Category: Mortgage (Page 28 of 60)

The Fed’s Latest Announcement Has Little To Do With Mortgage Interest Rates

September 22, 2020 / Tom Bonetto

The Federal Reserve board announced last week that they think the federal funds rate will remain at close to zero through at least 2023.

That’s pretty bizarre…and they must have some sort of an amazing crystal ball that we don’t know about. I don’t know of any Federal Reserve Board that has given 2+ years of guidance in one day. Evidently they’ve turned into economic soothsayers.

As a reminder, the federal funds rate that is set by the Fed and mortgage rates (not set by the Fed) are two totally completely different instruments.

The Federal Funds Rate

The federal funds rate is the target interest rate set by the Federal Reserve Open Market Committee at which commercial banks borrow and lend their excess reserves to each other overnight. It really has limited impact on the mortgage market.

I’d invite you to read this article that I’ve written that outlines what really drives mortgage interest rates: https://lendingcoach.net/mortgage-rates-the-fed/ (hint…it isn’t the Federal Reserve).

Mortgage Interest Rates

This graph shows the deviation of the 30-year mortgage versus the federal funds rate – and you can see there’s quite a dramatic difference.

Inflation Worries

Secondly, the fact that the Federal Reserve stated that they are OK with inflation levels over their original 2% target will not help the bond market or mortgage backed securities (the true drivers of mortgage interest rates).

They stated that they would allow inflation to run moderately above 2% “for some time” – and many in our industry are worried that once inflation gets rolling (and it has been moving up, even in today’s COVID economy) it will be impossible to stop.

Mortgage rates will be affected by inflation because inflation erodes the buying power of the fixed return that a mortgage holder receives. And interestingly, the best way to combat inflation is by raising the Fed Funds Rate.

If inflation begins to rise, and there are already some signs of this, Mortgage Rates will start to climb in response. All this can absolutely still occur while the Fed Funds Rate is at zero.

Today’s Opportunity

With all of that said, the current mortgage rate environment presents an incredible opportunity that should be taken advantage of for either a purchase or refinance. Contact me so I can help you benefit before things change too dramatically!

Is Making an Offer Over Asking Price a Good Idea?

August 10, 2020 / Tom Bonetto

Making an offer over the asking price on a house often makes buyers wince.

But let’s face it, paying above list price is just a reality in certain circumstances—at least if you really have any hopes of getting that house!

Is it a good idea? Well, this article from Realtor.com outlines a few reasons why it might be. It’s a good read and I highly recommend it.

Reasons to Offer Over Asking

In many parts of the country we are in what would be considered a “sellers market”, so buyers must adapt. A good rule of thumb: ‘If houses are selling in your neighborhood in less than 10 days, it’s a strong seller’s market’.

Here are a few other reasons you may want to bid more than list price:

You love the home and want to make sure you get it
You know there’s a bidding war or lots of competition for the property
The house is undervalued (comparable sales can help you judge this)
There are cash bids on the table

How To Decide

With that said, does it really make financial sense to pay more for a home than the asking price?

The answer is…it depends – and you should do the math to make sure.

My friends at The MBS Highway have put together a tool that helps buyers decide if making an offer over the asking price is a good financial decision.

Their “Buy Over Ask” tool takes into account a myriad of factors – from the asking price itself to expected appreciation – even to a break-even point that shows the exact month you should expect your return.

In the example above, by offering $7,500 over the seller’s asking price, a buyer’s break-even point is only one month away…and they can expect appreciation of nearly $100K over the next 5 years. In this case, it looks like paying a bit over asking would be a good idea, indeed.

Find Out If Offering Over Asking Is Right For You

It would be my pleasure to help any potential buyer find out if bidding over list is a good idea.

Reach out to me and I can easily put together a summary just like the one above for you to help determine if making an offer over the asking price is something you should consider!

Now Is A Great Time To Refinance That Investment Property

June 25, 2020 / Tom Bonetto

Mortgage rates are at all-time lows. Many homeowner’s are taking advantage and locking in for the long term. But what about investors, are they doing the same?

