Buying Land to Build a House

Buying Land to Build a House

So many people imagine building their dream home in an ideal location. Finding that location and buying land to build a house is the first step in fulfilling this dream. 

Paying for this lot with cash is the ideal scenario but with lot prices climbing into the hundreds of thousands of dollars range, most buyers will need a loan to purchase a lot. 

The loan you use for buying land to build a house on is very different than the traditional home mortgage loan. Land loans differ because there are generally no improvements like a house on the property. On a traditional mortgage, the home is used to secure the loan. In a land scenario, there are no improvements to use in order to secure the loan. 

This makes the land loan a risky loan for the bank. Because of this, these loans have more stringent requirements than traditional mortgages. You’ll need more money down 20% to 30% depending on your credit score.

Yes, these loans can be difficult to obtain because of the requirements but at the end of the day, it’s worth the hassle because you’ll enjoy plenty of benefits when you do so. Before you even start thinking about them all, you need to do a lot of research. Don’t worry! We’ve done it for you!

Here’s everything you need to know about purchasing land before building your house.

Reasons to Look for Land to Build on

Privacy: Living in an urban or even a suburban neighborhood usually means a lack of privacy. You see and hear your neighbors constantly, and while they may be great people, you want your privacy.

When you buy land to build a house, you have the flexibility of choosing a place the lends itself to seclusion and privacy. Additionally, you have the option of situating your home on the lot in order to maximize your privacy. 

While custom home lots are more extensive than subdivided lots, they also tend to be much larger. This means you’ll have more space surrounding your home, hopefully giving you peace, privacy, and quiet.

Convenience: One of the advantages of buying land is choosing where you’re going to be. That means you can be closer to work, family, or whatever your lifestyle priorities are. 

If convenience is your priority, you may need to be flexible when it comes to designing and building your home. Since communities located close to amenities and other conveniences tend to have more restrictions than more rural communities, you may have to adhere to building restrictions and requirements. This may force you to compromise on the actual type and style of home you end up building.

Style: One of the biggest benefits of building your own home is that you get to choose the style of the home. If you want to build something truly unique, building your own home is the right decision. When you shop for your lot, it’s important that you do your homework in order to make sure you can build what you want. Many communities have architectural guidelines and restrictions that will dictate what you can and cannot build.

When you build your house, you are supposed to get everything that you want. Make sure you buy your lot in an area that has no restrictions or at least restrictions you can live with.

Flexibility: Tract or production builders do a great job of building an attractive product that appeals to a wide range of homebuyers. Unfortunately, not everyone has the same needs and wants. Have you always dreamt about a larger garage, a dedicated workshop, or a cottage? Since you’re in charge of designing the house, you can do it!. You can choose to be practical, extravagant, or something in-between. It’s up to you.

It’s important that you make sure you will have the ability to do the things you want when you choose your building site. You need to make sure the building envelope large enough to accommodate your plans. Also, check to make sure there are no environmental issues that would keep you from executing your plans. We often see large pieces of land that are either too steep or have unbuildable areas because of drainage or some other issue.

The time to find out about these types of conditions is before you close on your lot, not after.

How to Find Land to Build on

Realtor: Your Realtor is a great place to start when looking for land. Realtors often have access to pocket listings, these are lots that are not yet on the market but the owner might be looking to sell.

It’s important to note that realtors tend to specialize in different aspects of the market. A Realtor that specializes in luxury condos in an urban area is probably not a great resource for a custom home lot in a rural or suburban setting. Ask around in order to find realtors that specialize in the type of land you are looking for.

MLS: A Multiple Listing Service (or MLS) is like a realtor’s database, where multiple real estate agents offer both homes and land for sale to each other. Unlike the pocket listing, a property offered on the MLS is there because the owner wants to sell.

Your realtor can set up a search for you on the MLS system. This search will send you notifications when a listing that meets your criteria hits the market. One of the most valuable aspects of this type of search is that the agent can change the search criteria if you aren’t seeing the types of properties you are interested in.

Tax records: If you have a very specific area or neighborhood that you want to live in, this is a great way to search for a lot. Looking at the county tax assessor’s website to locate unimproved properties is how the professionals do it. Builders will often scour the tax records looking for unimproved land. The goal is to find a vacant lot that has been owned for a while, if the owner is out of the area, it’s even better.

Builders will reach out to the owners to see if they have any interest in selling the property. These lots are often owned free and clear, so the only expense to the owner is the property tax. These property owners often don’t even consider selling until someone asks.

This method requires a little detective work and a little bit of hustle but the results can be very rewarding.

Landwatch: Realtors, MLS, and tax records are old-school ways of looking for land. Nowadays, we can take advantage of the internet. And www.landwatch.com is the perfect place to look for land online.

On this website, you’ll find countless land listings from huge agricultural tracts to small parcels. These listings come with descriptions, pictures, pricing, and more. If you like what you see, you can contact the owner and buy it.

Subdivisions: The developers of large subdivisions tend to sell directly to home builders. This is a very efficient method for these developers because the builders buy in bulk and have the financing in place. It’s rare to find a subdivision that sells directly to homeowners, but they do exist. 

Subdivisions that sell directly to private individuals tend to be custom home subdivisions. If you are looking for this type of opportunity, you’ll need to stay on top of the market. Talk to builders and Realtors about where these subdivisions are. If you have already chosen your home builder, they can be a great asset in this search as well.

Important considerations

Rural or Suburban: You probably know the difference between a rural and a suburban setting. When you decide to buy land to build a house, this is a crucial factor.

View: Do you want a view? Or, perhaps, are you willing to sacrifice that in favor of other things? You have to figure out what you want – and to picture how things will look from your finished house, both in and out.

Exposure to the sun: Enough sun exposure will heat your house – but too much of it will overheat your place. In colder areas, too little or too much sun can be the difference between snow and ice on your driveway.

Utilities: Water, electricity, and gas are all a given for most people. Not for those who are building their own house, though. Does your lot have access to utilities? Are the utilities at the property line or will you need to bring them in? Do you have access to a municipal water system, or are you going to need a well? Are you able to tap into a sewer system or will your home need a dedicated septic system?

