Mortgage rates still falling — just not as quickly

 

Following last week’s substantial drop, rates leveled off but still declined modestly, while pending home sales were flat.

Key points:

• The 30-year fixed rate mortgage averaged 6.61%, down from 6.67%.
• Pending home sales were up in three regions, but on a national level did not increase (or drop) in November.
• Economists continue to express optimism about the housing market in 2024.

After speeding toward 6% territory, mortgage rates leveled off a bit at the close of 2023.

The 30-year fixed-rate mortgage averaged 6.61% this week, according to Freddie Mac's latest survey. That's down from 6.67%, and while the drop was not as dramatic this week, it represents the ninth consecutive week of declines.

It's also the lowest rate since May.

"The rapid descent of mortgage rates over the last two months stabilized a bit this week, but rates continue to trend down," said Sam Khater, Freddie Mac's chief economist.

The 15-year fixed-rate mortgage also fell slightly to 5.93%, down from last week's 5.95%.

Mortgage News Daily reported a slight uptick in rates on Dec. 28, suggested that another big drop isn't likely as the year wraps up. While the weekly decline was relatively small, the trend over the past several weeks appears to bolster economist predictions for a happier new year for the housing market.

Pending home sales flat, but optimism abounds 

Pending home sales held steady as well, the National Association of Realtors reported. The Northeast, Midwest and West saw an increase in pending transactions, while sales fell in the South, resulting in an overall increase of 0% nationwide in November.

Though pending home sales in all regions were down year-over-year, NAR Chief Economist Lawrence Yun found reason for optimism.

"Although declining mortgage rates did not induce more homebuyers to submit formal contracts in November, it has sparked a surge in interest, as evidenced by a higher number of lockbox openings," Yun said.

Yun expects home sales to improve in 2024, and Khater is similarly bullish, even though home prices show few signs of decreasing.

"Heading into the new year, the economy remains on firm ground with solid growth, a tight labor market, decelerating inflation, and a nascent rebound in the housing market," Khater said.

BY: Cheryl Reid-Simons

Original Post

Shark Tank's Barbara Corcoran says you're 'dead wrong' if you try to wait for a better deal on the housing market

 

• Don't wait for a better deal in the housing market, Shark Tank's Barbara Corcoran says.
• As rents and mortgage rates drop, prospective buyers may be tempted to see how low they go.
• "The minute actual interest rates come down just one more point, everybody's going to jump into the market."

As mortgage rates and rent prices drop, prospective buyers may be tempted to wait out the fall before diving into the market.

That's a fool's errand, "Shark Tank" investor and real-estate legend Barbara Corcoran says.

"You're much better off buying something now when you can," Corcoran said in a CNBC interview on Wednesday. "Because if you don't have a chit in the game, and you continue to be a tenant and wait the market out — which many people are thinking right now they should be doing — they're dead wrong."

Redfin noted recently that median asking rents saw their biggest year-over-year drop since February 2020. Corcoran said rent prices had probably hit a short-term peak as inventory concerns eased, but it was a minor decline at best.

Mortgage rates, too, have been sliding on the market's conviction that the Fed is pivoting to rate cuts soon. The 30-year fixed rate has tumbled to 7.03% from 8% in October. 

Some people have been cashing in on the downtrend. In fact, median home sales prices as of last week are clocking in at $364,535, Redfin data shows. That's down from $414,000 in October.

But those trying to time the housing market may see their plans backfire.

"The minute actual interest rates come down just one more point, everybody's going to jump into the market, and you're going to be paying a lot more for your house," Corcoran said.

Her advice echoed her previous warnings about home prices back in August when she said, "All hell's going to break loose" once the Fed cuts rates and mortgages get cheaper.

"If you have any way of getting cash together and getting into the market and buying a house and getting out of a rental, which is tempting to keep because it's a little cheaper, don't do it," she said. "Buy yourself a house."

Similarly, a Bank of America executive told Business Insider recently that trying to time the housing market by waiting for lower rates wasn't a good idea.

"It's really when you're financially ready, emotionally ready, and, ultimately, you find that home that fits your dreams and/or your needs," said Matt Vernon, the bank's head of consumer lending. 

BY: Aruni Soni

Original Post 

Holiday Real Estate: A Buyer’s Guide

 

There’s a myth that the real estate market shuts down over the holidays and that it’s a terrible time to buy a home—because who wants to buy a home when you could be spending that time with family. You saw where we said “myth,” right? 

The truth is that buying a home over the holidays can yield you a great deal while minimizing the competition. Here’s what you need to know if you’re in the market now. 

Look past the sparkle

You’re going to see some inflatable Santa's and lights galore. Some homes might have 20 years of holiday décor displayed throughout every square inch. While these sellers may have been smart to declutter and keep the holiday stuff light this year, it’s up to you to try to see beyond it. What do the bones of the house look like? Is the floorplan what you’re looking for? What about the size of the rooms? How much updating will you have to do? Regardless of what sellers have—and have not—done to their home, you’ll want to keep your key questions in mind while touring.

Decide what’s important to you

It can be easy to be seduced by a home that’s priced low and be blinded by the affordability to the point that you overlook a floorplan that doesn’t really work for you or a neighborhood that's not in your top tier. Creating a “must-have” list before you go house-hunting can help keep you on track. 

Look past the imperfections

But, a home that goes on the market over the holidays might not be updated and staged to your standards. There’s likely a reason the home is for sale at this time of year. Perhaps there was a job loss or a transfer to another area. If you can look past the little things, you might be able to get a great deal.

Understand there’s less competition

“If there’s one undeniable truth about the holidays, it’s that real estate inventory is limited during the holiday months,” said Fortune Builders. “There’s simply less real estate activity — less people selling less homes — during the holidays. To compound this fact, there are fewer mortgage lenders, realtors and inspectors available than usual. But rather than seeing this as a major obstacle, this can add up to a huge advantage for home buyers during the holidays: less competition. If you’re able to find a property, there’ll be a lot less buyers — and the strong possibility that you’ll negotiate a favorable price that can put additional savings in your pocket.”

But understand that there are limits to how low you can go. Work with your real estate agent to make sure your offer is a strong one. You don’t want to offend the seller and lose out on the house. 

Don’t underestimate other buyers

Just because there is less competition over the holidays doesn’t mean you can dawdle. If you’re smart enough to be out there looking for a home right now, there are other savvy buyers doing the same thing. If you find a house you love, don’t sleep on it.

Hire the best agent

In many areas, a handful of real estate agents sell the majority of houses,” said The Mortgage Reports. “Usually, they are at the biggest agencies, and they talk to each other about what’s coming on the market. This is important, because fewer properties are listed between Halloween and New Year’s Day. You want early access to as many houses as possible…and a successful, connected agent can help you get it.”

Get prequalified first

Many real estate agents today won’t even take a client to see homes without knowing what they can afford. Maybe a friend or family member who is an agent will let that slide just for the sake of seeing what’s out there. But what you don’t want is to fall in love with a home and lose it because you had to go talk to a loan agent when another buyer was prepared, prequalified, and ready to make an offer. 

Get your house in order

If you have a house to sell at the same time you’re buying a new home, make sure it’s in listing condition. You could potentially delay or derail your purchase because your home wasn’t ready to list when you made an offer on the new home.

WRITTEN BY JAYMI NACIRI

Original Post

How To Get Free Money Or Make Easy Money For Your Down Payment

 

Want to buy a house but short on cash to get the deal done? It's a common problem that is keeping countless potential buyers on the sidelines. "Money issues often stand in the way of homeownership," said Bankrate. "A survey by rental service Apartment List found that 80 percent of millennial renters want to buy a home, but most say they can't afford to."

A recent story in Apartment Therapy titled "How I Saved $40K in 5 Years for a Down Payment" piqued our interest. Their tip: Get a side hustle and sock all that money away. Those are some Impressive saving skills, but if you're saying to yourself, "I don't even want to wait five months, let alone five years", we have some tips that can help. None of them are quite as hardcore as working a second job late into the night (but if you're just that committed, more power to ya!). Instead, we're focusing on ways to get free money or make easy money.

