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Are Subprime Mortgages Still a Part of Mutual Funds?

As such, you would think these types of dodgy loans would be a thing of the past. Although they come with a different name and appearance, the subprime mortgage is back with a vengeance and they are more popular than ever. They’re essentially housing loans given to people who don’t have the credit to qualify for a mortgage. Prior to 2008, they were given out to millions of people with no credit who were clearly unable to ever pay them back. The result was a huge debt bubble that eventually popped, causing the financial crash. Why They’re Back In the wake of the crash, tough legislation was brought in to stop predatory lenders from issuing subprime mortgages. These are proving to be just as popular as the subprime mortgages of the past, meaning there could be potentially devastating repercussions for the economy. What Investors Should Know If you’re an investor, especially one with their toes in mutual funds, this will obviously concern you. Make sure to keep up to date with all of the latest investment trends via money market investments, so you can avoid being burned in the future. One thing that’s certain is that if another major banking collapse does happen, the political will to bail them out like in ’08 will be non-existent.

The cost of homeownership vs. renting over 3, 5 and 10 years

Buy or rent? Find mortgage rates for first-time buyers (Jan 26th, 2019) Ongoing costs Once you’ve moved in, you’ll need to be able to comfortably pay all those expenses that renters don’t have to worry about. So what are those costs? Should you buy now? Mortgage insurance if your down payment is less than 20 percent, most mortgage lenders require you to purchase mortgage insurance. Government-backed mortgages also have mortgage insurance costs. Every month, an amount to cover your annual insurance and property taxes is added to your principal and interest payment. And, by the time your place is 25 years old, you should each year be setting aside 4 percent of the purchase price. Presumably, you’d have had to rent a home. Landlords typically charge each month between 0.8 percent and 1.1 percent of a home’s value.

Mortgage originations slow in Las Vegas

Rising interest rates and price appreciation are slowing mortgage originations in Las Vegas, but a growing percentage of homeowners here are bucking the national trend by refinancing their homes and getting home equity lines of credit, according to a research firm. The interest rates surpassed 5 percent for the first time since the downturn of the market in October 2008, when rates were 6.5 percent, she said. Someone with a credit score in the mid-600s can get a rate of 5.375 percent with a 5 percent down payment. “People trying to buy homes are running into problems because it’s cutting into their affordability,” Gatling said. It is normal during this time of year for the market to slow down, but with rising rates and uncertainty in the political environment, you are going to see a lot of people on the sideline to watch what happens.” What will help Las Vegas originations is people relocating here for jobs who won’t be deterred from buying in a market that has lower home prices than where they currently live, Hulsey said. The total number of originations in Las Vegas during the second quarter was 20,802, a gain of 7 percent over the second quarter of 2017. That was driven by a gain in refinance, up 14 percent to 7,290, and home equity lines of credit, up 28 percent over the past year to 1,817. Both of those large gains in Las Vegas go against the national trend, Blomquist said. Blomquist attributes price appreciation in Las Vegas for the gains in refinancing and home equity lines of credit. Hulsey said they’re seeing more Nevada customers turn to home equity products for “home improvements, make large purchases or consolidate other debts.” All of the second-quarter totals in Las Vegas are well below the peak of the market, according to ATTOM.

Do you need good credit to buy a home?

Luckily, you don’t need impeccable credit to buy a home. For instance, official FHA guidelines say you can get a 3.5% down loan with a 580 score. Apply with many lenders, especially if you have a lower credit score. Check your eligibility for a low-credit home loan here. (Oct 31st, 2018) Credit score minimums The following minimums apply to the major loan types available in today’s market Conventional/conforming: 620 minimum credit score FHA loans: 580 minimum score (3.5% down); 500 score (10% down) VA loans: No minimum score per guidelines, but lenders set minimums around 620 USDA loans: 640 minimum, although some lenders will approve lower scores Keep in mind that if you have banged-up credit, an FHA, VA, or USDA loan might suit you best. Conventional loans come with high rates for applicants with credit scores below 680. If you’re in the market to buy a home, it’s best to know your credit issues so you can start addressing them. Other times, you have to make timely payments for 6-12 months before your credit score starts rising again. How do I check my eligibility for a home loan? The first step to buying a home is to get pre-approved via an application with a lender.