Access: Can you get to your future house from public-access roads? Sometimes, a plot of land is only accessible from other people’s property; if that’s the case, you need an easement to access your house through private land. That could turn into a legal hassle.

Zoning: Zoning laws and a major consideration when building and proper zoning could be the difference between building your dream house and having a plot of land you no longer want. You need to check and double-check your land’s zoning rules and regulations to make sure you can build what you want.

Survey: No matter if someone surveyed the land not too long ago, you need to survey the lot you want to buy. That’s the only way to know where you can build and where your property ends.

Soils and perc tests: Believe it or not, certain soils like clay and rock can be problematic for building houses. You need to perform a soil test before you build. Savvy buyers will do these tests as a part of the due diligence portion of the sales process. This way you don’t end up with a lot you can’t build on.

How to pay

Cash: Cash is king. Always was and always will be. And this is even truer when you’re buying land to build a house.

Sure, you can take a loan to buy land (although they are more expensive than your average mortgage), but if that’s the case, you’ll have to pay back the loan and invest in building your house at the same time.
On the other hand, if you buy the land using cash, you can then use your new property as equity to finance construction.

Land Loan: As we’ve discussed, land loans are different from mortgages. They have higher interest rates, are not that simple to obtain. These loans have much shorter terms and require a good credit score as well as a 20% to 30% downpayment.

Usually, land loan interest rates are much higher than the average mortgage interest rate. And you have to pay it back in 3 to 5 years; that’s almost ten times less than your average 30-year mortgage.

USDA: Not all land loans are equal, though. If you wish to buy land in a rural area, you might qualify for a loan from the U.S. Department of Agriculture (USDA) – and almost 97% of all Americans are eligible for it.
These loans have few requirements, don’t need a down payment, and feature a fixed interest rate.
The USDA loans are for people who want to build their primary residence, not for any other purpose. And you’ll have to meet specific criteria to ask for one.

Owner Carry: If you don’t have the cash right now and don’t qualify for any loan, it’s not over yet. You can arrange a loan-like scenario with the land’s owner.
Because financing a land purchase can be difficult, property sellers will agree to act as the bank and carry the loan for the sale. The buyer makes payments directly to the property owner. In these scenarios, the buyer will often be asked to make a balloon payment after a number of years. In most cases, the landowner is paid off once the purchaser obtains construction financing.

The relationship between lot cost and total building cost

One final thought when it comes to building your home and the purchase of the lot. Cost and value are two very important factors. It is important from an investment standpoint that you keep the relationship between lot cost and home value in the proper relationship.

The lot price is traditionally 25% of the total cost of the entire home building project. Failing to observe this metric can cause problems further down the road when it’s time to sell the home. After construction, the lot price becomes a part of the home price. If you pay too much for the lot, it increases the price per square foot of the home.

When it’s time to sell, your home is compared to other homes on the market. If your value is in the lot, it’s usually difficult to recover those costs when it’s time to sell.

The bank is also going to be concerned with this when it’s time to get your construction financing. There are requirements you’ll have to meet for this type of loan. Such as showing detailed specs, providing proof of income, and having a good credit score. They vary depending on the loan you’re after.

In Conclusion

Finding an ideal spot to build your dream home can be a difficult task but at the end of the day, it’s worth the journey. In a world where there are very few truly special homes, this is your opportunity to get exactly what you want and make it special. There is a special pride you see in people that have built their dream homes that you almost never see in those that settled for a tract home in a cookie-cutter subdivision.

So, if you are up for the task the rewards are worth it but make sure to use the advice of professionals and experts in the field. Mistakes in this type of project can have serious consequences.

Source: realtybiznews.com

Amerifirst Financial Review: They Take Home Purchase Lending Seriously

Posted on February 24th, 2021

It’s not every day you come across a large-scale independent mortgage lender that has been around since the 1980s, but Amerifirst Financial Inc. fits that description.

The Arizona-based company understands that there’s more to the mortgage business than just refinances, which is why their goal is to be the lender of choice for real estate professionals in all the markets they serve.

This could be a pretty smart strategy if and when interest rates rise and the pool of eligible refinance candidates begins to run dry.

If you’re thinking about buying a home, Amerifirst could be good choice for your financing needs since they’re heavily focused on purchase loans. Let’s discover more about them.

Amerifirst Financial Fast Facts

  • Direct-to-consumer retail mortgage lender
  • Founded in 1989, headquartered Mesa, Arizona
  • Offers home purchase financing and mortgage refinances
  • Funded more than $2 billion in home loans last year
  • Most active in Arizona, Colorado, and California
  • Licensed to do business in 43 states and the District of Columbia
  • Also operate several DBAs including AFI Mortgage, Spire Financial, and Truly Mortgage

Amerifirst Financial Inc. is a direct-to-consumer retail mortgage lender, meaning they operate a call center along with branches throughout the country.

The company was founded all the way back in 1989 and is headquartered in Mesa, Arizona, which is just east of Phoenix.

They also have branches in nine states, including Arizona, California, Colorado, Florida, Mississippi, Nevada, Oregon, Texas, and Utah.

Amerifirst appears to specialize in home purchase financing, with roughly two-thirds of total volume dedicated to home buyers.

The rest can be attributed to mortgage refinances, including rate and term refinances and cash out refinances.

Last year, the company funded more than $2 billion in home loans, with nearly a billion in their home state of Arizona.

They’re also very active in Colorado and California, and have a decent presence in Nevada and Texas as well.

While they’re licensed in most states nationally, they don’t seem to be available in Delaware, Hawaii, Maine, New York, Rhode Island, Vermont, or West Virginia.

How to Apply with Amerifirst Financial

  • You can get started instantly by visiting their website and clicking “Apply Now”
  • They offer a digital mortgage application powered by ICE that lets you complete most tasks on your own
  • It’s also possible to browse their online loan officer (or branch) directory first to find someone to work with nearby
  • Once your loan is submitted you can manage it 24/7 via the online borrower portal

Amerifirst Financial makes it super easy to get started on your home loan application.

Simply head to their website and click on the big “Apply Now” button and you’ll be off to the races.

That will take you to their digital mortgage application powered by ICE that lets you input all your personal and financial details electronically.

