The housing crisis of the last decade was partially caused by unhealthy levels of mortgage debt. Homeowners were using their homes as ATMs by refinancing and swapping their equity for cash.
When prices started to fall, many homeowners found themselves in a negative equity situation (where their mortgage was higher than the value of their home). As a result, they walked away. This caused prices to fall even further.
Headlines are again talking about record levels of mortgage debt, making the comparison to the challenges that preceded the housing crash. However, cumulative debt is not an important data point. If we look at the debt as a percentage of disposable personal income, we are at an all-time low.
Here’s a visual representation of mortgage debt as a percent of income:Furthermore, according to a ...
Whether it is your first time or your fifth, it is always important to know all the facts when it comes to buying a home. With the large number of mortgage programs available that allow buyers to purchase homes with down payments below 20%, you can never have too much information about Private Mortgage Insurance (PMI).
What is PMI?
Freddie Mac defines PMI as:
“An insurance policy that protects the lender if you are unable to pay your mortgage. It's a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.
Once you've built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”
As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:
“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score,...
When buying a home today, why is there so much paperwork mandated by the lenders for a mortgage loan application? It seems like they need to know everything about you. Furthermore, it 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 other 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 several years, banks were forced to take on the responsibility of liquidating millions of foreclosures and negotiating an additional million plus short sales. Just like the government,...
Congratulations! You’ve found a home to buy and have applied for a mortgage! You are undoubtedly excited about the opportunity to decorate your new home! But before you make any big purchases, move any money around, or make any big-time life changes, consult your loan officer. They will be able to tell you how your decision will impact your home loan.
Below is a list of 7 Things You Shouldn’t Do After Applying for a Mortgage! Some may seem obvious, but some may not!
1. Don’t change jobs or the way you are paid at your job! Your loan officer must be able to track the source and amount of your annual income. If possible, you’ll want to avoid changing from salary to commission or becoming self-employed during this time as well.
2. Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.
3. Don’t make any large purchases like a new car or new furniture for your new home. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher debt to income...
According to the National Association of REALTORS most recent Profile of Home Buyers & Sellers, married couples once again dominated the first-time homebuyer statistics in 2018 at 54% of all buyers. It is no surprise that buying a home is more attainable with two incomes to save for down payments and contribute to monthly housing costs.
However, many couples are also deciding to buy a home before spending what would be a down payment on a wedding. Last year, unmarried couples accounted for 16% of all first-time buyers.
If you’re single, don’t fret! Single women made up 18% of first-time buyers in 2018, while single men accounted for 10% of buyers. One recent article pointed to a sense of responsibility and commitment that drives many single women to want to own their home, rather than rent.
Here is the breakdown of all first-time homebuyers in 2018 by percentage of all buyers, income,...
There are some people who haven’t purchased homes because they are uncomfortable taking on the obligation of a mortgage. However, everyone should realize that unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.
As Entrepreneur Magazine, a premier source for small business, explained in their article, “12 Practical Steps to Getting Rich”:
“While renting on a temporary basis isn’t terrible, you should most certainly own the roof over your head if you’re serious about your finances. It won’t make you rich overnight, but by renting, you’re paying someone else’s mortgage. In effect, you’re making someone else rich.”
With home prices rising, many renters are concerned about their house-buying power. Mike Fratantoni, Chief Economist at MBA, explained:
“The spring homebuying season is almost upon us, and if rates stay lower, inventory continues to grow, and the job market maintains its...