home buying

Apache is functioning normally

By David Piscatelli

Fed’s inflation fight tightens the U.S. housing supply and makes home buying even more difficult

Conventional wisdom dictates that U.S. inflation will continue to decline as the Federal Reserve keeps interest rates high. This action, which makes loans more expensive for businesses and consumers, should lead to less spending, less consumption and higher unemployment.

Or at least that’s Econ 101. Yet both consumers and investors have acclimated to the current market environment. Moreover the key driver of inflation — housing — cannot be adequately contained through the Federal Reserve’s usual tactics.

In fact, the Fed’s policies have created a Catch-22 in the housing market by creating “golden handcuffs.” Instead of easing consumer demand, the Fed’s actions unintentionally restricted U.S. housing supply, resulting in a stalemate between home buyers and sellers. Homeowners who locked into historically low mortgage rates before and during the pandemic are now reluctant to sell, which in turn is increasing the likelihood of persistent higher inflation.

The case for this condition to persist , which the market is mostly failing to consider, continues to grow stronger as the odds of a recession fade. This should be an alarm bell and a potential opportunity for investors to redeploy at least part of their capital into hard assets to serve as a hedge against inflation risk.

The recession that never was

Many economists have predicted that a recession would hit the U.S. Their reasoning was sound: aggressive monetary action by the Federal Reserve, investor dissatisfaction with inflation, loss of consumer confidence and reductions in home asking prices — all points that were hard to argue against.

Yet most of the key ingredients needed for a recession have not materialized. Investors have acclimated to inflation, consumer confidence is growing and the housing market has, by and large, entered a period of stalemate where prices remain high due to lack of supply.

In fact, the only relevant argument in the recession camp that remains is the Fed continuing its aggressive posture against inflation — now considered the fastest monetary policy tightening cycle in more than 40 years. Such action continues to lead many to speculate that recession is imminent, and the only questions left to answer are “when,” and “how deep it will be?”

Housing prices obey the laws of supply and demand

Housing is perhaps the most consequential category that makes up the Consumer Price Index (CPI), which markets track every month as a core measure of inflation.

The undersupply of housing in the U.S. is grounded in years of underbuilding and is not the result of a single federal policy, war, or external event. If anything, the power to create more housing supply rests with state and local governments, which often require working through a patchwork quilt of differing zoning and land-use regulations.

The high estimate of the country’s current housing shortage is pegged at about 7.3 million units, while the most conservative estimate shows it to be about 1.7 million. While the true shortage is most likely somewhere inbetween, the bottom line is that the United States faces a textbook housing shortage that cannot be solved overnight. Worse, the Fed’s current policies are making the prospect of home ownership even more difficult.

Nobody wants to move and reset their loans at much higher rates.

Central bank measures designed to clamp down on inflation by making borrowing more expensive (which theoretically should drive down the costs of homes), are having the opposite effect. This is because homeowners, who locked in historically low mortgage rates before and during the pandemic, are now reluctant to sell their home.

Simply put, nobody wants to move and reset their loans at much higher rates. Would-be sellers are therefore sitting on the sidelines, which has unintentionally created an even greater shortage in supply. Meanwhile, potential buyers, who cannot afford higher mortgage rates, are incentivized to rent instead.

To end this stalemate, the Fed would need to start cutting interest rates, which it has stated is unlikely this year. But if inflation is being driven by the cost of housing, as demonstrated in the Consumer Price Index, more attempts to tame inflation via rate hikes suggests homeowners will only become more entrenched as supply dwindles further As the labor market continues to prove surprisingly resilient, homeowners, and by extension everyday consumers, don’t seem to mind waiting it out.

Read: Nouriel Roubini says a return to 2% inflation is ‘mission impossible’

Also: Most long-term investors can ignore the Federal Reserve’s latest move

The case for hard assets

Seasoned investors know that during times of rising interest rates, restrictive credit and prolonged inflation, more investments flow into “hard” asset classes such as real estate. This hedging strategy is used almost like an insurance policy by investors to preserve capital from the depreciating effects of inflation. And according to research, it works. For example, a Stanford University study found that residential real estate is historically an investment haven during inflationary periods. Even during the inflation of the 1970s, home prices increased relative to the size of the economy. This is because housing is typically tied to consumer prices and rises with inflation.

With housing assets so closely tied to inflation, as well as to the laws of supply and demand, investments in this hard asset class deserve due consideration. Strong economic growth, coupled with the one-two punch of resilient consumer spending and near record-low unemployment, is good news. It also means the Fed won’t be lowering rates soon. Housing will remain a key driver of inflation, and future rate-hikes will further entrench homeowners and push more would-be buyers into renting.

To achieve a return to 2% inflation, U.S. policymakers would be wise to work with state and local governments to incentivize development, which would drive down the greatest expense for most Americans. But even with decisive action, fixing the fundamental housing shortage that is responsible for sustaining stubbornly persistent inflation will be a longer process than most investors realize.

David Piscatelli focuses on research, economic analysis and strategy at Avenue One, a property technology service platform and marketplace for institutional owners, buyers and sellers of residential homes. Views of the writer do not necessarily reflect the views of Avenue One.

More: Meet the brave Americans buying and selling their homes, despite stubbornly high interest rates

Plus: 9 ways home buyers can stretch their dollars even though mortgage rates are high

-David Piscatelli

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

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09-23-23 0837ET

Copyright (c) 2023 Dow Jones & Company, Inc.

Source: morningstar.com

Apache is functioning normally

Apache is functioning normally

If you think home prices are too expensive, you wouldn’t be the only one.

A new analysis from First American revealed that housing affordability is the lowest it has been in more than three decades.

In other words, it hasn’t been this expensive to purchase a home since the 20th century.

The title and settlement company’s Real House Price Index (RHPI) determines house-buying power using median household income, mortgage rates, and home prices.

And they found that real house prices, adjusted for these factors, were up nearly 17 percent year-over-year in July.

Blame Higher Mortgage Rates and Home Prices for a Lack of Affordability

As for why housing affordability continues to erode, it’s a combination of factors.

The first and most obvious issue is markedly higher mortgage rates, with the 30-year fixed mortgage now priced above 7%, assuming discount points aren’t paid.

Per Freddie Mac, rates on this most-popular loan program are up about 1% from year-ago levels. First American pegs the annual change at a higher 1.4 percentage point increase.

