This has kept single-family permits from falling and kept construction workers employed to build and finish the backlog of single-family homes in the pipeline.
We obviously can’t say that the apartment marketplace and permits are back to recession lows.
So, for now, homebuilders can still keep construction workers employed in the single-family housing market as they slowly work through the backlog of homes.
From Census: New Home Sales: Sales of new single‐family houses in February 2024 were at a seasonally adjusted annual rate of 662,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.
As we can see below, new home sales aren’t booming. We are still at the level seen in the 1990s, so no record-breaking demand is happening here like we saw in the run-up to 2005, which took new home sales up to 1.4 million. However, slow and steady wins the race.
For sale inventory and months’ supply: The seasonally‐adjusted estimate of new houses for sale at the end of February was 463,000. This represents a supply of 8.4 months at the current sales rate.
Here’s my model for understanding the builders:
When supply is 4.3 months and below, this is an excellent market for builders.
When supply is 4.4-6.4 months, this is just an OK market for builders. They will build as long as new home sales are growing.
When supply is over 6.5 months, the builders will pause construction.
This housing cycle is unique due to the historic backlog of homes the builders still have, so they will be mindful to ensure they can sell those homes once they’re completed units. If the original contract buyer can’t buy now, they must ensure they can sell that new home to a new buyer. As you can imagine with 8.4 months of supply, don’t expect the builders to be building single-family homes in a big fashion. They will go nice and slow because they’re not the March of Dimes; they’re here to make money.
One of the things I like to do is break down the monthly supply data into subcategories. People sometimes believe that the monthly supply of new homes means live, completed homes ready to buy, but that isn’t the case. In this report:
1.5 months of the supply are homes completed and ready for sale — about 85,000 homes.
4.9 months of the supply are homes that are still under construction — about 272,000 homes
1.9 months of the supply are homes that haven’t been started yet — about 106,000 homes
As shown below, we only have 85,000 completed homes ready for sale.
This report had some minor positive revisions to the previous month, so to keep things simple, as long as mortgage rates don’t head toward 8%, new home sales have the backdrop to grow sales if rates are in the 6% range because they can buy down rates to a sub-6% level to move homes. It gets much more expensive for them to do this at 8%.
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Mortgage rates increased this week. But the latest news from the Federal Reserve suggests that we could see them start to tick down in the coming months.
On Wednesday, the Fed announced that it will keep the federal funds rate steady as it waits for more data showing that inflation is nearing its 2% goal. The central bank also released the latest Summary of Economic Projections, which showed that Fed officials still expect to cut rates three times this year. This would likely lead to lower mortgage interest rates as well.
Average 30-year mortgage rates increased 13 basis points to 6.87% this week, according to Freddie Mac. Average 15-year rates also inched up to 6.21%.
“After decreasing for a couple of weeks, mortgage rates are once again on the upswing,” Sam Khater, Freddie Mac’s chief economist, said in a press release. “As the spring homebuying season gets underway, existing home inventory has increased slightly and new home construction has picked up. Despite elevated rates, homebuilders are displaying renewed confidence in the housing market, focusing on the fact that there is a good amount of pent-up demand, an ongoing supply shortage, and expectations that the Federal Reserve will cut rates later in the year.”
The Fed could start cutting rates as soon as its June meeting, according to the CME FedWatch Tool. This would remove some of the upward pressure off of mortgage rates and allow them to trend down a bit.
But it will likely be a while before we see affordability improve significantly. If you’re waiting for rates to drop before you start the homebuying process, you may have better luck later this year or in 2025.
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$1,161 Your estimated monthly payment
Total paid$418,177
Principal paid$275,520
Interest paid$42,657
Paying a 25% higher down payment would save you $8,916.08 on interest charges
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Paying an additional $500 each month would reduce the loan length by 146 months
By clicking on “More details,” you’ll also see how much you’ll pay over the entire length of your mortgage, including how much goes toward the principal vs. interest.
30-Year Fixed Mortgage Rates
Last week’s average 30-year fixed mortgage rate is 6.87%, according to Freddie Mac. This is a 13-basis-point increase from the previous week.
The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.
The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you’ll have a higher rate than you would with shorter terms or adjustable rates.
15-Year Fixed Mortgage Rates
Average 15-year mortgage rates inched up to 6.21% last week, according to Freddie Mac data. This is a five-point increase since the week before.
If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.
How Do Fed Rate Hikes Affect Mortgages?
The Federal Reserve has increased the federal funds rate dramatically to try to slow economic growth and get inflation under control. So far, inflation has slowed significantly, but it’s still a bit above the Fed’s 2% target rate.
Mortgage rates aren’t directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy.
The Fed has indicated that it’s likely done hiking rates and that it could start cutting soon. This will likely allow mortgage rates to trend down later this year.
When Will Mortgage Rates Go Down?
Mortgage rates increased dramatically over the last two years, but they’ve moderated somewhat in recent months, and are expected to drop further this year.
In February 2024, the Consumer Price Index rose 3.2% year-over-year. Inflation has slowed significantly since it peaked last year, which is good news for mortgage rates. But it has to slow further before rates will begin to fall.
For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.
A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.
Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
Have you ever wondered, “Should I move to Chicago, IL?” Living in the Windy City is like being in a giant playground with endless adventures around every corner. The city is famous for its vibrant arts scene, diverse neighborhoods, and passionate sports fans. From the towering skyscrapers that touch the clouds to the deep-dish pizza that’ll make your taste buds dance, Chicago is truly one-of-a-kind.
Whether you’re exploring the museums, taking a stroll by Lake Michigan, or cheering at a baseball game, Chicago has a unique way of making everyone feel at home. In this article, we’ll discuss 11 pros and cons of living in Chicago to help you decide if it’s the right place for you. Let’s get started.