Get down payment assistance

Many people don't think about looking for down payment help (beyond asking their parents, anyway). And many of those who do think about it don't realize they might be eligible. Yes, many grants and other programs are specifically for low income borrowers, but others have surprising income caps that could spell the difference between buying now and having to wait a while.

"Grants and loans help you cover the upfront costs of purchasing a home," said NerdWallet. In Nevada, for example, prospective homeowners can qualify for a grant of up to 5% of their mortgage to put toward a down payment and closing costs. District of Columbia residents can qualify for a down payment assistance loan of up to 3.5% of their mortgage. The loan needs to be repaid only if you sell, refinance or vacate the property within the first five years. Help isn't reserved for low-income borrowers. Nevada's grant program is available to those with an annual income below $98,500. The D.C. program caps income eligibility at just over $132,000."

Move your money around

You may be aware of intro offers on credit cards that allow you to do a balance transfer to a lower (or zero) interest rate. While these are great options to take advantage of if you are trying to pay off an existing balance at a higher interest rate, be sure to check with a lender before you take on any new credit; if you're looking to buy a house soon, this could ding your credit and make it harder to get a loan.

Credit cards aren't the only place you can take advantage of great offers to save - or make - some money. Some banks and credit card companies also offer cash incentives for opening up checking or savings accounts with them. 

Sell your stuff

You might be shocked to learn how much you can make just by selling the stuff you already own - and probably don't want to take with you to your new place anyway. Garage sales can yield a couple hundred dollars, depending on the crowd and the goods. Craig's List is a great place to list items you don't want to let go of for a couple bucks at the crack of dawn on a Saturday. Everything from gold and other jewelry to silverware and old phones can be listed online. Furniture, art, and designer clothing can fetch more money at a consignment shop.

Switch providers

Seeing great deals out there for cable/satellite and Internet that are far better than what you're getting? Packages that offer super low prices to everyone but existing customers are frustrating. Don't be afraid to look around, even if you're planning a move in the next few months. Providers typically have a moving package that will allow you to transfer your service to your new address for free.

If you called your existing provider and you're getting stonewalled, call again and ask for the loyalty department. Our recent call to DISH resulted in a $70 monthly savings and upgraded equipment at no cost. This was a far better deal ($65 a month better, and no $100 new equipment fee) than we were offered by customer service.

Ask your boss for a flexible schedule

Working from home one day a week can save on gas, tolls, and even daycare if you're in a situation where your young child could behave while you're working alongside her and your daycare will work with you on price for using them four days per week instead of five. Some employers will also allow you to work more flexible hours on a daily basis so you could leave in time to pick your child up from school and forgo after-school care. Letting them know you're saving for a house may help elicit the cooperation you need.

Collect plastic bottles

If you drink bottled water and are accustomed to putting all the bottles in your recycling bin, collect them and sell them back to make a little extra cash. Will it be life-changing money? No. But it may be enough to enjoy a meal out here and there during your super-saving mode, or pay for a few knickknacks after you move. "The number of bottles that recycling centers will pay per bottle depends on the type of plastic, as well as how many you have," said Small Business. "Michigan pays 10 cents a bottle whereas most other states pay anywhere from a few pennies to 5 cents for each bottle. Check with the recycling center that you intend to use for its rules. Some prefer that you keep caps on the bottles or if they don't accept them at all."

Negotiate your closing costs into the deal

This isn't exactly free money because you end up paying for the closing costs anyway (albeit over 30 years), but if you're a little short on cash getting in, adding the closing costs into the mortgage could get you where you want to go faster. Even better: If the seller will pay the closing costs! This could save you thousands of dollars upfront.

Research alternative mortgages

It could be that a different kind of loan than the traditional 30-year mortgage or FHA loan could greatly cut down on your down payment and also save you money monthly. USDA loans for homes located in certain rural areas may require no down payment. VA loans offered through the U.S. Department of Veterans Affairs "help active-duty military members, veterans and surviving spouses buy homes" with zero down payment, said Bankrate. HUD's Neighbor Next Door program "is designed to encourage renewal of revitalization areas by providing an opportunity for law enforcement officers, firefighters, emergency medical technicians and teachers to purchase homes in these communities," according to the HUD site. "HUD provides a substantial incentive in the form of a 50% discount off the list price of eligible properties."

WRITTEN BY JAYMI NACIRI

Original Post

Is Homeownership the Greatest Way to Secure Your Financial Future?

 

First-time homebuyers tend to focus on two things: The price of the home they’re buying and the monthly payment. And it’s entirely understandable. Affordability is key when you’re buying your first place—or any place, for that matter. And it’s especially relevant considering rising home prices across the country.

But there’s something else to consider: The future value of the home. Equity growth is likely something you’ve at least thought about if you’re in the market for a home. After all, the idea of paying someone else’s mortgage payment interminably instead of building equity in your own place has probably been driving you crazy. But let’s dive in a little further.

Appreciation in a nutshell

“Appreciation, or the rising of home prices over time, is how the majority of wealth is built in real estate,” said Forbes. “This is the ‘home run’ you hear of when people make a large windfall of money. While prices fluctuate, over the long run real estate values have always gone up, always, and there is no reason to think that is going to change.”

That makes real estate one of the more stable long-term investments. A paper from economists at University of California-Davis, University of Bonn, and the Deutsche Bundesbank (the central bank of Germany) culled together “the annual returns of treasury bills, treasury bonds, equities, and residential housing from 1870 to 2015 for 16 now-rich countries such as the US, Germany, and Japan” to study the effects of different forms of investments. They found that, “in the average wealthy country, the annual return on housing during that period was just over 7% when adjusted for inflation, while the return on equities was just under 7%,” said Quartz. “At the same time, the risk associated with housing was far lower. By standard measures of uncertainty, housing was about half as risky as equities, and slightly less risky than bonds.”

This is, obviously, important to those who are purchasing real estate for strictly investment purposes. But it’s also something to keep in mind when buying real estate for personal use.

Proving financial security later

“Paying off a mortgage during your working years allows you to remove a large expense from your plate during retirement,” said Forbes. “For retirees that see a drop in income once they start taking Social Security or pulling from their retirement accounts, this can be the difference between living a comfortable life and living paycheck to paycheck.”

And while it may be hard to look forward several decades and even try to picture what retirement will look like, especially if you’re just starting out, the idea of long-term savings is attractive nonetheless.

“Forced savings”

Need a little help saving? A house is great that way. “For those who haven’t made a habit of putting money away, paying a mortgage can create a savings cushion that renting cannot,” said Forbes. “Owning a home does not guarantee a higher net worth, nor does it remove the need to be financially responsible, but it does provide a structure within which one can build wealth.”

Buying young

The earlier you buy, the more wealth you have the opportunity to create. “Of today’s older adults, those who bought their first home from ages 25 to 34 accumulated the most housing wealth by their 60s — a median of around $150,000, according to a report by the Urban Institute, a nonprofit research organization,” said app. “In contrast, the median housing wealth for those in their early 60s who bought later (ages 35 to 44), was about half as much, at $76,000. Homeowners who bought after they were 45 had about $44,000 in housing wealth by their 60s.” What you do today can absolutely affect your future financial picture.

WRITTEN BY JAYMI NACIRI

Original Post

Smart Tips to Pay Your Mortgage off Early

New data shows that nearly 40 percent of all homes in the United States are owned free and clear, with “the highest share” in West Virginia at 54%,” said Bloomberg. “Maryland and the District of Columbia were on the other end of the spectrum with rates of 27% and 24%, respectively.”

When many a real estate dream is focused on the idea of buying a home and staying just long enough to earn enough equity to move up to something bigger and better, this may come as somewhat of a surprise. If you have considered the idea of buying a forever home (or if you’re already there!) and want to be amongst the almost 40 percent of owners living mortgage free, there are some tips that can help you move toward that zero balance.

