Record Low Interest Rates

 

Take Advantage of Record Low Interest Rates: What They Mean for Home Buyers

Mortgage interest rates are at their lowest levels since 2022, creating an unprecedented opportunity for homebuyers. Whether you’re a first-time buyer, refinancing your existing mortgage, or looking to invest in property, these record-low rates can help you save significantly on your monthly payments and the total cost of your loan.

In this guide, we’ll explain why mortgage rates are so low, how you can take advantage of them, and what this means for the housing market

Key Takeaways:

• Mortgage rates are at record lows, offering substantial savings on new home loans and refinances.
• Refinancing your existing mortgage could lower your monthly payments and reduce interest costs.
• First-time homebuyers can benefit from lower rates, allowing for more affordable financing and larger homes.
• To secure the best mortgage rates, compare lenders, check your credit score, and consider locking in a rate as soon as possible.
• Real estate investors can capitalize on low rates for higher returns on investment properties.

Why Are Mortgage Interest Rates So Low?

Mortgage rates are influenced by a variety of factors, including inflation, economic growth, and Federal Reserve policies. Rates have remained exceptionally low due to several key factors:

• Federal Reserve Actions: The Federal Reserve has maintained a supportive stance on interest rates, allowing long-term borrowing costs to stay low. This has directly impacted mortgage rates, making homeownership more affordable.
• Economic Conditions: Despite fluctuations in the economy, inflation rates have remained manageable, which helps keep mortgage rates at historically low levels. This stability has been crucial for maintaining affordable lending rates.
• Increased Competition Among Lenders: With more mortgage lenders in the market, competition has driven rates down, making it easier for consumers to find favorable loan terms.

For home buyers, these low rates provide a unique window of opportunity to secure favorable financing terms that may not be available in the future.

How Can You Benefit from Record Low Mortgage Rates?

If you’re looking to purchase a home or refinance your mortgage, now is the time to take action. Here’s how you can make the most of these record-low rates:

1. Refinance Your Existing Mortgage
If you currently have a mortgage with a higher interest rate, refinancing to lock in a lower rate could save you thousands of dollars over the life of your loan. Lower monthly payments, reduced interest costs, and faster repayment are just a few of the benefits of refinancing during a period of record-low rates.

2. Buy a Home with More Affordability
For first-time homebuyers, low mortgage rates open up new possibilities for purchasing a home. With rates at historic lows, you may be able to afford a larger home or better location than you would have been able to with higher rates. These lower rates also reduce your monthly payment, allowing you to put more toward other investments or savings.

3. Invest in Real Estate
With low mortgage rates, real estate investors can also capitalize on the market. If you’re looking to expand your property portfolio, low rates mean lower borrowing costs and higher potential returns on investment. Whether you’re buying rental properties or flipping homes, taking advantage of low mortgage rates could yield significant profits.

What Record Low Interest Rates Mean for the Housing Market

With mortgage rates at record lows, several changes are occurring in the housing market:

• Increased Demand for Homes: Low mortgage rates are attracting more buyers, which can increase competition for homes. As more people enter the market, home prices may see upward pressure in some regions, especially in high-demand cities.
• Boost in Home Construction: Builders are responding to the demand for homes by ramping up construction. As interest rates remain low, developers are more inclined to build new homes to meet the growing demand from buyers seeking affordable mortgages.
• First-Time Homebuyers: Many first-time homebuyers are finding it easier to enter the market with lower borrowing costs. The affordability of financing makes homeownership accessible to a larger group of people who may have been previously priced out of the market.
• Competitive Mortgage Offers: With more lenders offering low rates, there is increased competition among banks and mortgage companies to provide the most attractive offers. This can lead to better deals for borrowers, including reduced fees and more flexible loan terms.

Tips for Securing the Best Mortgage Rate

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Conclusion: Lock in Your Low Mortgage Rate Now

With mortgage rates at record lows, now is the time to act if you’re considering buying a home, refinancing, or investing in real estate. These low rates provide significant savings opportunities, whether you’re a first-time homebuyer or an experienced investor. By shopping around for the best rates, improving your credit score, and making a sizable down payment, you can maximize the benefits of these favorable mortgage conditions.

Don’t miss out on this opportunity to secure affordable financing for your home. With the housing market shifting and rates remaining at historically low levels, this could be the perfect time to make your move.

