Category Archives: Mortgage News

The Truth About Homeowner Equity

truth homeowner equity

A recent article from a reputable news source was titled: Here’s why some homeowners still can’t sell. In the opening bullets of the article, the author claimed, “Negative equity is one of the main reasons why there are so few homes for sale.” The article then goes on to soften that stance but we want to bring better clarity to the equity situation.

A recent report from CoreLogic (which was quoted in the article) revealed that over 80% of all homes now have “significant equity,” which means the home has over 20% equity. That level of equity allows the homeowner to sell their home if they so desire. (There was no reference to significant equity in the article.)

If eight out of ten homeowners now have significant equity in their homes, it is hard to make the claim that lack of equity is “one of the main reasons why there are so few homes for sale.”

Here is a map showing the percentage of homes in each state which currently have significant equity:

The Truth About Homeowner Equity | Keeping Current Matters

Thoughts on Homeowner Equity

If you are one of many homeowners who is debating selling your home and are wondering how much equity you have accumulated, contact a local real estate professional who can help you determine if now is the time to list.

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5 Surprising (and Useful!) Ways to Save for a Down Payment

One of the biggest misconceptions of home buying? The 20% down payment. Here’s how to buy with a lot less down.

First-Time-Home-Buyers

Buying your first home conjures up all kinds of warm and fuzzy emotions: pride, joy, contentment. But before you get to the good stuff, you’ve got to cobble together a down payment, a daunting sum if you follow the textbook advice to squirrel away 20% of a home’s cost.

Here are five creative ways to build your down-payment nest egg faster than you may have ever imagined.

1. Crowdsource Your Dream Home

You may have heard of people using sites like Kickstarter to fund creative projects like short films and concert tours. Well, who says you can’t crowdsource your first home? Forget the traditional registry, the fine china, and the 16-speed blender. Use sites like Feather the Nest and Hatch My House to raise your down payment. Hatch My House says it’s helped Americans raise more than $2 million for down payments.

2. Ask the Seller to Help (Really!)

When sellers want to a get a deal done quickly, they might be willing to assist buyers with the closing costs. Fewer closing costs = more money you can apply toward your deposit.

“They’re called seller concessions,” says Ray Rodriguez, regional mortgage sales manager for the New York metro area at TD Bank. Talk with your real estate agent. She might help you negotiate for something like 2% of the overall sales price in concessions to help with the closing costs.

There are limits on concessions depending on the type of mortgage you get. For FHA mortgages, the cap is 6% of the sale price. For Fannie Mae-guaranteed loans, the caps vary between 3% and 9%, depending on the ratio between how much you put down and the amount you finance. Individual banks have varying caps on concessions.

No matter where they net out, concessions must be part of the purchase contract.

home saving

3. Look into Government Options

The U.S. Department of Housing and Urban Development, or HUD, offers a number of homeownership programs, including assistance with down payment and closing costs. These are typically available for people who meet particular income or location requirements. HUD has a list of links by state that direct you to the appropriate page for information about your state.

HUD offers help based on profession as well. If you’re a law enforcement officer, firefighter, teacher, or EMT, you may be eligible under its Good Neighbor Next Door Sales Program for a 50% discount on a house’s HUD-appraised value in “revitalization areas.” Those areas are designated by Congress for  homeownership opportunities. And if you qualify for an FHA-insured mortgage under this program, the down payment is only $100; you can even finance the closing costs.

For veterans, the VA will guarantee part of a home loan through commercial lenders. Often, there’s no down payment or private mortgage insurance required, and the program helps borrowers secure a competitive interest rate.

Some cities also offer homeownership help. “The city of Hartford has the HouseHartford Program that gives down payment assistance and closing cost assistance,” says Matthew Carbray, a certified financial planner with Ridgeline Financial Partners and Carbray Staunton Financial Planners in Avon, Conn. The program partners with lenders, real estate attorneys, and homebuyer counseling agencies and has helped 1,200 low-income families.

4. Check with Your Employer

Employer Assisted Housing (EAH) programs help connect low- to moderate-income workers with down payment assistance through their employer. In Pennsylvania, if you work for a participating EAH employer, you can apply for a loan of up to $8,000 for down payment and closing cost assistance. The loan is interest-free and borrowers have 10 years to pay it back.

