Things to Avoid After Applying for a Mortgage

Things to Avoid After Applying for a Mortgage | Simplifying The Market

Congratulations! You’ve found a home to buy and have applied for a mortgage! You’re undoubtedly excited about the opportunity to decorate your new home, but before you make any large purchases, move your money around, or make any big-time life changes, consult your loan officer – someone who will be able to tell you how your decisions will impact your home loan.

Below is a list of Things You Shouldn’t Do After Applying for a Mortgage. Some may seem obvious, but some may not.

1. Don’t Change Jobs or the Way You Are Paid at Your Job. Your loan officer must be able to track the source and amount of your annual income. If possible, you’ll want to avoid changing from salary to commission or becoming self-employed during this time as well.

2. Don’t Deposit Cash into Your Bank Accounts. Lenders need to source your money, and cash is not really traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.

3. Don’t Make Any Large Purchases Like a New Car or Furniture for Your New Home. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher debt to income ratios…higher ratios make for riskier loans…and sometimes qualified borrowers no longer qualify.

4. Don’t Co-Sign Other Loans for Anyone. When you co-sign, you are obligated. As we mentioned, with that obligation comes higher ratios as well. Even if you swear you will not be the one making the payments, your lender will have to count the payments against you.

5. Don’t Change Bank Accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is consistency among your accounts. Before you even transfer any money, talk to your loan officer.

6. Don’t Apply for New Credit. It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO® score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.

7. Don’t Close Any Credit Accounts. Many clients erroneously believe that having less available credit makes them less risky and more likely to be approved. Wrong. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those determinants in your score.

Bottom Line

Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. The best advice is to fully disclose and discuss your plans with your loan officer before you do anything financial in nature. They are there to guide you through the process.

Powered by WPeMatico

6 Graphs Showing the Strength of the Current Housing Market [INFOGRAPHIC]

6 Graphs Showing the Strength of the Current Housing Market [INFOGRAPHIC] | Simplifying The Market

6 Graphs Showing the Strength of the Current Housing Market [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • Keeping an eye on the current status of the housing market is one of the best ways to make powerful and confident decisions when buying or selling a home.
  • Mortgage rates remaining near historic lows and houses selling in an average of only 29 days are just two key elements driving the strength of today’s market.
  • With the national data shown here, make sure to also determine what’s happening in your local market so you are fully informed when you’re ready to make your next move.

Powered by WPeMatico

What Is the Probability That Home Values Sink?

What is the Probability that Home Values Sink? | Simplifying The Market

With the current uncertainty about the economy triggered by a potential trade war, some people are waiting to purchase their first home or move-up to their dream house because they think or hope home prices will drop over the next few years. However, the experts disagree with this perspective.

Here is a table showing the predicted levels of appreciation from six major housing sources:What Is the Probability That Home Values Sink? | Simplifying The MarketAs we can see, every source believes home prices will continue to appreciate (albeit at lower levels than we have seen over the last several years). But, not one source is calling for residential real estate values to depreciate.

Additionally, ARCH Mortgage Insurance Company in their current Housing and Mortgage Market Review revealed their latest ARCH Risk Index, which estimates the probability of home prices being lower in two years. There was not one state that even had a moderate probability of home prices lowering. In fact, 34 of the 50 states had a minimal probability.What Is the Probability That Home Values Sink? | Simplifying The Market

Bottom Line

Those waiting for prices to fall before purchasing a home should realize that the probability of that happening anytime soon is very low. With mortgage rates already at near historic lows, now may be the time to act.

Powered by WPeMatico

Millennial Buying Power Poised to Boost Homeownership

Millennial Buying Power Poised to Boost Homeownership | Simplifying The Market

In a recent article by Realtor Magazine, Mark Fleming, Chief Economist of First American Financial Corporation, notes,

“The largest group of millennials by birth year will turn 30 in 2020, which puts them entering their prime homebuying years”.

The article continues to describe how millennials have more buying-power than the generations that preceded them, making their interest in embracing homeownership stronger than ever,

“Millennials—the most educated generation—have the highest incomes across their generational cohorts, even when salaries are adjusted for inflation.”