Chicago at a Glance
Walk Score: 77 | Bike Score: 72 | Transit Score: 65
Median Sale Price: $335,000 | Average Rent for 1-Bedroom Apartment: $1,835
Chicago neighborhoods | houses for rent in Chicago | apartments for rent in Chicago | homes for sale in Chicago
Pro: Rich historical heritage
Chicago’s rich historical heritage is evident in its architecture, museums, and landmarks. The city played a pivotal role in the development of skyscrapers, and a walk through its downtown area reveals architectural marvels like the Willis Tower and the John Hancock Center. Chicago’s history is also preserved in institutions like the Chicago History Museum and the DuSable Black History Museum, offering residents and visitors the opportunity to deep dive into the city’s past.
Con: Harsh winters
One of the most challenging aspects of living in Chicago is its notoriously harsh winters. Temperatures can plummet well below freezing, and the city often experiences heavy snowfall, ice storms, and biting winds that come off Lake Michigan, making it feel even colder. These conditions can make daily commutes and outdoor activities quite daunting from late November through March.
Pro: Outstanding dining and culinary scene
Chicago’s dining scene is second to none, offering a diverse array of culinary experiences that cater to all tastes and budgets. From the legendary deep-dish pizza to Michelin-starred restaurants like Alinea and Chicago Cut Steakhouse, the city’s food landscape is rich and varied. Chicago is also home to a thriving street food scene, with food trucks and pop-up markets offering everything from gourmet sandwiches to international delicacies.
Con: Traffic congestion
Chicago is notorious for its heavy traffic congestion, especially during rush hours and peak travel times. The city’s extensive network of highways, streets, and intersections can become gridlocked, leading to frustrating delays and longer commute times for residents and commuters. This congestion is exacerbated by ongoing road construction projects, lane closures, and infrastructure repairs, which further disrupt traffic flow and contribute to traffic-related stress. For example, the Kennedy Expressway, one of the busiest highways in the city, experiences frequent congestion, causing significant delays for drivers traveling to and from the downtown area.
Pro: Extensive park system
Chicago is renowned for its extensive park system, offering residents and visitors alike a green escape within the urban environment. The city’s crown jewel, Grant Park, hosts the iconic Buckingham Fountain and provides a stunning backdrop to the Chicago skyline. Additionally, the 18-mile-long Lakefront Trail offers unparalleled access to beaches, parks, and recreational activities along Lake Michigan, making it a favorite among outdoor enthusiasts.
Con: High cost of living
The cost of living in Chicago is 14% higher than the national average. Rent and real estate prices in desirable neighborhoods can be steep, making it challenging for some residents to find affordable living spaces. Additionally, the city’s sales tax is one of the highest in the nation, which can further strain budgets, especially for those already struggling with the high costs associated with urban living.
Pro: Diverse neighborhoods
One of Chicago’s greatest strengths is its diversity, reflected in the city’s wide array of neighborhoods, each with its own unique character and cultural heritage. From the historic architecture of the Gold Coast to the vibrant murals of Pilsen, Chicago’s neighborhoods offer a mosaic of experiences. This diversity fosters a rich community life where various cultural traditions and cuisines are celebrated, making it a fascinating city to explore and live in.
Con: Seasonal allergies
For those sensitive to seasonal changes, Chicago’s diverse plant life and weather patterns can trigger significant allergy symptoms. Spring and fall are particularly challenging times for allergy sufferers. The city’s abundant parks and green spaces contribute to higher pollen counts. This can be a minor inconvenience for some but a major health issue for others, affecting their ability to enjoy the city’s outdoor amenities.
Pro: Vibrant arts and culture scene
Chicago boasts an incredibly vibrant arts and culture scene that is hard to match. From the world-renowned Art Institute of Chicago, which houses masterpieces spanning centuries. To the eclectic music scene that has birthed genres like Chicago blues and house music, the city is a haven for art lovers and musicians alike. The city also hosts numerous festivals throughout the year, including the Chicago Jazz Festival and Lollapalooza, drawing in crowds from all over the globe.
Con: Noise pollution
Should I move to Chicago if I like peace and quite? Maybe not. As a bustling metropolis, Chicago experiences a significant amount of noise pollution. From the constant hum of traffic to the sounds of construction and urban development, noise is a constant presence. This can be particularly challenging for those living in denser neighborhoods or near major roads.
Pro: Access to world-class healthcare
Residents of Chicago have access to some of the best healthcare facilities in the country. The city is home to top-ranked hospitals such as Northwestern Memorial Hospital and the University of Chicago Medical Center. Each of which are renowned for their research, specialty care, and medical education programs. This access to high-quality healthcare is a significant advantage for those living in and around Chicago.
Jenna is a Midwest native who enjoys writing about home improvement projects and local insights. When she’s not working, you can find her cooking, crocheting, or backpacking with her fiancé.
Having a list of mortgage questions to ask potential lenders is just the start. Knowing the answers you’re looking for puts you ahead of the game.
1. Which type of mortgage is best for me?
This question will help you determine whether you’re talking to a salesperson or a quality advisor. When you ask, “What are my options?” for each type of loan discussed, the mortgage lender should tell you the pros and the cons in light of your situation.
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2. How much down payment will I need?
A 20% down payment is every lender’s ideal, but it’s not always required. Qualified buyers can find mortgages with as little as 3% down, or even no down payment. Again, there are considerations for every down payment option. The best lenders will take the time to walk you through the choices.
3. Do I qualify for any down payment assistance programs?
If you’re interested in local, state and national down payment assistance programs, lenders with knowledge of them — and the wherewithal to help you navigate the process — are well worth the hunt.
4. What is my interest rate?
You probably already planned to ask this mortgage question. It’s the one benchmark we all understand. Or do we? Lenders can move the needle on your mortgage interest rate a number of ways, most of them involving additional fees.
But after talking to at least a couple of lenders, you’ll get an idea of a ballpark interest rate you’ll qualify for. Let’s say it’s 6%. We’ll call that your payment interest rate because that’s what your monthly mortgage payment will be based on.
