Unison’s March 21 homeownership survey gives interesting insight regarding how the pandemic has impacted Americans’ feelings about their homes. It covers many different aspects of American home ownership in 2021. Here are some points that I find most interesting.
The pandemic forced Americans to do everything from home, so homes became schools, offices, gyms, and more. Therefore, 64% of respondents stated their home is more important now than ever before. 91% of respondents stated that owning a home makes them feel more successful, stable and secure. Before covid, 58% of homeowners felt an emotional attachment to their homes. After the pandemic changed our lifestyles, 70% of owners now feel an emotional attachment to their homes. Millennials reported the highest level of emotional attachment to their homes.
90% of respondents view their home as an asset as opposed to a burden. However, 29% of owners had to take some sort of action to keep up with their mortgage payments due to pandemic impacts. To weather the storm, homeowners accessed retirement savings, delayed remodeling projects, rented out portions of their homes, and sought forbearance relief. The study noted that Millennials reported the greatest economic impacts from covid.
45% of homeowners are planning a 2021 home improvement project. 33% of mortgage-holders say they would tap their homes’ equity to finance a home improvement. That’s up from 21% before the pandemic. The most popular planned renovations are kitchen and bathroom remodels. Only 4% believe creating a dedicated home work space will most improve their home life.
Finally, 37% of Millennials stated that the pandemic has made them consider moving. The biggest drivers of the desire to move are (1) needing more space, (2) reducing living expenses, and (3) job location flexibility.
The study has a lot more detail than I can cover here. Check it out if you want to learn more.
From a mortgage perspective, interest rates are still close to historic lows. Now is still a great time to buy a new home or do a cash out refinance to fund a home improvement project. If you know someone in Georgia considering a move or a refinance, please refer them to me. The Dunwoody Mortgage team can help our buyers win purchase contracts and will make the mortgage process as simple as possible.
A recent mortgage industry headline surprised me, “Many Homeowners Still Missing Out.” The subheading read, “80% of owners have not refinanced.” Given that interest rates have reached historic lows, with less than 3.0% rates often available for 30 year mortgages, I’m really surprised that so many people have not refinanced.
The article provides the following statistics:
Almost 30% of mortgage holders do not know their current interest rate!!
Almost 20% of borrowers have refinanced in 2020.
Over 25% have considered refinancing but have not done it.
And over 50% have not even considered a refinance.
I am now doing refinances for customers whom I refinanced in 2019. Mortgage interest rates have continued dropping to the point that a second refinance now makes financial sense for some of my clients.
If you have a mortgage on a Georgia home, here are a couple of clues that you might want to talk with me about refinancing now:
Your interest rate is above 3.5%. The rate typically shows on your mortgage statement. Take a quick minute to look at it.
You obtained a FHA loan more than 2 years ago. With recent home appreciation, it’s worth exploring a conventional refinance in hopes that you can eliminate the FHA mortgage insurance.
The ultimate consideration is how much will the loan cost as compared to how much you can save monthly. Yesterday, I talked with a former purchase client. In 2016, she bought a house with a 3.5% down FHA loan at a 3.75% interest rate. That was a great deal for her….back then. Since she bought the house, it has appreciated over $100,000. With her increased equity, doing a refinance now would lower her interest rate almost a full percentage point, and she would eliminate the FHA mortgage insurance that costs her $155 every month. Her total monthly savings could be around $330. I estimate a refinance will pay for itself in just over a year.
What about you? Is your interest rate over 3.5%? Do you have a 2 year (or older) FHA loan? Do you want to give yourself a raise by lowering your monthly mortgage payment? If yes, give me a call. I can easily help you analyze your current situation to see if a refinance makes sense for you. Don’t wait too long. Who knows when interest rates will start rising.
Historically low mortgage interest rates have created a refinance “boom” in 2020. Millions of homeowners have realized significant monthly savings by lowering their interest rates. Current rates are still very low by historic standards, but refinancing is now getting more expensive.