 

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The Difference Between Annual Percentage Rates and Interest Rates

 If you are looking around for the best rates and options for a mortgage, then you are probably familiar with interest rates and annual percentage rate (APR). The majority of consumers think that these are one and the same, but they are not. They are related but that is as close as it gets.

What is the interest rate?

Simply put, interest rate is the percentage you pay to borrow the principal amount on your loan on an annual basis. The interest rate applies to the life of the loan, from the day it’s borrowed to the day it’s paid off. There are two types of interest rates, fixed or variable. When you get a fixed interest rate, the interest rate stays the same throughout the life of the loan. A variable rate varies and will change over the life of the loan. A variable rate is based on the prime rate and when the prime rate changes, so will your variable rate. This means that the payment on your variable rate will go up or down when the Fed moves to change the rate.

What is APR?

This can be a bit confusing but just remember that the interest rate is what the lender will charge the borrower for the loan. The annual percentage rate is the total price of the loan expressed as a percentage. The annual percentage rate will include lender fees as well, so the APR will be the same as the interest rate if the loan does not have any additional fees. If the loan does have additional fees, then the APR will be higher.

Why do you need to understand both APR and interest rate/?

When you are shopping for a loan, you want the lowest rates. Most consumers look for the lowest interest rate but if they do not include the APR rate, they will not get a full picture of the amount they will owe. The interest rate only calculates the cost that it will be to borrow the principal, but the APR will give you the cost of the total lifetime cost of the loan. For example, if you borrow $15,000 to be paid over 72 month at an interest rate of 7.99% with no origination fees, the APR will also be 7.99%.

How are interest rates calculated?

When determining your interest rate, a lender will look at your credit history, application information and the terms you selected. This means that the better your credit score is, the better interest rate you will be able to obtain. So getting your credit score the highest you can get it will get you the lowest rate. To ensure that you have a healthy credit score, you need to pay your loans and bills on time, do not use all of your credit that is available, pay any debt you have down, and don’t apply for a new loan or credit cards right before you are applying for a mortgage.

How is APR calculated?

When APR is calculated, a lender will take into consideration your interest rate, finance charges, and fees you will have on your loan. Remember that the APR can be affected by the origination date and your payment’s due date.

All financial decisions are a big part of your life, so you need to make them wisely. Remember to get all of the facts before you decide to borrow. If you are working with a real estate agent, they can refer you to a lender that is right for you.

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More Backing by FHA Loans for New Home Sales

 According to the National Association of Home Builders, the Quarterly Sales by Price and Financing report shows that FHA backed close to 14% of new home sales in the second quarter of 2023. Conventional loans went down to 73.7% of new home sales the same quarter while VA-backed sales were up to 5.4%. Cash purchases declined to 6.5% of new home sales. In fact, the share of cash purchases has decreased 2.9 percentage points over the past year and has ranged from 4.1% to 10.7% since Q2 2020.

Different regions within the US are backed by different financing sources. The national median sales price of a new home was $416,100. Split by types of financing, the median prices of new homes financed with conventional loans, FHA loans, VA loans and cash were $458,100, $346,500, 392,600 and 364,300, respectively. The price of a new home did decline in the past year. The biggest drop seen was a 20.1% decline.

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The Best Investment You Could Make

 Today’s housing market is all over the palace. There are prospective homebuyers out there who are asking themselves if this is the right time to purchase a home.

The pandemic caused a crazy housing market with home prices skyrocketing and buyers in bidding wars. Today, the market is cooling off a bit because of the high inflation.  The average interest rate for the benchmark 30-year fixed mortgage reached 7.29%, as of July 31.

Even though these red flags might scare you, this is a great time to invest in the real estate market. According to Mike Biryla with The Agency, when there’s volatility in the housing market, it is a great time to purchase. “Sellers that are on the market right now are not opportunistic sellers. This isn’t the market where sellers can just try for a high number and see if it’ll happen,” says Biryla.

When investing in real estate, you need to remember that you are setting yourself up for the future. “If you’re not ready to take on that responsibility just yet but want to lock in an interest rate, buy it now. When it comes to real estate, I think it’s one of the best investments you could possibly make. It’s great for your portfolio and it’s great for your retirement,” says Emma Hernan of the Oppenheim Group.

