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Author: Jason Haeger

Jason Haeger is the Webmaster and Editor of Benchmark.us and the Benchmark.us network of websites. In addition to design, web development, and writing, he enjoys playing guitar, gardening, reading, and spending time with his wife and kids.

Benchmark Delivers A Christmas Homecoming Miracle

by Jason Haeger

Benchmark could just be another mortgage lender, but we’re not. Sure, every company has their ‘core values’, but there is something tangible and special about ours.

Our core values didn’t exist until after they were identified in the soul of the company years after it was established. These values not only inform how we do things, they defined what was already at work. They support an existing culture, rather than being the rules for mandating it. First and foremost, Benchmark is about relationships.

We recognize, and experience, the reality that it is people just like you who make what we do worthwhile. It’s not about money, fame, or pride; in the end, it’s about having the privilege to serve so many people in financing their dreams, while care for their future.

There are many client stories that remind us why we do what we do, and validate our mission. Stories like this one from our branch in Imperial, CA.

Good evening team, I wanted to thank you again for an incredible job getting the Rosales home for Christmas. They were homeless for 6 months, and living in a friend’s room with 2 kids.

We knew we could close for New Year’s but for Christmas we needed a miracle, and today when I give them the news that the house was recorded under their name, the first thing they told me was,

“Please thank everyone on your team because we knew we needed a Miracle and that Miracle is Benchmark. For the last 3 days every time I give Mom an update she will cry and I kept telling her don’t cry because you will make me cry.”

I was lucky to be present when they got the keys, and seeing her kids choosing their rooms and wanting to move all their furniture from storage tomorrow was the greatest gift I could have received as a Loan Officer. 

My client knows I’m the face of Benchmark, but without any of you this will never be possible. 
Valentina Estes, NMLS# 810063
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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.

 

Benchmark brings you home.

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Is waiting for lower interest rates a mistake?

by Jason Haeger

With mortgage interest rates at a level not seen for over a decade (see chart below), the question of whether to wait for interest rates to fall is creeping in. This is not unreasonable, however, it does beg the question.

Are rates actually high?

If you take a look at the chart below, you can get a pretty good idea. At first glance, you may be tempted to think, “With rates THIS high, they’re bound to come back down before too long.” You may think this looks like an economic blip; that things will calm down back to normal soon.

10 Year chart of mortgage interest rates

But a longer view may give you a different perspective.

Looking over the past ten years means we are looking back on a housing market recovering from the 2008 crash (the conditions of which do not exist today). This is a short-term view; A view that includes a lot of market manipulation intended to encourage buying through various means, including keeping interest rates low.

To see more clearly, we need to take a look at a much longer time frame.

25 year chart of interest rates

The longer view gives a sobering realization. Current rates do not appear to be high at all, in the long term. The reality is that the lower rates we’ve been experiencing are a strange occurrence, fueled by quantitative easing. The rising rates we see now are the result of a slight reversal of this practice. To better understand what this really means, take a look at the chart of the Federal Reserve’s Balance Sheet over the last 10 years below.

10 year chart of Federal Reserve balance sheet

The Federal Reserve was buying investment securities (including mortgage debt securities) to help prop up the economy, and to bring mortgage interest rates down. The fact that the strategy worked is a clear sign that its reversal means that rates have, and will probably continue to drift back up to natural market levels. As we have discussed before, a rising interest rate means a rising cost of homeownership.

However, it’s clear that interest rates are not the only thing going up.

Inflation is a value killer

Inflation is on everyone’s minds as of writing. The Consumer Price Index shows a fairly sharp climb since the COVID-19 pandemic began, and the Federal Reserve’s increase in interest rates (not the same as mortgage interest rates) was intended to alleviate inflation. Oh, you want a chart to show inflation? See below.

5 Year chart of Consumer Price Index

The rising prices means that your money is worth less. Everything costs more than it did, which can eat into what you can afford for a monthly mortgage payment. It may seem like a good idea to wait: for your money to be worth more, for the economy to stabilize, and for mortgage interest rates to return to their senses.

