Finding Opportunity in Today’s COVID-19 World

Anyone who is on this planet knows that COVID-19 has created a virtual economic slow-down across the globe. Everyone and every nation can help stop its spread. You know as well as I do, we will conquer this virus and our economy will begin to recover and it is a long-term process. It’s not going to happen overnight. However, one interesting little piece of this is in some areas the economic slowdown may cause some home values to take a modest dip over the short term. But this could be viewed as an opportunity. Just prior to the pandemic, the housing market was really, really hot and it actually still is in many areas like where I live in the Pacific Northwest. It was not, and it still is not uncommon to see multiple offers on the same home.

Sales were at their best levels in 13 years and every metric was favorable, and in many areas still really are very favorable. There’s simply so much more demand for homes than there are homes for sale. And the supply of homes will remain tight, simply due to population numbers, whether it’s household formation from births, from folks moving into the country, or actually other folks who maybe been having multigenerational housing and they’re deciding to split off.

So one of the things that’s going to be interesting is while we do understand that there may be a short term decline in some activity especially depending on your housing price, up in the upper end, we’re going to see that probably a little bit more. It can also provide just the right opportunity to provide a home purchase at a really good price.

During the economic recovery, it’s likely that housing is going to lead the way. There’s going to be a lot of pent up demand. We’ve had a lot of construction shutdown depending on what state you’re in, and that’s all going to ramp up and really get going. So, remember, home ownership is not a sprint. It is a marathon. It’s a long-term investment and the average length of stay in a home right now is 10 years. That’s much longer than it was when we hit the 2008, 2009 and 2010 recession. There’s also a really good chance that the purchase of a home today will result in a really happy outcome in the future for valuation purposes as you stay in that home.

If you have questions, let me know.

The 2020 CARES Act – Forbearance

Here’s an update of something that’s come out from the CARES Act, which the government just created to help assist homeowners who have income that’s been really adversely affected by the Corona virus. One of the components is something called a “forbearance” and it’s not just in the CARES Act. It’s also in the fact that a lot of servicers are trying to be proactive and help people. What a forbearance means, and it is very often misinterpreted, is that you are temporarily halting the payment structure. It’s not stopping it permanently. It’s not eradicating it. It’s just temporarily doing it. And forbearance means that your payments will be stopped for a specific amount of time and it’s whatever you have agreed upon with your servicer or, if you’re going directly for some reason to Fannie Mae or Freddie Mac.

When you go into forbearance, let’s say you do a three-month forbearance, and your first payment’s due in April, right? Your first payments are due in April, May and June. So, your actual payments now are all due in July. So, if your monthly payments were $2000, $2000, $2000 – that’s $6000. Then, July – the fourth month – is $8000. You now have to pay $8,000 in July. That’s a forbearance. That is not the same as a deferment, which I’ll go over in a different video. But this is really important: forbearance is really, really important that you understand it and understand what you’re getting into. Because at the end of that four months or whatever your agreed upon time is if you cannot pay that back, you go to loan modification. Loan modifications are credit impacting and they can significantly impact your ability to borrow or buy for a long time. And I just want to make sure that you are getting the information you need.

Um, the CFPB actually has a great blog on this. Because it’s a lump sum repayment, then you might have to modify your loan. This may have no benefit for you. At the end of the day, do you want to have to modify your loan if you can’t make the payments? You need to think this through and also read the paperwork that is sent to you very carefully to make sure that what you understood on the phone is really what you’re signing. The other thing is, please don’t stop making your loan payments until you’ve gotten a fully executed document agreeing to the fact that you are going to go forbearance. You can’t just willy-nilly stop making your payments. It doesn’t work that way and you should never do that because that will hurt you and that will have a credit impact and a very negative one.

So, depending on your situation, you may also be able to still qualify for a refinance. And if you can, you may need to do some debt consolidation or maybe just get cash out to give you a cushion for a short time, in case you’re afraid you may lose your job later on. I can help you with that and I can also answer whatever questions you may have on the forbearance deferral piece of it. A lot of this is a moving target and as more information comes out, I’ll be doing more updated videos.

