Housing affordability is increasing — here’s where it’s up the most

Reports show improving affordability

Homebuyers are enjoying increased affordability — at least according to two new reports released last week. Affordability is up most notably in some of the nation’s higher-priced markets, including many along the West Coast.

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Housing is more affordable than buyers think

According to the latest Housing and Mortgage Market Review released by Arch MI, “housing isn’t as expensive as you think.”

“Housing affordability is actually better now than its historic norms in most states and remains far better than the worst point for each state since 1990,” explains Ralph DeFranco, Arch MI’s global chief economist. “This may be surprising because we tend to focus on home prices rather than affordability. Affordability accounts for the offsetting factors of low interest rates and a 28% increase in median household income since 2012.”

Analysis in the HaMMR shows the majority of U.S. states require homebuyers to spend less than the recommended 30% of their monthly income on housing costs. In states like Arkansas, Iowa, Oklahoma, and West Virginia, it’s less than 20% — the all-time most affordable level for most of them.

Affordable housing: These cities take the smallest salaries to buy a house

Top cities for affordability

But housing affordability hasn’t just improved in the long run. According to a second report from title insurance firm First American, there’s also been serious movement over the last year.

Buying a house in 2020? Here’s who you’re up against

The improvements were biggest in three cities in California: San Jose, Riverside, and San Francisco. It also became considerably more affordable to buy a house in Baltimore and Denver as well.

House-buying power jumped 22% in Baltimore and 21% in Riverside. It also improved in Los Angeles, Portland, Dallas, Boston, and Washington D.C. Overall affordability improved in all 44 markets tracked by First American.

Verify your new rate (Feb 28th, 2021)

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Are you looking to buy a house in today’s affordable housing market? Then shop around and see what mortgage rates you qualify for today.

Verify your new rate (Feb 28th, 2021)

Source: themortgagereports.com

Rising Rates Damp Mortgage Applications Ahead of Spring Selling Season

Mortgage rates reached their highest level since November last week, cooling off home purchase and refinance applications ahead of the all-important spring selling season.

The average rate on the 30-year fixed-rate mortgage rose to 2.81% in the week ended Feb. 18, the highest since the second week of November, according to mortgage-finance giant Freddie Mac. A measure of mortgage applications fell 11.4% over the same week, according to the Mortgage Bankers Association.

Improving Covid-19 vaccination rates in the U.S. and expectations of a large federal stimulus package in the coming weeks drove benchmark 10-year Treasury note yields, which are closely tied to mortgage rates, to their largest weekly gains in more than a month last week. Demand in safe-haven assets such as government bonds weakens when investors feel optimistic about the economy.

“Higher rates are a signal of expectations of faster growth and a stronger job market ahead,” said Mike Fratantoni, the MBA’s chief economist. “This last week, rates have turned faster than many people had anticipated.”

Rising rates sometimes prompt borrowers to put their mortgage plans on hold for a few weeks, Mr. Fratantoni said. Measures of purchase and refinance activity fell 11.6% and 11.3%, respectively, in the week ended Feb. 19, according to MBA data.

If mortgage rates begin to increase at a faster pace, some borrowers could be discouraged from attempting to buy a home during the crucial home-selling months of March through June. In a typical year, more than 40% of annual home sales are made during this period, according to the National Association of Realtors.

Still, rates remain historically low, and more people are applying for purchase mortgages and refinances than at the same time in 2020. Last year was a banner one for the housing market, thanks in large part to mortgage rates, which fell below 3% for the first time last summer.

Mortgage lenders originated a record $3.6 trillion worth of mortgages last year, according to the Mortgage Bankers Association, an increase of more than 50% from 2019. Refinances accounted for about 59% of that volume. With the 30-year rate near 2.81%, between 16.7 million and 18.1 million Americans could lower their monthly mortgage payments through a refinance, according to mortgage-data firm Black Knight Inc.

Lissette Gomez will close this week on a new loan that lowers the mortgage rate on her Cleveland-area condo to 2.75% from 4.125%. Ms. Gomez, a special-education teacher, said she decided to refinance after she watched her boyfriend get a much lower rate on his mortgage.

