Posts Tagged ‘prequalification letter’

Housing prices should level off

June 21, 2022

Housing affordability has become a key concern in the real estate market, amid rising mortgage rates and double-digit annual house appreciation. The average monthly payment is 50% higher than a year ago! Those rising costs are sidelining more aspiring home buyers.

Signs are surfacing that the housing market could be slowing, and that could put less pressure on home prices. For the fourth consecutive month, sales of new homes dropped, reaching their lowest level since the pandemic. Existing-home sales also decreased in April, falling for the third consecutive month and down nearly 6% compared to a year ago, according to National Association of REALTORS® data.

These trends should offer some hope for buyers. The drop in sales should equate to less competition for buyers who are eager to buy yet keep getting beat out on offers. We may also see the trend of remote work continue – for instance, relocating to an area offering homes that meet their needs without breaking their budgets. 

Yes, rates are higher. Yet for those who need to move and couldn’t get under contract due to intense competition, the current trends do offer hope of a calming market (in terms of the number of buyers and home values slowing down).

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.

Purchase process normalizing (maybe)

February 23, 2022

A survey from National Association of REALTORS® shows fewer buyers are willing to waive any (or all) contingencies when purchasing a home. This is a really good thing as buyers should not feel pressure to overpay to purchase a home (waiving an appraisal contingency) or buying a home without the seller addressing issues with the property (waiving due diligence).

From July 2021 to December 2021, a noticeable decrease occurred in the number of buyers waiving due diligence (down about a third from the July peak), waiving appraisal contingencies (down over a quarter from the July peak), and the decrease also showed up in the number of buyers choosing to waive financing contingencies, home sale contingencies, and even title contingencies.

I love surveys, data, and especially numbers (obvious as I play with numbers for a living!). One drawback to surveys is they are always looking backwards. Yes, the trend was on the decline. Yet it may be on the way back up.

  • in December and early January all my buyer’s contracts contained all of the major contingencies (due diligence, appraisal and financing).
  • As we’ve moved into February, all of my buyers have waived at least one of those three, and several have waived more than one.

Why the shift? With fewer buyers out toward the end of the year, sellers received fewer offers. This allowed buyers to make less aggressive offers. As the Spring market is heating up, we may be seeing a shift back to waiving one (or more) contingencies to make an offer stand out among the crowd.

As discussed often this month, it is a challenging market right now for buyers.

One of the easiest contingencies to waive (without major risk) is the financing contingency. By going through a TBD Underwrite, you’ll be able to make an offer knowing your financing is already approved by an underwriter. This way the seller knows your offer is vetted, and we only need the appraisal, clear title, and the ability to insure the home in order to close.

If you are buying a home in the state of Georgia, contact me today. I can help get you going on a TBD underwrite to allow your offer to stand out from the crowd.

More people staying put

February 15, 2022

Last year I discussed seniors holding onto their homes longer than previous generations. It seems this trend moved into Generation X too.

According to AARP’s newly released Home and Community Preferences Survey, seventy-seven percent of adults 50 and older say they want to remain in their current homes over the long term. Some respondents said they already live in a home that allows them to age in place, such as with a bathroom on the main level or a room on the first floor that could be used as a bedroom. Then a third of participants said they would need to modify their current home so they or a loved one could live there.

Those who do not want to remain in their home are looking for something that is better to age into and requires less maintenance.

Meaning, a majority of people already feel they are in a home they can age into over the coming years (decades) and have no plans to sell their home. This lack of downsizing is hurting the market in terms of the number of homes listed. Those 50 and over are making plans to stay in place more than moving into retirement communities, assisted living, or downsizing to a condo… fewer single family homes are coming back on the market for resale.

Let’s go builders! We need some new homes on the market to help with the inventory crunch!

As I conclude this February series on preparing for the Spring market, obviously, it is still 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.

Tapering begins again

January 4, 2022

Part of the stimulus plan by the Federal Reserve during the Covid caused Recession was purchasing bonds. This was a repeat effort by the Feds just like they did during the Great Recession. Just as they stopped this effort several years ago, they started the process of ending bond buying again.

The process began in November 2021. The Fed was purchasing $120 Billion monthly in bonds ($80 Billion in Treasuries and $40 Billion in mortgage backed securities). It was reduced to $105 Billion (a $70 & $35 breakdown) in November and down to $90 Billion ($60 & $30) in December. This trend will continue until the Fed is completely out of the bond buying business.

What can we expect from Tapering? The main impact for readers of this blog – mortgage rates will rise. Rates were predicted to end 2021 in the low 3s for a 30 year fixed rate loan (they did) and move into the upper 3s by the end of 2022.

How will this impact home loans?

  • expect a sharp drop in the number of refinances in 2022
  • we may see a cooling of the housing market in terms of purchase volume, but not necessarily a cooling in housing prices

What will keep prices steady for home sales? For one, sellers who do not need to move may simply take their home off of the market if they cannot get a high price for their home. The bigger story here is the sheer number buyers still looking to purchase a home. Many would-be buyers stopped looking in 2021. With many still wanting to purchase a home, along with Millennials in their prime home-buying years, and an improving economy, signs remain positive for the housing market itself.

While we may be in a new year (hello 2022!), this year should still be another’s seller’s market (although possibly not as severe as 2021).

It is still a competitive market. With the numbers of homes expected to be sold this winter higher than normal, 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.

