Sunrise Homes & Renovations, Inc.

Looking at Home Mortgage Refinancing in 2021

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Looking at Home Mortgage Refinancing in 2021In 2019 many people expected that the home lending market was going to eventually grow more expensive. Instead, 2020 spent its entire 12 months becoming more affordable when it came to financing a personal home, moving in the opposite direction of what was expected. Not only did the loan cost drop break previous records, but it also presented an additional opportunity for homeowners to reposition and take advantage of lower borrowing costs again.

The General Advantages of a Home Loan Refinance

The refinancing of a mortgage has traditionally been three-fold. First, it is a chance to renegotiate the loan on a home purchase for a lower interest rate, which means more of the borrower’s payment goes to the loan and less to an interest charge. Second, it gives people an option to change the interest rate charged to a shorter payment period, which can also save considerable money. A borrower will pay dozens of thousands less on a 15-year loan versus a 30-year mortgage. Finally, refinancing allows a borrower to tap into home equity to use that cash value to consolidate debt, pay for other big costs, or make renovations to the home without paying out of pocket for them.

Why 2021 Provides a Good Window

By the time 2020 ended, mortgage rates overall were running at all time lows on a conventional 30-year fixed mortgage, an amazing opportunity for the cost of borrowing and probably the lowest possible in 50 years. The dip won’t last forever, as many people have been trying to project, and eventually what goes down also goes back up. Some amount of rising rates is a firm prediction from the National Association of Realtors® for 2021 which has already occurred, and that loan interest rate cost is expected to eventually go somewhat higher by the end of the year if the economy speeds up again. So, the 2021 window for a valuable refinancing opportunity is clearly the beginning half of the year.

Comparing Current Status to “What If”

Obviously, just chasing a mortgage refinance for minimal gain is silly. The amount paid in closing costs can be expensive. However, when the shift can easily be a percentage point difference or more, then it is worth considering. Many people locked in homes at higher rates in the past and are still paying that amount, especially on an adjustable-rate mortgage. Grabbing a fixed mortgage refinance in the current rate environment is definitely worth the work and time, potentially paying for itself in a handful of years or by consolidating higher cost debt into the home loan.

There is no perfect formula that applies to everyone, but 2021 has already shaped up to be the year that the majority of homeowners can definitely benefit from, especially given the need for financial reserves and a bit of personal finance reorganization after 2020.  As always, consult with your professional mortgage advisor for details on your personal situation.

 

NAHB: Home Builder Confidence Ticks Up in April

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NAHB: Home Builder Confidence Ticks Up in AprilThe national reading for home builder confidence rose one point to an index reading of 83 in April; the National Association of Home Builders predicted a reading of 84. Component readings for April’s national index readings were mixed.  Builder confidence in current market conditions for single-family homes rose one point to 88. Builder confidence in market conditions for single-family homes in the next six months fell two points to 81 but homebuilder confidence in buyer traffic in new home developments rose two points to an index reading of 75.

Readings over 50 indicate a majority of builders are positive about housing market conditions. Buyer traffic readings published before the pandemic rarely exceeded index readings of 50.

Regional Home Builder Confidence Varied

Regional readings for home builder confidence varied in April. The Northeast region reported an index reading of 84 in April, which was two points lower than in March. The Midwestern region’s April reading was three points lower at 75 than in March. Homebuilder confidence in the South rose two points to 84 and builder confidence in the West was unchanged with an index reading of 92.

NAHB’s Three-month moving average of regional homebuilder confidence in housing market conditions reported for the Northeast rose six points to 86; builder confidence in the Midwest fell two points to 78 and builder confidence in housing market conditions rose one point to 83. Builder confidence in housing market conditions in the West was unchanged at an index reading of 90.

High Demand for Homes Persists as Materials Costs Limit Affordability

Shortages of available pre-owned homes continued to boost new home sales, but rising materials costs and supply chain issues presented ongoing challenges to builders. NAHB Chair Fowkes said, “The supply chain for residential construction is tight, particularly regarding the cost and availability of lumber, appliances, and other building materials.”

