Kathy Torvick
Seniors Real Estate Specialist
Realty Executives Arizona Territory
Searching for a better deal can pay off when looking for a mortgage.
According to the Consumer Financial Protection Bureau, you could save $100 a month on your mortgage by looking at multiple lenders.
Analyzing Home Mortgage Disclosure Act data from 2021 found that price dispersion—variation in mortgage rates among lenders for the same loan product—was around 50 basis points (.50%) of the APR..
That translates into a significant difference in monthly payments. For example, on a $300,000 loan with a 3% interest rate, opting for a 3.5% rate would increase the monthly payment by $82.
Since interest rates have risen significantly since 2021, the impact on monthly mortgage payments has become more pronounced.
With a loan amount of $300,000, the monthly payments for a 30-year fixed loan with a 6.5 percent interest rate and a 7 percent interest rate are, respectively, $1,896 and $1,996—a difference of $100 a month.
Still, finding a lower mortgage rate can be more difficult for older borrowers.
Research (https://bit.ly/3r39hh2) by the Federal Reserve Bank of Philadelphia found that older Americans face challenges getting a mortgage as they age and are more likely than younger borrowers to be rejected for such loans.
"I find that older borrowers face higher coupon rates on home purchase and refinance mortgages that were sold to Fannie Mae and Freddie Mac. Together, the empirical results suggest that, for a large part of the market for simple refinance and home purchase mortgages, older individuals who apply for such credit alone systematically face higher access barriers," wrote Natee Amornsiripanitch, the study's author.
The research found that the overall mortgage rejection rate was 17.5%. But for those in their 60s, that figure rises to 19% and to 20% or more for applicants in their 70s.
Even though it may be more challenging for those aged 60-plus to get a mortgage, it can be done.
Here are some tips:
If you last got a mortgage several years ago, refresh your knowledge of the mortgage process. Here are some resources:
Begin you search with Tucson Senior Loan Officer Resa Kaiser of VIP Mortgage. She has years of experience in the real estate and mortgage industry and can review your options with you. Call her today to begin the process of finding the right mortgage product.
Resa is skilled in fixed rate mortgages, she is a Certified Mortgage Planner, Home Equity, and U.S. FHA Financing. Strong finance professional with a Bachelor of Science degree.
It surveyed participants (https://bit.ly/3pmCbbq) in the Vanguard Research Initiative, a panel of account holders at the Vanguard Group, Inc., to get their opinions on the optimal time to transfer control once cognitive decline becomes a concern.
They could choose one of three options:
Most respondents (84%) prefer taking a middle ground, making the transfer after some cognitive decline but before completely losing their ability to manage money.
But by waiting too long, older people can make financial mistakes that endanger their long-term financial security.
Starting a money conversation is critical if you're responsible for eventually taking over your parents' finances. It's a touchy subject, and parents may resist giving up control, have trouble accepting their cognitive decline, and fear a loss of independence.
Here are some tips from Bank of America (https://bit.ly/43tesEN) and Charles Schwab (https://bit.ly/3NrAwcr) about raising the topic with parents and easing yourself into a new role.
Get an early start –To get a feel for their financial landscape, talk with your loved ones about money before an emergency strikes or cognitive decline begins. Expect the process to take time and know that it won't be a one-and-done conversation.
Offer your help – Make gradual changes and start by helping them open, review, and
pay bills together. That way, they'll get comfortable with your involvement.
Automate billing – Simplify the monthly bill paying by automating bill payments and switching income streams to direct deposit.
Inventory financial and legal papers – Start making a list of account numbers and legal documents (birth certificates, insurance policies, and wills, for example), and be sure all the documents are in a secure spot.
Work with professionals – Work with an elder law attorney to be sure all the appropriate paperwork—estate planning and a power of attorney, for example—is in place, up to date, and fits the wishes and needs of your loved one.
5 Secrets Buyers and Sellers Must Know About Virtual Home Tours
For years now, virtual home tours have helped real estate buyers far and wide find the perfect home. But because of the pandemic, they have recently experienced a huge spike in popularity. One survey found that nearly 33% of recent home tour requests were for virtual tours, as compared to just 2% pre-pandemic.[1] And it’s easy to see why.
Buyers want to quickly find their next safe haven, one that may need to serve as their office, gym, and even classroom for months to come. And sellers want to limit the number of strangers in their home, yet still have the ability to reach enough potential buyers to get the best offer on their property.
