Hello, early Christmas present! Mortgage rates have fallen by almost 1% in a short time, and it has created four straight weeks of positive purchase application data. I recently covered this noteworthy topic on the HousingWire Daily podcast because we need to add some reality checks with this positive data, but we also stress that people can’t make the same mistake as last year of ignoring the positive forward-looking data.
Last week, purchase apps were up 5% over the previous week, making the year-to-date count 22 positive prints versus 23 negative prints and one flat week. We have a few weeks left for the year and with mortgage rates falling as much as they have, we might end up positive on the year-to-date count.
Mortgage rates and the 10-year yield
We are back! The 10-year yield closed below 4.25% again and mortgage rates ended the week at 7.09%. For my 2023 forecast, my range for the 10-year yield was 3.21%-4.25%, which meant mortgage rates between 5.75%-7.25%. I said the 10-year yield would only break below 3.37% if the labor market breaks — this level is the “Gandalf line” I have used all year.
Now, in order to get above 4.25% on the 10-year yield, we needed the economy to outperform. In Q3, the U.S. economy grew above 5%, and jobless claims headed lower. That economic growth and lower jobless claims data, on top of the Fed being hawkish at their Fed meeting, sent the 10-year yield over 5% making the Fed policy very restrictive. This is not what they wanted after all their rate hikes.
However, those are over for now. Mortgage rates went from 7.32% to end the week at 7.09%. If the spread between the 30-year mortgage rate and 10-year yield were behaving normally we would be talking about mortgage rates under 6% today!
Weekly housing inventory data
It’s December, which means the seasonal decline in housing inventory is well underway, which means in 2023, I have batted a whopping zero on how much I predicted weekly inventory would grow with higher mortgage rates. The call was that if mortgage rates rose above 7.25%, we would see more inventory growth — between 11,000-17,000 weekly. That hasn’t happened once this year. The closest we got to this level was when inventory grew for a few weeks by about 9,000 and it did grow faster with higher rates late in the year, but it never hit my target, so I got this wrong. Now, we see the seasonal inventory decline.
Last year, according to Altos Research, the seasonal peak for housing inventory was Oct. 28. It appears that the seasonal peak this year was Nov. 17.
Weekly inventory change (Nov. 24-Dec. 1): Inventory fell from 565,875 to 555,717
Same week last year (Nov. 11-Nov. 18): Inventory fell from 564,571 to 550,302
The inventory bottom for 2022 was 240,194
The inventory peak for 2023 so far is 569,898
For context, active listings for this week in 2015 were 1,081,712
The one positive inventory story in 2023 is that we formed a bottom in the new listings data! One concern with higher mortgage rates was that more sellers — who are traditional buyers — would not list their homes. This didn’t happen at all this year, even with mortgage rates heading toward 8%. I talked about growth in the new listings data on CNBC as it appeared to me we were forming a bottom months ago.
New listings data for this week over the last several years:
2023: 28,297
2022: 28,471
2021 32,018
Traditionally, one-third of all homes take price cuts before they sell. When mortgage rates rise and demand decreases, the percentage of homes with price cuts usually increases. However, even with mortgage rates reaching 8% this year, we trended 4% below 2022 levels of price cuts. This explains why home prices are more firm in the second half of 2023 versus the same period in 2022.
Price cut percentages this week over the last few years:
2023: 39%
2022: 43%
2021: 27%
The week ahead: Jobs week!
Yes, it’s that time of the month again: Jobs week! We have had a big move in bond yields already, and we are staring at four labor data reports this week: job openings, ADP, jobless claims, and jobs Friday. We should get a slight boost in the jobs report from the labor strikes being over. However, it will be interesting to see how the bond market reacts to each labor report.
Are you considering refinancing your mortgage, but hesitant about the high cost of closing? A no-closing-cost refinance may be the solution for you.
In this article, we’ll explain what a no-closing-cost refinance is, how it works, and the benefits and drawbacks of this type of mortgage refinance. We’ll also go over the qualifications and the process of getting a no-closing-cost refinance, so you can decide if it’s the right choice for you.
What is a no-closing-cost refinance?
In short, it’s a mortgage loan that offers homeowners the option to refinance their mortgage without having to pay initial fees to lenders.
Closing costs usually pay for lender fees as well as loan origination fees, third-party expenditures, appraisal fees, and underwriting and processing costs. Refinance lenders also take on costs that originate from third parties, including escrow and title costs.
With a no-closing-cost refinance, you potentially save money on closing costs, lower your monthly payment, and build equity in your home faster.
It’s certainly tempting and may be the right choice for certain types of borrowers. However, those closing costs saved are costs added to the loan amount that you’ll eventually have to pay back.
How does a no-closing-cost refinance work?
The application process for a no-closing-cost refinance is similar to that of a traditional refinance. You’ll need to provide financial information and documentation to the lender, and they will run a credit check. Once the mortgage lender approves your application, the refinance process can begin.
You may be wondering how the lender makes money on a no-closing-cost refinance. The lender recoups their costs by charging a slightly higher interest rate on the loan. This way, they can potentially make more money in the long run, even though you don’t pay any closing costs up front.
Pros and Cons of No Closing Costs
Having no upfront closing costs comes with a range of both advantages and disadvantages. The idea of skipping the closing costs and fees upfront may be appealing, or even right for you.
However, it’s still important to consider the various ways it may affect your financial situation next month, next year, and next decade. Here are some pros and cons:
Pros
Upfront savings: The most immediate benefit of a no-closing-cost refinance is the elimination of substantial upfront fees. This can be particularly advantageous for homeowners who may not have the liquid assets to cover these costs at the time of refinancing. It allows for the conservation of cash that could be used for other pressing financial needs or opportunities.
Simplified financing: This type of refinance simplifies the financial burden for homeowners. It removes the hurdle of saving for and managing large, one-time closing costs. This is especially helpful for those with limited disposable income or those facing unexpected financial challenges.
Quicker break-even point: For homeowners planning to move or refinance again in the short term, a no-closing-cost refinance can be financially advantageous. By not paying closing costs upfront, they can reach a break-even point more quickly, especially if they sell the home or refinance before the added costs accrue significantly.
