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Use These Mortgage Charts to Easily Compare Rates

Last updated on December 14th, 2020

One of the things prospective home buyers and existing homeowners seem to care most about is mortgage rates.

And for good reason – the interest rate you receive on your home loan dictates what you’ll pay each month, sometimes for as long as the next 30 years. That’s 360 months!

The rate you receive can also completely make or break your home purchase, or sway the decision to refinance a mortgage.

As such, I decided it would be prudent (and helpful) to create a “mortgage rate chart” that displays the difference in monthly mortgage payment across a variety of interest rates and loan amounts.

My New Expanded Mortgage Rate Chart

mortgage rate chart

  • I created a fresh mortgage rate chart that factors in the new record low rates
  • And the possibility of them drifting even lower over coming months and years
  • The chart is also more granular because rates are broken down by eighths as opposed to quarters
  • Also available in 50k increments if your loan amount is closer to that

mortgage rate chart 150k

These charts can make it quick and easy to compare rate quotes from mortgage lenders, or to see the impact of a daily rate change in no time at all.

After all, mortgage rate updates can happen frequently, both daily and intraday. And rates are especially erratic at the moment.

So if you were quoted a rate of 3.5% on your 30-year fixed mortgage two weeks ago, but have now been told your home loan rate is closer to 4%, you can see what the difference in monthly payment might be, depending on your loan amount.

Today, that scenario might be the opposite. A quote of 3.5% a month ago might now be 3%, or even below 3%.

That has forced me to create a new expanded mortgage rate chart that contains 30-year fixed interest rates all the way down to 2%. Whether they get anywhere close to that remains to be seen, but never say never.

I just hope I don’t have to make another chart…

Anyway, this is all pretty important when purchasing real estate or seeking out a mortgage refinance, as a significant jump in monthly mortgage payment could mean the difference between a loan approval and a flat out denial.

Or you might be stuck buying less house. Or perhaps driving until you qualify!

30-Year Mortgage Rates Chart

Mortgage Payment Chart

Click to enlarge

  • Use the 30-year mortgage rates chart above
  • To quickly ballpark monthly principal and interest payments
  • At varying interest rates and loan amounts
  • While handy for estimates, don’t forget the taxes and insurance!

My first mortgage rate chart highlights monthly payments at different rates for 30-year mortgages, with loan amounts ranging from $100,000 to $1 million.

I went with a bottom of 3.5%, seeing that mortgage interest rates were around that level recently, and generally don’t seem to go any lower than that. Well, maybe they will…one can hope.

There is certainly the possibility that fixed rates could drift back in that direction with all the trade war uncertainty and the election year on the horizon.

Regardless, one might be able to buy their rate down to around that price, assuming they want an even lower rate on their home mortgage.

For the high-end, I set interest rates at 6%, which is where 30-year fixed mortgage rates were for many years leading up to the mortgage crisis.

With any luck, they won’t return there anytime soon…though in time they could potentially surpass those levels. Eek!

Yep, they could rise even higher over time depending on what transpires in the mortgage market, but hopefully home loan rates won’t climb back to the double-digits last seen in February 1990.

That fear aside, this mortgage payment chart should give you a quick idea of the difference in monthly payments across a range of mortgage rates and loan amounts, which should save some time fooling around with a mortgage calculator.

It should also make your job easier when you compare rates from different lenders. Or when you compare your current mortgage rate to what’s being offered today.

For the record, you can use the 30-year chart above for adjustable-rate mortgages too because they’re based on the same 30-year loan term. They just don’t offer fixed rates beyond the initial teaser rate offered.

So if you’re looking at a 5/1 ARM, you can still use this chart, just know that your interest rate will adjust after those first five years are up, and the chart will no longer do you any good.

That is, unless you’re looking to refinance your mortgage to a new low rate to avoid the interest rate adjustment.

Tip: Use the charts to quickly determine the impact of a higher or lower credit score on rates. If you’re told you can get a rate of 4% with a 760 credit score or a rate of 4.5% with a 660 score, you’ll know how much marginal or bad credit can really cost.

15-Year Mortgage Rates Chart

15 Year Fixed Mortgage Payment Chart

Click to enlarge

  • The 15-year mortgage rates chart helps illustrate the massive cost difference of a shorter-term mortgage relative to a 30-year mortgage
  • Use it to determine the capability of making larger monthly payments at various loan amounts
  • And also to see if refinancing makes sense at certain interest rates
  • While payments are significantly higher, you can save a ton of money on interest while paying off your home loan in half the time

Now let’s take a look at my mortgage rates chart for 15-year fixed mortgages, which are also fairly popular, but a lot less affordable.

I used a floor of 3% and a max rate of 5.50%.  Again, rates can and probably will climb higher, just hopefully not anytime soon. Spoiler alert: They drifted lower, but not much lower than 3%.

For the record, you can obtain mortgage rates at every eighth of a percent, so it’s also possible to get a rate of 3.625%, 3.875%, 4.125%, 4.375%, and so on.

But for the sake of simplicity, I spaced it every quarter of a percent except for the jump from 5% to 5.5%.

These charts are really just a quick reference guide to get ballpark monthly mortgage payment amounts if you’re just beginning to dip your toes in the real estate pool.

If you’re getting serious about home buying or looking to refinance an existing mortgage, whip out a loan calculator to get the exact PITI payment.

Some Interesting Takeaways from the Mortgage Rate Charts

  • Monthly payment differences are larger when interest rates are higher
  • Higher mortgage rates may be worse than larger loan amounts
  • Small loan amounts are less affected by interest rate movement
  • Those with smaller loan amounts have a higher likelihood of affording 15-year payments

The lower the interest rate, the smaller the difference in monthly payment. As rates move higher, the difference in payment becomes more substantial. Something to consider if you’re looking to pay mortgage discount points.

