Blog :: 10-2019
Many potential homebuyers believe they need a 20% down payment and a 780 FICO® score to qualify to buy a home. This stops many people from even trying to jump into homeownership! Here are some facts to help take the fear out of the process:
- 71% of buyers who purchased homes have put down less than 20%.
- 78.1% of loan applications were approved last month.
- In September, the average credit score for approved loans was 737.
Here are four great reasons to consider buying a home today, instead of waiting.
1. Prices Will Continue rising
CoreLogic’s latest Home Price Insights Report shows that home prices have appreciated by 3.6% over the last 12 months. The same report predicts prices will continue to increase at a rate of 5.8% over the next year.
The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.
2. Mortgage Interest Rates Are Projected to Increase Next Year
The Primary Mortgage Market Survey from Freddie Mac indicates that interest rates for a 30-year mortgage have recently hovered just above 3.5%. This is great news for buyers in the market right now, because low-interest rates increase your purchasing power – but don’t wait! Most experts predict rates will rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac, and the National Association of Realtors are in unison, projecting that rates will increase by this time next year.
An increase in rates will impact your monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is needed to buy your next home.
3. Either Way, You Are Paying a Mortgage
There are some renters who haven’t purchased a home yet because they’re uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you’re living rent-free with your parents, you are paying a mortgage – either yours or that of your landlord.
As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to have equity in your home you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.
Are you ready to put your housing costs to work for you?
4. It’s Time to Move on With Your Life
The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears both are on the rise.
But what if they weren’t? Would you wait?
Look at the actual reason you’re buying and decide if it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer, or you just want to have control over custom renovations, maybe now is the time to buy.
Buying a home sooner rather than later could lead to substantial savings. Let’s get together to determine if homeownership is the right choice for you and your family this fall.
DID YOU KNOW? Construction on U.S. new houses fell more than 9% in September, but a recent surge in permits suggests the decline in so-called housing starts is just a brief pause in a real estate market reinvigorated by lower mortgage rates. Housing starts slid to an annual rate of 1.26 million last month from a revised 1.39 million in August. (Marketwatch)
DID YOU KNOW? Of the 618,000 “millennial millionaires” - those currently aged 23 - 37 years old with a net worth of over $1 million - in the USA, 44% are concentrated in California. California also has the highest percentage of business owners (23%) and the highest percentage of real estate investors. New York ranks No. 2, home to 14% of the millennial millionaire population. (CNBC)
DID YOU KNOW? Hedge funder Ray Dalio - speaking at the IMF and World Bank annual meetings - said the global business cycle is in a “great sag” and the world’s economy holds at least two parallels to the 1930s. Here are some of his thoughts:
* Monetary policy, and especially interest rate reductions, were unlikely to offer much stimulus.
* The world was also experiencing the biggest wealth gap since the 1930s and that was creating political stress. In the USA the top one-tenth of 1% of the population has a net worth that is approximately equal to the bottom 90%.
* Like the 1930s, we have a rising power challenging an existing world power in the form of China-U.S. challenges.
* There were four types of wars to watch for — trade, technology, currency and geopolitical. (CNBC)
DID YOU KNOW? Total national real estate website visits - not unique visitors - in the month of September looked like this:
Zillow: 179 million
Redfin: 46,5 million
Compass: 3,543 million
Coldwell Banker: 2,9 million
Sothebys Realty: 2,773 million
Thanks to Jeremy Schwartz from Compass SEO Analytics who provided this information.
Many people plan to build their net worth by buying CDs or stocks or just having a savings account. Recently, however, Economist Jonathan Eggleston and Survey Statistician Donald Hays, both of the U.S. Census Bureau, shared the biggest determinants of wealth,
“The biggest determinants of household wealth [are] owning a home and having a retirement account.” (Shown in the graph below):
“Net worth is an important indicator of economic well-being and provides insights into a household’s economic health.”
Having equity in your home can help your family move in that direction, building toward substantial financial growth. According to the report noted above, people are not only creating net worth in the homes they live in, but many are also earning equity in rental property investments. (see below):
John Paulson said it well,
“If you don’t own a home, buy one. If you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home.”
There are financial and non-financial benefits of owning a home. If you would like to increase your net worth, let’s get together so you can learn all the benefits of becoming a homeowner.
While a recent announcement from CNBC shares that the average national FICO® score has reached an all-time high of 706, the good news for potential buyers is that you don’t need a score that high to qualify for a mortgage. Let’s unpack the credit score myth so you can to become a homeowner sooner than you may think.
With today’s low-interest rates, many believe now is a great time to buy – and rightfully so! Fannie Mae recently noted that 58% of Americans surveyed say it is a good time to buy. Similarly, the Q3 2019 HOME Survey by the National Association of Realtors said 63% of people believe now is a good time to buy a home. Unfortunately, fear and misinformation often hold qualified and motivated buyers back from taking the leap into homeownership.
According to the same CNBC article,
“For the first time, the average national credit score has reached 706, according to FICO®, the developer of one of the most commonly used scores by lenders.”
This is great news, as it means Americans are improving their credit scores and building toward a stronger financial future, especially after the market tumbled during the previous decade. With today’s strong economy and increasing wages, many Americans have had the opportunity to improve their credit over the past few years, driving this national average up.
Since Americans with stronger credit are now entering the housing market, we are seeing an increase in the FICO® Score Distribution of Closed Loans (see graph below):
But hang on – don’t forget that this does not mean you need a FICO® score over 700 to qualify for a mortgage. Here’s what Experian, the global leader in consumer and business credit reporting, says:
FHA Loan: “FHA loans are ideal for those who have less-than-perfect credit and may not be able to qualify for a conventional mortgage loan. The size of your required down payment for an FHA loan depends on the state of your credit score: If your credit score is between 500 and 579, you must put 10% down. If your credit score is 580 or above, you can put as little as 3.5% down (but you can put down more if you want to).”
Conventional Loan: “It’s possible to get approved for a conforming conventional loan with a credit score as low as 620, although some lenders may look for a score of 660 or better.”
USDA Loan: “While the USDA doesn’t have a set credit score requirement, most lenders offering USDA-guaranteed mortgages require a score of at least 640.”
VA Loan: “As with income levels, lenders set their own minimum credit requirements for VA loan borrowers. Lenders are likely to check credit scores as part of their screening process, and most will set a minimum score, or cutoff, that loan applicants must exceed to be considered.”
As you can see, plenty of loans are granted to buyers with a FICO® score that is lower than the national average. If you’d like to understand the next steps to take when determining your credit score, let’s get together so you can learn more.