Cons
Increased long-term cost: While there’s an immediate saving on closing costs, this type of refinance often results in a higher interest rate or a larger loan balance. Over time, this can lead to significantly higher interest payments. Homeowners should carefully consider the long-term financial implications, such as how the increased loan balance or rate will impact the total interest paid over the life of the no-closing-cost loan.
Higher monthly payments: Due to the higher interest rate associated with a no-closing-cost refinance, homeowners might face higher monthly payments. This increase can strain monthly budgets, especially for those who are already managing tight finances.
Reduced home equity: Rolling closing costs into the loan balance can reduce the amount of equity a homeowner has in their property. This is a critical consideration for those who may need to leverage home equity in the future for other financial goals or emergencies.
How to Qualify for a No-Closing-Cost Refinance
When it comes to qualifying for a no-closing-cost refinance, the eligibility requirements are similar to those of a traditional refinance. Your lender will look at your credit score, income, and debt-to-income ratio to determine if you qualify.
To improve your chances of being approved for a no-closing-cost refinance, and potentially lower your monthly payment, it’s a good idea to make sure your credit score is as high as possible. You should also have a solid income and a low debt-to-income ratio, which lenders assess to determine your ability to manage the monthly payment. Additionally, having a good track record of paying your bills on time can also help.
Once you have determined that you are eligible for a no-closing-cost refinance, you need to compare different options to determine which one will be the most cost-effective for you in the long run. Be sure to consider the interest rate, fees, and overall costs of each option before making a decision.
Finding Lenders Offering No Closing Cost Refinance
When considering a no-closing-cost refinance, finding the right lender is a crucial step. Different lenders offer varying terms and rates, so it’s important to conduct thorough research to find the best option for your financial situation. Here’s a guide on how to find and compare lenders for a no-closing-cost refinance:
Start with your current lender: Your existing mortgage lender is a good starting point. They may offer competitive refinance options to retain your business. Ask about their no-closing-cost refinance options and compare these with what you might find elsewhere.
Research online: Many lenders provide details of their refinance products online. Use mortgage comparison websites to gather information on various lenders’ offerings. These platforms often allow you to compare rates, terms, and fees side by side.
Check with local banks and credit unions: Local financial institutions sometimes offer better terms to members or local residents. Visit or call your local banks and credit unions to inquire about their no-closing-cost refinance options.
Consult mortgage brokers: Mortgage brokers have access to various lending sources and can often find deals that may not be widely advertised. They can help you navigate through different offers and identify the most cost-effective option.
Consider online lenders: Online mortgage lenders can be a viable option as they often have lower overhead costs, potentially translating to better terms or lower rates. However, ensure you research their reputation and customer service record.
Understanding the Details of No-Closing-Cost Refinancing
Before you get excited about not paying anything upfront, sit down with your lender to discuss all the details. Be sure to keep an eye out for the following details:
Some loans are not actually “no cost”
Some loans solely cover lender fees, while others may cover all expenses, including third-party costs
Home loans differ from lender to lender, so it’s important to shop around
Lenders may pay different interest rates and costs on your behalf. Find out all the details before you commit.
Consider all the costs: title and appraisal, lender fees, credit report fees, escrow, home inspections, mortgage points and other third-party fees
Is a no-closing-cost refinance right for you?
Deciding on a no-closing-cost refinance requires weighing your immediate financial needs against the long-term effects on your mortgage. This option is attractive for its low initial fees, but understanding its overall impact is essential. For those planning to move or sell their home shortly, saving on upfront costs can offer immediate financial relief. It’s an appealing choice if staying in your current home isn’t part of your long-term plan.
However, a no-closing-cost refinance usually translates to a higher loan amount or increased interest rate, affecting the total cost over time. If you’re several years into your mortgage, like 10 years into a 30-year loan, the added expense from higher interest rates can surpass the benefits of initial savings.
Before deciding, it’s important to calculate how this choice will affect your monthly payment and compare the overall costs with those of a traditional refinance. Shopping around for the best deal is crucial to align this financial decision with your overall goals.
A Closer Look at No-Closing-Cost Mortgage Deals
Now that you understand the positives and negatives of selecting a no-closing-cost refinance, here’s an example of how these loans may play out in a lending setting:
For example, you may be charged $4,500 in closing costs, the average cost for homeowners today. If you choose to pay this out of pocket, the $4,500 cost will remain static as a one-time charge.
On the other hand, if you skip those fees, that sum will be rolled into your mortgage bills each month over the duration of that loan. Over 30 years at 4.125% interest, the borrower will eventually pay a total of $7,851.
Meanwhile, over the course of five years, the borrower will wind up paying $6,000 after initially skipping the $4,500 closing fee.
Whether this is worth it or not is entirely up to you. If you’re planning to sell your home within the next couple of years, the immediate savings may be worth it for you to pay a bit more over two years.
You can take that saved money to invest in repairs, remodels, realtor fees, and other associated costs that accompany selling a home. Moving a home quickly on and off the market can save you other costs that make this type of loan right for you.
How to Spot a Bad No-Closing-Cost Refinance Deal
No-closing-cost loans are each different from one lender to another. By seeking different opinions and home equity options, you can ensure that you’re getting a good deal. Here are a few warning signs to look out for:
The loan is called “no cost” but it turns out you’ll have to pay for appraisals, title fees, escrow, property taxes, insurance, and prepaid interest.
The loan is called a “no lenders fee loan,” which means the bank will only cover just that—lenders fees, and nothing else.
Carrying out a refinance through a mortgage broker, who then adds on a lender credit, further increases your interest rate.
A bank uses “bundles” that tack on closing costs on top of the cost of the loan. These bundles further increase the size of the loan, as well as the interest rate, leading to a higher monthly payment over time.
Be aware of potential red flags and take your time when considering any type of home loan. This is especially true if the terms of the loan are unclear, and you are feeling pressured to make a decision before fully understanding the details of the loan. It’s always better to be cautious and well-informed before making a commitment.
5 Tips for Negotiating No-Closing-Cost Refinances
Negotiating the terms of your no-closing-cost refinance is crucial in securing a favorable deal. Focus on these effective strategies:
Conduct thorough market research: Understand the current market rates and terms from various lenders. This knowledge positions you as an informed borrower, giving you an edge in negotiations.
Leverage your creditworthiness: If you have a strong credit history, use this as a bargaining chip. Lenders may offer better terms to borrowers who present lower credit risks.
