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

Category: Uncategorized (Page 1 of 2)

Consumer View of US Housing Market Reach New Lows – But Is It Correct?

Only 21% of Americans say it is a good time to buy a house, the lowest percentage ever in Gallup’s polling sample.

Prior to 2022, for example, 50% or more respondents unfailingly thought it was a good time to make a home purchase, and you can find the specifics of the poll here….

The latest results are from Gallup’s annual Economy and Personal Finance poll, conducted over 3 weeks in April. Unbelievably, 78% percent of those surveyed say it is a bad time to buy a house right now.

To add some context, Gallup first asked Americans about their thoughts on the housing market in 1978, when 53% thought it was a good time to buy.

Per Jeffrey Jones’ report, “thirteen years later, when the question was asked again, 67% held that view. The record high of 81% was recorded in 2003, at a time of growing homeownership rates and housing prices.”

No doubt the respondents are sure of their positions, but does the data really bear that out?  And what does the future hold?

The Current Situation – Two Viewpoints

Per Jones, “in the past two years, as housing prices have soared and the Federal Reserve has raised interest rates to try to tame inflation, houses have become less affordable for many Americans, and views of the housing market have tumbled.”

However, another housing survey, this one from the industry specific MBS Highway, showed in April another solid increase in buying activity as the spring selling/buying season kicked into high gear. This marks the 4th-straight month of improving sentiment for their report.  You can find out more on that here…

68% of respondents characterized their market as ‘active’ and 33% of respondents indicated that they were now seeing price increases.

Media Bias Might Be To Blame

The latest Existing Home Sales report showed that the median home price declined on an annual basis for the first time in almost 11 years. That seems like a big headline, right?!

This is a classic case of the media trying to gain and keep viewership with shock headlines.

In many ways, our mainstream media is not truly interested in digging deeper for the facts and truth.  You can find out more on that here…

First of all, the decline was only 0.2% – and it was for the median home price, which is NOT the same as appreciation.

FHFA’s latest appreciation report showed that home prices rose 5.3% year over year. And according to Case-Shiller, they rose 3.8% year over year.

These are the two best ways to measure home price appreciation.

The Real Inside Scoop

Although no one can deny that higher mortgage rates are keeping would-be buyers on the sideline, the story that no one is talking about is the lack of housing supply.  You can find out more on that here…

More importantly, let’s take a closer look at active listings in the US:

You might remember from your Econ 101 class that supply and demand is what sets prices.  Smaller supply means that a higher price is to be paid…so I do believe that home prices will not be going down any time soon!

All things considered, the opportunity in this market appears to be very favorable.  If you are trying to wait to time the market, that home you are waiting for will just be more expensive down the road. 

And if you make that purchase now and interest rates fall (as many think will happen), you can easily refinance into a lower rate!

In Conclusion

Per Jones, “it is likely that Americans’ pessimism about homebuying reflects the high prices and high interest rates that are conspiring to make mortgage payments less affordable. These attitudes may keep many prospective homebuyers out of the market.”

If that’s the case, that means there is a window of opportunity for buyers ready to act today.

Do reach out to me to find out more, as it would be my pleasure to help you finance that investment property or the home of your dreams.

Barry Habib – Real Estate Market Webinar

Barry Habib is a real estate and mortgage industry executive, bestselling author, and founder and CEO of MBS Highway. Barry is also a well known media resource and TV commentator on the mortgage and real estate markets.

You are cordially invited to this exclusive 90-minute webinar on Thursday, February 4th at 12:00pm MST/11:00am PST, sponsored by Finance of America Mortgage.

Please click here to register…

As a professional in the real estate industry, you know that interest rate fluctuation and real estate pricing can be a challenge to predict. Stay ahead of your competition and find resources to help you become a trusted advisor to buyers and borrowers in your community in this rapidly changing environment.

Barry will discuss his predictions for the housing market going forward in 2021 and the benefits of utilizing this system to show clients and referral partners the power of homeownership.

Click here to register for the February 4th Webinar with Barry Habib and Finance of America Mortgage…

The Cost of Waiting to Purchase a Home and Trying to Time the Market

If you’re shopping for a home today, you know it can be hard work. You might not find something right away and it’s easy to become frustrated and fatigued.

Sometimes buyers get discouraged and say, “Let me take off a few months, maybe I’ll come back 6 months later.”

Some, on the other hand, think that the market might weaken shortly or that interest rates will fall even further…and are trying to essentially “time the market” Is that the right strategy?

The Cost of Waiting

Here’s the potential problem with that thinking…while you might want to take time off and away from your search, the market isn’t taking time off!

The cost of waiting to buy is defined as the additional funds it would take to buy a home if prices & interest rates were to increase over a period of time.

The market is quite good in terms of appreciation right now in California and Arizona. The forecasted growth in value is 2.4% in just the next 6 months; let’s quantify that.

The Numbers

A home worth $300,000 today would be worth $7,300 more in 6 months. Additionally, if you were planning on putting the same percent down, you would have to borrow more because the home is more expensive.

What about interest rates? Rates today are at very attractive levels, so does it make sense to wait for rates to go down further…and what if they don’t?

No, the monthly savings with a lower rate are nice but are dwarfed by the missed appreciation and amortization, and it would take many, many years to recoup what you would have lost.

One other thing to consider…if rates drop significantly after your purchase, you can always refinance in the future to take advantage of that lower rate.

Today’s Data

Here’s the data from FHFA – see how the forecast is for nearly 5% appreciation in the year ahead. The longer you wait, the more you miss out on appreciation and the more expensive you new purchase will be.

