Posts Tagged ‘atlanta housing market’

Home Affordability at its Highest Point in Years

November 1, 2019

According to a recent report by Black Knight, Inc., home affordability reached its best level in years in August 2019.  This follows a consistent decline in home affordability from late 2016 through late 2018.  Home affordability hit a nine-year low in November 2018, as mortgage rates rose to the 5% range.  At that time, the national home payment to income ratio rose to 23.7%.  According to Black Rock, this led to an extended slow down in home price growth.

Since November 2018, mortgage rate declines plus this slower home appreciation has greatly improved home affordability.  The national payment to income ratio has dropped to 20.7%.  This ratio means that the monthly principal and interest (P&I) payment on an average-priced home now requires only 20.7% of the national median income.

Put another way, interest rate declines between November 2018 and August 2019 has increased home buying power by about $46,000. In August 2019, a home buyer would pay the same P&I amount on a $246,000 home mortgage as she would have paid on a $200,000 home mortgage in November 2018.

On the other hand, I found websites and recent articles showing that Atlanta-area rents have risen around 4% in the preceding 12 months.  In short, owning a home in Atlanta has gotten more affordable while renting has gotten more expensive.

Do you rent your home in Georgia?  Has your rent increased making money tight?  Give me a call and let’s talk about mortgage affordability.  You don’t need perfect credit to buy a home, and you will need only a minimum 3% to 3.5% for your down payment.  (Military veterans can obtain VA loans with a 0% down payment.)  With the current low mortgage rates, you might be able to buy more home than you thought you could, for a lower monthly payment than you thought you would have to make.  And with buying a home, you will get the equity / wealth benefits from potential home appreciation.  It’s a GREAT time to buy a home in Georgia!!

Is It Time to Refinance An FHA Mortgage?

October 11, 2019

As discussed previously, using an FHA loan to buy a home makes sense for home buyers with relatively low credit scores and limited down payment funds. FHA loans offer very attractive pricing for these home buyers.

Interest rates have now fallen to their lowest level in three years, so it may be time for current FHA mortgage holders to consider a conventional mortgage refinance. The interest rate savings may not be huge, but changing from FHA mortgage insurance to private mortgage insurance could bring significant financial benefits.

I’m working with a couple now (we’ll call them Jack and Diane) who bought their home in 2017.  At that time, their qualifying credit score was in the mid-600’s and they had just enough cash for the FHA minimum down payment.  This was an ideal scenario for an FHA mortgage.

Fast forward to 2019 – their credit scores have increased and home appreciation in their neighborhood has given them more equity.  A conventional loan now makes sense for their updated situation.  They can refinance to a new interest rate that is just 0.25% less than their current rate.  Normally such a small monthly savings, by itself, does not justify the cost of refinancing.

In addition to the interest rate savings, they will also save money every month with lower mortgage insurance payments.  Switching from their FHA loan to a conventional loan will lower the mortgage insurance monthly premiums by about $120.  Their total monthly savings equal $160, and their refinance has a break-even point of just over two years.  Considering the interest rate savings plus the mortgage insurance savings makes their refinance worthwhile.

An added benefit is that their new private mortgage insurance will cancel in a few years (unlike the FHA insurance which is permanent), increasing their monthly savings to about $200. So, Jack and Diane will realize this bonus savings in just a few years.

Ultimately, home buyers who used an FHA loan two or three years ago may reap big rewards from a conventional refinance now, assuming their property value has increased.

Ron moved into your neighborhood in the last three years or so. At the neighborhood Halloween party, ask Ron if he has heard of an FHA mortgage. If he replies, “Yes, that’s the type of loan I have,” ask him if he would like to lower his monthly payment.  Then connect Ron with me.  We will quickly determine whether moving to a conventional mortgage can help Ron financially.

American Homebuying Power Grows

September 26, 2019

Overall economic circumstances keep improving for potential homebuyers.  First American’s Real House Price Index (RHPI) shows that Americans’ homebuying power increased consistently from January through July 2019.  The index tracks single-family home price changes adjusted for mortgage interest rate changes and personal income changes.

Mortgage interest rates trended downward during the first half of 2019, and they are even lower now compared to mid-year.  First American reported mortgage rates in January were 4.5%, and rates moved into the 3’s over the summer.  Average household income increased over the same time period.

Decreasing mortgage rates combined with increasing household incomes provide a double boost to Americans’ home buying power.  The Index’s “house-buying power” for consumers increased roughly 10% from January through July.  According to First American’s Chief Economist, Mark Fleming, “House-buying power is at the highest it’s been since we began tracking it in 1991.”

