us real estate markets

Top 7 Real Estate Markets for 2019

Everyone likes to predict things but determining what is going to happen in real estate is always challenging. Realtor.com recently gave it a try and predicted that the following markets in the US should experience robust growth this year.

#1 Las Vegas

Sin City was hit hard by the real estate crash, but the economy here is expected to grow by nearly 9% in 2018. This is compared with 6.4% for the other top 100 markets. This means there will be a lot of people moving in and looking for a home. It is expected the median sales price in Las Vegas will be $285,000.

A major factor in the growth of Las Vegas is the relatively low cost of living and its proximity to California. Many people are tired of the high cost of living on the West Coast and are moving to Las Vegas. With many new residents coming into town and the return of previous buyers who lost their homes in foreclosure, homes that are properly priced in nice neighborhoods are moving fast.

#2 Dallas TX

This oil and tech town is booming as many companies are moving here from higher tax states, expanding and opening up in the Texas market. Companies are drawn to Texas by the very low taxes, including no corporate income tax, and the low cost of living.

For example, Toyota recently moved its HQ to Plano near Dallas, and asked 4,000 employees from other parts of the country to come as well.

The median home sale price is $339,000 and sales growth is expected at 6% this year. Housing experts here say most of these houses that are sold are newly built and builders cannot keep pace.

Others say that some houses in the $250,000 to $350,000 may experience a drop in price this year as they may have become overpriced.

#3 Deltona FL

Deltona’s great location, between Orlando and Daytona Beach, is a major attraction. In fact, many people work in Orlando and drive home to Deltona, where prices are lower. The median home price inside the city limits is only $159,000, while in the entire Deltona metro area it is $275,000.

The city was hit hard by the last recession, but it has made it most of the way back. The area economy is expected to grow by 8% this year and employment will increase by nearly 3%.

Real estate investors helped to boost the market when prices dropped in 2009. Now many of the rentals they refurbished are hitting the market.

#4 Stockton CA

Stockton has a lot of crime, so it does not have the best reputation. But it is becoming more popular because of the low cost of living. It is possible to buy a home in Stockton for under $300,000 which is less than a quarter of what you pay in San Francisco for the same property. Many people in the Bay Area who were priced out of the market move to Stockton and discover they can buy a fixer upper for $250,000.

Some say that Stockton has seen a major revitalization in the past five years; major historic buildings are being brought back to live, and new neighborhoods are being built. The area has been aided by its proximity to the Lodi vineyards.

#5 Lakeland FL

Like Deltona, the major attraction of Lakeland is its excellent location. It is only 40 minutes east of Tampa and an hour from Orlando to the south. It makes it a desirable place to live for commuters who want to save money.

The median price for homes here is in the low $200,000s and sales growth is predicted at 3% for the next year. Inside city limits, it is possible to find a home for under $200,000. The county also has several down payment assistance programs for qualified buyers. This is giving the local real estate market a lift.

#6 Salt Lake City UT

Salt Lake City has become hot in the past three years with a median home price of $360,000 and predicted sales growth of 4.6%. Buyers inside city limits are seeing offers on their homes 25% above asking price. Many people are tired of high taxes and high cost of living, and also long commutes. So they are relocating to downtown Salt Lake City.

#7 Charlotte NC

Just like Dallas, much of the boom in the real estate market here is thanks to many people moving in from out of state. Many people move in to relocate for work. Charlotte is now a major financial hub for the south. Others are moving in to retire and find attraction in the low cost of living.

The median home price here is $325,000 and sales growth is predicted at 6% for the year.

 

 

References: https://www.realtor.com/news/trends/top-housing-markets-of-2018/

 

FHA Homeowners Who Purchased a House after June 1, 2013.   Here is the Bad News.

Many home buyers with past credit problems and lower down payments turn to the Federal Housing Administration or FHA to help them get a mortgage. FHA mortgages are not issued by FHA; they are underwritten by FHA approved lenders who have more credit and income flexibility in their underwriting standards so people who may not otherwise be able to get a home loan can get one. It is possible for a borrower with a 600-credit score and a 3.5% down payment to be approved for an FHA mortgage in some situations. And the borrower can often get that loan at a rate below conventional rates. What a deal!