This combination of power and desire has the potential to drive positive growth in the homeownership rate heading into the near future. According to Fleming,

‘“The gap between the potential and actual homeownership in 2018 narrowed slightly as the growth in homeownership modestly exceeded the increase in potential demand,” he says, citing First American’s Homeownership Progress Index.

“We expect the homeownership rate to further close the gap with potential in the years ahead as millennials continue to make important decisions, such as attaining an education and, later in life, getting married and having children.”’

That said, the shortage of sellable inventory in the entry and mid-range levels that’s attractive to potential millennial buyers may be a contributing factor as to why many millennials haven’t yet purchased a home. According to another recent report citing Frank Martell, President and CEO of CoreLogic,

“Lower rates are certainly making it more affordable to buy homes and millennial buyers are entering the market with increasing force. These positive demand drivers, which are occurring against a backdrop of persistent shortages in housing stock, are the major drivers for higher home prices, which will likely continue to rise for the foreseeable future.”

With millennials aging-up into mortgage-ready and home-buying territory, along with their strong buying interest and buying power, this generation is poised and ready to have positive impact on homeownership rates across the country. Many of them just need to find a home they’re excited to buy in this competitive end of the market.

Bottom Line

If you’re thinking of selling, let’s connect and determine if now is a great time for you to list your house and move-up. More millennials are getting ready to jump into the market and join the ranks of homeownership, so demand for homes in the starter and mid-level range will continue to be strong.

Powered by WPeMatico

Home Sales Expected to Continue Increasing In 2020

Home Sales Expected to Continue Increasing In 2020 | Simplifying The Market

Freddie MacFannie Maeand the Mortgage Bankers Association are all projecting home sales will increase nicely in 2020.

Below is a chart depicting the projections of each entity for 2019, as well as for 2020.Home Sales Expected to Continue Increasing In 2020 | Simplifying The MarketAs we can see, Freddie MacFannie Mae, and the Mortgage Bankers Association all believe homes sales will increase steadily over the next year. If you’re a homeowner who has considered selling your house recently, now may be the best time to put it on the market.

Powered by WPeMatico

Everybody Calm Down! This Is NOT 2008

Everybody Calm Down! This Is NOT 2008 | Simplifying The Market

Last week realtor.com released the results of a survey that produced three major revelations:

  1. 53% of home purchasers (first-time and repeat buyers) currently in the market believe a recession will occur this year or next.
  2. 57% believe the next recession will be as bad or worse than 2008.
  3. 55% said they would cancel plans to move if a recession occurred.

Since we are currently experiencing the longest-ever economic expansion in American history, there is reason to believe a recession could occur in the not-too-distant future. And, it does make sense that buyers and sellers remember the horrors of 2008 when they hear the word “recession.”

Ali Wolf, Director of Economic Research at the real estate consulting firm Meyers Research, addressed this point in a recent interview:

“With people having PTSD from the last time, they’re still afraid of buying at the wrong time.”

Most experts, however, believe if there is a recession, it will not resemble 2008. This housing market is in no way the same as it was just over a decade ago.

Zillow Economist, Jeff Tucker, explained the difference in a recent article, Recessions Typically Have Limited Effect on the Housing Market:

 “As we look ahead to the next recession, it’s important to recognize how unusual the conditions were that caused the last one, and what’s different about the housing market today. Rather than abundant homes, we have a shortage of new home supply. Rather than risky borrowers taking on adjustable-rate mortgages, we have buyers with sterling credit scores taking out predictable 30-year fixed-rate mortgages. The housing market is simply much less risky than it was 15 years ago.”

George Ratiu, Senior Economist at realtor.com, also weighed in on the subject:

“This is going to be a much shorter recession than the last one, I don’t think the next recession will be a repeat of 2008…The housing market is in a better position.”

In the past 23 years, there have been two national recessions – the dot-com crash in 2001 and the Great Recession in 2008. It is true that home values fell 19.7% during the 2008 recession, which was caused by a mortgage meltdown that heavily impacted the housing market. However, while stock prices fell almost 25% in 2001, home values appreciated 6.6%. The triggers of the next recession will more closely mirror those from 2001 – not those from 2008.

Bottom Line

No one can accurately predict when the next recession will occur, but expecting one could possibly take place in the next 18-24 months is understandable. It is, however, important to realize that the impact of a recession on the housing market will in no way resemble 2008.

