What Do Experts Say About Today’s Mortgage Rates?

 

What Do Experts Say About Today’s Mortgage Rates?

Mortgage rates are hovering near record lows, and that’s good news for today’s homebuyers. The graph below shows mortgage rates dating back to 2016 and where today falls by comparison.Generally speaking, when rates are low, you can afford more home for your money. That’s why experts across the industry agree – today’s low rates present buyers with an incredible opportunity. Here’s what they have to say:

Sam Khater, Chief Economist at Freddie Mac, points out the historic nature of today’s rates:

“As the economy works to get back to its pre-pandemic self, and the fight against COVID-19 variants unfolds, owners and buyers continue to benefit from some of the lowest mortgage rates of all-time.”

Mark Fleming, Chief Economist at First American, talks about how rates impact a buyer’s bottom line:

“Mortgage rates are generally the same across the country, so a decline in mortgage rates boosts affordability equally in each market.”

Danielle Hale, Chief Economist at realtor.com, also notes the significance of today’s low rates and urges buyers to carefully consider their timing:

“Those who haven’t yet taken advantage of low rates to buy a home or refinance still have the opportunity to do so this summer.”

Hale goes on to say that buyers who don’t act soon could see higher rates in the coming months, negatively impacting their purchasing power:

“We expect mortgage rates to fluctuate near historic lows through the summer before beginning to climb this fall.”

And while mortgage rates are still low today, the data from Freddie Mac indicates rates are fluctuating ever so slightly right now, as they moved up one week before inching slightly back down in their latest release. It’s important to keep in mind the influence rates have on your monthly mortgage payment.

Even small increases can have a big impact on what you pay each month. Trust the experts. Today’s rates give you opportunity and flexibility in what you can afford. Don’t wait on the sidelines and hope for a better rate to come along; the rates we’re seeing today are worth capitalizing on.

Bottom Line

Mortgage rates hover near record lows today, but experts forecast they’ll rise in the coming months. Waiting could prove costly when that happens. Let’s connect today to discuss today’s rates and determine if now’s the time for you to buy.

Pre-Approval Makes All the Difference When Buying a Home

Pre-Approval Makes All the Difference When Buying a Home

You may have been told that it’s important to get pre-approved at the beginning of the homebuying process, but what does that really mean, and why is it so important? Especially in today’s market, with rising home prices and high buyer competition, it’s crucial to have a clear understanding of your budget so you stand out to sellers as a serious homebuyer.

Being intentional and competitive are musts when buying a home right now. Pre-approval from a lender is the only way to know your true price range and how much money you can borrow for your loan. Just as important, being able to present a pre-approval letter shows sellers you’re a qualified buyer, something that can really help you land your dream home in an ultra-competitive market.

With limited housing inventory, there are many more buyers active in the market than there are sellers, and that’s creating some serious competition. According to the National Association of Realtors (NAR), homes are receiving an average of 5.1 offers for sellers to consider. As a result, bidding wars are more and more common. Pre-approval gives you an advantage if you get into a multiple-offer scenario, and these days, it’s likely you will. When a seller knows you’re qualified to buy the home, you’re in a better position to potentially win the bidding war.

Freddie Mac explains:

“By having a pre-approval letter from your lender, you're telling the seller that you're a serious buyer, and you've been pre-approved for a mortgage by your lender for a specific dollar amount. In a true bidding war, your offer will likely get dropped if you don't already have one.”

Every step you can take to gain an advantage as a buyer is crucial when today’s market is constantly changing. Interest rates are low, prices are going up, and lending institutions are regularly updating their standards. You’re going to need guidance to navigate these waters, so it’s important to have a team of professionals such as a loan officer and a trusted real estate agent making sure you take the right steps and can show your qualifications as a buyer when you find a home to purchase.

Bottom Line

In a competitive market with low inventory, a pre-approval letter is a game-changing piece of the homebuying process. Not only does being pre-approved bring clarity to your homebuying budget, but it shows sellers how serious you are about purchasing a home.

What Credit Score Do You Need for a Mortgage?

 

What Credit Score Do You Need for a Mortgage?

