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Category: Refinance (Page 1 of 9)

Home Appreciation Continues To Accelerate

Good news on the home appreciation front…real estate valuations are continuing to increase at a rapid pace!

Check out these numbers…

CASE-SHILLER

The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed home prices rose 1.2% in August and 20% year-over-year, which was unchanged from the previous reading.

This was the first time since early 2020 we have not seen a year-over-year increase, which means that we might have reached the height of annual growth and we will start to see those appreciation numbers slow a bit.

With that said, it’s not that prices are declining, they are just increasing at a slower rate.

As you can see above, Phoenix, San Diego, and Tampa reported the highest annual gains.

FHFA

The FHFA (Federal Housing Finance Agency) released their House Price Index, as well. This measures home price appreciation on single-family homes with conforming loan amounts. 

Home prices rose 1% in August of 2021 and are up 18.5% year-over-year, down from 19.2%. 

Believe it or not, this is the first time we actually saw prices moderate on an annual basis in quite some time.  We are still seeing home prices rise, but just at a slightly slower pace. 

This is great news for homeowners, as their equity position has increased tremendously over the last 3+ years.

If I can be of help in strategizing on a purchase or refinance, don’t hesitate to reach out, as it would by my pleasure to do so!

Choosing The Right Mortgage Loan Originator

Whether a borrower is making a home purchase or refinancing their current mortgage, choosing the right mortgage loan originator is critical to their success.

The right lender is a crucial part of the purchase process…but how do you know if the loan originator is an expert and understands your needs and financial situation?

In this article, we’ll go over several ways to identify how borrowers can identify a great home financing partner.

Purchasing a home is one of the most important transactions of our lives, so we need someone who can not only find a low interest rate, but understands the borrower’s financial situation and long-term goals.  The terms of the mortgage are going to impact the borrower’s household finances for years to come, so it’s important to find the right fit!

The right loan originator will help determine the mortgage program and term, as well as walk the borrower through that lengthy process.  Lenders should have experience in the local market and the type of transaction (primary residence, 2nd home, or investment property), as well.

Understanding the Local Market

It’s important that a borrower’s originator has knowledge of the community.  They should be able to offer personalized expertise and information unique to the area buyers are considering.

The lender should also have a good report with the borrower’s real estate agent and other real estate professionals.  This will give the buyer access to a resourceful network of inspectors, contractors, financial professionals, in their area.

With record-low mortgage rates and the increased demand for living space, coupled with the entrance of a large group of first-time home buyers, our market is expected to be tight for the foreseeable future.

Utilizing a local loan officer to help you navigate the home market, one who is focused on helping you make the best decisions for your financial situation and long-term goals, is crucial.

Access to a Variety of Mortgage Programs

There are always a number of factors that impact loan qualification – such as self-employment, student loan debt, and credit score, just to name a few. 

There truly is no one-size-fits-all mortgage, and you buyers should consider working with a loan originator that has access to multiple loan programs.

With that in mind, it’s critical that borrowers work with a local loan officer with access to a multitude of home loan programs that fit’s their scenario.  There are many types of loans out there, and it’s the lender’s responsibility to recommend the right product for the borrower’s needs.

A Trustworthy Lender

The borrower’s relationship with their loan officer shouldn’t end at closing. A reputable lender should be concerned with your overall purchase experience and ask for your feedback after the transaction.

The borrower should continue to rely on their lender as a resource for advice and expertise for all of their future real estate needs.

One way for a borrower to find out about the lender’s reputation is to check online reviews.  Both positive and negative ones should be readily available with a simple online search.  Check out Zillow or Social Survey to find out more about your chosen lender!

Long Term Perspective

Ultimately, the right originator should be a strong advocate and listener who will act in the borrower’s best interest throughout the process.

The right lender should ask many questions, be cooperative and willing to listen, plus really know the borrower’s financial situation and goals. Their communication must be top notch.

Purchasing a home might seem like a one-time thing, but that’s not the reality of purchasing real estate.  The right loan originator will be a partner for the long-term and shouldn’t take a one-time transactional approach.  It’s wiser to find a home financing partner for a lifetime.

It would be my pleasure to help any borrower for the long term! Please do reach out to me for more information or to discuss how I might be able to help.

Now Is A Great Time To Refinance That Investment Property

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
  • 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.

Shop for a Mortgage Without Hurting Your Credit Score

Make sure to do a little planning before you start looking for a mortgage.  With a some work, you can keep your score in top shape relatively easily as you shop for the right mortgage lender.

“Metaphorically, not letting your lender check your credit is like not letting a doctor check your blood pressure. Sure, you can get a diagnosis when your appointment’s over — it just might not be the right one.” – Gina Pogol, The Mortgage Reports

When you start looking for the right mortgage provider, shop carefully because your credit score might suffer if you don’t take care. Each time you apply for a home loan, a mortgage lender will make a credit inquiry to review your credit history. These inquiries are reported to the three major credit-reporting agencies: Equifax, Experian and TransUnion.

I’m linking to a great article by Gina Pogol of The Mortgage Reports that discusses credit inquires and how it impacts a borrower’s score – you can view the entire article here…

If there’s one thing to take away, from Pogol’s article…”do make sure to share your social security number with your lender so they can give you accurate mortgage rate quotes instead of just best guesses or ‘ballpark rates’.”

Mortgage vs Credit Card Inquiries

A hard inquiry generally means you’re searching for additional credit. “Statistically, you’re more likely to have debt problems and default on financial obligations when you increase your available credit. This is especially true if you’re maxed out or carrying credit card balances and looking for more”, says Pogol.