And if we zoom out a bit more, this key interest rate was in the 3% range to start out 2022.

So interest rates alone have wreaked havoc on housing affordability and home buying power.

Just consider a loan amount of $400,000 at a 3% rate versus 7% rate. We’re talking about a monthly principal and interest payment of $1,686 vs. $2,661.

That’s nearly $1,000 based on the interest rate increase alone. Then you have to factor in higher property taxes, higher insurance premiums, and so on thanks to a higher purchase price.

Yes, despite higher interest rates, nominal home prices have also risen year-over-year.

While people logically think there’s an inverse relationship with home prices and mortgage rates, this isn’t always true.

Per First American, nominal home prices (not adjusted for inflation) were also up 4% year-over-year.

This means a prospective home buyer faces both a higher purchase price and a significantly higher mortgage rate.

And though household income increased 3.7% since July 2022, it wasn’t enough to offset the higher costs associated with the jump in rates and rising nominal home prices.

Real Home Prices Are Now Above the 2006 Peak

If you recall the year 2006, you might remember that home prices peaked and then began to fall.

Back then, unsustainable home price gains were fueled by exotic financing.

Many home loans were underwritten via stated income or no documentation at all, while the products offered may have been option ARMs and other adjustable-rate mortgages.

Additionally, the typical down payment was at or close to zero, while the loan-to-value (LTV) ratio was often 100% when it involved a mortgage refinance.

In other words, home prices were too high, borrowers had little to no skin in the game, and many weren’t even qualified to be homeowners.

Without the widespread use of loose underwriting, home prices would not have been able to continue rising as high as they did.

As we know, the housing bubble burst set off the Great Recession, leading to double-digit home declines and scores of short sales and foreclosures.

Today, unadjusted home prices are 53.7% above those during the peak in 2006, while real prices are 0.7% higher than that housing boom peak.

While this might be reason to worry, consider the new mortgage rules that were born out of that crisis.

The Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule) essentially outlawed much of what I just mentioned.

Borrowers today must be fully qualified when taking out a mortgage, and the vast majority are going with a 30-year fixed-rate mortgage.

Gone are the days of stated income underwriting and negative amortization. That makes the current situation more of an affordability crisis than a housing bubble.

It is driven more by a lack of supply than it is loose financing, with not enough inventory to meet demand.

Housing Is Overvalued Nationally, But Some Markets Remain Affordable

As noted, the July 2023 Real House Price Index (RHPI) increased about 17% from a year ago.

This meant the median sale price was roughly $345,000, while the median house-buying power was just $337,000.

Since house-buying power is below the median price, it means housing is overvalued. In an ideal world, it should be at or below the median.

However, that applies to the national median price of real estate. Only 24 of the 50 top markets tracked by First American are overvalued by this measure.

Granted, it has worsened over time, as only 15 markets were considered overvalued last July.

At the moment, San Jose, California is the most overvalued metro, with the median sale price nearly $1,440,000 and consumer house-buying power just $700,000.

San Francisco and Los Angeles were also quite overvalued by this measure, though to a lesser degree.

Meanwhile, some undervalued markets still exist, if you can believe it. The metros of Detroit, Philadelphia, and Cleveland are undervalued by roughly $126,000.

How Do We Fix the Unaffordable Housing Market?

We know home prices are out of reach for many, but how do we fix it? Well, the Real House Price Index (RHPI) takes into account home prices, mortgage rates, and incomes.

So if you want housing to be more affordable, you need relief via those three elements.

This means either mortgage rates need to fall, home prices have to come down, or incomes must increase.

Or you get some combination of the three, such as a 1% drop in mortgage rates and a pullback in prices, which boosts affordability.

The problem at the moment is mortgage rates might be higher for longer, and home prices are pretty sticky due to a major lack of inventory (why are there no homes for sale?).

Incomes also don’t look to be increasing by a material amount, making it difficult for prospective buyers to get in the door.

One exception is new home sales, which have relied heavily on temporary and permanent mortgage rate buydowns to tackle the financing piece.

But there are only so many new homes for sale, and such sales only typically account for 10% of the overall market.

This explains the current housing market dynamic. Ultimately, there aren’t many existing homes on the market, not a ton of demand, and not a lot of sales.

And until something changes, this will likely be the status quo.

Read more: Why are home prices so high right now?

Source: thetruthaboutmortgage.com

Apache is functioning normally

Apache is functioning normally

When it comes to the Los Angeles housing market, the numbers speak volumes.

As we navigate the contours of 2023, the Los Angeles housing market continues to dominate conversations, not just among locals but also among potential buyers, sellers and investors nationwide. Recent data shows a complex narrative: a market that is both competitive and costly, while simultaneously in a state of flux.

While the towering home prices persist in their upward trajectory, a marked reduction in the volume of homes actually changing hands year-over-year offers a nuanced and intriguing subplot.

Climbing the million-dollar ladder

As of July 2023, the median sale price for a home in LA sits at an astonishing $1 million. This represents a 4.3% elevation since the previous year.

To place this figure in a broader frame, the median sale price in Los Angeles is a whopping 132% higher than the national average. But it’s not just the overall home prices that have climbed; even the cost per square inch is inflating. The median price per square foot has ascended to $627, a 2.0% increase from last year.

Market dynamics

In the Los Angeles housing market, homes don’t linger. The average home is sold after a mere 37 days on the market, a slight but meaningful increase from 35 days in the prior year. This suggests that while the market remains fiercely competitive, it is not a feeding frenzy. On average, homes in Los Angeles receive three offers.

However, adding a layer of complexity, the number of homes sold in July 2023 reached only 1,477, plummeting 18.8% from the same period last year. These numbers indicate a fascinating conundrum: Although the demand is astronomical, supply is staggering behind, making it predominantly a sellers’ market — but with intriguing twists.

How competitive is the Los Angeles housing market?

Measuring competition in any market is complex, but when it comes to the Los Angeles housing market, there are some quantifiable indicators. According to the Redfin Compete Score™, the market ranks as “somewhat competitive.” The average home here is sold for approximately 1% above the listing price.

