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A new survey from Zillow revealed that prospective home buyers may be “ill-prepared to take out a mortgage,” with basic mortgage questions answered incorrectly nearly one-third of the time.

For example, 34% of prospective buyers indicated that they weren’t aware you could get a mortgage with a down payment of less than five percent.

Zillow countered this myth by noting that loan requests with down payments between 3.5% and 5% have risen 570% over the past two years in the Zillow Mortgage Marketplace.

There are indeed options for those putting down less than five percent, including FHA loans, which only require 3.5% if your credit score is 580 or higher, and also specialty programs, such as Fannie Mae Homepath, which requires just 3% down.

Of course, with the housing market white-hot these days, you’ll be hard pressed to get your offer accepted if you’re only able to put down five percent or less.

A large down payment can separate you from the crowd if there are multiple offers, so it’s not always wise to put down as little as possible.

At the same time, a low down payment can raise your mortgage payment in three different ways, making life more difficult assuming you land the house.

Zillow also found that a quarter (26%) of buyers believe they must close their loan with the bank that pre-approved them. Again, not true, regardless of the scare tactics employed.

Often, a seller will have a preferred lender that they want you to get pre-approved with, but you’re under no obligation to use them. However, getting the pre-approval is a sign of good faith if you’re serious about getting your offer accepted. You can switch lenders after the fact…

24% Believe Best Mortgage Rates Are With Banks

Meanwhile, roughly a quarter of respondents looking to buy indicated to Zillow that the best mortgage rates and fees can be found with banks they currently do business with.

Again, this isn’t necessarily true, though it could be. Your bank may or may not have the best deal, and the only way you’ll know for sure is to shop around.

Most consumers only bother to obtain a single mortgage quote, which can result in thousands of lost dollars over the years.

Learn more about effective mortgage rate shopping to ensure you get your hands on the rate you deserve.

Even those who already have a mortgage lack basic understanding. For example, one in five of these respondents didn’t know you could refinance if underwater.

If you’re one of these people, there is a program called HARP that allows borrowers to refinance, regardless of loan-to-value ratio. Homeowners with FHA loans can also execute a streamline refinance without LTV constraints.

This means there could be millions of untapped HARP refinances, which is good news for loan originators bracing for a slowdown in refinance activity this year.

Finally, about half (47%) of current homeowners surveyed believe you must wait a year between refinancing.

Once again, this is a myth – you can pretty much serially refinance if you want to, though some loans contain prepayment penalties that will cost borrowers.

And it doesn’t always make sense to refinance. Make sure you do the math first to determine if it’ll actually save you some money.

[Refinance rule of thumb.]

After all, you won’t want to spend a ton of money refinancing, only to sell your property a year or two later. If you’re serious about paying off the mortgage, it may make more sense to refinance to a lower rate.

For those who are considering selling in the near future, refinancing could be a losing proposition.

More survey takeaways:

– 34% of prospective home buyers don’t know what the term APR means
– 50% of prospective home buyers don’t know mortgage rates change daily
– 31% of current homeowners wrongly believe you must wait seven years after short sale or foreclosure to buy again

Don’t Blame Consumers for Mortgage Confusion

While some of these stats may seem alarming, you can’t really blame consumers for their naïve understanding of mortgages.

As I always say, mortgages are very complicated, even for the experts. Additionally, the landscape is always changing, so what’s true today may be wrong tomorrow.

If guidelines were set in stone, it’d be a lot easier to navigate the mortgage market, but they’re not. Rules also vary by bank, thanks to lender overlays and product niche.

[See: Why every lender will disappoint you for more on that.]

The latest mortgage crisis changed a lot of things, and there are even more changes on the horizon, such as the Ability-to-Repay and Qualified Mortgage definitions.

For these reasons, you really need to “put in the time” when going about getting your mortgage. Don’t rush it.

It’s probably one the biggest financial decisions you can make, so do your homework and shop around. Or simply regret not doing so after the fact.

Source: thetruthaboutmortgage.com

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Here’s what you need to know to secure a home in Austin, Texas.

Welcome to the ever-changing landscape of the Austin housing market. Known for its quirky culture, burgeoning tech industry and eclectic lifestyle, Austin has been a safe bet for real estate investments for the past decade-plus.

However, as we venture past the midway point of 2023, Austin’s real estate climate is experiencing some intriguing twists. Whether you’re a potential homeowner, a first-time seller or an investor eyeing the Austin housing market, buckle up — there’s a lot to unpack.

Median sale price

The median sale price of a home in Austin is a meaty $571,000. This may sound impressive at first glance, but when you stack it against last year’s figures, there’s a 9.94% year-over-year decrease. This pivotal number is a heartbeat monitor for the Austin housing market, and right now, that beat is slowing down a bit.

So, what does this drop really signify? Is it a sign of market stabilization or a canary in a coal mine?

Average time on the market

A home in the Austin housing market now spends an average of 48 days on the market before being sold. This is a significant increase from the 34-day average of 2022. While the Austin housing market remains competitive, it’s evidently losing some of its previous ferocity. If you’re a buyer, you might find this elongated timeline a tad comforting.

Volume of sales

Let’s talk numbers — 883 homes were sold in Austin in July 2023. This is a 3.8% decline from the previous year. Though the decline is marginal, in the world of the Austin housing market, even a small drop can ripple across the real estate pond.

