Home Real Estate - Mortgage

Real Estate - 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?

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.”

Real estate strategy: How to win at real life Monopoly

Here’s how to win at Monopoly in real life by adopting some of its real estate strategy. Considerations for investors with multiple mortgaged properties Mistakes to avoid The leverage you gain with smart mortgaging allows you to control more rentals and acquire wealth. Check mortgage rates for rental property here (Dec 18th, 2018) Monopoly and mortgages The objective of this classic game is to control property and extract rents from your competitors until they run out of money. Some properties are more valuable and desirable than others, and owning a matching group allows you to build homes and hotels and charge much higher rents. Real estate strategy: leverage Monopoly is not just a game. According to Alex Hemani at Forbes.com, leverage in real estate investing works best when property values and rents are increasing. And while most investor property mortgages require at least 20 percent down, getting that 20 percent from your other properties allows you to leverage a lot more. Investment cash-out mortgages in real life There are many ways to extract equity from investment properties. Financing more properties Mortgage lenders require significant cash reserves when financing rental property, and the more properties you have mortgaged, the higher this number may be. Most property investors make their money over time, paying off their mortgages and investing their rental income Many, many wealthy people in the US got there with real estate investing.

States with highest mortgage delinquency rates have these things in common

Low delinquency rates bode well for homeowners and lenders; however risks still exist that put more people in jeopardy of foreclosure. Top 5 states with most serious delinquencies are on the East Coast In August, the states with the most serious delinquencies, which are defined as 90 or more days past due, were New York (3.1 percent), New Jersey (2.9 percent), Mississippi (2.9 percent), Louisiana (2.7 percent) and Florida (2.5 percent), according to CoreLogic’s latest Loan Performance Insights report. Top 5 states with highest serious mortgage delinquencies State Percentage of delinquencies Foreclosures Source: ATTOM Data Solutions New York 3.1% 12,000 New Jersey 2.9% 15,000 Mississippi 2.9% 773 Louisiana 2.7% 2,073 Florida 2.5% 19,000 “Because of extremely long foreclosure processes in those states, exacerbated by delays because of questionable mortgage documents, there are still a relatively high percentage of delinquent homeowners who have been delinquent for years but not yet foreclosed on — or whom got into a loan modification to avoid foreclosure but have fallen back into foreclosure,” Blomquist says. Louisiana and Mississippi also face a tough housing market, which is more a product of lagging home price growth in the wake of the housing crisis. Almost 21 percent of Louisiana homes and 23 percent of Mississippi homes are underwater, according to ATTOM. That compares with the national average rate of 9 percent. Income inequality topped the national average in Florida, Louisiana and New York. We saw during housing crisis that one spouse wouldn’t tell the other that they were in trouble,” Gerecke says. Some people were victims of frauds and scams – people are somewhat hesitant to ask for help and for good reasons.” For people who are drowning in debt or are facing financial trouble, seeking the help of a financial counselor is a good place to start, Gerecke points out. This is especially true for people who are hesitant to contact their lenders for fear of foreclosure; generally the counselor can act as an intermediary.

Does affordability matter: Why delinquent mortgages more common in ‘most affordable’ states

Why do the states with housing’s highest “affordability” measurements — much-discussed but perhaps dubious economic yardsticks — have more borrowers who can’t make their mortgage payments? The state’s home listings are priced at 55 percent of normal “affordability,” according to one housing-cost index from the National Association of Realtors. That ranks next to last nationally. I loaded my trusty spreadsheet with various economic and housing markers — plus the recent ranking of state rankings I compiled — to ponder how housing “affordability” translated to other measurements of life. Now to be fair to those “affordable” states, homeownership (tracked by the US Census Bureau) paralleled affordability: averaging 69 percent for states with the highest Realtor grades vs. 63 percent for the least affordable. The same hiring spree that put them in a home-buying mood also makes housing costlier to buy. A broad-based cost-of-living scorecard from the state of Missouri gave most “most affordable” states an average No. 37 for least affordable. 37 for least affordable. And it’s not a small gap: thin 0.2 percent population growth for “most affordable” states in 2018 vs. swifter 1 percent for the pricier locales.