As discussed previously, however, there is no solid basis for anticipating mortgage rates to come down any time soon, if at all. If this is true, though, does it even make sense to buy a home? Is real estate really the right place to put your money if the cost of living goes up?

Rising prices mean cash held in hand is losing value, while investments that rise with it are, at the very least, holding value.

“Real estate is one of the time-honored inflation hedges. It’s a tangible asset, and those tend to hold their value when inflation reigns, unlike paper assets. More specifically, as prices rise, so do property values.”

Mark Cussen, Financial writer at Investopedia

Higher cost (rates) means less competition

We have seen a cooling of demand in the housing market since rates have started rising. The sellers’ market has become more equitable, favoring buyers in many locations. There have been fewer multiple-offer scenarios, and even when there are multiple-offers, there have been fewer offers to compete with.

If you live in a competitive market, Benchmark can give you an edge. If you don’t live in a competitive market, this could be your opportunity to get your offer accepted on the best possible terms. Again, this is what we do best. Contact us get more information about how you can win with Benchmark.

Housing prices tend to climb

The financial world is full of commonly repeated advice. Invest early and invest often. The best time to plant a tree is 20 years ago; the second best time is today. Add this one to the list: Buy now to buy more.

Even if we find ourselves in a recession, as some predict, this does not guarantee falling home prices. The exception being the notorious 2008 recession due to the collapse of real estate debt-based investment schemes, the conditions of which do not exist, and have not existed since.

Buying a home is not just about building family wealth. Owning your own home comes with other benefits. Owners Enjoy More Privacy and Security, for example.

Will interest rates come down?

There is no indication that they will come down any time soon. Even if you do suspect that rates will be reduced in the future, you should weigh the cost of waiting. Of course, you may be able to refinance at a lower rate in the future, while taking advantage of current home prices now.

Either way, your rent payment will become at least a partial investment into a physical asset you own. The principal portion of a mortgage payment directly reduces the amount you owe on your home. When you pay rent, the only equity you are building is your landlord’s.

Not to mention, rent also rises.

10 Year Rent Inflation Chart

The chart above is not plotting rent prices. The chart is plotting rent price inflation. See the dip caused by the COVID-19 pandemic starting early 2020? This isn’t really a dip; it’s just a reduction in the annual inflation rate of rent prices. Inflation never reversed within the last decade.

How do you escape the squeeze?

It would do no good to lie to you and tell you that there is an easy way out of the rising cost of housing. We have published a short list on How to Get Ahead When You Can’t Get the House You Want, but the wisest words I’ve ever read on housing were these: “Welcome to California. Buy a house immediately.” This is less about California, and more about how to live with rising housing prices. This was advice given to someone who moved there for a job in the tech industry. The advice holds true now: the sooner you buy, the better your chances of being able to buy.

Related: Top 5 Myths About Home Buying in 2020

If you think you might want to become a homeowner, I encourage you to contact us. Even if you think you cannot afford a home yet, or if you don’t know what you need to do to get started, we specialize in helping people just like you achieve the American dream of homeownership. Benchmark has been helping people get into their own home since 1999, and we’ve learned a few things along the way.

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 brings you home.

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Is Buying A Home Really More Expensive Than Renting?

by Jason Haeger

If you rent, you probably have good reasons. I bet that “paying my landlord’s mortgage”, “noisy neighbors”, or other caveats aren’t among them. Look, we know that owning isn’t right for everyone. As much as we write about why owning a home is better than renting, there are legitimate reasons for choosing to rent. For one thing, while renting may require a deposit, it doesn’t require a down payment. Renting is often the first choice for someone who wants or needs to be able to move with minimal hassle, or for someone whose focus is too occupied to be concerned with managing repairs and maintenance.

