Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
A strong U.S. economy will be a boon for the housing market, Mortgage Bankers Association’s (MBA) chief economist said on Thursday, as it will buoy demand and as inflation continues to fall, mortgage rates will decline as well making home loans more affordable for buyers.
The U.S. economy accelerated at a faster-than-expected clip in the fourth quarter of 2023 at 3.3 percent, the Commerce Department’s Bureau of Economic Analysis revealed on Thursday.
Meanwhile, the personal consumption expenditures (PCE) price index—the Federal Reserve’s preferred measurement of inflation’s progress—jumped by 1.7 percent during the quarter. Core PCE, which excludes the often volatile food and energy prices, increased by 2 percent.
These dynamics bode well for the housing market that has been struggling under the weight of record-high mortgage rates, sparked in part by the Fed’s hiking of rate at the most aggressive clip since the 1980s to fight soaring inflation.
The Fed’s funds rate currently sits at 5.25 to 5.5 percent—the highest they have been in two decades—and policymakers have signaled that they will slash rates should inflation come down to their 2 percent target.
But an economy that may avoid a recession as inflation moderates without the Fed’s tight monetary policy doing too much damage to the jobs market would help the housing sector.
“Stronger economic growth will benefit the housing market, keeping demand robust,” Mike Fratantoni, MBA’s chief economist, said in a statement shared with Newsweek. “Moreover, today’s report also showed further reductions in inflation, which will enable the Federal Reserve to cut rates later this year—as they have been hinting.”
Mortgage rates ticked up slightly for the week ending January 25, Freddie Mac said on Thursday, with the 30-year fixed rate averaging 6.69 percent.
“The 30-year fixed-rate has remained within a very narrow range over the last month, settling in at 6.69% this week,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Rates look to have stabilized, Khater suggested, encouraging buyers to jump off the fence.
“Despite persistent inventory challenges, we anticipate a busier spring homebuying season than 2023, with home prices continuing to increase at a steady pace,” he said.
A slowdown in rates could have a negative impact on home buyers, some analysts say.
A decline in the cost of home loans would encourage more purchases, and this increase in demand will spark competition at a time when there is a limited supply of homes for sale.
More buyers who can afford mortgages entering the market will push up prices, analysts from Goldman Sachs said this week.
The investment bank’s experts project prices to soar by 5 percent in 2024, a marked revision from their earlier expectation of a 2 percent jump. That trend will continue through next year when prices are forecast to increase by nearly 4 percent, which is also a change from a previously estimated increase of close to 3 percent.
Amid the price increases, Goldman Sachs analysts anticipate that rates will fall to 6.63 percent for the year. This drop in rates from the near 8 percent highs of November 2023, will make house loans more affordable, sparking more demand for properties.
“We have very low inventory of houses for sale, which is generally supportive of prices, along with generally stable demand that is coming from things like household formation,” Roger Ashworth, senior strategist on the structured credit team at Goldman Sachs, said this week.
On Thursday, new home sales climbed up by 8 percent in December, according to government data, while prices declined to two-year lows. The fall in prices and a rise in sales was partly due to builders offering inducements to buyers, according to Yelena Maleyev, a senior economist at KPMG.
“Builders have pivoted to building smaller homes and offering more discounts and concessions, such as mortgage rate buydowns, to bring in buyers sidelined by rising mortgage rates,” she said in a note shared with Newsweek.
But the data from the U.S. Census Bureau also showed that inventory of newly built homes fell last month after going up the previous months. There were 453,000 houses available for sale at the end of December, which accounts for 8.2 months’ worth of supply.
This constituted a 3.5 percent decline from the same time a year ago, Maleyev pointed out.
The lack of inventory also comes at a time when the used homes market has struggled. Sales are down in that segment amid a lack of supply of homes as sellers are reluctant to give up their low rates for new home loans hovering in the mid-6 percent.
This lack of supply will be key to how prices shake out and the outlook for the year is not encouraging.
“If mortgage rates fall below 6 [percent] in 2024, more owners will feel comfortable listing their homes for sale, alleviating some of the shortages, but not enough to close the supply gap,” Maleyev said.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
The real estate market is often characterized by ups and downs, with certain seasons being more popular for buying and selling homes than others. While the spring and summer months may traditionally steal the spotlight, homebuyers increasingly recognize the advantages of purchasing a home during the off-season. These are the often-overlooked benefits of buying a home during the real estate off-season.
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One of the most significant advantages of buying a home in the off-season is the reduced competition. With fewer buyers actively searching for homes, you’re less likely to find yourself in bidding wars or facing multiple offers on the same property. This diminished competition allows you to negotiate more effectively and potentially secure a better deal.
During the off-season, sellers are often more motivated to close deals quickly. Whether they are relocating for work, downsizing, or have personal reasons prompting the sale, motivated sellers are likely to be more flexible when it comes to negotiations. This increased willingness to negotiate can translate into a lower purchase price, additional concessions, or favorable terms for the buyer.
Historically, home prices have been known to dip during the off-season due to decreased demand. Sellers may be more willing to lower their asking prices to attract potential buyers and facilitate a faster sale. This affordability factor can be particularly appealing for budget-conscious homebuyers looking to maximize their investment.
The off-season often means a more streamlined real estate process. With fewer transactions taking place, mortgage lenders, real estate agents, and other professionals involved in the home buying process may have more time and resources to dedicate to your transaction. This can result in a smoother and faster closing process, saving you time and reducing stress.
Off-season homebuyers have the advantage of inspecting properties under less-than-ideal weather conditions. This allows for a more accurate assessment of the property’s condition, including its performance during colder months. From checking the heating system to evaluating insulation, winter or rainy season inspections provide a comprehensive understanding of the home’s functionality throughout the year.
While the idea of house hunting in the off-season may seem unconventional, it comes with benefits that can make the experience more enjoyable and financially advantageous. By exploring the market during the off-season, you may just find your dream home at a dreamier price!
Are you looking for a home this winter? Give us a call today! One of the experienced real estate agents at Zoocasa is happy to help you along your exciting home-buying journey!
Looking for a home this off season?
We can help!
Source: zoocasa.com
Despite decades of anti-discrimination legislation and other efforts to fight redlining, create fair lending, and ban racial and other bias, housing discrimination can still exist in many markets throughout the country, especially for first-time homebuyers.
It can be subtle or overt. Either way, housing discrimination holds people of color, immigrants, families with children, and LGBTQ people back by denying them access to safe neighborhoods, good schools, and the generational wealth that comes with homeownership.
This guide offers more information on housing discrimination and what to do if it happens to you.
Federal law defines housing discrimination as discrimination concerned with renting or buying a property based on race, color, religion, national origin, sex (including gender identity and sexual orientation), familial status, or disability. In other words, if anyone in the house-hunting or mortgage loan process treats a person buying, renting, or selling housing differently because of any of these reasons, they are breaking the law.
Whether first-time homebuyers are buying a starter home or upsizing, they may want to fine-tune their anti-bias antennas and know the laws.
💡 Quick Tip: You deserve a more zen mortgage loan. When you buy a home, SoFi offers a guarantee that your loan will close on time. Backed by a $5,000 credit.‡
Housing discrimination comes in many forms. It could be a landlord who charges higher fees to renters with children, a real estate agent who refuses to show immigrants homes in certain neighborhoods, or a buyer offering less because of the seller’s race.
What’s more, housing discrimination can be subtle, according to the U.S. Department of Housing and Urban Development (HUD), making it difficult to prove and punish. Here are examples of subtle housing discrimination described on HUD’s website:
An African American man speaks on the phone to a landlord who seems eager to rent to him. But when the man meets with the landlord to fill out the application, the landlord’s attitude is different. A few days later, the potential renter receives a letter saying his application was denied because of a bad reference from his current landlord. But his current landlord says he was never contacted.
An Asian man meets with a real estate broker because he is interested in purchasing a house for his family in a specific neighborhood. When he mentions the neighborhood, the broker tells the Asian man that she has wonderful listings in a neighborhood where there are more people like him. When he looks at houses in the neighborhood she recommends, he notices that the majority of residents are Asian. The man files a complaint. Steering buyers to certain neighborhoods because of race is illegal.