Discuss customization options: Each borrower’s situation is unique. Talk to your lender about tailoring the refinance terms to suit your specific financial needs and goals, especially if you plan to stay in your home for a long time or move soon.
Be prepared to walk away: If the terms offered don’t align with your needs, be ready to explore other options. Showing your willingness to consider other lenders can motivate your current lender to offer better terms.
Review the final offer thoroughly: Ensure that all negotiated terms are clearly included in the final offer. A careful review before agreeing can save you from unexpected terms or conditions.
By applying these strategies, you can effectively negotiate and secure a no-closing-cost refinance that aligns with your financial objectives. Remember, your aim in negotiation is not just to lower costs, but to find a deal that supports your overall financial strategy.
Frequently Asked Questions
What are the average closing costs for a refinance?
The average closing costs for a refinance can vary depending on the location, property type, and loan type. Typically, closing costs for a refinance can range from 2% to 5% of the loan amount.
For example, on a $200,000 loan, the closing costs can be anywhere from $4,000 to $10,000. These costs include the loan origination fee, appraisal fee, title search and insurance, and other miscellaneous fees.
Can you negotiate closing costs on a refinance?
Yes, it is possible to negotiate closing costs on a refinance. While some costs, such as the appraisal fee or title search, are set by third-party providers and cannot be negotiated, other costs such as the origination fee or lender’s title insurance can be negotiated with your lender.
Here are a few strategies to negotiate closing costs on a refinance:
Shop around: Compare offers from multiple lenders and negotiate with them to see if they can lower or waive certain fees.
Timing: Closing costs tend to be lower during slow periods for the housing market.
Ask for a credit: Some lenders may offer a credit towards closing costs in exchange for a slightly higher interest rate.
Be prepared to walk away: If a lender is not willing to negotiate closing costs, it may be best to look for another lender that is more willing to work with you.
When would a no-closing-cost refinance be a bad idea?
A no-closing-cost refinance may not be the best idea in certain situations. Here are a few reasons why a no-closing-cost refinance may not be a good idea:
Short-term ownership: If you don’t plan to keep your home for a long time, you may not be in the house long enough to recoup the costs of the refinance.
Not enough equity: If you don’t have enough equity in your home, you may not be able to qualify for a no-closing-cost refinance.
Higher interest rate: If the interest rate is higher than the rate you already have, it typically does not make sense to refinance.
Limited budget: if you’re tight on budget, and the higher interest rate on the no-closing-cost refinance will put you in a difficult financial situation, then it’s not a good idea.
If you’ve just gotten your first $1,000 that’s free to invest, you might be freaking out a little bit. What are you going to do with that money? And how will you keep it growing so that you can continue to invest more for your future?
Well, $1,000 is a great start, but it’s not a ton of money. That means you can’t spread it out into too many different options. But you can prioritize the best ways to invest that thousand bucks. Here are some of the best ways to invest your first $1,000.
Overview: How and Where to Invest $1000
Investment Type
Best For
Paying off debt
Those with high-interest debt
High-yield savings account
Emergency fund
Tax-advantaged account
Beginner investing
Stocks
Having control over where your money goes
Real estate
Alternative investment
Art
Alternative, long-term investment
Peer-to-peer lending
High-risk/high-reward
CD
Those who don’t need the money right away
Treasury security
Safe investment to balance risk
Use a Micro-Savings app to both save and invest
Those who want to invest while shopping
1. Pay Off Debt
First, if you have high-interest debt, you’re likely best off putting your money towards that. If you’re paying 15% or more interest, you won’t likely be able to put your money towards an investment that out-earns that. So it’s best to pay off that debt.
The general rule of thumb here is that you first put enough money into an employer-sponsored account to get any matching option. Then, you put your money towards high-interest debt until that’s paid off. Once that’s done, you can move on to these other options.
2. Use a High-Yield Savings Account
If you don’t have any money saved for an emergency, put your $1,000 into a high-yield savings account for emergencies. This keeps you from going into more debt if an emergency does arise, so it’s a good idea. Look for a savings account with little to no ongoing fees and as high an APY as possible.
Here are a few of our favorite high-yield savings accounts:
Featured Savings Accounts
Bank/Credit Union
Min. Deposit
Learn More
3. Put It Into a Tax-Advantaged Account
If you don’t have an employer-sponsored retirement plan, or if you can’t put this $1,000 in there, you should consider making your investment through an IRA. Tax-advantaged investment accounts can boost that amount and grow your money over time. Luckily, some of the options below, including some robo advisors, allow you to invest through an IRA, so you can get both good returns on your investment and tax advantages.
4. Try Your Hand At Investing In Stocks
You don’t want to invest your whole portfolio over time in stocks. But if you’re interested in trying your hand at stock investing, try it through a solid platform like E*TRADE, TD Ameritrade, or Ally Invest. These platforms let you make trades on your own, so you can see what it’s like to build your custom investment portfolio. You can also opt for a semi-robo advisor like M1. This one is free to use and lets you put together your portfolio of ETFs, which tend to be more stable than individual stocks but still give you the feel for putting together your investments.
But if you don’t know what you’re doing or just don’t want to deal with the time and energy it takes to pick good stocks, fear not. One of the best ways to have your money managed for you is by working with a Certified Financial Planner. The problem is, they’re hard to find (good ones, at least).
5. Start a Robo Advisor Account
If you want more handholding or to be hands-off with this starter investment, consider using a robo advisor like Betterment. With a dollar amount on the small side like this, Betterment is probably your best bet. It’ll let you set your investment preferences and forget about managing your account daily.
6. Use a CD For Mid-Term Savings
What if you want to put that $1,000 towards the start of some larger savings goal for the medium-term? Like buying a house or a car? In this case, you might consider putting it into a CD. If you know you won’t need it to be liquid for a set period of time, a CD can get you a good return on your investment without risking your capital as you will with many investing opportunities.
Read more: Best CD Rates
7. Buy a Treasury Security
If you have a higher income tax rate, you might get a better deal from a Treasury security versus a CD. They do tend to have slightly lower rates, but their earnings are exempt from state and local taxes. Before you decide to lock your money up in either option, be sure you do the math to get the best bang for your buck.
