Courtesy of the California Association of Realtors
By Sarah Max
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.
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.”
Who would have guessed that these remodeling projects would be the most popular!
Courtesy of the California Association of Realtors
A new breed of homes provides ‘pet suites’ for owners’ furry friends
Upstairs, the master bathroom has a spa built for him and her modeled after a five-star resort, with dual showers and porcelain tile. Downstairs, there’s another spa, but this one is strictly for paws and fur.
Each floor plan for the new homes being built in Brea, in a development known as Avignon at Blackstone, includes an optional 170-square-foot “pet suite.” The suite includes a tiled washing station with leash tie-downs and a hand-held sprayer, a pet dryer, a cabinet with built-in bedding, a stackable washer/dryer combo (separate from the human laundry room), a flat-screen TV and a patio door that opens to a dog run.
The developer, Irvine-based Standard Pacific Homes, says it’s building homes with the lap dog of luxury in mind.
“It comes back to enhancing the lives of our homeowners who are pet owners,” said Danielle Tocco, a spokeswoman for Standard Pacific.
Pet-friendly residential design is gaining popularity as owners become more sensitive to their pets’ needs, said Jennifer Wolch, dean of the College of Environmental Design at UC Berkeley.
“Such inclusive designs range from apartment complexes with dog-washing facilities, cat-friendly interior design, dog runs, trails and parks, and entire communities oriented toward living with companion and other animals,” Wolch said.
But Michael Bianchi, managing broker for Berkshire Hathaway HomeServices California Properties, said that after polling his network of 150 agents about the pet suites, he thinks Standard Pacific has taken pet-friendly offerings to a new level.
“Standard Pacific is the only builder offering it as a package,” Bianchi said. “The reality is, the amount of money people are spending on their pets is going through the roof. So why wouldn’t they?”
The home builder is just one of many responding to a surge in pet ownership — nearly 70% of American households have pets — and spending, according to a pet industry survey. The companies are also capitalizing on a trend that experts call “pet humanization.” Owners now think of their furry friends as children, and have begun to redefine what they consider necessary supplies, services and treatments, economists and pet industry experts say.
Wealthy pet owners have long splurged on high-end offerings that in many ways mirror what’s available for humans — hotel-style kennel accommodations, fitness programs, expensive veterinary treatments and organic, gluten-free foods, some even prepared by private chefs.
Dogs at D Pet Hotels in Hollywood are boarded in “suites,” including some outfitted like human bedrooms. Grooming options include full-body massages and detoxifying thermal wraps, and a chauffeur service will pick up lucky dogs in a Bentley, Rolls-Royce or Lamborghini Gallardo. Owner Alissa Cruz said her clients want to provide such creature comforts for dogs that love them unconditionally, like children who never talk back.
Beverly Hills Caviar offers a line of caviar for dogs and cats. It began in 2009 as a kind of a joke, owner Kelly Stern said. But she now has about 100 regular customers for the stuff — salmon roe for dogs and trout eggs for cats — which runs about $7 per ounce.
“Some dogs, you know, they’re just born into luxury,” Stern said. Her customers include celebrities and private chefs who cater to the rich — and their pets.
But now even those who aren’t millionaires are pampering their pets.
America’s pet spending is up across the board, not just among the jet set, and is expected to reach about $60 billion in 2014, according to some estimates. That’s an increase of 70% over what it was a decade ago.
More than half the pet market — about $31 billion — is made up of owners who earn more than $70,000 a year, said Michael Dillon, president of Dillon Media, which publishes an annual report on the pet industry. But pet spending is skewing toward even higher income levels, he said.
“The long-term trends show consumers, households making over $100,000 a year have really ramped up spending,” Dillon said.
Pet suites in a range of sizes are offered at 27 of Standard Pacific’s communities throughout the country with prices beginning at $1,500, but typically around $8,000 or more, spokeswoman Tocco said.
The Avignon community features the largest layout, which adds about $35,000 to home prices that start at $1.3 million. A buyer from China has already ordered a house with a pet suite even though construction has yet to begin on the new homes, Standard Pacific said.
Melanie Dean lives in a Standard Pacific home near Dallas with her husband and two young sons. She said the pet suite was one of many things they loved about the house when they first saw it, though they had no pets at the time. They’ve since adopted a boxer named Lola.
“She’s a part of the family,” Dean said. “Everybody else has a room — so does she.”
Dean said she thought it was a unique idea, but didn’t realize how convenient the suite would be. It has helped her keep Lola’s things organized, she said, and has saved her the hassle and expense of taking the puppy to a groomer.
“If we were to move again, now that I’ve had this space for Lola, I would want it again,” Dean said. “It’s hard to go backward.”
Dean said she didn’t know anyone else with a pet suite when they moved in last spring. Now Standard Pacific is building a home for her parents down the street. It’ll have a pet suite too.