Home Mortgages: Rates Up, Requirements Easing

Posted on by
Reply

The media has extensively covered the rise in mortgage interest rates since last fall (from 3.42% last September to the current 4.1% according to Freddie Mac). However, a less covered aspect of the mortgage market is that requirements to get a mortgage have eased while rates have risen.

The Mortgage Bankers Association (MBA) quantifies the availability of mortgage credit each month with their Mortgage Credit Availability Index (MCAI). According to the MBA, the MCAI is:

“A summary measure which indicates the availability of mortgage credit at a point in time.”

The higher the index, the easier it is to get a mortgage. Here is a chart showing the MCAI over the last several months as rates have increased.

Home Mortgages: Rates Up, Requirements Easing | MyKCM

Have requirements for attaining a mortgage actually eased?

Yes. Here are two examples:

  1. FICO® Score – the credit score which helps determine a buyer’s eligibility. The score required to attain a mortgage has been falling over the last five months:

 

Home Mortgages: Rates Up, Requirements Easing | MyKCM

  1. Down Payment Requirement – the percentage of the purchase price necessary to place as a down payment on a home. To make this point, let’s look at the percentage of first-time buyers who have put less than 5% down over the last several years as compared to the 1st quarter of 2017:

Home Mortgages: Rates Up, Requirements Easing | MyKCM

Bottom Line

Whether you are a current homeowner looking to move to a home that will better serve your family’s current needs, or a first-time buyer looking for a starter home, it is easier to get a mortgage today than it has been at any other time in the last ten years.

Millionaire to Millennials: Buy Now!

Posted on by
Reply

Millionaire to Millennials: Buy Now! | MyKCM

Self-made millionaire David Bach was quoted in a CNBC article explaining that “the single biggest mistake millennials are making” is not purchasing a home because buying real estate is “an escalator to wealth.”

Bach went on to explain:

“If millennials don’t buy a home, their chances of actually having any wealth in this country are little to none. The average homeowner to this day is 38 times wealthier than a renter.”

In his bestselling book, “The Automatic Millionaire,” Bach does the math:

“As a renter, you can easily spend half a million dollars or more on rent over the years ($1,500 a month for 30 years comes to $540,000), and in the end wind up just where you started — owning nothing. Or you can buy a house and spend the same amount paying down a mortgage, and in the end wind up owning your own home free and clear!”

Who is David Bach?

Bach is a self-made millionaire who has written nine consecutive New York Times bestsellers. His book, “The Automatic Millionaire,” spent 31 weeks on the New York Times bestseller list. He is one of the only business authors in history to have four books simultaneously on the New York Times, Wall Street Journal, BusinessWeek and USA Today bestseller lists.

He has been a contributor to NBC’s Today Show appearing more than 100 times, has been a regular on ABC, CBS, Fox, CNBC, CNN, Yahoo, The View, and PBS, and has been profiled in many major publications, including The New York Times, BusinessWeek, USA Today, People, Reader’s Digest, Time, Financial Times, The Washington Post, The Wall Street Journal, Working Woman, Glamour, Family Circle, Redbook, Huffington Post, Business Insider, Investors’ Business Daily, and Forbes.

Bottom Line

Whenever a well-respected millionaire gives investment advice, people usually clamor to hear it. This millionaire gave simple advice – if you don’t yet live in your own home, go buy one.

Looking to Move-Up to a Luxury Home? Now’s the Time!

Posted on by
Reply

Looking to Move-Up to a Luxury Home? Now’s the Time! | MyKCM

If your house no longer fits your needs and you are planning on buying a luxury home, now is a great time to do so! We recently shared data from Trulia’s Market Mismatch Studywhich showed that in today’s premium home market, buyers are in control.

The inventory of homes for sale in the luxury market far exceeds those searching to purchase these properties in many areas of the country. This means that homes are often staying on the market longer, or can be found at a discount.

Those who have a starter or trade-up home to sell will find buyers competing, and often entering bidding wars, to be able to call your house their new home.

The sale of your starter or trade-up house will aid in coming up with a larger down payment for your new luxury home. Even a 5% down payment on a million-dollar home is $50,000.

But not all who are buying luxury properties have a home to sell first.

In a recent Washington post article, Daryl Judy, an associate broker with Washington Fine Properties, gave some insight into what many millennials are choosing to do:

“Some high-earning millennials save money until they are in their early 30s to buy a place and just skip over that starter-home phase. They’ll stay in an apartment until they can afford to pay for the place they want.”

Bottom Line

The best time to sell anything is when demand is high and supply is low. If you are currently in a starter or trade-up house that no longer fits your needs, and are looking to step into a luxury home… Now’s the time to list your house for sale and make your dreams come true.

The ‘REAL’ News about Housing Affordability

Posted on by
Reply

The 'REAL' News about Housing Affordability | MyKCM

Some industry experts are claiming that the housing market may be headed for a slowdown as we proceed through 2017, based on rising home prices and a potential jump in mortgage interest rates. One of the data points they use is the Housing Affordability Index, as reported by the National Association of Realtors (NAR).

Here is how NAR defines the index:

“The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.”

Basically, a value of 100 means a family earning the median income earns enough to qualify for a mortgage on a median-priced home, based on the price and mortgage interest rates at the time. Anything above 100 means the family has more than enough to qualify.

The higher the index, the easier it is to afford a home.

Why the concern?

The index has been declining over the last several years as home values increased. Some are concerned that too many buyers could be priced out of the market.

