Do 46 Million Millennials Know They Are Mortgage Ready?

There are over 46 million millennials (33% of the generation) who are considered “Mortgage Ready”, meaning they meet the qualifications to be approved for a mortgage today!

Many have written about the millennial generation and whether or not they, as a whole, believe in homeownership as part of attaining the American Dream.

Millennials have taken longer to obtain traditional milestones than the generations before them, such as getting married, having kids, and buying a home. However, that does not mean that they do not still aspire to achieve those things.

History shows that people tend to buy their first home around age 30. Nearly 5 million millennials will turn 30 in the next two years. This will continue to fuel demand for housing.

This is also one of the many reasons why the millennial homeownership rate has continued to grow over the past few years. 48.4% of Americans between the ages of 30-34 now own a home.

There are over 46 million millennials (33% of the generation) who are considered “Mortgage Ready”meaning they meet the qualifications to be approved for a mortgage today!

  • a FICO Score ≥ 620
  • a Back-End Debt to Income Ratio ≤ 25%
  • no Foreclosures or Bankruptcies in the last 7 years
  • no severe delinquencies in 1 year

Rob Chrane, CEO of Down Payment Resource, commented on the findings of the report,

“We now know there are millions of buyers with the income & credit necessary to qualify to buy a home. The biggest question is:

Do they know it? …Unfortunately, many renters don’t investigate homeownership simply because they don’t believe it’s an option.”

The good news is that more and more millennials are realizing that they can afford a home now. Even so, more can be done to increase awareness of low down payment programs to attract even more of this generation.

New data from realtor.com shows that in December, millennials accounted for 42% of all new home loans originated in the month. This is more than any other generation.

Bottom Line

If you are one of the many millennials who may be “Mortgage Ready” but are unsure what your next steps should be, let’s get together to help guide you on your path to homeownership!

Home mortgage rates are down but you’d better hurry

Small changes in mortgage rates can have a big impact on the housing market.

North Texas home sales fell about 6 percent in the fourth quarter of 2018 in large part due to higher home finance costs. The drop in home buys in the final months of the year caused sales for all of 2018 to drop for the first time in almost eight years.

Higher mortgage rates — which rose to about 5 percent in early November — were the biggest contributor to the slump in Dallas-Fort Worth home purchases last year.

Now that mortgage costs have eased off a bit, builders and real estate agents say they’re seeing more home shoppers hit the market.

They’d better hurry. Home finance costs are traditionally the lowest at the start of the year.

And the Federal Reserve has signaled that more interest rate hikes are coming in 2019.

“It provides a little bit of urgency in a market where buyers have gotten lackadaisical about mortgage rates — they just assumed they would stay low,” said Paige Shipp of housing analyst Metrostudy Inc.

Potential buyers were caught off guard last year when they found they couldn’t afford as much house as they wanted and their monthly mortgage payments would be higher than expected.

“The buyers that said interest rates are too high and we can’t do this are probably regretting that they didn’t get approved for a loan and keep hunting houses,” Paige said. “Rates are lower now.

“If people want to buy a home in the spring, they need to stay on top of where mortgage rates are.”

The decrease in nationwide average mortgage rates to just under 4.5 percent has already caused a surge in applications for home loans.

“We have seen a boost in loan application volume, both for purchase and for refinance,” said Frank Nothaft, chief economist for CoreLogic. “Fixed-rate mortgage rates are down about a half percentage point from November 2018.

“That is an important gain in affordability,” he said. “For example, to buy a $300,000 home with 20 percent down payment, the monthly principal and interest payment for a $240,000 30-year fixed-rate loan has dropped from $1,280 to $1,209, a monthly savings of $71. That makes a big difference in a family’s budget.”

Nothaft still expects home loan costs to move higher this year — back to near 5 percent at the end of 2019. And rates are still almost a half percentage point higher than they were a year ago.

“With interest rates expected to rise, if the prospective home buyer is ready to buy, it’s better to act sooner than later,” he said.

Lawrence Yun, the National Association of Realtor’s chief economist, said the dip in home finance costs should bring another 200,000 nationwide home sales this year. “Falling mortgage rates have always boosted sales,” Yun said. “Sentiment and enthusiasm has turned for the better.”

The National Association of Home Builders has even boosted its outlook for U.S. home starts this year because of the lower finance rates.

“Our forecast calls for a slight improvement in sales due to rates falling from 5 percent to 4.5 percent,” said the builders’ association’s top economist Robert Dietz.

If you are planning to buy a house, don’t dawdle. Contact the Indigo Skye Group and let us go over your options on what you can afford or how to best price your home to sell.

No one expects the recent reduction in home mortgage rates to last forever.

