Two-Thirds of Buyers Fail to Shop Around for a Mortgage | Realtor Magazine

Many buyers may be potentially leaving money on the table by failing to contact more than one lender when shopping for a mortgage. Two-thirds—or 65 percent—of 1,000 buyers recently surveyed said they didn’t shop around for a mortgage, despite it being the biggest purchase they’ll ever make.

 

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The study, conducted by PenFed Credit Union, also found a lot of confusion surrounding mortgages. For example, 44 percent of home shoppers believe the best mortgage for them is always the one with the lowest rate.

“The lowest-rate mortgage isn’t always best and consumers should consider additional factors, including the total closing costs and the broader annual percentage rate,” according to the study. “It’s also important to choose a company you trust and consider one that you already have accounts with since it can simplify payments.”

Many consumers also believe being prequalified is the same as being preapproved, or they’re unsure of the terms, the study found. Being prequalified by a lender gives a buyer an idea of what they can afford, but being preapproved for a loan is the extra step that makes you a qualified buyer who can obtain financing for a home purchase.

The survey also found that a majority—58 percent—of surveyed Americans believe adjustable-rate mortgages are only for risk takers. However, lenders say that ARMs may be a viable option for homeowners who plan to stay in their home for less than five years. A 5/5 ARM has a fixed rate for the first five years, for example, and likely has a lower payment than a 30-year fixed-rate mortgage.

But by failing to shop around, consumers’ confusion over what mortgage is best for them may persist—and it could prove costly. A separate study earlier this year found that borrowers could potentially save an average of $1,500 over the life of a 30-year fixed-rate loan by getting just one additional rate quote when shopping for a mortgage, according to Freddie Mac. More quotes can offer even more savings—for example, 80 percent of borrowers who received one additional rate quote while shopping for a mortgage saved between $966 to $2,086 over the life of their loan. Borrowers who gathered five rate quotes saw an average savings of $2,914. Eighty percent of the borrowers who obtained five quotes saved between $2,089 and $3,904, according to Freddie Mac’s report.

Things to Know Before Buying Your First Home

Certainly, the best time to trade security deposits for a down payment is different for everyone.

But if you’re considering ditching the landlord for a mortgage, here are five things you need to know that’ll help you figure out if you’re ready to buy a home or keep renting.

#1 Your Down Payment May Not Be the Biggest Hurdle

Let’s not beat around the bush: Buying a home requires a substantial financial commitment.

There’s the down payment, of course. “On average, you want to have a minimum of 5% to 7% of the cost of the home you’re targeting,” says Jason Harriman, a REALTOR® with San Antonio-based Heyl Real Estate Group at Keller Williams Realty. Then, add 3% to 6% more for closing costs, which will vary based on where you live and what taxes your state and city require you to pay.

Tip: Keep in mind if you put down less than 20%, you’ll pay PMI, private mortgage insurance, which protects the lender in case of default. Usually, it’s about $50 to $200 a month. But once you reach a certain threshold on your loan to value ratio, you can cancel PMI. 

A healthy credit history is also important. Most borrowers will start to qualify for a mortgage with a minimum score of 620 — but the most competitive interest rates will be offered to those with a score of 700 or above. So if you haven’t started practicing those good credit habits yet, it’s time to start developing them.

Related: Myths About Credit Scores

One of the trickiest hurdles for young adults, so many of whom are lugging around student loan debt, is the debt-to-income (DTI) ratio. Mortgage companies want borrowers to have a certain level of cash flow each month, and that means taking into account how much you’re paying out to other lenders. Ideally, a borrower’s debt-to-income ratio — how much you pay toward debt each month divided by your gross monthly income — should fall below 36%. (Strictly speaking, a loan is considered able to be paid if the DTI doesn’t exceed 43%.) If yours doesn’t, think about how you can get that debt needle moving in the right direction.

“The best way to do this is to pay off any unsecured debts like credit cards and personal loans, and keep them as close to a zero balance as you can,” says Harriman.

 

#2 You Probably Will Have to Compromise

Kathleen Celmins, who manages the personal finance site “Stacking Benjamins,” was financially prepared to manage a mortgage. But once the house hunting began, she quickly realized she was priced out of the homes she had envisioned for herself.

“I originally wanted a single-family home with a yard and in a great neighborhood,” she says. But given her price point, the homes she could afford ended up being in, well, not the greatest neighborhoods. “At one point, we looked at a property that was directly behind a strip club,” she laughs. “We didn’t even go inside.”

