In this episode of ‘On the House,’ we uncover the diverse world of mortgage products beyond the 30-year fixed rate. From Fannie Mae to FHA and VA loans, discover options for first-time buyers, low credit borrowers, and more. Learn about down payment assistance and why working with a loan officer is key to finding the perfect fit.
Video:
Host: Jason Haeger – Host | On The House Podcast
Guest: Mary Ann Pallitto – Product Development Specialist
Want to see if homeownership is right for you? Reach out to your local Benchmark branch to learn more. https://benchmark.us/
Legal Disclaimer:
The information provided in this presentation is for general informational purposes only. The content shared here is not intended to be financial, legal, or professional advice specific to your situation. Mortgage regulations and requirements may vary, and the information discussed may not be applicable to your individual circumstances. Therefore, we recommend consulting with a qualified professional or contacting Ark-La-Tex Financial Services, LLC – NMLS #2143 directly for personalized advice tailored to your needs. Any reliance you place on information from this presentation is at your own risk. By listening to this presentation, you acknowledge and agree that Ark-La-Tex Financial Services, LLC – NMLS #2143, its hosts, and guests are not responsible for any losses, damages, or liabilities that may arise from your reliance information presented here. Ark-La-Tex Financial Services, LLC NMLS# 2143 (www.nmlsconsumeraccess.org). All loans subject to borrower qualifying. This is not a commitment to lend. Other restrictions may apply. (https://benchmark.us)
The insurance industry has experienced significant changes over recent years, with homeowner’s and auto insurance rates increasing rapidly. The reasons behind these trends are numerous, involving a combination of economic, environmental, and market-driven factors.
Homeowner’s insurance on the rise
Homeowner’s insurance rates have risen notably, driven by several unrelated critical factors:
Rising Rebuilding and Replacement Costs: Between 2019 and 2022, the costs associated with rebuilding and replacing homes climbed by 55%1. This increase is a principal driver behind higher premiums as insurers recalibrate to cover these escalated costs.
Extreme Weather Impacts: A rise in natural disasters, including severe storms and wildfires, has heavily impacted the insurance sector2. The increase in these catastrophic events have lead to more large claims, driving up costs for insurers. Costs which, in turn, get passed on to homeowners.
Market Pressures and Area Exits: Worsening financial performance has caused property insurance market to experience significant strains, which are partly due to economic inflation and changes in exposures3. These pressures have resulted higher premiums and, in some cases, insurers exiting certain markets (no longer writing polices in certain regions) or reducing their policy offerings4.
Accelerating auto insurance premiums
Auto insurance has also experienced rate increases, with overlapping and unique factors to blame:
Rising Inflation and Repair Costs: Similar to homeowners insurance, auto insurance is impacted by inflation. The cost of repairs, labor, and parts has increased, leading insurers to raise premiums to cover these higher expenses5.
More Natural Disasters: Auto insurance companies were also impacted by natural disasters, which can lead to a higher volume of claims. Vehicles damaged by storms, floods, or fires contribute to the overall risk insurers need to manage5.
More Technological Complexity: Modern vehicles come equipped with advanced technology, making repairs more expensive. This novel complexity adds to the overall cost insurers need to cover, contributing to premium increases.
Common themes and relationships in insurance
Analyzing the causes behind the steep rise in both homeowners and auto insurance rates reveals common themes:
Impact of Weather Extremes: Both sectors are significantly affected by climate change, leading to an increase in natural disaster-related claims. This trend underscores the growing importance of environmental factors in insurance pricing.
Economic Factors: Inflation plays a crucial role in both contexts, impacting the cost of repairs, replacements, and labor. Economic conditions directly influence insurance rates, reflecting broader market dynamics.
Technological and Material Costs: Just as the cost of modern vehicle technology impacts auto insurance, the rising costs of building materials and construction technology affect homeowners insurance. These factors contribute to the overall increase in premiums.
Looking ahead
Understanding these trends is critical for consumers looking to navigate the changing insurance landscape effectively. While external factors like climate change and inflation may be beyond individual control, there are steps consumers can take to mitigate the impact on their insurance rates. Regularly reviewing policies, improving property resilience, and shopping various insurance providers can help secure more favorable terms.