Washington University in St. Louis offers forgivable loans to qualified employees who want to purchase housing in specific city neighborhoods. University employees receive the lesser of 5% of the purchase price or $6,000 toward down payment or closing costs.

Ask the human resources or benefits personnel at your employer if the company is part of an EAH program.

mortgage tiles

5. Take Advantage of Special Lender Programs

Finally, many lenders offer programs to help people buy a home with a small down payment. “I would say that the biggest misconception [of homebuying] is that you need 20% for the down payment of a house,” says Rodriguez. “There are a lot of programs out there that need a total of 3% or 3.5% down.”

FHA mortgages, for example, can require as little as 3.5%. But bear in mind that there are both upfront and monthly mortgage insurance payments. “The mortgage insurance could add another $300 to your monthly mortgage payment,” Rodriguez says.

Some lender programs go even further. TD Bank, for example, offers a 3% down payment with no mortgage insurance program, and other banks may have similar offerings. “Check with your regional bank,” Rodriguez says. “Maybe they have their own first-time buyer program.”

Not so daunting after all, is it? There’s actually a lot of help available to many first-time buyers who want to achieve their homeownership dreams. All you need to do is a little research — and start peeking at those home listings!

How Long Is Mortgage Pre-Approval Good For?

mortgage

If you want to show sellers you’re seriously interested in buying their home, getting mortgage pre-approval is a critical first step. It proves that, after digging through your financials, a lender is willing to give you money to buy a house.

“Getting pre-approved is a great way to differentiate yourself when making an offer,” says Linda Walters, a Realtor® in Wayne, PA.

Unfortunately, a pre-approval isn’t a one-and-done process. In fact, if your home search drags on for several months, there’s a chance your pre-approval won’t be valid after a certain point. Let’s explore how long a pre-approval letter remains valid and what to do if yours expires before you find a house.

Pre-approval vs. pre-qualification

It’s important to understand that pre-approval is different from pre-qualification.

To get pre-approval, the lender will review your financial information such as bank statements, pay stubs, W-2s or 1099s, a year or two of your tax returns, and your credit report. Once the numbers are crunched, the lender will provide you with a pre-approval letter certifying you are qualified to borrow a certain amount of money at a certain interest rate. Pre-approval does not lock you into a deal with a lender; in fact, it’s wise to speak to a couple of lenders before signing a mortgage.

On the flip side, getting pre-qualified for a loan is much less of a financial deep-dive. The lender simply estimates what you’d probably qualify for based on information you provide about your income, debts, and assets. It’s good information to have if you’re not sure you can get a mortgage, but it doesn’t mean as much to sellers as pre-approval does.

mortgage tilesWhy mortgage pre-approval matters

“If you want to purchase a home, you will have to demonstrate that you are financially able to buy it,” says Cathy Baumbusch, a Realtor in Alexandria, VA. “It doesn’t make sense to look for properties to purchase without first knowing what price range you qualify for and are able to purchase,” she says.

If you are in a competitive market, a pre-approval letter is often needed for your offer to be taken seriously.

How long does your mortgage pre-approval last?

It varies from lender to lender, but mortgage pre-approval is typically valid for about 90 days, according to Baumbusch. Your letter will have a date on it, after which it is no longer valid.

The reason pre-approval letters “expire” is because banks need the most up-to-date information about your salary, assets, and debts. Three months is long enough that you could have left a job, taken on new debts, or spent what was previously in your bank account.

In fact, even if you’re pre-approved, most lenders will want an updated set of pay stubs and bank statements around the time of closing. Hey, nobody ever said getting a mortgage was easy!

mortgage house keyring

What do you do if your mortgage pre-approval has expired?

If you’re still house hunting past the expiration date on your pre-approval letter, you just need to get another one. If you go to the same lender, it “can be updated by reverification of your financial documents,” says Sheree Landerman, a Realtor in Farmington, CT.

You will need to provide updated pay stubs and bank statements, but if nothing major has changed in your financial world, it should be no problem to get a fresh pre-approval letter from your lender.

shared from realtor .com, written by By Audrey Ference

7 Key Things That Help You Qualify For A Mortgage

A SHARED ARTICLE WRITTEN BY MICHELE LERNER

mortgage-refinancing

In an environment where lenders are highly regulated and risk-averse, borrowers are rightfully a little nervous when they apply for a mortgage. But with the right preparation, qualifying for a home loan can be a rewarding experience in your journey toward homeownership.