Government Shutdown Brings Mortgage Obstacles

The shutdown effect is obvious if you're a government worker suddenly trying to buy a home with IOU's – but, otherwise, why would your mortgage application be affected? Other loans may require verifying paperwork from the IRS – for example, verification of income – before loan processing can proceed. How To Keep the Home You Already Have Government workers who already own homes have a more fundamental cash flow problem. Your lender may also be able to provide a short-term loan at reduced interest rates. It may be making mortgage payments when you're hit with a financial crisis, making unexpected home repairs, or getting into a bidding war to buy your first home. Start by establishing an emergency fund during better times, so you don't have to rely completely on credit to get through a true financial crisis. If you would like to monitor your credit to prevent identity theft and see your credit reports and scores, join MoneyTips. Make all payments on time and keep other debts as low as possible. You'll have to prioritize debt and possibly make only minimal credit card payments while you devote existing cash toward your mortgage. Did we mention the importance of an emergency fund?

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.

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.

Good news and bad news about the real-estate market in 2019

The problem is that the pent-up demand is still expected to continue to exceed supply, even with more homes for sale. NAR predicts that existing home prices will rise 2.5% in 2019, to a median of $265,200, compared with a 4.7% rise in 2018, to $258,700. Mortgage rates will continue rising From the beginning of 2018 to mid-December, 30-year fixed mortgage rates went up a little less than three-quarters of a percentage point, to around 4.75%. Fannie Mae’s forecast is for an increase of just 0.1 percentage point. For example, in NerdWallet’s daily mortgage rate survey, the 30-year fixed-rate mortgage started the year averaging 4.09%. Affordability still a concern As home prices and mortgage rates rise in tandem, home buyers find it harder to afford homes. New homes get smaller From a home buyer’s perspective, most markets need more houses for sale, and they need to be on the affordable end of the price scale. Lending standards ease a little Mortgage lenders learned an enduring lesson in the housing crisis a decade ago: Make sure borrowers can repay their loans. Borrowers choose ARMs because the initial rates on adjustables are lower than the rates on fixed-rate mortgages. In October, 8.2% of mortgages were ARMs, according to Ellie Mae; 12 months earlier, ARMs had a 5.5% share of mortgages.

Here are two new ways to boost retirement income

But are these newfangled alternatives to reverse mortgage loans safe—and sensible? In a shared equity agreement, the company gives you cash in exchange for a portion of the upside in the home’s value. Under the agreement, the company gives you cash in exchange for a portion of the upside in the home’s value at some point in the future. In essence, they become co-owners of your home (though you will still continue to pay the mortgage and property taxes). Shared equity agreements have a fixed term, often as little as 10 years but sometimes as long as 30. At the end of the term, you have to pay back the equity you received, plus the company’s share of appreciation, which most people do by selling the home. Converting to a rental Another option is called a sale-leaseback, offered by New York City-based start-ups Irene and EasyKnock. Then they rent your property back to you for as long as you want. Sale-leaseback companies also charge fees, of course. To repurchase your home, you’ll pay the funding amount you initially received, plus a premium of 5% in the first year or 2.5% in subsequent years.

TRENDING

Are Extra Mortgage Payments Worth It? A Look at the Numbers

How much time and money can you really save paying a little extra on the mortgage? Additional Monthly Payment Time saved Interest Saved $30 1 year 2 months $13,458 $60 2 years 4 months $25,560 $150 5 years 2 months $55,605 $300 8 years 8 months $91,742 $500 12 years $124,385 $1,000 16 years 11 months $170,620 The first thing you’ll notice is that paying a little more each month saves you money over the long term. With just $30 in additional principal payments a month, which most of us can afford and wouldn’t notice, you can save over a year of payments and $13,458 in interest. Now, the most important thing to notice about this chart is that for every additional dollar put towards principal, you get less of a return than the previous dollar. Looking at the $30 and $60 monthly payments, you can see that $60 a month does not give you twice the return of $30 a month. The more you pay each month, the less benefit each additional dollar has on time saved. $100 a Month Extra Payment Time Saved Total Interest Saved Years 1-5 1 year 2 months $17,025 Years 5-10 11 months $12,290 Years 10-15 8 months $8,304 Years 15-20 7 months $5,170 Years 20-25 5 months $2,708 Years 25-30 4 months $785 Each of the payment plans above is exactly the same. For example, if you pay $100 more a month for the first five years of the loan, you will save 1 year 2 months of payments and $17,025 in interest. If you did the same payment plan between years 25-30, you would only save 4 months and $785. Let’s go a step further (not in the chart) and calculate the extra payments starting in year 10 and going until the loan is paid off (18 years and 1 month of payments).