Millennials would rather buy real estate from an influencer than an agent

If you’re trying to help a millennial with real estate, you might be better off being an influencer than an agent. A recent Engel & Völkers study found that 80 percent of millennials would consider hiring an influencer as a real estate agent, according to Inman. The study surveyed more than 1,000 people born between 1982 and 1999 with annual incomes of more than $100,000. The top three factors for the participants when choosing a real estate agent were referrals, local reputation and neighborhood expertise. But, agents “have to have a niche or distinguishing factor that blends this knowledge with entertainment or aspirational value that will make you a center of influence — building your following and referral base as a result,” explained Engel & Völkers Americas President and CEO Anthony Hitt, speaking to Inman. The study also found that 98 percent of respondents refer to social media or online reviews when contemplating a purchase and 84 percent said influencers “impacted their decision.” [Inman] – Eddie Small

No Pay Stub? No Problem. Unconventional Mortgages Make a Comeback

Ms. Hering’s case highlights how a flavor of mortgage once panned for its role in the housing meltdown a decade ago is making a comeback. Lenders issued $34 billion worth of these unconventional mortgages in the first three quarters of 2018, a 24% increase from the same period a year earlier, according to Inside Mortgage Finance, an industry research group. Even so, some regulators, consumer advocates and others worry that the growth in this type of mortgage and rising competition to make such loans could lead to renewed risks for the housing market. But traditional lenders, which are doing less conventional business as interest rates rise, are turning to borrowers with harder-to-document creditworthiness as a new source of revenue and are helping to drive the growth. Tom Jessop, the loan consultant at New American Funding who handled Ms. Hering’s loan, said he has seen demand for unconventional loans double over the past 18 months and they currently makes up more than one-third of his business. “As more companies enter the space you’re going to see more competition, and with more competition, you’re going to see loosening of underwriting” standards. Photo: Jessica Pons for The Wall Street Journal In many unconventional loans for which it is difficult to document income, borrowers use bank statements like Ms. Hering did to show they are making money. Newsletter Sign-up Ms. Hering, who is 30 years old, received a loan at a rate of just over 6% for the first five years; it adjusts after that. She used the money to fully buy out her grandfather’s house in San Clemente, Calif. She jointly inherited it with other relatives and said she needed a loan to pay them for their shares of the property. “It was scary because if it didn’t work out then I would have had to give up the house, but I was determined to keep it,” said Ms. Hering, who is renting out rooms in the house to help pay the mortgage.

Stuck in the rent vs buy dilemma? Consider the local price-to-rent ratio

Price-to-rent answers affordability questions If you’re debating whether to rent or buy, look to your local price-to-rent ratio for guidance. Verify your new rate (Oct 29th, 2018) Where buying a home’s more affordable According to a new analysis from Rentberry, Trenton, New Jersey, boasts the nation’s lowest price-to-rent ratio, making it a slam-dunk for potential home buyers. The median property price in Trenton sits at $149,700, while the average monthly rent is $1,500 per month, making Trenton’s rent-to-price ratio 8. Daniela Andreevska, content director at real estate analytics firm Mash Visor, says anything in the 15 and under range means buying a home is more affordable than renting. “For renters and homebuyers, this means that it is relatively cheaper to buy a property in a certain market rather than to rent there,” Andreevska said. “So, if you have the necessary cash for a down payment and have figured out the rest of your financing in such a market, go ahead and buy a home.” Other cities with low price-to-rent ratios include Toledo, Dayton and Akron, Ohio; Syracuse, New York; Davenport, Iowa; Hartford, Connecticut, Cedar Rapids, Iowa; and Lansing, Michigan. “In most of these locations, the median property price does not exceed $250,000, which is below the level in many other top markets at the moment,” Andreevska said. Home prices in the area average $1.4 million, while the average monthly rent is $2,780. “Some of these cities are infamous for the high real estate prices there, such as San Francisco, New York, El Paso, and Irvine,” Andreevska said. In such expensive markets, it makes sense that renting is the better option or even the only affordable one.” Show Me Today's Rates (Oct 29th, 2018) Get today’s mortgage rates Looking to buy a home in one of the nations low price-to-rent markets?

2018 taxes for homeowners: How 2018 tax law changes affect you

Tax law changes: Homeowners are likely paying more You’re not alone if you think 2018 taxes for homeowners seem odd, scary, and costly. Projections on the new tax law estimate that property owners will pay an additional $668.4 billion in the next few years. This is due to eliminating deductions such as: Taxes not paid or accrued in a trade or business (except for up to $10,000 in State and local taxes), Interest on mortgage debt in excess of $750K, Interest on home equity debt, Non-disaster casualty losses So what can you expect when you file 2018 taxes? Itemized deductions Taxpayers are allowed to write off either their standard deduction or itemized deductions — but not both. Under tax reform, interest on home equity debt is only deductible if the money is used to make a “substantial improvement” in the property. Third, it used to be that taxpayers could write off both property taxes and state income taxes. Under tax reform, state and local taxes (i.e. property tax and sales tax) remain deductible. Homeowners with high property and sales tax states like Washington, Louisiana, Texas and others will likely exceed this limit. Those who paid mortgage insurance in 2018 must file their taxes before the deadline, then, can submit an amended return if Congress approves the deduction later in the year. Most homeowners will elect to take the standard deduction.