Virtual home tours are the popular thing right now, but that doesn’t automatically mean they’re the only option for your homebuying or selling experience. Read on to learn five important secrets of virtual home tours and how they impact today’s home buyers and sellers.
SECRET #1: Virtual Tours Have Evolved
The phrase “virtual tours” has evolved this year as real estate agents have been forced to quickly create innovative ways to show homes while keeping our clients safe and socially-distanced. Here are some terms you should know:
SECRET #2: Virtual Doesn’t Mean Impersonal
For a purchase as intimate as your next home, details easily seen on virtual tours like a new refrigerator or the size of the master closet aren’t the only deciding factors. Luckily, virtual tours are also exceptional tools for personal connection.
Virtual tours allow buyers to easily picture themselves in the space and to get their questions answered by an insider. And sellers can be sure that interested buyers are still getting that up-close and personal look at their home that will inspire their strongest offers.
SECRET #3: Virtual Is Just The First Step To Safe Home Sales
Virtual tours are still the recommended way to safely buy and sell real estate.[2] Buyers don’t have to worry about exposure to anyone who previously visited the property, and sellers cut down on the foot traffic in their home.
But some buyers will still need to visit a home themselves in order to feel confident enough to submit an offer. In this situation, listing agents and sellers will work together to come up with a procedure that ensures everyone feels safe and comfortable. They might require interested buyers to present a pre-qualification letter before scheduling an appointment for a tour, for example. And the day of the tour, agents may take safety precautions such as asking buyers to wear protective gear and refrain from touching any surfaces in the home.[2]
SECRET #4: The Speed of Closing Depends on Your Goals
In 2019, buyers viewed an average of 10 homes over a period of 10 weeks before submitting an offer.[3] But thanks to virtual tours, they’re able to peek inside that number of homes in a much shorter period. This increased buyer activity is leading to more offers per listing that features a virtual tour.[4]
Buyers wanting to compete for listings may need to cut their search time down to quickly submit an offer. And sellers need to carefully weigh the temptation to entertain more and more offers, which can keep their home on the market up to six percent longer.[4] Your agent can help you decide the right strategy for your priorities.
SECRET #5: Virtual May Not Always Be the Right Choice
Creating, editing, uploading, and marketing virtual tours for a listing can be pricey. Even seemingly inexpensive options like video call walkthroughs still require time and energy on behalf of both the seller and agent.
This means that a full virtual tour package might not always be a good return on investment for sellers. And buyers may notice that some listings within their search parameters don’t offer virtual tours, so it’s important not to close the door on your dream home just because it doesn’t have virtual events and features.
ARE VIRTUAL HOME TOURS IN YOUR FUTURE?
If buying or selling a home is on your mind, we’d be happy to discuss how virtual tours can play a part in your real estate experience. Reach out to us today for help finding local homes for sale that have virtual tours, or to chat about if adding a virtual tour to your upcoming listing is the right fit.
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By Kathy Torvick, REALTOR August 2020
Lowest Mortgage Rates in History: What It Means for Homeowners and Buyers
In July, the average 30-year fixed-rate mortgage fell below 3% for the first time in history.1 And while many Americans have rushed to take advantage of this unprecedented opportunity, others question the hype. Are today’s rates truly a bargain?
While average mortgage rates have drifted between 4% and 5% in recent years, they haven’t always been so low. Freddie Mac began tracking 30-year mortgage rates in 1971. At that time, the national average was 7.31%.2 As the rate of inflation started to rise in the mid-1970s, mortgage rates surged. It’s hard to imagine now, but the average U.S. mortgage rate reached a high of 18.63% in 1981.3
Fortunately for home buyers, inflation normalized by October 1982, which sent mortgage rates on a downward trajectory that would bring them as low as 3.31% in 2012.3 Since 2012, 30-year fixed rates have risen modestly, with the daily average climbing as high as 4.94% in 2018.4
So what’s causing today’s rates to sink to unprecedented lows? Economic uncertainty.
Mortgage rates generally follow bond yields, because the majority of U.S. mortgages are packaged together and sold as bonds. As the coronavirus pandemic continues to dampen the economy and inject volatility into the stock market, a growing number of investors are shifting their money into low-risk bonds. Increased demand has driven bond yields—and mortgage rates—down.5
However, according to National Association of Realtors Chief Economist Lawrence Yun, “the number one driver of low mortgage rates is the accommodating Federal Reserve stance to keep interest rates low and to buy up mortgage-backed securities.” According to Yun, “we will see mortgage rates stay near this level for the next 18 months because of the significance of the Fed’s stance.”6
HOW DO LOW MORTGAGE RATES BENEFIT CURRENT HOMEOWNERS?
