Rocket Mortgage was far ahead of its competitors in creating a fully online home loan process. In addition to this convenience, the free Rocket Rewards program offers closing cost discounts for learning about the mortgage process. This program allows you to read articles, use calculators, work on your mortgage application and more to earn points that you can redeem for credit toward your closing costs.
Additionally, Rocket Mortgage offers a step beyond traditional preapproval with its Verified Approval program. To qualify, underwriting must review and confirm your credit, income and assets. Afterward, Rocket Mortgage guarantees that your loan will close due to this review — and if not, you’ll get $1,000. Plus, this lender gives you up to 90 days to shop for a home with a locked interest rate through the RateShield program, which is available on 30-year conventional, FHA and VA loans.
Keep in mind that unlike some competitors, Rocket Mortgage doesn’t offer USDA loans. It also doesn’t provide any down payment or closing cost assistance. However, it will cover 2% of your down payment through its ONE+ program if you meet income, credit and debt requirements and also make a down payment of 1%.
Rocket Mortgage also accepts outside down payment assistance from other institutions on your behalf if you’ve been approved — though only down payment grants and loans are accepted.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
By 2028, women are projected to own 75 percent of discretionary spending in the United States. [Nielsen]
Considering women make up 51 percent of the U.S. population, female consumer trends have a strong influence on the economy. Collectively they make up a sizable growth market that can’t be ignored.
Women are increasingly invested in the quality of the items they buy and how well they fit their lifestyle. Since they’re more likely to shoulder the responsibility for things like household purchases, grocery shopping and meal preparation, convenience is a high priority in women’s spending habits and something they seek out in their everyday lives.
Businesses that fail to understand the unique characteristics of female consumers are ultimately losing out on a valuable market. Greater effort will be required to keep up with the evolving consumer landscape that is driven largely by women. By analyzing the statistics associated with women’s spending habits, we can gain insight into their preferences, values and thought processes when it comes to what and how they buy. Read on to learn more.
Note: We reference the most updated data available, but sometimes that information is from several years ago—check each individual source for specifics.
Table of contents:
An overview of female consumer trends
The impact of female consumerism in the U.S. is hard to understate, as they make the majority of all consumer purchases. This could be attributed to the fact that women often buy not only for themselves but also for their families and children.
With women leading the majority of household purchases, retailers could benefit from focusing on how they can best serve the vast number of female consumers who stimulate their sales year after year.
By 2028, women are projected to own 75 percent of discretionary spending in the United States. [Source: Nielsen]
Women make 91 percent of new home purchases. [Source: Girlpower Marketing]
An average of 89 percent of women across the world reported controlling or sharing daily shopping needs, household chores and food prep compared to an average of approximately 41 percent of men. [Source: Nielsen]
Women are the primary purchasers of everyday household items. [Source: Nielsen]
61 percent of women in the U.S. believe that they are worse off or about the same compared with five years ago when it comes to finances. [Source: Nielsen]
67 percent of women in 2019 were employed for pay. [Source: Civic Science]
Men’s vs. women’s spending habits
There are often notable differences between the minds of men and women, including what motivates them when it comes to their spending habits. While neither gender can be placed in a box and a broad range of characteristics exist for each, there are general patterns that can shed light on their financial lives and choices.
The answer to the question “Do women shop more than men?” is a bit complex. Women are often far more selective in their purchases than men and are willing to spend the time necessary to find products that fit their needs and requirements. While men are usually more straightforward and goal-oriented in their shopping, women are more detail-oriented, paying attention to the quality of an item before purchasing. The majority of men prefer to get in and get out of a store as quickly as possible, while women generally enjoy the shopping process as a whole.
Female buying behaviors indicate that they want a risk-free and convenient shopping experience, which goes hand in hand with their desire for their purchases to enhance their lifestyles. They frequently prioritize ensuring that their purchases check every box and fulfill their needs, and usually spend more time than men making sure of this before spending any money.
43 percent of women and 52 percent of men prefer making technology purchases online. [Source: First Insight]
74 percent of women report finding items on sale matters to them in their purchasing habits, compared to just 57 percent of men. [Source: Belvg]
34 percent of women report caring about applying coupons and promotions to their purchases, compared to 26 percent of men. [Source: Belvg]
14 percent of women are inclined to study promotional emails, compared to only 8 percent of men. [Source: Belvg]
58 percent of women report checking products and prices on Amazon.com before looking elsewhere, compared to 64 percent of men. [Source: First Insight]
42 percent of women are encouraged to buy online if free delivery is included, as opposed to 35 percent of men. [Source: Nielsen]
91 percent of women buy food and groceries in-store, compared to 86 percent of men who do the same. [Source: First Insight]
Women are 48 percent more likely to use reusable shopping bags than men. [Source: Civic Science]
30 percent of women are encouraged to shop online if they receive text or email updates on product availability, as opposed to 27 percent of men. [Source: Nielsen]
42 percent of women are encouraged to buy online when the purchase includes a money-back guarantee, as opposed to 31 percent of men. [Source: Nielsen]
67 percent of women examine food labels to determine if a product is healthy, while only 48 percent of men do the same. [Source: Nielsen]
Women are 13 percent more likely than men to deem a product premium based on whether it contains high-quality ingredients. [Source: Nielsen]
Slightly more women than men prefer to shop online at 72 percent, compared to 68 percent of men. [Source: Belvg]
Online vs. in-store shopping habits
While the digital shopping landscape continues to grow more robust and popular with each passing year, women are still making more in-store purchases than they are online. However, even though women consumers are more inclined to spend more in-store, they aren’t as inclined to visit a store in person unless they have a specific purchase in mind. Retailers can capture this opportunity by making sure they’re offering the exact products women are specifically searching for when they visit a store.
