According to Sam Khater, Freddie Mac’s chief economist, the lower mortgage rates are getting positive results from home buyers across the nation. Mortgage applications for home purchases are rising steadily and have seen the highest year-over-year change since the fall of 2017.

Here is a look at the national averages with mortgage rates Freddie Mac reported for the week ending July 25, 2019:

The 30-year fixed rate mortgages averaged 3.75% with an average 0.5 point. This was a dip from the week prior which was at an average of 3.81%. July of 2018 reported 30-year rates averaged 4.54%.

The 15-year fixed mortgages reported as the following. They averaged 3.18%, with an average 0.5 point. Again, this was a lower than last week’s which reported 3.23% average. This time last year the 15-year rates averaged 4.02%.

The average 5-year hybrid adjustable-rate mortgages was 3.47%, with an average 0.4 point. Another fall from last week’s 3.48% average. A year ago the 5-year hybrid adjustable-rate mortgages (ARMs) averaged 3.87%

“While the improvement has yet to impact home sales, there’s a clear firming of purchase demand that should translate into higher home sales in the second half of this year,” Khater says.

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We all know that buying a home is a big step for anyone especially for someone who is doing it for the first time. A bipartisan House bill passed at the beginning of July 2019 that will help ease the first time buyer’s anxiety over the homebuying process. The bill will allow first-time homebuyers to pay less closing cost if they go through homeownership counseling.

“The idea behind the legislation is that counseling should improve loan performance and make people better borrowers,” said Pete Mills, senior vice president of residential policy for the Mortgage Bankers Association, which generally supports the bill.

The Housing Financial Literacy Act applies to mortgages backed by the Federal Housing Administration and is a tool that can be used for first-time homebuyers. Those eligible, will go through counseling which teaches them ways to be financially responsible homeowners. Once completed, they would receive a discount on the upfront mortgage insurance that is required on FHA loans.

First-time homebuyers tend to go with FHA loans because of the less-stringent requirements. Although the requirements are more lax than a conventional loan it requires more money for insurance premiums because the FHA loan is riskier. Today the delinquency rate on FHA loans is around 9% where the delinquency rate on a conventional loan is only around 3%.

The risk for the lenders on an FHA tends to be higher because a good many of the first-time homebuyers using an FHA have low or moderate incomes with lower credit scores. Lenders require those using the FHA to pay mortgage insurance along with an upfront mortgage insurance premium. Currently the upfront amount paid is 1.75% of the base loan amount. If a borrower does not have the money upfront to pay the premium, the cost can be rolled into the loan. The Housing Financial Literacy Act allows a discount of 25 basis points making the premium amount 1.5% of the base loan amount instead of the 1.75%. As an example, the upfront mortgage premium on a $200,000 loan would be $3,500 but with the discount the first-time buyer would only need to pay $3,000.

Hopefully if put into law, the bill will not only help reduce cost, but also give first-time homebuyers the tools to become financially responsible homeowners.

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When purchasing a home, the majority of homebuyers will purchase using a mortgage. Your credit and your down payment will affect your monthly payment and mortgage rate. The more you put down the lower your monthly payment will be making it easier to build more equity in a shorter amount of time. Although this is a plus, it can back-fire when a homeowner puts down most of their savings on a downpayment leaving no funds for home maintenance or emergencies.

“There’s really no one-size-fits-all solution,” says Jason Speciner, a certified financial planner in Fort Collins, Colorado.

Find a happy balance. Figure out how much you can put down to lower payments without leaving the finances high and dry for those upgrades, maintenance issues, life emergencies or life in general. Here are a few pointers to follow when deciding the amount to put down on a home.

Do the benefits outweigh the negatives? Future homeowners are surprised at the differences in the monthly mortgage payments when calculating different down payment amounts. If a higher down payment would mean a borrower could avoid mortgage insurance this would definitely be a plus. Mortgage insurance is a monthly expense added on top of the monthly mortgage payment making it a much slower process of building equity. There are times when a higher downpayment does not reap any benefits. If it leaves a future homeowner strapped for cash it is just not worth it. If someone just needs to put down 3% for a conventional loan but tries to scrape together 5% to lower the monthly payment it just doesn’t make enough difference and cannot be justified if it leaves a future homeowner strapped.