Sexual harassment, failure to comply with accessibility requirements, and rules against renting or selling to families with children are also discriminatory.
Housing discrimination by sellers, lenders, and landlords based on race, color, religion, or nationality has been illegal since Congress passed the Fair Housing Act in 1968. The act was expanded in 1974 to include gender and in 1988 to include families with children and people with disabilities. Additional laws concerning discrimination in mortgage lending are included in the Equal Credit Opportunity Act, passed in 1974.
Some situations are exempt from the Fair Housing Act. These include some types of senior housing and housing operated by religious organizations and private clubs. Single-family rental homes are also exempt as long as the landlord does not own more than three homes and does not advertise or broker the rentals. Owner-occupied properties with four or fewer rental units are not governed by the Fair Housing Act.
States and local jurisdictions may have additional laws regarding housing discrimination. For instance, many states and cities ban discrimination based on age, criminal history, immigration status, marital status, or sexual orientation.
In 2020 the Trump administration made several changes to HUD regulations, making it more complicated for people to prove they are victims of housing discrimination. Specifically, victims had to go to great lengths to show that the discrimination was intentional. In early 2021, President Joe Biden signed executive orders aimed at reversing those changes. Housing discrimination continues, however, and in 2023, HUD announced that it was making $30 million in additional funding available to state and local fair housing enforcement agencies across the country to help fight discriminatory practices.
First, become familiar with the federal, state, and local laws that may apply. Knowing the laws and how they work is vital to filing an effective complaint and getting a successful outcome.
If you think you are a victim of housing or mortgage lending discrimination, you can file a federal complaint with the HUD Office of Fair Housing Equal Opportunity (FHEO). This office investigates claims concerning any of the protected classes specified in the Fair Housing Act. You can file a complaint online or mail the complaint form to your regional HUD office or call the Housing Discrimination Hotline at 800-669-9777. The complaint form is available in nine languages, including English and Spanish, and any retaliation for filing a complaint is illegal.
The FHEO is supposed to investigate complaints within 100 days. Sometimes complaints prompt the U.S. Department of Justice to file lawsuits against people or companies that may have violated the law.
You may also want to file a complaint with your state attorney general’s civil rights bureau or your city’s civil rights or fair housing commission. This may be more effective than filing solely with the FHEO, especially in areas with extensive housing discrimination regulations. To find out where to file a complaint in your area, start with the National Fair Housing Alliance website for a list of local agencies.
In addition to the FHEO, mortgage lending discrimination complaints can be filed with the Consumer Financial Protection Bureau.
💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.
Extensive documentation can help prove housing discrimination. When you are talking to real estate agents, sellers, landlords, or lenders, it’s a good idea to listen carefully and take notes during each conversation. HUD officials suggest looking for what they call red-flag language. This may occur when a real estate agent is trying to steer you away from or into a particular neighborhood. Phrases such as “This wouldn’t be a good fit for you” or “You’d be happier in this other neighborhood” can be red flags.
If you feel you are being “steered,” you can do an online search to learn if a broker failed to show all of the houses in the local housing market in your price range.
If you suspect lending discrimination, such as being quoted a higher rate than you expected, you can check the posted rates online at that mortgage lender and others to see how they compare. You can take screenshots or print this information.
Keep an eye out for and document surprising obstacles that come up in the home buying or renting process. Perhaps a landlord, seller, or agent has said a property is not available but then you find that it is still on the market weeks later. Or maybe your application to purchase a co-op is denied, but you aren’t given a specific reason why. These may be signs of discrimination. You’ll want to document the situation with dated notes from your conversations and screenshots or copies of the ads showing the property still available after you were turned down.
Local housing advocacy and human rights groups also offer help. Organizations such as the Fair Housing Justice Center may help you conduct tests using volunteers of different races to test for disparate treatment in specific locations. These tests can also provide compelling evidence for your case.
Recommended: Home Affordability Calculator
Longstanding laws and regulations are not enough to eradicate housing discrimination, but informed buyers and renters can fight back. Make sure you advocate for yourself at every stage of the process.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
Photo credit: iStock/zoranm
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.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
‡SoFi On-Time Close Guarantee: If all conditions of the Guarantee are met, and your loan does not close on or before the closing date on your purchase contract accepted by SoFi, and the delay is due to SoFi, SoFi will provide you $2,000.^ Terms and conditions apply. This Guarantee is available only for loan applications submitted after 6/15/22 for the purchase of a primary residence. Please discuss terms of this Guarantee with your loan officer. The property must be owner-occupied, single-family residence (no condos), and the loan amount must meet the Fannie Mae conventional guidelines. No bank-owned or short-sale transactions. To qualify for the Guarantee, you must: (1) Have employment income supported by W-2, (2) Receive written approval by SoFi for the loan and you lock the rate, (3) submit an executed purchase contract on an eligible property at least 30 days prior to the closing date in the purchase contract, (4) provide to SoFi (by upload) all required documentation within 24 hours of SoFi requesting your documentation and upload any follow-up required documents within 36 hours of the request, and (5) pay for and schedule an appraisal within 48 hours of the appraiser first contacting you by phone or email. The Guarantee will be void and not paid if any delays to closing are due to factors outside of SoFi control, including delays scheduling or completing the appraisal appointment, appraised value disputes, completing a property inspection, making repairs to the property by any party, addressing possible title defects, natural disasters, further negotiation of or changes to the purchase contract, changes to the loan terms, or changes in borrower’s eligibility for the loan (e.g., changes in credit profile or employment), or if property purchase does not occur. SoFi may change or terminate this offer at any time without notice to you. ^To redeem the Guarantee if conditions met, see documentation provided by loan officer.
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.
SOHL0124024
Source: sofi.com
Pennymac proudly supports our nation’s heroes by offering Department of Veterans Affairs (VA) loans. We service over 445,000 VA loans on behalf of service members, veterans and their families – over 43,000 of which originated in the first 9 months of 2023.*
If you’re connected with the United States military, you may be eligible for VA loans, such as no down payment purchase loans and low-interest refinance loans. In this guide, we’ll look at what a VA loan is, the qualification criteria, the benefits and how to find the one that could be right for you.
*As of 9/30/2023
A VA loan is a mortgage loan guaranteed by the United States Department of Veterans Affairs. It’s available to eligible veterans, service members and surviving spouses and offers numerous benefits, including:
VA loans are specifically designed to meet the needs of veterans and their families, opening up increased opportunities for homeownership and building equity.
VA loans are government-backed loans that offer veterans and service members more flexible borrower criteria than conventional loans. The VA guarantees the loans, reducing the risk for lenders and enabling lower credit scores and down payment requirements.
While you can use a VA loan for your first home, you can take advantage of the VA loan benefit again if you sell or refinance.
VA loans and the process to obtain them are similar to other types of Pennymac mortgage loans, with some key differences. Here’s a breakdown of the steps involved in applying for and securing a VA home purchase loan.
1. Start your application online or talk to a Pennymac Loan Expert. One of the unique aspects of a VA loan is that we’ll use your Certificate of Eligibility (COE) to confirm that you meet the basic VA loan requirements, but you don’t need it to begin your application.
You can visit the eBenefits section of the U.S. Department of Veterans Affairs website to request your COE online or obtain VA Form 26-1880 to make your request through the mail. If you prefer, your Loan Expert will be happy to guide you through the steps involved to verify your eligibility and obtain your COE.
2. Receive a Pennymac BuyerReady Certification. The BuyerReady Certification is Pennymac’s unique loan certification process that confirms how much of a mortgage you will likely qualify for based on submitted financial documents. While it doesn’t guarantee a loan, BuyerReady Certification can help you house-shop with confidence so you’ll know which homes will fit your budget.
BuyerReady Certified homebuyers also qualify for Pennymac’s Lock & Shop program,* which allows you to lock in a rate before locating a property. Protect yourself from future rate increases and potentially save thousands of dollars in the lifetime cost of your mortgage.
3. Look for homes. Meet with a real estate agent and begin looking for homes. Once you’ve found a home you’d like to purchase, you can continue with the VA loan process. Pennymac Home Connect can assist in finding a reputable real estate agent in your area.
