mortgage — Strategic Realty

Big News for Buyers Struggling to Afford a Home

The United States Department of Housing and Urban Development (HUD) has recently revealed plans to lower mortgage insurance premiums (PMI) on Federal Housing Administration (FHA) loans. This adjustment is anticipated to ease and make more cost-effective the process of acquiring homes for Americans with low to moderate incomes.

This substantial PMI reduction means borrowers could save an average of $800 per year on mortgage payments, potentially amounting to thousands of dollars in savings over the loan’s duration. The PMI decrease comes as a result of the FHA’s Mutual Mortgage Insurance Fund’s enhanced financial performance, which has experienced a growth in its capital reserves.

PMI costs can pose a considerable obstacle to homeownership for many Americans, especially those with lower incomes or first-time homebuyers. PMI is mandatory for borrowers who contribute less than 20% down payment on their home purchase and can increase monthly mortgage payments by hundreds of dollars. The PMI reduction is projected to render homeownership more attainable and affordable for such borrowers.

This PMI reduction is part of HUD’s larger initiative to endorse homeownership and widen access to affordable housing. The agency has also initiated the House America Campaign, which seeks to augment the availability of affordable housing, encourage fair housing practices, and bolster economic mobility for low-income families.

Consumer advocates and housing industry groups have largely applauded the PMI reduction, as it is believed to help tackle the ongoing issue of housing affordability in the United States, particularly in costly areas, like Central Oregon, where home prices have dramatically risen in recent years.

The PMI reduction is also predicted to positively influence the overall economy. Homeownership has been demonstrated to contribute to household wealth and foster stronger, more stable communities. By making homeownership more affordable and accessible, HUD aims to spur greater economic growth and stability for all Americans.

It is crucial to note that the PMI reduction is only applicable to FHA loans and does not impact private mortgage insurance (PMI) on conventional loans. Prospective homebuyers should collaborate closely with a lender or housing counselor to comprehend their options and identify the most suitable course of action.

PMI reduction signifies a positive development for low to moderate-income Americans seeking to purchase a home. By cutting mortgage insurance costs, HUD is rendering homeownership more affordable and accessible, which could yield significant advantages for individual households and the wider economy. If you would like to know how this PMI reduction could affect your home-purchasing ability in Bend and surrounding communities, please don’t hesitate to contact us.

Interest Rates are Rising

By Kerry ONeal

As Rick Blaine says, “Maybe not today, maybe not tomorrow, but soon and for the rest of your life.” We all know that interest rates cannot stay as low as they have over the last several years. But, honestly, I’ve almost worn myself out predicting the rise.

For the last three years, we’ve agreed with industry experts that we would likely see a 1% rise in interest rates over the following 12 months. Each of those predictions was based on solid evidence, historic precedent, and prudent thinking. However, the market has continued to enjoy this very incredible period of ridiculously low interest rates.

A one-percent rise in interest rates doesn’t sound like a whole lot. And in reality, it’s not. Especially when you compare it to where interest rates have been historically. For many of our parents, and grandparents, the fear of a 5.5% mortgage rate would seem absolutely absurd. Most of that group have memories of purchasing real estate with mortgage rates in excess of 15%.

So, does a small rise really matter?

It could. Especially in markets where buyers are finding it difficult to afford what they need, and that’s why it matters to Bend and Central Oregon. A 1-point rise in a 4% interest rate is still only one percent in additional interest rate. But, it is also true that it represents a 25% increase in the interest payment on the mortgage. And 25% is significant, perhaps even critical, in markets where affordability is already a struggle.

To a family or individual that is struggling to purchase their first home in Bend, Oregon, that one percent rise has significant effects on their price range. Mortgage availability has come back around, to a large extend, which means our hypothetical buyer will likely be able to find low-downpayment financing options. Of course, those options are completely dependent on the buyer’s income qualifying for the loan payment. And, because first-time buyers are taking advantage of low-down payments, the interest they’re being charged on their mortgage debt causes a large swing in the home they can afford.

