Mortgage with Manny Gomes

Here's why I think interest rates will gradually rise in the coming months. Today I'm going to talk about why rates are poised to increase. In the last year, we had to deal with an extreme economic event: COVID. To keep the economy from falling off a cliff, the Federal Reserve took extreme measures, the same measures they enacted during the 2008 recession and more.  They lowered the Fed funds rate to 0%, which is the rate at which banks borrow money from the Fed, and they bought every kind of bond crazily. The economy is starting to heal, but the price of goods is increasing. Some of that is due to supply chain disruptions and organic inflation, but it's getting harder for the Fed to remain disconnected from the political and economic pressures. “Rates would not be this low if it weren't for extreme intervention by the Fed.” So what can the Feds do when prices get higher? Raise interest rates; that's it. What this does is lower the borrowing power of the consumer, which lowers consumer demand. That decreased demand forces businesses to offer lower prices to entice consumers again.  Rates would not be this low if it weren't for extreme intervention by the Fed. We're likely going to see rates increase for a while before it becomes a good idea for people to buy bonds. Rates should increase gradually over the next six to 12 months, but that's not a sure thing. Inflation could turn out to be much worse than people thought, and rates might have to increase a lot before they level off again. Or maybe this inflation will change the consumer's mindset and lead to an economic slowdown, which would keep rates steady at where they are now. I don't have a crystal ball, so I can't tell you for sure. I make educated guesses, and I'm guessing that rates will gradually increase. If you're on the sidelines looking to refinance or buy a home, now is the time to do it, before rates rise and make those processes much more expensive. If you have any questions or are looking to get a home loan, reach out to me and my team via phone or email. We'd love to help.

Since I began work in originating loans, I have reviewed tens of thousands of credit reports, mortgage states, income documents, and so on. I rarely find people in their 40s or even their 50s who have paid off a majority of their mortgage. Why is that? The reason is that most people don't stay in their mortgages for very long, and when they choose to purchase a new home or refinance, they start the madness of a 30-year term all over again. In the first five years of a 30-year mortgage, the bank collects 27% of the interest. Ultimately, you're paying very little principle and a majority of the interest. By the fifteenth year of the mortgage, the bank collects 71% of the interest. Once you hit 15 years, you start to accelerate the principal reduction. That's why most people never pay off the loan—they don't make it to the 15-year mark. Over the years, I've successfully educated many people about the benefits of a shorter-term loan. Why? Because the script is flipped; you're no longer paying a majority of interest in the first five years, but you are paying a majority of principal.  That allows you to pay off the house faster and reach a milestone in life where you have a majority of your home paid off by using your mortgage as a tool to fulfill your future financial objectives.  “That's why most people never pay off the loan—they don't make it to the 15-year mark.” If you've been making a mortgage payment for a while, you probably owe less than your original loan balance. So if you convert your loan to a 20-year loan, the monthly payment difference is sometimes minimal or even nonexistent, especially if the interest rate is declining at the same time. With rates starting to inch higher, now is a good time to consider refinancing.  If you have any questions or would like to have your mortgage analyzed and learn about the benefits of a short-term loan, don't hesitate to give us a call or send an email. We'd love to have a conversation with you.

Are home prices going to crash? A lot of people have this concern, and it's easy to see why. Prices have been rising for so long that people assume they will have to crash eventually. However, this isn't necessarily the case, and today I want to talk about all the reasons why that is.  I started my real estate career during the last big crash in 2008, and what's happening in our market right now is nothing like what was happening back then. The biggest issue in 2008 was that banks were approving people for mortgages without vetting their finances at all. This created an influx of artificial buyer demand that drove home prices up like crazy. Things got so bad that it was sometimes cheaper to rent a home down the street than to pay your mortgage payments.  We had a huge amount of people approved for a mortgage who couldn't afford it. When the economy took a downturn, it caused a chain reaction in the housing market that led to a giant wave of foreclosures. This greatly devalued homes everywhere.  “Our current market is nothing like the one from 2008.” Does that sound like today? It shouldn't. Our economy is strained, but we're mostly seeing this result in inflation, which is good for homeowners. If the costs of assets increase, that means the value of your home will increase too. On top of this, we have low interest rates creating organic buyer demand that doesn't look like it's going anywhere. Finally, the government added a whole new slate of regulations on banks following 2008, so lenders can't approve people for bunk mortgages like they did before.  In reality, our hot market is driven by two big factors: low supply and high demand. As the millennial generation has grown up, their appetite for homes has hit the market hard. They are well-funded buyers, and their demand doesn't seem to be going anywhere.  Because of all these factors, it doesn't make sense for home prices to crash or even decline anytime soon. That being said, we probably won't see the same crazy rate of growth of the last few years. Things will likely level out to a healthy and stable market.  If you are thinking of buying a home, take advantage while you can. Interest rates are rising, so if you want to make a move or have any questions, please call or email me. I am always willing to help.