Powered by WPeMatico

How Property Taxes Can Impact Your Mortgage Payment

How Property Taxes Can Impact Your Mortgage Payment | Simplifying The Market

When buying a home, taxes are one of the expenses that can make a significant difference in your monthly payment. Do you know how much you might pay for property taxes in your state or local area?

When applying for a mortgage, you’ll see one of two acronyms in your paperwork – P&I or PITI – depending on how you’re including your taxes in your mortgage payment.

P&I stand for Principal and Interest, and both are parts of your monthly mortgage payment that go toward paying off the loan you borrow. PITI stands for Principal, Interest, Taxes, and Insurance, and they’re all important factors to calculate when you want to determine exactly what the cost of your new home will be.

TaxRates.org defines property taxes as,

“A municipal tax levied by counties, cities, or special tax districts on most types of real estate – including homes, businesses, and parcels of land. The amount of property tax owed depends on the appraised fair market value of the property, as determined by the property tax assessor.”

This organization also provides a map showing annual property taxes by state (including the District of Columbia), from lowest to highest, as a percentage of median home value.How Property Taxes Can Impact Your Mortgage Payment | Simplifying The MarketThe top 5 states with the highest median property taxes are New Jersey, New Hampshire, Texas, Nebraska, and Wisconsin. The states with the lowest median property taxes are Louisiana, Hawaii, Alabama, and Delaware, followed by the District of Columbia.

Bottom Line

Depending on where you live, property taxes can have a big impact on your monthly payment. To make sure your estimated taxes will fall within your desired budget, let’s get together today to determine how the neighborhood or area you choose can make a difference in your overall costs when buying a home.

Powered by WPeMatico

Homeownership Will Always Be a Part of the American Dream

Homeownership Will Always Be a Part of the American Dream | Simplifying The Market

On Labor Day we celebrate the hard work that helps us achieve the American Dream.

Growing up, many of us thought about our future lives with great ambition. We drew pictures of what jobs we wanted to have and where we would live as a representation of a secure life for ourselves and our families. Today we celebrate the workers that make this country a place where those dreams can become a reality.

According to Wikipedia,

Labor Day honors the American labor movement and the contributions that workers have made to the development, growth, endurance, strength, security, prosperity, productivity, laws, sustainability, persistence, structure, and well-being of the country.”

The hard work that happens every day across this country allows so many to achieve the American Dream. The 2019 Aspiring Home Buyers Profile by the National Association of Realtors (NAR) says,

“Approximately 75% of non-homeowners believe homeownership is part of their American Dream, while 9 in 10 current homeowners said the same.”

Looking at the number of non-owners, you may wonder, ‘If they believe in homeownership, why haven’t they bought a home yet?’. Well, increasing home prices and low inventory can be part of the reason why some haven’t jumped in, but that does not mean there is a lack of interest. The same report shows the increase in the desire to buy in the last year (as shown in the graph below):Homeownership Will Always Be a Part of the American Dream | Simplifying The MarketAs we can see, there are more and more people each quarter who want to buy a home. The good news is, as more inventory comes to the market, more non-homeowners will be able to fulfill their dreams. Finally, they’ll be able to move into that home they drew when they were little kids!

Bottom Line

If you’re a homeowner considering selling, this fall might be the right time, as there are buyers in the market ready to buy. Let’s get together to determine how you can benefit from the pent-up housing demand.

Powered by WPeMatico

A Recession Does Not Equal a Housing Crisis [INFOGRAPHIC]

A Recession Does Not Equal a Housing Crisis [INFOGRAPHIC] | Simplifying The Market

A Recession Does Not Equal a Housing Crisis [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • There is plenty of talk in the media about a pending economic slowdown.
  • The good news is, home values actually increased in 3 of the last 5 U.S. recessions, and decreased by less than 2% in the 4th.
  • Many experts predict a potential recession is on the horizon. However, housing will not be the trigger, and home values will still continue to appreciate. It will not be a repeat of the crash in the 2008 housing market.

Powered by WPeMatico

iBuyers: What Is the “Cost of Convenience” When Selling Your Home?

iBuyers: What Is the “Cost of Convenience” When Selling Your Home? | Simplifying The Market

When thinking about selling their house, homeowners have many options. A relatively new option is using an “iBuyer.” What is an iBuyer?

