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Money and home,loan,mortgage. Change home into cash concept. US Dollar in sack bag, Wooden house model put on scales on wood table with green tree bokeh as background. Balance home and debt.

Is Now a Good Time to Refinance My Home?

With interest rates hitting all-time lows over the past few weeks, many homeowners are opting to refinance. To decide if refinancing your home is the best option for you and your family, start by asking yourself these questions:

Why do you want to refinance?

There are many reasons to refinance, but here are three of the most common ones:

1. Lower Your Interest Rate and Payment: This is the most popular reason. Is your current interest rate higher than what’s available today? If so, it might be worth seeing if you can take advantage of the current lower rates.

2. Shorten the Term of Your Loan: If you have a 30-year loan, it may be advantageous to change it to a 15 or 20-year loan to pay off your mortgage sooner rather than later.

3. Cash-Out Refinance: You might have enough equity to cash out and invest in something else, like your children’s education, a business venture, an investment property, or simply to increase your cash reserve.

Once you know why you might want to refinance, ask yourself the next question:

How much is it going to cost?

There are fees and closing costs involved in refinancing, and The Lenders Network explains:

As an example, let’s say your mortgage has a balance of $200,000. If you were to refinance that loan into a new loan, total closing costs would run between 2%-4% of the loan amount. You can expect to pay between $4,000 to $8,000 to refinance this loan.”

They also explain that there are options for no-cost refinance loans, but be on the lookout:

“A no-cost refinance loan is when the lender pays the closing costs for the borrower. However, you should be aware that the lender makes up this money from other aspects of the mortgage. Usually charging a slightly higher interest rate so they can make the money back.”

Keep in mind that, given the current market conditions and how favorable they are for refinancing, it can take a little longer to execute the process today. This is because many other homeowners are going this route as well. As Todd Teta, Chief Officer at ATTOM Data Solutions notes about recent mortgage activity 

“Refinancing largely drove the trend, with more than twice as many homeowners trading in higher-interest mortgages for cheaper ones than in the same period of 2018.”

Clearly, refinancing has been on the rise lately. If you’re comfortable with the up-front cost and a potential waiting period due to the high volume of requests, then ask yourself one more question:

Is it worth it? 

To answer this one, do the math. Will it help you save money? How much longer do you need to own your home to break even? Will your current home meet your needs down the road? If you plan to stay for a few years, then maybe refinancing is your best move.

If, however, your current home doesn’t fulfill your needs for the next few years, you might want to consider using your equity for a down payment on a new home instead. You’ll still get a lower interest rate than the one you have on your current house, and with the equity you’ve already built, you can finally purchase the home you’ve been waiting for.

Bottom Line

Today, more than ever, it’s important to start working with a trusted real estate advisor. Whether you connect by phone or video chat, a real estate professional can help you understand how to safely navigate the housing market so that you can prioritize the health of your family without having to bring your plans to a standstill. Whether you’re looking to refinance, buy, or sell, a trusted advisor knows the best protocol as well as the optimal resources and lenders to help you through the process in this fast-paced world that’s changing every day.

Single mother having fun with young daughter on the backyard.

Great News for Renters Who Want to Buy a Home

Rents in the United States have been skyrocketing since 2012. This has caused many renters to face a tremendous burden when juggling their housing expenses and the desire to save for a down payment at the same time. The recent stabilization of rental prices provides a great opportunity for renters to save more of their current income to put toward the purchase of a home.

Just last week the Joint Center of Housing Studies of Harvard University released the America’s Rental Housing 2020 Report. The results explain the financial challenges renters are experiencing today,

“Despite slowing demand and the continued strength of new construction, rental markets in the U.S. remain extremely tight. Vacancy rates are at decades-long lows, pushing up rents far faster than incomes. Both the number and share of cost-burdened renters are again on the rise, especially among middle-income households.”

According to the most recent Zillow Rent Index, which measures the estimated market-rate rent for all homes and apartments, the typical U.S. rent now stands at $1,600 per month. Here is a graph of how the index’s median rent values have climbed over the last eight years:Great News for Renters Who Want to Buy a Home | MyKCM

Is Good News Coming?

There seems, however, to be some good news on the horizon. Four of the major rent indices are all reporting that rents are finally beginning to stabilize in all rental categories:

1. The Zillow Rent Index, linked above, only rose 2.6% over the last year.

2. RENTCafé’s research team also analyzes rent data across the 260 largest cities in the United States. The data on average rents comes directly from competitively rented, large-scale, multi-family properties (50+ units in size). Their 2019 Year-End Rent Report shows only a 3% increase in rents from last year, the slowest annual rise over the past 17 months.

