The media has extensively covered the rise in mortgage interest rates since last fall (from 3.42% last September to the current 4.1% according to Freddie Mac). However, a less covered aspect of the mortgage market is that requirements to get a mortgage have eased while rates have risen.
The Mortgage Bankers Association (MBA) quantifies the availability of mortgage credit each month with their Mortgage Credit Availability Index (MCAI). According to the MBA, the MCAI is:
“A summary measure which indicates the availability of mortgage credit at a point in time.”
The higher the index, the easier it is to get a mortgage. Here is a chart showing the MCAI over the last several months as rates have increased.
Yes. Here are two examples:
Whether you are a current homeowner looking to move to a home that will better serve your family’s current needs, or a first-time buyer looking for a starter home, it is easier to get a mortgage today than it has been at any other time in the last ten years.
There are many benefits to homeownership. One of the top ones is being able to protect yourself from rising rents and lock in your housing cost for the life of your mortgage.
"Low rental vacancies and a lack of new rental construction are pushing up rents, and we expect that they'll outpace home price appreciation in the year ahead."
In the Joint Center for Housing Studies at Harvard University's 2015 Report on Rental Housing, they reported that 49% of rental households are cost-burdened, meaning they spend more than 30% of their income on housing. These households struggle to save for a rainy day and pay other bills, such as food and healthcare.
In Smoke's article, he went on to say,
"Housing is central to the health and well-being of our country and our local communities. In addition, this (rental affordability) crisis threatens the future value of owned housing, as the burdensome level of rents will trap more aspiring owners into a vicious financial cycle in which they cannot save and build a solid credit record to eventually buy a home."
"While more than 85% of markets have burdensome rents today, it's perplexing that in more than 75% of the counties across the country, it is actually cheaper to buy than rent a home. So why aren't those unhappy renters choosing to buy?"
Perhaps you have already saved enough to buy your first home. HousingWire reported that analysts at Nomura believe:
"It's not that Millennials and other potential homebuyers aren't qualified in terms of their credit scores or in how much they have saved for their down payment.
It's that they think they're not qualified or they think that they don't have a big enough down payment." (emphasis added)
Many first-time homebuyers who believe that they need a large down payment may be holding themselves back from their dream home. As we have reported before, in many areas of the country, a first-time home buyer can save for a 3% down payment in less than two years. You may have already saved enough!
Don't get caught in the trap so many renters are currently in. If you are ready and willing to buy a home, find out if you are able.
Let's talk to determine if you could qualify for a mortgage now!
When was the last time you checked your credit score? In a 2012 study by the Federal Trade Commission, one in five people identified at least one error on their credit report. In their 2015 follow-up study, almost 70% thought that at least one piece of previously disputed information was still inaccurate.
These rampant inaccuracies are a big deal, especially if you’re thinking of buying a home soon. With a less-than-great score, you may not get preapproved for a mortgage. Or if you do get preapproval, you might get a higher mortgage rate -- which means thousand of extra dollars per year spent in interest payments.
Review every section of your report, starting with your personal information. Make sure your name, address, social security number, and birthdate are current and correct. Are your prior addresses correct? Is your employment information up to date? Is your marital status correct? Even seemingly minor errors in this section can lower your score.
Your public records will list things like lawsuits, tax liens, judgments, and bankruptcies. If you have any of these, make sure they’re correct and actually belong to you. A bankruptcy filed by a spouse or ex-spouse should not be on your report, for example. Are there tax liens that you paid off that are still listed as unpaid, or lawsuits that are more than seven years old? Those also need to go.
Are there any unusual inquiries into your credit listed in this section? An example might be a credit inquiry when you went for a test drive at a car dealer. Make sure to take note of these as well.
If there are major mistakes, you can take your dispute to the credit agencies. While you could send a letter, it’s faster to submit your report through the credit agency’s website. Experian, Transunion and Equifax all have step-by-step forms to submit reports online.
If you have old information on your report that should have been purged, such as a debt that has been paid off, you may need to go directly to the lender to resolve the dispute.
You must follow up to make sure disputes get resolved. Keep notes about who you speak to and on which dates you contacted them. Since all three companies share data with each other, any mistakes should be corrected on all three reports. If your disputes are still not corrected, you may have to also follow up with the institution that reported the incident, or a third-party collections agency that is handling it.
You should work with a loan professional to check your score. A professional will be able to guide you to whether your score is in the ‘good’ range for home buying, and their inquiry into your credit is less likely to have a negative impact on your score. Once you know your score, you can start taking action on cleaning up your credit.
Does your credit score need a boost so you can buy a home? Get in touch with us, and we can connect you with the right lending professionals to help you get the guidance you need.
There are some people that have not purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent free, you are paying a mortgage - either yours or your landlord's.
As The Joint Center for Housing Studies at Harvard University explains:
"Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return.
That's yet another reason owning often does--as Americans intuit--end up making more financial sense than renting."
Christina Boyle, a Senior Vice President, Head of Single-Family Sales & Relationship Management at Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:
"With a 30-year fixed rate mortgage, you'll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years - unlike rents which will continue to rise over the next three decades."
As an owner, your mortgage payment is a form of 'forced savings' which allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee the landlord is the person with that equity.
Interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac's latest report shows that rates across the country were 3.43% last week.
Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, now may be the time to buy.
Have you ever been flipping through the channels, only to find yourself glued to the couch in an HGTV ‘show hole’*? We’ve all been there… watching entire seasons of “Love it or List it,” “Fixer Upper,” “House Hunters,” “Flip or Flop,” “Property Brothers,” and so many more, just in one sitting.
When you’re in the middle of your real estate themed show marathon, you might start to think that everything you see on TV must be how it works in real life, but you may need a reality check.
Truth: There may be buyers who fall in love and buy the first home they see, but more often than not the process of buying a home means touring more than three homes.
Truth: The reality is being staged for TV. Many of the homes being shown are already sold and are off the market.
Truth: Since there is no way to show the entire buying process in a 30-minute show, TV producers often choose buyers who are further along in the process and have already chosen a home to buy.
Truth: Of course this would be great! Open Houses are important to guarantee the most exposure to buyers in your area, but are only a PIECE of the overall marketing of your home. Just realize that many homes are sold during regular listing appointments as well.
Truth: Similar to the buyers portrayed on the shows, many of the sellers have already spent hours deliberating the decision to list their home and move on with their life/goals.
Having an experienced professional on your side while navigating the real estate market is the best way to guarantee that you can make the home of your dreams a reality!
*Show Hole - A side effect of binge-watching. Symptoms include a sense of emptiness and depression brought on by realizing you just wasted a good portion of your life watching several seasons of a TV show or an entire movie franchise all at once when you could have managed your time better.