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Why Is There So Much Paperwork to Sign to Get a Mortgage? | Simplifying The Market

We are often asked why there is so much paperwork mandated by the bank for a mortgage loan application when buying a home today. It seems that the bank needs to know everything about us and requires three separate sources to validate each and every entry on the application form.

Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.

There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

1. The government has set new guidelines that now demand that the bank prove beyond any doubt that you are indeed capable of affording the mortgage.

During the run-up in the housing market, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again.

2. The banks don’t want to be in the real estate business.

Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.

However, there is some good news in the situation.

The housing crash that mandated that banks be extremely strict on paperwork requirements also allows you to get a mortgage interest rate as low as 3.43%, the latest reported rate from Freddie Mac.

The friends and family who bought homes ten or twenty ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s). If you went to the bank and offered to pay 7% instead of less than 4%, they would probably bend over backwards to make the process much easier.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.

Source: Keeping Current Matters

By | Published: | In: Las Vegas Real Estate

Don’t Get Caught in the Rental Trap! | Simplifying The Market

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.

Don’t Become Trapped

Jonathan Smoke, Chief Economist at realtor.com, reported on what he calls a “Rental Affordability Crisis.” He warns that,

“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.

It’s Cheaper to Buy Than Rent

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?”

Know Your Options

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!

Bottom Line

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 get together to determine if you could qualify for a mortgage now!

Source: Keeping Current Matters

By | Published: | In: Las Vegas Real Estate

How Supply & Demand Impacts the Real Estate Market [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • The Concept of Supply & Demand is a simple one. The best time to sell something is when supply of that item is low & demand for that item is high!
  • Anything under a 6-month supply is a Seller’s Market!
  • There has not been a 6-months inventory supply since August 2012!
  • Buyer Demand continues to out-pace Seller Supply!

Source: Keeping Current Matters

By | Published: | In: Las Vegas Real Estate

How Scary is the Housing Affordability Index? | Simplifying The Market

Some industry pundits are saying that the housing market may be heading for a slowdown. One of the data points they use is the falling numbers of the Housing Affordability Index, as reported by the National Association of Realtors (NAR).

Here is how NAR defines the index:

“The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.”

Basically, a value of 100 means a family earning the median income earns enough to qualify for a mortgage on a median priced home, based on the price and mortgage interest rates at the time. Anything above 100 means the family has more than enough to qualify.

The higher the index the easier it is to afford a home.

Why the concern?

The index has been declining over the last several years as home values increased. Some are concerned that too many buyers could be priced out of the market. Here is a snapshot of the index since 2009:

How Scary is the Housing Affordability Index? | Simplifying The Market

But, wait a minute…

Though the index has decreased over the last four years, we must realize that at that time there was an overabundance of housing inventory and as many as one out of three listings was a distressed property (foreclosure or short sale). All prices dropped dramatically and distressed properties sold at major discounts. Then, mortgage rates fell like a rock.

The market is recovering and values are coming back nicely. That has caused the index to fall.

However, let’s remove the crisis years and look at the current index as compared to the index from 1990 – 2008. We can see that, even though prices have increased, historically low mortgage rates have put the index in a better position than every year for the nineteen years prior to the crash.

How Scary is the Housing Affordability Index? | Simplifying The Market

Bottom Line

The Housing Affordability Index is in great shape and should not be seen as a challenge to the real estate market’s continued recovery.

Source: Keeping Current Matters

By | Published: | In: Las Vegas Real Estate

Housing Market Slowing Down? Don’t Tell Builders! | Simplifying The Market

Many experts have been calling upon home builders to ramp up construction to help with the lack of existing inventory for sale. For the past two months, new home sales have surged, with July’s total coming in at the highest since October 2007.

The latest estimates from the US Census Bureau and Department of Housing and Urban Development show that sales in July were 31.3% higher than this time last year, and 12.4% higher than last month, at a seasonally adjusted annual rate of 654,000. 

Zillow’s Chief Economist, Svenja Gudell, echoed the reaction of some as she commented:

“July(‘s) new home sales data was a surprise, but a welcome one. For years, the market has been practically begging builders to both ramp up their efforts overall and to put more focus on serving the less expensive end of the market. Today’s data confirms both are happening in earnest.”

The National Association of Home Builder’s (NAHB) Chairman, Ed Brady, didn’t seem as surprised:

“This rise in new home sales is consistent with our builders’ reports that market conditions have been improving. As existing home inventory remains flat, we should see more consumers turning to new construction.”

NAHB’s Chief Economist, Robert Dietz, believes this is just the start for new home sales if market conditions continue:

“July’s positive report shows there is a need for new single-family homes, buoyed by increased household formation, job gains and attractive mortgage rates. This uptick in demand should translate into increased housing production throughout 2016 and into next year.”

The existing home sales numbers for July will be released today and will shed more light on the overall health of the housing market.