According to data from the most recent Origination Insight Report by Ellie Mae, the average FICO® score on closed loans reached 753 in February. As lending standards have tightened recently, many are concerned over whether or not their credit score is strong enough to qualify for a mortgage. While stricter lending standards could be a challenge for some, many buyers may be surprised by the options that are still available for borrowers with lower credit scores.

The fact that the average American has seen their credit score go up in recent years is a great sign of financial health. As someone’s score rises, they’re building toward a stronger financial future. As more Americans with strong credit enter the housing market, we see a natural increase in the FICO® score distribution of closed loans, as shown in the graph below:If your credit score is below 750, it’s easy to see this data and fear that you may not be able to qualify for a mortgage. However, that’s not always the case. While the majority of borrowers right now do have a score above 750, there’s more to qualifying for a mortgage than just the credit score, and there are still options that allow people with lower credit scores to buy their dream home. Here’s what Experian, a global leader in consumer and business credit reporting, says:

• Federal Housing Administration (FHA) loans: “With a 3.5% down payment, homebuyers may be able to get an FHA loan with a 580 credit score or higher. If you can manage a 10% down payment, though, that minimum goes as low as 500.”
• Conventional loans: “The most popular loan type typically comes with a 620 minimum credit score.”
• S. Department of Agriculture (USDA) loans: “In general, lenders require a minimum credit score of 640 for a USDA loan, though some may go as low as 580.”
• S. Department of Veterans Affairs (VA) loans: “VA loans don't technically have a minimum credit score, but lenders will typically require between 580 and 620.”

There’s no doubt a higher credit score will give you more options and better terms when applying for a mortgage, especially when lending is tight like it is right now. When planning to buy a home, speaking to an expert about steps you can take to improve your credit score is essential so you’re in the best position possible. However, don’t rule yourself out if your score is less than perfect – today’s market is still full of opportunity.

Bottom Line

Don’t let assumptions about whether your credit score is strong enough put a premature end to your homeownership goals. Let’s connect today to discuss the options that are best for you.

Home Mortgage Rates by Decade

 

Home Mortgage Rates by Decade [INFOGRAPHIC]

Some Highlights

• Mortgage interest rates have dropped considerably over the past year, and compared to what we’ve seen in recent decades, it’s a great time to buy a home.
• Locking in a low rate today could save you thousands of dollars over the lifetime of your home loan, but these low rates may not last forever.
• If you’re in a position to buy a home, let’s connect to determine your best move in today’s housing market while interest rates are still in your favor.

Financial Fundamentals for Homebuyers [INFOGRAPHIC]

 

Financial Fundamentals for Homebuyers [INFOGRAPHIC]

Some Highlights

• When you’re thinking about buying a home, there are a few key steps to take before you even start to look at houses.
• From saving for your down payment to getting pre-approved for a mortgage, you’ll want to make sure you keep your financial plan on track from the beginning.
• Let’s connect today to make sure you have an introduction to a trusted lender and the best possible real estate guidance as you begin your homebuying process.

Should I Wait for Lower Mortgage Interest Rates?

 

Should I Wait for Lower Mortgage Interest Rates?

Historically low mortgage rates are a big motivator for homebuyers right now. In 2020 alone, rates hit new record-lows 16 times, and the trend continued into the early part of this year. Many hopeful homebuyers are now wondering if they should put their plans on hold and wait for the lowest rates imaginable. However, the reality is, acting sooner rather than later may be the actual win if you’re ready to buy a home.

According to Greg McBride, Chief Financial Analyst for Bankrate:

“As vaccines become more widely available and a return to normal starts to come into view, we’ll see mortgage rates bounce off the record lows.”

While only a slight increase in mortgage rates is projected for 2021, some experts believe they will start to rise. Over the past week, for example, the average mortgage rate ticked up slightly, reaching 2.79%. This is still incredibly low compared to the trends we’ve seen over time. According to Freddie Mac:

“Borrowers are smart to take advantage of these low rates now and will certainly benefit as a result.”

Here’s why.

As mortgage rates rise, the increase impacts the overall cost of purchasing a home. The higher the rate, the higher your monthly mortgage payment, especially as home prices rise too. Sam Khater, Chief Economist at Freddie Mac, says:

“The forces behind the drop in rates have been shifting over the last few months and rates are poised to rise modestly this year. The combination of rising mortgage rates and increasing home prices will accelerate the decline in affordability and further squeeze potential homebuyers during the spring home sales season.”

