Category Archives: Financing

What to Expect on Closing Day

Source: Chris Knox, Sr. Loan Advisor – Fairway Mortgage Co.

When you purchase a home, the most exciting part of the process is the day you finally are handed the keys. But, before this happens, you will need to sign some important papers to close the deal. Closing day is going to be a busy one with your mind on moving into your new home, but it is important to know what will happen at the closing table so that you are prepared.

Generally, the closing will happen at the office of the settlement agent (potentially an attorney, depending on which state you close in), or the closing could take place at one of the real estate agent’s offices or my office. Your real estate agent, the seller’s agent, the title agent and a notary may be there. I will also make my best effort to be there in case you have any last-minute questions.

Be sure to bring your ID (if there is a co-signer, please make sure they have their ID as well). We will have already discussed whether you are wiring the money or bringing a certified check for costs such as down payment, taxes, insurance or other closing costs. Don’t worry; I will make sure you are well-prepared.

You can then read, ask questions about and sign the loan documents that Fairway has prepared for you. Included in this paperwork is going to be your Closing Disclosure (which we will have reviewed together before closing), the promissory note (which says you will repay Fairway for the loan amount that you are borrowing) and the deed of trust (also known as the lien on the property). If you have questions about these, please do not hesitate to ask me.

My goal is to fully prepare you for what will happen at the closing table. We will talk often before then, and I will answer questions you may have and do my best to make this a stress-free process for you.

Chris Knox
Sr. Loan Advisor
NMLS# 129636
WA# MLO-129636
Phone: (253) 905-4810

105 8th Ave. SE, Suite 102
Olympia, WA 98501
http://loansbychrisknox.com/

Paperwork Needed For Your Loan

Source: Chris Knox, Sr. Loan Advisor at Fairway Mortgage Co.

When applying for a home loan, you will need more than just an application. With today’s mortgage regulations, the paperwork listed below is required to verify all the information you provided on the loan application about you, your income, assets, credit and other real estate you may own. Delivering these documents all together, up front makes the process easier for you and helps ensure a hassle-free, on-time closing.

Depending on the type of loan you are doing and its approval requirements, we may need some or all the following paperwork for each borrower on the loan:

Income Documents

  • Most recent pay stubs covering the last 30 days of earnings with YTD totals
  • If you own 25% or more of any company or have rental property, Personal Federal Income Tax Returns for the past two years
  • All W-2s, K-1s or 1099s for the past two years
  • If self-employed and/or you own 25% or more of any company, all pages of business federal tax returns for the past two years
  • YTD Profit and Loss Statement and Balance Sheet for each company you own
  • Awards Letter from Social Security Administration for all social security
  • Income
  • Letter regarding pension/retirement income amount to be received for the year 

Asset Documents

  • All pages of checking and savings account statements for the past two months
  • For any large, unidentified deposits, a letter of explanation for the deposit and a copy of the item(s) that were deposited (we will let you know the threshold on this)
  • If the money transferred from another account, all pages of the statements for that account as well
  • All pages of the most recent statement for any other assets, such as bonds, stocks, cash value life insurance or money saved in retirement programs that will be used for cash to close or reserve funds
  • If using retirement account funds for the loan, the generic “terms of withdrawal” for the account along with the loan or withdrawal documentation
  • Copy of current mortgage statement(s) for all real estate you already own: current home, rental properties or vacation home. If these mortgages are not escrowed for taxes and insurance, provide the most recent annual tax bill and insurance declaration page with premium as well. Also, if the property has HOA dues, a copy of the most recent HOA dues bill.
  • If any part of the down payment or closing costs are coming from a gift from an eligible source, a Gift Letter along with proof of receipt of gift funds

Personal

  • Driver’s license(s) or passport
  • All pages of separation agreement, divorce decree or court order, if applicable
  • Name and phone number of your current landlord, if applicable
  • Most recent student loan statement(s) listing the minimum monthly payment amount. If you are currently in deferment (no payments due), proof of the payment amount(s) once they come out of deferment.
  • All pages of bankruptcy, foreclosure, short sale or deed in lieu of paperwork 

