Category: Housing Market (Page 31 of 38)

6 Ways Mortgage Shoppers Are Saving On Closing Costs

March 6, 2017 / Tom Bonetto

It is not uncommon for buyers to find the perfect home right at the top of the their budget. While it is our job as realtors and lenders to always find the most competitive rates, these clients need our expertise more than most.

If getting into a home is contingent on affordable closing costs, there are things that can be done to make this process less stressful.

Source: 6 Ways Mortgage Shoppers Are Saving On Closing Costs | Mortgage Rates, Mortgage News and Strategy : The Mortgage Reports

Lower Your Closing Cost Bill

Depending on the loan amount and the location of the home, loan applicants can pay anywhere from 3% up to about 6% of their home price, in closing costs. While some costs associated with the location of the property cannot be controlled, other steps can be taken to cut costs incurred by the buyer.

Closing costs can accumulate rather quickly as lenders pay for credit reports, attorney services, title services and more.

Those costs are covered by either the borrower, the seller, the lender, or a combination of the three.

It is important to understand what motivates a lender or a seller to cover these costs, as you strategize with your buyers.

Be Aware of the Other Costs that come with a Mortgage Loan

In addition to standard closing costs, buyers should be made aware of other fees associated with a mortgage loan.

Getting buyers ready to hear terms like prepaid interest, homeowner’s insurance, property taxes, escrow deposit for taxes and insurance, and loan discount points, will help the process not seem so daunting, especially to a first time buyer

What Are a Buyer’s Options?

While most people evaluate loans by rate shopping, that is not always the most effective way to choose a loan.

Buyers should know how to compare lender’s charges, and should understand how to avoid paying too many points on a loan.

When possible, advise buyers to close near the end of the month to help save on prepaid interest.

For some buyers, choosing to buy up the interest rate, and not buy it down with loan discount points, can motivate a lender to pay a part or all the closing costs.

Finally, it is always an option to ask a motivated seller to help with closing costs.

Understanding the costs associated with a loan is important for all the parties involved, as a good deal for a buyer benefits all of us.

Please schedule a time to talk if you are interested in more ways to qualify your buyers. I look forward to getting your clients into the home of their dreams.

“Your Home Is A Better Investment Than Bonds” – US News

January 30, 2017 / Tom Bonetto

Believe it or not, there’s a nice way to measure the “investment value” of your home – and you can do it via the bond market. Jeff Brown from US News and World Report has written an interesting piece on how to quantify your home as an investment – and it’ really worth the read!

Find out more from Jeff Brown at US News and World Report here…

Many homeowners look upon their homes as a valuable asset they can utilize for retirement through downsizing or a loan. They count on building equity in the traditional way, by paying off the debt month-after-month and enjoying some price appreciation.

“There’s another option: making extra principal payments on the mortgage to reduce the debt faster. Every dollar used to pay down the loan earns a “yield” equal to the loan rate, since it saves you from having to pay that amount of interest.” – Jeff Brown, US News and World Report

“If your loan charges 4 percent, prepayments earn 4 percent, a lot more than you’d get in bank savings or a 10-year Treasury note, now yielding a paltry 1.8 percent.”

“A very conservative investor who is averse to debt may find paying off his or her mortgage is the right choice,” says Eric Meermann, a planner with Palisades Hudson Financial Group in Scarsdale, New York. “If the alternative is sticking your money in a money market or savings account, you’re better off paying (the mortgage off) early.”

Brown uses the example of a homeowner with a $300,000 mortgage for 30 years at 4 percent would pay $1,432 a month in principal and interest.

By adding about $150 a month in prepayments, the loan could be paid off five years early, reducing total interest charges by about $40,500. Without the prepayments, the homeowner would still owe nearly $78,000 after 25 years.

With that said, although today’s bond yields make mortgage prepayments appealing, stocks returns could beat prepayment yields substantially. Index funds tracking the Standard & Poor’s 500 index are up nearly 8 percent this year, and averaged 6.7 percent a year over the past decade.

That’s generally much better than you’re likely to do with a mortgage prepayment.

While Americans have traditionally thought of the home as a rock-solid investment, many homeowners suffered deeply from the home-price plunge in the Great Recession, when millions ended up owing more than their home was worth.

So you can lose money investing in your home, though there’s less chance of ending up underwater if prepayments have trimmed the debt.

In most of the country, housing markets are a lot stronger than they were in the years after the financial crisis. But although a nationwide price collapse is very rare, they do occur here and there from time to time, so assess your local market before committing more money to your home.

The views expressed are my own and do not necessarily reflect those of American Financial Network, Inc

Realities Facing Homeowners and Renters

December 26, 2016 / Tom Bonetto

Regardless of whether they rent or buy, folks will be paying more to do so, according to second quarter data released by the Census Bureau, which also shows the homeownership rate in the U.S. is at the lowest level in more than 50 years.

The percent of households that are owner-occupied, known as the homeownership rate, was 62.9 percent in the second quarter, the lowest since 1965. The rate is 0.5 percentage points lower than the second quarter of last year and 0.6 percentage points lower than the rate in the first quarter of 2016.

“Tight housing inventory from a lack of new construction continues to create affordability challenges, particularly at the lower end of the market,” Doug Duncan, Fannie Mae’s chief economist, notes in an economic outlook note.

Less for More

A chart from the Census Bureau shows how rental asking prices have continued to rise through the last two recessions. Meanwhile, home sale asking prices, which have been rising this year, are recovering from the major drop during the last recession.

The median asking rent for vacant units was $847 in the second quarter, according to the Census Bureau. The median asking sales price for vacant sale units was $164,500.

