Please take the time to visit my Webpage at www.denismarque.com .
I have added extensive statistical data on Sales, Listings, Days on Market, Foreclosures and many other items at "Market Statistics" on the webpage. You will find it to be encouraging if you are buying or selling in the Phoenix Metro marketplace.
As an aside, if you are concerned about keeping your current home, we do have several plans available to assist you including HAFA, HAMP, and HARP. Give us a call at 480-899-8844.
Denis
Showing posts with label affordability. Show all posts
Showing posts with label affordability. Show all posts
Monday, September 3, 2012
Thursday, May 5, 2011
Affordability Reaches Generational High
May 5, 2011 from Realty Times
Affordability Reaches Generational High by Carla Hill
If you have good credit and savings, now is a great time to buy. According to Zillow.com, "Homes are more affordable than they’ve been in the past 35 years."
Not only have home values fallen in many key markets, making homeownership more accessible to the average buyer, interest rates are at historic lows, meaning that once a home is purchased, monthly payments are smaller than in our recent past.
Zillow notes that "today’s median home buyer can expect to pay about 17% of his monthly gross income on his mortgage, compared to a 25% average since 1975."
In the 1980's, when interest rates were dangerously near 20 percent, this would take up nearly 45 percent of a buyers gross monthly income. In comparison, today's rates are an extreme bargain.
The main road block to homeownership at this time is access to credit. Although nearly one-third of all home purchases in recent months have been all-cash, that leaves the majority of the market shares requiring financing.
The tightening of lending standards in recent years, though, has been in direct response to the subprime lending trend during the housing boom.
Federal Reserve research indicates that a quarter of all mortgages in 2006 were subprime. This means that these loans were made to borrowers with credit scores below 620-660 and who were unable to put down the traditional 20 percent.
Today, buyers need credit scores in the 700s, with the higher the better. According to Zillow, "Applicants with FICO scores under 620 were virtually unable to get loans at any rate, thus being effectively excluded from the home-buying market. And those with FICO scores below 620 represent almost a third of the population."
There has also been a return of the 20 percent downpayment. This is in your best interest, as it means savings when it comes to closing costs. "The difference between a 10% and 20% down payment means she now has to save up another $17,220 in addition to any closing costs." (Zillow)
So, while it is more difficult for many homeowners to get into the market in today's economy, for buyers who have good credit and adequate savings, homes may never have been more affordable.
Copyright © 2011 Realty Times. All Rights Reserved.
Affordability Reaches Generational High by Carla Hill
If you have good credit and savings, now is a great time to buy. According to Zillow.com, "Homes are more affordable than they’ve been in the past 35 years."
Not only have home values fallen in many key markets, making homeownership more accessible to the average buyer, interest rates are at historic lows, meaning that once a home is purchased, monthly payments are smaller than in our recent past.
Zillow notes that "today’s median home buyer can expect to pay about 17% of his monthly gross income on his mortgage, compared to a 25% average since 1975."
In the 1980's, when interest rates were dangerously near 20 percent, this would take up nearly 45 percent of a buyers gross monthly income. In comparison, today's rates are an extreme bargain.
The main road block to homeownership at this time is access to credit. Although nearly one-third of all home purchases in recent months have been all-cash, that leaves the majority of the market shares requiring financing.
The tightening of lending standards in recent years, though, has been in direct response to the subprime lending trend during the housing boom.
Federal Reserve research indicates that a quarter of all mortgages in 2006 were subprime. This means that these loans were made to borrowers with credit scores below 620-660 and who were unable to put down the traditional 20 percent.
Today, buyers need credit scores in the 700s, with the higher the better. According to Zillow, "Applicants with FICO scores under 620 were virtually unable to get loans at any rate, thus being effectively excluded from the home-buying market. And those with FICO scores below 620 represent almost a third of the population."
There has also been a return of the 20 percent downpayment. This is in your best interest, as it means savings when it comes to closing costs. "The difference between a 10% and 20% down payment means she now has to save up another $17,220 in addition to any closing costs." (Zillow)
So, while it is more difficult for many homeowners to get into the market in today's economy, for buyers who have good credit and adequate savings, homes may never have been more affordable.
Copyright © 2011 Realty Times. All Rights Reserved.
Saturday, April 9, 2011
The Numbers on Buying a House
April 7, 2011 from Realty Times
The Numbers on Buying a House by Carla Hill
It can be a tricky question. How much home can you really afford? From employment status, to savings, downpayment, and even spending habits, there are a myriad of factors that come into play.
Here is a list of items to consider before settling on a budget.
1. Monthly Payment: Conventional wisdom tells us that your mortgage payment should be no more than 28 of your gross monthly income. This means that if you make $50,000 a year, the maximum amount you would safely want to pay each month is $1,166. How do you figure this for you own salary? Take ___ (salary) x .28 = total dollar amount for year. Then divide the total dollar amount by 12 (months in the year) and there you have it!
The National Association of Realtors also gives this simple equation for renters to use to figure out how much they can afford. Multiply your rent by 1.32 and that will equal your affordable mortgage payment.
2. Job Security: Have you just switched jobs? Is your company experiencing layoffs? In times of economic uncertainty, you may find it best to stay put. This is why many economic analysts keep saying that a housing recovery is dependent on a jobs recovery. When jobs return, so will the buyers.
3. Savings: The state of American savings is scary. According to Visual Economics.com, the average family has $117,951 worth of debt and only $3,800 in savings.
And a quarter of Americans have no savings at all! Half have nothing saved for retirement. Talk about crossing your fingers that social security will hold out for a while.
New grads are encountering an even scarier situation. The average college graduate has well over $20,000 in student loans to repay, and according to the New York Times, "Paying back student loans is likely to be especially difficult for recent graduates ... because the unemployment rate for college graduates ages 20 to 24 was 8.7 percent in 2009 — the highest annual rate on record and a substantial rise from 5.8 percent in 2008."
How does your debt-to-income ratio stack up? The Federal Reserve thinks debt adding up to more than 40% of your gross income could indicate financial distress.
The U.S. savings rate has risen steadily since the recession hit. It is now at 5.8 percent (American Express Spending & Saving Tracker). Hopefully, this rate will continue to be a trend.