“Everybody was getting the word, especially in the second half of 2020, that the rates were super low,” Ms. Gomez said. “I wanted to refinance when people were jumping on it, and the numbers were as low as they’ve ever been.”

Source: realtor.com

Home-Builder Confidence Slips From Record High in December, as Buyers Get Cold Feet

The numbers: The construction industry’s outlook worsened slightly in December, according to research from a trade group released Wednesday.

The National Association of Home Builders’ monthly confidence index dropped four points to a reading of 86 in December, the trade group said. This was the first time that the index had dropped after three consecutive months of record highs. Even with December’s decline, the figure represents the second-highest reading in the index’s history.

Index readings over 50 are a sign of improving confidence. The index had fallen below 50 in April and May in the immediate wake of the pandemic.

What happened: The three main indicators that guide the overall index all decreased by four points from November’s reading.

The index that measures sentiment regarding prospective buyer traffic came in at 73. The index of expectations for future sales over the next six months dropped to 85, and the gauge of current single-family home sales slipped to 92.

Sentiment also declined across all parts of the country. The index fell by three points in Northeast, Midwest and South, and by two points in the West.

The big picture: The housing market has remained a bright spot in the economy throughout the pandemic, and despite the monthly decline in December the home-building industry remains on strong footing. That said, builders are responding to buyers who appear to be cooling on the market.

To some extent, this could be a reflection of buyers growing accustomed to low mortgage rates, meaning that cheap financing is no longer providing the same boost to the market. At the same time, rising home prices across the country could be negating some of the benefit of lower interest rates.

While the rollout of vaccines to combat the coronavirus is good news for the economy, it could end up causing a slowdown in the housing market. “As the economy improves with the deployment of a COVID-19 vaccine, interest rates will increase in 2021, further challenging housing affordability in the face of strong demand for single-family homes,” Robert Dietz, chief economist at the National Association of Home Builders, said in the report.

Dietz also noted that issues such as the availability of land and skilled labor “will continue to place upward pressure on construction costs,” which could price even more buyers out of the market.

What they’re saying: “There is still an immense undersupply of all types of housing, particularly affordable rental housing which may keep multifamily construction from slowing too much,” Sam Bullard, managing director and senior economist at Wells Fargo Corporate and Investment Banking, wrote in a research note earlier this week.

“Fewer builders are reporting improved [year-over-year] traffic quality than earlier in 2020, which may be a sign of decreased customer urgency, or builders may have worked through a significant number of highly-qualified customers already,” home-building analysts at BTIG wrote in their monthly home builder survey report.

Source: realtor.com

U.S. Existing Home Sales Rise in January as Buyers ‘Snatch Up’ Any New Listings

The numbers: U.S. existing home sales inched up 0.6% to a seasonally-adjusted annual rate of 6.69 million, the National Association of Realtors said Friday. Compared with a year ago, home sales were up 23.7%.

Economists polled by The Wall Street Journal had forecast that existing home sales would fall to a median rate of 6.66 million.

What happened: The median existing-home price rose to $303,900 in January, up 14.1% from a year ago.

The inventory of homes for sale fell to a record low 1.04 million units by the end of January. That’s a 25.7% decline year-over-year. The market had a 1.9-month supply of homes for sales. A 6-month supply is considered a sign of a balanced market.

The South and the Midwest showed an increase in sales in January.

Big picture: Sales have been moving sideways since setting a cycle high in October. Economists think that low mortgage rates will continue to boost housing demand in coming months. Buyers are also looking for more room and more remote locations in the wake of the pandemic.

What the NAR said: “Home sales continue to ascend in the first month of the year, as buyers quickly snatched up virtually every new listing coming on the market. Sales easily could have been even 20% higher if there had been more inventory and more choices,” said said Lawrence Yun, NAR’s chief economist.

What economists are saying? “In general, record low mortgage rates and families fleeing more crowded living situations are fueling demand for single family homes in spite of ongoing turmoil in the labor market and higher home prices. Indeed, this is one sector which is coming out of the crisis stronger than it went into it,” said Josh Shapiro, chief U.S. economist at MFR Inc.

