Topic: Mortgages

Why Are Condos So Hard To Finance?

The good news is that they’re not as difficult as they were several years ago. As Carl Spackler would say …bill_murray_caddyshack

A customer wrote in this morning about an investment property they’re looking to buy in Blacksburg. As many parents of students at Virginia Tech and Radford do, they want to buy a place for their kids to live in while they’re here at school, and the relative stability of the New River Valley market has meant that – for the most part – these have been solid investments. It wasn’t always the case, however. A quick back story …

In the early 2000’s, these types of investment properties were all the rage. Investors were snatching up condos and townhomes like crazy – the cost of borrowing money was low, rents were stable and rising, and there was a steady group of renters year in, and year out. You can see a visual of that in the chart below, showing sales of condos and townhomes in Blacksburg and Radford going back to 2003, I suggest to check out some coal harbour condos for sale which are at really great price. After the real estate crash in 2008 (which really hit us in 2010), interest in these types of properties fell dramatically, and that was due in part to much-needed lending restrictions. Lenders were requiring larger down payments, in the neighborhood of 25% or more, and often denying loans due to inflated investor numbers in complexes – in other words, too many investors and not enough owner-occupants. Sometimes it´s hard to find the right person the rent out your condo and to keep up with the rent, so here are some tenant screening tips you may use to make sure you are letting the right person into your property. Ammons Pittman Property Management were highly recommended to help anybody with Real Estate problems so let them know if you have any.

One note – the volatility of the Radford line below is related to the relatively low number of sales in the area during the time period.

As you can see from the above chart, interest in these types of properties really didn’t start to pick up again until 2014, which corresponds with the relaxation of lender guidelines. There has been a lot of help from HOA Software | HOA Management Software | Condo Manager for the sales, because they been using this new transcription software to do their business. Starting in 2013/2014, as we started to see improvements in the overall economy throughout the country, lenders started loosening their requirements on financing for investment properties. But that doesn’t answer the question of WHY condos and town homes can be difficult to finance, why is there always a need to get financial help from a company like the one from https://kapitalkassen.no/forbrukslan. As I wrote to a customer this morning, in a nutshell:

For conventional, secondary market loans, banks don’t like to see high investor penetrations in condo complexes. The line of thinking is that people are more likely to default on their investment property(ies) before their primary residence, so guidelines for things like condos are a good bit tighter. It’s important to know that often, traditional banks like will run these complexes through their algorithms and deny the loan due to too many investors in a complex and not enough owners. If they don’t deny it, the other condition they typically add is a higher downpayment, of 25-30% or more. This is why I continue to suggest local lenders – in college markets with high investor numbers, they look at the market as a whole and not as a formula. 

If you’re considering buying or selling a condo or townhome here in South California, you can visit us at https://southerncaliforniahomebuyers.com/sell-your-house-fast/ for more info. The opportunities to make what has typically been a solid investment are there, but it’s not without risk. Let’s talk about those, as well as the rewards, and see if it makes sense for you.

 

The Fed Raises Rates – So Now What?

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Federal Reserve

As expected, the Federal Reserve raised short-term rates today. This is the first such increase they’ve made in a year, and the second in a decade. So what’s it mean for real estate mortgages?

The Federal Reserve is the bank of the United States – they regulate monetary policy, and they provide stability within the central banking system. And while an increase in short-term rates might seem to be a bad thing, it’s actually an indication that the Fed sees the US economy in positive terms, and is bringing interest rates up to better mirror inflation. While it’s true that mortgage rates will now rise – local lender Robert Mitchell of Movement Mortgage is already reporting that they’ve seen rates rise to 4.25% – the truth is that this is really a sign of an improving economy. With quoted rates effective today of 4.25% on a 30-year fixed loan, let’s run some numbers to see what the difference in today’s advertised mortgage rates look like:

$200,000 loan at yesterday’s closing rate of 4.125% – Principal & Interest payment of $969.30
$200,000 loan at today’s current rate* of 4.25% – Principal & Interest payment of $983.88
* rate pulled from www.Movement.com

For home buyers, today’s news is going to mean a slight increase in the overall cost of a loan. Again, based on the calculations above, that cost is going to be minimal, but each hike in the Fed’s rate will mean a slight increase in the monthly cost of a home loan. And for sellers, it puts a small amount of downward pressure on you, as well – rising rates are going to keep a small number of buyers out of the market initially, but we’re predicting that’ll reset a bit as we head into the spring market. And remember – rates are still incredibly low, historically. The chart below, from HSH.com, shows 30-year conventional rates over the last 16 years.