Given the complex interplay of factors driving insurance rates up, it’s evident that both homeowners and auto insurance sectors are navigating through a period of adjustment. Awareness and proactive management of insurance policies become even more crucial to adapt to these changes.
What’s a future homeowner to do?
It’s no secret that inflation has taken a bite out of the average worker’s spending power. The general cost of living is, on average, higher than it used to be. See the chart below of the latest 5-year trend of the Consumer Price Index in the United States using data from the US Bureau of Labor Statistics:
If you currently rent your home, you may also have noticed that the average cost to rent has risen as well. Below is a chart of Rent Inflation for the past 5 years, again, using data from the US Bureau of Labor Statistics:
If you are feeling the pinch of inflation and rent increases, you may be tempted to believe that the American Dream of homeownership is slipping away. Headlines have emphasized the increase in mortgage rates, and it’s no secret that demand has buttressed home prices, as indicated in the chart below using data from the Federal Housing Finance Agency (FHFA):
United States FHFA House Price Index: Last 5 Years
What if you could do something now to help prepare for a more expensive future? What if homeownership is more than just a foundational part of the American Dream, but a tool to leverage a better financial future for family, or just for yourself?
Fight rent increases: Fire your landlord. (and become your own)
Maybe you love your landlord. Maybe you really dislike your landlord. Either way, the odds are good that your rent is higher than it was 2 years ago (Remember the rent inflation chart above?).
You know what isn’t higher? The principle and interest monthly payment for a mortgage that started 2 years ago. That’s the magic of a mortgage loan: the monthly payment doesn’t change for the life of the loan. Sure, this doesn’t account for insurance rates, taxes, or HOA fees, but every dollar you pay on the principle is equity in your home that you now own, and your lender doesn’t. You can’t say that about rent.
Your home as a financial asset
As the property you own increases in value, you own every bit of the new value, and your monthly payment (principle and interest) stays the same. Maybe you have a growing family, or you want a bigger garage, office, space to entertain, or whatever you have your heart set on. If you want to get a bigger house, you can take the equity of your existing house, and use it to help pay for your next house.
Over time, as your equity grows (and your monthly principle and interest payment stays the same), your net worth and economic resilience grows with it. In fact, if you want an even lower monthly payment, you may be eligible to refinance your remaining debt into a new mortgage, if rates are favorable. You could also use a portion of the equity in your home for other expenses. (These are referring to various loan products, and the best product for your situation may not be the same the best option for someone else.) The point is, becoming a homeowner gives you options that are not available otherwise.
Know your options
If you firmly believe that homeownership is out of reach, we encourage you to explore your options anyway. There are a variety of programs, and a variety of properties that can work together to help you start building home equity. If qualification is a problem, there are steps you can take to work towards qualification.
The point is, don’t let your own limiting beliefs hold you back. Our team of loan experts thrive on helping buyers overcome challenges to help you fire your landlord, become a homeowner, fight back against rising rents, and start building equity.
If you are ready to get started, fill out our no-obligation form, and your mortgage loan expert will contact you to help you determine your best path forward.
The information provided in this presentation is for general informational purposes only. The content shared here is not intended to be financial, legal, or professional advice specific to your situation. Mortgage regulations and requirements may vary, and the information discussed may not be applicable to your individual circumstances. Therefore, we recommend consulting with a qualified professional or contacting Ark-La-Tex Financial Services, LLC – NMLS #2143 directly for personalized advice tailored to your needs. Any reliance you place on information from this presentation is at your own risk.
By listening to this presentation, you acknowledge and agree that Ark-La-Tex Financial Services, LLC – NMLS #2143, its hosts, and guests are not responsible for any losses, damages, or liabilities that may arise from your reliance information presented here.
Ark-La-Tex Financial Services, LLC NMLS# 2143 (www.nmlsconsumeraccess.org). All loans subject to borrower qualifying. This is not a commitment to lend. Other restrictions may apply. (https://benchmark.us)
In this episode of ‘On the House,’ we explore the impact of high-interest rates and challenges faced in 2023, emphasizing the importance of careful consideration before making housing decisions. Additionally, we delve into predictions for 2024, including forecasts for home sales, mortgage rates, and property values from industry experts.