In and around the City of Bend, as I write this, there are roughly 611 single-family homes for sale. Of that list, only about 15 of them are under $250,000. If you’re a homebuyer qualifying for a FHA loan with 3.5% downpayment, a 4% mortgage rate on your $250,000 purchase would make your principle and interest payment about $1150.

Now raise the interest rate to 5%. If your income demands that your payment stay in that $1150 range, your purchase power just dropped to about $222,000. Want to know what that does to your selection? You now get to choose between two homes. One that is being advertised for auction, and a 748 sf home on .07 acres that is advertised as needing some “TLC”.

The bottom line?

If you’re going to need to buy a home next year, you might want to buy it this year. If you plan on living in the home for a long period of time, the cost of waiting could be even more dire. And if you know of a first-time homebuyer that is talking about purchasing next year, please tell them not to wait. We’ve seen too many people being priced out of the market by appreciation, and the compounding effects of rising mortgage interest rates will accelerate the process.

What you don’t know about today’s mortgages…

By Kerry ONeal

Sometimes the past is hard to forget. The real estate market in this county has been through some incredible highs and lows over the last 10 years and it has been difficult for even some professionals to wrap their head around. For most people, a home purchase is the single largest investment they’ll even make, and making a mistake with that investment has repercussions far into the future. There are a large number of folks in the Central Oregon market that were party to a short sale or foreclosure over the last several years. And even for those that kept their homes, the tough times we went through meant that their credit scores may have suffered. One of the biggest misconceptions about the current mortgage market is that it is difficult to get a loan.

As the graph shows, the availability of mortgage credit is much higher than in the recent past and it continues to increase. Banks are in the business of loaning money, and as the economy continues to improve they are rapidly focusing on making mortgage loans in this market.

Both Freddie Mac and Fannie Mae are working to update their loan guidelines to make more money available for mortgage loans in the secondary market. They are also expanding the kinds of loans that can be made.

At the last Mortgage Bankers Association conference just last month, Mel Watt, the director of the FHFA, which oversees Fannie Mae and Freddie Mac, said this:

“To increase access to creditworthy but lower-wealth borrowers, FHFA is also working with the enterprises (Fannie Mae and Freddie Mac) to develop sensible and responsible guidelines for mortgages with loan-to-value ratios between 95 and 97 percent.”

The important thing to remember is at the same time as more mortgages are available, many experts are expecting mortgage rates to continue to increase. Many people look at increasing mortgage rates as just an added expense. What they don’t often think about is that mortgage rate has an incredible impact on the final price of the house you can afford. This is why we are encouraging many of our clients to make their next move now. If you’re thinking about cashing in on some of the equity you’ve made over the last few years, moving up, or going to stay put for several years in your next house, it makes sense to get it done now. Increasing interest rates can not only cost you more money, they can damper the market for selling your home.

Talking to a loan officer or mortgage broker is a painless process, but still few clients know how much they can afford before walking into our office. For a variety of reasons, we feel that finding a mortgage professional you trust is an important second step in any real estate move. Let us know that you would like a recommendation on a mortgage professional and we can provide you with some choices.

How to beat a bank in 5 days: Final Chapter

By Catherine

How to Beat a Bank in 5 days: Conclusion

This is the final part to a multi-episode, written depiction of a real life short sale.

It’s been awhile since I last updated this story, partly because we were working the short sale and partly because the outcome was so brutal. After much waiting, I beat the loan servicing company (which was amazing given the fact that the negotiator was the single most unpleasant person I have ever talked to), then I beat Fannie Mae and they approved the file, and then (cue ominous music)……the mortgage insurance company said they won’t agree to the sale unless the borrower signed a $25,000 note payable at approximately $350/month. One word (no, it’s not that word). Awesome.

