Who among us hasn’t found themselves occasionally (or frequently) caught in a vortex of procrastination? I would say, probably all of us from time to time.
And we may even get down on ourselves because it seems like we’re “lazy,” but is that true? Procrastination is something that perfectionists will do – avoiding starting things because they’re afraid of ridicule or failing.
Don’t beat yourself up. Read this mindfulness post from Kristen Rogers of CNN about reframing the way we perceive ourselves.
If you’ve been considering buying a house — or if you’re actually in the process — you’ve probably heard two things quite a bit lately:
Rates are going up.
They’re still historically cheap.
Yes, interest rates remain historically low, but that doesn’t negate the fact that they’re higher than if you had only recently purchased a home. Don’t grind your teeth…
Likely, rates and house values will drop in the near future, so wait just a little longer and you’ll see how well it pays off. Unfortunately, it appears that rates may rise even more in the near future, and home prices don’t appear to be on track to come down by much.
So, let’s look at some methods for managing increasing interest rates in order to make your payments as manageable as possible, and maybe even save money.
Credit. Clean it up. The better your credit is, the lower your interest rate will be. Check out your credit report to see if anything obviously wrong can be fixed. If anything looks strange to you, get advice from your mortgage rep or a credit repair professional on any issues they discover that you could fix, pay down, or reduce in order to raise that credit score.
Shop around. Check with a few lenders to find out who offers the lowest rate. Alternatively, go through a mortgage broker that has access to several lenders and can do the shopping for you. If one appears too good to be true, be mindful of the rates and charges. If you happen to know anyone that works at a credit union or is connected with one, ask them – they frequently have better rates since they lend their own cash and/or have a closer connection with their customers.
Buy discount points. Buying down your mortgage rate by paying “discount points” is a good idea. These are fees paid in advance to secure a lower mortgage interest rate. Buying a point will cost you 1% of your home loan and will typically reduce your interest rate by 0.25 percentage points, although this varies from lender to lender. Most offer a maximum number of points you can purchase, and they sometimes provide the choice of purchasing smaller than full point increments. If you want to stay in your home for an extended period, this is a great alternative.
Lock in that rate. Despite the fact that rates have already been on the rise, there’s a good chance they’ll rise even more. Rate locks are generally only given for 60 days, so if you want to buy soon, now is the time to lock in at current rates. Make sure to ask your lender how much a rate lock will cost you. Check to see whether they provide a “float down” option, which would allow you to take advantage of a lower rate than the one you locked in if rates drop before you close on your property.
Get an adjustable mortgage rate. Rates have been so low for so long that adjustable rate loans haven’t really appealed to consumers, since the 30-year fixed-rate mortgage was so cheap. However, as individuals strive to save money wherever they can, adjustable rate mortgages are making a comeback. Variable rate bonds give you the greatest chance of securing higher rates compared to fixed rate bonds. Variable term mortgages are normally more favorable with a greater interest rate at a predetermined period, but only for a limited time before they raise (as the name implies). Depending on what rates are when the opportunity arises, they might change up or down. To be safe, anticipate that the rate will be higher on that day. The period before the rate rises is usually 5, 7, 10, or 15 years. If you’re not thinking about living in your house for a complete 30 years, these are ideal. Consider how long you’ll stay in your house and pick one that won’t change rates before you move so you aren’t penalized. If you’re sure you’ll be moving in the next decade, a 10-year ARM may be the best option for you.
Make bi-monthly payments. If you pay half of your monthly mortgage payment every two weeks, you end up making an extra payment each year. This cuts years off your loan and saves you a lot of money in interest charges.
Re-fi when the rates move down. Keep an eye on interest rates. When mortgage rates fall significantly, refinance your mortgage at a lower rate.
You don’t necessarily have to accept whatever interest rates are offered. As a result, even if rates aren’t as low as they’ve been in the recent past, you still have choices and control over how much interest you’ll pay. You’re certain to save money if you utilize one or a combination of the techniques above!
It happened. I’d hoped it wouldn’t happen, but it happened.
I had a buyer back out of the deal yesterday one day before the contract had to be done. They said a couple times in the last week, “I give up,” “Let the other offer take it,” and “I quit.”