“In a lot of ways, lenders have gone back to the basics, looking at fundamental personal finance criteria to decide who qualifies for a loan,” says Rick Sharga, chief marketing officer of Ten-X, an online real estate marketplace in Irvine, California.

At the same time, Sharga says lenders have been more risk-averse than ever since the housing bust.

A.W. Pickel, III, Midwest division president of AmCap Mortgage in Kansas City, Missouri, recommends finding a loan officer you can trust and sticking with that person during your entire homebuying process.

“A good loan officer is like a pilot flying you and your loan from Kansas City to Hawaii,” Pickel says. “There are several ways to get there and several things that can happen on the way. A good loan officer has seen the turbulence and knows where the smooth air is.”

7 steps toward a loan approval

The back-to-basics approach by lenders means that borrowers can take steps that increase their chances of a mortgage approval.

Improving your credit, reducing your debt and gathering your documentation are among the many things you can do long before a loan application to increase the likelihood of getting a “yes” from a lender.

1. Maintain a high credit score. The average FICO score for an approved borrower is around 720 for a conventional loan and close to 700 for an FHA-insured loan, says Sharga. He says borrowers should find out their FICO score before applying for a loan, make sure their credit report is correct and take steps to improve their score if necessary. Pickel says he recently reviewed a loan file with a high debt-to-income ratio of 49 percent but a credit score over 800, which resulted in a loan approval.

Keep a vigilant eye on your credit profile while you wait for your loan to close, too.

“Once the application process has begun, borrowers shouldn’t do anything that might negatively impact their credit rating — no new accounts, no late or missed payments,” says Sharga.

2. Save for a bigger down payment. One way to minimize risk for a lender is to make a higher-than-minimum down payment. “The average down payment today is around 10 percent; historically the standard has been 20 percent,” says Sharga. “Anything above that lowers the loan-to-value ratio, which is viewed positively.”

3. Choose the right loan. If you have less money for a down payment but have good credit, you may qualify for a conventional loan with private mortgage insurance and a down payment requirement of 3 to 5 percent.

You may want to look for a lender who issues FHA loans, which are often available to borrowers with less cash or a lower credit score and require a down payment of 3.5 percent. Keep in mind these loans require a monthly mortgage insurance payment in addition to principal and interest, Sharga says.

4. Manage your debt. Lenders are reluctant to issue loans that fall outside qualified mortgage rules established by the Consumer Finance Protection Bureau (CFPB), says Sharga. These loans have a strict cap of a 43 percent debt-to-income ratio, which is the percentage of your gross monthly income that goes toward the minimum payment on all your debt, including your mortgage.

Paying off credit card balances or at least reducing debt before applying for a home loan is helpful.

5. Buy within your means. “Be realistic with your monthly income,” Pickel says. “Buy a house with a monthly payment you can afford. Buying a house that needs the income from two or three future raises will only cause stress.”

It matters that you can afford your payments and have remaining income after those payments are made, he says.

6. Demonstrate stability. Lenders look for signs of personal and financial stability, such as whether you’ve saved three to six months’ worth of expenses in the bank, whether you have a steady employment record and how often you’ve moved over the past few years, Sharga says. Your good credit score and a pattern of saving money are both indicators of financial strength.

7. Respond fast to lender requests. The CFPB’s ability-to-repay rule requires lenders to verify whether a borrower has the means to handle loan payments, says Sharga. This requires you to have all your financial records in order, including pay stubs, bank records, tax returns and more. Sharga says incomplete documentation is a common reason for loans being declined.

“If the loan officer asks for it, then bring it,” says Pickel. “Sometimes people don’t want to say they can’t find something or they don’t want to look for it, but it really helps to have all the information that the loan officer requests. This will help expedite the process.”

While it should go without saying, honesty is an essential component of a loan approval.

“No one likes surprises, especially loan underwriters,” says Pickel. “Tell the truth, even if it hurts. It will help even if it means that you don’t qualify today.”

Michele Lerner has been writing about real estate, personal finance and business topics for more than two decades and contributes articles about mortgages at MoneyGeek.com. Her work has appeared in The Washington Post and online at Fox Business News, Forbes BrandVoices, NewHomeSource.com, MSN.com, and Yahoo.com.