If you have questions, let me know.

Downpayment Assistance & First Time Home Buyers

Our segment today is going to cover down payment assistance programs and do you have to be a first-time home buyer to qualify for them? According to the national association of realtors, the most difficult step in the home buying process is saving for the down payment. And as my granddaughter says – ta-dah! Oh, she’s so cute… so is my grandson. They’re both awesome. Enter the down payment assistance programs. Many folks think you still do need 20% down to buy a home. You really don’t. You can if you want, but you really don’t. Another little nugget is many downpayment assistance programs do not require you to be a first-time home buyer. In some cases, you can use the programs over and over again depending on your situation.

What these programs do is they provide money that can be put towards your down payment or closing costs or a combination of both. That way you don’t need as much money up front, which can make the prospect of purchasing your first home or another home, much less daunting. So, the money arrives in one of three ways. It’s a grant where you don’t have to pay it back. Some people call this a gift. It’s really a grant because it’s coming from an entity. The next one would be an interest free loan that typically runs with the term of your first mortgage and it is paid back later. There are no payments or no interest. And the third is a loan that also runs with a term of your first mortgage and has very small payments and very low interest. So, as you can see, there’s a lot of different ways to put this together. No, you don’t have to be a first-time home buyer to qualify for down payment assistance in many cases.

If you have questions, let me know.

What is PMI?

Today we’re going to talk about PMI or private mortgage insurance. When you as a home buyer make a down payment that is less than 20% you are going to be required to purchase private mortgage insurance if you are doing a conventional style loan. This private mortgage insurance or PMI protects the lender in case a foreclosure happens. The cost of PMI is usually between 0.3 and 1.5% of your original loan amount per year. That number does vary based on the size of your down payment and your credit score. On some loans, the PMI doesn’t stay around forever, as on some loans it will cancel so you don’t have to refi-out.

There are four types of mortgage insurance that I’ll go over really quickly.

The first is monthly, which most of you probably know about. It’s a premium that’s included in your monthly mortgage payment. Once you paid your mortgage down to 80% of the original sales price. With conventional financing, you can call to request that it be removed, but as 78% of the original loan amount and purchase price, the mortgage insurance will automatically cancel.

The next is single premium mortgage insurance, which is when you buy out the monthly premium with a flat fee. This is paid as a closing cost, eliminating the need for any kind of monthly mortgage insurance. Depending on your down payment, the premium may be able to be financed into your home loan as well instead of paid in cash at closing.

Then there’s split mortgage insurance, which is a little bit of monthly and a little bit of single premium. You can pay a certain percentage upfront and this will reduce your monthly mortgage insurance payment. So it’s a really great option if you can, uh, put this together this way.

The fourth option is lender paid mortgage insurance, which is when the mortgage insurance premium is paid by the lender and it’s built into an interest rate. And even though it sounds like your payment will be higher, it actually can produce a lower monthly payment because you’re not having this single amount of mortgage insurance included in the payment.

If you have questions, let me know.

Who Touches Your Mortgage Loan File

In today’s post, we’re covering who actually works with you on your loan file. This will vary from company to company and from originator to originator. At Movement and with Team Springer, this is how we work with you on your loan file during the process, so that way you always know who’s touching your file.

The first person who you work with is obviously going to be me, I’m your Loan Officer and I help guide you through the process of picking your loan product, your interest rate, your down payment, the structuring of your loan, and other aspects. I’ll go over the process with you from start to finish so you’re comfortable on how everything works and what is expected from you.

The next person who steps into the picture with me is Jill and she’s an Administrative Assistant here at the Vancouver office with me. Jill’s role is to:

  • Support you, the consumer, with your loan file.
  • Help you with making sure your documents are accurate and correct.
  • Order all the supporting documentation from verifications and title work appraisal and everything like that.
  • Work with Theresa on the file to get it to underwriting.

