Posts Tagged ‘atlanta housing market’

Millennials and Home Ownership

July 30, 2020

Millennials are the largest generational group in US history.  This year, the largest section of Millennials will turn age 30, entering what many consider to be “prime homeownership years.”  So how is the pandemic impacting these potential home buyers?  Two recent studies have addressed this topic.

The first, by First American economist Mark Fleming is more optimistic than the second.  Fleming states that the pandemic has delayed, but not denied, homeownership for Millennials.  He notes that household formation is a key driver of home demand, and that the Millennial generation is making lifestyle decisions that “will continue to support potential homeownership demand in the years ahead.”  He further states that Millennials “may fuel a ‘roaring 20’s’ of homeownership demand.”  As a loan officer, I love optimism in the housing market!

On a less optimistic note, a realtor.com report stated that pandemic-related unemployment could further delay Millennials’ homeownership dreams.  It expresses concern that unemployed potential homebuyers will live from their savings.  And it could take them years to recoup their savings once the go back to work.  The article then references how a 10% down payment on a $320,000 home (the median list price of a US home in April), is $32,000.  Ultimately, it can take people months, if not years to save tens of thousands of dollars for a down payment.Here’s the good news related to down payments – a 10% down payment is not required.  Many home buyers obtain conventional loans with only a 5% down payment – even 3% down if they are willing to pay a higher interest rate.  And there are income-based conventional loan programs that offer discounted interest rates and mortgage insurance for a 3% down payment – for those buyers who qualify.  Home buyers can obtain 3.5% down FHA loans.  And military veterans can buy a home with a zero down VA loan.

While obtaining a mortgage with a less than 20% down payment requires paying for mortgage insurance (except for VA loans), my opinion is that paying the mortgage insurance to buy a house sooner is often better than waiting and paying rent.  As long as home prices continue appreciating, the homeowner will likely build wealth even if they have to pay the mortgage insurance.  And in my opinion, growing wealth is superior to expense only home rental payments.

Are you or someone you know a Millennial wanting to buy a home in Georgia?  I would love to help.  We can explore low down payment and other options to help you buy a home (and start growing your wealth) sooner rather than later.  Give me a call and let’s get started.

 

Good News for (Some) Home Buyers!

July 16, 2020

As a loan officer, I really like the Home Possible and Home Ready conventional loan programs.  For eligible borrowers, these programs offer discounted interest rate pricing and discounted mortgage insurance premiums.  To qualify, home buyers must make a down payment between 3% and 20% and complete an online homeownership class.  Borrowers must also earn an income of 80% or less than the area median income for the census tract where they will buy a home.

I think these programs are such good deals that I have recommended (1) borrowers who planned to make a 20%+ down payment actually make less than a 20% down payment to qualify for the lower rate and (2) spouses or domestic partners put only one person on the loan application to keep income lower to qualify for the discounts (that’s perfectly legal and within guidelines, by the way!!)  The discounts are especially powerful for people wanting to buy condominiums, as these programs allow the buyer to avoid the expensive “condominium price adjustment” in the interest rate calculation.  The Mortgage Blog has covered these programs in the past.

So, what’s the good news?  On July 12, Freddie Mac updated its Home Possible Eligibility Tool to reflect the new 2020 area median income limits issued by the Federal Housing Finance Agency (FIFA).  Approximately 87% of counties will experience AMI increases in 2020.  That means that more home buyers can now qualify for these great loan programs.

I checked the tool for some addresses in the Atlanta Metro Area.  Before July 12, the Home Possible annual income limit in these areas was $63,360.  Now the annual income limit is higher at $65,760.  I also checked Fannie Mae’s Home Ready website and found the same adjustment.  While the income increases are not huge, every little bit helps, right?  Home buyers earning $64,000 to $65,000 now can take advantage of these great programs, whereas they could not before July 12.

I recently talked with a first-time home buyer.  She said another lender suggested she get an FHA mortgage.  I recommended that with her 740 credit score and qualifying income, the Home Ready / Home Possible programs would be much better for her.  She could get a similar interest rate with a 3% down payment, and she could avoid the FHA up-front mortgage insurance, which would cost her over $4,500.  She agreed with me.

Do you know someone who wants to buy their first home in Georgia?  They need to find a mortgage lender who will explore all loan options to find the loan that best fits their own unique situation.  Tell your friend or coworker to call me.  I’ll make sure we structure the loan and their application to take advantage of the best loan program available.

COVID Could Negatively Impact the Rental Market

June 18, 2020

It’s fascinating to see studies about how the pandemic could impact the future residential real estate market.  The latest Mortgage Blog post noted that many city dwellers are now considering a move to the suburbs.  Here’s another impact:  A recent renters survey showed that 35.9% of all renters say they likely will not renew their lease, while another 38% are not sure or are somewhat likely to renew their lease.  Most striking is that 41.6% of renters who pay $1,750 or more per month say they will likely not renew their lease.  The article states that apartment fitness centers, pools, and clubhouses closed due to the pandemic contributed to this renter sentiment.

