NEW YORK – July 30, 2015 – First-time homebuyers are emerging as a bigger force in the housing market. But getting approved for a mortgage, finding the right home and staying within budget can pose a challenge for them.
Bankrate.com notes some of the most common first-time buyer mistakes:
1. Judging only the mortgage payment: Some first-time homebuyers mistakenly focus only on the monthly mortgage payment, which they can afford, and forget that a home comes with other expenses, which they can’t afford.
“They have an idea of what their mortgage payment is going to be, but they don’t realize there’s much more to it,” says attorney Rafael Castellanos, a managing director at Expert Title Insurance. Property insurance, taxes, homeowner association dues, maintenance and utility bills can add up too.
2. Emptying out their savings for a downpayment: It’s a mistake to spend everything in the savings account for a downpayment, says Ed Conarchy, a mortgage planner and investment adviser at Cherry Creek Mortgage in Gurnee, Ill. “Some people scrape all their money together to make the 20 percent downpayment so they don’t have to pay for mortgage insurance, but they are picking the wrong poison because they are left with no savings at all,” he says. “I’d take paying for mortgage insurance any day over not having money for rainy days. Everyone – especially homeowners – needs to have a rainy-day fund.”
3. Getting new credit before the deal is closed: When borrowers prequalify for a loan, they need to avoid big-ticket purchases until the loan closes. Lenders pull credit reports before the closing to make sure the borrower’s financial situation has not changed since the loan was approved. Any new loans on their credit report could cause a closing delay.
First-time buyers “sign the contract and they want to buy new furniture for the house or a new car,” says Steve Anderson, a broker and owner at RE/MAX Benchmark Realty in Las Vegas. “I remember one case where, just before closing, the buyer drove to the office and says, ‘Look at my brand-new car.’ I told them, ‘You’d better go back to that dealership.'”
Source: “5 First-Time Homebuyer Mistakes to Avoid,” Bankrate.com (June 2015)
MIAMI – June 12, 2015 – Is removing a squatter a civil matter or a crime? It depends.
Overall, two things impact squatting: The police department system in the jurisdiction and its procedures for handling a squatting complaint, and the steps a property owner takes when he or she first discovers the squatter.
Miami-Dade County police noted an increase in squatters last year. Working with local groups, including Realtors, the city proposed and passed an ordinance creating a system for dealing with squatter complaints.
Following the change, the Miami Association of Realtors hosted a “Removing Illegal Occupants from Residences” seminar. An important distinction noted by Miami-Dade Police Department Sgt. David Goldberger during the conference had to do with an owner’s reaction to a squatter.
Goldberger’s advice specific to Miami-Dade County’s squatting rules:
Squatters can be removed under trespassing laws, but officers must verify certain information and documentation before they can act.
If an owner identifies a squatter, he or she should call the police bureau (in Miami-Dade it’s the Economic Crimes Bureau) during normal business hours. Squatting is not considered a “911” emergency telephone call.
If calling after hours, request that a uniform officer go to the home.
If the property is located within an incorporated city’s boundaries rather than unincorporated Miami-Dade County, ask the local police department about their policy. If the response is, “It’s a civil matter,” you should verify that. Under certain circumstances, squatting does become a civil matter.
Owners or their representatives with a squatter complaint must provide proof of ownership. Acceptable documentation is a writ of possession, a certified copy of the certificate of title or a certified copy of the final summary judgment. Agents must have a limited power of attorney to act on the owner’s behalf.
After documentation is verified, the owner/representative needs to provide a verbal trespass warning in the officer’s presence. Under the trespass warning, the squatter will be instructed to leave immediately or within a reasonable timeframe (for example, 30 minutes to gather belongings).
Important note: The owner/representative should not give the squatter additional time to get out (such as 24 hours to clear everything), because doing so gives the squatter permission to remain in the home. That “permission” could make the problem a civil rather than criminal matter.
It’s okay for the owner/representative to make arrangements with the squatter to return and gather the remainder of their belongings. An officer will respond if needed to keep the peace.