That means now is a great time to buy a home!  Even though home prices have been increasing, the decrease in mortgage rates coupled with household income growth make right now the best time to buy a home in almost 30 years, based on the RHPI measures.

Do you have a Georgia friend who complains about a landlord who won’t fix problems?  Let them know that their homebuying power is stronger than it has been in decades, and connect them with me.  I’ll help them obtain the best home mortgage for their unique situation as quickly as possible.  I’ll help your friend take advantage of today’s really low mortgage rates before they increase to 2018 levels or even higher.  Together, we will fire their unresponsive landlord!

Which Type of Mortgage To Use – Scenario 1

August 13, 2019

Now that everyone understands the basics of FHA and conventional loans, let’s do a buyer comparison. Both Jack and Diane want to purchase a $300,000 home. They both have $11,000 (3.7%) for the down payment and qualifying credit scores of 680 for Jack and 795 for Diane.

With Jack’s 680 credit score, his monthly payment for a conventional loan (principal, interest, and mortgage insurance “MI”) would be $1,820.82.  For a FHA loan, his payment would be $1,563.19. There’s no comparison. For Jack, the better deal is the FHA mortgage, even though it has the draw backs of the up-front mortgage insurance and the permanent monthly mortgage insurance payment.

With Diane’s 795 credit score, her monthly payment for a conventional loan would only be $1,582.61. Her FHA loan payment would be $1,542.47.  In this case, Diane is also better off, at least initially, with the FHA loan. One thing to keep in mind is the MI premium. If Diane chooses the FHA loan, that premium is permanent (assuming Congress does not change the law). If she chooses the conventional loan, the insurance will eventually be cancelled, dropping her payment to $1,442. The key question for Diane is, “How long will you stay in the home?” If less than 5 years, Diane’s best bet is the FHA loan. If longer than 5 years, Diane may want to consider the conventional loan.

Notice the FHA payments for these examples. They differ by only about $21 even though the credit scores are drastically different (680 versus 795). This shows why FHA is better for those making a purchase with lower credit scores. The buyer doesn’t see as steep of an increase in their payment.

In the next blog post, we will make the same comparison with a 10% down payment.

Does your friend Scott talk about buying a house?  Does he understand which loan program is best for him?  If not, have Scott contact me. We Dunwoody Mortgage professionals understand the details of these mortgage programs, and we coach our buyers to make the best decision given their circumstances.  Often, with a slight change to their home purchase situation (change of down payment, paying down a credit card balance, etc.), we can help our clients save money with a better interest rate or a lower mortgage insurance cost.  Home buyers should consider all options before buying, and Dunwoody Mortgage offers the service and knowledge to help home buyers make the best decision possible.

FHA still looking to revise condo guidelines

June 13, 2019

A post earlier this year on The Mortgage Blog detailed some of the potential changes coming from the Federal Housing Administration for using FHA loans when purchasing condos. As with most things involving the government, they still haven’t finalized the details, but the final product is coming more into focus.

The FHA Commissioner stated the agency is currently working to revise its condominium approval rules and that he expects a final rule to be announced soon. These changes on condos are paramount has he called condos a “mainstay of affordable housing” for seniors citizens and first-time buyers.

With that in mind, here are some of the proposed changes:

  • allow owner-occupancy determinations on a case-by-case basis.
  • allow up to 45% of commercial space in a building without documentation.
  • increase the approval period from two years to five years (this would be amazing since condo complexes are seemingly always in a “get approved with FHA mode” since they only last two years).
  • still the possibility of allowing for spot approvals.

The goal for FHA loans and condos is the become more flexible, less prescriptive and more reflective of the current market than existing guidelines.

While these changes will be welcome, it is hard to get too excited. The FHA issued proposed changes to its condo rules in 2016 that promised to lift a number of restrictions and streamline the certification process, but it has yet to issue a final rule. 

If these can go into effect, it would be perfect for buyers with lower down payments and/or below average credit scores. While one can qualify to buy condo with 3% down using a conventional loan, the rate for someone with below average credit scores is 1% or more higher than doing an FHA loan. This would make condos more affordable to more buyers.

Looking to buy a condo around the Atlanta BeltLine? Maybe a live/work/play area with condos over businesses? Or perhaps just a good old fashioned high rise condo complex? If you are looking to buy a condo in Georgia, contact me today. We’ll get you ready to move into your new home in no time at all!