Switch to biweekly payments

Say your mortgage payment is $2,000. Pay it once per month, and you’re paying $24,000 per year. Switch to biweekly payments of $1,000 every two weeks, and you end up paying $26,000 for the year. That adds up.

Say your mortgage payment is $2,000. Pay it once per month, and you’re paying $24,000 per year. Switch to biweekly payments of $1,000 every two weeks, and you end up paying $26,000 for the year. That adds up.

“This will have the nearly the same impact on your budget as one monthly payment, but because there are 52 weeks in a year, a biweekly payment schedule will result in 13 full-sized payments a year instead of the normal 12,” said The Motley Fool. You'll be making an entire extra payment every year without having to scrounge around for the extra money. To look at some real-life numbers, if you have a 30-year $200,000 mortgage at an interest rate of 5%, making biweekly instead of monthly payments would save you $34,328 in interest and allow you to pay off the loan almost five years early.”

Make extra principal payments

Especially in the early years of your mortgage, your payments are likely to be mostly interest. But you can eat away at your principal by making an extra "principal only" payment. “The benefit of paying additional principal on a mortgage isn’t just in reducing the monthly interest expense a tiny bit at a time,” said Bankrate. “It comes from paying down your outstanding loan balance with additional mortgage principal payments, which slashes the total interest you’ll owe over the life of the loan.”

Let’s use their example of a $120,000 mortgage at a 4.5 percent interest rate, with monthly principal and interest of $608.02. Pay an extra $25 principal payment every month and you can save more than $9,000 in interest over the life of the loan.

You’ll want to make sure you’re allowed to make these extra principal payments per the terms of your loan, however. “Check with your mortgage company first,” said Dave Ramsey. “Some companies only accept extra payments at specific times or may charge prepayment penalties.”

Refinance into a shorter-term loan

Can you swing a higher monthly payment? Refinancing out of a 30-year mortgage to a 15-term can save you an enormous amount of money. “A mortgage amount of $250,000 over 30 years at a rate of 4% would cost $429,674 in principal and interest payments by the end of the term,” said Investopedia. “The total interest would be $179,674 for borrowing for 30 years. The same loan amount and interest rate over 15 years would cost $332,860 by the end of the term. Total interest would be $82,860 for borrowing for 15 years. At 4%, you'd pay only about 46% of the total interest for a 15-year than you'd pay for the 30-year.”

There is a secondary benefit to refinancing to a shorter term; these rates are typically lower. At press time, Wells Fargo’s 30-year fixed mortgage rate was 3.875%, while the 15-year fixed rate was 3.125%.

Make small sacrifices

“Other small sacrifices can go a long way to help pay off your mortgage early,” said Dave Ramsey. “How much could you save if you took your Starbucks money and added it to your mortgage payment each month? According to the Acorns Money Matters Report, the average American spends $3 per day on their coffee. That’s around $90 a month added to your mortgage payments—which will save you $25,000 in interest and four years on the life of your loan!”

Be careful about refinancing

The idea of a lower interest rate is what largely drives refinances. But refinancing to a lower rate may not be the best move if it means you’re paying a bunch of fees and/or taking out cash that eats away at your available equity. If your goal is to get your mortgage paid off as quickly as possible, you may want to just leave your loan alone.

WRITTEN BY JAYMI NACIRI

Original Post

Watch Out For These Expenses and Fees When You Buy a House

When you’re preparing to buy a house, you might think about the purchase price, but that only tells part of the story. The costs of buying a house go well beyond what your mortgage payment would be. To truly figure out your budget and how much home you can afford, don’t forget to factor in other fees and expenses.

Down Payment

The down payment is what you’re going to need in cash, upfront to buy a house. It’s usually 10% or 20% of the purchase price. If you choose an FHA loan or a conventional loan, a down payment is required. For a conventional loan, your down payment depends on the lender. Some loans might require as little as 3% down. VA loans and USDA loans have stringent requirements but don’t require down payments.

Origination and Application Fees

When you work with a bank to get a loan, then you have to pay an origination fee. An origination fee is payment for the services required to create a loan. An underwriting fee might also be owed, and an application fee. The lender can also charge a fee for your credit report.

Origination fees can be anywhere from 0.5% to 1% of the loan amount. Origination fees may be negotiable, but not always. You might also hear origination fees called points or discount fees.

Origination and application fees are sometimes grouped together as closing costs. In total, closing costs will usually add up to anywhere from 2% to 5% of the purchase price of a home.

Title Fees

Title fees actually are part of the closing costs, but since some new buyers aren’t aware of them, they’re worth talking about on their own. Title fees represent the cost to transfer a home’s title from the seller to the buyer.

You might, for example, have to pay a title search fee. This covers the cost of searching for property records to make sure no one else can make a claim to the property you want to buy.

Insurance

There are two types of insurance that are especially relevant when you’re going to buy a home. There’s homeowners insurance, and then there’s private mortgage insurance (PMI).

Homeowners insurance is what’s going to protect you if your home is damaged. If you were the victim of a theft or a natural disaster, for example, homeowners insurance might cover your losses.

PMI is required by most lenders if you make less than a 20% down payment. PMI is a way for a lender to protect itself. Your PMI premium could on average be anywhere from .58% to 1.86% of the amount of your loan. Once you start building equity in your home by paying down your mortgage, you can eliminate your PMI.

Taxes

You may be responsible for taxes at closing. Usually you can expect to pay two months of property taxes when you close. Since most homeowners pay property taxes in advance, you might have to reimburse the seller for these. There’s also the potential you’ll have to pay a transfer tax. This is a tax for changing the title to the property. The amount you’ll pay in transfer taxes depends on where you live, and sometimes this is shared by both the buyer and seller.

Appraisal and Inspection Fees

If you’re going to get a loan to buy a home, you’re going to need an appraisal. An appraisal gives an estimated value of the home you’re going to buy. Lenders require it so that they know that you’re not overpaying for a home. Appraisal fees range from around $300 up to $1,000.

A home inspection fee is separate. A lender might want an inspection or you could want one for your own peace of mind. Inspection fees range from $300 to $500 most of the time. If you’re buying an older home you could also opt for a mold or pest inspection, each of which can be upwards of $200.

Real Estate Commissions

If you use a real estate agent, they’re going to get paid by commission, which is a percentage of the sales price. Sellers may pay these fees, but not always. You may have to pay them out of pocket, so be clear on the terms of your agreement. 

You may not have to pay all of the above fees, or you may have to pay even more. It varies depending on your state and individual situation, but you do need to be clear on any and all fees before you enter into an agreement to buy a home. Go over your loan disclosure carefully as well, and if you aren’t sure about anything, consider consulting with a closing attorney.

Original Post

5 Overlooked Factors That Can Affect Your Home’s Insurance Rates

Insurance rates—how are they even calculated? It can be complicated, but it all comes down to an algorithm that takes many variables into account. If keeping your rates as low possible is your number one concern, you need to know about these five factors that can affect your bottom line.

1. The age and condition of your house.

This is one of the most obvious factors and also one of the biggest. The age of your house and the wiring, pipes, roof, lumber, square footage, and even how many corners it has all play a role in the price of your insurance.

It comes down to the risk associated with the house and the costs that come with repair or replacement. For example, if your home was built in 1920, it may have old pipes and wiring that aren’t up to code. These materials come with a much higher risk of damage or fire, so the insurance companies will charge more to insure it.

2. In a flood zone? It can cost you.

Again, if the risk of destruction is high, your insurance will reflect it. If you have a beachfront home on the Gulf Coast, you can expect to pay more than if you’re in an area of the country where flooding is typically not a concern, such as the Midwest.

If you’re in any sort of flood zone and you have a mortgage on your home, your lender will probably require a separate flood insurance policy—and that costs money. Even if you aren’t in a flood zone, your mortgage company may still require coverage, so be sure to look into your lender’s requirements when you begin shopping around.

