Progress on the Fed’s preferred inflation measure has stalled, while the latest data on appreciation and signed contracts show strength in the housing sector. Here are the headlines:
-Progress Stalls on Inflation
-Media Mixed Up About Mix of New Home Sales
-More Signed Contracts Despite Higher Rates
-Higher Trend in Home Prices Continues
-Jobless Claims Story Remains the Same
Progress Stalls on Inflation
February’s Personal Consumption Expenditures (PCE) showed that headline inflation rose 0.3% from January, with the year-over-year reading up from 2.4% to 2.5%. Core PCE, the Fed’s preferred method which strips out volatile food and energy prices, rose by 0.3% monthly. The year-over-year reading fell from 2.9% to 2.8%, pushing this important metric one step closer to the Fed’s 2% target and its lowest level in almost three years!
What’s the bottom line?The Fed has been working hard to tame inflation, hiking its benchmark Fed Funds Rate (which is the overnight borrowing rate for banks) eleven times between March 2022 and July 2023. These hikes were designed to slow the economy by making borrowing more expensive, lowering the demand for goods, and thereby reducing pricing pressure and inflation.
The Fed wants to see annual inflation as measured by Core PCE return to its 2% target, though they’ve indicated they won’t “wait to get to 2% to cut rates.” While the latest 2.8% Core PCE reading is much lower than the 2022 peak of 5.6%, progress has been slowing. So, the question remains: When will the Fed think inflation has progressed low enough for them to start cutting the Fed Funds Rate later this year?
Simplifying the Mortgage Application Process for Millennial First-Time Home Buyers with Primemax Mortgagage
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Purchasing your first home is an exciting milestone, but it can also be a daunting process, especially for millennials entering the real estate market. As a millennial first-time home buyer, you may have concerns about navigating the mortgage application process smoothly. Fortunately, Primemax Mortgage is here to simplify the experience for you. In this blog post, we will explore how Primemax Mortgage makes it easy for millennial homebuyers to apply for a mortgage, empowering them to achieve their dreams of homeownership effortlessly.
Primemax Mortgage understands the preferences of tech-savvy millennials who prefer convenient digital solutions. With their user-friendly online application, you can initiate the mortgage application process from the comfort of your own home. By visiting Primemax Mortgage's website, you'll find a streamlined application form that guides you through each step, making it easy to enter your personal information, financial details, and property preferences.
While the online application may be straightforward, Primemax Mortgage recognizes the value of personalized assistance during the mortgage application journey. They have a team of experienced mortgage professionals who are readily available to address your concerns and guide you through the process. Whether you have questions about the application, require clarification on certain terms, or need assistance with documentation, our experts will provide the support you need to feel confident and informed.
Gathering and submitting documents is a crucial aspect of the mortgage application process. However, Primemax Mortgage has implemented measures to streamline this process for millennial first-time home buyers. They provide a comprehensive document checklist, outlining all the necessary paperwork you'll need to provide. Furthermore, they offer secure online document submission options, allowing you to upload your documents quickly and securely. This eliminates the need for physical paperwork and saves you valuable time.
Waiting for mortgage pre-approval can be a nerve-wracking time, particularly when you're eager to start house hunting. Primemax Mortgage recognizes the importance of timely responses and aims to provide fast pre-approval for qualified millennial buyers. By leveraging their advanced technology and efficient processes, Primemax Mortgage can often provide you with a pre-approval decision in a short period. This puts you in a stronger position to make offers confidently and secure your dream home quickly.
Clear and open communication is essential throughout the mortgage application process, especially for first-time home buyers. Primemax Mortgage is committed to keeping you informed every step of the way. They provide regular updates on the status of your application, ensuring you know what's happening and allowing you to plan accordingly. Their team is readily available to address any concerns or questions that may arise during the process, ensuring a smooth and transparent experience.