Knowing that, you’ll move on to the next — and very important — question, about the annual percentage rate, or APR.
By the way, if you’re considering an adjustable-rate mortgage rather than a fixed-rate loan, you’ll want to ask: How often is the payment interest rate adjusted? What is the maximum annual adjustment? What is the highest cap on the rate?
5. What is the annual percentage rate?
Now that you have an idea of what your payment rate will be, it’s time to find out what your annual percentage rate is. The difference between the two? The APR incorporates all of the embedded fees of the loan.
Ask your lender if any discount points are included in your APR. To make an apples-to-apples comparison among lenders, the answer you’re looking for is “No.” You can always decide later to buy discount points, which are extra fees you pay upfront to lower your interest rate.
When you have zero-discount-point APRs from competing lenders, you can see who has the lowest fees for the same payment rate.
In our example of receiving a 6% payment rate, you’re looking for the lowest APR based on that payment rate. Maybe one lender offers you a 6.25% APR, and another a 6.5% APR. The 6.25% APR lender is charging you fewer fees.
A higher APR isn’t always a bad thing.
Say you’re buying your “forever home.” If you buy discount points to lower your payment rate, you’ll have a higher APR. But after some years, you’ll make up for the additional fees by paying less in interest thanks to that lower payment rate.
6. Are you doing a hard credit check on me today?
It’s always good to know when the lender is going to perform a “hard” credit check, called a “hard inquiry.” That type of payment history inquiry shows up on your credit report. Lenders need to do this to give you a firm interest rate quote.
When you’re shopping more than one lender, you’ll want these hard credit pulls to occur within a short period of time — say within a few weeks or so — to minimize the impact on your credit score.
7. Do you charge for an interest rate lock?
Once you’ve decided on a lender, you may want to lock in your interest rate. This ensures that it doesn’t go up — though it won’t go down, either.
Some lenders charge a fee to lock in your rate. Others don’t — but the cost might be rolled into your interest rate and other lender fees. The answer you’re looking for on a typical home loan (not a construction loan) is: There’s no charge for an interest rate lock.
8. Will I have to pay mortgage insurance?
If you put down less than 20% on a conventional loan, the answer will probably be “Yes.” Mortgage insurance on government-backed loans works differently. For example, read more about FHA mortgage insurance.
Even if the mortgage insurance is “lender paid,” it’s likely passed on as a cost built into your mortgage payment, which increases your rate and monthly payment. You’ll want to know just how much mortgage insurance will cost and if it’s an upfront or ongoing charge, or both.
Then, ask the lender what your options are. The answer may be just, “Make a bigger down payment.”
Or you may find there are other loan programs that you might qualify for that don’t require mortgage insurance.
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9. What will my monthly payment be?
You’ve probably asked this question already. But knowing what your monthly mortgage payment will be is kind of key to the whole deal, right? You’ll also want to ask if there is any prepayment penalty if you pay off the mortgage early — for instance, if you sell your home or refinance. The answer should be “No.”
10. Do you have an origination fee?
An origination fee provides additional profit for the lender beyond what’s built into the interest rate. A good follow-up question: What are all of your lender fees? Be sure to specify “lender fees.” They’ll know what you mean because there are other additional costs, which you’ll ask about next.
These costs will be detailed in your official Loan Estimate document and your Closing Disclosure. But the sooner you know what they are, the better you can shop, compare — and prepare — for them.
11. What other costs will I pay at closing?
Fees charged by third parties, such as for an appraisal, a title search, property taxes and other closing costs, are paid at the loan signing. You can also see these costs in your Loan Estimate and Closing Disclosure.
12. How — and how often — will I be updated on the loan’s progress?
Will you have a single point of contact throughout the mortgage loan process? And how will you be updated on the progress: by email, phone or an online portal? Establishing your service expectations upfront, and seeing just how eager the lender is to meet them, will give a clear point of comparison among lenders.
13. Do I have to sign all the paperwork in person?
A mortgage e-closing is likely to proceed faster than a traditional mortgage closing, and you’ll probably be better informed about what’s happening every step of the way.
One other benefit of e-closings: Electronic documents can’t be submitted with a missing signature. On a paper document, a missing signature might not be detected immediately, causing headaches and delays.
14. How long until my loan closes?
Of course, you want to know what your target closing and move-in dates are so you can make preparations. And just as important: Ask what you should avoid doing in the meantime — like buying new furniture on credit and other loan-busting behavior.
Planet Home Lending hired Matt Kingsborough as regional sales manager, the Connecticut-based lender, servicer and asset manager announced Thursday.
Kingsborough has more than 20 years of experience in mortgage lending and will be responsible for driving the company’s expansion plans in the western U.S.
“Stepping into Planet Home Lending marks a pivotal chapter in my career,” Kingsborough said in a statement. “It’s an opportunity to align with an organization that not only values excellence and innovation in mortgage lending but also deeply invests in the growth and success of its sales professionals.
“I’m here to build on our presence in the West by fostering an environment where mortgage loan originators and branch managers can truly thrive.”
“Matt’s role is crucial as we look to attract and support the best talent in the industry,” John Bosley, Planet’s president of mortgage lending, said in a statement. “His ability to mentor, coupled with a keen understanding of the mortgage landscape, makes him the perfect fit to lead our expansion efforts in the West.”
Prior to joining Planet, Kingsborough was a multistate regional area manager for HomeBridge Financial Services and was the Northern California regional manager for Prospect Mortgage. Adding his leadership skills will be beneficial at a time when Planet is looking to differentiate itself with various purchase loan products, one-time-close construction loans and other niche programs, the company stated.
Planet Home Lending is an originator, correspondent lender, servicer and subservicer of agency and nonagency residential and commercial mortgages. Founded in 2007, it was the only top 10 national lender to grow its sales volume on a year-over-year basis in the first half of 2023, according to Inside Mortgage Finance data.