3. The CoreLogic Single Family Rent Index reports on single-family only rental listing data in the Multiple Listing Service. Their latest index shows how overall year-over-year rent price increases have slowed since February 2016, when they peaked at 4.2%. They have stabilized around 3% since early 2019.

4. The Apartment List National Rent Report uses median rent statistics for recent movers taken from the Census Bureau American Community Survey. The 2020 report reveals that the year-over-year growth rate of 1.6% matches the rate at this time last year; it is just ahead of the 1.5% rate from January 2016. They also explain how “the past five years also saw stretches of notably faster rent growth. Year-over-year rent growth stood at 2.6% in January 2018, and in January 2016 it was 3.3%, more than double the current rate.”

It seems tenants are getting a breather from the rapid rent increases that have plagued them for almost a decade.

Bottom Line

Rental expenses are beginning to moderate, and at the same time, average wages are increasing. That power combination may allow renters who dream of buying a home of their own an opportunity to save more money to put toward a down payment. That’s sensational news!

Income Needed to Qualify for a Mortgage Loan

Income Needed to Qualify for a Mortgage Loan

When you apply for a home loan, the mortgage lender will conduct a thorough review of your income situation. Income is one of the most important factors to a lender, along with your credit score and debt level. This article answers a common, income-related question that home buyers often ask: How much income is needed to qualify for a mortgage loan?

The first thing to know is that mortgage lending standards and requirements can vary from one lender to the next. For example, if I approach a handful of lenders about a certain home loan, and my income level is on the “border” of acceptability, one company might approve me for the loan while others turn me down. That’s because they have their own business models and assessment procedures.

In addition, your household income level is only one piece of the mortgage qualification process. Lenders will review other things as well, including your credit score and your total amount of debt. Remember, your debt takes away a big part of your income — so the two things are usually reviewed together.

How Much Income to Qualify?

These days, most lenders set the bar somewhere around 43% to 45% for the total debt-to-income ratio or DTI. This means that if your recurring monthly debts use up more than 45% of your monthly income, you might have trouble qualifying for a loan. On the other hand, a borrower who only uses about 35% of her income to cover the monthly debts should be in good shape, as far as lenders are concerned.

These numbers are not set in stone. Some lenders may allow total DTI ratios above 45%, especially when there are certain “compensating factors.”

According to the Consumer Financial Protection Bureau (CFPB):

“Larger lenders may still make a mortgage loan if your debt-to-income ratio is more than 43 percent … But they will have to make a reasonable, good-faith effort, following the CFPB’s rules, to determine that you have the ability to repay the loan.”

So, where do you stand? What’s your total debt-to-income ratio? You can find plenty of calculators online to help you calculate your DTI level. That’s a good place to continue your research.

Applying for a Mortgage Quote

When you’ve done the necessary research, and feel that you’re ready to take on a mortgage loan, the next logical step is to apply for quotes from lenders. The good news is that this process is easier than ever, thanks to the internet. You can apply online and get information sent to you by email.

Granted, you’ll have to fill out a more complete application at some point, along with plenty of supporting documents (tax records, bank statements, etc.). But the initial online application is a good way to get the ball rolling.

Don’t Overstretch Your Income

The last point I want to make is that a mortgage lender cannot tell you what you can afford. They can only tell you what they are willing to lend you, in terms of a loan. You must determine your own affordability limits before you even start talking to lenders.

Doing some basic budget math up front could help you avoid financial issues down the road. So take a good, hard look at your current debt and income situation — and decide what you’re comfortable paying each month in the form of a mortgage payment.

Mortgage Rates Rise to Their Highest Level in Over Four Years

Are you thinking about buying a home in the near future? Do you need a mortgage loan to finance your purchase? Here’s a trend you should know about. This week, the average rate for a 30-year fixed-rate mortgage loan rose to its highest level since 2013. This is based on the weekly industry survey conducted by Freddie Mac.

Mortgage Rates Hit 4-Year High in April 2018

On April 26, 2018, Freddie Mac published the latest results of its Primary Mortgage Market Survey (PMMS). This survey has been running for decades, and it gives us good insight into various trends. The company describes it as “the foremost reliable, representative source of regional and national mortgage rate trends.”

Here are the results of the survey for the week of April 26, 2018:

•    30-year fixed mortgage loans had an average rate of 4.58%.
•    15-year fixed mortgage loans had an average rate of 4.02%.
•    5/1 adjustable (ARM) loans had an average rate of 3.74%.

