Category: Housing Market (Page 32 of 40)

Home Buyers Should Know These 5 Things for 2017-2018

August 6, 2017 / Tom Bonetto

There’s a lot of advice online for homebuyers these days. But, hey, who’s got the time to do all of that research. So I’ve selected five things prospective buyers should know about purchasing your house in the next 18 months.

The real estate market is getting more competitive by the day, due to limited inventory. On the other hand, mortgage qualifications have loosened a bit and rates are still near historic lows.

Home prices have risen steadily in recent years, and they continue to do so. Mortgage rates are expected to inch upward in the coming months. Most analysts are predicting a rate increase by the fed in the fall of 2017.

With those things in mind, let’s take a look at 5 key issues:

Mortgage rates are expected to slowly climb into 2018

The Federal Reserve will be reducing the amount of mortgage-backed securities in their portfolio relatively soon – and they have hinted at another rate increase or two over the next 6 months.

In its latest forecast, the Mortgage Banker’s Association economists predicted that the average rate for a 30-year fixed mortgage loan would rise to 4.5% by the fourth quarter of 2017. Looking beyond that, they expect 30-year loan rates to rise above 5% by around the middle of 2018.

With that said, these rates are still extraordinarily low compared to historical standards.

Home prices are rising

According to Zillow, the real estate information service, the median home value across the US has risen by over 7% in the last year – and many experts see that pace staying consistent. Most economists expect prices to rise by another 6% over the next 12 months, extending into the summer of 2018.

As a result, homebuyers will encounter higher housing costs than those who purchased over the last couple of years. So be sure to research the market ahead of time, work with the right real estate agent, and go into it with a realistic view of what you can afford.

Mortgage qualification is easier today

The mortgage industry has loosened up a bit over the last two or three years. Mortgage giants Fannie Mae and Freddie Mac have relaxed debt-to-income ratios. As a result, it’s slightly easier to qualify for a mortgage loan today than it was in the past.

For example, many first-time homebuyers think they must have 20% or more ready for a down payment. But that isn’t true at all. Today, there are mortgage programs available that allow for down payments as low as 3%, or even 0% if you’re military or live in rural areas.

Don’t make assumptions about your ability to qualify for a home loan. Reach out to me, and we’ll review your situation to determine if you’re a good candidate for a home loan.

Housing inventory is getting tighter

The reason why home prices are rising has to do with inventory – or the lack of it. It’s just supply and demand at work, really.

In most cities across the west, the current supply of homes is falling short of demand.

What does this mean to the homebuyer? It means you should be prepared for some competition, and be ready to move quickly when the right house comes along.

It’s a sellers market right now

Due to the lack of inventory, this will directly impact you as the buyer. In 2017, most of the major cities across the state are experiencing sellers’ market conditions. In short, there aren’t enough homes for sale to meet the current level of demand.

This is an important factor to remember when it comes time to make an offer and negotiate with sellers. This is where the right real estate agent can really help.

The reality is that current real estate market conditions favor sellers over buyers.

My opinion is that it isn’t worth your time to haggle with the seller over the small stuff. When you find a home that meets the majority of your criteria and falls within your budget, you should move quickly with a legitimate, competitive offer.

In conclusion

With that said, this is my reading on current trends in the real estate and mortgage marketplace. The continuation of rising home prices and more-than-likely mortgage rate increases makes a compelling argument for buying a home sooner rather than later.

As always, please do contact me for more, as it would be my privilege to help you!

What is a Home Appraisal and Why is it Important?

July 24, 2017 / Tom Bonetto

If you’re buying a home and your offer has been accepted, one of the next steps is verifying the value of the home. As part of that process, your lender orders a home appraisal.

It gives you a trained professional’s point of view on the fair market value of the home to make sure it’s in line with the purchase price.

What Is a Home Appraisal?

A home appraisal is an unbiased report on the worth of a house in the fair market, performed by a trained and licensed individual.

Appraisals are needed to ensure the homebuyer, the home seller and the mortgage lender receive the accurate and true value of the real estate in question.

In most residential property transactions you are able to choose your real estate agent and your lender. However, in today’s regulatory world, you don’t get to pick your appraiser. Instead the appraiser must be chosen by the lender to provide a level of independence from the buyer and seller.

In order to ensure that appraisals are impartial, the Appraisal Independence Requirements, or AIR, prohibits a lender’s loan production staff from having direct contact with—or influence upon—any appraisers.

To reduce the risk of violating AIR, lenders now hire appraisers via appraisal management companies. These companies work with many residential appraisers in order to cover a more diverse housing market and to reduce the risk of improper influence.

Who orders and pays for the appraisal?

Your lender orders the appraisal to be performed by a licensed appraiser through an appraisal management company. However, you, the borrower, are typically required to pay for it – outside of escrow. Usually with a credit card.

The cost appears on the Closing Disclosure as part of your closing costs.

What determines a home’s value?