8. Put it in your kid’s 529 account
What if you’re already maxing out your retirement accounts or saving as much as you feel like you should? In this case, consider adding that $1,000 to a 529 college savings account for your kid. These accounts act as an IRA for education spending, so they’re a valuable way to save up now for those hefty college expenses you’ll see in the future.
9. Use a Micro-Savings App to Both Save and Invest
Did you know that you don’t even need to wait to accumulate $1,000 to begin investing? Naturally, there’s more you can do with your portfolio if you have that kind of money. But if you have been having difficulty accumulating it, or you have at least $1,000 and want an automated system to increase it, Stash Invest needs to be on your radar.
Stash Invest provides you with a debit card. You can set the card to use round-ups to make regular contributions to your investment account. For example, if you make a purchase for $9.15, your account will be charged the full $10, with $.85 going into your investment account. Multiply that by dozens of transactions per month, and you can easily see $20, $30, $40, or even $50 going into your investment account each month.
Stash Invest even makes investment recommendations for you. You’ll have the option to choose from more than 400 individual stocks and exchange-traded funds. They provide a portfolio model based on your risk tolerance, time horizon, and investment goals. They won’t manage the portfolio for you but will guide you toward creating one that works for you. As much as anything else, Stash Invest is an excellent introduction to self-directed investing, both helping you to accumulate funds for investment and then gradually helping you get your feet wet with managing your portfolio.
Read our full review on Stash Invest.
Start Keeping Track
Whatever you decide to do with that $1,000, be sure you keep the cycle going by keeping track of both your budget and your investments. One way to do this is with Empower, a platform that lets you pull all of your investing and spending data together into a single place. With it, you can watch your original investment grow, but you can also manage your budget to live on less than you earn and invest the rest.
FAQ
How much interest will I earn on $1k?
To determine the interest you’ll earn on $1k, multiply 1,000 by the rate of return you expect. So, for example, if you expect a 6% rate of return, you’d earn $60 in interest by the end of the year (1,000 x .06 = 60).
How should I invest $1k to make 100k?
To turn $1k into $100k, you expect to 100x your investment. The best way to do this is to start with $1k and continue to invest at regular intervals over time. For example, if you started with $1,000 and invested $200 per month, every month, for 20 years and earned a modest rate of return of 6.5% (compounded monthly), you’d end up with just over $100k.
How can I invest $1k wisely?
To invest $1k wisely, you should open an account with a robo advisor and let them do the work for you. $1k isn’t enough to invest in most mutual funds or even some index funds, but it is enough to start investing with a robo advisor. This way, your investment will be broadly diversified and actively managed on your behalf.
What’s the best way to invest $1k short term?
The best way to invest $1k in the short term is to put it into an ETF or index fund that captures a wide scope of the total stock market (like VTI, for instance). Most brokers will allow you to open an account with $1k, but you might have to search for a fund that will let you buy in for $1k (many require a minimum investment of $2,500, for example). Alternatively, you can put the $1k in a robo-advisor account and let them manage it.
Bottom Line
Having $1k to invest is more than many people have. Most Americans don’t have $1,000 to cover an emergency without going into debt. So consider yourself lucky in that sense. That’s why you want to make sure it lasts, and it’s invested wisely.
Related: Savings by Age: How Much to Save in Your 20s, 30s, 40s, and Beyond
Review our advice above, choose a safe, short-term investment, and keep a close eye on it. Your $1,000 investment isn’t going to get you to retirement by itself, but it can serve as a wonderful safety fund and a foundation for a larger portfolio.
Resources:
Read More:
Abby is a freelance journalist who writes on everything from personal finance to health and wellness. She spends her spare time bargain hunting and meal planning for her family of three. She has a B.A. in English Literature from Indiana University Purdue University Indianapolis, and lives with her husband and children in Indianapolis.
Your home’s equity is the portion of your home that you own free and clear. For example, if your home is worth $400,000 and your mortgage balance is $225,000, you have $175,000 in home equity. That’s money you can tap into to help you pay off high interest debt, make home repairs or cover a wide range of other expenses.
A home equity loan is one of the best ways to access your home equity. These loans, also called second mortgages, typically come with fixed interest rates and payments. Moreover, rates on these loans are usually very competitive because the lender uses your home as collateral.
But it’s important to understand the costs before you tap into your home’s equity. After all, you’ll need to pay your home equity loan back over time.
Access your home’s equity with a home equity loan today.
How much do home equity loans cost per month
The monthly cost of a home equity loan depends on the total amount of the loan as well as the interest rate your lender charges you. The average interest rates on home equity loans in today’s market are as follows:
10-year fixed home equity loan: 9.09%
15-year fixed home equity loan: 9.12%
Considering these averages, here’s what you can expect to pay on a home equity loan based on your loan’s value and duration (data courtesy of the First National Bank of Omaha home equity loan payment calculator):
$25,000 10-year home equity loan: $318 per month
$25,000 15-year home equity loan: $255 per month
$50,000 10-year home equity loan: $636 per month
$50,000 15-year home equity loan: $511 per month
$100,000 10-year home equity loan: $1,272 per month
$100,000 15-year home equity loan: $1,021 per month
It’s important to keep in mind that interest rates and home equity loan amounts can vary. So, your monthly payment may be higher or lower than the payments quoted above.
Find out how affordable your home equity loan can be now.
How to cut the cost of your home equity loan
As mentioned above, the cost of a home equity loan varies depending on the amount of the loan and the interest rate the lender charges. Of course, when costs can vary, there’s typically an opportunity to save. Here are a few ways you can cut the cost of your home equity loan:
Compare your options
Financial institutions are free to charge whatever interest rate they’d like when they issue a loan — within reason, of course. As a result, interest rates are one of the primary ways financial institutions compete with each other for your business.
“As with any loan, borrowers should research the best loan for their unique financial situation,” says Austin Niemiec, chief revenue officer for Rocket Mortgage.
So, if you want the lowest interest rate possible, it’s important to compare your options. Don’t just apply for the first home equity loan you find. Instead, look into at least three options to find the lowest interest rate possible in your unique situation.
Opt for a longer loan term
“Looking for a longer term can help” you save money on payments, says Niemiec. “Opting for a 20-year loan instead of a 10-year loan can help keep monthly payments low.” It’s worth noting, though, that while a longer term may reduce your monthly cost, it will likely increase the overall interest you’ll pay over the life of the loan.