Market reaction: U.S. stocks opened higher Friday with the S&P 500 index up 12.48 points in mid-day trading after declining in the past three trading sessions.

Source: realtor.com

Home Builder Confidence Improves, but High Construction Costs Remain a Concern

The numbers: The construction industry’s outlook improved in February amid better foot traffic from home buyers, even as the cost of building homes increased.

The National Association of Home Builders’ monthly confidence index rose one point to a reading of 84 in February, the trade group said this week. The modest increase comes after two consecutive months where the index has dropped.

Index readings over 50 are a sign of improving confidence. Last spring, the index dropped below 50 as concerns regarding the coronavirus pandemic grew, but the index rebounded and later hit a series of record highs in the fall.

What happened: The index that measures sentiment traffic of prospective buyers increased four points to 72. Comparatively, the outlook regarding current sales activity held steady between January and February, while the index of expectations for future sales over the next six months declined by three points to 80.

On a regional basis, builders’ confidence regarding the housing market in the Northeast improved dramatically, rising from 68 in January to 89 in February. Builders also grew more confident about the state of the market in the Midwest and maintained their positive outlook on the South. Confidence worsened slightly in the West, however.

The big picture: Demand for new homes remains extremely high. The lack of existing homes for sale, plus renewed interest in suburban living amid the pandemic, is pushing buyers further out from major cities and toward newly-constructed developments. But price pressures could begin to affect builders and buyers alike in the coming months.

“Lumber prices have been steadily rising this year and hit a record high in mid-February, adding thousands of dollars to the cost of a new home and causing some builders to abruptly halt projects at a time when inventories are already at all-time lows,” Chuck Fowke, who is the current chairman of the National Association of Home Builders and a custom home builder from Tampa, Fla., said in the report.

“Builders remain very focused on regulatory and other policy issues that could price out households seeking new homes in a tight market this year,” Fowke added.

What they’re saying: “Housing starts and permits should moderate, but from the highest levels since 2006, as building activity continues to be supported by strong demand for homes — especially single-family construction — and low inventories,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, wrote in a research note.

Market reaction: The Dow Jones Industrial Average and the S&P 500 index were both down slightly Wednesday morning.

Source: realtor.com

Biden Administration Extends Forbearance and Foreclosure Protections Through June

Good news for Americans who are forced to skip their mortgage payments amid rising unemployment.

The White House is extending the foreclosure moratorium until the end of June for homeowners with mortgages backed by the Department of Housing and Urban Development, Department of Veterans Affairs, and Department of Agriculture. Homeowners will also have until the end of June to request forbearance, which allows them to pause monthly payments.

Originally, both protections were set to disappear at the end of March. The Trump administration put the protections in place almost a year ago as the coronavirus pandemic upended the nation’s economy.

Additionally, the White House announced that homeowners who had entered forbearance before June 30, 2020 will be entitled to an additional six months of mortgage-payment forbearance, broken up into three-month increments. Originally, mortgage borrowers could only receive up to 12 months of forbearance, split up into six-month segments.

The move by the White House comes roughly a week after the Federal Housing Finance Agency announced it would extend the forbearance period for borrowers with loans backed by Fannie Mae and Freddie Mac by three months. All told, the deadlines for forbearance were pushed back for nearly three-quarters of all borrowers with single-family mortgages, the Biden Administration said.

Thus far, the forbearance program has helped to prevent many Americans from becoming delinquent on their home loans, which would have put them at risk of foreclosure. Extending the protections is important, according to economic experts.

“The year-long forbearance initially afforded through the CARES Act seemed sufficient at the time, but the pandemic and its economic fallout is dragging on far longer than had been expected,” said Greg McBride, chief financial analyst at Bankrate.com. He added that the extra six months of forbearance “reflects the reality that long-term unemployment will be an ongoing issue.”

Currently, roughly 5.4% of mortgages across the country are still in forbearance, according to the Mortgage Bankers Association. That level is down from the peak reached last June, when the figure reached well above 8%. However, this winter the number of people exiting forbearance and resuming making their monthly mortgage payments has stagnated in tandem with the bounce-back in employment.