Opportunity in the Austin housing market

In yesteryears, the Austin housing market was practically a gladiator arena for buyers. Homes would receive multiple offers, almost like suitors vying for a rose in a reality show. Now, the terrain seems a bit more even.

Homes in Austin are selling for about 3% below the list price, and the Sale-to-List Price ratio has declined by 2.6 points to 97.5%. To put the cherry on top, only 17.1% of homes are now selling above the list price — a stark contrast to previous years.

Austin housing market migration

Here comes the really juicy stuff: migration patterns. About 29% of Austin homebuyers are planning their exit, while a more substantial 71% are committed to staying in Austin. On the other hand, people are flocking to Austin from metros like San Francisco, Los Angeles and Chicago. It’s a fascinating migration dance that’s shaking up the Austin housing market dynamics.

But where are Austinites going? Turns out, they have their sights set on places like San Antonio, Denver and Corpus Christi. Whether it’s the allure of a different Texas city or the Rocky Mountain high, Austin’s outbound traffic is certainly something to keep an eye on.

The Austin lifestyle

Let’s not forget why people love Austin in the first place. The city boasts schools like Forest Trail Elementary and Canyon Creek Elementary, rated 10/10 by GreatSchools. The Austin housing market remains a family-friendly arena.

However, climate risks, like moderate flood and fire factors, are creeping into the Austin housing market narrative. Plus, a severe risk of heat waves over the next 30 years is something the Austin housing market simply cannot ignore.

The Austin housing market at a glance

The Austin housing market of 2023 is not what it used to be, but it has not entirely lost its luster either. Prices are more balanced, homes are staying on the market a bit longer and new migration patterns are reshaping its demographics.

For buyers, sellers and investors, understanding the nuances of the Austin housing market is essential for making informed decisions. The market may be in a cooler state, but its complex interplay of factors keeps it as fascinating as ever.

Renting in Austin

So far, we’ve been talking about buying and selling homes. But what about those of us who aren’t ready or interested in making a long-term commitment?

The Austin housing market has a lot to offer renters, too. With the city’s unique culture and growing job market, it’s no surprise that renting remains an attractive option for many. But before you sign that lease, let’s delve into what’s happening in Austin’s rental market.

Austin’s average rental prices

When we talk about rentals, the numbers are quite striking. According to recent data, Austin is witnessing some fascinating shifts in average rent:

In essence, while studio and two-bedroom apartments seem to be getting somewhat more affordable, one-bedroom apartments are moving in the opposite direction. So if you’re considering a roommate, Austin might be a good fit for you.

Neighborhoods in Austin

If you’re looking for the perfect apartment, understanding the Austin housing market at a neighborhood level is essential. Neighborhoods like Market District and Zilker have seen a surge in studio apartment rents, with a 24% and a staggering 147% annual increase, respectively. On the other hand, areas like East Austin and Oak Hill are experiencing decreases in average rent for studios by 8% and 17% respectively.

For the budget-conscious renter, the most affordable neighborhoods for a one-bedroom apartment are Cherrywood, Montopolis and South Austin, with average rents ranging from $1,033 to $1,100. These figures are significantly lower than the Austin one-bedroom average of $1,677.

Breaking down apartment rent ranges

Where does the majority of Austin’s apartment rents lie? According to the data:

  • $501-$700: 0% of the market
  • $701-$1,000: A mere 3%
  • $1,001-$1,500: Occupies 16% of the market
  • $1,501-$2,100: Commands 22% of the market
  • $2,101 and above: The lion’s share at 58%

Clearly, if you’re planning on renting in Austin, you’re more likely to encounter higher-end rental costs.

How does Austin compare to other cities?

For those looking outside the Austin housing market, cities like Manor, Round Rock and New Braunfels offer alternatives with differing rental prices. For example, a studio in Manor is going for an average of $3,500, whereas in Round Rock, the average studio is priced at $1,500, a 17% annual decrease.

Austin’s rent trends

Looking at the trend data, rents for all apartment sizes have fluctuated throughout 2023, but one-bedroom apartments have seen a consistent increase. While studios and two-bedrooms show somewhat stabilized rents as of September 2023, only time will tell what the last quarter holds.

The Austin rental market at a glance

Renting in Austin? You’re not alone. Whether you’re here for live music, tech jobs or the infamous Austin weirdness, understanding the rental market is crucial. While Austin’s rental market is complex and dynamic, with neighborhoods and apartment sizes all showing different trends, one thing is clear — the Austin housing market, for buying and renting, remains a topic of captivating shifts and turns.

A native of the northern suburbs of Chicago, Carson made his way to the South to attend Wofford College where he received his BA in English. After working as a copywriter for a couple of boutique marketing agencies in South Carolina, he made the move to Atlanta and quickly joined the Rent. team as a content marketing coordinator. When he’s off the clock, you can find Carson reading in a park, hunting down a great cup of coffee or hanging out with his dogs.

Source: rent.com

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Is the housing boom already over? Did home prices peak before summer?

Well, a new report from Redfin revealed that competition among home buyers eased in May, which may be an ominous early sign of what’s to come.

The company noted that 69.5% of Redfin real estate agents that wrote an offer last month faced competition from another agent, which while high, was down from 73.3% in April and well below the 2013 high of 79%.