After several weeks of searching, Celmins realized she needed to find a middle ground. “In my price range, I could get a not-so-great house in a not-so-great neighborhood. Or, I could get a really cute condominium with a gas range and granite countertops,” she says. “It was something I compromised on. I gave up a yard for having fancy stuff in my condo.”

#3 Be Emotionally Ready for Financial Surprises

When it comes to renting, surprises don’t require much emotional investment. The rent goes up? You can move. The fridge is on the fritz? The landlord will send someone over. Home ownership is a bit more hands-on. If the toilet breaks, it’s time to start reading Yelp reviews. And if property taxes unexpectedly rise, it’s on you to appeal or pay up.

“My homeowners association fee doubled in the first year I owned my condominium,” says Celmins. “Then my real estate taxes were reassessed. My mortgage payment went up and I panicked. I didn’t even know that could happen.”

Of course, having the financial flexibility to cover those unexpected things is important, but don’t overlook the importance of having the mental and emotional capability of dealing with them responsibly when they arise. Everything could be peachy for months, and then three maintenance issues might spring up in the same week. Stress management and problem solving skills are home ownership biggies.

#4 A Mortgage Can Be Cheaper Than Rent

Depending on the home you choose and where you live, you may pay a lower mortgage than you paid for rent. But even if you don’t, there’s still the financial advantage of building equity in your home, instead of lining your landlord’s pockets.

#5 Your Lifestyle May Call for Buying Instead of Renting

Many people find a rental can only take them so far. When you’re ready to start a family, you’re going to want a few extra rooms, and that can get expensive with rising rental rates. A yard also provides a safe place for Junior to play or for a dog to scamper around. And speaking of Fido, the vast majority of renters have trouble finding a place that will allow for their pet. Home ownership can end that stress for good.

Then there are the renovations. If you’re itching to test out your DIY skills and personalize your space, you’re probably ready to own. Landlords who allow property renovations — especially DIY projects — are few and far between.

Buying a first home is a big change — both from a financial and an emotional perspective. Still, for many, home ownership can be one of the most rewarding life choices one can make. “Turns out it’s awesome,” said Celmins. “I love it so much.”

 

Real Estate Market Prepares for Burst of New Listings | Realtor Magazine

The number of homes for sale in the country is starting to flatten, which realtor.com® researchers say is signaling a “crucial inflection point for the inventory crisis.” Inventory has decreased slightly by 0.2 percent from a year ago, but is poised for an increase in the months ahead due to an 8 percent increase in new listings. This marks the largest annual jump since 2013, according to a new report from realtor.com®.

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“After years of record-breaking inventory declines, September’s almost-flat inventory signals a big change in the real estate market,” says Danielle Hale, chief economist for realtor.com®. “Would-be buyers who had been waiting for a bigger selection of homes for sale may finally see more listings materialize. But don’t expect the level to jump dramatically. Plenty of buyers in the market are scooping up homes as soon as they’re listed, which will keep national increases relatively small for the time being.”

Properties continue to sell at a fast pace. Homes for sale sold in an average of 65 days, which is four days faster than last year.

But home prices aren’t rising as fast. The U.S. median list price was $295,000 in September, a 7 percent increase year over year, which is lower than last year when 10 percent increases were more the norm.

Overall, larger cities are seeing some of the biggest increases in listed properties. Twenty-two of the largest 45 markets saw year-over-year inventory increases in September. The five markets with the largest jumps in For Sale signs were: San Jose, Calif.; Seattle; Jacksonville, Fla.; San Diego; and San Francisco. All five of these markets posted increases of 31 percent or more.

© realtor.com

 

Mortgage Rates Drop Slightly for First Time in 5 Weeks | Realtor Magazine

© REALTOR® Magazine

Mortgage Rates Drop Slightly for First Time in 5 Weeks

October 5, 2018

Borrowers saw a slight cool down in mortgage rates this week following last week’s seven-year high. The 30-year fixed-rate mortgage dipped for the first time after five consecutive weeks of increases, averaging 4.71 percent.

But the higher rates may be deterring some would-be home buyers. “The strength in the economy has failed to translate to gains in the housing market as higher mortgage rates have contributed to the decrease in home purchase applications, which are down from a year ago,” says Sam Khater, Freddie Mac’s chief economist. “With mortgage rates expected to track higher, it’s going to be a challenge for the housing market to regain momentum.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Oct. 4:

• 30-year fixed-rate mortgages: averaged 4.71 percent, with an average 0.4 point, falling slightly from last week’s 4.72 percent average. Last year at this time, 30-year rates averaged 3.85 percent.
• 15-year fixed-rate mortgages: averaged 4.15 percent, with an average 0.4 point, decreasing from last week’s 4.16 percent average. A year ago, 15-year rates averaged 3.15 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 4.01 percent, with an average 0.3 point, rising from last week’s 3.97 percent average. A year ago, 5-year ARMs averaged 3.18 percent.

