For most of us we do not have a surplus of money to spend on our housing needs, we need to be smart and get value for every dollar spent. So is it time to buy a home? The answer is not as simple as most people think. If you are in a financial position to purchase and you find a property that you like at a fair price then the answer is simple, yes it is time to buy. Where is get more difficult is for people that have families that are renting. Let’s face it, life gets in the way. There are many financial challenges that get in the way. For example, Divorce, Kids, Vehicle Needs, Medical Issues and any of hundreds of unexpected expenditures that all have their hands on the money we make. I have lived much of the above and why “I say life gets in the way.”
Here is a little more to think about, home mortgage rates are going up and we are looking a rates in the mid 5% range most likely by the end of 2018. For those of us old enough to have lived this we all know about the average rate of inflation running at 5%. For a mortgage rate of 5% or less it is basically free money. Below is the posted inflation rate table that pops up when “2018 inflation rate” is put into a website search engine. For those of us living in Southern California this is way off. Home values alone are going up much faster.
So the question comes down to housing affordability when considering purchasing a home. Rents are going to continue to go up and housing affordability is going to continue to go down. So do you move to a lower priced area or a smaller place? I would consider looking at long term plans of 7 to 10 years and where do you see yourself living? The decision on housing is a personal choice that we most all make individually. For most of us, the short term financial sacrifices are worth the long term benefits. It is ok not to rush into purchasing a home. Find a professional Real Estate Agent in your target area and get a full understanding of the homes values. Then speak with a professional Mortgage Banker / Loan Officer to see if the cost is within your budget plans. When armed with the financial facts the picture comes clear.
One last thing to think about, most people that invest in the stock market seem to lose money, why is that? Have you ever considered that we seem to speak with family members or friends for our financial advice? We all love our families and friends but there is a clear pattern here. It is always good to talk things out with our families or friends but you should always seek out advise from professional people before making any larger purchases.
I have always responded to mortgage question from readers, part time editors, not so much. Any case I have created the “Mortgage Answers” tab above to provide links to several short videos that address the most common questions I receive. As always if you should have a mortgage question please feel free to ask.
One of the negatives of an approving economy is inflation. As more people return to work there is more demand for……everything. The improving economy is a good thing as people returning to work instills self-pride as they can finally get that new car, take a vacation or purchase a home. Purchasing a home gets hit with a double whammy as inflation drives up values and mortgage rates. Both have a negative impact on the affordability index for purchasing a home. I am already beginning to hear from people “why did you not tell me” home prices, rates and affordability index are all going up. Truth be told I said it many times verbally and in this blog. So here is the next thing, click on the link to see a short video that breaks down in more detail “It is not always about the rate.”
Over the past few years we has experienced artificially low mortgage rates so people will not want to sell or refinance as they will lose their 3% rate. Simply put those days are gone and will most likely not return in my lifetime. As we move forward with real estate and mortgages we should understand that rates are moving up. Debt reduction to improve monthly cash flow is, for the most part, the only refinance option for most home owners. This is due to increased property values for debt consolidation or to remove mortgage insurance.
Home Owners with FHA loans should consider refinancing to remove the mortgage insurance. FHA mortgages offer many advantages to borrowers but the mortgage insurance in many cases never goes away. If you should have a FHA loan that will allow for the mortgage insurance to be removed then you should know that earned equity does not factor into the loan to value equation for removing the mortgage insurance. It will drop off when the original principle balance is reduced to 78% or in most cases roughly 11 years of on time payments.
It is anyone’s guess as to what the future holds for mortgage rates but 5.5% for a 30 year fixed should be expected. For those of you that are holding out for a 3.0% rate I think it is safe to say that ship has sailed. It is sad to said but rate reduction refinancing is not going to happen for most people.
Today I think it is fair to say we live in a technology world. When it comes to the Mortgage Industry your mortgage is not something you really want to rocket into. Technology is a great thing but it will not replace the benefit of a qualified Loan Officer. Until we have actual thinking technology it will be difficult for borrower’s to actually pick the best mortgage option for them without human interaction. For example, if you are only emailing with someone in any business you are leaving your emails open to the receiving parties interpretation. So your message could be completely misunderstood. So now ask yourself, can a computer that only speaks in text, actually communicate as well as a qualified Loan Officer?
Technology is best used as support to the Loan Officer and not as the only means of communication between a borrower and the Lender. MN Capital Home Mortgage has a very good example of technology supporting both the borrower and the Loan Officer. If you go to MN Capital Home Mortgage Facebook page you will see they are currently posting educational information for borrowers. Here is an example of what MNC is doing MNC Video Link. The video link addresses PMI or mortgage insurance.
Do not get me wrong, I do like technology. I just have not seen Mortgage Industry technology that works for all loan types over multiple Lender platforms. I am sure the day will come but until then the current technology is helpful but in my opinion there is still more development work to be done before it will equal the benefit of a qualified Loan Officer.
When looking for a new home mortgage it is difficult to know where to go. Do you use your bank, a broker or maybe a mortgage lender? We all think that our bank is the safest place for us as they know all about you so they would not need much paperwork. Well that is not correct as they need all of the same paperwork as any other Lender. So a Mortgage Broker? Well this one is could cost you less but it will most likely take more time. As for the Mortgage Lender these companies have many advantages in terms of cost and speed but the current larger companies are working more like banks and talk more about awards from the past or glory days. There is one other option and that is a Direct Lender. Direct Lenders will fund your new mortgage in house, with their own funds, and have multiple outlets is they choose to Broker a loan as well.
Banks use depository money to fund loans. Brokers use Wholesale Mortgage Lenders to fund loans. Retail Mortgage Lenders use their own money to fund loans but offer limited loan programs, in most cases. A Direct Lender, simply put, offers nearly all of the above options and will go with the program that is best for the borrower. So it is my opinion that a Direct Lender is your best option when looking for a new mortgage. A Direct Lender will look for the best mortgage program fit for you and not try to put you into one of the programs a particular company offers or aka “box.”
If anyone should have any questions in regards to a mortgage program please send me your questions. I will be happy to respond back to you with my thoughts and, if possible, how to get your Lender to improve their mortgage offer to simply let you know yo have a good offer.