Additionally, the percentage of homes that received multiple offers was nearly at year-ago levels again, when the number was 69.3%.

Meanwhile, 49% of Redfin’s winning offers were above the original asking price, down from 51.9% in April.

Why Is the Housing Market Cooling Again?

If this report was for June, as opposed to May, one could look to the higher mortgage rates as a potential housing market buzz killer.

But these are the May numbers, when mortgage rates were still relatively low for a decent chunk of the month. So the obvious issue is an increase in inventory.

Housing inventory always rises in spring as it’s the start of the traditional home buying/selling season, and that’s exactly what happened this year.

In April, the number of homes for sale increased 6.4% month-over-month, the largest monthly increase since March 2010, when the homebuyer tax credit was phasing out.

At the same time, inventory was down 26% compared to April 2012. Home buyer demand was also down, with home tours and written offers slightly lower in May, per Redfin.

Of course, housing demand is definitely local, with Los Angeles and San Francisco still red-hot in terms of competition, while San Diego and Orange County saw significant month-over-month declines in interest.

And not every major market is seeing home prices go for well above the asking price, despite all the rosy media reports.

While that was the case in a staggering 96.8% of properties in San Francisco, which on average sold for 9.7% above list, just 19% of winning offers went above ask in Chicago.

In some major metros, including Baltimore, Chicago, Los Angeles, and Washington D.C., the average difference between offer price and asking price was actually negative.

Now we’ve got the prospect of even more homes coming to market, coupled with significantly higher mortgage rates.

As I’ve noted in the past week or so, mortgage rates are about 1% higher than they were a month ago, so there’s definitely going to be some kind of effect, though it’s too early to tell what that may be.

Plenty of pundits think housing can recover in the face of higher mortgage rates, even with rates in the 5-6% range.

But others are questioning the entire rally now that rates have begun to tick up, calling the recovery nothing more than a weak attempt to keep home prices inflated.

In any case, competition will remain elevated, even if not at levels seen earlier this year.

Characteristics of a Winning Bid

Wondering what it takes to get your offer accepted? Wonder no longer. Below are the most common attributes of a winning offer in May, per Redfin:

– 68.3% were conventional loans, up from 61.7% in April
– 29.4% had a cover letter, up from 28% in April
– 11% waived the inspection contingency, up from 8.3% in April
– 8.9% waived the financing contingency, up from 7.1% in April

As you can see, government loans have fallen out of favor with prospective home buyers, most likely because of the recent increase in annual FHA mortgage insurance premiums.

Additionally, many FHA loans now require insurance for the life of the loan, which clearly isn’t economical, let alone feasible for many would-be borrowers.

Both FHA and VA loan volume decreased from April to May, accounting for just 8.5% and 6.6% of winning offers, respectively.

Meanwhile, all-cash offers grabbed a 5.5% share of the market, up from 5.1% in April – 16.1% of offers were all-cash in Orange County last month, up from 9.7% a month earlier.

What this all means is that if you’re a seller, you better get on it, as things appear to be trending down. And if you’re a prospective buyer, you might be able to bide your time, though you’ll have to contend with the prospect of rising rates.

Read more: Slowing mortgage market could lead to looser lending.

Source: thetruthaboutmortgage.com

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How fast is fast enough? Ask Guaranteed Rate, which just launched “5 Minute Approval” for mortgage applications.

This new “innovation” from the Chicago-based mortgage lender allows borrowers to get approved for a home loan in just five minutes.

Interestingly, it comes not long after their Same Day Mortgage, which apparently wasn’t quick enough for some.

It might also be a sign of the times, with mortgage application volume at its lowest levels since the 1990s.

As the name suggests, customers can get approved for a home loan in as little as five minutes and possibly close in just 10 days.

How Does This New 5 Minute Mortgage Approval Work?

Those who are in a really big rush to get a mortgage can now take advantage of Guaranteed Rate’s so-called 5 Minute Approval.

As noted, the company only just launched Same Day Mortgage back in March, but apparently they had their sights set on faster.

And faster is exactly what this is. How it works appears relatively simple.

You visit their website, access the secure portal, sign the initial application package, then upload any requested documents.

This can apparently be done without any human interaction as well, and is about three minutes faster than Rocket Mortgage’s 8-minute full approval launched back in 2015.

To date, Guaranteed Rate has “successfully approved” more than 100 loans within 5 minutes via their pilot program.

It’s unclear how much is needed from the borrower as they didn’t provide the details, but that obviously seems lightning fast.

Also not totally clear if this is a full loan approval or a more basic mortgage pre-approval.

Simply visiting a website and filling out a form can easily take five minutes, so my assumption is they aren’t asking for much here. It’s unclear if credit is pulled, but I’d guess at least a soft pull is required.

If document upload is needed, that would likely take several minutes to track down from other websites.

Perhaps they allow applicants to link bank accounts, pay stubs, and other key information to speed up this process.

Either way, only a cookie-cutter vanilla loan scenario is going to get a mortgage approval in as little as five minutes.

This means a W-2 borrower with good credit and nothing out of the ordinary. And perhaps really fast fingers and a fiber internet connection to make it through the application in record time.

Jokes aside, it’s available for both home purchases and mortgage refinances, assuming you’re the impatient type. Okay, I guess one more joke.