A substantial majority (80%) of industry experts polled this week by Bankrate.com think rates will continue to go up over the short term. Only 20% think they’ve peaked, and none believe they’ll lower.
WASHINGTON (AP) – June 12, 2015 – Average long-term U.S. mortgage rates jumped this week to their highest levels this year, with the key 30-year rate topping 4 percent for the first time since late 2014.
Rates have been surging amid signs of improvement in the economy, which have pushed bond prices lower and bond yields higher. Mortgage rates often follow the yield on the 10-year Treasury note, which reached a high for the year of 2.49 percent Wednesday. That was up from 2.37 percent a week earlier.
The increase in mortgage rates has come during the height of the spring homebuying season.
Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage climbed to 4.04 percent this week from 3.87 percent a week earlier. It’s the first time the benchmark average rate has exceeded 4 percent since last November, when it was 4.02 percent. The rate on 15-year fixed-rate mortgages increased to 3.25 percent from 3.08 percent.
A striking sign of improvement in the economy came last Friday, when the government reported that U.S. employers added 280,000 jobs in May. That was a surprisingly robust tally at a time when consumers are hesitant to spend and some key industries like energy and manufacturing have been struggling.
The report from the Labor Department showed that employers seem confident that the economy is regaining its footing after shrinking at the start of the year and that their customers’ demand will accelerate. And the new data led many economists to predict that the Federal Reserve will raise interest rates as early as September because the economy might no longer need the stimulus of near-zero rates. The Fed has kept them at that level for more than six years.
Despite their recent surge, though, mortgage rates remain low by historic standards. A year ago, the average 30-year rate was 4.20 percent and the 15-year was 3.31 percent.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for a 30-year mortgage was unchanged from last week at 0.6 point. The fee for a 15-year loan rose to 0.6 point from 0.5 point.
The average rate on five-year adjustable-rate mortgages increased to 3.01 percent from 2.96 percent; the fee declined to 0.4 point from 0.5 point. The average rate on one-year ARMs fell to 2.53 percent from 2.59 percent; the fee remained at 0.2 point.
NEW YORK – June 9, 2015 – The period where borrowers could lock in a 3.5 percent rate on a 30-year fixed-rate mortgage may have ended. Mortgage rates are showing signs of inching up.
Rates are “definitely in panic mode,” Matt Weaver, senior mortgage loan originator with PMAC Lending Services, told CNBC. “A lot of refinance clients are moving to locks immediately because the Fed talk is starting to be an eye opener for everyone.”
Weaver says there has been a rush to lock in a rate before they edge higher after mortgage rates, which can fluctuate every day, spiked last Wednesday. Mortgage rates loosely follow the yield on the 10-year Treasury.
“If the Wednesday surge of Treasury yields persists, the impact on mortgage rates is likely to result in a bout of affordability shock to many housing markets across the country,” says Len Kiefer, deputy chief economist at Freddie Mac.
The 30-year fixed-rate mortgage is up three-eighths of a percentage point since mid-May, averaging about 4.125 percent.
While three-eighths may not sound like much of an increase, “it’s more of what it’s going to look like, where we’re going. Is it a train that’s not stopping?” Weaver says. “When we see an eighth, a quarter, now it’s starting to become typical language. We would normally see a little bit of a pullback, and then it goes up again, and now that’s not happening. We’re slowly steadily increasing.”
Freddie Mac Lists Steps To Help Distressed Borrowers Avoid Foreclosure Relief Scams
Freddie Mac issued a list of “red flags” in a blog entry Monday for distressed borrowers seeking help with their mortgage to watch out for in order to avoid fraud.
Citing a Detroit Free Press story from April about Anthony Carta, who was sentenced to 30 to 99 years in prison for perpetrating a “faith-based” foreclosure relief scam in which he promised to help distressed borrowers avoid foreclosure in exchange for an up-front fee. Carta marketed the alleged foreclosure relief services of his company, Freedom by Faith Ministries, through various unwitting Christian channels from 2009 and 2013 and collected money but did not provide any of the promised services. For his part in the scam, Carta was ordered to pay $400,000 in restitution to more than 300 victims.