4. Complete underwriting and loan process. Since you’ve already submitted most of the documentation and information you’ll need for the mortgage through the BuyerReady Certification process, loan processing is typically smoother and faster.
5. Close and get the keys! Once your loan is approved, you’ll have your closing, where all necessary paperwork will be signed.
At this time, you’ll get the final details of your loan terms and required closing costs, which are the extra fees buyers and sellers pay to close on a real estate transaction beyond the home’s purchase price. One of the fees unique to the VA loan is the funding fee, which can be paid in full at closing or rolled into the total loan amount.
The funding fee is a one-time charge, typically between 1.25% and 3.3% of the loan amount. The fee goes to the U.S. Department of Veterans Affairs to support the VA loan guaranty program, which helps keep VA mortgages low-cost and available for future veterans to achieve homeownership.
The following individuals are exempt from paying the VA funding fee:
If the borrower’s exemption status is unclear, the VA will make the final decision on funding fee exceptions.
VA loans are available to active-duty service members, veterans and their surviving spouses. If you meet one or more of the following criteria, you may be eligible for a VA home loan:
VA home loans are valuable financing solutions to help qualified service members and veterans achieve their homeownership aspirations. The primary benefits of VA home loans include:
Veterans and service members have access to several types of VA loans, whether you’re buying a home or refinancing.
Buy a home with zero down payment and a competitive interest rate.
Who is it for? Qualified first-time or repeat homebuyers who are purchasing a primary residence.
Benefits:
*As long as the sales price does not exceed the appraised home value.
An IRRRL, also known as a Streamline Refinance Loan, allows you to refinance your existing VA loan to a lower interest rate, which may potentially lower your monthly payments. You may also be able to refinance an ARM into a fixed-rate mortgage.
Who is it for? Individuals who already have a VA loan.
Benefits:
Your rate and monthly payment after refinancing must be lower than your current payment, except when refinancing an ARM to a fixed-rate mortgage.
VA cash-out refinance loans allow you to refinance your existing loan — which doesn’t have to be a VA loan — for a higher balance and receive the difference as cash. Use the funds for any purpose, such as paying off debt, funding education or making home improvements.
Who is it for? Qualified veteran homeowners who want to use their equity in their homes.
Benefits:
*Loan limits are established by the VA and can vary by county.
By refinancing your existing loan, your total finance charges may be higher over the life of the loan.
A VA loan is a versatile, flexible financing option designed to empower veterans, service members and their families.
VA purchase loans can be used to finance a primary residence, including:
VA IRRRL loans are used to replace an existing VA loan at a lower interest rate. This can potentially reduce your monthly payments, freeing up money you can use for other expenses, such as home renovations, college tuition or credit card debt. You can refinance:
The home must be your primary residence, and you must already have a VA loan. You can also refinance an ARM into a fixed-rate mortgage.
With a VA cash-out refinance, you may be able to obtain funds for:
You can also use a VA cash-out refinance to replace a non-VA loan with a VA loan. The home you are refinancing must be your primary residence.
As part of our nation’s military, you’ve dedicated your life to serving our country. Pennymac is proud to serve you. We provide VA purchase loans and refinancing options that can make homeownership more attainable and affordable for America’s heroes. Contact a Pennymac Loan Expert today to learn more.
*Lock & Shop Program allows consumers who have a Pennymac BuyerReady Certification for a purchase loan with Pennymac to lock a rate prior to locating a property. The program requires a non-refundable fee of $595 due at the time of the rate lock. Consumers with a Pennymac BuyerReady Certification for a purchase loan with Pennymac must meet appropriate underwriting conditions to obtain a mortgage loan. Consumers may choose between a 60-day, 75-day or 90-day lock period. Consumers must initiate a mortgage loan application for a specific property and be under purchase contract for the property at least 30 days prior to lock expiration in order to extend the locked rate. All rate lock extensions are subject to Pennymac’s standard rate lock extension fees. After the rate lock and subject to favorable market conditions, consumers may be eligible for a one-time reduction in rate once the loan application for a specific property has been initiated (0.50 % maximum reduction in interest rate allowed). Eligible loan products are Conventional Fixed, Conventional ARM, FHA Fixed and VA Fixed. Program excludes Jumbo, refinance, third-party and in-process loans. Program subject to termination in Pennymac’s sole discretion and without notice.
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Source: pennymac.com
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Attention in the hallways in the early going at the IMB Conference in New Orleans is varied. LinkedIn traffic seems to have picked up for IMB companies like Draper and Kramer and Atlantic Bay, but that is hardly a scientific measure of companies being bought, buying, or exiting the business. (As always, direct questions to company representatives.) Credit costs and trigger leads are a big item; this Wednesday’s L1 Mortgage Matters session at 2PM ET features John Fleming, of John Fleming Law and the Texas MBA, discussing issues including a fine update on the trigger lead situation. Being pragmatic about handling branches that are losing money, even if the crew there has been with you for years and years, is a hot topic among owners. The last 18 months has not been the time to waffle or ignore information. Today’s podcast can be found here and this week’s is brought to you LoanCare. LoanCare has successfully navigated clients and homeowners through market change for 40 years. The mortgage subservicer is known for delivering superior customer experience through personalization and convenience via its portfolio management tool, LoanCare Analytics™, supporting MSR investors with a focus on customer engagement, liquidity, and credit risk.
Lender and Broker Services, Products, and Software
Jonathan Spinetto COO & Co-founder at Nyfty Door, grew business from 0 loan originations two years ago when he signed with TRUV, and is projected to hit 3,000 loans a month in 2024. NYFTY door sees conversion rates over 60% with Truv and is saving 60-80% over competitors. Contact TRUV today for your income, employment, insurance, and asset verifications.
“Citi Correspondent Lending continues to foster targeted growth of our approved lender base with a focus on the expansion of our Community Lending platform. To start off the new year, we’re moving forward with full implementation of our proprietary affordable lending program, HomeRun, which features no MI, up to 97 percent LTV and as little as 1 percent borrower down payment contribution. To further compliment this rollout, our CRA pricing incentives were recently updated with enhancements to several markets, including Miami, Newark, San Jose, and Los Angeles. Learn more about HomeRun and all of the other growth opportunities Citi Correspondent Lending has to offer by contacting our National Client Services Team or completing our Prospective Correspondent Questionnaire.”
Get ready to rev your engines and network like a champion at the 3rd annual Supercar Experience, brought to you by Lender Toolkit, Reggora, Lenders One, and LodeStar! Mark your calendars for March 18th, before the kickoff of EXP24 in Vegas. We’ll take over Speed Vegas Exotics Racing, where you can unleash your inner speed demon behind the wheel of a dream supercar and connect with industry decision makers in a high-octane setting. Build valuable partnerships and expand your circle with leading mortgage minds at this one-of-a-kind event. Gain exclusive insights from and ask your questions of industry expert Rob Chrisman in a live Chrisman Commentary podcast. Plus, shake hands with Talladega Nights’ icon, Ricky Bobby himself! Experience more than just supercar thrills with an exclusive reception, delicious catering, and racetrack excitement. Don’t miss out on this unforgettable opportunity to elevate your brand, fuel your EXP24 prep, and network like a boss. Secure your spot now. Shake and bake!
One of the more annoying jobs of a loan officer is putting together closing cost summaries every time a borrower looks at a new house. What if they could fire them off from their phone (accurately) without having to go into the LOS each time? All your pre-approved buyers, on your phone, integrated with the LOS. Turn your loan officers into super-awesome fireball-throwing loan officers with QuickQual by LenderLogix.
Introducing The 2024 Lender Playbook: 4 Tips to Drive Profitability in a Recovering Market. How will the coming election, housing inventory, and Fed action impact the mortgage market (and your lending success) this year? There’s a lot going on in 2024, and market recovery won’t be straightforward. The good news? You can still build a strong, forward-thinking plan for resilience and profitability. Tenured industry experts from Maxwell’s senior team helped create this guide to teach you how to reduce costs, win borrower business, and capture intermittent loan volume as it reemerges in the market. To get a leg up on the competition and build agility into your business, click here to download The 2024 Lender Playbook: 4 Tips to Drive Profitability in a Recovering Market.