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Another Drop in Mortgage Rates

 The end of March saw another rate drop for the second week in a row even with the uncertainty stemming from the economy and bank failures. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.42% which was down from 6.60% the week prior. Unfortunately, this is still no match for the 30-year fixed-rate mortgage rate from a year ago at 4.42%.

“Mortgage rates continued to slide down as financial market concerns came to the fore over the last two weeks,” said Sam Khater, Freddie Mac’s chief economist.

“If mortgage rates continue to slide over the next few weeks, look for a continued rebound during the first weeks of the spring homebuying season,” replies Khater.

The Fed will still likely boost the rates a little to offset the volatile economy we are currently in. Robust economic data suggested the Federal Reserve was not done in its battle to cool the US economy and would likely continue hiking its benchmark lending rate. The rate was raised by the Feds at the end of March by a quarter point but the Fed also said that the aggressive rate hikes will more than likely stop.

“Depending on the extent of the impact of a tighter banking sector, Powell expressed a ‘wait-and-see’ approach to further contractionary policy. However, the federal funds rate is expected to remain elevated through the end of the year, meaning that a higher interest rate environment is here to stay for the time being, including for home loans,” says Hannah Jones with Realtor.com.

The rate is based on the yield on 10-year US Treasury bonds which will move according to the Fed’s action. Basically, when the Treasury goes up, mortgage rates will also go up and when the Treasury goes down, so do mortgage rates.

“At the current price and mortgage rate level, the typical housing payment on a median-priced home is 43% higher than one year ago,”said Jones.

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The Mortgage Rates of 2022

 The end of 2022 saw a dip in mortgage rates with the 30-year fixed-rate mortgage at an average of 6.49% even though this is down from the week prior at 6.58% it is still way up from the same time last year which averaged 3.11%.

The Federal Reserve has been boosting the interest rates due to easing the rising inflation but they are falling because inflation has “reached its peak.” According to Jerome Powell, Fed Chairman, they started to cool off on the spike in rates December 2022. Although the rates were dipping and home prices were easing up, homebuyer demand was still slowing down at the end of 2022.

“Mortgage rates continued to drop this week as optimism grows around the prospect that the Federal Reserve will slow its pace of rate hikes. Despite some promising developments, we have a long way to go,” said Sam Khater, Freddi Mac’s chief economist.

“The Fed is indicating that the aggressive rate hikes this year have been enough to start slowing inflation,” according to George Ratiu, Realtor.com’s manager of economic research.

He also goes on to explain that the falling away from 7% rates is a relief to homebuyers. Due to the dip, homebuyers have been more positive and welcome the slow down. Mortgage applications have been rising according to the Mortgage Bankers Association.

“The silver lining is that inventory of homes for sale continues ramping up, even with sellers taking a step back from the market this fall. Buyers who are ready can expect more properties to choose from, and a better negotiating position,” says Ratiu.

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How Much of Your Net Worth Should Be in Real Estate?

 Ever since the first settlers came to America, real estate has been a worthy investment. Even with the volatile economy we currently are living in, real estate is still a pretty safe way to invest and grow your net worth. The home prices are high currently, but those that have recently invested in a new home will still see a good return. There are some homeowners who have too little or too much of their net worth invested in real estate which can result in problems. So what is the magic number when it comes to investing your net worth into real estate?

According to professionals in the industry, you should use anywhere from 25% to 40% of your net worth for real estate. This will include your home that you live in and other real estate investments. By doing this, it allows you to capitalize on the advantages of real estate ownership while giving you plenty of flexibility to pursue other avenues of investment and wealth development. This is a broad percentage range but your age, risk tolerance and other various factors will play a part in determining how much you should go with.

Investors will tell you that adding real estate to a portfolio is very beneficial. You can enjoy predictable cash flow, excellent returns, tax advantages and diversification. Remember there are several pros to real estate investments. Real estate can appreciate over time, bring you tax incentives, provide a large chunk of income, allows you to use leverage and build equity, and allows the investor to have direct control over the investment.

Investors will need to know first hand how to calculate how much real estate should go into their net worth. This can be calculated with a net worth formula which is net worth = total assets – total liabilities. There are net worth calculators online that will provide you with the figure. An investor should always know the information needed to calculate.

To make it easier, an investor will need to divide their assets into four categories. These include tangible assets (furniture, cars, collectables, physical properties, etc.), equity assets (ownership in stocks, investments in partnerships and businesses, retirement accounts, life insurance cash value, etc.), cash and cash equivalents (cash, money market accounts, checking accounts, savings, etc.) and fixed income (bonds, etc.).