Want to see if homeownership is right for you? Reach out to your local Benchmark branch to learn more. https://benchmark.us/
Legal and Compliance:
The information provided in this presentation is for general informational purposes only. The content shared here is not intended to be financial, legal, or professional advice specific to your situation. Mortgage regulations and requirements may vary, and the information discussed may not be applicable to your individual circumstances. Therefore, we recommend consulting with a qualified professional or contacting Ark-La-Tex Financial Services, LLC – NMLS #2143 directly for personalized advice tailored to your needs. Any reliance you place on information from this presentation is at your own risk.
By listening to this presentation, you acknowledge and agree that Ark-La-Tex Financial Services, LLC – NMLS #2143, its hosts, and guests are not responsible for any losses, damages, or liabilities that may arise from your reliance information presented here.
Ark-La-Tex Financial Services, LLC NMLS# 2143 (www.nmlsconsumeraccess.org). All loans subject to borrower qualifying. This is not a commitment to lend. Other restrictions may apply. (https://benchmark.us)
Benchmark, a leading mortgage lender since 1999, is proud to announce its accreditation as an Accredited Social Impact Lender (ASIL) by the National Association of Minority Mortgage Bankers of America (NAMMBA).
This accreditation is a testament to Benchmark’s commitment to providing quality mortgage services to all of its clients. Benchmark’s mission is to make homeownership accessible to everyone, and this accreditation is a major milestone in achieving that goal.
“We are thrilled to be recognized by NAMMBA as a Social Impact Lender,” said Benchmark CEO, Brian McKinney. “At Benchmark, we strive to provide our clients with the best possible service and this accreditation is proof of our commitment to our mission.”
NAMMBA is a national organization dedicated to promoting diversity and inclusion in the mortgage industry. The ASIL accreditation is a rigorous process that requires lenders to demonstrate their commitment to social impact lending.
“We are proud to have Benchmark join our ranks of ASIL lenders,” said NAMMBA President, Tony Thompson. “Benchmark’s commitment to providing quality services to all of its clients is a testament to their dedication to their mission.”
Benchmark is committed to providing its clients with the best possible service and this accreditation is a major milestone in achieving that goal. With this accreditation, Benchmark is now better equipped to serve its clients and help them achieve their goals of homeownership.
For more information about Benchmark and its services, please visit benchmark.us.
A Home Equity Line of Credit (HELOC) is an easy way to borrow money using your home’s value as collateral. Let’s look into how a HELOC works and whether this option is right for you.
A home equity line of credit (HELOC) works much like a credit card. With money drawn from a HELOC, you can pay for things like home remodeling/repair fees, credit card debts, or even save it for rainy day funds.
A HELOC’s interest rates can be significantly lower than a credit cards
How Much Can You Borrow with a HELOC?
The first step in deciding if a HELOC is right for you is knowing whether you have enough home equity to qualify. This will also determine the amount of the credit line that you’re eligible for.
Your home equity is the difference between your home’s appraised value and your mortgage balance (assuming you have an existing mortgage).
Example: HELOC for a home worth $500,000
if your home is worth $500,000 and you have 50% equity, you may be able to borrow as much as $150,000 in a Home Equity Line of Credit (HELOC).
Let’s break that down.
If your home is worth $500,000 and you owe $250,000, your equity is 50%.
$500,000 – $250,000 = $250,000
If your home is worth $500,000 and you don’t have a mortgage, your equity is 100% ($500,000 – 0 = $500,000).
To estimate your possible HELOC credit limit, calculate your combined loan-to-value ratio (CLTV ratio, or your line of credit relative to your home equity). Most HELOC lenders allow a CLTV of at least 80% on your main home, sometimes higher.
To estimate, multiply your home’s appraisal value by 0.8. This is approximately how much money lenders may let you borrow against your home. With a home value of $500,000, it comes to $400,000.
$500,000 x 0.80 = $400,000
Then, subtract the amount you still owe on your existing home loan. For our example, let’s estimate that to be $250,000.
$400,000 – $250,000 = $150,000 credit limit for our example HELOC.
So, How Does a HELOC Work?
A HELOC is a revolving line of credit with a variable interest rate, like a credit card. It also has a fixed term and a defined repayment period, like a mortgage.
