Having the Nicest Home on the Block a Challenge

Andy Davis

Home buyers are wise to take careful note of the houses around them before they make an offer on that picture-perfect home. Buying the most expensive house in the neighborhood isn’t always the best strategy. Sure, they’ll have bragging rights, but your buyers may need to be informed about some challenges during resale. After all, unloading the priciest home on the block and seeing an increase in equity isn’t easy. “A lot of buyers forget a home is an investment,” says Brendon DeSimone, a real estate expert and author of “Next Generation Real Estate.” “The world changes. Things happen fast. People transfer, people lose their jobs. Now imagine yourself as the seller of that home.” With the nicest home on the block, home owners who do any upgrades – even minor – may be doing a larger mismatch between their home and the surrounding homes.

By considering the home as an investment, buyers will look at homes that leave some room for improvement and that will allow them to build equity and hopefully even pay it off when they do sell. DeSimone actually recommends to his clients buying the worst house in the best neighborhood. “You can add value on your own,” he says. “If you’re choosing between an awesome house in a crappy location and an awful house in a great location, I would choose the latter.” Improvement doesn’t need to entail a total renovation either. DeSimone says just regular maintenance, refreshing the paint, and making minor repairs that the previous owner ignored could add to the home’s value.

Source: Realtor.com 

Fannie Mae Survey Reveals Consumers Unaware of Requirements to Qualify for Mortgage

Bob Vaughan

A recent survey performed by Fannie Mae on a significant number of consumers revealed there is large gap in consumer knowledge when it comes to qualifying for a mortgage loan. Of the consumers interviewed, 40% did not know the minimum down payment required to qualify for a loan, 54% did not know the minimum credit score required and 59% didn’t know the maximum back-end debt to income ratio. “There is a significant lack of understanding about minimum mortgage qualification criteria not only among consumers in general but, more importantly, among renters who plan to purchase a home within the next five years” according to Fannie Mae. It is extremely important to know the guidelines and requirements when looking to get financing, or are working towards improving your situation for financing in the future. If you don’t know the correct guidelines today, how can you know how to prepare for the future? Call us today so we can answer any questions you may have about the mortgage loan process and help you get on the right track.

FHA/VA Still Dominates High-LTV Lending

Bob Vaughan

In December, the Data & Analytics division of Black Knight Financial Services looked at high loan-to-value (LTV) mortgage loan products (greater than 95% LTV), in light of the GSEs’ reintroduction of high-LTV products at the end of 2014 (3% down conventional loan), coupled with the 50-basis-point reduction in FHA annual mortgage insurance premiums earlier this year. Despite the renewed availability of GSE high loan-to-vale products, the data from the company’s latest Mortgage Monitor Report shows that high-LTV lending is still primarily the province of the FHA/VA. “High-LTV purchase mortgage originations are up 20% in the third quarter over last year,” said Black Knight Data & Analytics Senior Vice President Ben Graboske. “That’s compared to an approximately 13% increase for the purchase market overall. High-LTV products now account for 23% of all purchase originations.”

What’s particularly interesting in today’s market is how heavily the high LTV lending is dominated by FHA/VA. Back in 2007, the GSEs made up over 45% of high-LTV mortgage loan purchase originations, while FHA/VA lending made up roughly one-third of mortgage loan purchase originations. “Since 2009, FHA/VA products have made up over 90% of high-LTV purchase originations every year, and the same is true in 2015, even with the GSEs having reintroduced their own 97% LTV products,” said Graboske. “In fact, those products have accounted for less than 3% of all high-LTV originations so far this year.”

“As we reported last month, recent increases in purchase lending have been driven primarily by higher-credit-score borrowers, and these high-LTV products are no exception,” said Graboske. “We’ve seen average credit scores on high-LTV FHA/VA loans rise six points from last year to 706. Of course, scores for GSE and portfolio high-LTV loans are roughly 35 points higher still.”

The market has experienced annual declines in high-LTV mortgage lending among 620-660 credit scores for each of the past six months even though overall high-LTV purchase volumes have risen in each of those months, which may be attributed to tightening credit, said Graboske, or it may be that the FHA’s reduced annual mortgage insurance – which FHA estimates will reduce borrowers’ mortgage payments by $900/year – has enticed some higher-credit borrowers into those FHA mortgage loan products.

Market Recovery Double-Edged Sword

Andy Davis

Most real estate and mortgage professionals realize that the housing recovery has been extremely good since the low in 2012.

In November the Fannie Mae Home Purchase Sentiment Index indicated that consumers aren’t as optimistic about housing prospects for the future.