Once you have this total, then you will need to add up your liabilities. This can be divided into two categories which are secured debts (car loans, home equity loans, mortgages, etc.) and unsecured debts (credit card debt, student loans, personal loans, taxes, medical bills, etc.). Once you have your total for your assets and liabilities you will apply the net worth formula.

Remember, it is very important to understand how your net worth is calculated and what information you will need to do this. If you are in the market for a home or a real estate investment, talk to a local realtor who can help you with a real estate transaction.

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The Market Is Seeing a Decline in Home Prices

 For two years we have seen a boom in the housing market when it comes to price appreciation. We have finally seen the peak, as the prices are now declining.

Prices will keep declining in the near future but will not drop as far as they did during the recession. From the peak in 2006 all the way through to 2012 there was a 27% decrease in home prices.

“It was different in 2008, 2009 because that drop in prices was because of a push from sellers,” said Jeff Tucker, senior economist at Zillow. “Because of foreclosures and short sales there were a lot of extremely motivated sellers who were willing to take a loss on their homes.”

“I would be surprised to see prices anywhere drop below where they were in 2019,” said Tucker. “There was some overheating in the housing market in 2021 through this spring that pushed prices higher than what the fundamentals would support. Now they are coming down.”

With the soaring mortgage rates along with elevated home prices and slow increases in wages, home buying is not in most potential buyers’ future. According to Goldman Sachs we should see a decline of around 5% to 10% from the peak, Wells Fargo predicts a 5.5% decrease. This means the median home price will fall to $364,000.

“The primary driver behind the housing market correction thus far has been sharply higher mortgage rates,” the Wells Fargo researchers wrote. “If our forecast for Fed rate cuts is realized, mortgage rates are likely to fall slightly just as cooling inflation pressures boost real income growth. A modest improvement in sales activity should then follow, which will reignite home price appreciation heading into 2024.”

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Is Today’s Current Housing Market A Challenge Or An Opportunity For Homebuyers?

COVID-19 caused havoc on the housing market, especially due to health scares and stay-at-home orders.  During the pandemic home buyers were up against low home inventory which caused bidding wars.  Even though we are still seeing these challenges, many professionals in the industry say they are now a buyer’s opportunity.  In today’s current the inventory is still low but buyers are not as eager due to the higher mortgage rates. 

The low inventory is still a challenge because of underbuilding since the market crash in 2008. The current moderating of demand is slowing the pace of home sales which is starting to even out so builders are able to catch back up. For the buyer, this means there are more options to choose from.  Good news, as this will also lead to fewer and fewer bidding wars as home buyers have more options.  According to the National Association of Realtors (NAR) Realtors Confidence Index bidding wars are letting up month-over-month.   The average number of homes sold between April 2022 – June 2022 are as follows: April 5.5, May 4.2 and June 3.4.   Those that have been outbid for the past two years can see the light at the end of the tunnel.

If you are in the market for a new home, it is still a good idea to consult with a local sales agent who can guide you through the process.  With an agent, you will definitely make the strongest and best offer upfront.  Partnering with a real estate agent will just ramp up your home buying experience.

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Housing Market Is Making A Turn for The Best for Buyers

 According to Realtor.com, inventory rose to 31% in July making it a peak in three straight months.  This means there are tons more homes for buyers to pick from.

“The U.S. housing market continues to move toward more evenly balanced supply and demand compared to the 2021 frenzy,” Danielle Hale, Realtor.com’s chief economist said.

She goes on to explain that the rise in mortgage rates caused buyers to tighten their spending budget.  It has caused sellers to reduce their listing price.  Although there are more options, the rise in inventory is because most home buyers cannot afford what is out there.  As of August 4^th, the 30-year fixed rate averaged 4.99%.  Freddie Mac said this was down from the prior week but still up .77% from the same week a year ago.

Realtor.com also reported a decline in new listings in July showing a shift in many sellers’ plans to list.  Sellers are still in a good position as homes that are priced right are selling very quickly. The recent spike in home prices has also cushioned my homeowner’s equity so they can be a bit more flexible with their listing price.  According to the New York Federal Reserve Bank, the median expected increase in home prices dropped to 3.5% from 4.4% in June and 6% in January.