Currently, roughly 5.4% of mortgages nationwide are in forbearance, but around a quarter of these borrowers continue to make monthly payments.

Of the roughly 2.7 million borrowers who are in forbearance, around a quarter have continued to make their monthly payments, according to real-estate data firm Black Knight. There are also around 1.1 million borrowers who are delinquent but did not enter forbearance.

What will happen to all these mortgages when forbearance ends remains an open-ended question. But researchers at the Urban Institute, a think-tank based in Washington, D.C., projected that many people will be able to avoid foreclosure.

“Loss mitigation policies and substantial housing equity can keep foreclosures at bay in most states,” the researchers wrote.

When borrowers exit forbearance, they are not required to pay back all of their missed payments at once in a balloon payment, though loan servicers do offer that as an option. Instead, they can request that the forborne amount be moved to the end of their loan’s duration. That will allow borrowers to resume making payments at the amount they were paying before the pandemic, without incurring extra costs.

Of course, many borrowers will find homeownership unaffordable overall and may not be able to resume making their monthly payments ever because of extended job loss. For most of these borrowers, the higher level of equity built in their homes, especially compared with the foreclosure crisis that preceded the Great Recession, will serve as a buffer.

Researchers at the Urban Institute calculated that less than 1% of mortgages nationwide have negative equity, meaning the loan is larger than the home is worthy. And only 5.5% of loans were found to be near-negative equity. Following the Great Recession, nearly a third of homes were in negative or near-negative equity, they said.

Home-price gains over the past year have meant that most homeowners could sell their property and come out ahead on the sale — though home prices in some parts of the county, such as Chicago and Baltimore, remain below their record peaks.

As a result, most homeowners in forbearance could afford to sell their home rather than go into foreclosure. Of course, these homeowners may struggle to find other housing. And if foreclosure numbers were to increase, that could begin to have an impact on home values across the country and push more people into negative equity.

“A further extension may well be necessary,” the Urban Institute researchers wrote.

Source: realtor.com

Borrowers With Fannie Mae, Freddie Mac Mortgages Can Get Additional Forbearance, Regulator Says

The Federal Housing Finance Agency is extending the length of time that borrowers can be in a COVID-related forbearance on mortgages back by Fannie Mae and Freddie Mac.

Originally, Fannie Mae and Freddie Mac instructed loan servicers that mortgage borrowers could request up to 12 months of forbearance on their mortgages as a result of the coronavirus pandemic.

Now, the FHFA is allowing these borrowers to request a forbearance extension of up to three months, the agency announced Tuesday.

While in forbearance, mortgage borrowers are not required to make their monthly mortgage payments. When forbearance ends, these borrowers have a range of options to choose from to pay back the owed amount, including tacking the missed payments onto the end of the mortgage’s duration.

Homeowners must already be in forbearance on their mortgage by Feb. 28 to qualify for the three-month extension.

Separately, the FHFA is extending the moratorium on single-family foreclosures and evictions for properties with mortgages backed by Fannie and Freddie by one month until March 31. FHFA Director Mark Calabria said the steps were being taken “to keep families in their home during the pandemic.”

The FHFA expects that Fannie and Freddie will bear between $1.5 billion and $2 billion in expenses as a result of the COVID-19 foreclosure moratorium.

As of Jan. 31, 3.07% of Fannie Mae and Freddie Mac loans are in forbearance, according to recently-released data from the Mortgage Bankers Association. That’s better than the overall forbearance rate for all mortgages nationwide, which stands at 5.35%.

The number of loans in forbearance decreased at the end of January, the Mortgage Bankers Association reported. “While new forbearance requests increased slightly at the end of January, the rate of exits picked up somewhat but remained much lower than in recent months,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.

Fratantoni had expected the rate of exits from forbearance to pick up in March and April as people came up against the original 12-month deadline to resume making payments. He warned that, given the employment situation nationwide, homeowners who are unemployed and still in forbearance would “need additional support until the job market recovers to a greater extent.”