4. Emergency Fund: Before you even begin to think about buying a house or moving, you must have an 8-month emergency fund in the bank. This means you need to add up your living expenses for a month. Include all the necessities and things that must be paid (rent or mortgage, car payments, insurance, food, gas money, electric, phone, tuition, day care, etc). Then multiply this number by 8. You must have this in case you or your spouse loses your job, gets sicks, or some other disaster hits your family.
5. Downpayment: This is savings in addition to your 8-month emergency fund. And a downpayment should be at least 20 percent of your purchase amount.
Look at it this way. If your monthly expenses are $2,000 a month and you want to buy a $100,000 house, you'll need a bare minimum of $36,000 in the bank to truly afford this move. That doesn't include cash needed for closing costs, repairs, moving expenses, and renovation.
6. Lifestyle and Extraneous Factors: Everyone has different wants and needs. You may be fine spending a little more for the house of your dreams in exchange for taking fewer vacations. Others abhor the statement, "house rich, cash poor," and instead would rather have funds for shopping, dining out, and travel. And don't forget about extraneous factors, such as aging parents, car repairs and maintenance. Things may come out of nowhere!
Buying a house is a fulfilling experience, but it comes with a lot of financial responsibility that shouldn't be taken lightly. Be sure to mull these items over when considering a buy.
Copyright © 2011 Realty Times. All Rights Reserved.
The Numbers on Buying a House by Carla Hill
It can be a tricky question. How much home can you really afford? From employment status, to savings, downpayment, and even spending habits, there are a myriad of factors that come into play.
Here is a list of items to consider before settling on a budget.
1. Monthly Payment: Conventional wisdom tells us that your mortgage payment should be no more than 28 of your gross monthly income. This means that if you make $50,000 a year, the maximum amount you would safely want to pay each month is $1,166. How do you figure this for you own salary? Take ___ (salary) x .28 = total dollar amount for year. Then divide the total dollar amount by 12 (months in the year) and there you have it!
The National Association of Realtors also gives this simple equation for renters to use to figure out how much they can afford. Multiply your rent by 1.32 and that will equal your affordable mortgage payment.
2. Job Security: Have you just switched jobs? Is your company experiencing layoffs? In times of economic uncertainty, you may find it best to stay put. This is why many economic analysts keep saying that a housing recovery is dependent on a jobs recovery. When jobs return, so will the buyers.
3. Savings: The state of American savings is scary. According to Visual Economics.com, the average family has $117,951 worth of debt and only $3,800 in savings.
And a quarter of Americans have no savings at all! Half have nothing saved for retirement. Talk about crossing your fingers that social security will hold out for a while.
New grads are encountering an even scarier situation. The average college graduate has well over $20,000 in student loans to repay, and according to the New York Times, "Paying back student loans is likely to be especially difficult for recent graduates ... because the unemployment rate for college graduates ages 20 to 24 was 8.7 percent in 2009 — the highest annual rate on record and a substantial rise from 5.8 percent in 2008."
How does your debt-to-income ratio stack up? The Federal Reserve thinks debt adding up to more than 40% of your gross income could indicate financial distress.
The U.S. savings rate has risen steadily since the recession hit. It is now at 5.8 percent (American Express Spending & Saving Tracker). Hopefully, this rate will continue to be a trend.
4. Emergency Fund: Before you even begin to think about buying a house or moving, you must have an 8-month emergency fund in the bank. This means you need to add up your living expenses for a month. Include all the necessities and things that must be paid (rent or mortgage, car payments, insurance, food, gas money, electric, phone, tuition, day care, etc). Then multiply this number by 8. You must have this in case you or your spouse loses your job, gets sicks, or some other disaster hits your family.
5. Downpayment: This is savings in addition to your 8-month emergency fund. And a downpayment should be at least 20 percent of your purchase amount.
Look at it this way. If your monthly expenses are $2,000 a month and you want to buy a $100,000 house, you'll need a bare minimum of $36,000 in the bank to truly afford this move. That doesn't include cash needed for closing costs, repairs, moving expenses, and renovation.
6. Lifestyle and Extraneous Factors: Everyone has different wants and needs. You may be fine spending a little more for the house of your dreams in exchange for taking fewer vacations. Others abhor the statement, "house rich, cash poor," and instead would rather have funds for shopping, dining out, and travel. And don't forget about extraneous factors, such as aging parents, car repairs and maintenance. Things may come out of nowhere!
Buying a house is a fulfilling experience, but it comes with a lot of financial responsibility that shouldn't be taken lightly. Be sure to mull these items over when considering a buy.
Copyright © 2011 Realty Times. All Rights Reserved.
Thursday, March 31, 2011
Discounted Home Prices
March 31, 2011 from Realty Times
Spring Market Conditions Bode Well For Discounted Home Prices by Broderick Perkins
Optimism about the housing market isn't quite sweeping the nation, but Americans remain sold on the value of home ownership at a good time to be bullish about buying a home.
With home sales and prices still falling, the spring could shape up as an opportune time to make a deal.
The housing downturn hasn't shaken consumers' resolve to consider home ownership an integral part of an American Dream, even among home owners with homes that have lost value.
The eighth quarterly "Allstate-National Journal Heartland Monitor Poll: The American Dream" revealed that nearly nine out of 10 homeowners say they would buy their same homes again.
Among those with homes with lost value, the same percentage said they would buy their home again.
Also, seven of 10 Americans say they would advise a friend or family member to buy a home as a long-term asset.
The spring could be a good time to take that advice.
Existing-home sales, completed transactions that include single-family, townhomes, condominiums and co-ops, dropped 9.6 percent to a seasonally adjusted annual rate of 4.88 million in February from 5.40 million in January. February 2010 sales were 2.8 percent below the pace in February 2010, according to the National Association of Realtors (NAR).
The slow sales pushed the median price down to $156,100, the lowest level since February 2002, setting the stage for spring bargains.
Some experts say the housing market is years away from a full blown recovery and the home buyer tax credit is kaput. However, improvements in employment and manufacturing and other economic sectors, bargain home prices and affordable interest rates could light a fire under buyers who've been sitting on the fence.
"Housing affordability conditions have been at record levels and the economy has been improving, but home sales are being constrained by the twin problems of unnecessarily tight credit, and a measurable level of contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers," said Lawrence Yun NAR chief economist.