Migration and relocation trends

The Los Angeles housing market isn’t solely affected by prices and competition; it’s also swayed by the tides of migration. Between June and August 2023, a considerable 81% of LA homebuyers expressed intentions to remain in the metropolitan area, affirming their loyalty to the City of Angels.

Conversely, 19% are looking to spread their wings and fly to other destinations, with Las Vegas, San Diego and Bakersfield topping the list. However, Los Angeles continues to exert its magnetic pull, drawing in new residents chiefly from San Francisco, followed by Chicago and New York.

LA’s housing market at a glance

The Los Angeles housing market of 2023 is an intricate choreography of rising prices, intense yet waning competition and fluctuating migration patterns. For prospective buyers, the city’s market poses challenges, but they are not insurmountable walls. Sellers, too, need to navigate carefully. The diminishing number of homes sold indicates a potential saturation point or perhaps signs of buyer fatigue.

For everyone involved — whether you’re an investor eyeing long-term gains, a first-time buyer looking to plant roots or a seller aiming to capitalize on high prices — knowledge is power. Staying abreast of the ongoing trends and dynamics in the Los Angeles housing market is not just advisable; it’s imperative. After all, in a market as multifaceted as this, understanding the lay of the land can make all the difference.

The Los Angeles rental market

While the focus has largely been on home buying and selling, the rental sector adds another complex layer to the Los Angeles housing market. As one of the most sought-after places to live in the country, it’s no surprise that Los Angeles’ rental rates are a significant talking point as well.

Average rent and annual changes

The average rent for a studio apartment in the City of Angels hovers at $2,421, marking a 3% increase from the prior year. One-bedroom apartments haven’t been left behind in this upward trajectory, clocking in an average rent of $2,905, which also reflects a 3% annual increment. Two-bedroom apartments, meanwhile, cost an average of $3,894, but have seen a more modest annual growth of 1%.

This data paints a picture of a rental market that, much like its home-owning counterpart, experiences its fair share of challenges and costs. Apartments in Los Angeles are not for those hunting for bargains, with the average rent ranging between $2,421 and $3,894.

Rent ranges

The Los Angeles rental market shows an overwhelming skew towards the higher-end. While 0% of apartments rent in the $501-$1,000 range, a staggering 80% of them command a rent north of $2,100. This underscores the upward pressure on the cost of living in Los Angeles and speaks volumes about the limited affordability.

Neighborhoods

When it comes to neighborhoods, Bel Air tops the list for studio apartments with an average rent of $3,695. On the other hand, areas like Beverly Grove and Westwood Village have seen decreases in average rent by 11% and 14% respectively. Silicon Beach, however, is bucking the trend with an 18% annual increase, echoing the tech boom that the area is experiencing.

For those looking for more budget-friendly options, South Park, South LA and Crenshaw offer average one-bedroom rents ranging from $1,650 to $1,900, compared to the Los Angeles average of $2,905 for a one-bedroom.

Comparing Los Angeles to nearby cities

In terms of rent, Los Angeles still commands a premium compared to other nearby cities. For instance, a studio apartment in Santa Monica averages $3,540 with a 6% annual increase, while the same in Long Beach costs $2,850 but has soared by 37% in the past year. Glendale stands at $2,755 for a studio, with an 8% rise.

Understanding the trends

The fluctuating rental rates over the past year indicate a market that’s anything but static. For instance, studio rents went from $2,302 in September 2022 to peak at $2,422 in July 2023 before slightly reducing. Similar patterns are observed for one-bedroom and two-bedroom apartments, showing the market’s elasticity and potential volatility.

The Los Angeles rental market at a glance

The rental landscape in Los Angeles is a vital part of the overall housing market, influencing and influenced by similar factors like location, demand and economic status. Whether you’re a potential tenant eyeing the city’s ritzy neighborhoods or someone seeking more affordable options, the Los Angeles rental market provides a plethora of choices — albeit at a generally high price point.

For individuals and families not yet ready to commit to homeownership, or those who prefer the flexibility that renting provides, understanding the dynamics of the rental market is as crucial as grasping the trends in home buying and selling.

When you’re ready to enter LA as a local, there will be an apartment waiting for you on Rent.

Rent prices are based on an average from Rent.’s multifamily rental property inventory as of July 2023.
Other demographic data comes from the U.S. Census Bureau.
The rent information included in this article is used for illustrative purposes only. The data contained herein do not constitute financial advice or a pricing guarantee for any apartment.

Source: rent.com

Apache is functioning normally

Apache is functioning normally

This article originally appeared on The Financially Independent Millennial and was republished here with permission.

If you’ve been paying attention to the housing market recently, you will have noticed it’s on fire. From Seattle, WA, to St. Petersburg, FL, there isn’t a market that hasn’t been affected by the low mortgage rates and high millennial demand for housing. The market hasn’t seen this much activity ever (even more so than the housing financial crisis of 2008).

Given the recent interest in home buying, we thought it would be prudent to discuss exactly how Americans can afford such large homes. And, why now?  After all these years, why are mortgages and refinances becoming popular all of a sudden? Let’s first discuss the basics of a mortgage and what its advantages are. They’re equally complex and beneficial, so it’s important to ensure we cover all the bases.

What Is a Mortgage Loan?

Simply put, your home secures the mortgage loan. It might be a house, a store, or even a piece of non-agricultural land. Banks and non-banking financial institutions both offer mortgage loans.

The lender gives the borrower cash, and charges them interest on it. Borrowers then pay back the loan in monthly installments that are convenient for them. Your property acts as security against the mortgage. And, your lender retains a charge until the borrower pays the loan in full. As a result, the lender will have a legal claim to the property for the duration of the loan. If the buyer fails to pay the debt, the lender has the power to seize the property and sell it at auction.

What Are the Different Types of Mortgage Loans? 

No matter what anyone tells you, always remember: A mortgage is a debt. Debt is a very polarizing topic to discuss with friends because many of us were raised on the premise that debt is bad. The truth is, some debt is bad, some debt is okay, and some debt is good. Many today would argue that mortgage debt is good since the rate is so low and it affords you a bigger home. 

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Some people believe that debt should be prevented at all costs. Others view it as a means of improving one’s quality of life or as a means of increasing fortune. What’s awful about debt, factually, is reckless credit usage.

Here’s a rundown of the many types of mortgage programs, along with their benefits and drawbacks, to help you determine which is best for you.