Source: realtor.com

Is now a good time to buy a house? What home buyers in 2021 should know

2021 is a great time to buy a house, for some

There’s never been a home buying market like this one.

The ongoing COVID-19 pandemic has made 2021 a singular time to become a homeowner if that’s one of your goals this year. 

Mortgage rates are still near record lows, and work-from-home policies mean buyers have more flexibility to choose where they’ll live. 

However, high unemployment and an uncertain economy could make it hard for some buyers to get financing. 

So, is it a good time for you to buy? Here’s what you should know.

Verify your home buying eligibility (Feb 10th, 2021)

In this article (Skip to…)

The 2021 housing market: An overview 

Interest rates plummeted to historic lows last year, and they’ll likely remain low for the next couple of years.

That’s great news for borrowers — it means lower monthly mortgage payments and bigger home buying budgets.

However, low rates have also generated more bidding wars and driven home prices up. There are fewer homes on the market and house hunting has become more competitive.

You’ll likely have to move fast when you find your dream home.

And you should figure out ahead of time how much over the asking price you’re willing to pay if it comes to that. 

Low interest rates can help buyers afford more expensive homes. But they also create more competition in the market.

The massive move to work-from-home may also have you thinking about a place with enough space to accommodate a home office, or simply spread out a little now that everyone works, studies, and socializes from their living rooms.

Work-from-home policies have given many people the freedom to reconsider where they live, allowing them to relocate to less expensive or otherwise more desirable areas without sacrificing their jobs. 

Whatever your reasons for entering the housing market, 2021 could be your year to become a first-time home buyer.

Below, we’ll address some key questions and concerns you may have about buying a house during the pandemic. 

Is buying a house during COVID a good idea? 

The decision to buy a house has less to do with the broader economy and more to do with your financial situation.

Buying a house during COVID might be a good idea if you: 

  • Earn a steady income
  • Have dependable employment
  • Have a credit score in the 580-620 range or higher
  • Have money saved up for a down payment and closing costs
  • Have a low to moderate debt-to-income ratio (DTI)

In the current economy, employment and income stability are key.

Mortgage lenders want to see that your income will continue at its current level for at least 3 years after closing.

If you were recently laid off then hired back, had hours cut, or work in an industry heavily impacted by COVID, you’ll likley have a harder time getting a mortgage right now. 

But there’s an upside to buying a house during COVID.

Assuming you have good credit, you may be able to secure an ultra-low mortgage rate this year. This could lower your monthly payments and save you thousands of dollars over the life of the loan.

But you don’t want to rush into a purchase based on interest rates alone.

A mortgage is a long-term commitment, so make sure you’re financially ready, regardless of what’s happening in the real estate market. 

Verify your home buying eligibility (Feb 10th, 2021)

What’s different about buying a house during coronavirus? 

As sellers, real estate agents, and lenders comply with social distancing mandates and work to keep themselves and their teams safe, you may find that some aspects of the home buying process have gone online.

For instance, some sellers or agents may offer virtual tours rather than in-person showings, and you may opt for an online mortgage application rather than applying at a brick-and-mortar bank or lender.

Depending on who you work with and where you live, the home inspection and closing process may happen virtually as well. 

Your home buying prospects could also depend on your profession in 2021.

If you work for yourself or have non-traditional income (such as being a gig worker or seasonal worker), some lenders may be reluctant to work with you right now because they’re more risk-averse due to COVID.

However, you can ask lenders about your situation before submitting an application, and they can advise you on exactly what documents and income proof you’ll need to qualify.  

If you have a steady, reliable income and your business is not at risk during COVID, you should still be able to get a loan. If one lender denies you simply because you’re unemployed, try again with a few others that will look more holistically at your application.

Are you eligible to buy a house this year?

If you’re wondering whether you should buy a house this year, the first place to look is your personal finances.

Factors like your credit score, savings, income, and debts will determine whether you qualify for a mortgage, and how much house you can afford.

How much down payment do I need? 

Expect to put down at least 3% to 3.5% on your new home.