The Allstate survey of 1,000 Americans also found.
• Buying a home was the best investment among 24 percent, behind "investing in retirement savings" (38 percent), but ahead of "saving money in the bank" (20 percent), and "investing in the stock market" (6 percent).
• A majority, 58 percent of those who believe the housing crisis will remain a serious problem would still recommend buying a home.
• Americans are evenly split on whether the federal government should continue policies to encourage home ownership at the same level (46 percent) or scale them back because they cost too much (46 percent).
• More than half of Americans (52 percent) blame the housing crisis on banks and lending institutions for misleading borrowers and approving bad loans, while 32 percent blame people who bought homes and took out mortgages they couldn't afford, and only 12 percent blame government policies that encouraged too many people to try to own their own homes.
"Owning a home continues to be the bedrock of the American Dream – even as incomes are down, jobs are scarce and families struggle to make ends meet," said Thomas J. Wilson , Allstate chairman, president and chief executive officer.
"Homeownership is viewed positively by the vast majority of Americans as both a place to raise a family and a sound investment," he added.
Copyright © 2011 Realty Times. All Rights Reserved.
Spring Market Conditions Bode Well For Discounted Home Prices by Broderick Perkins
Optimism about the housing market isn't quite sweeping the nation, but Americans remain sold on the value of home ownership at a good time to be bullish about buying a home.
With home sales and prices still falling, the spring could shape up as an opportune time to make a deal.
The housing downturn hasn't shaken consumers' resolve to consider home ownership an integral part of an American Dream, even among home owners with homes that have lost value.
The eighth quarterly "Allstate-National Journal Heartland Monitor Poll: The American Dream" revealed that nearly nine out of 10 homeowners say they would buy their same homes again.
Among those with homes with lost value, the same percentage said they would buy their home again.
Also, seven of 10 Americans say they would advise a friend or family member to buy a home as a long-term asset.
The spring could be a good time to take that advice.
Existing-home sales, completed transactions that include single-family, townhomes, condominiums and co-ops, dropped 9.6 percent to a seasonally adjusted annual rate of 4.88 million in February from 5.40 million in January. February 2010 sales were 2.8 percent below the pace in February 2010, according to the National Association of Realtors (NAR).
The slow sales pushed the median price down to $156,100, the lowest level since February 2002, setting the stage for spring bargains.
Some experts say the housing market is years away from a full blown recovery and the home buyer tax credit is kaput. However, improvements in employment and manufacturing and other economic sectors, bargain home prices and affordable interest rates could light a fire under buyers who've been sitting on the fence.
"Housing affordability conditions have been at record levels and the economy has been improving, but home sales are being constrained by the twin problems of unnecessarily tight credit, and a measurable level of contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers," said Lawrence Yun NAR chief economist.
The Allstate survey of 1,000 Americans also found.
• Buying a home was the best investment among 24 percent, behind "investing in retirement savings" (38 percent), but ahead of "saving money in the bank" (20 percent), and "investing in the stock market" (6 percent).
• A majority, 58 percent of those who believe the housing crisis will remain a serious problem would still recommend buying a home.
• Americans are evenly split on whether the federal government should continue policies to encourage home ownership at the same level (46 percent) or scale them back because they cost too much (46 percent).
• More than half of Americans (52 percent) blame the housing crisis on banks and lending institutions for misleading borrowers and approving bad loans, while 32 percent blame people who bought homes and took out mortgages they couldn't afford, and only 12 percent blame government policies that encouraged too many people to try to own their own homes.
"Owning a home continues to be the bedrock of the American Dream – even as incomes are down, jobs are scarce and families struggle to make ends meet," said Thomas J. Wilson , Allstate chairman, president and chief executive officer.
"Homeownership is viewed positively by the vast majority of Americans as both a place to raise a family and a sound investment," he added.
Copyright © 2011 Realty Times. All Rights Reserved.
Wednesday, February 23, 2011
Housing Affordability Reaches 20 Year High
Realty Times February 23, 2011
Housing Affordability Reaches 20 Year High
by Carla Hill
Housing affordability is higher today than it has been for decades. What does this mean for today's buyer? It means now is the time to buy.
According to the latest National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) data, "73.9 percent of all new and existing homes sold in the fourth quarter of 2010 were affordable to families earning the national median income of $64,400."
"Today's report shows that housing affordability at the end of 2010 was at its highest level since we started computing the HOI," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. "However, while this is good news for consumers, both home buyers and builders continue to confront extremely tight credit conditions, and this remains a significant obstacle to many potential home sales."
Are you looking for the best of the best when it comes to affordable markets? Indianpolois-Carmel, Indiana, is a great place to start. It was ranked as the most affordable housing market in the entire country. Ninety-three percent of homes sold in the city were affordable to households earning to area median of $68,700.
On the opposite end of the spectrum, Santa Cruz-Watsonville, CA, was ranked as the least affordable city in the country. Only 45 percent of homes were affordable to families making the median household income of $84,200.
Also near the bottom of the list, according to the NAHB, were: Ocean City, N.J; San Luis Obispo-Paso Robles, Calif.; Laredo, Texas; and Santa Barbara-Santa Maria-Goleta, Calif.
Nearly all of the lowest range major metrol areas were in California, which is not surprisingly considering the housing bubble that formed in the early 2000s.
Copyright © 2011 Realty Times. All Rights Reserved.
Housing Affordability Reaches 20 Year High
by Carla Hill
Housing affordability is higher today than it has been for decades. What does this mean for today's buyer? It means now is the time to buy.
According to the latest National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) data, "73.9 percent of all new and existing homes sold in the fourth quarter of 2010 were affordable to families earning the national median income of $64,400."
"Today's report shows that housing affordability at the end of 2010 was at its highest level since we started computing the HOI," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. "However, while this is good news for consumers, both home buyers and builders continue to confront extremely tight credit conditions, and this remains a significant obstacle to many potential home sales."
Are you looking for the best of the best when it comes to affordable markets? Indianpolois-Carmel, Indiana, is a great place to start. It was ranked as the most affordable housing market in the entire country. Ninety-three percent of homes sold in the city were affordable to households earning to area median of $68,700.
On the opposite end of the spectrum, Santa Cruz-Watsonville, CA, was ranked as the least affordable city in the country. Only 45 percent of homes were affordable to families making the median household income of $84,200.