Bad news Fannie Mae’s Home Purchasing Sentiment Index dropped 2 point to 62.8 which is the lowest level since 2011.  The survey point out that only 1 of every 6 consumers (17%) surveyed said that it’s a good time to buy a home and for sellers, 67% believe it is a good time to sell.

“The Sentiment Index has declined steadily for much of the year, as higher mortgage rates continue to take a toll on housing affordability,” Doug Duncan, Fannie Mae’s chief economist, said in a statement.

To be sure, “with home-price growth slowing, and projected to slow further, we believe consumer reaction to current housing conditions is likely to be increasingly mixed,” Duncan said.

“Some homeowners may opt to list their homes sooner to take advantage of perceived high prices, while some potential homebuyers may choose to postpone their purchase decision, believing that home prices may drop.”

 

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A Drop in Refinancing Hurt Mortgage Rates in May

 According to Black Knight's monthly market monitor, May saw a 5% drop in rate lock volume due to a slow month for refinancing. The drop in refinance activity fell for both rate term refis and cash-outs. This is not good news for lenders because they rely on the purchase market for origination volumes.

Black Knight's monthly market monitor report watches the trends in the homeownership life cycle. It is the leader in the industry with its own software, data and analytics program.  The combined insight of the Black Knight HPI and Collateral Analytics’ home price and real estate data provides one of the most complete, accurate and timely measures of home prices available, covering 95% of U.S. residential properties down to the ZIP-code level. In addition, the company maintains one of the most robust public property records databases available, covering 99.9% of the U.S. population and households from more than 3,100 counties.

The report revealed that slower monthly mortgage originations caused a dip
of 4.8% in rate locks. Mortgage rates are down this month 7 basis points from April which came in at 5.34%. There was a 23.6% decline in rate/term refinance lending activity from April and an 89.9% dip year over year. As for cash-out refinance locks they were down 11.9% from April and 42.2% from the same time last year.

“We’ve seen rate/term refinance activity essentially evaporate and cash-out activity is now suffering as well,” said Scott Happ, president of Optimal Blue, a division of Black Knight. “While there is volume pressure across the board due to rising rates, purchase volumes are holding up the best and are now driving 82% of all origination activity.”

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A Golden Opportunity For Sellers This Spring

 The current housing market is booming for sellers. Timing is crucial with the sale of your current home and the purchase of a new one. As a seller, you will want to get the best of both worlds. Listed are four reasons why this is the best time for you to sell your home.

1. The Number of Homes on the Market Is Still Low

The past year and currently the housing inventory is low, low, low. This is great news if you are a home seller. Buyers are fighting for what little is currently on the market. Buyers are waiting for homes to go on the market in order to get to them first. Your home will be the center of attention when it comes on the market. Realtors will price your home according to the market value and will get your home sold quickly.

2. Your Equity Is Growing in Record Amounts

CoreLogic's Homeowner Equity Insight reports that current  homeowners are sitting on record amounts of equity thanks to recent home price appreciation. The report finds that the average homeowner has gained $55,300 in equity over the past year. With this amount of equity, you will be able to make a move in this hot market.

3. Mortgage Rates Are Increasing

While mortgage rates have been slightly rising this year, they are still lower than they have been. Freddie Mac shows that the current 30-year fixed mortgage rate is at 3.85%. “For homebuyers, we believe that borrowing costs will likely rise with the increase in mortgage rates,” according to Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae.

4. Home Prices Are Climbing Too

With the demand from buyers and lack of inventory, home prices are skyrocketing. It is predicted they will keep rising if this imbalance continues. If you are thinking of selling, now is the time to sell. Get ahead of the curve by selling and purchasing now before the prices climb even higher.

Remember if you are thinking of selling, contact your local Realtor. A local Realtor can help you price your home right and get it sold in no time.

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The Cost of Buying a Home

Buying a home is one of life's big moments and is a huge financial expense. If you are in the market for a home, then you will want to factor in all the costs associated. Here are the true costs of owning a home.

A home inspection is a cost that you will occur and if there are any issues with the home, you will either negotiate with the seller or have to come up with the money to fix the problems. A detailed, in-depth home inspection is a good idea to get on the home you are going to purchase.

When you purchase a home, you will need to bring closing costs to the table. Closing costs include title fees, lawyer fees, contract fees, and more. Future homeowners need to realize the listing price is not the only expense but closing costs will be added on.