If you look at the 30-year mortgage rate chart, the monthly payment difference on a $500,000 loan amount between a rate of 3.5% and 3.75% is $70.36, compared to a difference of $77.93 for a rate of 5.25% vs. 5.5%.

Additionally, higher mortgage rates can be more damaging than larger loan amounts. Again using the 30-year mortgage rates chart, the payment on a $400,000 loan amount at 3.50% is actually cheaper than the payment on a $300,000 loan at 6%.

So you can see where an individual who purchases a home while mortgage rates are super low can actually enjoy a lower mortgage payment than someone who buys when home prices are lower.

However, for someone purchasing a really expensive home, upward interest rate movement will hurt them more than someone purchasing a cheaper home.

Sure, it’s somewhat relative, but it can be a one-two punch for the individual already stretched buying the luxury home.

To illustrate, the difference between a rate of 5% and 5.25% for loan amounts of $300,000 and $900,000 is about $46 vs. $138, respectively.

Be Sure to Look at the Big (Payment) Picture

  • Most advertised mortgage payments only include principal and interest
  • There is a lot more that goes into a monthly housing payment
  • Including property taxes, homeowners insurance, HOA dues, PMI, and so on
  • Don’t buy more than you can afford without considering all of these items

Lastly, note that my mortgage payment graphs only list the principal and interest portion of the loan payment.

You may also be subject to paying mortgage insurance and/or impounds each month. Property taxes and homeowner’s insurance are also NOT included.

You’ll probably look at this chart and say, “Hey, I can get a much bigger mortgage than I thought.”  But beware, once all the other costs are factored in, your DTI ratio will probably come under attack, so tread cautiously.

And don’t forget all the maintenance and utilities that go into homeownership. Once you hire a gardener, pool guy, and run your A/C and/or heater nonstop, the costs might spiral out of control.

I referenced this problem in another post that focused on if mortgage calculators were accurate, in which I found that housing payments are often greatly underestimated.

So you might want to drop your loan amount by $100,000 if you think you can just get by, as those other costs will certainly play a role.

Oh, and if you want to nerd out a little bit (a lot), learn how mortgages are calculated using real math, not some fancy calculator that does it all for you.

Or just use my mortgage payment calculator and enjoy the simplicity of it all. The choice is yours.

Source: thetruthaboutmortgage.com

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You Can Buy More House If You Put More Money Down

I was reading through the latest quarterly home price report from the National Association of Realtors yesterday and stumbled upon an interesting nugget.

It might seem obvious, but it’s worth pointing out to prospective home buyers who might be lacking in the income department.

Simply put, if you are able to come to the table with more money for a down payment, you’ll be able to buy more house.

Allow me to explain, using the NAR’s latest Metropolitan Median Area Prices and Affordability and Housing Affordability Index release (Q2 2020).

National Median Home Price Rises to $291,300

  • Expect home prices to keep rising throughout the year and next
  • This should continue to hurt purchasing power despite low mortgage rates
  • But if you’re able to come in with a larger down payment
  • You can keep your loan amount at a reasonable level and boost affordability

In the report, they noted that the national median existing single-family home price rose to $291,300 in the second quarter of 2020, up 4.2% from a year earlier ($279,560).

For the record, the pace slowed a bit as the median price in the first quarter of 2020 was 7.7% higher than it was during the first quarter of 2019.

Still, we continue to see healthy (maybe too healthy) home price growth and it’s probably going to keep rising, which should make it more difficult for some would-be buyers to purchase homes due to DTI restrictions.

Yes, mortgage lenders limit what you can afford based on your income, but there’s a way around this if you happen to have money in the bank (or a relative willing to gift you money for a down payment).

Ultimately, the more you put down, the smaller your loan amount will be. And the smaller your loan amount, the less income you’ll need to qualify for a mortgage.

In the report, NAR highlighted the fact that affordability improved in the second quarter compared to the second quarter of 2019 because of lower mortgage rates.

But that might not continue to be the case if home prices keep surging higher and interest rates stay relatively flat.

What It Takes to Buy a Median Priced Home Today

  • Let’s consider the income you need to buy a median-priced home
  • Which varies based on the down payment you’re able to come up with
  • As you can see, the more you put down, the less you need to make
  • Of course you’ll have to save more of your money along the way or rely on a gift

This is what is now needed in the way of income to purchase a single-family home at the national median price:

If 5% down payment: income of $58,613
If 10% down payment: income of $55,528
If 20% down payment: income of $49,358

Assuming you’re a frugal person who actually socks away savings, unlike most Americans, you’ll be able to buy the median priced home despite having significantly lower income than other individuals.

In fact, if you’re able to come in with a 20% down payment, you can buy that $291,300 median home price with less than $50,000 in annual household income.

Meanwhile, someone only able to muster a 5% down payment will need to be making nearly $60,000 per year.

NAR assumes a mortgage rate of 3.29% and a monthly principal and interest payment limited to 25% of gross income.

You might be thinking that the person with a lower income probably has more difficulty saving, but that’s not always the case.

There are plenty of folks who simply live beyond their means, despite making more money, and wind up with nothing in the way of savings.

The point here is that you don’t need to make a ton of money in order to buy a house. You’ll just need more money for the down payment.

Another benefit of a higher down payment, specifically of 20% or more, is that you can avoid mortgage insurance entirely.

Additionally, you’ll be able to obtain a lower mortgage rate because pricing adjustments are lower when your loan-to-value ratio (LTV) is 80% or less.

You’ll also have a decent chunk of equity in your home, which will give you the ability to sell it if need be, or refinance in the future.

And overall, you’ll have more lending options when you put more money down, along with fewer close calls if the numbers don’t quite add up while in underwriting.

