by jeffp | Feb 3, 2015 | Inside Real Estate
Many experts predict a continuing housing recovery in 2015, despite stagnant builder confidence and slowing price gains. While this year could still be a great time for you to buy a new home or invest in real estate, a look at the big picture never hurts. Consider these potential events cited by CNNMoney as today’s biggest threats to the housing market.
Institutional Investors May Sell Off Properties
Institutional investors—organizations that pool and invest large sums of money—have purchased hundreds of thousands of properties as rentals. However, now that home price increases are slowing, it is possible that they will begin cashing out their gains. There are some indications that this is already beginning to happen. According to the National Association of Realtors, the number of institutional investors dropped to a four-year low in the third quarter of 2014.
Foreign Buyers May Lose Interest in U.S. Properties
As the dollar has grown stronger, investing in U.S. housing has become more expensive for foreign buyers. According to the National Association of Realtors, real estate purchases by European and Russian buyers have already started to lag. In addition, according to the California Association of Realtors, the number of sales to foreign buyers within the state has fallen 25 percent.
American Incomes Are Not Increasing Fast Enough
The unemployment rate has continued to fall, dropping to 5.6 percent in December according to the Bureau of Labor Statistics. However, wages are not increasing fast enough to keep pace with market prices. The Society for Human Resource Management, the nation’s largest group of human resource professionals, has forecast a base salary increase of 3 percent for U.S. workers in 2015. This disappointing figure may make purchasing a home less affordable for buyers—particularly in higher priced areas.
Some Lenders Are Still Reluctant to Lend
While both Fannie Mae and Freddie Mac recently eased the lending standards on the mortgages they buy, reducing the required minimum down payment to 3 percent, some experts believe other lenders are still taking it too hard on potential buyers. Evidence of this includes demands for near perfect credit and large down payments. This can increase borrowing challenges for a variety of buyers including those with short-lived credit histories, former homeowners who had to short sale a previous property, or anyone with a heavy student loan debt load.
Mortgage Rates Could Increase Sharply
The general consensus among financial experts is that The Federal Reserve Bank will increase the prime rate—the benchmark rate against which many other interest rates are calculated—sometime in 2015. However, no one really knows how soon The Fed will do so, or by how much. If rates climb high enough, housing affordability in high-priced markets could plummet.
While the U.S. housing market could face a few bumps in the road in 2015, it still makes sense to explore your options if you have been considering a new home purchase or investment. I would love to talk you through an analysis of your local market, personal financial situation and buying goals.
by jeffp | Feb 3, 2015 | Inside Real Estate
Many experts predict a continuing housing recovery in 2015, despite stagnant builder confidence and slowing price gains. While this year could still be a great time for you to buy a new home or invest in real estate, a look at the big picture never hurts. Consider these potential events cited by CNNMoney as today’s biggest threats to the housing market.
Institutional Investors May Sell Off Properties
Institutional investors—organizations that pool and invest large sums of money—have purchased hundreds of thousands of properties as rentals. However, now that home price increases are slowing, it is possible that they will begin cashing out their gains. There are some indications that this is already beginning to happen. According to the National Association of Realtors, the number of institutional investors dropped to a four-year low in the third quarter of 2014.
Foreign Buyers May Lose Interest in U.S. Properties
As the dollar has grown stronger, investing in U.S. housing has become more expensive for foreign buyers. According to the National Association of Realtors, real estate purchases by European and Russian buyers have already started to lag. In addition, according to the California Association of Realtors, the number of sales to foreign buyers within the state has fallen 25 percent.
American Incomes Are Not Increasing Fast Enough
The unemployment rate has continued to fall, dropping to 5.6 percent in December according to the Bureau of Labor Statistics. However, wages are not increasing fast enough to keep pace with market prices. The Society for Human Resource Management, the nation’s largest group of human resource professionals, has forecast a base salary increase of 3 percent for U.S. workers in 2015. This disappointing figure may make purchasing a home less affordable for buyers—particularly in higher priced areas.
Some Lenders Are Still Reluctant to Lend
While both Fannie Mae and Freddie Mac recently eased the lending standards on the mortgages they buy, reducing the required minimum down payment to 3 percent, some experts believe other lenders are still taking it too hard on potential buyers. Evidence of this includes demands for near perfect credit and large down payments. This can increase borrowing challenges for a variety of buyers including those with short-lived credit histories, former homeowners who had to short sale a previous property, or anyone with a heavy student loan debt load.
Mortgage Rates Could Increase Sharply
The general consensus among financial experts is that The Federal Reserve Bank will increase the prime rate—the benchmark rate against which many other interest rates are calculated—sometime in 2015. However, no one really knows how soon The Fed will do so, or by how much. If rates climb high enough, housing affordability in high-priced markets could plummet.
