This month, we had the pleasure to sit down with Barb Fox—Senior Account Manager at Rainier Title & Escrow. Barb has been providing exceptional service for more than 17 years in the title and escrow industry. As our go-to professional, Barb is a wealth of knowledge and it was incredibly valuable to sit down with her to get some must-know information about title insurance and escrow as part of the home buying process.
Read the Q&A below!
For many of us, our children have either already grown up and left home, or they will be leaving the nest soon. We are no longer interested in spending long hours keeping up our yards, and our homes are larger than what we need. If you are among those in this boat, the good news is it is a fantastic time to sell a home! The bad news is that buying a home can be challenging in the current Seattle-area housing market. If your goal is to stay in the area, there are a couple of good long-term and short-term strategies.
Many homeowners in the Seattle area are hesitant to sell their homes right now unless they can purchase their new home before selling their existing home. The Seattle housing market is the hottest real estate market in the country, with no signs of slowing down. January 2017 marked the 17th month in a row that Seattle has led the country in home price increases. Because of this, homeowners feel secure in owning a home and worry that they will not be able to find another home that they love in the hyper-competitive market. This has made low housing inventory a common theme in our area, driving up competition and prices for buyers. If you are worried about buying a new home in this market, you can explore creative methods, like a home equity line or other financing options that will allow you to purchase before you sell.
Another option is to get started on a two-year strategy. If in-city life appeals to you, purchasing a condo presale could be a good option. Developers prefer to sell future condominium homes prior to breaking ground on the project. For an empty nester that isn’t quite ready to move, there are a few excellent benefits for taking this route!
- First, you are purchasing at current market prices, which will very likely save you money in this skyrocketing housing market. All that is required is a small deposit (usually 10%) with no additional payments until closing. If our market continues to appreciate as it has, by the time you move in you will already have significant equity in the home.
- Second, you will be moving into a brand-new home that suits all your needs. Many empty nesters appreciate the smaller size of condominiums, the convenience of location, the lack of yard to care for, and the lock it and leave it lifestyle that is perfect for travelers.
- Finally, you will have plenty of time to get your home ready to sell, pack up, and downsize your belongings. This will result in maximizing the sale price of your home!
The SeattlebyDesign team is always available for consultation on your specific circumstances.
Please don’t hesitate to contact us!
If you are planning on buying a home or refinancing a loan, be cautious with your finances. Going overboard on holiday shopping can hurt or even kill a loan approval entirely!
Realogics Sotheby’s International Realty and Caliber Home Loans looked at average prices of newer condominiums and compared rents for comparable apartments. They found the total cost of ownership was effectively lower when factoring income tax deductions, not to mention the opportunity for capital appreciation. The research was performed as part of a recent think tank hosted by the Puget Sound Business Journal, which was published as a section called The Manhattanization of Seattle.
Economic indicators Released Last Week:
o Monday, December 2, 2013: Construction Spending – rose .8% in October; PMI Manufacturing Index – rose slightly 54.7 growth
o Wednesday, December 4, 2013: New Home Sales (Oct) 444K versus 420K market expectations
o Thursday, December 5, 2013: Jobless Claims –298K versus 330K market expectations
o Friday, December 6, 2013: Unemployment rate ticked down to 7% versus the 7.2% expectation ; 203K jobs added in November, higher than the 180K Wall Street anticipated. Consumer sentiment jumped to 82.5 for December, up from 75.1 in November.
• Janet Yellen is expected to be confirmed this week as next Federal Reserve Chairperson. She has indicated she will follow suit with current Federal Reserve quantitative-easing policy until employment picture is much stronger. Employment participation rate is at 63%, the lowest level in 3 decades.
2013 Reflective Highlights:
- FHA increases monthly mortgage insurance premiums and lengthens length of time requirements that mortgage insurance remains in place on loans
- Minimum down payment was raised to 5% on all conventional loan programs
- Asset based lending makes it debut – Asset rich borrowers with non-traditional income streams will now have the opportunity to finance real estate
2014 Looking forward:
- Buckle your seat belts and be ready for a financial strip search… The QRM (Qualified Residential Mortgage) is set to take effect January 10, 2014 as part of further Dodd-Frank legislation.
- QRM requires borrowers to show greater strength in employment history, lower debt to income ratios, and qualify based on tighter credit and income guidelines than in the past.
- Buyers be prepared for a financial strip search and get pre-approved prior to shopping for a home. Preparation and education is key!
- Don’t be caught in a web of surprise. Even buyers who think they are among the qualified elite may be in for surprise with the strengthened guidelines.
- There are still plenty of great loan program options for borrowers even with all of these changes!
-Enrico Pozzo, Barry Bergner & the SeattlebyDesign Team
Original Post: https://www.rsir.com/blog/?p=3983
With big changes coming to the mortgage industry at the beginning of next year, many consumers will want to evaluate their homebuying plans. Regulations drafted by the Consumer Financial Protection Bureau will change the definition of a qualified mortgage for any loan applications received on and after Jan. 10, and many consumers may find themselves unable to meet the new requirements.
Qualified mortgages are loans that meet certain standards designed to ensure that borrowers are highly likely to be able to pay back the amount in question. Facing this challenge, it’s up to the hopeful homeowner to improve their chances of mortgage approval by doing the necessary research, improving their credit profiles and meeting the qualified mortgage standards well in advance of filling out loan applications.
It’s important to meet qualified mortgage standards because government-sponsored enterprises, known as GSEs, like Fannie Mae and Freddie Mac have said they won’t buy non-qualified mortgages starting next year, said Joshua Weinberg, senior vice president of compliance with First Choice Lending/Bank. Fannie and Freddie don’t lend to homeowners directly, rather they purchase mortgages from banks and then bundle them into securities and sell those securities to investors.