Navigating the mortgage application process as a millennial first-time home buyer doesn't have to be overwhelming. Primemax Mortgage simplifies the experience with their easy-to-use online application, personalized assistance, streamlined document submission, fast pre-approval, and transparent communication. By choosing Primemax Mortgage, you can feel confident and empowered to achieve your dreams of homeownership. Start your journey today and embrace the excitement of becoming a proud homeowner with Primemax Mortgage by your side.
Remember, homeownership is within reach, and Primemax Mortgage is here to make it easy for you.
Mortgage rates have declined from the highs reached late last year. You may be wondering if you should wait for them to drop further before making a home purchase. Let me explain why it may be more beneficial to act now instead.
We recently received December’s Pending Home Sales data, which measures signed contracts on existing homes. This number came in better than expected. We’re also starting to see other housing sales figures improve like New Home Sales. This rebound means activity is picking up and will likely only increase from here.
Instead of waiting, a better tactic would be to purchase that home today while there is less competition and more room for negotiation. This will help you get the best deal, and if rates do move lower, you can likely refinance your loan, while benefiting today from the price savings.
Don't wait, I’m Regina Rickles and I’m here to help you navigate your homebuying journey.
What is a Temporary 2/1 Buydown
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A Temporary 2/1 Buydown is an up-front interest payment that lowers the interest on a fixed-rate mortgage for the first two years of the loan term. After the 2 years are up, the interest rate reverts to the full note rate for the remaining life of the loan.
Fairway Wholesale currently only offers 2/1 Temporary Buydown funded by the seller. Which allows seller, utilizing a seller concession, to prepay some of the interest on a fixed-rate mortgage, in exchange for a temporary lower monthly payment for the borrower.
A predetermined amount is collected at closing and withdrawn each month from an account set up and maintained by Fairway for the purpose of covering the difference between the reduced payment made by the borrower and the regular payments received by the lender.
The total monthly payment received by the lender —consisting of the payment made by the borrower, plus the withdrawal from the established escrow account —is the same as it would be in the absence of the temporary buydown.
There are Fed Announcements, which involve rate hikes/cuts, press conferences, and updated rate forecasts after a 2 day meeting among Fed members. And then there are the "minutes" from that meeting. The minutes are released 3 weeks after the big announcement and they simply offer some more context to the rate hike/cut, etc.
Today was a Fed minutes day--not a "Fed Day," per se. The minutes didn't offer any striking new insights to the Fed's line of thinking. Thus, bonds (which dictate rates) didn't really respond. Instead, bonds had already moved toward slightly lower rates overnight due to friendly inflation data overseas (bonds like low inflation).
There was a bit of push back in the morning due to a government labor survey that showed job openings remaining extremely high. The Fed is looking for a bit more slack in the labor market to bolster the case for lower inflation. When the labor market shows signs of remaining tight (i.e. more jobs than job seekers), investors worry the Fed will have to keep the upward pressure on rates in order to avoid a resurgence in inflation.
The push-back wasn't enough to derail a bit of improvement in the mortgage market. The average lender was quoting the same rates as yesterday, but with slightly lower upfront costs today. Many lenders were effectively unchanged versus yesterday with the average conventional 30yr fixed rate still just under 6.5% for top tier scenarios.
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Mortgage rates decreased slightly at the end of December. But they should turn around in January and keep climbing throughout 2022.
Recent declines can be pinned on the Omicron variant. The ultra–contagious strain caused renewed fear about traveling, dining out, in–person shopping, and other key economic activities that were just beginning to normalize before the variant hit. This resulted in a minor slowdown in the pace of economic growth and dragged mortgage rates slightly lower.
But consumers’ outlook on the economy is still positive overall. And the forces driving interest rates upward – including record–high inflation – are still present.
Perhaps most importantly, the Federal Reserve recently announced it would speed up the pace of tapering to combat those high inflation numbers.
The Fed expects to end its mortgage stimulus program by March or April of 2022. That could mean significantly higher mortgage rates in the first quarter of the year.