Last year, I made a video about where I thought our real estate market would go due to the effects of the pandemic. Now that we’re beginning to come out of the health crisis, I wanted to share again where I think we’re heading and answer a few questions I’m receiving all the time these days. My goal is to help you make the best decisions when purchasing a home. Feel free to watch the full message above, or use these timestamps that will direct you to various points in the video. 0:05: Introduction to today’s topic 1:10: Is the market too hot? 2:40: Does it cost less to build than to buy? 3:20: Explaining our home appreciation in the past, present, and future 5:40: Why a quality real estate agent makes such a difference 6:45: Wrapping up today’s topic If you have any questions about our market or how any of this affects you, call us at (203) 673-2131 or send us an email. We would love to help you.

What’s happening in the lending world? If you’ve been following the news lately, you may have heard that many lenders have increased minimum credit score requirements—some as high as 700. Some have also increased their down payment requirements and made 20% down mandatory. This is a direct reaction to the COVID-19 pandemic, which has also made many people elect to take on a mortgage forbearance. How do these developments affect you as a homebuyer? That’s the question I’ll answer today. Cited below for your convenience are timestamps that will direct you to various points in the video. Feel free to watch it in its entirety or use these timestamps to browse specific points at your leisure: 1:14—Why lenders have to be smarter about their lending decisions right now 1:46—Why entertaining a forbearance costs lenders a great deal of money 3:11—Why it’s critical for consumers to get qualified for financing far in advance  4:39—A word of advice for homebuyers  6:07—What if the economy declines even further? 6:32—Wrapping things up  As always, if you have questions about this or any real estate topic or are thinking of buying or selling a home soon, don’t hesitate to reach out to me. I’m happy to help.

People have been floored when I tell them that I’ve been busy helping people make offers on properties, even with the stay-at-home orders. We haven’t been impacted by any severe price reductions due to the pandemic, either. People assumed that the coronavirus halted everything, but that’s not the case when it comes to real estate. There are three reasons why I believe that our housing market won’t be seriously affected by COVID-19 this year: 1. There’s an imbalance between buyers and listings. Way more buyers are looking for properties than there are quality listings. The coronavirus has exacerbated this problem; there are fewer listings in the marketplace due to COVID-19, but there is much higher demand at the moment because of a minor shift of individuals looking to leave New York and move to Connecticut.  “It will probably be a long time before we see a shift and see higher levels of depressed inventory hit the market.” 2. There’s a delay in foreclosures due to courthouse closings. The C.A.R.E.S. Act has afforded any consumer impacted by the COVID-19 crisis the ability to put their mortgage into forbearance for up to 12 months. Not to mention that Connecticut is a judicial state—the foreclosure process typically takes anywhere from 12 to 24 months to close, with the courts urging the bank and the borrower to work out some sort of modification plan before moving forward with the foreclosure process. It will probably be a long time before we see a shift and see higher levels of depressed inventory hit the market. 3. In my view, the opposite of what people believe will happen tends to take place. The pendulum always swings from extreme pessimism to extreme optimism; people now seem to think that the housing market is going to do so badly, but in reality, the opposite will likely happen, and we’ll see our housing market do well over the next few years. If you have any questions regarding housing, don’t hesitate to reach out to me. I’d love to hear from you.