5 Myths That Keep Buyers on the Sidelines | Realtor Magazine

Consumers can have a lot of assumptions about the housing market. Some of those beliefs may cause them to miss out on a great house. HouseLogic.com recently featured some of the biggest misconceptions that buyers have, including:

 

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1. Assuming you need 20 percent for a down payment. Buyers who may be waiting to save 20 percent for a down payment on their home purchase may end up missing out. About 60 percent of home buyers actually put down less than 6 percent on their home purchase. If buyers have less than 20 percent, a lender may require a monthly fee called private mortgage insurance, or PMI. But home shoppers will be able to start building home equity sooner, and likely will be able to snag a lower mortgage rate now, rather than waiting months or years.

2. An online home value estimator is always accurate. Several real estate websites offer a home value estimator to see what a home is worth—but consider this a ballpark on value, not a fact. For example, the online estimator may not take into account the seller’s recent renovations or the condition of the home. A real estate professional will take the actual home and the current market into account to give consumers a more accurate number of what the home is worth.

3. Refusing to consider homes that don’t have everything on your list. A list of everything a buyer wants in a home is a starting point, but compromising is likely for some features. Help your clients distinguish the must-haves from nice-to-haves. For example, a home with laminate countertops can easily be switched out for quartz, but the home’s location cannot be changed.

4. Judging a house on price alone. Buyers might find an appealing home that’s way under budget. But if the home is in need of some major TLC, you’ll need to factor in the fix-up costs to show your client whether it’s still that great a deal. Calculate beyond the mortgage payment to include costs such as utilities, homeowner or condo fees, and any remodeling ideas.

5. Fixating on a few grand. Maybe your buyer offers $198,000, but the seller won’t budge from $200,000. Advise your client to consider the big picture: Is it worth it to lose the house over $2,000? On a big purchase like a home, the additional $2,000 could add just $8 a month to the mortgage payment. Your client may want to consider trimming something out of their monthly budget to avoid missing out.

Solar on Residential Homes is becoming Increasingly Popular

Investment trends: Consumers have historically invested in remodelling kitchen and bathrooms to increase the value of their homes. Installing solar and energy storage systems is added to the list recently. Not only does it increase the value of homes beyond the cost of the system, but it also pays for itself.

Benefits of Solar system:

1. If correctly sized, solar system has a potential to pay for itself in 5~7 years or lesser. That can be a 15%-20% or higher return on investment. 
2. Take advantage of the 30% tax credit offered by IRS before it is reduced after next year and eventually phased out. Please talk to your CPA how you can take advantage on your 2018 taxes. You should have installed your system in 2018. 
3. Protect against increase in utility rates. PG&E has increased cost of power by over 163% in last 7 years (23% increase every year). 
4. PG&E is planning a major change in billing plans starting 2019. All residents will be moved from current tiered plans to Time-Of-Use plans. This could increase cost of power by up to 15% ~ 25%
5. Electric cars are becoming a norm in California. They consume significantly more power than most homes currently use. Solar system reduces cost significantly for car charging at home instead of using utility power. 
6. Storage systems back essential systems such as Internet, security systems, IP phone lines, lights and essential appliances in case of power failure. 

Ownership considerations

1. Own vs lease: Leasing solar system sounds cheaper option. However it is generally 6x more expensive than owning a system. Leasing puts a 20 year lien on your property and you might not be able to sell or refinance until lease is paid off. After 20 years you don’tt own the system either
2. System selection: There are many products in the market. Some of the recent solar products launched in 2017 and 2018 are significantly better than older technology. Look for solar panels that are 350W or more. If a vendor tries selling you panels that are 335W or smaller is size, walk away. These are obsolete, and inefficient. Such products are not being manufactured any more. Chances are some of the panel manufacturers are out of business and unable to provide product warranty.
3. Installer selection: Although there are popular brand names for installing solar systems, small / local installers provide best value, service, and pricing. 

After going through 5-6, I found a solar energy company (Nabu Solar) that also specializes in home and commercial building energy analytics (EnerSaaS). I have been pleased with the knowledge, workmanship, and quality of work delivered by this company. Besides pricing, \tThey have few advantages over traditional solar companies. I am happy to make introductions.