Then you can link financial accounts using your credentials to avoid having to scan/upload or track down your documents.

Additionally, you can order your own credit report and eSign disclosures to speed through the more painstaking part of the process in a matter of minutes.

Once your loan is submitted and approved, you’ll receive a to-do list with any conditions that must be met to get to the finish line.

You’ll also be able to track and manage your loan via the online borrower portal, and get in touch with your lending team if and when you have questions.

Those who prefer a more human touch can also visit a local branch and/or browse the online loan officer directory to learn more about the individuals who work there.

It may also be advisable to speak with a loan officer first to discuss loan pricing and available loan programs, then proceed to the online mortgage application.

In any case, they make it really simple to apply for a mortgage and manage your loan from start to finish thanks to the latest technology.

Protect Your Transaction Pre-Approval for Home Buyers

Protect Your Transaction

One perk to using Amerifirst Financial, especially if you’re buying a home in a competitive market, is their “Protect Your Transaction” loan commitment.

It goes beyond both a pre-qualification and pre-approval in that it’s underwritten upfront by a real human loan underwriter.

In fact, the PYT even comes with monetary assurance (up to $15,000, with an additional $5,000 for first responders and teachers), which represents their belief in the strength of your application.

So if the loan falls through and it turns out to be the lender’s fault, you could be entitled to that cash, which can also be shared with the seller. This may strengthen your offer.

Next to a cash offer, they believe it provides the greatest assurance that they can provide financing for your home purchase.

And that could just be enough to give you edge versus other home buyers on a hot home.

It may also give you peace of mind in the process, knowing you can actually get financing when all is said and done.

Loan Programs Offered by Amerifirst Financial

  • Home purchase loans
  • Refinance loans: rate and term, cash out, streamline
  • Conforming home loans
  • High-balance and jumbo home loans
  • FHA/USDA/VA loans
  • Down payment assistance
  • Green Value Mortgage
  • Fixed-rate and adjustable-rate options available

Amerifirst Financial offers both home purchase loans and refinance loans, including rate and term, cash out, and streamline refinances.

You can get financing on a primary residence, including townhomes/condos, along with a vacation home or 1-4 unit investment property.

They offer all the popular loan types, including conforming loans backed by Fannie Mae and Freddie Mac, high-balance and jumbo loans, and government-backed options like FHA, USDA, and VA loans.

They also offer an exclusive loan program known as the “Green Value Mortgage” that offers a reduced interest rate, fees, and discounted mortgage insurance if your property has a green score of 75 or lower.

You may also be eligible to receive up to 3.5% of the purchase price as a non-repayable gift. All the more reason to go green!

In terms of loan programs, you can get either a fixed-rate mortgage such as a 30-year or 15-year fixed, or an adjustable-rate mortgage like a 7/1 or 5/1 ARM.

Amerifirst Financial Mortgage Rates

One slight negative to Amerifirst Financial is the fact that they don’t mention their mortgage rates anywhere on their website.

As such, we don’t have any clues about their loan pricing relative to other banks and lenders out there.

The same goes for lender fees, which aren’t clearly listed on their website to my knowledge.

This means you’ll need to get in touch with a loan officer to discuss rates and fees to ensure they are competitively priced.

Be sure to compare their rates/fees with other lenders before you proceed to the application if you want peace of mind on pricing front.

Customer service and competence is always important, especially when it comes to a home loan, but so is cost.

Amerifirst Financial Reviews

On Zillow, Amerifirst has a very impressive 4.98-star rating out of 5 from roughly 900 customer reviews, which is quite impressive given the volume of feedback.

On LendingTree, they have a perfect 5-star rating, though it’s based on just about 30 reviews. They also have a 100% recommended score there.

If you’re looking for more reviews, you can also check out local ones on Google for their brick-and-mortar branches nearest you.

Lastly, the company is Better Business Bureau accredited, and has been since 2014. They currently enjoy an ‘A+’ rating based on complaint history.

To sum it up, Amerifirst Financial could be a solid choice for someone purchasing a home (especially a first-time buyer) thanks to their robust Protect Your Transaction loan approval and variety of down payment assistance programs.

Amerifirst Financial Pros and Cons

The Good

  • You can apply for a home loan from any device in minutes
  • Offer a digital mortgage application powered by ICE
  • Lots of loan programs to choose from
  • Discounts for those who purchase a green home
  • Protect Your Transaction loan approval for home buyers
  • Excellent customer reviews from former customers
  • A+ BBB rating, accredited business since 2014
  • Free mortgage calculators and mortgage dictionary on site

The Not

  • Not available in all states currently
  • Do not list mortgage rates or lender fees on their website

(photo: nathanmac87)

Source: thetruthaboutmortgage.com

Ask the Readers: What Do You Do for Fun While You’re Stuck at Home?

It is strongly recommended (and in some places mandated) that we all stay home as much as possible to avoid unknowingly spreading COVID-19. If you like spending time out and about, whether socializing with friends or enjoying local attractions, being stuck at home can sound really boring…but it doesn’t have to be! Let’s share some ideas on fun things you can do right at home.

What do you do for fun while you’re stuck at home? Are there any resources that have been particularly helpful in finding things for you and your family to do? What free activities would you recommend to others?

Tell us what you’re doing for fun while you’re stuck at home and we’ll enter you in a drawing to win a $20 Amazon Gift Card!

Win 1 of 3 $20 Amazon Gift Cards

We’re doing three giveaways — here’s how you can win:

  • Follow us on Twitter
  • Tweet about our giveaway for an entry.
  • Visit our Facebook page for an entry.
  • Follow @janetonthemoney on Twitter.

Use our Rafflecopter widget for your chance to win one of three Amazon Gift Cards:

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Giveaway Rules:

  • Contest ends Monday, March 30th at 11:59 p.m. Pacific. Winners will be announced after March 30th on the original post. Winners will also be contacted via email.
     
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Good Luck!

Source: wisebread.com

Today’s mortgage rates rise — refinance before they go even higher | February 23, 2021 – Fox Business

Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders, all opinions are our own.

