Category: Buying a Home
HUD Lowers Mortgage Insurance Premiums for Most FHA Loans
[UPDATE – According to Housing Wire, This reduction has been indefinitely suspended mere minutes after Donald J. Trump was sworn in as the 45th President of the United States of America.]
The Department of Housing and Urban Development announced on Monday that they plan to reduce the Mortgage Insurance Premium for FHA mortgage loans. Since 2012, the Federal Housing Administration’s(FHA) Mutual Mortgage Insurance(MMI) Fund has gained $44 billion, and is now 32 basis points above the 2 percent threshold level required by Congress. This is ~$13 billion more than projected for Fiscal Year 2017 in an Actuarial Review of the MMI Fund for Fiscal Year 2012.
The FHA Pays It Forward
“After four straight years of growth and with sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families,” … “This is a fiscally responsible measure to price our mortgage insurance in a way that protects our insurance fund while preserving the dream of homeownership for credit-qualified borrowers.” – Julián Castro, HUD Secretary
According to the FHA, the reduction will return the Mortgage Insurance Premium nearly to levels seen before the housing bubble crisis. The FHA also predicts that ~1 million borrowers will buy or refinance with an FHA loan over the next year, most of whom will see reduced costs.
“We’ve carefully weighed the risks associated with lower premiums with our historic mission to provide safe and sustainable mortgage financing to responsible homebuyers,” … “Homeownership is the way most middle class Americans build wealth and achieve financial security for themselves and their families. This conservative reduction in our premium rates is an appropriate measure to support them on their path to the American dream.”
– Ed Golding, Principal Deputy Assistant Secretary for HUD’s Office of Housing.
The Takeaway
According to the FHA, annual mortgage insurance premiums will be lowered 25 basis points*, or one quarter of one percent, will come into effect on January 27th of this year. The FHA estimates that new rates could save, on average, $500 in 2017 alone for most FHA borrowers.
*For loans less than or equal to $625,500 with a maturity greater than 15 years. Please see the full report from HUD for more details of different loan scenarios and their actual MIP’s.
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Millionaire Tells Millennials To Buy A Home
CNN recently ran an article explaining why self-made millionaire David Bach has said,
“The fact is, you aren’t really in the game of building wealth until you own some real estate.”
In his book, “The Automatic Millionaire” Bach writes,
“As a renter, you can easily spend half a million dollars or more on rent over the years ($1,500 a month for 30 years comes to $540,000), and in the end wind up just where you started — owning nothing. Or you can buy a house and spend the same amount paying down a mortgage, and in the end wind up owning your own home free and clear!“
We have touched on this in the past. (see Buying Still Cheaper Than Renting, Renting vs Buying a Home and Accumulating Wealth, and Homeowner Average Net Worth 3,600% Higher Than Renter)
Bach has told CNBC that buying a home is “an escalator to wealth“.
“If millennials don’t buy a home, their chances of actually having any wealth in this country are little to none. The average homeowner to this day is 38 times wealthier than a renter.”
In regards to the idea of a starter home, Bach says,
“Oftentimes, buying your first home means you’re not buying your dream home. You’re just getting into the market.”
The Logic
Following David Bach’s logic is simple. We all have to live somewhere. We have to pay either rent or a mortgage. Over time, a mortgage can increase your net wealth over renting.
While buying your dream home would be nice, Bach says that the key is to just get into the market, and admits that your first home may not be your last.
The Takeaway
On average, family wealth of homeowners is dramatically higher than that of renters, and this divide has seen growth over time. David Bach, best-selling author and self-made millionaire, advises homeownership as the surest path to building wealth.
Call or contact me today! Contact your Benchmark mortgage lender today. Find Your Branch here: Get Started Now!
5 Ways to Adjust To Your New City
Whether you are striking out to your first job after college, or moving your whole family for a job relocation; moving is hard. Here are a few helpful tips to successfully begin adjusting to your new surroundings.
Plan Your New Commute
Think ahead, and plan the routes you’ll eventually need to follow. Knowing the quickest way to work, schools, and local centers will make you feel more confident about starting a new routine. As you map out your regular routes, make note of surroundings and landmarks. Having a general understanding of the city layout makes it seem less foreign.
