Archive for the ‘Mortgages, Mortgage Rates, Refis, & Loan Limits’ Category

Answering a Common Question: Mortgage Refi FICO Scores

If you use a credit card or Billerica bank checking account’s online system, you may have noticed the appearance of a free service: FICO score tracking. You find it as a clickable area with a link title like “Your FICO® score” or just “FICO®.”

For many years, each of the major credit reporting agencies was mandated by law to honor any consumer’s request for a copy of their credit scores—but it was a once-a-year deal. For access to regular updates, you had to pay for a subscription. Particularly for consumers working to improve their credit scores, the paid services became a prudent monthly expense. The arrival of anytime free FICO score reporting eliminated much of that need.

Of course, tracking your FICO score is only useful if you know how the lending institutions will view it—and the answer to that is anything but clear-cut. Not only does each lender has their own confidential requirements, but since there are three separate reporting agencies, Billerica consumers have three FICO scores (and they’re rarely the same).

Even so, let’s face it: the single piece of information most everybody wants to know is what FICO score is needed to buy a home? or to refinance a home? Even if the answer is imprecise, it’s human nature.

To quell that curiosity, at least one source is willing to report what amounts to an average of approximations: it’s called EllieMae®. Ellie is a company that serves banks, credit unions, and mortgage companies by providing a raft of automated tools—but those are for industry insiders. As a sideline, they also put out a monthly Origination Insight Report with statistics drawn from the home loans processed through their systems—including some that most future Billerica home loan applicants will be interested to learn:

Average FICO score for conventional mortgage refis closed last month: 732

Average score for conventional purchases: 752

Average for FHA purchases: 681

Average FICO score — all loans: 724.

Average time needed to close: 43 days.

The percentage of mortgage refis grew to 39% of all loans, probably because interest rates decreased “for the sixth straight month” to 4.2%. EllieMae reckons that constitutes “a new 2017 low”—something Billerica refi and home loan applicants will be interested to know!

Those bargain basement interest rates continue to create a terrific opportunity for Billerica real estate. Call me for a no-obligation discussion about how you might take advantage of the current real estate environment!

Joan Parcewski, Realtor & Notary

LAER Realty Partners           http://www.JoanParcewski.LAERRealty.com

JParcewski@LAERRealty.com    cell 978-376-3978

Laer Realty PartnersJoan Parcewski Full Picture 102017

 

A Single Underlying Factor When Applying for a Mortgage

Every mortgage lender develops their own unique guidelines for evaluating the factors contained in a home loan application. These may change from time to time so that their portfolios stay “balanced”—that is, so that the cumulative risk represented by the entire batch of home loans do not exceed the level of risk they wish to assume.

Potential Bedford mortgage applicants are bound to be curious about which factors are more or less influential for that decision. Their curiosity is why you can find hundreds of “Top 5” and “Top 7” lists of “mortgage application factors”—and why home loan originators pay top dollar to advertise on them.

Given that the factors mortgage companies examine are hardly secret, it’s not surprising that all of the lists are pretty similar. It’s also true that the individual factors all have something to do with a single underlying element. (I’d call it the “hidden factor” if it weren’t right out there in the open). Here’s a typical list seen as it relates to that single underlying factor:

  1. Down payment (underlying factor: size of loan). If, say, $50,000 will be available for the down payment, a $200,000 home loan would be easier to grant than one for $600,000. Many mortgage firms have relaxed their requirements—but inevitably look harder as a down payment percentage declines.
  2. Debt level; aka Debt-to-Income ratio (underlying factor: size of loan). Lenders analyze an applicant’s monthly cash flow to determine how much will be available to pay the monthly mortgage payment. The size of the loan—thus amount of the payment—determines if that’s easily doable.
  3. Loan type (underlying factor: size of loan). Conventional loans carry stricter qualifying factors than do other types. For instance, if the size of the loan is beyond the conforming loan limitation, jumbo loan requirements pitch in.
  4. Employment history (underlying factor: size of loan). Starter homes requiring smaller loans are often right-sized for younger borrowers with shorter employment records.
  5. Credit Score. Typical descriptions say things like, “Borrowers who need to finance more will need a higher credit score of 700 or above…” In other words (you guessed it), underlying factor: size of loan.