A mortgage with a fixed rate

The interest rate is fixed for the duration of the loan. These loans provide a consistent monthly payment and a low-interest rate. Borrowers who wish to pay off their mortgage quicker can typically make extra payments toward the principal, as prepayment penalties are uncommon.

Pro: It’s predictable because the monthly payment is fixed.

Con: Taking out a fixed-rate loan while the interest rates are high means you’re stuck with it for the duration of the loan. The only way out is to refinance at a lower rate.

A mortgage with an adjustable rate (ARM)

After a fixed-rate cycle of months to years, the interest rate on an adjustable-rate mortgage (ARM) varies. Lenders sometimes publish ARMs with a pair of numbers, such as 7/1 or 5/1. Usually, a 5/1 ARM has a fixed rate for five years and then adjusts every year, rounding off if that option exists.

Pro: An ARM’s opening interest rate is often lower than that of a standard fixed-rate loan, so it’s easy to get lured in by the teaser rate. But, it might wind up costing more in interest over the term of your mortgage than a fixed-rate loan. An ARM may be the ideal option for someone who plans to market their home before the rate changes.

Con: Future rate hikes might be significant, leaving many adjustable-rate mortgage borrowers with significantly elevated monthly payments than if they chose a fixed-rate mortgage.

Refinance loan or second mortgage

Sometimes, a homeowner already has a mortgage but wants to change the terms. Maybe they want a lower rate or a longer term. Or maybe, they want to take out more equity from their home. Whatever the case, many options are available! The most common would be refinancing the home mortgage. With mortgage refinance, the homeowner closes out their original mortgage, and obtains another one – ideally with more favorable terms. 

With interest rates so low these past couple of years, refinancing has become much more popular. How often a homeowner refinances is usually a personal decision, but they should consider at least these factors:

  • market interest rate vs their current mortgage interest rate
  • length/term of their loan vs the new one they want to get
  • cost of the loan (“closing costs”) vs keeping still
  • [cash-out refinance only] what to do with the funds

Pros: If you can secure a lower interest rate than your current loan, and the closing costs aren’t significant, then it could definitely be worth refinancing. On the other hand, if you need the money for home renovations, a cash-out refinance may be your best bet.

Cons: Refinancing costs money, so make sure the math works in your favor. 

Conventional loan

The standards for conventional loans are generally more stringent than those for government-backed house loans. When reviewing traditional loan applications, lenders usually look at credit history and debt-to-income ratios.

Pro: A conventional mortgage may be used for a range of property kinds, and PMI would help borrowers qualify for a conventional loan even if they have less than 20% for the down payment.

Con: Compared to government loans, conventional loans have tougher qualification standards and may demand a larger down payment.

Interest-only mortgage

The average age of home purchases has decreased, and an increasing number of millennials are now purchasing their first houses. Typically, the loan duration is determined by the debt-to-income (DTI) ratio and the sum of interest negotiated on the mortgage. For homebuyers, a longer contract means a lower payment, but a longer time to pay off that debt.

Some lenders may offer an interest-only mortgage, meaning the borrower’s monthly fees will cover only the interest. As a result, it’s best to have a strategy in place to ensure that you can have enough money to return the entire sum borrowed at the end of the period.

Interest-only loans may be appealing since your monthly payments are low. But, unless you have a strong strategy to reimburse the capital, at some point, a fixed loan could be the better option.

Pro: Interest-only mortgages allow the borrower to place their capital elsewhere, such as in dividend stocks, a rental property, or other investments. 

Con: Borrowers who aren’t careful with their budget may find themselves never being able to pay off the loan.

Read more: 15 Ways to Generate Passive Income from Real Estate

FHA loan

FHA loans and VA loans are mortgage loans insured by the government and available for potential homebuyers. FHA loans are available to lower-income borrowers and typically require a very low down payment. Also, borrowers get competitive interest rates and loan costs. 

The government does not directly grant Federal Housing Administration (FHA) loans. FHA loans can be issued by participating lenders, and the FHA guarantees the loans. FHA mortgages might be a viable option for those who have a high debt-to-income ratio or a bad credit score.

Pro: FHA loans need a smaller down payment and credit score requirements are lower than conventional loans. Moreover, FHA loans may enable applicants to use a non-resident co-signer to assist them to be qualified.

Con: Unless a borrower puts down 10%, the monthly mortgage insurance will remain a part of the payment for the loan’s life. If a borrower ever wants to remove the monthly mortgage insurance, they must qualify and refinance into a conventional loan.

Read more: How to Improve Your Credit Score

FHA 203(k) loan

An FHA 203(k) loan is a government-insured mortgage allowing funding borrowers with one loan for both home renovation and house purchase. Current homeowners may also be eligible for an FHA 203(k) loan to help pay for the repairs of their current house.

Pro: An FHA 203(k) loan can be utilized to purchase and renovate a home that would otherwise be ineligible for a traditional FHA loan. It just takes a 3.5% down payment.

Con: You must be eligible for the full property value, as well as the price of anticipated improvements, with these loans. The rate may be greater than on a normal FHA loan. You’ll also have to pay both a one-time, and monthly mortgage premium insurance payments.

VA (Veterans Affairs) loan

Home loans for veterans, reservists, and military or National Guard members, as well as qualified surviving married partners, are backed by the US Department of Veteran Affairs. 

In fact, nearly 90% of all VA-backed home loans are made without a down payment.

Pro: You won’t have to put any money down, or deal with PMI payments every month.

Con: On purchase loans, a one-time VA “funding charge” varies from 1.4% to 3.6%.

Fannie Mae homestyle loan

The Fannie Mae homestyle mortgage needs just 3%–5% down, but a credit score of 620 is an option for fixer-uppers.

Pro: You don’t have to pay for mortgage insurance beforehand, and you can terminate it after twelve years or when you have 20% equity on your house. The rate is frequently cheaper than an FHA 203(k) loan.

Con: Credit score requirements must be met.

Reverse mortgage loan

Homeowners aged 62 and above can use a reverse mortgage to convert some of their property value into cash. The age of the youngest homeowner, the loan rate and fees, the heir’s wishes, and payout type are all aspects for the lender to consider.

Pro: There are no monthly payments required, and the homeowner can select between a one-time balloon payout, a monthly payout, a line of credit, or a combination of the three.