Affordability is a substantial obstacle for first-time and moderate-income home buyers Prices of pre-owned homes are rising at their fastest pace in 15 years as mortgage rates move higher. NAHB Chair Fowkes also said, “Though builders are seeking to keep prices affordable…policymakers must find ways to increase the supply of building materials as the economy runs hot in 2021.”

Homebuilders and potential home buyers can expect ongoing challenges in 2021. As home prices rise, fewer families can enter the housing markets; other potential buyers may decide to postpone buying homes until home price growth eases.

Buying a Home While Relocating is a Smarter Choice

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Buying a Home While Relocating is a Smarter ChoiceThe idea of buying a home is challenging enough as the process requires a lengthy approval validation, paperwork, financing, and the actual move with logistics. However, when one really looks at what typically occurs with relocation, buying versus renting can start to make more sense over time.

Finances Have to be In Order

Buying a home more than once every ten years requires a good amount of discipline on one’s personal finances. Most of the initial decisions and approvals will depend heavily on keeping one’s debt versus income ratios in line and viable. That also means saving up a lot to have sufficient cash flow for fees and your down payment. It also means not letting credit cards get out of hand or taking on other significant debt unless necessary as both weigh against one’s ability to obtain new financing for the next home purchase.

Renting Versus Owning

Renting or leasing tends to be the go-to option during a relocation because it tends to be easier upfront, has fewer requirements to achieve, and involves less of a significant commitment financially. After all, what happens if there is another relocation just a year later? However, most relocations are fairly defined in time. Anything under a year would make sense for renting, but when one starts getting beyond a year, buying starts to become far more appealing.

First, all the dollars one pays in rent are a sunk cost. If one buys, some of that money goes into home equity. Second, many companies and organizations who relocate their people often have connections for quick purchasing and residential needs, leveraging corporate interests for their employees. This allows for the rotation of homes from one employee to the next and makes buying easier for longer-term stays.

Third, a purchase for a shorter-term stay doesn’t have to be a full-scale home. Smaller units that cost much less are easier to close and can work just as well for temporary living. Relocating buyers should really consider a wide range of housing options in a buy versus just a strict replacement of what they had before.

Finally, market costs in the target location have to be considered. Some markets are very affordable and might be cheaper than renting month to month but others are astronomical, and it simply doesn’t make sense to buy in these regions for a short-term stay.

The Bottom Line

Understand with renting everything paid is gone and won’t be recovered in any form at all. It’s a lost expense. That can be thousands of dollars after one year alone. Buying will have fees, but the money spent on the mortgage each month buys equity which can be recovered in a sale, plus a possible gain as well down the road. Buying doesn’t work in every situation where one is relocated, but it can be a viable option in affordable markets and when one is staying longer than a year.

As always, check with your local real estate professional for the best advice on your relocation and your personal financial situation.

Approved With Conditions: What Does It Mean?

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Approved With Conditions: What Does It Mean?Applying for a home loan might not be the most exciting part of purchasing a home; however, many homeowners need to go through a lender to purchase a home. It is exciting to hear that the approval letter has gone through; however, it is also possible for someone to see that they have been approved with conditions. What does this mean?

What are some of the most common reasons why someone might have conditions?

It Could Just Be Standard Procedure

Sometimes, people see that they have conditions to meet as a simple part of the approval process. For example, someone might be missing standard paperwork. It is the job of the underwriter to make sure that the lender is not taking on too much risk. Usually, this simply means that the loan requires some additional paperwork to be made final. Applicants need to gather this paperwork as fast as possible so the loan continues through the process. If there is a seller waiting, it is critical to jump on this immediately to prevent the offer from falling through.

What Are The Most Common Conditions?

There are several conditions that people might have to meet in order to finalize the loan approval process. For example, some people may need to provide letters of explanation, documenting anything that could be related to questions in the file. In other situations, a large deposit could require a letter of explanation as well. That way, the lender knows that someone has not taken a cash advance or opened another line of credit to cover the down payment. In other situations, proof of employment could also be listed as a condition of approval. Lenders want to make sure that applicants are going to keep their job after they purchase the house. Finally, earnest money proof could also be required. This is simply a copy of the earnest money check itself. It is critical for applicants to provide this paperwork quickly in order to finalize process.

