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

Category: Housing Market (Page 1 of 19)

A Unique Home Buying Opportunity

Is now a good time to buy a home?

It might be — but not for the reasons you might initially think.

These really are most unusual times, especially when you consider the Covid-19 pandemic…but really good home buying opportunities are out there, to be sure.

Right now, buyer demand is down, as sellers just aren’t seeing the multitudes of offers they had a little over a month ago. A few have even taken their homes off the market, but the majority are looking to sell now and are forced to consider offers from a smaller buyer pool.

After Covid-19

When the coronavirus pandemic subsides, home prices could very well be higher, and financing could be harder to come by, so buyers should try to find deals now, if they are able.

So says Barbara Corcoran, founder of the Corcoran Group, a New York-based residential brokerage.

“If you’re smart enough to attack the market as an educated consumer, and get out there, and make a bid on a sweetheart deal, you’re gonna be the smartest guy. And everybody’s going to applaud you six months from now,” Corcoran said on Wednesday.

You can find the entire article here…

The Key Issue

The market could very soon favor sellers even more than it did previously. Many sellers have pulled their homes off of the market, which will further limit inventory and drive prices higher. It’s just simple supply and demand.

On top of that, buyers will have more competition once consumers start buying again.

“The reality is [that] when they [buyers] come to the market, everyone’s going to be in the market at the same time, they’re going to pay more for the home then than they’re going to pay now,” said Corcoran. 

While the current lock down is making buying real estate difficult, buyers should still keep an eye on their local market so they can recognize a good deal when they see it, Corcoran said.

To identify good deals, buyers should learn about their local market, monitor sales data and find the right real estate agent.

“Because then they’re [the educated buyer] in the position to actually recognize a sweetheart deal when they see it. And if they pounce on it, they’re going to get the deal of a lifetime,” said Corcoran.

“Every real estate cycle that has gone up and down, the deals weren’t made in the down cycles, nor in the up cycles. They were always made in the times where there’s the greatest uncertainty where everybody’s guessing.”

In Conclusion

Now really is a good time to act, if you are able. Do reach out to me if you would like some help with financing – and I’d be glad to point you in the direction of the right real estate agent, as well!

Housing Market Forecast in Today’s Coronavirus Economy

Everyone is rightly concerned about the Coronavirus – as well as its impact on the economy and on housing.

But before the Coronavirus took hold, housing was very strong, with both new construction data and existing home sales at 13-year highs.

Believe it or not, we expect the strength to resume in housing when things get better, and I’m quite confident they will get better!

Sure, there might be a slower period as we practice social distancing, but most experts believe that when the economy comes back, it’s going to come back strong.

Did you know affordability is actually improving in the United States? You can find out more on that here…

In addition to that, homes are valued quite fairly; they’re not overpriced…and home appreciation has been steady and sustainable (more on that here…)

Look at this metric: when you take annual rents, the value of a home is about 17 times what annual rents would be. The historical average is 16, so we’re right there.

The peak was 24 times annual rents and we’re nowhere near that level! And if you take a look at replacement costs, home values are 1.59 times the cost to replace the home. The 40-year average is 1.58. It’s nowhere near the peak of roughly 2.

We can expect housing to come back very strong and this may be a great opportunity to buy that home you were looking for and benefit from it well into the future.

Please do reach out to me for more information and to set up your strategy!

March Home Appreciation and Interest Rate Update

Good news for home owners and buyers alike – home appreciation remains strong.

Interest have moved to historic lows due to multiple factors, including the virus scare.

The Federal Reserve has cut it’s funds rate by .50 basis points in an attempt to “provide a meaningful boost to the economy”, per Chairman Jerome Powell.

With these things in mind, make sure you have a solid game plan to navigate the market right now. Think about inventory, equity in your home, second homes, and investment properties as strategies to build wealth.

It’s also a good time to take a look at refinancing any properties you own, as rates have dropped significantly over the last 2 years.

The housing reporting benchmark, CoreLogic, reported that home prices rose 0.1% in January and 4.0% year over year.

The year-over-year reading remained stable from last month’s report. CoreLogic forecasts that home prices will appreciate by 5.4% in the year going forward, which slightly higher pace. from the 5.2% forecasted in the previous report.

This is great news for would be buyers, as they can expect a great return on their investment!

Do reach out to me to find out more, as it would be my pleasure to help you determine the right strategy for today’s environment.

Second Homes and Investment Properties – A Mortgage Primer

I work with a wide variety of clients, from first time buyers to seasoned investors…and many in between.  However, some of the most frequent questions I receive deal with second home mortgages versus investment property financing.

Interestingly, there are specific rules and regulations for both, and I’d like to outline a number of major differences between them.

In general, whether you’re buying a vacation home or an investment property, you’ll pay slightly higher mortgage rates and have to meet stricter guidelines to qualify.