Every time they wanted to jump ship, I sat with them, and helped weigh their options, and showed how we could make it easy to get the job done. I found a new lender and set them up. I helped go through documents to send to the lender. I drove to their house to pick up documents which I took to the office to scan because the buyer couldn’t send them properly.
Then, the morning of the home inspection, the buyer threw in the towel. Walking through the house that was going to be theirs, they started to focus on things like peeling paint and little stuff. And they seemed to be forgetting that we found a cottage that is walking distance to the Atlantic Ocean at a price 1/3 under market value of comparable homes. Fear of the unknown caused the buyer to throw in the towel.
I felt like I failed the buyer AND the seller agent, who happens to be a good friend. I was feeling like a fool when my friend called me a few minutes later. Here’s what she reminded me of:
People get cold feet. It happens.
No matter the level of care we give, or the data you provide, there will always be some whose gut will tell them it’s not the right time. And it wasn’t. It wasn’t the right time for this buyer.
That’s a pretty amazing friend, right? She’s a rockstar agent, and I love that she knows what I need to hear when I need it. I like to be that friend for my clients too.
Buying a home is one of the largest purchases we make, and there will be feelings of “did I do the right thing?” Heck, in this market, it’s more like, “My offer was accepted??? Did I offer too much?? What’s wrong with the house?”
Go with your gut. Get help from your agent or real estate professional, and stay focused on the steps rather than get nervous about the whole picture. We’re here to help you.
Homeownership has become an important element in people’s pursuit of the American Dream. According to a recent study from the National Association of Realtors (NAR), over 86% of purchasers agree that homeownership is still the American Dream.
Before the 1950s, less than half of the nation lived in their own house. However, many returning veterans took advantage of the GI Bill’s provisions to buy a home after World War II. Since then, the proportion of homeowners throughout the country has steadily increased to 65.5 percent today. That strong desire for property ownership has kept house values from declining since then.
The only time in the last 76 years that home values fell so severely was during the housing bubble and burst of 2006-2008. It looked a lot like today’s inflation in prices back then, so some people today are concerned that we’re on the verge of another drop in house values similar to 2008. Let’s look a little closer…
What The Heck Happened?
The housing market was devastated in 2006. Foreclosures flooded the market, causing home values to plummet. The two primary reasons for the deluge of foreclosures were:
Many purchasers were not qualified for the mortgage they obtained, which resulted in more houses entering foreclosure.
A number of homeowners sold the equity on their houses. They hit an underwater situation when prices dropped (where the property was worth less than the mortgage on the house). Many of these homeowners abandoned their homes, causing additional foreclosures. This drove down home values even further in the neighborhood.
And this went on. For 2 years.
So Lloyd, What’s Different About This Housing Market?
Well, I’ll tell you. Two reasons:
1. Demand for Homeownership Is Driven by Purchasers, Not the Banks
Running up to 2006, banks were creating artificial demand by lowering lending standards and making it simple for almost anybody to qualify for a home loan or refinance their current homes. Today’s purchasers / refinancers have to meet much stricter criteria from lenders. And lenders are not making risky bets on borrowers anymore.
2. Your Home is Not a Debit Card
A lot of people thought it would never stop in the early 2000s, when home prices were going up so fast. They began financing new cars, boats, and vacations with the equity in their houses. So when the prices dropped, many of these homeowners ended up underwater (owing more than the value of their home) causing some to leave their homes. This increased the number of foreclosures.
And now, homeowners are a little nervous as they’re reminded of that crash as prices have now been skyrocketing again. On study shows that on average, homeowners’ equity has increased in the last year by a whopping $55,300! In one year!
Homeowners have learned their lesson. In another study shows that 41.9% of all homes with a mortgage today have at least 50% equity. That’s a LOT different than the squirrels 2000s.
What’s It All Mean, Lloyd?
The housing crisis of the early 2000s was caused by a crush of foreclosures. The risk of widespread foreclosures having an impact on today’s market isn’t going to happen due to the tight mortgage requirements and historically high levels of homeowner equity.
So breath. And call me. Values aren’t going to tank. You can buy a home now.
When it comes to purchasing a property, it might be difficult to know how much money you’ll need and where to get that information. You should understand, however, that you are not required to have all of the answers on your own. There are several reputable professionals who can assist you in understanding your finances and what you’ll require to budget for throughout the process. Here are some things experts recommend when it comes to planning ahead.
