Central Alabama Real Estate BlogRecently posted or modified blog posts by tag - home mortgagehttps://www.jacobsandershomes.com/blog/Copyright JacobSandersHomes.com2022-12-29T12:16:47-07:00tag:jacobsandershomes.com,2012-09-20:5605Applying For a Mortgage? Here’s What You Should Avoid Once You Do.While it’s exciting to start thinking about <a href="https://www.simplifyingthemarket.com/2022/12/05/prioritizing-your-wants-and-needs-as-a-homebuyer-in-todays-market/?a=15254-9542e274d2d9fa8a80c682c004b9b73f">moving in</a> and <a href="https://www.simplifyingthemarket.com/2022/11/25/home-sweet-home-the-emotional-benefits-of-homeownership-infographic/?a=15254-9542e274d2d9fa8a80c682c004b9b73f">decorating</a> after you’ve <a href="https://www.simplifyingthemarket.com/2022/10/28/applying-for-a-mortgage-doesnt-have-to-be-scary-infographic/?a=15254-9542e274d2d9fa8a80c682c004b9b73f">applied for your mortgage</a>, there are some key things to keep in mind before you close. Here’s a list of things you may not realize you need to avoid after applying for your home loan.
Don’t Deposit Large Sums of Cash
Lenders need to source your money, and cash isn’t easily traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.
Don’t Make Any Large Purchases
It’s not just home-related purchases that could disqualify you from your loan. Any large purchases can be red flags for lenders. People with new debt have higher debt-to-income ratios (how much debt you have compared to your monthly income). Since higher ratios make for riskier loans, borrowers may no longer qualify for their mortgage. Resist the temptation to make any large purchases, even for furniture or appliances.
Don’t Cosign Loans for Anyone
When you cosign for a loan, you’re making yourself accountable for that loan’s success and repayment. With that obligation comes higher debt-to-income ratios as well. Even if you promise you won’t be the one making the payments, your lender will have to count the payments against you.
Don’t Switch Bank Accounts
Lenders need to source and track your assets. That task is much easier when there’s consistency among your accounts. Before you transfer any money, speak with your loan officer.
Don’t Apply for New Credit
It doesn’t matter whether it’s a new credit card or a new car, when you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), it will have an impact on your FICO® score. Lower credit scores can determine your interest rate and possibly even your eligibility for approval.
Don’t Close Any Accounts
Many buyers believe having less available credit makes them less risky and more likely to be approved. This isn’t true. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those aspects of your score.
Do Discuss Changes with Your Lender
Be upfront about any changes that occur or you’re expecting to occur when talking with your lender. Blips in income, assets or credit should be reviewed and executed in a way that ensures your home loan can still be approved. If your job or employment status has changed recently, share that with your lender as well. Ultimately, it’s best to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature.
Bottom Line
You want your home purchase to go as smoothly as possible. Remember, before you make any large purchases, move your money around, or make major life changes, be sure to consult your lender – someone who’s qualified to explain how your financial decisions may impact your home loan.
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2022-12-29T04:43:54-07:002022-12-29T12:16:47-07:00Jacob Sanderstag:jacobsandershomes.com,2012-09-20:5494Expand Your Homebuying Options With a Fixer-Upper MortgageExpand Your Homebuying Options With a Fixer-Upper Mortgage
It’s the lament of first-time homebuyers in just about every housing market: There aren’t enough entry-level homes available that are move-in ready.
One solution is to broaden the search to fixer-uppers. With a renovation mortgage, you can get one home loan that combines the purchase price with the cost of improvements.
Not enough affordable homes
Entry-level homes are scarce, whether new or used. Most gains in housing inventory have been in upscale homes, according to Realtor.com.
The decline in entry-level new construction is stark: 36 percent of homes built in 2000 had under 1,800 square feet; in 2017, 22 percent did, according to the Harvard Joint Center for Housing Studies.
As for existing homes, resales of homes costing $100,000 to $250,000 were down 1.9 percent in October, compared with a year earlier, according to the National Association of Realtors®. The demand is there: Even with the decline, homes in that price range accounted for 40.2 percent of sales.