Home mortgage rates are changing mortgage chart indigo skye group blog
Home finance costs have dropped since a recent peak of almost 5 percent in November. (Source: Freddie Mac)

No Bubble Here! How New Mortgage Standards Are Helping

No Bubble Here! How New Mortgage Standards Are Helping

Real estate is shifting to a more normal market; the days of national home appreciation topping 6% annually are over and inventories are increasing which is causing bidding wars to almost disappear. Some see these as signs that the market will soon come tumbling down as it did in 2008.

As it becomes easier for buyers to obtain mortgages, many are suggesting that this is definite proof that banks are repeating the same mistakes they made a decade ago. Today, we want to assure everyone that we are not heading to another housing “bubble & bust.”

Each month, the Mortgage Bankers’ Association (MBA) releases a measurement which indicates the availability of mortgage credit known as the Mortgage Credit Availability Index (MCAI). According to the MBA:

“The MCAI provides the only standardized quantitative index that is solely focused on mortgage credit. The MCAI is calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.).” *

The higher the measurement, the easier it is to get a mortgage. During the buildup to the last housing bubble, the measurement sat at around 400. In 2005 and 2006, the measurement more than doubled to over 800 and was still at almost 600 in 2007. When the market crashed in 2008, the index fell to just over 100.

Over the last decade, as credit began to ease, the index increased to where it is today at 186.7 – still less than half of what it was prior to the buildup of last decade and less than one-quarter of where it was during the bubble.

Here is a graph depicting this information (remember, the higher the index, the easier it was to get a mortgage):

real estate bubble

Bottom Line

Though mortgage standards have loosened somewhat during the last few years, we are nowhere near the standards that helped create the housing crisis ten years ago.

*For more information on the MCAI, including methodology, FAQs, and other helpful resources, please click here.

 

Related Article: Why we are not heading toward a housing bubble.

Where Are Interest Rates Headed in 2019?

The interest rate you pay on your home mortgage has a direct impact on your monthly payment. The higher the rate, the greater the payment will be. That is why it is important to know where rates are headed when deciding to start your home search.

Below is a chart created using Freddie Mac’s U.S. Economic & Housing Marketing Outlook. As you can see, interest rates are projected to increase steadily throughout 2019.

How Will This Impact Your Mortgage Payment?

Depending on the amount of the loan that you secure, a half of a percent (.5%) increase in interest rate can increase your monthly mortgage payment significantly. But don’t let the prediction that rates will increase stop you from purchasing your dream home this year!

Let’s take a look at a historical view of interest rates over the last 45 years.

Bottom Line

Be thankful that you can still get a better interest rate than your older brother or sister did ten years ago, a lower rate than your parents did twenty years ago, and a better rate than your grandparents did forty years ago.

 

Related article: Rent or Buy: either Way You’re Paying a Mortgage!

Keller Williams Introduces ZeroPlus Mortgage

Keller Williams rolls out a new mortgage program created for buyers of Keller Williams agents.

The new Keller Williams ZeroPlus Mortgage is an awesome program for buyers that work with Indigo Skye Group. If you use Keller Mortgage, it can save you a ton of money when buying a home!

KW buyers pay no lender fees + they receive an extra $1,000 closing credit.

Keller Williams buyers pay no lender fees + they receive an extra $1,000 closing credit. Typical lender fees are 1–2%. On $300,000 that’s $3,000–$6,000; after another $1,000 credit that brings the total savings to $7,000, and the interest rate stays nice and LOW!

Buyers can use the savings to:

  • Qualify for a higher loan amount
  • Increase their down payment
  • Improve their offer price
  • Offset repairs
  • Buy new furniture
  • Pay moving expenses

Buyers can skip lender fees ONLY because they are working with a KW agent!

Obviously, for a seller who is also buying, they can use Keller Mortgage ZeroPlus too!  Just see your Keller Williams agent. Even if the buyer already has another agent, they can still use ZeroPlus through Indigo Skye Group as the selling agent and buy the house with the savings – making it easier for them to buy, buy more, or save money!

Types of loans ZeroPlus offers :

  • Conventional
  • FHA
  • VA
  • Jumbo loans up to $3,000,000

ZeroPlus offers 10, 15, 20, 30 year fixed rates as well as ARMs for primary residences, second homes, and investments.

…but wait, there’s more!

Thinking about refinancing?  ZeroPlus also offers the same benefits for a refinance.

For more information visit the ZeroPlus Mortgage website, or contact Janelle or Judy at the Indigo Skye Group.

Mortgage Interest Rates Have Begun to Level Off

Whether you are a buyer searching for your first home, or a homeowner looking to move up to your next home, you should pay attention to where mortgage interest rates are heading.

Over the course of 2018, according to Freddie Mac’s Primary Mortgage Market Survey, rates have increased from 3.95% in the first week of January to 4.40% in the first week of April.

At first glance, the difference between these numbers in such a short amount of time could be concerning, but if we look at the graph below, we’ll see that rates have already started to level off and return to the mark set in February.