What does this mean for buyers?

Right now, the inventory of houses for sale is also at a historic low, making it more challenging than normal to find a home to buy in many areas. As more buyers hit the market in the typically busy spring buying season, it may become even harder to find a home in the coming months. With this in mind, Len Keifer, Deputy Chief Economist for Freddie Mac, recommends taking advantage of both low mortgage rates and the opportunity to buy:

“If you’ve found a home that fits your needs at a price you can afford, it might be better to act now rather than wait for future rate declines that may never come and a future that likely holds very tight inventory.”

Bottom Line

While today’s low mortgage rates provide great opportunities for homebuyers, we may not see them stick around forever. If you’re ready to buy a home, let’s connect so you can take advantage of what today’s market has to offer.

Why Is It so Important to Be Pre-Approved in the Homebuying Process?

 

Why Is It so Important to Be Pre-Approved in the Homebuying Process?

You may have heard that pre-approval is a great first step in the homebuying process. But why is it so important? When looking for a home, the temptation to fall in love with a house that’s outside your budget is very real. So, before you start shopping around, it’s helpful to know your price range, what you’re comfortable within a monthly mortgage payment, and ultimately how much money you can borrow for your loan. Pre-approval from a lender is the only way to do this.

According to a recent survey from realtor.com, many buyers are making the mistake of skipping the pre-approval step in the homebuying process:

“Of over 2,000 active home shoppers who plan to purchase a home in the next 12 months, only 52% obtained a pre-approval letter before beginning their home search, which means nearly half of home buyers are missing this crucial piece of paperwork.”

This paperwork (the pre-approval letter) shows sellers you’re a qualified buyer, something that can really help you stand out from the crowd in the current ultra-competitive market.

How competitive is today’s market? Extremely – especially among buyers.

With limited inventory, there are many more buyers than sellers right now, and that’s fueling the competition. According to the National Association of Realtors (NAR), homes are receiving an average of 2.9 offers for sellers to negotiate, so bidding wars are heating up.

Pre-approval shows homeowners you’re a serious buyer. It helps you stand out from the crowd if you get into a multiple-offer scenario, and these days, it’s likely. When a seller knows you’re qualified to buy the home, you’re in a better position to potentially win the bidding war and land the home of your dreams.

Danielle Hale, Chief Economist for realtor.com notes:

“For ‘a buyer in a competitive market, it’s typically essential to have pre-approval done in order to submit an offer, so getting it done before you even look at homes is a smart move that will enable a buyer to move fast to put an offer in on the right home.’”

In addition, today’s housing market is also changing from moment to moment. Interest rates are low, prices are going up, and lending institutions are regularly updating their standards. You’re going to need guidance to navigate these waters, so it’s important to have a team of professionals (a loan officer and a real estate agent) making sure you take the right steps along the way and can show your qualifications as a buyer at the time you find a home to purchase.

Bottom Line

In a competitive market with low inventory, a pre-approval letter is a game-changing piece of the homebuying process. If you’re ready to buy this year, let’s connect before you start searching for a home.

Homes Are More Affordable Right Now Than They Have Been in Years

 

Homes Are More Affordable Right Now Than They Have Been in Years

Today, home prices are appreciating. When we hear prices are going up, it’s normal to think a home will cost more as the trend continues. The way the housing market is positioned today, however, low mortgage rates are actually making homes more affordable, even as prices rise. Here’s why.

According to the Mortgage Monitor Report from Black Knight:

“While home prices have risen for 97 consecutive months, July’s record-low mortgage rates have made purchasing the average-priced home the most affordable it’s been since 2016.”

How is that possible?

Black Knight continues to explain:

“As of mid-July, it required 19.8% of the median monthly income to make the mortgage payment on the average-priced home purchase, assuming a 20% down payment and a 30-year mortgage. That was more than 5% below the average of 25% from 1995-2003.

This means it currently requires a $1,071 monthly payment to purchase the average-priced home, which is down 6% from the same time last year, despite the average home increasing in value by more than $12,000 during that same time period.