Bolstered by its 2022 acquisition of Homepoint’s delegated correspondent channel, Planet originated $13.9 billion in the first six months of last year, an 11.7% increase. By contract, the country’s top 50 lenders as a whole saw volumes fall by more than 50% during the same period.
Earlier this month, Planet added Doug Long as a senior vice president and divisional sales manager. He will focus on product development and building the company’s retail lending network.
Welcome to the vibrant city of Oklahoma City, where the spirit of the Wild West meets modern urban living. With its rich cowboy culture, thriving arts scene, and friendly community, Oklahoma City offers a unique blend of tradition and progress. From the bustling Bricktown entertainment district to the serene Myriad Botanical Gardens, there’s something for everyone in this diverse city. So whether you’re searching for a spacious home for rent in the historic neighborhoods or a trendy apartment in downtown, you’ve come to the right place.
In this ApartmentGuide article, we’ll cut to the chase, breaking down the pros and cons of moving to Oklahoma City. Let’s get started and see what awaits in the heart of the Sooner State.
Pros of living in Oklahoma City
1. Affordable cost of living
Oklahoma City offers a significantly lower cost of living compared to many other major cities in the United States. The average rent for apartments in Oklahoma City, is between $775 and $1,092 in 2024. Residents can enjoy affordable housing options, lower utility costs, and reasonable prices for everyday goods and services. This makes it an attractive option for individuals and families looking to stretch their budget without sacrificing quality of life.
2. Thriving arts and culture scene
Oklahoma City boasts a vibrant arts and culture scene, with numerous museums, galleries, and performance venues to explore. The Oklahoma City Museum of Art, the National Cowboy & Western Heritage Museum, and the Paseo Arts District are just a few of the many cultural attractions that residents can enjoy. From visual arts to live music and theater, there’s no shortage of creative expression to experience in this city.
3. Outdoor recreation opportunities
With its abundance of parks, lakes, and outdoor spaces, Oklahoma City offers plenty of opportunities for residents to enjoy nature. The city’s extensive network of hiking and biking trails, along with its beautiful botanical gardens and urban parks, provide a welcome respite from the hustle and bustle of city life. Whether it’s fishing, boating, or simply taking a leisurely stroll, outdoor enthusiasts will find plenty to love about Oklahoma City.
4. Strong job market
Oklahoma City’s economy is diverse and robust, offering a range of employment opportunities across various industries. The city is home to thriving sectors such as energy, aerospace, healthcare, and technology, providing job seekers with a wealth of options. Additionally, the relatively low unemployment rate and favorable business climate make Oklahoma City an appealing destination for those looking to advance their careers.
5. Friendly and welcoming community
Oklahoma City is known for its friendly and welcoming community, where residents take pride in their city and look out for one another. Whether it’s through local events, volunteer opportunities, or neighborhood gatherings, there’s a strong sense of camaraderie and support among the city’s diverse population. This creates a warm and inclusive environment for newcomers and long-time residents alike.
6. Delicious and diverse food scene
Oklahoma City offers a diverse culinary landscape, with a wide range of dining options to satisfy every palate. From classic barbecue joints and food trucks to upscale restaurants and international cuisine, the city’s food scene is a melting pot of flavors and influences. Whether residents are craving comfort food or seeking out new culinary adventures, they’ll find no shortage of delicious dining experiences in Oklahoma City.
Cons of living in Oklahoma City
1. Extreme weather conditions
Oklahoma City experiences a wide range of weather extremes, including hot summers, cold winters, and the occasional severe weather event. Residents must be prepared for temperature fluctuations, thunderstorms, and the possibility of tornadoes, which can impact daily routines and require extra precautions.
2. Limited public transportation options
With a transit score of 17, Oklahoma City’s public transportation system is relatively limited, with fewer options for commuters who prefer to rely on buses, trains, or other forms of transit. This can pose challenges for individuals who don’t drive, potentially leading to longer commute times and logistical hurdles.
3. Distance from major urban centers
While Oklahoma City offers its own unique attractions and amenities, it is situated at a considerable distance from other major urban centers. This can make it less convenient for residents who desire easy access to a wider range of cultural events, international travel options, or specialized services that may be more readily available in larger cities.
4. Limited nightlife and entertainment options
For those seeking a bustling nightlife and a wide array of entertainment options, Oklahoma City may not offer the same level of variety and excitement as larger cities. While there are certainly local venues and events to enjoy, the overall nightlife scene and entertainment choices may be more limited.
5. Limited diversity in some areas
While Oklahoma City is a diverse and inclusive community, some neighborhoods may have limited diversity in terms of cultural representation and ethnic cuisine options. Residents seeking a wide range of cultural experiences and international influences may find that certain areas of the city have a more homogenous cultural landscape.
6. traffic congestion and infrastructure challenges
Oklahoma City experiences traffic congestion during peak hours, and ongoing infrastructure projects may lead to temporary disruptions and detours. Residents should be prepared for potential delays and plan their travel routes accordingly, especially during times of heavy construction and road maintenance.
Is Oklahoma City the right move for you? Final thoughts
Moving to Oklahoma City offers both pros and cons. On the positive side, the city boasts a low cost of living, a strong job market, and a vibrant cultural scene. Residents can also enjoy the city’s beautiful parks and outdoor recreational activities. However, the city does have its drawbacks, including extreme weather conditions and limited public transportation options. Overall, Oklahoma City provides a mix of opportunities and challenges for those considering a move to the area.
Mike Fratantoni, the chief economist and senior vice president of research and industry technology at the Mortgage Bankers Association (MBA), addressed three major challenges in the housing market during testimony before the U.S. House of Representatives‘ Financial Services Subcommittee on Housing and Insurance.
The biggest challenge in today’s housing market is the lack of inventory, Fratantoni said in his written statement on Wednesday.
“While the demographic fundamentals of the market continue to support strong housing demand for the next several years, the market is millions of units short of that needed to support this demand,” he said.