Improve your credit score
Chances are that your credit score will play a significant role in the interest you pay on your home equity loan. Those with a strong credit profile typically pay better rates than those with a poor one.
“Another way to save money is by working to increase your credit score before applying for the loan. A higher credit score can help you get a lower interest rate which can save a lot of money in the long term. Even a quarter of a percentage point can save thousands of dollars,” Niemiec says.
So, it may be advantageous for you to take steps to improve your credit score before you apply for a home equity loan. Some things to consider doing to improve your credit include:
Pay down your credit cards to improve your credit utilization and debt-to-income ratios.
Settle any past-due debts.
Make it a point to make all of your loan payments on time.
Consider purchasing discount points
When you purchase a home, you typically have the option to purchase discount points that reduce the overall interest on your mortgage. Some lenders also allow you to purchase discount points when you take out a home equity loan.
In most cases, discount points cost 1% of the total value of the loan and bring the interest on the loan down by 0.25%. Although the 1% up-front fee may seem relatively high, you could save a significant amount of money over the life of your loan by purchasing discount points if you plan on making minimum payments. However, discount points may not be worth it if you plan on paying your loan off early.
Don’t miss out on today’s best deals. Lock in your home equity rate now.
The bottom line
Home equity loans are relatively inexpensive, especially when compared to unsecured lending options like credit cards and personal loans. Moreover, there are a few things you can do to further reduce your cost of borrowing against your home. Tap into your home equity today to access the money you need.
More
More
Joshua Rodriguez
Joshua Rodriguez is a personal finance and investing writer with a passion for his craft. When he’s not working, he enjoys time with his wife, two kids, three dogs and 10 ducks.
Just yesterday, we were nodding in agreement and acceptance of the fact that rates were better served by cooling off a bit (read: “rising”) after improving at a pace that seemed too quick for the motivations earlier in the week. In other words, it was a bit of a pickle to explain why Tuesday and Wednesday’s news and data were worth a surge to 3-month lows.
Now today, we’re right back in the same pickle, but everyone who’s cool knows that pickles are delicious. Today’s is no exception with the average lender easily moving down to new 3-month lows.
As for motivations, today actually wasn’t quite as pickled as Wednesday. We had the week’s most anticipated economic report and the most anticipated Fed speech.
ISM Manufacturing only came in a bit weaker than expected (good for rates), but perhaps more importantly, it didn’t come in higher than expected. Thus, the bond/rate market wasn’t forced to quickly change its strategy of adjusting for a new, lower rate outlook for 2024.
Same story with Fed Chair Powell’s mid-day speech. Knowing what we know about Powell, it wasn’t too likely that he’d take a strong stand in one direction or the other (which is exactly right given the “data dependent” nature of the Fed’s rate considerations), but some saw a risk that he would intentionally try to nudge rates higher due to the speed with which they’ve recently fallen.
Powell definitely didn’t convey any such agenda today and bonds/rates were invigorated as a result. Traders moved to defend against the possibility that next week’s data continues arguing for lower rates. We say “defend” because if the data is accordingly weak, the current level of rates is far too high.
As exciting as that sounds, keep in mind that data can come in stronger too. In that case, the current level of rates is far too low. Bottom line, volatility is all but guaranteed in any scenario where most of next week’s data is on one side of the stronger/weaker continuum.
Home prices will drop next year, but so will inventory, the real-estate site says in its 2024 housing forecast
The 30-year mortgage rate will fall below 7% by April 2024, Realtor.com says in its housing forecast for next year.
The average mortgage rate in 2024 is expected to be 6.8%, and the 30-year may fall to as low as 6.5% by the end of the year, according to Realtor.com’s report.
“We’re gonna to start to see some relief for buyers who have been priced out,” Danielle Hale, chief economist at Realtor.com, told MarketWatch.
“It’s still expensive to buy a house, but instead of getting more expensive, we’ve turned the corner,” she added. “We’re starting to see housing get less expensive.”
Realtor.com sees mortgage rates falling to 6.5% by the end of 2024
A weakening U.S. economy will be the key driver pushing down mortgage rates in 2024, Hale said.
“We expect unemployment to begin to gradually tick up – but we don’t expect to see a huge surge – and the labor market to begin to soften,” she said.
But “more importantly,” Hale added, “we expect inflation to improve.”
The economy has begun showing indications of cooling off. In October, inflation was flat, thanks to cheaper gasoline prices. The job market is also showing some signs of weakness, and the unemployment rate edged up that month to a 21-month high of 3.9%.
Mortgage rates have already begun to fall, Hale noted. They are no longer hovering at the 8% range, thanks to weaker economic data. The 30-year mortgage was averaging 7.29% as of Nov. 22, according to Freddie Mac.
But don’t expect to see rates fall much lower. Even though Realtor.com noted that the historical average for the 30-year mortgage rate between 2013 and 2019 was 4%, home buyers should consider those days long gone.
That period “was not quite a normal housing market,” Hale said. “It seems unlikely that we’ll see mortgage rates get back to that range in the foreseeable future.” Between 2013 and 2019, inflation stayed below 2.5%, according to data from the St. Louis Fed.
“The Fed was constantly worried about inflation that was too low” back then, Hale said.
Below are Realtor.com’s predictions for the housing markets that will see the most and least home price appreciation in 2024.
Home prices to fall 1.7% in 2024
Realtor.com also expects home prices to fall 1.7% over 2024. Sale prices took a dip over the spring and summer this year, but they may stay flat or rise over the rest of 2023, Hale said.
But starting in May 2024, home prices overall may drop. That’s partly because home sellers may cut prices, but it could also be due to a further pullback in homeowners listing their homes. Realtor.com expects existing-home inventory to fall sharply by 14% over 2024, which is steeper than the 5.7% drop in 2023.
That means that the typical monthly cost for a median-priced home could drop to $2,200 in 2024, which would be down from $2,240 in 2023.
The Realtor.com report also suggested strong home price growth in the Midwest and the Northeast. The company expects home prices to grow on an annual basis in 2024 by 10.9% in the Detroit-Warren-Dearborn, Mich., metro area, 10.4% in Rochester, N.Y., and 9.9% in the Des Moines-West Des Moines, Iowa, metro area.
