Should You Invest in a College Town Rental?


It’s back-to-school time and college towns are bustling with students settling into their campus housing. Students are choosing between apartments or single-family rentals while parents are being introduced to the booming business of college-town land-lording.

More and more parents are buying a college town rental when a child starts at a university to solve their housing needs for the next four years. Roommates pay rent to cover the mortgage and expenses, then,  after graduation, the property continues to generate rental income and appreciates. Generous parents will sometimes turn the title over to their child to begin their investing career.

It’s a formula that works for many families, but college rentals don’t always have happy endings. Owning and managing a student rental is significantly different from a traditional rental, and even investors who have been successful in other markets can fail in college towns.

College students College students

Here is a list of pros, cons, and solutions when deciding whether or not you should invest in a college town rental:

Reasons to Invest in a Campus Rental

  1. Low vacancy rates. In addition to providing housing for a child, college rentals typically have low vacancy rates during the academic year. The market for college renters is larger than the undergraduate student body.  Graduate students, faculty, and college employees increase the demand for rentals as well. Many investors report 100% occupancy.
  2. Better than average appreciation.  Colleges, especially larger private and state universities, create local economic stability. Most grow over time to serve expanding generations and to develop their research and post-graduate offerings. Potential investors should research cap rates, competitive environment, and the financial viability and growth potential of local schools. The National Center for Education Statistics predicts college enrollment in the U.S. will reach 19.8 million students in 2025, an increase of 14% from its 2014 enrollment of 17.3 million.
  3. Low marketing expenses. Some universities will post ads for rentals for free as a service to students. Advertising on sites popular with students, like student newspapers or other hyper-local campus sites, is inexpensive and sufficient.
  4. Higher rent. Most college town landlords who rent to students charge rent that’s a little higher than they would in other markets because they can base rents to room and board fees at the college.

Challenges of Campus Rentals

  1. Local ordinances that hurt rental profits. Investors in college towns report that their most significant and unexpected problems result from ordinances, local regulations, and college policies designed to protect students from unscrupulous landlords or boisterous students. Examples include bans against more than three unrelated people living in the same rental, limits on rent increases, restrictions on security deposits, school requirements that first-year students live in dorms, and outright bans on renting to undergraduates. College towns that have housing shortages are far more likely to pass these rules, possibly after receiving some pressure from the college itself.
  2. Timing is everything. Students and their parents prefer nine-month leases, but landlords prefer 12-month contracts so that they are not stuck with a summer-long vacancy.
  3. Constant turnover. It’s not unusual for 80 to 100% of college rentals in a market to turnover every year. For landlords with a portfolio of nine-month leases, the summer can be a hectic time as landlords clean, repair and try to rent properties as quickly as possible.
  4. Irresponsible behavior: damages and late rental payments. Most undergraduates have never been responsible for a rental. If they (or mom and dad) have already made a security deposit, irresponsible students may have no qualms about leaving a rental  disorderly, which could cost up to three times as much as their base security deposit. For some students who are not mature enough to worry about their credit ratings, making timely rent payments may be a problem.


  1. Hire a qualified property manager but stay involved.  Investing in college rentals is not for distant owners who are new to real estate investing. Even seasoned investors will find renting to college students a different experience. Consider hiring a local property management company that is experienced in dealing with local colleges and universities. They will know the local rules and regulations, college administrators, and the local marketplace.
  2. Tailor the lease. Have your attorney craft a special lease tailored to renting to college students. It should include co-signers as well as clauses on noise, maximum occupancy, and damages/repairs.
  3. Do a thorough credit and history check on the students and parents. Use a screening service that can do a national criminal search and a national eviction search as well as a credit screen.
  4. Insist on a 12-month lease. A 12-month lease is an industry standard. If your tenant is not staying through the summer, they are free to sublease it.
  5. Have parents co-sign. In most cases, parents will be paying all or part of the rent. Add both parents to the rental agreement as co-signers since minors can’t enter into legally binding contracts. Consider having parents co-sign even if the student isn’t a minor. By co-signing they accept liability.  Review any rules on rental payments with both parents and students. Make it clear that in your eyes, the parents share the responsibility for the conduct of their child and his/her roommates.
  6. Consider asking for rent payment in advance.  If you have any doubts from the screen or your contacts with the tenant or parents, ask for full payment of the rent one month or one semester in advance.
  7. Ask the students to pay the utilities. Have them share the responsibility for energy-efficiency.
  8. Enforce limits on roommates. Check your local zoning laws for any limitations on maximum capacity. Make sure your tenants know and abide by the maximum.
  9. Visit occasionally.  Let your tenant know that you would like to stop by to see how they are doing. Meet new roommates and make sure they know your rules. Take the opportunity to inspect for damage. 