Garry’s Thoughts

If you are renting now you are very familiar with the high cost of rental rates in this sizzling real estate market.  This article will help with laying the ground work for qualifying for a mortgage to purchasing your own home plus the mortgage payment will most likely be less than what you are paying in rent right now.

Millions of Owners Are Missing Out on Savings

Nearly 4.5 million borrowers are eligible to refinance and could lock in savings on their monthly mortgage payments but have not taken advantage, according to a new report from Black Knight Financial Services.

The average borrower stands to save $260 a month. Nearly 700,000 borrowers could save $400 or more per month, the report shows.

“The recent pause in the upward movement of interest rates continues to encourage late-to-the-game borrowers to refinance,” says Lynn Fisher, the Mortgage Banker Association’s vice president of research and economics.

But many owners are not refinancing, despite the potential savings.

“Our data doesn’t tell us about motivation,” says Ben Graboske, senior vice president of data and analytics at Black Knight Financial Services. “It leaves us to surmise that the reason is apathy, lack of awareness, and education.”

Some homeowners may still be underwater on their home loans, owing more than what the home is currently worth. Other owners may have a low credit score that is blocking them from taking advantage of lower rates.

Still, owners likely will have more time to take advantage. “I don’t think this will be the last opportunity [to refinance into a low rate], but I don’t have a crystal ball,” says Graboske. “There are enough pressures in the market—lenders getting more efficient—that we’re going to have competitive rates around for awhile.”

Source: “Reason to Refinance: 4 Million Homeowners Are Leaving $1 Billion on the Table,” CNBC (June 22, 2017)

Garry Thoughts

Whether you are a first time home buyer or a seasoned homeowner these suggestions make sense and we can all hear this information from time  to time.

Americans Want to Hear More on Affordability

“In many ways, housing is an invisible crisis,” says Jonathan Reckford, CEO of Habitat for Humanity International. “There are still too many families without access to safe, secure, and affordable housing. This survey highlights the value all of us place on a decent place to call home and underscores the critical need to increase access to affordable housing.”

According to the survey, nine out of 10 Americans say owning a home is one of their greatest achievements in life. Also, 68 percent of U.S. renters say owning a home is one of their chief goals, according to the survey. PSB, on behalf of Habitat for Humanity, surveyed 1,000 people in the U.S. and Canada to gauge their perceptions of and challenges to affordable housing.

Ninety-one percent of American homeowners credited owning a home with making them more responsible, and 44 percent said it helped them build a nest egg. Forty-one percent say homeownership has given them stability.

But homeownership remains out of reach for many. Nine out of 10 Americans and Canadians say it’s important to find solutions to the lack of affordable housing. At 59 percent, concerns regarding U.S. affordability in particular easily topped other housing issues like safety (16%) and quality (11%).

One major barrier to homeownership cited among survey respondents: the high costs of rent. Eighty-four percent of survey respondents said the high cost of rent was preventing them from buying, followed by 75 percent who said obtaining a mortgage was proving to be a big barrier.

Many of the survey respondents said they’ve struggled to pay housing costs at some point in their life. Among U.S. respondents, 27 percent of respondents said they struggled to pay housing costs in their 20s; 22 percent in their 30s; 11 percent in their 40s; and 9 percent in their 50s.

Source: “Nine Out of 10 Americans and Canadians Call for Affordable Housing Solutions,” Habitat for Humanity (June 20, 2017)

Shared from DAILY REAL ESTATE NEWS

Garry’s Thoughts

It seems hard to believe in our market here in Colorado and how housing prices have been increasing over the past 3 years but here is a short list of areas in the country where housing prices are actually dropping.

First-Time Buyers Face New Competition

Investors are scouring real estate markets looking for low-priced homes, and they’re increasingly stepping on the toes of first-time buyers, who are hunting in the same price range. “The investor is starting to gobble up pretty much anything under $200,000,” Dennis Cisterna, chief revenue officer for Investability Real Estate, which markets rental homes, told The Dallas Morning News. “We are not adding any new supply to the market to serve that first-time home buyer.”

Housing inventories are at the lowest level in 30 years, and the shortages are most pronounced in the low and middle price ranges. “We are losing inventory at a record pace and in the segment of the market with the most demand,” says Javier Vivas, a realtor.com® analyst.