Guaranteed Rate President and CEO Victor Ciardelli notes that you can even be touring a house and generate the insanely fast approval while you’re walking around.

Is Speed Still Necessary in Today’s Cooler Housing Market?

While it feels like a distant memory, there used to be a waiting list to refinance a mortgage at certain banks.

And many loans took two months or longer to close, due to unprecedented demand related to record low mortgage rates.

Several years ago, just getting an underwriting decision could take a couple weeks.

Not so today, with mortgage application volume down to 1996 levels, per the latest report from the Mortgage Bankers Association (MBA).

But despite depressed levels of demand, there are still bidding wars and multiple offers on many home sales because inventory is also rock-bottom.

At last glance, months’ supply was hovering around three months, which is well below a healthy market at 4-5 months of supply or more.

So it’s not just low demand, it’s also a story of very limited supply.

Guaranteed Rate cited Zillow data that found 48% of homes for sale still receive three or more offers.

This means it can still pay to have a mortgage approval in-hand if and when you tour a property.

Of course, a same day approval vs. five minute approval might just be splitting hairs.

Perhaps more importantly, Guaranteed Rate says applicants can close on their home loan in as little as 10 days.

Getting to the finish line that quickly seems a lot more valuable than rushing through an approval at the start.

Read more: Guaranteed Rate’s OneDown Offers a 1% Mortgage and $1,000 Toward Lender Fees

(photo: Steve Austin)

Source: thetruthaboutmortgage.com

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Over the past week and change, I’ve begun to notice the early signs of an overheated real estate market.

For much of 2013, virtually any property that made its way to market was “pending” within a week, largely due to a lack of supply, coupled with record low mortgage rates and relatively low home prices. This made it extremely attractive to purchase a home.

Typically, properties were shown to prospective buyers a few days after being listed, and final and best offers were due within a week. It was pretty much a slam-dunk.

Many of these properties got tangled up in bidding wars, much to the delight of listing agents and the sellers they represented. And most eventually sold above list, often well above list in fact.

Meanwhile, real estate agents sent out e-mails boasting about how their properties received multiple offers, sold before the first open house, or already had offers before hitting the market.

This environment was the true definition of a seller’s market. Finally, those who had no equity for so many years were able to sell for a profit. Amazing turnaround, to be sure.

The Pendulum Has Swung

But there seems to be a market shift in the works. Perhaps all that euphoria and subsequent greed is coming to a head.

Lately, I’ve seen homeowners listing their properties for way too much money. You can simply eyeball prices and realize they’re too high.

A few months back, list prices were still fairly conservative, which explains why bidding wars ensued and final sales prices were higher than list.

Now, it seems some homeowners are trying to play catch-up to take advantage of the hot market. Unfortunately, they might be too late to the party. Or simply too desperate to break even.

You can’t list your home for significantly more than what recent comps went for, especially when mortgage rates are more than 1% higher than they were when those homes sold.

Well, you can, but don’t expect your home to be pending within a week. And if you list too high, it’d be pretty embarrassing to have to lower the price, especially in this hot, hot market. Or risk the appraisal coming in low.

When it comes down it, as home prices and mortgage rates rise, the pool of eligible home buyers will shrink. It’s an affordability thing. At the same time, inventory will rise as more homeowners look to sell after missing the apex.

[Home Buyers Are More Worried About Rising Mortgage Rates than Prices]

No Hard Data…Yet

For the record, I don’t have any hard evidence or data to support my claim at the moment. Why? Because every single metric out there is based on old data, from a month or two ago.

So the good news will continue to pour in for months – but if you look at your local market, you might see what I see. Price reductions, properties sitting on the market longer, and rising inventory.

It’s simple really – when properties begin selling close to all-time highs again (just years after the crisis), and mortgage rates (which were the impetus for the recovery) are significantly higher than they once were, you have to question whether this boom will continue.

Sure, it might not result in a bubble, but I think some homeowners looking to score a tidy profit could be in for a rude awakening, especially if a bunch of them all have the same idea at the exact same time.

Read more: Five Reasons Housing Inventory Will Begin to Rise

Source: thetruthaboutmortgage.com

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Mortgage rates were mixed this week, according to data compiled by Bankrate. See below for a breakdown of how each loan term moved.

After increasing interest rates at 10 consecutive meetings in 2022 and 2023, the Federal Reserve finally paused at its June 14 meeting — only to resume July 26, with a quarter-point increase.

Official inflation has fallen to 3 percent, near the Fed’s official goal of 2 percent, and housing economists say the end is near for the central bank’s intense fight against inflation.

“We do expect mortgage rates to trend down once the [Federal Open Market Committee] clearly signals that they have reached the peak for this cycle, as the reduction in uncertainty with respect to the direction of rates should narrow the spread of mortgage rates relative to Treasury benchmarks,” says Mike Fratantoni, chief economist at the Mortgage Bankers Association.

Rates accurate as of September 6, 2023.

The rates listed here are marketplace averages based on the assumptions indicated here. Actual rates listed across the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Wednesday, September 6th, 2023 at 7:30 a.m.

>>Check out historical mortgage interest rate trends

You can save thousands of dollars over the life of your mortgage by getting multiple offers. Comparing mortgage offers from multiple lenders is always a smart move, but shopping around grew especially critical during the interest rate run-up of 2022, according to research by mortgage giant Freddie Mac. It found the payoff for bargain-huntng borrowers doubled last year.