Always be mindful of the effects a higher downpayment will have on your financial plan. According to the Bank of the West’s 2018 Millennial Study, 29% of homeowners between the ages of 21 to 34 borrowed from their retirement accounts to make a large downpayment on a home. Taking from Peter to pay Paul is not always the greatest solution. Taking money from your 401(k) is definitely risky. If you loose your job, the money must be put back into the 401(k) before the next yearly tax filing or it will be treated as ordinary income with a 10% penalty. An Roth IRA is not as risky, but when taking out money from your IRA you are losing tax-free growth.

Always expect the unexpected. You always want a cushion to fall back on. Leave some cash in the bank for emergencies. Sadly NerdWallet’s 2019 Home Buyer Report, says that 34% of recent first-time home buyers feel they are no longer financially secure after purchasing their home. Homownership includes many expenses that first time homebuyers might not have planned for. Do not drain your savings on a down payment and closing costs.

Speciner says it best, “Emergency reserves are for ‘Oh, shoot’ moments.”

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Even with the sales numbers for new homes for sale during May, 2019, not all in, an annualized report of new home sales shows a 3.8% increase, year-over-year of new home sales. Because many different firms only look at sales numbers through the lens of how they compare to the previous month’s sales, the reports of new home sales growth slowing have been inaccurate when taken into account of adjusting for seasonal fluctuations and year-over-year numbers.

In 2018, two things affected new home sales – the increases in interest rates throughout the year and a slight stock market “bear market” which slowed down the economy overall. The beginning of 2019 shows a boost after the slowdown, and it also doesn’t show any signs of wavering throughout the rest of the year according to Forbes.com economic contributor John S. Tobey (click here to read the article).

The seasonal adjustments account for the slowdown of new home sales throughout the winter – this is a consistent annual occurrance. It is Tobey’s opinion that home buyers “postponed” the purchase of their new home to wait for better housing market conditions. He also anticipates double-digit growth rates towards the end of 2019’s home buying season.

Locally, in St. Tammany Parish, Louisiana, local home builders enjoyed enormous turnout for the 2019 Parade of Homes. Also, local builders have also seen tremendous and growing interest in home buyer contacts to build new homes and fully custom homes in Mandeville, Covington, and Madisonville. Ron Lee Homes has been inundated with interested home buyers, partially as a result of the Parade of Homes. We welcome you to Contact Us for your home building needs to sit down for a consultation to discuss your options. Call 985-626-7619 or Email Info@RonLeeHomes.com.

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For the first time in two months, the year-over-year increases in existing home sales increased during the month of May, according to the National Association of Realtors (NAR). The exact number of home sales was 5.34 million, increasing existing home sales by 2.5%. Part of this increase is due to supply. For many months, it’s been a seller’s market because the number of homes for sale has not been able to meet the demand of home buyers on a national level.

The number of homes for sale increased from April, 2019, to May, 2019, from 1.83 million units to 1.92 million units in May. The types of homes included were single-family homes, townhomes, condominiums, and co-ops. There was also a year-over-year increase in the number of homes available for sale from 2018, which saw 1.87 million units available to May, 2019, which had 1.92 million units, which is a 4.3-month supply for potential home buyers.

Home buyers are eager to pick up homes as soon as they come on the market, which has been great for sellers and Realtors alike. The average amount of time that an existing home stayed on the market before going under contract was 26 days, and that actually accounted for 53% of homes under contract. This statistic is kind of unusual because average home prices are up in 2019 – by 4.8%, averaging $277,700 for resales.

All statistics were made on a national level, but specifically in the Southern region, resale sales were up 1.8%, and home sales also increased by 1.3% in the Southern region. Locally, homes for sale have been “flying” off the market, so if you are in the market for a home for sale or are considering buying a new home for sale, Contact Ron Lee Homes for your next new home purchase! Call 985-626-7619 or Email Info@RonLeeHomes.com.

