Tag Archives: mortgage news

The Home-Buying Equation

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Buying a home for the first time can seem daunting. One way to alleviate the process is to organize your finances before embarking on the house hunt. Unsure how to get yours in order? Remember A + B + C + D + E:

Ask + Budget + Check + Differentiate + Estimate

Before you start searching for a home, ask a real estate professional for guidance. He or she will have expertise related not only to financing, but also to negotiating a deal in your favor.

Next, set a budget that takes into account your down payment, your anticipated monthly mortgage payment (with interest), and your closing costs. These figures are all important considerations in the home-buying process.

Prior to house-hunting, check your credit report and score. Your credit is a determining factor in a lender’s approval or denial of your mortgage loan application, as well as your mortgage interest rate. Take steps to correct any errors on your report, or improve your score, if necessary.

Shop around for mortgage lenders to differentiate between loan offerings—even a slight variation in rates or terms can lead to significant savings over the life of your loan. Your real estate professional may recommend a lender, but it is ultimately your choice with whom to obtain a mortgage.

Estimate oft-forgotten homeownership-related expenses, such as your monthly homeowners insurance premium, your maintenance costs, your moving expenditures, your property taxes and your utility rates. These will all play a role in your overall affordability.

Completing A, B, C, D and E will not only prepare you for the home-buying process, but also lay a strong financial foundation for you as a new homeowner. The result of the equation speaks for itself!

Reprinted with permission from RISMedia. ©2016. All rights reserved.

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Fixed Mortgage Rates Don’t Budge

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Average fixed mortgage rates remained unchanged from the previous week, while still remaining near their all-time record lows, according to Freddie Mac’s recently released Primary Mortgage Market Survey®.

The 30-year fixed-rate mortgage (FRM) averaged 3.43 percent with an average 0.6 point for the week ending August 25, 2016, unchanged from last week. A year ago at this time, the 30-year FRM averaged 3.84 percent.

The 15-year FRM this week averaged 2.74 percent with an average 0.5 point, unchanged from last week. A year ago at this time, the 15-year FRM averaged 3.06 percent.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.75 percent this week with an average 0.4 point, up from last week when it averaged 2.74 percent. A year ago, the 5-year ARM averaged 2.90 percent.

“Treasury yields were little changed from the prior week and the 30-year fixed-rate mortgage held steady at 3.43 percent this week,” says Sean Becketti, chief economist, Freddie Mac. “This marks the ninth consecutive week that mortgage rates have been below 3.5 percent. Markets are erring on the side of caution ahead of the second estimate for second-quarter GDP and Fed Chair Janet Yellen’s speech on Friday.”
Reprinted with permission from RISMedia. ©2016. All rights reserved.

Consumers See Interest Rate Increase from Opposite Angles

Real Estate News

Prospective homeowners express concern over increase and perceived effect on real estate decisions and lifestyles; existing homeowners stand indifferent to rate boost

Berkshire Hathaway HomeServices, part of the HSF Affiliates LLC family of real estate brokerage franchise networks,  released results from its 2015 Homeowner Sentiment Survey indicating a significant split in the way real estate consumers perceive the Federal Reserve’s anticipated raising of its benchmark interest rate and the subsequent impact on mortgage rates.

Existing homeowners expressed indifference to the notion of a lift in mortgage rates as a result of the Fed’s action. By contrast, 62% of prospective homeowners – a survey group composed mainly of millennials and Gen-Xers – said rising mortgage rates would make them feel anxious about their current financial situations.

It’s been nearly 10 years since the Fed raised its benchmark rate, which stands near zero as part of the Fed’s effort to stimulate the U.S. economy. Accordingly, mortgage rates, which move in response to the fed funds rate, have hovered at or near historic lows for years. Yet in the survey, 67% of prospective homebuyers categorized the level of today’s mortgage rates as “average” or “high.”

“The Fed is seeing more people going back to work and with the expectation of job growth for America it feels comfortable with its intent to raise rates,” said Berkshire Hathaway HomeServices President Stephen Phillips. “But the reality is that an entire generation of first-time buyers has never experienced a meaningful rate increase; this is a new and unfamiliar phenomenon to them.”

Should mortgage rates rise in response to a boost in the fed fund rate, many prospective homeowners said they would have to alter their home searches and 51% would adjust their savings pace. In addition, exactly half of prospective homeowners believed they would experience more difficulty affording their ideal home. Current homeowners, whose ranks are mostly Boomers and Gen-Xers, said that increased mortgage payments would mean more personal sacrifices in areas such as family vacations, home improvements and shopping.