Home Purchase

  • Sales Contract for the purchase of a new home
  • Homeowners insurance agent’s name and contact info
  • Homeowners’ association information with contact information if property is a condo or part of a homeowners’ association
  • Purchase Contract for current home being sold

Home Refinance

  • Copy of first mortgage statement on current home
  • If you have a second mortgage or equity line, copy of statement, note/equity line agreement
  • Copy of title insurance policy from previous closing or HUD-1 Settlement Statement
  • Copy of your homeowners insurance declarations page

Please note that additional documentation may be required upon further review of your file. I will explain the steps of the loan process and review with you what documents are needed and if we require anything else. My job is to guide you through the lending experience for the best possible result!

Chris Knox
Sr. Loan Advisor
NMLS# 129636
WA# MLO-129636
Phone: (253) 905-4810

105 8th Ave. SE, Suite 102
Olympia, WA 98501
http://loansbychrisknox.com/

Everything You Need To Know About Down Payments!

Source: Chris Knox, Fairway Independant Mortgage Corp.

For homebuyers purchasing their first house, the biggest obstacle to overcome is often the down payment. Making sure you fully understand the down payment and closing costs will help you throughout the home mortgage loan process. Many options for first-time homebuyers allow for little or no down payment on your home, and I am here to help answer any questions.

Depending on the loan program, the down payment may not have to come from your savings. A family member can sometimes make a “gift” to you to cover the down payment, or you could choose to pull money from your retirement plan. A mortgage planner can help you understand ways to take money from a retirement plan to buy your first house, without paying any tax penalties. If you choose a down payment of more than 5% but less than 20%, you will have to pay private mortgage insurance. Known as PMI, private mortgage insurance protects the lender in the event the loan goes into default.

In addition to the down payment on your mortgage, closing costs and pre-paid expenses are also involved with a home purchase. You usually must pay lender costs, an appraiser and legal fees associated with transferring the title on the house from the seller to you, the buyer. In addition, you will pay homeowners insurance for one year in advance, and the lender will establish an escrow account, which will take a portion of your monthly payment and save it to pay your future property tax bills and homeowners insurance bills. Most first-time homebuyer loans will require you to have an escrow account to pay for the future tax and insurance bills.

Some first-time homebuyer programs allow negotiation with the seller of the home to have them pay a portion of the closing costs. Doing so can help reduce how much money is needed to purchase your first house. Be sure to talk with your real estate agent before making an offer to negotiate that into the deal. It is always a great idea to talk with a lender first, so you can understand exactly what the closing costs will be and how much you will need the seller to pay.

As qualified FHA, VA and USDA mortgage lenders, the licensed mortgage professionals at Fairway can help you determine the best loan program to use for your first home. I will help you decide which loan program is best for you, the right amount for your down payment and how much the seller should pay for your closing costs, and I will give you other considerations to make sure you get the best financing for your first home purchase. You can trust me to make your home loan as stress-free as possible. Call me today to set up an appointment.

Chris Knox
Sr. Loan Advisor
NMLS# 129636
WA# MLO-129636
Phone: (253) 905-4810

105 8th Ave. SE, Suite 102
Olympia, WA 98501
http://loansbychrisknox.com/

Single Woman’s Guide to a Mortgage-Worthy Credit Profile

Source:  / CreditCards.com

Research shows women often face challenges getting approved for home loans, and financial gender inequality may be to blame.

According to a study conducted by the Woodstock Institute, women are more likely than men to be denied mortgage loans. Typical reasons for mortgage denial include a high debt-to-limit ratio or a poor overall credit history.

The gender pay gap is a big reason why many women struggle for total financial independence. While the large-scale fight for gender equality is long and collaborative, there is something you can do to play a part: maintain a high credit score.