 

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According to the Urban Institute Housing Finance Policy Center, mortgage lenders are becoming more flexible with riskier applicants. Their quarterly credit availability report found that they are lending to people with lower credit scores, higher debt-to-income ratios and smaller down payments.

The report finds that the Federal Housing Administration (FHA), Department of Veterans Affairs (VA) and the Department of Agriculture’s rural home loans are taking the highest risk levels since before the crash. In fact, Fannie Mae and Freddie Mac have steadily taken more risk since 2009. This is great news for potential home buyers, especially those with less than perfect credit scores.

“Significant space remains to safely expand the credit box,” Laurie Goodman, vice president of the Housing Finance Policy Center, says.

The current lender risk levels are very low and will still stay within the “reasonable lending standards.” Loan officers around the country have seen a creative side to the lending industry recently which gives the “credit-strained buyer” hope. John Meussner, executive loan officer with Mason-McDuffie Mortgage Corp. in San Ramon, California, says he has seen a perfect example of this.

“Recently we saw one investor roll out a product offering up to $2 million in financing for FICO scores down to 600,” said Meussner.

The loan mentioned, will allow the borrower to have made a late payment on a mortgage within the past year and have major incidents such as foreclosure or bankruptcy. Many lenders will now take a score in the mid-500s with a small down payment. In the past, Fannie and Freddie have required a FICO score of around 750 to obtain a home loan.

The requirements might be a little less risky but lenders are still doing their homework on their potential borrowers. Paul Skeens, president of Colonial Mortgage Group in Waldorf, Maryland believes that the attention to documents in unbelievable detail has kept the market from seeing a lot of defaults.

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Everyone wants to save money and have a little extra in their pocket each year. One way to do this is through saving on utilities. Energy-Efficient homes are the way to do this and here are some reasons why.

There are many benefits to owning an energy-efficient home. When it comes to utilities, 30% of homeowners say the cost to heat, cool and illuminate their home is expensive. Energy Star rated homes use 20% less energy according to the U.S. Environmental Protection Agency. Energy-efficient homes are known to sell faster and at a higher price than un-certified homes. Studies done by the National Association of Home Builders have shown that they can bring in on average about $5,000 more.

Energy-efficient homes are held to a higher standard. There are many certification rules and these can vary by region. The house itself is not the only thing that must be certified. Many contractors such as the HVAC contractor must have proper credentials and have EPA training. There is a close inspection of the homes lot design, home location, sustainability of building materials, and even access to alternative transportation to meet minimum standards.

These homes are in demand. James W. Mitchell, founder of Renewablue, a home energy consulting firm in Fort Collins, Colorado, believes that this is the only time someone will save money when borrowing it to purchase a home. When looking for an energy-efficient home look for keywords in listings such as “green”, use an “eco-savvy” agent, request past utility bills from the seller and consider an energy-efficient mortgage.

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Homebuyers have better than expected lower rates this Spring. For the first of the year many potential homebuyers called it quits with rising house prices, low inventory and mortgage rates above 5%.

“It was somewhat of a surprise to see the degree and intensity of the pullback,” said Robert Dietz, chief economist of the National Association of Home Builders. “Five percent at those pricing levels was enough to take the wind out of sails of the housing market.”

The current 4.5% rate is predicted to not rise much for the remainder of the year which means several positive outcomes for the homebuying market.

To begin, there will be more buying power. Lower mortgage rates along with rising wages gives homebuyers more leverage in the current residential real estate market. Current 4.5% rates make a $200,000 30 year-fixed mortgage $71 cheaper than at 5% which means total interest savings over the life on the loan would total $21,699.

“While folks might not have hit the bottom of the rate cycle – no one can perfectly time markets – on the historic side, these are still very attractive rates,” said John Pataky, executive vice president, chief consumer and banking executive at TIAA Bank.

Sellers will want to take the gains and run. According to evidence move-up buyers are purchasing more. The average mortgage balance for purchases has reached record levels. This is also good news for homebuyers in the lower priced home market. The move-up buyers will open up inventory in lower priced homes.