Faced with a shortage of affordable homes, it makes sense to consider buying and fixing up dwellings that are outdated or in need of repair.
The two major types of renovation loans are the <a href="https://www.nerdwallet.com/article/fha-loan?utm_campaign=ct_prod&utm_source=syndication&utm_medium=wire&utm_term=grantpearce&utm_content=588961" rel="nofollow">FHA 203(k) loan</a>, insured by the Federal Housing Administration, and the HomeStyle loan, guaranteed by Fannie Mae. Both cover most home improvements, whether major or minor.
“Basically, every kind of repair that can be done to a property, we do it,” says Brad McMullen, vice president of renovation lending for PrimeLending, a national mortgage lender that emphasizes renovation loans.
» MORE: <a href="https://www.nerdwallet.com/mortgages/how-much-house-can-i-afford/calculate-affordability?utm_campaign=ct_prod&utm_source=syndication&utm_medium=wire&utm_term=grantpearce&utm_content=588961" rel="nofollow">Find out how much house you can afford</a>
Renovation loans open more doors
Both FHA 203(k) and HomeStyle can be used for structural and cosmetic renovations. With both loan types, renovation work may begin immediately after closing.
FHA’s 203(k) loan is for primary residences only. It requires a minimum credit score of 500 with a down payment of at least 10 percent; a credit score of 580 or higher allows a down payment of 3.5 percent. These loans can’t be used for work that the FHA deems a luxury, such as installing a swimming pool.
There are two types of 203(k) loans: limited and standard. The limited is for renovations costing $35,000 or less that don’t require major structural work. The standard is for projects upwards of $35,000 or involving major structural work.
A 203(k) standard loan requires a HUD consultant, who helps the homeowner solicit and analyze bids and oversees inspections of the work. Consultants are often contractors, architects or inspectors, McMullen says. HUD has a tool to <a href="https://entp.hud.gov/idapp/html/f17cnsltdata.cfm">search for consultants</a>.
Fannie Mae’s HomeStyle loan may be used to buy and fix up a primary residence, second home or investment property. It requires a minimum credit score of 620. Minimum down payment is 3 percent or 5 percent, depending on whether the home is owner-occupied and the borrower is a first-time homebuyer or has a low to moderate income.
HomeStyle loans have few restrictions on improvements, other than that they “should be permanently affixed to the real property (either dwelling or land),” according to Fannie Mae guidelines. That means HomeStyle may pay for adding a swimming pool.
» MORE: <a href="http://www.nerdwallet.com/blog/mortgages/203k-and-homestyle-mortgage-loans-for-home-renovation?utm_campaign=ct_prod&utm_source=syndication&utm_medium=wire&utm_term=grantpearce&utm_content=588961" rel="nofollow">Ins and outs of 203(k) and HomeStyle loans</a>
Pitfalls to watch for
The most common problem is failing to get detailed cost estimates, McMullen says. To prevent cost overruns, make sure estimates are specific about materials, and include costs for inspections, permits and consultant fees (if applicable).
Another pitfall: over-improving the home. If every house on the block has one story and three bedrooms, it might be a bad idea to add a second story with two bedrooms. The home will no longer fit in with the neighborhood, and it will be difficult to get an accurate estimate of the home’s post-renovation value because of a lack of nearby comparable houses.
Getting started
After finding the house you want, choose a lender, decide on a loan type and hire a HUD consultant. Then, with the consultant’s guidance, get estimates from contractors. Your lender will need copies of the estimates.
The renovation work may begin immediately after you close the loan. When the improvements are complete, you’ll have your home the way you want it — sooner than you might have thought possible.
2022-12-16T03:54:42-07:002022-12-16T04:15:26-07:00Jacob Sanderstag:jacobsandershomes.com,2012-09-20:5477Mortgage Denied? Here’s How to RecoverMortgage Denied? Here’s How to Recover
When Philip Weiss, a systems engineer in New Jersey, saw the rustic house on a four-acre lot in the Poconos, it was love at first sight. He was preapproved for a mortgage, placed an offer on the home and the seller accepted.