Fed policymakers have said the pace at which they’ll raise interest rates will be gradual – an increase of a quarter of a percentage point is typical. A similar rise in mortgage rates would add about $43 a month to a hypothetical $300,000, 30-year mortgage with a 3.75% rate, explained Gino Blefari, CEO of HSF Affiliates. “A bump in mortgage rates has more bark than bite,” he said. “The average American spends about twice as much every month on coffee[1].”

A majority of current homeowners (59%) and half of prospective homeowners believed interest rates are holding steady. Lower interest rates remain the top reason why many survey respondents view the current housing market favorably.

Respondents also identified factors they believed are driving U.S. real estate forward. Increased residential construction and increased construction in urban areas offering more housing choices closer to work topped the list. Respondents also indicated that the housing market is benefiting from an increase in millennial buyers and by a boost in housing inventory; the latter factor has hamstrung real estate in many markets since the downturn. (See Homeowner Sentiment Survey results from September.)

“As always, our agents and the industry as a whole must take great care to educate buyers and sellers about the real estate process, which includes mortgage rates,” said Blefari. “A Fed rate increase may grab people’s attention, yet the cost of borrowing money to buy a home remains historically low by all measurements. From our perspective, even though we can’t predict the future, it looks like mortgage rates will remain attractive, and that’s good for consumers and the real estate market.”

The full survey details are available upon request.

 

Berkshire Hathaway HomeServices Consumer Sentiment Survey Methodology

Interviews with 2,502 respondents were conducted online by Edelman Berland in November 2015. The respondents captured were either current homeowners (individuals who currently own a home as a primary residence) or prospective homeowners (individuals who are looking to buy a home within the next six months). The margin of error is +/-2.2% for current homeowners and +/- 4.4% for prospective homeowners.


Real Estate News

About Berkshire Hathaway HomeServices and HSF Affiliates LLC

Berkshire Hathaway HomeServices, based in Irvine, CA, is a real estate brokerage network built for a new era in residential real estate. The network, among the few organizations entrusted to use the world-renowned Berkshire Hathaway name, brings to the real estate market a definitive mark of trust, integrity, stability and longevity. Visit www.berkshirehathawayhs.com.

 

Irvine, CA-based HSF Affiliates LLC operates Berkshire Hathaway HomeServices, Prudential Real Estate and Real Living Real Estate franchise networks. The company is a joint venture of which HomeServices of America, Inc., the nation’s second-largest, full-service residential brokerage firm, is a majority owner. HomeServices of America is an affiliate of world-renowned Berkshire Hathaway Inc.

[1] According to a National Coffee Association study.

Look for prices to rise more slowly in 2014 and home building to push ahead of the housing market’s recovery.

This was a great article in USA Today…worth reposting!

The housing recovery hit high gear in 2013 with bigger than expected price gains and solid home sales. This year isn’t likely to be as exciting. Rising mortgage interest rates will price out some potential buyers. Instead of double-digit price gains, look for single-digit ones, economists say, while existing home sales remain at last year’s level.

Sound boring? “You want boring in the housing market,” says Svenja Gudell, Zillow director of economic research.

Here’s what’s ahead for:

• Home prices. They were the highlight of the 2013 housing market, up 12.5% in October year over year, CoreLogic says. Prices are now 20% off their 2006 peaks after falling more than 30%, shows the Standard & Poor’s Case-Shiller index.

Economist John Burns looks for a 6% gain in 2014. Many others see smaller increases ahead. Zillow forecasts just a 3% rise.

Prices will likely rise more slowly as more homes come on the market, fewer investors bid for homes and higher ownership costs — including interest rates and home prices — take a bite out of housing affordability, housing experts say.

Still, U.S. housing remains 4% undervalued when compared with other economic fundamentals, such as consumer incomes and the cost to rent, says Jed Kolko, Trulia economist. At their 2006 peak, home prices were 39% overvalued based on the same metrics, Kolko says.

•Existing home sales. They’ve started to slow. In November, they were down year over year for the first time in 29 months, National Association of Realtor data show.

The dip was driven by higher interest rates and a tight supply of homes for sale. It doesn’t mean the housing recovery has come off the rails, because home prices and housing starts continue to improve, says Capital Economics economist Paul Ashworth.