Try To Meet All Requested Conditions As Quickly As Possible

It can be frustrating to see that a loan has been approved with conditions. Fortunately, a lot of these conditions are relatively easy to meet. Homeowners that are requested to provide proof to finalize the application process should try to do this as quickly as possible.

Why A Carpet Change Can Boosts Your Home Sales Price

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Why A Carpet Change Can Boosts Your Home Sales PriceWhen selling a home, it is rare for folks to see in bold big letters, “new carpet just installed”. However, on a practical level, replacing the carpet in a home just before selling can go a long way to helping the deal close.

A Brutally-Beaten Leftover

In just about every used home, the carpet has taken a beating. Even if the home has only been owned for a few years, carpets have taken a tremendous amount of traffic, walked-in dirt, funky smells, and dust that build up over time. That not only changes the color of the existing carpet, it also impacts the air in the house as smells are permanently trapped in that same carpet. And, if the existing homeowner had or has pets, the issues can be ten times as strong.

A Sure Formula

By replacing the existing carpet with a new one that is a neutral color and just installed, it adds perceived value to the home and comes a lot closer to competing with new homes in the area. Everybody buying a home wants to have a sense of newness when entering the home. If it’s an existing home, replacing the carpet will be almost a given for the new homeowner before moving in. So, combining a new carpet with the sale saves the buyer the headache and becomes far more attractive right off the bat.

Removing Embarrassing Conversations

The worst situation to be in is having to explain stains and torn carpet or worn-out patches. Letting them stay practically begs a prospective buyer to argue for a lower price to even disengage. Of course, this issue doesn’t apply so much when it’s a seller’s market and homes are being bid on unseen with high demand. But that isn’t always the case. Rather than handing an argument to a buyer free, adding the carpet could reverse the situation and give you support for a higher sales price.

Case by Case

Your real estate agent will have the best idea of how much a new carpet will apply to your local market for home sales, so start with him or her first. If the current market is looking for lots of quality improvements in a home for sale, you can expect that a new carpet would be to your advantage. And you don’t need to break the bank doing so. Follow the example of builders; use a base level carpet at an affordable price. It will look new, do the job, and help sell your home without paying a premium and cutting into your sale profit.

An Overview of Amortization: It Plays A Role In Monthly Mortgage Payments

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An Overview of Amortization: It Plays A Role In Monthly Mortgage PaymentsEven though this may sound like a fancy word, amortization is simply a long word for a straightforward topic. Furthermore, it plays a significant role in the determination of monthly mortgage payments.

Before taking out a home loan, homeowners need to understand how their payment schedule works and what this means for the future of the home loan.

Amortization refers to the way monthly payments are calculated to make sure that homeowners pay the same amount every month throughout the life of the loan. Even if homeowners do not stay in the house for the life of the loan, amortization will still play a significant role in the amount of money they receive if they decide to sell the home.

Amortization Plays A Major Role In Calculating Monthly Payments

First, amortization plays a major role in calculating monthly payments because it ensures that homeowners pay the same amount of money over the life of the loan. Even though there is interest on the home loan, and inflation will play a role in the value of money during the life of the loan, the monthly payment is going to stay the same.

This is particularly beneficial to homeowners who are still working and believe that their income is going to go up during the life of a 15 year or 30 year mortgage. Even if their income goes up, and even if inflation plays a role, their monthly mortgage payments will still stay the same thanks to amortization.

Amortization Divides Interest And Principal In Monthly Payments

On the other hand, amortization also plays a role in calculating interest versus principal in monthly mortgage payments. At the beginning of the loan, the majority of each monthly payment goes toward interest on the loan. At the end of the loan, the majority of each monthly payment goes toward principal.

This also means that if homeowners decide to sell their home at some point during the loan, they might not get as much money as they think because most of their monthly payments have gone toward interest and haven’t built up any equity. This is another key factor homeowners should keep in mind when it comes to amortization.