Nearly one month later, the unexpected happened. Weiss says despite having a 700+ <a href="https://www.nerdwallet.com/article/mortgages/whats-exact-credit-score-need-buy-home?utm_campaign=ct_prod&utm_content=902485&utm_medium=wire&utm_source=syndication&utm_term=grantpearce" target="_self" rel="nofollow">credit score</a>, a low debt-to-income ratio and stable income, two past delinquencies on his credit report came back to haunt him, even though the accounts were paid in full. He was denied the mortgage loan.
Getting approved for a mortgage isn’t easy. About 460,000 home purchase mortgage applications for single-family homes — 8% of them — were denied in 2019, according to data submitted under the Home Mortgage Disclosure Act (HMDA).
If you’ve been denied, don’t despair: Getting turned down for a mortgage doesn’t have to be the end of your homeownership dreams. It’s possible to recover from a mortgage denial by taking these steps.
Find out why you were denied
The Equal Credit Opportunity Act says your lender has 60 days to give you a specific reason why your loan application was not accepted. Some of the most common reasons a mortgage application is denied, according to HMDA data, are:
Credit history.
High debt-to-income ratio.
Insufficient down payment.
As Weiss learned, a preapproval doesn’t guarantee your mortgage will close. In some cases, you might be denied when the loan enters underwriting and the lender examines every aspect of your financial profile.
Understanding the reason or reasons behind the rejection can help you figure out what to do next, says Bruce McClary, senior vice president of communications at the National Foundation for Credit Counseling.
Reason for denial: Credit history<br />Next step: Scour your reports
If you were denied a mortgage because of information in your credit report, you are entitled to a free copy so you can verify the report is correct. Until April 2021, consumers can get a free copy of their credit report every week from the three major credit bureaus at AnnualCreditReport.com.
Dispute any errors or outdated information by contacting the credit reporting agency online, or by writing a letter and sending it via certified mail. Submit copies of any supporting documentation to strengthen your case.
If the negative information on your report is correct, only time will get rid of it. Most negative items will stay on a credit report for up to seven years, including late payments, repossessions or a Chapter 13 bankruptcy.
If you were denied a mortgage because you lack a <a href="https://www.nerdwallet.com/article/mortgages/mortgage-no-credit-history?utm_campaign=ct_prod&utm_content=902485&utm_medium=wire&utm_source=syndication&utm_term=grantpearce" target="_self" rel="nofollow">sufficient credit history</a>, take steps to build your credit profile. Getting a secured credit card or having your on-time rent and utility bill payments reported to the credit bureaus are two options.
Reason for denial: Low credit score<br />Next step: Build it up
Some lenders have adopted stricter credit score requirements during the coronavirus pandemic, making it tougher to get a mortgage. But with some time and patience, there are ways to help your credit score.
Manage your credit responsibly by paying all of your bills on time, making more than the minimum payment or several small payments throughout the month.
Keep your existing credit card balances low, as well as the percentage of available credit you use.
Avoid applying for any new lines of credit, applying for multiple credit accounts at the same time or closing any unused cards.
Reason for denial: High debt-to-income ratio<br />Next step: Make a plan to reduce it
Lenders use your <a href="https://www.nerdwallet.com/article/mortgages/debt-income-ratio-mortgage?utm_campaign=ct_prod&utm_content=902485&utm_medium=wire&utm_source=syndication&utm_term=grantpearce" target="_self" rel="nofollow">debt-to-income ratio</a>, or DTI, to evaluate your ability to repay the loan. Your DTI is all of your monthly debt payments divided by your gross monthly income. The lower the DTI, the better. A good DTI to get approved for a mortgage is 36% or less.
If your DTI is high, lowering it before reapplying for a mortgage will raise your chances of getting approved. You can reduce your DTI by increasing your income, avoiding new debt or paying down your credit cards and loans.
Reason for denial: Insufficient down payment<br />Next step: Save more or seek assistance
Saving for a down payment can be tough, even if you’re only putting down 3%, the minimum requirement for a conventional loan.
Before reapplying for a mortgage, make saving a priority: You could automate transfers to your savings account every time you get paid, or sock away a windfall like a tax return to make progress toward your goal even faster.