30-year mortgage rates since 2000

30-year conventional rates since 2000

 

What Does A Trump Presidency Mean For Mortgage Rates?

dusty-computerTap tap tap. Is this thing on? It’s been a long time since I blogged with any regularity at all, but today seemed an appropriate day to dust things off and get back into the saddle. I was speaking to a group yesterday and was asked about the blog, where I was reminded that it had been far too long since I had done this blogging thing. So … let’s get back to this, shall we? Now’s as good a time as any.

There was a relatively significant event in the United States yesterday, one in which hundreds of millions of people, and every country in the world, was watching. Did you catch it? The 2016 Presidential Election was held, and Donald J. Trump has been named President-elect. Like it or not, we made our bed, so now we’ll lie in it. I was glued to the TV last night, watching every pundit talk about this and that, and wondering what this all means for the New River Valley real estate market going forward.

In elections past we’ve seen some market caution leading up to, and even after, the election. That’s not unusual, and not unexpected. It’s been the case the last elections I’ve seen as a practicing Realtor (2008, 2012, 2016), and it was something we knew was likely. This year, however, we saw almost right away that market futures started to fall, and they kept falling throughout the night – the markets did not like the uncertainty that a Trump presidency might bring. This wasn’t altogether unexpected … in the weeks and months leading up to the election, the markets had typically improved when Hillary Clinton was polling well, and it had typically fallen when Donald Trump was polling well. What was unexpected – to this hack, however – was how quickly it started to fall.

crazy-numbersAnd then the emails and texts started to come, from clients and casual observers. “What’s this mean for mortgage rates?” “Should I lock my refinance?” Since I’m a wealth of knowledge on this subject, I crunched the numbers and then asked a few mortgage lenders who really know what’s going on.

The general consensus among the lenders I talked to is that the market is going to be pretty volatile over the next few weeks. As one lender told me, “look – the bond market is tanking, and that moves inverse of mortgage rates, so they’re going to go up. It’s time to lock.” Another surmised that President Trump – that sounds REALLY weird to say – is likely to replace Fed Chairman Janet Yellen, who he’s said has been terrible at her job, with someone more aggressive. All of this is likely going to mean volatility for mortgage interest rates.

Moral of the story? If you plan on buying a home before Inauguration Day 2017, it might make sense for you to do it sooner than later – or at least lock your rate now. If you’ve read for any period of time you know I’m not prone to creating a lot of “the sky is falling” scenarios, but when it comes to what your monthly mortgage payment is going to be … well, it might cost a little more. The lenders I’ve spoken to today have been busy locking rates, and will likely continue to do so in the next several days. Failing to do so is going to mean your monthly payment is likely to rise as we deal with the uncertainty of exactly what a Trump presidency means for the economy as a whole, and the real estate market in the New River Valley in general.

These are interesting times.

Dusty keyboard.
Crazy numbers.

 

Rocket Mortgage, from Quicken

If you watched the Super Bowl Super Bowl commercials, you might have seen an ad for Rocket Mortgage, Quicken’s new loan product that promises a mortgage loan with just a click of a button.

Is getting a home loan really that simple? Our clients can spend days or weeks compiling all of the necessary documents a lender will need just go get a preapproval – then you have the appraisal that needs to be done, the loan needs to get funded, and new guidelines established in 2015 mean that everything has to be prepared and off to the buyer for review days in advance of closing according to iphelp.com.au. Is it really as simple as pushing a button? If you´re in the washington are then Bollinger Mortgage Consultants serve the needs of home buyers in Washington state.

