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PLUNGING INTEREST RATES COULD HELP BUYERS ON THE FENCE

Mortgage rates are falling fast, and they could sink even lower reports Mortgage News Daily. The 30-year fixed-rate mortgage now averages 3.34%, a rate last reached in 2012 and briefly in 2016. That is for borrowers with strong financials and credit scores.

As coronavirus fears hit financial markets, U.S. bond yields are tanking, pushing mortgage rates that loosely follow the 10-year Treasury yield toward an eight-year low. They could sink even lower.

“When rates fall this quickly, it’s not so much that big banks draw the line on mortgage rates, but rather, the underlying mortgage backed securities market refuses to improve as quickly as the Treasury market,” Matthew Graham, chief operating officer at Mortgage News Daily, explained to CNBC. Mortgages become less valuable to investors if they get paid off too quickly.”

And those payoffs, or refinances, are surging right now. Applications to refinance a home loan are up around 165% annually, according to the Mortgage Bankers Association.

Mortgage applications to purchase a home have not been as strong, due to the severe shortage of homes for sale. Builders, however, may be getting a boost, especially those putting up more affordable homes.

GOOD NEWS FOR ENTRY-LEVEL BUYERS

Falling rates help loosen up a tight market. When rates rise, homeowners are more likely to stay put because they don’t want to take on bigger mortgages. But when loan costs fall, buyers on the fence get motivated to trade up. And that frees up entry-level homes for eager first-timers.

People shopping for homes will likely see lower rates in the coming weeks as the 10- year hits new lows, according to Bankrate.com. For existing mortgage borrowers, another drop in rates might clear the path for refinancing.

“The refinancing door has blown open with mortgage rates continuing to fall amid fears of slower global economic growth,” Greg McBride, CFA, Bankrate chief financial analyst says. “This helps those looking to refinance a mortgage as well as would-be homebuyers .”

BUYERS TRADE UP

If you are ready to buy the downturn interest rates can be a big win. One result of falling borrowing costs is that buyers are able to afford bigger mortgages. Those seeking pricier properties are acting now because their choices are increasing, and profits from selling their current home can fund the down payment on the next one.

To take full advantage of lower interest rates, the key is to be prepared. Be sure to choose the right Real Estate Professional to make sure all the details of a transaction are complete. Make sure to have your pay stubs, tax returns, bank statements, and other necessary documents together so there is no delay in processing. Delays could be costly when there is no guarantee how long low interest rates will last.

Whether you are looking to buy or sell, C21 Hometown Realty’s Agents have the most homes listed and the most homes sold! Visit one of the ten local offices throughout the Central Coast or click on c21home.com.

About CENTURY 21 Hometown Realty – Hometown Realty is the leading real estate firm on the Central Coast of California with offices spanning Santa Barbara County and San Luis Obispo county offering expert agents and convenient locations.

Is the list price the sales price

Arroyo Grande Homes for SaleCentury 21 Hometown Realty has 300 properties for sale in company inventory today. There are about 1000 single family homes listed in the region. The top 10 brokerages in CCRMLS combined to sell about 400 homes. Century 21 Hometown sold around 100. By all accounts, the county only has two to three months of inventory. If you are searching for a home in a specific town or for a specific price, you will find that your selection is very low. For example, there are only 12 Single Family Homes priced between $350,000 and $450,000 at the time of this article. If you have your hopes on a three bedroom, two car garage and a fireplace, there are only 4.

The issue of low inventory is that it puts upward pressure on pricing. As you can imaging, if there are 20 families looking for the type of home that only has 4 matches, offers typically come in at or above the list price. You would think that if you make a cash offer with no contingencies and agree to pay list price for a home, the seller can’t say no. A recent court case says otherwise.
RealPro, Inc. v. Smith Residual Co., LLC (2012)

In RealPro, Inc. v. Smith Residual Co., the seller placed a desirable lot of land on the market. An aggressive buyer quickly offered to purchase the lot exactly as listed – all cash without any contingencies. Upon receipt of the buyer’s offer, the seller countered at a higher price. Negotiations broke down and the buyer walked away.