72 percent of women shop online. [Source: OptinMonster]
When shopping online, 77 percent of women say they add extra items to their carts that they didn’t originally intend to purchase. [Source: First Insight]
Adding extra unplanned items to their cart is more common among in-store shoppers, with 89 percent of women saying they sometimes or always do so when shopping in person. [Source: First Insight]
69 percent of women choose in-store shopping when they need something specific. [Source: First Insight]
56 percent of women choose online shopping when they have a specific need for something. [Source: First Insight]
70 percent of women usually spend $50 or more when shopping in-store, compared to only 49 percent who spend more than $50 when shopping online. [Source: First Insight]
33 percent of women spend over $100 during an average in-store shopping trip, while only 17 percent say they spend over $100 when shopping online. [Source: First Insight]
91 percent of women buy food and groceries in-store. [Source: First Insight]
47 percent of women shop on eBay, and 80 percent of women use Etsy. [Source: RepricerExpress]
46 percent of women shop for clothing and sporting goods online. [Source: Belvg]
25 percent of women purchase books, magazines and learning materials online. [Source: Belvg]
10 percent of women buy medicine online. [Source: Belvg]
35 percent of women spend on travel and holiday accommodations online. [Source: Belvg]
30 percent of women purchase household items online. [Source: Belvg]
26 percent of women purchase event tickets online. [Source: Belvg]
16 percent of women buy music or movies online. [Source: Belvg]
What consumer goods are women buying?
With data pointing to women as most often responsible for the majority of grocery shopping and meal preparation, the food industry represents a significant opportunity for companies to find ways to connect with their female consumers.
Women also spend significant amounts on beauty products, clothes and travel. With clothing ranking as a top spending category among women, the continued evolution of the retail world represents a chance to lean further into the habits of women consumers.
Beauty and skin care spending
Women have historically spent a considerable amount on personal care, cosmetics and skin care, and it’s no different today. While makeup and beauty products aren’t a part of every woman’s routine, almost everyone uses some type of skin care product—even if it’s just sunscreen or hand lotion. This sheds some light on the astonishing size and increasing growth of the skin care market, particularly among women.
While older consumers used to lead the demand for products in these industries, an increasing number of younger women now play a significant part. This could explain the shift in the market, indicating women’s increasing desire for more natural and organic products, which continues to go up as consumers become more knowledgeable about toxic ingredients in their products and factors like sun damage. Cosmetics and skin care brands that recognize these emerging values among their consumers will outgrow those that don’t.
The global skin care industry is estimated to reach $189.3 billion in the U.S. by 2025. [Source: Statista]
Natural cosmetics had a global market value of $34.5 billion in 2018, and are expected to increase in value to $54.5 billion by 2027. [Source: Statista]
Women who spend money on their appearance will spend roughly $225,360 in a lifetime. [Source: OnePoll]
When it comes to beauty-based purchases, women spend the most on facials, haircuts, makeup, manicures and pedicures. [Source: OnePoll]
Women spend $91 a month on facial products. [Source: OnePoll]
The fragrance industry will reach an estimated $91.17 billion globally by 2025. [Source: Health Careers]
Women in their 30s buy more anti-aging products than women between the ages of 40 and 60. [Source: OnePoll]
Women in their 20s make more makeup purchases than any other age group. [Source: OnePoll]
Household and grocery spending
Data shows that women do the majority of household spending, grocery shopping and meal preparation. With women generally spending more time on household duties than men, it’s no surprise that much of their spending is allocated to these categories.
Women are twice as likely to take charge of household grocery shopping than men. [Source: Civic Science]
80 percent of women who have children and live with a spouse or partner say they are typically in charge of meal prep. [Source: Pew Research]
75 percent of women without children who live with a spouse or partner say they are typically in charge of meal prep. [Source: Pew Research]
80 percent of women who have children and live with a spouse or partner say they are typically the grocery shopper. [Source: Pew Research]
68 percent of women without children who live with a spouse or partner say they are typically the grocery shopper. [Source: Pew Research]
Women spend more money per grocery shopping trip than men, averaging $44.43 per trip. [Source: Nielsen]
Clothing spending
Clothes have always been a large category of spend among women. The market value for women’s retail is expected to rise to around $394 billion by 2025, and retailers are becoming more aware of what women want in their clothing. They value versatility and functionality without sacrificing function and utilize their fashion choices as a source of empowerment and confidence.
