Simplifying the Market

Think Twice Before Waiting for 3% Mortgage Rates

Tue, 17 Jan 2023 11:30:00 GMT

Last year, the Federal Reserve took action to try to bring down inflation. In response to those efforts, mortgage rates jumped up rapidly from the record lows we saw in 2021, peaking at just over 7% last October . Hopeful buyers experienced a hit to their purchasing power as a result, and some decided to press pause on their plans.

Today, the rate of inflation is starting to drop. And as a result, mortgage rates have dipped below last year’s peak. Sam Khater, Chief Economist at Freddie Mac , shares :

That’s potentially great news if you’re a buyer aiming to jump back into the housing market. Any drop in mortgage rates helps boost your purchasing power by bringing down your expected monthly mortgage payment. This means the lower mortgage rates experts forecast this year could be just what you need to reignite your homebuying goals.

While this opens up a window of opportunity for you, remember: you shouldn’t expect rates to drop back down to record lows like we saw in 2021. Experts agree that’s not the range buyers should bank on. Greg McBride, Chief Financial Analyst at Bankrate , explains :

It’s important to have a realistic vision for what you can expect this year, and that’s where the advice of expert real estate advisors is critical. You may be surprised by the impact even a mild drop in mortgage rates has on your budget. If you’re ready to buy a home now, today’s market presents the opportunity to get a more affordable mortgage rate, find your dream home, and face less competition from other buyers.

Bottom Line

The recent pullback in mortgage rates is great news – but if you’re ready to buy now, holding out for 3% is a mistake. Work with a local lender to learn how today’s rates impact your goals, and let’s connect to explore your options in our area.

What Past Recessions Tell Us About the Housing Market

Mon, 16 Jan 2023 11:30:00 GMT

It doesn’t matter if you’re someone who closely follows the economy or not, chances are you’ve heard whispers of an upcoming recession. Economic conditions are determined by a broad range of factors, so rather than explaining them each in depth, let’s lean on the experts and what history tells us to see what could lie ahead. As Greg McBride, Chief Financial Analyst at Bankrate , says :

As talk about a potential recession grows, you may be wondering what a recession could mean for the housing market. Here’s a look at the historical data to show what happened in real estate during previous recessions to help prove why you shouldn’t be afraid of what a recession could mean for the housing market today.

A Recession Doesn’t Mean Falling Home Prices

To show that home prices don’t fall every time there’s a recession , it helps to turn to historical data . As the graph below illustrates, looking at recessions going all the way back to 1980, home prices appreciated in four of the last six of them. So historically, when the economy slows down, it doesn’t mean home values will always fall.

Most people remember the housing crisis in 2008 ( the larger of the two red bars in the graph above ) and think another recession would be a repeat of what happened to housing then. But today’s housing market isn’t about to crash because the fundamentals of the market are different than they were in 2008. According to experts , home prices will vary by market and may go up or down depending on the local area. But the average of their 2023 forecasts shows prices will net neutral nationwide, not fall drastically like they did in 2008.

A Recession Means Falling Mortgage Rates

Research also helps paint the picture of how a recession could impact the cost of financing a home. As the graph below shows, historically, each time the economy slowed down, mortgage rates decreased.

Fortune explains mortgage rates typically fall during an economic slowdown:

In 2023 , market experts say mortgage rates will likely stabilize below the peak we saw last year. That’s because mortgage rates tend to respond to inflation. And early signs show inflation is starting to cool. If inflation continues to ease, rates may fall a bit more, but the days of 3% are likely behind us.

The big takeaway is you don’t need to fear the word recession when it comes to housing. In fact, experts say a recession would be mild and housing would play a key role in a quick economic rebound. As the 2022 CEO Outlook from KPMG, says :

Bottom Line

While history doesn’t always repeat itself, we can learn from the past. According to historical data, in most recessions, home values have appreciated and mortgage rates have declined.

If you’re thinking about buying or selling a home this year, let’s connect so you have expert advice on what’s happening in the housing market and what that means for your homeownership goals.

Key Terms To Know When Buying a Home [INFOGRAPHIC]

Fri, 13 Jan 2023 11:30:00 GMT

Some Highlights

Is It Time To Sell Your Second Home?

Thu, 12 Jan 2023 11:30:00 GMT

During the pandemic, second homes became popular because of the rise in work-from-home flexibility. That’s because owning a second home, especially in the luxury market, allowed those homeowners to spend more time in their favorite places or with different home features. Keep in mind, a luxury home isn’t only defined by price. In a recent article , Investopedia shares additional factors that push a home into this category: location, such as a home on the water or in a desirable city, and features, the things that make the home itself feel luxurious.

A recent report from the Institute for Luxury Home Marketing (ILHM) explains just how much remote work impacted the demand for second and luxury homes:

But what if you bought a second home that you no longer use? If you’re now shifting back into the office or are seeing your priorities and needs change, you may find you’re not utilizing your second home as much. If so, it may be time to sell it .