Home prices are generally affected by things like unemployment, interest rates, and supply and demand. What impact will the coronavirus have on these things? Schools are closed, people are staying home, and an economic event is happening right now. While we work to contain the virus, what effect will that have on real estate prices? Here’s an outline of my discussion, with timestamps so that you can skip ahead to the sections that interest you most: 2:00- Why it’s hard to compare the coronavirus to other major events 2:40- Where are local home prices headed and why? 3:30- Why home prices tend to stall out in certain markets 4:15- Is buyer motivation still out there? 5:00- Why I believe demand will increase from here 6:15- Wrapping things up If you have any questions relating to mortgage rates, real estate, or the economy, don’t hesitate to reach out via phone or email. I would love to hear from you.

Several weeks ago, mortgage rates hit their lowest levels in history, creating an environment for more people than ever to benefit from refinancing. Since news networks are blasting viewers with headlines like “Coronavirus leads to lower rates,” people who otherwise wouldn’t have noticed rate changes are paying close attention and looking to get in on the action.  We’re now experiencing the biggest run on mortgage refinancing ever. Due to this unprecedented, ballooning volume, banks were forced to sort of slow things down; they slightly raised rates, not to demotivate buyers, but rather to offset two things:  1. Maxed-out operational capacity2. The bond market blow-up.  Expanding on No. 2 a bit, the market realized how much volume was about to flood into it down the line, and the valuation metrics have been recalculated, but not in a good way. The inability of the market to absorb as much paper as has been coming out created an environment where lenders find it difficult to determine what rates they should set for certain loan programs. As a result, they’ve added in a buffer to absorb any potential losses when it comes to securitizing.  “Once the government earmarks funds for the purchase of mortgage-backed securities, we’ll see rates improve.” Many years ago, there was a disconnect between what Treasury yields were pricing and what mortgage-backed securities were pricing—those two do compete for the same investment dollar. The government stepped in and initiated a quantitative easing program that earmarked funds for the purchase of mortgage-backed securities, affording the banks a place to deliver loans so that they could keep running the loans and help the consumers.  I expect that this will happen again (depending on when you’re viewing this post, it may have already happened). Once the government earmarks funds for the purchase of mortgage-backed securities, I believe that the liquidity for lenders to have a place to deliver loans will be there, and we’ll see mortgage rates improve.  If you have not yet refinanced, the best advice I can give you is to reach out to your lender and prepare yourself for when rates do come down. Understand the pros, cons, and costs of a refinance ahead of time. Don’t miss out on a rare opportunity. If you have questions or would like me to elaborate on something I mentioned today, feel free to reach out to me. I’m always here to answer your questions.

CBC recently released an article that said housing competition is so fierce that the spring market has already started. I completely disagree with that. I believe that competition is so fierce because we have way more buyers right now than sellers. For this reason, I believe the competition will become more normal and a little less intense as we get deeper into the spring.  People tend to get their homes ready for the market during this time of the year, especially in Connecticut with the winter weather. Sellers want their home to look great and get top dollar. They can accomplish both of those things later in the spring. “We can help you become a stronger buyer, no matter your situation.” Many of the sales in our state are a result of sellers wanting to move up to a bigger home. If they’re moving up to a bigger home, they’ll need a bigger down payment to keep up with the competition for their new home.  I think this increased competition is going to put borrowers with a smaller down payment at a complete disadvantage. Low down payment buyers are easily outbid and out-negotiated. Their financing simply doesn’t look as concrete as someone who puts 20% down. If you need to buy with a small down payment, we can help you in a few different ways. We can get you qualified quickly, and we can get your offer underwritten and credit-qualified, which will make you a stronger buyer in the eyes of sellers. If you have any questions for me, feel free to reach out via phone or email today. I look forward to speaking with you soon.