Check out the mortgage rates for February 23, 2021, which are trending up from yesterday. (iStock)

Based on data compiled by Credible Operations, Inc., NMLS Number 1681276, mortgage rates have risen since yesterday.

  • 30-year fixed-rate mortgages: 3.000%, Up from 2.875%, +0.125
  • 20-year fixed-rate mortgages: 2.875%, Up from 2.750%, +0.125
  • 15-year fixed-rate mortgages: 2.250%, Unchanging

Rates last updated on February 23, 2021. These rates are based on the assumptions shown here. Actual rates may vary.

To find the best mortgage rate, start by using Credible, which can show you current mortgage and refinance rates:

Browse rates from multiple lenders so you can make an informed decision about your home loan.

Looking at today’s mortgage refinance rates

Today’s mortgage refinance rates have remained largely unchanged since yesterday. Mortgage and refinance rates continue to move away from record lows, with 30- and 20-year rates holding firm at or above 3%. If you’re considering refinancing an existing home, check out what refinance rates look like:

  • 30-year fixed-rate refinance: 3.000%, Unchanging
  • 20-year fixed-rate refinance: 3.000%, Unchanging
  • 15-year fixed-rate refinance: 2.375%, Unchanging

Rates last updated on February 23, 2021. These rates are based on the assumptions shown here. Actual rates may vary.

A site like Credible can be a big help when you’re ready to compare mortgage refinance loans. Credible lets you see prequalified rates for conventional mortgages from multiple lenders all within a few minutes. Visit Credible today to get started.

Current mortgage rates

The spike in mortgage interest rates today marks a new high, with 30-year rates reaching 3.000% for the first time in 143 days. The average rate across all loan types also set a new record, topping 2.708%.

Current 30-year fixed-rate mortgages

The current interest rate for a 30-year fixed-rate mortgage is 3.000%. This is up from yesterday.

Current 20-year fixed-rate mortgages

The current interest rate for a 20-year fixed-rate mortgage is 2.875%. This is up from yesterday.

Current 15-year fixed-rate mortgages

The current interest rate for a 15-year fixed-rate mortgage is 2.250%. This is the same as yesterday.

You can explore your mortgage options in minutes by visiting Credible to compare current rates from various lenders who offer mortgage refinancing as well as home loans. Check out Credible and get prequalified today, and take a look at today’s refinance rates through the link below.

Rates last updated on February 23, 2021. These rates are based on the assumptions shown here. Actual rates may vary.

How mortgage rates have changed

Today, mortgage rates are up compared to this time last week.

  • 30-year fixed-rate mortgages: 3.000%, up from 2.750% last week, +0.250 
  • 20-year fixed-rate mortgages: 2.875%, up from 2.500% last week, +0.375
  • 15-year fixed-rate mortgages: 2.250%, up from 2.125% last week, +0.125

Rates last updated on February 23, 2021. These rates are based on the assumptions shown here. Actual rates may vary.

If you’re trying to find the right rate for your home mortgage or looking to refinance an existing home, consider using Credible. You can use Credible’s free online tool to easily compare multiple lenders and see prequalified rates in just a few minutes.

The factors behind today’s mortgage rates

Current mortgage and refinance rates are affected by many economic factors, like unemployment numbers and inflation. But your personal financial history will also determine the rates you’re offered.

Larger economic factors

  • Strength of the economy
  • Inflation rates
  • Employment
  • Consumer spending
  • Housing construction and other market conditions
  • Stock and bond markets
  • 10-year Treasury yields
  • Federal Reserve policies

Personal economic factors

  • Credit score
  • Credit history
  • Down payment size
  • Loan-to-value ratio
  • Loan type, size, and term
  • Debt-to-income ratio
  • Location of the property

How to get your lowest mortgage rate

If you want low mortgage rates, improving your credit score and paying down any other debt could secure you a lower rate. The size of your down payments also affects mortgage rates, with a low down payment likely to yield you a higher rate.

It’s also a good idea to compare rates from different lenders to find the best rate for your financial goals. According to research from Freddie Mac, borrowers can save $1,500 on average over the life of their loan by shopping for just one additional rate quote — and an average of $3,000 by comparing five rate quotes.

Credible can help you compare current rates from multiple mortgage lenders at once in just a few minutes. Are you looking to refinance an existing home? Use Credible’s online tools to compare rates and get prequalified today.

Mortgage interest rates by loan type

Whether you’re a first-time homebuyer shopping for a 30- or 15-year mortgage, or you’re looking to refinance an existing home, Credible can help you find the right mortgage for your financial goals.

Be sure to check out these loan rates, which you’ll be able to compare by annual percentage rate (APR) as well as interest rate:

Mortgage refinance:

Home purchase:

More resources on getting a home loan

Want to learn more about how to get a mortgage? Take a look at the following articles:

Source: foxbusiness.com

Depleted savings, ruined credit: What happens when all the rent comes due?

Millions of Americans unable to pay their rent during the pandemic face a snowballing financial burden that threatens to deplete their savings, ruin their credit and drive them from their homes.

A patchwork of government action is protecting many of the most financially strapped tenants for now. But it could take these renters — especially low-income ones — years to recover, even as the rest of the economy begins to rebound.

“Even if they say we can pay [missed rent] back in two or three years — that’s money we don’t have,” said Kelly Wise, a 32-year-old resident of L.A.’s Westlake neighborhood. After losing jobs selling merchandise at concerts and cutting fabric for Hollywood sets, she is more than $10,000 behind on rent.

Debt threatens to hit renters in several ways. Some have kept up with their rent payments but have turned to credit cards and high-interest loans. Others owe mounting bills directly to landlords that must be paid back when eviction moratoriums expire, opening the possibility — if the debt goes unpaid — for evictions and court orders for back rent. That could erode credit scores and lead to wage garnishments and more.

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“We are setting up millions of people for long-term harm and a cycle of economic and housing instability,” said Emily Benfer, chair of the American Bar Assn.’s COVID-19 Task Force Committee on eviction.

Renters across the nation are dipping into 401(k)s, taking on higher-interest debt, and scrambling for risky, essential-worker jobs to pay the rent. Research from Moody’s Analytics and the Urban Institute estimates 9.4 million U.S. renter households owed an average of $5,586 in back rent, utilities and related late fees as of January, for a total burden of $52.6 billion.