But as with almost everything in life, nothing is for free. With FHA mortgages, you must pay for mortgage insurance at closing and annually. This is referred to as MIP. FHA assesses a 1.75% upfront mortgage premium when the loan closes. Then, it charges the buyer a varying rate each year; most common it is 1.35% of the loan value. The borrower pays that premium each month as part of their mortgage payment.

FHA loan holders are not the only ones who must pay mortgage insurance. On conventional mortgages that are supported by Fannie Mae and Freddie Mac, you must pay PMI or mortgage insurance when you have less than a 20% down payment. Once you have reached 20% equity through mortgage payments, appreciation or a combination, you can have PMI removed.

June 1, 2013

It used to be that you could do the same thing with FHA loans. In 2013, it was determined that the FHA’s Mutual Mortgage Insurance Fund or MMI was short of money. This fund is used to pay default claims when buyers cannot pay their loans anymore. Federal law dictates there must be a minimum amount of funds in MMI – $2 for every $100 that is insured by FHA. As of an audit in 2013, FHA had -$1.44 for every dollar it insured.

That is why FHA had to change its rules. In the past, FHA required homeowners to pay MIP as long as their loan to value was more than 78%, where the value assumed was whatever the last known value was, such as at loan closing. Also, if the loan term was more than 15 years, at least 60 payments had to be made before FHA could cancel MIP.

But as of June 1, 2013, this changed. All loans closed on that date and afterwards that had a down payment of 10% or more could only have MIP cancelled after 11 years. Loans that have less than a 10% down payment must pay MIP for the entire term.

This means if you buy a home with an FHA loan with 3.5% down, you must pay for MIP for all 15 or 30 years of the loan term. This may seem very unfair, especially for people who have far more than 20% equity in their property after years in the home. But this is the price you pay for getting approved for a loan through FHA.

Of course, FHA rules change often. It is possible this rule could be changed in the future, but as of today, MIP is forever if you put down less than 10%.

Other Options

The silver lining to this unfortunate situation is that if you have a better credit situation and are paying your loan on time, you do not need to keep your FHA loan forever. If the interest rate environment gets to a point where you can refinance at the same or even a lower rate into a conventional loan, you may be able to do so without paying mortgage insurance.

With a conventional loan and at least a 20% down payment, you can get a loan without any mortgage insurance. You will simply need to make sure you have suitable credit to be approved for a conventional loan. Lending standards for conventional loans are stricter than FHA. You will generally need a credit score of 640 to be considered and will have to pay a higher rate at that FICO score. The best conventional rates go to those who have well over a 700 FICO score.

The bottom line with FHA loans is this is a great program for people with average or even poor credit. Some people with past bankruptcies or foreclosures will have difficulty being approved for a conventional loan. FHA is often the last resort, and it really is a good deal. MIP is the only major problem though. Just keep in mind that you need to get your credit score and payment history in order if you ever want to refinance the FHA loan so you do not need to pay mortgage insurance after you achieve 20% equity.

 

 

 

 

G7 Meeting and Trade Wars Can Affect the Interest Rates Globally How?

The G7 met earlier in June 2018, as it began to weigh the EU response to the new US tariffs on EU, Canadian and Mexican aluminum and steel imports, which were at 25% and 10%, while overturning exemptions that Trump granted last March.

The EU during the G7 meeting responded with a promise to impose tariffs of its own against more than $3 billion in US products, including whiskey and playing cards among other things. However, this threat ignored a warning that he would retaliate further with any tariffs on American goods entering other countries. This is thought by many G7 countries that he would put tariffs on automobiles entering the US.

This type of tit for tat on the global economic front can have an effect on every country in the world that engages in trade of any kind. In turn, the tougher economic situation can cause interest rates to rise, which can affect housing markets in the United States.

As many experts in the financial markets argue, in the end, it is the consumer that ultimately bears the final burden of tariffs. It also is the final consumer that may need to switch from one product to a cheaper product. Further, if the trade wars cause interest rates to rise, it is possible that it could cause an increase in interest rates that could make homes unaffordable for some Americans in 2018.

One professor of international business at Warwick Business School in the UK noted recently that it is often importing agents who make the final decisions on what products will get a tariff and which will not. So, if Californian wine increases in price by 20%, people will not then buy it, so it will not be imported. This can cause different products to show up on grocery store shelves.