Success when applying for a mortgage loan does involve all these factors—­and more­­—but that’s just another way recognizing the common sense notion that home loans are granted to those who can demonstrate the ability to repay. The last time that notion was abandoned, the global financial crisis ensued.

The corollary for house hunters is equally clear: determine your comfortable budgetary range first­­­–then go out and find your new home. The mortgage lenders will fall into line—and I’ll be delighted to help!

Joan Parcewski, Realtor & Notary

LAER Realty Partners           http://www.JoanParcewski.LAERRealty.com

JParcewski@LAERRealty.com    cell 978-376-3978

Laer Realty PartnersJoan Parcewski Full Picture 102017

 

Buying Your Billerica House in a Hurry? Not So Fast!

 The goal of owning your Billerica home free and clear is usually thought of as the sunniest eventual outcome of the process that begins with buying your Billerica house. The vision of the day when you make that last mortgage payment is an attractive one: whether in retirement or sooner, a “free rent” future has great appeal.

So when financial planners argue against the wisdom of paying off your mortgage, it makes for interesting reading. One such planner is Ric Edelman, whose article “11 Great Reasons to Carry a Big, Long Mortgage” presents a laundry list of the possible financial benefits. As one of the nations’ foremost financial advisers, Edelman also has a well-earned reputation for brash presentations (his PBS series made the most of that). And he really does list eleven reasons why “you should have as big a mortgage as you can get and never pay it off.”

Some of the reasons are fact-based—but not really pertinent. For instance, Reason #1 is that your mortgage doesn’t affect your home’s value. True: whether its value rises or falls depends largely on the current Billerica market…but that isn’t a reason for or against carrying home loan debt.

The same is true for Reason #2, which is that a mortgage “won’t stop you from building equity…” The logic here is the same: even if you never paid down your home loan’s principal at all, if the expected market value rises (it’s “almost certain to grow in value over the next 20 years”), your equity would grow independently.

More convincing are the remaining nine reasons, leading off with Reason #3, “A mortgage is cheap money.” This will earn head nods from every financial analyst, and it’s doubly true with today’s incredibly low interest rates. It may only be useful to those who have ideas for places where the “cheap money” can produce juicy profits—but what financial planner can’t suggest a few?

The other reasons deal with:

  • tax benefits
  • the dwindling real cost of mortgage payments over time due to inflation
  • the liquidity provided by refinancing (“selling without selling”)
  • the wealth creation possibilities of money invested sooner rather than later

Each of these can be illustrated by graphs and charts (and believe me, they are).

Whether you are more of the less-owed-the-better mindset or Edelman’s big long mortgage school, one thing holds true in both cases: buying your Billerica house is the necessary first step. I can be of immediate value in that department—call me to see what I mean!

Joan Parcewski, Realtor & Notary

LAER Realty Partners           http://www.JoanParcewski.LAERRealty.com

JParcewski@LAERRealty.com    cell 978-376-3978

 Laer Realty PartnersJoan Parcewski Full Picture 102017

 

Billerica Mortgage Rates: Perception and Reality

Billerica mortgage rates have been so low for such a long time that it would be surprising if area buyers didn’t begin to take them for granted. It’s only human nature. Addressing would-be home buyers who, though qualified, remain on the sidelines, government-sponsored Freddie Mac headlined the question, “If Housing Is So Affordable, Why Doesn’t It Feel That Way?

The article appeared in Freddie Mac’s Insight publication which noted that right now housing isn’t just affordable—it’s “near record” affordable! HUD’s Housing Affordability Index has been rising for over 35 years, interrupted only briefly by the housing crisis of the mid-2000s. It hasn’t quite sustained the all-time affordability peak but is holding steady well within hailing distance of that 2012 record.

Billerica mortgage rates have cooperated nicely, continuing to go with the national herd. For 30-year fixed-rate mortgages, U.S. rates averaged 3.90%—down even further from the previous week’s 3.93%. Of course, the 15-year and adjustable rate offerings were even lower.

With that kind of good news, why do the media report “affordability issues” (Mortgage Daily News) and even an “affordability crisis” (PBS)? The answers dwell in both perception and in some underlying realities.