Other estimates show a smaller but still significant amount of rent debt. The full scope of the problem isn’t clear because the situation is fluid, and estimates so far are based on surveys and models, rather than hard data.

“[Bad] debt affects your credit score, and credit scores affect everything in your life,” said Yuval Yossefy, a manager at the Legal Aid Foundation of Los Angeles, a nonprofit law firm.

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Federal, state and local officials are grappling with how best to help people stay afloat — including keeping them housed — amid job losses, slashed incomes and pervasive disease. A second year of the COVID-19 pandemic has brought little reprieve, with new variants of the coronavirus threatening to accelerate the virus’ spread and cause longer disruptions to the economy and everyday life.

States are planning to get federal aid funds, which have begun to flow, into the hands of landlords to reduce the debt load on tenants. California, where median rent is 50% higher than in the nation at large, has passed what state leaders characterize as the strongest statewide measures to address the crisis, providing a potential model for how states could distribute rent funds.

The California measures, approved by the Legislature last week, extend a statewide moratorium on evictions for people with pandemic hardships through June. Significantly, they bar landlords from using rent debt accrued between March 2020 and June of this year to deny future housing — a nod to fears that unpaid rent may affect people’s housing for years to come.

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And to protect the most vulnerable, they establish a program that uses federal stimulus money to encourage landlords to forgive debt accrued by low-income tenants over the span of a year: April 2020 to March of this year.

Whether California landlords opt in, exactly how the program will be implemented, and if it will make a significant difference for those most in debt are still open questions. Nonprofit groups that work with low-income renters say the measures could be hard to enforce and, in terms of altogether forgiving some debt, rely precariously on optional landlord participation.

Eviction and debt can make it difficult to find new housing, take out loans, get some types of jobs or budget for necessities like food. In California, where rent was unaffordable for most tenants to begin with, the debt pile-on compounds a long-brewing problem.

Illustration: a man and a woman weighed down by balls and chains representing their debt.

Eviction and debt can make it difficult to find new housing, take out loans and get some types of jobs.

(Nicole Vas / Los Angeles Times)

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“A family that makes less than $30,000 a year, they are going to be on the verge of homelessness for the next 10 to 15 years because of this huge debt,” said Ana Grande, associate executive director of the nonprofit Bresee Foundation in Los Angeles, which provides assistance to low-income families.

Making matters worse: Studies show those with debt are least likely to afford it — even if they regain their old incomes. Compared with all L.A. County renters, households that earned less than $25,000 in 2019 were more than twice as likely as all renters to not pay their rent during the pandemic, according to a joint USC-UCLA survey. Households that earned between $25,000 and $50,000 were the second most common group to report not paying.

Nonpayment was also highest among Latino and Black Americans who, compared with white Americans, have been hit harder by the health and economic effects of the virus. They are also less likely to have family who can lend financial help given the country’s long-running racial wealth gap.

An eviction ‘changes the trajectory of a life’

Across the country, a series of problems can unfurl from a single eviction.

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Some landlords refuse to take tenants with an eviction on their record, while those who do are likely to charge more, fail to keep up their properties and have units located in dangerous neighborhoods, according to housing attorneys and other experts.

Studies have found people who are evicted are more likely to experience depression and to die of any cause. People move far from their support networks, or miss work while trying to find new housing and lose their jobs. Kids fall behind at school.

“An eviction is not a single event in a person’s life,” Benfer said. “It actually changes the trajectory of a life, because it has such catastrophic implications for fiscal and mental health.”

In a pandemic, experts say an eviction is particularly dangerous, leading a person to double up with friends and family in crowded housing situations that accelerate the virus’ spread.

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Absent an eviction on a person’s record, debt and poor credit scores can impede the ability to find housing, often leaving people to live in lower-quality conditions, said Ariel Nelson, an attorney with the National Consumer Law Center.

Poor credit scores also limit the ability to take out car, home and other loans at reasonable interest rates, putting homeownership further out of reach.

Past-due debts on a credit report may lead some employers to turn down a candidate for jobs that involve handling money, such as a bank teller or a cashier at a restaurant, said Bruce McClary, spokesperson for the National Foundation for Credit Counseling.

If debts continue to go unpaid, creditors can garnish wages, though restrictions exist on how much disposable income creditors can take.

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To preempt this, people might dip into savings or cut back on food. They may take out the only loans available to them: sky-high-interest products that critics say are nearly impossible to pay back.

Some tenants have already headed down the debt spiral. The USC-UCLA study found 8.5% of surveyed tenants paid some rent with a credit card in July, compared with 3% normally. Nearly 8% used a payday or other emergency loan.

An out-of-work graduate student in Lakewood told The Times she requested and got a budget increase for her student loan to pay rent, adding to her total student loan load. A laid-off worker in the concert industry said they used a 401(k) loan. Some people interviewed said they had already dipped into their savings.

Lamonte Goode, a 44-year-old dancer, says he may tap his savings to begin paying the roughly $10,000 in back rent he owes. With COVID-19 restrictions halting TV shows and theater performances, Goode said he hadn’t found steady work since March and was looking for a job outside his field to pay bills. Unemployment hasn’t been enough to cover expenses, including the $1,800-a-month rent on his one-bedroom in West Hollywood, he said.

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Asked if he thought he would be able to repay the debt, Goode said he didn’t know and that he was trying hard to come up with the money. He also raised the question: Should the burden fall on him? “I am not the reason COVID is happening. Yet I still have to pay the debt for something I am not in control over.”

“The fact that someone lost their job and couldn’t keep up on rent is a very unique and extreme circumstance and does not and should not have a bearing on their creditworthiness for this next almost-decade,” said Nisha Kashyap, a staff attorney at the pro bono law firm Public Counsel, citing how long bad debts typically stay on a credit report.

“This is a global pandemic that came out of nowhere.”

Sid Lakireddy of the California Rental Housing Assn., which represents landlords in the state, says he believes fears of mass evictions and long-term harm to credit are overblown. Most landlords would rather work with their tenants on repayment plans than fight in court over an eviction or debt, he said, particularly since vacancies have risen in many cities. “The last thing we want is to put a good tenant out on the street.”