The director of trade at KPMG recently noted that all consumers in the US will suffer if trade wars and tariffs continue to escalate after the G7 meeting. David Slater said there are not any winners in the long term in a trade war. It usually will have a negative effect on jobs, the global economy and the US housing market. Competition decreases, prices of commodities increase, and investment and innovation are reduced. He noted that a major concern of a trade war is that it usually will increase borrower costs. While loans are not subject to tariffs overseas, the higher costs of goods we buy from tariffs will increase inflation beyond the target the government has for the US economy. In such a case, the Federal Reserve might not have a choice but to increase interest rates, and that has a negative effect on people who are trying to get mortgages.

Already in the US, we see mortgage interest rates substantially higher than just a year ago. The typical rate for a 30-year, conventional fixed rate mortgage is almost 4.8% as of June 2018, which is 1% higher than just last year.

At this time, the number of industries that have been affected by US tariffs is small, but after a heated G7 summit, it is possible there could be more protectionism on the way.

This continues to be a volatile situation in the summer of 2018, and people who are buying a home should be aware of the possible fallout. If rates continue to go up, all consumers should try to pay down consumer loans and mortgages as much as they can. Also, experts advise to not take on any new debt until the situation becomes clearer.

 

References:  https://www.independent.co.uk/money/spend-save/trade-war-personal-finances-how-affect-savings-us-trump-g7-a8398541.html

Trade Wars and How They Affect Global Market Especially US Housing Market.  Steel, Lumber Kitchen Faucets All Impacted.

Talk of a trade war has been dominating talk on Wall Street in recent months. Some experts say that Main Street should be worried about it as well. It is likely that a trade war and accompanying tariffs can lead to higher costs for new home owners and those buying homes. They say that a trade war by the Trump administration could be a burden on people trying to afford to buy a home in 2018 and could be a weight on the housing industry going forward.

It is possible that the tariffs being implemented on steel and aluminum could raise the prices of new homes, which could be a serious problem. Affordability is already an issue in many parts of the country, with a shortage of starter homes in the $150,000 to $250,000 range. Many home builders shy away from building these types of entry level homes because the profit margins are narrower on them compared to more expensive homes. But the tariffs could make this problem even worse.

The new tariff on steel and aluminum is not the only one the housing market in the US must contend with, either. There was a 20% tariff placed on Canadian softwood lumber producers in late 2017, which was a counteraction to the Canadian taxing of US dairy products. It is estimated that 1/3 of all softwood lumber that is used in new home construction is from Canada. The tariffs on lumber were intended to make new jobs in the US lumber industry, but they are actually pushing the cost of lumber higher, which makes it more expensive for builders to get lumber, which makes home prices higher. It is believed that the increased cost of lumber is adding up to $9000 per home built since 2017.

Lumber prices also are being affected by a number of wildfires around North America as well as a shortage of rail transportation. Prices are up 67% from a year ago, and demand hit a record high in May 2018 as demand for housing is very high going into the summer season.

A new report in mid-June 2018 stated as well that the trade war regarding lumber prices with Canada is affecting home builder confidence moving forward. A lumber pricing index called the Random Lengths Composite Framing Price Index has gone up 59% since the beginning of 2017, largely due to the 20% tariff on lumber from Canada.

That said, the overall homebuilder confidence index is still at a healthy 70 for the year, which was never accomplished even during the housing boom of a decade ago.

Regarding steel demand in the US, it is estimated that the construction industry accounts for 40% of it. Steel and aluminum constitute about 1% of the cost of construction of a typical home. Apartment buildings and condominiums use more steel for their support skeletons, and is used to strengthen cement, for the stairwells, as well as emergency escapes and elevators. Therefore, it is logical that rental rates will rise with the tariffs.

Other Headwinds for US Housing Prices

As the US economy is generally as strong as it has been in years, one of the other challenges for the US housing market is interest rates. Mortgage interest rates for a 30 year conventional fixed mortgage are now in the 4.75% range, which is at least 1% higher than the beginning of 2017. The higher rates in concert with the higher costs for building materials is making owning a home substantially more expensive than a few years ago. Rising rates are one of the reasons that housing purchases have continued to be relatively strong this year as many buyers are trying get their mortgage signed and closed before rates hit 5%, which is anticipated to occur at some point in 2019. This is the highest rates we have seen since at least 2011.