3. Some dog breeds can take a big bite out of your wallet.

In some cases, your family dog can bump up your premiums. Certain breeds, such as pit bulls and “bully” breeds, have a reputation of being more dangerous than others and historically come with larger liability concerns to your insurer, resulting in a higher rate.

Three things can happen if your dog is considered a “dangerous” dog breed: you could be charged a higher rate from your carrier, your provider may cover you but exclude any liability associated with the dog, or the carrier could decide not to insure you at all.

4. Your pool can put your rates in the deep end.

Pools, trampolines, and even backyard construction projects are in a category called attractive nuisances, which are recreational amenities added to a home that can raise liability concerns (and your rates) on behalf of an insurer. If there is something in your yard that can attract the attention of a minor and pose any level of danger, it will probably affect your insurance policy.

5. Proximity to the fire department affects your premiums.

If your house were to catch fire, how long would it take for the local fire department to get there? The faster they can get there and handle the situation, the better chance they have of minimizing the damage.

Every homeowner’s policy requires what’s called a Public Protection Class (PPC) rating. A PPC is rated between 1-10 (one being the best) and takes factors like proximity to the fire department, proximity and number of fire hydrants, municipal water towers, and even railroad tracks into account.

In some cases, you may be able to make some changes to help lower your rates, but never lie or intentionally exclude key information on your application—this could result in your coverage or renewal getting denied. Be honest with your agent, and they will help you find the right coverage and rate that works for your needs.

WRITTEN BY PAUL MARTIN, CPCU

Original Post 

Shopping For Mortgage Rates the Right Way

 When you’re getting ready to buy and finance  a home or perhaps refinance an existing  mortgage, one of the things you end up doing is shopping around for mortgage rates. Individual lenders set their own rates each and every day. Sometimes even more than once per day during an odd, but not unprecedented, volatile mortgage market. The Fed doesn’t set your typical 30 year fixed rate mortgage, it’s the individual lender. Yes, the Fed does affect mortgage rates but only indirectly. Some adjustable rates can reflect Fed actions but your everyday fixed rate loan is in the lender’s hands.

Okay, that said, how do you shop around for rates? Here are some things you should definitely do:

Shop for rates on the same day. 

Because mortgage rates react to certain market conditions, getting a rate quote on a Monday could be very different from a rate on Thursday. Market conditions can change in just a few days, so to be fair to yourself, set aside a rate shopping day and start making some calls. Note here, when you review rates on a website, pay attention to when the rate was posted. If it was a couple of days ago, you need to pick up the phone and make a few phone calls.

Shop at the same time of day.

Just as it’s important to shop around on the same day, you can also help by shopping at the same time of day as well. Again, things can change rather rapidly without your knowing and a rate quote in the morning might be different in the afternoon.

Shop for the same program. 

Only get a quote for the same exact mortgage program. You can’t compare rates for a 30 year loan with a 15, for example. And certainly don’t compare rates for a fixed with an adjustable. 

Points? 

If you’re getting 30 year quotes and you’re shopping in the morning, make sure you get the exact program and I mean exact. Get a quote for a 30 year loan with one point, for example. And also get the quote for the same ‘lock’ period. Most lenders offer various rate guarantees, or locks, at different periods of time. A lender might have a 10 day lock, a 30 day and so on. The longer the lock period, the higher the rate will be.

Finally, compare lender fees. One lender might have a much better rate than everyone else but that lender might also have higher loan charges.

It can be hard to compare apples and apples sometimes, but if you follow these steps, you’ll be doing exactly that.

WRITTEN BY DAVID REED

Original Post 

Washing Machines Spreading Deadly Superbugs

 

STORY AT-A-GLANCE

• Thirteen newborns in Germany were colonized with a dangerous bacterium after the washing machine used for their personal items began growing Klebsiella oxytoca, a bacterium normally found in the intestines, which may trigger life-threatening lung infections and damage
• The authors caution those doing laundry for people who are prone to infection, such as those who are immune compromised or the elderly, should take precautions with their machines at home. There are pros and cons to high efficiency top- and front-loaders and to standard top-loading machines
• Although front-loading washing machines are more prone to the development of toxic mold growth along the rubber gasket seal, even top-loading machines should be cleaned and sanitized routinely to reduce the growth of bacteria and mold, and to prolong the life of the machine
• While not implicated in the featured study, it bears noting that your dishwasher has the same type of rubber gasket to keep water in the machine and therefore the potential to grow mold and bacteria. Consider cleaning your dishwasher at least every two months to reduce your potential risk of exposure to mold spores

An early version of the washing machine was introduced in the 1850s and has since evolved from manual labor gear devices to high tech machines that assistance dogs are able to load and start.

Clothes used to be washed by pounding them on rocks or washing away dirt in streams and rivers. The metal washboard was invented in 1833 and by the mid-1800s a patent for the first washer was submitted.1 Interestingly, the machine invented in France was called the ventilator. After the washing machine, electric dryers began appearing in the U.S. just before World War I.

The first computer-aided washing machine sold to consumers was on the market in 1998.2 By 2019, computer-aided machines became smart devices able to connect to your smartphone.3 The machines detect dirt levels and adapt your washing cycles; some include a textile guard to protect synthetic fabrics.

Lee Maxwell was so enamored with washing machines he collected 1,600, now on display in the Lee Maxwell Washing Machine Museum.4 Commercial washing machines and dryers are used in hospitals.5 They make use of high extraction methods to save time and energy and are programmable to allow facilities the option of washing personal items, bed pads and mopheads efficiently.

Culprit: Rubber Ring on Front-Loading Washing Machine

In a published study in Applied and Environmental Microbiology6 it was revealed that 13 newborns and one child in a German hospital were colonized with Klebsiella oxytoca. The newborns were 1 week to 4 weeks old and, thankfully, none became seriously ill from the known superbug.7

The bacteria were passed on knitted socks and hats used to keep the babies warm; they had been washed in a machine found on the hospital unit. Ricarda Schmithausen, a hygienist from the University of Bonn, pointed out the machines did not meet standards for hospital use and were used only for the mothers’ clothes and baby wear.

Klebsiella oxytoca occurs naturally in the intestines but may cause severe infections outside the intestinal tract.8 Most infections happen in the health care setting. Long-term complications are uncommon, but lung infections may result in damage and can be life-threatening. Hygienist Martin Exner from the University of Bonn commented on the results of the study:9

"If elderly people requiring nursing care with open wounds or bladder catheters, or younger people with suppurating injuries or infections live in the household, laundry should be washed at higher temperatures, or with efficient disinfectants, to avoid transmission of dangerous pathogens."

The physicians found the superbug on the babies’ skin, but it did not trigger infections. Tests ruled out the bacteria being passed from the mother or health care workers. Ultimately the team learned the source was a rubber door seal on the washing machine.10

The authors cautioned that those doing laundry for individuals susceptible to infection, such as the elderly or people with a compromised immune system, may need to take precautions with their machines at home to avoid transmitting pathogens.

It may be important to be especially careful of energy efficient front-loading washing machines. These use lower water temperatures and rely on a rubber seal to contain the water in the machine.

Top-Loading or Front-Loading Washing Machine

When it comes to purchasing a new washing machine and dryer for your home, the options seem nearly limitless. Washing machines may start at $275 and go as high as $2,500 or more. Some even multitask and allow you to wash two loads at once or go straight into a drying cycle without touching the clothes.

Consumer Reports11 tested machines to determine cleaning efficiency and how gentle they were on fabric. Older machines use an agitator and load from the top. They're the least expensive with the shortest cycle times but are tougher on fabric and may increase water pollution leaving your home.

High-efficiency top loaders use less water and extract more of it, which shortens the amount of time you run the dryer. A front-loading machine is gentle on fabric and uses the least amount of water. In addition, front-loading machines may be stacked to save space. However, washing times are usually much longer and Consumer Reports finds mold can be a problem, especially in front loaders.