Down Payment
When it comes to saving for a home, you’re likely already thinking about your down payment. You may believe you must set aside 20% of the purchase price for your down payment, but that isn’t always the case. The National Association of Realtors (NAR) advises: “One of the most widespread misconceptions among housing purchasers is what the average down payment is and what amount is required to go into homeownership. Having this information helps you know where to save.”
The good news is that in some cases, you may be able to put as little as 3.5 percent (or even 0%) down. To learn more about your choices, speak with a qualified expert who can explain the many loan kinds, down payment assistance programs, and what they entail.
2. Earnest Money Deposits
Another item to consider is a down payment in earnest money. While it isn’t necessary, it is becoming increasingly popular as a way for your offer to stand out in a competition.
What is it, exactly? It’s money you pay as a sign of good faith when making an offer on a property. This deposit functions like a credit. You’re demonstrating your commitment and seriousness to the seller by using some of the money you saved for your purchase. It’s not an extra cost; it’s paying part of the down payment up front. First American describes what it is and how it works:
“The money paid by the buyer to the seller as part of an offer. This deposit is usually kept in trust by a third party and shows the seller that you are serious about buying their property. The money will generally be used to pay for your down payment or closing costs after closing.
In other words, the first check you’ll write towards your purchase may be an earnest money deposit. The amount varies by jurisdiction and situation. According to Realtor.com,
“The amount you deposit as earnest money will be determined by a variety of things, including your state’s regulations and limitations, the current market, what your real estate agent suggests, and whatever the seller requires. On average, you can anticipate to put down 1% to 2% of the total house price. ”
When it comes to selling your property, you want someone who can guide you through the process and get the most out of it. A real estate advisor will assist you in determining whether or not something may be a viable alternative for you.
3. Closing Costs
The next item to consider is your closing expenditures. Closing costs are defined by the Federal Trade Commission (FTC) as:
“The upfront expenses incurred when purchasing a mortgage loan. These may include, but are not limited to, a loan origination fee, title examination and insurance, survey, attorney’s charge, and prepayments for taxes and insurance.”
Closing costs, in a nutshell, cover the expenditures for various people and services connected with your deal. According to NAR, you should budget about:
“A home costs more than simply the sale price,” says the article. Closing expenses, for example, which represent between 2 and 5 percent of the purchase price, are a significant added cost… A mortgage lenders gives buyers with a Closing Disclosure at least three business days before closing to allow them to plan ahead of time for these additional fees.
The most important point to remember is that savvy purchasers budget for these fees ahead of time so they can enter the process prepared. As Freddie Mac puts it,
“If you’re looking to buy a house, your down payment is almost certainly at the top of your list. And rightfully so – it’s usually the most expensive element of house buying. However, it isn’t the only cost and you must know all of your expenditures before diving in. The more prepared you are for your down payment, closing fees, and other expenses, the better off you’ll be as a home buyer.”
Bottom Line
It’s critical to know how much you should budget for throughout the home buying process. To guarantee that you understand these and any other costs that may arise, give me a call. You’re not in this alone.
Why is it so difficult to locate a home to purchase this year, especially in high-demand areas like the seacoast of New Hampshire and Maine? The fact is that we’re in what’s known as a seller’s market, which makes real estate extremely competitive for buyers right now. The number of people looking for a house greatly outnumbers the number of houses available.
Despite the fact that low housing inventory is nothing new, it’s a problem that grows worse with time. Here’s a look at two reasons why today’s housing supply is limited, as well as what it means for you.
1. For many years, new home construction has lagged behind.
The graph below depicts new single-family home construction over the past five decades, including the long-term average for housing units completed. During the housing bubble, builders surpassed that normal (in red on the graph). As a consequence, there was an overabundance of properties on the market, causing house values to drop. This was one of
Since then, new home construction has dropped significantly. For the past 13 years, builders haven’t been able to produce enough homes to match the typical (as shown in green on the graph). That underproduction left us with a multi-year inventory gap going into the epidemic.
2. The Economic Impacts of the Pandemic
Then, when the epidemic hit, it provided a fresh perspective on home and a new appreciation for its significance. The value of having a secure place to live, work, school, and exercise became even more significant for people all across the nation. As mortgage rates fell to below 3%, buyers flooded the market searching for a house that would fit their changing needs at bargain prices. Simultaneously, sellers were hesitant to put their homes on the market because concerns about the epidemic increased.