Thanks

Will the Housing Market Pass or Fail the ‘5 Percent’ Test? | Realtor Magazine

The 30-year fixed-rate mortgage—the most popular loan for home buyers—is inching closer to the 5 percent range. The rise in mortgage rates coincides with years of home price increases. Could this erode affordability more and cause would-be buyers to sideline themselves from the housing market?

 

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The Mortgage Bankers Association reports mortgage rates have surged to 4.97 percent. When including fees, most 30-year borrowing costs have already reached 5 percent or higher. The higher mortgage rate translates to about $35,000 more on interest on a $220,000 loan over 30 years, Reuters reports.

“Higher interest rates is a headwind for housing, but it’s not a major obstacle right now,” Ward McCarthy, chief economist at Jefferies & Co. in New York, told Reuters.

But some economists are seeing it as eroding housing affordability. “The rise in mortgage rates this summer to their highest level in seven years has made it more difficult for potential buyers to afford a home,” Frank Nothaft, chief economist for CoreLogic, said in a statement about a new report from CoreLogic that showed a rise in home prices continues in several markets. 

Last week, the Federal Reserve voted to raise its key interest rate. It also strongly hinted that several more rates are ahead. While mortgage rates aren’t directly tied to the Fed’s benchmark rate, they are often influenced by them.

Following the Fed’s move, National Association of REALTORS®’ Chief Economist Lawrence Yun declared the “era of super-low mortgage rates is over.” But he was quick to note that the Fed’s move was occurring because of an improving economy. “Therefore, home sales should hold steady as the opposing forces of higher rates and more jobs neutralize each other,” Yun said in a statement. “[But] home price growth will surely slow as higher interest rates limit the stretching of the home buyers’ budget.”

The rising rates may push some consumers to buy sooner rather than later.

“Affordability at least currently is average in this period of time,” McCarthy told Reuters. “The rise in mortgage rates has encouraged some people to move into the market now.”

Amazon Partners With Builders to Put Alexa in New Homes | Realtor Magazine

Amazon is partnering with homebuilders to bring its Alexa voice assistant to more new housing units as a standard smart-home feature. The online retailer recently announced it has partnered with Plant Prefab, a California-based company that uses sustainable materials to build prefabricated single-family and multifamily homes. The move comes after Amazon introduced more than a dozen Alexa-controlled smart-home devices, including a microwave oven and doorbell.

“Voice has emerged as a delightful technology in the home, and there are now more than 20,000 Alexa-compatible smart-home devices from 3,500 different brands,” Paul Bernard, director of the Alexa Fund, said in a statement. “We’re thrilled to support [Plant Prefab] as they make sustainable, connected homes more accessible to customers and developers.” Amazon also has partnered with Lennar, one of the nation’s largest homebuilders, to preinstall Alexa in all of the builder’s new homes.

Plant Prefab is trying to use automation to speed up construction projects and lower costs. The company says its prefab method cuts construction time in half and costs up to 10 percent to 25 percent less than a traditional home. “In the housing-crunched major cities like Los Angeles, New York, and San Francisco—along with areas like Silicon Valley—it takes too much time to build a home from groundbreaking to occupancy. And labor shortages, construction delays, and increased construction costs are exacerbating this trend even further, making homes increasingly less affordable,” says Plant Prefab CEO Steve Glenn.

Meanwhile, the smart-home market is seeing explosive growth in new technology products. It’s expected to grow to a $53 billion industry by 2022, according to Zion Market Research.

Tenant Troubles: Who Is Responsible for Problems in Your Rental?

Who foots the bill when the maintenance issues roll in? It depends, so get to know your tenant rights.

One of renting’s major benefits is that you don’t have to worry about upkeep, maintenance and expensive repairs. So when things go bad — your dishwasher stops working, the roof is leaking or the bugs just won’t go away — your first call is usually your landlord.

But how do you know what’s really their responsibility and what falls to you? And what do you do if they refuse to handle the repairs?

Read on for the most common rental issues and how to get them fixed quickly.

Water damage & mold

Easily one of the nastiest discoveries you can find in your home, mold is a common problem — especially in humid or rainy climates. And while most mold doesn’t cause health problems, some types can cause respiratory issues, headaches and allergy symptoms.

Since there’s no easy way for the average tenant to know if the mold in their home is dangerous or not, it’s always best to ask your landlord to get rid of it.

While there’s no federal law that dictates mold exposure limits in rental housing, some states and cities have put guidelines in place. But, even if your state doesn’t have specific mold regulations, your landlord is still responsible for providing safe, livable housing.

