For retirees Fred and Shelby Bivins, selling their home in Green Valley, Ariz., will enable them to realize their dream of traveling in retirement. The Bivinses have put their 2,050-square-foot Arizona home on the market and plan to relocate to their 1,600-square-foot summer condo in Fish Creek, Wis., a small community about 50 miles from Green Bay. They plan to live in Wisconsin in the spring and summer and spend the winter months in a short-term rental in Arizona, where they have family.  

Fred, 65, says the decision to downsize was precipitated by a two-month stay in Portugal last year, one of several countries they hope to visit while they’re still healthy enough to travel. “We’ve had Australia and New Zealand on our list for many years, even when we were working,” says Shelby, 68. The Bivinses are also considering a return visit to Portugal. Eliminating the cost of maintaining their Arizona home will free up funds for those trips. 

With help from Chris Troseth, a certified financial planner based in Plano, Texas, the Bivinses plan to invest the proceeds from the sale of their home in a low-risk portfolio. Once they’re done traveling and are ready to settle down, they intend to use that money to buy a smaller home in Arizona. “Selling their primary home will generate significant funds that can be reinvested to support their lifestyle now and in the future,” Troseth says. “Downsizing for this couple will be a positive on all fronts.”

Challenges for downsizers 

For all of its appeal, downsizing in today’s market is more complicated than it was in the past. With 30-year fixed interest rates on mortgages recently approaching 8%, many younger homeowners who might otherwise upgrade to a larger home are unwilling to sell, particularly if it means giving up a mortgage with a fixed rate of 3% or less. More than 80% of consumers surveyed in September by housing finance giant Fannie Mae said they believe this is a bad time to buy a home and cited mortgage rates as the top reason for their pessimism. “This indicates to us that many homeowners are probably not eager to give up their ‘locked-in’ lower mortgage rates anytime soon,” Fannie Mae said in a statement. As a result, buyers are competing for limited stock of smaller homes, says Hannah Jones, senior economic research analyst for Realtor.com. 

Here, though, many retirees have an advantage, Jones says. Rising rates have priced many younger buyers out of the market and made it more difficult for others to obtain approval for a loan. That’s not an issue for retirees who can use proceeds from the sale of their primary home to make an all-cash offer, which is often more attractive to sellers. 

Retirees also have the ability to cast a wider net than younger buyers, whose choice of homes is often dictated by their jobs or a desire to live in a well-rated school district. While the U.S. median home price has soared more than 40% since the beginning of the pandemic, prices have risen more slowly in parts of the Northeast and Midwest, Jones says. “We have seen the popularity of Midwest markets grow over the last few months because out of all of the regions, the Midwest tends to be the most affordable,” she says. “You can still find affordable homes in areas that offer a lot of amenities.” 

Meanwhile, selling your home may be somewhat more challenging than it was during the height of the pandemic, when potential buyers made offers on homes that weren’t even on the market. The Mortgage Bankers Association reported in October that mortgage purchase applications slowed to the lowest level since 1995, as the rapid rise in mortgage rates has pushed many potential buyers out of the market. Sales of previously owned single-family homes fell a seasonably adjusted 2% in September from August and were down 15.4% from a year earlier, according to the National Association of Realtors. “As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales,” NAR chief economist Lawrence Yun said in a statement. 

However, because of tight inventories, there’s still demand for homes of all sizes, Jones says, so if your home is well maintained and move-in ready, you shouldn’t have difficulty selling it. “The market isn’t as red-hot as it was during the pandemic, but there’s still a lot to be gained by selling now,” she says.

Other costs and considerations 

If you live in an area where real estate values have soared, moving to a less expensive part of the country may seem like a logical way to lower your costs in retirement. While the median home price in the U.S. was $394,300 in September, there’s wide variation in individual markets, from $1.5 million in Santa Clara, Calif., to $237,000 in Davenport, Iowa. But before you up and move to a lower-cost locale, make sure you take inventory of your short- and long-term expenses, which could be higher than you expect. 

Selling your current home, even at a significant profit, means you will incur costs, including those to update, repair and stage it, as well as a real estate agent’s commission (typically 5% to 6% of the sale price). In addition, ongoing costs for your new home will include homeowners insurance, property taxes, state and local taxes, and homeowners association or condo fees.