As a result, home values continued to plummet. Value dropped even more. According to realtor.com, “Last month, the number of homes for sale fell 26.8% versus a year earlier, with about 177,000 fewer houses advertised in what’s usually a slower month due to the holidays and colder weather. . . .”
What Does This Mean for You?
Low inventory may be a struggle for a buyer. You want to find the house of your dreams, and you don’t want to compromise. What if there aren’t that many houses to select from?
There is some good news. According to experts, more houses will become available soon as sellers return to the market. While this optimism comes from Danielle Hale, Chief Economist at realtor.com, he adds a note of caution:
“We expect that the epidemic will begin to abate in 2022, and inventory levels will stabilize. . . But that implies we’ll be dealing with half of what we had before the pandemic. The market is likely to continue to move at a fast pace for buyers. If you see a house you like, you want to act quickly.
Simply said, inventory is still low, even though new homes are being built. But don’t let your strategy go by the wayside because more houses are expected to hit the market soon. Instead, keep searching and persevering in spite of today’s limited supply. If you’re patient and dedicated, you can locate your next home.
Make a list of reasons why finding a home is so vital. Those things should be your driving force behind your search. Make sure your agent understands them and that you are clear on your priorities. As you wend your way through today’s limited housing inventory in order to discover the ideal house for you, having a reliable advisor at hand
Bottom Line
Even if inventory rises, it’s still lower than usual. Give me a call at 818-305-5693 to find out more about what’s going on in your neighborhood, which houses are for sale, and why it’s still important to prioritize your home search now.
Home buyers who do mortgage loan shopping can avoid leaving money on the table.
Whether you’re shopping for new bed sheets or a new car, the drill is usually the same. Hit the reviews, check with friends, and scope out the best deal. After all, who wants to buy a car that racks up repair bills right away? Yet when picking a mortgage loan, borrowers don’t always think about comparison shopping.
In a Bankrate survey of recent home buyers, 12% of millennials said they believe their mortgage rates were too high. Some buyers may think that when mortgage rates are low, they don’t need to shop for the best offer. But even a few basis points can make a difference of thousands of dollars over the life of a loan, according to Bankrate, the Consumer Financial Protection Bureau, and the Federal Trade Commission.
You may think mortgage shopping is about as much fun as prepping for a tax audit. It’s true that comparing home mortgages can get complicated. But you don’t need a finance degree to make an informed decision. Here are some steps to get there.
Find a Few Lenders
When looking for lenders to consider, loan officers recommend going to a few sources:
Locals you know and trust: “Make sure the lenders you’re comparing come from referrals from local people you know who’ve worked with them — like your friends or relatives,” advises Jeff Koch, vice president of residential lending at Draper & Kramer Mortgage Corp in Schaumburg, Ill. “Wherever you have trust established would be a good source.”
Your real estate agent: “If you’re working with a real estate agent, find out if they have any feedback or advice on a lender or a loan officer,” recommends Jim DeMarco, branch manager and senior loan advisor at Flagstar Bank in Seattle.
Online reviews: These can be a good starting point, DeMarco says. “If you see a lot of really good reviews, that means people are taking the time to provide them.”
Have an Intro Mortgage Loan Meeting
During a meet and greet, you and the loan officer will usually ask each other questions, and the loan officer will use that information to assess your qualifications. That may sound cut and dried, but the meeting should be fluid based on what you’re ready to do.
Typically, the loan officer would schedule a meeting focused on comparison shopping separately. If that sounds painful to borrowers who want to (literally) get moving. No worries, Koch says. “The borrower may be well versed and want to get right to what’s most relevant for them, which are the financial and comparison details. But a lot of people need to go over their own questions or cover key topics first.”
Want to meet virtually? “Some folks are just more comfortable virtually, and that’s OK,” DeMarco says. “I’ve closed loans with people I’ve never talked to on the phone. It’s all via text.”
Interview the Mortgage Loan Officer
Whichever way you choose, this meeting is prime time to interview the loan officer. Borrowers need to find someone who will be in there with them and can problem solve. “We call unanticipated problems ‘icebergs,’” DeMarco says. “You think there’s smooth sailing. And then, suddenly, you smack into an iceberg.”
