Category Archives: Finance

6 Smartest Moves for First-Time Home Buyers

By Sarah Max

Why It’s Finally Easier to Get a New Mortgage

By: Ian Salisbury @iansalisbury

Courtesy of Money Magazine

April 19, 2016

Rates are again low and banks are loosening up, but sterling credit still pays.

After the housing crisis, mortgage lending standards became unreasonably tight for many. In 2014, only 51% of refi applications went through, according to mortgage-software company Ellie Mae, and one that didn’t gained notoriety: That year Ben Bernanke said he was turned down when he tried to refinance the mortgage on his Washington, D.C., home shortly after stepping down as chairman of the Federal Reserve. While he didn’t say why, one theory was that his post-Fed income as a consultant was irregular.

Today, 66% of refis are approved, and that’s not the only good sign for borrowers in search of a plain-vanilla mortgage—that is, a 20% down fixed- or adjustable-rate loan guaranteed by the government-sponsored agencies Fannie Mae or Freddie Mac. As the graphic below shows, the average FICO credit score on a 30-year loan to buy a home has dropped from a high of 765 in 2010 to a recent 755, the real estate data firm CoreLogic reports. Borrowers with the average score of 695 might be able to get a conforming mortgage (loans for less than $417,000 in most of the country) for the first time in years, says Trulia chief economist Ralph McLaughlin.

Get off the bubble

The very best rates are still reserved for borrowers with top scores of 800-plus. The good news is that the difference between the rate you’ll get with an excellent score of 800 and what you’ll get with a very good score between 750 and 800 has narrowed to almost zero, says McLaughlin. “The big gap is between people in the 750 range and those in the low 700s and high 600s,” he says. With weaker credit, you could pay nearly a quarter of a point more. On a $200,000 mortgage, that’s $10,000 more over the 30-year life of the loan.

rea_graphic_modest-easing

While you should be able to get a top rate with a 740 credit score, lenders don’t follow uniform cutoffs. That score might get you lumped in with borrowers in the 700 to 750 range at one bank but the 740 to 800 range at another. The more quotes you get, the more likely you are to land the best rate you can.

Revisit your refi

Banks have gotten even more relaxed about refinancing. Once you have a record of paying your mortgage, banks typically assume you’ll pay it in the future.

Even if you already hit the refi table—say when rates fell well below 5% in 2010—check back. The Federal Reserve raised short-term interest rates in December, raising worries of higher consumer loan rates, and it may do so again in June. But mortgages typically track 10-year Treasury bond rates. Investors, uneasy about the economy’s long-term prospects, have been snapping up these bonds, pushing prices up and rates down. The upshot: The average rate on a 30-year mortgage is 3.9%, lower than at almost any time since early 2013. But with the Fed still committed to raising rates in 2016, that low rate will eventually rise. Don’t dally.

Calculator: Should I refinance my mortgage?

One way to profit now: Switch from a 30-year to a 15-year loan. If you last refinanced in 2010, your rate is probably around 4.7%, the average that year. On a $200,000 mortgage, that monthly bill is $1,036. By swapping your mortgage for a 15-year loan, you should be able to lock in 3.1%. That will bump your payment to $1,229 but let you retire the loan nearly a decade sooner and save $77,000 in interest.

Let yourself go big

In some high-cost areas, home prices have surged: Median home prices in San Jose have doubled off their housing-crisis lows. Prices are up 60% in Seattle and 45% in Washington, D.C. That can be a problem. Loans for more than $625,500 in high-cost areas and $417,000 in the rest of the country don’t qualify for guarantees from Fannie or Freddie, making them harder to get.

While overall caps haven’t changed in more than a decade, limits in 39 counties across the country, including areas near Boston and Seattle, were raised last year. If your home failed to qualify for a Fannie- and Freddie-eligible loan before, check again. (For limits by county, go to the data section of fhfa.gov.)