Remember that the Fed’s bond purchases throughout the pandemic were keeping mortgage rates artificially low. As the Fed pulls back (‘tapers’) those purchases, mortgage rates will almost certainly rise.
As of its last meeting, the Fed expects to end its mortgage stimulus program by March or April of 2022. That could mean significantly higher mortgage rates in the first quarter of the year.
For now, though, interest rates are still at historic lows.
If you’ve put off refinancing a home or purchasing a new home, January 2022 could be the time to do it. The window to take advantage of today’s low–rate environment could close quickly.
Given the Federal Reserve’s current policy of holding the Fed funds rate at near 0% for the foreseeable future, you might assume mortgage rates will remain at the historically low levels we have seen throughout the COVID-19 pandemic. However, we have seen this before and mortgage rates did move.
The last time the Fed instituted a Zero Interest Rate Policy (ZIRP) was following the Global Financial Crisis lasting a span of seven years from December 2008 to December 2015. In December 2008, the average note rate for 30-year mortgages was 5.14%; when ZIRP ended in December 2015, the par note rate was 3.31%. However, despite a Federal Open Markets Committee target on short-term rates of 0.00% - 0.25%, mortgage rates experienced several violent swings. Rates shot up more than 100 basis points over a short 3-month period, and during another span lasting only 9 weeks, pricing for the lowest-coupon mortgage-backed security (MBS) declined by 800 basis points from 101 to a 93 handle. Note that this activity occurred more than two years before the Fed began tapering off its purchasing of Treasuries and MBS.
Currently, the Fed has indicated it will not raise the Fed funds rate until at least 2023. However, this does not mean mortgage rates will remain in the same range that we’ve seen over the last 10 months. It would not be unusual to see changes of even an entire whole percentage point up, or down, for however long this current policy remains in place. Therefore maintaining a comprehensive hedge strategy is a must to both benefit and protect your pipeline during these swings.
The short answer is that mortgage rates are going up because the economy is starting to have a more positive outlook on post-COVID recovery.
Coronavirus has been the major force keeping rates low over the past year. The closer we get to widespread vaccination — and the better our economic outlook as a result — the higher rates will go.
Although the U.S. is still at a critical stage with the virus, and far from tangible recovery, we’re finally starting to see a path forward.
This is largely due to Biden’s win, as well as the Georgia runoff election in which Democrats Raphael Warnock and Jon Ossoff won Senate seats.
Current mortgage rate movements are due partly to the fluidity of the political and economic situation in the U.S., as the country prepares for a transition from the Trump administration to the Biden White House on January 20.
President-Elect Joe Biden has signaled that he wants to implement a $1.9 trillion stimulus plan to jumpstart the economy, and the Democratic wins in Georgia give him a Senate majority that will likely aid his efforts.
Although Biden’s proposed stimulus plan has drawn criticism that relief checks of even $2,000 are unlikely to do much for the economy, the aim of the plan is to ease the country’s economic burden and spur spending and growth.
Economic growth would likely raise mortgage rates as different sectors rebound.
Mortgage professional Magazine also reported that stimulus spending could increase inflation, which would drive up mortgage rates as well.
Eli Sklar, senior loan consultant with loanDepot, pointed to the Ten-Year Treasury as an indicator of an improving economy and a signal that rates will rise in the coming year.
“The Ten-Year Treasury’s price, which is a big indicator of mortgage rates, is inversely related to how the market is doing. As the market continues to do well, the Ten-Year Treasury’s value goes down because the Ten-Year Treasury is known as the safest investment,” Sklar said.
A spike in investor interest in the Ten-Year Treasury as the economy cratered last year, combined with the Federal Reserve’s commitment to keep interest rates low, drove down mortgage rates.
But, Sklar said, as the economy recovers and people regain confidence in other types of investments, the Ten-Year Treasury will decline and mortgage rates will rise once again.