Growth in the retail industry among women could be due to the fact that economically empowered female consumers who maintain the majority of control of spending in American homes have more purchasing power, much of which continues to be allocated toward clothes.
Digital trends are also impacting women’s shopping habits, and almost three-quarters of women now shop online. Women are increasingly utilizing social media platforms for fashion discovery, product inspiration and finding authentic reviews from their peers online.
On average, the clothes in a woman’s wardrobe equal between $1,000 and $2,500. [Source: CreditDonkey]
9 percent of women have over $10,000 worth of clothing in their closet. [Source: CreditDonkey]
32 percent of women in the U.S. own over 25 pairs of shoes. [Source: CreditDonkey]
Over half of women estimate that 25 percent of their wardrobe goes unworn. [Source: CreditDonkey]
Every three months, 73 percent of women refresh one quarter of their closet. [Source: CreditDonkey]
Around 15 percent of women don’t have clothes older than five years old in their closet. [Source: CreditDonkey]
Women who are 16 and older spend an average of 76 percent more on clothing than men every year. [Source: CreditDonkey]
Women between the ages of 45 and 54 spend $793 per year on clothing, the highest spent of any age group. [Source: CreditDonkey]
75 percent of women over 18 would choose Target for undergarments over Victoria’s Secret. [Source: Civic Science]
Women’s purchasing values
Diversity and inclusion factors have a larger impact than ever on women’s shopping decisions and expectations. With diversity and inclusivity growing increasingly important in the world of retail and beyond, women consumers expect brands to evolve with the cultures they serve. Among women today there is more scrutiny of brands’ and retailers’ values, hiring practices, product-to-market placements and ability to truly listen to their customers.
Women, like all people, are driven by their values and habits, so understanding what’s important to them, what their day-to-day lives look like and what makes them unique is crucial in fostering a true connection that might influence purchasing behavior.
About half of women in the U.S. believe that having minority-held leadership positions is important and believe that retailers would benefit from hiring Chief Diversity Officer positions. [Source: First Insight]
45 percent of women say cultural inclusivity in brands is important. [Source: First Insight]
44 percent of women believe it’s important for influencers to represent diverse points of view. [Source: First Insight]
67 percent of women say that inclusivity in extended sizing is the top diversity factor to consider. [Source: First Insight]
55 percent of women in the U.S. say they would temporarily stop shopping at a brand or retailer who released an offensive product. [Source: First Insight]
71 percent of women believe brands and retailers should make it at least six months without any offensive items released before they would feel comfortable purchasing from them again. [Source: First Insight]
Opportunities for financial success
Women who are active in their own financial planning are less stressed on average than those who avoid it. There are many ways to prioritize financial success such as committing to your retirement savings, learning investment strategies and managing your personal credit and debt.
Managing credit card debt or poor credit is an important starting point on the road to financial success. Taking responsibility for debt or bad credit will help you secure a more prosperous financial future, and utilizing the help of a credit repair team could help you manage the process. If you are a woman moving toward financial independence, know that it’s never too late to take steps toward a brighter financial future.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
Reviewed By
Sarah Raja
Associate Attorney
Sarah Raja was born and raised in Phoenix, Arizona.
In 2010 she earned a bachelor’s degree in Psychology from Arizona State University. Sarah then clerked at personal injury firm while she studied for the Law School Admissions Test. In 2016, Sarah graduated from Arizona Summit Law School with a Juris Doctor degree. While in law school Sarah had a passion for mediation and participated in the school’s mediation clinic and mediated cases for the Phoenix Justice Courts. Prior to joining Lexington Law Firm, Sarah practiced in the areas of real property law, HOA law, family law, and disability law in the State of Arizona. In 2020, Sarah opened her own mediation firm with her business partner, where they specialize in assisting couples through divorce in a communicative and civilized manner. In her spare time, Sarah enjoys spending time with family and friends, practicing yoga, and traveling.
The rise of active listings in this spring housing market reminds me of a zombie slowly rising from its grave. Yes, we found the seasonal bottom for housing inventory on April 14, but this year’s rise in active listings has been tepid at best.
Here’s a quick rundown of the last week:
Total active listings grew 662 weekly, and new listing data is still trending at all-time lows.
Mortgage rates fell last week as we started the week at 6.65% and got as low as 6.49% to end the week at 6.55%.
Purchase application data rose 5% weekly as the streak of lower rates impacting the weekly data continues.