And if you own what’s considered a luxury home, buyer demand for it may be even greater. In another report, the Institute for Luxury Home Marketing explains :

If you own a luxury second home that isn’t being used as much anymore, now’s the time to sell. There are still buyers in the market who are looking for a home like yours today.

Bottom Line

Let’s connect to explore the benefits of selling your second home this year.

Today’s Housing Market Is Nothing Like 15 Years Ago

Wed, 11 Jan 2023 11:30:00 GMT

housing market

Real Estate Forecast Summit

housing market

There’s Opportunity in Real Estate Today

less competition

David Stevens

Bottom Line

The Truth About Negative Home Equity Headlines

Tue, 10 Jan 2023 11:30:00 GMT

Home equity has been a hot topic in real estate news lately. And if you’ve been following along, you may have heard there’s a growing number of homeowners with negative equity . But don’t let those headlines scare you. In truth, the headlines don’t give you all the information you really need to understand what’s happening and at what scale. Let’s break down one of the big equity stories you may be seeing in the news, and what’s actually taking place. That way, you’ll have the context you need to understand the big picture.

Headlines Focus on Short-Term Equity Numbers and Fail To Convey the Long-Term View

One piece of news circulating focuses on the percentage of homes purchased in 2022 that are currently underwater. The term underwater refers to a scenario where the homeowner owes more on the loan than the house is worth. This was a huge issue when the housing market crashed in 2008, but it much less significant today. Media coverage right now is based loosely on a report from Black Knight, Inc. The actual report from that source says this:

Let’s unpack that for a moment and provide the bigger picture. The data-bound report from Black Knight is talking specifically about homes purchased in 2022, but media headlines don’t always mention that timeframe or provide the surrounding context about how unusual of a year 2022 was for the housing market. In 2022, home price appreciation soared, and it reached its max around March-April. Since then, the rate of appreciation has been slowing down. Homeowners who bought their house last year right at the peak or those who paid more than market value in the months that followed are more likely to fall into the category of being marginally underwater. The qualifier marginally is another key piece of the puzzle the media isn’t necessarily including in their coverage. So, what does that mean for those who purchased a home in 2022? It’s important to remember, owning a home is a long-term investment, not a short-term play. When headlines focus on the short-term view, they’re not necessarily providing the full context. Typically speaking, the longer you stay in your home, the more equity you gain as you pay down your loan and as home prices appreciate. With recent market conditions, you may not have gained significant equity right away if you owned the home for just a few months. But it’s also true that many homeowners who recently bought their house are unlikely to be looking to sell quite yet.

Bottom Line

As with everything, knowing the context is important. If you have questions about real estate headlines or about how much equity you have in your home, let’s connect.

What Experts Are Saying About the 2023 Housing Market

Mon, 09 Jan 2023 11:30:00 GMT

Bottom Line

Tips To Reach Your Homebuying Goals in 2023 [INFOGRAPHIC]

Fri, 06 Jan 2023 11:30:00 GMT

Some Highlights

3 Best Practices for Selling Your House This Year

Thu, 05 Jan 2023 11:30:00 GMT

new experiences

Bottom Line

Avoid the Rental Trap in 2023

Wed, 04 Jan 2023 11:00:00 GMT

realtor.com

Census

Housing Forecast

Homeownership Provides an Alternative to Rising Rents

says

home equity

Homeowner Equity Insight

wealth

Bottom Line

2 Key Differences Between Mortgages and Commercial Lending

websites@hibu.com (Hibu Websites) — Tue, 26 May 2020 19:09:38 GMT

If you're one of the 65.3% of Americans that own a home, chances are you're already familiar with the mortgage loan process. You might believe the process is the same, or very similar, to obtaining a commercial loan for a business. However, this is not the case. There are a couple of key differences between mortgage loans and commercial lending that you should be aware of if you're looking to open up a business with a physical location.

Debt Coverage Ratio

The debt coverage ratio (DCR) is essential for commercial lenders looking to approve your commercial loans. While mortgage companies look at elements like a buyer's credit score to judge whether they will be able to pay back the loan every month, this alone is not enough for commercial lenders to approve a loan. In order to feel safe in their investment, commercial lenders will require a certain DCR to approve your commercial loan.

The DCR is a number, usually between 1.25x and 1.35x, that is calculated by the dividing net operating income (NOI) by the total debt service. For example, if your NOI is $120,000 per year and your total debt service is $100,000 per year, your DCR is 1.2x, meaning you can pay back 120% of the commercial loan every year. If a lender doesn't accept your DCR, you might have to make more changes in order to get approved for a commercial loan. Usually, putting down a bigger down payment and trying to get a lower interest rate are the best ways to increase your DCR for approval.