A strong credit score is important for financial equality

Your credit score is a tool lenders use to determine your trustworthiness when borrowing money and answer questions about your financial habits.  Will you max out your credit line? Will you pay your bills on time? Will you pay off your debt in full? Are you a high-risk or low-risk borrower?

Anytime you try to borrow money – whether on a credit card, small business loan, car loan or mortgage – your credit report and overall score will be reviewed to determine if you’re approved or denied and what your interest rate and credit limit will be.

A high credit score can also protect you (and your kids, if you have any) in case of divorce, a spouse’s death, or events that cause your spouse’s credit score to drop.

Gender roles in society have an effect on women and credit

Women sometimes have thin credit files due to traditional gender roles. An example is a household in which the husband is the family’s financial manager and applies for all credit cards and loans in his own name. In this case, his wife will not have an opportunity to build credit unless she obtains other credit lines in her name. If the husband dies or the couple divorces, the woman may find it difficult to strike out on her own.

A relatively low income – perhaps due to gender bias in a workplace – can also hamper a woman’s ability to build credit.

One of the most important factors lenders use to calculate your credit score is credit utilization. Credit utilization indicates how much of your total available credit you’re using. For example, if you have a card with a $2,000 limit and your balance is $1,000, you have a credit utilization ratio of 50 percent. The lower your utilization, the better your credit score will be.

Credit limits are often based in part on how much you are able to pay each month. So, since women typically make less than men (thanks, gender pay gap), that can result in a low credit limit, and a better chance of credit score damage from high utilization.

Establishing your own credit

If you have a thin credit file, there are a few ways to build it up:

  • Become an authorized user. If you don’t have any credit history to work with, you can start by becoming an additional cardholder or authorized user on a friend, family member or spouse’s card.
  • Apply for a secured or prepaid card. These cards are great starter cards for those who are worried about credit card debt, and they generally require no credit history to get approved. Just make sure the card you choose reports to one of the major credit reporting agencies.
  • Apply for a rewards credit cardIf you qualify, cards with no annual fee and a low APR can help you build credit with small purchases that you pay off each month. Plus, rewards cards help you earn points and miles that you can use towards travel or your monthly statement.

Preparing your credit before buying a home

Establishing credit isn’t enough to get a solid mortgage approval; your score must be strong, and your credit habits need to be healthy.

Here are a few ways you can make sure your credit profile is in great shape before you apply for a mortgage:

1.  Check your credit reports

A high credit score and a clean credit report can help you lock in a low interest rate. You can visit AnnualCreditReport.com to pull a copy of your report and look over it. You’re entitled to a free copy once a year from the three major credit bureaus – Experian, Equifax and TransUnion.

Review your reports for errors, no matter how small. Correcting these can help bump your score and ensure you have an accurate profile. All three bureaus handle report disputes online, which helps simplify the process.

2. Stay away from larger purchases and unnecessary credit lines

As you get closer to when you plan on applying for a home loan, avoid making large purchases and opening additional lines of credit. Experts advise limiting the number of hard inquiries into your account and keeping your credit profile “quiet” leading up to the homebuying process.

3. Reduce your utilization

Paying off debt (without draining your savings) can help boost your credit score, helping you land a better interest rate on your home loan.

Keeping your utilization low across your accounts is always a good credit habit to get into, whether you’re planning on buying a home or just want to stay financially healthy.

4. Improve your areas of credit weakness

Do you have a habit of forgetting to make payments on time? Set reminders on your phone or enroll in auto pay. Are you behind on any payments? Talk to your lender or card issuer about getting back on track. Did you find multiple errors on your credit reports? Make every effort to get those corrected.

Take the time you need to get your finances as healthy as possible before applying for that loan application. An extra six months to get your credit score up could mean the difference between being approved with a great interest rate and barely scraping by with a rate that will cost you an exorbitant amount of money down the line.

Protecting your credit

Your credit isn’t only important in the lead-up to buying a home. Credit scores are commonly used as an indicator for your overall financial health. Establishing strong credit habits and protecting your score can help you remain financially independent throughout your entire life.