Generational competition

December 14, 2021

A new analysis by Zillow shows millennials and baby boomers—two of the biggest generations in U.S. history—are both in the market for homes. While we know millennials will be out in force buying their first home and/or buying a larger home as their families grow, a new trend emerges. Americans 60 years and older were more active in the housing market than a decade ago.

With an aging population (assisted by an improving economy), individuals of every age group over 30 were buyers at higher rates in 2019 than those same age groups in 2009. Even as millennials are the biggest players in the U.S. housing market, buyers still trend older. The median age of a recent buyer—somebody who bought a home in the past year—was 44 in 2019 (up from the age of 40 in 2009).

That’s largely because baby boomers, who make up a big share of the population, were also more active in the housing market than those their age just 10 years prior. Millennials must overcome many hurdles when buying homes and one of them being in fierce competition from the next-most-populous generation: baby boomers.

Baby boomers being more active means competition that previous generations did not have when buying their first home. Older buyers have the advantage of a lifetime’s worth of savings and home equity to leverage in a competitive offer.

How does one compete? Regardless of the year, it is always harder to compete against a cash offer. I’ve personally been through this when I bought my first home during the housing boom in the early 2000s. It isn’t fun! When an all cash offer isn’t an option, one way to ease a seller’s mind is being underwritten prior to making an offer.

I talk about this strategy often on this blog, and it is a great option. If a buyer makes an offer to buy a home with an offer letter stating their income, assets, tax returns, etc. have already been reviewed and approved by an underwriter, it is a much stronger offer than an auto generated online letter someone could get by using an online bank or smart phone app. Using the pre-underwriting strategy, the seller knows not only have you spoken with an actual person about your loan, it has been reviewed/approved by a real underwriter!

If you are looking to purchase in the state of Georgia, contact me today! I can help get you underwritten prior to making offers!

Rents continue to rise

December 7, 2021

Rent prices are surging in the US. Since January of this year, the national median rent increased over 15% according to the latest National Rent Report from Rents aren’t slowing down either as demand continues to remain high.

This is why buyers continue to pay more than the list price for homes and are out fighting in such a tough market. In the Atlanta metro area, it is cheaper to buy than rent.

In addition to saving money on rent, buyers can tap into equity on the home they purchase. The average homeowner gained about $51,500 in equity over the past year, according to CoreLogic. We’ve seen double digit appreciation the past two years, and 2022 is expected to be another strong year.

When you combine higher rent prices, the opportunity to gain equity through home appreciation, and the stability coming with owning a home… these are the trends fueling the current housing market.

It is still a seller’s market, and will be again in 2022. One way to strengthen an offer is to get underwritten prior to making the offer. This way the seller knows your loan has been reviewed by underwriting and you can consider making a 0 day financing contingency offer on a home. It will help strengthen your offer.

If you are looking to purchase in the state of Georgia, contact me today! I can help get you underwritten prior to making offers!

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 appreciation to continue

August 10, 2021

Home values should continue to rise as they are for the next 12 months. Veros Real Estate Solutions data-driven approach indicates many of the top-performing cities are trending upwards at a double-digit rate. By Q2 2022, the average forecast is up 7% nationwide.

“The VeroFORECAST data continues to exhibit upward price pressure in nearly all markets throughout 2021 and into 2022,” said Darius Bozorgi, CEO of Veros Real Estate Solutions. “Buyer demand is strong in nearly every market in the country.”

This is still a seller’s market, and buyers are forced to make their absolute best offer – often making offers above asking price. The seller’s market will continue to be driven by pent up demand (many people put off purchasing a home in 2020 due to the emergence of Covid), low interest rates, and historically low inventory levels.

With the seller’s market expected to last for another year, buyers will need to continue to do extra steps to make their offers stand out – getting pre-approved, pre-underwritten, make non-contingent offers, shorten financing contingency windows, and using appraisal waivers (if the transaction allows it).

Wondering what some of those things mean? If you are buying in Georgia, contact me today. We’ll go through your file and see what we can do to make your offer stand out in this strong seller’s market.

Home ownership creates wealth

April 6, 2021

The reason it’s a zoo out there right now trying to find a home…. owning a home creates wealth. Home equity can be up to 90% of the total wealth in a house hold. So while prices are rising, this is why the demand for buying a home remains high.

I do remember the housing crash having started in the mortgage industry in 2007. I also remember from history another housing crash in the 1930s. Other than these two major outliers, home ownership helps grow a person’s net worth.

How much?

In the past 10 years, the medium home price grew $176,000. Obviously median is just an average. Using this average, someone who purchase a home for $175,000 with 5% down in 2011 could have over $200,000 of equity in their home now. Wealth accumulation takes time. The earlier and longer someone owns a home, the more equity they build.

Gay Cororatan, a senior economist for the National Association of Realtors, writes “homeownership often has long been pointed to as a way to build wealth over the long run. It also could help narrow racial income and wealth inequity gaps.”

So again, this is why the housing market is still strong even with low inventory. While home prices vary, appreciate faster some years than others, and at times, depreciate, overall home ownership leads to wealth generation.

Want to get in on this housing market? Have no idea where to start? No worries. If you are buying in the state of Georgia, contact me today. In a few minutes, I can have you ready to make offers on a home. We will discuss strategies for making your offer stand out in this crowded housing market.