There’s definitely reality in the widespread phenomenon of a shortage of housing supply. Billerica listings may show a number of properties being offered, but the national number of homes up for sale remains “very tight.” The echoes from 2009, when new housing starts hit rock bottom, are still having an effect. In that year, housing starts barely equaled a third of the previous averages. Even though current construction levels are nearly back to normal, they’ve yet to make up for that shortfall.

Less real is the public perception of how much cash is needed for a down payment. Billerica mortgage rates may be tantalizingly low, but when potential local applicants “mistakenly believe they must have a 20% down payment to obtain a mortgage,” the result is a number of otherwise-qualified buyers who don’t know that more than half of today’s borrowers make smaller down payments.

Not mentioned in the Insight article is another psychological factor that could explain two things at once. In The New York Times’ “Politics” section, a commentary sought to explain why the Federal Reserve wasn’t acting to boost interest rates. According to the author, the cause lay with inflation rates, which remain low—“and that’s a problem” for Fed rate-makers. The reason higher inflation would be a good thing (despite common sense) is that it makes consumers feel good when their paychecks go up. “A little inflation can brighten the economic mood…people enjoy the illusion.”

The upshot here may be that even though today’s extraordinarily low Billerica mortgage rates create actual affordability, some well-qualified customers may feel safer staying on the sidelines until the economy starts generating go-go economy headlines. It’s an ironic reality that by the time those headlines materialize, actual affordability might have already begun to slip away.

If you’ve been mulling the wisdom of your own Billerica home acquisition, let me show you some great properties…and some great numbers!

Joan Parcewski —CRS, MRP, CSHP, SRES, CBR, LMC, Realtor & Notary
978-376-3978   JParcewski@LAERRealty.com    OR    JParcewski@gmail.com
 
Licensed MA & NH    
Introductory Video  https://youtu.be/RrM4q17cjU0
Laer Realty PartnersJoan_Parcewski (1 of 1)

 

 

 

Buyer’s Remorse, Billerica Mortgage Rates, and Summertime

Mortgage rates in Billerica remained mostly steady this past month, at least partially due to the predictable July-August doldrum effect. When the summertime vacation schedules of Washington and Manhattan movers and shakers presages a slowdown in activity and economic reports, there is simply less going on that might affect the rate meter—in either direction.

Summertime can also mark the beginning of a nationwide tapering off of real estate’s peak selling season. With the added factor of mortgage rates in (town) looking as if they will remain invitingly low for the near future, fear of a sudden rate rise is ebbing as well. It’s the kind of  apprehension that can spur some buyers into feeling the need to scoop up some of Billerica’s current inventory with less than due diligence, so that’s a positive development—especially if a new report from Trulia is accurate.

Trulia’s report highlighted the importance of careful deliberation for new buyers. A wide-ranging poll registered the startling fact that nearly half of Americans are willing to express some form of buyer’s remorse about their home soon after purchase.

Trulia found the top regret came in not choosing the right sized home. The lion’s share belonged to the third of homeowners who wished they’d bought a larger place. This might have been expected among those whose budgets wouldn’t accommodate a “dream home” property, yet even among Americans earning $100,000 or more, according to the study, 16% regretted having bought a home that was proving too small for their liking.

The takeaway is simple: if you are thinking of buying in the near future, allowing any outside factors (including Billerica mortgage rates) to push you into a home that isn’t right for you and your family can have an immediate downside. Buying a home is definitely a venture that rewards cool reflection…even when a potential dream home is in on the horizon.

At least for the moment, mortgage rates in (town) remain at historically affordable levels.  If you’re looking to buy this year, be sure to keep your “must have” list handy as you assess the emerging inventory. Better still, when you give me a call, I’ll be happy to turn my professional efforts to helping with the monitoring effort. I’m here all summer standing by!

Joan Parcewski —CRS, MRP, CSHP, SRES, CBR, LMC, Realtor & Notary
978-376-3978   JParcewski@LAERRealty.com    OR    JParcewski@gmail.com
 
Licensed MA & NH    
Introductory Video  https://youtu.be/RrM4q17cjU0

 

Events Solidify Burlington Mortgage Rate Speculation

Several weeks ago there was another interest rate development—though it was a slightly whipsawed kind of development. Since mortgage interest rates are so important to the bottom line in all but all-cash Burlington residential home sales, the direction rates are headed is something worth watching closely.