“All too often, some homeowners take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”

Mortgage rates for home purchase

30-year mortgage moves upward, +0.06%

The average rate for the benchmark 30-year fixed mortgage is 7.59 percent, an increase of 6 basis points from a week ago. This time a month ago, the average rate on a 30-year fixed mortgage was lower, at 7.40 percent.

At the current average rate, you’ll pay principal and interest of $705.39 for every $100k you borrow. That’s an increase of $4.12 over what you would have paid last week.

When to consider a 30-year fixed mortgage

Choosing the right home loan is an important step in the homebuying process, and you have a lot of options. You need to take several factors into consideration, including your credit score, income, down payment amount, budget, and financial goals.

15-year mortgage rate moves lower,-0.02%

The average 15-year fixed-mortgage rate is 6.79 percent, down 2 basis points from a week ago.

Monthly payments on a 15-year fixed mortgage at that rate will cost $887 per $100,000 borrowed. That may squeeze your monthly budget than a 30-year mortgage would, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much more rapidly.

5/1 ARM rate retreats, -0.01%

The average rate on a 5/1 ARM is 6.54 percent, ticking down 1 basis point since the same time last week.

Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. In other words, the interest rate can change periodically throughout the life of the loan, unlike fixed-rate loans. These types of loans are best for people who expect to sell or refinance before the first or second adjustment. Rates could be materially higher when the loan first adjusts, and thereafter.

While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.

Monthly payments on a 5/1 ARM at 6.54 percent would cost about $635 for each $100,000 borrowed over the initial five years, but could climb hundreds of dollars higher afterward, depending on the loan’s terms.

Jumbo mortgage moves up, +0.10%

Today’s average rate for jumbo mortgages is 7.63 percent, up 10 basis points over the last week. This time a month ago, the average rate on a jumbo mortgage was below that, at 7.43 percent.

At the current average rate, you’ll pay $708.14 per month in principal and interest for every $100,000 you borrow. That’s an extra $6.87 compared with last week.

Rate review: How mortgage rates have shifted over the past week

  • 30-year fixed mortgage rate: 7.59%, up from 7.53% last week, +0.06
  • 15-year fixed mortgage rate: 6.79%, down from 6.81% last week, -0.02
  • 5/1 ARM mortgage rate: 6.54%, down from 6.55% last week, -0.01
  • Jumbo mortgage rate: 7.63%, up from 7.53% last week, +0.10

Interested in refinancing? See mortgage refinance rates

30-year mortgage refinance moves higher, +0.09%

The average 30-year fixed-refinance rate is 7.75 percent, up 9 basis points compared with a week ago. A month ago, the average rate on a 30-year fixed refinance was lower, at 7.46 percent.

At the current average rate, you’ll pay $716.41 per month in principal and interest for every $100,000 you borrow. That’s an additional $6.21 per $100,000 compared with last week.

Where are mortgage rates headed?

The days of sub-3 percent mortgage interest on the 30-year fixed are behind us, and rates have so far risen beyond 7 percent in 2022.

“Low interest rates were the medicine for economic recovery following the financial crisis, but it was a slow recovery so rates never went up very far,” says McBride. “The rebound in the economy, and especially inflation, in the late pandemic stages has been very pronounced, and we now have a backdrop of mortgage rates rising at the fastest pace in decades.”

Comparing different mortgage terms

The 30-year fixed-rate mortgage is the most popular option for homeowners, and this type of loan has a number of advantages, including:

  • Lower monthly payment: Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower payments spread over time.
  • Stability: With a 30-year mortgage, you lock in a consistent principal and interest payment. Because of the predictability, you can plan your housing expenses for the long term. Remember: Your monthly housing payment can change if your homeowners insurance and property taxes go up or, less likely, down.
  • Buying power: With lower payments, you can qualify for a larger loan amount and a more expensive home.
  • Flexibility: Lower monthly payments can free up some of your monthly budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.
  • Strategic use of debt: Some argue that Americans focus too much on paying down their mortgages rather than adding to their retirement accounts. A 30-year fixed mortgage with a smaller monthly payment can allow you to save more for retirement.

That said, shorter-term loans have gained popularity as rates have been historically low. Although they have higher monthly payments compared to 30-year mortgages, there are some big benefits if you can afford the upfront costs. Shorter-term loans can help you achieve:

  • Greatly reduced interest costs: Because you pay off the loan faster, you’ll be able to pay less interest overall.
  • Lower interest rate: On top of less time for that interest to compound, most lenders price shorter-term mortgages with lower rates.
  • Build equity faster: The faster you pay off your mortgage, the faster you’ll own value in your home outright. That’s especially handy if you want to borrow against your property to fund other spending.
  • Debt-free sooner: A shorter-term mortgage means you’ll own your house free and clear sooner than you would with a longer-term loan.

What comes next:

Featured lenders for today, September 6, 2023

Source: bankrate.com

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Mortgage rates have hit a 20-year record high, but buyers are still eager to purchase homes in South Bend, Indiana.

“People want to buy a house even though the interest rates are up right now,” said Jan Lazzara, a real estate agent who has worked in St. Joseph County for more than two decades. “As long as we’re not overpriced, we’re seeing multiple offers.”