The buyer’s agent filed a lawsuit against the seller claiming that the seller is compelled by the listing agreement to sell the home at the price offered. The buyer’s agent reasoned that the seller unreasonably refused a buyer who seemed to match the seller’s original criteria. The court rejected this argument.

Exclusive Listing Agreements

When you list a home with Century 21 Hometown Realty or any other brokerage, you enter into an Exclusive Listing Agreement. Every ELA includes a section for your agent to enter a minimum list price for the property. However, this is more of a marketing authorization by the seller and less of a minimum sales threshold. Most form ELA’s have the clause “…or at other terms acceptable by the Seller” immediately following the space for the list price. This allows the agreement to remain valid if the property sells above or below listing price because the sale was on “other terms acceptable to the Seller.”

In RealPro, the court found that the buyer’s agent had not produced an offer that was “acceptable to the seller.”

Therefore, homebuyers should never expect that the initial list price is binding on the seller. Listing agreements simply authorize the listing agent to market the property and solicit offers for the benefit of the seller. The terms assented to by the seller in the purchase agreement are the acceptable terms which obligate payment to the real estate agents.

Homebuyer Tips

The best thing that you can do to increase the likelihood of getting your offer accepted is to get pre-qualified for a mortgage. Century 21 Hometown Realty has an affiliated mortgage partner in Prime Lending.

List your home with Century 21

Century 21 Hometown has more buyers than properties for sale today. If you do not know a Century 21 Hometown Agent already, please feel free to call any of our offices and ask for the office manager. The office managers’ name is listed under each of our offices. Select the Meet our Agents link along side any office listed here.

Top 10 Area Brokerages by Unit Volume in July

Top Central Coast Real Estate Brokers
CCRMLS July 2012

Credit Scores for Home Loans

borrowing powerIf you are planning to finance or refinance your home, you need to understand a thing or two about what is happening in the mortgage universe. As you may already know, the mortgage industry had very low standards for consumer credit ratings and home loan downpayments a few years ago. The story on the street was that if you had a pulse, you could get a home loan with no money down. This was not totally true, but suffice it to say that lending standards were pretty low. Mortgage companies would write a loan with a consumer, then bundle that loan together with other loans and sell them to investors. Clearly, that policy did not work. Consumers began to default on their loans at an alarming rate and the financial mortgage industry collapsed around those defaults.

To help, the Bush Administration and the Obama Administration bailed out the banks. Many of the home loans in America are backed by the Federal Housing Administration, a division of the Department of . FHA insures the loans. Since the passing of the Frank-Dodd legislation, standards for home mortgages have increased as mandated by law. Among those standards are requirements for FHA backed loans and standards for Government Sponsored Entities like Fannie Mae and Freddy Mac.

The first new standard is that consumers should anticipate putting 20% down. You can put less down, but that puts you into a higher risk type of mortgage and you will likely pay a higher rate.

The second new standard is that consumers should Only

  • Base loan limits must be below $417,000
  • Max Seller Contribution 3%
  • No lates on housing payment in the last 12 months
  • No Property Flips

    • You may not understand all of these terms and conditions. Century 21 Hometown Agents can explain them to you, and/or set up a call or meeting with PrimeLending. PrimeLending representatives are in Century 21 Hometown office every day.

    Housing advice from Moms

    I love MomMoms are the greatest. Although many moms are working today, they are still run the roost at home and have the best advise when it comes to home ownership. In honor of Mothers Day, Century 21 Hometown Realty celebrates the wisdom of mothers. Here is advice that we were able to locate from Moms.

    How much can you afford?

    Lenders like PrimeLending, our mortgage partner play a significant role in home ownership. They will pre-qualify you for a home loan so you know how much the bank believes that you can afford. If you are pre-approved for a $300,000 loan, mom’s advise is to look at homes for $250,000.  This leaves a cushion for the unknown.

    Another mom suggests buying a home as if you only have one income. Being house poor is never a great situation, especially in today’s sluggish job market. Most job seekers are in the market for 6 months today, so make sure you have some savings to manage the possibility of employment challenges.

    Buy Smart!