When estimating a property’s value, appraisers consider:

Comparable properties that have sold recently, especially those that are similar in size and location to the home you are buying. Their sale prices are usually the most important factor.
General condition and age of the home
Location of the home, including views or other remarkable features
Size and features of the home and property, including the number of bedrooms and baths
Major structural improvements such as additions and remodeled rooms
Features and amenities such as swimming pools and wood flooring

What’s the difference between an appraisal and an inspection?

An appraiser does not necessarily look for potential defects in the home. That’s the responsibility of the home inspector. You hire an inspector directly if you are purchasing a home and want an itemized report of potential repairs or problems with the property.

The appraiser instead focuses on whether the home’s agreed-upon purchase price is in line with what it is worth.

How Can You Improve Your Home Appraisal Process?

As a buyer, you can make sure that the home appraisal process protects you by taking a careful look at the Final Report of Value. If there are portions of it that you don’t agree with, such as findings that differ from your inspection report, or inaccurate comps, be sure to speak up.

If there is a significant difference between the agreed selling price and the appraised value of the home, your bank may choose not to fund the mortgage and the deal could fall through. Buyers can typically solve this problem by bringing additional “cash to close,” which is essentially increasing your down payment by the difference between the sales price and the appraisal value, or negotiating the sales price.

As a home seller, you will also want to be ready for the appraisal process. Itemize any recent improvements that you have made to the home and complete any planned do-it-yourself projects before the appraisal. Don’t be afraid to highlight the upgrades and positive features of your home to the appraiser.

In Closing

Appraisals are a very important part of obtaining a mortgage loan. I’d be more than happy to help you learn more about the other steps involved in buying a home so you can navigate them with confidence. Please contact me to find out more about this important step in the home buying process.

Fannie Mae Eases Qualification Requirements

June 12, 2017 / Tom Bonetto

The country’s largest source of mortgage money, Fannie Mae, soon plans to ease its debt-to-income (DTI) requirements, opening the door to home-purchase mortgages for large numbers of new buyers.

This move by the mortgage giant will dramatically increase the number of people who will now be able to qualify for a home loan.

Per The Washington Post, “Studies by the Federal Reserve and FICO, the credit scoring company, have documented that high DTIs doom more mortgage applications — and are viewed more critically by lenders — than any other factor.”

Using data over the last 15 years, Fannie Mae’s researchers analyzed borrowers with DTIs in the 45 percent to 50 percent range and found that a significant number of them actually have good credit and are not prone to default.

Simple Definition : Debt-To-Income (DTI)

Debt-to-Income (DTI) is a lending term which describes a person’s monthly debt load as compared to their monthly gross income.

Mortgage lenders use debt-to-Income to determine whether a mortgage applicant can maintain payments a given property.

DTI is used for all purchase mortgages and for most refinance transactions.

It can be used to answer the question “How Much Home Can I Afford?”

Debt-to-Income does not indicate the willingness of a person to make their monthly mortgage payment. It only measures a mortgage payment’s economic burden on a household.

Most mortgage guidelines enforce a maximum debt-to-Income limit – and Fannie Mae has essentially “upped” that ratio to help more borrowers qualify!

Housing Ratio or “Front-End Ratio”

Lenders add up your anticipated monthly mortgage payment plus other monthly costs of homeownership. These other costs of homeownership could include homeowner association (HOA) fees, property taxes, mortgage insurance, and homeowner’s insurance.

Normally, some of these expenses are included in your monthly mortgage payment. To calculate your housing ratio or front-end ratio, your lender will divide your anticipated mortgage payment and homeownership expenses by the amount of gross monthly income.

Total Debt Ratio or “Back-End Ratio”

In addition to calculating your housing ratio, lenders will also analyze your total debt ratio. At this time your other installment and revolving debts will be analyzed and added together. Installment and revolving debts will appear on your credit report.

These payments are expenses like minimum monthly credit card payments, student loan payments, alimony, child support, car payments, etc.

Your monthly installment and revolving debts are then added in addition to your estimated monthly mortgage payment and housing expenses and divide that number by your monthly gross income.

Because of these changes by Fannie Mae, many individuals that did not qualify for a home loan might now be eligible under these new regulations.

Please contact me to find out more!

2017 To Be A Breakout Year For FHA Buyers

April 24, 2017 / Tom Bonetto

The FHA mortgage was designed to help home shoppers with lower credit scores and a small amount of cash in the bank – and these loans have long been one of the most popular mortgage types available.

Per mortgage software firm Ellie Mae, approximately twenty percent of all mortgage applicants will opt for an FHA loan because of its buyer-friendly guidelines.

Thanks to recent policy changes within FHA, lenders could start approving more loans. Buyers could have a much easier time purchasing a home, and applicants who were previously turned down could receive an FHA mortgage approval in 2017.

Source: The Mortgage Reports

Lenders and the FHA In 2017

FHA’s new policy will benefit home buyers this year, albeit a bit indirectly.

Per Tim Lucas at The Mortgage Reports, lenders should become more lenient as they experience less scrutiny from FHA. In turn, mortgage banks and brokers could relax lending standards and approve more FHA buyers in 2017.

This should further increase access to FHA loans for the typical home buyer, in line with FHA’s core mission.

