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Historically Low Mortgage Rates May Continue

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I recently spoke with Kathleen Howley and Forbes about the expectation that rates may remain low, as we have seen over the past year.

Just recently the Federal Reserve Bank of Kansas City canceled their Jackson Hole Economic Policy Symposium due to the rising spread of the delta-variant. How does this point to low rates?

Well, when shutdowns across the country began occurring last year the Fed cut rates and they have remained low throughout this year as well. In January, the average rate for a 30-year fixed mortgage reached 2.65%, an all-time low according to data from Freddie Mac. The recent cancellation of this in-person event may signal to investors that the pandemic is not truly over. Despite the vaccine rollout cases continue to increase in many places across the country.

“The Fed has been reassuring markets since last year that they will keep buying bonds as long as there’s a concern that the pandemic is going to slow the economy,” said Mark Goldman, a mortgage broker with C2 Financial Corp. in San Diego. “Now, we’re hearing every day that hospitals are full, and that’s not a sign that the economy is about to take off.”

For the full article, click here.

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Should buyers pay more than the appraised value?

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In this aggressive seller’s market, many successful bidders are waiving appraisal contingencies. Agents must be equipped to address their buyer-clients’ concerns about paying more than the appraised value for a property.

An appraised value less than the contract price will increase the loan to value. This can require additional cash down payment and/or mortgage insurance.

Should a buyer pay more than appraised value? Tough question. But, in this market, the answer is often “yes”.  There are many competing buyers willing to waive appraisal contingencies. However, home prices are moving up at a brisk pace. The appreciation in value will likely help home values catch up to price in a year or so.

The strongest buyers prevail – Successful bidders for homes are making cash offers with no contingencies for the appraised value. Move up buyers are confronted with the challenge to buy a new home before selling their departure residence. One concern is to sell first and not get a new home in time for the move. Such buyers may need to qualify for their purchase while carrying their departure residence because sellers may not consider a contingency for the sale of the departure residence.

Do bidding wars create a bubble in prices? I do not believe that the current trend to higher prices will create a bubble that will burst because the buyers are purchasing for their use, not speculation. Price bubbles in stocks, tulips, and real estate are the result of investors simply speculating that some fool will be willing to pay more for an asset in the near term. I have not observed investors buying homes on speculation to flip at a higher price.

Many sectors of the market have prospered during Covid. As we return to normalcy, the economy will improve even more. So, the upward pressure on home pricing will continue. Higher interest rates in the next 6-12 months may moderate the rate of appreciation unless inflation becomes an additional influence to even greater price increases.

Millennials are entering the home market. We will see more millennials become home buyers in the next few years created even stronger demand for the limited housing supply in San Diego. 

Conclusion – This is a tough market for home buyers with prices rising rapidly and fierce completion for limited inventory. I expect pricing to continue upward in the next year. However, I believe the rate of appreciation will slow later this year as the fear of Covid subsides and more home sellers are willing to list their property.

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Changes to Refinances in 2020

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Recently Fannie Mae and Freddie Mac announced that they are raising fees on refinances. The new fee will add 0.5% of the loan amount to the borrowers’ cost. The fee was originally planned to be put in effect starting September 1st, but is currently being charged by lenders.. This fee will cause a slight increase of approximately 1/8th to the rate on many refinances

This fee was put in place to protect against risk of default or forebearance, since many borrowers have been taking the opportunity to refinance their home loans. Rates have remained low, and we can expect them to stay low going into next year. Fannie and Freddie state that this fee will not cause monthly payments to increase. Most borrowers who refinance do achieve a lower monthly payment; and this fee would only reduce those savings by about $15 a month.  

The fee will apply to most refinances, with some exclusions being:

  • Mortgages to purchase a home
  • Refinances with loan amount below $125,000
  • Refinance loan amounts above $510,400, or your conforming local limit (Jumbo Loan)
  • Home Ready refinance loans
  • Home Possible refinance loans

My mortgage interest outlook is that rates could increase due to expectations of greater inflation. The Federal Reserve has announced that they will keep the Fed Funds Rate low into 2023. However, that is an overnight borrowing rate to banks. Rates on long term fixed rate loans will reflect the inflation risk. Another factor that will put upward pressure on rates is economic recovery. In general, mortgage interest rates are very low now by historic comparisons. I see more factors motivating higher rates than lower rates at this time. One other factor that can push rates up is good news on a Covid Vaccine. Of course we all want an effective vaccine. But, I expect news of a vaccine will push rates up.