Today’s topic may seem strange to some. Why do some people find success buying or selling a home after switching agents? Being a loan officer, I have the privilege of working with dozens of the top agents in the area. I’ve had the honor of helping thousands of people through the home buying process. Over the years, I have discovered there is a learning curve when entering the housing market to buy or sell a home. This means that sometimes the real estate agent you begin with is not who eventually fits your needs.  Cited below for your convenience are timestamps that will direct you to various points in the video. Feel free to watch the full message or use these timestamps to browse specific topics at your leisure:  0:00: Introduction to today’s topic 1:35: Why there are many emotions involved in the home selling and buying process 2:25: How to price your home accurately  3:05: Why the longer a property sits on the market the less attractive it becomes 5:45: Why it’s so important to work with an agent you like and trust 6:20: How to contact me If you would like to have a conversation with someone active in the marketplace, I would be glad to do that. If you need a recommendation for a skilled agent, I can help with that as well. Feel free to reach out to me by phone or email. I look forward to assisting you. 

A topic that has gotten a lot of attention recently is: Are we headed into a recession? More importantly, will a recession impact our housing market? Today I’ll answer these critical questions and try to ease some of the anxiety people are experiencing about the potential upcoming recession. Just a heads up: There’s no reason to be as fearful as some people are about our market.  Cited below for your convenience are timestamps that will direct you to various points in the video. Feel free to watch the full message or use these timestamps to browse specific topics at your leisure:  0:00: Introduction to today’s topic. 0:20: Are we heading into another recession? 1:00: Take a look at the GDP 1:20: Look at the unemployment rate and wages 2:45: Fluctuation of interest rates 4:45: Are we expecting a repeat of the 2008 recession? 5:55: About the conceivable upcoming recession 6:50: How millennials are affecting the market 8:05: Wrapping up today’s topic If you have any questions or want to have a conversation about the economy, feel free to reach out to me by phone or email. I would love to speak with you.

Interest rates have come down recently and a lot of people are thinking about refinancing. However, I’ve been having a lot of conversations with homeowners who are cross-shopping for the best rates, and there have been moments where I’ve looked at the numbers and let them know that it actually doesn’t make sense for them to refinance. It’s strange how a lender can massage the numbers and make substantial savings appear when there’s not much of a benefit in the end. If someone’s in a 30-year loan and they’ve been paying it off for years, they owe less money in interest. Because they owe less money, the payment on a lower loan amount is calculated. As a result of the principal and interest being lower because of the lower loan amount, the monthly payments appear more substantial than they really are. “Focus on the interest savings.” If you’re looking at refinancing, the only statistic you should be paying attention to is interest savings. How much interest are you saving? Quite often, when someone rolls their loan amount back into a 30-year term, they have to start paying more and more interest right off the bat, instead of paying the principal amount off. Your monthly payment might be lower, but I’ve found that if someone has been paying into a mortgage and refinances to a shorter period, the savings on interest over the life of the loan outweigh the savings on a 30-year loan more often than not. By switching to a shorter term, you’re paying much less in interest per payment, and you’ll leave with a substantial amount of equity in the home down the line.  On the flip side, if you’re looking to downsize down the line, this strategy still works. The only time you want to stretch out your loan and lower your payments is if you’re in dire financial straits. If you have any questions about your specific situation or anything else related to the mortgage world, don’t hesitate to give me a call or send me an email. I look forward to hearing from you soon.

It’s no surprise that fewer people list their homes and fewer people look for homes to buy in the fall and winter months, but a big reason for this is because they assume there’s more opportunity in the spring.  Is that true? In some ways, yes. In other ways, no—there is plenty of opportunity for both buyers and sellers in the fall and winter markets. “Buyers should take full advantage of these conditions.” For example, sellers who keep their homes on the market during the fall and winter are likely very motivated to sell, either because they need to upsize, downsize, relocate, etc. As a result, they’re more willing to drop their sale price or entertain offers that are lower than normal. This is in stark contrast to spring, where homes always sell for higher prices. Buyers should take full advantage of these conditions. When you combine them with the fact that interest rates are near-historic lows, it’s a wise move to buy now.  If you’re a seller and you need to buy your next home, the math doesn’t support the notion that spring automatically equals a more successful double-transaction. If you aim to move into a larger home, you may have to sell your current home at a lower price, but you’ll also be able to purchase your next home at a discount. If you’re in need of a good agent, you need to get qualified for a home purchase, or you have any more questions about this topic, don’t hesitate to reach out to me. I’d be happy to help you.