She continues, “Understanding this, it makes sense that your credit scores drop when you go applying for new credit cards or charge cards. Fortunately, credit bureaus have learned that mortgage shopping behavior does not carry the same risks and they no longer treat a slew of mortgage inquiries the same way.”

They key point here is that multiple mortgage companies can check your credit report within a limited period of time – and all of those inquiries will be treated as a single inquiry. That time period depends on the FICO system the lender uses. It can range from 14 to 45 days.

What FICO Says

This is what MyFICO says about its algorithms and how it treats rate shopping inquiries:

FICO® Scores are more predictive when they treat loans that commonly involve rate-shopping, such as mortgage, auto, and student loans, in a different way. For these types of loans, FICO Scores ignore inquiries made in the 30 days prior to scoring. 

So, if you find a loan within 30 days, the inquiries won’t affect your scores while you’re rate shopping. In addition, FICO Scores look on your credit report for rate-shopping inquiries older than 30 days. If your FICO Scores find some, your scores will consider inquiries that fall in a typical shopping period as just one inquiry. 

For FICO Scores calculated from older versions of the scoring formula, this shopping period is any 14-day span. For FICO Scores calculated from the newest versions of the scoring formula, this shopping period is any 45-day span. 

Mortgage rate shopping / credit score Q&A with Gina Pogol

Do mortgage pre-approvals affect credit score?

Yes, but only slightly. Credit bureaus penalize you a small amount for shopping for credit. That’s a precaution in case you are trying to solve financial problems with credit. But requesting a mortgage pre-approval without applying for other types of credit simultaneously will have little to no effect on your score.

Will shopping around for a mortgage hurt my score?

You have 14 days to get as many pre-approvals and rate quotes as you’d like — they all count as one inquiry if you are applying for the same type of credit.

How many points does your credit score go down for an inquiry?

About 5 points, but that could be lower or higher depending on your credit history. If you haven’t applied for much credit lately, a mortgage inquiry will probably have a minimal effect on your score.

How much does a mortgage affect credit score?

Having a mortgage and making all payments on time actually improves your credit score. It’s a big loan and a big responsibility. Managing it well proves you are a worthy of other types of credit.

What’s the mortgage credit pull window?

You have 14 days to shop for a mortgage once you’ve had your credit pulled. Within 14 days, all mortgage inquiries count as one.

The Final Take-Away

A mortgage credit inquiry does have a small effect on your score, but it’s still worth shopping around to find the right lender. Borrowers can save both money and headaches by doing some work to find the lender that you trust the most.

Economic Turbulence on the Horizon – Recession, Rates, and Real Estate

It does look like most economists are pointing to a recession (although most do think it will be relatively mild by historical standards) in the next 12 months.

A recession occurs when there are two or more consecutive quarters of negative economic growth, meaning GDP growth contracts during a recession.

When an economy is facing recession, business sales and revenues decrease, which cause businesses to stop expanding.

How do the economists know this?  And what does this mean for interest rates and real estate values?  Read on for more…

Recessionary Indicators

The Yield Curve

One of the major indicators for an upcoming recession is the spread between the 10-year US treasury yield and the 2-year US treasury yield.

While various economic or market commentators may focus on different parts of the yield curve, any inversion of the yield curve tells the story – an expectation of weaker growth in the future.

What does this inverted yield curve look like?  Here’s a good depiction:

Why does inversion matter?  Well, the yield curve inversion is a classic signal of a looming recession. 

The U.S. curve has inverted before each recession in the past 50 years. It offered a false signal just once in that time. 

When short-term yields climb above longer-dated ones, it signals short-term borrowing costs are more expensive than longer-term loan costs. 

Under these circumstances, companies often find it more expensive to fund their operations, and executives tend to temper or shelve investments.

Consumer borrowing costs also rise and consumer spending, which accounts for more than two-thirds of U.S. economic activity, slows.

Unemployment

Unemployment is a recessionary factor, too – as economic growth slows, companies generate less revenue and lay off workers to cut costs.

A rapid increase in the overall unemployment levels—even if relatively small—has been an accurate indication that a recession is underway.

Here’s a chart that shows what happens when unemployment starts to trend upward – and notice that recessions follow shortly thereafter:

As you can see, when things in the economy starts to slow down, one of the first things business do is to reduce their labor force.  The curve is flatting now, and unemployment might be ticking up soon.

Mortgage Rates During Recession

When a recession hits, the Federal Reserve prefers rates to be low. The prevailing logic is low-interest rates encourage borrowing and spending, which stimulates the economy.

During a recession, the demand for credit actually declines, so the price of credit falls to entice borrowing activity. 

Here’s a quick snapshot of what mortgage rates have done during recessionary periods:

Obtaining a mortgage during a recession might actually be a good opportunity. As mentioned, when the economy is sluggish, interest rates tend to drop.

Refinancing or purchasing a new home could be a great way to get in at the bottom of the market and make a healthy profit down the road. A borrower should be market- and financially savvy when considering large real estate purchases in a recession

Real Estate During Recession

Believe it or not, outside of the “great recession” of 2007 (which was caused, in part, to a housing crisis), home values and real estate actually appreciate historically during times of recession.

That seems counter intuitive…but because interest rates generally drop during recessionary periods, homes become MORE affordable to potential buyers (even though property values are higher), due to the lower payments provided by those lower rates.

When more people can qualify for homes, the demand for housing increases – and so do home prices.

In Closing

Although no one likes to see recession, you can observe that it actually can be beneficial for homeowners and would-be purchasers to refinance or purchase during these periods.

If you have more questions and or would like to strategize about purchasing or refinancing, don’t hesitate to contact me, as it would be my pleasure to help you!

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