Existing home sales, which came in at a 4.9 million seasonally adjusted pace in November, are expected to be about 10% higher in 2013 than 2012 and stay about the same at 5.1 million in 2014, NAR forecasts. That’s roughly back to 2007 levels but below the inflated levels preceding the housing crash.

New-home sales, which make up a smaller part of the market, have more room to grow. They hit an annual pace of 464,000 in November, up almost 17% from a year ago but still below the 700,000-a-year pace generally considered healthy.

The new year will be different for home buyers, though.

Look for fewer bidding wars and a less frantic market, says Glenn Kelman, CEO of brokerage Redfin. Its data show bidding wars recently falling to one of two offers handled by Redfin agents, down from three of four at the peak in March.

Homes are taking longer to sell, and more sellers are also reducing prices to win sales, Kelman says. At the same time, the supply of existing homes for sale edged up to 5.1 months from 4.9 months in October, NAR says. That’s still below the six-month supply that Realtors generally consider to be a balanced market for buyers and sellers.

Supply should get closer to that level in 2014, Kelman says.

Donaee and Jeff Reeve hope he’s right. The couple sold their Seattle-area home in just 10 days amid a hot June market. They’ve been renting as they search for a new home with a few acres. Meanwhile, prices have risen. The lack of suitable homes for sale is “discouraging,” says Donaee Reeve, 36, a dental hygienist.

• Housing construction. This part of the housing recovery has been a laggard.

November’s data showed an improvement, with housing starts topping 1 million on an annual basis, the Commerce Department says. That was up almost 30% from a year earlier, but it’s still far below the norm. Starts averaged 1.5 million a year before the mid-2000s housing boom.

Construction won’t return to normal this year, but it will strengthen enough to be the main driver of the housing recovery as home price gains shrink, says investment manager Goldman Sachs Asset Management.

It sees housing starts increasing 20% a year for the next several years as household formation picks up with the strengthening economy.

More home construction means more jobs for construction workers, plumbers, civil engineers and others in the building trades, as well as related industries such as furniture manufacturing, it says.

Construction alone will add 300,000 to 500,000 jobs a year to the nation’s job base for the next three years, GSAM predicts. That’s up from about 100,000 in 2013.

“The construction revival is primarily a matter of when, not if,” says Tom Teles, GSAM head of securitized and government investments.

• Mortgage rates. Sarah and Andrew Katz know home prices are going up, and mortgage interest rates, too. But they’re still convinced it’s a good time to buy a first home. They’ve set their sights on spring.

“We’re banking on interest rates staying under 5%, but they are what they are,” says Sarah, 29, who works in public relations in Manhattan.

The couple better not wait too long, economists warn.

Average rates for a fixed 30-year mortgage will rise to 5.5% by the end of 2014, says Lawrence Yun, NAR chief economist. Rates have already risen about 1 percentage point in the past year as the economy has strengthened. They’ll be pushed up further as the Federal Reserve winds down its $85 billion monthly bond-buying program.

Each percentage point increase in mortgage rates makes homes about 10% more expensive in terms of higher housing payments.

Another factor could weigh on borrowers. Starting in January, lenders must make home loans that meet new federal qualified mortgage standards or face greater liability from borrower lawsuits, should the loans go sour.

At least 5% of mortgages extended in 2013 wouldn’t meet the new standard, Yun says. More than that will likely face additional scrutiny from lenders as they implement all parts of the new rule, says Brian Koss, executive vice president of lender Mortgage Network.

He says the higher rates and tighter rules will likely drive some home buyers out of the market or into lower-priced homes than they could have afforded last year.

“People have gotten spoiled,” Koss says. Higher rates and home prices will test the strength of the housing recovery in 2014, he says.

Originally posted by, Julie Schmit, USA TODAY

PenFed Announces 30-Year Fixed, Jumbo Loans

People oftentimes ask me what I like about being with Prudential PenFed Realty – being able to offer our clients awesome products like 3.625% on jumbo loans up to $4 Million is at the top of the list. Questions? Ask me! Want to know how to offer your clients these great programs? Call me!

For the full scoop visit https://www.penfed.org/30-Year-Fixed-Jumbo-Mortgage/

Seller Contributions and Non-Allowed Lender Fees

Questions?  Call Maxine for answers! 703-836-1464

Questions? Call Maxine for answers! 703-836-1464

Did you know that FHA and VA loans both contain fees that a borrower cannot, by law,
pay?