For more information about buying, selling, or renting, visit  find step-by-step guides!

Steve Cook is the editor of the Down Payment Report and provides public relations consulting services to leading companies and non-profits in residential real estate and housing finance. He has been vice president of public affairs for the National Association of Realtors, senior vice president of Edelman Worldwide and press secretary to two members of Congress.



New Petition Urges Mortgage Re-HARPing

Well, file this one under “was bound to happen,” or, “was only a matter of time.”

A clever guy by the name of Marcus J. from Clementon, New Jersey has created an online petition to eliminate the securitization cut-off date for HARP eligibility.

At the moment, this ever-important cut-off date is May 31, 2009, meaning if your mortgage was sold to Fannie Mae or Freddie Mac after that date, you’re not eligible for a HARP refinance.

Unfortunately, many homeowners already refinanced their mortgages under HARP, perhaps when it wasn’t as attractive as it is now, seeing that there is a much more flexible HARP 2 nowadays.

At the same time, mortgage rates have marched lower and lower since HARP was originally unveiled, again, likely frustrating homeowners who refinanced early on.

There are also the many people who purchased homes after that cut-off date, who are now underwater and likely seeking a HARP refinance.

Eliminate HARP Cut-Off Date?

The petition essentially calls for the elimination of the cut-off date, which Marcus J. refers to as “arbitrary,” along with the one-time HARP limit. This would allow for so-called “reHARPing.”

He argues that removing these roadblocks would permit millions of Americans to refinance their mortgages to lower rates, thus saving thousands on their monthly mortgage payments over time.

Note: You can reHARP a Fannie Mae loan that was refinanced under HARP from March to May 2009.

Interestingly, he isn’t the first to propose such an idea. Back in May 2012, U.S. Senators Robert Menendez (D-NJ) and Barbara Boxer (D-CA) proposed extending the cut-off date an additional year to May 31, 2010.

That seemed to fall on deaf ears, so it’s unlikely a complete removal of this key date will be approved.

As much as it sounds like a good idea (maybe), it’s a bit of a slippery slope. If you remove the date, borrowers could just refinance over and over until they saw fit, assuming rates continued to fall.

And this isn’t a traditional refinance program – it’s essentially a loss mitigation tool for distressed borrowers, or those at risk of walking away.

A line has to be drawn somewhere, otherwise it would become something of a free-for-all.

Does the cut-off date deserve a second look? Absolutely; the FHFA should dissect the data to determine if extending it will provide a net benefit.

But removing the date entirely might be a bit extreme.

When it comes down to it, timing can be your best friend or your worst enemy, and we can’t rely on the government to extend the program every time rates drop, especially when there’s not even a refinance program for non-agency mortgages.

Ironically enough, you can blame the government for creating this situation, seeing that they simultaneously worked to push mortgage rates lower and lower long after HARP was released.

Petition Needs 25,000 Signatures


It will certainly be interesting to see if the petition receives the necessary 25,000 votes to at least “get a look.”

It’s currently available for online signature over at, which is the official website to have your voice heard.

At the moment, it only has 26 signatures, so an additional 24,974 are needed by February 8th, 2013 in order for an official review and response from the Obama administration.

Additionally, it needs at least 150 signatures to be publicly searchable on the website, meaning it’s got zero visibility right now.

If you’re interested, you can sign here.

(photo: Feral78)

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


Staying Prepared in a Recession | Tips for Financially Protecting Your Home

It was one for the history books, second only to the Great Depression, the Great Recession saw countless homes foreclosed, numerous bankruptcies, and overall catastrophic distress in the housing & financial markets. In fact, during the 10 years that spanned the Great Recession, 7.8 million foreclosures happened. For those that lived through the financial turmoil, there is fear and hesitancy of history repeating itself. The real estate market has certainly recovered; however, there is chatter that a looming correction could be on the horizon. Whether it’s just an adjustment in the housing market or a full-blown recession, there are steps you can take now to hedge your bets and place you in the best place financially.