Mortgage rates could continue to rise this year, particularly if the newly elected President Biden is able to enact a relief package that includes direct payments to taxpayers and other stimulus measures.
However, major housing agencies predict only a modest rise throuhout 2021, with 30-year mortgage rates staying in the high 2% or low 3% range on average.
JUNE 8, 2020
Last Week in Review: Four Reasons Why Rates are on the Rise This Week
This past week, home loan rates ticked a bit higher from their best levels in U.S. history. More importantly, this increase in rates may be the start of a trend in higher rates.
Here’s four reasons why rates rose and why they may continue to do so:
The good news: Any uptick in rates in the near-term may be limited for two reasons. The Fed continues to purchase Bonds on a daily basis, thereby holding yields down, and economies are reopening slowly, so rates should increase slowly over time as well.
Bottom line: With rates at all-time lows, if you can secure a home loan to either refinance or purchase a home, now is a great time.
Mortgage Closings and the Coronavirus Update
Only weeks ago, thousands of borrowers were rushing to take advantage of record-low mortgage rates. Refinance applications soared over 400% annually, and homebuyers were out early and in force.
Now some of those loans are stuck in limbo as the in-person closing process can no longer be held because of the coronavirus pandemic.
State, county and local governments have shut down or are limiting the number of people who may enter their offices, including property recording centers.
That puts the whole system at risk, as title insurers are less able to conduct the research that goes into issuing a policy. The ability to record documents is also getting tougher as county recording offices close.
Currently, nearly 2,100 counties provide some electronic access to their property records, but that means about a third of the jurisdictions still don’t have the ability to accept digital documents, according to Tomb.
“While they may allow for electronic recording, many jurisdictions do not provide access to records online. The biggest holdup to bringing county governments to the digital age has been time and money,” she added.
One large lender explained that it’s a bit of a moving target now and varies by state. Where title companies are still open, the closings are proceeding as is. In some areas, they are partnering with third parties to arrange video closings.
In an effort to get the whole system moving, Sens. Kevin Cramer, R-N.D., and Mark Warner, D-Va., introduced the Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020. It permits immediate nationwide use of Remote Online Notarizations, a type of electronic notarization where the notary and signer are in different physical locations.
“At a time like this, when we have perhaps, for many people, really a once-in-a-lifetime refinancing opportunity, they could miss out on that because of social distancing — miss out on that because you can’t get a group of people in a room, that would be a great tragedy,” said Cramer. “Marketwide you have financial institutions participating, you have a major consumer piece, and the consumer drives the market in this country, plus you’re going to move a lot of product a lot better.”
Right now, 23 states allow remote electronic notarization, but there is pushback from some that are concerned about states’ rights. They consider this a federal mandate. California, which has one of the most active and valuable real estate markets in the country, is one of those states.
“We’ve had some resistance from senators from those states that feel like even with the interstate commerce clause this would force something on them they’re not ready to accept.”
Already other parts of the mortgage process have shifted to accommodate social distancing. The FHFA this week directed Fannie Mae and Freddie Mac to change some underwriting guidelines, including allowing appraisal alternatives that would reduce the need for appraisers to enter the home for inspection. These are commonly called drive-by appraisals, where the appraisal uses data about the house available online.
The FHFA said: “In the event lenders cannot obtain verbal verification of the borrower’s employment before loan closing, the Enterprises will allow lenders to obtain verification via an e-mail from the employer, a recent year-to-date pay stub from the borrower, or a bank statement showing a recent payroll deposit.”
It did emphasize that lenders should continue to utilize sound underwriting judgment, “to ensure these alternatives are appropriate to the borrower’s circumstances.” (courtesy of CNBC)
NO Mortgage rates are Not 0-25%! The Fed Reserve cut its benchmark interest rate to zero on Sunday, the second such emergency rate cut this year in response to the coronavirus. The Fed funds rate is indirectly tied to mortgage rates, it’s a good possibility that mortgage rates may fall even more in the days and weeks to come as investors flee to safe-haven asset classes, like the 10-year Treasury note, which typically moves with mortgage rates. However this is not necessarily so. The mortgage industry as a whole right now choose to raise the rates last week to slow the industry who is lacking in manpower to handle the volume of refinances and new home loans.