For lenders that originate mortgages with the intention of selling them to the GSEs, as many do, originating non-qualified mortgages won’t be feasible. Other lenders own the mortgages they originate, meaning they don’t have to worry about selling them to GSEs, and such larger portfolios could probably take on non-qualified mortgages.
What’s Changing? Mortgages must pass tests of sorts to meet the standards of a qualified mortgage: The APR must be within 150 basis points (1.5 percentage points) of the annual prime offer rate, the loan term cannot exceed 30 years, points and fees cannot exceed 3 percent of the loan balance and there can be no negative amortization or interest-only payments. Under these conditions, the mortgage qualifies for safe harbor, meaning the lender is not at risk of being sued by a borrower who is unable to repay the loan.
There’s a class of loans called higher-priced qualified mortgages, in which the APR exceeds the 150 basis-point limit, and in those cases, the loan falls under rebuttable presumption, meaning the lender is assumed to have complied with ability-to-pay requirements, unless a borrower or attorney argues otherwise. Loans with rebuttable presumption will likely come at an additional premium, said Cameron Findlay, chief economist at Discover Home Loans, though the price of that premium is unclear at this point.
The ability to repay comprises a series of requirements that must be met by the borrower and verified by the lender, including income and debt levels. All of these CFPB regulations are aimed at protecting consumers from mortgages they can’t reasonably expect to repay, because such faulty loans triggered the recent financial crisis. Given these limitations, and some new restrictions on lenders that also go into effect in January, some have suggested that consumers may find themselves struggling to acquire a mortgage.
Weinberg described it this way: Originating a mortgage has been a process that blends science and art. The science includes the regulations that give clear guidelines for what does and does not meet qualified mortgage standards. The art comes in when an originator decides to approve or deny a mortgage application, even if a borrower doesn’t meet every requirement in the book, because his or her experiences can give important context to a case that numbers and rules cannot.
“With this QM rule we’re seeing an elimination of the art and a focus on the science,” Weinberg said. “The way the points and fees will be calculated is now a pretty defined standard. My gut says because of the shrinking art component and the emphasis on the science, fewer people are going to qualify for loans.”
While the new regulations are beyond consumer control, there are several things potential homeowners can do to prepare for buying residential property in 2014.
1. Ask Questions: If this all sounds a bit confusing, don’t worry. You’re not alone. Both Findlay and Weinberg acknowledged the complexity of the new rules and said there’s confusion among lenders. For potential homeowners who don’t understand what these changes mean for them, there’s no shame in asking someone to explain them.
There are a lot of components to mortgages that first-time homebuyers may not be familiar with. Say a lender instructs you to reduce your debt-to-income ratio — that means how much of your income is tied up in student loan payments, collections accounts, judgments and other existing loan obligations. You’ve just learned that points and fees can’t exceed 3 percent of the loan balance, but what’s a point?
A point, for the record, is prepaid interest on the loan, with one point equal to 1 percent of the loan. If a borrower would rather have a lower interest rate than the one they’re offered then they can pay points to lower that rate.
There’s bound to be something that confuses the borrower, and no one should enter into such a large financial decision with uncertainty. Ask a lender to explain it to you, but understand that the lenders are nailing down the new processes, as well. “It doesn’t bode well for the consumer when there’s this confusion,” Findlay said.
It’s important to shop around for mortgages, and consumers should know that they can concentrate their mortgage search into a few weeks in order to minimize the impact on their credit scores. Inquiries are a major factor in your credit scores, and too many inquiries can hurt your credit. Mortgage inquiries made within that short period (which varies by credit scoring model) will count as a single inquiry on their credit reports, and because multiple inquiries would normally ding credit scores, this allows consumers to find the best offer without harming their credit profiles. If you want to see how inquiries are affecting your credit, you can look at your free Credit Report Card, which grades you on important credit score factors and gives you free credit scores.
2. Tackle Debt: If you have debt, you should try to reduce it, and this is true for all consumers, not just those looking to buy a house. Potential homeowners, however, should be extra motivated to conquer their debt: Under new ability-to-repay requirements necessary to attain a qualified mortgage, a borrower’s debt-to-income ratio must be 43 percent or less, including the potential mortgage payment.
“Not only do we consider the debts that show up on your credit report, but we have to look at debts you may expect to pay in the future,” Weinberg said, giving the examples of child support and student loans in deferment. “They are also going to need to be comfortable and aware of managing that debt. They are going to be asked questions about that.”
Whether you’re looking to buy a home next year or in two years, make a plan to manage debts now. It can only help.
3. Start the Paperwork: Though these new requirements impact consumers, they also affect lenders, and no one wants to be the first to screw up. The ability-to-repay measures require a lot of documentation, which will need to come from you, the applicant.
“We’re really needing to get a very holistic perspective on the borrower in order to complete the analysis necessary to meet compliance,” Weinberg said. Borrowers should ask a lender exactly what they’ll need to provide, and in order to answer lenders’ questions, they should also take stock of their credit profile.
Consumers are entitled to a free annual copy of their credit report from each of the three major credit bureaus — Experian, Equifax and TransUnion. That’s three credit reports, so it’s smart to review at least one before starting the homebuying process.
No one is sugar-coating these changes — they’re a lot to handle. Changes are common in this post-crisis climate, so the best consumers can do is ask questions and do their part to prepare and educate themselves. “If we’re making better loans, and the consumers are protected better, that’s better at the end of the day,” Weinberg said.
Ready to buy? Let us help you through the lending process. Give us a call today.
Enrico Pozzo, Barry Bergner & the SeattlebyDesign Team
Original article: https://www.aol.com/real-estate//#!