But, wait a minute…

Though the index skyrocketed from 2009 through 2013, we must realize that during that time, the housing crisis left the market with an overabundance of distressed properties (foreclosures and short sales). All prices dropped dramatically and distressed properties sold at major discounts. Then, mortgage rates fell like a rock.

The market is recovering, and values are coming back nicely. That has caused the index to fall.

However, let’s remove the crisis years (shaded in gray) and look at the current index as compared to the index from 1990 – 2008:

The 'REAL' News about Housing Affordability | MyKCM

Though prices and rates appear to be increasing, we must realize that affordability is composed of three ingredients: home prices, interest rates, and income. And, incomes are finally rising.

ATTOM Data Solutions recently released their Q1 2017 U.S. Home Affordability Index. The report explained:

“Stronger wage growth is the silver lining in this report, outpacing home price growth in more than half of the markets for the first time since Q1 2012, when median home prices were still falling nationwide. If that pattern continues, it will help turn the tide in the eroding home affordability trend.”

Bottom Line

Compared to historic norms, it is still a great time to buy from an affordability standpoint.

Careful…Don’t Get Caught in the Rental Trap!

Posted on by
Reply

Careful…Don’t Get Caught in the Rental Trap! | MyKCM

There are many benefits to homeownership. One of the top benefits is being able to protect yourself from rising rents by locking in your housing cost for the life of your mortgage.

Don’t Become Trapped 

Jonathan Smoke, Chief Economist at realtor.com, reported on what he calls a “Rental Affordability Crisis.” He warns that,

“Low rental vacancies and a lack of new rental construction are pushing up rents, and we expect that they’ll outpace home price appreciation in the year ahead.”

In the Joint Center for Housing Studies at Harvard University’s2016 State of the Nation’s Housing Report, they revealed that “The number of cost-burdened households rose to 21.3 million. Even more troubling, the number with severe burdens (paying more than 50% of income for housing) jumped to a record 11.4 million.” These households struggle to save for a rainy day and pay other bills, such as food and healthcare.

It’s Cheaper to Buy Than Rent 

In Smoke’s article, he went on to say,

“Housing is central to the health and well-being of our country and our local communities. In addition, this (rental affordability) crisis threatens the future value of owned housing, as the burdensome level of rents will trap more aspiring owners into a vicious financial cycle in which they cannot save and build a solid credit record to eventually buy a home.”

“While more than 85% of markets have burdensome rents today, it’s perplexing that in more than 75% of the counties across the country, it is actually cheaper to buy than rent a home. So why aren’t those unhappy renters choosing to buy?”

Know Your Options

Perhaps you have already saved enough to buy your first home. HousingWire reported that analysts at Nomura believe:

“It’s not that Millennials and other potential homebuyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment. 

It’s that they think they’re not qualified or they think that they don’t have a big enough down payment.” (emphasis added)

Many first-time homebuyers who believe that they need a large down payment may be holding themselves back from their dream home. As we have reported before, in many areas of the country, a first-time home buyer can save for a 3% down payment in less than two years. You may have already saved enough!

Bottom Line

Don’t get caught in the trap so many renters are currently in. If you are ready and willing to buy a home, find out if you are able. Let’s get together to determine if you can qualify for a mortgage now!

Millennials Flock to Low Down Payment Programs

Posted on by
Reply

Millennials Flock to Low Down Payment Programs | MyKCM

A recent report released by Down Payment Resource shows that 65% of first-time homebuyers purchased their homes with a down payment of 6% or less in the month of January.

The trend continued through all buyers with a mortgage, as 62% made a down payment of less than 20%, which is consistent with findings from December.

An article by DS News points to the new wave of millennial homebuyers:

“It seems that the long-awaited influx of millennial home buyers is beginning. Ellie Mae reported that mortgages to millennial borrowers for new home purchases continued their ascent in January, accounting for 84 percent of closed loans.”

Among millennials who purchased homes in January, FHA loans remained popular, making up 35% of all loans closed. Ellie Mae’s Executive Vice President of Corporate Strategy Joe Tyrrell gave some insight into why:

“It is not surprising to see Millennial borrowers leverage FHA loans because they typically offer lower down payments and lower average FICO score requirements than conventional loans. Across the board, we’re continuing to see strong interest in homeownership from this younger generation.”

Bottom Line

If you are one of the many millennials who is debating a home purchase this year, let’s get together to help you understand your options and set you on the path to preapproval.

MEASURING YOUR ABILITY TO ACHIEVE THE AMERICAN DREAM

Posted on by
Reply

Forbes.com recently released the results of their new American Dream Index, in which they measure “the prosperity of the middle class, and…examine which states best support the American Dream.”

The monthly index measures several different economic factors, including goods-producing employment, personal and commercial bankruptcies, building permits, startup activity, unemployment insurance claims, labor force participation, and layoffs.

The national index score was rounded out to 100 in January and saw a modest jump to 100.5 in February.

Alaska represented the lowest score on the index at 80.7, due mostly to the recent collapse in oil prices. Nevada came in with the highest score at 108.8, boosted by big gains in goods-producing jobs and new construction activity. The full results can be seen in the map below.

Measuring Your Ability to Achieve the American Dream | Keeping Current Matters

Forbes Senior Editor Kurt Badenhausen explained why many states saw a boost in the index last month:

“[B]usinesses are hiring in part in anticipation of tax cuts and less regulation… Many areas of the country have experienced strong upticks in employment and construction, as well as declines in unemployment claims since the start of the year.”

Bottom Line

The American Dream, for many, includes being able to own a home of his or her own. With the economy improving in many areas of the country, that dream can finally become a reality.