Whatever your reason, there is little doubt that most people probably want to eventually own their own home, even if not yet. If your reason is financial, you may think that buying is more expensive than renting. On one hand, you may have a point. On the other hand, the long view casts a long shadow of doubt on that assumption. Even if you plan to rent for awhile longer, educating yourself is always a good idea, especially if you plan to one day own, rather than rent, your own home.

Let’s talk about it.

Costs of Buying and Owning

Let’s talk about equity.

Before we jump into the actually costs of buying and owning your own home, It would be shortsighted to not discuss how equity plays into the equation. For starters, if you don’t know what equity is, it is just the portion of a whole asset that you own. It can be calculated by subtracting the remaining loan balance from the total value of the home. This is a major reason why a Self-Made Millionaire Told Millennials To Buy A Home three years ago.

With every mortgage payment, a portion of it goes toward the principal balance of the loan. (See: Why Buying Is Investing) This means that, without any extra effort on your part, your net worth grows by the amount of the principal portion that you pay each and every month. How much of your rent adds to your net worth? Oh.. sorry, I didn’t mean to make you feel bad. When you rent, you add to your landlord’s net worth, not your own net worth. Hey, at least your money is helping someone, though, right? Let’s move on.

Do you need a lot of cash for a down payment?

That depends. How much how do you want to buy? How much do you consider to be a lot? The truth is, you don’t need as much as traditional wisdom may have led you to believe. In my last article, Owning A Home May Already Be Within Reach, I talk a little more about that. There are conventional loan programs that require as little as 3% down, depending on your particular scenario. Assuming a $250,000 purchase price, 3% amounts to $7,500. However, a down payment is just putting your own investment dollars into the transaction. A down payment reduces your liability, and while you will no longer have the cash in hand after the transaction, it will not reduce your overall net worth. On the contrary, it could be the vehicle that gets you on your way towards a higher net worth than you would have access to otherwise. See a previous article we published, called Homeowner Average Net Worth 3,600% Higher Than Renter.

What about closing and other transactional costs?

Ah, closing costs. Sometimes surprising first-time home buyers, the purchase of a home requires a lot of moving parts, and many parties who work together to make this transaction of real estate possible. Apply the economic principle of “There is no such thing as a free lunch” to the purchase of a house, and it’s logical, really. So how much are they? That all depends.

Generally speaking, home buyers will pay roughly 2-5 percent of the purchase price in closing and transactional costs. These can be seen as true costs, as they do not translate to equity in the purchased home. There is almost always room for negotiation on these, so it’s worth talking to your loan officer about this ahead of time. It is their job to put together a mortgage package that fits nicely with your own personal financial situation and goals.

There will be other costs of ownership.

When the plumbing needs work in your apartment, you know what to do. You either call your landlord, a property manager, or the maintenance number. At some point, someone will come to your apartment to do the necessary repairs. Simple.

When you own your home, you are on the hook for arranging the repairs yourself. Sure, there are home warranty packages you can purchase that cover certain repairs, but you’re on the hook for setting that up, too. Don’t be intimidated by this, though, because home warranty sellers are anxious to trade their promises for your hard-earned money. The debate about whether a home warranty is worth it or not is for another post.

Another option is to find your own contractor. This sounds like more work, but this is actually a huge advantage. Want to upgrade? Go for it. Find a killer deal? You’re free to call whoever you like. Depending on the repair, you may be able to DIY and learn a new skill while saving your money.

No matter which way you go about it, repairs and maintenance costs will come directly from your pocket. Do not gloss over this fact when considering how much house you can afford, or you might find yourself “house poor”. Remember, however, that homeownership is not a quick win. It is a long game of wealth accumulation. That’s probably not even the top reason why people buy homes. What’s your motive?

Opportunity Costs

Like every other decision you make, there is an undeniable opportunity cost to buying a home. When you buy a home, you’ve lost access to the money that you used as a down payment. Maybe you wanted to use that money to pay for college, start a business, or save for a rainy day. Then again, maybe you recognize that the better option for you is to put it into a real asset like a home.