On the other hand, the data indicates a sharp slowdown in home price growth out west. Home prices are expected to fall the most in 2024 in Austin-Round Rock, Texas, by 12.2%, as compared to 2023. Other metros at the bottom of the home price growth list include St. Louis, Mo.-Ill., and Spokane-Spokane Valley, Wash., where prices are expected to fall by 11.7% and 10.2% respectively.
Demand is also expected to be lower, because rates will continue to stay relatively elevated, Hale said.
But lower rates could also convince homeowners who bought with a 3% rate to consider selling, easing the so-called lock-in effect, which could increase inventory.
Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch publisher Dow Jones is also a of News Corp unit.
-Aarthi Swaminathan
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.
Mortgage originators will pay more to access consumer credit reports in 2024, reigniting complaints from mortgage lenders and trade associations.
In 2024, Fair Isaac Corp. (FICO), the company that retains the rights to the market’s adopted methodology to measure consumer credit risk, will charge one price – higher than the current price – to all mortgage lenders, independent of their volumes. The change represents a departure from the tier-based pricing structure it implemented in early 2023.
FICO will also collect the same per score price for soft pulls and hard pulls next year, an initiative that started in 2023 despite significant differences in these products.
“FICO will collect approximately $10 total for all three scores out of a $50 (or more) tri-merge report and score bundle, which continues to constitute a low percentage (approximately 20% or less) of the overall cost of a tri-merge report,” a spokesperson for FICO wrote in a statement to HousingWire.
For 2023, FICO said it would collect approximately $2 to $8 for all three score tiers out of a $40 to $50 (or more) tri-merge report and score bundle and out of an average $3,800 in closing costs. Compared to 2022, mortgage lenders in 2023 saw a price increase between 10% and 400%, mortgage trade groups and other stakeholders said.
For 2024, two mortgage executives who spoke on the condition of anonymity for fear of retaliation, told HousingWire that they expect prices to increase by more than double in some cases. Ultimately, the sources added that lenders will charge more to their borrowers, who are already facing affordability challenges.
“It seems like only yesterday you could pull a single borrower tri-merge for $15 and a joint for $30,” Greg Sher, Managing Director of NFM Lending, wrote in a LinkedIn post that went viral in the mortgage industry. “Now those prices will be in the neighborhood of $50 and $100 respectively — one well-known, widely used credit reporting agency plans on charging $75/$150. For clarification purposes, every IMB uses 3rd party vendors (also known as credit reporting agencies).”
Scott Olson, executive director at the Community Home Lenders of America (CHLA), said that increasing prices in this difficult economic environment will “only make it difficult for borrowers to participate in the American dream.”
Soft and hard pulls
Another change for 2024 is related to the pricing structure of soft pulls, which are performed to provide pre-approval letters, only visible to the borrower and without impacts on credit scores. Its prices will come closer to those applied to hard pulls, which are recorded on the borrower’s credit report, visible to anyone and can trigger leads.
“Last year, we implemented a tier-based pricing structure for mortgage originations, and FICO collected the same per score wholesale price for most soft pulls as hard pulls, but some lenders qualified for a lower price in certain cases for some soft pulls,” the spokesperson for FICO told HousingWire.
Brendan McKay, president of advocacy at the mortgage broker group Association of Independent Mortgage Experts (AIME), complained FICO doubled the cost of hard pulls at the beginning of 2023.
“Now they are charging the same amount for a soft credit pull, an inherently inferior product that provides less actionable information than a hard credit pull. There has been no justification given for the increased expense.”
According to McKay, the cost burden will be passed directly onto consumers, and those from underserved communities will feel it most.
“Despite being a private institution, FICO is currently a critical component in the mortgage process. As an industry, we owe it to future homeowners to bring attention to the misuse of power,” McKay said.
Fannie Mae and Freddie Mac are moving away from the current Classic FICO credit score model, requiring lenders to use two credit scores generated by the FICO Score 10 T and the VantageScore 4.0 models, which are considered more inclusive than their predecessor.
Price to originators
A FICO representative said the company does not set the retail price for end users.
Ultimately, “Anything above these wholesale prices, charged as part of a tri-merge score and report bundle, is collected and retained by others who sell and distribute the scores,” the spokesperson said.
Credit bureaus, which work with the FICO model, may pass the FICO price increases to their clients.
TransUnion and Experian did not reply to a request for comments.
Meanwhile, a spokesperson for Equifax wrote to HousingWire that beginning in January 2024, it will have a price adjustment to “reflect cost increases from third-party providers of credit reports and credit scores.”
However, the spokesperson added, “Equifax is sensitive to the impact these third-party cost increases may have on customers, especially given current market conditions. With this in mind, Equifax is not increasing the costs related to the Equifax credit file component of the tri-merge credit report for 2024.”
The Mortgage Bankers Association (MBA) president and CEO Bob Broeksmit said that, “In light of these media reports about another round of unexplained sharp price increases, we reiterate our concerns about the lack of transparency into the factors that are driving these pricing changes.”
“Given the unique market structure and limited options for obtaining credit reports and credit scores, MBA urges policymakers to examine the drivers of these cost increases to ensure transparency and to protect consumers from paying higher costs in connection with their home mortgages,” Broeksmit said.
Editor’s note: This story was updated after publication to include comments from the Mortgage Bankers Association.
FDIC insured commercial banks and savings institutions reported net income of $105.5 billion in 2007, a decline of $39.8 billion or 27.4 percent from the $145.2 billion earned in 2006, thanks in part to higher loan loss provisions tied to bad mortgages.
The FDIC also said fourth-quarter earnings dropped to just $5.8 billion, compared to profit of $35.2 billion a year ago, the lowest level since the fourth quarter of 1991.
“It’s no surprise to anyone that the second half of 2007 was a very tough period for the banking industry. Fourth quarter results were heavily influenced by a number of well-publicized write-downs by large banks,” said FDIC Chairman Sheila C. Bair, in a statement.
“Weakness in the housing sector and the credit squeeze in financial markets made it a very challenging time for many institutions. And we can expect these problems to continue in 2008.”
Despite the record decline, nearly half of all insured institutions reported increased net income in 2007, with six large institutions accounting for more than half of the year-over-year decline in quarterly net income.
At the same time, one out of every four institutions with assets greater than $10 billion reported a net loss during the quarter.
