Posts Tagged ‘historically low interest rates’

Moving to the suburbs?

June 16, 2020

Another change in sentiment from Covid is the possibility of people moving from the city and into the suburbs. A recent Harris poll stated about a third of those surveyed are considering moving to the suburbs in light of the pandemic.

Larger lots… more green space… less population density… easier to get to grocery stores… these are essential items for those surveyed considering moving out from the city. Couple this with the my recent post detailing an increased desire for dedicated home office space, we have definite trend changes in home buying due to Covid.

Homes are going fast right now. I’m seeing my clients getting under contract on homes just hitting the market. How does one set their offer apart from such a competitive field. Consider either:

  1. Making a non-contingent offer. If one qualifies to carry two mortgages, it makes the offer more appealing to the seller when they see the offer to buy their home is not contingent on the sale of the potential buyer’s home.
  2. Getting pre-underwritten. Using a “TBD” underwrite strategy is great for potential offers. The seller knows the potential buyer’s credit file (credit score, income, assets) has been reviewed and approved. This gives the seller more confidence the potential buyer’s offer will close.

Using either one (or both) of these options can set an offer apart from others in such a crowded market.

The purchase market is definitely hot right now. If you are buying in the state of Georgia, contact me today. We can get you prequalified and on your way to a “TBD” underwrite to help make your offer more competitive and stand out in the crowd.

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.

More changes due to Covid

April 21, 2020

I know… I know…. we’ve had our fill of Covid related news. I hear you! I know your head is probably spinning trying to keep up. Mine too! To compensate, let’s get straight to the point!

A post from earlier in April detailed changes in the mortgage industry. One of the changes focused on the increased scrutiny of continued employment due to many layoffs/furloughs throughout the country. Since the post, we’ve experienced more changes.

  • Year to Date Profit and Loss statements are often being required for self employed borrowers. This is to show stable income in the time of Covid.
  • Those getting temporary or permanent salary reductions can still qualify for a home loan. So long as we can show the updated income (pay stub reflecting the reduced pay), and the borrower still qualifies for the loan with the reduced pay, then we can proceed as normal.
  • Investment accounts had a mandatory manual reduction of 50% from the statement balance due to the losses in the stock market (if an investment account shows $200,000, then we could only use $100,000 toward the loan). With the rebound in stocks, the manual adjustment is now 30%.

While the entire experience right now can be frustrating, underwriting has shown some flexibility:

  • P&Ls: I had a client closing where half of their income is earned in the 4th quarter. If you took the first quarter earnings and multiplied by 4 to get a yearly total, the pace would be way off! I had my client compile a P&L from the first quarter in 2019 to compare it to year to date 2020 to show income is similar when compared to the same time last year. The loan was approved.
  • Normally when there is a reduction of income/hours, we need to show the reduction has been in place for a period of time (not just one pay period). Well, we have successfully closed clients after one pay period of the reduced pay so long as they still qualify for the loan with the reduced pay.
  • Updates are happening in relatively real time as the investment account requirement updated as market conditions improved.

I feel underwriting is trying to work with us during this tough time while still meeting the agency guidelines. I’ll work with my clients to present the best case for continued stability of income for those who are in the loan process and being impacted by the fallout from Covid.

Thinking of getting a home loan right now? Rates are still low for those looking to refinance… people are still out looking for homes to purchase. The housing market is still very active. Contact me today, and we can talk about how Covid will impact your ability to purchase a home (if any impact at all). If you are looking to get the loan on a property in the state of Georgia, I can gladly help you with the loan!

Covid-19 creating more changes in mortgage industry

April 2, 2020

Covid-19’s reach extends everywhere in the world. The scope of the impact is staggering. It seems like every day there is something new. Lets try and cover some of the impacts to the mortgage industry.

If you are tired of Covid coverage, then how about something completely unrelated. Who can resist watching hamsters eat burritos!

 Previous posts touched on how Covid impacts mortgage rates and changes for appraisals and foreclosures. Today, let’s touch on more changes.