What’s more, banks are starting to warm to customers who need these bigger loans, known as jumbos, though they are still skittish when it comes to credit. The average FICO score on a jumbo loan is 770 for purchases and only slightly lower for refinancings. But if you can meet that criteria, you’ll pay a rate of just 3.8%.

Read Next: How to Master Shopping for a Mortgage Online

Finally, there’s one jumbo option to be leery of. You may be offered an interest-only loan, which is initially more affordable because you don’t pay principal until years later. Stay away: “These are one of the products that led to the downturn,” says HSH‘s Tim Manni. “Now we are starting to see them surface. It’s risky business.”

Fannie Mae, Freddie Mac Ease Lending Standards

LAtimes_Business

 

Fannie Mae, Freddie Mac reach deal to ease mortgage lending

By E. Scott Reckard, Tim Logan , Los Angeles Times

Mortgage financing giants Fannie Mae and Freddie Mac, together with their federal regulator, have drawn up rules aimed at loosening constricted lending standards to make mortgages more affordable and easier to get for those with less than stellar credit.

The move comes in response to criticism that banks have clamped down too much on loan criteria to avoid legal liability for any mortgages they sell to Fannie or Freddie that may go bad in the future.

The two companies, seized by the government in 2008 as they teetered on financial collapse during the Great Recession, turned on lenders over mortgages that fell apart as the market melted down in 2007. Many loans were poorly underwritten, with some lenders accepting simply a borrower’s statement on income rather than verifying it.

Bankers have been forced to pay tens of billions of dollars in recent years to settle assertions that the bad loans violated representations and warranties made when the loans were sold and demanding that the banks repurchase them.

In reaction, lenders have drawn their purse strings tighter than Fannie and Freddie require when evaluating loan applications, saying the threat of repurchase demands makes the risks worth taking only for borrowers with excellent credit profiles.

The clearer guidelines are intended to convince lenders that they won’t regret lending to higher-risk but still worthy borrowers, according to people briefed on the matter, who spoke on condition of anonymity because the program won’t be announced formally until next week.

Under the new rules, the financing firms would delineate what constitutes cause for requiring banks to repurchase loans. They also would reduce the minimum down payment to 3% from 5% generally needed to qualify for selling the loans to Fannie and Freddie.

The changes resulted from discussions that trade group Mortgage Bankers Assn. arranged between lenders and Fannie, Freddie and their regulator, the Federal Housing Finance Agency.

Fannie and Freddie are the biggest pillars of support for U.S. housing, guaranteeing 59% of all mortgages being written. They are regulated by the Federal Housing Finance Agency, which has tried to address the lenders’ complaints previously with changes that produced little effect on tight standards.

An FHFA rule that took effect in January 2013 said loans on which the borrower paid as agreed for the first 36 months would not be candidates for repurchasing unless they were clearly fraudulent or seriously overstated the borrowers’ qualifications.

Earlier this year, the FHFA further loosened its rules so that loans would be deemed solid even if a borrower fell delinquent for 30 days on two separate occasions during the first 36 months.

Fannie and Freddie guidelines set a minimum credit score at 620, once widely regarded as the cutoff between prime and subprime borrowers. But this year the average loan guaranteed by Freddie has a 742 credit score, high in the “excellent” credit range and down only a little from 756 in 2012.

The reduction in the minimum down payment for most Fannie and Freddie loans to 3% brings the requirement in sync with the Federal Housing Administration, which insures loans made to first-time and lower-income borrowers.

A few Fannie and Freddie programs already offer a 3% down payment. The giant mortgage companies generally require borrowers with down payments of less than 20% to buy private mortgage insurance to offset the greater risk, and will do so under the new guidelines.

Fannie and Freddie buy mortgages and issue debt securities backed by payments on the loans. The companies guarantee to pay investors themselves if the borrowers go delinquent.

Tight lending standards have held back home purchases by average buyers in recent years, slowing the nation’s economic recovery.