Weekly housing inventory
Well, the best thing I can say for spring 2023 inventory is that we found the seasonal bottom a few weeks ago. On the positive side, we’re at least seeing inventory rise — some had feared that because new listing data was trending at all-time lows, we wouldn’t see a spring increase in the active listings at all. This doesn’t appear to be the case for 2023.
However, new listing data is very seasonal and we have less than two months left before it starts declining again. I had hoped we would see more active listings before that period, but unfortunately that’s not the case. In fact, this data line has been absolutely crazy.
How crazy?
Last year, from April 22 to April 29, total single-family inventory grew by 16,311 in that one week. This year, from the seasonal bottom on April 14 to now — a whole month — total active inventory has only grown by 14,913.
Weekly inventory change (May 5-12): Inventory rose from 419,725 to 420,381
Same week last year (May 6-13): Inventory rose from 300,481 to 312,857
The inventory bottom for 2022 was 240,194
The peak for 2023 so far is 472,680
For context, active listings for this week in 2015 were 1,108,932
According to Altos Research, new listing data rose weekly but is still trending at all-time lows this year. When you consider that a home seller is a natural homebuyer as well, you can see why the housing market broke after mortgage rates went on a roller coaster last year. Mortgage rates went above 6.25%, then declined back to 5% then spiked back to 7.37%. We have not been able to recover from that mortgage rate spike and it has bled into 2023 as well.
Last year, new listing data, while trending at all-time lows, was at least rising year over year. That is no longer the case after the second half of 2022.
New listing weekly data for this week in May over the past three years:
2023: 62,382
2022: 73,515
2021: 71,191
New listing data from previous years for the same week, to give you some historical perspective:
2017: 90,112
2016: 82,621
2015: 98,436
The NAR data goes back decades and it illustrates just how hard it’s been to get the total active listings back to the historical range of 2 million to 2.5 million. The next existing home sales report comes out this week and we should see an increase in active listings, which have been stuck at 980,000 active listings over the last three months.
NAR: Monthly active listings
NAR: Total active listing data going back to 1982
I often get asked about the big difference between NAR and Altos Research inventory data. This link explains the difference. Overall, inventory data tends to move together, even if different sources are working with other numbers and have a different methodology.
The 10-year yield and mortgage rates
For 2023, one of the most important economic storylines has been the 10-year yield refusing to break below the critical levels I have talked about for months — the level between 3.37%-3.42%. I believed this level was going to be so hard to break under that I named it the Gandalf line in the sand. No matter how crazy things have gotten in 2023, the 10-year yield only broke it once, at the height of the banking crisis. That didn’t last long as we headed right back higher.
As you can see in the chart below, that line in the sand has been tested many times.
When I talk about mortgage rates, it’s really about where I feel the 10-year yield will go for the year. In my 2023 forecast, I said that if the economy stays firm, the 10-year yield range should be between 3.21% and 4.25%, equating to 5.75% to 7.25% mortgage rates.
Now if the economy gets weaker, meaning the labor market sees a noticeable rise in jobless claims, then the 10-year yield should break under 3.21%, going all the way to 2.72%. This will take mortgage rates under 6%, and if the spreads return to normal, this can get us below 5% mortgage rates again. Yes, I said below 5% again.
Can you imagine the housing market at that point? We would have much more stability.
However, for that to happen, jobless claims would need to rise to 323,000 on the four-week moving average. We did have a big jump in jobless claims last week. However, this data line can have some odd quirks week to week, so focus more on the trend and the four-week moving average rather than one week’s data.
From the St. Louis Fed: “Initial claims for unemployment insurance benefits increased by 22,000 in the week ended May 6, to 264,000. The four-week moving average also rose to 245,250.”
Last week, mortgage rates didn’t move much, but as the year goes on, we will be tracking more and more economic data to get clues on the economic cycle and where mortgage rates will be heading.
Purchase application data
The dynamics of the U.S. housing market changed starting Nov. 9, 2022, when the purchase application data began to react more positively as mortgage rates fell. Since that time, making some holiday adjustments to the data, we have had 17 positive weekly prints versus seven negative prints. Year to date, we have had 10 positive prints versus seven negative prints.
Last week, the weekly data showed a positive 5% print, while the year-over-year data shows a 32% year-over-year decline.
I view this data line as just a stabilization of the housing demand data, coming off a waterfall dive in 2022. However, this stabilization is critical because of what it has done: It has changed the housing dynamics.
When housing demand collapsed last year, the low inventory didn’t provide a big shield against pricing getting much weaker. Pricing in the second half of the year was going negative month to month, of course, from an overheating start in 2022. Starting from Nov. 9, the entire housing dynamics changed from demand collapsing to demand stabilizing.
This explains pricing getting firmer in 2023 due to the low inventory environment. Purchase apps look out 30-90 days before they hit the sales data, so we don’t have the sharp recovery data we saw during the COVID-19 recovery. However, we do have a good stabilization story here today.
