Flagstar Bank, FSB
8787 E Pinnacle Peak Rd
Scottsdale, AZ 85255
888-760-8383 ext 230
Branch/Company ID: 317287
|We are dedicated to helping Americans achieve and maintain the American Dream of Homeownership. Our commitment is to provide the highest quality service while working to help our clients achieve their financial objectives within the real estate process. We are proud of our work that has made us the area’s company of choice for so many working towards their long-term goals. If you know anyone that is in the market of purchasing a home or refinancing, send them my direction. One of the greatest compliments to have is a referral. It is greatly appreciated!
June 4, 2013
Why Are Rates Rising — Part Two
Several weeks ago we spoke about the reasons interest rates have been on an uptrend for the most part this year. The first thing we want to make clear is that the reasons have not changed. However, because we experienced a downtrend for a few weeks in the midst of the uptrend, there is reason for additional analysis in this regard. What were these reasons? There were basically three. Rates were bouncing back from ridiculously low levels reached at the end of last year when the economy slowed down and the budget crisis threatened to shut down the government completely. Secondly, the economy seemed to be bouncing back from the pause of late last year. Thirdly, the Federal Reserve Board was making noise about ending their purchases of Mortgage Backed Securities and an ending date for stimulus activity known as Quantitative Easing (QE).
The next question is–why did the rising trend stop? It appeared that the economy was not bouncing back from the pause as quickly as we thought. Weak data included the employment report for March and there was continued negative news from Europe and elsewhere overseas. Now, several weeks of rates drifting back down has been erased in a matter of days in the wake of a stronger employment report for April and continued strong data from the real estate markets. The additional perspective? For one, the employment reports are being watched closely and we have another report which will be released on Friday. Obviously, this report has the ability to turn the markets in either direction with a surprise in the data. Secondly, we can see that rates have become very volatile. Volatility is indicative of a market which has hit bottom. The conclusion? While we can’t tell you where rates will go from here, all along we have indicated that record low rates would end and when they do, we will get no warning. Our advice is this–don’t focus where rates will go, but focus on where rates are. They are still historically low and if you want to borrow money to finance a house, car or business–now is the time to get it done.
Consider this one more sign that the housing market is heating up: Appraisers are putting higher values on homes again, allowing for more deals to go through. During the housing bust, sales were often derailed by low-ball appraisals that fell far shy of a home’s selling price. For example, if a home cost $500,000 and required a 20% down payment of $100,000, the buyer would need to finance $400,000. But if the appraiser valued the home at $450,000, the buyer would only be eligible for a $360,000 loan — making the home too costly for some buyers. But now, as home prices climb and housing inventories shrink, appraisers are valuing homes at or above their selling prices, according to Lawrence Yun, chief economist for the National Association of Realtors. Between 2008 and 2010, appraisals for more than a third of Seattle-based real estate agent Michael Ackerman’s sales came in below the selling price. So he had to get creative. “I started pulling out the key boxes at the homes so the appraisers couldn’t get in,” said Ackerman. “They had to call me to let them see the home. I would bring a packet of comparables along and explain what I used to price the home.” But now, with home prices posting such strong gains, those strategies may not be necessary anymore. “I’ve closed 15 homes so far this year and none of the appraisals have come in below the selling price,” said Ackerman. Source: CNN/Money
The housing market may be recovering, but for many renters, things aren’t looking up. Owning a home has become more affordable, renting less so. From 2008 to 2011, renters’ housing costs increased almost 6 percent, while their income fell 3.2 percent, according to a recent report from the Center for Housing Policy. More than 26 percent of working renters spent at least half their income on housing in 2011, up from about 23 percent in 2008. One reason: There just aren’t enough affordable rental units to go around. In 2010, there were 5.1 million more low-income families than there were affordable units. In about two-thirds of the country’s largest cities, owning a home is less expensive than renting within three years or less (accounting for the upfront costs of buying), Zillow says. Source: Bloomberg
About a quarter of first-time home buyers use gifts from relatives to fund a down payment for a home purchase, according to data from the National Association of Realtors®. But lenders are carefully scrutinizing such gifts. “Basically, the banks want to make sure that you’re not getting a second loan,” Ray Mignone of Ray Mignone & Associates, a financial planning firm, told The New York Times. “If all of a sudden $50,000 pops into your account, they want to make sure it’s not a loan against the property that they’re going to put a mortgage on.” In a recent article, The New York Times provided some of the following tips in making these lenders’ checks and balances go smoother for home buyers:
- Have the money come in a check or wire transfer so that it’s traceable. Lenders often become cautious over cash gifts.
- Have the giver provide the lender with a gift letter, which verifies the money is a gift, the specific amount being given, the relationship to the borrower, and that repayment is not required.
- Don’t deposit the gift at the last moment.
- Consider federal gift-tax regulations: Individual gifts of more than $13,000 must be reported to the IRS and are subject to tax.
Be aware that certain types of home loans may limit how much of a down payment you can receive as a gift. For example, with conventional loans, lenders may require at least 5 percent in the borrower’s own money that is not a gift. However, Federal Housing Administration loans — which are popular among first-time home buyers — do not have any limits on gifts and borrowers can use gifts to cover the entire down payment. Source: The New York Times