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The federal government and state and local officials say they are trying to help both tenants and small landlords, who are also struggling.

Then-President Trump signed a bipartisan stimulus bill in December that approved $25 billion in rent and utility relief funds nationwide. President Biden extended the national eviction moratorium for people with pandemic hardships until the end of March, though critics say that ban is weak.

The new California law is stronger and contains provisions to reduce the likelihood that pandemic debt will have wide ripple effects.

Under the law, landlords cannot sell or assign any rent debt accrued during the pandemic until July 2021.

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Russ Heimerich, a spokesman for the state’s Business, Consumer Services and Housing Agency, said the law goes even further for low-income tenants with pandemic hardships: It forever bars landlords from selling rent debt accrued through June.

That would prevent a primary way credit scores could take a hit, since it’s usually debt collectors rather than landlords who report to the credit bureaus, said Nelson, the attorney. Heimerich said the law also included several incentives for landlords to participate in the rent relief program for low-income tenants, and that making it mandatory would have been legally impractical.

Still, critics of the law say it relies too much on tenants knowing their rights and having the means to exercise them, putting the least-resourced in a weak position to benefit.

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Some tenants have already been evicted, said Stephano Medina, an attorney with the Eviction Defense Network, during a recent news conference held online by tenant advocates on their concerns about the law. Moratoriums don’t stop landlords from filing cases, and tenants sometimes don’t realize they need to show up in court to defend themselves, Medina said.

One part of the law that is likely to be particularly hard to enforce is a clause that prohibits landlords from denying housing based on rent debt accrued during the pandemic, said Leah Simon-Weisberg, legal director with Alliance of Californians for Community Empowerment, an organizing group that advocates for low-income households. Prospective landlords often screen tenant candidates through their former landlords, allowing them to learn of debts they aren’t supposed to base decisions on.

It’s also unclear how many landlords will participate in the state’s rent relief program, which will pay landlords 80% of what they are owed if they forgive the remaining 20%. Lakireddy said that’s a good deal, and many landlords are likely to accept it.

California’s rent-control laws may complicate the landlord’s decision, said Tina Rosales, a lobbyist with the Western Center on Law and Poverty. Under state law, landlords can charge as much as they can get for a rent-controlled unit once it becomes vacant. So it could be more lucrative to pursue an eventual eviction and not forgive debts if a tenant is paying significantly below market rates.

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“It has the potential for landlords to pick and choose which tenants they will participate in the program with,” Rosales said, potentially affecting the most vulnerable.

Another outstanding question is how far California’s rental relief funds will go, given the range of estimates of how much rent people owe. Some tenants, for example, might miss out on debt forgiveness — not because their landlord won’t participate but because the pool of money runs out.

For many who can’t work from home, the cost of staying housed becomes a choice between incurring debt or accepting the risk of contracting COVID-19 on the job.

One family’s hard choices

The Buenos, a family of five in Los Angeles’ Koreatown neighborhood, were like many of the country’s hardworking households. Fernando prepped fish for a sushi chain. His wife, Maribel, cooked at a downtown L.A. brunch spot.

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Maria, 23, the eldest of three sisters, worked at a big-box retailer and helped out with the family bills. She set a goal to own her own home by 30.

The Buenos are now scattered. A promotion sent Maria’s father to New Jersey before the pandemic, but his hours were soon cut as lockdowns were put in place. Her mother lost her job and moved across the country with her youngest daughter to join Fernando.

At home in Koreatown, the bills fell on Maria, who stayed behind with her 18-year-old sister, Pamela. Their parents send money, but even coupled with Maria’s $20-an-hour wage, it’s not enough to cover the $2,500 in monthly rent. She exhausted her $3,000 in savings and is still $15,000 behind on rent.

Maria worries about how she’ll protect her younger sister and keep both of them from becoming homeless.

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James Engel, a principal with the company that manages Bueno’s building, said the company planned to work with residents on multiyear repayment plans when rent protections expire, rather than pursue evictions and collections. He wouldn’t comment on individual tenants’ cases.

Maria says she doesn’t want to risk having the debt over her head and is looking for a second job during the pandemic.

The possibility of getting sick is a sacrifice she’s willing to make.

Source: latimes.com

Today’s mortgage refinance rates move higher | February 12, 2021 – Fox Business

Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders, all opinions are our own.

Check out the mortgage refinancing rates for February 12, 2021, which are up from yesterday. (iStock)

Based on data compiled by Credible Operations, Inc., NMLS Number 1681276, current mortgage refinance rates increased compared to yesterday’s. Though 20-year rates bumped up by 250 basis points today, 15-year rates have not budged from 2.125% in four consecutive days.

  • 30-year fixed-rate refinance: 2.750%, Unchanging
  • 20-year fixed-rate refinance: 2.750%, Up from 2.500%, +0.250
  • 15-year fixed-rate refinance: 2.125%, Unchanging

Rates last updated on February 12, 2021. These rates are based on the assumptions shown here. Actual rates may vary.

If you’re thinking of refinancing your home mortgage, consider using Credible. Whether you’re interested in saving money on your monthly mortgage payments, or considering a cash-out refinance, Credible’s free online tool will let you compare rates from multiple mortgage lenders. You can see prequalified rates in as little as three minutes.

Current 30-year fixed-rate refinance

The current rate for a 30-year fixed-rate refinance is 2.750%. This is the same as yesterday.

Current 20-year fixed-rate refinance

The current rate for a 20-year fixed-rate refinance is 2.750%. This is up from yesterday.

Current 15-year fixed-rate refinance

The current rate for a 15-year fixed-rate refinance is 2.125%. This is the same as yesterday.

You can explore your mortgage refinance options in minutes by visiting Credible to compare rates and lenders. Check out Credible and get prequalified today.

Rates last updated on February 12, 2021. These rates are based on the assumptions shown here. Actual rates may vary.

How mortgage refinance rates have changed

Today, mortgage refinance rates have risen compared to this time last week.