Join FirstClose, Curinos and Fifth Third Bank on Thursday, February 15 for a deep dive into today’s home equity market. Take a look behind the scenes at the products and processes that fuel home equity lending, new financing options that are creating opportunities for both depository and non-bank participants and, most importantly, learn how to capitalize on this market. This one-hour online event is a must attend for anyone currently in the home equity space or thinking of entering. Register today.
STRATMOR on LO Habits
Do you ever feel like you’re living the same day over and over again? Sometimes it takes watching a 90’s comedy classic to bring us to our senses and remind us that we must keep trying new things, changing, and evolving if want to see new and different results. In his latest Customer Experience Tip, STRATMOR Customer Experience Director Mike Seminari shares some lessons Bill Murray’s character learns in the movie “Groundhog Day” and how LOs can apply it to their process in 2024. Check out “Fresh Ideas for LOs Looking for Better Results in 2024” for recommendations on how to incorporate small change habits into your daily routine to help drive more referrals and repeat business in 2024.
Webinars, Events, and Training to Wrap up January
The upcoming webinar, “California Lien Law Overview for Construction Lenders” will be hosted by Land Gorilla on Wednesday, January 24 at 10AM PT/1PM ET. In continuation of the informative construction lien law webinars covering Florida and Texas, this webinar promises more great insights and understanding into California’s specific statutory requirements. Discover faster and more cost-effective alternatives to a foundation survey. Gain insights into California’s Prompt Payment Act. Learn the significance of the Notice of Completion in California and its critical timeline that can minimize a lender’s exposure during the final disbursement. You won’t want to miss these key insights to help you effectively manage construction loans. Register now to secure your spot. All registrants will receive the webinar recording.
A good place for longer term conference planning is to start is here, and click on “events” for conferences in the future. Of course this week we have the MBA’s IMB Conference in New Orleans.
What’s ahead for commercial real estate (CRE) markets in 2024? Join SitusAMC’s inaugural “ValTrends First Look” webinar on January 23, at 2pm ET, hosted by Senior Director of SitusAMC Insights Peter Muoio, PhD and Vice President of SitusAMC Insights Jennifer Rasmussen, PhD. Instead of looking back at the previous quarter, the new ValTrends webinar will leverage recent survey data of leading institutional and regional CRE executives to give you a forward-looking snapshot of the quarter ahead.
National MI: Highlights from the Profile of Home Buyers and Sellers with Rebecca Lorenz – January 23rd at 2PM ET. Build a Prospecting Follow-Up Strategy with Kendra Lee – January 25th at 1PM ET.
Sign up for a complimentary webinar hosted by ICE to hear about AI and the future of home valuations. A panel of industry experts will discuss the ways AI-powered tools eliminate valuation bias. They’ll also cover how AI accelerates the valuation process, and ways you can look out for fraud when using AI in home appraisals. The webinar, Artificial Intelligence and the Future of Home Valuations, will be held on Tuesday, Jan. 23 from 2 -3 p.m. Don’t miss out on key insights: register here.
Join BankingBridge, Wednesday, January 24th, 2PM ET/11AM PT, for an insightful webinar delving into the opportunities Zillow offers to enhance lead generation and conversion for mortgage lenders. This comprehensive session is designed to guide you through the various advertising avenues available on Zillow, including the strategic use of the Zillow Mortgage Rate Table, and the nuances of both long-form and short-form leads.
Wednesday the 24th, looking for more in-depth commentary on weekly mortgage news? Register here for “Mortgage Matters: The Weekly Roundup” presented by Lenders One. Every Wednesday at 2PM EST/11AM PT is a dive into a range of mortgage-related topics, including market trends, interest rate fluctuations, innovative mortgage products, and industry advancements. Listen to a unique mix of age perspective, expertise, and charisma to the screen, ensuring that the information is not only educational but also entertaining. Hear from This week is fabled Austin-based attorney John Fleming discussing trigger leads and the NAR verdict.
“Mastering the Art of Mortgage Broker Engagement” is on January 24th at 10AM PST to learn best practices and strategies that wholesale lenders are using to thrive in the TPO market. This webinar will show you proven tactics and technology tools that are helping wholesale lenders create efficient sales processes that are both scalable and effective. Click here to register.
Join Real Estate Consulting (RCLCO) for this Month’s Webinar: New Year, New Trends – Compensation & Talent Management, Thursday, January 25th, 9:15AM PT / 12:15PM ET. Speakers include Ellen Klasson, Managing Director; Eric Willett, Managing Director; Adam Ostler, Principal, and Moderator Joshua A. Boren, Managing Director, Strategic Initiatives (Moderator).
Friday, January 26th, is this week’s episode of The Mortgage Collaborative’s Rundown covering current events in the mortgage market for 30-45 minutes starting at noon PT, 3PM ET, in “The Rundown”.
The California Association of Mortgage Professionals (CAMP) is presenting the 2024 Economic Forecast with Dr. Michael Frantanoni and Rob Chrisman on Tuesday, January 30th
1PM PT. “Unlock the Future: 2024 Economic Forecast Revealed! Dive into a World of Opportunities and Growth. Discover Key Insights, Trends, and Strategies for Success in the Upcoming Economic Landscape.”
“Lending operations leaders who care about increasing revenue and decreasing costs, join your tribe in this live event. On January 30th at 1pm CT is an electric panelist lineup made up of Industry leaders that are going to ‘spill the beans’ on ten strategies they are focused on to increase sales and reduce costs with minimal investment in 2024. Join Kevin Peraino, Chief Lending Officer at PRMG, Delfino Aguilar, Chief Production Officer – TPO, Kind Lending, David Lykken, Founder & Chief Transformation Officer at Transformational Mortgage Solutions, LLC (TMS), and Richard Grieser, VP of Marketing at TRUV.
Now available on the Federal Housing Administration’s (FHA) Single Family Housing Events and Training web page under Single Family Housing Self-Paced, Pre-Recorded Training
The first self-paced training module, the Single-Family Housing Policy Handbook (Handbook 4000.1) is an evergreen presentation that walks new and/or existing stakeholders needing a refresher through Handbook 4000.1’s structure and style. It is designed to help viewers understand its benefits, where to access it online, how to read Mortgagee Letters (ML) in context, and how to locate content updates.
The second self-paced training module, the Home Equity Conversion Mortgages (HECM) Origination and Servicing Overview, focuses solely on the newest and final Handbook 4000.1 section that was released on October 31, 2023, and announced in a press release and FHA INFO 2023-84. It begins with a review of the new HECM section’s style and structure, consistent with the rest of Handbook 4000.1 for HECM originators, servicers, and other interested parties. Additionally, it provides viewers with an overview of some of the more recent HECM policy updates that have been incorporated into this new Handbook section, making it easier for HECM originators and servicers to locate the information needed to do with business with FHA in one place.
Capital Markets
Another week, another round of good U.S. economic news. Last week’s Michigan sentiment for January crushed expectations to register at the highest point since July 2021, strong retail sales data from December, and the lowest level of initial jobless claims in over a year. Positive economic news, coupled with diminished chances of a March rate cut, have pushed bond yields to the highest levels in a month. Americans are feeling positive about the economy, their incomes, and the outlook on prices. Notably, the increase in consumer sentiment was accompanied by another drop in year-ahead inflation expectations, which have returned to a level not seen in three years.
The preliminary reading of the University of Michigan’s Consumer Sentiment Index for January was well ahead of estimates, hitting its highest level since July 2021 with year-ahead inflation expectations decelerating to 2.9 percent from 3.1 percent, a rate not seen in just over three years. Existing home sales decreased 1.0 percent month-over-month in December to a seasonally adjusted annual rate of 3.78 million from 3.82 million in November. Sales were down 6.2 percent from the same period a year ago as high mortgage rates continue weighing on the overall level of activity, though they have not stopped prices from continuing to climb.