Monitor your credit score for fluctuations and suspicious activity. Most card issuers have mobile apps, and many have built-in credit monitoring benefits for all cardholders. A lot of card issuers and banks allow you to set up purchase notifications, which can also help you stay on top of spending while watching out for fraudulent charges.

Another way you can protect your credit is by protecting your personal information. Never give out private information like usernames, passwords or account numbers over the phone or through email.

Finally, avoid using your credit cards more than is necessary. Pay them in full each month to avoid incurring interest charges and keep your credit score in good shape.  And maintain a savings account for emergencies and large purchases.

The bottom line

Building and maintaining a strong credit profile is important – both for future loan applications and overall financial gender equality. Make sure you’re putting your best foot forward for your future by establishing healthy credit habits, whether you’re a newly single divorcee looking to gain financial independence or a college graduate ready to make your mark on the world.

David Lafferty
CreditCards.com
9430 Research Blvd. | Building 4, Suite 400 | Austin, TX 78759

Special Financing Terms for Veterans

 

 
Land Home Financial Waives Our Upfront Origination
Fee to Help Support Our Military Veterans! **
You have served our country and made sacrifices to help protect our way of life. Land Home appreciates all you have done, and to thank you for your service we would like to take an opportunity to give back to you.

A veteran who obtains VA financing through Land Home Financial is not charged an origination fee, therefore can pay up to 1% of the sales price in non-allowable fees. This eliminates the need for a seller credit to cover these costs. This levels the playing field and our Veterans offer is as strong as other home financing programs.

VA Loan Benefits:
  • No Money Down Financing Option Available.
  • Mortgage insurance not required.
  • Flexible qualifying guidelines.
  • Conforming loan amounts: $424,100 in the Continental US, and $636,150 in
    Hawaii and Alaska.
  • Competitive interest rates.
  • Buyer is not responsible for certain closing costs, for example: escrow fees, notary fee, and processing fee.
Call Today and Let Me Help Turn Your
Dreams Into a Reality.
Kenton Becker Kenton Becker
Sr. Mortgage Consultant
NMLS #123961Office: 425.289.1102
Cell: 206.423.2552
Fax: 206.309.4736
Email: kenton.becker@lhfs.com22525 SE 64th Place, Suite 220
Issaquah, WA 98027
Land Home Financial
Land Home Financial Services, Inc. is an Equal Housing Opportunity Lender. Equal Opportunity Lender The rates, loan programs, fees, options and guidelines in any loan scenario shown: (i) are for illustrative purposes only; (ii) are subject to change without notice; (iii) are subject to restrictions; (iv) will not apply to all borrowers or situations; and (v) do not represent a commitment to lend. Contact a Mortgage Loan Originator for details. Land Home operates only in states where it is authorized to conduct business. Branch location: 22525 SE 64th Place, Suite 220, Issaquah, WA 98027. Licensed by the WA State Department of Financial Institutions (DFI) (Consumer Loan Branch Office License #CL-89331). Corp. NMLS #1796. To view state licenses go to www.nmlsconsumeraccess.org

*Must meet VA eligibility to qualify for a VA loan. Cannot be used in conjunction with a Community Lending Program. **No Origination, Processing or Land Home Admin Fees. Land Home Financial Services, Inc. is licensed nationally, but its Loan Originators can only assist consumers with property located in state(s) where the Loan Originator is licensed. Click on the NMLS link above to view a complete list of the Loan Originators licenses. 

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Rev – 5-2017

 

 

Mortgage Interest Deduction Capped in Proposed Tax Overhaul

Source: RISMedia / Jameson Doris

After weeks of debate, Republican lawmakers have finally revealed their legislation for a major tax overhaul, the largest to be proposed in decades. The bill, entitled the Tax Cuts and Jobs Act, nearly doubles the standard deduction for middle-class families and makes no changes to the way 401(k) plans are treated pretax, but for REALTORS® and the consumers they serve, it’s not all good news.