In addition to requesting that your landlord remove the mold, make sure they find the source of the mold, whether it’s a leak in the roof or around the windows, failing plumbing, or a basement that’s not watertight. If the underlying water damage isn’t addressed, the mold will likely return.

The one time a landlord may be able to reject your request for mold remediation is if they believe it’s a result of your behavior — if you don’t keep your home well-ventilated, don’t clean regularly or run a humidifier too much.

Broken appliances

Your landlord is responsible for keeping any appliances that came with the unit in good working order. They’re also required to do the preventive maintenance that keeps your appliances up and running, like replacing worn hoses or servicing the air conditioner.

If you brought some of your own appliances, like a microwave or a washer and dryer, you’re typically responsible for repairing and replacing them.

Perhaps the most important appliance your landlord is responsible for is your furnace. Local and state laws require landlords to provide adequate heating, so if you’re having trouble keeping your home warm, reach out to your landlord immediately.

In some warm-weather states, landlords are also required to provide air conditioning. It may not be required in other states, but if your unit has air conditioning, your landlord is required to maintain it.

Pests

Remember when we said that landlords are required to provide tenants with a safe, livable space? That includes pest-free living, but there are a few more gray areas with pests than with other maintenance issues.

Whether your landlord is responsible or not depends on a few factors, including the state you live in, the type of rental unit and the type of pest. For example, in some states (but not others), landlords are legally required to manage bedbug infestations, which are an increasingly common issue.

In some states, landlords are responsible for all pest control, unless you’re renting a single-family home and they can prove that the pests are a result of you not keeping your home clean.

No matter where you live and what local and state regulations are, let your landlord know about any kind of pest as soon as possible. A good landlord should want to address these issues quickly to avoid having them spread to different units.

What if my landlord isn’t cooperating?

In a perfect world, your landlord would fix every problem, without issue, in a timely manner. But in the real world, that doesn’t always happen.

Consider these tips for getting landlord repair issues handled quickly and completely:

• Report even small issues. That tiny leak under your bathroom sink may not seem like a big deal now, but it could cause a serious mold problem down the road. Always let your landlord know about issues as soon as you notice them, before they can get worse.
• Make repair requests in writing. Don’t make repair requests verbally. Instead, send them via email so you have a paper trail and documentation with a date and time stamp.
• Always have renters insurance. It’s an affordable way to protect your belongings in case of damage caused by landlord negligence, plus a variety of other issues. It’s typically very affordable and can be purchased online in a matter of minutes.
• Reread your lease. You (hopefully!) read your lease when you first signed it, but if you’re having issues with your landlord refusing to do repairs, take another look at your lease paperwork and see what they — and you — have already agreed to.
• Get help from a local tenants’ rights organization. If your landlord isn’t addressing major repair issues, find a local tenants’ rights organization on the U.S. Department of Housing and Urban Development website. They can help you identify local and state laws that apply to your situation and provide resources for additional assistance.

Mortgage Rates Surge to 7-Year High After Fed Hike | Realtor Magazine

Mortgage rates surged to their highest averages since 2011 following the Federal Reserve’s announcement Wednesday that it is raising its benchmark interest rate by a quarter point. The 30-year fixed-rate mortgage jumped to 4.72 percent, up from 4.65 percent last week.

 

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“The robust economy, rising Treasury yields, and the anticipation of more short-term rate hikes caused mortgage rates to move up,” says Freddie Mac Chief Economist Sam Khater. “Even with these higher borrowing costs, it’s encouraging to see that prospective buyers appear to be having a little more success. With inventory constraints and home prices starting to ease, purchase applications have now trended higher on an annual basis for six straight weeks.”

Khater also notes that consumer confidence is at an 18-year high, and job gains continue to hold steady. “These two factors should keep demand up in the coming months, but at the same time, home shoppers will likely deal with even higher mortgage rates,” Khater says. Freddie Mac reports the following national averages with mortgage rates for the week ending Sept. 27:

• 30-year fixed-rate mortgages: averaged 4.72 percent, with an average 0.5 point, rising from last week’s 4.65 percent average. Last year at this time, 30-year rates averaged 3.83 percent.
• 15-year fixed-rate mortgages: averaged 4.16 percent, with an average 0.5 point, rising from last week’s 4.11 percent average. A year ago, 15-year rates averaged 3.13 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 3.97 percent, with an average 0.3 point, rising from last week’s 3.92 percent average. A year ago, 5-year ARMs averaged 3.20 percent.