Explore Your New Neighborhood
Discovering local places can help give you a good idea of your new neighborhood’s personality. Gainin an understanding of your community’s identity can put you in a better position to settle in. Shopping and dining locally is also a great way to integrate into your new community.
Keep Your Relationships
Staying connected with friends from your previous city requires some effort, but it’s worth it. Long distance friendships have a way of making you feel balanced and grounded when you experience change. New relationships can take time to develop when you move to a new city, but you’ll appreciate knowing you have support from your friends.
Remember that People are Mirrors
People tend to reflect the energy that they see and feel around them. If you don’t feel that your new city has a friendly environment, look to yourself first, and think of the way strangers see you. If you appear closed off and sullen, they’ll interact with you the same way. Making the conscious decision to be kind and warm toward everyone around you can make your new city feel that way to you, too.
Understand that Adjustment Takes Time
Moving to a new city is difficult. Don’t doubt yourself if your new place or your new city doesn’t feel like home right away. Be patient as you undergo this major change, and eventually, you will feel like your new home is, well… home.
Buying Still Cheaper Than Renting
Even in light of rising home prices, Trulia‘s October 2016 “Rent vs. Buy Report” successfully argues that owning your home with a conventional 30-year fixed rate mortgage costs less than renting in major US metros, even in high priced areas like Honolulu, HI (which sees 17.4% cost reduction over renting). The highest difference was 53.2% in Miami, FL and West Palm Beach, FL.
Nationally, the average was an impressive 37.7% cost reduction.
It’s a Game of Pace
Even while home prices are appreciating nation-wide, interest rates have remained so low that the pricing increase has not approached matching rental inflation. In fact,
Prices would have to appreciate 23% in Honolulu, HI, to over 45% in Ventura County, CA before renting, at current rates, becomes less expensive than buying. On the other side, rates would have to approach 9.1%, which would be a 145% increase over the current average of 3.7%, for renting to be financially more attractive than buying. (We have not seen rates like those since January 1995, according to Freddie Mac)
Consider also the Family Wealth aspect of home ownership, coupled with ownership being closely tied to the American Dream, and the reduced out-of-pocket cost of owning over renting, and it might make one wonder if the benefits of renting are really worth it.
The Takeaway
The numbers are clear. It makes good financial sense to be a homeowner. Let’s not forget the slice of the American Dream that comes with it! If you are interested in taking advantage of the benefits of home ownership, but aren’t sure where to start, call or contact me today! contact your Benchmark mortgage consultant today. Find Your Branch here: Get Started Now!
Appraisal Shortage Causing Delays In Home Sales
CNBC published an article on their Real Estate blog entitled, “‘Massive’ shortage of appraisers causing home sales delays”
Below are a few quotes that summarize the story quickly, in case you don’t have the time or patience to read the article yourself.
“The appraisal shortage is massive. You’re seeing significant delays, you’re seeing cost increases, you’re seeing rate [locks] expire,” said Brian Coester, CEO of Rockville, Maryland-based CoesterVMS, a national appraisal management company.
…when the U.S. housing market came crashing down, the number of appraisers has shrunk by 22 percent, according to the Appraisal Institute, an industry association. With so few new cadets, the current population of appraisers is aging. More than 60 percent are over the age of 50.
…the decline in new appraisers is largely due to new regulations…
…appraisers no longer see a need to pay apprentices, but at the same time, licensing requirements to become an appraiser include 2,500 hours of appraisal experience to be completed in two years as an apprentice.
In some of the nation’s hottest housing markets, where sales are up double digits compared to a year ago, the shortage means searching far and wide for an appraiser.
[Home] Prices could change in the course of two months, the delay time it is now taking in some markets to have an appraisal done. Mortgage rates are also starting to move in a wider range, and that makes rate-locks ever more important.
read more: http://www.cnbc.com/2016/09/27/massive-shortage-in-appraisers-causing-home-sales-delays.html
How Does Benchmark Respond?
Our 5 Core Values have served us well. We believe that they will continue to enable us to thrive, even in a complicated market.
We built our reputation and our business on these Core Values, one of which is Relationship. Another complimentary value that we hold dear is Positive Attitude. The combination of these can go a long way in ways you may never expect. So what is our approach?