A credit card’s credit limit is based on your household income and credit score. You can spend as much, up to the credit limit, or as little as you want in each billing cycle. When you get your statement, you have to make at least the minimum monthly payment, but you can choose to repay the entire statement balance if you don’t want to accrue interest. When your payment is processed, your available credit increases by the amount of your payment that went toward the balance. If a portion of your payment is going to interest, this portion will not contribute to your available credit.
A HELOC is similar, but your credit limit is also based on how much equity you have in your home. Additionally, a HELOC has two periods:
First, there is a draw period, typically several years, during which you can borrow up to your credit limit and make interest-only payments.
Then, there is a repayment period, generally several more years, when you can no longer borrow money but must repay your outstanding balance with interest.
What are the steps to get a HELOC?
Apply with a Benchmark online, in person, or over the phone.
You will be asked to submit supporting documents including photo ID, paystubs, tax returns, proof of assets, bank statements, current mortgage details, and other financial information
If approved, Benchmark will issue an initial, conditional approval
Benchmark will order and schedule an appraisal of your home.
Our underwriters will check your application and make sure everything’s in order
Your final approval will be sent by your underwriter
Close the loan and receive funding. Since a HELOC is not a lump sum loan, you’ll receive a special account or card allowing you to access your HELOC as needed
What else should you know to decide if a HELOC might be a good choice for you?
We recognize that not every loan product is right for everyone. There are a few more things you should know about HELOCs.
Like most credit, the better your credit score and credit history, the higher the chances are that you will be approved.
A HELOC is a very low cost way to borrow money, and can be an attractive option if you do not have a substantial amount in savings, and are in need due to a crisis or economic downturn.
You can use a HELOC to pay for almost anything, and funds are easily accessible once open.
If you feel burdened with credit card debt, and you’re looking for a way to save on interest, a HELOC could be a great tool.
Curious to learn more?
At Benchmark, we are committed to listening to your goals and setting you up for future success. To learn more, Contact your local Benchmark branch. Contact us today for personalized information. Call me yourself or request a call from me. WeI would be honored to provide you with our famous excellent service.
Has your home been on the market long? Do you feel like selling your home is an insurmountable task? Selling your home can feel hopeless the longer your property sits awaiting a buyer. As sellers struggle to attract buyers, they are confronted with ideas like price slashes or full remodels to sell to their homes. These ideas would inevitably cost thousands, reducing the gain from the listing price, and leave a seller wondering if there is a better way. Perhaps what you’ve been waiting for is a 2-1 Buydown.
It’s Hard to Sell in the Current Market
Since the beginning of 2022, sellers may have noticed a decline in property purchases.
In fact, the National Association of Realtors says that
“existing-home sales declined for the fifth straight month to a seasonally adjusted annual rate of 5.12 million. Sales were down 5.4% from May and 14.2% from one year ago.”
The national inventory of unsold homes is on the rise, almost parallel to the rise in interest rates from 2021 to 2022. The housing market interest rates have seen a steady increase from the average 2.96% in 2021 to 4.61% at the end of Q3 in 2022. Current buyers have now watched interest rates cross 5%, with no projections for drastic decreases any time soon.1
With increasing buyer fearfulness, how can you, a seller, stand out and encourage buyers to choose your home as their first option? Offer a 2-1 Buydown agreement.
What is a 2-1 Buydown?
The 2-1 Buydown: The seller contributes an upfront fee, which lowers the buyers effective interest rate by up to two percentage points for the first two years of their loan.
This lowers initial monthly payments, giving the buyer more funds to turn their new house into a dream home, or to use in any other financial goals, and gives them time to plan for the higher interest payment after the first, and then second year.
You, the seller, will have provided a unique experience by enabling the buyer to build equity as they ease into their new home.
2-1 Buydown Inspiration Story
The following story is fictional, loosely based on a real sale, and is used to explain how a 2-1 Buydown could help a seller incentivize a buyer.
A seller named Benjamin Smith, like you, dreaded each passing day as his property listing had no potential buyers.
After weeks of constant turmoil, he turned to his friend, a loan officer at Benchmark. After a lengthy conversation about market prices and interest rates and the awful feeling from not being able to sell his home, they discussed the idea of a 2-1 Buydown. The following week, Ben’s Realtor mentioned that a buyer had interest in the home, but wasn’t fully convinced yet.