  • 30-year fixed refinance: 2.750%, the same as last week
  • 20-year fixed refinance: 2.750%, up from 2.625% last week, +0.125
  • 15-year fixed refinance: 2.125%, up from 1.875% last week, +0.250

Think it might be the right time to refinance? To understand just how much you could save on monthly mortgage payments by refinancing now, crunch the numbers and compare rates using Credible’s free online tool. Within minutes, you can see what multiple mortgage refinance lenders are offering.

Rates last updated on February 12, 2021. These rates are based on the assumptions shown here. Actual rates may vary.

The factors behind today’s refinance rates

Current refinance rates, like mortgage interest rates in general, are affected by many economic factors, like unemployment numbers and inflation. But your personal financial history will also determine the rates you’re offered when refinancing your mortgage.

Larger economic factors

  • Strength of the economy
  • Inflation rates
  • Employment
  • Consumer spending
  • Housing construction and other market conditions
  • Stock and bond markets
  • 10-year Treasury yields
  • Federal Reserve policies

Personal economic factors

  • Credit score
  • Credit history
  • Down payment size
  • Loan-to-value ratio
  • Loan type, size, and term
  • Debt-to-income ratio
  • Location of the property

How to get your lowest mortgage refinance rate

If you’re interested in refinancing your mortgage, improving your credit score and paying down any other debt could secure you a lower rate. It’s also a good idea to compare rates from different lenders if you’re hoping to refinance, so you can find the best rate for your situation.

Borrowers can save $1,500 on average over the life of their loan by shopping for just one additional rate quote, and an average of $3,000 by comparing five rate quotes, according to research from Freddie Mac. Credible can help you compare multiple lenders at once in just a few minutes.

If you decide to refinance your mortgage, be sure to shop around and compare rates from multiple mortgage lenders. You can do this easily with Credible’s free online tool and see your prequalified rates in only three minutes.

Credible also has a partnership with a home insurance broker. You can compare free home insurance quotes through Credible’s partner here. It’s fast, easy, and the whole process can be completed entirely online.

Mortgage rates by loan type

Whether you’re a first-time homebuyer shopping for mortgage loans, or you’re seeking lower monthly payments on an existing home, Credible can help you keep an eye on current mortgage rates and find the right loan for your financial goals.

Be sure to check out these loan rates, which you’ll be able to compare by annual percentage rate (APR) as well as interest rate:

More resources on mortgage refinance

Want to learn more about refinancing your home loan? Take a look at the following articles:

Source: foxbusiness.com

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We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free – so that you can make financial decisions with confidence. The offers that appear on this site are from companies from which TheSimpleDollar.com receives compensation. This compensation may impact how and where products appear on this site including, for example, the order in which they appear. The Simple Dollar does not include all card/financial services companies or all card/financial services offers available in the marketplace. The Simple Dollar has partnerships with issuers including, but not limited to, Capital One, Chase & Discover. View our full advertiser disclosure to learn more.

Source: thesimpledollar.com

‘How Can We Catch Up?’ Mortgage Denials Stack the Deck Against Black and Hispanic Buyers

The American dream of homeownership is not an equal opportunity ambition.

Black and Hispanic home buyers are more frequently denied mortgages than white buyers—even when their financial pictures are similar, according to a realtor.com® analysis of 2019 mortgage data. When they are able to secure mortgages, Black and Hispanic borrowers are more likely to pay higher fees and interest rates on their loans than white and Asian borrowers.

“What we call it in my community is the ‘Black tax,'” says Donnell Williams. He is president of the National Association of Real Estate Brokers, an organization for Black real estate professionals, and a broker with Destiny Realty in Morristown, NJ.

“Even if we have a college degree, we’re still getting the same treatment as a white high-school dropout,” he says.

Black buyers were twice as likely to be refused mortgages than whites, according to the realtor.com analysis of 7.2 million loan applications in 2019. Only about 5.5% of whites had their loan applications rejected, compared with 6.8% of Asians, 9.3% of Hispanics, 11.7% of Blacks, and 10.8% of multi-minority race individuals hoping to be approved. These denials were only for applicants where all the data was available for fully completed applications that weren’t withdrawn.

Decades of discrimination against people of color have resulted in lower homeownership rates among minorities than among whites in America. And that has a deep, long-term impact on wide swaths of America, since homeownership is traditionally how generations have catapulted themselves into the middle class, as their properties appreciate in value over time.

Nearly three-quarters of whites, 74.5%, owned their homes in the last quarter of 2020, according to a quarterly report from the U.S. Census Bureau. However, just 44.1% of Blacks, 49.1% of Hispanics, and 59.5% of Asians were homeowners in the last three months of the year.

“There are a lot of obstacles that are working against buyers of color,” says Brett Theodos, a senior fellow at Urban Institute, a nonpartisan research group based in Washington, DC.

On top of racial discrimination, “they’re less likely to get help with the down payment from the bank of Mom and Dad,” says Theodos. “They’ve also [often] entered adulthood with higher student loan debt, less inheritance, and are on average in professions that earn lower wages.”

Many of these problems took root generations ago. Whites who served in World War II were offered low-cost mortgages for single-family homes in newly built suburbs when they returned. Blacks and other minorities were often denied access to these loans. In many cases, Blacks, in particular, were explicitly barred from living in white communities through a toxic combination of racial covenants written in deeds and government-supported redlining.

Black Americans, like these Tuskegee Airmen, served their country in World War II but returned home to face discrimination.
Black Americans, like these Tuskegee Airmen, served their country in World War II but returned home to face discrimination.

Bettmann/Getty Images

So Blacks who wanted to become homeowners often had to buy homes at inflated prices in less desirable areas. If they were able to get mortgages at all, they typically paid more for them. And homes in these areas haven’t appreciated nearly as much as homes in white areas, except in the places that have seen significant gentrification. As homeownership is used to catapult folks into the middle class and build wealth, that’s left many minorities with less money to pass down to future generations in the form of college tuition assistance or a down payment.

“How can we catch up? How can we be on par? We didn’t have that head start of generational wealth,” laments the National Association of Real Estate Brokers’ Williams. “You want a piece of the American dream, and it’s hard. You feel like your efforts are in vain.”