Potential homeowners will need to consider monthly utility expenses. Operating home expenses can be a surprise to first-time homebuyers. Some of these expenses, just to name a few, include heat or cooling, appliances, lights, gas, water, trash and recycling.

Along with a mortgage monthly payment, you will need to pay homeowner's insurance. A homeowner's insurance agent can explain what is included in these monthly costs. The homeowner's insurance premiums are held in the escrow account and paid each year. They are collected monthly on top of the mortgage monthly payment.

Moving costs are many times looked over. These costs need to be considered whether your move is local or far. These costs can include time off work, packing, loading and unloading, and in some cases storage facilities and packing supplies.

When you live in a neighborhood with a homeowners association there will be HOA fees that are due each year. These will be paid either monthly or annually. You will need to factor this cost into your budget.

If you are in the market for a new home, using a Realtor is a smart choice. Remember to leave the house shopping, buying, and selling to the professionals.

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The 2022 Housing Market and How Interest Rates Will Change It

 For the past few years, the housing market has seen historically low-interest rates but this might change. Sources report that we will be faced with rising interest rates throughout 2022. Here are some tips that professionals in the industry look at when determining the change housing market.

This year the market is starting to slow down on refinancing and pick back up with purchasing housing. The 30-year loan average interest rate jumped from 3.5% to 3.64% in just two weeks int the beginning of the year. Home prices also increased close to 8% due to the fear rates will start to rise.

Fortunately, we no longer have stay-at-home orders and the unemployment rates are down 2.8% from this time last year. More homes are being built so the low inventory problem is resolving. Data shows that there is a 34% increase in new homes being built across the country. Job security and more inventory should encourage hopeful homebuyers.

The shift in remove work has also changed what homebuyers deem important in a home. As of September 2021, 45% of full-time employees worked remotely. More people are looking for a single-family home with more bedrooms and a finished basement.

The 2022 market is looking good. Just because interest rates are rising, doesn't mean now is not a good time to purchase a home. There are many factors that come into play that help balance the housing market event with high home prices and rising interest rates.

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Top Three 2022 Real Estate Investment Trends

 Today's housing market is booming and prices are continuing to rise. The National Associations of Realtors has reported that the median price of existing single-family homes has risen by double-digits in 78% of the tracked markets. Real estate investing is also increasing, and investors depend on key trends in the market. Here are the top three trends for 2022.

1. The Continuation of Historically Low-Interest Rates

Even with talk that the interest rates will rise next year, they still will be at historical record lows.  David Bianco, chief investment officer for the Americas at DWS Group, expects two quarter-point rate hikes next year. This should not be too much of a concern due to the 30-year Treasury bond is still holding at less than 2% and the 30-year fixed mortgage rates are a little above 3%. These lows will keep the housing market booming.

2. The Emergence of Alternate Property Sectors

With the expansions due to the hot market, investors are keeping an eye out for these opportunities. Investors are watching for single-family build-to-rent residential opportunities. Many homebuyers are still shying away from the cities after the pandemic scare. Due to this shift, build-to-rent properties are becoming popular. According to industry research, single-family homes built between 2019 and 2020 for rent increased 30%. "Last-mile industrial real estate has also become a big interest. Online shopping has grown especially during stay-at-home orders making warehouses a lucrative investment. Another popular opportunity currently is multi-asset real estate in the South East. Multi-family communities have steadily gained popularity.

3. The Sunbelt is Positioned for Further Appreciation

The Sunbelt includes cities that are located in the southern third of the country. The area is seeing a very strong demand for real estate. This strong demand is due to population growth, business-friendly local governments, and milder climates. Census data reports that the Sunbelt is home to 10 of the 15 fastest-growing cities in the U.S. States such as Tennessee, North Carolina, Texas, and Georgia are business-friendly which attracts higher real estate prices. A warmer climate allows for fewer maintenance expenses as well.

If you are a home buyer or an investor looking for real estate, don't do it alone. Contact a Realtor who can help you purchase a home or an investment property.

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Five Financial Obligations Every Homeowner Should Know

Buying a home can be both stressful and exciting. Homeownership is an important life event, especially for first-time homebuyers. Understanding these five financial obligations can help your journey be less stressful.