Also near the bottom of the list, according to the NAHB, were: Ocean City, N.J; San Luis Obispo-Paso Robles, Calif.; Laredo, Texas; and Santa Barbara-Santa Maria-Goleta, Calif.
Nearly all of the lowest range major metrol areas were in California, which is not surprisingly considering the housing bubble that formed in the early 2000s.
Copyright © 2011 Realty Times. All Rights Reserved.
Friday, January 14, 2011
Mortgage Rates Down for Second Week
January 14, 2011
Mortgage Rates Down for Second Week
McLean, VA – Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®). The survey results showed lower mortgage rates for both long- and short-term rates, with the 30-year reaching a four-week low.
30-year fixed-rate mortgage (FRM) averaged 4.71 percent with an average 0.8 point for the week ending January 13, 2011, down from last week when it averaged 4.77 percent. Last year at this time, the 30-year FRM averaged 5.06 percent.
15-year FRM this week averaged 4.08 percent with an average 0.7 point, down from last week when it averaged 4.13 percent. A year ago at this time, the 15-year FRM averaged 4.45 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.72 percent this week, with an average 0.7 point, down from last week when it averaged 3.75 percent. A year ago, the 5-year ARM averaged 4.32 percent.
1-year Treasury-indexed ARM averaged 3.23 percent this week with an average 0.6 point, down from last week when it averaged 3.24 percent. At this time last year, the 1-year ARM averaged 4.39 percent.
Frank Nothaft, vice president and chief economist of Freddie Mac, reports, "Bond yields drifted lower following the release of the December employment report , which was weaker than the market consensus forecast and implied that the labor market is still in a sluggish recovery. Fixed mortgage rates followed bond yields lower for a second consecutive week, bringing them to a four-week low."
"In its January 12th regional economic review, the Federal Reserve noted that activity in residential real estate and new home construction remained slow across all Districts over the last two months of 2010 due to concerns about the pace of economic recovery, especially in employment. In addition, the outlooks for residential real estate were mixed, with contacts in most Districts described as expecting continued weak conditions."
Copyright © 2011 Realty Times. All Rights Reserved.
Mortgage Rates Down for Second Week
McLean, VA – Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®). The survey results showed lower mortgage rates for both long- and short-term rates, with the 30-year reaching a four-week low.
30-year fixed-rate mortgage (FRM) averaged 4.71 percent with an average 0.8 point for the week ending January 13, 2011, down from last week when it averaged 4.77 percent. Last year at this time, the 30-year FRM averaged 5.06 percent.
15-year FRM this week averaged 4.08 percent with an average 0.7 point, down from last week when it averaged 4.13 percent. A year ago at this time, the 15-year FRM averaged 4.45 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.72 percent this week, with an average 0.7 point, down from last week when it averaged 3.75 percent. A year ago, the 5-year ARM averaged 4.32 percent.
1-year Treasury-indexed ARM averaged 3.23 percent this week with an average 0.6 point, down from last week when it averaged 3.24 percent. At this time last year, the 1-year ARM averaged 4.39 percent.
Frank Nothaft, vice president and chief economist of Freddie Mac, reports, "Bond yields drifted lower following the release of the December employment report , which was weaker than the market consensus forecast and implied that the labor market is still in a sluggish recovery. Fixed mortgage rates followed bond yields lower for a second consecutive week, bringing them to a four-week low."
"In its January 12th regional economic review, the Federal Reserve noted that activity in residential real estate and new home construction remained slow across all Districts over the last two months of 2010 due to concerns about the pace of economic recovery, especially in employment. In addition, the outlooks for residential real estate were mixed, with contacts in most Districts described as expecting continued weak conditions."
Copyright © 2011 Realty Times. All Rights Reserved.
Friday, October 29, 2010
Mortgage Rates Up But Still Incredibly Low
October 29, 2010
Mortgage Rates Up But Still Incredibly Low from Realty Times
McLean, VA – Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey (PMMS), which found that the 30-year fixed-rate mortgage rate rose slightly for the second consecutive time in six weeks. The 15-year fixed-rate mortgage rate also rose slightly while the 5-year ARM set another low, and the 1-year ARM tied last week's low.
30-year fixed-rate mortgage (FRM) averaged 4.23 percent with an average 0.8 point for the week ending October 28, 2010, up from last week when it averaged 4.21 percent. Last year at this time, the 30-year FRM averaged 5.03 percent.
15-year FRM this week averaged 3.66 percent with an average 0.7 point, up from last week when it averaged 3.64 percent. A year ago at this time, the 15-year FRM averaged 4.46 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.41 percent this week, with an average 0.6 point, down from last week when it averaged 3.45 percent. A year ago, the 5-year ARM averaged 4.42 percent. The 5-year ARM has not been lower since Freddie Mac started tracking it in January 2005.
1-year Treasury-indexed ARM averaged 3.30 percent this week with an average 0.7 point, unchanged from last week. At this time last year, the 1-year ARM averaged 4.57 percent . The 1-year ARM ties last week's low.
Frank Nothaft, vice president and chief economist at Freddie Mac, reports, "Mixed economic data releases left mortgage rates little changed this week. Consumer confidence increased slightly in October, according to The Conference Board , but still remains at low levels. Based on the S&P/Case-Shiller 20-city composite index, house prices fell 0.3 percent between July and August, while the purchase-only index by the Federal Housing Finance Agency showed a 0.4 percent gain over the same period."
"Historically low rates are supporting home sales and reducing the excess stock of homes available for sale. Existing home sales, including condominiums and co-ops, rose for the second consecutive month in September, up almost 18.0 percent over July's low. Similarly, sales of new homes had back-to-back increases and were 7.7 percent above July. The inventory of new homes for sale has either stayed the same or declined every month of this year."
Copyright © 2010 Realty Times. All Rights Reserved.
Mortgage Rates Up But Still Incredibly Low from Realty Times
McLean, VA – Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey (PMMS), which found that the 30-year fixed-rate mortgage rate rose slightly for the second consecutive time in six weeks. The 15-year fixed-rate mortgage rate also rose slightly while the 5-year ARM set another low, and the 1-year ARM tied last week's low.