The silver lining, however, is that builders have picked up their pace of construction. New homes now account for roughly one-third of homes on the market, which compares to a more typical historical share of 10%.
As a result, a large delivery of multifamily units is expected over the next few years, but the recent trend in elevated mortgage rates has exacerbated this supply shortfall, Fratantoni explained.
Compounding the lack of supply is the proverbial “lock-in“ effect that has disincentivized homeowners to sell their current properties, thereby giving up a low mortgage rate and taking on a new loan at a much higher rate.
“A homeowner that was able to refinance into a low-3% or high-2% mortgage rate is just much less likely to list their property,” Fratantoni told lawmakers. “It doesn’t mean they’re never going to list … but it’s a friction in the system, so it’s going to keep existing inventory much lower than it otherwise would be.
“That’s been a support to home prices, but for someone trying to get into the market, it’s really an obstacle.”
Concerns over Basel III Endgame
Fratantoni also expressed concern that the recent Basel III Endgame proposal would accelerate the trend of the mortgage market shifting away from depository institutions, particularly large banks, toward non-depositories and independent mortgage banks.
The Basel Endgame proposal — issued by the Federal Reserve, Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency (OCC) in July 2023 – boosted capital requirements for residential mortgage portfolios at large U.S. banks in comparison to international standards.
Under the draft proposal, 40% to 90% risk weights would be assigned for large banks that issue residential mortgages, depending on the loan-to-value ratio, which is 20 basis points above the international standard.
MBA’s comment letter highlighted the overly conservative risk weights on mortgages — particularly for low down payment loans favored by first-time homebuyers — and the lack of benefit for loans with mortgage insurance. It also mentioned the punitive treatment of mortgage servicing rights (MSRs) and the burdensome treatment of warehouse lending as being particularly negative for the mortgage market.
The Basel Endgame proposal would increase capital requirements on all three types of mortgage activities by banks — low down payment loans held on balance sheets, mortgage servicing and warehouse lending.
As a result, the Basel Endgame proposal “poses a significant risk to the stability of the housing finance market if it is not modified across all of these dimensions,” Frantantoni stated.
Rising cost of property insurance
Addressing the increased cost of property insurance for both prospective homebuyers and current homeowners is a priority for the MBA.
“The lack of availability and cost of homeowners insurance … it’s not only impacting the ability of borrowers to qualify for a loan, but increasing payments for existing homeowners to such an extent really puts them on an unstable path, so it really is front and center for us right now,” Fratantoni told lawmakers.
The average cost to insure a $300,000 home surged by 12% in 2023, reaching $1,770 per year, according to an Insurify report.
Certain insurance carriers have also limited their participation in natural disaster-prone states like California and Florida, given the increases in risks and costs.
Over the past 18 months, seven of the 12 largest insurance companies by market share in California have either paused or restricted new policies in the state, highlighted by the departures of State Farm and Allstate in June 2023.
Due to these departures and price hikes, the California FAIR Plan, the state’s insurer of last resort, has seen enrollment double over the past few years.
“Although these increases in premiums and reductions in availability of insurance have been concentrated in certain markets at this point, the concerns regarding property insurance continue to build for our lender members in the residential, multifamily and commercial sectors — and for all their customers,” Fratantoni said.
Building your dream home from the ground up is a great way to make sure it meets all your expectations. Securing a home construction loan can assist you in realizing your plans, but you need to know the specifics that come with these types of loans.
Here’s an overview of what you should know when obtaining a construction loan.
What is a construction loan?
A construction loan is a type of loan specifically designed to finance the cost of building a new home or renovation of an existing property. It’s a short-term loan with a variable interest rate, and is typically used during the construction phase of a project.
Unlike a traditional mortgage, construction loans are disbursed in installments as the construction progresses, rather than as a lump sum. This helps to minimize the risk for both the lender and the borrower, as the loan amount is based on the actual costs of construction.
How do construction loans work?
Construction loans are typically offered by specialized lenders or banks and are often secured by the property being built. Borrowers are usually required to provide a detailed construction plan, as well as a budget and timeline for the project. The lender will then release funds as each construction milestone is completed and inspected.
At the end of the construction process, the construction loan will typically be converted into a permanent mortgage. This conversion process can occur automatically or require a separate application and approval process, depending on the lender’s requirements.
3 Types of Home Construction Loans
There are three main types of home construction loans: construction-to-permanent, construction-only, and renovation.
Construction-to-Permanent Loan
With this type of home construction loan, once the home is built, the loan converts to a permanent mortgage. You typically only have to pay closing costs once, which can save you money.
You can also choose to pay interest during the building phase. However, it’s typically a variable interest rate, so your payments will fluctuate. After the home is built, and your construction loan converts to a permanent mortgage, you might be able to choose whether you want a variable rate or a fixed rate.
You may want to consider this type of loan if you have a feasible plan for your house’s construction, and you want to pay it back over time with a reliable monthly payment.
Construction-Only Loan
This type of loan requires full repayment at the end of the construction phase, rather than automatic conversion to a mortgage. This means that you’ll incur two sets of closing costs and have to secure approval for two separate loans.
However, a construction-only loan may require a smaller down payment compared to a construction-to-permanent loan. If you already own a home, you may consider obtaining a construction-only loan initially and waiting to sell your current home to accumulate a larger down payment for a mortgage.
Construction-only loans can be a suitable option for individuals who currently have limited funds but expect to have more in the future. After completing construction, you can apply for a mortgage to pay off the loan.
One potential drawback of this type of loan is that if your financial or credit situation changes during construction, you may not qualify for a mortgage large enough to repay the loan. This can lead to new problems, including the possibility of losing your home before you even move in.
Renovation Construction Loan
Rather than helping you build something new, a renovation loan is designed to help you cover the costs of a major remodel. If you want to turn a fixer-upper into the home of your dreams, but aren’t sure if you have the money for renovations, this type of loan can help.