I traditionally weigh this data line after the second week of January to the first week of May, and now that we are in the second week of May, I would say the 2023 purchase apps data is slightly positive, with stabilization for sure, just not a booming mortgage demand market with mortgage rates still over 6%.
The week ahead: Big housing data coming up
We have a jam-packed week with economic data, especially for housing. We have the builder’s confidence data, housing starts and existing home sales. Monday, we also have the New York Fed quarterly credit and debt update. Those charts are my favorites as they show how credit stress in the U.S. today doesn’t look like anything we saw in the run-up in 2008.
Since the foreclosure process has started again, we should be working our way back up to pre-COVID-19 levels. However, 30, 60, and 90-day lates are near all-time lows, and it took many years to build up the credit stress we saw from 2005 to 2008, before the job-loss recession.
Retail sales come out on Tuesday, which can move the bond market depending on what the report shows. As the year progresses, all these reports will give us more clues to see where the economy is heading. That’s critical since economic data can move the bond market and what can move the 10-year lower or higher drives mortgage rates as well. If mortgage rates head lower, we could see inventory drawn down faster during the seasonal decline period of fall and winter.
I saw the news about the new FHFA lending fee structure for Freddie Mac and Fannie Mae and thought, as usual, things were being blown out of proportion. Then I saw the table for the new fees and I could not believe how they have made it more expensive for high-down-payment borrowers than low-down-payment borrowers. I don’t mean the fees decreased for low down payment mortgages and are closer, but still lower than high down payment mortgages. The total LLPA fees are lower across the board for those who put 5% down or less than those who put 20 percent down.
What are FHFA and LLPA Fees?
LLPA stands for loan level pricing adjustment. They are fees that were put in place after the 2008 crash to help Freddie and Fannie Mae stay solvent during another downturn. The Fees are applied on most conventional mortgages and were set high for low down payment and low credit borrowers because those borrowers are more likely to default. If the fees are higher the banks will typically raise the interest rate on those loans. In the past, people with high credit and high down payments paid lower fees and had lower interest rates.
FHFA is the Federal Housing Finance Administration. FHFA announced that they changed the fee structure in April and has received a ton of backsplash after many sources claimed mortgages for high credit and high down payment borrowers would be more expensive than mortgages for low credit and low down payment borrowers. This is not exactly true in all cases, but it is true that the interest rate will be higher for some people with higher credit and higher down payments than those with lower credit and down payments.
Why did FHFA change the fee structure?
FHFA said:
“It had been many years since a comprehensive review of the Enterprises’ pricing framework was conducted. FHFA launched such a review in 2021. The objectives were to maintain support for purchase borrowers limited by income or wealth, ensure a level playing field for large and small lenders, foster capital accumulation at the Enterprises, and achieve commercially viable returns on capital over time.”
There have been other articles that have claimed race inequality was part of the reasons for the change, but the just of it is, they wanted to make it cheaper for low-income and low-credit score borrowers to buy houses.
FHFA officials have justified this move by saying:
“An FHFA official told The Post the agency was “tasked with ensuring [Fannie and Freddie] fulfill their role in any market condition,” adding that shifts in long-term mortgage rates are a far bigger factor in determining finance conditions in the US housing market.
The latest recalibration to the pricing framework that FHFA announced in January 2023 is minimal, by comparison, and maintains market stability,” the FHFA official said in a statement.”
This is from a New York Post article: https://nypost.com/2023/04/16/how-the-us-is-subsidizing-high-risk-homebuyers-at-the-cost-of-those-with-good-credit/
What they said was that interest rates went up a ton, so you shouldn’t worry about what we are doing. Worry about interest rates instead.
How much more will good credit buyers pay for a mortgage?
While some buyers getting a mortgage will pay less than before, overall the fees will be higher now. The people paying the highest fees will be those with high down payments and low credit. That’s right. I said high down payments. Some high down payment borrowers with good credit will now pay a .2 to .3% higher interest rate than they paid before. In fact, those high down payment borrowers are paying higher fees than those putting less money down! While high credit, low down payment borrowers, may be paying lower fees than before.
On a $400,000 mortgage, a borrower with good credit putting 20% down may pay $40 more a month because of the higher rates. That is not a huge amount but it is tough to bear with interest rates already 2 to 3 times higher than 18 months ago.
How much less will bad credit buyers pay for a mortgage?
Those with lower credit and a high down payment will be paying less than before, but those with low credit and a low down payment get the biggest discount. Some of the worst buyers will now get a .4% discount on their interest rate compared to what they are paying now. Those low-credit borrowers won’t be paying less than high-credit, high-down-payment borrowers, but the gap shrunk significantly.
For someone with a 620 credit score and 5% down or less, they will now save about $80 to $100 off their mortgage payment thanks to the interest rate decrease.