If you’re buying a home worth $300,000, that means you’ll need at least $9,000 to $10,500 saved for a down payment.

You need to budget for closing costs, too. These typically add 2% to 5% of the purchase price to your upfront fees. That’s another $6,000 or more on a $300,000 home loan.

Keep in mind, mortgage loans with less than 20% down charge private mortgage insurance (PMI). This adds to your monthly bill, but can help you buy a home much sooner.

Can I buy a house without a down payment?

If you’re a veteran, or if you are buying in a rural area and meet certain income limits, you may be able to qualify for a 0% down payment VA loan or USDA loan.

VA loans are typically reserved for veterans, service members, and their families. USDA loans are available in designated rural areas and were designed for low- to moderate-income buyers

If you’re not eligible for a VA or USDA mortgage, a down payment assistance program can help you close the gap and qualify for a mortgage.

Down payment assistance programs vary by state and county, but they often provide help in the form of grants or forgivable loans that may be used toward buying a home.

In some cases, the programs include cash or a loan toward a down payment, as well as help with closing costs. 

Check your low-down-payment mortgage options (Feb 10th, 2021)

What credit score do I need to buy a house? 

The minimum credit score to qualify for an FHA loan is 580. You’ll typically need a 620 FICO score to be considered for a conventional or VA mortgage. And USDA applicants must have a score of at least 640.

Keep in mind, the higher you can get your credit score before applying for a mortgage, the better the interest rate you’re likely to get.

A high score indicates good financial habits, and lenders factor it into their lending decisions and the rates they offer. 

Can I buy a house on unemployment? 

Generally speaking, you will not be able to buy a home on unemployment income.

Lenders need to verify your income when you apply for a mortgage. They want to know it will remain steady once they’ve made the loan. Since unemployment is a temporary benefit, lenders can’t use it to qualify you. 

However, you may be able to get a mortgage if you’re unemployed but you have a documented offer of employment that indicates how much you’ll be earning once you start the job.

Mortgage lenders will also look at your credit score and your payment history while you were unemployed, as well as your down payment amount.  

Can I buy a house with student loans?

Yes, you can buy a house with student loans. However, those loans factor into your debt-to-income ratio, which is a key metric lenders use in approval decisions.

If your student loan payments take up a significant amount of your monthly income, you may have a more difficult time getting approved for a home loan. 

There are ways to improve your chances, though.

Consider loan consolidation or applying for a graduated repayment plan. Either of those options may reduce your monthly obligations, at least for a time, and that can get you to a more favorable DTI.

If you can save more than 3% for a down payment, that may help as well, since a smaller loan means less risk for borrowers.

As a first-time home buyer, you may also want to look at small homes with lower price points. That may help you secure a loan, and it can also keep your mortgage payments manageable while you continue paying down your student debt. 

Do you have to be married to buy a house? 

No, you do not have to be married to buy a house. You can qualify for a mortgage as an individual borrower, or you can buy a home with a partner to whom you are not married.

Buying a home as a single borrower simply means you need to qualify for the loan on your own merits. You will not have a partner’s income to supplement your budget.

If you’re unmarried buy want to buy a home with a partner or roommate, you can apply for the loan as co-borrowers and count both your incomes toward the mortgage.

As long as you qualify for the mortgage, it’s no harder to buy a home when you’re single than when you’re married.

Verify your home buying eligibility (Feb 10th, 2021)

The home buying process in 2021

What’s the first step when buying a house? 

The first step toward buying a house has not changed during the COVID pandemic. Potential home buyers should start by getting pre-approved for a mortgage.

A preapproval letter does not guarantee that a lender will work with you, as they will vet your finances more closely during the formal application process.

But it does give you a sense of whether you’ll qualify for financing, as well as how much you might be able to borrow.

Not only does this help you focus your home search on properties you can afford, it tells real estate agents and sellers that you’ll likely be able to go through with a purchase once you’ve made an offer. 

Do I need a real estate agent to buy a house?

You don’t need a real estate agent to buy a house, but they can be quite helpful. A real estate agent generally has deep knowledge of the local market, and they do a lot of the legwork for you.