To be as clear and transparent as possible in building relationships with partners in helping our mutual clients to get their new home as smoothly as possible. Just like we pride ourselves on being thorough and courteous for our clients, we strive to be open and thorough in our communications with partners.
We have an experienced staff who search daily to ensure coverage. We foster a positive relationship with our panel of appraisers.
Our appraisers prioritize us because we pay them generously and pay them quickly.
We have an advantage over appraisal management companies, as our appraisers receive the full fee, rather than just a percentage, and we have control over both the fee and the due date.
We have clear channels of communications with our appraisal department to quickly and efficiently resolve disputes and revisions.
Service is Our Trademark
For years, we have made the mortgage process look easy to those who have entrusted us with their home loans.
…efficiency and customer service is second to none.
Tom and his team make you feel like family and not just a number. He walks you thru all of your options and helps guide you thru the whole process. The attention he gives to his clients is untouchable. You will not get service like you get from him anywhere. 5 star all the way
…the Benchmark Mortgage Team are outstanding! From start to finish they kept us informed of the process, progress, and approvals. By far the most professional and expedient loan process I have ever been through.
We take service seriously. These are just a taste from a small collection of genuine testimonials giving by our Benchmark clients/fans. I encourage you to view more testimonialsmy testimonials. If you love being taken care of and like what you see, call mefind your branch or apply now
Jump in New Home Sales Highest Since 2008
According to a press release from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, new single family home sales in June grew by 3.5%* over May, and 25.4%** over June 2015. The seasonally adjusted annual rate was 592,000 in June, and 572,000 was the revised rate in May. The rate in June of last year was estimated to be 472,000.
Economists Weigh In
June 2016 is the highest new single family home sales we’ve seen since February of 2008, according to Ralph McLaughlin, Chief Economist for Trulia, who writes, “This is a continued sign that demand for homes remains solid and aptly reflects increasing homebuilder confidence.”
Brent Nyitray, a Chartered Financial Analyst specializing in economics and financial markets, said, “New Home Sales rose to 592k in June, much higher than the Street expectation. The median new home price rose 6.1% YOY to $306,700. There is about 4.9 month’s worth of inventory right now, compared to 5.1 months in May.” (read more)
Home Prices Rose
In June, the median new home sale price was $306,700, with the average sales price at $358,200.
Home prices nationwide rose 5% in May (compared to May 2015), according to the CoreLogic Case-Shiller Indices.
The Takeaway
New Home sales have seen an increase since last year, and since last month, with the highest numbers since February of 2008, 100 months ago. This has surpassed expectations, and signals that demand really is the driving force in the housing market. With the inventory at only 4.9 months, compared to 5.1 months in May, low housing inventory is still driving values up.
With inventory shrinking, home values are likely to increase. With rates still low, it’s a great time to buy. Call us today!
*(±23.9%), **(±27.9%) – 90% confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero.
The EU Referendum, Brexit, and US Mortgage Rates
“The sudden stop in employment growth rules out any chance of a rate hike from the Fed at next week’s FOMC meeting, particularly now that the UK vote on whether to leave the European Union appears to be going down to the wire,” said Capital Economics Chief Economist Paul Ashworth. (source: Housingwire.com)
Britain’s exit from the EU increases the value of the dollar, which will push U.S. mortgage rates still lower. “This would create another mini refinance mortgage boom at financial institutions as homeowners rush to lock in near-historic low interest rates,” says Steve Rick, chief economist for CUNA Mutual Group. (source: Bankrate.com)
Fed Not Expected To Raise Rates
As Paul Ashworth indicated in his quote in HousingWire, The Federal Open Market Committee (who determines monetary policy of the Federal Reserve) is not likely to raise interest rates in their next meeting in July.
Futures dropped in the wake of the UK’s vote to leave the EU today, June 24th. This lack of confidence puts more pressure on the FOMC to, once again, postpone a rate hike.
US Dollar Strengthens as Pound is Pummeled
The pound fell to near 1985 levels, making it the lowest value in three decades. According to the Federal Reserve of St. Louis, 1GBP is now down to 1.37USD. (source: WashingtonPost)
When our currency is worth more, it has more purchasing power, which is cause for suspecting that this could make the cost of housing cheaper still.