1. Don’t be fooled by your mortgage pre-approval amount

Getting a pre-approval is the first step on the journey of owning a home. A pre-approval letter from a mortgage lender does not mean you have it in the bank so to speak. A mortgage pre-approval is only just assurance from a lender that the buyer is in good financial standing to take on a mortgage of a certain size.  Just because you are pre-approved for a certain amount, doesn't mean you can afford it. Your pre-approval does not equal your actual budget. For example, even though you are approved for $300,000 doesn't mean you can pay the payments for a $300,000 mortgage.

2. Closing costs can add up—and be complicated

Closing costs are out-of-pocket expenses which include title insurance, notary fees, and the cost of the deed. Buyers can ask for sellers to pay closing costs but it is not to their advantage in the current seller's market.

“Some loan programs only allow a certain percentage of the sale price to be given to the buyer as a credit,” says Joe DiRosa, a real estate agent with RealtyTopia in Pennsylvania.

That means that if you’re offering $200,000 for a house and your lender only allows you to accept 2% in closing costs, you shouldn’t ask for $5,000—that would be $1,000 down the drain since you can only accept up to $4,000 in credit. Before you make an offer, ask your lender if your loan institutes a limit on closing cost credits.

3. PMI isn’t actually the devil

PMI stands for private mortgage insurance and has been characterized as both a blessing and a curse. PMI is a safety net for mortgage lenders when homebuyers do not put 20% down. It covers the lenders if the homebuyers default on their mortgage. The PMI is an additional payment on your mortgage payment. Unlike your principal, PMI does not add to your equity. Once a homeowner does have 20% equity, you can ask to have the PMI removed.

4. You might have to make escrow payments

Escrow simply refers to the separate account where that money is held; basically, our lender sets aside the money for taxes and insurance, which acts as a safety net to ensure that we sock away enough money for those expenses.  So when you have a loan with PMI, you have to pay money into an escrow for property taxes and home insurance.

5. You need to budget for surprises (and your own mistakes)

There will definitely be unexpected expenses in homeownership. Even if you depend on your clean report from the home inspector, something could come up the next day. A home inspector gives the dishwasher an A+ but the next week after you move in and go to wash the dishes it won't start.

Homeownership is a great investment, but you have to plan ahead. A local Realtor can help you navigate and find your perfect dream home.

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Third Quarter 2021 Reaches a 13-Year High for Conventional Loan Share of New Home Sales

 

The National Association of Home Builders shared that 75.5% of new home sales that were recorded in the 2021 third quarter was the largest share seen since the first of the 2008 Great Recession. The data comes from the U.S. Census Bureau's Quarterly Sales by Price and Financing.

The Quarterly Sales by Price and Financing reports are surveys of New Residential Sales that are done every March, June, September and December. These are tables that are published through the U.S. Census Bureau.

This record share saw an increase of 1.7 percentage points over 2021 2nd Quarter and has kept rising for the last three quarters. This has shown an increase of 6.9 percentage points since Q4 2021.

As for sales backed by conventional loans, the share increased quarter-over-quarter 74% from Q3 2020 to Q3 2021. The data shows a 4.9 percentage points gain over Q2 2021. FHA-backed sales came in at 11.9% in Q3 2021 which was a decline of 1.1 percentage points over Q2 2021. As for year-over-year, it was a decline of 6.6 percentage points.

VA-backed sales also came in with a decline of 1.7 percentage points from Q3 2020. The data shows a 4.9% decline which is the exact opposite of cash purchases.

Cash purchases rose 7.6% making this a rise for the past two quarters. It is now 4.4% which is the largest we have seen since Q4 2014. For Q3 2021 there was a 7.7% climb with 1,000 sales and a 4,000 increase year-over-year.

The 30-year fixed rate for both conventional and government-backed mortgages also declined quarter-over-quarter. Conventional-backed mortgages reported a 93 basis points decline while government-backed mortgages came in 72 basis points lower than seen in Q4 2019.

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If Your Considering Refinancing Your Home Here Are Six Important Things You Need To Know

  

There are several reasons a home may want to refinance. Homeowners can use the new loans to lower their interest rates, pay off mortgages at a faster pace or turn their home equity into cash. Before choosing this path, you need to makes sure that refinancing is right for you. Here are six things to consider to help you with the answer.

1. Refinancing is a process

Refinancing typically takes 30 to 45 days from start to finish. Once you choose a lender they will need to assess your income, assets and credit history. You will need to gather all your documents such as pay stubs and bank statements. An appraisal will also be done for the new mortgage. Make sure to clean your home and make sure your landscaping is in top shape.