Realtor.com took a hard look at which races are most likely to be denied mortgages and the reasons provided for those rejections as well as who is paying the most for those loans. To do so, we analyzed 2019 mortgage application data available through the Home Mortgage Disclosure Act. The act, passed in 1975, requires most larger lenders to collect mortgage data and make it public. We looked at only first-lien mortgages on purchases of one- to four-family homes built on site, so manufactured homes wouldn’t be included.

When possible, we compared borrowers with similar financial profiles to see who was getting loans—and who wasn’t. However, our analysis doesn’t take into account certain discrepancies like credit scores.

Blacks most likely to be denied mortgages—even with good-sized down payments

According to our analysis, even aspiring home buyers of color with sizable down payments are more likely to be denied mortgages.

Black borrowers with 10% to 20% to put down were more than twice as likely to be denied than whites offering the same down payments. Lenders rejected 6% of whites and 9% of Asians—compared with 11% of Hispanics and multi-minority race borrowers and 13% of Blacks.

These higher denial rates may be due to minority borrowers having lower credit scores, more debt, or some other financial black mark. But lending experts believe that racial discrimination also plays a part.

For example, a loan officer might tell white borrowers to improve their credit before submitting an application, be more understanding of alternative forms of income, such as a family member contributing or a side gig, or wait until mortgage rates fall a little so their monthly payment is lower. The latter would increase such borrowers’ shot at getting a loan. But a loan officer may not do the same for customers of color.

“Some of it is decisions being made by the lending officers,” says sociology professor Lincoln Quillian of Northwestern University in Evanston, IL. “They have powerful stereotypes of who is likely to repay loans.”

Black and Hispanic borrowers often pay more for their mortgages

Black and Hispanic borrowers were more likely to receive higher mortgage interest rates on their loans—which can add up to big money over time.

About 59% of white borrowers and 52% of Asian borrowers received rates within 1 percentage point of the best (i.e., lowest) possible rate. However, only 51% of multi-minority race borrowers, 47% of Hispanics, and 44% of Blacks fared as well. (It’s unknown whether some of these borrowers pre-paid or bought down their interest rates during the closing process.)

Even the smallest differences in rates can really add up. A single percentage point difference can lead to a larger monthly mortgage payment and tens of thousands of dollars more paid out over the life of a 30-year fixed-rate loan. (The exact difference depends on the purchase price of the home, the exact mortgage rates, and the size of the down payment.)

A recent study found that wealthier Blacks were given higher mortgage rates than low-income whites.

Black households making between $75,000 and $100,000 a year were saddled with a median 4.215% mortgage interest rate in 2019, according to a report from the Joint Center for Housing Studies at Harvard University. However white households earning $30,000 or less had a lower median mortgage rate of 4.16%. The study looked at 2019 U.S. Census Bureau data.

Even Black households raking in $100,000 a year or more paid slightly higher interest rates, 4.169%, than low-income whites. Whites with six-figure incomes had median 3.946% rates—about 22 basis points less than Blacks who were also earning $100,000 or more.

“We have some deep problems in the mortgage market,” Raheem Hanifa, a research analyst at the center who wrote the study.

“Some of the differences in mortgage [costs] is due to differences in who the lenders are. There’s evidence that Black and Hispanic buyers are more likely to be marketed to by lenders who are higher-cost,” says sociology professor Quillian. “White and Asian borrowers are more likely to go to traditional banks.”

Predatory lending and the proliferation of subprime mortgages doled out to communities of color led to the last housing crash, and plunged the world into a financial crisis more than a decade ago. But at least some of today’s pricier lenders may simply be smaller operations that need to charge more since they’re not dealing with the economies of scale of the bigger banks.

People of color more likely to be denied loans due to debt

Minorities are more likely to be denied mortgages due to their debt. Before deciding whether to grant loans, lenders look closely at potential borrowers’ debt loads. Their goal is to make sure borrowers can afford to pay back their credit card, student loan, car, and other payments—on top of a mortgage.

Only 1.6% of potential whites borrowers had their applications rejected because of their debt loads—compared with 2.5% of Asians, 3.1% of Hispanics, and 3.8% of Blacks. About 3.7% of multi-minority race applicants were also rejected.

While that does not sound like that much of a difference, it means that 1 in 64 white applicants is denied versus 1 in 26 Blacks.

Some minority borrowers may simply carry more debt than white borrowers. Many face discrimination in the workplace that can manifest in lower salaries and fewer promotions. Also, they may not receive the same level of financial help from their families when they get into a tough financial spot.

Black households were more than twice as likely to have student loan debt than white households, according to a recent report from the National Association of Realtors®. About 43% of Black households had student debt, at a median $40,000, compared with 21% of whites, at a median $30,000 in student debt. (The report was based on a survey of more than 8,200 home buyers who purchased a primary home from July 2019 to June 2020.)

Employment and credit histories also led to higher mortgage denial rates for minorities

Blacks and Hispanics were also more likely to be denied a loan due to their employment history. One in 568 white applicants was rejected due to their work history, compared with 1 in 282 Blacks.

“People of color, notably Native Americans, Blacks, and Hispanics, face higher rates of discrimination in hiring,” says the Urban Institute’s Theodos. “It can be more difficult to be promoted or advanced.”

That plays a big part in how much they’re earning. In 2019, Asian households had the highest median incomes of $98,174, followed by non-Hispanic white households at $76,057, according to U.S. Census Bureau data. Hispanic households had a median income of $56,113, while Black households brought in the least, at $45,438.

Blacks and Hispanics are also more likely to lose out on a loan due to their credit scores. About 0.6% of Asians and 1% of whites were denied due to their credit histories compared with 1.6% of Hispanics, 2.9% of Blacks, and 2.4% of multi-minority races.

Typically, people build good credit by paying off their student loans, car loans, and credit card bills on time each month. However, many lower-income Americans are less likely to have graduated from college or have credit cards. And what folks do pay every month—their rent, utility, and cellphone payments—often aren’t counted toward credit profiles.

“It’s not just discrimination today that is why we see denials at higher rates for Blacks and Hispanics. It’s the byproduct of generations of systemic racism,” says Theodos. “We have a long way to go in overcoming the deep, historical divide of opportunity for people of color in this country.”

Source: realtor.com