This month, Arch Mortgage Insurance released their spring Housing and Mortgage Market Review. The report explained that an increase in mortgage rates and/or home prices would impact monthly payments this way:
- A 5% increase in home prices increases payments by roughly 5%
- A 1% rise in interest rates increases payments by roughly 13% or 14%
That begs the question…
What if both rates and prices increase as predicted?
The report revealed:
“If interest rates and home prices rise by year-end in the ballpark of what most analysts are forecasting, monthly mortgage payments on a new home purchase could increase another 10–15%. That would make 2018 one of the worst full-year deteriorations in affordability for the past 25 years.”
The percent increase in mortgage payments would negatively impact affordability. But, how would affordability then compare to historic norms?
Per the report:
“For the U.S. overall, even if affordability were to deteriorate as forecasted, affordability would still be reasonable by historic norms. That is because the percentage of pre-tax income needed to buy a typical home in 2019 would still be similar to the historical average during 1987–2004. Thus, nationally at least, even with higher rates and home prices, affordability will just revert to historical norms.”
What about home prices?
A decrease in affordability will cause some concern about home values. Won’t...
With home prices on the rise and buyer demand strong, some sellers may be tempted to try and sell their homes on their own (FSBO) without using the services of a real estate professional.
Real estate agents are trained and experienced in negotiation and, in most cases, the seller is not. Sellers must realize that their ability to negotiate will determine whether or not they get the best deal for themselves and their families.
Here is a list of some of the people with whom the seller must be prepared to negotiate if they decide to FSBO:
- The buyer who wants the best deal possible
- The buyer’s agent who solely represents the best interest of the buyer
- The buyer’s attorney (in some parts of the country)
- The home inspection companies, which work for the buyer and will almost always find some problems with the house
- The termite company if there are challenges
- The buyer’s lender if the structure of the mortgage requires the sellers’ participation
- The appraiser if there is a question of value
- The title company if there are challenges with certificates of occupancy (CO) or other permits
- The town or municipality if you need to get the CO permits mentioned above
- The buyer’s buyer in case there are challenges with the house your buyer is selling
- Your bank in the case of a short sale
The percentage of sellers who have hired real estate agents to sell their homes has increased steadily over the last 20 years. Let’s get...
When it comes to buying a home, whether it is your first time or your fifth, it is always important to know all the facts. With the large number of mortgage programs available that allow buyers to purchase homes with down payments below 20%, you can never have too much information about Private Mortgage Insurance (PMI).
What is PMI?
Freddie Mac defines PMI as:
“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.
Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”
As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:
“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.”
According to the National Association of Realtors, the average down payment for all buyers last year was 10%. For first-time buyers, that number dropped to 5%, while repeat buyers put down 14% (no doubt aided by the sale...