Several weeks ago, mortgage giants Fannie Mae and Freddie Mac announced a new 0.5% “Adverse Market Refinance Fee,” applied to all mortgage refinances (not purchase mortgages). They announced this fee as a risk management step to address “loss forecasting precipitated by continued economic and market uncertainty.” In layman’s terms, Fannie and Freddie are collecting this new revenue to offset losses from expected foreclosures due to the pandemic and related economic stress.
Fannie and Freddie announced that the new fee would be effective for all loans they purchase starting on September 1, 2020. There was an immediate outcry from the mortgage industry. One mortgage association executive called this new fee an “ill-timed, misguided directive,” and urged its repeal. The same executive noted that the fee will raise interest rates on “families trying to make ends meet in these challenging times.” Fannie and Freddie relented, a bit, and delayed the implementation of the new fee until December 1.
What does that mean now if you want to refinance? It may be too late to avoid the fee. Many lenders are now pricing this fee into their published interest rates. Why so early? It can take a lender 30 – 60 days to package closed loans and sell them to Fannie and Freddie. Since lenders will pay this fee beginning December 1, loans locked for 30 to 45 days in late September may not be sold to the mortgage giants until after the December 1 fee date. The lenders don’t want to pay the fee themselves, so many are now passing the fee along to their customers.
What does this mean for new mortgage customers? Well first, if you want to buy a home, the fee does not apply and you can still take advantage of the lowest interest rates in history. Call me to get prequalified and then you can start your home search. Secondly, if you bought a home in 2017, 2018, and early 2019, it might still make good financial sense to refinance now, even if you have to pay the fee. Call me and we can evaluate your current mortgage versus a new mortgage. I can calculate your monthly savings, your loan costs, and determine a “return on investment” period for you. I often hear investment advisors recommend, “Don’t try to time the market.” I think that applies to a refinance. If the numbers make good financial sense now, don’t wait for rates to fall further, because they could go up instead. Let’s talk and evaluate what’s the best move for you now.
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.
The amount of equity in US homes now exceeds the levels seen before the housing crash. Available equity in the US is just over $6 trillion, which is 25% higher than the peaks seen during the housing boom.
Black Knight Inc uses data and analytics to provide forecasts for the mortgage and real estate industries. Their surveys indicate just over half of home owners have rates at 0.750% or higher than current rates. The average home owner has $140,000 in equity in their homes.
Meaning… homeowners have enough equity to avoid PMI (or get rid of PMI if currently on their loan) and lower their monthly payment by moving to a better interest rate.
With rates at yearly lows, and lots of equity in homes, it is the right environment for a refinance. So… should you refinance?
The main question I ask clients is “how much longer do you plan to remain in the home?”
If the homeowner is looking to move in the near future, then it rarely makes sense to refinance.
If the monthly savings begins to exceed $100 per month and a break-even point is around 2-3 years, then a refinances begins to make more sense.
Another question I get is “when should I consider refinancing?” It is a great question, and my answer is simple… if the current interest rate is 0.500% or higher than your rate, then at least have a conversation.
Own a home in Georgia and your interest rate is at or over 4.500%? Wondering if now is a good time to refinance? Contact me today. In just a few minutes, we’ll put together some numbers to see if a refinance could make sense. A credit pull isn’t required for this conversation.
Mortgage rates are as low as they’ve been in a couple of years. There is more equity than ever in US homes. If you are planning on remaining in your home for 2+ years, now may be a great time for a refinance.
As recently reported in The Mortgage Blog, mortgage interest rates have dropped to their lowest level in over two years. The last time rates were consistently this low was just before the 2016 Presidential election. For people who purchased homes since then, it may make sense to refinance now. So how do you decide if a refinance is right for you?
I read one article from a major think tank stating you should refinance for a rate that is a specific amount lower than your current rate. I believe that is a bit simplistic and you should crunch numbers in more detail. I recommend comparing the financial benefits against the cost of refinancing – the total amount you can save each month versus the refinance cost.
With a rate / term refi, you will save by lowering your monthly interest payments and, possibly, by lowering or eliminating private mortgage insurance (PMI) payments. I recommend you focus on the dollar savings. A 0.5% interest rate change on a $100,000 loan will save you much less per month than the same interest rate change on a $400,000 mortgage. Eliminating or reducing PMI payments can provide significantly lower monthly payments. To eliminate PMI, you must must have 20% equity. Perhaps your home’s value has increased since you bought it. You can capture this higher value as equity in the new loan using a new appraisal value. If the appraisal shows you have greater equity, even if it’s less than 20%, you may see your PMI payment reduced, perhaps substantially.