Con: The interest rate may be greater than that of a typical mortgage. Mortgage insurance, a direct charge, an initiation fee, and third-party expenses are usually paid by the homeowner.

Final Thoughts

Mortgage loans are given to those who have enough income and assets vs. their debt. Mortgages also aid in the development of credit. They enable homeowners to invest in a home, with the advantage of having a forced-savings component. However, like with any loan, borrowers should be responsible when taking out a mortgage. It’s easy to get carried away and buy more than is necessary (and become house-poor).

Source: credit.com

Apache is functioning normally

Apache is functioning normally

Quick answer: Yes, it’s possible for undocumented immigrants to get a mortgage loan. They face legal and financial obstacles that don’t stand in the way of other purchasers, but millions have done so successfully.

You don’t need to be a resident to own real estate in the United States. Many documented immigrants own homes. While it’s difficult to get accurate statistics about undocumented homeowners for a number of reasons, in 2014, the Migration Policy Institute estimated that around 3.4 million undocumented immigrants owned homes in the United States.

Keep reading to discover how your residency status impacts the home loan process. We’ll also highlight some important information you should know about your rights when applying for a mortgage. 

In This Piece

  1. How Residency Status Affects a Home Loan
  2. Understand Your Rights
  3. How to Get a Mortgage

How Residency Status Affects a Home Loan

Overall, residency status plays a significant role in determining the availability and terms of home loans for individuals in the United States.

Green Card Holders

Green card holders are permanent residents eligible for most types of mortgages available to U.S. citizens. This means they must provide proof of income, credit history and other financial documents to qualify for a home loan. In some cases, green card holders might face additional challenges during the home loan and purchase process. Those can include difficulty in obtaining mortgage insurance or a higher down payment requirement, which can vary based on the lender and the type of loan.

Refugees and Asylum Grantees

Refugees and asylum grantees are individuals granted legal status in the United States due to persecution or fear of persecution in their home countries. They may be eligible for certain types of mortgages. However, their ability to obtain a home loan might depend on their specific immigration status and financial circumstances. For example, refugees or asylum grantees who have been in the United States for less than 2 years might have a harder time getting a mortgage because many lenders require at least 2 years of residency to establish credit history.

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DACA

DACA recipients, or individuals who’ve been granted Deferred Action for Childhood Arrivals, are not eligible for most types of home loans. This is because they don’t have legal permanent residency status. However, some lenders may offer alternative financing options or assistance programs specifically designed for DACA recipients and other undocumented immigrants. 

Additionally, DACA recipients who have obtained an Employment Authorization Document and can demonstrate a stable income and credit history may be able to get a mortgage under certain circumstances. 

Understand Your Rights

The Fair Housing Act prohibits discrimination in housing based on race, color, national origin, religion, sex, familial status or disability. Immigrants, including those who aren’t U.S. citizens or permanent residents, are protected under the FHA and have the same rights as other individuals.

That includes:

  • The right to rent or purchase housing without discrimination based on national origin
  • The right to be treated the same as U.S. citizens or permanent residents in all aspects of the housing process, including advertising, application, screening and approval
  • The right to request reasonable accommodations in housing, such as modifications to the physical structure of a home or changes to policies or procedures, if disabled

If you believe you’re being discriminated against during the home loan, home buying or other housing process, you should report it.  

How to Get a Mortgage as an Undocumented Immigrant

Undocumented immigrants aren’t usually able to qualify for mortgages through traditional services, such as those backed by Fannie Mae and Freddie Mac. However, individuals with an ITIN may be able to get approved for special loans from private lenders. An ITIN (Individual Taxpayer Identification Number) is a unique identifier the IRS uses to process tax returns and payments for those that do not have or do not qualify for a social security number.

Apply for an ITIN

The first step is to apply for an ITIN, or Individual Taxpayer Identification Number. You do this by completing Form W-7 via mail, in person at an IRS-authorized agent or in person at an IRS Taxpayer Assistance Center.

Save for a Down Payment

Because undocumented immigrants can’t usually qualify for federally backed loans, such as those through the FHA, they probably won’t qualify for mortgages with low down payment requirements. Private lenders may require down payments as much as 20% or even 30%. If an undocumented immigrant wants to buy a home, they should start saving as soon as possible. That might mean paying down other debt first.

Get Documentation Ready

In addition to the ITIN, undocumented immigrants will have to provide information to help qualify them for a private home loan. That information can include:

  • Proof of income, such as recent pay stubs, tax returns or other financial documents
  • Information about credit history, including any outstanding debts, loans or credit accounts
  • Recent bank statements that show account balances and transaction history
  • Identification documents, such as passports or government-issued IDs
  • Proof of residency status, such as a lease agreement or utility bill in the person’s name
  • Proof of employment or self-employment, such as a letter from an employer or recent tax returns

Apply for an ITIN Mortgage

Once you have an ITIN, a down payment and all the necessary documentation, you can apply for an ITIN mortgage. Start by browsing the mortgage options in the Credit.com marketplace.

Source: credit.com

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Apache is functioning normally

Article originally published December 13th, 2017. Updated February 16th, 2023.

Buying a home is an extensive process. It includes marshaling your assets, reviewing your credit—and potentially trying to improve it—and shopping for a house that meets your wants and needs. That’s all before you enter the process of applying for a mortgage and considering your offers.

The process can be daunting, but it’s important to take one step at a time to avoid becoming overwhelmed. One area where people become especially concerned is the overall cost of a home loan. Securing a mortgage can be challenging, but how can you get a good interest rate to reduce the long-term cost of your home?

Here are some tips to help you get the best rates for mortgages. Just remember that many of these tips take time, so plan months or even years ahead for your homebuying journey. 

In This Piece

Tips for Getting the Best Interest Rate on Your Mortgage

When you’re looking to secure a mortgage or get the best possible interest, personal finances really matter. Our tips include those related to your credit history, savings and income, along with some advice about educating yourself on mortgage terms and interest types. 

Understand Interest Rate Types: Fixed vs. Adjustable

A fixed-rate mortgage has the same interest rate throughout the loan’s entire life. This makes your rate and monthly payment predictable and consistent. An adjustable-rate mortgage comes with an interest rate that can change—and often one that could increase if interest rates in the market increase. This can make your rate and monthly payment unpredictable.