FHA, from its inception in 1934, has maintained flexible lending standards – as their goal is to promote homeownership among a population that would not qualify for other types of financing.

Guidelines are so lenient, in fact, that lenders usually set their own FHA lending standards that are much more strict.

For example, states Lucas, the FHA may allow the borrower to qualify with income received for less than two years. A lender can “overlay” a requirement that the borrower needs to be employed a full two years before approving the loan. By-the-book FHA guidelines would result in an approval.

He states that “lender created overlays to reduce risk that their loans will be subject to FHA penalties. Overlays won’t go away. But they could be diminished enough for a subset of borrowers to be approved even if they received a denial in the past.”

FHA Making It Easier To Qualify

The Federal Housing Administration (FHA) is a government agency that insures the loans, which in turn allows lenders to issue approvals with low downpayments and less-than-perfect credit scores.

But FHA will only insure a loan if it meets its standards.

Lenders approve loans imperfectly, sometimes missing the mark when it comes to FHA guidelines. Minor errors and mistakes make their way through the loan process.

States Lucas, “this is an unintended consequence for FHA. The organization’s mandate is to increase homeownership levels in the U.S. But loan refusals were the real-world effect, as lenders feared high penalties for mistakes.

To combat this, the FHA announced that it would not penalize lenders when loans went through with minor mistakes that had no bearing on loan approval.”

This takes a lot of pressure off of lenders. FHA’s goal is that lenders will be more willing to approve home buyers for FHA loans.

FHA Benefits and Their Appeal

FHA loans will continue to be a favorite among first-time home buyers. While the program is well-used by new buyers, applicants also use it to make a subsequent home purchase due to a move or after outgrowing their first home.

One advantage with an FHA loan is its lenient credit score requirements. Lenders genrally require a minimum score between 580 and 640 – and this is one of the lowest required scores among mortgage options.

Another draw to the FHA loan is its low required downpayment. As little as 3.5% down is required at closing.

FHA loans also tend to offer some of the lowest mortgage rates available. According to Ellie Mae, average mortgage rates on FHA loans are between 10 and 15 basis points (0.10% – 0.15%) lower than average rates on conventional loans.

FHA loans provide a unique set of benefits that are a perfect “fit” for a sizable portion of today’s home buyers. Contact me for more regarding FHA home loans!

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

Technology and the Human Touch

April 17, 2017 / Tom Bonetto

“Anyone who has kids probably has seen them experience a moment of confusion over ‘old technology.’ In fact, there are hilarious videos online of children trying to use rotary phones, typewriters and 1980s-era Sony Walkman music players.

When you watch these videos, you can’t help but wonder how long it will be before a child looks at a pencil and piece of paper and wonders: ‘How do these things work?’”

Chris Backe, the Director of Financial Services at Velocify

Source: The Scotsman Guide

Even with all of the technology available in the home buying process today, the overall buying experience hasn’t necessarily gotten better for consumers.

Purchasing and financing a home is still confusing and even a bit daunting — and it’s even more nerve-wracking when buyers don’t get the help they need when they need it.

To reverse this trend, agents and lenders need to find ways to give borrowers both the technology and the human expertise they desire, and at the right times in the transaction.

What is the real technological impact?

Backe states “it could not be a better time to improve the [buying] experience for consumers. Job growth and incomes are relatively strong, the U.S. is experiencing the highest home-sales rate in more than a decade, and the Mortgage Bankers Association expects purchase-loan volume will increase this year and again in 2018.”

Although the gains in technology have given potential buyers greater access to more information about home buying and mortgages, these consumers are not necessarily better informed.

Technology may have actually distanced borrowers from the human expertise they traditionally depended on to make the largest financial transaction in their lifetimes.

Recent data from the McKinsey Group shows that compared to social media, e-mail is 40 times more effective at gaining new customers.

Today, real estate and mortgage professionals are swarming to Facebook and Twitter, yet many agents and originators fail to respond to an e-mail from a potential borrower the same day it was sent.

Focusing on the customer

Making the buying and mortgage process faster and more efficient remains an important goal that also benefits consumers. Yet real estate and loan professionals who want to take advantage of today’s strong housing-market fundamentals to grow their business would be wise to focus less on how quickly they can move prospects through the funnel and more on actual client relationships.

Many lenders, for instance, now offer online portals where borrowers can gain approval for a loan all by themselves simply by answering a few questions, uploading documents and electronically signing a few disclosures.

No loan officer is needed. But is this really the best way available?

Ironically, many borrowers are not using these services. The major drawback of a consumer-driven mortgage process appears when a borrower has a question, and there’s no one around to provide an answer.

For online portals to be truly successful, human expertise must be available at key moments, and it must be provided quickly.

In Conclusion

Bache concludes by stating that “it may still be some time before printed paper goes the way of the rotary telephone. Keep in mind that cell phones have been around for decades, but they did not achieve mass appeal until manufacturers figured out how to deliver a better user experience.”

For what it’s worth, we should continue to push for the technological advances in the home purchase arena….but in doing so, let’s not forget that most buyers and borrowers would prefer the right home and mortgage to a fast one.

Find the right agent and lender that provides the right human touch.