How do I analyze the savings? I estimate a new monthly payment based on the lower interest rate and potential PMI changes and compare this rate versus their current payment. Then I divide the refi closing cost by the monthly savings to get a “break even” point. If the monthly savings break even on the closing costs in three years or less, I typically recommend that the client pursue the refinance. Why three years? It seems most people have a general idea of their plans for the next three years or so. Anything further than that becomes a little murkier. I’m currently working with a client who has a $335,000 loan. I estimate a refinance will save her $150 per month and will “break even” in about 22 months. That seems like a wise financial move to me.
Another option to consider is a cash out refinance. Is there a home project you want to do? Perhaps a kitchen or bathroom renovation? I have clients using their home equity and lower interest rates to take cash out for a project, and still have the same payment (or even a better payment) than they have now.
Do you know someone who bought a Georgia home in 2017 or 2018? Ask them what they would do with an extra $100 per month. Then refer them to me. I’ll run the numbers to determine whether refinancing is a wise move.
This news may shock you – mortgage underwriters actually look at a borrower’s credit report. Notice I said, credit report, not credit score. The score is only one component of the full report.
When we pull a credit report, the first thing we do review is the credit score. If the score doesn’t qualify, there’s no need to spend time on the report details. My lending guidelines state that minimum qualifying credit scores for my clients are:
620 for FHA and VA loans.
620 for conventional loans.
Mortgage credit scores are different from consumer credit scores people get from websites like credit karma. Issues pertaining to past mortgages carry more weight on a mortgage score than a consumer score. So your mortgage score may differ significantly from a consumer score given to you by a credit card company or a website. I’ve had clients with mortgage scores higher than their consumer scores and other clients with scores less than their consumer scores. You never know for sure until you actually pull the mortgage report.
We look at scores from all three credit bureaus – Equifax, Experion, and Transunion. We are required to use the borrower’s middle score for loan qualification. And if there are multiple borrowers, then the lowest middle score is the score we use to qualify the application. When I pull a report, if the score is less than 620, the client and I will discuss ways that they can improve their score, which may be simply waiting for their score to rise while they pay their bills on time, or contacting a credit counselor who might be able to help improve their score.
Regardless of how good the score is, I will look carefully at additional report details. Sometimes these details can cause some underwriting questions or challenges, even if the score qualifies. It’s usuaully best to deal with any credit questions proactively.
Home buyers deserve to know as early as possible whether they can realistically win loan approval. There’s no need for them to waste their time or a Realtor’s time searching for a home when they cannot qualify for a mortgage.
We will review other key credit report details in future blog posts. But for now, if you know someone looking to buy a home in Georgia, and this person may have a few “skeletons” in their “credit closet,” (hey Halloween is approaching!), refer them to me. I’ll take the time to look at all the details, giving them the level of service they truly deserve.
In the last blog post, I introduced the FHA “streamline” refinance loan. These loans are the fastest, simplest way for FHA mortgage holders to refinance to today’s low, low rates.
The streamline program simplifies home refinancing by waiving the documentation typically required for a mortgage, including income and employment verification, credit score verification, and an appraisal of the home. Homeowners can also possibly use the program to reduce their FHA mortgage insurance premiums (MIP). Like an Olympic swimmer reduces friction by “streamlining” when underwater, the FHA streamline refinance offers much less resistance and effort than a regular purchase loan.
Here’s a quick summary of the benefits:
No appraisal is required – FHA will use your original purchase price as your home’s current value, regardless of what the house is worth today.
No employment verification is required with the streamline refinance.
No income verification is required.
No detailed review of your credit report is performed. If your score is 600 or higher, you qualify.
So to sum up the benefits, you can be (a) out of work, (b) without income, (c) have a low credit score, and (d) be underwater on your home mortgage and you can still qualify for an FHA streamline refinance.