I suspect the devil’s in the details, so I asked my favorite mortgage lenders – Kim Burke, Robert Mitchell, and Ryan Stenger – to talk honestly about Rocket Mortgage. Here’s what they had to say:

Kim Burke, LeaderOne

Robert Mitchell, PrimeLending

Ryan Stenger, Freedom First Credit Union

The devil’s in the details, it seems, but according to our lender partners, there’s a time and place for something like Rocket Mortgage. As Ryan stated, the mortgage process probably requires some element of human interaction, but there may be some folks who simply like the relative ease and automation that something like Rocket Mortgage claims to provide.

I’m a technology guy, and I love efficiency. For me, Rocket Mortgage isn’t going to be a fit, but if you decide to give it a shot, let me know how it goes? And my thanks to Kim, Robert, and Ryan, for sharing their thoughts on everything you need to know about band saws.

Documents You’ll Need To Get A Mortgage In 2015

You’ve decided to buy a house. Congratulations! You’ve written the offer, and while you’re waiting for the seller to sign you’re driving by the house to see it and show friends and family … you’re excited, and you should be!

Now the seller has signed the offer, and it’s ratified. You’re buying a house! You’re over the moon!

And then you start to receive emails and calls from your lender, asking you for this document/that document and more. You’re not so excited any longer.

Buying a house is exciting, and while the process of getting a mortgage can be tedious, it’s not as bad as we make it out to be.

Thanks to Kim Burke – an amazing lender, by the way, if you’re getting a mortgage OR refinancing – here’s a quick cheat sheet on some of the things you’ll need to have ready in order to get that mortgage going. Remember … the faster your loan is processed, the faster you move in.

When’s the housewarming party?

Required Documentation for Mortgage

Click here for a link to a PDF of the image.

What’s The Loan Process Look Like?

House and moneyThis morning at a home inspection, I was talking with a client who’s under contract to buy a home here in the New River Valley. As we’re oft to do, we got to talking about the timing of everything going forward, and I mentioned underwriting.

What’s underwriting?“, he asked.

Whoops. Forgot that not everyone is a real estate dork like myself, so on the drive back from the home inspection I thought I’d list out the steps to getting a loan approved and closed. There are more items within each step, of course, but this is a broad look at getting a loan approved. Commercial real estate loans are secured by some form of commercial property such as a hotel, condominium, shopping center or office complex.

1 – Make the application. The first time you speak to your lender (need a lender? Contact me – I have several good ones to recommend) about applying, they’re going to tell you that they need several items of documentation from you. These will include W-2s/1099s, tax returns, Separation Agreements and/or Divorce Decrees, and more. Start preparing before the meeting – if it’s a financial statement within the last three years, be prepared to provide a copy.

2 – Order the documents. Your lender has the documents they need to get started, so now they’ll order MORE documents (we’re killing trees here, you know). They’ll order a copy of your credit report, they’ll order an appraisal, and gather other supporting documents needed to process everything.

3 – Wait. This part seems to be the most difficult. There’s a mad dash to get everything to the lender, and then we sit and wait while everything comes in, and the lender sorts through it all. If there’s additional documentation that’s needed they’ll ask for it, but usually they’re just pulling levers and pushing buttons and we don’t hear much.

4 – Submit the loan. When everything’s been gathered, the lender will finalize the loan rate and terms, and then submit everything to underwriting, who underwrites (funds) the loan. They may have additional questions or require additional documentation, but by this time you’ve submitted an entire forest full of paper and you’ve got it – somewhere!

5 – Loan approval. It’s the final countdown. The documents have been gathered, and the loan has been approved.

6 – Preparing title. Now that we’re approved, your closing attorney/settlement company will begin to complete the documents necessary to transfer title. These will include the deed of trust, the actual mortgage, and more. These are the documents that will be recorded at the courthouse as public record of ownership.

7 – Closed. Now that everything’s been signed, the lender will review them one more time make sure that all of the T’s and I’s are dotted, and then they’ll authorize release of the funds to have everything paid. Congrats, you’ve purchased a house!