While the U.S. housing market could face a few bumps in the road in 2015, it still makes sense to explore your options if you have been considering a new home purchase or investment. I would love to talk you through an analysis of your local market, personal financial situation and buying goals.
by jeffp | Jan 22, 2015 | Inside Real Estate
If you’ve ever purchased a home, you’ve encountered escrow: the period between the acceptance of your offer and deposit of your earnest money and the final closing of the buyer-seller-lender transaction. The escrow period can range from weeks to months—depending on the lender’s timetable and the desires of the seller and buyer—and can be a bit confusing if you don’t understand what’s going on. While you can always ask your real estate agent to keep you informed on your escrow’s progress, the following details may also help alleviate uncertainty.
The Parties Involved
Multiple parties are involved in the escrow process and include your real estate agent, the sellers’ real estate agent, your lender, a title agent and an escrow agent.
- Your real estate agent is there to guide you through the process, much as the sellers’ real estate agent will do for them.
- Your lender takes your mortgage application and verifies all the important details before putting it through underwriting.
- The title company makes sure the title to the property you are buying is free of liens and judgments. It also issues title insurance to protect you and your lender from any future property claims or disputes.
- The escrow agent serves as a neutral third-party officer. He or she coordinates the escrow process, ensures it follows the terms of the purchase contract, and handles all of the paperwork.
Basic Escrow Timeline
While the actual timeline of any escrow may change due to a variety of factors, the basic steps involved in the process are as follows:
- A realtor submits the purchase and sale agreement to the escrow agent.
- The escrow agent sends instructions to the buying and selling parties, requesting more information about the transaction if necessary.
- The escrow agent contacts the title agent and asks for a title search on the property.
- The title agent conducts a title search and notifies the escrow agent of any issues.
- If there are title issues, the escrow agent will work to clear them from the title.
- The lender sends the completed loan document to the escrow agent.
- The escrow agent prepares a settlement statement that reflects the costs of the transaction including loan fees, escrow fees and title fees.
- The escrow agent prepares other documents the parties will need at closing.
- The escrow agent coordinates a closing date.
- The buyer, seller, escrow agent (and sometimes the buyer/seller real estate agents) meet to sign the closing documents.
- The buyer gives the escrow agent a money order for any transaction costs that are not included in the loan amount.
- The escrow agent sends copies of the signed loan documents to the lender.
- The escrow agent sends the deed or deed of trust to the title agent.
- The lender reviews the documents and approves them.
- The escrow agent communicates this approval to the title agent.
- The title agent records the documents (this is when the transaction is officially closed).
- The lender wires the funds for the property purchase to the escrow agent.
- The title agent sends the escrow agent a recording number indicating he/she has recorded the documents.
- The escrow agent disburses the purchase funds to the appropriate parties.
- The escrow agent sends a final settlement statement to the involved parties.
The escrow process is best navigated by a licensed real estate professional who works with lenders, title and escrow agents on a regular basis. Few experts would advise that a homebuyer tackle it alone. Fortunately, I’m here to help! Give me a call if you have additional escrow questions or have been thinking about buying, selling or investing in real estate.
by jeffp | Jan 14, 2015 | Inside Real Estate
Since the advent of the subprime mortgage crisis in late 2007, mortgage companies, banks and government-backed mortgage guarantors have tightened their lending standards. Many potential homebuyers and refinancers without the near-perfect credit and substantial 20 percent down payment (or equivalent equity) required, have had to kiss their dreams of home ownership or lower interest rates goodbye as a result. Fortunately, all of that is about to change.
Fannie Mae and Freddie Mac are lowering their down payment requirements.
These two government sponsored enterprises buy mortgages from the banks, credit unions and other financial institutions that make them. Doing so is a sizable investment, and to minimize their risk they require that the loans they purchase “conform” to specific guidelines. In an effort to make home purchases more affordable for first time and low-income homebuyers, they recently adjusted these rules to allow for the backing of mortgages with 3 percent down payments.
In order for the entities to consider the mortgages conforming, these loans must require private mortgage insurance, a minimum 620 credit score, and complete income, asset and job documentation. Additionally, borrowers receiving these loans must attend homeownership counseling.
Fannie Mae started backing loans that met the loosened requirements in December. Freddie Mac will begin purchasing them from lenders in March. They will include 15-, 20- and 30-year fixed rate options with a borrowing limit of $417,000.
Lenders are already responding favorably to the changes.
In a recent article by CNN Money, an official at Fannie Mae noted that the average credit score seen on approved loan applications has dropped slightly. He is seeing lenders making mortgage loans to borrowers with lower down payments as well. And according to a survey conducted by the Federal Reserve, 14 percent of senior loan officers report that their banks began loosening lending standards in the fall.
What does this mean for you? If you’ve been dreaming about buying your first home, moving up into a bigger home, or refinancing your current mortgage, it’s unlikely there will ever be a better time to do so—even if lenders have turned you down before. Contact your real estate and mortgage professionals today to explore your options and learn more about next steps.
by jeffp | Dec 2, 2014 | Inside Real Estate
Look up “remorse” in the dictionary and you’ll learn it means “deep and painful regret for wrongdoing; compunction.” That sounds like something no one should ever experience. Unfortunately, remorse is an all too common feeling among homebuyers. In fact, according to one recent CNN Money article, 80 percent of homebuyers report regretting at least one thing about their new home. If you don’t want to be among them, consider these ways to avoid remorse the next time you make a real estate purchase.