First-time home buyers may also be able to take advantage of state and local <a href="https://www.nerdwallet.com/blog/mortgages/first-time-home-buyer-programs-by-state/?utm_campaign=ct_prod&utm_content=902485&utm_medium=wire&utm_source=syndication&utm_term=grantpearce" target="_self" rel="nofollow">down payment assistance programs</a> that provide funds as a grant or loan. Some programs may have income or credit score requirements to qualify.
Consider reapplying with another lender
Underwriting standards and guidelines vary by lender. McClary says it makes sense to shop multiple lenders to increase your chances of getting approved. He says you can limit the impact to your credit score by applying with several lenders within a 30- to 45-day period.
Weiss was discouraged when his application for a conventional mortgage was denied, but he was not deterred. He applied with another lender and discovered he could qualify for a loan backed by the Federal Housing Administration. Going through another mortgage application process was cumbersome, but Weiss says it was worth it.
He closed on his dream home in early November 2020 and is thrilled to finally be a homeowner.
“It’s a little daunting having a mortgage, but I’m truly excited,” Weiss says.2022-12-11T17:26:17-07:002022-12-11T17:31:33-07:00Jacob Sanderstag:jacobsandershomes.com,2012-09-20:5244VA Loans: Making Homes for the Brave Achievable [INFOGRAPHIC]<img src="https://files.simplifyingthemarket.com/wp-content/uploads/2022/11/09154358/VA-Loans-Making-Homes-For-The-Brave-Achievable-MEM.png" alt="VA Loans: Making Homes for the Brave Achievable [INFOGRAPHIC] | Simplifying The Market" />
Some Highlights
<a href="https://www.benefits.va.gov/HOMELOANS/documents/docs/VA_Buyers_Guide.pdf" target="_blank">VA Loans</a> can help make <a href="https://www.simplifyingthemarket.com/2022/11/08/the-majority-of-americans-still-view-homeownership-as-the-american-dream/?a=15254-9542e274d2d9fa8a80c682c004b9b73f">homeownership</a> possible for those who have served our country.
These loans offer <a href="https://www.benefits.va.gov/REPORTS/abr/docs/2021_loan_guaranty.pdf" target="_blank">great benefits</a> for eligible individuals and can help them buy a VA-approved house or condo, build a new home, or make improvements to their house.
Homeownership is the American Dream. One way we can honor and thank our <a href="https://www.simplifyingthemarket.com/2022/11/10/va-loans-can-help-veterans-achieve-their-dream-of-homeownership/?a=15254-9542e274d2d9fa8a80c682c004b9b73f">veterans</a> is to ensure they have the best information about the benefits of VA home loans.
2022-11-13T07:58:13-07:002022-11-13T08:07:23-07:00Jacob Sanderstag:jacobsandershomes.com,2012-09-20:5106Should You Still Buy a Home with the Latest News About Inflation?While the Federal Reserve is working hard to <a href="https://www.keepingcurrentmatters.com/2022/09/27/how-an-expert-can-help-you-understand-inflation-mortgage-rates/">bring down inflation</a>, the latest data shows the <a href="https://www.bls.gov/news.release/cpi.nr0.htm">inflation rate</a> is still high, remaining around 8%. This news impacted the stock market and added fuel to the fire for conversations about a recession.
You’re likely feeling the impact in your day-to-day life as you watch the cost of goods and services climb. The <a href="https://www.keepingcurrentmatters.com/2022/09/13/three-things-buyers-can-do-in-todays-housing-market/">pinch</a> it’s creating on your wallet and the looming economic uncertainty may leave you wondering: “should I still <a href="https://www.keepingcurrentmatters.com/2022/10/05/the-long-term-benefit-of-homeownership/">buy a home</a> right now?” If that question is top of mind for you, here’s what you need to know.
Homeownership Is Historically a Great Hedge Against Inflation
In an inflationary economy, prices rise across the board. Historically, homeownership is a great hedge against those rising costs because you can lock in what’s likely your largest monthly payment (your mortgage) for the duration of your loan. That helps stabilize some of your monthly expenses. James Royal, Senior Wealth Management Reporter at Bankrate, <a href="https://www.bankrate.com/investing/inflation-hedges-to-protect-against-rising-prices/">explains</a>:
“A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same.”