Bottom line – Rates are great now. Take advantage if you have need.

Let me know when I can help.

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San Diego Home Prices Reach New Record

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I spoke with The San Diego Union-Tribune recently about the new record high prices we have seen in San Diego. This year there are a lot less homes on the market, meaning a lot more competition for buyers and therefore higher home prices. Many sellers are receiving multiple offers, some even over asking price and selling in a few days.

The Union-Tribune reports “the county has seen prices rise more than 8 percent since the pandemic took effect in March” which is something we have seen across major cities in the country. Low interest rates have incentivized many to buy now, so more buyers have entered the market. I believe rates will stay like this for some time, so it’s a good time to buy for those who can.

For more information, read the full article here.

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San Diego Real Estate Market Update-September 2020

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Over the last few months we have continued to see record-low rates. The average 30 year fixed rate is currently 3.010% which is good news for buyers looking to purchase a home. If you have thought about taking advantage of low rates to refinance, you may want to act fast due to the 0.50% fee* that will be imposed on most refinances. This news comes from Fannie and Freddie and will be in effect for conforming loans delivered after December 1, 2020. This is most likely a response to the large amount of refinances that have occurred due to the low rates. Many conforming lenders are already pricing this fee into their loan locks.

In San Diego we continue to see a low inventory of available homes, meaning more competition for buyers. Inventory for detached homes is 52% lower compared to last year; and attached is 30.2% lower. Low inventory has been a problem for some time now, and it continues to drive up prices. This is good news for sellers who can expect to receive multiple offers on their home and sell it quickly. On average, marketing times are down to 24 and 25 days for detached and attached homes respectively, but we have all seen those homes that sell in a matter of days. If you’re working with buyers, make sure they are prepared to act fast. Get your buyers pre-approved for their financing. Be aware that many lenders have slow turn times these days due to very high refinance volume. Some lenders are running two weeks for underwriting purchases. After loan approval, it can take 10 days to clear conditions for loan documents. There are still lenders who can close purchases in 3 weeks. Get realistic turn times from your lender to meet contingency periods.

Good news on non-conforming loans. The jumbo lenders are returning to the market with competitive pricing. However, underwriting guidelines are still strict with requirements for higher credit scores, lower debt-to-income ratios and higher reserve requirements. Also, self-employed borrowers are scrutinized with more conservative underwriting of income. Also, bank statement loans for self-employed borrowers and debt service coverage loans for investment properties are slowly returning to the market. Rates are higher for these Non-QM loans, but they are coming back. Non-QM loans can also be useful for borrowers with credit events.

The Federal Reserve has announced a more aggressive policy to allow higher inflation before raising their overnight discount rate. According to the Fed, their long-term strategy is to keep rates low for the upcoming years. This is an effort to boost spending. However, long term lenders who make 15 and 30 year fixed rate loans may raise rates in anticipation of inflation. In my opinion, this indicates that mortgage interest rates are more likely to go up from here than down.

Let me know when I can help.

*The fee will apply to most refinances, with some exemptions being:

  • Mortgages to purchase a home
  • Refinances with loan amount below $125,000
  • Refinance loan amounts above $510,400, or your conforming local limit (Jumbo Loans)
  • HomeReady refinance loans
  • Home Possible refinance loans

How to Choose A Mortgage Broker

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When choosing a mortgage broker don’t just look at who is promising the best and lowest rate. It’s important to work with someone who has your best interest in mind and will help you make the right choice for your loan. The mortgage process can be long and you may hit some bumps in the road, so it’s important your broker is experienced and can help you navigate your different options and any difficulties that may come along. Here are some of the things you can expect from your mortgage broker:

1. Form a mortgage plan

You need someone who will not simply get you a loan, but a mortgage plan. This can include knowing the basics like what you will pay now and down the road for the life of the loan. Remember that a mortgage can last many years so you want to know what to expect during that time. A mortgage plan can also include evaluating investment options for you down the road. Mortgages are not one size fits all so your mortgage broker should help you put together a plan just for you.

2. Inform and educate

We truly believe there are no bad questions when it comes to your mortgage. You should expect to have all your questions answered in a timely manner and to make sure you are really understanding what is going on. A home is a large investment so we want to make sure you are in control and aware of what’s happening every step of the way.

3. Personalized service

We make sure that when you have questions or need assistance you are speaking directly to us and don’t have to go through a large phone tree with getting no help. That can be a big difference between working with an independent mortgage broker and choosing a loan with a big bank. Make sure that your mortgage broker gives your loan the attention it deserves to make sure you are getting the best possible option.