In 2014, Jeff Grossarth and I introduce the “Homes for Heroes” program to Connecticut. Since then, we’ve helped dozens of families save thousands when buying or selling a home. This program is specially made for law enforcement, firefighters, EMS, military members, healthcare professionals, and teachers. To find out how you can benefit from this program, watch this short video. Jeff GrossarthRealty One GroupCell: 203-209-9037

How do you find the right agent to represent you? There are a few tips to take into consideration. Oftentimes, I’ll hear people tell me they hired their agent because they liked them as a person. There’s nothing wrong with hiring a likable agent, but a home is one of the biggest purchases you’ll ever make, so choosing the person who will guide you through this purchase should depend on more than just whether you like them or not. Experience, for instance, is an important factor, and a lot of people prefer to hire an agent who has a lot of experience. You need to be careful when gauging an agent’s experience, though, because that goes beyond just how many years they’ve been in the business. The number of years they’ve been an agent doesn’t automatically correlate with how effective they’ll be in a transaction.   One way to find out whether someone’s a true professional or not is to see whether they identify as a real estate advisor. Advisors are different from agents. An agent is someone who’ll simply carry out your marching orders to the best of their ability. An advisor, on the other hand, will push back against what you tell them in order to protect you from yourself. This is something I do quite often—I’ll offer clients a different perspective concerning their wants and needs to help them get the best deal possible.   “One way to find out whether someone’s a true professional or not is to see whether they identify as a real estate advisor.” A simple, effective way to vet an agent is to simply Google them. By doing this, you’ll be able to read reviews past clients have written about them and see how many sales they’ve handled. If you can count the number of sales they’ve handled on one hand, they may not have the transactional experience necessary to navigate you through the sales process as seamlessly as you would like. This isn’t to say that you can’t hire someone who’s new, young, and hungry to represent you to the best of their ability. If you can find someone like that who’ll work hard for you, by all means hire them, but make sure you ask them the right questions first—especially if you’re selling your home. For example, you can ask them what the average list-to-sale price is for your neighborhood, or what the average days on market is for homes in your neighborhood. Their answers will give you an idea of how well they understand the local market. Lastly, if you’re having trouble finding a good agent, you can just ask me and I’d be happy to refer one to you. I’ve been working in this area for a long time, and I know plenty of great agents who would love to help you. If you have any more questions about how to find the right agent or you have any mortgage needs I can take care of, don’t hesitate to reach out to me. I’d love to help you.

It seems like every year during January and February, as I pull new credit reports for people entering a mortgage contract, I continue to shock them with their FICO scores. They’re always a little lower than what they expected, and the culprit is holiday shopping. How does this happen? As people put their holiday shopping on credit, their balances increase and they inch closer and closer to their limit. Whenever this happens, your FICO score automatically drops. A large percentage of your credit score is determined by how your balance stands in proportion to your limit. If you have a $1,000 limit and you max that out, even if you intend to pay it off the following month, credit scores are delayed by 30 to 60 days. This means the impact of your January payment won’t be seen or felt until later on in February or possibly March. “A large percentage of your credit score is determined by how your balance stands in proportion to your limit.” To keep your score up during the holidays, there are a couple of things you can do. First, you can spread out your balances across multiple cards. If it’s early enough, you can also ask for a credit limit increase if you know you’ll use a lot of your revolving limit during the holiday season. All you have to do in this case is call up your credit card company around the holidays—they’re always willing to increase your limit. Be cautious that you don’t overspend at the same time, though. If you have any questions about this topic or you’re thinking of buying or selling a home soon, don’t hesitate to reach give me a call or send me an email. I’d be happy to help you.  