As someone who likes growing my net worth, I must say this survey makes sense to me.  At today’s historically low interest rates, it is possible for someone in the Atlanta area to buy a $300,000 home with a 5% down payment, and have a mortgage payment of only about $1,750 per month.  (This assumes a 3.5% interest rate.)  With a monthly rent payment, the entire amount is an expense.  Renters do not build wealth from their residence.  But a home buyer begins building her net worth with her first mortgage payment.  For the scenario mentioned here, the very first mortgage payment includes $448.53 of principal, or equity in the home.  So only $1,302 is an expense.  That seems like a better use of money to me.

And, given recent home price appreciation, it is reasonable to assume that an owner’s home will appreciate over time, building additional wealth.  So home owners build wealth with appreciation over time and with each payment.  My question is, “Why would someone pay $1,750 in monthly rent when they could own a $300,000 home instead?”  I suppose I can understand if people love their apartment’s amenities or if they don’t want to deal with home maintenance issues.

But many people believe myths that make them think they cannot buy, when they actually can.  One myth is that a buyer must make a 20% down payment.  I have closed many mortgages where the home buyer made only a 3% down payment.  And I’ve closed VA loans where the borrower paid $0 down.  To fund 3% down payment a buyer can get a gift from a relative or perhaps borrow from a 401K account.  Another myth people believe is that they must have “great” credit.  Even in the pandemic world, we can close mortgages for people with a 620 credit score.  And there are ways to improve a credit score over time.

Would you like to grow your wealth every month with homeownership in Georgia instead of making an expense-only rent payment?  If yes, contact me today.  We can start planning now to help you buy a home as soon as possible.

 

 

Updated News Regarding Mortgage Forbearance….

June 3, 2020

In late April, the Mortgage Blog reported on mortgage forbearance impacts to home owners.  But policies change quickly in our 2020 pandemic world, so it is now time for a forbearance policy update.

The Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, recently announced that borrowers who have opted for forbearance can now refinance or buy a new home much sooner than previously thought.  On May 19, FHFA stated that borrowers can obtain a new conventional mortgage after making three straight months of payments following the end of their forbearance period.  Before this announcement, the policy was unclear and many experts thought that homeowners would not be able to obtain a new conventional loan for 12 months after exiting forbearance.

Fannie Mae clarified two other policy details:

  • Borrowers who missed payments due to a COVID-19 financial hardship but have repaid the full amount of the missed payments will have no waiting period to obtain a new mortgage.
  • Borrowers who requested forbearance but did not actually miss a payment will also have no waiting period.

FHFA Director Mark Calabria said, “Today’s action allows homeowners to access record low mortgage rates and keeps the mortgage market functioning as efficiently as possible.”

Ultimately, these announcements are positive for the industry, but they do not make me change my recommendations from the prior forbearance post.  Those are: (1) If a borrower cannot make a mortgage payment, forbearance is a better option than a late payment or default, and (2) Forbearance is not a wise move for someone who still earns enough to make timely mortgage payments.  Using forbearance to skip payments to save for something else such as a down payment on an investment property will still cause the borrower to wait before obtaining a new mortgage.  Only now, the wait will not be as long as previously thought.

Do you have a friend who keeps talking about the current historically low interest rates but hasn’t taken action yet?  Connect your friend with me and I’ll help them navigate our pandemic-minded guidelines to close a new mortgage and realize potentially great monthly savings with a low rate.

Pandemic Impacts to Self-Employed Borrowers

May 19, 2020

In the world of mortgage origination and underwriting, the greatest focus is limiting risk.  COVID-19 has caused underwriting guidelines to get a little tighter as millions are unemployed, furloughed, and going into a forbearance status on mortgage payments. Today, I’ll focus on the tighter guidelines for self-employed buyers.

The guidelines can change depending on the lender you use. For example:

  • One lender now requires that self-employed borrowers asset statements show 6 months of “reserves” to cover mortgage payments after closing.  That means that the borrower’s bank statements must show enough available cash, after closing, to cover 6 months of mortgage payments.
  • One lender now requires an audited profit and loss statement from the most recent month to verify recent business performance (The word “audited” got my attention and I don’t believe I’ll be working with them on self employed buyers anytime soon).
  • Another lender now requires the following for self-employed borrowers:
    • Year to date profit and loss statement showing income consistent with previously filed tax returns.
    • Most recent three months of bank statements showing deposits consistent with sales / gross receipts specified on the P&L statement.
    • If the monthly statements show declining deposits, the underwriter will determine if the revenue decline results from an interruption from COVID or some other reason.  Ultimately, the underwriter will want to determine that the income is “stable and likely to continue” before approving the loan.