On Wednesday, the Mortgage Bankers Association announced its figures for mortgage applications during the week ending March 6. And it said applications for new loans jumped by 55.4% from one week earlier. Those for refinances increased 79%. Both were at their highest levels since April 2009.
“So some lenders simply lack the skilled professionals to process all the applications they’re receiving. On Monday, senior originator Ted Rood told Mortgage News Daily, ” … some lenders are not accepting new loans or locks, and lock pricing engines are crashing repeatedly due to excessive volume.”
“The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” the Fed said in a statement as it cut interest rates to near-zero and launched a $700 billion quantitative easing program to shelter the economy from the effects of the virus.
We will not fully know the impact of this until the markets open tomorrow and more reports are released this week.
My suggestion is that you lock if you’re less than 30 days from closing. Yes, you’d have made losses if you’d taken that advice a couple of weeks ago. But we’re looking at a personal judgment on a risk assessment here: Do the dangers outweigh the possible rewards? So far, this week is making our recommendation look prescient.
However, none of this means we expect you to lock on days when mortgage rates are actively falling. That advice is intended for more normal times. This is NOT normal times!!
February could be a wild ride for mortgage rates. Market-moving news will leave rates different than they were in January. The only question is, will they be more or less advantageous for mortgage shoppers?
Forecasts for 2020 say rates will average around 3.7%. However, that doesn’t tell you how high or low rates could go throughout the year.
Rates could be 4.5% for six months and 3.4% for the next six months and you still get an average of 3.9%. But when you lock matters a lot.
Rates are hovering near 3.8% now according to Freddie Mac data, so it’s an excellent time to lock in and eliminate the risk of higher rates later.
Reports of a new virus originating in Wuhan, China is strangely affecting mortgage rates. This trend could gain momentum in February.
As January came to a close, markets were watching the spread of the virus, with new cases being discovered in the US and other countries.
Mortgage rate watchers are justified in wondering how a virus could affect rates. The relationship is not exactly obvious.
Mortgage rates fall during times of economic uncertainty and lower expectations of inflation. The Wuhan Coronavirus contributes to both.
Officials are limiting travel and transportation in Wuhan, which is a major trade and export hub in China. The decreased activity and mobility in one of China’s largest cities could spark a wider slowdown that could disrupt economic growth and slow inflation worldwide.
Of course, no one wants a global outbreak, but one unexpected outcome could be lower rates throughout February and perhaps beyond.
Don’t expect much movement in mortgage rates after the January 28-29 Federal Reserve meeting.
The group has broadcasted again and again that it likes the level of its benchmark rate, called the federal funds rate.
After slicing the rate three times in 2019 — in the face of one of the greatest expansions in US history — the Federal Reserve isn’t enthusiastic to provide more stimulus to an already-hot economy.
In fact, the Fed doesn’t expect to drop rates again at all in 2020.
Unemployment is near 50-year lows, the stock market is at all-time highs, and inflation is stagnant. It’s a real “Goldilocks scenario” — meaning nearly all aspects of the economy are just right.
All this means the January 2020 Fed meeting should be a real snoozer, with no rate adjustment and no major policy shifts.
Luckily, mortgage rates are already low and don’t need an artificial push downward by the Fed.
This year will be a big one for first-time homebuyers. According to new data, up to 9.2 million first-time buyers will hit the market between 2020 and 2022.
According to a new analysis from Transunion Credit bureau , anywhere from 8.3 million to 9.2 million first-time homebuyers will enter the housing market between 2020 and 2022. That’s up from just 6.67 million between 2013 to 2015 and 7.64 million between 2016 to 2018.