Nicholas Bunio, a certified financial planner in Berwyn, Pa., says one of his retired clients moved to Florida and purchased a home that was $100,000 less expensive than her home in New Jersey. Florida is also one of nine states without income tax, which makes it attractive to retirees looking to relocate. Once Bunio’s client got there, however, she discovered that she needed to spend $50,000 to install hurricane-proof windows. Worse, the only home-owners insurance she could find was through Citizens Property Insurance, the state-sponsored insurer of last resort, and she’ll pay about $8,000 a year for coverage. Her property taxes were higher than she expected, too. When it comes to lowering your cost of living after you downsize, “it’s not as simple as buying a cheaper house,” Bunio says 

Before moving across the country, or even across the state, you should also research the availability of medical care. “Oftentimes, those considerations are secondary to things like proximity to family or leisure activities,” says John McGlothlin, a CFP in Austin, Texas. McGlothlin says one of his clients moved to a less expensive rural area that’s nowhere near a sizable medical facility. Although that’s not a problem now, he says, it could become a problem when they’re older. 

If you use original Medicare, you won’t lose coverage if you move to another state. But if you’re enrolled in Medicare Advantage, which is offered by private insurers as an alternative to original Medicare, you may have to switch plans to avoid losing coverage. To research the availability of doctors, hospitals and nursing homes in a particular zip code, go to www.medicare.gov/care-compare.

At a time when many seniors suffer from loneliness and isolation, a sense of community matters, too. Bunio recounts the experience of a client who considered moving from Philadelphia to Phoenix after her daughter accepted a job there. The cost of living in Phoenix is lower, but the client changed her mind after visiting her daughter for a few months. “She has no friends in Phoenix,” he says. “She’s going on 61 and doesn’t want to restart life and make brand-new connections all over again.”

Time is on your side 

Unlike younger home buyers, who may be under pressure to buy a place before starting a new job or enrolling their kids in school, downsizers usually have plenty of time to consider their options and research potential downsizing destinations. Once you’ve settled on a community, consider renting for a few months to get a feel for the area and a better idea of how much it will cost to live there. Bunio says some of his clients who are behind on saving for retirement or have high health care costs have sold their homes, invested the proceeds and become permanent renters. This strategy frees them from property taxes, homeowners insurance, homeowners association fees and other expenses associated with homeownership 

The boom in housing values has boosted rental costs, as the shortage of affordable housing increased demand for rental properties. But thanks to the construction of new rental properties in several markets, the market has softened in recent months, according to Zumper, an online marketplace for renters and landlords. A Zumper survey conducted in October found that the median rent for a one-bedroom apartment fell 0.4% from September, the most significant monthly decline this year. 

In 75 of the 100 cities Zumper surveyed, the median rent for a one-bedroom apartment was flat or down from the previous month. (For more on the advantages of renting in retirement, see “8 Great Places to Retire—for Renters,” Aug.)

Aging in place

Even if you opt to age in place, you can tap your home equity by taking out a home equity line of credit, a home equity loan or a reverse mortgage. At a time when interest rates on home equity lines of credit and loans average around 9%, a reverse mortgage may be a more appealing option for retirees. With a reverse mortgage, you can convert your home equity into a lump sum, monthly payments or a line of credit. You don’t have to make principal or interest payments on the loan for as long as you remain in the home. 

To be eligible for a government-insured home equity conversion mortgage (HECM), you must be at least 62 years old and have at least 50% equity in your home, and the home must be your primary residence. The maximum payout for which you’ll qualify depends on your age (the older you are, the more you’ll be eligible to borrow), interest rates and the appraised value of your home. In 2024, the maximum you could borrow was $1,149,825.

There’s no restriction on how homeowners must spend funds from a reverse mortgage, so you can use the money for a variety of purposes, including making your home more accessible, generating additional retirement income or paying for long-term care. You can estimate the value of a reverse mortgage on your home at www.reversemortgage.org/about/reverse-mortgage-calculator.

Up-front costs for a reverse mortgage are high, including up to $6,000 in fees to the lender, 2% of the mortgage amount for mortgage insurance, and other fees. You can roll these costs into the loan, but that will reduce your proceeds. For that reason, if you’re considering a move within the next five years, it’s usually not a good idea to take out a reverse mortgage.