Overall, while the housing market is still strong, the combination of tariffs and higher interest rates could cool the housing market substantially in the next few years if nothing else changes. It is unknown if the Trump administration will reconsider the tariffs going into next year.

 

References: https://seekingalpha.com/article/4154248-real-estate-trade-war-consequences-housing

 

maxine waters

5 Reasons Why Maxine Waters is Right About FHA and Mortgage Insurance

Perhaps the current FHA requirement for mortgage insurance (MIP) for the life of most FHA loans could be a thing of the past, if Rep. Maxine Waters has her way. The California Democrat recently proposed a bill in the House of Representatives that would repeal the life of loan standard for FHA mortgage insurance. It would reinstate the past policy of requiring loan holders to pay until the principal balance is 78% of the original loan value. That is the standard currently for conventional loans.

FHA changed the policy in 2013 as an effort to improve the financial health of the Mutual Mortgage Insurance Fund that is the flagship fund for FHA. The Federal Housing Administration needed a nearly $2 billion bailout in 2013 because of a shortfall in that fund. Since that time, the fund has seen four straight years of growth and exceeded its mandated financial target set by Congress for the last two years.

Now that the MMI Fund is on better financial footing, Waters wants to eliminate the policy to keep mortgage insurance for the life of the loan.

Cutting this policy, which requires FHA mortgage holders to keep mortgage insurance for the entire loan life, is a big change that many in the housing and mortgage business have wanted for years. Waters stated that families that choose FHA financing should not be required to have expensive mortgage premiums for the life of their FHA loan. The bill would remove this requirement and would make FHA mortgages more affordable for many American families.

The president of the National Association of Realtors, William Brown, agrees with Waters’ assessment. He stated in late 2017 that lower income Americans often want to get an FHA mortgage, but policies such as life of the loan MIP make it more difficult for borrowers to afford the loan. He also said that mortgage insurance for life encourages people with a lot of equity to refinance to a conventional loan after they have 20% equity in their homes. This is a missed opportunity to boost the strength of the FHA program.

We support the bill that Waters has sponsored and hope it is passed soon so people can cancel their MIP once they have 20% equity in their home.

Below are some of the reasons we support Maxine Waters on this mortgage bill:

#1 Cost of MIP

Private mortgage insurance is expensive, and FHA loan holders are among those least able to afford it. MIP can cost as much as 1% of the loan amount on a yearly basis. This means for a $100,000 loan, you could pay $1000 per year, which is $83 per month. It can easily be $200 per month for many homes in the US in the $200,000 range. Two hundred dollars per month is a lot of money for people with a lower income!

#2 May Not Be Tax Deductible

As of 2017, PMI and MIP were tax deductible, but this is only true if the adjusted gross income for the borrower is under $109,000. This means that many families with two incomes will be left out. The ability to deduct mortgage insurance costs from your taxes is due to a special tax law that has been extended every year for years. But it is unknown if this will continue.

#3 Heirs Get Zero

When most homeowners hear about insurance, they think that their family will get something if they die. This is not true with mortgage insurance. The mortgage company is the only beneficiary if you die. The proceeds will be paid to the lender. If you want to protect your family so they have money if you die, you have to have a life insurance policy. Do not think that your mortgage insurance will help anyone other than the lender.

#4 Throwing Money Away

Paying mortgage insurance for the entire life of the loan is crazy. If you were able to take that money and invest it into a mutual fund with deferred tax obligations, such as in an IRA, you easily could have hundreds of thousands of dollars after 20 years.

#5 Cannot Be Cancelled

It is simply unfair that MIP on FHA loans cannot be cancelled at all, but you can do so if you are paying PMI on a conventional loan. This is essentially discriminatory against people with lower incomes who get an FHA loan.

The only way that you can ever cancel MIP on an FHA loan for loans issues after mid 2013 is to put down 10% or more. In those cases, you can cancel your loan after you have paid on time for 11 years. So even when you put down well more than the minimum of 3.5%, you can only cancel after 11 years!

Maxine Waters in the News

In April, Rep. Maxine Waters introduced a bill aimed at reducing the burdens of homeowners that have FHA mortgage insurance. The GOP in Congress and the Trump Admin did not take up her bill, but this was another example, of Waters once again fighting for American homeowners.