It’s important to note that these aren’t home improvement loans. A home improvement loan often deals with smaller remodels and is based on how much equity you currently have in the home. Renovation construction loans are about major overhauls.
Typically, you’ll get a loan big enough to cover the costs of renovations as a mortgage. You only apply for one loan, and it’s based on the likely value of the home after the remodel is finished. This can be a big help if you don’t want to try to finance the cost of upgrades after you buy the house.
Expenses Covered by Construction Loans
In general, you’ll find that most construction loans pay for various aspects of a project, including:
Obtaining the land (or the fixer-upper if you’re getting a renovation loan)
Getting the plans for the home
Applying for the permits
Paying the fees associated with construction
Contingency reserves for covering unexpected costs
Closing costs
You might also be able to have interest reserves built into your construction loan if you would rather not make interest payments while your home is being built or renovated.
The idea is that everything you need to complete your home, whether new-built or a renovation, is wrapped up in the loan.
Create a Plan for Your Custom Home
When building a home, you can’t just ask a lender for an appraisal or just get approved for a certain amount. Construction loan lenders expect to see a plan for the construction of the home.
When you apply for a home construction loan, you’ll need to let your lender know the following information:
Size of the home and the lot
Placement of the lot
Home plans (possibly include blueprints)
Materials used to build the home
Types of renovations you plan to make (for an applicable loan)
Timeline for completing the home
Contractors that will be hired
Lenders will dig into this information to decide if you’re a good risk. They want to know that the home, or the lot, will at least be worth something if you default on the loan. Part of the process is understanding that the home will at least be worth what you’re borrowing once it’s finished.
At each stage of construction, and before disbursement is made, the work will have to be inspected. If you choose a general contractor that’s experienced and respected, they can help you provide needed information to your lender, and you can be reasonably assured that they will do good work.
Qualifying for a Home Construction Loan
Now that you have a plan for your new home, it’s time to qualify for your construction loan. In many ways, the process is the same as qualifying for a traditional mortgage loan. The construction loan lender will review your financial situation and decide if you present a relatively low risk. Some of the things that a construction loan provider looks at include:
Credit score: This is the most important element of any home loan, and it’s no different with construction loans. In fact, because there might not be anything of tangible value before construction, you might need an even higher credit score. You typically need a minimum credit score of 680 to qualify, so you need to improve your credit score if you’re not there yet.
Debt-to-income (DTI) ratio: As with a regular mortgage, the lower your debt-to-income ratio, the better off you’ll be. Most lenders require that your DTI be no more than 45% of your gross monthly income.
Down payment: While you might be able to get by with 5% or less for a down payment with traditional mortgages (FHA, USDA, and VA loans famously come with much lower down payments), construction loans are a different story. You’ll likely have to put down at least 20% to make it happen. In some cases, though, as with a renovation loan, you might get away with a lower down payment.
By planning ahead and making sure your finances are in order, you have a better chance of qualifying for a construction loan.
Prepare for a Longer Closing Period
Realize that there are many moving parts to your home construction loan. It’s not just you and your lender involved. You’ve got a builder or contractor as part of the arrangement, and you’re not going to get a lump sum. Instead, the lender will evaluate you and the contractor you choose separately.
Additionally, a timeline for disbursements needs to be set up. Moreover, a lender might need to consider insurance related to the process. Plus, whether you choose a construction-to-permanent or construction-only loan matters a great deal as you negotiate with a lender about your terms.
As a result of these different aspects of construction loans, you might have to allow for a longer closing period. Additionally, you’re likely to see delays and additional costs during the building portion, so making sure you have adequate contingency reserves built into your new home is vital.
Bottom Line
With a construction loan, you can turn your dream home vision into a reality, whether building from the ground up or renovating a fixer-upper. Be aware, however, that a construction loan entails different terms and conditions.
Your lender will not simply grant you the entire loan amount without first ensuring your ability to use it responsibly. You must prove your financial capability and the viability of your construction project. Your lender will keep a close eye on the allocation of funds as the project progresses.
If you have a good understanding of how a construction loan operates, it can be a valuable tool in ensuring you achieve the home of your dreams.
See also: Is It Cheaper to Build or Buy a House?
Frequently Asked Questions
How do I qualify for a construction loan?
To qualify for a construction loan, you will typically need to have a good credit score and a sufficient amount of equity in your property (if you are building on land that you already own). You will also need to provide a detailed construction plan and budget, as well as proof of your ability to repay the loan.
How long does it take to get a construction loan?
The process of getting a construction loan can vary in length depending on the lender and the specifics of your situation. In general, it can take several weeks or even months to complete the application process and receive approval for a construction loan.
How much can I borrow with a construction loan?
The loan amount you can obtain through a construction loan is based on various factors including your credit score, the worth of the property, and your equity in the property. Usually, borrowers can expect to secure up to 80% of the property value. However, the loan amount can differ based on the lender’s policies.
How are funds from a construction loan distributed?
The distribution of funds from a construction loan is typically done in stages, based on the progress of the construction project. The lender will release funds as specific milestones are reached, such as the completion of the foundation, the rough framing, or the final inspection. This process helps to ensure that the funds are used for the intended purposes and that the construction project is proceeding as planned.
Before each release of funds, the lender may require an inspection to verify that the work has been completed to their satisfaction. The exact terms of the distribution of funds may vary based on the lender and the specifics of the loan agreement.
Are construction loans more expensive than other types of loans?
Construction loans can carry higher interest rates and fees due to the higher risk for the lender. However, the total cost of the loan will vary based on the lender, loan type, and loan terms.
Can I use a construction loan to remodel my existing home?
Yes, construction loans can be utilized for renovating an existing home too. Normally, those borrowing must present a comprehensive renovation plan, cost estimate, and demonstrate their repayment capability.