Refinancing rental properties can unlock a good deal of wealth-building opportunities for investors, including the ability to lower interest rates and monthly payments, improve loan terms, and earn additional cash flow.

Interestingly, many investors have not taken advantage of today’s market.

For one reason or another, there are a number of investors that don’t even realize the opportunity that’s in front of them.

Should I Refinance My Rental Property?

In most cases, investors should consider a refinance to:

Lower the mortgage rate

Take cash-out to purchase new investment properties

Convert from an ARM to a fixed-rate

Turn a hard money loan into a conventional one

Pay off the loan more quickly

Upgrade a current investment property

Much has changed in a relatively short period of time regarding rates and valuations…and they are almost all in favor of the investor.

As mentioned earlier, interest rates are historically low…and they look a lot better than they did even this time last year, let alone a few years ago.

5.75% versus 4.5% example

If you purchased an investment property in October of last year, for example, many borrowers took on mortgages with an interest rate in the high 5% range.

Today, if that investor were to refinance their $250,000 loan from 5.75% to 4.5% for example, they would save nearly $200 per month.

There might be some discount points involved depending on the scenario, but they can be financed into the loan amount, so the only out-of-pocket cost would be that of an appraisal.

Assumptions: $250K loan, 70% loan-to-value and 760+ credit score

In Conclusion

When you own an investment property, the goal is to earn a solid rate of return…and refinancing that property can increase your short-term cash flow and help you build longer-term wealth.

Do reach out to me for more, as it would be my pleasure to help you look at different options and programs that might help you in today’s market.

Establishing and Building Credit

June 11, 2020 / Tom Bonetto

The dilemma: a credit card is the quickest way to build credit, but it’s nearly impossible to get a credit card without established and/or good credit.

If you’re trying to build credit or improve it, a secured credit card is one of the best tools to help you achieve that goal.

What is a secured credit card?

A secured credit card works the same as a traditional unsecured credit card, with one major distinction…a secured card requires a security deposit to use as collateral.

This deposit can be as low as $200 or $300 and is usually equal to your chosen credit limit. The credit card issuer holds onto the deposit in case you default on your payments.

What happens to that $300 deposit if you always pay your bill on time? You’ll eventually get it back. Use the card responsibly, and you can improve your credit enough to qualify for an unsecured card — one that doesn’t require a deposit.

How To Use It

Although they require a deposit, secured credit cards are a powerful tool for rebuilding credit. Most importantly, use the card carefully, making a few purchases every month – don’t go too close to your credit limit.

A generally accepted directive is to use less than 30% of your credit line each month.

When you keep your card balance at a reasonable level, it demonstrates to creditors that you are not relying solely on credit to meet your obligations.

Pay your balance in full (or just slightly short of it) every month before the due date. When you pay in full, you won’t be charged interest. Interest rates on secured cards are generally higher than those on unsecured cards.

Keep an eye on your credit score over time using a free service like Credit Karma; when it has meaningfully improved, ask your issuer about upgrading to an unsecured card

As you use a secured credit card regularly and make your payments on time (or even early) every month, you establish better and better credit through your payment history.

Key Tips to Follow

Make Sure It Will Help

Some secured cards don’t report your account activity to all three major credit bureaus. This means that even if you use the card responsibly, it may not help you build your credit history. Make sure that the card you choose reports to the credit bureaus.

Consider the Issuer

Some of the major credit card issuers offer secured credit cards, but most secured cards are issued by banks and credit unions you may not recognize. That’s fine, but do your research to make sure the issuer is reputable and offers a good customer experience.

Look Out for Fees

Some secured credit cards charge an annual fee and other fees. Others, however, won’t charge you a fee unless you take out a cash advance or request balance transfers.

“The score doesn’t look at a secured card any differently than an unsecured card,” said Barry Paperno, a credit score expert who has worked with FICO and Experian.

“It will look at the fact it’s a credit card, when the card was opened, the credit limit and the balance, and of course the payment history. In that way it will help establish credit just like an unsecured card.”