30-year fixed-rate mortgage (FRM) averaged 4.23 percent with an average 0.8 point for the week ending October 28, 2010, up from last week when it averaged 4.21 percent. Last year at this time, the 30-year FRM averaged 5.03 percent.
15-year FRM this week averaged 3.66 percent with an average 0.7 point, up from last week when it averaged 3.64 percent. A year ago at this time, the 15-year FRM averaged 4.46 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.41 percent this week, with an average 0.6 point, down from last week when it averaged 3.45 percent. A year ago, the 5-year ARM averaged 4.42 percent. The 5-year ARM has not been lower since Freddie Mac started tracking it in January 2005.
1-year Treasury-indexed ARM averaged 3.30 percent this week with an average 0.7 point, unchanged from last week. At this time last year, the 1-year ARM averaged 4.57 percent . The 1-year ARM ties last week's low.
Frank Nothaft, vice president and chief economist at Freddie Mac, reports, "Mixed economic data releases left mortgage rates little changed this week. Consumer confidence increased slightly in October, according to The Conference Board , but still remains at low levels. Based on the S&P/Case-Shiller 20-city composite index, house prices fell 0.3 percent between July and August, while the purchase-only index by the Federal Housing Finance Agency showed a 0.4 percent gain over the same period."
"Historically low rates are supporting home sales and reducing the excess stock of homes available for sale. Existing home sales, including condominiums and co-ops, rose for the second consecutive month in September, up almost 18.0 percent over July's low. Similarly, sales of new homes had back-to-back increases and were 7.7 percent above July. The inventory of new homes for sale has either stayed the same or declined every month of this year."
Copyright © 2010 Realty Times. All Rights Reserved.
Friday, October 8, 2010
Mortgage Rates Continue to Fall
Realty Times of October 8, 2010
Mortgage Rates Continue to Fall According to Freddie Mac's Weekly Survey
McLean, VA – Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), which found that the 30-year fixed-rate mortgage rate dropped yet again to break the survey's all-time low; the 15-year fixed-rate did the same. The 5-year ARM also set an all-time survey low.
30-year fixed-rate mortgage (FRM) averaged 4.27 percent with an average 0.8 point for the week ending October 7, 2010, down from last week when it averaged 4.32 percent. Last year at this time, the 30-year FRM averaged 4.87 percent.
15-year FRM this week averaged a record low of 3.72 percent with an average 0.7 point, down from last week when it averaged 3.75 percent. A year ago at this time, the 15-year FRM averaged 4.33 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.47 percent this week, with an average 0.6 point, down from last week when it averaged 3.52 percent. A year ago, the 5-year ARM averaged 4.35 percent.
1-year Treasury-indexed ARM averaged 3.40 percent this week with an average 0.7 point, down from last week when it averaged 3.48 percent. At this time last year, the 1-year ARM averaged 4.53 percent.
Frank Nothaft, vice president and chief economist at Freddie Mac report, "The 12-month growth rate in the core price index for personal consumption , which the Federal Reserve closely tracks, has been drifting lower over the past six months ending in August and suggests inflation is running at a tepid pace at best. This allowed mortgage rates to ease to new or near record lows this week."
"Housing affordability increased for the second month in a row in August to tie April's level, according to the National Association of Realtors® (NAR). As a result, pending existing home sales also rose for the second consecutive month in August to the strongest pace in four months, the NAR also reported. Furthermore, since the end of August, mortgage applications for home purchases were up over 14 percent for the week ended October 1st."
Copyright © 2010 Realty Times. All Rights Reserved.
Mortgage Rates Continue to Fall According to Freddie Mac's Weekly Survey
McLean, VA – Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), which found that the 30-year fixed-rate mortgage rate dropped yet again to break the survey's all-time low; the 15-year fixed-rate did the same. The 5-year ARM also set an all-time survey low.
30-year fixed-rate mortgage (FRM) averaged 4.27 percent with an average 0.8 point for the week ending October 7, 2010, down from last week when it averaged 4.32 percent. Last year at this time, the 30-year FRM averaged 4.87 percent.
15-year FRM this week averaged a record low of 3.72 percent with an average 0.7 point, down from last week when it averaged 3.75 percent. A year ago at this time, the 15-year FRM averaged 4.33 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.47 percent this week, with an average 0.6 point, down from last week when it averaged 3.52 percent. A year ago, the 5-year ARM averaged 4.35 percent.
1-year Treasury-indexed ARM averaged 3.40 percent this week with an average 0.7 point, down from last week when it averaged 3.48 percent. At this time last year, the 1-year ARM averaged 4.53 percent.
Frank Nothaft, vice president and chief economist at Freddie Mac report, "The 12-month growth rate in the core price index for personal consumption , which the Federal Reserve closely tracks, has been drifting lower over the past six months ending in August and suggests inflation is running at a tepid pace at best. This allowed mortgage rates to ease to new or near record lows this week."
"Housing affordability increased for the second month in a row in August to tie April's level, according to the National Association of Realtors® (NAR). As a result, pending existing home sales also rose for the second consecutive month in August to the strongest pace in four months, the NAR also reported. Furthermore, since the end of August, mortgage applications for home purchases were up over 14 percent for the week ended October 1st."
Copyright © 2010 Realty Times. All Rights Reserved.
Friday, September 24, 2010
Fixed-Rate Mortgages Unchanged
September 24, 2010
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From Realty Times - Fixed-Rate Mortgages Unchanged While ARMs Are Mixed
McLean, VA – Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®). The 30-year fixed-rate mortgage rate and the 15-year fixed-rate were unchanged; shorter-term rates were mixed.
30-year fixed-rate mortgage (FRM) averaged 4.37 percent with an average 0.7 point for the week ending September 23, 2010, unchanged from last week when it averaged 4.37 percent. Last year at this time, the 30-year FRM averaged 5.04 percent.
15-year FRM this week averaged a record low of 3.82 percent with an average 0.7 point, unchanged from last week when it averaged 3.82 percent. A year ago at this time, the 15-year FRM averaged 4.46 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.54 percent this week, with an average 0.6 point, down slightly from last week when it averaged 3.55 percent. A year ago, the 5-year ARM averaged 4.51 percent.
1-year Treasury-indexed ARM averaged 3.46 percent this week with an average 0.7 point, up from last week when it averaged 3.40 percent. At this time last year, the 1-year ARM averaged 4.52 percent.