Ben asked his agent to express that he would be willing to do a 2-1 Buydown. The buyer was very happy with the idea of two years of lower payments, and planned to use the resulting savings to remodel the garage into a home gym.
He had a $250,000 loan with a note rate of 5%. The monthly payments would be $1,342. After Ben’s temporary 2-1 Buydown of $5,232, here’s what the reduction in monthly payments would look like for the first two years. (APR 5.558% at 5.375%)
Year
Rate
Monthly Payment
1
3%
$1,054
2
4%
$1,194
3
5%(original rate)
$1,342
That left our homeowner Ben with an extra $288/mo for the first year, and an extra $148/mo the second year before the original interest rate begins in the 3rd year. That’s a total of $3,456 saved in the first year, and $1,776 saved in the second year, for a combined savings of $5,232 (the 2-1 Buydown amount) for the first two years of homeownership. This also gave Ben the opportunity to buy now, and time prepare for higher payments later, rather than waiting to buy (which has itsown costs).
Sell faster with a 2-1 Buydown from Benchmark
Ready to learn more? Get the sellers’ edge, and help your buyers start building family wealth with a 2-1 Buydown agreement with Benchmark.
Contact your local Benchmark branch. Contact us today for personalized information. Call me yourself or request a call from me. WeI would be honored to provide you with our famous excellent service for your new loan.
Benchmark has been named one of the 50 Best Places to Work for by Mortgage Executive Magazine!
We’re ranked #7 on average score!
Additionally, Benchmark was named to the magazine’s Top 100 Mortgage Companies in America. We landed at #38 alongside some of the biggest names in the country.
64 of our teammates were recognized as the Top 1% Originators in America. The magazine stated, “the top 1 percent of mortgage originators delivered outstanding results in a challenging market” and we couldn’t agree more!
April 26, 2022 – Steve Remington, Benchmark’s C.O.O., was sworn in as the 2022/23 President of the Texas Mortgage Bankers Association last month at the TMBA Annual Convention in Austin, TX.
The TMBA’s membership is the largest in the nation, made up of mortgage bankers, banks, credit unions, attorney firms, vendors, technology firms, and more. Remington joined the TMBA in 1998, reverent of the associations impact on legislation through legislative advocacy and policy making for the mortgage industry since 1917. Remington assumed many roles within the non-profit organization, serving on committees, boards, and projects, developing relationships with colleagues/friends he leans on for mentorship.
“I’m grateful for the tremendous amount of networking, and access to industry veterans whose careers span decades longer than my own that have been very successful in our business.”
“Their lessons in servant leadership have influenced my style of leading at Benchmark through flourishing times and moments of uncertainty.”
Steve Remington
Remington calls himself a student of the industry, and one of his goals during his presidency is to educate those in real estate finance, while attracting new members. Leadership development is a personal passion Remington shares with the TMBA. Communicating and navigating challenges and issues on a national level to protect & prosper our industry will be high on his priority list as he serves his term.
It’s the question that’s buzzing around real estate offices, mortgage companies, backyard barbecues, water coolers and passing conversations with neighbors.
The short answer is — we think so.
Yes, it is still a good time to buy.
The long answer is more complicated. Consider these four trends to help you as you make your housing buying decisions.
Higher home prices show no signs of reversing course.
Even before the pandemic, the supply of the housing market couldn’t meet the demand. In 2020, COVID-19 affected the housing market just like it did every other industry. However, we’d soon find out that the real estate market was a double-sided coin.
Let’s set the record straight. If you’re expecting the trajectory to result in a housing bubble ready to burst, reminiscent of 2008’s Great Recession, this isn’t that. The market variables that resulted in the 2007-2008 housing market crash don’t exist now. If higher home prices cause are causing you to hesitate, keep in mind that prices will likely continue to rise. Home prices were rising already before the virus, and multiple variables from the pandemic created greater demand in an already competitive market.
With the introduction of social distancing measures, many began to conduct the majority of their lives inside their homes and, unsurprisingly, wanted or needed more space. Many also sought financial security, preferring a traditional equity purchase that still carried relative liquidity amid the health crisis uncertainty. What better way to adapt to the new world than investing in your home: the very place you planned to ride out the epidemic? Many see it as a timely investment vehicle.