Investors comprised 33 percent of all single-family and condo sales in 2016, the highest percentage ever recorded by real estate data firm ATTOM Data Solutions. “This is setting the stage for a boom in single-family rentals,” says Daren Blomquist, an economist at ATTOM.

But while institutional investors dominated the rental housing market after the housing crash, they’re increasingly being priced out of markets such as Denver and Dallas. Smaller mom-and-pop investors are now stepping in to take their place. “The investors are competing for those starter homes,” Blomquist says, adding that 61 percent of investor purchases are for homes between 1,000 and 2,000 square feet.

Investors also tend to pay cash, which is making it difficult for first-time buyers who need financing to compete. About 19 million single-family homes in the U.S. are now owned by investors, according to ATTOM Data Solutions.

Source: “First-Time Buyers Hunting Affordable Housing are up Against Property Investors … and Losing,” The Dallas Morning News (June 16, 2017)

Shared from: DAILY REAL ESTATE NEWS

Garry’s Thoughts

This article is great as it describes the fact that First Time Homebuyers are being forced out of the market.  This is due largely because housing values are increasing so significantly and buyer’s aren’t able to qualify for the average sale price of homes in the Front Range area. We are finding that an FHA loan or even a low down-payment conventional financed loan cannot compete against an investor cash offer who will use the home as a rental property. I am seeing a large percentage of investors taking their money out of their stock market investment portfolios and reinvesting in real estate.

Industry News: Reducing FHA Premiums to Help Make Mortgages More Affordable – Stay Tuned

Industry News: Reducing FHA Premiums to Help Make Mortgages More Affordable 

Thanks Sandy for the latest information. Stay tuned. — Garry

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January 7, 2015
Reducing FHA Premiums to Help Make Mortgages More Affordable
The FHA is reducing annual FHA mortgage insurance premiums by 0.5 percentage points from 1.35 percent to 0.85 percent. This reduction in premiums will produce an average savings of $900 annually for all new FHA borrowers.

From the Office of the Press Secretary…

“When President Obama took office, our housing market was in free-fall, and rising unemployment and plunging house prices posed numerous challenges for families and the broader economy. The President took immediate action to stabilize the housing market and protect the middle class. These steps helped millions of middle class families stay in their homes, save money on their mortgages, and turn their communities around.

Today, the housing market is on firmer footing. Rising home values have brought millions of families out from being underwater, new foreclosures are at the lowest levels since 2006, and home sales have substantially increased. The President’s push for tough enforcement against past abuses and strong new consumer protections have helped curb irresponsible lending and have given responsible Americans more confidence and security in their most substantial investment. And the Consumer Financial Protection Bureau has pioneered new, streamlined mortgage forms to make simpler and easier for families to buy a house.

Still, there’s more work to do: too many creditworthy families who can afford—and want to purchase—a home are shut out of homeownership opportunities due to today’s tight lending market.”

Continue Reading »<http://www.whitehouse.gov/the-press-office/2015/01/07/fact-sheet-making-homeownership-more-accessible-and-sustainable&gt;

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Reducing FHA Premiums to Help Make Mortgages More Affordable

The FHA is reducing annual FHA mortgage insurance premiums by 0.5 percentage points from 1.35 percent to 0.85 percent. This reduction in premiums will produce an average savings of $900 annually for all new FHA borrowers.

From the Office of the Press Secretary…

“When President Obama took office, our housing market was in free-fall, and rising unemployment and plunging house prices posed numerous challenges for families and the broader economy.  The President took immediate action to stabilize the housing market and protect the middle class.  These steps helped millions of middle class families stay in their homes, save money on their mortgages, and turn their communities around.

Today, the housing market is on firmer footing. Rising home values have brought millions of families out from being underwater, new foreclosures are at the lowest levels since 2006, and home sales have substantially increased.  The President’s push for tough enforcement against past abuses and strong new consumer protections have helped curb irresponsible lending and have given responsible Americans more confidence and security in their most substantial investment. And the Consumer Financial Protection Bureau has pioneered new, streamlined mortgage forms to make simpler and easier for families to buy a house.

Still, there’s more work to do: too many creditworthy families who can afford—and want to purchase—a home are shut out of homeownership opportunities due to today’s tight lending market.”

Continue Reading »<http://www.whitehouse.gov/the-press-office/2015/01/07/fact-sheet-making-homeownership-more-accessible-and-sustainable>