I’m linking to an article from Peter Miller at The Mortgage Reports – and you can see his entire piece here…

Interest Rate Differences

Mortgage rates are generally higher for second homes and investment properties than for the home you consider your primary residence.

In general, investment property interest rates are about 0.625% to 1% higher than market rates for primary homes.

For a second home or vacation home, they’re only slightly higher (generally .125% to .25% higher) than the rate you’d qualify for on a primary residence.

Of course, investment property and second home mortgage rates depend on similar factors as those for your primary home. Each borrower’s situation will vary based on income, credit score, assets, and down payment percentage, just to name a few elements.

Why Are Second Home and Investment Interest Rates Different?

Per Miller, “The home you live in (your “primary residence”) is seen as the least risky form of real estate. It’s likely to be the one bill homeowners will pay if times get tough. A vacation home or investment property, on the other hand, is riskier. Borrowers are a lot more likely to forego those payments when money is short.

Because of the higher risk second homes pose, they come with stricter rules about financing.”

Second Home Mortgage Regulations

There are a few key things a buyer needs to know about mortgage requirements if they are considering a second or vacation home.  First of all, one you will essentially live in for part of the year, but not full time.

Lenders expect a vacation or second home to be used by you, your family, and friends for at least part of the year. However, you’re generally allowed to rent the house out when you’re not using it.

If you plan to rent the property when you are not there, you cannot use expected income from that property to help income qualify for the loan.

Down Payment of 10% or More

Most lenders will want at least 10 percent down for a vacation home. If your application isn’t as strong (say you have a lower credit score or smaller cash reserves), you may have to put 20 percent or more down.

Also, gift funds are generally allowed for a portion of the down payment, but at least 5% of it must come from the borrower’s own funds if bringing in less than a 20 percent down payment

Credit Score

The purchase of a second home or vacation home requires higher credit scores, typically in the 640 or higher range. Lenders will look for less debt and more affordability, think of tighter debt-to-income ratios. Strong reserves (extra funds after closing) are a big help.

Investment Property Mortgage Regulations

If you are planning on purchasing an investment property there are specific rules that apply.

If you’re financing a home as an investment property, and you plan to rent it out full-time, you are not personally required to live in the building for any amount of time.

Down Payment of 15% to 25%

Down payment requirements for an investment property range from 15 percent for a one-unit property to 25 percent for a two- to four-unit property. You may also be required to make a bigger down payment depending on your application and the type of loan.

No gift funds are allowed for investment property purchases, so most lenders will require down payment funds “seasoned” for at least 60 days in the borrower’s personal account.

Using Expected Rental Income to Help Qualify

The good news about utilizing an investment property loan is that the borrower can use expected rents as income to help in qualification.

Here are some of the guidelines:

  • If the property is leased, then copies of the current signed lease agreements may be required.
  • If the property is not currently leased, then the lender may use “market rent” information provided by the appraiser.
  • When there is no rental income for the subject property on the borrowers tax returns, the rental income will be reduced to 75% of the gross rental income provided on the lease.

You can find more on this subject here…

Credit Score

Lenders generally require borrowers to have a credit score above 640 for an investment property loan. With that said, rates can run very high for low credit scores.

The Bottom Line

When you apply for a mortgage, you are required declare how you intend to use the property. Lenders take such declarations seriously because they don’t want to finance riskier investment properties with residential financing.

Make sure to find a lender who truly understands the differences and requirements between second homes and investment properties.  I’d be more than happy to share other resources I have on the subject, so don’t hesitate to reach out to me with your questions!

Homes Are MORE Affordable Today – Not Less

You might be seeing in the press or hearing from others that owning a home today is less affordable than it has been in the past.  Sure, home prices have increased over the last five years and current inventory is tight.

However, that narrative is completely wrong, when you look at the data. Now is the most affordable buying a home has been in the last 30 years.

I’m linking to an article from Caety James at Keeping Current Matters that outlines some of the reasons.  You can find the article in its entirety here…

Low Mortgage Rates a Key Driver

James writes: “Homes, in most cases, are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by over a full percentage point since December 2018. Another major piece of the affordability equation is a buyer’s income. The median family income has risen by approximately 3% over the last year.”

Just take a look a the National Association of Realtors “Housing Affordability Index” – it shows that home affordability is better today than nearly any point over the last 30 years!

Potential buyers really should take the time to find out why now is the time to make that purchase.

Payment as Percentage of Income

The report on the index also calculates the mortgage payment on a median priced home as a percentage of the median national income. Historically, that percentage is just above 21%. Here are the percentages since June of 2018:

Again, we can see that affordability is much better today than the historical average and has been getting better over the last year and a half.

Bottom Line

Whether you’re thinking about buying your first home or contemplating a vacation home or investment property, don’t let the false narrative about affordability prevent you from moving forward.

From an affordability standpoint, this is truly one of the best times to buy in the last 30 years.  Please do reach out to me to find out more and how I can help!

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