Last June, House Speaker Paul Ryan warned that he would likely be unable to save all of the tax incentives that REALTORS® view as vital, The Wall Street Journal reported. We now know exactly what the Republicans were unable to salvage. Under their bill, existing homeowners can keep their mortgage interest deduction, but purchases that are made moving forward will be capped at $500,000. The bill also cuts the corporate tax rate to 20 percent (from 35 percent), as reported by The New York Times on Thursday.

“This legislation closely tracks with the House Republican Blueprint for tax reform, which threatens home values and takes money straight from the pockets of homeowners,” said National Association of REALTORS® (NAR) President Bill Brown in a statement. “REALTORS® believe in the promise of lower tax rates, but this bill is nowhere near as good a deal as the one middle-class homeowners get under current law. Tax hikes and falling home prices are a one-two punch that homeowners simply can’t afford.”

“The House Republican tax reform plan abandons middle-class taxpayers in favor of high-income Americans and wealthy corporations,” said Granger MacDonald, chairman of the National Association of Home Builders (NAHB), in a statement. “The bill eviscerates existing housing tax benefits by drastically reducing the number of homeowners who can take advantage of mortgage interest and property tax incentives. Capping mortgage interest at $500,000 for new-home purchases means that homebuyers in expensive markets will effectively lose this housing tax benefit moving forward.

“The House leadership killed a cost-effective plan proposed by NAHB that Ways and Means Committee leaders agreed to include in the legislation,” MacDonald said. “It would provide a robust homeownership tax credit that would have helped up to 37 million additional homeowners who do not currently itemize. Most of them are low- and moderate-income homeowners. Meanwhile, as corporations receive a major tax cut, small businesses, which generate the lion’s share of job growth, get limited relief. The bottom line: Congress is ignoring the needs of America’s working-class families and small businesses, and by undermining the nation’s longstanding support for homeownership and threatening to lower the value of the largest asset held by most American families, this tax reform plan will put millions of homeowners at risk.”

“The tax reform legislation proposed by House Republican leaders takes a historic step in directly revising the mortgage interest deduction (MID), a $70 billion annual tax expenditure that primarily benefits higher income households—including the top 1 percent of earners in the country,” said Diane Yentel, president and CEO of the National Low Income Housing Coalition (NLIHC), in a statement. “The Republican tax proposal makes sensible reforms in lowering the amount of a mortgage against which the MID can be claimed to $500,000 for new-home loans and doubling the standard deduction. This change to the MID would impact fewer than 6 percent of mortgages nationwide and would save an estimated $95.5 billion over the first decade; however, the legislation uses the savings generated by the MID reform to pay for lower tax rates for billionaires and corporations without addressing the affordable housing crisis in America. This proposal is a non-starter.

“Instead, Congress should reinvest the savings from the MID reform into affordable housing solutions, like the national Housing Trust Fund, rental assistance, or a renter’s credit, that would help the lowest income people in America—including seniors, people with disabilities, families with children, and other vulnerable populations—who too often struggle to pay the rent and make ends meet.

“The National Low Income Housing Coalition has significant concerns with other provisions in the overall tax bill and further analysis is needed to determine the impact,” Yentel said.

The California Association of REALTORS® (C.A.R.) echoed similar concerns. “We are currently reading through the bill proposed [on Thursday] to determine the exact impact it will have on California homeowners and its housing market,” said C.A.R. President Geoff McIntosh. “From what we have seen so far, limiting the mortgage interest deduction to $500,000 will no doubt hurt homeownership in states with high housing costs such as California.

“Any change that would make home-buying less attractive will be detrimental to the housing industry and the nation’s economy because of the 2.5 million private-sector jobs created by the industry in an average year,” McIntosh added.

It’s important to keep in mind, however, that this legislation will be aggressively contested and debated over the next several weeks as Republicans fight to have a finalized version on President Trump’s desk by Christmas. That version stands to be unrecognizable to what was announced today, due to battles various lobbying groups are about to wage.