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Knowing your plans for the future can help you understand which type of interest rate is best for you. If you only plan to hold on to the home for a few years before selling it to upgrade, an adjustable-rate mortgage—or ARM—might work for you. This is especially true if interest rates are currently low, as an ARM loan tends to start with lower rates than fixed-rate mortgages when all other factors are equal.  

Keep Your Credit Healthy

You do typically need decent credit to secure a mortgage, but there are options for those with lackluster credit. While the credit score required to buy a home depends on many factors, the better your score, the better rates you may be able to command. Interest rates are a huge factor in how much your monthly payment is. Better credit typically equals more favorable rates, which equals lower monthly payments.

Make a Bigger Down Payment

The larger your down payment, the lower your overall loan amount is. That can lead to a lower interest rate when you secure a mortgage. That’s because your interest rate is partially based on your home’s loan-to-value, or LTV.

For example, if a home is worth $200,000 and the loan is for $199,000, that would be considered a high LTV and is riskier for a lender. That could lead to a higher interest rate. If the ratio is lower, however, you might be rewarded with a lower interest rate. 

Have Stable Income

If you can prove that your line of work is in high demand with no sign of slowing down, or if you work for a large, profitable company, your lender may take this into account when processing your paperwork. Income stability demonstrates that you’re less likely to miss mortgage payments.

You can also demonstrate income stability by income history. Documents that show a stable income, such as check stubs, W2 forms and tax returns, might all be required by a mortgage lender when evaluating you for a loan. 

Lower Credit Utilization Ratio

Credit utilization refers to how much of your available credit you’re actively using. A high credit utilization rate occurs when you use a large percentage of your available credit. For example, if you have $10,000 total in credit limits across your credit cards and you have a total balance of $5,000, that’s a credit utilization rate of 50%.

The Consumer Financial Protection Bureau notes that keeping your credit utilization at 30% or lower helps improve your credit score, which can lead to better interest rates for mortgages. It can also ensure mortgage lenders don’t see you as using credit in a desperate or risky way, making them more likely to approve you and offer better rates. 

Make Mortgage Point Payments

It’s possible to pay extra directly to your lender to lower your interest rate. For every one percent of your loan amount you’re willing to pay upfront, you may be able to get as much as half a percent off your home loan interest rate. Essentially, you’re just paying a larger amount of interest upfront, and this is known as buying points. 

Have Enough Savings

Most people know they should have enough savings to cover about 6 months’ worth of bills. Proving to your lender that you can still pay your mortgage in the event of a job loss because you have cash on hand can help you score a lower interest rate. 

A Final Word on Getting the Best Interest Rates for Mortgages

Keeping your finances healthy is the best way to protect yourself when applying for loans. Do the work ahead of time to ensure you’re ready to apply for a mortgage. Then, you can start by comparing rates online to secure a mortgage that works for you.

Source: credit.com

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Apache is functioning normally

When you’re considering starting home shopping, it’s important to put yourself in the best possible position. To do this, you’ll want to shore up your finances and increase your credit score. Follow these simple steps to get you closer to your homebuying dream.

Improving Credit for Future Homebuyers

1. Check Your Credit Score

Your credit score will be one of the main considerations in your mortgage application, so check yours to see what needs the most work. A credit score is based on a number of factors: payment history, credit usage, types of credit, age of credit, and recent inquiries. Though you can’t impact all of these in a short period of time, you can take steps to improve in some areas.

Make sure you’re paying all of your bills on time, as on-time payments have a huge impact on your score. Don’t apply for new lines of credit, but you can request a credit limit increase to current credit lines to improve your usage percentage. If you see any errors on your credit report, dispute them so that errors can be removed or corrected, and target credit usage when you make your budget.

2. Assess Your Finances

To know what you have to do to buy the home of your dreams, you need to know where you stand. Write down everything you have coming in and going out each month first. Some of these expenses, such as your car and student loan payments, stay the same over time and will come with you to your new home. Others are variable and change from month to month, including how often you eat out and your entertainment expenses, and these expenditures can most likely be shaved down or eliminated entirely with a budget.

Because homebuying comes with many expenses–a down payment, inspection fees, closing costs–your budget should be tighter in the period before you buy than normal. You’ll also want to budget for a home warranty; see if a home warranty is worth the money. When developing your budget, focus on eliminating your high-interest debt and saving for those homebuying expenses.

Lenders will also look at your debt-to-income ratio or DTI which is the amount of money you have coming in each month versus the expenses you have. Though it varies between lenders, many lenders will not give a mortgage to someone whose DTI is higher than 43%.

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3. Understand Homebuying Costs

For nearly every type of mortgage, a down payment is required. A down payment of no less than 20% is suggested to have better home options and lower monthly costs. Conventional loans allow 20%, however, you can also have a  down payment of as little as 3%; for down payments below 20%, PMI (private mortgage insurance) is required. Other types of loans, like an FHA loan, require between a 3.5-10% down payment, depending on your credit score. Make sure you understand how much you’ll be spending on your new home by using a mortgage calculator. 

Other homebuying fees can add up quickly and be more variable. You will likely have a loan origination fee, inspection fee, appraisal fees, and other fees. You may be able to control some of these by choosing your own professionals. However, others will be selected by the seller, real estate office, or mortgage company.

A brokerage commission may be paid to real estate agents on closing. Your home warranty, property insurance and taxes, and any points you wished to pay to lower your mortgage rate as well as current interest rates will all go into your final costs. Account for all of these expenses when deciding how much mortgage you can afford.

Take steps to improve your creditworthiness and your DTI, and know what you’re looking for when you begin shopping for a lender to work with so you get the best rate possible. With the right moves, you’ll be closing on your dream home in no time.

Source: credit.com

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Apache is functioning normally

Posted on: September 18, 2023

The Federal Open Market Committee’s next meeting is scheduled for September 19, 2023. A policy update, which will include any rate adjustments, is expected to be announced on September 20. As the next meeting date approaches, all eyes are on the decision-makers at the Federal Reserve.

Let’s explore what experts expect in the coming meeting and what that could mean for home buyers.

Check your VA home buying eligibility. Start here (Sep 18th, 2023)

What the experts expect

The CME FedWatch Tool, a tool investors use to predict Fed policy changes, indicates that there is over a 90% chance that the Fed will keep interest rates the same at the meeting later this month. As of September 6, there’s less than a 10% chance the Fed will increase the federal funds rate.