All buyers will now pay more LLPA fees for 20% down vs 5% down or less
The crazy part of these changes is that across the board for good credit or bad credit, all buyers will be paying less LLPA fees for having a lower down payment (unless they put more than 25% down). Someone with an 800 credit score will pay three times the fees when putting 20% down versus putting 5% down or less. Even someone with a 620 credit score will pay less LLPA fees when putting less than 5% down verse 20% down.
Below is the table showing the new fees:
This is from: https://singlefamily.fanniemae.com/media/9391/display
The left side of the table shows the credit scores and the top shows the loan-to-value ratio (the higher the number the less money people are putting down). There are also many other factors that will impact these fees like debt-to-income ratios, type of property, refinance vs new purchase, etc. The video below goes over the changes in detail.
Were the FHFA LLPA fees always structured to reward low-down payments?
I am always skeptical of headlines and crazy stories like this. Many of you probably think it has always been this way, but the old fees were structured much differently. You can see them below:
This chart is from 2020 and can be found at: https://www.freeandclear.com/guides/mortgage-topics/loan-level-price-adjustments.html
As you can see, the fees were higher for low down payments and lower for high down payments. The fees were also higher for lower credit and low down payments. I think common sense tells us this is what the chart should look like.
Do high down payment borrowers really pay more?
FHFA said in a statement that while the fees from FHFA for high down payments are higher than the low down payments, that does not mean those high down payment borrowers will pay more. If you put less than 20% down on a mortgage you most likely will be paying mortgage insurance which would be higher than the LLPA fees. So those who put more than 20% down, will still most likely pay fewer fees. Those who put 15% or 10% down, will still have mortgage insurance and have higher fees and mortgage insurance than those putting 5% or less down.
What the spokesman for FHFA did not mention is that you can often get mortgage insurance removed after a couple of years on conventional mortgages. After the mortgage insurance is removed, many buyers who put less down would be paying a lower rate without mortgage insurance than those who put 20% down.
What is one of the craziest scenarios with LLPA fees?
The Mortgage Interest Rate Is now lower for someone with a 680 credit score putting 3% down than for someone with a 730 credit score putting 15% down. If you look at the chart from FHFA, a person with a 730 credit score putting 15% down would have a 1.25% LLPA fee, and the person with a 680 credit score with 3% down would pay a 1.125% fee. Both of those buyers would pay mortgage insurance.
Conclusion
I could not believe the numbers when I saw them on the LLPA fee table. The media was not overblowing what had happened, in fact, I think they missed how bad it was. These guidelines do not apply to FHA, VA, or USDA but for Freddie Mac and Fannie Mae. Most people with good credit and debt-to-income ratios will be using Fanie Mae and Freddie Mac and are being punished for putting more money down.
There are different types of mortgage loans available to today’s consumers, each with slightly different guidelines. Some have inherent advantages so it takes some time to consider which loan type best suits your requirements.
Let’s take a look at the different programs to see what’s right for you.
Click here to check today’s VA loan rates.
VA Refinance
VA loans are available for eligible veterans, certain active-duty personnel, borrowers with six years’ service in the National Guard or Armed Forces Reserves, and other selected borrowers. VA loans offer two types of refinancing, a standard or a streamline — all backed by the Department of Veterans Affairs.
A standard VA refinance requires the borrowers to provide complete documentation of their loan file including a new appraisal, income and employment verification and fair credit. This loan is also known as a VA cash-out refinance, and is typically only used when getting cash out or paying off a non-VA loan.
Apply for a VA cash out loan here.
For those with a VA mortgage, there’s the VA streamline refinance, officially called the Interest Rate Reduction Refinance Loan (IRRRL). This refinance in essence allows eligible borrowers to drop their rate with very little documentation, time, or money. No income or asset verification and no appraisal are required.
Click here to apply for a VA streamline refinance.
The streamline program may be used to finance a property that was previously occupied and a VA loan used to finance the original purchase. Only an existing VA loan may be eligible for the streamline program. No cash out is allowed.
All VA loans require a funding fee which can be as high as 3.3 percent of the loan amount and may be included in the final loan. For the VA streamline, the funding fee is dramatically reduced to as low as 0.50 percent.
Non-VA Refinance Types
For eligible homeowners, the VA loan is usually the cheapest and easiest option. However, in some cases, those looking to refinance might choose another loan type.
Here are the main non-VA choices.
1. Conventional Refinance
Conventional mortgages are those approved using guidelines established by Fannie Mae and Freddie Mac and are by far the most popular program. Almost every lender offers them and guidelines are mostly consistent from lender to lender, with very few differences.
Mortgage rates on conventional loans are very competitive as lenders compete using the same programs. The best use of a conventional refinance occurs when the homeowners have at least 20 percent equity in the home. In this case, no private mortgage insurance is required.
A VA refinance requires an upfront funding fee, which ranges from 0.50% to 3.3% depending on refinance type. But conventional loans don’t require an upfront fee. This could save Veterans money, provided they have enough home equity for a conventional refinance.