Don’t abandon your must-haves.
While four bedrooms might be nice (defined as a “want”), a family of three must have (or “needs”) at least two bedrooms. When shopping for a home you can look at properties that don’t have all your wants. But if you want to avoid homebuyer remorse, don’t bother with those that lack essential must-haves. There’s no sense in falling in love with something that will make you unhappy in the long run.
Stand up for your feelings.
It’s possible your spouse or partner will pressure you to purchase a property you don’t like. If it’s lacking a few of your wants but has everything you need, you might agree to compromise. However, if you are certain you will be unhappy in the new home—for whatever reason—make sure your feelings are known. You don’t want the purchase to cause resentment down the line.
Don’t act impulsively.
Have you ever bought a handbag you didn’t absolutely love just because all of your friends wanted it? Chances are that impulse buy didn’t make you happy—and an even larger impulsive purchase is even less likely to do so. One of the biggest sources of homebuyer remorse is overpaying on a property because of a bidding war. If you don’t really want the home, or can’t get it for a price within your budget, move on.
Don’t make dangerous concessions.
If your dream house has dry rot, termites or a sinking foundation, pull out of the deal or ask the seller to lower the price to account for the cost of repairs. It’s unlikely your mortgage lender will approve the loan otherwise. Even if they do, turning a blind eye to costly flaws will only reduce your love for the property later on.
Consider the big picture.
Even a “perfect” home might not be the right home for you. Sure, it might have everything you need and even most of the things you want, but if it’s too far from your office, in a crime-ridden area, a little out of your budget, or near a loud highway, it might not be the best choice. Make sure you consider the big picture—from the school system and neighbors to the distance from your favorite restaurants and movie theaters—before you make an offer.
by jeffp | Nov 17, 2014 | Inside Real Estate
When most people want to buy a home, they speak to a mortgage lender about financing. After all, with median existing home prices in the U.S. at $209,700 (5.6 percent higher than they were 12 months ago), it would be decidedly difficult for the majority of homebuyers to access that much cash. Some, however, are able to do so—24 percent according to data from the National Association of Realtors. Many investors are among them. In fact, 63 percent of investors purchasing residential real estate properties paid in cash in September.
While all-cash offers can make the market a bit more challenging for consumers planning to use financing, they don’t make buying a home with a mortgage impossible. In fact, there are several tactics you can use to beat the all-cash offers against which you may be competing.
Secure mortgage pre-approval before making an offer.
While you may want to obtain mortgage pre-qualification before you even begin looking for new home, you’ll need more than that—a full pre-approval—when making an offer against other homebuyers. While pre-qualification requires nothing more than stating your income, assets and debts so your mortgage lender can estimate the amount for which you should qualify, a pre-approval involves a complete mortgage application, financial documentation and credit check. Once it’s complete, you will have a better idea of the interest rate you’ll receive and—even better—you’ll receive a written conditional offer for an exact loan amount. This makes you much more attractive to home sellers.
Waive or shorten the mortgage contingency.
Most offers include a contingency wherein the seller will refund your earnest money if you are unable to secure financing within a set period. While waiving this contingency can be risky if you’re not absolutely certain you’ll qualify for a loan—you’ll lose your deposit—it can make you more attractive to home sellers who stand to benefit. If you’re uncomfortable waiving the contingency altogether, offering a shorter contingency—say, seven rather than 30 days—is also an option.
Make a bigger down payment and finance less of the purchase price.
Some home sellers see a larger down payment as an indication that you are serious about purchasing their property. Additionally, the larger your down payment, the more likely you are to secure a mortgage (and you’ll get better terms as well). This can make your offer more attractive.
Make the seller’s needs a priority.
Perhaps you’d like to close and move in by the first of the month, but the seller’s new home won’t be ready until mid-month. Maybe the seller wants to take her window coverings (or other items that are usually included in the home sale) with her when she leaves. The more flexible you can be to meet the seller’s needs, the more attractive your offer on the home.
Appeal to the seller’s emotions.
Ask any real estate agent if emotions should be involved in the home selling process and they’ll say, “No.” However, it’s exceedingly difficult for homeowners to ignore the emotional attachment they have to their property when it’s time to move on—especially if they’ve lived there for decades. For this reason, it can be helpful to include a personal letter with your offer. Write about how much you love the home, complement them for taking such wonderful care of it, and explain why it is perfect for your family. Note: don’t elaborate on upgrades or changes you plan to make to the property.
Many sellers like all-cash offers, especially in a market where mortgages are more difficult to secure. But this does not mean you won’t be able to buy with a loan—especially if you employ one or more of the tactics outlined here. Contact your mortgage lender or real estate agent today if you’re ready to get started.