Once your loan file goes through underwriting, Brenda, who is my rock star Processor and has been in the business a long time, jumps into the picture. Brenda’s role is to:

  • Takes the file from underwriting to funding and closing. What that means is once the underwriter’s reviewed your file, they may add some conditions, or they may have some clarifications. Brenda takes that input from underwriting and contacts you to get the information and answers back to them.
  • When we’re clear to close, she works with the closing department to make sure the loan documents are issued, the closing disclosure has already been signed and we’re ready to go.

Because we actually use Easy Sign, you sign the vast majority of your loan documents in your closing package online and you are pretty much signing just a little teeny tiny stack at actual closing. Everything goes much more quickly.

So that’s the team and our process here at Movement, and I hope you look forward to working with them because I have some great support staff and Brenda and Jill are amazing. Not every loan company has teams like this to support their Loan Officers. Other loan officers and mortgage companies work very differently and may not want the contact directly with you, the consumer. I prefer it because I like to be involved throughout the process.

If you have questions, let me know.

Appraisals and the Value of the Home You’re Purchasing

An appraisal is basically an evaluation by an independent professional. It could an appraiser to determine an opinion of the value of the home. The appraiser will look at recent comparable sales and market conditions to determine the value of a home in order to help support the agreed upon sale price. So let’s say the house you were looking to buy is $250,000. If you’re lucky, it may appraise for higher than what you are going to pay for it and that just means you get instant equity on the day you close. Suppose however the value comes in lower than the sales price. Well, this does allow you to possibly renegotiate with the seller, which may reduce your loan amount and save you money on your monthly payments. Appraisers also look at the condition of the home. Some programs do have much more strict guidelines on condition than others.

If you have questions, let me know.

The Case-Shiller Home Price Index and Pending Home Sales

Let’s talk about the Case-Shiller Home Price Index and the Pending Home Sales Report. These are two major monthly home reports that have the best finger on the pulse of the housing economy.

The first which is the Case-Shiller Home Price Index. It is considered the gold standard for appreciation and it was just released for this month. Case-Shiller does have a few indexes which can make it confusing but two are the most important: the National Index and the 20 city index. The US National Home Price Index covers all nine census divisions, reported a 3.2% annual gain in August. So, remember this is a three-month average of June, July and August prices. This in particular, was a slight increase from July, which covers May, June and July and was revised lower from 3.2 to 3.1. The other index which is important is the 20 City Index, and it was unchanged at 2% on a year over year basis with no change from the previous month. Remember on a $300,000 home with 3.2% gain and appreciation really translates to $9,600 bucks over the course of a year, and that’s still quite meaningful.

The second report, which is the Pending Home Sales Report from the National Association of Realtors, which measures assigned contracts on existing homes and it’s a really good leading indicator for existing home sales by a month or two. It was at 1.5% in September. This reading was actually much stronger than expectations of the 0.7% gain and the second best number in the last 12 months. The gains were fairly broad based, although the overall gains in the West and the Northeast are easing a bit and not coming in a strong. Year-over-year contract signings were up 3.9% annually, and today’s report continues to string of strong housing data, which is really good news for us as homeowners.

If you have questions, let me know.

What is a Rate Lock?

I’m kicking off a series of mortgage minutes detailing different parts of the loan or loan process. Today’s topic is rate locks. Rate locks are in reference to the interest rate on your mortgage. A rate lock, or locking your rate, uses the current day’s interest rate to secure your loan. That means your interest rate will not change based on market conditions. This protects you, the client from rising rates if the market shifts… and it has been shifting like crazy recently.

Rate locks can usually be done in increments of 15 days, running from 15 days to 360 days, depending on the loan type you are getting. Is it a purchase or refi construction, renovation and so on. The other thing here is at Movement we have a little bit of an unusual rate lock system. We allow clients to lock in smaller slices, so, instead of having a 15, 30, 45-day, so on, we do 37-day, 20-day, 17-day, etc. So you can take advantage of a better rate in a smaller slice.