Check your refinance eligibility here.
A conventional loan can also be used to finance an investment property. Other programs, VA, FHA, and USDA loans are only available to purchase an owner-occupied home while a conventional loan can be used to finance the purchase of a primary residence or a rental property.
Borrowers are also allowed to pull equity out of the home in the form of cash when refinancing, referred to as a “cash out” refinance. Most lenders allow for a cash out refinance up to 80 percent of the value of the property, although you’ll likely get a lower interest rate if you stay below 75 percent.
Conventional refinance loans are always “fully documented” meaning the borrowers must qualify in the same manner as during the purchase with paycheck stubs, appraisal, and income tax returns in addition to other standard requirements.
2. FHA Refinance
The FHA refinance also has a streamline program, very similar to the VA program.
No credit score requirement, no appraisal, and no income or employment verified. The FHA streamline is available for FHA-to-FHA transactions. In other words, you have an FHA loan currently.
It may also be used to finance a property that was previously occupied by the borrowers but is now rented out.
The new loan rate and mortgage insurance must drop. The refinance must benefit the borrower.
There can be no payments within the previous three months more than 30 days past the due date.
FHA loans require a monthly and upfront mortgage insurance premium. If the original FHA loan was opened prior to June 1, 2009, the mortgage insurance premiums receive a nice discount.
If you have a VA loan, however, your best option is the VA streamline.
3. USDA Refinance
The USDA program is for properties located in rural or semi-rural areas and the borrowers must not exceed specific income guidelines. The USDA refinance is a standard refinance requiring a fully documented loan including an appraisal, credit, and income among others.
There is a pilot streamline refinance program available in 35 states and operates in a similar fashion as VA and FHA streamline programs. The USDA streamline is for a 30 year fixed rate only and the rate must be at least one percent lower than the existing one and can only be a USDA-to-USDA transaction. No cash out is allowed.
VA, FHA, USDA or Conventional: Which Refinance is Best?
It really all depends on your home equity. VA, FHA, and USDA loans all have some form of mortgage insurance or funding fees applied, increasing the loan amount as well as the monthly payment. If there is at least a 20 percent equity position in the property refinancing out of one of these three loan types into a conventional one is the better choice.
If there are loan to value issues and there isn’t at least 20 percent equity in the transaction then the applicable streamline should be considered.
There can always be additional lender requirements on top of any issued guidelines called overlays. Some lenders may ask for an appraisal for a streamline for instance. If you’re thinking about refinancing, consider all your options. Not only could you benefit from a lower rate, but you might also be able to get rid of mortgage insurance premiums as well.
Click here to check today’s VA refinance rates.
Let’s look at a comparison of the four major loan types for a $250,000 purchase price.
Head to Head – VA Compared to other Loan Types
VA
FHA
Conventional
USDA
APR*
3.721% APR
4.798% APR
5.192% APR
4.246% APR
Principle and Interest
$1146
$1102
$1168
$1163
Monthly Mortgage Insurance or Fee
$0
$269
$210
$84
Estimated Taxes and Insurance
$268
$268
$268
$268
Total Monthly Payment
$1414
$1639
$1646
$1515
Qualification:
Comparison of Qualification Requirements
VA
FHA
Conventional
USDA
Down Payment Percentage
0%
3.5%
5%
0%
Approx. Cash Needed**
$0
$8750
$12,500
$0
Typical Minimum Credit Score Needed***
620-640
620-640
680
620-640
Streamline Refinance Available?
Yes
Yes
No
Yes
**Assumes $6000 in seller-paid closing costs; ***Varies based on lender; All scenarios assume 700 credit score, property in WA
Additional Benefits of VA Home Loans
VA home loans have more lenient credit and debt ratio guidelines. You may qualify for a VA loan even if you can’t be approved for other loan types. Get your free rate quote.
You can refinance or sell your home at any time without penalty with a VA loan.
The seller is allowed to pay all of your closing costs up to 4% of the purchase price.
I’m Ready to Apply for This Great Benefit
The VA home loan program is a great opportunity for active-duty service members and veterans. Take advantage of your entitlement.
Last Updated on February 25, 2022 by Mark Ferguson
The FHA 90-day flip rule has caused me delays on a few flips this year. The rule basically says that FHA financing is not allowed on a house for new buyers that was purchased fewer than 91 days ago by the current owner. If you buy a house, fix it up, and try to sell it to FHA buyers, you will have to wait until you have owned the house for 90 days before you can even accept a contract from those buyers. There are some exceptions for certain sellers—like banks and builders—but for flippers, it is almost impossible to get around this rule.
What exactly does the FHA 90-day flip rule say?
It used to be that the buyer could order a second appraisal to bypass the FHA 90-day flip rule, but that changed in 2014. If you are selling a flip that has a huge difference from your buying price and the selling price (close to double), you still may have to order a second appraisal, even after the 90 days.