NAR had already begun fighting before the legislation was announced. Recently, the Association deployed digital ads in every district of House Ways and Means Committee members asking constituents in those areas to remind their lawmakers not to “let tax reform become a tax increase for middle class homeowners.”

The Association has now announced that it will expand these efforts to Senate Finance Committee members’ states by the end of the week.

In the immediate future, things will move rapidly and countless groups will come forward to have their opinions heard. This is one area where NAR has a distinct advantage. Not only does it carry the influence of being the largest association; it also represents one of the most coveted voting blocs in the country: homeowners.

What Trump’s ‘Big Number’ on Dodd-Frank Means for Brokers

Source: Andrew King via RISMedia

President Donald Trump has promised many changes since being sworn in a couple short months ago, but one of the more specific—and likely to impact real estate brokers across the nation—is his pledge to “do a big number on Dodd-Frank.”

This call to action is a clear shot across the bow to regulators and Democrats who put new policies in place following the real estate market meltdown of the late 2000s. Much of the president’s stated agenda has been taken with a grain of salt due to his unorthodox approach to communicating with the public. Anyone who follows @POTUS on Twitter knows it’s hard to keep up with what is really being set as a new direction for the U.S. and what is a political sideshow. Yet, there’s something about the dismantling of Dodd-Frank that seems more legitimate than most of the other noise coming out of Washington since Trump assumed the highest office in the land.

But what does this “big number” mean for real estate?

Most likely, it will include a significant rollback in the hurdles that banks must leap in order to issue a loan. The idea is to spur small businesses and strengthen the economy, so small businesses can expect easier financing, such as smaller cash flows to justify larger loan amounts, and hefty interest rates to go along with it.

With mortgages, it’s a similar dynamic. Big banks and community lenders alike won’t be limited by many of the burdensome rules of Dodd-Frank that brokers have been complaining about for years. Income-to-debt ratios may become more favorable for borrowers, appraisers might be held to looser standards when analyzing valuations through comparable sales, and brokers might be able to more easily help facilitate a loan for clients who are at a higher risk of paying it back. Plus, the banks themselves might not be audited and stress-tested as much as they have been under the previous administration.

On the surface, any of this would be good for real estate prices in the short term, and brokers are already preparing for the new deregulatory environment.

“I do believe that rolling some things back will allow more people to qualify for financing,” says Anthony Hitt, CEO of Engel & Völkers North America. “They will buy more properties and prices will go up.”

Hitt, who oversees 2,100 agents in the United States, Canada, Mexico and the Cayman Islands, adds that an overhaul of lending regulations, which would stimulate the housing market in the short term, begs a big question for the long term: “Will we run into the issue where people qualify for loans who shouldn’t have?”

Regardless of the answer, Hitt says he is concerned that many people who went through the previous housing bubble will still be concerned about the question once lending standards are loosened. Those concerns might be hard to overcome as brokers send their agents out to close new business.

“The one thing we need to pay attention to is that a lot of the buying public was affected horribly the last time we went too far. A lot of people remember that, not only because they qualified for vehicles they couldn’t afford, but because people got into vehicles they could afford, but their property values plummeted,” Hitt says. “The good homebuyers might be concerned, and that could be a new phenomenon.”

Hitt adds that millennials are a key home-buying demographic that needs to be both incentivized to make their first purchase and also protected under any pending deregulation.

“Millennials are a growing category,” he says. “Will they have to go down the same road?”

Coming off the last crisis, the stakes are too high now to make another big mistake and there is a lot of attention on the White House and Congress to see how they address Dodd-Frank and the underlying systemic issues that it attempted to correct.

“My concern as a real estate broker is that while President Trump has a lot of knowledge of real estate and making deals, I’m not so sure how well versed he is in non-luxury real estate and non-commercial property,” says John Agostinelli, author of “Easy Money and the American Real Estate Ponzi Scheme and broker/owner of Agostinelli Realty Group based in Massachusetts. “President Trump would do well to become educated about the last real estate cycle, its true causes and why many of the systemic issues that brought us to the brink of financial collapse still exist. He needs to be made aware of eroding underwriting criteria, FICO scores and the pressures from the Real Estate Industrial Complex (REIC), their housing activist allies, together with the politicians who push the same wealth redistribution agenda. Failure to recognize these looming issues over the first years of a Trump administration will only advance the next housing crisis.”