On the blog, Freddie Mac points out the number of recent mortgage relief or foreclosure relief scams that were perpetrated by exploiting the members of a particular community.
“The idea behind ‘affinity fraud’ is to exploit the baseline trust that generally exists within an ‘affinity group’ – i.e. a group defined by a common heritage, language, ethnicity, workplace, or circle of friends,” Freddie Mac wrote. “What happened in Detroit is a sad reminder that no group is inherently safe from fraudsters, including devout and religious people.”
One of the steps Freddie Mac lists for borrowers to take in order to avoid being the victim of a scam is, first and foremost, calling your servicer. The borrower’s servicer is the only one who can modify the mortgage or finalize a loss mitigation plan – anyone other than the servicer who professes the ability to do so is a scammer, especially if they require the payment of an upfront fee.
Second, outside of your servicer, borrowers can receive reliable advice by seeking free assistance from a HUD-approved housing counselor. Freddie Mac also says on the blog post that anyone who promises to pay the mortgage and rent the house back to the borrower in exchange for the title to the house should raise an immediate red flag. The GSE also warns borrowers against signing documents with errors or blank spaces, documents they don’t understand, or documents that transfer the title of the home – since genuine mortgage workouts or home retention solutions will never require the title of a home to be transferred.
Freddie Mac encourages anyone who suspects fraud to report it by calling (800) 4FRAUD8 or emailing email@example.com.
Buying a home costs money. Lots of money. There’s the down payment and the monthly mortgage payment and the maintenance and taxes and the insurance and… Are you overwhelmed yet?
It might seem like so much that you just want to put off the house hunt and sign that yearlong lease with your landlord (even though he upped your rent 25% and will likely do the same next year).
But this is going to blow your mind: Even with all of those costs, you still stand to save more than $200,000 over the next 30 years if you buy right now.
“But that’s over the course of 30 years!” you say. “I’m thinking about my money right now!” you say.
Well, get this: Wait just one year, and you throw nearly $19,000 in savings down the drain. The penalties are so high because mortgage rates are forecast to increase and because home prices are rising quickly, according to our chief economist, Jonathan Smoke.
Yep, that’s right. There’s a financial benefit—and, similarly, a financial penalty—for every single day you pay your landlord instead of your mortgage company. At a national level, the 30-year financial benefit of owning today is $217,726, according to our economic data analysts, who crunched the numbers to determine the relative merits of buying vs. renting. (Their work doesn’t capture qualitative advantages such as more control over your living situation, flexibility with pets, and, generally, more options—all things many potential home buyers would argue are equally, if not more, important when deciding whether to take the plunge.)
Postpone for one year, and you’re losing out on an estimated $18,672 in savings. Delay for three years, and that figure jumps to $54,879.
“We’re at a critical juncture: Rents, home prices, and mortgage rates are all expected to rise significantly over the next several years,” Smoke says. “That means the cost of delaying homeownership will go up even more sharply, if you wait three years or even one. It’s much like the decision to start contributing to a 401(k). Delay contributing, and you lose out on the compounding returns.”
‘Financial calculus’ confirms it’s wise to buy ASAP
Smoke and his team used a lot of factors to come up with these estimates, and they made quite a few assumptions as well.* For instance, they assumed that any money saved by renters would be invested, and that the investment would enjoy a compound annual growth rate of 5% (that’s consistent with conservative long-term expected market returns).
We know—these are some pretty big assumptions. How many renters are actually saving and investing? But we’re telling you about these assumptions, because the bottom line is this: Our data team stacked the deck against owning and still came out with eye-popping figures in favor of buying.
“The financial calculus confirms it’s wise to buy—and buy as soon as possible,” Smoke says.
That’s because no matter how you slice it, you can’t deny a few key facts that make the case for buying: Nationally, it’s cheaper right now to buy than to rent, home prices are expected to appreciate, and, while renting is subject to inflation, homeownership costs are locked.
In some markets, financial ‘penalty’ is over $1M
But, as always, it depends on where you go.