The website Zillow came on the scene many years ago, serving as a way for people to see what their homes were worth. Today, it has become a popular tool that most homebuyers now use to gauge what their home would be worth if they chose to list it. This has become a huge pain for consumers who are looking to get an accurate sense of their home’s worth. Why? Because, while it can be fairly accurate at times, it can also be really off. For this reason, Realtors tend not to like Zillow. It provides a false estimation of a home’s value. Let’s break down how Zillow actually calculates the value of a property: They use an algorithm that averages out the square footage sales price for a home in your immediate area that is comparable to your home’s own square footage, bedroom count, and bathroom count. This would work if we all lived in cookie-cutter neighborhoods, where all the houses are identical. But that’s not the reality of how most people live. There are always new homes being built in neighborhoods, so if you have the nicest, newest home in an area of older, dated, smaller houses, Zillow will really drag down the value of your property. “If you’re thinking of listing your home in the near future and want to ensure that what you’re offering is reasonable, don’t rely on Zillow.” On the flip side, if you have a very dated, smaller property in an area dominated by newer, larger homes, Zillow will make your home appear much more expensive than a potential buyer would ever realistically pay for. This is one of the reasons why there’s a large discrepancy between what a real estate agent may value your home at and what the Zestimate says. My advice to you: If you’re thinking of listing your home in the near future and want to ensure that what you’re offering is reasonable, don’t rely on Zillow. Talk to a real estate agent who is attuned to your market area. If you have any questions or need a recommendation for a Realtor, reach out to me. I’d be happy to help you.

We’re officially heading into fall. Pumpkin spice lattes are everywhere and the leaves are starting to change color. Fall is a really fun time of year, but this season does mean something entirely different for our real estate market. Today, I’ll explain what separates the spring real estate market from the fall real estate market. Most people who want to sell their current homes so they can transition into a larger home like to list their homes for sale in the spring. The same is true for sellers who have children; these sellers want to move into certain school districts. Spring is the time when most sellers who want top dollar for their properties tend to list their homes. The fall market is a little bit different. The fall market is comprised of properties that have lingered throughout the spring and summer market. Perhaps the property was priced too high or perhaps it simply wasn’t an ideal property for any buyers. In any case, these properties have lingered into fall, and with the winter market ahead of them, these sellers tend to drop the price. Ultimately, this means that a property that was overpriced in the spring may be in a more comfortable price point come fall. The second major difference in the fall market is that there are people who did not want to move their families during the spring or summer. These people are looking to take advantage of the lower prices in the fall or winter market. “Stopping your home search in the fall is a big mistake.” Those are the two main differences between the spring and fall market. If I wanted to list my home and buy a larger home, I would say that fall is a great time to do that. However, year after year, we lose a lot of buyers in the fall. These buyers have been out in the spring and summer market. Without any available inventory in a price range that is attractive to them, buyers get frustrated and quit looking for homes. That is certainly understandable. It’s not easy to be outbid on house after house. That said, don’t give up now. I think stopping your home search in the fall is a big mistake. There are usually price reductions in the fall, which gives you a great opportunity to get a premium property at a discount. In the fall, there is more price power for the buyer. There are also fewer buyers to compete against, so it makes a lot of sense to consider purchasing a home in the fall. So, get energized and start looking for a home! (Again!) If you have any other questions about the fall market, please don’t hesitate to reach out to me. If you are interested in buying or selling a home, I can certainly put you in touch with a rockstar real estate agent. Just give me a call or send me an email. I would be happy to help you!

Many blame adjustable-rate mortgages for the financial and housing crises a few years back—but are they really all bad? Years ago, an adjustable-rate mortgage (ARM) was almost like a bad word. After the financial crisis and the housing collapse, a lot of people blamed much of that on adjustable-rate mortgages. I personally believe that that’s because people who shouldn’t have taken on ARM loans were enticed to purchase them by mortgage originators. How does an ARM loan work? It’s actually quite simple: Your rate is fixed for a period of time (often five to 10 years), and then it becomes variable based on an index. If the index in the open market is moving higher, your rate will move higher as well. “The difference between an ARM and a 30-year fixed mortgage is typically about three-quarters of a percentage point.” One thing I do like about adjustable-rate mortgages is that the initial rate is much lower. The difference between an ARM and a 30-year fixed mortgage is typically about three-quarters of a percentage point. If you’re buying your first property or a home you can stay in for seven years or less, taking a 7/1 ARM and capitalizing on the interest rate differential will save you a tremendous amount of money over time. You do need to be careful, however; be sure to have an exit strategy. You’ll need to improve your current financial state or you’ll have to be prepared to refinance out of the ARM within seven years if rates look like they’ll be higher on your current mortgage. Ultimately, ARMs are nothing to be scared of if you understand them. If you’d like to learn more about this and other types of loans, feel free to reach out to me. I’d be happy to help.