And with <a href="https://www.keepingcurrentmatters.com/2022/09/30/why-buying-a-home-may-make-more-sense-than-renting-infographic/">rents</a> being as high as they are, the ability to stabilize your monthly payments and protect yourself from future rent hikes may be even more important. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), <a href="https://www.nar.realtor/blogs/economists-outlook/instant-reaction-inflation-october-13-2022">explains</a> what happened to rents in the latest inflation report:
“Inflation refuses to budge. In September, consumer prices rose by 8.2%. Rents rose by 7.2%, the highest pace in 40 years.”
When you rent, your monthly payment is determined by your lease, which typically renews on an annual basis. With inflation high, your landlord may be more likely to increase your payments to offset the impact of inflation. That may be part of the reason why a <a href="https://www.realtor.com/research/july-2022-rent/">survey</a> from realtor.com shows 72% of landlords said they plan to raise the rent on one or more of their properties in the next year.
Becoming a homeowner, if you’re ready and able to do so, can provide lasting stability and a reliable shelter in times of economic uncertainty.
Bottom Line
The best hedge against inflation is a fixed housing cost. If you’re ready to learn more and start your journey to homeownership, let's connect.2022-10-20T07:25:04-07:002022-10-20T07:36:59-07:00Jacob Sanderstag:jacobsandershomes.com,2012-09-20:5060The Cost of Waiting for Mortgage Rates To Go DownMortgage rates have <a href="https://www.freddiemac.com/pmms/archive">increased significantly</a> in recent weeks. And that may mean you have questions about what this means for you if you’re planning to buy a home. Here’s some information that can help you make an informed decision when you set your homebuying plans.
The Impact of Rising Mortgage Rates
As mortgage rates rise, they impact your purchasing power by raising the cost of buying a home and limiting how much you can comfortably afford. Here’s how it works.
Let’s assume you want to buy a $400,000 home (the median-priced home according to the National Association of Realtors is <a href="https://www.nar.realtor/newsroom/existing-home-sales-slipped-0-4-in-august">$389,500</a>). If you’re trying to shop at that price point and keep your monthly payment about $2,500-2,600 or below, here’s how your purchasing power can change as mortgage rates climb (see chart below). The red shows payments above that threshold and the green indicates a payment within your target range.
<a href="https://files.keepingcurrentmatters.com/wp-content/uploads/2022/10/03144108/20221004-NM-Eng-1.png" class="lightbox-added aligncenter"><img loading="lazy" class="aligncenter wp-image-2085293 lazy-loaded" src="https://files.keepingcurrentmatters.com/wp-content/uploads/2022/10/03144108/20221004-NM-Eng-1.png" data-lazy-type="image" data-src="https://files.keepingcurrentmatters.com/wp-content/uploads/2022/10/03144108/20221004-NM-Eng-1.png" alt="The Cost of Waiting for Mortgage Rates To Go Down | Keeping Current Matters" width="550" height="413" srcset="https://files.keepingcurrentmatters.com/wp-content/uploads/2022/10/03144108/20221004-NM-Eng-1.png 960w, https://files.keepingcurrentmatters.com/wp-content/uploads/2022/10/03144108/20221004-NM-Eng-1-300x225.png 300w, https://files.keepingcurrentmatters.com/wp-content/uploads/2022/10/03144108/20221004-NM-Eng-1-768x576.png 768w" data-srcset="" sizes="(max-width: 550px) 100vw, 550px" /></a>
As the chart shows, as rates go up, the amount you can afford to borrow decreases and that may mean you have to look at homes at a different price point. That’s why it’s important to work with a <a href="https://www.keepingcurrentmatters.com/2022/09/09/why-its-so-important-to-hire-a-pro-infographic/">real estate advisor</a> to understand how mortgage rates impact your monthly mortgage payment at various home loan amounts.
Are Mortgage Rates Going To Go Down?