Last week’s batch of data, which included a mix of high consumer confidence and lower inflation expectations that points toward a soft landing for the U.S. economy and Fed Chair Powell’s war on inflation, has dropped the implied likelihood of a 25-basis points rate cut at the March FOMC meeting to 45 percent currently from over 55 percent seen at the beginning of last week. While investors continue to chip away at bets that the Fed will cut rates early and aggressively this year, there remains a significant gap in the market and Fed expectations for the fed funds trajectory this year.
It all points to a solid American economy, notably more so despite a Fed rate-tightening campaign that seemingly has broken the back of inflation. However, investors are eager to know when those rate hikes will be reversed; expect them to wait to ease, and that the market will merge with what the Fed thinks. The Fed will err on the side of being conservative.
Central banks will also be busy, with monetary policy statements and interest rate decisions expected from the Bank of Japan, European Central Bank, and Bank of Canada. In the U.S., Federal Reserve members will be in a blackout period of no public talks ahead of the next FOMC meeting on January 30-31.
This week’s economic calendar includes month-end auctions consisting of $162 billion 2-year, 5-year, and 7-year notes tomorrow through Thursday with $18 billion 2-year FRNs also on Wednesday, Fed surveys, S&P Global PMI flashes, durables goods orders, the first look at Q1 GDP (expected at 2.0 percent), new home sales, and Fed favorite PCE on Friday. Expectations are for the core PCE Price Index to increase 0.2 percent month-over-month and 3.0 percent year-over-year versus 0.1 percent and 3.2 percent previously. No Fed speakers are scheduled with the Fed in their blackout period.
Additionally, this week brings the ECB’s first monetary policy meeting of 2024 and a rate decision from the Bank of Japan. Today’s economic calendar sees just one data point with leading indicators for December. (The forecast is for unchanged which, if realized, would be the first non-negative reading in 21 months.) We begin the week with Agency MBS prices better by .125-.250, the 10-year yielding 4.09 after closing last week at 4.15 percent., and the 2-year at 4.38.
Download our mobile app to get alerts for Rob Chrisman’s Commentary.
Source: mortgagenewsdaily.com
Existing-home sales fell to their lowest level in nearly 30 years in December—but that didn’t cool red-hot home prices, with the median price reaching an all-time high of $389,800, the National Association of REALTORS® reported Friday.
Existing-home sales—which include completed transactions for single-family homes, townhomes, condos and co-ops—declined 1% month over month in December and are down 6.2% compared to a year earlier, NAR’s latest sales index shows. But lower mortgage rates, which are now below historical norms, likely will set the stage for stronger sales in 2024, NAR predicts.
“The latest month’s sales look to be the bottom before inevitably turning higher in the new year,” says NAR Chief Economist Lawrence Yun. “Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in the upcoming months.”
But home buyers nationwide are still facing a dearth of options. Total housing inventory at the end of December was down 11.5% from November, remaining at historical lows. Many would-be sellers are reluctant to trade in their super-low mortgage rates from just a couple of years ago and make a move at today’s higher rates and home prices. This “lock-in effect” has been blamed for subduing housing inventory, along with sluggish new-home construction that economists say isn’t keeping pace with demographic needs.
With home prices continuing to surge, homeowners are watching their equity grow. Yun says 85 million homeowners saw gains in housing wealth last month. The average U.S. homeowner with a mortgage has built more than $300,000 in equity since their purchase date, according to CoreLogic’s equity report.
However, “the recent rapid, three-year rise in home prices is unsustainable,” Yun says. “If prices continue at the current pace, the country could accelerate into ‘haves’ and ‘have-nots.’ Creating a path towards homeownership for today’s renters is essential. It requires economic and income growth and, most importantly, a steady buildup of home construction.”
Builders are trying to ramp up construction, but there are production swings from month to month. Housing construction fell 4.3% in December but remains above 1 million units, the Commerce Department reported this week. Single-family housing permits—a gauge of future construction—posted an uptick last month, indicating that more new inventory is on the way. Still, it’s likely to be a challenging year for new-home construction due to higher mortgage rates and tight monetary policy, says Alicia Huey, chair of the National Association of Home Builders.
“Moderating mortgage rates are expected to provide a boost to new-home construction in 2024, but an uptick in building material prices and a shortage of buildable lots and skilled labor are serious challenges for home builders,” adds Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis.
In the existing-home market, homes continue to sell fast. Fifty-eight percent of those sold in December were on the market for less than a month, NAR’s latest research data shows. NAR has predicted a stronger housing market for 2024. Here are more key housing indicators from NAR’s December report:
The following is a closer look at how existing-home sales fared across the country in December:
Source: nar.realtor
Here is a look at the first week of the year:
Yes, the inventory growth rate slowed weekly, but I will take it! I have been waiting for years for a standard inventory data line to start the year, and so far that’s what I’m seeing. Traditionally, the weekly inventory bottoms out in January or February and rises into the spring. The bottom has been in March and April in the past few years. So far, so good in 2024.
While new listings data isn’t growing in significant terms year over year — sorry, silver tsunami crowd — it is showing growth year over year. Most sellers are buyers, and new listing data decreased after rates increased in 2022. So, we are working our way back to normal, and lthough we still have a way to go, but I am happy with this. I talked about this very topic on CNBC a few days ago.
New listings data last week over the past several years:
Every year, one-third of all homes take a price cut before selling — nothing abnormal about that. However, this data line accelerates when mortgage rates rise and demand gets hit harder. A perfect example was in 2022: when housing inventory rose faster, the percentage of price cuts rose faster, as home sales crashed. That increase matched the slope of the inventory increase, and people needed to cut prices to sell their homes.
This is not what we’re seeing now, as home sales aren’t crashing like they did in 2022. Sales aren’t growing much, but they’re not crashing as they did in 2022, so we track this data line religiously weekly to get clues, especially with the movement of mortgage rates
This is the price-cut percentage for the same week over the last few years:
So, the 2024 spring season officially started last week and purchase apps were positive 9% week to week. I believe tracking this data line when mortgage rates are rising is always vital. Of course, we aren’t talking about 8% mortgage rates anymore, but mortgage rates have risen from the recent lows. So far no damage to the data line yet. We have had a positive trend streak since rates have fallen. I exclude all the holiday weeks and the first week of the year, so we have had seven weeks of positive trend and year-to-data we’ve had one positive print.
We just had the existing home sales report that showed a month-to-month decline. One thing to always remember about purchase application data: it looks out 30-90 days before it hits the sales data, so the December report was too soon to account for the full effect of lower mortgage rates and rising application data.
Also, remember we are working from deficient demand levels, so take the bounce in that context. This isn’t like the COVID-19 recovery, which was fast and had a big volume.
The 10-year yield is the key for housing in 2024. In my 2024 forecast, I have the 10-year yield range between 3.21%-4.25%, with a critical line in the sand at 3.37%. If the economic data stays firm, we shouldn’t break below 3.21%, but if the labor data gets weaker, that line in the sand — which I call the Gandalf line, as in “you shall not pass” — will be tested. This 10-year yield range means mortgage rates between 5.75%-7.25%. This assumes spreads are still bad.
Mortgage rates and the 10-year yield both rose last week. Mortgage rates started the week at 6.77% and finished the week at 6.92%. The 10-year yield started the week around 4%, and intraday almost reached 4.20% before heading lower and ending at 4.13%. One positive story in 2024 is that the spreads are getting better this year, and if we get 4.25% on the 10-year yield, we won’t hit 7.25% in mortgage rates.
Last week, we had some excellent labor data from jobless claims. We also had some Fed presidents push back on rate cuts, regarding how many we will have this year. So, always remember that inflation data has fallen noticeably year over year. However, you want to go with labor data over inflation if you’re looking for lower mortgage rates, especially under 6%.
The growth rate on a three- to six-month Core PCE inflation report could be under 2% in the following report. Even with that reality, which the market knows, the 10-year yield today is still above 4%. This looks right to me with a Hawkish Fed and the jobless claims data being low. The closer we get to my critical level of 323,000 on the four-week moving average, the more the bond market will act differently; the headline data just broke under 200,000 again.
Remember, the Fed hasn’t pivoted: they’re less hawkish with their policy because they over-hiked last year and want to take back some of their rate hikes.