A high-efficiency top loader takes from 60 to 80 minutes to wash your laundry, compared to the 60 to 120 minutes of a front loader.12 The top-loading high-efficiency washing machine is gentler on your clothes than a standard and offers savings in water, detergent and energy.13 While all washing machines carry a risk of developing mold growth, it may be more difficult to keep a front-loading machine dry and clean.

Is There Mold in Your Washing Machine?

Top loaders and front-loading machines have the potential for growing mold and bacteria when the lids or doors are kept closed, which maintains a moist environment. However, front loading machines seem to have more problems as water has the potential to accumulate behind the rubber seal without any visual sign of mold.

When mold is there, each time you open the door, tens of thousands of spores may be released into the air. The problem has become so widespread that Whirlpool,14 Frigidaire15 and others have faced class-action lawsuits alleging front loading machines collect water and trigger the growth of mildew and mold.

Ruth Ogden reported she threw out hundreds of dollars of clothing when she believed the odor from her clothes was the result of her teenage son’s sloppy habits.16

One group of environmental testing professionals17 wrote the odor emanating from front-loading machines is a combination of a chemical release from microbial volatile organic compounds, similar to traditional volatile organic compounds released from paints and petroleum-based products.

The introduction of toxic mold spores to microbial, volatile organic compounds increases the potential health risks from chronic exposure. One woman described the scent, saying:18 “It kind of smells like a turtle pond.” In 2016 one class action lawsuit involving 6 million people was resolved and the participants received up to $50 in cash or a discount on a new appliance.

Protect Your Family From Mold and Bacteria in the Wash

All machines require a deep cleaning at least twice a year to prolong the life of the machine and reduce bacteria and mold growth.19 Front-loading machines may have a few trouble spots requiring extra attention. There are a few things you can do between deep cleanings to reduce the risk of mold and bacterial growth:20

• Leave the lid or door open after each washing to allow the machine to dry
• Take your clothes out promptly and use high-efficiency detergent in high-efficiency machines
• Use a dehumidifier in the laundry room if the humidity remains above 60%
• Clean the washer by using white vinegar in a hot water wash, without any clothes in the machine
• Wipe down the door and rubber gasket after each wash in a front-loading machine

Clean the inside of your machine every six months with a solution made with white vinegar. Vinegar is natural and mildly acidic, and will kill up to 82% of all mold species.21 It can be sprayed on the interior between washes. Fresh lemon is also an acidic mold killer, but I don’t recommend it as a leave-on spray because substances that break down may encourage mold growth.

Use a microfiber cloth to wash and dry the outside of the machine as well, since this removes visible grime where floating mold spores may colonize.22 Pay close attention to the top lid or door, as well as any small areas where you may need to use a toothbrush. Even if you don't see scum, you still want to clean the rubber door seal and lid or door.

Remove any dispensers used for bleach or fabric softener, even if you don’t use them. Wash these in the sink and dry thoroughly. After scrubbing out the inside of the tub, pour in lemon juice or vinegar and run the machine on the hottest setting to help remove stains, detergent buildup and mineral deposits.

Your Dishwasher Has the Same Rubber Ring

It's important to remember that dishwashers have the same type of rubber gasket, and that running the dishwasher does not clean the interior. It does increase the humidity inside the machine, which raises the risk of spreading mold spores throughout your kitchen.

Clean your dishwasher by taking out the detachable racks and using a towel or toothbrush to remove any scum you find.23 Next, replace the rack and fill a container with a cup of white vinegar. Run the machine completely empty with a cup of vinegar in the upper rack on the hot water cycle.

This helps to clear out detergent buildup, dissolve minerals and neutralize food odors. Once finished, sprinkle 1 cup of baking soda on the floor of the dishwasher and run it on the hot water cycle. Repeat these two steps every two months to prolong the life of your appliance and reduce the growth of any mold or bacteria.

Analysis by Dr. Joseph Mercola

Original Post

Home Sales Rise as More Sellers Cut Prices and Grant Concessions to Buyers

Home sales ticked up to their highest levels in a year last month as more sellers tried to sweeten the pot for buyers with price cuts and concessions.

Deterred by climbing home prices and high mortgage rates and homeowners insurance costs, would-be buyers backed out of deals at record levels in October, according to a new report from real estate brokerage Redfin. As a result, nearly a third of home sellers are making compromises to close the deal, including slashing prices and paying for closing costs, among other concessions.

“Home prices are high, mortgage rates are high and insurance costs are high, and when buyers see the final number, a lot of them are backing out,” Redfin Tampa Sales Manager Eric Auciello said in the report.

Homebuyers are backing out, sellers cutting prices

Pending home sales increased 1% from September to October, reaching their highest level in 12 months. While they sales are down 4.8% year-over-year, the annual decline was the smallest in nearly two years.

The housing market is far from ideal for buyers, even as mortgage rates fell (slightly) to 7.44% for the week ending in Nov. 16. The median U.S. home sale price climbed 3.5% last month to $413,874, and although the supply crunch eased a bit in October, the historically low number of homes for sale is keeping prices elevated and options limited.

Even though pending sales have crept up in the past few months, the number of closed home sales has continued to decline. Last month, closed sales were down 12.5% year–over-year.

Redfin found that a 54,000 home-purchase agreements were canceled in October. That’s 17.2% of homes that went under contract the same month, the highest percentage recorded by Redfin since it started tracking home sale data in 2017.

“Buyers want turnkey houses because everything is so expensive now, whereas in 2021 and 2022, they felt lucky to get any house,” Redfin Premier agent Heather Mahmood-Corley said in the report.

To compete in a tough market, sellers are slashing prices and yielding to buyers with concessions to close deals. Almost 21% of homes sold in October had a price cut, and 35% of sellers are offering concessions like cash for mortgage-rate buydowns, repairs or closing costs.

That said, Redfin expects the cancellation rate for home-purchase contracts may decrease in November thanks to declining mortgage rates.

Top 10 cities for home-purchase agreement cancellations

The following metropolitan areas saw the highest percentage of pending sales fall out of contract in October, according to Redfin:

• Jacksonville, Florida (25.3%)
• Atlanta, Georgia (24.6%)
• Orlando, Florida (23.7%)
• Fort Worth, Texas (23.6%)
• Fort Lauderdale, Florida (23.4%)
• Las Vegas, Nevada (22.6%)
• Tampa, Florida (22.1%)
• Houston, Texas (21.9%)
• Riverside, California (21.4%)
• Phoenix, Arizona (20.5%)

By: Mary Ellen Cagnassola

Photo: Olive Burd / Money; Getty Images, Shutterstock

Original Post 

USPS Changes Procedures for Changes of Address

According to a recent report on FOX Business, the U.S. Postal Service has initiated a new process for people who are moving and submitting a change of address for mail forwarding.   The new process introduces a more secure way to verify the customers’ identity by confirming their address change via a QR code sent to their email.  Then, you must then take your ID or driver’s license with that QR code to the post office in-person.

“Today a customer that submits a ‘change of address’ request must have their identity verified…There are three ways to initiate a change of address request: online, visiting a local retail office, or submitting the request by mail,”  James McKean, senior public relations representative, told FOX Business.

BY BRAD BECKETT 

Original Post

This French App Will Change the Way You Grocery Shop

 

Scan a barcode, any barcode. Yuka will give it a score.

Yuka’s arrived Stateside.

The health app has proven a sensation in France since it launched back in 2017. Using Yuka’s nifty barcode technology and an extensive database of registered products, consumers are able to summon definitive ratings of the snacks, drinks and ingredients they find along grocery store shelves — or already sitting in their own pantries.

Designed by brothers Julie Chapon, François Martin and Benoit Martin, Yuka became enough of a phenomenon in France that one supermarket giant, Intermarche, vowed to reform 900 of its saltiest/sweetest recipes. And it took a minute, but Yuka is now making waves on this side of the pond; it’s currently the fourth-ranked free health and fitness app in the App Store.

Spoiler alert: we’re fans, and we think you should download it. But the app has weathered some criticism as of late, especially from TikTok dietitians. Here’s how to use it, why you should and the reason a subsection of people are upset.