The Urban Institute estimates that 1.2 million more home loans would have been made in 2012 had the lending standards common in 2001 — well before safeguards were tossed out the window during the housing bubble — been in place.

Investors paying all cash for foreclosed properties buoyed housing markets for several years, but a decline in distressed sales and rising home prices have reduced those once common transactions.

The California Assn. of Realtors last week projected that home sales in the state this year would fall nearly 65,000 short of their initial forecast, in part because of tighter mortgage lending.

At No. 1 mortgage lender Wells Fargo & Co., Chief Financial Officer John R. Shrewsberry said this week that the standoff over mortgage repurchases has created two mortgage markets, only one of which — for affluent borrowers with well-established credit — serves borrowers well.

The low- to middle-income and minority borrowers most often thwarted by the tougher lending standards are also the same people who were hit hardest in the mortgage crisis, said Paul Leonard, California director of the Center for Responsible Lending.

“Those folks took it on the chin the hardest and have been least able to get up off of the mat,” Leonard said. “That’s a serious challenge in terms of building wealth.”

“There’s a perception of a lot of risk in lending to these communities,” he said. “Understandably, after the crisis the pendulum of mortgage credit standards swung to a far extreme. It’s now working its way back to a more moderate position.”

David Stevens, president of the Mortgage Bankers Assn. and a former FHA commissioner in the Obama administration, said his group has been in talks with the White House about ways to devise clearer guidelines.

“You’ve got to give confidence to lending institutions that they’re not going to be held accountable for minor mistakes,” Stevens said. “All the incentives [for lenders] right now are not aligned around prudent judgments. They’re aligned around complete risk avoidance for fear of retribution.”

Article courtesy of the Los Angeles Times

Print

Sales of $1-million-plus homes went through the roof!

Lynne has been saying the market is red hot!

Here is what the Los Angeles Times has to say about it!

LATime_RE

In California last year, 39,145 homes were sold for $1 million or more, a six-year high. Celebrities and flippers did their part.

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January 30, 2014

By Lauren Beale

 

Crowned by the sale of a Malibu estate for $74.5 million, the number of houses sold last year at $1 million and above statewide jumped to a six-year high, according to real estate information service DataQuick.

In the strongest showing, the number of homes sold at $2 million and up set state, Southern California and L.A. County records.

“The luxury market did bounce back last year,” said housing market analyst Paul Habibi, a real estate lecturer at UCLA’s Anderson School of Management. “A lot of people were stepping back into the waters.”

Among them were lucrative investors looking for a place to park their dividends.

“The stock market lined the pockets of high-end buyers,” Habibi said. “That translated into home purchases.”

Appreciation-fueled gains in home equity allowed others who had been waiting on the sidelines to move up to bigger and better digs, releasing pent-up demand from recent years.

“It’s a herd mentality,” said Westside Estate Agency co-founder Stephen Shapiro, who last year saw well-priced homes drawing multiple bidders. “When people start paying more for houses, other people don’t mind paying more.”

Statewide, 39,145 homes changed hands for $1 million or more in 2013, up 45% from the year before and the best showing since 2007, DataQuick said. This slice of the market outpaced overall sales, which were essentially the same as in 2012, down only 0.6%.

An all-time high of 7,383 homes sold in the state at the $2-million-and-above mark, up 33% from the 5,536 that changed hands in 2012. Southern California broke a record with 4,514 sales at $2 million and above, and L.A. County also eclipsed previous highs with 2,628 sales.

In L.A.’s ultra-luxury market, locals, foreigners, flippers and celebrities came to the party, with billionaires playing musical houses in the $20-million-and-up price range.

Oaktree Capital Management Chairman Howard Marks had the priciest sale statewide, unloading his 9.5-acre estate in Malibu in an off-market deal for $74.5 million. The beachfront property includes a 15,000-square-foot main house, two guesthouses, a gym and a swimming pool.