Now this sounds crazy. Why would they do this? Well remember, to qualify, you must already own the home and have an FHA mortgage. We are not qualifying you to take on a new mortgage payment for a new house. The FHA is already committed to insuring your home mortgage.
Therefore, it is in the FHA’s best interest to help as many existing mortgage holders as possible lower their payments. By lowering payments, they will lower the default rate. So this program helps the FHA, but it also helps the borrower who can lower his monthly payment.
In the next post, we will review example scenarios where this type of loan can really help the homeowner. But for now, if someone you know in Georgia has a FHA mortgage with an interest rate of 4.00% or higher, have them call me to discuss a potential refinance. We’ll run the numbers together to make sure it’s a good financial move for them.
In recent weeks, interest rates dropped to their lowest levels since May 2013, causing the refinance business to jump significantly. Interest rates have climbed a bit since late January, but for some people, now is still a great time to refinance. So how do you know if refinancing may help you? If any of these conditions apply to you, you may want to consider refinancing:
If you have a conforming loan (not FHA and not jumbo) and you can lower your rate by 0.5%.
If you have a FHA loan obtained between 2010 and January, 2015 – even if you obtain a new FHA loan, FHA mortgage insurance premiums have declined significantly – this may lower your payment significantly.
If you pay mortgage insurance on your home loan, you can look to refinance to a lower rate and possibly drop your insurance payment depending on how much your home has appreciated since you bought it.
If you have a jumbo loan and can lower your rate by 0.25%.
To refinance you will incur closing costs. Even if the closing costs are rolled into the loan balance you still ultimately pay those costs over time. So you need to determine if your monthly savings is worth the closing costs you will pay. We calculate your breakeven point in months by dividing your refinancing costs by the savings on your monthly payments.
You need to ensure that refinancing will benefit you financially. Consider this question first…”How long do you plan to stay in this home?” If your breakeven point is after you think you will move out of the home, it’s probably best for you not to refinance. If your breakeven point comes before the date you think you will move, then you should consider refinancing.
Not sure if refinancing is a good option? That’s OK. Contact us here at Dunwoody Mortgage. We will ask you a few questions, and then we can determine your monthly mortgage savings and calculate your breakeven point. We can discuss your options and, if refinancing makes sense for you, we will pursue it and give you the best possible rate, competitive closing costs, and outstanding customer service. You have nothing to lose.
Don’t miss this opportunity. Call us now before rates go back up!!
When you are looking to buy a home, one primary consideration is, “What interest rate will I pay for my mortgage?” I’ll borrow the saying “have your cake and eat it too” in order to explain.
Truth is mortgage interest rates fluctuate daily, and can change multiple times in a single day. So when do you lock the rate? Now you’re faced with a dilemma and must ask yourself:
“If I don’t lock and rates go up, my monthly payment will be higher.”
“If I lock today and rates go down, I will miss the chance to have a lower monthly payment.”
This is one case in life – when working with the right lender – you can actually have your cake and eat it too! Get out your fork and napkin while I explain.
The base layer of your cake is a quick description of a rate lock. You lock the interest rate for the period of time you need to close on your home. Options include 15, 30, 45 days, etc.
The next layer of your rate lock cake is the fact that when you lock, your interest rate will not increase even if market rates rise significantly before you close. You are locked in and won’t pay more as long as you close within your lock window. You’ve just addressed the first horn of your dilemma.
Now the sweet icing on your rate lock cake…some lenders, like the ones we at Dunwoody Mortgage represent, offer interest rate “float down” options. If rates improve before you close, you can have the opportunity to “float down” to a lower mortgage interest rate at no cost to you – dilemma solved!!
Financing your new home purchase with Dunwoody Mortgage can protect you against rate increases and decreases. Your dilemma is solved as you don’t have to worry about when to lock OR what if rates improve! If you are looking to buy a home in the state of Georgia, and want this kind of interest rate security, then give me a call. I would love you help you have your cake and eat it too.
Clay Jeffreys is a Mortgage Consultant with Dunwoody Mortgage Services and a writer for “the Mortgage Blog.” If you would like to be a guest writer for "the Mortgage Blog" please contact Clay for details.
busino
clayjeffreys
Rodney
vanpurser
The Mortgage Blog 