African male holding piece of paper while paying gas and electricity bills online on notebook pc. Young family calculating their expenses, planning domestic budget, sitting in kitchen interiorAfrican male holding piece of paper while paying gas and electricity bills online on notebook pc. Young family calculating their expenses, planning domestic budget, sitting in kitchen interior

Take Advantage Of Current Low Interest Rates

For much of 2019, interest rates have been low. One of the contributing factors to foreclosures during the recession were extreme or variable interest rates. There are two ways to take advantage of low interest rates to protect yourself in case of another recession:

  1. Buy A Home. Arguably one of the best ways to hedge your bets is to have affordable housing that can sustain an economic downtown. Locking in a mortgage with a low interest rate helps a buyer experience more affordable monthly payments & more money applied to the principal balance.
  2. Refinance Your Mortgage. If your original home mortgage was secured pre-recession, you probably know the impact of variable rates, interest-only loans, & balloon payments. Even if your mortgage was secured after the recession, mortgage rates have since declined and your home equity could have increased. By refinancing your current mortgage, you can lower your overall monthly payment. Decreasing your overall monthly housing budget is a critical step in recession-proofing your finances.

Create Multiple Streams Of Income

While the housing market took a downtown during the recession, the rental market remained steady and one of the ways to withstand an economic downturn is to have multiple streams of income. While demand may be less from buyers due to a recession, the demand by renters typically increases. By purchasing rental properties with lower interest rates, the additional stream of income can be a vital asset during a recession. While strategies may vary in how to acquire a cash-flowing rental property, the math is still the same: purchase low with a 20% down payment and a low interest rate will help an investor to not only maintain but cash flow the rental.

Pay Down Your Mortgage

Whether you choose to refinance your current mortgage or not, paying down your existing mortgage will not only build equity but provide freedom in the next recession. By utilizing programs such as Bi-Saver, homeowners can experience flexibility in mortgage payment schedules as well as increased equity. Programs like Bi-Saver act as a third party that collects the mortgage bi-weekly throughout the life of the loan– by the end of each year at least one additional mortgage payment is applied to the loan. This process can erase years off the life of the loan. By combining a low interest rate and additional mortgage payments each year, homeowners have the ability to experience some breathing room in their finances.

While nobody knows if, or when, the next recession will be, it’s important to make cautious and wise financial decision now that your future-self will thank you for. By taking advantage of lower interest rates, creating multiple streams of passive income, and paying down your mortgage will help you to hedge your bets!

Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She’s passionate about the power of real estate. She’s also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.


Why I’m Grown-Up and Employed, but Still Need Mom to Co-Sign on My Home

When I got my first apartment after college, I needed my mom to co-sign my lease.

The landlord required proof that I made three times the rent, but since I wasn’t making nearly enough, I called Mom to sign on that second dotted line.

Then, in my mid-20s, when I bought my first condo, I needed a co-signer again. Once again, my mom was there for me.

Now I’m almost 30, married, and expecting our first child. Both my husband and I are gainfully employed and have good credit histories, so you’d think we wouldn’t need any parent co-signing for us to rent a home! But alas, we’d recently moved to New York City, where rents were so high, snagging a half-way decent apartment would require Mom to co-sign once again.

What’s going on? Would I need my mother to co-sign forever?

Of course, I feel lucky to have a parent who’s so supportive. But I can’t help but think that there’s something wrong with me, where I was choosing to live, or perhaps the housing system in general.

So, I started looking into why co-signing is so often required, even in cases where it seems unnecessary. Here’s what I learned, and some words of wisdom from experts that could help you get through the inconvenient (and embarrassing) cycle.

Why co-signers are required

What bothered me most about needing a co-signer was that I felt like I wasn’t being taken seriously as a tenant. I had a good job and a college degree, why couldn’t I be trusted to pay my rent?

As it turns out, many people face this problem.

While landlords may have differing requirements, the industry standard is that your take-home income must be three times what you pay in rent. So if you make $3,000 a month, your monthly rent should not exceed $1,000.

But is this realistic with today’s runaway rent prices?

For instance, in 2013, as a fresh college graduate, I paid $1,600 a month for a one-bedroom, third-floor walk-up in Los Angeles. So based on the three-times rule, I should have been earning $4,800 a month, or $57,600 a year.

A salary that size was an unattainable dream for me right out of college. Even though I had a great sales job and a minimum-wage side hustle, I was making only about twice the annual rent, or $40,000.

And I was one of the lucky ones. The minimum wage in California is $12 an hour, but in 2013 it was $8. To afford a monthly rent of $1,600 in 2013, a minimum-wage worker would have needed to put in 150 hours a week.

Is the three-times rent rule realistic?