Another drawback: When interest rates rise, the amount of money available from a reverse mortgage declines. Unless you need the money now, it may make sense to postpone taking out a reverse mortgage until the Federal Reserve cuts short-term interest rates, which is unlikely to happen until late 2024 (unless the economy falls into recession before that). Even if interest rates decline, they aren’t expected to return to the rock-bottom levels seen over the past 15 years, according to a forecast by The Kiplinger Letter. And with inflation still a concern, big rate cuts such as those seen in response to recessions and financial crises over the past two decades are unlikely. 

Note: This item first appeared in Kiplinger’s Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related Content

Source: kiplinger.com

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But let’s slow our roll here Yet she also sought to temper the enthusiasm: “Mortgages are so specific to the situation and individual, so not everybody’s rate drops by half a percentage point overnight,” she said. “A lot of the savvy buyers understanding that we’re looking at rates that are going to be closer to … [Read more…]

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TPO, Anti-Valuation Bias Tools; Retail and Broker News; Interview on Home Equity Levels

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TPO, Anti-Valuation Bias Tools; Retail and Broker News; Interview on Home Equity Levels

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Thu, Dec 21 2023, 10:43 AM

“What do you call a Christmas wreath made out of $100 bills? Aretha Franklins.” It’s cutting-edge humor like this that keeps readers coming back for more, right? Or astronomy tips, as today is the Winter Solstice, with the least amount of sunlight in the Northern Hemisphere and a little music to go along with it. “The winter is here again, oh Lord. Haven’t been home in a year or more.” (Look at that hair!) Lenders and vendors are hoping that the decline in rates keeps the “winter” away from lending, and holds more salary cuts, layoffs, and furloughs at bay. Mortgage banking is not alone in expanding automation and trying to save money. Do you think that you deserve a lower price for checking out of a store yourself and not using a paid clerk? Many do. The number of people who work as cashiers dropped from 1.4 million in 2019 to 1.2 million today, and over the next decade the BLS projects an additional 10 percent decline. (Today’s podcast can be found here, and this week’s is sponsored by Lender Toolkit’s AI-powered AI Underwriter and Prism borrower income automation tools. Get loans approved in under two minutes. By providing lightning-fast underwriting decisions, your market reputation with borrowers and Realtors will soar. Listen to an interview with Hometap’s Dan Burnett on record home equity levels and how Americans can best leverage them.)

Lender and Broker Products, Programs, and Services

“With increased regulatory focus on property-valuation bias, lenders need robust risk-management processes in place. The recently released interagency proposals on AVM-quality control and ROV-process guidance are designed to prevent valuation bias and help ensure industry stakeholders follow fair-lending practices. Watch our complimentary on-demand webinar to learn how you can prepare, and implement the tools needed to support the proposed changes.* Our experts discuss how to identify potential bias in valuations, ways to mitigate bias risk, how to monitor AVM and appraisal compliance with fair-lending requirements, and more. Watch this timely and important webinar here. *Check with your compliance or legal department for information on complying with applicable law.”

“As the year draws to a close, Planet Home Lending extends our heartfelt gratitude to our invaluable correspondent partners. Together, we’ve stood strong in the face of challenges in a demanding market. Thank you for being an integral part of our shared journey. As we look forward to 2024, we continue our commitment to being your go-to team, your reliable partner, your toolkit, and your product gateway. Here’s to a smooth finish for 2023 and a prosperous New Year.”

“Ready to make your borrowers’ dreams of homeownership a reality? Kind ‘s blended FICO (conventional representative score) loan options can help make it happen! With this option, your borrowers have a greater chance of final approval for a home loan based on their average combined score. Kind has the tools & resources to help you get the job done fast and easy! Using the Kwik Pricer in our broker platform, Kwikie – built with brokers in mind, you’ll be able to knock out deals hassle-free! Learn more by connecting with your Kind Account Executive. If you’re not yet a partner with us, join the #kindmovement today by submitting your broker inquiry.”

Disaster Updates and Other Industry News

On December 13, 2023, with DR-4751-TN, the Federal Emergency Management Agency (FEMA) declared that federal disaster aid with individual assistance has been made available to four Tennessee counties; Davidson, Dickson, Montgomery and Sumner to supplement recovery efforts in the areas affected by severe storms and tornadoes on December 9, 2023.