Avoid Other Debt and Your Income Goes Further

  • If your income is constrained and not expected to increase
  • There’s another way you can further your purchasing power
  • Simply by paying off debt and not accumulating new debt prior to home purchase
  • This means more of the income you have can go toward a monthly mortgage payment

Another way to boost your home buying power is simply to avoid other debt.

If you don’t have any outstanding credit card debt, auto loans, student loans, etc., your income will go further when it comes to the mortgage.

When lenders determine how much you can afford, they combine all your monthly liabilities from your credit report and use your income to offset them.

If you have a ton of liabilities, your income won’t go as far since it will already be swallowed up by car payments, credit card payments, etc.

Conversely, if you’ve paid off your car and carry no other debt, that full amount of income will be available to offset your housing costs, boosting what you can afford.

Read more: What you can afford isn’t necessarily what you should spend.

Source: thetruthaboutmortgage.com

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Record Number of Home Buyers Searching Outside Their Own City as Properties Fly Off the Shelf

Posted on June 25th, 2020

After some uncertain months while COVID-19 first emerged, home buying has become hot again. Super-hot.

In fact, homes are being scooped up at the fastest pace in more than two years, per Zillow.

Homes Are Going Pending Fast

  • Homes went pending in a median 22 days during week ending June 13
  • Down 9 days month-to-month and 3 days year-over-year
  • Listings going pending in as few as 5 days in Columbus, Ohio
  • But slowing down in metros like NYC (up to 70 days from 47 last year)

During the second week of June, the typical listing accepted an offer after just 22 days, the best reading since June 2018, when it was a 21-day average.

It was even faster in certain Midwest cities like Columbus, Cincinnati, and Kansas City, where homes went pending in less than a week, in as little as five days on average.

Of course, this could be a temporary trend related to sellers being more reticent about listing their homes, while home buyers continue to exhibit a relatively strong appetite.

We’ll know as more listings hit the market and eliminate some of the recent scarcity. Zillow said new listings were up 14% month-over-month, so that could balance the market somewhat.

Meanwhile, there are still slow housing markets, with New York properties typically spending a staggering 70 days on the market before an offer is accepted, an increase of more than three weeks from the same time last year.

Similar trends have been seen in cities like Miami (55 days) and Atlanta (38 days), also struggling with COVID-19 related closures and disruptions.

Density Has Become a Problem

home buyers moving

  • Record 27% of prospective home buyers looking outside their metro
  • Up from 26% in first quarter of 2020 and 25.2% in Q2 2019
  • Redfin says searching for out-of-town homes could be related to coronavirus
  • Searches for homes in small towns continue to surge on Redfin website

If there were a word to define 2020 at this moment, it would probably be “distance.”

Whether it’s social distancing, six feet apart, tables spaced apart, walking on different sides of the street, one-way grocery aisles, etc.

Now it appears living too close to someone else is also a problem, as evidenced by the uptrend in rural and small town home searches.

Per Redfin, pageviews of property listings in towns with fewer than 50,000 residents increased 87% year-over-year in May.

That was more than triple the 22% year-over-year increase in pageviews seen for properties in cities with more than one million residents.

So it’s pretty clear a lot of prospective home buyers have the same idea about greener and larger pastures.

Specifically, many of them want to leave once-bustling metropolises like Los Angeles, New York, and San Francisco, which had the biggest net outflows (more leaving than coming) in April and May.

As for where everyone is going, the top destinations are:

– New York residents want to move to Atlanta
– San Francisco residents want to move to Sacramento
– Los Angeles residents want to move to San Diego
– Chicago residents want to move to Phoenix
– Boston residents want to move to Portland, Maine

The trend of moving from more expensive cities to cheaper ones isn’t new, but it’s probably more practical now since a lot of people can work remotely without issue.

This is especially true for tech workers, whose companies (Facebook, Twitter and Slack) have embraced the work-from-home movement.

For many, this means moving from expensive urban centers or coastal cities to more spread out, inland metros.

The big question remains whether this is a permanent, lasting sea change, or just a short-term trend that will reverse itself in coming months or years.

If it’s short-lived, it could mean opportunity to buy a home or condo in a once-hot urban center at a discount with less competition. Same goes for properties in vacation locales that have cooled.

Will Hot Housing Market Taper Off Later This Year?

  • There are possible headwinds facing the housing market in fall
  • High and lasting unemployment has yet to be factored in
  • And the end of forbearance programs could lead to a foreclosure surge
  • A COVID-19 second wave is also a major concern

We’re only halfway through 2020 and it has been beyond painful. It’s hard to imagine what’s to come for the rest of the year.

And it won’t be without fireworks, given we’ve got a presidential election in the fall that could be more contentious than usual thanks to increased mail-in voting.

There’s also the nagging issue of unemployment, which both the stock market and housing market have seemed to shrug off so far.

At some point, we’re going to need to face the music, and the same goes for expiring mortgage forbearance programs.

While some homeowners will be able to pick up where they left off in making monthly mortgage payments, others may not be so fortunate.

This could lead to an increase in defaults, foreclosures, and higher REO inventory, which could hurt the seemingly unscathed housing market.

Of course, an ongoing inventory shortage could provide a strong buffer, assuming the pool of eligible home buyers remains.

Moody’s Analytics chief economist Mark Zandi told CNBC he thinks the housing market will “cool off a bit later this year.”

He added that he doesn’t expect a “sharp downturn,” noting that “there are some very solid underpinnings” giving the housing market strength.

I tend to agree – it’s not 2008 all over again. However, at some point in coming years it might be.

Read more: Should I rent or buy a home?

Source: thetruthaboutmortgage.com

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Despite COVID-19, You Can Still Get a Jumbo Home Loan

While lots of lenders have recently cut back on offerings that aren’t backed explicitly by the government, some are rolling out new loan programs to help homeowners get the financing they need.