Frank Nothaft, vice president and chief economist of Freddie Mac, said, "In its September 21st policy committee statement, the Federal Reserve indicated that the pace of recovery in output and employment has slowed in recent months. In addition, inflation was at levels somewhat below its comfort zone. The perception of slow growth and low inflation removed any upward pressure on fixed mortgage rates this week."
"Since 1975, fixed mortgage rates typically fall over the 12 months following the end of a recession; the one exception was the 1980 downturn. The National Bureau of Economic Research recently announced that the current recession ended in June 2009. Rates for 30-year fixed mortgages were 0.7 percentage points lower in June 2010, representing the largest decline during the first year of recovery over the last six recessions. With a weaker recovery, these rates fell by another 0.4 percentage points by September."
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Copyright © 2010 Realty Times. All Rights Reserved.
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From Realty Times - Fixed-Rate Mortgages Unchanged While ARMs Are Mixed
McLean, VA – Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®). The 30-year fixed-rate mortgage rate and the 15-year fixed-rate were unchanged; shorter-term rates were mixed.
30-year fixed-rate mortgage (FRM) averaged 4.37 percent with an average 0.7 point for the week ending September 23, 2010, unchanged from last week when it averaged 4.37 percent. Last year at this time, the 30-year FRM averaged 5.04 percent.
15-year FRM this week averaged a record low of 3.82 percent with an average 0.7 point, unchanged from last week when it averaged 3.82 percent. A year ago at this time, the 15-year FRM averaged 4.46 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.54 percent this week, with an average 0.6 point, down slightly from last week when it averaged 3.55 percent. A year ago, the 5-year ARM averaged 4.51 percent.
1-year Treasury-indexed ARM averaged 3.46 percent this week with an average 0.7 point, up from last week when it averaged 3.40 percent. At this time last year, the 1-year ARM averaged 4.52 percent.
Frank Nothaft, vice president and chief economist of Freddie Mac, said, "In its September 21st policy committee statement, the Federal Reserve indicated that the pace of recovery in output and employment has slowed in recent months. In addition, inflation was at levels somewhat below its comfort zone. The perception of slow growth and low inflation removed any upward pressure on fixed mortgage rates this week."
"Since 1975, fixed mortgage rates typically fall over the 12 months following the end of a recession; the one exception was the 1980 downturn. The National Bureau of Economic Research recently announced that the current recession ended in June 2009. Rates for 30-year fixed mortgages were 0.7 percentage points lower in June 2010, representing the largest decline during the first year of recovery over the last six recessions. With a weaker recovery, these rates fell by another 0.4 percentage points by September."
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Copyright © 2010 Realty Times. All Rights Reserved.
Tuesday, October 20, 2009
For Help Making Your Home Affordable
Learn About Making Home Affordable
Refinancing
Many homeowners pay their mortgages on time but are not able to refinance to take advantage of today’s lower mortgage rates perhaps due to a decrease in the value of their home.
Modification
Many homeowners are struggling to make their monthly mortgage payments perhaps because their interest rate has increased or they have less income.
Beware of Foreclosure Rescue Scams - Help Is Free!
Beware of anyone who asks you to pay a fee in exchange for a counseling service or modification of a delinquent loan.
Scam artists often target homeowners who are struggling to meet their mortgage commitment or anxious to sell their homes. Recognize and avoid common scams.
Assistance from a HUD-approved housing counselor is FREE.
Beware of people who pressure you to sign papers immediately, or who try to convince you that they can “save” your home if you sign or transfer over the deed to your house.
Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.
Never make a mortgage payment to anyone other than your mortgage company without their approval.
Report Lending Discrimination to HUD
If you believe you have experienced discrimination based on race, gender, national origin, or another reason, contact HUD’s Office of Fair Housing and Equal Opportunity at 1-800-669-9777.
To read the full text of the government webpage, go to http://makinghomeaffordable.gov/
Refinancing
Many homeowners pay their mortgages on time but are not able to refinance to take advantage of today’s lower mortgage rates perhaps due to a decrease in the value of their home.
Modification
Many homeowners are struggling to make their monthly mortgage payments perhaps because their interest rate has increased or they have less income.
Beware of Foreclosure Rescue Scams - Help Is Free!
Beware of anyone who asks you to pay a fee in exchange for a counseling service or modification of a delinquent loan.
Scam artists often target homeowners who are struggling to meet their mortgage commitment or anxious to sell their homes. Recognize and avoid common scams.
Assistance from a HUD-approved housing counselor is FREE.
Beware of people who pressure you to sign papers immediately, or who try to convince you that they can “save” your home if you sign or transfer over the deed to your house.
Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.
Never make a mortgage payment to anyone other than your mortgage company without their approval.
Report Lending Discrimination to HUD
If you believe you have experienced discrimination based on race, gender, national origin, or another reason, contact HUD’s Office of Fair Housing and Equal Opportunity at 1-800-669-9777.
To read the full text of the government webpage, go to http://makinghomeaffordable.gov/
Wednesday, July 15, 2009
America's most affordable cities.
From Realty Times of July 15, 2009
Market Conditions by Realty Times Staff
Forbes.com recently reported on its what stats show are America's most affordable cities.
Their criteria was based on cost of living and employment rates. They report that "U.S. homes are more affordable than they've been in two decades. The most recent report by the National Association of Homebuilders and Wells Fargo Bank showed that 72.5% of American homes sold in the last quarter were considered affordable. Of course, foreclosures and sliding prices may play a role."
Making the list:
Phoenix, Arizona
Columbus, Ohio
San Antonio, Texas
Houston, Texas
Dallas, Texas
Austin, Texas
Cincinnati, Ohio
Pittsburgh, Pennsylvania
St. Louis, Missouri
Indianapolis, Indiana
Copyright © 2009 Realty Times. All Rights Reserved.
Market Conditions by Realty Times Staff
Forbes.com recently reported on its what stats show are America's most affordable cities.
Their criteria was based on cost of living and employment rates. They report that "U.S. homes are more affordable than they've been in two decades. The most recent report by the National Association of Homebuilders and Wells Fargo Bank showed that 72.5% of American homes sold in the last quarter were considered affordable. Of course, foreclosures and sliding prices may play a role."