We’ve all heard of “the American Dream,” but where did the phrase originate and when did homeownership become part of that idea?  First appearing in the book “The Epic of America,” author James Truslow Adams says: “The American Dream is that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement.”  Nearly a century since “The Epic of America” was first published, many of the ideas it espoused still hold true today. However, there have obviously been certain cultural, social, and economic changes since this book came out. The transformation of real estate and homeownership in our country is one such example.  Back in the 1930s, homeownership was reserved for the wealthy. It was only after WWI that homeownership became a symbol of the American spirit and a facet of the American Dream. Yet some have suggested that in the present, homeownership is no longer part of this ideal.  To understand why, we must examine the events of the last decade and how they have impacted our nation’s attitude toward real estate. Prior to the housing crash in 2008, obtaining financing for a mortgage was incredibly simple. Beyond that, many people were falsifying their income in order to afford homes that were beyond their means. This artificial demand dramatically drove up home prices while simultaneously reducing affordability—two factors that, as you likely remember, led to a market crash.  “Buying a home could be the right next step in your pursuit of the American Dream.” Thankfully, our market has since recovered. Real estate in 2018 is a very healthy industry, partially due to help from new rules and regulations put in place to prevent similar circumstances to what we saw a decade ago.  Nevertheless, some are still skeptical about the prospect of homeownership. Is it still a worthwhile pursuit? Actually, there are many benefits associated with owning a home today. Several of the advantages that first propelled homeownership into becoming a facet of the American Dream still exist.  The first advantage is the most obvious—when you own a home, it’s yours to do with as you please. Owning a home lets you plant roots on your own terms. It eliminates uncertainty in your living situation.  Secondly, real estate is a great long-term investment. By accruing equity in your property, you are building wealth and safeguarding your future.  The third advantage to homeownership is that it grants you the ability to leverage appreciation. If you purchased a $100,000 with a $20,000 down payment and that property doubles in value over time, you essentially gained an additional $100,000 in value for a comparatively small initial investment.  Finally, remember that whether you rent or buy property, the need you’re satisfying by doing so is the same. People need shelter, so why not own yours? When you rent, you’re essentially paying someone else’s mortgage. Buying a home and paying your own mortgage, instead, may make a lot more sense, and could be the right next step in your pursuit of the American Dream.  If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.

I have been doing this job for a long time and the one thing I have realized is that nobody likes to pay mortgage insurance. In fact, a lot of people actually prolong the home purchase so they can accumulate the 20% down payment to avoid paying it. But, what exactly is mortgage insurance? It is an insurance policy that protects lenders against early default. History has shown that people who put down less than 20% for their down payment have a higher risk of defaulting on the loan. In order for lenders to actually write these loans and take an additional risk, they purchase insurance that is then passed through to the borrower. This insurance is doing nothing but protecting the lender. You don’t have to keep mortgage insurance forever. Once you reach a point where you have a significant portion of equity, normally 22%, your home mortgage insurance does drop. “Mortgage insurance rates for someone with a high credit score have been super low.” In the last year or so, with so many home prices stabilizing and in some areas home prices going up, mortgage rates at the private level have started decreasing. In fact, just last month, rates were slashed again. The rates for extremely high credit score individuals have been super low. I just priced out a $400,000 loan and the mortgage insurance was less than $80 per month. In that case, it made a lot more sense for that client to not put down 20% and instead hold the money to reinvest into the property. I believe a lot of people have a fear of mortgage insurance. However, it is really not that bad anymore. If you are waiting for a 20% down payment before purchasing, please reach out to me. I would be happy to price out exactly what mortgage insurance would cost for you per month.