According to Joe Mellman, senior vice president at TransUnion, the next couple of years should mark a turn-around for homebuyers.
“While we’ve recently seen a boom in refi activity, actual homeownership rates are down,” he said. “Challenges have included high home prices, sluggish wage growth, and limited housing inventory, but we may be starting to see daylight as slowing home price appreciation, low unemployment, increased wage growth, and low interest rates are helping affordability. As a result, we are optimistic that first-time homebuyers will contribute more to home ownership than at any time since the start of the Great Recession.”
Call Primemax today to discuss your options and programs designed especially for you! We love First Time Home Buyers and We make It Easy!! 256-543-9211
To Lock or Not To Lock........
Locking or floating over this weekend should be based on what you feel the outcome of the UK vote on the Brexit deal. If UK is unable to pass the deal through their house, then i think rates will react positively Monday morning which makes floating a good call. If UK passes the Brexit deal, rates will come under pressure which means locking to is the safe call. Regardless rates are the best they have been since 2011.
With just two days until college football season kicks off, the Tide is hunkering down to play Duke on August 31. The game will make the fourth meeting for the Tide and the Blue Devils.
Before Coach Saban took the spotlight in Tuscaloosa, a host of winning coaches set the stage for Saban’s decade long tenure. Whether under Wallace Wade, Gene Stallings, Bear Bryant or somewhere in between, Alabama had claimed 12 national titles before Nick Saban filled the role as Head Coach and added five more.
Even after last year’s perfect season ended in a National Championship loss to Clemson, headlines make it clear the Tide is still expected to be on top this season. With names like Tua Tagovailoa and Jerry Jeudy returning among a sea of promising new faces, football fans everywhere say they wouldn’t be surprised to see Alabama start the season ranked in the no. 1 spot.
Are you ready to host an incredible football party but don't have space? Give us a call and score a touchdown with Primemax Mortgage Group.
Are you currently renting? Is your lease coming up for renewal? Before you extend your lease for another year or two, why not consider exploring the possibility of buying instead of continuing to pay someone else’s mortgage? First of all, we are not going to say everyone should buy a house. Not everyone wants to. But there are many advantages to homeownership. On top of the normal benefits to homeownership, this is quite the time to buy! A few reasons to become a homeowner now rather than later include the following.
8 Reasons to Buy Now Instead of Renting
In many cases, renters are surprised to learn that the monthly mortgage payment to buy a house may be less than they pay for rent. However, since home prices are increasing, this translates to potentially more equity for you, the buyer. As a recent article mentions on Realtor.com, “After all, your home is your biggest investment and most significant asset.”, so why not buy now to take advantage of increased equity? While there is no guarantee that real estate will appreciate, historically it has and has been the largest asset for many who choose to buy. Furthermore, your landlord is keenly aware of this.
First-time buyers are affected most by a rise in the purchase price and values. The reason is this raises the entry price level homes. In any real estate market, a first-time buyer median price at $200,000 compared to $150,000 really knocks a lot of buyers out. For the most part, prices are not going down. Therefore, homebuyers have more advantages in purchasing now versus later.
Interesting to note, if housing is expected to rise, it is not only houses that are for sale …. You can expect the same from rentals as well. So it only makes sense to lock in a monthly payment that you can be comfortable with and have control over in the coming years.
It amazes us to hear so often that first-time buyers cannot buy a house because they don’t have a 20% down payment. That is quite the misconception! Options available for first-time buyers today include so many low to no down payment loan programs. Plus, just because there is a low or no down payment financing program option, it doesn’t mean the interest rates are much higher. Conversely, most interest rates for government loans such as VA, FHA, and USDA are lower than conventional rates with 20% down. Even when a down payment is required by a program, it may even be a gift! So the barrier to cross from a renter to a homeowner is about as low as it has been in years!