Many say that a smart deregulation strategy would make alternative lending available to more people without qualifying subprime borrowers and inserting their mortgages into investment-grade securities, which endangered the whole credit system when they began defaulting. The problem, brokers say, is that the government tends to overreact to such panics, and Dodd-Frank had many overreaching aspects to it. The challenge now is to not overcorrect again, they say.

Lauren Taylor is the founder of Capaven, a brokerage that specializes in single-family investment properties. She says she would like to see the Trump administration stay out of the housing industry for the most part and establish a “normalcy in interest rates as the low rates are a false sense of affordability.

“For us in particular, Dodd-Frank has been very restrictive. It has tightened lending and made access to capital much harder to reach,” Taylor explains. “The Act, though well intended enough, was entirely too wide-reaching. We saw regulations pinned on the seller financing sector and capital that was needed many times was unreachable for small businesses and operators.”

Like the other issues that the president is tackling in his first months in office, housing deregulation will be one that people do not agree on 100 percent, even within the broker community. However, there does seem to be a growing consensus that Dodd-Frank could use some updating and that more certainty would probably improve consumer confidence—a major factor that fuels all sectors, but has particular importance for an industry such as real estate.

“Homeownership is definitely something that people crave,” says Hitt. “I just get concerned that we don’t learn from our mistakes.”

Are Higher Mortgage Rates Scaring Off First-Time Homebuyers?

Source: RISMedia

First-time homebuyers are shying away from their plans to purchase this spring, according to a recently released report by realtor.com®, due to the surge in mortgage rates in the last two months of 2016. Though rates have deflated since the end of the year, they remain hovering above 4 percent—high enough to scare off first-timers this spring, now down to 44 percent from 55 percent in October.

“The rise in rates is associated with an anticipation of stronger economic and wage growth, both of which favor buyers,” says Jonathan Smoke, chief economist for realtor.com. “At the same time, higher rates make qualifying for a mortgage and finding affordable inventory more challenging. The decline in the share of first-time buyers since October suggests that the move-up in rates is discouraging new homebuyers already.”

First-time homebuyers affording a 20 percent down payment on a median-priced home at the current average 30-year rate would be responsible for an additional $720 in interest each year, according to realtor.com’s report.

Record-high home prices will tamp down first-time homebuyers, as well. The median list price in December 2016 matched the median list price in July 2016: $250,000. Inventory in December 2016, in addition, remained limited, setting the new year up with the lowest inventory since the recession. The National Association of Home Builders (NAHB) expects single-family construction to grow 10 percent in 2017.

The rise in rates is not stifling demand overall, though, according to realtor.com’s report—in fact, repeat homebuyer activity has continued, as buyers, uncertain about the future, take advantage of still-low rates. Consumers recently surveyed by Fannie Mae believe now is a good time to buy a home, but also believe mortgage rates will rise in the year ahead.

“Last fall, we saw a large jump in the number of first-timers planning home purchases, which was very encouraging because their market share is still well below pre-recession levels,” Smoke says. “But, as evidenced by their decline in share, first-time buyers are really dependent on financing, and affordability is one of their largest barriers to homeownership. This number could continue to decline with anticipated increases in interest rates and home prices.”

For more information, please visit www.realtor.com.

For the latest real estate news and trends, bookmark RISMedia.com.

Buying Is Better Than Renting in Most Markets…but for How Long?

Source: RISMedia

Buying a home is more affordable than renting one in 66 percent of housing markets in the U.S., with Cook County, Ill., Maricopa County, Ariz. and Miami-Dade County, Fla. among those with the highest buy affordability, according to ATTOM Data Solutions’ 2017 Rental Affordability Report. Renting a home, to compare, is more affordable than buying one in 34 percent of markets, with Dallas County, Texas, Kings County, N.Y. and Santa Clara County, Calif. among those with the highest rent affordability.