Fluctuating Interest

Commercial lenders do not, like mortgage lenders, give out commercial loans with a fixed-year interest rate. Instead, the interest rate on commercial loans fluctuates with the market after a certain amount of years, known as "floating." Unlike your home loan, your commercial loan might have a fixed interest for the first three years, but then this rate will increase every year or every other year.

It's important to keep this fluctuation in mind, as well as the possibility of paying back a balloon payment after your initial fixed-rate time period. This can help prevent the fluctuating interest keep you from paying back your loan. Talk to your commercial lenders in detail to get more information about your fluctuating interest rates, possible balloon payments, and all other essential information to know how to make the best payment plan for your loan.

Owning a business and looking at commercial real estate can be exciting and profitable. However, mom-and-pop shops and start-up businesses must be careful to examine every detail of their commercial loans. Though there are many other key differences between mortgages and commercial loans, these two key differences will help you understand a little bit better what commercial lenders are looking for: successful, profitable businesses. If you're confident that your commercial real estate or business will be profitable and are looking for the best commercial loans in your area, don't hesitate to research and reach out to commercial lenders.

How to Pay Down Your Mortgage Fast

websites@hibu.com (Hibu Websites) — Mon, 20 Apr 2020 17:48:08 GMT

How to Pay Down Your Mortgage Fast

It's well known that buying a house is the most important step you can take to build up lasting wealth in your life. Our first home is one of the biggest investments we will make, and can pay off in a big way as its value accumulates over time. Of course, buying a house and paying it down is not a straightforward process.

In the end, your ability to pay off your mortgage comes down to the rate you are able to get, and the strategies you employ to meet your mortgage payments. Read on to get some helpful tips for both.

How to Get a Good Rate

Home ownership involves careful financial management and responsibility. If you are fortunate enough to have a very strong credit score then mortgage companies in Florida, or anywhere in the country, will be apt to give you an enticing rate. However, if your credit score is less than ideal, it is likely that you will not get the best possible rate.

Bad credit is an extremely common reality for countless Americans. There is no shortage of ways that you can damage your score, some of which many people may not even be aware of. Here is a comprehensive list so you can be sure of exactly what situations to avoid to protect your credit score:

Loan defaults : Loans can be famously challenging to repay, particularly if you are hit with high interest rates and large monthly payments.
Sizeable balance on credit cards : Credit utilization is very heavily weighted by the agencies that dictate credit scores. As a result, it is advised that people try to keep their credit usage below 30% at all times, else their scores will suffer.
Foreclosures : This is an issue that can hit people who are already homeowners. Foreclosures occur when homeowners fall too far behind on their monthly or semi-monthly mortgage payments.
Having a creditor send your account to a collector : If you neglect to make a payment toward a creditor in the time they allotted, odds are they will send that account to collection. Having debt marked as in collection can be harmful to your credit.
Missed payments : Paying your credit card bills on time is crucial to maintaining a healthy score. Late payments, particularly repeat offenses, can wreak havoc on your score.
A written off account : One of the quickest ways to destroy your credit score is to have an account get charged off or written off. These terms refer to creditors assessing that an active line of credit is at high risk of never being paid back. When this happens, creditors cease offering credit and credit reporting agencies are notified that the account has been charged off. This is absolutely devastating to a score and will take a long time to recover from.
A short credit history : There are two ways to shorten your credit score: apply for too many new accounts, and close an old one. You should make sure to adequately space out new credit card applications so that your average duration of credit history stays long enough. Closing an account also serves to shorten this moving average, and should thus be avoided.
Insufficient diversification of credit : One of the lesser-known factors in credit scores is diversification. If you have only one type of credit in your file -- just credit cards, or only loans -- your score will be adversely affected.
Bankruptcy : This one really goes without saying. If you file for bankruptcy, your credit score will be dramatically reduced for years to come. Bankruptcy remains on your record for seven years. That is a long time to spend rebuilding your score and should be avoided at all costs.

Payment Strategies

Maintaining a good credit score in order to secure a good rate is only part of the battle, however. There is still the matter of actually paying the charges, which can pose a challenge even with the mildest of rates. Fortunately, there are some strategies you can use to get your mortgage paid down as quickly and efficiently as possible.

Switch to a bi-weekly payment system: While you may be tempted to keep your cash in your pocket and pay your mortgage as infrequently as possible, bi-weekly payments will make a big difference in the speed at which you can pay the debt off.

Pursue a mortgage refinance: Refinancing your mortgage down the line can be a huge boon to your financial future. If you can, take advantage of a market with competitive rates, or new rates that become available as your credit score improves.

Paying your mortgage doesn't need to be stressful. Do your research and give yourself plenty of time; after all, the average loan process takes about two months from start to finish. If you properly prepare your credit score and take the necessary steps to pay the debt down, you can learn to control your mortgage rather than letting your mortgage control you.