Fannie Mae concludes that the decrease in the sentiment index was mainly due to two things; Expected decrease in supply and  affordability.

With current interest rates near an all-time low affordability is still high, but higher interest rates could derail consumer sentiment.

Homebuyers Unsure of How to Improve Credit

Andy Davis

A recent TransUnion survey indicated that the majority of potential homebuyers planning on purchasing a home within the next 12 to 18 months don’t know how to improve their credit.

Even more surprising was the amount that didn’t even know what a credit score was made up of and that it directly impacted their mortgage loan interest rate.

If you are interested in purchasing a property within the next year and don’t know anything about a credit score call us today for a free consultation.

Mortgage Loan Rates Set to Increase?

Bob Vaughan

Janet Yellen, the chairwoman of the Federal Reserve hinted Wednesday (Dec 2nd) that economic conditions were looking favorable for the Federal Reserve to possibly raise interest rates this month at their Open Market Committee meeting (December 15-16). “The economy has come a long way toward the (Federal Open Market Committee’s) objectives of maximum employment and price stability,” Yellen said during a speech to the Economic Club of Washington. Mortgage loan interest rates are near an all time low and the federal funds target rate has not been increased since 2006. The federal funds rate has been at .25% since the beginning of 2008 and analysts and investors are predicting a .25% – .50% increase come the December 15th meeting. If the Fed does increase the target rate come the December meeting, mortgage loan interest rates are likely to increase.

FHFA Announces 2016 Maximum Conforming Mortgage Loan Limits

Bob Vaughan

The Federal Housing Finance Agency recently announced that maximum conforming mortgage loan limits for mortgages purchased by Fannie Mae and Freddie Mac will remain unchanged in 2016, with the exception of certain designated high-cost counties which will increase. No changes to the conforming mortgage loan limits were observed in the state of Florida; the conforming mortgage loan limit in the state of Florida is $417,000, with the exception of Collier County and Monroe County which remained at $448,500 and $529,000 respectively. The conforming mortgage loan limit for Lee County is $417,000. There were 39 high-cost counties across the country which will undergo a limit increase in 2016: the majority of which were located in Tennessee and Colorado. A complete list of conforming mortgage loan limits for each county throughout the country is available on FHFA’s website: www.fhfa.gov.

Are Overlays Affecting Your Customers?

Andy Davis

Fannie Mae and Freddie Mac have their own guidelines, but sometimes investors require their lenders or brokers to go above and beyond making it difficult for qualifying customers to get a loan. Click this link to check out my video about overlays and how they may be affecting your customers.

Good News for Interest Rates

Andy Davis

The Federal Open Market Committee at the end of January calmly resisted the urge to set into play an increase in key interest rates, saying for now that holding the federal funds rate at 0-1/4 percent is “appropriate.” The FOMC statement described U.S. economic expansion since December at “a solid pace”–optimistic language not seen in previous statements. “Labor market conditions have improved further, with strong job gains and a lower unemployment rate,” the statement said. “On balance, a range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately; recent declines in energy prices have boosted household purchasing power. Business fixed investment is advancing, while the recovery in the housing sector remains slow. Inflation has declined further below the Committee’s longer-run objective, largely reflecting declines in energy prices. Market-based measures of inflation compensation have declined substantially in recent months; survey-based measures of longer-term inflation expectations have remained stable.” But the FOMC made no move to put a rate increase in place, saying in determining how long to maintain the target range of 0-1/4 percent, it would continue to assess progress toward its objectives of maximum employment and two percent inflation. Source: MBA

HARP Refinance Mortgage

Andy Davis

harpOver the last few years many people have heard about the HARP program but detailed information on the HARP is hard to come by. The HARP program was designed for borrower’s whose loans were held by Fannie Mae (Freddie Mac also has a program with similar guidelines).

The huge benefit of HARP is that there is no appraisal required so borrower’s that have no equity or are underwater on their mortgages can still qualify.

There is no loan to value restrictions. Another benefit is that this loan can be closed very quickly.

Some important requirements for the loan are that the borrower’s must be the same as the current loan, borrower’s still must have qualifying credit, and borrower’s must show they can afford the new loan.

If you think the HARP program may be right for you please contact me today.

Monday Mortgage Recap

Andy Davis

Last week mortgage rates moved up slightly. The new chair of the Fed, Janet Yellen, had her first testimony before congress and indicated that the economy was still moving in the right direction even though economic indicators pulled back slightly. More importantly her tone led prognosticators to believe that the Fed won’t change their course any time soon so rates will stay low. Look for rates to remain fairly stagnant with slight moves each way depending on the reported data. See current information at the Wall Street Journal Market Data page.