Plus: a sneak peak of the worst rating we’ve seen on the app yet.

How it works

Yuka’s a pretty instinctual app, and especially now that we’re so used to pointing our phones at “QR code menus” in restaurants. The homepage is a camera with a scanner, capable of capturing any product barcode in the app’s system. It’s uncommon that Yuka doesn’t have a product in its database, though the app’s international rollout is ongoing, so we can excuse them for not having information on every obscure granola bar at Whole Foods. Users are able to enter information for a product themselves, if the spirit moves them.

Once you’ve scanned an item, its product page pops up, with a score out of 100 and a traffic cone-type rating from red (bad) to forest green (excellent). Beneath will appear a summary of the product’s negatives and positives. The former might point out that the product has “additives to avoid,” like texturizing and anti-caking agents, while the latter might celebrate a product’s richness fiber, or lack of sugar.

We’re here for the recs

Everything you scan is permanently accessible under the History tab. And in the event that a product doesn’t receive a rating over 50 (the bare minimum to qualify as “good” in the Yuka app) it will also appear under the Reco tab, next to a product that you might consider subbing it for. In the wide world of wellness, this is typically where apps start to shill for brands, but Yuka is fiercely independent. It refuses to accept money from brands, and earns its bread via a sliding scale membership that maxes at $19 a year.

Personally, we think the flat fee is worth it, as it offers A) unlimited search of the Yuka database (otherwise you can only fetch the information of products you’re literally holding in your hand) and B) allows for offline scanning (which is clutch, considering how many grocery stores are underground…though admittedly, this is mainly an issue in urban areas).

At any rate, the free version of the app will auto-generate alternatives to whichever scanned product didn’t make the grade. It’s an appreciated and actionable extra step; when we learned our oat milk was chock-full of preservatives, we switched to one with no hazardous substances or synthetic herbicides. And after whimsically scanning our 4:00 office snack of choice (salt and vinegar potato chips), we discovered nominations for popcorn, seaweed snacks and nuts in a similar seasoning.

0/100

One of our favorite things to do with Yuka is find “foods” (relative term here) that throw up a goose egg. It helps to pay for premium here, so you can search on a whim, though there’s an aisle at the grocery store — you know the one — where 100 products would have a hard time adding up to a 100 rating…combined. Some proud zeroes: Cheetos Puffs, Captain Crunch, Coke. Anything with an anthropomorphic mascot is likely hovering down near nothing.

Meanwhile, there are plenty of “comfort foods” that draw somewhere between 5 and 30 points, due to crazy amounts of salt, or fat, or food coloring. We didn’t find this to be particularly surprising for any products. Of course Kraft Macaroni and Cheese, for instance, got a bad rating. We’d be more concerned if it rated well, as Yuka’s categorization strategy (which assesses a product’s Nutri-Score, use of additives and organic origins) would lose all credibility.

Finding a zero or similar in the wild is a reminder that highly-processed crap is still going strong. Is there ever a world where it makes sense to eat something without a single nutritional point of value? Not really — but maybe there’s something freeing in knowing that you can partake of nutrition’s absolute rock bottom once in a while (big games, road trips, birthday parties) and be okay.

“Clean eating”?

In order to combat self-defeatist diet cycling, nutritional experts have championed “intuitive eating” in recent years, imploring adults to stop thinking of foods as “good” or “bad,” and to start thinking about how food makes them feel — both in the moment, and in general. The idea being: same as the bladder or a knee, the body sends important biological clues as to whether it can handle a certain type of food, in a certain amount, at a certain time of day.

Fad diets, meanwhile, tends to advance inane and impersonal rules that put way too much pressure on their desperate followers. When these dieters slip up, they sometimes devolve into what’s known as the “what-the-hell-effect,” eating even more than they did before they signed up for their new meal plan. Some have expressed concern that Yuka advocates for a problematic and unattainable “clean eating” diet, via which its devotees will grow obsessed with the ratings of food, and swear off any products with too many calories or artificial ingredients.

Which is possible, of course. But it’s also a pretty depressing take. Yuka is no cult; it’s a tool. The reason it’s gotten so popular is because it’s meeting people where they are — the scanning tech, the out-of-100 rating…these are things that are more easily digested than poring over the vitamin percentages in a Nutritional Facts chart. Yuka’s system is by no means perfect, but that’s something that people need to learn from themselves along the way. (For example: the app tends to dock points from products like peanut butter, or extra virgina olive oil, for being too fatty or caloric. But these are healthy foods that just happen to be hefty.)

The rating is more of a guidepost. What’s the difference between a 78 and an 84? Well, who cares? Those are good scores, which capture the general essence of a product — go ahead, make a meal with it. The shitty ratings down near the bottom are the ones you probably shouldn’t see as negotiable. In other words: Yuka can disseminate an honest appraisal on the merits, or lack thereof, of a sugar-rich yogurt. But if you’re trying to reach a consensus on whether it would be healthier for you to cook sockeye salmon or Arctic char tonight, you’ve lost the plot.

TikTok critiques

Another critique, meanwhile (you can find some anti-Yuka sentiment on TikTok here) revolves around the perceived lack of respect that Yuka reserves for the inflated cost/paltry serving size of its recommended products. And it’s true — Yuka sort of just slots in whatever it’s determined as healthier, without acknowledging the fact that sometimes, the “lesser” product is simply more convenient.

But hey, Yuka’s job has to stop at some point. It’s free, after all. Perhaps that’s just where the app leaves you? Parents are especially familiar with the imperfect mental calculus that grocery shopping requires. Building out a fridge, pantry and snack drawer that satisfies a household’s worth of stomachs is a thankless ask. Yuka brings some order to the madness, though, by rooting out obvious no-gos, offering a bit of nuance between products that seem like the same thing, and suggesting a step away from brand loyalty, at least once in a while.

There’s also an aspirational/inspirational bent to the app; you could let bad ratings get you down, or you could try adding some good ratings to your weekly lineup. While we respect the tireless work that nutritional experts have done on this side of the 2020s to combat dietary obsession and weight loss culture, let’s remember: there is nothing wrong with pointing out that a particular food is healthy. Maybe there are no “good” foods, but there are certainly good decisions. Downloading Yuka is one of them.

BY TANNER GARRITY

Original Post

Huge Drop in Mortgage Rates After Friendly Inflation Data

 

November 3rd's jobs report brought an outstanding week for Treasuries and mortgage rates to an outstanding conclusion.  From there, the following week (last week) was sorely lacking in inspiration.  Markets were anxiously awaiting today's release of the Consumer Price Index (CPI) and it did not disappoint.  

If we had to pick the single, biggest consideration for interest rates these days, it would surely be inflation. CPI is the biggest market mover among the inflation reports and this one left no doubt.  By merely coming in 0.1% lower than expected for the month, CPI sparked one of the biggest single-day bond market rallies since last year (incidentally also due to a CPI report in November 2022).

While this is important confirmation of the prospective shift away from the recent rate ceiling, there are other economic reports and other factors that could make for a bumpy road on the way down.  In fact, we should keep in mind that there have been a few "false starts" in rates that have looked quite a lot like the past few weeks only to give way to another surge toward higher highs.  

Either way, it will be the balance of economic data and the Fed's response to that data that will do the most to dictate the broader trends in rates.  On that note, tomorrow morning brings more important reports.  The Producer Price Index and Retail Sales are certainly not on the same level as today's CPI, but if they speak loudly enough and in unison, they could add momentum to today's improvement or make a case for more consolidation before rates move any lower (equivocal, but accurate). 

By: Matthew Graham

Original Post

Definition of Mortgage Rates: What Are They Really?