Because I needed a co-signer, I couldn’t help but wonder about the three-times rent rule, and the reason for it. Did this mean I’d overextended myself?

As it turns out, I had no reason for worry. With a monthly rent of $1,600, I had another $1,600 left for other expenses, and it was more than enough.

So I started wondering: If twice my income worked just fine for my bills, why do landlords want proof that renters make three times their rent?

“The exact origins of the three-times rule is unknown,” says Michael Dinich of Your Money Geek. Nonetheless, this rule has remained the industry standard—for renters and home buyers alike.

“Mortgage lenders have often used the guideline that housing costs should be no more than 30% of income,” Dinich says. “The three-times rule is likely a handy approximation based on those old guidelines.”

This guideline may even contribute to younger generations’ low rates of homeownership.

“The income of many people, particularly younger adults, has not kept up with home prices in many areas,” says Andrew Latham, managing editor of SuperMoney. “This is why millennials have lower homeownership rates than previous generations.”

Plus, experts say that most landlords (even the nice ones) don’t necessarily care if people aren’t making as much money as they used to. They care more about finding a renter who will be able to pay their rent on time. And if that means sticking to the tried-and-true method of renting to those who can prove they have plenty of income to spare, or can at least get a co-signer, they’ll do it.

How I pay my rent without a co-signer today

While it’s tough for young renters and home buyers almost everywhere to cover their housing costs, it’s even worse in New York City.

Sure, my mom agreed to co-sign the lease, as always. Yet with a baby on the way, my husband and I decided that, rather than taking my mom up on her kind offer, I’d try to find an apartment with a rent that fell comfortably within the three-times rule.

We started crossing things off our wish list. We moved our search from Manhattan to Brooklyn. We stopped looking at homes near subway stations and cute cafes and started touring apartments that were a bit farther out. In the end, we found a studio we liked, and the low rent didn’t require a co-signer.

For more smart financial news and advice, head over to MarketWatch.


How the App Makes Homebuying Simply Smarter

While some homebuyers exhaust their search efforts online, scouring through page after page of listings in their area, others opt for an easier approach to finding their dream home. As mobile apps have continued to become more advanced, many buyers and renters are taking the start of their home searching journey from desktop to mobile. The app helps make that transition easier and safer. A long list of user-friendly features and smart capabilities are what make the app one of the most sought after tools while searching for a home. From saving your favorite listings without the need of creating an account (because who needs more emails, right?) to mobile video tours and virtual open houses, there’s not much this app can’t do.

[embedded content]

Your Privacy, Protected

While other mobile home search apps may ask for your phone number, email, name, and an agreement to a long list of terms and conditions regarding your privacy, does things differently. The accountless approach that is offered to users makes it so you can enjoy the features of saving your favorite searches and homes without sacrificing your privacy. No email address, password, or any type of login will be required from those who wish to browse and save on their own terms. The best part? If you prefer the accountless approach, you’ll be excited to hear about a new feature rolling out very soon for our mobile users. Whether you create an account or not, you’ll be able to opt-in to receive push notifications that will alert you of price changes in your saved homes. app

View More Than Listing Photos

Every listing available on’s Android app includes the option for you to look at it through Google Street View. You can use this feature to not only look at the home you’re interested in, but you can see your potential neighborhood as well. Are the houses too close or too far apart for your liking? Is your home off of a busy road or in a quiet area? You can also get these questions answered through virtual and video tours as well. These scheduled tours will upload to your phone’s calendar so you’ll have it front-of-mind when the time comes. If you have a question before the tour, communicate directly with your agent at the touch of a button!

Find Your Dream Home Faster Than Ever Before

As you start your home search journey, you’ll need a search engine that’s reliable, easy-to-use, and fast. The mobile app is up to three times faster than our competitors’ apps on Android devices and we continuously strive to have the fastest home search app across all mobile operating systems. So, when you start finding and saving those homes you love, our app won’t slow you down. As our mobile app continuously improves, gesture-based navigation will help you browse even faster without having to find and click buttons to search through each page. A simple swipe forward or backward can get you where you want to go quicker than before (and it will be here before you know it!).

swiping gif photo gallery appswiping gif photo gallery app

Made for Future Home Buyers and Renters, Just Like You

From the beautiful design released with the native version of the app, homebuyers now have access to find the homes they love, in a way they love. “By offering a family of products and giving the user the ability to choose how they want to digest the information, we are reaching more home searchers. It’s kind of like reading a book, some people prefer paper books while others prefer Kindles. Both will give you what you are looking for, just in different substrates,” says Tabatha Anger,’s Mobile Product Analyst.