We’ve already seen non-QM lending basically dry up as the COVID-19 pandemic hit, though some lenders in the space are still hanging on with reduced menus.

And I’ve reported that numerous large, depository banks have also eliminated their higher-risk programs, including Chase upping credit score requirements and no longer offering HELOCS.

Similarly, Wells Fargo tightened its mortgage guidelines and even implemented a rule requiring $250,000 in one of their bank accounts in order to get a jumbo loan.

Clearly that won’t work for a lot of folks, so if you’re in need of a jumbo home loan, it might be a lot harder than it used to be.

Sprout Mortgage Launches Premier Jumbo Program

  • Loan amounts as high as $3 million for purchase or refinance
  • Up to 90% loan-to-value (LTV) with a 700 FICO score and no PMI
  • Up to 43% DTI ratio (40% DTI for LTV>85%)
  • 1-4 unit primary, second homes, and investment properties (condos included)

One mortgage lender has just launched a new proprietary jumbo loan program that allows loan amounts up to $3 million on a 30-year fixed, which is available to approved mortgage brokers and correspondents.

Sprout Mortgage based in East Meadow, New York unveiled its so-called “Premier Jumbo” today to meet the demand of home buyers and homeowners left behind by larger banks and lenders.

They will allow borrowers to secure jumbo loan financing with a FICO score as low as 660, with loan-to-value (LTV) ratios as high as 80% and loan amounts up to $1 million.

Those with credit scores of 700 or higher will be able to take out $1 million loan amounts as high as 90% LTV.

And if you’ve got a 740 or higher credit score, it’s possible to get a $3 million mortgage up to 70% LTV.

Note that the max debt-to-income ratio (DTI) is 43%, or 40% for LTVs above 85%.

You also need to have cash on hand, with minimum asset reserves varying from six months to 12 months depending on the loan attributes, though gift funds are acceptable.

Sprout also allows one 30-day mortgage late in the past 24 months, but you must have been current over the past six months.

They don’t allow foreclosure, bankruptcy, or deed-in-lieu of foreclosure in the past seven years, or short sale, pre-foreclosure, or loan modification in the past four years.

Yes, You Can Get Cash Out with That Too

  • Many lenders have stopped offering cash out refinances in light of COVID-19
  • Too risky to offer them since Fannie and Freddie won’t buy them if in forbearance
  • Sprout allows cash out up to 80% LTV with $1 million loan amounts
  • Only need a 680 credit score to qualify and investment properties are also in play

It’s also possible to get a cash out refinance via the new loan program, another area lenders have been shying away from due to widespread mortgage forbearance.

In short, Fannie Mae and Freddie Mac aren’t buying cash out refis if they go into forbearance, so it’s riskier to originate such loans right now.

But Sprout is happy to offer cash out refis, even allowing $1 million loan amounts up to 80% LTV on primary residences with a 680 minimum credit score.

If you own an investment property, you can also get cash out up to 60% LTV on loan amounts as high as $1.5 million with a 700 FICO score.

Now the big question is how good are their mortgage rates? It’s great that they offer such flexible financing terms, but you’ve got to see how competitive they are, assuming other lenders can match their programs.

As always, be sure to take the time to shop around if you need a jumbo loan – yes, it’ll be harder to do so, but right now pricing can really vary from shop to shop.

About the Author: Colin Robertson

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

Source: thetruthaboutmortgage.com

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Mortgage Lenders Now Providing Payment Relief Due to Coronavirus

Last updated on December 28th, 2020

I will update this post as new information is made available, but we’re starting to see mortgage relief packages rolled out by all the major housing agencies.

Whether the government launches some sort of HAMP-esque program that goes beyond the usual loss mitigation options remains to be seen.

That may be dictated by how bad the coronavirus outbreak gets, and its eventual effect on the housing market.

Coronavirus Relief for FHA Loans

The Department of Housing and Urban Development (HUD), which oversees the FHA home loan program, has halted foreclosures and evictions for the next 60 days as a result of COVID-19.

This applies to the initiation of a foreclosure and the completion of any foreclosures in process.

Additionally, lenders must cease all evictions of individuals living in an FHA-insured single-family property.

This guidance applies to both forward FHA loans and reverse mortgages, known as Home Equity Conversion Mortgages (HECM).

With regard to mortgage payment relief, the FHA has called on loan servicers to offer its suite of loss mitigation options, including short and long-term forbearance options, along with mortgage loan modifications.

Coronavirus Relief for VA Loans

The VA has released a circular titled, “Foreclosure Moratorium for Borrowers Affected by COVID19,” which strongly encourages a 60-day halt on foreclosures and evictions beginning March 18th, 2020.

They have also encouraged holders of VA guaranteed home loans to extend forbearance to borrowers affected by COVID-19.

Loan servicers have been to told to evaluate the VA Loss Mitigation options outlined in Chapter 5 of the VA Servicer Handbook M26-4.

This may include the reapplication of prepayments to cure or prevent a loan default, and allows the terms of any guaranteed loan to be modified without the prior approval of the VA, assuming conditions in the regulation are met.

USDA Rural Development Response

First off, USDA Rural Development will continue to provide USDA home loans and grants to those in rural communities nationwide.

Additionally, they have granted authority to lenders that participate in their Single-Family Housing Guaranteed program to work with borrowers having difficulty making payments.

Lastly, RD will issue guidance to its Single-Family Housing Direct borrowers to ensure those in need of payment assistance are adequately reached.

Fannie Mae and Freddie Mac Assistance Options

The pair, which back the vast majority of home loans, have both suspended foreclosure sales and evictions for the next 60 days.