    Century 21 Hometown Realty is one of the few companies that offer consumers the ability to do deep level of research on your home purchase. Take a close look at the neighborhoods where you want to live. Give consideration to the market conditions in that neighborhood. If possible, avoid neighborhoods that have a lot of foreclosures or a lot of homes for sale – this signals a fragile marketplace where your home purchase could include a lot of downside risk.

    Pick the right real estate agent and spend time with them to understand the real estate market. This is true for buyers and sellers. Take the time to look at lots of homes that are priced in your price range to understand what other buyers and sellers are looking at. Century 21 Hometown Realty agents have access to a market analytics tool called REALTORS Property Resource. Ask your agnet for an RPR report before you buy or sell a home.

    Don’t Forget the Home Inspection

    It really does not matter if you are buying a new home or a used home, the home inspection is really important. Ask questions about the cost of irrigation, the cost of landscaping. Find out how old the heating and ventilation is and who the service provider is. Take a close look at the roof. When was the home last painted?

    Here in California, rodents and termites can do a lot of damage. Moms say that they would have delayed listing their home for sale if they had done an inspection before listing their home. Sometimes the price you list your home for does not account for repairs that are needed before the transaction closes.

    Thanks Mom!

    Happy Mothers Day.

    View More Home Buyer Resources

    View More Home Seller Resources

    Your Fair Credit Rights

    Fair Credit RightsWe’ve all heard that many things in life are not fair. But the process of qualifying for a mortgage shouldn’t be one of them. That doesn’t mean you necessarily get the loan you apply for. It does mean that you have the right to be judged on your financial stability and credit history rather than on biases. Two federal laws, theEqual Credit Opportunity Act and the Fair Housing Act, prohibit lenders from considering irrelevant information, such as race or gender. And, these laws provide recourse if you suspect lenders have run afoul of the law in rejecting your application. If the Department of Justice suspects housing discrimination, an investigation may be filed under either or both of these laws. The Equal Credit Opportunity Act (ECOA) was originally signed into law in 1974. It prohibits discrimination in any credit transaction, including mortgages, based on:

    • race or color
    • religion
    • national origin
    • sex
    • marital status
    • age (provided the applicant is legally able to form a contract)
    • income from public assistance programs
    • the applicant’s good faith exercise of any right granted under the Consumer Credit Protection Act, which is the umbrella statute that includes the ECOA.

    The Fair Housing Act (FHA) was initially passed in 1968. It is also called Title VIII of the Civil Rights Act, and makes it unlawful to discriminate in residential real estate transactions, including buying, selling, improving, or renting a housing unit. This law prohibits discrimination on bases similar to the ECOA. When the FHA was first signed into law it was specifically to prevent unfair practices based on race or skin color. Although the law also covers other bases for discrimination, nearly four decades after its passage, the majority of FHA violations reported to the Department of Fair Housing still involve race and color.

    Municipalities have also been charged with violating the FHA by rejecting building permits or by passing zoning regulations, which result in physical separation of residents by race, color. The FHA also bars direct discrimination based on religion, as well as indirect discrimination such as zoning ordinances designed to prevent the use of private homes as places of worship. In today’s housing market, a rising number of single women are homeowners. Not too many years ago, it was hard for women to get mortgages alone because lenders saw them as financially risky. But the Fair Housing Act makes it unlawful to base a decision not to sell housing because of an applicant’s gender.

    Discrimination based on an individual’s country of birth, or the country of birth of his ancestors, is also prohibited by the FHA. The Justice Department has taken action against some municipalities which have set up more stringent standards for certain groups to buy or build houses, as a covert way to limit the growth of those populations.

    Having children under the age of 18 is not a lawful premise for refusing to approve a mortgage, according to the FHA. However, certain housing facilities may be designated as restricted to those ages 55 and over, under the Housing for Older Persons Act, an amendment to the FHA.

    Discrimination based on disability is illegal in all types of housing transactions. This includes physical and mental disabilities, as well as a growing list of specific conditions. For example, according to the U.S. Department of Justice, disability may include conditions such as blindness, hearing impairment, mobility impairment, HIV infection, mental retardation, alcoholism, drug addiction, chronic fatigue, learning disability, head injury, and mental illness. However, the Justice Department adds that “current users of illegal controlled substances, persons convicted for illegal manufacture or distribution of a controlled substance, sex offenders, and juvenile offenders are not considered disabled under the Fair Housing Act, by virtue of that status.” The FHA prevents the use of zoning laws to hinder the residential choices of the disabled. It also demands that new multi-family construction meet the accessibility requirements within the law.