On 12/13/2023, with DR-4751, FEMA declared federal disaster aid with individual assistance has been made available to counties affected by severe storms and tornadoes on 12/9/2023. See AmeriHome Mortgage Disaster Announcement 20231205-CL for inspection requirements.

Hometown Equity Mortgage is offering G-PA 525 Fast closings 21-30 days, 5-25 units can be mixed use, Mixed use is viable with 70 percent residential, no prepay, I/O 12/24, Up to 75 percent LTV.

Create opportunities with ITIN borrowers in the new year. If you’re not sure how, reach out to the Champs of Non-QM. Champions Funding is steadfast in its mission to help you and your borrowers access loan products outside of traditional agency options. Don’t miss out on learning all the CDFI benefits too! Not yet partnered with the Champs? Sign up today!

loanDepot, Inc. a leading provider of home lending solutions that enable customers to achieve the dream of home ownership, unveiled its fully automated melloNow underwriting engine, changing the game for mortgage borrowers by delivering a fully conditional loan approval in minutes rather than hours or days. Utilizing a fully digital verification process, melloNow swiftly analyzes credit reports, detects fraud, and validates income and employment data at the point of sale, instantaneously generating unique borrower conditions. Now, with the melloNow digital underwriting engine, many loanDepot customers will enjoy a dramatically improved experience.

Newfi Wholesale announced its partnership with the popular technology solution, ARIVE to bring its full suite of Non-QM products to loan officers and brokers. With this partnership, ARIVE is now expanding its capabilities to include DSCR loans. This illustrates the industry-wide shift towards the growing Non-QM sector. Specializing in alternative lending products, Newfi has led the way with innovative solutions relevant for today’s markets. This strategic partnership will empower mortgage brokers with a one-stop shop mortgage experience to a wide array of niche loan programs. Newfi approved brokers will gain immediate access to Newfi’s diverse product lineup and competitive pricing in seamless technological experience, with deeper integrations in development and are set to be unveiled soon, further enriching our shared platform’s capabilities. Brokers interested in working with Newfi can sign up here.

Effective for FHA case number assignments on or after January 1, 2024, AmeriHome’s 2024 Loan Limit Pricing will be available. For additional information including updates on VA loan limits, see AmeriHome Mortgage announcement 20231207-CL for details.

For Mortgage Loans converted from interim construction financing to a permanent loan with a modification, the Loan Modification Agreement required to be included in the Collateral Package may be a certified copy with the original document treated as a Trailing Document. View AmeriHome Mortgage Product Announcement 20231206-CL for details.

VA announced an update to VA Lenders Handbook Chapter 4 Topic 7, Subsection b on Collection Accounts. See AmeriHome Mortgage announcement 20231204-CL for details.

Jet Mortgage is offering a new FHA DPA, 100 percent LTV FHA with New Improved Pricing. Jet 200 FHA DPA Highlights include 600 Min FICO, 1 Unit, Condo’s, Townhomes, Repayable & Forgivable Option, Max 2 percent BPC/LPC – Max 2 percent Discount Points. Must be DU Approve/Eligible, no Manual Underwrites allowed. Contact Jet Mortgage for more information.

VA has issued Circular 26-23-26 regarding the impact of 2024 Conforming Loan Limits on VA loans. Contact Kind Lending with questions about impacts to VA loans regarding changes to conforming loan limits for 2024

Capital Markets

Bonds enjoyed another winning session yesterday on the back of some market-friendly inflation data for November out of the United Kingdom, geopolitical angst tied to a potential military response to Houthi rebels disrupting shipping activity in the Red Sea, slowdown worries linked to disappointing forward revenue guidance from economic bellwether FedEx, and some safe-haven positioning before the extended Christmas weekend. The market largely overlooked some stronger-than-expected existing home sales activity in November, a nice pickup in consumer confidence in December, and a weak 20-year bond reopening auction.