Although mortgage rates are slowing the home market across the country, buyers still face competition in South Bend due to limited inventory.

The South Bend-Mishawaka area placed ninth for best emerging housing markets, according to the Wall Street Journal and Realtor.com. The summer ratings indicate areas with appreciating home prices, a strong local economy and attractive lifestyle amenities.

Many cities which placed in the top of the rankings were affordable Midwestern cities. South Bend is no exception. According to Realtor.com, the median housing price in South Bend was about $188,000 in July 2023, compared with a national median housing price of more than $400,000 this year, as reported by the U.S. Census Bureau.

“Generally speaking, I expect home prices in South Bend to be lower than most of the country,” said John Stiver, a Notre Dame finance professor who teaches macroeconomics.

After a 11-year incline, housing prices in the U.S. began falling on an year-over-year basis this April. In South Bend-Mishawaka, prices are still increasing, though not as quickly as in 2022. Between the second quarter of 2023 and the second quarter of 2022, the South Bend-Mishawaka all-transactions housing price index increased 9.2%, the slowest year-over-year increase since the beginning of 2021, according to data from the U.S. Federal Housing Finance Agency and the St. Louis Federal Reserve.

“It looks like the rate of change of prices is going down,” Stiver said about South Bend-Mishawaka.

The average South Bend home value at the end of July was 4.6% higher than the same time last year, according to a Zillow report. The majority of homes in South Bend were sold for equal to or more than asking price in August, according to a Rocket Homes report.

“It’s been wonderful, one of my busiest years yet,” Lazarra said about the market. “The problem that we’re having is that there’s not a lot of inventory.”

Across the nation, housing inventory is down about 8%, according to data from the St. Louis Federal Reserve. In the South Bend-Mishawaka area, housing inventory decreased about 5% between August 2022 and August 2023. 

Due to record-high mortgage rates, many existing homeowners don’t want to put their homes on the market and give up low interest rates.

“People are afraid to list because they have a low interest rate,” Lazzara said.

But the high interest rates aren’t strangling buyer demand.

On a home she listed last week, Lazzarra received three overbid offers in less than a couple days. Another one of her listings received 27 offers.

She said a large portion of demand is from first-time home buyers looking for homes in the $150,000 to $300,000 price range. Many are moving to St. Joseph County for jobs at Notre Dame and the local hospitals. 

According to data from the U.S. Census Bureau, the population of South Bend and St. Joseph County remained relatively unchanged between April 2020 and July 2022.

Even though the local population is not increasing and the costs of borrowing are high, limited inventory is keeping prices high. For those who are moving, finding a home near South Bend is difficult.

Tim Travis, chief executive for a local medical foundation, closed on a home in Granger, Indiana in March 2023. Travis, his wife and three sons moved from Louisville, Kentucky because of a job promotion that came with a significant moving package.

“I couldn’t have moved up here and benefited from it for less than $100,000 probably,” Travis said. 

Although Travis traded a 3% mortgage rate for a rate of about 5%, he said the promotion justified the higher mortgage payments.

Still, “it would make a huge difference in my mortgage payment if rates came down,” he said. “I’d like to put those couple hundred dollars towards something else.”

Last spring, Travis had a hard time finding homes for sale, especially in his desired school districts. Travis moved to Indiana in November 2022 before his family joined up with him. He spent months looking for the right home.

“I was on it two to three days a week. It was like a second job, looking for housing,” he said. “It’s like going into a department store to look for clothes, and there’s no clothes.” 

When he finally found a 5-bedroom, 5,400 square foot home in a school district his family liked, he quickly put in a competitive offer just under $600,000.

Travis got the house. He also gained a deeper understanding of limited housing inventory in St. Joseph County.

“The interesting thing about it all is that the housing supply has gone down because people can’t move,” Travis said. “I wouldn’t want to be looking right now,” he said a few months after his March 2023 closing.

Tags: home market, housing inventory, local economy, Mishawaka, mortgage, mortgage rates, Realtor.com, South Bend, St. Joseph County, Zillow

Source: ndsmcobserver.com

Apache is functioning normally

To say 2013 has been a good year for real estate would be an understatement. A huge one…

Over the past 12 months, home prices have risen by double digits throughout much of the nation and most who listed their home during that time were met with a bidding war.

And often times these bidders were so motivated to buy that the sales price would far exceed the list price.

It’s as if today’s home buyer is willing to pay future prices just to get in, whether that’s because mortgage rates are super cheap, or simply a return of the bubble mentality.

In California, 49.5% of homes sold so far in 2013 went above asking price, which is nearly double the share seen in 2012 (25.9%), according to the 2013 Annual Housing Market Survey released by the California Association of Realtors.

If you go back to 2011, the share of homes sold above list was just 16.6%. In other words, housing took off from its bottom fast, and never looked back.

For the record, the long-term average share of homes sold above list has been 18% (over the past 20 years). So yes, real estate is hot in the Golden State and elsewhere.

In fact, some sizzling markets like Dallas and Denver are at new all-time highs. Who would have thought that just a year or two ago?

The scary part is the chart above shows a huge drop-off after such a stellar year, which makes me wonder if 2014 and beyond will be flat or even negative in some markets.

While there are stories of epic battles that pushed prices up more than $100,000, most homes that did sell above list in California this year only went for about 5% more.