The rise in mortgage rates and the resulting decrease in purchasing power may leave you wondering if you should wait for rates to go down before making your purchase. Realtor.com <a href="https://www.realtor.com/news/trends/column-homebuyers-have-hard-the-bad-news-heres-the-good/">says</a> this about where rates could go from here:
“Many homebuyers likely winced . . . upon hearing that the Federal Reserve yet again boosted its short-term interest rates by three-quarters of a percentage point—a move that’s pushing mortgage rates through the roof. And the already high rates are just going to get higher.”
So, if you’re waiting for mortgage rates to drop, you may be waiting for a while as the Federal Reserve works to get <a href="https://www.keepingcurrentmatters.com/2022/09/27/how-an-expert-can-help-you-understand-inflation-mortgage-rates/">inflation</a> under control.
And if you’re considering renting as your alternative while you wait it out, remember that’s going to get more expensive with time too. As Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), <a href="https://www.nar.realtor/blogs/economists-outlook/instant-reaction-mortgage-rates-september-15-2022">says</a>:
“There is no doubt that these higher rates hurt housing affordability. Nevertheless, apart from borrowing costs, rents additionally rose at their highest pace in nearly four decades.”
Basically, it is true that it costs more to buy a home today than it did last year, but the same is true for renting. This means, either way, you’re going to be paying more. The difference is, with homeownership, you’re also gaining <a href="https://www.keepingcurrentmatters.com/2022/09/20/watching-the-stock-market-check-the-value-of-your-home-for-good-news/">equity</a> over time which will help grow your <a href="https://www.keepingcurrentmatters.com/2022/09/06/how-owning-a-home-builds-your-net-worth/">net worth</a>. The question now becomes: what makes more sense for you?
Bottom Line
Each person’s situation is unique. To make the best decision for you, let's connect to explore your options.2022-10-06T15:15:00-07:002022-10-06T17:19:51-07:00Jacob Sanderstag:jacobsandershomes.com,2012-09-20:5026How an Expert Can Help You Understand Inflation & Mortgage RatesIf you’re following today’s housing market, you know two of the top issues consumers face are inflation and mortgage rates. Let’s take a look at each one.
Inflation and the Housing Market
This year, <a href="https://www.keepingcurrentmatters.com/2022/05/20/dont-let-rising-inflation-delay-your-homeownership-plans-infographic/">inflation</a> reached a high not seen in <a href="https://www.cnbc.com/2022/06/10/consumer-price-index-may-2022.html">forty years</a>. For the average consumer, you probably felt the pinch at the gas pump and in the grocery store. It may have even impacted your ability to save money to buy a home.
While the Federal Reserve is working hard to lower inflation, the <a href="https://www.nar.realtor/blogs/economists-outlook/instant-reaction-consumer-price-index-september-13-2022">August data</a> shows the inflation rate was still higher than expected. This news impacted the stock market and fueled conversations about a recession. It also played a role in the Federal Reserve’s decision to raise the Federal Funds Rate last week. As Bankrate <a href="https://www.bankrate.com/real-estate/how-fed-rate-hike-affects-housing/">says</a>:
“. . . the Fed has raised rates again, announcing yet another three-quarter-point hike on September 21 . . . The hikes are designed to cool an economy that has been on fire. . .”
While their actions don’t directly dictate what happens with mortgage rates, their decisions have contributed to the intentional cooldown in the housing market. A recent article from Fortune <a href="https://fortune.com/2022/08/15/falling-home-prices-to-hit-these-housing-markets-in-2023-and-2024/">explains</a>:
“As the Federal Reserve moved into inflation-fighting mode, financial markets quickly put upward pressure on mortgage rates. Those elevated mortgage rates . . . coupled with sky-high home prices, threw cold water onto the housing boom.”