Making the list:
Phoenix, Arizona
Columbus, Ohio
San Antonio, Texas
Houston, Texas
Dallas, Texas
Austin, Texas
Cincinnati, Ohio
Pittsburgh, Pennsylvania
St. Louis, Missouri
Indianapolis, Indiana
Copyright © 2009 Realty Times. All Rights Reserved.
Tuesday, June 16, 2009
Real Estate Outlook
From Realty Times of June 16, 2009
Real Estate Outlook: Mortgage Rates and Inflation
by Kenneth R. Harney
Most of the key economic indicators for real estate continue to be at least moderately positive -- home sales are up, prices are stabilizing or up, unsold inventories are down, and even new unemployment filings are down slightly.
But there's a storm cloud looming on the near horizon that everybody needs to keep an eye on: Mortgage rates have been moving up -- fast. Bond market investors are spooked by the federal government's massive borrowings to pay for the stimulus and the deficit.
They're worried that serious inflation may be coming and they're demanding higher rates on the ten year Treasury bonds that are the benchmark used to price mortgages.
But let's focus first on the positive side of the ledger: A key housing price index released last week suggests that the long-awaited turnaround may be underway. The Integrated Asset Services Index - which is based on data from 15,000 local market segments around the U.S. -- went flat on a national basis in May for the first time in a year.
Prices in the Northeast were up by six tenths of a percent for the month. In the Midwest they rose by one tenth of a percent, they were down slightly in the South, and flat in the Western region.
Now that might not impress you, but David McCarthy, CEO of the research and services firm, said flat means bottoming out - and in his words, "that's encouraging (for housing) for the long term."
In some California markets that had experienced severe hits during the darkest days of the bust, the price changes for the month were larger than the national numbers.
San Bernadino prices gained 1.1 percent between April and May. Monterey saw a 3.7 percent increase and Sacramento homes were up four tenths of a percent.
Meanwhile, ZIP Realty's monthly national survey of unsold housing inventories found the number of MLS listings in 28 major markets down by 4 percent in May, and by 24 percent from year-earlier levels.
Now on to the sobering news on mortgage rates: No one can predict precisely how high rates are headed, but in the past two weeks they've jumped by more than a percentage point. The Mortgage Bankers Association reports that last week alone average 30-year fixed rate jumped to 5.6 percent from five and a quarter the week before.
Some analysts project rates to hit and surpass the 6 percent mark if current trends continue.
Bottom line: Given that house prices have turned around, and interest costs are soaring, value-conscious shoppers need to get their contracts and loan applications in -- quick!
Copyright © 2009 Realty Times. All Rights Reserved.
Real Estate Outlook: Mortgage Rates and Inflation
by Kenneth R. Harney
Most of the key economic indicators for real estate continue to be at least moderately positive -- home sales are up, prices are stabilizing or up, unsold inventories are down, and even new unemployment filings are down slightly.
But there's a storm cloud looming on the near horizon that everybody needs to keep an eye on: Mortgage rates have been moving up -- fast. Bond market investors are spooked by the federal government's massive borrowings to pay for the stimulus and the deficit.
They're worried that serious inflation may be coming and they're demanding higher rates on the ten year Treasury bonds that are the benchmark used to price mortgages.
But let's focus first on the positive side of the ledger: A key housing price index released last week suggests that the long-awaited turnaround may be underway. The Integrated Asset Services Index - which is based on data from 15,000 local market segments around the U.S. -- went flat on a national basis in May for the first time in a year.
Prices in the Northeast were up by six tenths of a percent for the month. In the Midwest they rose by one tenth of a percent, they were down slightly in the South, and flat in the Western region.
Now that might not impress you, but David McCarthy, CEO of the research and services firm, said flat means bottoming out - and in his words, "that's encouraging (for housing) for the long term."
In some California markets that had experienced severe hits during the darkest days of the bust, the price changes for the month were larger than the national numbers.
San Bernadino prices gained 1.1 percent between April and May. Monterey saw a 3.7 percent increase and Sacramento homes were up four tenths of a percent.
Meanwhile, ZIP Realty's monthly national survey of unsold housing inventories found the number of MLS listings in 28 major markets down by 4 percent in May, and by 24 percent from year-earlier levels.
Now on to the sobering news on mortgage rates: No one can predict precisely how high rates are headed, but in the past two weeks they've jumped by more than a percentage point. The Mortgage Bankers Association reports that last week alone average 30-year fixed rate jumped to 5.6 percent from five and a quarter the week before.
Some analysts project rates to hit and surpass the 6 percent mark if current trends continue.
Bottom line: Given that house prices have turned around, and interest costs are soaring, value-conscious shoppers need to get their contracts and loan applications in -- quick!
Copyright © 2009 Realty Times. All Rights Reserved.
Monday, June 1, 2009
How Much Can You Afford?
Realty Times of June 1, 2009
An excellent guide on keeping your house payment in an affordable range!
Helping Clients Estimate Their Affordability Range by Ralph Roberts
Traditionally, real estate and mortgage professionals have encouraged homeowners to stretch – to shop for homes at the upper end of their affordability range. We wanted them to maximize their investment, and we were seeing property values and incomes rise, especially for homeowners who were first starting out. It all made for a very sound investment in housing.
Recently, I have begun to question what an "affordable house payment" means. Even some of the major players in the mortgage lending industry have different ideas of what "affordable" means:
U.S. Treasury: 31 percent front-end DTI (debt-to-income) ratio, and less than 55 percent back-end DTI
FHA (Federal Housing Administration) Old: 29 percent front-end DTI, and 41 percent back-end DTI
FHA New: 31 percent front-end DTI, and 43 percent back-end DTI
Fannie Mae: 36 percent benchmark back-end DTI with a maximum of 45 percent with "strong compensating factors"
Conventional loans: 28 percent front-end ratio, and a 36 percent back-end ratio My rule of thumb is a maximum 30 percent front-end DTI. This means that a homeowner's monthly house payment or PITIA (principal, interest, taxes, insurance, and association fees) should be no higher than 30 percent of the gross monthly household income. For every $1,000 per month in household income, the homeowner should be able to afford $300 of house payment.
The trouble with these guidelines, even my guideline, is that they fail to take into account other mitigating factors. For example, couple with four children paying their own medical insurance premiums is probably going to be able to afford less house than a young couple with no children whose employers provide health insurance.
