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Zero-down mortgages can come with a high price, experts say

Guess what’s in vogue again? Mortgage deals that require zero or little down. Before you get excited, better give this idea a deep dive. Not having this obligation also likely means you’ll have cash on hand for other expenses,” says Max Soni, CEO of Delancey Street, a Manhattan company that provides residential, commercial and other loans. The cons: But those perks may come at too high a price. Often, many private lenders say zero-down, but actually, they charge additional fees, or higher interest rates which are added into your monthly payment, points out Soni. One way you’re certain to pay more: A premium for private mortgage insurance will be added to your monthly payment. Generally, lenders require this type of insurance if you’re not putting at least 20 percent down, says Ogechi Igbokwe, a certified financial planner with OneSavvyDollar.com in Eastport. That’s because you’re considered a higher risk, and PMI protects the lender — not you — if you stop making payments on your loan. Remember, the higher your down payment, the lower your monthly payment and interest rate will be, and the sooner you’ll accumulate the 20 percent equity you need to stop paying PMI premiums, says Tim Manni, a home expert at NerdWallet.com.

Philadelphia considering new law designed to limit reverse mortgage foreclosures

The city of Philadelphia is set to consider new legislation that would “prevent the spread of reverse mortgage foreclosures” in the city by “closing a loophole” in the city’s laws that some lenders allegedly exploit to foreclose on reverse mortgage borrowers. The bill, introduced this week by Philadelphia City Councilwoman Cherelle Parker, stipulates that a reverse mortgage borrower who is in a payment agreement for real estate taxes on their home cannot be considered delinquent on those real estate taxes. A reverse mortgage allows a homeowner, age 62 or older, to access the equity in their home via a loan, which does not need to be repaid until the last borrower dies or moves from the home. During that period, the borrowers are required to live in the home, maintain the home, and pay their real estate taxes and homeowner’s insurance. In a statement, Parker said that reverse mortgages have been a “scourge” in some of the city’s neighborhoods thanks to the “unscrupulous practices” of some lenders. “I know all too well the scourge that reverse mortgages have been on certain neighborhoods in the city. Unfortunately, it has been quite common for reverse mortgage lenders to swoop in and pay off any remaining real estate tax balance of homeowners even if they are in a payment plan and not delinquent, and then use this as an impetus to foreclose on these homeowners,” Parker said. “It is my hope that these new regulations and my accompanying legislation will protect homeowners by finally putting an end to some of the more unscrupulous practices we have seen from reverse mortgage lenders,” Parker added. The rule would match new Philadelphia Department of Revenue regulations that took effect recently. “I want to thank housing advocates, such as Community Legal Services, for first raising this issue, and commend Revenue Commissioner Frank Breslin and his team for changing the regulations,” Parker concluded.

California Housing Revolution?

Introduced by Scott Wiener, a Harvard-educated attorney and state senator, SB 827 would effectively abolish zoning restrictions in Wiener’s district of San Francisco and for significant portions of the state’s most populous areas—and likely produce a boom in new housing construction. So-called transit-rich zones would see local height limits lifted to anywhere from 45 feet to 85 feet—roughly from four to eight stories—depending on factors such as street width and station proximity. Cities could build taller, but they could not require that buildings be shorter. A majority of these rent-squeezed households—some 3.7 million—are in Los Angeles and the Bay Area. “We under-produce by about 100,000 housing units every year, and we have a housing debt that’s growing,” Wiener says. The most feasible way to pay off that housing debt, he believes, is to let developers build more units in concentrated areas. Another bill placed a measure on the 2018 ballot directing nearly $1 billion a year to subsidize new low-income housing. The ideal scenario for lowering the barriers to housing density near transit is to get more with less: more housing and affordability with less displacement and sprawl. In San Francisco, some 70 percent support building more housing to alleviate cost burdens. Wiener’s proposal is more aggressive: it would immediately up-zone nearly all of San Francisco, as well as South Los Angeles’s sprawling landscape of single-family homes.

The Problem With Real Estate Agents

What makes the profession such a big target for headlines, reality TV and venture capitalists? Let’s start with how the real estate industry has put a target on its own back. The 90/10 rule is true in this profession, and in my observation: 10% of real estate agents do 90% of the business. In order to protect the public, a licensed broker is required to hold the license of the salesperson and supervise them for at least three years before they can become a broker themselves. Uncle Bob ends up doing all the work and feels like Stan left him in the lurch. At closing, when he sees the commission that will be paid to Stan, he is furious — Stan didn’t earn that! Now the holidays are awkward anyway, Uncle Bob thinks all real estate agents are chumps and, in the end, Stan lets his license lapse and gets out of the business. The majority of the licensed agents a typical consumer knows are non-practicing. And so, our industry gets downgraded from a respectable profession to a pastime. Mentor and train the agents who are serious, and dump the agents who are not.

Here’s how a 5% mortgage rate would roil the US housing market

Mortgage rates are now at their highest level in four years and poised to move even higher. The timing couldn't be worse, as the usually busy spring housing market kicked into gear early this year amid higher home prices and strong competition for a record low supply of homes for sale. Mortgage rates have not been at 5 percent since 2011. Just 6 percent said they would drop their plans to buy altogether. About one-fifth of consumers said 5 percent rates would cause them to move with more urgency to purchase a home, fearing rates would rise even further. Another fifth said they would consider more affordable areas or just buy a smaller home. Specifically, the deduction on property taxes is now limited to $10,000. Some have claimed that higher rates and the new tax law will put downward pressure on home prices, alleviating some of the current sticker shock, but other factors are fighting that assertion. "There are still many more buyers than the current housing supply can support, with no major relief in sight." Higher mortgage rates may mean some borrowers on the margins will not qualify for the size of the loan they need or want.