Click here to download the Mobile App for Android devices.

Click here to download the Mobile App for Apple devices.

Content Marketing Assistant at | See more posts by this author

As’s content marketing assistant, Sydney gets to combine one of her favorite pastimes with her job– keeping up with pop culture. Outside of work, she enjoys stepping away from her phone and computer and spending time with her friends, whether it’s just hanging out or traveling. Trying new foods, going snowboarding, and long road trips are some of her other favorite things to do, but what does she loves the most? When people read’s blog articles, of course!


East Coast Market Outlook: Tallahassee, Florida

Capital of The Sunshine State, Tallahassee is a college town full of mossy oaks and award-winning outdoor recreation. The metropolitan area, which includes the city and four surrounding counties, is home to about 390,000 residents and the reputable Florida State University.

Market Snapshot

In 2015, the average starter home cost was about $48 per square foot. That average has increased 40% to almost $68 per square foot. According to Florida Realtors, the median starter home price in the area currently sits at $185,500, while the median sales price for all homes is about $227,000.

Meanwhile, average Tallahassee rental prices are increasing by about 1.03% each year; not a staggering amount, but they currently sit at around $1,012 for a 2-bedroom unit. 

Tallahassee, Florida, USA downtown skyline.Tallahassee, Florida, USA downtown skyline.

Why Consider Buying Now?

Long term, appreciation is expected to remain steady for the area. In the short-term, however, it seems to have slowed down compared to years prior. Tight inventories aside, this could open the opportunities for renters to enter the market before rates accelerate again. 

According to the National Association of Realtors, the value of a typical home in Leon County alone was about $230,900 in Q4 2019. With a 10% down payment, and a 4% interest rate (higher than current rates), they estimate that a buyer would pay about $993 each month for their mortgage — lower than the current rental average costs. 

Of course, there’s the added costs of utilities and services. But locking in a low mortgage rate now will keep monthly costs the same, opposed to rent prices that trends are suggesting will continue to increase. 

What to Prepare for

Like most markets, Tallahassee’s market is tight. However, with COVID-19 restrictions easing, sellers are looking to place their homes back on the market. Be prepared to act fast, as the time between listing and selling now averages about 21 days. 

Some Advice?

Nicholas Mihalich, president of the Tallahassee Board of Realtors, suggests buying now as long as you will be in the house for the next 3-5 years. “There is not much lower priced housing being added to the market, so demand will continue to outpace supply,” stated Mihalich. “Consequently, owning a home here is a safe and secure way to build wealth.”

Start Your Home Journey Today!

If you’re thinking about buying, has the simply smarter tools to help you get started. From mortgage calculators to a comprehensive “How-To” guide, we’re your one-stop resource to find your dream home. 

Content Marketing Assistant at | See more posts by this author

As’s content marketing assistant, Sydney gets to combine one of her favorite pastimes with her job– keeping up with pop culture. Outside of work, she enjoys stepping away from her phone and computer and spending time with her friends, whether it’s just hanging out or traveling. Trying new foods, going snowboarding, and long road trips are some of her other favorite things to do, but what does she loves the most? When people read’s blog articles, of course!


Investing in a College Town Rental Market: Ann Arbor, Michigan

College towns are attractive markets for investors in rental properties for several reasons. Students and faculty create large and dependable markets of tenants. Local economies dominated by academic institutions are remarkably stable compared to those based on manufacturing or agriculture. Larger universities create hundreds of non-academic jobs in research centers, medical facilities, and new companies spun off by technologies developed locally.

Ann Arbor, Michigan, home to the main campus of the University of Michigan, is an excellent example of a campus-based economy that is much larger than its facility and student body. One out of three local jobs are in educational service, and an additional one out of ten are in technical, professional and scientific services. At $39,235, Ann Arbor’s average per capita income and its median family income of $102,615 are 20% to 30% higher than national averages.

WalletHub ranked Ann Arbor, the nation’s fifth-best college town and the best small city college town in 2020 based on academic, social, and economic opportunities for students. It also ranked Ann Arbor, the nation’s “most educated city in 2020,” outranking San Jose, California, and Washington, D.C. It also placed first in educational attainment and quality of education and attainment gap.

Read: 5 Reasons Why You Should Still Buy an Investment Property

college university student leaving librarycollege university student leaving library

Affordability is Under Fire

Popularity can have a downside, and Ann Arbor is experiencing the price of success in rising housing costs and decreasing affordability, especially in Washtenaw County as a whole.