Exceptions to FHA property flipping restrictions are made for:
Properties acquired by an employer or relocation agency in connection with the relocation of an employee.
Resales by HUD under its real estate owned (REO) program.
Sales by other U.S. government agencies of Single-Family Properties pursuant to programs operated by these agencies.
Sales of properties by nonprofits approved to purchase HUD-owned Single Family properties at a discount with resale restrictions.
Sales of properties that are acquired by the seller by inheritance.
Sales of properties by state and federally chartered financial institutions and Government-Sponsored Enterprises (GSE).
Sales of properties by local and state government agencies.
Sales of properties within Presidentially Declared Major Disaster Areas (PDMDA) only upon issuance of a notice of an exception from HUD.
The restrictions listed above and those in 24 CFR 203.37a do not apply to a builder selling a newly built house or building a house for a borrower planning to use FHA-insured financing.
How do you handle an FHA contract that comes in before you have owned a property for 90 days?
I sold a flip earlier this year on which we actually got a contract before I had owned it 90 days. I have had up to 22 flips going at one time this year, and it is rare that I get a house repaired fast enough to list it for sale before I have owned it 90 days. However, I bought this house from my direct marketing campaign, and it did not need much work, which allowed me to get it fixed quickly. Here were the numbers on the house:
Purchased for $120,000
Repairs were about $20,000
Carrying costs were about $12,500
Buyer closing costs of $3,000
Selling price of $213,000
Total profit of about $57,500
This was one of my best flips of the year, especially considering I made this much on a low-priced property. I actually thought it would sell for a lot less when I bought it, but our market has been tremendous this year. We did run into some hiccups on this property because of the 90-day flip rule. I bought it on July 28th and listed it on September 22nd. We listed it for $199,900 and immediately received a $210,000 offer. I was ecstatic until the buyers’ lender said they could not close on the house because of the 90-day flip rule. They were hoping to close in October, but because of the flip rule, it would actually have to close in December. That was a long time to wait, but it was a great offer, so I went forward with the deal.
The 90-day flip rule does not state that you cannot buy a house prior to the 90 days but rather that the entire loan process cannot start prior to the 90 days. Technically we are not supposed to write the purchase contract until the 90 days have passed. What we did was write a contract between the buyers and sellers, and then we wrote a brand new contract when the 90 days passed. At that point, the appraisal, underwriting, and loan approval can begin. Luckily, the appraisal came in at value, and we closed on December 11th.
Are there other ways to get around the 90-day flip rule?
There are some ways to get around the 90-day flip rule, including dumb luck. I sold a house earlier in the year to an FHA buyer who wrote the contract before I had owned the house 90 days. I used this sale as a reason for the lender why we should not have to wait the 90 days on the property I discussed in this article. The lenders’ response was the underwriter and lender must have both forgotten about the 90-day flip rule on that deal. There is no way it should have been under contract or sold before the 90 days, even with a 2nd appraisal. I got lucky on that property. You can also try to find a buyer that does not need to use FHA. Often, a conventional mortgage is actually better for buyers, but they need to have better credit and debt-to-income ratios to qualify for conventional. Most of our buyers use FHA loans, and they are willing to pay the most for our flips, so it makes sense to cater to them.
Conclusion
I usually do not have to worry about the 90-day flip rule because it takes me longer than that to get my houses ready to sell. It can be a thorn in an investor’s side when they are counting on a house selling quickly and they have to wait a month or two longer. Investors also need to be aware they may need a second appraisal with FHA loans if they try to sell a house for twice what they bought it for. Conventional mortgages do not always eliminate these problems either as many conventional lenders adopt FHA rules.
The average 30-year mortgage rate broke record lows (again) at 2.65%, according to Freddie Mac. This marks the 22 weeks in a row that the average rate has been under 3% and the 17th time records have been broken since the start of 2020. Three of the records were broken in December alone. In response […]
The post Mortgage Rates Hit Another 50-Year Low. Should You Buy? appeared first on The Simple Dollar.
If interest rates are low, refinancing your home mortgage loan can seem like an attractive option to get smaller payments or significant savings. If you’re thinking of refinancing your home, it’s important to have a good understanding of the the right timing, the costs and the available types of refinancing options to ensure you make […]
The post Should I Refinance My Home While Interest Rates Are Low? appeared first on The Simple Dollar.
If you’re looking to start your homebuying journey, you may be wondering how different loan products compare and which one is right for you. Two of your most popular options will likely be an FHA (Federal Housing Administration) loan or a conventional mortgage. In this article, you’ll learn everything you need to know about FHA… View Article
The post FHA vs. Conventional Loans: Whatâs Better For You? first appeared on Total Mortgage.
It is better that you should not vow than that you should vow and not pay – Ecclesiastes 5:5 In this day and age it seems to have become more and more common for people to live above their means, and to use credit and debt to increase their lifestyle. Instead of saving up for […]