According to Jovio, the definition is:

“A company or investor that uses Automated Valuation Models (AVMs) to make instant offers on homes. It allows sellers to close on a property quickly. Once sold, the company then turns around and resells the home for a profit.”

Today, there are many iBuyer companies such as OfferPad, Zillow Offers, Knock, Opendoor, and Perch. Even some more traditional companies offer the same or similar services (ex. Keller Williams, Redfin, Realogy). Ivy Zelman reported in her ‘Z’ Report that some traditional brokers are partnering with some of the larger iBuyers too:

“Keller Williams announced a partnership with Offerpad, aligning the largest franchise-based brokerage brand in the U.S. with the five-year-old iBuyer. The move follows Realogy’s partnership with Home Partners of America last year as an established brokerage player more directly providing an iBuyer alternative…

Likewise, in early July, Redfin and Opendoor announced a partnership, starting in Phoenix and Atlanta – aligning interests of the 13-year old, tech-enabled and value-focused brokerage with the largest and longest-standing iBuyer. Outside of these larger scale alliances, Zillow’s strategy has been to work with local brokerages as partners on a market-by-market basis.”

Does it make sense to sell your home to an iBuyer?

It depends. Collateral Analytics recently released a study which revealed the advantages and disadvantages of using an iBuyer. According to the study, if the homeowner is looking for the convenience of a quick sale with less uncertainty, using an iBuyer may make sense.

“iBuyers offer quicker closings for sellers who would like to avoid the uncertainty of knowing when and if their home will sell. For motivated sellers who want a predictable sale date and need to move, perhaps a long distance from the current location, there is no question that iBuyers have provided a welcome alternative to traditional brokerage.”

The study, however, also showed there is a cost for that convenience. Collateral Analytics explained:

Traditional brokers fees generally range from 5% to 7% of the sales price…In addition to this cost, buyers typically pay some closing costs including lender related charges in the range of 1% to 3%.”

In contrast:

“iBuyers charge sellers a ‘convenience fee’ of 6% to 9.5%, some also charge the seller for fees typically paid by buyers at closing adding another 1% or more. Most iBuyers will inspect the home, assess a generous home repair allowance and negotiate a (an additional) credit to handle such repairs…Overall the total direct costs, ignoring repair credits, will run 7% to 10% for an iBuyer, versus the typical 5% to 9% combined seller and buyer costs with a traditional broker. Yet, that is not the end of the story or comparison.”

The study went on to explain how iBuyers need to charge even more because they have additional expenses beyond that of the traditional broker. They include:

  1. Carrying costs involving significant amounts of capital – The iBuyer must pay the expenses of the house between the time they purchase it and the time they sell it to a new buyer.
  2. Safeguarding the home risks – A home with an iBuyer ‘For Sale Sign’ alerts anyone passing that the house is vacant. The study suggests that these homes could become targets for vagrants and criminals.
  3. Adverse selection risks – The study explains that since iBuyers use computer models to determine their offer, they may be unaware of certain challenges in the neighborhood that could adversely impact the value.
  4. Potential home price declines – As the survey states:

A downturn in home prices, not forecast by the iBuyer market analysts could be devastating as they ramp up their business platforms, particularly if the cost of capital increases. At the same time, downturns are precisely when the most sellers would want this option.”

Bottom Line

After taking a thorough look at the iBuyer platform, the study concludes that using an iBuyer is more expensive for the homeowner than the traditional brokerage model, but for some sellers, it may still make sense:

“These preliminary empirical results suggest that sellers are paying not just the difference in fees of 2% to 5% more than with traditional agencies, and a generous repair allowance, but another 3% to 5% or more to compensate the iBuyer for liquidity risks and carrying costs. In all, the typical cost to a seller appears to be in the range of 13% to 15% depending on the iBuyer vendor. For some sellers, needing to move or requiring quick extraction of equity, this is certainly worthwhile, but what percentage of the market will want this service remains to be seen.”

Powered by WPeMatico

Show Buttons
Share On Facebook
Share On Twitter
Share On Google Plus
Share On Linkedin
Share On Pinterest
Share On Youtube
Share On Reddit
Share On Stumbleupon
Contact us
Hide Buttons