Buying a Home Earlier Delivers Long Term Wealth Benefits

May 22, 2019


It is common knowledge that many Millennials are delaying “life milestones.”  A recent study by the Urban Institute shows this by documenting the increase in young adults living with their parents.  People often assume that adults living with parents can save more money, better positioning themselves for a home purchase.  But this study reports that although the intentions are positive, the actual economic results tend to be negative.  The study concludes that adults who lived with their parents between ages 25 and 34 were less likely to form independent households and buy homes 10 years later, as compared with young adults who did not live with their parents.  And this result can negatively impact their future wealth.

The study reported that the percent of young adults living with parents almost doubled between 2000 and 2017 – growing from 11.9% to 22%.  This means 5.6 million more young adults live with parents now.  Reasons for this increase include, but are not limited to (1) Student debt – since 2000, student loan debt has more than tripled.  This debt burden makes it harder for young adults to live independently.  (2) Income – adults with lower incomes are more likely to live with parents.  (3) Housing costs – real rents are at historic highs, making it harder for young adults to live independently.  (4) Below average credit – in 2016, the median credit score was 640 for Millennials and 662 for Gen Xers.

So how does this trend affect young adults over time?  Studies show that home ownership is one of the best tools for building wealth.  And UI reports here that the biggest housing investment returns go to adults who bought homes at younger ages.  The study concludes, “our results suggest that living with parents has negative long-term economic consequences.”

As mentioned in a previous blog post, perhaps many of these young adults believe the many untrue myths that stop people from pursuing home ownership.  The fact is, buying a home with a small down payment, below average credit, and other debt can be easier than many people imagine.

Do you have friends in Georgia whose adult children live with them?  Do you know a young co-worker living with his parents?  Perhaps they fear they cannot buy a home because of below average credit scores or limited available cash.  Since the study shows these young adults may wind up better off financially if they buy a home sooner, refer these people to me.  We at Dunwoody Mortgage will do everything we can to help them buy a home and start building their wealth now, positioning them for a better economic future.

Home Sales Sentiment on the Rise

May 1, 2019

Lower than expected mortgage interest rates in the first four months of 2019 have helped drive Fannie Mae’s Home Purchase Sentiment Index (HPSI) to its highest level since June 2018.  Economists and experts have predicted higher mortgage rates for the last few years.  Rates trended higher in 2018 until the stock market volatility happened in November.  Then interest rates declined to below 4.5% and have stayed there for the last few months.  Lower interest rates occurring when potential home buyers expected higher rates translates to great news for home buyers.

HPSI jumped 5.5 points in March to the highest level since last June.  Survey responses considering now a “good time to buy” rose 7% while responses considering now a “good time to sell” rose 13%.  And the study shows that more consumers expect interest rates to decrease further.

Doug Duncan, senior vice president and chief economist at Fannie Mae stated, “The results further corroborate the positive effect of falling mortgage rates on affordability, which we expect will help support a rebound in home sales.”  Duncan further noted, “job confidence…also continues to support housing sentiment, while income growth perceptions firmed from both prior month and year-ago levels, potentially supporting an uptick in housing demand.”  Ultimately, lower interest rates, job confidence, and growing income expectations are fueling the current housing market.

Personally, I am seeing more interested buyers and homes for sale than I have seen since 2016.  That is a great thing.  Ultimately, with the lower rates and positive overall economic news, now is a great time to buy or sell a home.

Do you have a friend who complains about high rent and an inattentive landlord?  Tell her that now is a great time to fire her landlord and start building equity in her own home.  Then have her call me.  We at Dunwoody Mortgage will deliver outstanding mortgage experience along with these great low mortgage rates.

 

 

Generation Z is Preparing to Buy Homes

December 13, 2018

A recent study by realtor.com shows that Generation Z (ages 18 – 24) members show their strong home ownership desire because they prepare financially for a home purchase.  The study reports that Gen Z-ers are twice as likely as the previous generations to be saving or plan to be saving for a home purchase by age 25.   The study also noted that 40% of Gen Z-ers plan to become home owners by age 25.  These young people desire to buy homes at rates similar to Millennials and Gen X-er’s, but Gen Z-er’s have started saving sooner than prior generations.

The study shows that 79 percent are certain that they want to own a home, a level similar to the preceding generations.  Only 4 percent of this young generation say they do not want to buy a home.  The striking difference lies in the fact that, by age twenty-five, 74 percent have either started saving or plan to start saving for a home purchase.  Only 33 percent of the prior generations matched this saving discipline.  Some economists speculate that their graduating into one of the best labor markets in decades has given Gen Z-er’s a savings boost.

Other interesting details reported include:

  • Gen Z shows the least home-buying desire for investment or tax savings purposes (29 percent and 16 percent, respectively).
  • The top two reason for Gen Z home purchases are:
    • Customizing their own living space at 61 percent.
    • Raising a family in a home they own at 55 percent.