We have the all-important PCE inflation report coming out Friday, which can show sub 2% PCE inflation data on the three- and six-month averages. We also have new home sales and pending home sales. Pending home sales should show a bounce from the recent report as we will start to filter the positive purchase apps report. If it doesn’t show growth, it should be the last one before it picks up a bit.
Source: housingwire.com
There are many steps to the homebuying process. If you’re taking out an FHA loan (a loan backed by the Federal Housing Authority) to buy a property, you’ll most likely need to get an appraisal to verify the value and condition of the home. Let’s take a closer look at how FHA appraisals work, what to expect, and how to prepare as a homebuyer.
An FHA loan appraisal is an in-person assessment performed by an accredited appraiser. The purpose of the appraisal is to evaluate how much a house is worth and determine if it meets minimum safety and livability standards. The appraisal is sent to the lender for further evaluation before a FHA loan can be approved. FHA appraisals are typically required whether the borrower is buying or refinancing a home with an FHA loan.
💡 Quick Tip: Don’t have a lot of cash on hand for a down payment? The minimum down payment for an FHA mortgage loan is as low as 3.5%.1
Whether a borrower is seeking an FHA loan or a conventional loan, an appraisal estimates the fair market value of a home based on the property condition and nearby home values. But FHA loans must meet the minimum standards set by the U.S. Department of Housing and Urban Development (HUD). This means that FHA appraisals also consider the health and safety of the property, while conventional appraisals focus on the property’s value and condition. FHA lenders may require that any health and safety hazards be addressed before approving the mortgage.
FHA appraisers follow HUD guidelines for minimum property standards. During the appraisal, they analyze and report a property’s physical and economic characteristics to provide an opinion of its value. HUD requires FHA appraisers to have state certification and meet the minimum certification criteria issued by the Appraiser Qualification Board.
An FHA loan appraisal involves two steps. The appraiser will complete a site visit to inspect the property condition and perform market research for comparable homes in the area to estimate the market value of the home.
The appraiser will inspect the home’s interior and exterior to determine the property’s safety and soundness. The appraiser’s findings, plus information on the home like square footage and the year it was built, are cataloged in HUD’s Uniform Residential Appraisal Report.
To estimate the property’s value, the appraiser evaluates the selling prices for comparable homes in the same area that were recently sold. This information, combined with the property’s condition and characteristics, is used to estimate the market value.
Recommended: The Ultimate Home Inspection Checklist
FHA appraisals are required by lenders to ensure that the loan amount doesn’t exceed the market value of the property. The appraisal process is also used to determine that a property meets FHA standards for health and safety.
The appraiser only factors in readily observable conditions. A home inspection, by comparison, is much more in-depth in its assessment of a property’s need for repairs.
Besides the property value, the criteria evaluated during an FHA appraisal include the safety, security, and soundness of a home. In other words, the home should be safe for occupants to inhabit, protect the security of the property, and not have physical deficiencies or conditions impacting the structural integrity and ability to market it for future sale.
Appraisers are required to describe the property conditions, including any renovations, necessary repairs, or deterioration. Minor issues, such as missing handrails, cracked windows, or worn countertops, do not require automatic repair.
In terms of occupant health and safety, the FHA appraisal looks out for exposure to hazardous materials, such as lead paint and asbestos. Mold, radon gas, and poor insulation are other potential safety risks that would be flagged in an appraisal. The overall property structure needs to be in sufficient condition to keep occupants safe. This means that damage to the foundation, structural decay, or anything that impacts the long-term integrity of the home would not meet FHA requirements.
FHA appraisals follow the Minimum Property Standards (MPS) set by HUD. The MPS establishes baseline conditions to cover aspects of a property that aren’t met by model building codes. For example, the MPS covers doors, gutters, and wall coverings to ensure the property value is not impacted by the quality of these components.
Being prepared for an FHA appraisal can help streamline the loan application and homebuying process. Here’s what to expect from an FHA appraisal:
The duration of an FHA appraisal site visit varies by property size and condition, but plan for it to take between one and several hours to complete. The full appraisal report is usually complete within a week.
There are a number of issues and property conditions that the FHA requires to be remedied for loan approval. Some common issues include:
• Roof condition or damage
• Exposed wires
• Water heater temperature and pressure relief valve
• Damaged foundation
• Peeling paint (for homes built before 1978)
It’s important to know what won’t pass the FHA inspection. Any property conditions that impact the safety and health of occupants could need to be addressed in order to get FHA loan approval. Besides the common issues outlined above, hazards, nuisances, and obstructions to property access could fail to pass FHA inspection. For example, the level of traffic or proximity to a hazardous waste site could violate FHA standards.
Property valuation accounts for the home condition, square footage, any renovations, and the number of bedrooms and bathrooms. The appraiser must observe neighborhood characteristics and surrounding properties to make determinations that will be incorporated into the valuation of the property.
Sellers can plan ahead and fix what won’t pass FHA inspection to avoid delays and improve the marketability of their home. Here’s how to address some common issues that could cause a property to fail an FHA appraisal.
• Roof repair: Fix leaks and consider a new roof if life expectancy is less than three years.
• Chipped or peeling paint: Scrape and repaint peeling surfaces if property was built prior to 1979.
• Water heater: Ensure the water heater has a pressure and temperature relief valve and sufficient piping.
• Plumbing: Repair all toilets, showers, and sinks that aren’t in working order as leaky plumbing won’t pass FHA inspection.
Both the inspection and the home’s appraised value are critical to FHA loan approval. Sellers and their real estate agents are permitted to communicate with an appraiser to offer additional property information that can contribute to the valuation of the home. Gathering documentation beforehand on any home improvements can ensure the appraiser has everything needed for an accurate valuation.
Recommended: What Are the Most Common Home Repair Costs?
The FHA appraisal report will provide the estimated market value and outline any required repairs or alterations that need to be completed for FHA loan approval.
If an FHA appraisal comes back low, there are several possible scenarios. The seller can lower the sale price to accommodate the appraised value. Alternatively, the buyer can renegotiate to lower the price and potentially contribute a larger down payment to cover the portion of the home price that is not covered by the FHA loan. As a last resort, a buyer would be permitted to walk away from the deal if the FHA lender’s requirements can’t be met.
If refinancing with a FHA loan and the appraisal comes back low, there are a few courses of action available to borrowers. First, review the appraisal report to see if an appraiser missed anything important. If so, providing the correct information to get another appraisal could result in a higher appraised value.
If disputing the appraisal isn’t an option or successful, borrowers can consider restructuring the loan to take less cash out. Finally, the loan can be denied if the terms are not beneficial to the borrower.
The appraisal may identify repairs that need to be completed to close on the loan. Unless otherwise outlined in the purchase and sale agreement, sellers are typically on the hook for repairs. The sellers have up to 120 days to make necessary repairs and meet FHA standards if required by a lender.
Alternatively, buyers can pay for the repairs themselves. If the issues impact the health, safety, and livability of the property, they’ll need to be completed prior to closing. Other non-safety repairs can be completed after closing. Note that delayed repairs may require an extra escrow holdback for the estimated costs.
Once repairs and issues have been addressed, the property can be reassessed. Borrowers can consider a FHA 203(k) loan to finance both the purchase and rehabilitation costs through a single loan if the repairs are an obstacle to closing. Buyers might consider renegotiating their offer to reflect the repair costs being financed.
If appraisal-related issues are delaying closing, buyers can consider a mortgage rate lock to secure their interest rate for a set period. This can help buy more time for repairs to be made without losing out on favorable loan terms.
The loan simply moves forward if the appraisal comes back at or higher than the expected amount, barring any request for further repairs.
FHA appraisals are valid for 180 days unless it’s updated. If updated, an appraisal can be good for up to one year.
Recommended: 2024 FHA Loan Closing Cost Calculator
The FHA appraisal influences loan approval in two key ways. First, the appraisal evaluates the property condition and identifies if any repairs or further inspections are required for loan approval. Second, the appraised value determines the total loan amount a buyer is approved for. If the appraised value is lower than the purchase price on the contract, either a price reduction or larger down payment could fill the gap to get loan approval.
