what will happen to mortgage rates in late 2022. The Fed is likely to keep hiking interest rates in an attempt to bring inflation under control.  Couple that with a recession, however, and mortgage rates could very well move lower.

In Conclusion

Finally, it’s important for you and our clients to understand that the average mortgage is held for less than 7 years…and they are not at all married to that rate, especially if they get better!

If you or your clients are considering a purchase, your real estate search shouldn’t go on hold because of rising inflation or higher mortgage rates.  Contact me for more…as it would be my pleasure to help you.

New Housing Survey Shows Potential Opportunity for Buyers

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The MBS Highway Survey, which is comprised of roughly 3,000 Mortgage and Real Estate Professionals, was just released for August.

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For buyers looking to purchase real estate, this slight cool-down in activity may present a wonderful opportunity! 

There is certainly a slowdown in activity and pricing pressure from July to August, but 53% of respondents are still citing that their markets are active, while 47% note that it is slower.

16% of those surveyed are still seeing price increases, while 58% are seeing some degree of price decreases, although many of these are listing prices that are coming down to earth and not home value declines.

Out west, you can see that activity is slowing and pricing pressure has decreased dramatically!

Almost half of the respondents are seeing the sales pace at normal levels, with homes selling near the asking price.

Of those who said activity was slower, many cited that it was due to a lack of inventory. In addition, many are still seeing multiple offers, but less than in previous months.

Please do contact me for more information, as I would be glad to send you a customized report showing the health of the real estate market in your local area.

Inventory Numbers Explained – Late Summer 2022

Existing real estate inventory is up 22% from its lowest level in February.  Many in the media are claiming that this rise in inventory will lead to some sort of housing crash.

But a deeper look shows that this build in inventory is a normal occurrence that happens every spring and summer.

Families want their children to enter a new class at the beginning of the school year to more easily form friendships.  This means they would have to close on the purchase of their new home before September.  Naturally, they would have to list their existing home for sale during the spring and summer months to accomplish this, which explains why the inventory build occurs this time each year.

The chart below shows this annual trend – notice how each summer there’s an inventory build-up:

Additionally, the amount of existing homes for sale currently is less than half of what was available pre-Covid.  So, the increase we have seen is actually from a historic low.  And of those homes counted in inventory, more than half are under contract.  This means true available inventory is even less than the headline.

As a matter of fact, you can see from the graph below that actual housing supply is still a near all-time lows and is running at a deficit, relative to new household formations:

The increase in real estate inventory from such low levels isn’t all bad, as it makes purchasing a home a little easier.  And while demand has cooled, it is highly unlikely that the housing fears in the media will materialize.

To see what the appreciation forecast is in your local market, contact me here, as I’d be glad to run the numbers for you!

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