Stick with it, keep shopping, and you will find something. Don’t hesitate to reach out to me with questions, as it would be my pleasure to help!

Home Buyers and Mortgage Seekers – Beware of Online Credit Reports

U.S. Air Force illustration/Senior Airman Grace Lee

Many consumers are shocked to find out that their Credit Karma or other online scores do not match their true FICO score when it’s finally run by their mortgage lender.

This happens quite often – and it’s important to understand the differences and reach out to your mortgage professional first. 

Unfortunately, many would-be buyers have an incorrect view of their actual credit worthiness and begin looking at homes too soon in the process.

To repeat, the key thing to remember here is to reach out to your mortgage professional to get your official FICO score.

Dive Deeper

I’d invite you to find out the particulars here – as the free online credit products and the FICO score used in mortgage qualification process are noticeably different.  Essentially, they use different algorithms to come up with their own score. 

Most lenders determine a borrower’s creditworthiness based on FICO® scores, a Credit Score developed by Fair Isaac Corporation (FICO™). This score tells the lender what type of credit risk you are and what your interest rate should be to reflect that risk.

FICO scores have different names at each of the three major United States credit reporting companies. And there are different versions of the FICO formula. Here are the specific versions of the FICO formula used by mortgage lenders:

  • Equifax Beacon 5.0
  • Experian/Fair Isaac Risk Model v2
  • TransUnion FICO Risk Score 04

The Key Takeaway

The major takeaway is that your Credit Karma score will be different than your FICO score…and in most cases, the free, online score is better than the FICO score – at least that has been my experience.

Also, you can find out here how your credit score affects your mortgage rate – this is also worth the read!

Delayed Financing – A Great Purchase and Financing Option

Paying cash for a house has its advantages. Purchasing with cash rather than getting a mortgage could help you as the buyer win a bidding war when buying a new home. You may even be able to negotiate a lower price on the home if you’re paying cash.

After all, cash in hand is a sure thing, and a mortgage approval can take some time and isn’t always guaranteed.

Delayed financing is a specific program that allows the buyer to take cash out on a property immediately in order to cover the purchase price and closing costs for a property they had just purchased with cash.

How Delayed Financing Works

Delayed financing is a mortgage that is originated on a property after you already own it, in comparison to a typical mortgage that is used for the acquisition of a property. The delayed financing mortgage option allow buyers to compete with all-cash buyers when purchasing the property. 

By financing the property after the initial cash transaction, the borrower/buyer is able to regain their liquidity because the money isn’t tied up in the house after the delayed financing is completed.

Keep in mind that the value of the property might not the same as the purchase price. Borrowers will need an appraisal done by their new lender to determine the value.  Moreover, your new loan can’t be more than what you paid for the property plus your closing costs and lender fees.

Why Delayed Financing?

Delayed financing is generally helpful for:

  • Investors who want to compete with all-cash buyers’ short timelines
  • Investors who want to have more bargaining power because they’re paying with cash
  • A property that has multiple offers and the seller doesn’t want to wait on financing
  • Investment properties, vacation homes, and primary residences
  • An investor who wants to take their cash out and buy another investment property

The primary reason to utilize delayed financing is that buyers can stay liquid. Investors use delayed financing to recover their cash and be able to purchase another property.

Generally, delayed financing is right for an investor who wants to take advantage of all of the benefits of purchasing a home using all cash. They can often negotiate a lower price, close faster and compete with multiple other buyers. An investor who doesn’t immediately qualify for conventional financing may also opt for delayed financing.

An Investor’s Point of View

In this case, the buyer is an investor and purchases a property using all cash.  The buyer then wants to free-up some cash back to buy another property.

The buyer can then delayed financing to recoup the cash and take a loan out on the new property, utilizing the cash back from the initial transaction!

A Primary Occupancy Borrower’s Point of View

The buyer can also use this option to compete with all-cash buyers and negotiate better terms. Delayed financing can be done as quickly as three weeks after purchasing the property, which is different from a standard “cash-out refinance” transaction, where the borrower must wait six or more months.

How Long Do You Have to Wait to Refinance?

If you’re doing a delayed financing transaction on a property you purchased in the last 6 months, you’re allowed to take cash out immediately without any waiting period.

Under normal circumstances, if you bought a home with a mortgage instead of cash, you have to be on the title at least 6 months before you can take cash out and refinance your home, so delayed financing is a notable exception.

Delayed Financing Qualifications

There are certain qualifications that need to be met in order to qualify for a delayed financing transaction.  Most specifically, the property must have been originally purchased using all cash.

Lenders generally have the following qualifications for this type of transaction:

  • Arm’s Length Transaction: You can’t be related to or have a personal relationship with the seller
  • Closing Documents: Closing statement from the property purchase
  • Proof of Funds: Showing where you got the funds to purchase the property
  • New loan amount can be no more than the actual documented amount of the borrower’s initial investment in purchasing the property plus closing costs.
  • Appraisal: Ordered by the lender and paid for by you, generally $500-plus

There can be more needed and other regulations may apply, but these listed above are most standard.

Although you may have just ordered an appraisal when you originally purchased the property, as mentioned previously, the lender will want to conduct their own appraisal before they approve your loan.

It would be my pleasure to help any borrower with a delayed financing transaction, so don’t hesitate to reach out to me for more information or to get started!

« Older posts

© 2023 The Lending Coach

Theme by Anders NorenUp ↑