  • Verification of Employment: there is no standard policy across the board right now. Just know with all of the furloughs and layoffs across the country, documenting continued paid employment is emphasized. This can range from providing additional pay stubs (even if the loan is already approved) to multiple verbal verifications of employment up to the closing date. One good thing is employers are allowed to be called on their mobile phones for these verbal verifications. This is a great change as many offices are closed and everyone is telecommuting.
  • Government loans experienced a change to qualifying credit scores. Most banks increased the minimum credit score for government loans (FHA, VA, USDA) from 580 to 660.
  • Some banks have put caps on the amount of equity that can be taken out during a cash out refinance. Not everyone has made this change. Those who implemented the cap set a limit of $50,000 maximum cash out.
  • Many banks stopped offering Jumbo loans (a Jumbo loan is a loan amount over $510,400).
  • Almost all banks offering non-Qualified Mortgages (non-QM) have stopped funding closings altogether. A non-QM loan is any loan not backed by Fannie Mae, Freddie Mac, or Ginnie Mae (FHA/VA/USDA loans).
  • The CARES Act contained language and the option for home owners impacted by Covid to request loan forbearance on their mortgage payments from their loan servicers.

A forbearance is pretty much like deferring a student loan payment. Payments do not need to be made, but interest accrues. For example, let’s say the monthly interest on a mortgage payment is $750, and six mortgage payments are deferred. This means the principal balance of the home loan is increased by $4,500.

Who qualifies? It is designed for home owners who have been directly impacted by Covid. The forbearance provision isn’t really designed for people in this category. Given the increase to one’s principal balance, forbearance also isn’t something one should use unless desperately needed.

Do you qualify? There is so much misinformation out there, be careful when investigating. I cannot stress this enough. To see if you qualify, contact your loan servicer (who you make your mortgage payment to each month). They will let you know more about applying/qualifying.

So… that is a lot!… and that is only this week. Stay tuned as The Mortgage Blog will put up more information as things unfold.

Still looking to buy a home? People are still buying and selling real estate. Looking to take advantage of historically low interest rates? If the property is in Georgia, contact me today. In a few minutes, I can get you qualified and ready for your new home loan.

Made it this far? Need a laugh? Enjoy…

Mortgage rates all over the place

March 17, 2020

Based on the amount of calls and emails I’ve received, most of you know mortgage rates moved to historic lows in March. Rates also shot up about a full point during the middle of the month only to gain some ground back the following week.

What we are experiencing as a society with Covid-19 is unbelievable. All of us are being impacted in some way. There is enough commentary out there, so this blog will stick with what it tries to do best – impacts on the mortgage industry. Some of us are sick of the roller coaster ride with the markets.

Can we get off of this ride?!?

Again, it’s no secret rates are better. The mortgage industry is at an unprecedented level of refinancing home loans. This heavy loan volume is causing underwriting times to get longer than normal. Although purchase loans are not impacted as they get special access to an underwriter. Why? Purchase loans involve moving trucks and refinances do not. Purchases get priority.

So what is moving the markets? Well, it is a lot of things actually.

  • Covid-19: This is the easiest one to focus on because of the disruption to the economy of the world. Bad economic news is usually good news for mortgage rates. This is no exception. Covid-19 pushed stocks off of their all-time highs, and all of this money flowed into bonds pushing mortgage rates lower.
  • Covid-19 trend before cases in the US: International money flowed into US bonds in late 2019 and early 2020 as from an international stand point, there were fears of an economic slow-down. International investors began buying up our bonds and pushing rates slightly down. So the impact of Covid-19, while dramatic during March, was in play for the past several months.
  • Oil Wars: Saudi Arabia and Russia took off the gloves and went at each other. Russian didn’t want to cut back production to try and stabilize oil prices. Instead, Russia wants oil prices to go lower to hurt the US Shale industry (which needs higher oil prices to remain profitable). Since Russia decided to not play nice, Saudi Arabia is flooding the market with oil to gain back market share. Oil prices plunged. Part of the 2,000 point drop of the Dow on 3/9 was the start of the oil wars within OPEC.
  • The Federal Reserve: During the month of March, the Fed cut the Federal Funds rate to zero. With the Feds dramatically lowering rates, many people thought this would directly translate to mortgage rates. So far, it has not. The Federal Funds Rate lowers second mortgages/home equity lines. Mortgages rates are still determined by bond movement. When the Fed lowered rates the first time, mortgage rates actually increased. The second time mortgage rates improved from the previous week. Not because the Fed lowered rates but due to the Fed’s pledge to purchase bonds (specifically mortgage backed security bonds). Mortgage rates improved some after this announcement.

Where are as of this post? Mortgage rates are still low, but not as low as they have been over the past few weeks. Why?

  • Part of this is bond yields improving from their historic low (making mortgage rates worse).
  • Another part is rates were at historic lows in March; meaning, there is way more room for rates to get worse than better.
  • Lastly, the industry is pretty much at capacity and cannot handle more loan volume; meaning, banks are not being as aggressive with mortgage rates as they have more business than they can handle.