How to Build Home Equity for First-Time Homeowners

websites@hibu.com (Hibu Websites) — Tue, 03 Mar 2020 19:14:52 GMT

Are you looking to invest in your first home this year? You’re not alone. Nearly 35% of new home sales are first-time buyers. While you are likely considering many things such as your budget, size, and cost of different homes, locations, etc., don’t forget to consider what will be one of your most valuable assets in this process; home equity.

What is Home Equity?

Home equity is the portion of your home that you actually own. Basically, you increase your home equity as your home value becomes higher than the remaining debt you owe. You can make a general calculation of your home equity by subtracting your loan or debt value from the market value of your home.

Once you have more than 50% home equity, you can be considered “equity rich.” Mortgage companies will work with you through the steps of building your home equity and be a valuable tool in the process. Having more home equity is beneficial to you because you can use it as a financial asset to tap into for larger purchases such as a bigger home in the future, to consolidate other debt, or even when planning your retirement.

Here are a few steps you can take to work towards increasing your home equity:

Start with a Large Down Payment

The first thing you should consider when building home equity is the size of your down payment. Most mortgage companies recommend at least a 20% down payment if the homebuyer is using commercial loans. This means that if you want to start your homeownership with more home equity, you should strive to make an even larger down payment. The more you pay upfront, the more of your home you own from the start. This is a big decision to make as it ultimately will cost you more upfront. If you’re prepared for the upfront cost, it will allow you to start your home equity building process with a big step in the right direction.

Focus on Your Mortgage

Your mortgage is one of the main areas you should focus on to move closer to becoming “equity rich”. As you pay down the remaining debt on your home and pay off your mortgage, you will own more of your house and your equity will increase. There is always a required monthly amount you’ll need to pay. If you can make payments larger than that requirement, not only will that increase your equity, but it can also save you hundreds of dollars in interest as well. Make sure to do your research on mortgage companies before you choose which is best for your situation.

Use a Shorter Loan Term

The most common loan term used when people purchase a house is a 30-year loan. If you have the option and funds to start with a shorter term, 15 years, do it. With a shorter-term, you’ll pay off your loan in the half the time and have the luxury of being “equity rich” much sooner. You’ll also have access to that valuable financial tool sooner for big purchases or debt consolidation in the future.

If you’re not able to get a shorter-term loan from the mortgage companies you work with, look into a mortgage refinance options. Remember that refinancing isn’t always guaranteed and that you’ll likely need to have good credit scores and a low debt to income ratio. Make sure to stay away from a cash-out refinance as you’ll ultimately end up paying more mortgage which will set you back in your home equity building process. Before making any final decisions make sure to talk with a professional to find out which option works best for your situation.

Increase the Value of Your Home

One of the more budget-friendly options to increase your home equity is to increase the value of your home through renovations and enhancements. If you’ve purchased an older home, updating the appliances will add greatly to the value of the home. You’d also be surprised at how a fresh coat of paint and new flooring can make a big difference for the looks as well as value. Make sure that if you plan on making some big renovations, you either have the proper training or hire a skilled professional. Renovations gone wrong will not only lower the value of the home, but also cost you more money overall.

In Conclusion

As you start the process of purchasing a new home and building equity, these steps will help you take great leaps towards becoming “equity rich”. There are many mortgage companies to choose from when making this big decision. Colonial Mortgage Corp. has the experience and skills you need to have a positive home buying experience. They’ll do all they can to inform you of all of your options and help you make the best choices for yourself and your money. Contact them today to talk about your home buying needs.

Simplifying the Market

Think Twice Before Waiting for 3% Mortgage Rates

Bottom Line

What Past Recessions Tell Us About the Housing Market

A Recession Doesn’t Mean Falling Home Prices

A Recession Means Falling Mortgage Rates

Bottom Line

Key Terms To Know When Buying a Home [INFOGRAPHIC]

Some Highlights

Is It Time To Sell Your Second Home?

Bottom Line

Today’s Housing Market Is Nothing Like 15 Years Ago

There’s Opportunity in Real Estate Today

Bottom Line

The Truth About Negative Home Equity Headlines

Headlines Focus on Short-Term Equity Numbers and Fail To Convey the Long-Term View

Bottom Line

What Experts Are Saying About the 2023 Housing Market

Bottom Line

Tips To Reach Your Homebuying Goals in 2023 [INFOGRAPHIC]

Some Highlights

3 Best Practices for Selling Your House This Year

1. Price Your Home Right

2. Keep Your Emotions in Check

3. Stage Your Home Properly

Bottom Line

Avoid the Rental Trap in 2023

Homeownership Provides an Alternative to Rising Rents

Bottom Line

2 Key Differences Between Mortgages and Commercial Lending

How to Pay Down Your Mortgage Fast

How to Build Home Equity for First-Time Homeowners