Total loan loss provisions were $68.2 billion, more than double the $29.5 billion set aside a year earlier, while trading revenue fell 78.4 percent to $4.1 billion from $14.9 billion in 2006.
A whopping 1.39 percent of industry’s loans were noncurrent (90 days or more past due or in nonaccrual status) at the end of the quarter, the highest percentage since the third quarter of 2002, and the largest quarterly increase in the 24 years data has been reported.
“A key issue that we’ll be focusing on in the months ahead is asset quality,” Chairman Bair said. “The rising trend in noncurrent loans indicates that write-offs and loss provisions will likely remain high for the near future.”
“We’ll also need to keep a close eye as we’ve been doing for a number of months on loan portfolios other than housing, including commercial real estate, credit cards, and small business. All of these are showing signs of stress as housing market weakness continues.”
So-called “problem” institutions made up 76 of the 8,533 FDIC-insured banks as of the end of 2007, up from 50 a year earlier.
Here’s why you should call the Hoosier state home.
Indiana is celebrated for, among many other things, its agricultural prowess, its hardworking people and its top-tier higher education institutions. From the spanning farmlands to the rich culture, Indiana stands out in its own distinct way. But what is Indiana known for, exactly? It’s certainly not just cornfields and basketball: Let’s take a deeper dive into the intricacies and unique characteristics that make the Hoosier state such a great place to call home.
Employment
Historically known as a manufacturing hub, Indiana continues to play a pivotal role in the nation’s large-scale material production. The state hosts automotive giants, with companies like General Motors and Subaru operating major facilities. This industry not only provides jobs in production but also fuels ancillary industries, creating a ripple effect across the job market of the entire state.
The healthcare infrastructure in Indiana is robust, offering a ton of opportunities for professionals in a number of fields. Renowned medical institutions like Indiana University Health and the Mayo Clinic Care Network provide a spectrum of healthcare services and contribute significantly to the employment scene. From skilled medical practitioners to support staff, healthcare plays a vital role in the overall health of the statewide job market.
With renowned educational institutions like Purdue University and Indiana University, the state has a wealth of employment opportunities in academia and research. These institutions not only attract educators but also drive research and development initiatives, fostering innovation and intellectual growth.
Indiana’s business-friendly environment has nurtured a hard-working spirit. Startups and small businesses find ample support through various initiatives and incubation programs. This fosters a strong entrepreneurial ecosystem, contributing to widespread job creation and economic growth throughout the state.
Outside
Indiana is endowed with natural wonders that captivate outdoor enthusiasts. Indiana Dunes National Park, situated along the southern shore of Lake Michigan, boasts stunning sand dunes, pristine beaches and diverse ecosystems. The Hoosier National Forest, covering over 200,000 acres, is a haven for hiking, camping and wildlife observation to boot.
One of the most iconic attractions in Indiana is the Indianapolis Motor Speedway. Known as the Racing Capital of the World, it hosts the world-famous Indianapolis 500, the world’s largest single-day sporting event. Racing aficionados from around the globe flock to witness the thrilling spectacle of speed and skill.
Food
Indiana’s food scene reflects a rich amalgamation of flavors. The state is known for its Hoosier tenderloin sandwich — a delectable deep-fried pork or beef cutlet. For those with a sweet tooth, the Hoosier sugar cream pie is a local favorite, showcasing a delightful blend of sugar, cream and vanilla.
Five of the best restaurants in Indiana
With a thriving agricultural landscape, Indiana’s farm-to-table movement is strong thanks to the surrounding necessary resources. Farmers’ markets dot the state, offering fresh produce, artisanal cheeses and handmade crafts. These markets provide a glimpse into the heart of Indiana’s agricultural efficiency.
Culture
The Amish community has a strong presence in Indiana and contributes significantly to the state’s cultural diversity. Visitors can explore Amish country, characterized by simple living, traditional craftsmanship and horse-drawn buggies. Shipshewana, with its Amish-focused attractions and markets, is a window into this unique way of life.
Indiana has thriving artistic communities, like Bloomington and Nashville, where galleries, studios and theaters flourish. The Indiana University Art Museum in Bloomington showcases a diverse collection spanning centuries and traversing cultures. Brown County, often referred to as the “Art Colony of the Midwest,” attracts artists and amateur critics alike.
Entertainment
Indiana has left an indelible mark on the world of music. The legendary King of Pop, Michael Jackson, hailed from Gary, while the “Piano Man” Billy Joel was born in the state capital, Indianapolis. The Indianapolis Symphony Orchestra, known for its dynamic performances, adds a symphonic note to the state’s cultural landscape.
Throughout the year, Indiana hosts its fair share of festivals and fairs celebrating everything from food to arts. The Indiana State Fair, one of the oldest state fairs in the U.S., is a melting pot of experiences, with concerts and carnival fun for all.
It’s all about Indiana
With its unique blend of natural wonders, culinary delights, cultural richness and quality entertainment, Indiana invites exploration beyond the ordinary. This state, often overshadowed by its larger neighbors, stands as a testament to the richness and diversity that can be found in the heartland of America.
Ready to find your ideal Indiana apartment? You’ve come to the right place.
AI’s impact on the job market and society is a topic of much debate. However, its potential to assist businesses in making informed decisions is undeniable. Artificial intelligence (AI) has permeated various aspects of our lives, sparking discussions about its possibilities and challenges. Will we witness the realization of AI’s capabilities in the upcoming year? SAS, a frontrunner in AI and analytics, has enlisted the insights of executives and experts from across the organization to forecast trends and pivotal developments in AI for 2024. Here are some of the forecasts they have put forward.
Generative AI will augment (not replace) a comprehensive AI strategy
SAS, with a recent commitment of $1 billion to AI-powered industry solutions, emphasizes the growing significance of generative AI in organizational strategies. In 2024, organizations will shift towards integrating this technology to complement industry-specific AI strategies.
In banking, simulated data for stress testing and scenario analysis will help predict risks and prevent losses. In health care, that means the generation of individualized treatment plans. In manufacturing, generative AI can simulate production to identify improvements in quality, reliability, maintenance, energy efficiency and yield.
Bryan Harris, Chief Technology Officer, SAS
AI will create jobs
Although introducing new AI technologies in 2024 and beyond may lead to temporary disruptions in the job market, it will also ignite the creation of numerous new jobs and roles, thereby contributing to economic expansion.