 

In this economy, it is wise for self-employed home buyers to review their filed tax returns and recent business performance and bank statements with their loan officer before searching for new homes.  A loan originator who understands new underwriting guidelines and will take the time to review details up front can save borrowers time, money, and potential disappointment.

Working at Dunwoody Mortgage, I represent some national mortgage companies that have not implemented stricter standards for the self-employed.  If you know a self-employed person who wants to buy a home in Georgia, please connect that person with me.  I will invest the time needed to best position the self-employed for underwriting approval in this changing and challenging mortgage world.

 

Will home values drop?

May 12, 2020

Will home values drop? Many, many people want to know as the housing market is a major economic indicator for the U.S. If a recent survey conducted by the National Association of Realtors (NAR) is true, we may not experience much of a decline in values.

While home buyers hope values will reduce given the Covid-19 situation, the NAR survey seems to indicate values will hold steady for a few reasons:

  • available homes for sale are lower than normal due to the pandemic impact on the market. A lower supply of homes will mitigate a dramatic drop of home values.
  • NAR expects the normal Spring market activity will shift to later in 2020 as the country/economy/our lives/etc. shift back toward “normal.”
  • with forbearance and most people who filed for unemployment benefits in the “furlough” and not “laid off” category, there is not the concern over high numbers of foreclosures.

So far sellers are holding firm to their list prices with roughly 70% saying they have not lowered prices to attract buyers. About 60% of sellers in the survey admit Covid is only delaying them selling their home this year at their originally intended list price.

In the same survey, about 60% of buyers felt home values would drop due to less competition of people out looking to purchase homes. While the demand for those looking may be down, the supply of homes is also down. As I mentioned earlier in this post, the lack of available homes may mitigate any drop of home values.

What should a buyer do? This is a national survey, so let me address more of the local market.

My advice to buyers is always this… if you find the home meeting your needs, go ahead and make an offer on the home. You cannot always count on the next home being there, or hoping values drop, or hoping mortgage rates stay low. If the home is the right one, go for it!

Buyers are heading back out into the market place. Over the past two weeks, I’ve had several clients go under contract to purchase their new home. The homes under contract went for near, at, or more than the list price. Some of my clients were involved in multiple offer situations.

In other words, in metro Atlanta, it appears recently listed home values are holding and buyers are headed back out into the market. I had one agent tell me there is one home for every three buyers in the metro Atlanta market. If the statement is true, it is still a seller’s market and home values may not come crashing down as some hope (at least not in the near term).

Looking to get out into the delayed Spring market? The housing market is coming back to life! If you are buying in the state of Georgia, contact me today! We can get you prequalified in a few minutes, and you’ll be ready to purchase your new home!

The Mortgage World and COVID-19…

March 26, 2020

The Mortgage Blog has documented the recent rapid swings in mortgage interest rates based on COVID-19 economic impacts.  Now let’s look at some positive (non-interest rate) news from the mortgage world, specifically regulatory changes resulting from the massive disruption to the world economy.

First of all, Fannie Mae and Freddie Mac will ease their appraisal and employment verification standards, based on a Federal Housing Finance Agency directive.  The goal is to “facilitate liquidity in the mortgage market during the coronavirus national emergency.”  Appraisal management companies can now use “appraisal alternatives” that reduce the need for appraisers to enter homes “for eligible mortgages.”  Appraisers can use desktop appraisals and drive-by appraisals in certain circumstances.  Fannie Mae stated these alternatives may be used “when an interior inspection is not feasible because of COVID-19 concerns.”

The second source of good news is from financial regulators working to help borrowers avoid foreclosures.  On March 17, Fannie Mae, Freddie Mac, and HUD (FHA’s loan guarantor) announced that they will suspend foreclosures and evictions for 60 days to help borrowers stay in their homes while COVID-19 spreads.  The State of New York went further, as Gov. Andrew Cuomo announced that the state will enact a 90-day mortgage relief period.  Options for relief include forebearance, which allows borrowers to suspend mortgage payments for up to 12 months due to COVID-19 caused hardship.  Other options may include mortgage modifications and “other mortgage payment relief options available based on the borrower’s individual circumstances.”

I find this mortgage-market news encouraging, and hopefully it will reassure people considering a home purchase.  Just a reminder if you are thinking about a home purchase – interest rates are at very low levels historically.  From a mortgage perspective, now is still a good time to buy a home.  If you want to buy a home in the State of Georgia, reach out to me.  I promise that Dunwoody Mortgage will deliver outstanding service and will go the extra mile to close your purchase as quickly and with as little hassle as possible.