Great loan programs exist that can help young home buyers (older buyers, too) buy houses for as little as 3 percent down, and with interest rate and mortgage insurance discounts.  And military veterans can obtain VA loans with no down payment.  So young buyers who have started saving may be able to buy a home sooner than they think.

Do you know a young professional who talks about buying a home – perhaps a coworker or a niece or nephew?  Or has a friend with an adult child mentioned their kid’s home buying plans?  If so, please refer them to me.  If they are ready to buy now, we at Dunwoody Mortgage will get them into a home with a great loan that fits their needs.  If they are not ready to buy right now, we will coach them and help them to best prepare for their home purchase.  We love working with young (and older) home buyers.


Rents on the rise

December 11, 2018

Rents are still going up and just hit an all-time high, again. The U.S. Census Bureau reported that during the third quarter, the nationwide median asking rent topped $1,000 for the first time ever. According to the Census data, the median asking rent during the third quarter was $1,003, an increase of $52 over the second quarter and an increase of $91 over the same time period last year. That’s an increase of nearly 10% in just one year, when rents checked in at $912.

The increase has been dramatic over the last few years. Just three years ago, the asking rent was a full $200 less per month than it is right now.

Since we are a Georgia based company, I try and bring these topics back to the local area.

  • The Bad News: Rents are going up in Georgia.
  • The Not as Great News: So are home prices for buying.
  • The Good News: Metro Atlanta is a city where it is cheaper to own that rent.

A recent study by Trulia has Atlanta around the 60th cheapest metro area to rent (out of the top 100), and in the top 40 for cheapest metro area to own. While rents are going up, by living in the metro Atlanta area, you have the opportunity to own a home, build equity, and have your monthly housing payment go toward your financial goals (instead of your landlord’s).

Now here is the question – should I buy a home? To answer that question, ask yourself how long you plan to be in the home? Atlanta is a transient town, so maybe your time here is only for a year or two. In that case, renting could be the better option. If you plan to stay in a home for 3 years or more, that same Trulia article mentioned earlier says it is cheaper to buy than rent. Three years seems to be a good number for judging whether or not to consider buying a home or continuing to rent.

So… how long do you plan to stay in the home?

If you are looking to buy in the state of Georgia, contact me today! I can help get you prequalified for the home purchase. More importantly, we can discuss how much home you should buy versus how much home you qualify to buy. Often the amount one can qualify isn’t the amount one wants to pay each month as a mortgage payment. We’ll tackle those topics and more!

Cash Out Refi or HELOC – Key Questions

October 25, 2018


 

 

In the last post we covered the fact that American households have over $6 trillion of accessible home equity and described the two main ways home owners can access that equity – a cash out mortgage refinance and a home equity line of credit (HELOC).  I promised to make my recommendations on which option is best for a home owner, based on a set of questions.  You will find my recommendations below:

Question #1:  Do I want a fixed payment, or can I live with changing interest rates and payments?  Recent economic conditions show rising interest rates.   HELOC accounts typically carry a variable interest rate that increases as market interest rates increase and decrease as the market decreases.  Borrowers obtaining a cash out mortgage refinance often secure fixed rate mortgages, so the payments do not change over time.  Which do you prefer?

Question #2:  Am I disciplined to proactively pay down my loan over time, or will I only make minimum payments?  HELOC accounts typically require interest-only payments.  If you only plan to make the minimum payments, you may be surprised in a few years when your HELOC account matures and the bank expects you to pay off the remaining account balance.  If you will proactively pay down the balance, you will not have this surprise.  Refi mortgage payments fully amortize over the loan term, so your monthly payment always includes a principal component.  And when you make the last payment, your original loan balance will be fully repaid.  Which option is best for you?

Question #3:  How much money do I need, $100,000 for a home renovation or $10,000 for a home repair?  In short, if you do make extra principle payments, how long will it take you to repay the loan balance?  The lower the amount and the faster you repay it, the less likely increasing interest rates will burst your budget.  If you need a renovation amount of cash, selecting the long-term fixed mortgage rate may be a better option since it provides a fixed payment over a long time period.

Question #4:  Why do I need access to my home’s equity?  In my opinion, home renovations, repairs, and debt consolidations serve as good reasons to tap home equity.  These are steps that ultimately increase your equity or improve your overall financial position.  To me, that’s a wise use of your home equity.  On the other hand, tapping home equity for expendable items or vacations may not be the best use of a home’s equity.

Do you have a friend pondering whether to access their home’s equity?  Please refer them to me.  I will ask them these questions (and more) and coach them to make the best decision for their own unique circumstances.