On Monday, June 18, 2018, Rep. Maxine Waters introduced a bill to increase homeowner protections to prevent foreclosure. She is the ranking Democrat on the House Financial Services Committee, and Waters has made reforming the FHA and FHFA a few of her missions.

Maxine Waters said in a statement “Despite the lessons learned during the foreclosure crisis, we continue to uncover evidence of bad behavior by our nation’s mortgage servicers.” She continued, “Borrowers can’t choose their servicer so it’s especially important that Congress provide strong protections to prevent servicers from taking advantage of borrowers and to protect borrowers from foreclosure.”

This new bill would grow the Federal Housing Finance Agency’s oversight of mortgage service companies that do business with Fannie Mae and Freddie Mac.

economy and rates

If the Democrats Win 2018 Midterms Will Trump be Impeached and What Does that Mean to the Economy and Interest Rates?

As the Russia investigation has continued, there has been plenty of speculation about whether the investigation could result in charges of impeachment against President Trump. At this time, the GOP still holds the House of Representatives, so it would not happen. But if the Democrats win the 2018 midterms, it is possible they would attempt to impeach him. They have been making this threat for some time, and if they take power, it just might happen.

If that were to happen, there is much speculation what it would mean to the stock market and mortgage interest rates. Talk of impeachment is a good reminder that it is a good idea to have strategies in place for dealing with market volatility in your portfolio. It also is wise to pay attention to what is happening politically in the country when you are thinking about buying a home. A major political upheaval such as impeachment could cause interest rates to gyrate.

Some financial experts have said there is as much as a 47% chance that Trump will be impeached next year if the Democrats take power. According to Don Riley, chief investment officer at Wiley Group, he believes uncertainty around a Trump impeachment could cause the stock market to fall from 3-5%. It is difficult to say if this would cause mortgage interest rates to rise or fall, but there would certainly be an effect at least in the short term.

However, if Trump were impeached, it is important to note that a drop in the stock market could be short lived because Republicans still have control of Congress. Plus, a Pence administration would still be on the side of deregulation and tax cuts. This is an agenda that tends to bring a stronger stock market. Market reaction to impeachment would probably be cushioned by support from strength in the global and US economy.

On the other hand, if Democrats were to take all of Congress, there is a good chance there would be a longer sell off and mortgage interest rates would drop, as investors would be afraid of a declining economy. But there is virtually no chance the Democrats will take over the Senate during this cycle.

After impeachment if it were to happen, many experts believe markets would recover within three to six months. Markets like certainty, and that is hard to come by when there is a major political upheaval such as an impeachment.

It is interesting to look at history to get an idea what might happen during an impeachment proceeding. During the Clinton impeachment, the stock market dropped by 20% and mortgage interest rates dropped, but the market soon rallied, and made up for all the losses and then some. This indicates that markets fear uncertainty more than anything.

The market damage was worse during Watergate, which caused Nixon to resign before impeachment could be finalized. From the start of 1973 through his resignation in 1974, the S&P 500 dropped, losing 50% of its value. But that era also had a struggling economy, high inflation and an oil shortage, so it is hard to say how much of the drop was due to Watergate and impeachment.

Interest Rate Outlook for 2018

Regardless of whether the Democrats take the House or not this fall, it is clear we are in a long term, rising interest rate environment. As of late May 2018, the average interest rate for 30-year fixed mortgages was 4.66%. This was the highest interest rates we have seen since May 2011. This is up from 3.95% at the beginning of 2018, and 3.78% in September 2017.

30-year interest rates have increased in 15 of 21 weeks of this year, which is the largest increase since Freddie Mac began to track this data 40 years ago. A strong economy and the possibility of more inflation are increasing the yields on the 10-year Treasury bond to 3%. This rate has a direct effect on mortgage rates.

A .75% increase in mortgage interest rates this year would increase the payment each month on a $200,000 mortgage by approximately $85. It appears that higher mortgage costs have already caused home sales to fall. Existing home sales have fallen 2.5% since last month to a rate of 5.46 million per year. This is 1.4% what they were a year ago.

Given that mortgage interest rates are on the rise and prices are rising, it is probably a smart time to buy if you are thinking about it. There is little prospect that mortgage rates will fall back under 4% anytime soon. Unless of course, Trump is actually impeached if Democrats take Congress next year. Then, all bets are off at least in the short term.