4. Experience and expertise

Sometimes we will hit bumps in the road with your mortgage, so make sure you are working with someone who has the experience and expertise to navigate any issues that may come up. The difference between an experience broker and one that is not, could cost you your loan so be aware of this.

5. Have your best interest in mind

You may encounter brokers who simply want to close a loan, no matter what it is. This could result in you getting a loan that is not right for you and could lead to problems down the road. In my many years of working with borrowers, there have been time where I’ve simply had to present the available options and if they were not right then borrowers had to walk away. I was always understand of this, but also ready to help when more favorable options were available.

6. Doesn’t forget you after one loan

A good broker will make sure you are aware of how market changes are affecting you and when a possible opportunity comes your way. This can mean refinancing your home for a lower payment or investing in property. Your mortgage broker should remain in contact with you about these options and will work with you again when the time is right.

Jumbo Loans Making A Comeback

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The Jumbo Mortgage market took a hard hit because of Covid, but recently many lenders have provided information about their products coming back. Rates are still higher than conforming loans, but we will continue to monitor them.

Many home buyers had to put their plans on hold, but with the market slowly coming back to normal, now may be the time to begin their home search again. Competition is still an issue in the market, so getting pre-approved is important. If you are looking to buy a home or are an agent working with buyers, let me know when I can help.

Forbearance Pros and Cons

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I spoke with San Diego 10News about some of the pros and cons of forbearance for borrowers. Like I’ve mentioned before if you are considering this option reach out to your loan provider first. I’m happy to answer any questions you may have and help you determine if this is the right option for you. If you can continue to make your regular mortgage payment, this is typically the best course of action for you.

A forbearance will put a pause on your mortgage payment, but that amount will still be due. Depending on your loan provider you may have the option to repay it at the end of your loan as a lump sum or have an extension added to your loan. You may also be able to add that amount into your monthly payments. This may provide some financial relief for borrowers who find themselves unable to make their mortgage payment, and the payback options should be discuss to fit your needs.

Once a borrower has elected forbearance on their loan, they should be aware that they may not be able to refinance on that loan for possibly 12 months after they are current with payments. Recently rates have been low and many borrowers have taken advantage of this to refinance and achieve a lower monthly payment. This option may not be available to those who refinance so be aware of this for future plans.

In market news, the rising number of forbearances have caused a shortage of cash flow. This will drive up the price of mortgages so future borrowers may find it harder to get a home loan.

For more information and the full article, click here.

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Stay Informed On Your Mortgage Relief Options

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There is a lot of information circling around about the best options if you find yourself unable to pay your mortgage. First, let me say if you have any questions please let me know. These uncertain times have many of us just taking it day by day, but it’s always good to know what your options are and be prepared. Here is a quick overview of what options are available.

Forbearance

Forbearance will allow you to pause or reduce your mortgage payment for a period of time. Currently that period of time is 180 days, with an extension of 180 days available. The amount that is not paid during that time will still be due in the future. Different types of loans will have a different forbearance option. For more information on this program, click here.

Foreclosure Moratorium

During this time a lender or loan servicer is not allowed to start or finalize a foreclosure against you. This applies to federally backed mortgages and will vary by state. As of March 18, 2020 there is a 60 period for this moratorium.

Please make sure you are verifying information with the correct sources. This guide gives you some of the general information about the different options that are available and the steps you should follow. The options listed are designated for federally backed mortgages. If your mortgage does not fall under this criteria, you should still contact your loan servicer to find out what relief options they may be offering.

The information above is a general overview, so reach out if you have doubts or if you just want to know what the best option is for you.

Hope everyone is staying safe and healthy.

-Mark H. Goldman.

Mortgage Rates Close To All-Time-Low

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Mortgage rates continue to fall for another week amid the pandemic. This week rates fell to 3.31%, putting them only three basis points away from an all-time-low.

The government continues to put money into capital markets to keep rates low and help the recovery of the economy once it begins reopening. I believe rates will continue to float down by a small amount in the coming weeks.

What does this mean for you? If you have been contemplating a refinance of your mortgage now may be a good time to act. A lower monthly payment may be a good option for you during these times of uncertainty. If you had been thinking of purchasing a home and still find yourself in the position to do so, it would be a good time to lock in a low rate for your mortgage. If you have questions, reach out and let’s discuss a plan of action.

For the full article from Housing Wire and my comments, click here.