Once you’ve told them your price range and the type of property you want to buy, they can scour listings for suitable homes and arrange showings for you.

A real estate agent or Realtor can also negotiate on price and help you hone your offer, not to mention manage a lot of paperwork and logistics on your behalf. 

The exception to the real estate agent requirement is if you buy an FHA foreclosure property. In that case, you must be represented by a real estate agent. 

Can I make an offer on a house without seeing it in person? 

Yes, you can make an offer sight-unseen, meaning without seeing the home in person. In fact, this is pretty common.

Buying a house sight-unseen has become particularly common in cities such as Los Angeles and Denver, where desirable homes get sold very quickly. In competitive markets, a sight-unseen offer may be your only chance at nabbing a property that has caught your eye.

But there are risks to doing this. Visiting a house in-person gives you a close look at the features and flaws of the home, and it allows you to get a sense of the neighborhood and what the property looks like when it’s not being professionally staged.

Making an offer before you’ve been to the home means you could be on the hook for a home you don’t like or that needs more work than you expected. 

Can I buy a house remotely?

You may be able to buy a house remotely, depending on the seller, agent, and lender’s policies.

Some listings may include a virtual tour option, and with so many lenders offering online applications, keeping your distance has never been easier. Some appraisers and inspectors will do curbside or virtual appointments rather than going inside properties. 

If your lender offers virtual closings, you can finalize your loan and take possession without needing in-person meetings.

But there are downsides to a remote purchase as well.

If neither you nor your home inspector or appraiser has taken a good look at the property, you could miss red flags that would have made you reconsider the home or at least negotiate the price. 

Common financial questions for first-time buyers

Many first-time home buyers focus on their down payment. But there are all sorts of other fees associated with buying a home — some optional and some not.

What are the fees associated with buying a home? 

When you buy a home, you’ll pay closing costs of roughly 2-5% of your mortgage loan. These can include: 

  • Lender origination fee
  • Mortgage points (optional)
  • Prepaid property taxes and homeowners insurance
  • Inspection fees
  • Appraisal fees
  • Title fees 
  • Homeowners Association (HOA) fees 

You may be able to negotiate some of these fees with your lender.

In some instances, your seller may be willing to pay your closing costs in exchange for your willingness to pay full price or more than their asking price.

Or, you can ask your lender to cover part of your closing costs and pay a slightly higher interest rate in exchange. This is known as a “lender credit.”

Before choosing a loan, get quotes from several lenders and compare the loan estimates they provide you.

A Loan Estimate will break down all of the costs and fees associated with the loan, so you can do a side-by-side comparison to see where you’re getting the best deal. 

Get a custom Loan Estimate (Feb 10th, 2021)

What are points when buying a house? 

Discount points are a fee you can pay upfront to lower your mortgage interest rate.

One point typically costs 1% of the loan amount and lowers your rate by about 0.25%.

Paying points is optional, so if you don’t have extra cash to put down when you take out your mortgage, you can still go ahead with the loan.

If you’re worried about interest costs but don’t want to pay for mortgage points, you can consider refinancing once you’ve built up equity in the house. 

What is earnest money? 

Earnest money is essentially a deposit you put down to show you’re serious about buying a house. It’s typically paid when the seller accepts your offer.

This money is not pocketed by the seller. If you move forward with the home purchase, the earnest money goes toward your down payment.

In a competitive market where homes go quickly, offering earnest money can help distinguish your offer from those of other buyers.

If you’re buying in a rural area or a slow market, your offer may be accepted with an earnest money commitment of $1,000 or less. But if you plan to purchase in an in-demand area, be prepared to offer much more than that. 

Do you get a tax break for buying a home? 

The Biden Administration has proposed a $15,000 tax break for first time home buyers. But as of this writing, the measure has not yet been passed.

You may be able to deduct the interest you pay on your mortgage on your annual tax return. This benefit only applies if you do not choose the standard deduction and you instead itemize your deductions.

Taxpayers who itemize their deductions and are single or married and filing jointly can deduct interest paid on up to $750,000. Those who are married and filing separately may deduct interest paid on up to $375,000. 