Repairs aside, how long can you wait after the appraisal to close on an FHA loan? It helps to understand how long an FHA appraisal is good for. Once the borrower and lender receive a copy of the FHA appraisal, it’s valid for 120 days. However, borrowers can request a 30-day extension to allow more time to close on a FHA loan.
A conditional approval from the lender will outline the required repairs to be made in order to close. After the appraisal is approved in underwriting, the loan will most likely be cleared to close. Prior to closing, borrowers will receive a mortgage closing disclosure which outlines the total funds needed to close.
💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.
FHA appraisals estimate a property’s value and assess its condition to determine if it meets safety and livability standards set by HUD. Understanding the conditions and issues that won’t pass FHA inspection is important for buyers and sellers alike.
SoFi offers a wide range of FHA loan options that are easier to qualify for and may have a lower interest rate than a conventional mortgage. You can down as little as 3.5%. Plus, the Biden-Harris Administration has reduced monthly mortgage insurance premiums for new homebuyers to help offset higher interest rates.
Another perk: FHA loans are assumable mortgages!
With FHA loans, the appraised value of the property determines the loan amount a borrower can qualify for.
Yes, you can contest an FHA appraisal and provide additional information to inform the property valuation. However, there’s no guarantee that the appraiser will change the valuation.
If a property doesn’t meet FHA requirements, buyers can ask the seller to make the necessary repairs. Alternatively, buyers can consider other types of home loans, such as a conventional mortgage.
Photo credit: iStock/valentinrussanov
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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.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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.
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Source: sofi.com
Buying a home is an exciting milestone, but it comes with its fair share of financial responsibilities, including the often-misunderstood closing costs. These costs are a vital part of your home purchase budget and can significantly impact your financial planning as a new homeowner.
Far from being just a trivial detail, closing costs encompass a range of fees and charges that, when understood correctly, can help you make more informed decisions and potentially save money in your home-buying journey.
Here’s everything you need to know about mortgage closing costs to avoid any last-minute surprises.
When it comes to closing costs in a home purchase, the question of who pays what is often a topic of negotiation and varies by transaction. Generally, both buyers and sellers have their own set of fees to handle, but the exact distribution can differ.
Your mortgage lender is required to provide you with an estimated breakdown at multiple points in the loan process. The loan estimate outlines the estimated closing costs and lists out all the different fees, as well as who is responsible for paying them.
Typically, the buyer shoulders a significant portion of the closing costs, which can include:
Sellers commonly pay for:
It’s important to note that these are not hard and fast rules. In many cases, closing costs are a point of negotiation in the sale agreement. For example, in a buyer’s market, a seller might agree to cover a larger portion of the closing costs to attract buyers. Conversely, in a seller’s market, the buyer might take on a larger share to make their offer more appealing.
Imagine you’re buying a home priced at $300,000. The closing costs, amounting to approximately 3% of the purchase price, would be around $9,000. As a buyer, you might agree to pay $6,000 of this, covering most of the loan-related fees and escrow deposits. The seller, in turn, might handle the remaining $3,000, covering their portion of fees like the agent’s commission and transfer taxes.
Mortgage closing costs can be broken down into a few different categories: lender fees, real estate fees, and mortgage insurance fees.
These fees may vary depending on the lender you choose. Here’s a basic rundown of each closing cost to give you an idea of what you can expect.
Real estate fees are related to costs surrounding the property itself. Some are one-time fees, while others are recurring.
When you pay less than 20% of your home purchase price as part of your down payment, you’re usually required to pay mortgage insurance. Your private mortgage insurance (PMI) premium is typically assessed as a monthly fee within your mortgage payment. However, you may also have some costs at closing.
Upfront mortgage insurance fee: Depending on your loan type and lender, you may have to pay an additional application fee for a loan with mortgage insurance. Additionally, some loans require that you pay a one-time fee at the time of closing on top of your annual fee throughout the mortgage.
Government-backed loan fees: If your loan is from the FHA, USDA, or VA, then you may have extra mortgage insurance fees if your down payment is under 20%. FHA loans require an upfront mortgage insurance premium (MIP) of 1.75% and a monthly fee. The VA and USDA don’t charge mortgage insurance, but instead have guarantee fees. VA fees fall between 1.25% and 3.3% while USDA fees are a flat 2%.
That list may seem huge and overwhelming. However, before making an offer on a house, you can estimate your closing costs using some shortcuts. Average closing costs are usually about 2% – 6% of the loan amount.
Let’s look at that in real numbers.
Say you buy a home for $200,000. You can realistically expect your closing costs (not including your down payment) to extend anywhere between $4,000 and $10,000. That’s a pretty big range, so use that as a starting point when you begin to compare loan offers.
But don’t wait until you’ve fallen in love with a house to financially plan for closing costs.
Instead, use an online closing costs calculator early in the process to get a more specific estimate. You will want to use real information like average property taxes in your area and the costs associated with your type of loan.
A good mortgage lender can walk you through the variables, including how different loan types affect your closing costs.
Negotiating closing costs can be an effective way to reduce the financial burden of buying a home. While some fees are fixed, others offer room for negotiation. Here are strategies and insights to help you lower these costs:
Identify which fees are negotiable. These often include certain lender fees like the origination fee, broker fees, and some third-party charges. Knowing what can be adjusted is the first step in negotiation.
Before settling with one lender, shop around. Get Good Faith Estimates from multiple lenders and compare their closing costs. This can give you leverage in negotiations, as lenders are often willing to offer competitive pricing to win your business.
In some real estate markets, it’s common for buyers to ask sellers to cover a portion of the closing costs. This is particularly feasible in buyer’s markets, where sellers are motivated to make the sale.
Some lenders offer credits in exchange for a slightly higher interest rate on your loan. These credits can be used to offset closing costs. While this increases your long-term interest cost, it can significantly reduce upfront expenses.
For services like home inspections and title searches, you have the option to choose your provider. Shop around and negotiate with these providers for better rates.
Before closing, you’ll receive a Closing Disclosure form listing all the fees. Review it carefully and question any fees that seem off or weren’t previously disclosed. Sometimes, errors can be corrected, leading to lower costs.
By scheduling your closing towards the end of the month, you can reduce the amount of prepaid interest you’ll need to pay.
Consider consulting with a real estate attorney or a financial advisor. They can provide valuable advice on which costs can be cut and how to negotiate effectively.
In some cases, you can roll your closing costs into the mortgage, but you have to meet some basic requirements. First, it depends on your type of loan, since not all loans allow you to do this. Most government-backed loans, like FHA and USDA loans, do offer the possibility to add them into your home loan.
What’s the downside to this idea?
A higher loan amount means a higher monthly mortgage payment and a larger amount of interest paid over the life of your mortgage. Furthermore, your new home needs to appraise for the higher amount you want to finance. Plus, your debt-to-income ratio needs to be able to support that larger payment to qualify for such a loan.
If you’re getting a loan that doesn’t allow for closing costs to be rolled into the mortgage, you can still get around it. However, you must meet those criteria we just talked about.
Simply ask the seller (through your real estate agent) to pay for closing costs in exchange for paying the extra amount as part of the purchase price. Here’s an example.
If your $200,000 offer is accepted, but closing costs are $5,000, ask the seller to contribute $5,000 and change your offer to $205,000. At the end of the day, the seller still walks away with the same amount of money.
Again, this strategy is contingent upon the numbers working for you, your financial situation, and your mortgage application.
When you finally get to closing day, it’s almost time to relax and move into your new home. But first, don’t forget to set up a way to pay closing costs.
You can ask your lender or settlement company for the preferred payment method. However, in most cases, you can either get a cashier’s check from your bank or set up a wire transfer. There’s usually a minor fee associated with each one. It’s a quick and easy process, but it shouldn’t be forgotten before you get to closing.
Closing costs are a crucial aspect of buying a home. Being well-informed and prepared for these expenses can make a significant difference in your financial planning. Remember, while some fees are fixed, others offer room for negotiation, and shopping around can lead to potential savings.
By factoring in these costs from the start, you can ensure a smoother, more predictable home-buying experience. Buying a house is a major step – financially and personally. Approach it with the right knowledge, and you’ll be set to make this important decision with confidence and peace of mind.