Check out the lender’s communication strategy and their process for delivering on time. “The process is highly complex, and you’d think professional lenders all would have mastered it. That’s not the case,” says Koch. “When a loan isn’t delivered on time, people’s finances and lives are basically balanced on the head of a pin, which is the closing date.”
To avoid problems, ask questions like these:
Fact finding about the process:
Would you take me through the process?
What should I expect?
What will I need to supply?
Compatibility with the loan officer or mortgage banker or broker:
What’s your communication style? Are you willing to communicate virtually?
When would I work with you? Are you available in the evenings?
Will I be working with you or a member of your team?
What do you think of my time frame to get to closing?
What if any problems do you foresee?
Track record of loan officer and lender:
How long do loans you process typically take to close?
How would you expedite the process if there’s a tight time frame?
About what percentage of loans you work on close on time?
How many loans have you worked on that haven’t closed or haven’t met deadlines?
What’s the biggest problem you’ve had with a loan and how did you fix it?
Use the Meeting to Learn
You can also use the meeting to clarify general info you’ve picked up online and talk about your concerns. DeMarco gives a couple of examples. “You may have switched careers or industries in the last year or started having bonus or commission income. Your research may have shown you can just divide your salary by 12 to figure monthly income. But it may not be as simple as that.”
You’ll also want to bring up concerns like the impact on your credit score. Thirty-eight percent of buyers think comparing multiple mortgage offers in a short time will hurt their credit rating, according to a 2020 LendingTree survey. “As long as the lenders all pull the borrower’s credit within a couple of weeks, it’s counted as a single credit inquiry. So, it’s not a problem if they do it within a narrow band of time,” Koch explains.
Get andCompare Financial Information
Whether you’re looking at a federal form called a loan estimate or a precursor form called the fees worksheet, you’ll see a breakout of closing costs, explains Koch. “To compare the lender financials, you’ll want to drill down to origination charges in the lender section. Make sure you’re comparing apples to apples. If one lender is offering a 30-year fixed rate at 2.875% with no lender fees and another is offering 2. 75% with $1,500 in lender fees, those are unlike products. Get the fees at the same rate to find out which is less expensive.”
6 Tips to Get Mortgage Loan Information
Comparison shopping can get complicated. Here are six ways to keep it simple:
1. Keep Your Pool Manageable
Mortgage shopping “depends on the borrower and the personality type and how they’re wired,” Koch says. “The process can seem overwhelming. That’s why it makes sense to have a select few options to compare so borrowers can process and assimilate them.”
2. Get a Fees Worksheet
The best way to compare effectively is to zero in on the fees worksheet, which the loan officer should provide. “You’ll be able to figure out just what the lender’s direct fees are, and you can make a nice, simple comparison.”
3. Understand a Fees Worksheet Versus a Loan Estimate
The numbers on the worksheet are estimates and not locked in. Interest rates are fluid and change daily or even more often, DeMarco says. On the other hand, after you have a contract with a seller, “the loan estimate and loan application are where the information is binding, barring structural changes to the loan,” Koch says. Make sure the information reflects previous discussions with and disclosures by the loan officer.
4. Be Careful Interpreting Third-Party Fees
Third-party fee estimates are included on the worksheet. Two lenders could each come up with different estimates for title, escrow, or appraisal fees, Koch explains. But not all are negotiable. For instance, the seller chooses the title company, so the lender doesn’t control the choice or the fees. The lender could be choosing the high or low end of a range, but it’s only an estimate.
5. Think About Timing
Make sure lenders are using the same time frame for locking in pricing and that it will extend through the closing, Koch notes. “A lender might offer a rate that’s a lock for three weeks, but if you anticipate or know your closing date will be five or six weeks out, that’s a problem.”
6. Consider Applying for Loan Approval Before Finding a Property
“Many lenders will not do this,” Koch says. “But some will allow borrowers to go through the formal underwriting process — not just pre-approval — without having a property. The borrowers can get a bona fide mortgage commitment with all of the major buyer financials truly underwritten at that point. Then when borrowers make an offer, they can close more quickly.”
You’ll have to invest some time and effort into comparison shopping for a mortgage loan and selecting a lender and a loan officer. But your return on investment can pay off over the long haul.