Just down the street, “Karate Kid” producer Jerry Weintraub had the next highest 2013 sale for L.A. County, based on public record searches conducted by PropertyShark.com and Coldwell Banker. His bluff-top seven-acre compound, with two guesthouses, a swimming pool, a tennis court and a guardhouse, sold for $41 million.

“Our market has finally caught up with what is happening globally,” said Coldwell Banker’s Bobby Syed, who brokered an off-market deal last year of a 12,000-square-foot Beverly Hills estate priced in the $37-million to $39-million range. “A lot of foreign money is coming in, particularly to Beverly Hills and Bel-Air, which are still very cheap by comparison” to other major cities.

The 2.5-acre property he sold boasts a large flat area and expansive vistas, Syed said. “It was the biggest view from here to Taiwan,” he said.

He represented the buyers and the sellers, who had bought the property in the 1970s from actress Elizabeth Taylor.

Serial house buyer and talk show host Ellen DeGeneres was among celebrities who did their part to push high-end home sales, buying a 13-acre estate centered on a Tuscan-style villa in Santa Barbara County’s Toro Canyon that had been listed at $26.5 million.

She then started this year off with another big purchase, snagging a modernist trophy home on the Westside for $39.9 million.

Madonna pitched in too, ditching her 1.25-acre compound in Beverly Hills for $19.5 million.

Getting in on the high-end home-flipping act was retired actor Kristoffer Winters, who renovates homes with actor Jeremy Renner. Winters and his investors raked in $24 million for a mansion on two acres in Holmby Hills. The Roaring ’20s Art Deco-style house, reached by a cobblestone driveway, includes five fireplaces, six bedrooms, 11 bathrooms and 10,005 square feet of living space.

Statewide, areas with the highest number of sales at $1 million-plus were led by Manhattan Beach, Hillsborough and La Jolla. Brentwood and Beverly Hills came in sixth and seventh, respectively.

In some communities, such as Santa Monica, Rancho Santa Fe, Atherton and Los Altos, almost all home sales were in the $1-million-and-up category, partly because of rising prices.

“A lot of homes have just popped up over the $1-million mark with appreciation,” said DataQuick analyst Andrew LePage.

View the Los Angeles Times Article Here

Contact Lauren Beale at: lauren.beale@latimes.com

Who else thinks Suze Orman is adorable?!!

100010081-suze-orman-headshot-2013.600x400Suze Orman changes homebuying advice

Now that we are seeing a rebound in the housing market, it is time for a new home buying strategy says Suze Orman. “Financial advice needs to change according to what is happening in the economy,” she says.

In today’s economy, with interest rates still low, relatively speaking, and home prices leveling out, Orman says potential homebuyers no longer need to make a down payment of 20 percent. “I’m fine if you can get a mortgage with 10 percent down,” says Orman. In addition, she still maintains that:

• You get a 30- or 15-year fixed mortgage

• You qualify for a 4 percent to 4.5 percent interest rate

•Your mortgage payment, property tax, insurance and PMI (private mortgage insurance), is equal to or less than your current rent

•Your job is secure

These rules shouldn’t be too hard to follow. Over the last three months, interest rates for a 30-year fixed mortgage have been hovering around 4.5 percent and the rates for a 15-year fixed mortgage around 3.6 percent.

Home prices are also expected to stabilize more so because investors, who have been driving up the home bidding, are expected to exit the market soon. According to a survey by ORC International, 48 percent of investors plan to curtail home purchases. (See Analysis: Waning investor demand opens door for first-time U.S. homebuyers)

While this is one of the best times to re-enter the market or get into the market, Orman says you must still be wise and make sure you have an eight-month emergency fund in case “something happens and you don’t have money coming in.”

See what else Suze Orman has to say every Saturday at 9 p.m. EDT on CNBC.

See more of the Suze Orman Show