 

References: https://money.usnews.com/investing/buy-and-hold-strategy/articles/2017-08-04/what-a-trump-impeachment-might-mean-for-markets

3 Ten Year Means What to US Economy

In April 2018, the 10-year US Treasury yield broke through the critical 3% level. This left analyst wondering what it could mean for the future of the US and global economy.

In April, the yield on this important benchmark bond, which is used to set the price for various debt instruments around the world, went a bit above 3%, a level that some in the market say is dangerous for many investments and the US economy. It also is an important psychological level for the markets because there has not been a 3% yield on 10-year Treasury bonds since 2013.

Many finance wonks think the up or down movement of the 10-year Treasury bond is a crystal ball that can tell us when we will have inflation, recession, bull and bear markets, higher and lower home prices, corporate profits, etc.

As yields rise, and they move inversely to the price of the bond, market players expect higher interest rates from banks, such as in the mortgage markets. Because of higher interest rates, it is likely that companies will see higher costs when they borrow money and will not have as much money to increase salaries and to invest and provide returns to shareholders. Because the 10-year note is so important to set mortgage rates, it can reduce people’s abilities to buy homes.

This has been possibly happening in 2018, as mortgage rates have surged past 4.5%, and some analysts think we could see 5% in the next year. Rates have been moving higher than people’s salaries and wages have increased, and this could prevent some people from buying homes, especially in more expensive areas.

Some high net worth bond investors have said this month that if the 10 year yield goes well above 3%, then traders will being to bet that rates could go higher. This could fuel fears that a market crash will occur and could lead to a significant downturn in the stock market.

However, others argue that the US Federal Reserve has a lot of room for additional rate hikes and this will not seriously damage markets. After all, rates have been kept extraordinarily low since the 2008 market crash.

Others say the 10-year Treasury would need to rise above 4% before it started to really compete with the stock market, especially because of the level of earnings per share that people are seeing from the S&P 500 companies.

The stature of the 10-year Treasury is because so many investor regards it as free of risk. It makes it the one asset to which all others are compared to – mortgages, stocks and bonds. Treasuries are considered risk free because they are backed by the federal government and its ability to levy taxes. Stocks and corporate bonds are higher risk and can fail.

How the 10 Year Treasury Rate Affects You

As the yield on the 10-year note rises above 3%, so do the rates on 10 and 15-year mortgages. That is because the investors who buy bonds want the best rate with the lowest return. If the Treasury note rate drops, then rates on other less safe investments may fall.

Mortgage and other rates on other loans will always be higher than the 10-year Treasury. They need to provide compensation to investors for a higher risk of default. Even if the 10-year Treasury rate falls to zero, mortgage interest rates would still be higher. After all, mortgage lenders have to cover processing costs.

When the benchmark Treasury rate rises, it makes it more costly for you to own a home. You are paying the bank more interest to borrow the same amount of money. As home buying becomes more expensive, demand will generally fall.

While some experts worry about the rate on Treasuries rising above 3%, it is important to keep in mind that higher rates generally mean a stronger economy. There is low unemployment and rising wages, so people needing to pay higher interest rates on mortgages and other loans should be able to handle it, at least theoretically. Rates were extremely low for many years after the last downturn, and this recent uptick in rates is to be expected.

 

References: http://money.cnn.com/2018/04/24/investing/10-year-yield-3-percent/index.html

fannie mae no appraisal

How to Refinance with Fannie Mae with No Need for a New Appraisal

Do you have a Fannie Mae-backed mortgage, want to refinance, but do not want to have to do a new appraisal? You might be in luck. Thanks to a recent Fannie Mae program, some homeowners might not need to pay for or wait for an appraisal to do a mortgage refinance.

Rather than wait for an inspection by a human being, Fannie will use the automated valuation model on certain qualifying loans. Fannie Mae already does waive property appraisals on approximately 3% of loan applications that come into the automated underwriting system. Under the new enhanced property inspection waiver system, that number may rise to 10%.

This is a big deal because a human being doing an actual appraisal takes time. You need to schedule it typically a week or so before the day, have him spend several hours doing the appraisal. Then, you wait up to 10 days for the appraisal report. If you need to refinance now, the delay can be a problem. Plus, you can pay up to $500 for a new appraisal. It is a nice thing to avoid when you can, and Fannie Mae may let you do so.