Low mortgage rates increase buyer demand, which is good news for sellers. But what if you don’t have any plans to sell your home? Can current homeowners benefit from falling mortgage rates? Yes, they can!
A growing number of homeowners are capitalizing on today’s rock-bottom rates by refinancing their existing mortgages. In fact, refinance applications have surged over the past few months—and for a good reason.7 Reduced interest rates can save homeowners a bundle on both monthly payments and total payments over the lifetime of a mortgage.
The chart below illustrates the potential savings when you decrease your mortgage rate by just one percentage point. When it comes to refinancing, the bigger the spread, the greater the savings.
Estimated Monthly Payment On a 30-Year Fixed-Rate Mortgage
|
Loan Amount |
4.0% |
3.0% |
Monthly Savings |
Savings Over 30 Years |
|
$100,000 |
$477 |
$422 |
$55 |
$20,093 |
|
$200,000 |
$955 |
$843 |
$112 |
$40,184 |
|
$300,000 |
$1,432 |
$1,265 |
$167 |
$60,277 |
|
$400,000 |
$1,910 |
$1,686 |
$224 |
$80,368 |
|
$500,000 |
$2,387 |
$2,108 |
$279 |
$100,461 |
Be sure to factor in any prepayment penalties on your current mortgage and closing costs for your new mortgage. For a refinance, expect to pay between 2% to 5% of your loan amount.8 You can divide your closing costs by your monthly savings to find out how long it will take to recoup your investment, or use an online refinance calculator. For a more precise calculation of your potential savings, we’d be happy to connect you with a mortgage professional in our network who can help you decide if refinancing is a good option for you.
HOW DO LOW MORTGAGE RATES BENEFIT HOME BUYERS?
We’ve already shown how low rates can save you money on your mortgage payments. But they can also give a boost to your budget by increasing your purchasing power. For example, imagine you have a budget of $1,500 to put toward your monthly mortgage payment. If you take out a 30-year mortgage at 5.0%, you can afford a loan of $279,000.
Now let’s assume the mortgage rate falls to 4.0%. At that rate, you can afford to borrow $314,000 while still keeping the same $1,500 monthly payment. That’s a budget increase of $35,000!
If the rate falls even further to 3.0%, you can afford to borrow $355,000 and still pay the same $1,500 each month. That’s $76,000 over your original budget! All because the interest rate fell by two percentage points. If you’ve been priced out of the market before, today’s low rates may put you in a better position to afford your dream home.
On the other hand, rising mortgages rates will erode your purchasing power. Wait to buy, and you may have to settle for a smaller home in a less-desirable neighborhood. So if you’re planning to move, don’t miss out on the phenomenal discount you can get with today’s historically-low rates.
HOW LOW COULD MORTGAGE RATES GO?
No one can say with certainty how low mortgage rates will fall or when they will rise again. A lot will depend on the trajectory of the pandemic and subsequent economic impact.
Forecasters at Freddie Mac and the Mortgage Bankers Association predict 30-year mortgage rates will average 3.2% and 3.5% respectively in 2021.9,10 However, economists at Fannie Mae expect them to dip even lower to an average of 2.8% next year.11
Still, many experts agree that those who wait to take advantage of these unprecedented rates could miss out on the deal of a lifetime. “With rates now at all-time historic lows, it’s hard to imagine that people may be holding out for something even better," warns Paul Buege, president and COO of Inlanta Mortgage.12 Positive news about a vaccine or a faster-than-expected economic recovery could send rates back up to pre-pandemic levels.
HOW CAN I SECURE THE BEST AVAILABLE MORTGAGE RATE?
While the average 30-year mortgage rate is hovering around 3%, you can do a quick search online and find advertised rates that are even lower. But these ultra-low mortgages are typically reserved for only prime borrowers. So what steps can you take to secure the lowest possible rate?
Lock in an even lower rate by opting for a 15-year mortgage. If you can afford the higher monthly payment, a shorter mortgage term can save you a bundle in interest, and you’ll pay off your home in half the time.13
The economic downturn has made lenders more cautious. These days, you’ll probably need a credit score of at least 740 to secure their lowest rates.14 While there’s no fast fix for bad credit, you can take steps to help your score before you apply for a loan:15
The more equity you have in a home, the less likely you are to default on your mortgage. That’s why lenders offer better rates to borrowers who make a sizable down payment. Plus, if you put down at least 20%, you can avoid paying for private mortgage insurance.