Although this tool is helpful, it’s not a foolproof estimation. In August, Jerome H. Powell, chair of the Federal Reserve, made a speech at the Jackson Hole Symposium. Powell kicked things off by saying, “It is the Fed’s job to bring inflation down to our 2 percent goal, and we will do so. We have tightened policy significantly over the past year. Although inflation has moved down from its peak — a welcome development — it remains too high. We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”

It’s impossible to know what will ultimately come out of the FOMC meeting. But many expect rates to stand where they are.

Could mortgage rates fall?

Mortgage interest rates have been on the rise since March 2022. Until that point, American home buyers were enjoying historically low interest rates on home loans. But that all changed when interest rates started climbing.

Since March 2022, mortgage interest rates have increased dramatically. From an average of 3.76% on 30-year fixed-rate loans in March 2022, rates are currently sitting at 7.18% for the same loan type. Rising rates mean more expensive loan options for prospective homeowners. In some households, higher interest rates have put a home purchase out of reach.

If the Federal Reserve pauses its ongoing battle against inflation, interest rates will remain steady at the upcoming meeting. For potential home buyers, this pause will allow mortgage rates to remain where they are for now. The interest rate stability could be a game-changer for anyone looking to buy a home.

Beyond holding rates steady, some experts foresee a pause in interest rate hikes, leading to a drop in home loan interest rates. More stability in the market could allow lenders to offer slightly lower rates for home buyers.

Check your VA mortgage rates. Start here (Sep 18th, 2023)

What this means for you

If you are looking to take out a loan of any kind, a pause on interest rate hikes is a welcome reprieve. At the very least, you won’t face any higher interest rates. But in the best-case scenario, you can take advantage of the market’s temporary stability to lock in a slightly lower interest rate.

For anyone looking to purchase a home, a pause in rate hikes could be the signal that the cooling housing market has been waiting for. Any dip in mortgage rates could reignite the hot market conditions that persisted throughout 2021.

If you want to make a mortgage move, by either purchasing a new house or refinancing your current mortgage loan, a pause on interest rate hikes might be the appropriate time to act on your plans.

Future rate hikes

If the Federal Reserve doesn’t increase interest rates at the upcoming meeting, it will mark a big change. We’ve been seeing rates climb for over a year. A pause to higher rates would be a welcome reprieve.

Of course, we can only wait to see what the Fed will do at the next meeting. But even if interest rate hikes are paused for this meeting, it’s possible rate hikes will continue at the next meeting. After all, Powell’s recent speech made it clear that taming inflation is still the top priority for the Federal Reserve.

If you are planning to take out a home loan in the near future, keeping an eye on the changing interest rate market could make a big difference. A higher interest rate could eat into your home purchase budget, which means locking in the lowest possible rate is critical.

Check your VA home buying eligibility. Start here (Sep 18th, 2023)

Source: militaryvaloan.com

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The Keystone State boasts an array of architectural styles, reflecting its rich historical tapestry, from colonial heritage to contemporary design. In such a diverse setting, the home inspection offers a unique perspective into the essence of a potential new home, uncovering both its inherent charm and potential challenges. Conversely, sellers can leverage this process to transparently highlight their property’s worth and proactively address any concerns.

So, whether you’re starting your journey buying a home in Philadelphia or preparing to sell a house in Pittsburgh, this Redfin article provides comprehensive guidance on navigating the home inspection process in Pennsylvania with valuable insights from local home inspectors. Equipped with this knowledge, you’ll confidently navigate the Pennsylvania real estate market.

Why should you get a home inspection in Pennsylvania?

“The houses in Pennsylvania, half of which were built before 1959, can certainly give a neighborhood character, but can also cause a multitude of problems for the occupants,”  mentions Wolfe Home Inspections LLC. “Some of the old homes are filled with health hazards such as asbestos, lead paint, radon, and outdated wiring. Our picturesque rolling hills can also lead to moisture issues and foundation problems. It’s imperative that home buyers hire themselves a highly qualified home inspector to thoroughly evaluate the property for these potential issues.”

Are there any specialized inspections that Pennsylvania buyers should consider?

“Buyers should consider getting specialized inspections when necessary,” says Win Home Office. “Many buyers opt for a standard home inspection but specialized inspections, such as Mold Testing, Infrared Scanning, Radon Testing, Sewer Scope Inspections, and Fireplace and Chimney Inspections can help ensure that buyers are not only making a sound investment, but also prioritizing their future health and safety in that home.”

How much does a home inspection cost in Pennsylvania?

“The cost of a home inspection in Pennsylvania can vary based on factors such as location and the size of the property, but it generally ranges from $300 to $500,” notes Briton Inspection Services Pittsburgh.

Expert advice for Pennsylvania buyers before they get a home inspection

“Home buyers are smart to have a home inspection prior to purchasing the home as a second set of trained eyes can provide extra value in the form of a documented report on the property,” advises Kirschner Home Inspections, LLC. “A home inspection report documents the current condition at the time of the inspection and highlights any potential deficiencies. If major deficiencies are identified, the buyer may utilize the information in making a final decision on the purchase of the home or possibly negotiating a better offer.”

Ask your agent to point out possible problems

“Ask your agent during your initial or subsequent house showings if they see any possible home inspection issues,” shares The Home Pros. “Agents will regularly solicit important information from their trusted home inspectors before the offer. This can eliminate surprises during the actual inspection.”  

Attend the home inspection

“I highly encourage attending your home inspection,” insists Heritage Home Inspectors. “This gives you the ability to become very comfortable and familiar with your new purchase and allows you to ask the inspector any questions while onsite together. Gaining a strong understanding of your future home is an excellent way to start your home ownership.”

Hire a certified home inspector

“Pennsylvania does not have a state level license for Home Inspectors, though many of us carry state credentials for additional services, like radon testing, mold sampling, and wood destroying insect inspections,” says The Watson Team. “Because of this, it is important to make sure that the home inspector you are hiring is fully certified by a national association like ASHI and/or interNACHI.”

