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Monthly Archives: November 2016

Is Getting a Home Mortgage Still Too Difficult?

Is Getting a Home Mortgage Still Too Difficult? | Simplifying The Market

There is no doubt that mortgage credit availability is expanding, meaning it is easier to finance a home today than it was last year. However, the mortgage market is still much tighter than it was prior to the housing boom and bust experienced between 2003 – 2006.

The Housing Financing Policy Center at the Urban Institute just released data revealing two reasons for the current exceptionally high credit standards:

  1. Additional restrictions lenders put on borrowing because of concerns that they will be forced to repurchase failed loans from the government-sponsored enterprises or Federal Housing Administration (FHA).
  2. The concern about potential litigation for imperfect loans.

What has been the result of these concerns?

6.3 Million Less Mortgages

The Policy Center report went on to say:

“It was so hard to get a mortgage in 2015 that lenders failed to make about 1.1 million mortgages that they would have made if reasonable lending standards had been in place. From 2009 to 2014, lenders failed to make about 5.2 million mortgages thanks to overly tight credit. In total, lenders would have issued 6.3 million additional mortgages between 2009 and 2015 if lending standards had been more reasonable.”

In an interview with DSNews, Laurie Goodman and Alanna McCargo of the Policy Center further explained:

“Our Housing Credit Availability Index (HCAI)* measures the probability that mortgage borrowers will become delinquent on that mortgage for 90 or more days, which we refer to as the default risk. This measure indicates that the probability of default rose from 12 percent in 2001 to a peak of 16.5 percent at the end of 2005/beginning of 2006, before declining to the current level of 5 percent. Stated differently, lenders are currently taking less than half the credit risk they were taking in 2001, a period of reasonable credit standards.”

The cost to the economy if we’re writing fewer loans…

Goodman and McCargo put it best:

“…fewer households will become homeowners at exactly the point in the economic cycle when it is most advantageous to do so… [They] will continue to miss this wealth-building opportunity. The median family wealth for homeowners is $195,400, with their home the most valuable asset for most; the median family wealth for renters is $5,400… Fewer potential homebuyers means the housing market will continue to recover more slowly. At the same time, fewer buyers create a strain on other benefits to the economy which homebuying brings such as spending on home goods and an increase in construction jobs.”

Bottom Line

The housing market boom and bust caused many mortgage providers and lenders to tighten their lending standards in an effort not to repeat the recent past. This paired with many homebuyers disqualifying themselves before they even apply for a loan, due to the fear of rejection, has led to many households not yet becoming homeowners.

*The HCAI measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.

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Is Getting a Home Mortgage Still Too Difficult?

Is Getting a Home Mortgage Still Too Difficult? | Simplifying The Market

There is no doubt that mortgage credit availability is expanding, meaning it is easier to finance a home today than it was last year. However, the mortgage market is still much tighter than it was prior to the housing boom and bust experienced between 2003 – 2006.

The Housing Financing Policy Center at the Urban Institute just released data revealing two reasons for the current exceptionally high credit standards:

  1. Additional restrictions lenders put on borrowing because of concerns that they will be forced to repurchase failed loans from the government-sponsored enterprises or Federal Housing Administration (FHA).
  2. The concern about potential litigation for imperfect loans.

What has been the result of these concerns?

6.3 Million Less Mortgages

The Policy Center report went on to say:

“It was so hard to get a mortgage in 2015 that lenders failed to make about 1.1 million mortgages that they would have made if reasonable lending standards had been in place. From 2009 to 2014, lenders failed to make about 5.2 million mortgages thanks to overly tight credit. In total, lenders would have issued 6.3 million additional mortgages between 2009 and 2015 if lending standards had been more reasonable.”

In an interview with DSNews, Laurie Goodman and Alanna McCargo of the Policy Center further explained:

“Our Housing Credit Availability Index (HCAI)* measures the probability that mortgage borrowers will become delinquent on that mortgage for 90 or more days, which we refer to as the default risk. This measure indicates that the probability of default rose from 12 percent in 2001 to a peak of 16.5 percent at the end of 2005/beginning of 2006, before declining to the current level of 5 percent. Stated differently, lenders are currently taking less than half the credit risk they were taking in 2001, a period of reasonable credit standards.”

The cost to the economy if we’re writing fewer loans…

Goodman and McCargo put it best:

“…fewer households will become homeowners at exactly the point in the economic cycle when it is most advantageous to do so… [They] will continue to miss this wealth-building opportunity. The median family wealth for homeowners is $195,400, with their home the most valuable asset for most; the median family wealth for renters is $5,400… Fewer potential homebuyers means the housing market will continue to recover more slowly. At the same time, fewer buyers create a strain on other benefits to the economy which homebuying brings such as spending on home goods and an increase in construction jobs.”

Bottom Line

The housing market boom and bust caused many mortgage providers and lenders to tighten their lending standards in an effort not to repeat the recent past. This paired with many homebuyers disqualifying themselves before they even apply for a loan, due to the fear of rejection, has led to many households not yet becoming homeowners.

*The HCAI measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.

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Mortgage Interest Rates Just Went Up… Should I Wait to Buy?