In Conclusion

With the right secured credit card, you will have the benefit of being able to add positive payment history to your credit report. Consider a secured credit card as a stepping-stone to qualifying for a better credit card in the future. Please reach out to me for more, as it would be my pleasure to work with you in building your credit.

For more, check out the following links:

Nerdwallet

Self-Inc

Credit.com

Will sellers or buyers have the advantage this summer?

June 10, 2020 / Tom Bonetto

In most years (and in most parts of the country), summer is the best time for home sellers.

That’s because buyer competition typically accelerates from May through August.

This year, however, the Covid-19 pandemic might have altered that trend.

Could those changes be enough to alter the summer market in favor of home-buyers? For some, the answer might be yes!

Experts are split, but they agree on one thing: No one can say for sure how the market will move in the coming months.

I’m linking to an article from Eric Martin at The Mortgage Reports and I’d invite you to take a look.

Summer is normally a seller’s market

From Martin’s article:

A recent report by ATTOM Data Solutions had some interesting findings:

Sellers reap the greatest home sale premiums as the weather warms up
The months yielding the highest premiums are: June (9.6%); May (8.3%); and July (7.3%). August yields a 6.0% premium

Overall, says ATTOM, home sales completed in May, June, and July usually net 7% to 10% above market value.

That equates to roughly $17,000 to $25,000 extra for sellers.

Judging by the numbers, it would appear that sellers have a solid leg up on buyers in the summer months.

How COVID-19 changes the home buying balance

Martin states “some experts think that the coronavirus could alter the usual summer housing market patterns.”

“Consider that the aforementioned data is based on sales between 2011 and 2019. This year is a hard one to predict for numerous reasons — most of all a pandemic that’s likely to have long-lasting effects.”

“We are in uncharted territory,” says Caleb Liu, a real estate investor and owner of House Simply Sold.

“The longer this pandemic lasts, the more economic damage it may cause. Many sellers may be forced to sell their homes. That means an increased housing supply. And when inventory goes up, prices fall.”

That doesn’t necessarily mean homes will priced to sell quickly.

“But if the pandemic extends into the second half of 2020, I believe prices will start to drop,” says Liu.

“If the pandemic extends into the second half of 2020, I believe prices will start to drop” –Caleb Liu, Owner, House Simply Sold

Real estate attorney Rajeh Saadeh also feels buyers may have more leverage than many expect this summer.

“The economy is still relatively strong. And the buyer pool this year will likely be smaller due to job and income loss. Those factors can help give buyers the advantage,” explains Saadeh.

Remember that mortgage rates have recently dropped to all-time lows. Most experts also predict that this low-rate atmosphere will most likely continue throughout the rest of 2020.

Today is a Good Time to Buy

For buyers with stable employment, good credit, and enough cash for the down payment, closing costs, and mortgage payments, this summer could be an excellent time to make that purchase.

Martin quotes Suzanne Hollander, a Florida International University real estate faculty and attorney:

“Interest rates remain enticingly low,” says Hollander. “And if you live in a condo or apartment with common areas and are worried about coronavirus risks, a detached single-family home with your own yard might be just the place for you.”

You can check out another article here on the opportunity that’s presented itself in the housing market during the last few months.

“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.”

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 or to talk strategy this summer – as it would be my pleasure to help!

Category: Mortgage (Page 28 of 60)

The Fed’s Latest Announcement Has Little To Do With Mortgage Interest Rates

The Federal Funds Rate

Mortgage Interest Rates

Inflation Worries

Today’s Opportunity

Is Making an Offer Over Asking Price a Good Idea?

Reasons to Offer Over Asking

How To Decide

Find Out If Offering Over Asking Is Right For You

Now Is A Great Time To Refinance That Investment Property

Should I Refinance My Rental Property?

5.75% versus 4.5% example

In Conclusion

Establishing and Building Credit

What is a secured credit card?

How To Use It

Key Tips to Follow

In Conclusion

Will sellers or buyers have the advantage this summer?

Summer is normally a seller’s market

How COVID-19 changes the home buying balance

Today is a Good Time to Buy

In Conclusion

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