Key Concepts

• Mortgage rates are interest rates on home loans
• There are really TWO mortgage rates: the interest rate (or “note rate”) applied to your loan amount (or “principal”) and the rate implied by certain upfront costs (the “effective rate”).
• APR (Annual Percentage Rate) attempts to convey that “effective rate.”
• Understand the tradeoffs between upfront costs and payments over time

Principal (definition): the current balance of a loan/mortgage. In the absence of any additional costs or fees, the initial principal balance of a mortgage is whatever was borrowed to buy the home. Let’s say you buy a $200,000 home and are able to make a $10,000 down-payment (an upfront payment that reduces the amount of money borrowed). The principal in this case would be $190,000.

Principal also refers to the remaining balance after a mortgage payment. Each payment is typically contains some interest for the lender and can also contain property taxes, homeowners insurance and mortgage insurance. Whatever is left over goes toward reducing the principal balance (the amount you owe, which is slightly different from a “payoff balance”). In other words, as you make payments, the amount you owe decreases. When that amount reaches zero, you own the home outright!

Payoff vs Principal: If you’ve refinanced or sold a home before, you may have noticed that the amount required to pay off the old mortgage was slightly higher than the principal balance on the mortgage. This occurs because your monthly mortgage payment covers interest charged during the previous month. If you pay-off your loan in the middle of any given month, the lender hasn’t yet collected interest for that month. They’re not going to charge you for the entire month, however, only the number of days between the 1st of the month and the payoff date.

For example, your mortgage payment on June 1st would cover interest for the month of May. If you pay off your loan on June 10th, the lender has not yet been paid interest for those 10 days, and will add them to your payoff amount. This is true for both purchases and refinances. Many lenders charge a small additional fee to obtain the payoff balance for administrative costs associated with an early payoff.

Mortgage Rates are simply the interest rates applied to the principal balance, but there is an important distinction. What most people refer to as “mortgage rates” are actually only part of the equation. The more accurate term would be “note rates.” This refers to the interest rate on the promissory note (an official document that you’ll sign during the mortgage process).

Think of the promissory note and the note rate as a sort of baseline for the overall cost of financing. While it’s true that the note rate is 100% responsible for determining the monthly mortgage payment, it’s typically NOT the only cost of financing. Most mortgages have an “upfront cost” component.

Upfront costs are charged by multiple parties (examples include: lender, appraiser, credit bureau, local government taxes, homeowners insurance companies, attorneys/title company, etc.) Most of these costs will not change regardless of the loan type or the lender, but some will.

Upfront lender-related fees are common. They add to the overall cost of financing. Therefore, the NOTE rate differs slightly from the actual or “effective” rate you’re paying on your money.

The Truth In Lending Act stipulates that lenders must quote that effective rate in the form of APR or annual percentage rate.  If you don’t read anything else on APR, it’s important to know that not all lenders calculate them the same way, and APR can’t necessarily be trusted as an apples to apples comparison between two or more lenders.

For the purposes of understanding mortgage rate building blocks, we’ll simply use the term “upfront costs.” Whether we’re talking about the interest portion of your mortgage payment or upfront lender-related costs, it’s all money that ends up going from your wallet to the lender. In most cases, you have some say in dividing up the lender’s upfront income versus their income over time.

For instance, you will typically have the option to pay more upfront in exchange for a lower interest rate. The industry has long referred to this type of extra upfront payment as “points” or “discount points.” Despite any negative connotation from certain financial media pundits, points are neither good nor bad--simply a choice to pay now or pay later.

Only you can decide which way makes most sense for your scenario. The only thing that really matters is the trade-off between the two choices.

If you invest your extra cash and earn a certain rate of return, you may be better off minimizing your upfront costs and putting that money into your investments.

If, on the other hand, you wouldn’t be earning a great return on that money and you know you’ll have the mortgage for a long time, it may make sense to “buy down” the rate with additional upfront cost.

Your lender should be able to show you the difference between those options in terms of the number of months it will take to break-even on the additional upfront cost. For example, you would pay $1200 in extra upfront costs and $14 less per month in scenario B. It would take 86 months to break even because $1200/$14 = 86.

SCENARIO A:

Upfront costs: $5000

Payment: $2000 per month

SCENARIO B:

Upfront costs: $6200

Payment: $1986 per month

86 months (or 7.16 years) is a fairly typical break-even time frame when you buy-down your rate. Break-evens vary from lender to lender and from rate to rate. In cases where the break-even time frame is 4-5 years or less, it’s an increasingly compelling option for people who plan to keep the new mortgage for a long time and who don’t have a great place to earn a high rate of return.

The bottom line is that it’s your choice and there’s no right or wrong way to do it.

In terms of understanding mortgage rates, the important concept is that of “upfront cost” vs “cost over time.” For any interest rate you hear about or see online, there are certain assumptions underlying that quote. It could be based on higher upfront costs than you had in mind or a higher credit score than you have (read more about how credit and other individual factors can affect rate. You won’t ever be able to know the actual rate until you know what those assumptions are.

NOTE: In lieu of choosing a mortgage with a higher rate and lower upfront costs, you may be able to increase the new mortgage balance in order to pay the costs--sometimes referred to as “rolling in.” This would keep the interest rate the same, but the payment would still be slightly higher because the loan balance is slightly higher. You’d also need to consider the fact that you’ll have more principal to pay off when it comes time to sell or refinance. Even then, this can sometimes be a more appealing option than raising the rate to cover the costs--especially if the upfront cost savings happens to be minimal between the quoted rate and the next rate higher (remember, they vary from rate to rate and lender to lender).

Original Post

Real Estate Ten Commandments

 

4 Reasons It's Actually a Good Time to Buy a House (for Some People)

A record number of Americans think it’s a bad time to buy a house, and with housing costs near an all-time high, it's hard to blame them.

Mortgage rates are higher than they've been in decades, and the sales price of the typical American home — $394,300 — has shot up about 40% in the last four years.

For many would-be homebuyers, this is a uniquely difficult time to get into the real estate game. But for some people, experts say, it's actually opportune.

With so many people spooked out of the market, there's a lot less competition (and a lot more negotiating power) for those willing to tough it out.

And while navigating a house hunt under the current conditions certainly isn't for everyone, buyers with good credit and enough cash to make a sizeable down payment can shield themselves from some of the pain of high interest rates — or rely on a well-padded savings account until they can eventually refinance.

If you're determined — and financially ready — to buy a house right now, here are four reasons the odds could be in your favor:

The housing market isn't so crowded

During the pandemic, mortgage rates were near historic lows, which drove up demand and led to bidding wars that pushed home prices well above asking. Current mortgage rates (which are hovering around 8%) and the fact that people who bought homes in 2020 and 2021 now feel "locked in" to their ultra-low rate (which is closer to 3%) have led to a shortage of homes for sale.

But there are also fewer homebuyers these days, and there's less competition between people who are in the market. That gives prospective buyers a lot more leverage than their pandemic-era counterparts — especially if the listing they're eyeing was posted weeks ago (or longer).

"When something's been on the market... there's typically more of an opportunity to negotiate, whether it be price or terms," says Sarah Glovsky, senior vice president at The Charles Realty in Boston.

Most of the buyers Glovsky has worked with recently have been able to seal the deal with traditional offers, comprehensive home inspections and contingencies that let buyers back out of a purchase if they're unable to secure a loan. That wasn't the case during the pandemic-era home buying frenzy, and if mortgage rates drop swiftly, it won't be the case in the future, either.

Qualified buyers can keep interest rates at bay

When mortgage rates are high, all-cash buyers have two major advantages: They get the benefits of less competition while avoiding the burden of large interest payments. That's why more than a third of home purchases were made by all-cash buyers in September, the highest level since 2014, according to Redfin.

Home buyers with good credit scores and enough money on hand to make sizeable down payments also have a leg up, though to a lesser degree. Mortgage lenders offer better rates to these buyers, and offering up a large down payment reduces the size of their loan.

Glovsky says about half of the deals she's brokered in the past year have been all-cash deals. And even though many of her clients are still financing their home purchases, she says, more buyers are putting closer to 35% down; up from the traditional 20% down payment.

Selma Hepp, chief economist for CoreLogic, says this is especially true for Americans moving out of expensive cities to smaller, more affordable markets, where the equity they've gained in their previous home goes much further.