The Impact on Rising Mortgage Rates
Over the past few months, mortgage rates have fluctuated in light of growing economic pressures. Most recently, the average 30-year fixed <a href="http://www.freddiemac.com/pmms/pmms_archives.html">mortgage rate</a> according to Freddie Mac ticked above 6% for the first time in well over a decade (see graph below):
<a href="https://files.keepingcurrentmatters.com/wp-content/uploads/2022/09/28163914/20220927-NM-Eng-1-.png" class="lightbox-added aligncenter"><img loading="lazy" class="aligncenter wp-image-2085228 lazy-loaded" src="https://files.keepingcurrentmatters.com/wp-content/uploads/2022/09/28163914/20220927-NM-Eng-1-.png" data-lazy-type="image" data-src="https://files.keepingcurrentmatters.com/wp-content/uploads/2022/09/28163914/20220927-NM-Eng-1-.png" alt="How an Expert Can Help You Understand Inflation & Mortgage Rates | Keeping Current Matters" width="550" height="413" srcset="https://files.keepingcurrentmatters.com/wp-content/uploads/2022/09/28163914/20220927-NM-Eng-1-.png 960w, https://files.keepingcurrentmatters.com/wp-content/uploads/2022/09/28163914/20220927-NM-Eng-1--300x225.png 300w, https://files.keepingcurrentmatters.com/wp-content/uploads/2022/09/28163914/20220927-NM-Eng-1--768x576.png 768w" data-srcset="" sizes="(max-width: 550px) 100vw, 550px" /></a>
The mortgage rate increases this year are the big reason <a href="https://www.keepingcurrentmatters.com/2022/09/19/will-my-house-still-sell-in-todays-market/">buyer demand</a> has pulled back in recent months. Basically, as rates (and home prices) rose, so did the cost of buying a home. That pushed on <a href="https://www.keepingcurrentmatters.com/2022/09/13/three-things-buyers-can-do-in-todays-housing-market/">affordability</a> and priced some buyers out of the market, so home sales slowed and the <a href="https://www.keepingcurrentmatters.com/2022/08/25/why-you-may-want-to-start-your-home-search-today/">inventory</a> of homes for sale grew as a result.
Where Experts Say Rates and Inflation Will Go from Here
Moving forward, both of these factors will continue to impact the housing market. A <a href="https://www.cnet.com/personal-finance/mortgages/mortgage-rates-on-sep-26-2022-rates-tick-up/">recent article</a> from CNET puts the relationship between inflation and mortgage rates in simple terms:
“As a general rule, when inflation is low, mortgage rates tend to be lower. When inflation is high, rates tend to be higher.”
Sam Khater, Chief Economist at Freddie Mac, has this to <a href="https://freddiemac.gcs-web.com/node/25711/pdf">say</a> about where rates may go from here:
“Mortgage rates remained volatile due to the tug of war between inflationary pressures and a clear slowdown in economic growth. The high uncertainty surrounding inflation and other factors will likely cause rates to remain variable, . . .”
While there’s no way to say with certainty where mortgage rates will go from here, there is something you can do to stay informed, and that’s connect with a trusted real estate advisor. They keep their pulse on what’s happening today and help you understand what the experts are projecting. They can provide you with the <a href="https://www.keepingcurrentmatters.com/2022/08/29/a-trusted-real-estate-advisor-provides-expert-advice/">best advice</a> possible.
Bottom Line
Rising inflation and higher mortgage rates have had a clear impact on housing. For expert insights on the latest trends in the housing market and what they mean for you, Let's connect to discuss it.
2022-09-28T18:30:00-07:002022-09-29T07:09:01-07:00Jacob Sanderstag:jacobsandershomes.com,2012-09-20:4992A Crucial First Step: Mortgage Pre-ApprovalSome Highlights
Mortgage <a href="https://www.ftc.gov/sites/default/files/documents/one-stops/real-estate-competition/realestateglossary.pdf">pre-approval</a> means a lender has reviewed your finances and, based on <a href="https://www.investopedia.com/financial-edge/0411/5-things-you-need-to-be-pre-approved-for-a-mortgage.aspx">factors</a> like your income, debt, and credit history, determined how much you’re <a href="https://www.bankrate.com/mortgages/pre-approval/">qualified to borrow</a>.
Being <a href="https://www.keepingcurrentmatters.com/2022/07/19/why-pre-approval-is-a-game-changer-for-homebuyers/">pre-approved</a> for a loan can give you clarity while planning your <a href="https://www.keepingcurrentmatters.com/2022/04/05/what-you-need-to-budget-for-when-buying-a-home/">homebuying budget</a>, confidence in your ability to secure a loan, and helps sellers know your offer is serious.