In housing/real-estate news, Existing Home sales rose 0.8 percent month-over-month in November to a seasonally adjusted annual rate of 3.82 million, ending a five-month decline. Despite the rise, sales still sit 7.3 percent lower than a year ago largely due to mortgage rates spiking in September and October. Sales of existing homes continue to be hindered by high mortgage rates, high selling prices, and limited inventory. Inventory remains light, with only 3.5 months’ worth at the current pace. Fortunately, the recent drop in mortgage rates is expected to be a driver of stronger sales activity in December. The median home price rose 4 percent year-over-year to $387,600, while the first-time homebuyer share rose to 31 percent from 28 percent from the month prior.

As previously mentioned, this week contains a lot of housing data. After learning Tuesday of a substantial pick-up in residential activity recently, it would appear that home builders are becoming more optimistic as mortgage rates trend lower and economic growth remains resilient. Speaking of optimism, we also learned yesterday that the Conference Board’s Consumer Confidence Index increased in December as there was renewed optimism across all ages and household income levels with attention being paid to improved inflation trends, business conditions, and job availability. Consumer confidence is highly influenced by gasoline prices, which have been falling.

There will be little data of importance on the economic front until we get into the new year, though we do have a busy economic calendar today that is underway with the third look at Q3 GDP (4.9 percent, revised slightly downward). We’ve also received weekly jobless claims (205k, up from 202k) and Philadelphia Fed manufacturing (-10.5, much lower than expected). The core PCE deflator was expected to be unchanged at 2.3 percent. Later today brings leading indicators for November, KC Fed manufacturing for December, Treasury announcing next week’s laundry list of supply including 2-, 5- and 7-year notes before auctioning $20 billion reopened 5-year TIPS, and Freddie Mac’s Primary Mortgage Market Survey with the prior week’s 30-year mortgage rate slipping eight basis points to 6.95 percent. We begin the day with Agency MBS prices unchanged from Wednesday night, the 10-year yielding 3.87 after closing yesterday at 3.88 percent, and the 2-year at 4.36. With yesterday’s gains, the 10-year note yield returned to unchanged for 2023 after hitting 5.02 percent intraday in the middle of October.

Employment

“Logan Finance bucks mortgage industry trends with strong Q4 growth! As the year-end fast approaches, Logan Finance finds itself in a thriving environment sparking growth that has more than doubled over the last two years. “There’s a great need for Non-QM lending and we are positioned well to handle the influx of new business,” says Aaron Samples, Logan’s Chief Revenue Officer. TPO partners, if you missed the year-end pricing special announcement, see our LinkedIn profile at Logan Finance Corporation. Mortgage broker clients can get rate discounts of up to .375 on select loan products through the end of December, so bring your deals to Logan! Logan’s growth is also fueling several new hires including Wholesale and Correspondent industry veterans Nick Pabarcus and Dave Weatherford, who will focus on recruiting and growing our network. And speaking of hiring, we’re looking for Non-QM superstar AE’s, so contact Aaron Samples for hiring information. Learn more about Logan’s growth at Loganwholesale.com and Logancorrespondent.com.”

Happy Holidays from PrimeLending! Looking back at 2023, are you wrapping up the year feeling more confident of where your career is headed than when you started? Did you receive the coaching and support needed to strengthen critical skills, harness cutting-edge tools, and propel yourself to new heights? As you gear up for 2024, why settle for treading water? Take charge and position yourself to thrive at PrimeLending. Our LOs are transforming their professional journeys through One More, our exclusive peer-to-peer coaching program. Designed to empower producers to excel in today’s volatile market, One More offers a dynamic, fast-paced, and results-oriented small group support system where LOs can connect, collaborate, and ultimately surpass their goals. We’d love to talk with you about how we can help you flourish more too. Contact Nic Hartke for more information.

A Greater Town has built a robust real estate portal into its national hyperlocal marketing site and is looking for one mortgage lender (or a few select mortgage lenders) to “own” it, similar to having your own Zillow or Rocket Homes. About 600 MLS associations are represented with over 1,100,000 listings & 750,000 real estate agents & brokers. A comprehensive directory of every mortgage lender & MLO in the country is in construction as well. It’s the ideal environment for a national lender to set up shop. Examples include Editors Picks, Sally Forster Jones, Founder & CEO of the Sally Forster Jones Group at Compass, and Jerry & Lisa String, Listing & Buyer Agents at Realty ONE Group DocksideSouth. For further information, please contact Drew Knapp, CEO of A Greater Town, (973-477-7154).

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Source: mortgagenewsdaily.com