As of February 2020, the average monthly rent in Ann Arbor was $1,580 for an 882-square-foot apartment, a 3% increase over 2019, higher than the national median for a comparable apartment ($1,468) and considerably higher than nearby Detroit ($1,069) or East Lansing ($1,294), home of Michigan State University. Half of Ann Arbor tenants spend 30% or more of their household income on rent. HUD defines cost-burdened families as those “who pay more than 30% of their income for housing” and “may have difficulty affording necessities such as food, clothing, transportation, and medical care.”

“Ann Arbor – and its central driver, the University of Michigan – is a magnet for highly educated households with upward mobility and significant disposable income. With some exceptions, Ypsilanti (City and Township) and their challenge of being overloaded by a disproportionate number of at-risk households and homes with negative equity – is where the most affordable options exist,” stated a 2015 Washtenaw County housing study.

“Ann Arbor will become more costly, and less affordable, especially to non-student renters in the short run and eventually, to aspiring buyers as well. The driver for higher costs is a combination of high livability and quality of life, great public schools, resulting in sustained demand by households with discretionary income, and resulting expectations of stable and continually rising property values,” the study concluded.

Read: Investing in a College Town Rental Property: Charlottesville, VA

The Ann Arbor Rental Market is Vast and Profitable

In many ways, Ann Arbor is a great rental market. The massive student body drives demand. About 70% of the University of Michigan’s 46,000 students live off-campus and the current cap rate for Washtenaw County apartment buildings is a respectable 7.6%. (The capitalization rate is the ratio of rentals’ net operating income to property value. Low cap rates imply lower risk, and higher CAP rates indicate higher risk.)

Living off-campus is so popular; the university maintains web pages listing rentals and providing advice and information for off-campus renters. This summer initiated a “virtual housing fair” to help students find rentals for the 2020-2021 school year.

group of young college students hanging out at homegroup of young college students hanging out at home lists 1,235 properties in Ann Arbor, with a median home value of $355,600, about 17% above the national median of $304,100 in July. Of the total homes in Ann Arbor listed on, 60% are for sale, and 34% are rentals.

Read: What to Know Before You Rent to College Students

Though several new high-rise apartment buildings recently opened and more are under construction, single-family rentals still dominate the market. lists more than 200 single family homes for rent in Ann Arbor. Smaller rental households are a result of the above-average presence of single-family rentals relative to apartments. The average household size for Ann Arbor rentals is 2.2 people, compared to 2.3 for Michigan and 2.5 for the nation as a whole.

COVID-19 and Ann Arbor, Michigan

COVID-19 delayed the University of Michigan’s plans for the fall semester but did not cancel fall apartment rentals. The university’s plans include both in-person and remote classes, a new academic calendar, and the elimination of breaks and changes centered around preventing the spread of the coronavirus.

Despite the pandemic, Ann Arbor is still one of the best college town markets in the nation. As in most markets, acquisition is a challenge. Property prices in Ann Arbor are rising, and the smaller, less expensive homes that make ideal single-family rentals are few and far between.  Otherwise, conditions are good for single-family rental owners and will improve as the nation returns to health.

Steve Cook is the editor of the Down Payment Report and provides public relations consulting services to leading companies and non-profits in residential real estate and housing finance. He has been vice president of public affairs for the National Association of Realtors, senior vice president of Edelman Worldwide and press secretary to two members of Congress.


Remax-affiliated Motto Mortgage doubles originations in 2020

Motto Mortgage, Remax’s mortgage brokerage franchising business, reported explosive growth in the past year, with its operators doubling their combined origination volume on a year-over-year basis.

The 141 operating offices produced $2.47 billion in 2020; in 2019, the 111 locations the company had at the time did $1.1 billion.

“Closing nearly $2.5 billion in loan volume as a network is a remarkable feat in any year, but especially in a challenging one like 2020 – only our fourth full year of operations,” Ward Morrison, the president of Motto Franchising LLP, said in a press release. “2020 was a record-breaking year for Motto franchise sales, and the fourth quarter was our best quarter yet in company history.”

Remax rolled out Motto as a turnkey mortgage brokerage business in October 2016. Motto only collects franchise fees on a per-office basis from its operators. Each franchisee is responsible for brokering its own loans to the wholesaler.

During 2020, Motto sold 71 of its franchises. That’s both an annual record and an increase of more than 35% from 2019.