Connect with a trusted professional to learn more and start your homebuying process today.
2022-09-19T18:27:00-07:002022-09-19T05:35:35-07:00Jacob Sanderstag:jacobsandershomes.com,2012-09-20:4795Ins, Outs, Pros and Cons of Zero Down Payment MortgagesA mortgage with no down payment seems a little bit like scoring a buy-a-home lottery ticket. You get a home loan and keep more money in your pocket. What could be wrong with that?
Well, there are some downsides. And zero down home loans come and go — except for two perennial government programs.
Ups and downs of zero down mortgage programs
Pros
The easy answer: You put less money down
You may be able to buy sooner rather than later
You have more cash on hand for expenses
Cons
When you borrow the full value of your property, you’re more financially at risk in a property value downturn. Without equity in your home right from the start, any loss of value from a declining real estate market can lock you into a no-move situation.
You’re perceived as a higher risk by the lender, so you’ll likely pay a higher interest rate on your loan. With “risk-based pricing,” lenders charge higher mortgage rates to borrowers with lower credit scores and meager or no down payments.
You’ll probably pay higher fees on your mortgage, too — as well as mortgage insurance premiums
Your monthly payment will be higher
Some zero down programs may be going away
In the past year or so, a number of lenders have begun offering 1% and zero down payment programs. That’s because Fannie Mae and Freddie Mac, the government-sanctioned companies that provide capital to lenders, have been allowing 3% down loans. Some lenders have offered grants to borrowers in order to bridge the down payment difference and promote zero down payment loans.
But Freddie Mac is pulling the plug on such promotions, as of Nov. 1, 2017. Lenders can make contributions to a borrower’s down payment or closing costs, but only after the borrower has contributed a minimum 3% down payment.
“To meet that 3% threshold, the borrower can still come with funds from a relative, a government agency — such as grants from a housing finance agency — or from an employer housing program. That has not changed,” says Lisa Tibbitts, a spokeswoman for Freddie Mac.
The 3% stake that the borrower contributes “is a really important factor in creating responsible, sustainable homeownership,” Tibbitts adds.
While some lenders say they’ll continue with their programs with low and zero down payment, regardless of Freddie Mac’s policy changes, there is something else going on here as well, which we’ll get to in a moment.
These zero down programs are here to stay
There are two tried and true loan programs that require no down payments — and they are not in danger of going away. They are:
VA loans — Mortgages insured by the Department of Veterans Affairs offer zero down payments for service members and qualified veterans. VA loans also offer interest rates that are usually lower than conventional loans.
USDA loans — Loans guaranteed or issued directly through the Rural Development Guaranteed Housing Loan Program of the U.S. Department of Agriculture are another mortgage option that requires no down payment. While mainly targeted to rural borrowers, some suburban areas also qualify.
Zero down may cost you in the long run
Now to that other consideration regarding lender-provided down payment assistance.
The Federal Housing Finance Agency, which has authority over Freddie Mac and Fannie Mae, is keeping an eye on lender-funded down payment discounts, particularly when borrowers are charged higher interest rates or additional fees in order to reimburse the lender’s participation.
“Some down payment assistance programs are offered as gifts or grants that do not have to be repaid, while others finance gifts or grants through a higher mortgage note rate that is passed on to the borrower,” FHFA spokeswoman Stefanie Johnson says. “In other words, the borrower may end up paying more over the life of the mortgage than what the lender provided in assistance.”
It’s called “premium pricing,” and it may be one reason Freddie Mac is eliminating lender down payment subsidies: to prevent its authorized lenders from running afoul of the FHFA.
So far, Fannie Mae, which also offers a 3% down program that lenders could buy down on behalf of borrowers, has not issued any new restrictions on such lender-funded down payment assistance. But Fannie Mae does prohibit premium pricing and requires that lender-assisted down payments be true grants — meaning gifts that do not require repayment.
All the more reason to shop multiple lenders, especially if you are seeking a low or no down payment loan — so that you can be sure you aren’t a victim of premium pricing.2022-07-13T03:49:00-07:002022-07-12T14:46:07-07:00Jacob Sanders