Yep.  It is a fact.  In order to facilitate settlements you will find in most of our DC Metro Area contracts contain clauses in the VA and FHA Finance Addenda that state that the “sellers agree to pay any fees that the borrower cannot, by law, pay.”

If you have a contract with seller contributions, the fees the borrower cannot pay are first deducted by that same concession (i.e. If you have $500 in fees the buyer cannot pay and have
$1000 in seller contribution then the $1000 first pays the $500 for the buyer
and the remaining $500 is provided to offset other closing costs.)
Remember no closing costs assistance can EVER go towards a borrower’s down
payment.

But what if you have $0 seller contribution?  Again, as
most of our local contracts read, the seller will still be responsible for
paying those fees that the buyer cannot pay.  For Presidential Mortgage
Services, Prudential PenFed Realty’s affiliated lender, this amounts to $760 on a VA loan and
$85.00 on an FHA loan.  For other lenders it could be significantly more.

Please be aware that if you are a listing agent and you agree to an FHA or VA
contract that $0 seller contribution, does not necessarily mean $0 from your
seller.

On the Mortgage Horizon

I just got this from a lender we frequently do business with regarding the new Qualified Mortgage rule expected from the Consumer Financial Protection Bureau …it is an interesting read.

Mortgage questions?  Call us for answers! 703-836-1464

Mortgage questions? Call us for answers! 703-836-1464

This week CNN discussed the new Qualified Mortgage (QM) rule the Consumer Financial Protection Bureau (CFPB) is likely to release.  The new QM Rule is not expected to become effective until January 2014.

The new Qualified Mortgage (QM) rule is designed to establish new lending rules that will move us between the footloose times of no documentation loans and the current strict credit standards.  The QM proposes that borrower’s total debt to income ratios be capped at 43% of their monthly gross income.  It would also limit the risky products offered by lenders.  Such as, no more loan terms greater than 30 years, mortgage loans can’t have a balloon payment due, no loans in which the principle due increases over time, and interest only loans would go out the window as well.  Homebuyers who choose adjustable rate mortgages will no longer be qualified on low introductory teaser rates, but rather the fully indexed rate.

The QM rule is designed to help lenders determine the borrower’s ability to repay the loan by evaluating all aspects of their credit profile.  Such as current income and assets, employment history, credit history, the proposed mortgage payment to include insurance, real estate taxes, HOA dues, mortgage insurance and a borrower’s total monthly debt to income ratios.

This is not designed to alter the housing market’s recovery and assist consumers who can’t meet the 43% debt to income ratios, the agency said it was establishing a second, temporary category of qualified mortgages that meet most of the new guidelines and would qualify to be purchased or guaranteed by Fannie Mae or Freddie Mac.  Federal Reserve Chairman Ben Bernanke said, “The legitimate concern is that this will cement the tight mortgage underwriting standard that we currently have in place, and most people agree that they are too tight.”

Mary Ellen Podmolik of the Chicago Tribune reported:

Under the new rules, lenders who make qualified mortgages to well-qualified borrowers that carry a lesser chance of defaulting could be shielded from lawsuits from these prime borrowers who say the lender did not satisfy the ability-to-repay requirements.  Riskier, subprime borrowers could challenge the lender’s assessment of their ability to repay the loan but borrowers would have to prove that a lender didn’t adequately factor in the living expenses and other debts.

Diane Thompson, of counsel at the National Consumer Law center said, “They appear to favor lenders’ interest above consumers.  You have to prove what’s in the creditor’s records.  It may be that no homeowners are able to challenge it.  Otherwise, you’re relying on regulatory oversight, and we say how well that worked.”

In summary, the QM rule is designed to protect consumers from irresponsible mortgage lending and protect taxpayers from having to bail out Fannie Mae and Freddie Mac.  Lenders will be restricted from offering risky products to the consumer and charged with the task of responsible lending.  CFPB director Richard Cordray explained, the ability to repay rule is a common-sense answer to curb the borrowing and lending behavior that led to the financial crash.  Cordray says, “When consumers sit down at the closing table, they shouldn’t be set up to fail with mortgages they can’t afford.  Our ability to repay rule protects borrowers from the kinds of risky lending practices that resulted in so many families losing their homes.  This common-sense rule ensures responsible borrowers get responsible loans.”