In fact, buying power is now up 10% year-over-year, meaning the average home buyer can afford nearly $32,000 more home than they could at the same time last year, while keeping their monthly payment the same.”

This is great news for the many buyers who were unable to purchase last year, or earlier in the spring due to the slowdown from the pandemic. By waiting a little longer, they can now afford 10% more home than they could have a year ago while keeping their monthly mortgage payment unchanged.

With mortgage rates hitting all-time lows eight times this year, it’s now less expensive to borrow money, making homes significantly more affordable over the lifetime of your loan. Mark Fleming, Chief Economist at First American, shares what low mortgage rates mean for affordability:

“In July, house-buying power got a big boost as the 30-year, fixed mortgage rate made history by moving below three percent. That drop in the mortgage rate from 3.23 percent in May to 2.98 percent in July increased house-buying power by nearly $15,000.”

The map below shows the last time homes were this affordable by state:In six states – Arkansas, Iowa, Kentucky, Louisiana, Maryland, and West Virginia – homes have not been this affordable in more than 25 years.

Bottom Line

If you’re thinking of making a move, now is a great time to take advantage of the affordability that comes with such low mortgage rates. Whether you’re thinking of purchasing your first home or moving into a new one and securing a significantly lower mortgage rate than you may have on your current house, let’s connect today to determine your next steps in the process.

Mortgage Rates Fall Below 3%

Mortgage Rates Fall Below 3% [INFOGRAPHIC]

Some Highlights

• Mortgage rates hit another all-time low, falling below 3% this week.
• If you’re ready to buy a home, now is a great time to truly get more for your money at this historic moment.
• Let’s connect today to determine your best next steps toward homeownership.

Mortgage Rates Hit Record Lows for Three Consecutive Weeks

Mortgage Rates Hit Record Lows for Three Consecutive Weeks

Over the past several weeks, Freddie Mac has reported the average 30-year fixed mortgage rate dropping to record lows, all the way down to 3.03%. Last week’s reported rate reached the lowest point in the history of the survey, which dates back to 1971 (See graph below):

What does this mean for buyers?

This is huge for homebuyers. Those currently taking advantage of the increasing affordability that comes with historically low interest rates are winning big. According to Sam Khater, Chief Economist at Freddie Mac:

“The summer is heating up as record low mortgage rates continue to spur homebuyer demand.”

In addition, move.com notes:

“Summer home buying season is off to a roaring start. As buyers flooded into the market, realtor.com® monthly traffic hit an all-time high of 86 million unique users in June 2020, breaking May's record of 85 million unique users. Realtor.com® daily traffic also hit its highest level ever of 7 million unique users on June 25, signaling that despite the global pandemic buyers are ready to make a purchase.”

Clearly, buyers are capitalizing on today’s low rates. As shown in the chart below, the average monthly mortgage payment decreases significantly when rates are as low as they are today.A lower monthly payment means savings that can add up significantly over the life of a home loan. It also means that qualified buyers may be able to purchase more home for their money. Maybe that’s a bigger home than what they’d be able to afford at a higher rate, an increasingly desirable option considering the amount of time families are now spending at home given today’s health crisis.

Bottom Line

If you’re in a position to buy a home this year, let’s connect to initiate the process while mortgage rates are historically low.

This is Not 2008 All Over Again: The Mortgage Lending Factor

This is Not 2008 All Over Again: The Mortgage Lending Factor

Some are afraid the real estate market may be looking a lot like it did prior to the housing crash in 2008. One of the factors they’re pointing at is the availability of mortgage money. Recent articles about the availability of low-down payment loans and down payment assistance programs are causing concern that we’re returning to the bad habits of a decade ago. Let’s alleviate the fears about the current mortgage market.

The Mortgage Bankers’ Association releases an index several times a year titled: The Mortgage Credit Availability Index (MCAI). According to their website:

“The MCAI provides the only standardized quantitative index that is solely focused on mortgage credit. The MCAI is…a summary measure which indicates the availability of mortgage credit at a point in time.”

Basically, the index determines how easy it is to get a mortgage. The higher the index, the more available the mortgage credit.