“It’s a musical chairs game,said Mike Fratantoni, chief economist of the Mortgage Bankers Association. “You need someone in the higher end to move, and it works its way down the ladder, eventually opening up an entry-level home.”

Potential homebuyers cannot control the Fed or rising home prices but there are several factors they can control when it comes to determining the interest rate they will get on a mortgage. Homebuyers can reduce their rate by the amount of money they put down. The larger a down payment the lower the rate giving the homebuyer more risk than the lender. The higher your credit rating the better the rates. For example a person with a high credit score (760 – 850) would get a 4% rate while a person with a credit score of 660 to 679 would receive a 4.5% rate on a $216,000 price with a 30-year fixed-rate mortgage.

“While folks might not have hit the bottom of the rate cycle – no one can perfectly time markets – on the historic side, these are still very attractive rates,” said John Pataky, executive vice president, chief consumer and banking executive at TIAA Bank.

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This is the question many are pondering since Madisonville’s population is just over 800 residence. According to Louisiana Lawrason Act in order to be considered a town you must have 1,001 inhabitants.

In a report issued this week by the state legislative auditor it states, “Because Madisonville had only 748 residents as of the 2010 federal census, it appears that it should be classified as a ‘village’ under its charter.”

This is a serious issue posed on the town as it even says in Madisonville’s own charter that the governor must be notified of a change in the town’s population. There will be several recommendations the town must follow from changes to the number of town board members to refining policies.

Many residents and leaders alike are not happy with the change in board members from the current five to three.

“I kind of like five people,” Brad Haddox, who serves on the Town Council said. “That’s five different considerations. … With more varied people, you have more varied viewpoints.”

How did this oversight occur? According to Haddox it was an innocent oversight. The Madisonville Charter list many governmental responsibilities that just don’t apply to today. Examples include regulating taxes on corn doctors, pet bear exhibitors, exhibitions for pay, fortune tellers, ten pin alleys etc.

Madisonville has only had a population of at least 1,001 residents in two U.S. Census reports. One in 1910 with 1,028 inhabitants and in 1920 there were 1,103 residents. Since then the town has seen a drop with the lowest population in 1990 at 659. Currently the population sits at an estimate of 831 residents.

“I don’t think we’ve been at 1,000 for 40 or 50 years,” said Mayor Jean Pelloat.

As of February 1, 2019, Governor John Bel Edwards has been notified via letter of the town’s current population. Madisonville also sent a copy of the town’s charter and additional information the Governor requested to review.
The Mayor and town officials are waiting to hear back on his decision.

As for the name town or village, many residents believe a label does not define a community.

“We are such a small town,” said Stephen Marcus, president of the Madisonville Chamber of Commerce. “We’re in a pretty small area; we kind of call ourselves a tiny little village … there’s no stigma.”

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Spring always brings warm weather, sunshine and an upbeat attitude. The home market started off slow for the beginning of 2019, but analyst believe there will be a rise in home sales Spring 2019.

The beginning of the year wasn’t what the National Association of Realtors hoped for. Pending home sales did jump 4.6% this January, however sales were 2.3% lower than a year ago. January marked the 13th straight month of year-over-year declines.

The pending home-sales index (the NAR’s tracking system that records home contract signings) did go up in January to 103.2.  Analysts believe the reopening of the partial government shutdown caused the boost from the nearly five-year low it saw in December of 2018. In the Northeast pending sales increased 1.6%, in the Midwest 2.8%, only 0.3% in the West and 8.9% in the South. The market should see the home sales from these pending contracts right around Springtime. Contracts usually stay pending on average for about 45 days until they close.

“February existing home sales should now rebound handily and with new home sales likely to head higher too, given the rising trend in mortgage demand, the gloomy housing narrative in markets and the media is set to change quite dramatically over the next few months. The market is not rolling over, and it is not a harbinger of recession in the broader economy,” said Ian Shepherdson, chief economist for Pantheon Macro.

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