ADDISON, Texas, March 21, 2024 (SEND2PRESS NEWSWIRE) — Click n’ Close, a multi-state mortgage lender, today announced its Preferred Partner status with The Mortgage Collaborative (TMC), a leader in mortgage cooperatives dedicated to providing its members with cutting-edge technology and expert mortgage banking resources.
Image caption: Click n’ Close.
As a correspondent investor, Click n’ Close will offer TMC’s Lender Members access to SmartBuy™, a proprietary suite of down payment assistance (DPA) loan programs designed to give homebuyers an advantage in today’s heightened mortgage interest rate environment. This national program combines a USDA or FHA-insured 30-year first mortgage with either a second lien that is fully forgivable after five years or a 10-year repayable second lien amortized up to 30 years. The second lien funds available through both options meet agency minimum required investment guidelines and can be used by the borrower towards their down payment, closing costs, or to buy down the interest rate. SmartBuy also has no income or first-time homebuyer restrictions.
“TMC is one of the preeminent cooperatives serving mortgage lenders in today’s market, and we are delighted to be part of its Preferred Partner network,” said Click n’ Close founder and CEO Jeff Bode. “SmartBuy is a competitive alternative to managing the myriad of state and local programs. SmartBuy has helped more than 6,000 borrowers become homeowners by extending more than $1.5 billion in DPA-related financing. We’re looking forward to expanding both these numbers through our partnership with TMC.”
“TMC is thrilled to have Click n’ Close as a Preferred Partner serving the growing needs of today’s mortgage lenders through its SmartBuy product suite,” said TMC President and COO Melissa Langdale. “This partnership is a testament to TMC’s mission of providing its members with access to the most innovative and reliable solutions in the industry.”
About The Mortgage Collaborative
Based in Austin, Texas, The Mortgage Collaborative was founded in 2013 by four notable industry leaders and is the nation’s largest independent mortgage cooperative network. TMC is singularly focused on creating an environment of collaboration and innovation for small to mid-size mortgage lenders across the country to reduce cost, increase profitability, and better serve the dynamic and changing consumer base in America. For more information, visit http://www.mortgagecollaborative.com/
About Click n’ Close, Inc.
Click n’ Close, Inc., formerly known as Mid America Mortgage, is a multi-state mortgage lender serving consumers and mortgage originators through its wholesale and correspondent channels and is also the nation’s leading provider of Section 184 home loans for Native Americans. In operation since 1940, Click n’ Close has thrived by retaining its entrepreneurial spirit and leading the market in innovation, including its adoption of eClosings and eNotes.
Combining this culture of innovation with a risk management mindset enables Click n’ Close to deliver new products to market that address the challenges facing both borrowers and third-party originators (TPOs). These innovations include its USDA one-time close construction loans, proprietary down payment assistance (DPA) program and reverse mortgage division. Its direct relationships with Fannie Mae, Freddie Mac, Ginnie Mae and private investors afford Click n’ Close direct access to the capital markets, thus ensuring maximum liquidity for its product innovations. By servicing its loan programs in-house, Click n’ Close provides its wholesale and correspondent partners with an additional level of certainty regarding loan salability and superior borrower service over the life of the loan.
Personal Capital is a client-centric robo-advisor offering investment and wealth management services. The company distinguishes itself from the competition by combining automation with personal service. With over 2.7 million users, Personal Capital currently holds $16 billion in assets under management.
Unlike many financial apps designed to make investing more accessible, Personal Capital is a robo-advisor for those who already have some established wealth. They’ve gone back and forth on the minimum investment required, which is now set at $100,000.
Get started with Personal Capital
on Personal Capital’s secure website
Its goal is to provide a more transparent and affordable investment platform. However, its wealth management service does target clients with larger assets, with higher fees being assessed with the fewer assets you let the company manage.
In this Personal Capital review, we’ll get into the specifics shortly, but the upside to potentially paying higher fees is the access you get to financial advisors to help with your investment strategy.
The company utilizes five principles for investing:
the modern portfolio theory
personalized asset allocation
tax optimization
equal sector and style weighting
disciplined rebalancing
No matter how much in assets you’re looking to invest, consider Personal Capital if you prefer a hands-on experience or if you have a large portfolio to open or transfer. Either way, we’ll take you step-by-step through the different types of accounts you can have with Personal Capital, as well as the fees you’ll pay at different asset levels.
You’ll also learn about the special features that make Personal Capital unique, including financial tools and expertise. If you’re looking for an online advisor for any or all of your wealth management, see if Personal Capital is right for you.
Available Plans at Personal Capital
There are three different plans available at Personal Capital, which are divided up based on the amount of investable assets you have. If you know how much you’d like to invest, find the correct category to learn about the benefits and services you’d receive from Personal Capital. Then keep reading to learn more about the fee structure.
Investment Service Plan
The first plan is targeted for those with up to $200,000 in assets to be invested. Services include access to a financial advisory team, a tax-efficient ETF portfolio, dynamic tactical weighting, 401k advice, and cash flow & spending insights.
You’ll also get to use Personal Capital’s free wealth management tools. You do, however, need a minimum of $100,000 to get started investing with Personal Capital.
Wealth Management Plan
The next option is the Wealth Management plan, for those with investable assets between $200,000 and $1 million. You get access to all the benefits from the Investment Service plan, plus several others.
The Wealth Management service includes two dedicated financial advisors, customizable stocks and ETFs, a full financial and retirement plan, college savings and 529 planning, tax-loss harvesting and tax location, and financial decisions support.
The financial decisions support refers to help with insurance, home financing, stock options, and compensation. Also, note while your financial advisors can help you plan for investment accounts like a 401k for retirement or a 529 for college savings, Personal Capital doesn’t actually offer these accounts.
Private Client Plan
If you invest more than $1 million, you qualify for the Private Client Plan. Again, you receive all the perks of the previous two plans, in addition to several more.