Buying gained popularity.
However, many other Americans had the same idea. Additionally, the COVID-19 pandemic affected the ability and access for individuals to go to work. Companies in the housing industry suffered, as workers were absent due to new mandates among other pandemic-related challenges. As the pandemic wore on, labor and building materials supply chains struggled further.
Earlier, I wrote that, before the pandemic, as well as in its beginning, housing demand had exceeded supply. The difference now is that the supply of home options is extremely low1due to the factors mentioned above, which have resulted in climbing home prices. In fact, Zillow projects a 17% year-over-year rise in home valuations for 20222.
The effects of the pandemic only added more fuel to a white-hot market. Home prices aren’t going down any time soon, even if their rise slows.
Interest rates have started correcting to higher levels.3
At the beginning of the pandemic, in the face of a developing national health crisis, the Federal Reserve took action. They pledged (and proceeded) to buy debt and mortgage-backed securities (MBSs) in an effort to help the economy.4 This resulted in an artificially high demand for MBSs, driving down mortgage interest rates. For a time, this helped add stability to the economy. It made it easier access financial resources, investments, and loans — such as mortgages. It’s not surprising that so many individuals decided to pursue homeownership during the pandemic. Demand was already outpacing supply. The lower interest rates made a home purchase that much more attractive, tipping the balance further.
As inflation has risen, so too has the labor market. The Federal Reserve has noticed, and hasclaimed that they will begin selling some of their balance sheet. This move serves tocorrect mortgage interest rates back up to normal market levels.5
A more balanced market is good for the economy, in general. However, higher interest rates will only decrease buying power for home buyers. Additionally, home buyers who have waited for prices to fall just may see prices at least hold, if not increase.
Rent price increases are breaking records6 and making headlines.
It is well-known that rent prices rise over time. This is due to a variety of factors: inflation, rising utility costs, location value, and the list goes on. With reduced supply of homes and renter instability during the height of the pandemic, rent prices are up 14% year-over-year, with some up over 30% in many major metro areas.7
Renting is a great option for those who want to stay flexible. But for those looking to optimize their finances, it’s helpful to remember that 0% of your rent payment builds your own equity. Since it’s not part of a home investment, you’ll never see any of that money again!
Although a down payment may sting at first, a fixed rate mortgage payment does not increase over time. Compare that to rent, as it continues its daunting upward climb. Renting gives no net worth gain, and leaves you at the mercy of your landlord and binding lease agreement.
In some cases, after the down payment, a mortgage payment may be lower than rent for a comparable space. Be mindful where your money is actually going. You may be able to gain some equity for your housing costs.
The cost of waiting may be higher than you expect.
For many home buyers, the down payment is the hardest obstacle to overcome. With the home price index rising8, it will become increasingly difficult to save enough for a down payment. Down payments are measured as a percentage of home pricing, and are often tens of thousands of dollars. It can be quite a challenge!
Upward trends in demand, interest rates, rent prices, and the Consumer Price Index (CPI) means saving could become more difficult. If accounting for normal expenses and goals wasn’t enough, you will also be contending with market forces beyond your control. Should these trends continue, It will be harder to save for a ~12%9 down payment.
Depending on your situation, you may need less for a down payment than you think. Building your equity sooner means you could actually benefit from rising home prices. Even in a sellers’ market, getting into a home you can afford now may benefit you in the long run. However, we’d still advise that you exercise due diligence as you determine the best real estate investment for your situation.
8 https://www.spglobal.com/spdji/en/indices/equity/dow-jones-us-real-estate-index/#overview
9 2021 median down payment: https://www.nar.realtor/sites/default/files/documents/2021-home-buyers-and-sellers-generational-trends-03-16-2021.pdf
In the current housing climate, the cost of waiting to make a move in the real estate market will most likely cost you more in the long run.
Buying a home is a long-term decision that should be made with careful consideration. Financial decisions should be strategic. At Benchmark, we provide education to hopeful buyers regarding trends in the market and how they could affect future plans. We are committed to listening to your vision, and getting you the right mortgage for your future success.
Contact your local Benchmark branch. Contact us today for personalized information. Call me yourself or request a call from me. WeI would be honored to provide you with our famous excellent service for your new loan.