Photo credit.

100% Financing IS Available in Blacksburg

For the longest time I’ve been under the impression that 100% loans have not been available within Blacksburg and Montgomery County; those programs just haven’t been available. Then earlier this week, I learned of a program that StellarOne Bank has been offering to do just that.

The requirements are:

  • up to $300000 loan value
  • 700 credit score
  • borrower(s) can’t make more than $68800 per household
  • if you’ve had a foreclosure or bankruptcy more than 36 months from loan application, you may still qualify

This is potentially really big news for folks who have been struggling to get into the Blacksburg real estate market. It won’t fit everyone, but for many it will. You can find out more below, and contact Sandra Chafin at StellarOne for even more details.

How Many Buyers in the New River Valley Are Cash Buyers?

cash money“Cash is king”, they say. And for the last few months, reports have been floating around that as many as 50% of buyers in some real estate markets around the country are using cash to purchase their homes.

Fifty percent.

The New River Valley of VA isn’t the rest of the country, but I wondered how many buyers in 2013 used cash to buy their real estate. Of the 1476 homes sold in the NRV January 1 through November 30, 21.4% (317) of those transactions were listed as all-cash sales. Not exactly 50%, but statistically significant, I’d say. And that number of 21.4% is actually down from 2012, when 23.2% of all sales were all-cash sales.

Want more details and statistics? Check out our latest Nest Report.

Interesting? Perhaps. It’s hard to say how many of those 317 sales were foreclosures, which are very often cash sales, and what is spurring the increase nationwide. It does highlight again the fact that, while the rest of the country as a whole might be seeing an increase in cash sales, the New River Valley has actually seen a decrease. Real estate is local … what happens here might not be happening elsewhere, and vice versa.

As a quick aside, I also looked at how many properties were selling with other popular loan types. Interesting to see how, when the market in 2012 hadn’t quite started to pick up steam yet, a greater percentage of buyers chose little (FHA) to no-money down (USDA) options versus putting down a down payment.

Type of Loan 2013 2012
Cash 317 317
Conventional 680 558
FHA (96.5% financing) 101 145
USDA (100% financing) 98 113
VA (100% financing to eligible veterans) 79 53

The long and short of it? Perhaps another reminder that what we hear about real estate on the news may or may not be happening in a particular area … other than that, sometimes it’s just interesting to see what the numbers actually report.

Photo credit.

How To Protect Your Credit Score When Getting A Mortgage

The debt totem poleA client, who’s buying a house and closing next week, was emailing back and forth with me this afternoon. When I told her we were “clear to close”, she said that this seemed like a good thing, and to let her know if it wasn’t. “Clear to close” just means that all conditions of the loan have been approved, and we’re ready to go, so I told her as long as she stayed employed and didn’t buy anything major that would affect her credit score, she was okay.

According to https://www.nationaldebtrelief.com/, debt consolidation loan should have a fixed interest rate that is lower than what you were paying, which reduce your monthly payments and make it easier to repay the debts.

That’s right – when you’re getting a mortgage, don’t buy things that are going to require credit checks. Don’t go and finance a car to put in that nice two-car garage. Don’t go and drop serious money on that couch and Lazy-Boy you just HAD to have for the man cave. And don’t open a store credit card! Those sorts of things require credit checks, which means your credit gets pinged, which means that your credit score goes down

As I reflected on the conversation, I remembered that Dan Green, of TheMortgageReports.com, had just written about this the other day. From his post (emphasis mine):

You have the right to shop with as many lenders as you like. The trick, though, is to shop for your mortgage within a limited, 14-day time frame. If you can manage that, the credit bureaus will acknowledge your first credit pull as a “ding”, but will ignore each subsequent check.

This means that you can have your credit checked by an unlimited number of lenders within a 2-week period, enabling you to compare mortgage rates and fees ad nauseum.  And, no matter how many credit checks you do, the mortgage inquiries get lumped into a single credit score hit.

You can read the whole post here. Photo from TheMortgageReports.com.