An escrow account is a third-party account where funds are held during the process of a transaction, like buying a home. Regarding closing costs, part of these costs often includes initial deposits into an escrow account for future property taxes and homeowners’ insurance. This ensures that there is enough money set aside to cover these recurring expenses.
In some cases, closing costs can be rolled into the mortgage loan. This is more common with certain types of loans, like FHA loans. However, including closing costs in the loan increases the total loan amount and, consequently, your monthly mortgage payments and the total interest paid over the life of the loan.
Yes, certain closing costs can have tax benefits. For example, points paid to lower your interest rate may be deductible in the year you buy your home. Always consult a tax professional to understand how your closing costs might affect your taxes.
First-time homebuyers should start saving early for closing costs, which typically range from 2% to 6% of the home purchase price. It’s also helpful to research and understand the different types of fees involved in closing costs, and consider attending homebuyer education courses for more detailed information.
If you find that you can’t afford closing costs, there are a few options. You can negotiate with the seller to pay some or all of the costs, look for lender credits, or explore programs available for first-time buyers or low-income buyers that offer assistance with closing costs.
Source: crediful.com
Ready for homeownership — but looking for something a little bit less overwhelming than a whole house? A condominium might be the perfect fit. But can you purchase a condo with an FHA loan? Yes, under certain circumstances, you can use a loan from the Federal Housing Administration to buy a condo. However, the FHA has to approve condominiums before allowing people to take out FHA-insured loans to purchase them — and finding a condo that’s gone through this approval process (or getting one you have your eye on approved) can be a bit of a challenge. But it’s not impossible! Read on to learn more about FHA-approved condos: what it takes to get approval, where to find condos that have already been approved, and the process of getting an unapproved condo past the finish line.
To understand what an FHA-approved condo is, it helps to understand what the FHA has to do with purchasing a home in the first place. By offering insurance to lenders, the FHA helps consumers secure low-cost loans with less stringent qualification factors. These FHA loans are commonly used for single-family homes, but can also be used for condominiums, provided the condo is approved by the FHA. Thus, an FHA-approved condo is one that can be purchased with an FHA loan. Pretty simple right? Well, let’s take a closer look.
FHA condo approval is beneficial for buyers because finding an FHA-approved condo allows buyers to benefit from the lower overall costs of condo ownership compared to single-family homeownership — and enjoy the lower barrier to entry that an FHA loan can offer to lower-income families, first-time homebuyers, and others facing financial hurdles.
However, not every condo can be approved by the FHA. In order to qualify, it must meet the FHA’s appraisal standards, including safety features as well as financial factors. Entire condominium communities can be approved, and, as of August 2019, an individual unit can also be approved — provided it meets requirements including being “complete and ready for occupancy” and being part of a community with at least five units.
Sellers, too, benefit from FHA condo approval. Condos that can be purchased with an FHA loan are more attractive to buyers looking for home loans with lower costs and more lenient approval requirements, which means FHA approval is a boon for both parties.
💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.
When the FHA insures loans offered by private lenders, it does so at some level of risk: The loan may never be repaid, in which case it would lose money paying the lost funds back to the lending bank. But borrower delinquency isn’t the only reason a loan might go unfulfilled; if the condominium is falling apart or not financially viable, that could also increase the risk level of the loan. Therefore, the FHA approves condos on a case-by-case basis to help ensure their physical and financial safety for the lender, borrower, and the FHA itself.
If you’re considering buying a condo that doesn’t yet have FHA approval — and you’d like to get that approval to pursue an FHA loan — you can initiate the approval process on a single-unit basis. (Alternatively, you could reach out to the condominium association to see if it is interested in getting the community as a whole FHA approved.) The approval process will require a variety of documentation as well as an appraisal — again, in order to ensure both the physical and financial viability of the community.
To achieve FHA approval, condo communities must be demonstrably:
• Insured
• Compliant with state and local law
• In good financial standing
• In good physical standing
• Free of any legal action
For single-unit approval, a condo must be:
• Part of a complex that is not FHA approved
• Completely built and move-in ready
• Part of a community with at least five units
• Not a manufactured home
The FHA maintains minimum owner-occupancy ratios for complexes attempting to get approved. This figure ranges based on a variety of factors, but is usually somewhere between 35% and 50% — meaning between about a third and about half of the condo units must be occupied by their owners.
The FHA will also assess the financial stability of the condominium complex in order to ensure it’s likely to continue to stay in business for the foreseeable future. For example, 20% of the annual budget must be set aside for reserves, and three years’ worth of financial documents must be provided.
FHA-approved condos must maintain up-to-date insurance coverage in order to create financial safety for owners and lenders alike.
Condos that don’t meet the eligibility requirements outlined above may not be suitable for FHA approval — and therefore may not be able to be purchased with an FHA loan.
In order to get FHA approval, condos will need to prove they meet the requirements with documentation, including financial information, proof of insurance coverage, inspection reports, and more. If you’re attempting to get a single unit approved, the onus may fall on you as the interested party to get this process started. (The seller, if motivated, may also be able to help.)
In order for an entire condominium complex to become an approved FHA condo, the condo board must first meet to decide whether or not board members want to file for FHA approval. If the vote is in favor of seeking approval, the board will need to aid in filing paperwork to begin the application process and to prove the minimum required eligibility factors are fulfilled.
While specifics will vary and delays can occur, the FHA approval process for a condo may take between two and four weeks on average once all the paperwork is in place.
💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.
Fortunately, it’s pretty easy to determine whether or not a condominium you have your eye on is FHA-approved: The U.S. Department of Housing and Urban Development (HUD) offers a searchable database tool that allows you to simply look the property up by address, community name, condo ID, and more.
If you have your heart set on purchasing a condo — and on using an FHA loan to do so — a local real estate agent may have the best sense of which complexes in the area are already FHA approved. Some agents may be game to help you get a unit you’re interested in approved on a single-unit basis.
If you’ve fallen in love with a condo that is, alas, not FHA-approved, take heart: There are different types of mortgage loans worth considering. Many conventional loans these days come with required minimum down payments as low as 3%, though to avoid paying mortgage insurance, you’ll need a down payment of at least 20% of the home’s value. Fortunately, that goal may be a lot more achievable for a condo than a larger single-family home.
In addition, you may be able to use other types of government-insured loans, like VA loans and USDA loans, to buy condos if you qualify. (VA loans are for veterans and their families, while USDA loans are specifically for properties in designated rural areas.)
FHA-approved condos, like any other home, have both benefits and drawbacks to consider.
• Approved FHA condos can be purchased using an FHA loan, which my offer easier-to-meet qualification requirements and lower costs to borrowers
• Condos may be overall less costly to own than single-family homes
• FHA-approved condos can be harder to find, especially in competitive, fast-moving housing markets
• Getting a condo FHA approved is a process that takes time and effort, and can be difficult for an everyday consumer to take on
Purchasing an FHA-approved condo can help buyers hop over some of the primary hurdles to homeownership with lower down payment and minimum credit score requirements. However, not every condo meets the FHA’s strict approval criteria — which means hopeful homeowners may have to choose an alternative mortgage loan type (or keep looking for their dream home).
SoFi offers a wide range of FHA loan options that are easier to qualify for and may have a lower interest rate than a conventional mortgage. You can down as little as 3.5%. Plus, the Biden-Harris Administration has reduced monthly mortgage insurance premiums for new homebuyers to help offset higher interest rates.
Another perk: FHA loans are assumable mortgages!
If the condo in question is FHA-approved, yes, you can — but not all condominiums meet the FHA’s requirements. In order to discern whether or not the condo you’re looking at is FHA approved, you can use the FHA’s searchable database, which allows you to search by address, condo complex name, and more.
If a condo complex is not FHA approved, it may not meet the FHA’s requirements — or the board may simply have not yet filed for approval, which does take some time, effort, and paperwork to do. It also means that the condos will not be able to be purchased with an FHA-insured loan, at least until such approval is obtained.
FHA-approved condos must be in compliance with all state and local guidelines, which can vary by region — so yes, the specific criteria may vary slightly.
Photo credit: iStock/benedek
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¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
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.
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Source: sofi.com