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Monthly Archives: January 2016

Should you reach out personally to a seller?

For buyers looking for just the right home, muddling through the competitive market can feel like a deck stacked against them. Trying to make your offer stand out amongst a pile of other offers can be a struggle. This has led to many buyers trying to communicate directly with a seller and appealing to them on a personal level via a letter or email. 

When considering writing to a seller, it's important to keep a few things in mind:

Who are you writing to?

Try and educate yourself as to who the seller is as much as possible. Knowing who they are and why they're selling the property will help you decide how to approach the seller. Luckily, in the age of social media, there is a fair amount of publicly available information that can be gleaned via Twitter, Facebook and other platforms. Even still, it is preferable to opt for an introduction from a listing agent. 

How to approach the seller

Appealing personally to a seller can be tricky. For a seller selling a family home, the connection to the property can be deeply emotional — which may in fact work in your favor. The more you can make yourself stand out by appealing to their sense that you and your family will cherish the home, the better shot you have to make a positive impact and curry favor. 

The importance of flood insurance

For homeowners and even aspiring homebuyers, having insurance for a property is essential. But one incredibly useful form of insurance is often ignored until it's too late and the damage is done: flood insurance.

It is important to consider flood insurance because your typical homeowners or home insurance policy rarely includes flood coverage under their standard policy. Many consumers are not aware of this face, as shown by a recent study conducted by the National Association of Insurance Commissioners which revealed that 33 percent of homeowners mistakenly believe that flood damages are covered under a standard homeowners policy. 

Even in areas not known for flooding, the risk is palpable: floods are the number one natural disaster, in terms of frequency, in North America. Making matters worse is the fact that only a tiny fraction of homes are covered in case of flood. 

Market Preview 1-26: Will the stock market begin to effect lending volume?

STILL STUMBLING OUT OF THE GATE

In the first two weeks of January, the S&P 500 has lost over 10% of its value. This is the worst start to a new year ever.

The U.S. isn’t alone in this downturn. China’s Shanghai Stock Exchange Composite is down 16% year to date. Japan, Germany, and France have also experienced double-digit stock-market declines.

While commodity assets – food stuff and industrial metals – continue to hit new multi-year lows, home builders remain cautiously optimistic. The home builder sentiment index is at 60 in January, a solid number, although it’s the third-consecutive monthly decrease. This drop is likely a reflection of fewer starts. Total housing starts for December were down 2.5% to 1.149 million on an annualized basis. Single-family starts bore the brunt of the decline, falling to 768,000 from 794,000 month over month.

We’re still bullish on housing, but we’re also realistic. We wouldn’t be surprised to see a further slowdown in national sales volume. We also wouldn’t be surprised to see a slower pace of price appreciation (and even price depreciation) in more local housing markets.

Key differences between the housing market of the financial crisis and today

With the recent focus on the lingering impact of the financial crisis, as well as recent hit movie being made of Michael Lewis's best-selling account The Big Short, homebuyers are more familiar than ever with the underlying causes of the housing market instability. So as Fannie Mae and Freddie Mac both recently began offering individual low down payment mortgage products so as to expand the credit box for first-time homeowners, many voiced concerns that this could lead to the same kind of instability that got the economy in hot water years earlier.

 

The truth is that, while low down payment options were a factor in the housing crisis, the mistakes of the past have been learned from and times have changed. These programs are designed in fact to support potential homeowners who would make good loan candidates but might lack the credit to qualify — in some cases due to the impact of the housing collapse years ago. Freddie Mac says as much in a Housing Market Insight & Outlook report that addresses the concerns that some have about the move. 

What is a "Conventional Mortgage?"

For people looking to purchase a home, there are three primary types of home financing loans. Two of these loans are VA and FHA loans, backed by the government and only eligible to certain borrowers based on specific criteria. The final type of loan is what is called a "conventional mortgage" and is the most commonly granted kind of home financing available.  

Conventional loans are offered by private lenders like banks, credit unions or savings institutions. Since they are not backed by the government they are often simpler and quicker than VA or FHA loans—though they offer higher risk to lenders. To mitigate against risk and to incentivize payment, they often require a higher down payment: typically between 5 percent (the minimum) and 20 percent of the total value of the loan. 