This is great news for anyone looking to buy a home this spring! The spring is always one of the busiest seasons for home buying, and with rates increasing even more, buyers have come off the fence to lock in great rates! This is still great advice as the experts believe that rates will continue to rise throughout the year.

Every month, Freddie Mac, Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors release their projections for where they believe mortgage rates will be in the coming months. If we take the average of what each of the four organizations is predicting for the second quarter, rates are expected to rise to about 4.48% by June.

That average climbs to 4.73% by the end of this year.

So, what does this mean?

Waiting until the end of the year to buy, with rates still projected to increase, will end up costing you more money on your monthly mortgage payment. For every $250,000 you need to borrow to purchase your dream home, you will spend $49.21 more per month, $590.52 per year, and over $17,700 by the end of your 30-year mortgage.

And that’s just the impact of your interest rate going up!

Bottom Line

If you are ready and willing to purchase a home, find out if you’re able to. Let’s get together to evaluate your needs and help you with next steps!

Will the new tax laws take mortgage deductions out of your pocket??

Wondering if the new tax laws will take deductions out of your pocket? Here are a few ways the bill will affect homeowners and the housing market:

MORTGAGE INTEREST DEDUCTION

Prior to this tax reform bill, homeowners could deduct the interest on their mortgage debt, up to $1 million. The new law caps the interest deduction on mortgage debt to $750,000 for new mortgages. Current homeowners are not impacted by this change.

Additionally, homeowners are no longer allowed to deduct the interest they pay on home equity debt. VERY IMPORTANT: the home equity line of credit (HELOC) deduction is NOT grandfathered. So, individuals with a HELOC will lose the deduction.

PROPERTY TAXES

The new tax bill also curbs how much homeowners can deduct for paying property taxes. The previous tax law allowed taxpayers to deduct state and local income or sales tax and also property taxes.

Property, state and local income taxes face a combined $10,000 deduction limit.

CAPITAL GAINS ON HOME SALES

One tax break that remains in place is a rule that lets homeowners shield some of the profits they make selling their home from capital gains taxes.

For individuals, the break applies up to $250,000 in profits on the sale of a principle residence; for married couples, it is up to $500,000.

 

For more information on how the new tax bill might effect your homeowner deductions contact your CPA or tax professional.

Rents Are on the Rise: Don’t Get Caught in the Rental Trap!

There are many benefits to homeownership. One of the top benefits is protecting yourself from rising rents, by locking in your housing cost for the life of your mortgage.

Don’t Become Trapped 

A recent article by Apartment List addressed rising rents by stating:

“Rents are up 2.7% year-over-year at the national level. Year-over-year growth continues to fall between the 2.1% rate from this time last year and the 3.4% growth rate from October 2015.”

The article continues explaining that:

“Despite the seasonal slowdown, rents are still up year-over-year in 89 of the 100 Largest cities.

Additionally, the Urban Institute revealed that,

Over a quarter of renters, or 11.1 million households, are severely cost burdened, spending at least half their income on rental housing.

These households struggle to save for a rainy day and pay other bills, including groceries and healthcare.

It’s Cheaper to Buy Than Rent 

The results of the latest Rent vs. Buy Report from Trulia shows that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.

The updated numbers show that the range is an average of 6.5% less expensive in San Jose (CA), all the way up to 57% less expensive in Detroit (MI) and 37.4% nationwide!

Know Your Options

Perhaps you have already saved enough to buy your first home. A nationwide survey of about 24,000 renters found that 80% of millennial renters plan to eventually buy a house, but 72% cite affordability as their primary obstacle. Aside from affordability, one in three millennial renters have concerns about their credit scores, and another 53% said that a down payment is an obstacle.

Many first-time homebuyers who believe that they need a large down payment may be holding themselves back from their dream homes. As we have reported before, in many areas of the country, a first-time home buyer can save for a 3% down payment in less than two years. You may have already saved enough!

Bottom Line

Don’t get caught in the trap that so many renters are currently in. If you are ready and willing to buy a home, find out if you are able. Let’s get together to determine if you can qualify for a mortgage now!

Why Is There So Much Paperwork Required to Get a Mortgage?

Why is there so much paperwork mandated by the lenders for a mortgage loan application when buying a home today? It seems that they need to know everything about you and requires three separate sources to validate each and every entry on the application form.

Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.

There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

1. The government has set new guidelines that now demand that the bank proves beyond any doubt that you are indeed capable of paying the mortgage.

During the run-up to the housing crisis, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again.

2. The banks don’t want to be in the real estate business.

Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.

However, there is some good news in the situation.

The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a mortgage interest rate around 4%.

The friends and family who bought homes ten or twenty years ago experienced a simpler mortgage application process, but also paid a higher interest rate (the average 30-year fixed rate mortgage was 8.12% in the 1990s and 6.29% in the 2000s).

If you went to the bank and offered to pay 7% instead of around 4%, they would probably bend over backward to make the process much easier.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.