    If your income includes public Social Security, pensions, annuities, child support, payments under a separate maintenance agreement, reliable alimony, or public assistance, a lender cannot refuse to include those items in your income calculations. In the case of alimony, lenders do have the right to ask you to prove that the payments are consistent. Lenders can’t require that a co-signor be your spouse. They also cannot require a co-signor if you otherwise meet the standards.

    Lenders cannot discourage you from applying for a mortgage or reject your application on any of the bases prohibited by the Equal Credit Opportunity Act. They can however, determine your immigration status and your right to remain in the country long enough to repay the debt.

    Lenders also cannot refuse a mortgage because of the racial makeup of the neighborhood an applicant wishes to live in. It is unlawful to ask about plans to have children or expand a family. However, lenders do have the right to ask about expenses relating to current dependents.

    Your Century 21 Hometown Realty agent can answer any questions that you may have about your fair rights in applying for a mortgage. Additionally, loan officers at Prime Lending are available to help you with your application.

    How to adjust your underwater mortgage

    HARP 2.0Bakersfield’s real estate bust was certainly one of the worst in the country, and because of that, many homeowners have faced real challenges when evaluating the mortgage on their home. To a lesser extent, there was also plenty of pain felt by homeowners along the Central Coast too. Underwater homeowners wistfully listen to radio ads boasting refinances with ‘record low interest rates’, knowing that taking advantage of those rates in a refinance is simply out of the question.

    Compounding an already impossible problem, some homeowners also have an Option ARM that has reset, or is about to.

    The Federal HARP (Home Affordable Refinance Program) was announced in early 2009, but few were able to take advantage of the program and one of the primary challenges were the limitations around loan-to-value requirements.

    Simply stated, if your mortgage was more than 125% of your home’s current value, you were simply out of luck. And, in many places in Bakersfield’s housing market, we’ve seen as much as 50% of property values simply disappear.

    Who Is Eligible for HARP 2.0 Refinance

    Reach out to your lender for specific questions or contact our mortgage partner, Prime Lending. Here are some of the things you’ll want consider to determine whether or not you might be eligible for a HARP Refinance are the following:

    • You cannot have made more than one late payment in the last 12 months, and none in the last 6 months
    • The loan amount cannot exceed current conforming loan limits. California’s upper conforming loan limit is $625,000.
    • Your existing loan closed prior to May 31, 2009.
    • You’ve not done a HARP refinance. If you took advantage of HARP 1.0, you are not eligible for HARP again.
    • Second mortgages are allowed, but the second must approve.
    • Second homes and investment properties ARE eligible.
    • You may not use HARP if you have an FHA loan. For those homeowners, try the FHA Streamline Refinance Program.
    • There is 105% loan-to-value limit if HARP is used to refinance an adjustable rate mortgage or an Option ARM. If you need help with understanding what your valuation is, do not rely on Zillow – it is very inaccurate. Contact a Century 21 Hometown Realty Agent.
    • Loan is guaranteed by Fannie Mae or Freddie Mac. This is has nothing to do with who you make your mortgage payments to. To find out if your is guaranteed, check Fannie Mae and check Freddie Mac.

    I know this is some downright gripping reading, but I suspect if you are one of the homeowners that can benefit from a HARP refinance, you may very well be on the edge of your seat. If you have questions, if you are curious about your eligibility, don’t hesitate to reach out to us. If we don’t know, we’ll point you in the direction of the lenders we trust to help you get to the bottom of it.

     

    How Interest Rates impact the housing market

    Here in California, buying a home or other property is a factor of loan affordability. Today, we see a lot of “cash buyers” in the market – but that simply means that they have already arranged financing. In this borrowing home ownership economy, the interest rates play a very significant role in the value of homes. The national economic recovery in America has reached every part of the economy except for jobs and housing. The good news for Californians is that home prices in Bakersfield and on the Central Coast have stabilized or began to rise again. Every listing on C21home.com has a handy mortgage calculator which will allow you to estimate how much you can afford. Be sure to take advantage of low home loan interest rates while they last. It is a great time to lock in a low rate for a 30 year mortgage. There is a chart below that shows you why.