Another factor to consider is flexibility. You lose the opportunity to move in a hurry. If location flexibility is important to you, it can be beneficial to only have to pay a fee to break the rental contract and go at your convenience. If you own a home,  you will either need to keep paying the mortgage for a home you’re not living in while paying for rent or a new mortgage for a home in your new location, or you will need to coordinate the sale of your home with your planned move. When you sell, you are taking the equity you’ve accumulated in the home in cash, which is difficult to see the down side of. You can also potentially keep your previous home, and make it available to rent to someone who could then help pay the mortgage for you with your asking rent price.

Your situation is your own, and it’s your responsibility to decide what is best for you. I sincerely hope you find this article helpful when you make that decision.

Costs of Renting

There is no such thing as a free lunch, and there is also no such thing as a free home.* When you rent, the most obvious cost to you is just that: rent. Whether you think your rent is a good deal, or whether you think it’s too high, the rent must be paid. Your rent helps pay for your landlord’s mortgage, adding to his (or her) net worth. Unfortunately, there is no long term fiscal benefit to the rent payment. It especially doesn’t help when the rent price goes up.
* Unless you live with family.. or other less common exceptions.

Lack of Privacy

Since your home is not your own, you are at the mercy of your landlord, their property management, and local laws for your personal safety and security. Have you ever heard your neighbors arguing through the wall? Has a party gone on in the unit above you until well past a reasonable hour? Do the neighbors’ kids not understand what ‘courtesy’ means?

See: Owners Enjoy More Privacy and Security.

I’m not saying that buying means you get to choose your neighbors, but you can at least choose your neighborhood, and buy a single family home with no attached neighbors, if that’s what you want to do. If you buy a house with a yard, you have a green space to enjoy without having to go to a public park or courtyard just to enjoy the fresh air.

No Personalization

If you rent, you give up the option to really make your (well, your landlord’s) home your own. Do you want to change the paint color, wallpaper, tile, or carpet? You have to either get permission, do the work yourself, or both. With the costs involved, you probably won’t want to invest in your landlord’s equity with your own cash. I don’t blame you, especially since one of the benefits of renting is its transient nature.

Opportunity costs

Renting means giving up any future possible financial gains on your residence, because it’s not yours.  (see: This New Year, Reach Your Dream of Homeownership for a little math on this). It’s possible that you can see any of the previous costs as opportunity costs as well. With a financial stake in your community, you will be more invested in the culture and politics of your neighborhood and your hometown. This is not to say that you cannot also be personally invested if you rent, but that may come from owning or operating a local business rather than renting a home.

The Answer Is Ultimately Subjective

“Expensive” is relative. Expensive compared to what? Does buying a home come with a lot of cost, including upfront costs? Yes. Is it cheaper to pay rent, without gaining equity, for decades? No. However, is the cost worth it to you? Ultimately, that’s the question, isn’t it? I don’t know your particular life circumstances, goals, or timelines. However, you do. This is an answer you will need to arrive to on your own, based on your own priorities.

More recommended reading: Rent or Buy? A Fool, Do Not Be

If you are curious to see specific numbers to bring clarity, you will want to talk to one of our mortgage professionals. At Benchmark, our loan officers specialize in tailoring the best matching loan arrangement for your personal goals and financial situation. Find your branch, and contact them for more information.Contact us today. It would be our honor to help you decide what’s best for you.Please call me or request a call. I would be honored to be part of helping you decide what’s best for you.

 

Benchmark brings you home.

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Owning A Home May Already Be Within Reach

by Jason Haeger

Have you told yourself that you’re too _____ to buy a home? The blank could be almost anything. Whether you think you’re too broke, too poor, or your credit score is too low, are you allowing an invisible script to prevent you from attaining your dream of owning your own home?

Just a side note: You may also be interested in Top 5 Myths About Home Buying in 2020

You don’t have to be rich. You don’t have to have a 750+ credit score. You don’t need $50,000 in savings. Don’t believe me? Sit back, grab a cold drink, and hear me out.