Median asking rent for vacant “for rent” units shown with gray bars that indicate when the economy was officially in a recession. (Source: U.S. Census Bureau, Current Population Survey/Housing Vacancy Survey)

More Households Forming

But overall household formation has been relatively steady, thanks to renters who are going out on their own, the Wall Street Journal points out. Renter-occupied housing units surged by 967,000 in the second quarter to 43.9 million units from 42.9 million units in the second quarter of last year.

Meanwhile, owner-occupied units fell by 22,000 units to 74.4 million units in the second quarter compared to the same period last year.

Homeownership rates were highest for older households. Occupants aged 65 and older had a homeownership rate of 77.9 percent. The rate was lowest for those under 35 years at 34.1 percent.

Older Millennials Looking to Buy

Whatever is holding back renters from buying, whether it’s fewer starter homes or incomes, preferences may change in the future, leading these renters to become buyers.

Between 2010 and 2012, homeownership rate gains stabilized for young adults through their late twenties and early thirties, and between 2012 and 2014 homeownership rate gains were larger than the increments for previous generations passing through the same age range during the housing bust, according to Fannie Mae’s Economic and Strategic Research Group.

Find out more from Fannie Mae’s Home Story here

The views expressed are my own and do not necessarily reflect those of American Financial Network, Inc

The Top Benefits of Home Ownership

November 28, 2016 / Tom Bonetto

There are obvious reasons to buy a house. Interestingly, there are a number of fantastic secondary benefits of owning a home that most renters are not yet aware of.

Not least, of course, is that you have somewhere to live. But there are a number of other upsides that are considerably less apparent, and they aren’t all about money. Here’s a great piece from Peter Morgan at The Mortgage Reports that outlines a few of them….

Buying A House Is Generally A Fantastic Investment

The U.S. Census Bureau has a table of historical home values on its website that starts in 1940 and ends in 2000. It uses constant year-2000 dollars for all figures to account for inflation.

Home Ownership Gets Easier Over Time

Paying your mortgage over time means you’re building equity each month. An asset you can sell or borrow against in the future.

Although, when buying a house for the first time, there can be a little financial strain. You have to come up with a down payment and cope with unexpected homeownership costs. You may feel the pinch for a few years.

But gradually things get easier, trust me on that!

Build to Your Tastes, Not Your Landlord’s

Do you want a bunch of pets? Does taste in decor matter to you? Do you like walls painted in crazy shades of pink, or do you spend your weekends tearing apart engines or woodworking in your shop?

No problem. When you own your own place, there’s no landlord to tell you those aren’t allowed.

Improve Your Credit Score

Buying a house can improve your credit score, especially if you don’t have a long credit history or many installment accounts. That’s because your mortgage –provided it’s managed well — helps drive up your credit score by showing you are a responsible borrower when you make your payments on-time and consistently.

Wealth Accumulation via Forced Savings

You can view the equity you build in your home as you make payments every month as a type of saving. Unlike renters, you’ve no choice but to increase your net worth. The Harvard University Joint Center for Housing Studies confirms this. In fact, on of their studies showed that homeowners acquire 46 times as much net wealth as renters.

For every $1,000 accumulated by non-homeowners, those who own a home acquire $46,000.

Benefits for Your Family

The National Association of Realtors (NAR) website links to studies and reports that make some pretty extraordinary claims for the benefits of homeownership, including:

Better mental and physical health
Improved community engagement
Higher educational attainments for the children of homeowners

Of course, you have to choose to involve yourself in your neighborhood, and to support your children’s efforts.

Contact your Realtor or Mortgage Lender for more!

The views expressed are my own and do not necessarily reflect those of American Financial Network, Inc.

Use Assets as Income in Loan Qualification

November 9, 2016 / Tom Bonetto

A little-known change in Freddie Mac’s rules could be a big help to qualifying retiring Baby Boomers and other savvy homebuyers who have limited incomes, but substantial financial assets, for a low-rate conforming, conventional mortgage.

Without a steady income, how do they qualify for a loan? By utilizing assets as income, that’s how!

Loans backed by Fannie Mae and Freddie Mac — which means most loans issued these days — can use assets such as IRAs and 401(k)s to help applicants meet income requirements. The provision “lets you take advantage of your holdings to a greater degree,” says Keith Gumbinger, vice-president of HSH Associates, which publishes mortgage information and rates.

How Does It Work?

Assets that can be counted under these rules include retirement accounts such as IRAs and 401(k)s, lump-sum retirement account distributions and annuities.

“The borrower must be fully vested, and the retirement assets must be in a retirement account that is immediately accessible,” says Brad German, a spokesman for Freddie Mac. That means the money cannot be subject to an early-withdrawal penalty and cannot currently be used for income.

The formula takes 70% of qualifying assets, subtracts what will be needed for down payment and closing costs and divides the remainder by 360, the number of months in a standard loan, to arrive at a monthly income used to determine the applicants’ maximum payment and loan amount.

HSH.com says, for example, that a borrower with $1 million in assets could count $700,000. After taking out $10,000 for closing costs and dividing by 360, the borrower could show $1,917 in monthly income.

That, of course, is not enough for a gigantic loan. But it could be very helpful if the borrower needed a relatively modest loan for the gap between the cost of a new home and the proceeds from selling an older one. And Social Security, pension and other income sources could help the borrower get a bigger loan.

There are some catches, however. To be counted, the assets, including interest earnings and dividends, cannot be used for current income, HSH says.

If you would like to find out more about utilizing your assets as income for your next home purchase or refinance, reach out to your mortgage lender for more details.