Need a VA-backed second mortgage? Here’s how it can work

While a second mortgage may not be a preferred financial option, unexpected expenses or other budget crunches may make it a requirement. Lesser loan. The second mortgage “must be subordinated to the VA-guaranteed loan,” per the handbook. In lender parlance, that makes it a “junior lien.” Put simply, you can’t borrow more on the second go-round than you did for in the first loan. The loan can be used for closing costs or other purposes related to the first mortgage. It can even be used for a down payment, but only as part of meeting “secondary market requirements of the lender,” not to cover down-payment dollars required by VA to make up for a home priced higher than the agency’s “reasonable value.” 3. No cash. While the rest of VA second-mortgage rules leave a bit of wiggle room (with words like “may” and “should”), those using the benefit are explicitly not allowed to get cash back as part of their borrowing. Second mortgages can come with a higher interest rate than the first mortgage, but should be within industry standards, per the guidance. That’s part of the requirement that whatever deal is made not limit the borrower’s ability to sell the house; it’s part of an “assumability” provision.

Don’t Get a Mortgage Loan Without Doing This

“The Consumer Financial Protection Bureau found that nearly half of home buyers do not look for mortgages with more favorable interest rates. Why?” Well, for one: It’s the Wild West out there. If you’ve gotten even a third of the way through the home-buying process, you know there’s enough paperwork to fill what was supposed to be the guest bedroom in your new place. The process is overwhelming—so much so that simply getting a preapproval from one lender feels like a win. But you shouldn’t stop there! While the market dictates where interest rates hover, different banks and lenders have different offers, so call around and get at least a handful of different quotes before settling. It’s often the case, too, that bigger lenders will match or beat better offers you get—but that’s not something they usually advertise. You have to get in there and play the game. In Worth It, Steinberg uses a $100,000 mortgage example: If you pay this off over 30 years, you’ll end up paying over $71,000 on top of the mortgage amount. Whatever you do: Shop around, and know that almost everything involved in buying a house is negotiable—the mortgage included.

One Year into New Presidency, ‘Uncertainty’ Looms in U.S. Housing Market

A year into President Donald Trump’s term, the overall U.S. housing market remains strong. “It’s not so much what the event was, just that it’s over,” Mr. Miller said. “So it’s more a question of what the party will do, rather than put it all on Trump.” And it could be up to two years before the effects of any policy changes made during his administration will be manifest in the U.S. real estate market, Mr. Andres Carbacho-Burgos said. “What the housing market had been starved for under President Obama was inventory,” Ms. Richardson said. The overall market, however, was up 6.9% to $234,851. On the high-end of the market, Mr. Miller said there’s still too much “aspirational pricing,” which is one of the reasons sales are softer for luxury homes than lower-priced homes. This has more impact on the high end of the market, less impact on the lower end. “It took years to get there, and now we have to do it again.” The tax bill Although the tax law is now a done deal, it’s still unclear how far-reaching the ramifications will be. “It’s not so much what the event was, just that it’s over,” Mr. Miller said. “Once people can get their arms around it and make calculations, they can re-enter the market.” He added that was from his observations only, as the final numbers on sales are not yet available.

How to Explain a Gap in Employment on a Mortgage Application

A gap in employment can be a tough thing to explain, especially on a mortgage application. How about that period you spent out of work while you were going back to school? According to the experts, that's a big, fat affirmative—mortgage lenders need to have your full financial story, warts and all. How detrimental is a gap in employment on a mortgage application? Employment history on a mortgage application is something lenders look at in order to decide if you're going to be able to make your monthly payments and eventually pay off your home loan. After all, if you default on a mortgage, a lender is left holding the bag. According to Huettner, there are a number of red flags that can be found in an employment history, and they may require a deeper look by a mortgage underwriter—or they may keep you from qualifying for a home mortgage entirely. The biggest employment history concerns for lenders on a mortgage application include the following: Gaps in employment Frequent job changes Having been employed for less than two years Large changes in income (both increases and decreases) What if your employment history has a red flag? If you're self-employed, lenders want to see at least two years of self-employment to verify that you can make it on your own and still pay your bills on time, says Huettner. The law serves to identify who can repay a mortgage.

Why Millennials Are Moving the Needle on the Real Estate Market

While the uptick in homeownership is nowhere near pre-recession levels, it marks a significant shift from a decade ago, when an unstable job market kept most consumers from even contemplating the purchase of a home. Rates have remained reasonably low, so affordability is possible as well.” “If you look at some of the fintech companies using data science to underwrite people, they are finding people who are very good risks to lend to that they’re starting to bring into the market.”–Richard K. Green Buying Becomes More Attractive as Rents Rise As the saying goes in real estate, it’s all about location. Rising rents, especially along the coasts, “is really shifting the trade-off between owning versus renting,” Keys said. After watching your rent go up and up and up, and potentially bouncing around to look for more affordable rental units, at some point you realize it actually makes sense to buy.” But Sussman points out that money is still a barrier to home buying. It’s likely to remain low as we look forward in the next decade or two.” “After watching your rent go up and up and up, and potentially bouncing around to look for more affordable rental units, at some point you realize it actually makes sense to buy.”–Benjamin Keys It All Comes Back to Supply and Demand Supply and demand is driving up the prices for both renting and purchasing homes. That generation has a homeownership rate of 80%, and they are staying in place as they age. These older Americans are renting out their homes or passing them along to the next generations while they move into apartments. “The biggest change, in many ways, has been toward carefully underwriting the ability to repay. “It’s possible we’ll have a whole new platform that will allow less traditional kinds of borrowers to get approved for loans,” he said. “If the marriage rate stays depressed, then I think the homeownership rate will stay depressed.

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9 Killer Ways to Market Your Tech Startup

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