I hear this questions all the time: “I heard rates went up with the Federal Reserve. Does that mean mortgage rates have gone up too?” Quite simply, the answer is no. What the Fed controls is the fed funds rate. This is the borrowing cost of capital that banks borrow against the federal government. When the fed funds rate increases, short-term loans (home equity lines of credit, auto loans, credit card loans) tend to increase automatically. “Mortgage rates are actually set by the trading of mortgage-backed securities.” Home mortgage rates are actually set by the trading of mortgage-backed securities in the open market and are not as directly influenced by the fed funds rate as most people believe.  The media will talk about rates going higher all the time to sell ad space, but mortgage rates have actually behaved normally. I do believe that we’re at the end of the mortgage rate hike cycle that we’ve seen over the past eight months. We should see them come back down soon. If you have any questions for me or want to know what rates are doing right now, please feel free to give me a call or send me an email. I would love to hear from you.

We’ve finally made it to May! The housing market has been pretty active, but under the surface, there have been a couple of issues facing buyers in the current market. We have a large imbalance between quality inventory and the number of buyers. There are a lot of buyers chasing increasingly limited inventory, which creates multiple bid situations where buyers are learning the hard way that offering under asking price and hoping to get a good deal is not working. I’ve been following this for quite a while, and I think I’ve unraveled the buyer psychology behind it. When buyers enter the market, they bring with them the mindset from the market in years past, meaning that since the financial crisis, we have been in a predominate buyer’s market. Buyers would offer about 10% below the asking price and then close the gap with negotiations. Now, however, we are transitioning into an extreme seller’s market. The days on market for an average property has been dwindling. The average monthly inventory is down to a 10-year low at this point. Market conditions like this overtly favor a seller. “Buyers who are actively participating in the market are facing a learning curve.” Buyers who are actively participating in the market are facing a learning curve. They go in the first time and bid lower on the property and, not surprisingly, they get outbid. The second time they go in, they lead with a stronger offer. When they offer something closer to the asking price, they tend to be more successful. Here’s my advice when you’re making an offer on a property: Listen to your agent. Your agent knows the market and is talking with other agents; they have a better grasp on what is working and what is not working for a property, given the comparable sales. Don’t be nervous about taking an agent’s advice—the difference in the commission earnings an agent makes between going below asking price and above asking price is pretty insignificant. At the end of the day, they truly want to put you in a position to win your offer. As of late, I’ve noticed that not only does the offer you make in terms of sales price have an impact on your ability to win the offer, but the type of financing and who your lender is also impacts the listing agent and seller’s comfort level with pursuing your offer. In order to maximize your ability to win with your offer, we are: Offering to do an underwriter-level pre-approval, which, in most circumstances, is accepted similarly to a cash qualification because it’s subject only to a contract when you’re making the offer. Willing to lend you our services as a local lender with great brand recognition. A lot of listing agents know how fast we can turn around and deliver on our promises. Sellers and their agents are looking for a stable and attractive offer, using the terminology “highest and best” when vetting different offers. They want to know that the lender has a great track record and that they’ve ensured the loan on the offer they’ve accepted is viable. If you have any questions or are in need of advice about how to win in a multiple bid situation, please feel free to reach out. We’d be glad to help you.

What will happen with mortgage rates during 2018’s second quarter? First, let’s recap what happened with mortgage rates during the first quarter of 2018. At the beginning of this year, their trajectory was much higher, and they increased by as much as 0.5% because the bond market was getting very nervous about economic inflation. When there’s economic inflation, the bond values drop and yields have to go higher in order to compensate for this drop. On top of that, the Federal Reserve has been in increase-mode lately. As of last week, they actually increased rates by another 0.25%. Strangely though, rates have also started stabilizing and improving in the last couple weeks. I believe this is because fears over inflation have dissipated. Should we get any economic data that doesn’t show large-scale inflation, we’ll probably see rates continue to stabilize or decrease a bit during the second quarter. “Historically, the second quarter is the time when rates tend to improve.” Historically, the second quarter is the time when rates tend to improve going into the summer season, so I wouldn’t be too worried about rates increasing or use that possibility as a reason to jump into buying a home. To sum things up, there’s no need to worry that mortgage rates will surpass the levels we saw during 2018’s first quarter. If you have any other questions about mortgage rates or you have any other real estate needs I can assist you with, don’t hesitate to reach out to me. I’d be glad to help you.