Risky Home Loans Are Making a Comeback. Are They Right for You?

One popular loan is the interest-only adjustable rate mortgage, with which a borrower pays only the interest for a period before the rate resets and principal becomes part of the payment. “We all have time on our hands because business is so slow,” he said. “The worst it could be was 8.75 percent, and saving $25,000, I could put that money somewhere else.” The family’s plan, Mr. John said, is to make principal payments in addition to the interest, with the goal of reducing his mortgage faster than he would with a 30-year fixed-rate loan. The price falls will be higher because of the expectation that prices always go up.” And not paying principal during the initial interest-only period just makes the amortization period of the loan shorter, said Richard K. Green, a professor of real estate at the University of Southern California. In other words, instead of paying off a mortgage over 30 years, the borrower is paying it down over 20 or 25 years, increasing the amount of the payments after the interest-only period ends. “It’s not to just get someone into a house,” he said. The risk of a change in a person’s financial circumstances could affect the ability to repay interest-only loans. They were the first to lose their jobs.” Today, though, even qualified borrowers need to be aware of the loans’ risks. After the initial interest-only period resets, the payment can go up as high as 50 percent, and some people cannot afford that, Dr. Green said. “For the first-time home buyer, I say stay away.”

Detroit’s mortgages return to pre-recession levels, still face obstacles

(Photo: Max Ortiz, The Detroit News) Detroit — Nearly 1,300 home buyers took out mortgages in the city in 2018, a number not seen here since before the Great Recession. More than six years later, most home sales still are all-cash, and many Detroiters cannot obtain a loan. “Undoubtedly, Chemical’s presence will help residents access these tools.” (Photo: Max Ortiz, The Detroit News) Bertha Alexander relied on one of those tools after she lost her home insurance on the Morningside bungalow she purchased through a land contract in 2013. Since then, the bank has joined other efforts to increase financial literacy and lending. Maurice Cox, city of Detroit planning and development director, said Chemical Bank's move to Detroit is an endorsement that the city's recovery can be sustained. In 2018, residential properties gained more than $400 million in value and 90 percent of Detroit’s 194 neighborhoods saw increases in residential home values. While it is down from 97 percent in 2014, according to the Urban Institute, the national average is 36 percent. It offers low-interest mortgages and second loans up to $75,000 above the property’s appraisal for repairs. “We want people to know you can get a mortgage in the city of Detroit,” Pate said. Quicken Loans, Detroit's largest home lender in 2018 with 439 mortgages, provided $5 million to partner with Home Depot to renovate 70 homes in the city since 2015.

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Should I Accept Section 8 Tenants—Or Run the Other Way?

After dealing with Section 8 for almost 20 years, we can attest that it’s not nearly as bad as the gurus make it out to be. The Bad News Section 8 requires a lot of work—specifically, you have to deal with Section 8 applicants who never seem to understand the program, even after being on it for years. The Upside If you can handle the paperwork and have a good followup reminder system, the extra time and effort can pay off, with government payments coming in like clockwork. If you screen the applicants correctly, you can also avoid some of the pitfalls associated with Section 8. For the record, the (most important) “right question” is, “What is the HUD-determined Fair Market Rent (FMR) for a unit with ‘X’ bedrooms in my area?” The answers are available here—if the applicant wants to pay more than the FMR, they’ll have to make up the difference, and either way, they’ll pay 30% of their monthly income as rent, with Section 8 paying the difference between that amount and the FMR. But because Section 8 only covers 70% of the TCH up to $911, the most it can contribute is $638, meaning that regardless of their income, the tenant must pay the remaining $393. Filling out the forms and waiting for them to call you back is the easy part—the hard part is dealing with the Housing Quality Standards (HQS) inspections that happen every year. Here’s the short version: All windows must be present and undamaged; ground floor windows must have working locks. The floor, walls, and ceilings must not have any serious defects such as would indicate structural problems or present a danger to the tenants. What’s more, these inspections happen whether the property has a tenant in it or not, and the inspectors don’t particularly care if a particular problem was caused by the tenant or not—you still have to deal with it, and fast.

The Real Estate Concierge