Even though Remax owns the franchisor, Motto branches also have been sold to real estate brokers affiliated with other companies as well as independent operators.

Motto is working on a new concept called the “Branchise,” the Remax 10-K filing said.

These offices, which are being offered to existing Motto franchisees, are similar to having a satellite office at a traditional mortgage lender. It allows them to expand their physical and/or virtual presence for a reduced contractual fee.

“The aim of these new models is to give franchisees the flexibility to expand their business to places where it would not have been feasible to support a full additional franchise while keeping offices compliant with state branch regulations,” the Remax 10-K said.

As of Jan. 31, there were two open Branchises, the company added.

Last August, Remax purchased Wemlo, which provides processing services to mortgage brokers. The company paid $6.1 million in cash and $3.3 million in common stock, plus an additional $6.7 million of equity-based compensation, the 10-K filing said.


Mortgage and refinance rates today, Feb. 27, and rate forecast for next week

Today’s mortgage and refinance rates 

Average mortgage rates fell a little or held steady yesterday (Friday). Unfortunately, it was the only glimmer of light in a gloomy week that saw rises — including a sharp one — on every other day.

Right now, there seems to be no end in sight to these rate increases. Of course, we’re almost bound to see an occasional fall, because that’s how markets work. But sustained downward movement appears unlikely, and I’m expecting that mortgage rates will keep rising next week. Read on for more details.

Find and lock a low rate (Feb 28th, 2021)

Program Mortgage Rate APR* Change
Conventional 30 year fixed 3.062% 3.065% -0.13%
Conventional 15 year fixed 2.587% 2.596% -0.11%
Conventional 20 year fixed 2.875% 2.882% -0.13%
Conventional 10 year fixed 2.474% 2.493% -0.13%
30 year fixed FHA 2.87% 3.549% -0.1%
15 year fixed FHA 2.539% 3.121% -0.16%
5 year ARM FHA 2.5% 3.213% -0.03%
30 year fixed VA 2.383% 2.555% -0.36%
15 year fixed VA 2.25% 2.571% Unchanged
5 year ARM VA 2.5% 2.392% Unchanged
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

Find and lock a low rate (Feb 28th, 2021)

COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.

Should you lock a mortgage rate today?

If I were still floating, I’d lock my rate right away. Of course, there’s always a possibility of rates falling back. But that currently looks a slim one. And the chances of continuing rises seem much stronger. Read on to discover why.

So my recommendations remain:

  • LOCK if closing in 7 days
  • LOCK if closing in 15 days
  • LOCK if closing in 30 days
  • LOCK if closing in 45 days
  • LOCK if closing in 60 days

However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So be guided by your gut and your personal tolerance for risk.

Compare top lenders

What’s moving current mortgage rates

The forces that are driving rates higher are the same ones we reported last week. The vaccination program and dwindling COVID-19 infection rates are creating optimism that an economic recovery will be upon us sooner than many expected. Indeed, we’re already seeing some better economic data. And a better economy goes hand-in-hand with higher rates.

But what we last week listed as a secondary factor may have now turned into the primary one. And that’s the fear of future inflation.

Unfortunately, such fears also tend to push mortgage rates higher.

Fear of inflation

And you can see why. Imagine you’re an investor who buys a mortgage bond (a mortgage-backed security or MBS) with a fixed rate of 3% for 30 years. That means your yield (income) is fixed, too.

And now imagine how sick you’d feel if next year (or in 10 years’ time) serious inflation took hold, and you were suddenly seeing inflation and interest rates soaring up to 10% or even higher — while you were still getting 3%.

This isn’t impossible fiction. Between 1978 and 1990, the average rate for a 30-year, fixed-rate mortgage never dipped below 10%, measured annually. And, in October 1982, that rate peaked at 18.45%, according to Freddie Mac’s archives.

It’s not hard to imagine how petrified investors are of having their money tied up in fixed-rate securities if there’s any likelihood of future inflation.

Still a slim possibility of falls

Of course, nothing’s certain in markets. And some disastrous news could come out of nowhere and kill both optimism and its accompanying fear of inflation.

Indeed, earlier this week, The New York Times reported on a new variant of SARS-CoV-2 (the virus that causes COVID-19) that’s currently circulating in New York City. And some scientists worry that it might prove more resistant to current vaccines than existing strains are.

That research is yet to be peer-reviewed. And it may turn out to be nothing. But it’s an example of the sort of news that could turn markets and mortgage rates around. The trouble is, the chances of such an event arising before your closing date don’t seem high.

