Creative Ways to Source a Down Payment
How to Say Goodbye to Renting and Hello to Home Ownership
Becoming a first-time homeowner takes a lot more than a desire to buy a house. It takes a lot of effort on your part to save up a down payment — which is usually a pretty good sized chunk of change — research neighborhoods, get pre-approved for a loan and other steps. Fortunately, it is quite possible to say goodbye to renting and hello to homeownership, especially when homeowners-to-be consider the following tips:
Focus on the Down Payment
In order to leave the land of rent, you are going to need a down payment — plain and simple. While it is common to put down 20 percent, some lenders now allow a much smaller amount, and first-time home buyer programs may go as low as 3 percent. While a smaller down payment may sound enticing, a 5 percent down payment on a $200K home is still $10,000 — not exactly a small sum. If saving money does not come naturally for you, don’t worry. With some relatively minor lifestyle changes you can speed up the down payment savings process. Come up with a savings plan to determine how much you need to set aside every week or month and then find ways to “find” that money in your budget. Using the $10,000 example from before, if you are determined to buy a home in two years, you’ll have to come up with about $415 a month to stash into your down payment account. Take a close look at your monthly bills and determine what you can pare down or eliminate — maybe you are paying $75 a month for a gym membership you rarely use, or you pay $40 extra for premium satellite channels that no one watches. These services can be cancelled and the money can go directly into your savings account. Eat out less, have Starbucks twice a week instead of every day and if you need to, consider a side hustle on the weekends to reach this magical monthly amount of $415.
Avoid Identity Theft
Unfortunately, the chances of becoming a victim of identity theft increase when you are buying and moving into a new home. The stacks of documents that are part of buying a home and that are filled with your personal information may accidentally fall into the wrong hands, and once you move, mail may not be routed correctly and thieves may steal your mail and your identity from your old mailbox. Prevent this situation from happening by purchasing an identity theft protection program; find a trusted company that will help safeguard your personal data. In addition to letting you know when a bank pulls your credit report and asking if you have authorized this inquiry, certain services will monitor your financial activity and alert you if anything is amiss.
Check Your Credit Report
When you start the pre-approval process for a loan and then move on to the Big Kahuna of applying for an actual mortgage, your credit report will be pulled numerous times. Your credit score will then be used to determine if you are approved for a loan, and what type of interest rate you will get. Please do not wait until you have the down payment saved and you are champing at the bit to go look at houses to check your FICO score — check your credit as early in the process as you can. If you have a credit card that has been issued through your bank, give them a call and see if they can run your report for you for free; in the cases of some credit cards, they also offer a free monthly FICO score check. Read through the report and check for any errors; this includes credit lines you never opened and delinquent payments that you know were made on time. Dispute any mistakes that you find and look for ways to boost your credit score, like paying down credit card bills and setting up automatic bill pay so you are never late with your payments.
Top 10 Threats to Real Estate in 2019
Rising interest rates and the economy are the top two current issues to watch in real estate, according to the Counselors of Real Estate’s Top Ten Issues Affecting Real Estate 2018-2019, a list of the biggest threats to the housing market. For the first time, CRE broke its annual list down into current and longer-term issues to watch during the industry’s next year.
Top Current Issues to Watch
1. Interest rates and the economy: As interest rates rise, commercial and residential real estate markets are seeing several changes, such as decreasing demand for commercial property and higher home mortgage rates. Rate increases are making homes less affordable and are also limiting the value appreciation for commercial real estate. “Lack of wage growth for all but the wealthiest population segment is dampening housing demand, and limiting consumer spending that the economy needs for growth,” the report notes.
2. Politics and political uncertainty: Tax reform and policies aimed at balancing trade with other countries will have an impact on jobs, incomes, and both commercial and residential property, according to the report. “Congressional action to relax certain bank lending and asset management regulations was also among developing trends that may improve access to capital,” the report notes.
3. Housing affordability: The lack of affordable homes across income brackets, excluding the most wealthy, is being fueled by low wages, rising mortgage rates, and the underproduction of housing for nearly two decades, according to the report.
4. Generational change/demographics: Four distinct generations are exerting influence on commercial and residential real estate, such as in office design, student and elder housing, amenities, and location preferences.
5. E-commerce and logistics: Volatility in the retail sector, such as from the increase of e-commerce, is leading to a growth in warehouses.
Top Longer-Term Issues
1. Infrastructure: Roads, bridges, airports, water and sewer lines, electricity, and public transit are rapidly deteriorating, the report notes. An estimated $4.5 trillion is needed to improve critical infrastructure by 2025, according to the American Society of Civil Engineers. “The lack of serious effort by the U.S. to address its condition and much-needed revitalization leads the list of broader and emerging issues affecting real estate,” the report notes.