For example, in Bismarck, ND, the financial benefit of buying is actually negative. That means you’d spend $12,350 more over the next 30 years to buy instead of rent. That’s because in places such as Bismarck, rents are low, and while home prices have risen dramatically over the past few years, they aren’t expected to rise much in the future. That seems like an incentive to buy, right? Not necessarily. Think about this in terms of home appreciation. Because home prices may have peaked for the foreseeable future, you don’t stand to gain much from owning a house here.
The following markets have the least financial benefit over the next 30 years:
But travel west to California and you’ll see an entirely different picture. In Santa Cruz, for instance, you stand to save more than $1 million over the next 30 years if you buy today. That’s because both rent and home prices are skyrocketing, thanks to strong economic drivers such as job growth, population growth, and household growth.
But it’s still hard to get a foot in the door: A median-income household in Santa Cruz could afford less than 10% of the homes available for sale there.
In order to realize a positive financial benefit from buying a house, owners have to wait for “break-even time periods”—when the transaction costs of buying and selling cancel out. Nationally, that wait time is just over three years. In markets that have higher home price to rent ratios, such as San Jose, CA, and New York City, owners normally need to wait longer—as long as six to seven years.
“From a pure financial perspective, you have to be committed to staying longer term,” Smoke says about those high-cost markets. “That’s one of the reasons why rents are also high and getting higher.”
The 30-year financial benefit of owning in the following markets exceeds $500,000:
So, in some places you win, in other places you lose. That kind of means it all balances out, right?
Nope, Smoke says: Nearly 90% of the markets (335 of ‘em) produce a financial benefit of at least $100,000 from owning over 30 years. In addition, almost a quarter of the nation’s markets reap a financial return greater than the national average.
We’re not exactly math majors, but we’re picking up what Smoke is putting down. It might feel challenging to come up with a down payment, but we never saw the savings spelled out in such plain language. So BRB—gotta go buy a house.
*Our data analysts used the following assumptions to calculate the relative merit of buying vs. renting:
They factored in a 20% down payment with a closing cost of 3%. Maintenance and annual improvement costs are 1%, and the opportunity cost of capital is 5% (average U.S. investors required return on equity investments).
They assumed a marginal tax of 25% and the cost of selling a house is 8% of the sale price. Capital gains tax is 15% beyond $500,000 (for married couples). Rent brokerage is 1% of first year’s rent and rent insurance is 1% of monthly rent.
IRVINE, Calif. – June 4, 2015 — RealtyTrac’s Q1 2015 U.S. Home Purchase Downpayment Report finds that homebuyers continue to put less money down on a new home.
In the first quarter of 2015, the average downpayment (single family homes, condos and townhomes) was 14.8 percent of the purchase price, down from 15.2 percent the previous quarter and from 15.5 percent a year earlier.
The average downpayment for FHA purchase loans in the first quarter was 2.9 percent of the purchase price, while the average downpayment for conventional loans was 18.4 percent.
As a percentage of all loan originations, the number of FHA loans rose each month during the first quarter: from 21 percent in January to 22 percent in February to 25 percent in March.
“Downpayment trends in the first quarter indicate that first time homebuyers are finally starting to come out of the woodwork, albeit it gradually,” says Daren Blomquist, vice president at RealtyTrac. “New low downpayment loan programs recently introduced by Fannie Mae and Freddie Mac, along with the lower insurance premiums for FHA loans that took effect at the end of January, are helping, given that first time homebuyers typically aren’t able to pony up large downpayments.”
Blomquist also credits a decline in the number of institutional investors.
More buyers were approved for low downpayment loans in the first quarter. The share of low downpayment loans – defined as ones with a loan-to-value ratio of 97 percent or higher, or 3 percent downpayment – was 27 percent of all purchase loans in the first quarter, up from 26 percent in the fourth quarter and also 26 percent a year ago.
However, the share of conventional loans that were low downpayment decreased throughout the quarter, from 11 percent in January and February to 10 percent in March. Meanwhile, the share of lowdownpayment FHA loans increased from 83 percent in both January and February to 84 percent in March.