Discount points are fees paid to the mortgage company in exchange for a lower interest rate. At a cost of 1% of the loan amount, they aren’t cheap. But the investment can pay off over the long-term in interest savings.
Rates, terms, and fees can vary widely amongst mortgage providers, so do your homework. Contact several lenders to find out which one is willing to offer you the best overall deal. But be sure to complete the process within 45 days—or else the credit inquiries by multiple mortgage companies could have a negative impact on your credit score.16
|
READY TO TAKE ADVANTAGE OF THE LOWEST MORTGAGE RATES IN HISTORY?
Mortgage rates have never been this low. Don’t miss out on your chance to lock in a great rate on a new home or refinance your existing mortgage. Either way, we can help.
We’d be happy to connect you with the most trusted mortgage professionals in our network. And if you’re ready to start shopping for a new home, we’d love to assist you with your search—all at no cost to you! Contact us today to schedule a free consultation. |
The above references an opinion and is for informational purposes only. It is not intended to be financial advice. Consult a financial professional for advice regarding your individual needs.
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Traditionally, spring is one of the busiest times of the year for real estate. However, the coronavirus outbreak—and subsequent stay-at-home orders—led many buyers and sellers to put their moving plans on hold. In April, new listings fell nearly 45%, and sales volume fell 15% compared to last year.1
Fortunately, as restrictions have eased, we’ve seen an uptick in market activity. And economists at Realtor.com expect a rebound in July, August, and September, as fears about the pandemic subside, and buyers return to the market with pent-up demand from a lost spring season.2
But given safety concerns and the current economic climate, is it prudent to jump back into the real estate market?
Before you decide, it’s important to consider where the housing market is headed, how it could impact your timeline and ability to buy a home, and your own individual needs and circumstances.
WHAT’S AHEAD FOR THE HOUSING MARKET?
The economic aftermath of the coronavirus outbreak has been severe. We’ve seen record unemployment numbers, and economists believe the country is headed toward a recession. But people still need a place to live. So what effect will these factors have on the housing market?
Home Values Projected to Remain Stable
Many Americans recall our last recession and assume we will see another drop in home values. But the 2008 real estate market crash was the cause—not the result—of that downturn. In fact, ATTOM Data Solutions analyzed real estate prices during the last five recessions and found that home prices actually went up in most cases. Only twice (in 1990 and 2008) did prices fall, and in 1990 it was by less than one percent.3
Many economists expect home values to remain relatively steady this time around. And so far, that’s been the case. As of mid-May, the median listing price in the U.S. was up 1.4% from the same period last year.4
Demand for Homes Will Exceed Available Supply
There’s been a shortage of affordable homes on the market for years, and the pandemic has further hindered supply. In addition to sellers pulling back, new home starts fell 22% in March.5 In fact, Fannie Mae doesn’t foresee a return to pre-pandemic construction levels before the end of 2021.6
This supply shortage is expected to prop up home prices, despite recessionary pressures. Fannie Mae and the National Association of Realtors predict housing prices will rise slightly this year7, while Zillow expects them to fall between 2-3%.8 Still, that would be a far cry from the double-digit declines that occurred during the last recession.9
Government Intervention Will Help Stabilize the Market
Policymakers have been quick to pass legislation aimed at preventing a surge in foreclosures like we saw in 2008. The Coronavirus Aid, Relief, and Economic Security (CARES) Act passed by Congress gives government-backed mortgage holders who were impacted by the pandemic up to a year of reduced or delayed payments.10
The Federal Reserve has also taken measures to help stabilize the housing market, lower borrowing costs, and inject liquidity into the mortgage industry. These steps have led to record-low mortgage rates that should help drive buyer demand and make homeownership more affordable for millions of Americans.11
HOW HAS THE REAL ESTATE PROCESS CHANGED?
As the pandemic hit, real estate and mortgage professionals across the country revised their processes to adapt to shifting safety standards and economic realities. While these new ways of conducting business may seem strange at first, keep in mind, military clients, international buyers, and others have utilized many of these methods to buy and sell homes for years.
New Safety Procedures
The safety of our clients and our team members is our top priority. That’s why we’ve developed a process for buyers and sellers that utilizes technology to minimize personal contact.
For our listings, we’re holding online open houses, offering virtual viewings, and conducting walk-through video tours. We’re also using video chat to qualify interested buyers before we book in-person showings. This enables us to promote your property to a broad audience while limiting physical foot traffic to only serious buyers.