2. Disruptive technology: The report highlights advances in robotic manufacturing and warehousing; driverless cars and trucks; the extensive availability and utilization of personal and transactional data (aimed at enhancing business decisions); “smart” building technology that enables efficiency; global connectivity; automated business processes; and information protection through cybersecurity. “Nearly every aspect of real estate is undergoing dramatic change as these types of technology are adopted,” the report notes.
3. Natural disasters and climate change: The ongoing threat of natural disasters and climate change can result in high-priced property and environmental damage. This includes everything from severe storms, wildfires, and floods to earthquakes, volcanic activity, and rising sea levels.
4. Immigration: “If reduced by law, will have a negative impact on new housing starts and home purchases as well as worsen the current skilled labor shortage in the U.S.,” the report cautions.
5. Energy and water: Natural resources that are vital to property and quality of life are being threatened by environmental damage (manmade and from changing climates) as well as “entangling state and local regulations that are complicating development and lack the standardization that national regulations would provide.”
CRE additionally notes several other issues making its “watch list,” including rising construction costs; urbanization/suburbanization (with suburbs adapting citylike development and amenities); tax cuts (which may positively impact commercial properties; legislation is still developing); and societal leadership (social activism among younger Americans that is fueling business and social reform at many levels).
Existing-home sales declined for the second consecutive month in January and last month’s decrease was the sharpest in three years.
Total existing-home sales slumped by 3.2% in January to a seasonally adjusted annual rate of 5.38 million, according to the National Association of Realtors. The annual rate during December 2017 was 5.56 million.
Sales are down by 4.8% compared to this time a year ago, which is the lowest annual drop since August 2014.
Once again, low inventory is at the forefront of the market’s problems. Housing inventory actually increased by 4.1% last month to 1.52 million existing homes available for sale. Good news, right? Sort of. Inventory is still 9.5% lower than a year ago and has fallen year-over-year for 32 consecutive months, according to the NAR. Unsold inventory is at a 3.4-month supply at the current sales pace.
NAR chief economist Lawrence Yun believes the market desperately needs a correction from a supply standpoint to satisfy rampant buyer demand.
“While the good news is that Realtors® in most areas are saying buyer traffic is even stronger than the beginning of last year, sales failed to follow course and far lagged last January’s pace,” Yun said. “It’s very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth.”
The good news for agents and sellers is that prices increased for the 71st consecutive month. The median existing-home price in January was $240,500, up 5.8% from January 2017.
Agents can seriously control the market by accumulating a sufficient inventory of listings. Not only can you grow your network by connecting with sellers and buyers, you’ll put yourself in a prime position to cash in on the current market conditions. Until supply meets demand, housing prices should continue to rise.
Keep generating leads and kicking the tires on prospective, hesitant sellers. Remember: those who list, last.
by Matt Barbato
Mortgage rates were mostly flat again today, despite bond market weakness (lower bond prices generally mean higher rates). Between MBS (the mortgage-backed-securities that underlie mortgage rate movement) and US Treasuries (the risk-free benchmark for all US debt/bonds), the latter fared worse. In other words, mortgage bonds outperformed Treasuries. That’s one of the reasons we didn’t see much movement in mortgage rates today.
The other reason was as simple as the shape of market movement on Friday. Bonds improved throughout the course of the day but most lenders didn’t adjust rate sheets to reflect that improvement. As such, today’s weaker bond market levels ended up being fairly close to those that were in effect when lenders last set rates on Friday morning.
The absence of change continues to be a good thing given that rates remain very close to their lowest levels in more than 8 months. Only a handful of recent days have been any better. 4.0% is the most prevalently-quoted conventional 30yr fixed rate on top tier scenarios, though a few of the aggressive lenders remain at 3.875%.
Today’s Most Prevalent Rates
- 30YR FIXED – 3.875-4.00
- FHA/VA – 3.5-3.75%
- 15 YEAR FIXED – 3.125-3.25%
- 5 YEAR ARMS – 2.75 – 3.25% depending on the lender
Ongoing Lock/Float Considerations
- Investors were relatively convinced that the decades-long trend toward lower rates had been permanently reversed after Trump became president, but such a conclusion would require YEARS to truly confirm
- Instead of continuing higher in 2017, rates instead formed a narrow, sideways range, and held inside until April. Investor perceptions are shifting such that fiscal reforms and other policy developments will need to live up to expectations in order to push rates higher. Geopolitical risks would also need to avoid flaring up (more than they already have)
- For the first time since the election, we’re in a rate environment where you wouldn’t be crazy not to lock at every little opportunity/improvement. Until/unless it’s broken, the highest rates of early-2017 mark the ceiling, and we’re now waiting to see how much lower we can go from here.
- Rates discussed refer to the most frequently-quoted, conforming, conventional 30yr fixed rate for top tier borrowers among average to well-priced lenders. The rates generally assume little-to-no origination or discount except as noted when applicable. Rates appearing on this page are “effective rates” that take day-to-day changes in upfront costs into consideration.
BY: MATTHEW GRAHAM