Here’s what is truly noteworthy about these latest indicators. The average rate for a 30-year fixed mortgage (the most popular loan product used by home buyers) just hit its highest level in years. To date, the average rate for a 30-year home loan hasn’t been this high since August 2013.

As Freddie Mac officials reported in their April 26 report:

“Mortgage rates increased for the third consecutive week, climbing 11 basis points to 4.58 percent. Rates are now at their highest level since the week of August 22, 2013. Higher Treasury yields, driven by rising commodity prices, more Treasury issuances and the steady stream of solid economic news, are behind the uptick in rates over the past week.”

Buying a Home Now Versus Later

Granted, the interest rates that are actually assigned to home loans can vary from one borrower to the next, and for a number of reasons. Loan type, credit scores, and discount points all play a role. The numbers above are merely averages across all of the surveyed lenders.

It’s the overall trend here that’s most important. And the trend is that average mortgage rates have shot up quite a bit over the last few months.

Home prices, meanwhile, continue to rise in most cities across the country. According to the real estate information company Zillow, the nationwide median home value rose by around 8% over the last year (as of April 2018). And while prices have slowed a down a bit in many areas, they are expected to continue moving north over the coming months — and into 2019.

These are important trends for home buyers, particularly those who need mortgage financing to complete their purchases. Rising rates can chip away at your buying power, as can rising home values. So those who are planning to buy a home in 2018 might want to consider purchasing sooner rather than later.

7 Mortgage Tips for First-Time Home Buyers

The mortgage lending process can be somewhat intimidating, especially for first-time home buyers who’ve never been through it before. There’s so much money on the line, and so many steps along the way.

Below, we have assembled a “top-seven” list of mortgage tips for home buyers. Once you finish reading this list, you’ll have a much better understanding of how it all works.

1. Study the mortgage types.

Each type of mortgage loan comes with its own set of pros and cons. Some products are ideal for certain types of buyers but disadvantageous for others. To decide which type of loan is right for you, you’ll need to know the pluses and minuses of each type. Start by learning the pros and cons of (A) conventional versus government-backed loans, and (B) adjustable-rate versus fixed-rate loans. These are your two biggest choices.

2. Consider your staying time.

How long do you plan to stay in the home? This will often determine which type of home loan is best for you. For instance, an adjustable-rate mortgage (ARM) could lower your interest rate up front, when compared to a fixed-rate mortgage. But if you stay in the home beyond the ARM loan’s introductory period, you’ll face the uncertainty of interest rate adjustments. The 30-year fixed-rate mortgage is the most popular type of loan these days.

3. Consider all types of lenders.

Many first-time home buyers don’t realize they can find mortgage financing locally, at local banks and credit unions. It’s true. So when shopping around for a lender and a loan program, be sure to look beyond the “big banks.” Don’t limit yourself. Keep your options open. If you have an existing relationship with a bank or credit union, ask them if they offer home loans.

4. Shop for the best rate.

Mortgage lenders will offer interest rates based on your credit history and credit score. When your credit is good, lenders might offer you a lower rate. When your credit is bad, the opposite can be true. Each lender defines their comfort level differently, so interest rates may vary from one company to the next. This is why it’s so important to get offers from multiple lenders.

5. Consider paying points.

One “point” is equal to one percent of the loan amount. (On a mortgage loan for $200,000, a single point would equal $2,000.) Some home buyers pay points at closing in order to lower their interest rate over the life of the loan. It’s a tradeoff. You can pay more upfront, and out of pocket, to lower your total interests costs over time. This can be a wise strategy over the long term, but it might not work out well for a shorter stay. Ask your lender to show you pricing strategies both with and without points being paid.

6. Don’t go it alone.

Most of us have friends or family members who own homes. These are good sources of information. Somebody who has been through the process and seen mortgage loans from “all sides” can often provide great information. You should also enlist the support of your real estate agent. A real estate agent is not a mortgage advisor, but most are well-informed about the mortgage process.

7. Factor in PMI.

PMI stands for private mortgage insurance. If your down payment on a house is less than 20%, your lender might require that you pay PMI. This will increase the size of your monthly payments. If you can afford to put 20% down, you’ll avoid having to pay PMI. It’s possible to get a mortgage loan with a down payment below 20%, but you’ll probably end up paying mortgage insurance of some kind — either private or government. When you get mortgage estimates from lenders, any required mortgage insurance should be included in the quote. But ask about it anyway, just to be sure.

Let us know if you are ready to start the process to purchase your first home. We would love to help you find the lender that is just right for you.