Bottom Line

New home sales hit their highest mark in over 9 years. Buyers are out in force to find a home that fits their needs. Many are turning to new construction, as the inventory of existing homes has not been able to keep up with demand.

Source: Keeping Current Matters

By | Published: | In: Las Vegas Real Estate

2 Myths About Mortgages That May Be Holding Back Buyers | Simplifying The Market

Fannie Mae’s “What do consumers know about the Mortgage Qualification Criteria?” Study revealed that Americans are misinformed about what is required to qualify for a mortgage when purchasing a home.

Myth #1: “I Need a 20% Down Payment”

Fannie Mae’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 76% of Americans either don’t know (40%) or are misinformed (36%) about the minimum down payment required.

Many believe that they need at least 20% down to buy their dream home. New programs actually let buyers put down as little as 3%.

Below are the results of a Digital Risk survey of Millennials who recently purchased a home.

2 Myths About Mortgages That May Be Holding Back Buyers | Simplifying The Market

As you can see, 64.2% were able to purchase their home by putting down less than 20%, with 43.8% putting down less than 10%!

Myth #2: “I need a 780 FICO Score or Higher to Buy”

The survey revealed that 59% of Americans either don’t know (54%) or are misinformed (5%) about what FICO score is necessary to qualify.

Many Americans believe a ‘good’ credit score is 780 or higher.

To help debunk this myth, let’s take a look at the latest Ellie Mae Origination Insight Report, which focuses on recently closed (approved) loans. As you can see below, 54.1% of approved mortgages had a credit score of 600-749.

2 Myths About Mortgages That May Be Holding Back Buyers | Simplifying The Market

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will definitely make the mortgage process easier. Your dream home may already be within your reach.

Source: Keeping Current Matters

By | Published: | In: Las Vegas Real Estate

Whether You Rent or Buy, You’re Paying a Mortgage | Simplifying The Market

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.

Bottom Line

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.

Source: Keeping Current Matters

By | Published: | In: Las Vegas Real Estate

‘Old Millennials’ Are Diving Head-First into Homeownership [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • ‘Old Millennials’ are defined as 25-36 year olds according to the US Census Bureau.
  • According to NAR’s latest Profile of Home Buyers & Sellers, the median age of all first-time home buyers is 31 years old.
  • More and more ‘Old Millennials’ are realizing that homeownership is within their reach now!

Source: Keeping Current Matters

By | Published: | In: Las Vegas Real Estate

4 Stats That PROVE This Is NOT 2005 All over Again | Simplifying The Market

Recent research by the National Association of Realtors (NAR) examined certain red flags that caused the housing crisis in 2005, and then compared them to today’s real estate market. Today, we want to concentrate on four of those red flags.

  1. Price to Rent Ratio
  2. Price to Income Ratio
  3. Mortgage Transactions
  4. House Flipping

All four categories were outside historical norms in 2005. Home prices were way above normal ratios when compared to both rents and incomes at the time.

NAR explained that mortgage transactions as a percentage of all home sales were also at a higher percentage:

“Loose credit was one of the main culprits of the housing crisis. Mortgage lending expanded dramatically as unhealthy housing speculation reached its peak and was met by the highest level of credit availability as measured by the Mortgage Bankers Association. The index measures the overall mortgage credit condition by the share of home sales financed by mortgages. This metric does not capture credit quality, but it does set a view of the importance of financing in supporting the housing market.”

House flipping was rampant in 2005. As NAR’s research points out:

“Heightened flipping activity is a clear indication of speculation in the real estate market. A property is considered as a speculative flip if the property is sold twice within 12 months and with positive profit. Flipping is a normal part of a healthy housing market. In an inflated housing market, expectations about short-term profit from pure price appreciation are very high; therefore, the level of flipping activity would show evidence of being heightened.”

Here are the categories with percentages reflecting the unrealistic ratios & numbers of 2005 as compared to the current market. Remember, a negative percentage reflects a positive gain for the market.

4 Stats That PROVE This Is NOT 2005 All over Again | Simplifying The Market

Bottom Line

They say hindsight is 20/20… Today, experts are keeping a close watch on the potential red flags that went unnoticed in 2005.

Source: Keeping Current Matters

By | Published: | In: Las Vegas Real Estate

Real Life vs. Reality TV: 5 Myths Explained | Simplifying The Market

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.

Reality TV Show Myths vs. Real Life:

Myth #1: Buyers look at 3 homes and make a decision to purchase one of them.

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.

Myth #2: The houses the buyers are touring are still for sale.

Truth: The reality is being staged for TV. Many of the homes being shown are already sold and are off the market.

Myth #3: The buyers haven’t made a purchase decision yet.

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.

Myth #4: If you list your home for sale, it will ALWAYS sell at the Open House.

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. 

Myth #5: Homeowners make a decision about selling their home after a 5-minute conversation.

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.

Bottom Line

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.
Source: Keeping Current Matters