In 2023, there was a lot of worry about the jobs that AI might eliminate. The conversation in 2024 will focus instead on the jobs AI will create. An obvious example is prompt engineering, which links a model’s potential with its real-world application. AI helps workers at all skill levels and roles to be more effective and efficient.
Udo Sglavo, Vice President of Advanced Analytics SAS
AI will enhance responsible marketing
While AI holds the potential for optimizing marketing and advertising initiatives, it is essential to recognize that biased data and models can yield skewed outcomes.
As marketers, we must consciously practice responsible marketing. Facets of this are awareness of the fallibility of AI and alertness to possible bias creeping in. In SAS Marketing, we are implementing model cards that are like an ingredient list, but for AI. Whether you create or apply AI, you are responsible for its impact. That’s why all marketers, regardless of technical know-how, can review the model cards, validate that their algorithms are effective and fair, and adjust as needed.
Jennifer Chase, Chief Marketing Officer, SAS
Financial firms will embrace AI amid a Dark Age of Fraud
Even as consumers show increased vigilance against fraud, fraudsters use generative AI and deepfake technology to refine their multitrillion-dollar trade. Phishing messages are becoming more sophisticated, and imitation websites appear remarkably authentic. With simple online tools, a criminal can replicate a voice after just a few seconds of audio.
We are entering the Dark Age of Fraud, where banks and credit unions will scramble to make up for lost time in AI adoption – incentivized, no doubt, by regulatory shifts forcing financial firms to assume greater liability for soaring APP [authorized push payment] scams and other frauds.
Stu Bradley, Senior Vice President of Risk, Fraud and Compliance Solutions, SAS
Shadow AI will challenge CIOs
CIOs previously faced challenges with ‘shadow IT’ and will now encounter ‘shadow AI’ – solutions utilized by or developed within an organization without official approval or monitoring by IT.
Well-intentioned employees will continue to use generative AI tools to increase productivity. And CIOs will wrestle daily with how much to embrace these generative AI tools and what guardrails should be put in place to safeguard their organizations from associated risks.
Jay Upchurch, Chief Information Officer, SAS
Multimodal AI and AI simulation will reach new frontiers
The next step in generative AI is the combination of text, images, and audio into one model. This is called multimodal AI, which allows for the simultaneous processing of diverse inputs.
An example of this will be the generation of 3D objects, environments and spatial data. This will have applications in augmented reality [AR], virtual reality [VR], and the simulation of complex physical systems such as digital twins.
Marinela Profi, AI/Generative AI Strategy Advisor, SAS
Digital-twin adoption will accelerate
Organizations can refine operations, enhance product quality, boost safety measures, improve reliability, and decrease emissions through digital twins.
Technologies like AI and IoT [Internet of Things] analytics drive important sectors of the economy, including manufacturing, energy and government. Workers on the factory floor and in the executive suite use these technologies to transform huge volumes of data into better, faster decisions. In 2024, the adoption of AI and IoT analytics will accelerate through broader use of digital-twin technologies, which analyze real-time sensor and operational data and create duplicates of complex systems like factories, smart cities and energy grids.
Jason Mann, Vice President of IoT, SAS
Insurers will confront climate risk, aided by AI
After years of waiting, climate change has evolved from a potential threat to a real and urgent danger. The global insurance industry faced more than $130 billion in losses from natural disasters in 2022, putting immense pressure on insurers worldwide. In the United States, insurers face scrutiny for increasing premiums and pulling out of heavily affected states like California and Florida, leaving millions of customers in a difficult position.
To survive this crisis, insurers will increasingly adopt AI to tap the potential of their immense data stores to shore up liquidity and be competitive. Beyond the gains they realize in dynamic premium pricing and risk assessment, AI will help them automate and enhance claims processing, fraud detection, customer service and more.
Troy Haines, Senior Vice President of Risk Research and Quantitative Solutions, SAS
AI importance will grow in government
AI will soon have an impact on government workforces. Governments struggle to attract and keep AI experts because of their high salaries, but they will actively seek out this talent to support regulatory efforts.
And like enterprises, governments will also increasingly turn to AI and analytics to boost productivity, automate menial tasks and mitigate that talent shortage.
Reggie Townsend, Vice President of the SAS Data Ethics Practice
Generative AI will bolster patient care
In 2024, organizations will continue to advance health and enhance patient and member experiences by developing AI-powered tools for personalized medicine. These tools will include patient-specific avatars for clinical trials and the generation of individualized treatment plans.
Additionally, we will see the emergence of generative AI-based systems for clinical decision support, delivering real-time guidance to payers, providers and pharmaceutical organizations.
Steve Kearney, Global Medical Director, SAS
Deliberate AI deployment will make or break insurers
In 2024, a top 100 global insurer will face closure due to prematurely implementing generative AI. Insurers are rapidly introducing autonomous systems without customizing them to their business models. They aim to use AI for expedited claims processing to counteract recent poor business performance. However, following layoffs in 2023, the remaining workforce will need more support to oversee AI’s ethical and widespread implementation.
The myth of AI as a cure-all will trigger tens of thousands of faulty business decisions that will lead to a corporate collapse, which may irreparably damage consumer and regulator trust.
Franklin Manchester, Global Insurance Strategic Advisor, SAS
Public health will get an AI boost from academia
The COVID-19 pandemic has made it evident that safeguarding our population will necessitate exceptional technology and collaboration. Public health embraces technological advancements like never before.
Whether overdoses or flu surveillance, using data to anticipate public health interventions is essential. Forecasting and modeling are rapidly becoming the cornerstone of public health work, but the government needs help. Enter academia. We will see an increase in academic researchers carrying out AI-driven modeling and forecasting on behalf of the government.
Dr. Meghan Schaeffer, National Public Health Advisor and Epidemiologist, SAS
At SAS Innovate, April 16-19, 2024, in Las Vegas, you have the opportunity to discuss with SAS executives, gain insights into their forecasts, and delve into the newest developments in AI and analytics. Secure your spot to receive updates on the conference and take advantage of early-bird pricing.
Find me on:
Mihaela Lica Butler is senior partner at Pamil Visions PR. She is a widely cited authority on public relations issues, with an experience of over 25 years in online PR, marketing, and SEO.She covers startups, online marketing, social media, SEO, and other topics of interest for Realty Biz News.