Is a refinance boom coming? That remains to be seen, but with the relatively high supply in the housing market coupled with a stronger dollar, we may begin to see the supply begin to normalize as homeowners cash out on their accumulated equity.
The Takeaway
No matter your opinion of the EU Referendum result, mortgages are still, historically speaking, ridiculously cheap.
Mortgage prices tend to follow Treasury yields, which have been trending down all year, too. Last week, the interest on 10-year Treasuries dropped to its lowest in four years on worries that Britain would vote to leave the European Union. When the political and economic outlook is uncertain, the world’s money tends to flow into safe investments like U.S. bonds, including mortgages. – Loraine Woellert, Senior managing editor for Redfin research (source: Forbes.com)
Notes:
- FOMC(Federal Open Market Committee): http://www.federalreserve.gov/monetarypolicy/fomc.htm
Low Housing Inventory Driving Values Up
Many people may have been watching home values steadily rise over the past year, and notice that it isn’t slowing down.
Another Housing Bubble?
Is this the aftershocks of 2008? Has sub-prime lending made a comeback as the Federal Reserve has hesitated to raise interest rates? Are new homeowners soon to be upside down on their young mortgages? No. Some have speculated it. Don’t believe it.
Purely Supply and Demand
After the bubble crash 8 years go, demand dropped first, then supply followed. In the market’s rebound correction (that we are still in the middle of), demand is driving the housing market once again.
In this case, demand growth is outpacing the housing supply. The result? More people want the housing that is available, and the competition drives up market value.
While this does make it a difficult time to buy, it may also be a terrific time to sell!
What’s A New Buyer To Do?
When prices are going up, and are projected to continue to increase, it is good to remember that interest levels are still low. This is when it makes sense to consider the true cost of waiting.
True Cost of Waiting
Consider this:
If you were to buy a house right now, with a $250,000 mortgage at 3.68%APR interest, your Payment (P&I) would be $1,147.88
If you were to buy the same house Between January and March (estimate) in 2017, your same mortgage would be $263,750 at (estimated) 4.5%APR interest. Your Payment (P&I) would be $1,336.38
By buying now, your net worth would automatically increase by $13,750 (not including the principle payments that you would be making to shrink the balance/increase your equity)
The difference in monthly payment would be $188.50. Can you afford an extra $188/month in exchange for… uh… well… …hesitation?
Over the course of 30 years, you would end up paying $67,860 more as a result. What could you do with an extra $68k?
Lock It In, And Watch It Climb
The general convention, as we have mentioned before, is to buy as early as you can. You may be better off in terms of both equity and housing costs.
Ready to get started? Give us a call!
Home Prices and Mortgage Interest Rates to Rise in 2016
Your home’s mortgage payment is based on the price of the home (minus the down payment), and the interest rate for the loan.
Both prices and interest rates will likely rise in 2016.
Home Prices
CoreLogic anticipates a national 5.2% home value increase for the next year. The percentage varies by state, with WA, CA, NV, UT, AZ, NM, FL, and VT seeing the greatest increase at an average of 7.6% (the highest being CA at 10.8%, the lowest of this group being NM at 6.0%). The lowest forecasted home price increase is WV at 1.3%. Clearly, the majority of the country is projected to see a real home value appreciation that outpaces currency inflation (0.5% from 2014-2015).
Which reminds one of this post: click here
Mortgage Interest Rates
All four establishments who provide future projections on mortgage interest rates agree that rates will rise in 2016. The following table shows the change for each quarter of the next year.
| Quarter | Fannie Mae |
Freddie Mac |
MBA | NAR | Average of all four |
| 2016 1Q | 3.9 | 4.0 | 4.2 | 4.1 | 4.05 |
| 2016 2Q | 4.0 | 4.2 | 4.4 | 4.3 | 4.23 |
| 2016 3Q | 4.0 | 4.4 | 4.6 | 4.6 | 4.4 |
| 2016 4Q | 4.1 | 4.6 | 4.8 | 4.9 | 4.6 |
So, What’s the Bottom Line?
Since home prices and interest rates expected to increase over the next year, it makes sense to buy sooner rather than later, if you are buying a new home.