Note that Fannie Mae’s no appraisal option applies only to refinance loans on single family homes and condos with a value up to $1 million. The loan amount must be less than the limits set by Fannie Mae, which will vary by area of the country. Also, the loan to value cannot be more than a certain amount.

On limited cash out refinances, where you take out no cash or just enough to cover closing costs, Fannie Mae may allow you to go up to 90% loan to value. It is estimated that 25% of limited cash out refinances might qualify for the appraisal waiver.

On a cash out refinance, Fannie Mae will go up to 70% loan to value if the home is occupied by the homeowner, or up to 60% if the home is a vacation home or is an investment property.

Also, to Fannie Mae needs to have a physical appraisal for the same property with the exact same borrower in the Uniform Collateral Data Portal. This is a database into which lenders enter home appraisals for any mortgages that are submitted to Fannie Mae or Freddie Mac.

This is a huge treasure trove of electronic information that is collected by human appraisers that Fannie and Freddie can use to come up with automated appraisals, but it only has been in existence for five years. So a homeowner who wants to refinance a loan that is more than five years old probably will not qualify for the appraisal waiver.

All of this data has been collected from appraisers over the years and it can be used for the advantage of Fannie Mae and some homeowners. Some appraisers are not very happy about it, but if you qualify for the waiver, you certainly will be!

However, many experts say the new Fannie program has only a limited effect on appraisers. The Appraisal Institute is not as concerned about the no appraisal offer and is more concerned about the no cost automated appraisal alternative that Fannie Mae introduced a few years ago.

This new program is more geared towards new purchase transactions. This program would be advantageous for many home buyers because it would make it easier to close on a home and reduce delays and costs. This could be very helpful if you are in a bidding war on a property in a hot area of the country.

Even with the Fannie Mae waiver program helping out some refinance customers, refinances continue to slow as of mid-2018. Total mortgage refinances fell five percent for the week ending in May 2018. The higher rates for refinances is turning off many people. A 30-year conventional refinance rate is around 4.8%, which makes it less attractive to refinance. A year ago, refinance rates were in the high 3s to low 4s.

If you want to refinance, you should probably strongly consider it soon because rates seem to be on a long term rising trajectory.

 

 

 

credit unions

My Credit Union Has No Mortgage Insurance on 100 Percent Financing.  What’s the Catch?   No Catch just member benefits.

You have your mind set on your dream home, but have you given any thought yet to who your lender will be? Commercial banks and online mortgage lenders are not the only organizations that can issue mortgages. Credit unions are also a valuable option that might even save you some money. Keep reading to learn how.

Mortgage Overview

Any time you take out a mortgage, there are costs involved, no matter where you get the mortgage. Whoever provides the mortgage to you needs to make money. Closing costs are, for example, usually 3% to 5% of the loan amount. This varies quite a bit depending upon the state and the lender. Also, if you put down less than 20%, you will usually need to get mortgage insurance. Mortgage insurance protects the lender against default. This insurance can cost you at least $100 to $200 per month.

But in some cases, you can save on things such as closing costs and mortgage insurance by using a credit union for your mortgage loan.

Overview of Credit Unions

Credit unions are not for profit, member owned cooperatives that have been increasing their presence in the mortgage market. In 2015, credit unions had 11% of the mortgage market, which was an increase from 7% two years before.

Many experts believe that more Americans are turning to credit unions for their mortgages to save money in various ways. Here are some of the ways a credit union could help you.

You May Save Money

One of the best things about credit unions is they are nonprofit, so they tend to have lower fees on their mortgages. Lower fees and rates at credit unions help the borrower. The credit union usually passes their savings onto the members. At a bank, their sole purpose is usually to make revenue for their investors.

You may find that your credit union is able to charge lower closing costs on your mortgage because they are charged less themselves on some of the costs of finalizing the mortgage. This can really help you to save money when you come to the closing table.

There also are some credit unions that have mortgages with less than a 20% down payment that do not have mortgage insurance. Typically, the credit union will pay the mortgage insurance and charge you a slightly higher rate. But this higher rate will usually be less than what a conventional lender would charge.

Not a Mere Number

When you get a mortgage from a bank or other mortgage lender, you usually are just a number. But with a credit union, it is more likely you will know your servicer. Also, with a regular mortgage, it is very common for the company that collects your mortgage payments to change many times over the life of the loan. This does not usually happen with a credit union.

