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Monthly Archives: November 2015

3 facts about FHA loans

For buyers wondering what is an FHA loan, the answer is simple: an FHA loan is a mortgage insured by the Federal Housing Administration, an agency within the U.S. Department of Housing and Urban Development, aimed at allowing more buyers access to home financing through lower down payment requirements and less stringent lending standards. The FHA pays part of the buyer's mortgage insurance, allowing lenders to offer some of the lowest interest rates available to those with less-than-perfect credit or limited funds to contribute to a down payment.

Here are a few essential facts about FHA loans:

Market Preview: Home builder optimism falls, chances of Fed rate hike rise


Home builder optimism stepped back this month. The Wells Fargo/NAHB Sentiment Index posted at 62 for November, down from 64. But stay calm. A reading over 50 means optimism outweighs pessimism.

The future sales component was the most notable disappointment in the November numbers. Builder optimism eased five points to post at 70. This means builders still expect to sell a lot of homes in the coming months, just not as many as they expected last month.

The one consistent weakness has been traffic. The traffic component rose one point to 48 in November. The component remains weak due to our biggest lament – lack of first-time buyers. We’re hoping that D.R. Horton’s success, which we reported on last week, in building and selling starter homes points to an overall increase in first-time buyer participation.

Buyers and agents embracing new technology to find homes

New research published by the National Association of Realtors (NAR) suggests that, in spite of rapidly evolving technology, the relationship between buyers and real estate agents remains strong.

"Consumers have the ability to do more home buying research online and be more connected during the home search process than ever before, but research proves they are still seeing the value a Realtor brings to the transaction, from the initial search to well after the closing," said NAR president Chris Polychron. "Agents bring great value to buyers from every generation, demographic and location as well as in every financial and familial situation. So while consumers have more technological tools available at their fingertips, realtors are now more than ever a part of the home buying and selling equation."

Adjustable rate loans: An important tool for first-time homebuyers

The average homebuyer will move every seven years so why pay more for a 30-year fixed rate loan? While mortgage interest rates remain historically low, a longer term mortgage commonly results in a higher interest rate, meaning your loan ends up costing more in the long run. If you are on the hunt for a home but aren't sure that you'll be owning or occupying it for more than a decade, save yourself money and hassle and think about an adjustable-rate mortgage (or ARM).

An ARM is a mortgage product that (as the name suggests) allows the interest rate to adjust according to market rates after a set period of time. In the case of a 5-year ARM say, the initial mortgage rate of the loan remains locked in for a five year period. After the five years are over, the rate will adjust on the loan's "anniversary" every year for the next twenty-five years. It only adjusts once per year until the loan obligation is fulfilled.

October jobs report blows away expectations


October was huge for the economy. Payrolls surged by 271,000, handily beating all economists’ estimates. The month saw the strongest monthly payroll gains since last December. The surge in employment, in turn, dropped the unemployment rate down to 5%, the lowest it has been since May 2008.

We’ve been saying for a while now that we don’t see a fed funds rate increase coming, but the facts have changed. Even so, it’s important to remember, even if the Fed does raise the fed funds rate, that doesn’t mean rates are going higher. When the Fed made its other major policy change – to systematically withdraw from quantitative easing two years ago – rates ran up until the time the Fed begin to withdraw. Rates then drifted lower by a full percentage point over the subsequent year.

Home improvement projects with the best return on investment

When looking to improve the value of your home, certain home improvement projects offer greater return on investment (ROI) than others. Here is a guide to some of the best way to make the most of home improvement loans and maximize the value you get back:

  • Replacing your front door. As a simple, low-impact project, the ROI for replacing a front door is one of the highest nearly 98 percent. It improves curb appeal, can lead to energy efficiency savings and is one of the lowest-cost home improvement projects possible.
  • Update home siding. Another project with a big impact on curb appeal, old, worn out siding can take almost 10 percent off the value of your home. Fiber cement siding offers the highest ROI—nearly 84 percent—but midrange vinyl and foam-backed vinyl can offer similar value. 

The quickest, easiest ways to raise your FICO credit score

Your FICO credit score is one of the most important considerations when applying for and obtaining home financing. A higher score can result in a lower interest rate—which in turn can save a homeowner thousands of dollars over the lifespan of their loan. 

"Lenders look at several variables on the credit report,"says Matt Hackett, underwriting manager at Equity Now. "Outstanding debt; the outstanding debt relative to the total available debt; the length of the credit history; and the pursuit of new credit—how many inquiries are on your report." 

With this in mind, here are a few ways you can improve your score quickly and painlessly:

  • Dispute errors on your credit report. Inaccurate or misreported information could be bringing down your score. Contact the agency that reports the error and provide documentation supporting your claim. 

Simple green home improvements to cut energy bills and boost value

One of the biggest trends with homeowners is making "green" home improvements. These home improvements aren't just eco-friendy, they can actually reduce your monthly bills and improve the value of a home dramatically, according to data from a University of California study.

If you're looking for upgrades that will up the value of your home and make your utility bills less expensive, consider the following home improvements:

  • Install solar panels. Roof-mounted solar panels are an increasingly common feature of many home and compensate for energy bills every month with clean, renewable energy. Costs associated with installations are falling rapidly, and many solar providers offer no-cost lease programs. The panels are long-lasting and a feature many modern homebuyers look for (and are willing to pay extra for) when buying a home.

Important facts about financing investment properties

Mortgage rates have recently reached historic lows while limited inventory and high demand slowly begin to push up home prices. This makes it the perfect time to consider an investment property.

As part of a portfolio or as a way to ensure equity you can use in retirement, an investment property can offer a buyer solid financial security and big gains in a healthy market. Before you make up your mind to buy though, here are a few facts about an investment property mortgage:

  • Private mortgage insurance (PMI) won't cover an investment property. Because PMI doesn't cover investment properties, lenders may ask for a higher down payment—typically over 20 percent.

Jumbo loans surge in California amidst housing boom

Recently released data from the California Association of Realtors reports that buyers looking to finance houses worth more than $625,500 have been entering the market in record numbers. This rise in jumbo loans seems to be driven by high demand, rebounding home values, and the strength of the tech industry in the state.

Over half of Bank of America's jumbo lending is originated and closed in California, with the total amount being lent up 20 percent over a year ago from January through August 2015, according to Ann Thompson, Bank of America's regional sales executive for Northern California. Also of note was the fact that about 43 percent of Bank of America's California jumbo loans in the first half of 2015 went to first-time home buyers.

"California is by far the biggest lending state when it comes to jumbo mortgages both in dollar amount and number of loans," says Guy Cecala, publisher of Inside Mortgage Finance. Much of the increase in these loans seems encouraged by a healthy market and high home prices, particularly in areas affected by the tech boom.