Do I qualify to buy a house now?

The best way to find out whether you qualify to buy a house is to assess your credit score and your current debts. If your score is 580 or above and your debts are relatively low, it might be a good time to buy a home.

To learn more about your options, apply for a pre-approval to find out how much a lender may let you borrow.

Be sure to request quotes from several mortgage companies and compare rates and offers before you buy. 

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Source: themortgagereports.com

U.S. Sees Rise in Appetite for Single-Family Homes—Especially of the Luxury Variety

The appetite for high-end single-family homes is surging across the U.S., according to a report Thursday from real estate data provider HouseCanary.

Between the start of the coronavirus pandemic in March and the end of November, the number of single-family detached homes priced above $1 million to have entered contract jumped 28.8% compared to the same period last year.

The increasing popularity for luxury homes was followed closely by those priced between $600,000 and $1 million, which have seen their contract numbers increase 26.3% over the same time, the report said.

On the flip side, single-family homes priced below $200,000 have seen contracts fall by 13.7% compared to last year.

The data underlines the increasing desire for buyers to upgrade to larger homes with more amenities. Now spending more time at home and frequently working remotely, homeowners are realizing they’re in need of more square footage, home offices and outdoor space, features that often come with a steeper price tag.

Despite their surging popularity, $1 million-plus home sales only represent a fraction of the overall market, with most contracts being recorded on homes in the $200,000 to $400,000 range, according to the report.

“We anticipate that the housing market will maintain the status quo through year-end, but there is strong potential for a significant shift in the new year,” Jeremy Sicklick, co-founder and CEO of HouseCanary, said in the report, pointing toward the transition of White House leadership and Congressional appointment decisions.

“For now, outsized demand from home buyers is motivating sellers to maintain active listings and pushing prices on closed listings to record highs across the country,” he said. “Despite a turbulent election and a seasonal slowing of housing market activity, elevated demand levels continue to drive the housing market’s recovery and have largely offset the steep drop-off in new listings, contracts and closures observed recently.”

Source: realtor.com

Mortgage Rates Dip—Here’s Why You Shouldn’t Bet on Interest Rates Going Much Lower

Mortgage rates dipped slightly over the past week, as investors sought a safe haven amid volatile markets and concerns about the economy. But the era of persistently falling rates has likely passed, which is bad news for home buyers.

The 30-year fixed-rate mortgage averaged 2.73% for the week ending Jan. 28, down four basis points from the week prior, Freddie Mac reported this week.

The 15-year fixed-rate mortgage fell one basis point to an average of 2.2%, while the 5-year Treasury-indexed hybrid adjustable-rate mortgage held steady at 2.8%.

The slight decrease in rates was a testament to investor activity, according to Realtor.com senior economist George Ratiu.

“With COVID cases still elevated amid the vaccine rollouts, investors remained worried about high unemployment claims, volatile earnings and lingering concerns about the economic outlook from the Federal Reserve,” he said. “The mood kept them funneling funds into mortgage bonds.”

Despite the decline, Ratiu argued that rates will rise this year. If that prediction plays out, what will happen to home sales? It depends on who you ask.

“As we look at 2021, we expect rising mortgage rates to dampen the pace of activity in the next couple of months, as many buyers will be priced out,” Ratiu said. He noted that as the youngest millennials are entering their 30s and the economy is expected to improve from the coronavirus pandemic, both factors that should keep the pace of home sales elevated in the spring and summer.

Others argue that rising interest rates won’t necessarily hurt home sales or prices. “Historically, when mortgage rates rise, existing-home sales don’t necessarily fall,” Mark Fleming, chief economist at title insurer First American, wrote in a recent report.

Fleming examined previous eras where rates were rising. In two cases — the 2005-2006 period and the 1994 period — home sales did fall after interest rates increased. But in the other time periods he examined, home sales actually increased. The difference came down to why rates were rising.

“Rising interest rates reduce house-buying power and affordability, but are often a sign of a strong economy, which increases home buyer demand,” Fleming wrote.

Source: realtor.com