Staying with the same mortgage servicer can help you avoid late fees that can happen when there is confusion about where to send your loan payments.

Low Credit Scores- Not so Fast

Credit unions can be a good choice for the person but usually they are seeking a borrower that has high credit scores. Gone are the days that credit unions take risks on a lower or middle-income loan to a person with mediocre credit than many other originators. Credit unions do sometimes offer special mortgage programs for first time buyers.

For instance, there is a credit union in Raleigh NC that at one time offered 100% financing for up to $400,000 with no private mortgage insurance. That is not a typical loan that is offered at traditional lenders after the last market crash.

Last, getting into a credit union is not as difficult as you may believe. There are some credit unions that are for specific alumni and other types of groups that you must belong to. But there are other credit unions in large cities that anyone can belong to. In large part, they operate like a regular bank, but you may find that they charge lower fees and have better mortgage programs with lower interest rates than traditional lenders.

 

References: https://www.bankrate.com/finance/mortgages/get-mortgage-from-credit-union.aspx

 

house bubbles

Economy Strong. Consumer Confidence Up. Why Are Home Prices Static in Most Parts of the Country?

The economy is doing well, with unemployment well below 4% and economic growth anticipated to be in the 3% range at least in 2018. Consumer confidence is high. Mortgage interest rates are also on the rise, which indicates generally a stronger economy. Also, in much of the country, home prices have continued to rise. According to CNBC, US homeowners gained $1 trillion in equity last year as their home values increased. The website noted that home equity increased 13% in the first quarter of 2018 from a year ago. For the typical borrower, this means $16,300 in additional equity from a year ago. That is the largest gain in four years.

Still, while some homeowners are doing very well with their home values, others are still having problems. In some areas of the middle of the country, home prices are static. For approximately 2.5 million borrowers, they are still underwater on their mortgages, which means they owe more than their homes are worth. But in the first quarter of 2018, 84,000 borrowers did come out from underwater, gaining enough home value to be in positive equity territory.

The negative equity rate dropped by 21% from a year ago, when three million borrowers were underwater. Negative equity was at its peak in 2009 with 26% of all mortgage properties underwater.

As with all things in real estate, the gains vary a lot depending upon the location. Some areas are doing well and others not so well. In Washington state, prices are generally soaring with people gaining an average of $44,000 in home equity. In California, homeowners gained an average of $50,000. In the far Western states, equity gains are also substantial and being fueled by home price escalation in a stronger economy.

Experts say gains in home equity are probably fueling an increase in home remodeling. But they are not causing homeowners to list their houses for sale. Trading up to a bigger home is too expensive with interest rates at their current levels, and the supply of homes in many parts of the country is lean.

Ironically, many homeowners that are gaining equity in much of the country and homeowners who have negative equity are some of the reason why home prices are rising fast in some of the US. Supply is limited and demand is strong so new listings are selling fast, and many are selling above the list price. In the hotter areas of the country on the West Coast in particular, bidding wars are common.

In April, it took only 64 days to sell the typical home across the country, according to Trulia.com. That is nine days faster than last year. The previous record was set in July at 70 days. It is not a surprise that homes in the West are moving the fastest. Homes are going under contract in an average of only 26 days, according to NAR.

There also are parts of the country with overvalued real estate. Experts say Las Vegas home prices are rising at some of the fastest rates in the US, with builders getting record amounts and resale values are getting close to the highs of 2006. The growth is so rapid that prices are probably the most overvalued in the US.

Experts note that southern Nevada home prices were 20% overvalued at least in the first quarter of 2018. That is an increase of 15% to 19% in the same period from the year before, and 10% to 14% more overvalued from 2016.

Las Vegas was determined to be the most overpriced market in the country for the 20 listed in a recent Fitch report. Many locals wonder if Las Vegas in in another real estate bubble actually. That said, others say that household income is up and unemployment is way down in Vegas and this real estate boom is more stable than the one that led to the last economic downturn.

Overall, prices on homes are rising in the US, but there are certainly areas where prices are more static. Where the population is not growing and unemployment is higher, you will see less home price increases.

 

 

References https://www.cnbc.com/2018/06/07/us-homeowners-are-1-trillion-wealthier.html