It was one of those days that come about twice a year. It was the occasion when the Federal Reserve Chairman is called upon to testify before Congress. The date is set as a biannual marker for revealing what’s likely to lie ahead for interest rates. If the Fed is going to decide to raise the Fed Funds rate, it’s usually the single strongest pointer to higher mortgage interest rates. All things being equal, that would eventually slow Burlington’s real estate market activity by making mortgage payments more expensive.

As the appointed hour for the testimony neared, Reuters weighed in early. At about 8:30 in the morning, they reacted to the advance copy of Chairman Yellen’s prepared remarks. Reuters reported on some key paragraphs citing the continued gathering strength of the economy—which would, therefore, “warrant gradual increases in the federal funds rate over time.”

Not great news for Burlington mortgage rate watchers—or was it? Reading more closely, there were those “gradual” and “over time” phrases. Wouldn’t that lead one to think the raises would be slow and gradual? Possibly more slow and gradual than previous Fed hints had led us to believe?

Ninety minutes later came the actual testimony, followed by questioning from the congressional committee. CNBC saw good news for Burlington mortgage applicants: “Fed stands ready to slow down rate hikes” was their takeaway. Sooooo, the Fed was going to raise the Fed funds rate (bad), but more slowly than expected (good).

The picture became clearer as the Mortgage News Daily pointed to newly released retail sales and consumer inflation reports showing “economic data that coincides with rates moving lower.” And despite anything the public hearing had produced, in MND’s opinion, “the Fed is less likely to flip the switch on those plans.”

So Burlington buyers and sellers could head into the coming days with few worries about interest rates, which remain at appetizingly low levels. If you are thinking of taking a look at some of the terrifically affordable Burlington home buys they make possible, today would be a good time give me a call!

Joan Parcewski —CRS, MRP, CSHP, SRES, CBR, LMC, Realtor & Notary
978-376-3978   JParcewski@LAERRealty.com    OR    JParcewski@gmail.com
 
Licensed MA & NH    
Introductory Video  https://youtu.be/RrM4q17cjU0
Laer Realty Partners    Joan_Parcewski (1 of 1)

Bedford Mortgages & the Student Loan Phenomenon

All of a sudden last month Bedford readers might have come across a number of new articles dealing with the same topic: the problem young first time home buyers are encountering due to outstanding student loans.

The target group is the millennials—everyone born between the early 1980s and 2000s. If you are one of them, you are frequently reminded that there are millions and millions of you out there. And millions who also share the same student loan problem.

There are conflicting accounts of the precise size of the issue, but it seems that the average college graduate now carries somewhere between $30,000 – $50,000 in debt upon graduation. The Federal Reserve says that the amount of student debt has more than doubled since 2007, to something like $1.3 trillion, at this point!

Nobody would deny that this appears to be a roadblock to young adults contemplating applying for their first Bedford mortgage. Dealing with banks or any lending institutions for the first time always has the aura of stepping into alien territory. A major unknown is the detail known as the debt-to-income ratio.

Apparently many would-be first-time homebuyers who are thinking about qualifying for Bedford mortgages automatically assume that their own debt-to-income ratios disqualify them from consideration, even though that’s not necessarily the case. At least according to the folks at Equifax, the debt reporting company, that perception is at odds with the reality.

The debt-to-income ratio is the monthly dollar amount an individual must produce in order to service his or her combined debts in relation to their total income. It is not the total amount of debt (no matter how soberingly large that number might be). Rather, it’s the ratio between the cash in and cash out per month. That becomes a considerably less daunting proposition because it’s a measure that can be improved much more rapidly. A recent survey showed that most respondents assumed that they had to reduce their debt payments by more than $300 per month in order to qualify for a mortgage, but an actual analysis showed that the real number was most often less than $300—and sometimes as little as $150.

Qualifying for Bedford mortgages differs for everyone, so the takeaway for Bedford Millennials (as for every other first time home buyer) is that assumptions shouldn’t get in the way of real fact-finding. Give me a call if you’d like to get a broad view of today’s Bedford starter home offerings. It could be that you are closer to moving into a home of your than you think!

 

%d bloggers like this: