Posts Tagged ‘pre underwrite’

Housing market subdued

March 14, 2023

Subdued. That’s how Fannie Mae’s chief economist describes consumer sentiment toward the housing market, as recorded in the enterprise’s latest Home Purchase Sentiment Index (HPSI).

To which I respond…. “Oh, really? I hadn’t noticed.”

For those of us in the real estate industry, it is pretty obvious the market is subdued. I get it. Home prices are high and not substantially coming down (if at all depending on your market area). Also rates remain stubbornly high compared to the past few years. It is easy to see how the market got subdued.

While the index increased in January for the third-consecutive month, it remained well below its pre-pandemic high.

One thing to note about this index, it looks at past actions/sentiment. The recent reading from early March included data collected in January. Meaning, the data is five weeks old at its time of release.

Something changed in late February and March. My phone began ringing more often. My clients are making offers on homes with multiple offers. A more “real time” analysis seems to show the market gaining some momentum. Perhaps rates jump over 7% again (they’ve tested 7% twice in the past several months, and both times moved back below 7% rather quickly) or another bank crashes and people get really nervous. It’s quite an interesting time out there!

Even with all of this happening, the Spring market is here. More people are out looking, and competition for the limited number of homes out there is beginning to increase. I’ll be interested to see the HSPI numbers later this year once we have the figures for March and April.

For those of you looking to purchase a home in the state of Georgia, contact me today! I can get you ready to make an offer in just a few minutes, and work toward getting your loan pre-underwritten to make your offer stronger in an increasingly crowded market.

Will higher rates slow the housing market?

April 19, 2022

We’ve all seen articles/heard stories about mortgage rates going up this year. While the Federal Reserve rate increase is only 0.250 this year (so far!), mortgage rates are up significantly more than 0.250 on the year. Will this slow down the housing market?

In a word – no. In two words – not really. In a sentence – even with higher mortgage rates, the housing market is expected to remain strong and even see another year of double digit appreciation in home values.

I know….

…. but the lack of inventory is driving the housing frenzy. Higher rates will do a couple of things.

  1. Anyone not 100% serious about buying a home will probably walk away. If the idea was ” I want to buy a home while rates are at historic lows, but I do not really need to move,” those potential buyers are probably getting out as historically low rates are gone.
  2. First time home buyers are being squeezed out. Many first time home buyers do not have the assets for bidding wars. They were also stretching their budgets thin to compete with higher home prices. With rates higher, many are just now priced out of the market. It is incredibly frustrating for first time home buyers.

How does this trickle down to the market? I think higher mortgage rates will simply take a seller receiving 20+ offers, perhaps the seller receives 10-15 offers. There are so many buyers who put off buying a home in 2020 due to Covid… then in 2021 due to the housing market being so tough… there are plenty of buyers still out there to buy homes. Inventory levels must improve for the situation to improve.

Buying a condo in 2022

March 8, 2022

My colleague Rodney Shaffer began his posts this year detailing the changes in buying a condo due to all the loan guideline updates issued by Fannie Mae and Freddie Mac. These updates stem from the tragedy in Florida with the collapse of the high rise condominium. I will not rehash all of the details in this post as Rodney covered it in great detail (Part 1 and Part 2).

I want to focus on real world impact of the changes. How is buying a condo in 2022 different than previous years? It’s a mixed bag thus far.

Our office closed several condos so far in the first quarter. We closed several on time, and a few late due to the time it takes for condo questionnaires to be completed by condo associations. The new Condo Addendum adds all sorts of “fun” to the equation. The addendum can be viewed at this link.

Some condo homeowner associations have their records and details in order. Others do not. Some have gone through recent structural reports, and again, others have not. Complexes who are organized and on top of things have not had issues in closings. Those who are not, closings are being delayed (sometimes by weeks at a time).

And I completely get it. The addendum referenced above could result in a lot of liability for condo homeowner associations. They want to make sure all is in order before answering the addendum fully. Many are seeking legal counsel, getting engineering reports completed, and more. Makes total sense for them to be doing these things, and wanting to delay completing the addendum until the association is comfortable answering the questions.

The potential problem is delaying closing by delaying completing the new documentation.

I believe as we get further into the year, this will get smoother. Associations are seeing this stuff for the first time in early 2022. Delays were expected. My recommendation to buyers looking to purchase a condo is to not waive the financing contingency to protect their earnest money. When buying a condo, the complex AND buyer must be approved. While I can pre-underwrite a client’s credit/income/assets/etc., I can’t do that with condo complexes themselves.

To fully protect yourself when buying a condo, make sure to keep the financing contingency as part of the offer. OR at least be aware what it fully means waiving the financing contingency when buying a condo.

These changes are only in place for condominium purchases. None of this applies when buying a town home or single family home.

Looking to buy a condo (or any type of home) in the state of Georgia? Contact me today! I can get you ready to purchase a home in no time, and if buying a condo, cover all of the new ins-and-outs of the process.

Fewer bidding wars

February 8, 2022

There is a drop in the number of homes receiving multiple offers. Redfin reported 60.3% of home offers written by Redfin agents faced competition, unchanged from September but down from a pandemic peak of 74.5% in April.

The numbers declined further as we entered the winter season. I’ve had clients go under contract on homes which had been sitting on the market for a month or more with no other offers being made.

One thing to keep in mind is Redfin’s report is nationwide. In local areas, it could be very different from one city to another. For example, I would expect the metro Atlanta market to be on the higher end of the trend with competitive situations – just not as bad as 2021.

Redfin also reported home prices hit a record-high $359,975 in the four-week period ending November 21, up 14% year over year. The unseasonable surge in home prices appears to be drawing in more sellers, as the number of homes listed for sale was down less than 3% from 2020, and up 11% from 2019. “Rising rents and rising prices on everything from gas to groceries may be motivating more people to buy homes now,” according to Redfin Chief Economist Daryl Fairweather. “Buying a home is a type of hedge against inflation, especially with mortgage rates still near historic lows.”

In a competitive market, now is a good time to get ready to purchase a home. If you are buying in the state of Georgia, contact me today. In a few minutes, I can have you prequalified and working toward getting your loan pre-underwritten approved.

Know Your Competition….

September 28, 2021

A key concept in sports and business is, “Know your competition.” That concept also applies to home buyers in this very competitive market. So who are you competing with when offering on a home? There are many other people just like you who want to own and live in a primary residence. But increasingly, you are competing with investors, individuals and corporations buying homes which they will then rent. Here are some statistics on recent investor purchases from a second quarter 2021 Redfin study:

  • Nationwide, investors bought 67,943 homes in Q2 – $48.5 billion.
  • This is a 15.1% / $9.6 billion increase over Q1.
  • This is a 106.7% / $27.6 billion increase over last year – 2020 Q2.
  • Investors bought 15.9% of homes sold – about one in every six homes sold.
  • Investor purchases of single family homes and condos increased in Q2.
  • Investors purchased 21.2% of low-priced American homes. But due to Atlanta’s relatively low home prices, investors purchased 23.6% of Atlanta homes.
  • 74% of Q2 investor purchases were all-cash purchases.
OK, “enemy” may be too strong a term, but this tune rocks, and when was the last time you saw a music video in the Mortgage Blog, so let’s use it!

So how do you compete with investors making all cash offers? According to another study by Redfin, noted in this prior Mortgage Blog post, all cash offers deliver the greatest competitive advantage to the home buyer. The second most powerful offer detail is a zero-day finance contingency. By using a zero-day finance contingency, the home buyer is basically waiving her right to an earnest money refund if underwriting denies the loan application. Why would someone take that risk and offer a zero-day finance contingency? Because they have already been fully approved by underwriting prior to making the offer. We call this obtaining underwriting approval on a “to be determined (TBD)” property.

In August 2020, we used this approach with one of my clients. Jim wanted to buy a home in a very competitive market, and he wanted every competitive advantage he could get. So we obtained his TBD approval before he started making offers. When Jim’s Realtor saw the approval letter, he replied, “This is as good as a cash offer!” Now I don’t know that I would totally agree with that, but I would say it’s the next best thing to a cash offer. Then Jim actually beat a cash offer and has been living in his dream home for the last year now. Many more of my clients have successfully used TBD approvals to win their own homes this year.

Not every lender can obtain underwriting approvals for a TBD address. Dunwoody Mortgage can do it. Do you want to buy your own piece of the American Dream in Atlanta before prices rise more and mortgage interest rates increase? Then call me today and let’s get to work on your TBD approval so you can defeat your competition, whom you now know a little better.

Home improvement surges

February 2, 2021

Stop me if you’ve heard his before… inventory levels are low. Like super low. I am routinely hearing from agents they are receiving 20+ offers on their listings within 24-48 hours of the home being listed. I’ve been in the mortgage industry for 15 years now, and I’ve never seen it like this.

I’ve covered many reasons for the shortage of housing (and also famously said in 2019 that 2021 would be the year the market would begin to balance out. Wow, was that wrong). Covid has a lot to do with is. The uncertain economy/recovery has some people concerned.

Hearing the news of limited housing supply, some home owners fear putting their home on the market. They know they can sell. The concern is finding the new home. Instead, home owners are renovating their current homes. Recent stats from BuildFax supports this sentiment.

  • Money spent on home repairs soared in November; up 31.85% year-over-year.
  • Remodel volume and spend, which is a subset of home repairs that includes renovations, additions, and alterations, also increased by 6.38% and 7.60% compared to November 2019, respectively.
  • These trends (along with new construction) are causing building material costs to soar.

Given the uncertainty with the recovery, along with rising home prices due to the tight supply, some homeowners are simply reinvesting in their current home.

If this is you and you need money for those renovations, consider a cash out refinance. I have completed many, many cash out refinance loans over the past year. I can help you too!

What about those out there who have to buy a home… the family has grown… need a home office… no room for an addition on the home…. how does one set themselves apart in this market?

  • Work with a loan officer (like me) who can get you pre-underwritten. This way your offer can say the loan is approved pending the appraisal and clear title. This sets the offer apart from almost all offers out there.
  • Work with a loan officer (again, like me!) who will talk with the listing agent to let them know how smooth of a closing to expect.
  • Do everything in your power to make a non-contingent offer.

Need money for a renovation on your home?… Want to know more about some of those items mentioned above for your home purchase?… If the home is in the state of Georgia, contact me today. Whether it is a refinance or a purchase, I can have you pre-approved for a home loan same day. I can get a pre-underwritten approval in just a couple of days. It can be that quick!

Home sales soar

October 19, 2020

We’ve discussed new construction sales increasing recently on this site. Existing home sales are increasing too! August marked the third consecutive month of gains on existing home sales:

  • the increase was over 2% from July to August
  • it is over a 10% increase from last year
  • median sales price for all home types (single family, townhome, condo) was up over 11% from 2019.
  • Inventory levels are worse now (about 3 months) than last year around this time (about 4 months of inventory)

It’s a seller’s market, and does not seem to be changing anytime soon.

What does someone who owns a home and needs to sell it in order to make a down payment on their new home do in a time like this? Are there any options to avoid making a contingent offer to purchase a new home?

Why yes, there are options! Most people can qualify to carry two mortgages. Their current home + the new home. Given how fast homes are selling, the odds of having two mortgages payments for many months is low. So looking to qualify to buy the new home without selling one’s current home isn’t as daunting as it would seem.

The issue in this scenario would be the down payment. If the plan was to use the equity in the existing home to purchase the new home, how does one come up with the money for a down payment without selling their home?

Here are some options for the down payment on a new home:

  1. Borrow money from investment accounts: if money is tied up in investment accounts, look to borrow the money from yourself! It’s nice when you are the bank. Do consult with your tax professional to ensure any money you take out isn’t a tax liability OR if it is, you plan accordingly.
  2. Borrow from 401k: Most companies allow their employees to borrow some money from their 401k accounts when purchasing a home for as their primary residence. Borrowing and repaying a 401k loan should not trigger any tax liabilities, and the loan can be paid back pretty quickly once the current home sells. Again, it is nice when you are the bank!
  3. Gift from family: Getting money from an acceptable gift source to use for a down payment is allowed. Remember, you do not need 20% down to purchase the home.
  4. Temporary loan: apply and receive a temporary loan, such as a bridge loan, to use for the down payment. This is an option, but it can be more expensive in terms of closing costs (a 401k loan should have little/no fees and a gift from a relative has no fees). The buyer would also have to qualify on the new home loan with three mortgages… the current mortgage, the temporary home loan to use as a down payment, and the new mortgage on the new home.
  5. Combination of the previous options: perhaps one borrows from their 401k and gets a gift from a family member.

Doing anything above could allow a buyer to make a non-contingent offer on their next home, and give them an advantage over anyone who must sell their home to qualify for the new loan.

One last option is using the seller’s market to one’s advantage. Negotiate renting back one’s current home once it is closed. Then use the rent-back time to find their new home. Going this route has its advantages:

  • Since the home is sold, qualify on just the new mortgage
  • the equity in the home is now free and ready to be used as a down payment on the new home

The person purchasing your current home has 60 days to occupy it per the terms of a standard home loan used to purchase a primary residence. Is this something that can be done? Yes, I had a client close using a scenario like this month.

Again, if you own a home, use the seller’s market to your advantage. Talk with your agent and negotiate a rent back of your current home. Something like this is negotiated just like the purchase price, closing date, etc.

It’s a seller’s market, and it is hard out there for people looking to purchase a home. Just because it is a tough market doesn’t mean you can’t find ways to make your offer stand out from the crowd! Buying in the state of Georgia? Contact me today! I can help get you prequalified and we can explore several options to see if you are able to make a non-contingent offer on your new home purchase.

Pandemic baby boom?

May 26, 2020

Recent comments coming from the Mortgage Brokers Association point to another potential increase to housing demand. The theory is pretty simple based on most of population being asked to stay at home:

  • toward the end of this year/early 2021, there will be a baby boom.
  • there will more than likely be an uptick in divorce filings.
  • many families will want homes with better home office space.

If extremely low inventory wasn’t frustrating enough, the market could see even more buyers coming into it for the reasons listed above. How can one make their offer stand out in such a competitive market?

As mentioned on this blog in previous posts, the best way to make an offer on a home is with a credit approved offer letter. Simply apply for the loan with a “TBD address.” We’ll collect bank statements, pay stubs, tax returns, and submit the file for an underwriting review.

Once approved, the offer letter to the seller will say the file has been reviewed and approved by underwriting. All in the way of getting a loan approval is an appraisal, home insurance, and clear title. Doing this will set your offer apart from others.

Ready to buy in the delayed but not hopping spring market? Want to set your offer apart from others? If buying in the state of Georgia, contact me today! We can get started, pre-underwrite your file, and help you make a strong offer to purchase your next home.

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 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!

Inventory levels still low

February 21, 2019

If you think you’ve heard this before… it is because you have. Inventory levels are still low across the country. Low inventory levels push home values up due to the simple application of supply-and-demand. This is one of the main reasons home values have jumped so much in the past couple of years. How did we get here? There are a couple of reasons:

  • During the Great Recession, very few homes were being built. After many years of very little new construction (coupled with more people wanting to buy homes), a squeeze on inventory occurred.
  • While unemployment was high during the Great Recession, many people put off buying a home until their financial situation was more stable. This creates a pent up demand on those wanting to buy homes. This increases competition for the few homes available on the market.
  • Homeowners are remaining in their homes longer. We are at the highest rate of owners keeping their homes in 18 years. The length of time is now up to 7 years, which is a 10% increase year over year.

There are many reasons why people may choose to remain in their homes longer (they have a low rate on their current home, fear of finding their new home, tighter loan qualifying guidelines), but one new factor are baby boomers choosing to live/age in place. As baby boomers remain in their current homes (instead of down sizing or moving into assisted living), it again tightens the amount of available inventory. Of course, this will not always be the case. Baby boomers (along with the silent generation) own over 50% of the homes in America. As they age, we may find ourselves in the exact opposite situation – too much inventory.

Until we get there, how can someone make their offer stand out? There are a couple of things to do.

  1. Make a non-contingent offer on the purchase. For those who own their current home, qualifying to carry two mortgages means an offer can be made without a contingency. A seller with multiple offers would find that more attractive. Homes are going fast, so it is not very likely one would carry both home loans for an extended period of time. For those who need equity from the current home for the down payment on the new home, there is always the method of recasting the loan after closing. A future post will cover recasting.
  2. Get pre-underwritten prior to making an offer. In this method, the buyer applies for the home loan with a “to be determined” property address. Once approved, the offer letter to a seller simply says the buyer is ready to close pending an appraisal and final underwriting approval. This is a quick close and the seller knows the buyer is legitimate. Rodney Shaffer covers this more in-depth with this post.
  3. For first time home buyers (and repeat buyers too), look to use Home Ready. This is a conventional loan requiring only a 3% down payment. Some sellers would prefer not accepting an FHA offer, so Home Ready allows for a smaller down payment than FHA (3% vs 3.5%), and is still a conventional loan. Couple this with the “pre-underwrite” option and have even more power behind potential offers. There are conventional loans with only 3% down that are not Home Ready loans, but Home Ready has some advantages over the “standard” 3% down conventional loan that buyers would want to take advantage of if they qualify. Here is a case study on a Home Ready loan.

Yes, it is a tight market when it comes to available homes to purchase. That doesn’t mean buyers should despair. There are ways to help make the offer more attractive to sellers. Looking to buy in the state of Georgia? If so, contact me today. We can start talking about any or all of these potential options.