    Century 21 Hometown Realty CEO Jack Hardy shared a story yesterday. Jack and Shelia Hardy were at a listing presentation in Grover Beach where the homeowner felt like their home was valued in the low $600’s. It is common for homeowners to think that their homes are worth more than buyers are willing to pay today. Each homeowner has recent memory of an even higher home value 5 or 6 years ago. But the fact remains that we have seen 20% to 40% drops in some home values over the past few years. It is a heartfelt loss. But things are looking up. Homes that were selling in the low $500,000 range in Berry Gardens are now fetching prices in the mid to upper $5s. “We are seeing a lift in home prices in many areas of the Central Coast and Bakersfield,” says Hardy.

    Grover Beach Home Values
    Grover Beach Home Values, look at neighborhood details on any listing for market stats

     

    The housing market is an uncertain place unless you take a long term view. In the long run, buying a home is not like buying a car. If you own your home long enough, population growth and housing demand will increase its value. If you are both buying and selling a home, you always have a balanced transaction. The buying and selling power are equal. If you sell high, you buy high. If you sell low, you buy low.

    Here are a few tips that can help you prepare to buy or sell your home.

    1. Look into financing options first. Century 21 Hometown Realty offers mortgage support through Prime Lending. They have local loan officers who will be happy to walk you through the financing process. If you choose Prime Lending or other mortgage company, there should be no application or consulting fees to see where you stand.

    2. Keep a close watch on interest rates. The risk associated with your loan is what determines your interest rate. There are many factors including the bank’s cost of funds (Federal Bank Interest Rates), your credit rating, and the loan to value ratio on the property you purchase. Even a small difference in interest rate can make the difference in thousands of dollars in purchasing power. Here is a chart to help you understand this.

     

    Buying power and interest rates

     

    Here are the current interest rate trends as published by the National Associaton of REALTORS

    interest rate trends

    Top 8 Things to Know about a Mortgage

    Alterra Home Loans Pictures, Images and PhotosDeciding what kind of home loan is best for your needs is an integral part of the home buying process. But it’s not always easy, according to California mortgage broker Prime Lending.

    Prime Lending notes the eight most important factors to compare when shopping for a mortgage:
    • Principal – The principal is the amount you are borrowing—or the price of the home you are buying minus the down payment. Lenders will tell you how much they are prepared to lend you based on your income and credit score. That will help you determine how much house you can afford. Plan on putting down 10% to 20% to get the best rates.

    • Mortgage type – Mortgages fall into two categories; fixed rate or adjustable. With a fixed rate mortgage, you pay the same amount each month for as long as you have the loan. The interest rate is slightly higher than some adjustable rate mortgages, but adjustable rates change with the market and will likely rise over time. Currently rates are at historically low rates.

    • Interest rate – A loan with the lowest posted rate may have higher closing costs. Consider the Annual Percentage Rate (APR), which takes into account the interest rate and the loan’s other costs.
    • Monthly payment – A mortgage loan should help you build equity in your home. The best one may or may not be the one that carries the lowest monthly payment. Consult a mortgage broker for details.
    • Term – The term is the number of years your loan will remain active. Mortgages with shorter terms generally carry a higher monthly payment but they can save you a lot of interest over the years.
    • Discount points – A point is equal to one percent of the principal. Lenders may offer you the chance to pay points in order to lower the interest rate of your mortgage. If you plan to stay in the home a long time, it may make sense to pay points.
    • Lock-ins – When you apply for a loan, the lender will quote you the rates. But rates can go up while you shopping for a home, so it’s a good idea to lock in the quoted rates. There may or may not be a fee to do so. You can lock in your Prime Lending rate by contacting a mortgage specialist at 949.633.2919.
    • Closing costs – Origination fees, appraisal fees, and other costs will be added to your loan. Ask your lender for a good faith estimate of the costs, and an explanation of any charges you don’t understand.

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