Predominantly impacting affordability are stagnant wages, which have lagged at a growth rate of 2.2 percent since one year ago, compared to home prices, up 5.7 percent, and rents, up 4.2 percent.

Rising mortgage rates, according to ATTOM Senior Vice President Daren Blomquist, could deal another blow to affordability. Average rates, which retreated since charging forward following the election, are currently above 4 percent.

“While buying continues to be more affordable than renting in the majority of U.S. markets, that equation could change quickly if mortgage rates keep rising in 2017,” says Blomquist. “In that scenario, renters who have not yet made the leap to homeownership will find it even more difficult to make that leap this year. Additionally, renting may end up being the lesser of two housing affordability evils in a growing number of high-priced markets.”

Home price growth outpaced wage growth in 79 percent of the counties analyzed in the report, while rent growth outpaced wage growth in 62 percent. Both percentages include Harris County, Texas, and Los Angeles County and San Diego County, Calif. Wage growth, however, outpaced home price growth in 21 percent of the counties analyzed, and outpaced rent growth in 38 percent.

A monthly house payment on a median-priced home will require 36.6 percent of average wages, according to the report; a monthly fair market rent will require 38.6 percent.

The most affordable rental markets in 2017, based on the percentage of average wages needed to pay fair market rent, are:

  1. Madison County, Ala. (23.9 percent)
  2. Allegheny County, Pa. (24.4 percent)
  3. Fulton County, Ga. (24.8 percent)
  4. Anderson County, Tenn. (25.1 percent)
  5. Rock Island County, Ill. (25.3 percent)

The least affordable rental markets in 2017:

  1. Marin County, Calif. (77.3 percent)
  2. Spotsylvania County, Va. (73.7 percent)
  3. Monroe County, Fla. (72.2 percent)
  4. Honolulu County, Hawaii (70.7 percent)
  5. Maui County, Hawaii (70.6 percent)

Source: ATTOM Data Solutions

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Market Feels Effects of Rising Rates, Pending Home Sales Pull Back

SOURCE: RISMedia

The housing market is feeling the effects of rising mortgage rates, with pending home sales pulling back to year-lows last month as homebuyers struggled to put purchases in play, according to the National Association of REALTORS® (NAR). NAR’s Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, dipped 2.5 percent to 107.3 in November, down from 110.0 in October.

“The budget of many prospective buyers last month was dealt an abrupt hit by the quick ascension of rates immediately after the election,” says Lawrence Yun, NAR chief economist. “Already faced with climbing home prices and minimal listings in the affordable price range, fewer home shoppers in most of the country were successfully able to sign a contract.”

All is not lost, however. Rising mortgage rates, according to Yun, will be balanced by a more robust growth in wages in the next year.

“Healthy local job markets amidst tight supply means many areas will remain competitive with prices on the rise,” says Yun. “Those rushing to lock in a rate before they advance even higher will probably have few listings to choose from. Some buyers will have to expand the area of their home search or be forced to delay in order to save a little more money for their down payment.”

The Northeast saw the most pending home sales activity in November, with the PHSI up 0.6 percent to 97.5—now 5.7 percent above one year ago. In the Midwest, the Index was down 2.5 percent to 103.5, 2.4 percent below one year ago. Pending home sales in the South were down 1.2 percent to 118.7, 1.3 percent below one year ago. The Index in the West was down 6.7 percent to 101.0, 1.0 percent below one year ago.

Existing-home sales are still expected to close out 2016 at 5.42 million, which will eclipse 2015 (5.25 million) as the highest since 2006 (6.48 million), according to NAR. The national median existing-home price is also still expected to end 2016 at a 5 percent growth rate.

Looking ahead, existing-home sales are expected to come in at 5.52 million in 2017, while the national median existing-home price is expected to grow 4 percent.

For more information, please visit www.nar.realtor.

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