To begin, you’ll get priority access to CFP, financial advisors, investment committee, and support, plus an investment portfolio mix of ETFs, individual stocks, and individual bonds (in certain situations).
You also receive family tiered billing; private banking services; estate, tax, and legacy portfolio construction; and donor-advised funds. Personal Capital also offers private clients a private equity and hedge fund review, deferred compensation strategy, as well as estate attorney and CPA collaboration.
Get started with Personal Capital
on Personal Capital’s secure website
Fee Structure and Accounts
The more money you invest through Personal Capital, the more money you’ll save in fees. If you invest up to $1 million, your fee comes to 0.89% of the assets being managed. If you invest more than $1 million, your first $3 million in assets are only charged a 0.79% fee. Then, your next $2 million is charged 0.69%.
The $5 million after that are charged 0.59% and the next $10 million are charged 0.49%. However, there aren’t any charged beyond the account management fees, so you don’t have to worry about annual, transfer, or closing fees.
So what types of investment accounts are supported through Personal Capital? There are many: both individual and joint non-retirement counts; Roth, traditional, SEP, and rollover IRAs; and trusts.
Through your Personal Capital investments, you can expect a healthy range in your portfolio. For example, when buying U.S. equities, they buy a diversified sample of at least 70 individual stocks that epitomize their tactical weighting approach and optimize your account for tax purposes.
Personal Capital also only purchases liquid securities, so that if you ever need to access cash quickly, you can receive funds within a settlement period of just one to three days.
Funds are held by Pershing Advisor Solutions, a Bank of New York Mellon Company. It is one of the largest U.S. custodians and currently holds more than a trillion dollars in global client assets.
Tax Optimization Strategies
Personal Capital uses several techniques and strategies to ensure clients are optimizing their taxes on investments. First, they entirely avoid mutual funds, which they regard as inefficient for tax purposes. Their asset location is personalized whether you have taxable accounts or retirement accounts.
For example, Personal Capital typically places high-yielding accounts and fixed income into a tax-deferred or exempt account. REITs are also generally placed in a retirement account because they pay nonqualified dividends.
Finally, Personal Capital utilizes tax-loss harvesting, meaning they use individual securities that realize losses and can, therefore, offset gains or provide a tax deduction.
Special Features
You can take advantage of some of Personal Capital’s online resources without even becoming a client. Just by creating a Personal Capital account, you can link all of your financial accounts for an investment checkup.
The program analyzes your bank accounts, credit cards, and investments to create recommendations on your asset allocations. You can then choose whether to make those adjustments to your investments.
Additionally, you can check holistically on how your investments are performing by considering how much you’re charged in fees. You can do this in one of two ways.
The first is through the Mutual Fund Analyzer, which you can compare performance (with fees) against the broader markets. Then you can use the general Fee Analyzer to see what you’re being charged on your non-taxable retirement accounts.
You can also use Personal Capital for a budget check-up that analyzes your saving and spending. You can even incorporate their Retirement Planner for long-term savings projections.
You’ll be provided with several scenarios, including best-case, worst-case, and most likely. It gives you a good idea of what you could potentially expect when you’re finally ready to retire.
All of these features run through the Personal Capital financial dashboard, so you can get a holistic view of your entire financial picture. You can use them on their mobile app or website.
Some of their investment management tools include a 401(k) Analyzer, Retirement Planner, Investment Checkup, Net Worth Calculator. Moreover, you still have the ability to contact a personal financial advisor.
As we mentioned earlier, Personal Capital implements five distinct strategies for investing. Learn a bit more about each one to get a better grasp of how your money would be managed by this advisor.
Modern Portfolio Theory
The prime directive here is to create an efficient portfolio for clients while yielding the highest possible return for the lowest possible risk.
Personal Capital works with six asset classes to provide this equilibrium, which are all meant to be liquid and broadly investible. These asset classes are U.S. stocks and bonds, international stocks and bonds, alternatives (including ETFs and commodities), and cash for liquidity.
Personalized Asset Allocation
There’s a reason the company is called Personal Capital: they understand that no two investors are exactly alike. That’s why they look at your individual data and financial goals to balance your portfolio’s risk and growth.
They use a proprietary Retirement Planner software that analyzes your spending and savings habits in addition to your projected income. This helps you determine what your financial future looks like and what you may need to change to reach your future goals.
Tax Optimization
We mentioned earlier that Personal Capital optimizes your taxes by using tax-loss harvesting and asset location, as well as avoiding mutual funds.
In fact, these steps could boost your annual returns by as much as 1%. While many financial advisors use one or two of these tactics, Personal Capital offers a truly robust strategy to make your portfolio more tax efficient.
Equal Sector and Style Weighting
Personal Capital’s strategy for diversification involves equalizing the composition of your portfolio by sector, size, and style.
The goal is to prevent bubbles and other volatile conditions from adversely affecting your investments too much. Likewise, they don’t rely on a few large companies, but instead spread out U.S. stock investments between 70 and 100 different stocks.
Disciplined Rebalancing
Your portfolio receives a daily review for any potential rebalancing needs. For high-level assets, they’re typically rebalanced when they deviate more than a few percentage points from the target.
Specific securities receive a smaller margin and are reviewed after just a 0.5% move from the target. Having a systematic review allows you to maximize your ability to buy low and sell high.
Who is Personal Capital best for?
Personal Capital offers truly extensive services for high net worth investors, particularly considering the low percentage of fees charged. This is especially true if you’re an investor with several million dollars in assets and who likes to have easy access to a dedicated financial advisory.
After all, in the Private Client tier of $1 million+, you can get advice on just about anything related to your finances, whether it’s about retirement, real estate, or anything in between.
That’s on top of the personalized asset management, so you have a one-stop-shop of both automated algorithms and a human point of contact who understands the larger picture concerning your finances.
Personal Capital also makes it easy for this type of investor to remain passive. If you appreciate their investment management and like how the allocation and review processes, then you don’t have to do much on your own.