Both Fannie Mae and Freddie Mac will provide payment forbearance for up to 12 months.

Fannie Mae says it will either reduce or suspend borrower’s mortgage payments during that time.

Neither will assess penalties or late fees against borrowers.

Freddie Mac says forbearance is an option regardless of occupancy, meaning primary residences, second homes, and investment properties are all eligible for relief.

Additionally, both are suspending the reporting of delinquencies related to any forbearance, repayment, or trial plans to the credit bureaus.

So homeowners won’t have to worry about getting dinged by the credit bureaus as they seek assistance.

Boston Mortgage Relief

The Mayor of Boston, Marty Walsh, has inked a deal with 12 banks and mortgage lenders that allows homeowners to defer mortgage payments for at least three months.

The institutions in question include Bank of America, Boston Private, Cambridge Trust Company, Century Bank, Citizens Bank, City of Boston Credit Union, Dedham Savings Bank, Eastern Bank, Mortgage Network, Inc., PrimeLending, Salem Five Bank, and Santander Bank.

The participating lenders will extend loan deferment if needed, and have also agreed to a collective goal of approving deferments within 21 days of application.

Only “essential paperwork” is needed from the borrower, and it will not be reported to the credit bureaus as being a late, nor will they will charge late fees.

Most importantly, once the deferment period comes to an end, the homeowner will not be required to pay the total deferment/forbearance amount in a lump sum.

Connecticut COVID-19 Mortgage Assistance

Connecticut Governor Ned Lamont has announced that his administration has reached an agreement with 50+ credit unions and banks to offer mortgage relief to homeowners affected by the COVID-19 pandemic.

Like other states, there will be a 90-day grace period on mortgage payments and no foreclosures/evictions for 60 days.

Additionally, homeowners will get relief from any fees and charges for 90 days, and won’t suffer any negative credit score impact.

Nevada Mortgage Relief Measures

  • Moratorium on evictions and foreclosures for duration of the State of Emergency
  • 90-day grace period on mortgage payments
  • Banks have agreed to work directly with customers to ensure no one pays a giant lump sum payment to get back on track

Governor Sisolak and State Treasurer Zach Conine have announced relief options for homeowners in the state of Nevada.

They say “a vast majority of lending institutions are offering homeowners facing financial hardships due to COVID-19.”

This includes a a 90-day grace period on mortgage payments, and more importantly, have agreed to “ensure that no one is hit with a giant lump sum payment if they need to stop making payments for a couple of months.”

“In many cases, these payments can instead be added onto the back end of a loan, so people can get back to work and get back on their feet.”

New Jersey Mortgage Grace Period

New Jersey Governor Phil Murphy announced mortgage payment forbearance of up to 90 days for borrowers economically impacted by COVID-19.

  • 90-day grace period for mortgage payments
  • No negative credit impact for receiving assistance
  • No mortgage-related fees or charges for at least 90 days
  • Moratorium on foreclosure sales and evictions for at least 60 days

New York State Mortgage Assistance

In New York State, Governor Cuomo signed an executive order that provides mortgage relief, including a 90-day payment holiday to homeowners impacted by the novel coronavirus.

Here are the details:

  • Postpones or suspends any foreclosures
  • Waives mortgage payments for 90-days based on financial hardship
  • No negative reporting (late payments) to credit bureaus
  • Grace period for loan modifications
  • No late payment fees or online payment fees

Apparently, any missed monthly mortgage payments are being tacked on to the back of the loan. It’s unclear if this will effectively freeze the mortgage or result in a balloon payment.

Worldwide Response

Last week, Italy’s deputy economy minister announced that mortgage payments would be suspended across the entire country in light of the coronavirus (COVID-19) outbreak.

While plenty of Italian homeowners might not actually contract the virus, the economic implications of a countrywide shutdown could affect their ability to make timely housing payments.

For example, with Italy effectively coming to a standstill, many homeowners may not be able to work until the lockdown is lifted.

It’s unclear who will be paid during this time. There are also longer-term layoffs to consider if businesses are permanently affected.

In the UK, similar measures are already being extended by individual banks, including TSB Bank, which is offering a “repayment holiday for up to two months.”

My understanding is this gives homeowners a two-month break before they must resume making timely monthly mortgage payments.

Similar moratoriums are being offered to mortgage borrowers by other British banks, and they’re also making it easier for customers to get access to their cash if need be.

U.S. Mortgage Lenders May Not Be Far Behind

  • Italian banks have already suspended mortgage payments nationwide
  • UK banks are now offering mortgage holidays to affected customers
  • Matter of time before U.S. banks and lenders extend similar assistance
  • If you need help paying your mortgage, contact your loan servicer and look out for news bulletins

While no major coronavirus restrictions have made it to the United States just yet, at least beyond some universities and other private institutions, there’s a chance we could experience a similar clampdown soon.

Really, it sounds more like a matter of when than if, despite no mandatory freedom of movement likely.

This is known as “social distancing,” designed to limit human-to-human contact and stop the spread of the fast-moving COVID-19.

Assuming that happens, there’s a good chance mortgage lenders will step in and offer temporarily relief for those affected.

Again, while the virus itself may not directly affect an individual homeowner’s health, disruptions in multiple industries could lead to layoffs or the inability to perform job duties.

Generally, when a natural disaster occurs, Fannie Mae, Freddie Mac, and HUD offer some level of assistance and/or guidance to loan servicers to ensure borrowers can get back on their feet, or avoid falling behind to begin with.

This may involve the suspension or reduction of mortgage payments for 90 days up to six months, depending on the circumstances.

They may also suspend eviction lock-outs on real estate owned (REO) inventory to avoid displacing tenants during what could be a sensitive time.

Tip: If you need assistance paying your mortgage at this time, be sure to keep an eye on the FHFA or HUD websites, along with Fannie Mae and Freddie Mac’s, for any pertinent announcements.