Big Down Payments Are Old Hat

If you can scrounge up ~$10k for a down payment, I wager that you can probably buy a home. It’s not a sure thing, of course, but hear me out. While a 20% down payment is excellent wisdom, it isn’t a requirement. Depending on the loan type, and where you buy, you could be required to pay less than 5% down to get into it. FHA loans require 3.5% down, which is less than $10k, assuming the median sales price of $248,867*. There are some conventional loans that require as little as 3% down. That’s ~$7,500, assuming a sales price of $248,867.

Let’s assume you don’t have the full ten grand lying around in a checking or savings account. Some, or even all, of your down payment can come from gifts from family, depending on certain restrictions. The point is that you maybe shouldn’t let your savings dictate your eligibility. Even if you haven’t been prioritizing your savings, how long do you think it would take to save up? I don’t pretend to know or understand your financial situation, but it may come down to something as simple as organizing your priorities.

* https://www.zillow.com/home-values/

Your Credit Is Probably Fine

The average FICO credit score in the United States as of September 10, 2019 was 706**. In fact, as of January 13 of this year, 59% of people in the US have a FICO credit score greater than 700, and only 18% have a credit score that is considered subprime***. For everyone else, there is probably a mortgage product or program that suits your needs. I don’t pretend to know you or to know about your finances, so take that with a grain of salt. None of this is a guarantee, but I’m guessing based on averages.

Even if your credit isn’t where you want it to be yet, there are such things a conditional approvals. To learn more about this, it’s best to contact a mortgage pro. I might have a suggestion about how to find one at the end of this article.

** https://www.fico.com/blogs/average-u-s-fico-score-ticks-706
*** https://www.experian.com/blogs/ask-experian/consumer-credit-review/

Your Personal Debt Balance Isn’t That Important

The total balance of your personal debt isn’t a very important factor in qualifying for a new home loan. Once again, I don’t pretend to have a clue about your personal finances, so forgive the section title. Your debt balance is important, but probably not when it comes to buying a home.

If you are worried about your student loan debt, don’t be. This kind of debt is a little more complicated, but it can be based on your monthly minimum due or 5% of the balanced divided by 12 months, unless you’re in deferment for more than a year past the closing date. Like I said, it’s complicated, but it’s probably not preventing you from buying a home. The only way to find out how your particular student loan arrangement affects your ability to buy a home is to talk to a mortgage pro. Don’t worry, we’ll get to that soon.

If you have any other kind of personal debt, only the minimum payment as listed on your credit report matters. No matter your debt, this is what you need to know. The equation is called the “debt to income” ratio, or DTI. This is a ratio of your monthly financial debt obligations and your monthly income. That helps determine how much house you can afford, when coupled with your down payment and creditworthiness.

Asking Never Hurt Anyone

If you dream of owning your own home, like I once did, the only way to really know what your options are is to talk to a mortgage pro. If you only remember one tip from this short article, this is it. Nervous? I understand. So do the pros here at Benchmark.

Find your local Benchmark branch, and reach out to them.Contact us however you want to find out more.Give me a call, or request one from me to explore your options.

Even if the answer is “not yet”, you’ve made the first step towards achieving your dream, and your Benchmark loan originatorwemy team will be with you every step of the way.

Benchmark brings you home.

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Realtor-shows-home-to-prospective-buyers

What to look for when touring the home you want to buy.

by Jason Haeger

If you are looking for your first, or next, home, you will likely tour several before finding "the one." Before you let yourself be swept off your feet, stay grounded and take a closer look. While you will want to get a professional inspection, it's a good idea to get a good idea on your own. Doing so may save the cost of a professional, if significant issues are discovered, or if the home needs more work than you are willing to take on.

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Keep your home for a cheaper price without sacrificing your timeline with an odd term mortgage with Benchmark!

How to Refinance Without a New 30-year Commitment.

by Jason Haeger

Now, you could get a refinance loan for any term between 15 and 30 years! Get a better rate without "starting over". Benchmark presents: Odd Term Mortgages.

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