Pennsylvania home inspection: the bottom line

In the realm of Pennsylvania real estate, where history merges with contemporary living and unique environmental factors come into play, home inspections hold immense importance. Whether scrutinizing over buying historic homes or brand-new constructions, the pivotal factor is better understanding what’s going on inside the home beyond its exterior. For both buyers and sellers in the Keystone State, a thorough home inspection is not merely recommended—it’s imperative. It guarantees well-informed choices, transparency, and the smooth execution of property transactions.

Source: redfin.com

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Nestled along the Emerald Coast, this picturesque beachside city is not only famed for its stunning beaches and clear turquoise waters but also for its diverse and delectable dining scene. From fresh-off-the-boat seafood joints to upscale eateries offering gourmet experiences, Destin has something to satisfy every taste bud. So whether you’ve just moved to a new home in Destin or you’re a long-time local, check out some of the must-try restaurants in Destin, FL.

#1: Donut Hole Bakery Café

Cuisine Type: Donut Shop, Café
Location: 635 Harbor Blvd, Destin, FL 32541
Website: Donut Hole Bakery Cafe

Known for its delicious assortment of donuts and charming café atmosphere, Donut Hole Bakery Café is a favorite spot for locals and tourists alike. In addition to their classic glazed donuts, the Donut Hole offers unique flavors such as maple bacon, red velvet, and blueberry cake. Alongside their donuts, they also serve a variety of breakfast items, sandwiches, and coffee.

#2: Harbor Docks

Cuisine Type: Sushi Restaurant, Seafood Restaurant
Location: 538 Harbor Blvd, Destin, FL 32541
Website: Harbor Docks

Harbor Docks is a popular sushi and seafood restaurant located in Destin that offers a wide variety of options including sashimi, nigiri, sushi rolls, and traditional seafood favorites like shrimp, oysters, and crab. The restaurant has a laid-back and casual atmosphere, perfect for enjoying a meal with friends or family. With its waterfront location, Harbor Docks provides beautiful views of the harbor while you dine.

#3: Pepito’s Mexican Restaurant

Cuisine Type: Mexican Restaurant
Location: 36112 Emerald Coast Pkwy, Destin, FL 32541
Website: Pepito’s Mexican Restaurant

Another popular restaurant in Destin, FL is Pepito’s Mexican Restaurant. You can find a variety of Mexican favorites on the menu, including tacos, enchiladas, and fajitas.

#4: Marina Cafe

Cuisine Type: Sushi Restaurant, Steakhouse
Location: 404 Harbor Blvd, Destin, FL 32541
Website: Marina Cafe

Marina Cafe is a unique combination of a sushi restaurant and steakhouse, offering an eclectic menu that caters to all palates. From fresh and flavorful sushi rolls to succulent steaks cooked to perfection, Marina Cafe has something for everyone.

#5: Louisiana Lagniappe

Cuisine Type: Cajun and Creole Restaurant, Seafood Restaurant
Location: 775 Gulf Shore Dr, Destin, FL 32541
Website: Louisiana Lagniappe

From gumbo to jambalaya, guests can enjoy a variety of authentic Cajun and Creole dishes at Louisiana Lagniappe.

#6: Boshamps Seafood & Oyster House

Cuisine Type: Cajun and Creole Restaurant, Seafood Restaurant
Location: 414 Harbor Blvd, Destin, FL 32541
Website: Boshamps Seafood & Oyster House

Boshamps Seafood & Oyster House is a beloved restaurant located in Destin, FL. Specializing in Cajun and Creole cuisine, as well as mouthwatering seafood dishes, this restaurant offers a unique dining experience. From their fresh oysters to their Cajun-spiced shrimp, Boshamps offers a variety of flavorful dishes that will satisfy any seafood lover.

#7: Red Rooster Café

Cuisine Type: Breakfast Joint, American Restaurant
Location: 385 Harbor Blvd Ste 102, Destin, FL 32541
Website: Red Rooster Café

If you’re in search of a great breakfast spot in Destin, add Red Rooster Café to your list. The café offers a wide variety of breakfast dishes, from traditional pancakes and omelets to unique creations like their famous stuffed french toast. The cozy atmosphere and friendly staff make it a perfect place to start your day in Destin.

#8: Buck’s Smokehouse

Cuisine Type: BBQ Joint
Location: 303 Harbor Blvd, Destin, FL 32541
Website: Buck’s Smokehouse

Buck’s Smokehouse is a renowned BBQ joint located in Destin, FL. With a rustic and inviting atmosphere, the restaurant offers a wide variety of smoky and flavorful dishes. From their perfectly smoked ribs to their mouthwatering pulled pork, Buck’s Smokehouse guarantees a memorable dining experience. Don’t forget to try their famous homemade BBQ sauce, a perfect companion to their tasty fare.

#9: Boathouse Oyster Bar

Cuisine Type: Seafood Restaurant
Location: 288 Harbor Blvd, Destin, FL 32541
Website: Boathouse Oyster Bar

From oysters on the half shell to shrimp po’ boys, Boathouse Oyster Bar is a great casual restaurant in Destin to enjoy a delicious meal with a waterfront view.

#10: Burrito del Sol

Cuisine Type: Mexican Restaurant
Location: 517 Harbor Blvd, Destin, FL 32541
Website: Burrito del Sol

Burrito del Sol is a favorite Mexican restaurant among Destin locals. Known for their delicious burritos, tacos, and other specialties, Burrito del Sol offers tasty, classic Mexican dishes.

#11: Brotula’s Seafood House & Steamer

Cuisine Type: Bar, Seafood Restaurant
Location: 210 Harbor Blvd, Destin, FL 32541
Website: Brotula’s Seafood House & Steamer

Brotula’s Seafood House & Steamer is another popular bar and seafood restaurant located in Destin, FL. They offer a wide variety of fresh seafood dishes, including their famous seafood boils and steamed shellfish. With a beautiful waterfront location, Brotula’s provides a relaxed and casual atmosphere, perfect for enjoying delicious seafood while taking in the scenic views of the harbor.

#12: Dewey Destin Harborside

Cuisine Type: Seafood Restaurant
Location: 202 Harbor Blvd, Destin, FL 32541
Website: Dewey Destin Harborside

Last but not least is Dewey Destin Harborside. Known for its fresh catch and traditional seafood dishes, this restaurant offers a wide variety of options on its menu with a casual and laid-back atmosphere.

Source: redfin.com