2. Time is of the essence

Currently, we are at historic lows and this is a perfect time to refinance. This may not always be the case. It is smart to lock in a low monthly payment as well as a low rate. Once rates go up, the savings might not be there.

3. There are many reasons to refinance

A low interest rate is a big reason to refinance, however, it is not the only reason. The term of the loan is another factor, if you’re looking for a lower monthly outlay, a long-term loan will likely work best. This is not the case if you want to repay as soon as possible because you might get locked into a higher rate. Terms are important but other reasons also include changing your loan type, cashing out your equity or removing a name (in cases such as divorce).

4. You're not tied to your existing lender

You can always go with a new lender when refinancing. Once you have paid your original mortgage off with your lender you are free from obligation to them. This gives you an opportunity to shop around for the best terms and rates.

5. You can reinvest in your existing property

Many homeowners take the cash out equity and turn around and make improvements, renovations or additions to their home. These changes not only benefit your living situation but also can add more value to your home.

6. The decision is yours alone - so make it an educated one

Everyone has different goals and personal interests in life. This is also true with home purchases and refinancing. Refinancing is a personal decision and all options should be explored. If you are thinking of refinancing, contacting a lender who can help you with all aspects of home refinancing is the first smart choice of the process.

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Inventory Is Rising As of July 2021's Report

According to the National Association of Realtors (NAR) housing inventory is starting to improve. Industry leaders predict that home prices will begin to level off as the inventory starts to increase.

As of July 2021 on a year-over-year basis sales were up by 1.5% over this time last year. Existing home sales including single-family homes, townhomes, condominiums and co-ops also increased. Total existing-home sales jumped 2.0% to a seasonally adjusted annual rate of 5.99 million.

July also reported the current sales rates of unsold inventory sits at a 2.6 month supply. This is up from June 2021 but is still behind from this time last year. New construction will benefit from the low level of existing homes on the market.

Homes were on the market an average of 17 days in July which is an all-time low. This time last year homes stayed on the market for an average of 22 days. This summer homes 89% of homes that were sold stayed on the market for under a month.

Low inventory is still pushing home prices up. July reported a 17.8% increase in the median sales price of existing homes to $359,900. This is the 113th consecutive month of year-over-year increase according to the NAR. Multifamily existing homes were up 14.1% from a year ago to a median price of $307,100.

If you are in the market for a home, contact a local Realtor. Working with a local sales professional will help you save money and time. Realtors know the community the best.

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Another Drop in Mortgage Rates

 

Mortgage interest rates have been rising from the record low rates that were seen at the beginning of 2021.  Good news for those that missed out, rates are showing a dip back towards record lows. Freddie Mac reported the 30 year fixed rates have dropped to 2.88% and the 15 year fixed rates have dropped to 2.22%. These are the lowest levels seen since the middle of February 2021.

"Since their peak at 3.18% in April, mortgage rates have declined by thirty basis points," said Sam Khater, Freddie Mac's chief economist. "While this decline is not large, it provides modest relief to borrowers who are purchasing in a market with strong home appreciation and scant inventory."

The rising house prices coupled with rising rates pushed some buyers back from purchasing. Now that the rates are dropping these buyers hopefully will start actively looking again.  George Ratiu of Realtor.com believes the rates will offset the higher home prices.

"For buyers seeking predictable monthly payments, the continuation of low rates will enable them to keep searching for a desirable home with the peace of mind that their housing costs will remain steady for years to come with a low fixed-rate mortgage," he said.

Another positive outcome in the home market is the home inventory is up 5%.  Sellers are encouraged by the rising home prices and are now putting their homes on the market.

"The influx of fresh listings is helping moderate record-breaking price growth, presenting more opportunities for buyers. However, affordability will remain a challenge for many first-time buyers, as the monthly payment for the typical home is still $116 higher this week than it was a year ago."

Refinancing dropped in June 2021 due to the rising rates.  June 2021 saw refinancing 30% lower than in March of 2021 and 60% down from January 2021.  Now since the rates are dipping again, now is a good time for homeowners to revisit refinancing.

If you are in the market for a new home, contact a Realtor who can help with the process from start to finish.  This is a great time for potential homebuyers to take advantage of the low mortgage rates.

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