72% of Home Sales Received Multiple Offers

The reason so many homes went for more than their asking price was because more than seven out of 10 received multiple offers.

And the reason most had multiple bids was due to a shortage of inventory, which continues to be an issue in desirable markets nationwide.

[Homeowners Are Waiting for Prices to Rise Before Listing Their Properties]

In fact, each sold home received an average of 5.7 offers, up from 4.2 offers in 2012 and 3.5 in 2011.

In 2012, only 57% of homes received multiple offers. At that time, prospective buyers still weren’t quite sure we had hit the bottom.

CAR noted that the share of homes receiving multiple bids was the highest in at least 15 years.

Breaking it down further, REOs and short sales saw the most competition, with 91% and 75% receiving more than one offer, respectively.

That compares to 71% of REOs and 66% of short sales a year earlier. About 70% of equity sales (those not underwater) involved multiple bids, up from 51% in 2012.

It’s Becoming a Renter Nation

While home sales are up, it’s not first-time home buyers or everyday Joes acquiring their dream homes.

Rather, it’s investors and overseas buyers snagging properties on the cheap and renting them out.

Per the survey, 19% of home sales went to investors in 2013, up from 16% last year and nearly triple the rate seen a decade ago.

Meanwhile, overseas buyers scooped up eight percent of all sales, up from 5.8% in 2012 and the third successive increase.

Sure, some plan to live in the homes, but nearly one-third plan to rent them out.

Overall, cash buyers (typically investors) accounted for more than a quarter of home sales in California, down slightly from a year ago, but triple the rate seen in 2001 and well above the 15.1% average seen since 1998.

So the composition of the housing market is changing quite a bit, despite the seemingly positive news. Investors are squeezing out traditional buyers, which will likely create a unique environment in coming years.

Source: thetruthaboutmortgage.com

Apache is functioning normally

Buying a home is a big deal, both emotionally and financially. For many people, homeownership is still an essential part of the American dream. And, of course, it’s the biggest investment some will ever make. With the median price of a house hitting $428,700 in mid-2022 (ka-ching), it’s not a purchase to be made lightly.

If you’re buying a home for the first time, you may expect it to be the same as those quick, fun-and-done experiences portrayed on reality TV shows. In truth, however, it’s a process with a steep learning curve and many moving parts, from figuring out your home-shopping budget to satisfying your final mortgage contingencies. There can be minor hiccups as well as major missteps along the way.

That’s where this article comes in. It will educate you about the six most common first-time homebuyer mistakes and help you avoid them, including:

•   Not knowing how much house you can afford

•   Not shopping around for the best mortgage rate

•   Waiving an inspection because you’ve found your dream house.

First-Time Homebuyer Mistakes to Avoid

You’ve new to this homebuying business, so it’s worthwhile to educate yourself a bit about a few of the key moves to make the process go smoothly. Here, we’ll highlight the steps required for first-time homebuyers and help you avoid some common mistakes when buying a house.

1. Not Getting Your Mortgage Paperwork Moving

Before you start browsing online listings or get your heart set on a certain neighborhood, it might be a good idea to contact a lender (or, better yet, lenders) to show sellers that you are loan-worthy. If you don’t get your mortgage pre-qualification or even a pre-approval started, you’re unlikely to impress sellers as a serious bidder worth their consideration. You might just look like a person who enjoys poking around open houses for design ideas.

Nip that in the bud as follows:

•   Pre-qualification: You’ll provide basic information about your debt, income, assets, etc., and they will run a credit check and can give you an idea of how much you can borrow.

•   They will also share information on different types of loans — such as fixed-rate vs. variable-rate and 30-year vs. 15-year term — so you can see what best suits your financial situation and goals.

Remember, though: Mortgage pre-qualification isn’t a commitment for the lender or buyer — it’s just a first step. If you appear to meet a lender’s standards, you could move on to the pre-approval stage.

•   Pre-approval: This involves submitting additional income and asset documentation for a more in-depth review of your finances.

•   Once the lender approves these aspects of your loan application, you’ll receive a conditional commitment for a designated loan amount — called a pre-approval letter — and have a better idea of what your loan terms will be.

•   Mortgage pre-approval can help demonstrate to sellers that you’ve completed the first step in getting a mortgage because your credit, income, and assets have already been reviewed by an underwriter. This can smooth the bidding process and could give you an edge over others in a competitive situation with multiple offers.

2. Not Checking Out First-Time Homebuyer Programs

It’s wise to shop around for a few different mortgage quotes, but it can be a rookie mistake to overlook some great, government-sponsored programs that make homebuying more affordable. These include:

•   insurance (PMI), along with lower closing costs and a low interest rate.

•   FHA Loans : These mortgages are designed for those with low to moderate incomes. They typically offer low down-payment requirements, low interest rates, and the ability to get approval even if you have a fair credit score.

•   USDA Loans : These provide affordable mortgages to those with a lower income who are planning on buying a home in a qualifying rural area.

•   VA Loans : These mortgages help those on active military duty, veterans, and eligible surviving spouses become homeowners. If you can check one of those boxes, you may be eligible for a home loan with no down payment and no private mortgage.

3. Not Being Realistic About What You Can Afford

Once you know more about your mortgage pre-qualification, you can avoid the homebuying mistake of not knowing your home buying budget. The lender you choose will tell you the maximum amount you’re approved to borrow for a home, but you don’t have to use every penny of that money.