Home inventory hits record lows

March 11, 2020

About that last post… seems with new data coming out, the housing inventory levels will not be as good as initially thought.

Last time on The Mortgage Blog, I discussed a report with forecasts of more inventory in 2020 and a more balanced market in 2021. This may no longer be the case.

As we move into the latter part of the first quarter, all of the stats/numbers are in, finalized, and reviewed from the fourth quarter 2019. The fourth quarter wound up being a busier time than normal as home buyers purchased more homes than usual. They took advantage of stabilized home prices and lower mortgage rates. An already limited inventory selection got even worse.

In fact, inventory levels hit a record low, according to a study by realtor.com. National housing inventory fell by 13.6% in January, the sharpest year-over-year drop in more than four years. With the volume of newly listed properties down by 10.6% since last year, the housing crunch shows no signs of abating in the near future.

The news is bleaker in the metro Atlanta area where builders are way behind on new construction due to all the rain. What can a buyer do in this ultra competitive market?

The best strategy isn’t a prequalification letter… nor a pre-approval… the strongest offer letter one can give is a credit approval letter. This means the file is underwritten prior to making an offer. All the client would need to close is a satisfactory appraisal, clear title, and insurance on the home.

Going this extra step lets the seller know this buyer has been thoroughly vetted and approved pending getting under contract to buy a house.

If you are looking to purchase in the state of Georgia, contact me today. We can get you prequalified for a home loan in 10-15 minutes, and we can also start down the road of getting your file underwritten so you can make a strong offer on your new home!

Big VA Loan Changes for 2020!

December 12, 2019

Exciting new changes are coming for VA loans that close after January 1, 2020.  These two major changes will make it easier for military veterans to purchase a home.

The first change is that the threshold for VA jumbo loans will rise from $484,350 to $510,400.  This rise aligns with the increase in the conventional conforming loan limit.  This means that the higher VA jumbo interest rates will now apply only to loans exceeding $510,400.

The second change is expected to be 0% down payments on all VA loans.  The VA hasn’t officially released details on their max loans as of this post. Again, the expectation is no down payments will be required on VA loans in 2020.

Until now, veterans will full eligibility could obtain zero down loans on principal amounts only up to the VA jumbo threshold.  So the maximum zero down loan in 2019 is $484,350.  Loan amounts above this threshold have previously required down payments.  I won’t bore you with the complicated calculation now.  The key point is that veterans can now obtain 100% financing on homes priced up to $950,000.

This is a GREAT change for one of my current clients.  My client served for over 10 years, but the military doesn’t pay top dollar.  He and his wife were not able to save much money during his military days.  He recently started a very high paying job in Atlanta.  His credit score is over 800.  With his strong income, his debt to income ratio on a $750,000 home would fall well within VA underwriting guidelines.  He can make the monthly payments and he has a strong record of paying his bills on time.  He just has not been able to save for a significant down payment with his prior military pay.  Starting January 1, he will be able to buy that $750,000 home with zero down!  He is the “poster-child” for this VA loan change.

Do you know a military veteran here in Georgia?  Perhaps you see the Army, Navy, Air Force, or Marine Corps stickers on her car in the office parking lot.  When she complains about her commute, ask her how her life would change if she cut her commute by 30 minutes each way.  Then introduce her to me.  I’ll work to get her a great deal on a VA loan, taking advantages of the benefits she earned through her military service.  A new home closer to the office will make her life much better.

Owning Makes More Financial Sense than Renting

December 3, 2019

A recent Census Bureau report showed that construction began for 11,000 single-family built-for-rent houses in the second quarter of 2019.  Mind you, these are not apartments, but single-family homes built specifically to rent.  A recent National Association of Home Builders blog post stated that renting by choice is gaining popularity among millennials.   

The CEO of a build-for-rent developer stated, “What we were shocked to find out was it was people that had great credit, they had money for down payments, they had great incomes but they just didn’t want to own a home.”  So their renter clientelle does not consist of people experiencing job loss, credit challenges, etc.  They could buy a home, but they choose to rent instead.  It’s a lifestyle decision.

Here’s a negative consequence of this choice.  William Wheaton, a MIT housing economist, recently made said to NPR, “Owning still makes much more sense.  If prices continue to rise, buying will be a money tree.”  Even home price appreciation occurs at low levels, that growth serves to build personal wealth for the home owner.  So home price appreciation builds homeowner equity.  In addition, the principal component of every mortgage payment also builds homeowner equity.  A tenant’s monthly rent checks are expense only – there’s no wealth building when it comes to paying rent.

From a long-term wealth perspective, owning builds wealth better than renting (especially with today’s low interest rates and strong home affordability).  If you are renting in Georgia now and wonder if owning would benefit you financially, give me a call.  We’ll run some numbers and see if home ownership is better for you financially.