Mortgage Rates Stay Calm Before Tomorrow's (Potential) Storm
Jul 30 2019, 4:48PM
Mortgage rates haven't moved much this week, or last week, or the week before that. In fact, for the average prospective borrower, there haven't been any major changes since first making it down to the multi-year lows in June. That said, there has been enough volatility to matter. Today wasn't a great example of that, but tomorrow or one of the two days that follows, may be.
In addition to some more significant economic reports coming out in the morning, tomorrow brings the Fed rate decision. To be fair, the Fed's decision has already been made, best anyone can tell. A 25 basis point (0.25%) rate cut is basically guaranteed. That might seem like a good thing for mortgage rates, but the benefits have already been reaped. Tomorrow's market movement depends more on the economic data and the specifics in the Fed's verbiage. There will be two opportunities for markets to digest that verbiage tomorrow, first with the announcement at 2pm and then with Fed Chair Powell's press conference at 2:30pm. We shall see !
You’ve heard that getting a mortgage ranges from “insanely difficult” to “practically impossible for mere mortals,” right? However, if you have reasonable credit (600 or higher for a conventional loan) and can document your income and assets with the mortgage application, you’ll get your loan with few, if any, problems or delays.
Even though the belief that lenders have crazy-high standards today is completely false, the process of getting a mortgage today is more exacting than it once was. Underwriters, who review applications and approve loans, go over every little detail in the loan package, uncovering possible defects or problem areas.
This attention to detail doesn’t mean they’re looking for reasons to deny your loan; believe it or not, underwriters LOVE to approve loans. They are just making sure all the pieces of every loan puzzle fit together as they should.
If you understand what the underwriter is looking for, you’ll be better prepared—and your loan will sail easily through the approval process.
Income
You’ll give your loan officer a month’s paystubs to document your income. You’ll also provide last year’s W2. If you get overtime, you’ll have to document that you’ve received it for at least 24 months. If that’s not possible, you won’t be able to use that income to qualify—no matter how much money it is.
Multiple jobs
In general, you have to show that you have been in the same line of work for at least two years. If you’ve been working at your present job for just six months, your loan officer will get information about your previous employer.
TIP: Provide all salary information for any previous jobs, along with full contact information for the previous employer(s). The underwriter WILL require a VOE from the previous employer.
Gaps in Employment
If you were laid off for a month or so, but went back to work at a different company, you’ll be fine, so long as you can explain any gap in a reasonable way.
TIP: Write a letter of explanation about any gaps in your job history. Do this before your loan officer submits your loan. It is far better to be proactive.
If you were laid off for a month or so, but went back to work at a different company, you’ll be fine, so long as you can explain any gap in a reasonable way.TIP: Write a letter of explanation about any gaps in your job history. Do this before your loan officer submits your loan. It is far better to be proactive.
Liquid assets
No, we’re not talking about that special bottle of 30-year old scotch. If you are buying a home, you’ll have to pay cash to close your escrow. You will have to provide documentation for all money going into the transaction. If your cash is sitting in a savings account, you’ll provide two months’ full statements for that account.
This is where you can run into trouble if you’re not careful. Specifically, you’ll have to document any “large” deposits to the account. “Large” would mean deposits not identified as payroll, tax refund or transfers from other documented accounts and which exceed 10% of your gross monthly income.
TIP #1: Keep in mind that if you transfer money from another account, you’ll have to provide statements from that account as well. That account will be subject to the same kind of scrutiny.
TIP #2: While your mortgage application is in progress, avoid moving money around if possible.
TIP #3: If you receive a “large” sum of cash from some source, like selling a car, be prepared to document the receipt of those funds, assuming you deposit them into one of your accounts.
Gift funds
If you have a generous relative who loves you so much that they will give you a gift of cash to buy your home, you should know about the procedure for gift funds. First, your donor will sign a Gift Letter. This simple form says that they are making a gift of x-number of dollars for the purchase of your home, that it is a gift, and that it does not have to be repaid. The donor will also have to provide a full bank statement showing the source of the funds they are giving you.