I tried to get them to settle for less, to give a cash option, etc., because maybe, just maybe, the buyer would be willing to contribute to make the deal happen or we could find another solution. Just to summarize, 1) The seller couldn’t make their mortgage payment because they didn’t have the money 2) they had to uproot their family from a home they loved because they didn’t have the money 3) They couldn’t sell because the house was worth about ½ as much as they paid and they didn’t have the money to sell and make up the difference. So logically, the MI company realizing how much money the seller had (clearly defined above in the summary…ZERO), decided their portion of zero is $25k.

Needless to say, the deal fell apart and another foreclosure hit the market. To further illustrate the incompetence, we had an offer about $35k higher than the valuations the bank and previously mentioned idiots had in their possession, the mortgage insurance company still has to pay the bank the same amount, the buyer didn’t get the house, the brokers didn’t get paid, and Fannie Mae added to their ever-increasing property tax bill for Deschutes County. Oh and by the way, when the property came back on the market, the list price was $10,000 less than our offer.

Moral of the story: The banks, Fannie Mae, and mortgage insurance companies don’t care about the borrowers. They accept zero responsibility for their lending standards and practices and blame everything on the homeowners. Good news for them though, Uncle Sam will continue to fund their massacre of the people who are trying to do the right thing. I’m sick of it and my heart goes out to those who are dealing with this. End of rant.

Other parts of this series:

Part I: https://movetobend.com/how-to-beat-a-bank-in-5-days-part-i/

Part II: https://movetobend.com/how-to-beat-a-bank-in-5-days-part-ii/

Part III: https://movetobend.com/how-to-beat-a-bank-in-5-days-part-iii/

Final Chapter: https://movetobend.com/how-to-beat-a-bank-in-5-days-final-chapter/

Props to SunTrust Mortgage

By Catherine

Props to SunTrust Mortgage

In all of the real estate short sale turmoil, I have to take a few minutes and rant (positively) about SunTrust mortgage. In all honesty, I have no question the listing broker’s diligence was a big part of the recent approval. However, SunTrust just approved a short sale in approximately 50 days. This may seem insignificant to those unfamiliar with the incredibly long and drawn out short sale process, but I assure you it is not. Brokers in this day and age are in the trenches of short sales for months and months and approvals happening this quickly are few and far between. So SunTrust, you win lender of the week for your ability to actually work with your sellers and help them extinguish the agonizing and helpless situation brought on by a brutal economy and unforeseen circumstances. Keep up the good work:) End of rant.

What is a short sale? Loan modification? Deed in lieu of foreclosure?

By Catherine

A mortgage short sale, most commonly known as a short sale, is selling your home or other real estate for less money than you owe the lender. In a short sale, the bank will get less than owed and therefore must approve the sale of your property. Working with banks to complete a short sale is a very long and drawn out process, but when used in the right situation, will help decrease credit damage and the amount of bad credit you deal with in the future.
A loan modification, also called a “loan mod”, is when a bank agrees to change the terms of your loan so you can afford your payment. In a loan modification, some banks will cut the interest rate of your loan, some reduce the total amount you owe, and some banks will do both. Here’s and example: You owe $250,000 on your home, your interest rate is 6%, and your monthly payment is $2500. The bank reduces the amount you owe to $200,000, changes your interest rate to 3%, and thus, lowers your monthly payment to $1500. These numbers are not real numbers and the terms of each modification vary greatly from bank to bank and person to person. The loan modification process is also long and tedious, but if done correctly, is well worth the headache.
Deed in Lieu of Foreclosure is giving ownership of your home or property back to the bank to avoid a foreclosure. Basically, you say “here are the keys Mr. Bank” and they say thank you and move on. There is still paperwork and approval from the bank involved with this process also.
Short sales, foreclosures and deed in lieu of foreclosure may have tax consequences for you. The only way to find out what the consequences entail is to talk with a certified public accountant or tax attorney about your particular situation.

Big News for Buyers Struggling to Afford a Home

Interest Rates are Rising

What you don’t know about today’s mortgages…

How to beat a bank in 5 days: Final Chapter

Props to SunTrust Mortgage

What is a short sale? Loan modification? Deed in lieu of foreclosure?

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