Economic reports next week

Next Friday brings the official, monthly, employment situation report. And that’s arguably the most important economic data of all at the moment. So markets may be moved by those figures

They’re less likely to be affected by the other reports this week. However, any data can have an impact if it varies significantly from expectations.

Here are next week’s main economic reports:

  • Monday — January construction spending. Also February auto sales. Plus the February manufacturing index from the Institute for Supply Management (ISM)
  • Wednesday — February ISM services index
  • Thursday — Weekly new claims for unemployment insurance.
  • Friday — February employment situation report, including nonfarm payrolls and the unemployment rate.

Watch out, too, for top Federal Reserve officers’ speaking engagements. The Fed’s walking a fine line at the moment between keeping the recovery on the road and not stoking inflation fears. So investors are paying close attention to their remarks.

Find and lock a low rate (Feb 28th, 2021)

Mortgage interest rates forecast for next week

Unfortunately, I can only predict rising rates this week. The pace of increases may slow and we might even see some small and occasional falls. But, overall, it’s hard to imagine the recent trend reversing.

Mortgage and refinance rates usually move in tandem. But note that refinance rates are currently a little higher than those for purchase mortgages. That gap’s likely to remain constant as they change.

How your mortgage interest rate is determined

Mortgage and refinance rates are generally determined by prices in a secondary market (similar to the stock or bond markets) where mortgage-backed securities are traded.

And that’s highly dependent on the economy. So mortgage rates tend to be high when things are going well and low when the economy’s in trouble.

Your part

But you play a big part in determining your own mortgage rate in five ways. You can affect it significantly by:

  1. Shopping around for your best mortgage rate — They vary widely from lender to lender
  2. Boosting your credit score — Even a small bump can make a big difference to your rate and payments
  3. Saving the biggest down payment you can — Lenders like you to have real skin in this game
  4. Keeping your other borrowing modest — The lower your other monthly commitments, the bigger the mortgage you can afford
  5. Choosing your mortgage carefully — Are you better off with a conventional, FHA, VA, USDA, jumbo or another loan?

Time spent getting these ducks in a row can see you winning lower rates.

Remember, it’s not just a mortgage rate

Be sure to count all your forthcoming homeownership costs when you’re working out how big a mortgage you can afford. So focus on your “PITI” That’s your Principal (pays down the amount you borrowed), Interest (the price of borrowing), (property) Taxes, and (homeowners) Insurance. Our mortgage calculator can help with these.

Depending on your type of mortgage and the size of your down payment, you may have to pay mortgage insurance, too. And that can easily run into three figures every month.

But there are other potential costs. So you’ll have to pay homeowners association dues if you choose to live somewhere with an HOA. And, wherever you live, you should expect repairs and maintenance costs. There’s no landlord to call when things go wrong!

Finally, you’ll find it hard to forget closing costs. You can see those reflected in the annual percentage rate (APR) you’ll be quoted. Because that effectively spreads them out over your loan’s term, making that higher than your straight mortgage rate.

But you may be able to get help with those closing costs and your down payment, especially if you’re a first-time buyer. Read:

Down payment assistance programs in every state for 2020

Compare top lenders

Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.


Forbearances Post Typical Mid-Month Increase

Black Knight reports a second increase in the number
of loans in pandemic related forbearance
plans in as many weeks. Forborne loans
rose by 21,000 during the week ended February 23 after falling below 2.7
million for the first time since last April earlier this month. The company
said such mid-month increases have been typical in recent months. At of the end
of the reporting period there were 2.7 million homeowners in active plans, 5.1
percent of those with a mortgage, and representing an aggregate unpaid balance
of $537 billion.

The largest increase in active plans was among those
serviced for bank portfolios and private label securities (PLS) which grew by
16,000 loans or 2.4 percent growth. The number of VA an FHA loans in forbearance
rose by 7,000 or 0.6 percent. The combined Fannie Mae and Freddie Mac (the
GSEs) portfolios posted the only declines, with 2,000 fewer loans.

As of February 23, there were 903,000 GSE loans in
forbearance, 3.2 percent of those total portfolios. The FHA/VA loans totaled
1.13 million or 9.3 percent and the 678,000 portfolio/PLS loans are a 5.2
percent share of those being serviced.

Even though there was an uptick in the number of plans
over the past week, the monthly rate of improvement was 2.0 percent. This is
consistent with the declines for such periods since early December.

The company says around 160,000 forbearance plans are set to
hit scheduled expiration points at the end of this month.