TIP: Be sure your donor is aware of this procedure and is willing to hand over a full bank statement. They can’t black out or edit anything on that statement, or else the underwriter will reject it.
Previous addresses
Your loan application will list your previous addresses for at least the last 24 months. Your credit report will show the same information—with one important difference: the credit bureaus are often completely wrong about past addresses.
One common example: you may have lived at your present address since January, 2017, and the credit report lists that. But they may also list your previous address from five years ago, but ending June, 2015. This would obviously be wrong, but it brings us to another point of advice. TIP: Check for address discrepancies on your credit report. Write a simple letter of explanation to clear up your actual residence addresses and dates.
Letters of Explanation (LOE)
These simple notes don’t have to be elaborate or wordy. Just briefly explain the issue in question. Address the LOE “To Whom It May Concern,” sign it, and date it. Being proactive will save you a great deal of time.
While it’s true that getting a mortgage is not as easy-peasy as it once was, paying attention to these details will make it seem like a breeze.
When you use these tips to cure your application headaches, you’ll have a much better experience, especially if you’re buying and selling a home at the same time.
Top 5 Tips for Alabama Home Buyers in 2018
Despite what you might have heard about home prices “cooling” in 2018, the Alabama real estate market is still red-hot in terms of competition. But home buyers can still succeed in this market. Here’s how to get off on the right foot.
1. Balance your expectations against the realities of the market.
Home buyers tend to go into the market with an extensive wish list of features, location, etc. That’s fine, as long as you balance those expectations with the realities of the housing market. And the reality, as we enter 2018, is that the Alabama real estate market is very competitive.
In January, Zillow examined the nation’s 50 largest metropolitan areas in the U.S. to create a list of the “hottest” real estate markets. The group’s analysts looked at a variety of factors including home value changes, population growth and employment.
And then there’s the inventory situation. A “balanced” real estate market has somewhere around five or six months of housing supply. But at the start of 2018, Alabama had less than a three-month supply of homes for sale. That’s a serious inventory crunch, and it underscores the importance of having realistic expectations when buying a home
2. Aim to make the first offer, and make it a strong one.
Buyers are lining up for homes – literally, in some cases. So it’s crucial to stay on top of the market. As a home buyer, you want to review the big real estate listing websites once or twice a day. And be ready to pounce when the right house comes along. Try to get your offer in as quickly as possible, and make sure it’s a strong offer backed up by comparable sales data. An experienced real estate agent can help with this.
3. Consider the surrounding area.
A lot of home buyers want to purchase a house in the newer subdivisions but simply can’t afford it. That’s understandable. And while price growth has slowed a bit, house values are expected to continue moving north over the coming months.
4. Conduct a comprehensive search.
In a competitive real estate market like we have in Alabama, home buyers need to pull every possible thread when searching for a property. Viewing the real estate listing websites is a good place to start. But don’t stop there.
Find a good agent who can help you spot properties before they hit the market, through word-of-mouth. Use your social network (friends, families and coworkers) to get a jumpstart on properties that might be coming onto the market soon.
Drive through your desired neighborhoods and look for those for-sale signs. Some sellers put up a sign but don’t list their properties online. In short, be aggressive.
5. Have your financing arranged ahead of time.
This is a topic we’ve written about before, but it bears repeating. In 2018, Alabama home buyers would be wise to have their financing lined up ahead of time, before entering the market.
Remember, current market conditions favor sellers or buyers. So anyone selling a home in Alabama can be picky and selective as it relates to financing. Among other things, they will expect buyers to have their financing all set up. This is one of several reasons why it’s a good idea to get pre-approved by a mortgage company, early on in the process.
Get pre-approved: We can help you get a jumpstart on any home in Alabama by pre-approving you for a mortgage loan. Please contact our staff with any questions you have, or to get the process started.