Homeowners Are Helping Themselves to Lower Mortgage Rates

  • Record low interest rates lead to 55.4% increase in weekly mortgage applications, per MBA
  • Refinance share surged to 76.5% of total loan volume from 66.2% a week earlier
  • 2020 mortgage origination forecast revised up to $2.61 trillion
  • Industry group now expects refis to account for $1.23 trillion in volume, up 36.7% from earlier estimates

In the meantime, homeowners seem to be helping themselves by taking advantage of the record low mortgage rates also on offer at the moment.

Instead of asking for a payment holiday, borrowers are lowering their mortgage rates in droves via a traditional mortgage refinance.

This morning, the MBA reported that home loan applications surged 55.4% from a week earlier as refis jumped 79% to their highest level since April 2009.

Home purchase applications also rose six percent from a week earlier, a good sign in an otherwise uncertain time.

That pushed the refinance share of mortgage activity to 76.5% of total applications from 66.2% a week earlier.

The record low interest rate environment prompted the MBA to revise its origination forecast, forecasting total mortgage volume of $2.61 trillion this year, a 20.3% increase from 2019’s volume ($2.17 trillion).

Additionally, they expect home refinance originations to double their earlier projections, surging 36.7% to around $1.23 trillion.

Despite the unknowns in this ever-evolving situation, home purchase originations are still slated to climb 8.3% this year to $1.38 trillion.

While this is generally good news for the mortgage industry, it’s probably wreaking havoc on loan servicers and mortgage investors who are seeing prepayment speeds go through the roof.

Additionally, it’s going to make it difficult for mortgage companies to get their staffing right if mortgage rates all of a sudden U-turn, and in any case, once the party comes to an end.

Read more: How soon can I refinance my mortgage?

Source: thetruthaboutmortgage.com

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Is It a Bad Idea to Buy a Home During a Pandemic?

A recent op-ed said buying a home during a pandemic was a terrible idea.

The author, Teresa Ghilarducci, noted that both home prices and uncertainty are high.

Her basic message – we’re maybe acting irrationally due to the COVID-19 pandemic, and that it could be smart to hunker down until the dust settles.

While I totally get the author’s point of view, I never agree with blanket rules, especially when it comes to real estate and/or mortgages.

Ultimately, we are all different people in unique situations, and what benefits one individual may not work for another, and vice versa.

Simply put, it could be a great time to buy a home right now, and also a very bad one. It just depends…

Do You Have a Solid Home Purchase Plan?

  • Don’t buy a house just because everyone else is
  • Don’t buy a house because you don’t want to miss out
  • Don’t buy a house due solely to speculation
  • Don’t buy a house sight unseen or on a whim
  • Don’t buy a house without knowing your exit strategy

No matter what’s going on in the world, you should have a clearly thought out plan when venturing into the world of real estate.

Purchasing a home is a big commitment, and a costly one at that. Even if you get cold feet and decide to sell shortly after, there are lots of closing costs on both ends of the transaction.

You might be able to break even if home prices continue to rise after purchase, but if the timing just isn’t favorable, you could be caught holding the bag.

The good news is you can generally always sell the property if you have second thoughts, especially during a seller’s market, which the author and I agree we’re in at the moment.

Why is it a seller’s market right now? Well, because housing inventory continues to be very limited and mortgage rates are at record lows.

Combined, that makes it pretty easy for a prospective home seller to list their property for top dollar, considering the lack of competition from other sellers, and the increased purchasing power enjoyed by buyers at the moment.

The big question here is how long will sellers control the market, and also what’s more important, a low mortgage rate or a low purchase price?

I explored that very question a while back, with the main takeaway being you only pay for a house once, while the mortgage rate can be refinanced pretty much at any time if you qualify.

In other words, someone who pays $500,000 for a house can’t change that fact, whereas someone who purchased a home with an interest rate of 4% last year might be able to refinance it down to 3% or lower this year.

So purchase price does matter a lot, and can’t be taken back, but it doesn’t necessarily make or break the deal, nor does the mortgage rate.

Don’t Buy a House Because Financing Is Cheap

  • Purchases shouldn’t be dictated by the cost of financing
  • You should either want to buy a house or not want to buy a house
  • The same goes for any other product on the market
  • While cheap mortgage rates are a plus, they shouldn’t totally drive the decision

Let’s just think about the financing piece for a minute. Would you go out and buy something just because a store is offering 0% APR for X number of months?

Car dealers are constantly offering no interest for X months, but that doesn’t mean I rush out to buy a car.

The same goes for a refrigerator or a washing machine – just because it’s a good deal to finance it doesn’t mean I need it or want it.

Yes, it’s a popular and successful sales tactic, but it’s also just that.

While a low mortgage rate incentivizes a home purchase, it shouldn’t dictate the home purchase itself.

Similarly, a pandemic shouldn’t be the deciding factor in whether you should buy a home or not.

You shouldn’t rush out and buy a home in the sticks just because you fear the collapse of city living, nor should you necessarily put the purchase on hold because of the unknown.

Ultimately, COVID-19 should just make us all think a little more thoughtfully about major life decisions, not speed them up or postpone them.

So again, a blanket rule doesn’t work for me here, even in the face of uncertainty.

If you feel strongly about a home purchase and you’ve done your homework, it shouldn’t matter what tomorrow holds.

Conversely, if you’re rushing into a home purchase simply because mortgage rates are low and you’re abandoning the city, you might want to pump the brakes and give everything a little more thought.

While timing can make a real estate purchase very lucrative (or a horrible decision in hindsight), there are many reasons to purchase a home that aren’t at all financially driven.

In summary, there’s always going to be uncertainty in the world, and there’s never going to be a perfect time to buy a home. That’s just life.