It’s important to keep other factors in mind as you determine the top price you’ll pay for your first home. If you don’t have your pricing guardrails in place, you could wind up overbidding and winding up with a too tight budget. Here, some ways set your sights realistically:

•   Ask yourself if your projected mortgage payment will fit comfortably into your monthly budget. You may have to make some tradeoffs — less travel, shopping, or dining out — if your new payment is higher than your current rent or loan payment, which you can figure out with a mortgage calculator.

•   Keep in mind that your mortgage probably isn’t the only new expense you’ll have to cover. If you’re buying a bigger place than your current rental, you will likely pay more for utilities. If the home has a lawn or pool, you might have to maintain them or pay someone else to do it. Or you may have a homeowner association (HOA) fee. Add those costs, gleaned from online sources and/or open houses, to your projected monthly budget (you can make a budget in Excel, use paper and pencil, or work with an app).

•   You’ll also have to account for the cost of homeowner’s insurance and paying your property taxes. You can get some idea of what those costs will be by searching online. There are insurance calculators, and most home listings give you the annual property taxes.

By doing the math, you’ll make sure you are ready to keep up with the monthly flow of expenses without dipping into savings or taking on credit card debt.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

4. Digging Too Deep for a Down Payment

In their eagerness to become homeowners, many first-time buyers make the mistake of going overboard and directing every bit of money they have to the purchase.

If you have to drain your emergency savings to manage the down payment on a home, you might want to dial down the amount or wait and save up a bit more. Consider what could happen if the home needs a costly repair or, worse, if you or someone in your family suddenly has an expensive medical bill. That’s a good example of when to use an emergency fund.

The same thing holds for taking money from your retirement savings. The IRS allows first-time homebuyers (which the IRS defines as not owning a primary residence in the past two years) to withdraw money from an IRA penalty-free . But this is capped at $10,000, and you’ll still pay federal and state income taxes on the money — and lose out on the growth you’d possibly have if you left those funds alone.

If you have a 401(k), you could take a loan against those funds, but again, there are consequences. There may be a provision in your plan that prohibits you from making additional contributions until the loan balance is repaid, so you’ll miss out on any growth, and you may be required to pay back the loan immediately if you quit or lose your job. If that happens, the money you borrowed will become fully taxable and may be subject to a 10% early withdrawal penalty.

There are benefits to putting 20% down on a home: You’ll avoid paying private mortgage insurance (PMI) and your monthly payments will be lower. But 20% isn’t required. For example, the minimum down payment required for a conventional loan is 3%, and for an FHA loan, it’s 3.5%. According to the National Association of Realtors, first-time buyers typically put down 7% of a home’s price in 2021.

With all the other costs you could be looking at as you move into a home — closing costs, utility deposits, moving expenses, decorating, and more — your down payment amount is something to consider if you want to avoid getting in over your head.

5. Passing on a Full Inspection

It may be tempting to waive the home inspection when you’re trying to buy the home of your dreams — especially if you have some stiff competition to be the winning bidder for an in-demand property.

Sorry to say, this is a risky strategy. A home inspection might reveal critical information about the condition of a home and its systems, from electrical problems to hidden mold; from a failing septic system to a leaky roof. What you learn in an inspection could reveal that your dream home is actually a money pit.

What’s more, your inspection report might serve as a useful negotiating tool: You could use it to ask for repairs or to work out a better price from the seller. And if you really aren’t happy with the inspection results, you may be able to use it to cancel the offer to buy.

💡 Recommended: 7 Important Factors That Affect Property Value

6. Letting Your Emotions Get The Better of You

Homebuying can be a roller coaster, so it’s important to prepare yourself psychologically as well as financially. If you’ve ever talked to someone buying a house, you know there are potential pitfalls all through the purchasing process.

You might fall in love with the perfect house and find it’s way over your budget. You might get annoyed with the sellers or their Realtor, especially during the negotiation process. You might disagree with your spouse or a co-buyer about priorities.

All of these scenarios can cause a person to behave emotionally. It might make you want to walk away from a great deal. It might lead you to barrel ahead with a purchase, even when warning lights are flashing.

How to avoid such mistakes when buying a house? By recognizing that this will be a challenging and at times stressful process (especially because you are new to it), you can proceed more calmly. Find tools that help you move ahead with patience and a sense of calm, best as you can. With your eye on the prize — namely, your first home — you’ll get there.

💡 Recommended: 31 Ways to Save for a Home

The Takeaway

Buying a home for the first time is an exciting moment, but one that takes some time and care to make sure you avoid rookie mistakes. You’ll want to do due diligence, not skip steps, or get carried away by emotion.

When you’re ready to line up your financing, the loan terms you get could be nearly as significant as your home’s location in terms of long-term satisfaction.

When shopping for a mortgage, you may want to compare different interest rates, the length of the loan, and other factors that make one lender a better fit than another.

With a SoFi mortgage loan, for example, the pre-qualification process is super simple, and our loans have competitive rates. What’s more, qualifying first-time homebuyers can put down as little as 3%, and work with our Mortgage Loan Officers who can coach you through the required steps.

If you’re thinking about buying a home, see what a SoFi mortgage could do for you.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Source: sofi.com