Here is a graph of the MCAI dating back to 2004, when the data first became available:As we can see, the index stood at about 400 in 2004. Mortgage credit became more available as the housing market heated up, and then the index passed 850 in 2006. When the real estate market crashed, so did the MCAI (to below 100), as mortgage money became almost impossible to secure.

Thankfully, lending standards have eased since. The index, however, is still below 200, which is half of what it was before things got out of control.

Bottom Line

It is easier to get a mortgage today than it was immediately after the market crash, but it is still difficult. The difference in 2006? At that time, it was difficult not to get a mortgage.

VA Home Loans by the Numbers [INFOGRAPHIC]

VA Home Loans by the Numbers [INFOGRAPHIC]

Some Highlights:

• The Veterans Administration (VA) Home Loan is a benefit that is available to more than 22 million veterans and 2 million active duty service members to help them achieve the dream of homeownership.
• In 2018, $161 billion was loaned to veterans and their families through the program.
• In the same year, the average loan amount was $264,197 and 610,513 loans were guaranteed.

Taking the Fear Out of the Mortgage Process

Taking the Fear Out of the Mortgage Process

A considerable number of potential buyers shy away from the real estate market because they’re uncertain about the buying process – particularly when it comes to qualifying for a mortgage.

For many, the mortgage process can be scary, but it doesn’t have to be! 

In order to qualify in today’s market, you’ll need a down payment (the average down payment on all loans last year was 5%, with many buyers putting down 3% or less), a stable income, and a good credit history.

Once you’re ready to apply, here are 5 easy steps Freddie Mac suggests to follow:

1. Find out your current credit history and credit score– Even if you don’t have perfect credit, you may already qualify for a loan. The average FICO Score® for all closed loans in September was 737, according to Ellie Mae.
2. Start gathering all of your documentation– This includes income verification (such as W-2 forms or tax returns), credit history, and assets (such as bank statements to verify your savings).
3. Contact a professional– Your real estate agent will be able to recommend a loan officer who can help you develop a spending plan, as well as help you determine how much home you can afford.
4. Consult with your lender– He or she will review your income, expenses, and financial goals in order to determine the type and amount of mortgage you qualify for.
5. Talk to your lender about pre-approval– A pre-approval letter provides an estimate of what you might be able to borrow (provided your financial status doesn’t change) and demonstrates to home sellers that you’re serious about buying.

Bottom Line

Do your research, reach out to professionals, stick to your budget, and be sure you’re ready to take on the financial responsibilities of becoming a homeowner.

Things to Avoid After Applying for a Mortgage

Things to Avoid After Applying for a Mortgage

Congratulations! You’ve found a home to buy and have applied for a mortgage! You're undoubtedly excited about the opportunity to decorate your new home, but before you make any large purchases, move your money around, or make any big-time life changes, consult your loan officer – someone who will be able to tell you how your decisions will impact your home loan.

Below is a list of Things You Shouldn’t Do After Applying for a Mortgage. Some may seem obvious, but some may not.

1. Don’t Change Jobs or the Way You Are Paid at Your Job. Your loan officer must be able to track the source and amount of your annual income. If possible, you’ll want to avoid changing from salary to commission or becoming self-employed during this time as well.

2. Don’t Deposit Cash into Your Bank Accounts. Lenders need to source your money, and cash is not really traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.

3. Don’t Make Any Large Purchases Like a New Car or Furniture for Your New Home. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher debt to income ratios…higher ratios make for riskier loans…and sometimes qualified borrowers no longer qualify.

4. Don’t Co-Sign Other Loans for Anyone. When you co-sign, you are obligated. As we mentioned, with that obligation comes higher ratios as well. Even if you swear you will not be the one making the payments, your lender will have to count the payments against you.

5. Don’t Change Bank Accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is consistency among your accounts. Before you even transfer any money, talk to your loan officer.

6. Don’t Apply for New Credit. It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO® score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.

7. Don’t Close Any Credit Accounts. Many clients erroneously believe that having less available credit makes them less risky and more likely to be approved. Wrong. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those determinants in your score.

Bottom Line

Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. The best advice is to fully disclose and discuss your plans with your loan officer before you do anything financial in nature. They are there to guide you through the process.