Read more: Buying a Home in 2020? 11 Tips to Get It Done!

About the Author: Colin Robertson

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

Source: thetruthaboutmortgage.com

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Redfin: 2020 Home Sales Will Be Highest Since 2006

While 2020 continues to surprise us, somehow, someway, home sales are expected to hit their highest point since 2006 this year.

This, despite an ongoing worldwide pandemic and a contentious U.S. presidential election that’s less than a month away.

You’d think those types of events would give prospective home buyers pause, but they could actually be accelerating peoples’ plans.

6.2 Million Home Sales Expected for 2020

2020 home sales

  • The total includes both newly-built homes and existing home sales
  • Would be the highest total since 2006, around the time home prices peaked
  • Their low-end estimate is 6.08 million home sales, still 1% above last year
  • Their high-end estimate is 6.4 million home sales, 6% above last year

While the year 2020 certainly got off to a rocky start, and resulted in obvious disruptions during the traditional spring home buying season, we appear to be back on track.

In fact, some 6.2 million homes are expected be sold by the end of 2020, per Redfin’s model forecast, a 3% increase from 2019.

That’d make 2020 the best year for home buying since 2006, back when real estate was flying high, and only years before it all came crashing down and ushered in the Great Recession.

This doesn’t mean we’re doomed once again – things were a lot different back then, namely mortgage underwriting guidelines.

In 2006, you could buy a house with zero down, stated income, and a subprime credit score. In fact, you could by a 4-unit investment property with zero down. Yikes!

Today, there are still zero down mortgage options, but they require full doc underwriting that takes into account your income, assets, and employment.

Of course, there are still lots of loan programs out there that only require questionably-low credit scores, like FHA loans and VA loans, but I digress.

Redfin actually has a few different outcomes for home sales, including a low-end forecast of 6.08 million homes sold, which would still be 1% more than 2019.

And a high-end forecast of 6.4 million, which would be 6% more than 2019. It’s all pretty impressive given the year we’ve had.

What’s Driving Higher Home Sales in 2020?

  • The pandemic may have actually accelerated home buyers’ plans
  • Renters living in urban areas are craving more space in the suburbs
  • There are also 45 million first-time home buyers coming of age
  • And of course, the record low mortgage rates don’t hurt either

The obvious answer might be record low mortgage rates, which are making it more appealing (at least emotionally) to purchase a home.

The other reason might be the desire to move somewhere that offers more space, such as a home in the suburbs versus an apartment in the city.

It seems the pandemic has caused folks to take a hard look at their situation, and perhaps seek out more stable living conditions.

Home sales had also been trending higher for the past few years, and with millions of Millennials and Gen-Zs coming of age, there are lots of tailwinds.

As I wrote a while back, 45 million Americans are going to reach the typical first-time home buyer age of 34 over the next decade.

This, coupled with limited inventory, will make home buying competitive for the foreseeable future, and supports my argument of skipping the starter home.

That might be especially true now that “more space” is high up on the list of home buyers wants and needs.

With regard to how the presidential election could affect home sales, Redfin notes that past elections have had minimal impact.

Since 1980, home sales actually increased an average of 0.4% in October and November of presidential election years versus non-election years.

But in the December of election years, the month where sales would likely close for offers made during November, sales typically fell an average of 1.5%, but quickly recovered by the same amount in January.

Of course, this isn’t just any year, so we’ll see how things play out.

Redfin surveyed home buyers and found that only 13% of respondents said the upcoming election has made them more hesitant to buy or sell a home, which was down from 20% in November 2019.

Read more: 2020 home buying tips

About the Author: Colin Robertson

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

Source: thetruthaboutmortgage.com

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Fannie Mae and Freddie Mac Mortgage Refinances Just Got More Expensive

Last updated on October 30th, 2020

Way to rain on our parade, Fannie Mae and Freddie Mac.

Just when mortgage rates were hitting record lows, the pair decided to add a new fee to mortgage refinances in light of the ongoing pandemic.

Simply put, they expect more losses related to a higher rate of loan defaults, and are adjusting their pricing accordingly. And refinance rates are higher to begin with so it’s a double-whammy.

Remember, they don’t lend directly, but rather purchase and securitize many of the mortgages that are funded by banks and mortgage lenders.

As such, this new cost will be passed along to you, the consumer.

Introducing the Adverse Market Refinance Fee

  • Fannie Mae and Freddie are charging a new fee to account for higher risk related to COVID-19
  • It applies to all mortgage refinance transactions, including those without cash-out
  • Only exception is certain single-close construction-to-permanent loans
  • The new fee will apply to mortgages with settlement dates on or after September 1st, 2020

On August 12th, both Fannie Mae and Freddie Mac released lender letters discussing a new fee that they’re going to tack onto ALL mortgage refinance loans.

Known as the “Adverse Market Refinance Fee,” it is designed to cover higher costs associated with increased risk thanks to COVID-19.

Instead of absorbing that cost themselves, they’re passing it onto homeowners, even if you don’t actually pose any additional risk to Fannie and Freddie, collectively known as the government-sponsored enterprises (GSEs).

Fannie Mae said the new fee is being charged as a result of “market and economic uncertainty resulting in higher risk and costs incurred by Fannie Mae.”

Meanwhile, Freddie Mac said it “is a result of risk management and loss forecasting precipitated by continued economic and market uncertainty.”

In other words, they expect more of these new refinance loans to sour at some point after origination, despite borrowers likely obtaining lower interest rates and corresponding monthly payments.

Makes sense, right?

How Much More Expensive Will a Mortgage Refinance Be?