Where do we go from here? Who knows! Expect mortgage rates to stay low during market uncertainty, and the market is anything but “stable” right now! I also expect rates will improve back to where they were before the week of March 9th when rates unexpectedly got much worse. Beyond being back to historic low levels, I am not sure rates would improve much more unless things got exceedingly worse with the economy and/or the capacity issue within the mortgage industry subsides.

I am currently advising my clients if they are happy with the rate and the numbers make sense, let’s get going! It is much easier for mortgage rates to get worse than better given where rates currently sit. If unhappy, I am setting target rates to contact clients if/when rates move lower and it makes more sense to refinance.

Looking to refinance while rates are super low? If the home is in the state of Georgia, contact me today. In a short phone call, we can determine if the numbers make sense to refinance today, and if not, set a target rate for when rates improve.

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!

Mortgage Interest Rates Continue Falling

February 18, 2020

Mortgage rates – already at near historic lows – continue to improve.  Current interest rates are basically a full percentage point lower than this time last year.  I’ve recently locked clients into rates lower than I’ve ever had the privilege of doing in my entire career as a loan officer.    

What factors allow rates to continue improving?  One key component is the continuing spread of Coronavirus and the fears related to this public health concern.  In times of fear and uncertainty, investors typically move money to less-risky investments.  Given the fear and uncertainty related to coronavirus, investors have recently been doing this very thing.  Investors have been putting more money into US government bonds.  This drives bond prices up and interest rates down.  The US 10 Year bond trended upward from August 2019 until December.  Since then, the interest rate on this bond has moved consistently downward.

Investors consider mortgage backed securities to have a risk profile similar to US government bonds, so mortgage interest rates have declined along with rates on government bonds.  So mortgage rates now sit very close to historic lows.

How long will these low rates last?  That requires a crystal ball and I don’t have one.  If health officials can control the coronavirus spread and ease public concerns, perhaps rates will start moving higher again.  But looming over the entire situation is the 2020 Presidential and Congressional elections, which could bring more uncertainty to offset any positive news on the coronavirus front.

The bottom line is this:  Home owners who purchased or refinanced in 2017, 2018, or the first half of 2019 may have a great opportunity now to lower their interest rate by refinancing.  And home owners with FHA loans a couple of years old may be able to refi to a conventional loan now and lower or eliminate their mortgage insurance premiums.  Some of my clients have lowered their monthly payments by over $200 a month.  One even lowered her payment by over $300 a month.  Did I just describe you or a friend you know?  If yes, call me (or tell your friend to call me) to discuss refinancing now, before rates start increasing.  Don’t miss out on potentially large savings.

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.

Is a Housing Boom Coming?

November 19, 2019

Stephen McBride, a contributor for Forbes magazine, posted an October article titled, “The Biggest Housing Boom In History Has Just Begun.” McBride approaches the subject from an investor perspective, but as someone employed in the home finance world, the article is very relevant to my job.

One of McBride’s sources stated, “The most important driver of home prices is supply and demand.  And right now, there is a chronic undersupply of homes in America.”  Since the late 1950’s, the US has seen an average of 1.5 million homes built annually, according to Census Bureau data.  However, since the Great Recession started in 2008, new home construction has averaged only 900,000 units annually.  That’s a shortfall of 600,000 off the historical annual average for 10 years now.  So we have a cumulative undersupply of 6,000,000 homes relative to historical data.  The article goes on to state, “fewer homes were built in the last decade than any decade since the ’50’s.”

On the demand side, the focus is the Millennial cohort.  The Millennials are the largest generation in American history.  Now the median age of the Millennial cohort is 34.  This historical average age of people buying their first home is 33.  According to the National Association of Realtors, one-third of home buyers are now Millennials.  The article goes on to state that “Every year for the next decade, tens of millions of Millennials will hit home buying age.”

Put these two factors together and you have a tight housing supply coupled with increasing demand.  Supply and demand analysis therefore predicts that home prices will rise.  (This makes me want to buy another house or two!)

I earned my economics degree a long time ago, but the supply and demand basics have not changed.  This appears to be the perfect storm for rising home prices.  And that could mean significant wealth growth for home owners over the next several years.

Want to get into the market now while mortgage rates are near historic lows and before home values start rising quickly again?  Give me a call at Dunwoody Mortgage.  We will get you prequalified quickly and help you close with the best financing for your current situation.  You can buy a home with a minimum 3% to 3.5% down payment and a credit score of 620+.  Now could be the perfect time for you to buy a home.

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!!