Likewise, our buyer clients can view properties online and take virtual video tours to minimize the number of homes they step inside. Ready to visit a property in person? We can decrease surface contact by asking the seller to turn on all the lights and open doors and cabinets before your scheduled showing.
The majority of our “paperwork” is also digital. In fact, many of the legal and financial documents involved in buying and selling a home went online years ago. You can safely view and eSign contracts from your smartphone or computer.
Longer Timelines and Higher Mortgage Standards
The real estate process is taking a little longer these days. Both buyers and sellers are more cautious when it comes to viewing and showing homes. And with fewer house hunters and less available inventory, it can take more time to match a buyer with the right property.
In a recent survey, 67% of Realtors also reported delays in the closing process. The top reasons were financing and buyer job loss, but appraisals and home inspections are also taking more time due to shifting safety protocol.12
Securing a mortgage may take longer, too. With forbearance requests rising, lenders are getting increasingly conservative when it comes to issuing new loans. Many are raising their standards—requiring higher credit scores and larger down payments. Prepare for greater scrutiny, and build in some extra time to shop around.13
The reality is, there’s no “one size fits all” answer as to whether it’s a good time to buy or sell a home because everyone’s circumstances are unique. But now that you know the state of the market and what you can expect as you shop for real estate, consider the following questions:
Why do you want or need to move?
It’s important to consider why you want to move and if your needs may shift over the next year. For example, if you need a larger home for your growing family, your space constraints aren’t likely to go away. In fact, they could be amplified as you spend more time at home.
However, if you’re planning a move to be closer to your office, consider whether your commute could change. Some companies are rethinking their office dynamics and may encourage their employees to work remotely on a permanent basis.
How urgently do you need to complete your move?
If you have a new baby on the way or want to be settled before schools open in the fall, we recommend that you begin aggressively searching as soon as possible. With fewer homes on the market and a lengthier closing process, it’s taking longer than usual for clients to find and purchase a home.
However, if your timeline is flexible, you may be well-positioned to score a deal. We’re seeing more highly-incentivized sellers who are willing to negotiate on terms and price. Talk to us about setting up a search so we can keep an eye out for any bargains that pop up. And get pre-qualified for a mortgage now so you’ll be ready to act quickly.
If you’re eager to sell this year, now is the time to begin prepping your home for the market. A second wave of infections is predicted for the winter, which could mean another lockdown.14 If you wait, you might miss your window of opportunity.
How long do you plan to stay in your new home?
The U.S. real estate market has enjoyed steady appreciation since 2012, which made it fairly easy for owners and investors to buy and sell properties for a profit in a short period of time. However, with home values expected to remain relatively flat over the next year, your best bet is to buy a home you can envision yourself keeping for several years. Fortunately, at today’s rock-bottom mortgage rates, you can lock in a low interest rate and start building equity right away.
Can you meet today’s higher standards for securing a mortgage?
Mortgage lenders are tightening their standards in response to the growing number of mortgage forbearance requests. Many have raised their minimum credit score and downpayment requirements for applicants. Even if you’ve been pre-qualified in the past, you should contact your lender to find out if you meet their new, more stringent standards.
Is your income stable?
If there’s a good chance you could lose your job, you may be better off waiting to buy a home. The exception would be if you’re planning to downsize. Moving to a less expensive home could allow you to tap into your home equity or cut down on your monthly expenses.
WHEN YOU’RE READY TO MOVE—WE’RE READY TO HELP
While uncertain market conditions may give pause to some buyers and sellers, they can actually present an opportunity for those who are willing, able, and motivated to make a move.
Your average spring season would be flooded with real estate activity. But right now, only motivated players are out in the market. That means that if you’re looking to buy, you’re in a better position to negotiate a great price. And today’s record-low mortgage rates could give a big boost to your purchasing power. In fact, if you’ve been priced out of the market before, this may be the perfect time to look.
If you’re hoping to sell this year, you’ll have fewer listings to compete against in your neighborhood and price range. But you’ll want to act quickly. Economists expect a surge of eager buyers to enter the market in July—so you should start prepping your home now. And keep in mind, a second wave of coronavirus cases could be coming in this winter. Ask yourself how you will feel if you have to face another lockdown in your current home.
Let’s schedule a free virtual consultation to discuss your individual needs and circumstances. We can help you assess your options and create a plan that makes you feel both comfortable and confident during these unprecedented times.
The above references an opinion and is for informational purposes only. It is not intended to be financial advice. Consult a financial professional for advice regarding your individual needs.
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