Most conventional loans come in terms of 15, 20 or 30 years. While requirements vary from lender to lender, the average minimum credit score required to qualify is 620 — with 740 or above being the score that offers some of the best rates. Lower scores do not rule out eligibility, but often come with higher interest rates.

Simple ways to winterize your home

As the cold weather starts rolling in across the country, it becomes increasingly important to prepare your home for winter. Not only will it save you money on your utility bills, but it can also help avoid preventable weather damage associated with the season.

Here are a few simple and effective tips for winterizing your home:

Turn off water to outdoor spouts

Turn off water to any outdoor areas via the main supply point, then drain any excess water that may be lingering in pipes. This will keep pipes from freezing and potentially bursting as the water expands. 

Market Preview 1-18: Blow-Out Employment Numbers Fail to Budge Lending Rates

BLOW-OUT EMPLOYMENT NUMBERS FAIL TO BUDGE LENDING RATES

Employment has a major effect on interest rates, and December’s numbers look spectacular. Payrolls soared 292,000, obliterating economist’s predictions. What’s more, October and November payrolls were adjusted up a total of 50,000.

With payrolls trending ever higher, interest rates were expected rise, but they didn’t. In fact, the rates on the 15 and 30 year fixed-rate offerings are being quoted near a two-month low.

It seems that Macro events are holding rates down. China’s stock market has tanked to start 2016. The S&P 500 is down 6% year to date. And remember a few years ago when economists were prepping for life with $100 barrels of oil? Oil recently hit an 11-year low, with West Texas crude trading near $30/barrel. Commodities in general – oil, natural gas, metals, grains – are all selling near multi-year lows.

Despite this, inflation is still key. If there is no inflation, expect long-term mortgage rates to remain low. There is such a dearth of inflation these days that we’ve heard forecasts of the yield on the 10-year Treasury note falling below 2%. If that occurs, you can be sure that quotes below 4% on the 30-year fixed-rate loan will again be the norm.

The 4 key players in the mortgage process

Whether purchasing your first home or beginning a mortgage refinance, the key players in the loan process are generally the same. Here is a guide to the various people and institutions you may deal with on the path to getting your mortgage.

Real Estate Agents

For new homebuyers the process often starts with finding a home you like. You can start by going online or simply touring neighborhoods you are interested in and seeing what is available. Often though, homebuyers will employ a real estate agent to help them locate quality listings. While some homes may be a "for sale by owner," others may have "listing" agents representing the owners.

Some agents are referred to as "realtors," meaning they are agents a licensed and approved of by the National Association of Realtors. This simply means they are held to an institutionalized code of ethics.

When should you to stop renting and buy a home?

Buying a home can be the realization of a lifelong dream, offering stability and pride. But many may put off buying a home in favor of renting, either due to a lack savings or in an unstable housing market.

Even if you think that all you can afford is renting, the truth is that homeownership may in fact still be within your grasp maybe even the better option. Here are a few reasons why buying a home may be better than renting for you:

Building equity

Even if rent payments are less than mortgage payments, the money you pay is simply going into someone else's pocket instead of building your own equity. Every time you make a mortgage payment, you own more and more of your home, which you can leverage as a source of income in retirement or refinance to pay off debts. And your investment may appreciate in value automatically as you fix up your home or markets improve.

Five ways to entice homebuyers to close faster

With the rise and fall of the home market, home sellers need to do their best to make an attractive offer to buyers. For sellers looking to have a quick and painless close, the offering of incentives is common and can ultimately result in a stronger sale, where both buyer and seller feel satisfied.

Here are five unexpected ways that sellers can make the deal more appealing for a buyer:

Buy down the interest rate

If a buyer is looking to lock in a lower mortgage interest rate, paying an upfront fee that is a percentage of the total home loan called a "point" can result in a decrease in rates. The seller can offer to pay points up front on behalf of the buyer. Buyers may love this since the seller can offer a relatively small amount up front that results in a serious reduction of what the buyers pay in total over the lifespan of the loan at the unreduced interest rate.