Likewise, a family that spends $400 per month to heat their home will have less money available for a house payment. Let's look at a specific example. Suppose a family of four is pulling in about $6,000 per month. That's $72,000 annually. To simplify, we'll assume the family is debt free, except for the new home they are about to purchase. Based on a front-end DTI of 31 percent, the couple should be able to afford a monthly house payment of $1,860. That leaves them with $4,140 per month to cover everything else.
According to Ginnie Mae's How Much Home Can You Afford? calculator, an annual gross household income of $72,000 can afford a monthly house payment of $2,235. This represents a 37 percent front-end DTI, which is outside most guidelines.
Before we encourage the couple to purchase a $200,000 plus house, let's take a look at their current monthly budget. Assuming we were to sell them a house and saddle them with a $1,860 monthly mortgage payment, here's where the rest of the money ($4,140) would be going each month:
Income taxes (28 percent) $1,160
Daughter's college $1,000
Electricity (avg.) $250
Husband's health insurance $160
Groceries $400
Auto insurance $180
Auto fuel $100
Auto license $28
Auto maintenance/repairs $200
Charitable contributions $100
Movies, TV, Internet $120
Medical/dental (un-reimbursed) $250
Clothing & shoes $80
Dining out $100
Gifts $50
Personal care $40
Pets $40
Total $4,258.00
Now, you wouldn't exactly characterize this family as living large, yet if it had a house payment of $1,860, it would be seriously struggling every month to make ends meet.
What we as real estate professionals can learn from this example is that home financing eligibility guidelines are just that – guidelines, ballpark figures to get the conversation going. Mortgage lenders, real estate agents, and other professionals who are providing guidance to homeowners on how much house they can afford do their clients a grave disservice by using these general guidelines to make recommendations to specific families about how much house they can afford.
Currently, we are doing this all backwards. We tell homeowners how much house they can afford and then expect them to make the tough budget decisions to make that payment affordable. When the family still can't afford their house payment, we assume they are overspending and send them to credit counseling to become further humiliated.
Perhaps a better way to qualify homeowners for mortgage loans is to start with the family's existing budget and projections and develop a realistically affordable house payment based on current and projected net income and monthly expenses. Remember, every family's situation is unique. We need to tailor their house payment to their budget, not the other way around.
--------------------------------------------------------------------------------
Copyright © 2009 Realty Times. All Rights Reserved.
An excellent guide on keeping your house payment in an affordable range!
Helping Clients Estimate Their Affordability Range by Ralph Roberts
Traditionally, real estate and mortgage professionals have encouraged homeowners to stretch – to shop for homes at the upper end of their affordability range. We wanted them to maximize their investment, and we were seeing property values and incomes rise, especially for homeowners who were first starting out. It all made for a very sound investment in housing.
Recently, I have begun to question what an "affordable house payment" means. Even some of the major players in the mortgage lending industry have different ideas of what "affordable" means:
U.S. Treasury: 31 percent front-end DTI (debt-to-income) ratio, and less than 55 percent back-end DTI
FHA (Federal Housing Administration) Old: 29 percent front-end DTI, and 41 percent back-end DTI
FHA New: 31 percent front-end DTI, and 43 percent back-end DTI
Fannie Mae: 36 percent benchmark back-end DTI with a maximum of 45 percent with "strong compensating factors"
Conventional loans: 28 percent front-end ratio, and a 36 percent back-end ratio My rule of thumb is a maximum 30 percent front-end DTI. This means that a homeowner's monthly house payment or PITIA (principal, interest, taxes, insurance, and association fees) should be no higher than 30 percent of the gross monthly household income. For every $1,000 per month in household income, the homeowner should be able to afford $300 of house payment.
The trouble with these guidelines, even my guideline, is that they fail to take into account other mitigating factors. For example, couple with four children paying their own medical insurance premiums is probably going to be able to afford less house than a young couple with no children whose employers provide health insurance.
Likewise, a family that spends $400 per month to heat their home will have less money available for a house payment. Let's look at a specific example. Suppose a family of four is pulling in about $6,000 per month. That's $72,000 annually. To simplify, we'll assume the family is debt free, except for the new home they are about to purchase. Based on a front-end DTI of 31 percent, the couple should be able to afford a monthly house payment of $1,860. That leaves them with $4,140 per month to cover everything else.
According to Ginnie Mae's How Much Home Can You Afford? calculator, an annual gross household income of $72,000 can afford a monthly house payment of $2,235. This represents a 37 percent front-end DTI, which is outside most guidelines.
Before we encourage the couple to purchase a $200,000 plus house, let's take a look at their current monthly budget. Assuming we were to sell them a house and saddle them with a $1,860 monthly mortgage payment, here's where the rest of the money ($4,140) would be going each month:
Income taxes (28 percent) $1,160
Daughter's college $1,000
Electricity (avg.) $250
Husband's health insurance $160
Groceries $400
Auto insurance $180
Auto fuel $100
Auto license $28
Auto maintenance/repairs $200
Charitable contributions $100
Movies, TV, Internet $120
Medical/dental (un-reimbursed) $250
Clothing & shoes $80
Dining out $100
Gifts $50
Personal care $40
Pets $40
Total $4,258.00
Now, you wouldn't exactly characterize this family as living large, yet if it had a house payment of $1,860, it would be seriously struggling every month to make ends meet.
What we as real estate professionals can learn from this example is that home financing eligibility guidelines are just that – guidelines, ballpark figures to get the conversation going. Mortgage lenders, real estate agents, and other professionals who are providing guidance to homeowners on how much house they can afford do their clients a grave disservice by using these general guidelines to make recommendations to specific families about how much house they can afford.
Currently, we are doing this all backwards. We tell homeowners how much house they can afford and then expect them to make the tough budget decisions to make that payment affordable. When the family still can't afford their house payment, we assume they are overspending and send them to credit counseling to become further humiliated.
Perhaps a better way to qualify homeowners for mortgage loans is to start with the family's existing budget and projections and develop a realistically affordable house payment based on current and projected net income and monthly expenses. Remember, every family's situation is unique. We need to tailor their house payment to their budget, not the other way around.
--------------------------------------------------------------------------------
Copyright © 2009 Realty Times. All Rights Reserved.
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