Mortgage Interest Rates Just Went Up… Should I Wait to Buy? | Simplifying The Market

Mortgage interest rates, as reported by Freddie Mac, have increased over the last several weeks. Along with Freddie MacFannie Mae, the Mortgage Bankers Association and the National Association of Realtors are all calling for mortgage rates to continue to rise over the next four quarters.

This has caused some purchasers to lament the fact they may no longer be able to get a rate less than 4%. However, we must realize that current rates are still at historic lows.

Here is a chart showing the average mortgage interest rate over the last several decades.

Mortgage Interest Rates Just Went Up… Should I Wait to Buy? | Simplifying The Market

Bottom Line

Though you may have missed getting the lowest mortgage rate ever offered, you can still get a better interest rate than your older brother or sister did ten years ago; a lower rate than your parents did twenty years ago and a better rate than your grandparents did forty years ago.

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5 Reasons to Hire a Real Estate Professional When Buying & Selling!

5 Reasons to Hire a Real Estate Professional When Buying & Selling! | Simplifying The Market

Whether you are buying or selling a home, it can be quite an adventurous journey; you need an experienced Real Estate Professional to lead you to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO.

The 5 Reasons You NEED a Real Estate Professional in your corner haven’t changed, but rather have been strengthened, due to the projections of higher mortgage interest rates & home prices as the market continues to pick up steam. 

1. What do you do with all this paperwork?

Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true Real Estate Professional is an expert in their market and can guide you through the stacks of paperwork necessary to make your dream a reality.

2. Ok, so you found your dream house, now what?

According to the Orlando Regional REALTOR Association, there are over 230 possible actions that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, someone who knows what these actions are, to make sure that you acquire your dream? 

3. Are you a good negotiator?

So maybe you’re not convinced that you need an agent to sell your home. However, after looking at the list of parties that you need to be prepared to negotiate with, you’ll realize the value in selecting a Real Estate Professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people that you will have to be knowledgeable with and answer to, during the process. 

4. What is the home you’re buying/selling really worth?

It is important for your home to be priced correctly from the start to attract the right buyers and shorten the time that it’s on the market. You need someone who is not emotionally connected to your home to give you the truth as to your home’s value. According to the National Association of REALTORS, “the typical FSBO home sold for $185,000 compared to $245,000 among agent-assisted home sales.”

Get the most out of your transaction by hiring a professional.

5. Do you know what’s really going on in the market?

There is so much information out there on the news and the internet about home sales, prices, and mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively price your home correctly at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a lowball offer?

Dave Ramsey, the financial guru, advises:

“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”

Hiring an agent who has their finger on the pulse of the market will make your buying or selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.

Bottom Line

You wouldn’t replace the engine in your car without a trusted mechanic. Why would you make one of the most important financial decisions of your life without hiring a Real Estate Professional?

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Existing Home Sales Surge Forward Through Fall [INFOGRAPHIC]

Existing Home Sales Surge Forward Through Fall [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • The National Association of Realtors (NAR) recently released their latest Existing Home Sales Report.
  • First-time homebuyers made up 33% of all sales in October.
  • Homes are selling quickly with 43% of homes on the market for less than a month.
  • A limited supply continues to drive up prices for the 56th consecutive month.

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Thank You for Your Support!

Thank You for Your Support | Simplifying The Market

Have a Great Holiday!

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Thinking of Selling? Don’t Overlook an Outdated Kitchen, Buyers Won’t

Thinking of Selling? Don’t Overlook an Outdated Kitchen, Buyers Won’t | Simplifying The Market

If you are planning on listing your home for sale, make sure that you don’t overlook the condition of your kitchen. A recent article on realtor.com listed “7 Signs Your Kitchen Is Way Overdue for a Renovation,” in which they warned:

“Dated kitchens—just like bathrooms—are a major barrier for resale. Buyers want modern amenities and styling, and most aren’t interested in renovating post-purchase.”

Kitchen remodels can be pricey, with many complete remodels costing $20,000 or more. But not every kitchen needs a full remodel. There are many smaller projects that will help buyers see themselves trying their favorite Pinterest recipe in your home!

Here are a couple of project ideas that, if you’re handy or know someone who is, could end up boosting your home’s value without breaking the bank:

  • Are the cabinets in good shape but need an update? A new coat of paint and some updated hardware will instantly freshen up the space and drastically change the feel of the room all for under $300.
  • A new backsplash to match the freshly painted cabinets updates the space and adds some style while staying under $200, depending on the size of the room.
  • If the kitchen seems dark, consider adding LED under cabinet lighting for around $40.
  • If replacing the countertops in the kitchen isn’t within your budget, consider using a top coat to cover the current countertops.

If you decide to complete a full remodel of your outdated kitchen, you can expect a 67% return on a $30,000 upgrade (the national median cost). The benefits of a kitchen remodel aren’t purely financial, according to Houselogic:

“Eighty-two percent of homeowners said their updated kitchen gave them a greater desire to be at home, and 95% were happy or satisfied with the result.”

Bottom Line

Kitchens and bathrooms are often make or break for buyers when touring a home or searching through photo galleries online. Let’s get together to identify which small projects could pay off big!

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