  • The Adverse Market Refinance Fee is 50 basis points in price (not rate)
  • This will result in either higher closing costs or a slightly higher mortgage rate
  • Someone with a $300,000 loan amount may have to pay an extra $1,500 in closing costs
  • Or accept a higher mortgage rate to absorb those costs so they aren’t paid out-of-pocket

Fannie Mae and Freddie Mac are tacking on a 50-basis point fee to both no cash-out and cash-out refinance mortgages.

This means rate and term refinances where you don’t actually pull any cash out are subject to the fee, along with cash out refinances.

The new fee is in addition to any other mortgage pricing adjustments that may otherwise apply to your home loan.

On a $300,000 loan amount, we’re talking about another $1,500 in closing costs, which would likely just result in the borrower taking a slightly higher mortgage rate.

For example, if mortgage rates were to stay constant, and the borrower originally qualified for a 30-year fixed at 2.5% with no costs, their new rate might be 2.625% instead.

The good news is that’d only be a difference of about $20 in monthly payment. But it’s still an unwelcome development for those looking to snag the lowest mortgage rates in history.

It applies to mortgages with settlement dates on or after September 1st, 2020. It’s unclear how long they’ll impose this new Adverse Market Refinance Fee.

If you were thinking about refinancing your mortgage, you may want to do it sooner rather than later.

The big question though is how low will mortgage rates go, as I posed yesterday? If they keep falling from here, this new fee can be absorbed via the lower rates available.

So it’s hard to know if this will actually increase borrowing costs once we factor in where mortgage rates are in September and beyond.

They recently pulled back slightly after hitting new record lows, but it could just be a temporary rise before they reach even lower lows.

Note: This doesn’t affect FHA loans, but it often doesn’t make sense to refinance into an FHA loan due to the mandatory mortgage insurance premiums.

Fannie and Freddie CEOs Respond to Criticism

Folks in the industry were none too happy with the announcement, which eventually prompted a joint letter from the CEOs of Fannie Mae and Freddie Mac, Hugh Frater and David Brickman.

The pair attempted to justify the fee, claiming it wouldn’t cause mortgage payments to “go up” because a refinance generally results in a lower interest rate, which in turn reduces the monthly payment.

But that’s kind of like telling someone don’t worry about our cut, you’re still saving money.

Sure, a borrower’s payment may be lower post-refinance, but not as low as it was supposed to be, thanks to subsidizing an adverse market fee they may have nothing to do with.

The CEOs are basically arguing that with mortgage rates at or near record lows, you’re already saving lots of money, so why get upset. Hmm.

Something tells me that’s not going to go over well either.

Update: After mounting pressure, the FHFA has delayed the implementation date of their Adverse Market Refinance Fee until December 1st, 2020.

Additionally, the new fee will not apply to refinance loans with loan amounts below $125,000, Affordable refinance products, Fannie Mae HomeReady loans, and Freddie Mac Home Possible loans.

Source: thetruthaboutmortgage.com

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Veterans Can Now Get Rates as Low as 2.25% on a 30-Year Fixed Mortgage

Posted on June 24th, 2020

It seems mortgage rates keep moving lower and lower, and now some veterans and active duty military might be able to snag a 30-year fixed as low as 2.25%! That’s pretty unheard of.

While it sounds too good to be true, it appears to be a reality thanks to United Wholesale Mortgage’s push to dominate the mortgage market.

The rapidly growing wholesale lender based out of Pontiac, Michigan announced the new offering today via their website, calling it “Conquest for VA.”

Who Is Eligible for Conquest for VA?

  • Active duty military and veterans who otherwise qualify for VA loans
  • Those looking for a VA purchase loan or VA IRRRL (streamline refinance)
  • Primary residence only for purchases
  • Primary and second homes for VA IRRRLs
  • Minimum FICO score of 640
  • Must obtain financing via a mortgage broker approved to work with UWM
  • Homeowner must not have closed a refinance through UWM in past 18 months
  • Mortgage rates start from 2.25% to 2.375% on the 30-year fixed

Now let’s talk about who’s eligible for this seemingly fantastic loan program, which UWM says is being offered to honor our nation’s veterans.

As the name suggests, Conquest for VA is reserved for veterans and active duty military, and anyone else generally eligible for a VA home loan.

So if you don’t qualify for a VA loan, you’ll have to look into their general Conquest loan program instead.

Additionally, these low rates are only applicable to new home purchase loans and streamline refinances (IRRRLs). In other words, no cash out refinances here.

Take note of the occupancy type as well – primary residence only for purchases, primary and second homes for IRRRLs.

You must have a minimum FICO score of 640 and like the conventional Conquest program announced a couple weeks ago, these rates are only available to borrowers who haven’t worked with UWM in the past 18 months.

In terms of interest rates, they start as low as 2.25% on the 30-year fixed, which is surreal, though they could be an eighth higher at 2.375%. Either way, pretty hard to beat.

Another cool feature to this program is you can choose your own loan term, ranging from as little as eight to a full 30 years.

For example, if you’re already several years into a 30-year fixed, you could choose a shorter term to avoid resetting the clock while refinancing.

Lastly, UWM is a wholesale mortgage lender, meaning you can’t contact them directly as a homeowner.

Instead, you have to work with a mortgage broker who is approved with UWM.

So if you’re weighing the mortgage broker vs. bank argument, these super low rates could be a tipping point for some.

As always, be sure to shop mortgage rates with mortgage brokers and banks to ensure you don’t miss an even better deal.

Also, pay attention to the closing costs associated with these mortgage rates since interest rate is just one piece of the pie, and mortgage APR is a more accurate representation of total loan cost.

Like I mentioned with their conventional Conquest program, UWM seems to be the trailblazer here, but my guess is other mortgage lenders will jump on board and offer similarly low rates now or in the very near future.

About the Author: Colin Robertson

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

Source: thetruthaboutmortgage.com