One thing that happens when you lock your rate is, if rates go up, you are protected. And that’s actually great. You are not going to be subject to interest rate gyrations, as I said earlier. The other thing that happens is there are other instances that can change your interest rate and they are not market-related. If you do have questions on those, let me know.

Does it Make Sense to Take Time Off From Home Shopping?

If you are shopping for a home today, you know it’s really hard work. You may not find something right away and it’s super easy to get fatigued. Some buyers may get discouraged and say, “Let me take off a few months. Maybe I’ll come back in six months and see where everything’s at.” Well here’s the thing, while you can take some time off, the market isn’t and it is continuing to appreciate… and it’s hot right now in Clark County and in the Portland area.

The forecast appreciation is approximately 2% in just the next six months. Let’s quantify that. If you’re looking at homes priced at about $355,000 today, that home would be worth $7,100 more in six months. And if you were planning on putting the same amount down for percentage-wise, you would have to bring in more down payments since a home is now more expensive.

And what about those interest rates? Some folks think that rates aren’t as low as they could go. Well, while they’re at really attractive levels right now, does it make sense to wait for rates to go down further? They may not. They may go the other way. So, the monthly savings with a lower rate may be nice, but it is dwarfed by the missed appreciation and amortization. And it could take many years to recoup what you would have lost. Should rates drop significantly, we can always refinance you in the future. So stick with it, keep shopping, and you will find your home.

Now is a GREAT time to REFI!

Many of you have heard recently that it’s a really great time to Refi. Really true. We haven’t had rates this low in many years. For some of us who’ve been in the industry a long time, we haven’t seen these rates since the last three or four years, and well before that.

When we do a Refi, one of the questions we do get a lot, or at least I do, is, “Do I have to start my term all over again?” Well, no… if you have a conventional style loan and not a jumbo, or some other specialized loan in the conventional world, we can actually set your term the way you want it. For example, if I did your loan four years ago, and you have 26 years and two months left, then we can just do a 26 year and two-month loan. We do not have to automatically go to the 30-year fixed automatically.

If you want to shorten it yourself anyway to a 15 year, that’s fine too. But don’t feel that you are stuck with a 30-year term if that’s what you have originally. That’s great news on that side of things so you don’t have to end up making any more payments than you really do want to.

Doing a Refi has many added bonuses. You do get a skip at least one payment and possibly two and that’s actually some great money in your pocket there. If you think about your house payment. The other thing is if you currently have your property taxes and your homeowner’s insurance escrowed into your payment, when we close on the new loan, the old loan must give you that money back. So, you could potentially get a few thousand dollars in your pocket between skipping payments and the escrow account refund to you.

If you want to pull some of the money out when you Refi, you can do some things around the house that you’ve been wanting to do. If you want to spruce up your kitchen, maybe you want new cabinets or new countertops, or you want new floors in the house. Or maybe you’ve wanted an outbuilding to put that great tractor in that you have that sitting in your garage while you’ve been parking outside. The other thing you can do is if you bought your house with a first and second combo to avoid mortgage insurance or you had some kind of down payment assistance, we can actually put those two loans together. This will give you one loan and your rates will probably be lower than what you were originally paying. You can buy a vacation home to go hang out at the beach or over in Bend, or wherever you want to go. You could buy a rental property and if your debt service is high right now you can consolidate some of your debt. That could be a lift off your shoulders and make your life a little easier.

Of course, you don’t have to take cash out. You can just do a straight rate and term refinance and not take any money and that actually is a great way to go to because that’s where you’re going to realize the most savings.

If you have any questions or you just want to get started, click HERE or on the big yellow Get Started button at the top of this page, which will begin take you through the application. It’s a smart application and it’ll know what to ask you for in terms of documentation as you go through it. Once that’s done, I will personally review your application and call you.

If you’re not sure you’re ready to start an application and just want to run the numbers first, give me a call and let’s chat to see if it makes sense.