Some older Americans who are ready to downsize may also have an advantage in today's market.

"If they have a lot of equity in their home, or own the home free and clear, they can cash out basically and buy the next home with cash," Hepp says.

For everyone else — that is, buyers willing to stomach a 7% or higher interest rate — there's always the option to refinance down the road, and replace their mortgage with a new loan when rates are more favorable. Keep in mind that this can be risky: It's a gamble when rates will fall (and by how much) and refinancing comes with additional costs.

Home sellers are more motivated to close

The fall and winter months are historically slow for the real estate market since it's hard for families to relocate during the school year and people are less inclined to move during the holidays or in bad weather.

That means, in many cases, the homes put on the market around this time of year "are being sold by people who need to sell and not by people who want to test the market," Glovsky says. "You may be able to negotiate."

When more buyers are looking in the spring, there's a good chance that the home you end up falling in love with will get multiple offers, she says. If you find a great home now, that's far less likely.

In a slower market, buyers can also try to get rate buydowns, where the seller pays to essentially lower the mortgage rate for a couple of years, Glovsky says. In a 2-1 rate buydown, one of the most common of these concessions, a home buyer with a 7% interest rate would pay 5% for the first year of the loan and 6% for the second.

Next year could be even worse

High mortgage rates may be an obstacle for homebuyers well into 2024, or longer. The Federal Reserve is still focused on controlling inflation, and the agency says it's not even considering interest rate cuts right now.

There's also uncertainty about where home prices are headed, and experts at CoreLogic and housing economists at real estate firms like Zillow are forecasting that even higher prices are in store, due to the lack of inventory.

The truth is, nobody knows what will happen next, and for people who can comfortably afford it, the age-old advice that buying a house is a good investment still holds true.

"Simply because home mortgage rates are higher and have, in fact, wiped out some of the purchasing power for homebuyers, [is] not in itself a reason to not buy," Hepp says.

By: Pete Grieve
Editor: Kristen Bahler

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Image = Rangely Garcia / Money

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Pre-Approved vs. Pre-Qualified: What’s the Difference?

Pre-Approved vs. Pre-Qualified: What’s the Difference?

When shopping for a loan, lenders might encourage you to get a pre-approval or pre-qualification. Either of these terms indicates you meet at least some of the lender’s requirements to take out a loan. But, understanding the differences can be helpful as you navigate the lending process. Let’s explore the distinctions between pre-approved vs. pre-qualified and what the difference means for prospective borrowers.  

What is a pre-approval? 

Every lender has a distinct process, which means a pre-approval might mean different things to different lenders. But in general, a pre-approval involves a close look at your finances, which can lead to higher approval chances for the actual loan. 

For some lenders, there’s no difference between pre-approval and pre-qualification. For example, getting a preapproved credit card offer or personal loan might not look very different from getting pre-qualified.  

But in the realms of real estate and auto lending, a pre-approval tends to carry more weight than a pre-qualification. For example, a pre-approval usually involves a relatively comprehensive look at your financial situation.

The application might include documentation of your income through bank statements, pay stubs, and tax returns. Plus, mortgage and auto lenders often require a hard credit check as a part of this process, which shows up on your credit report.
   

What is a pre-qualification? 

A pre-qualification often means the lender has conducted a review of your creditworthiness to determine whether or not you might qualify for a loan. But it’s not a guarantee that your loan application will be approved.  

In most cases, the lender will request some baseline information about your finances. For example, you’ll often need to provide your annual income, housing costs and agree to a soft credit inquiry. 

However, the information can be self-reported, which means you won’t have to dig out your bank statements or tax returns.  

The pre-qualification indicates that you are likely to qualify for the loan. But when you want to finalize the loan, you’ll need to submit a formal application that includes documentation of your financial situation.  

Pre-approved vs. pre-qualified: What are the key differences? 

As you navigate the borrowing process, both pre-approved and pre-qualified are preliminary steps in the application process.  

Even if you obtain either of these documents, you’ll need to submit a final application before you are officially approved for the loan. But the two options aren’t entirely the same. Below is a breakdown of the key differences between pre-approved vs. pre-qualified below.  

Depth of assessment: Generally, a pre-approval is more comprehensive than a pre-qualification.  

Level of commitment: Some pre-approvals involve a hard credit inquiry, which impacts your credit score. With that, a pre-approval can involve more of a commitment than pre-qualification. If you are closely managing your credit, then you might choose to stick to pre-qualifications to avoid the hard credit inquiry until you are ready to take out your loan.  

Verification of income: Many lenders will require a more extensive look at your income if you’re seeking a pre-approval. For example, prospective home loan borrowers may need to provide paystubs for pre-approval but just an estimate of their income for pre-qualification.  

Reporting: Pre-approval involves a thorough evaluation of credit, income, and financial history, while pre-qualification is a preliminary estimate based on self-reported information. 

Timeline: In many cases, a pre-qualification is faster to receive than a pre-approval. While a pre-qualification might happen in minutes, it might take days to get a pre-approval.  

The type of credit you are seeking might have an impact on the process. For example, receiving pre-approved credit card offers in the mail might be the same as a pre-qualification. But if you’re applying for a mortgage, the pre-approval process tends to be more involved.  

Pre-approved vs pre-qualified: Taking the first step 

Whether you are pre-approved or pre-qualified, it’s generally the first step in the loan approval process. If your financial situation doesn’t pass this first test, you’ll have the opportunity to improve it before officially applying for the loan.  

FAQs  

Does being pre-approved mean I’m guaranteed a loan?  

No. Being pre-approved for a loan doesn’t mean you are guaranteed to obtain a loan. Although a pre-approval is a good sign for your ability to get the loan, it doesn’t mean the lender is ready to finalize the loan. It’s possible a further review of your finances will lead to a loan denial.  

Can I opt out of credit offers?  

Yes. It’s possible to opt out of prescreened loan offers. You can sign up to opt out of credit offers at optoutprescreen.com.  

Does pre-approval or pre-qualification affect my credit score?  

For credit cards, neither pre-approval nor pre-qualification should have an impact on your credit score. When you submit a formal loan application and agree to a hard credit inquiry, your credit score might be impacted. But for some mortgage preapprovals, your credit score might be impacted. 

By: Sarah Sharkey | Edited by Rose Wheeler

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The 9 Best Tips on How to Find a Property for Profitable Investing

Over the years real estate has proven to be one of the most profitable investing strategies.
Unfortunately, this doesn’t mean that just any investment property will bring high return and success to its owner. The secret to making money in real estate is finding profitable rental properties. If you are a new real estate investor with no experience in the business, don’t worry because you’ve come to the right place. In this article we will provide you with the best tips on how to find a property for profitable investing.

Tip #1: Buy a Property in a Top Real Estate Market

Anyone in the real estate industry will tell you that location is the first and foremost factor for a profitable investment. Where your rental property is located will determine the price you have to pay for it, the rental demand, the best rental strategy, the type of tenants you can expect, the rental rate, the occupancy rate and vacancy rate, and ultimately the return on investment. Thus, the first thing which any investor preparing to buy a property should do is to read about and research the best places for real estate investing in the US housing market. Don’t make the mistake of many beginners who focus on large cities only. Sometimes small towns and even villages offer a much higher return than major cities. For example, according to data from Mashvisor, a real estate data analytics company, the census-designated area with a population of about 7,000 people, Joshua Tree, has been one of the top locations for Airbnb rentals in the past few years.

Tip #2: Don’t Spend More Than What You Can Afford

As a beginner investor, you should always start with a small, cheap, easy-to-manage property. After all, the best investment property is the one which you can afford and which you can manage. To find such a property, you should prepare a budget. On the one hand, factor in your savings, the income from your full-time job and other sources, and the money you expect to make from your rental property. On the other hand, make a list of all the one-time and recurrent costs associated with buying, owning, and managing an investment property such as the property price, appraisal cost, home inspection fee, closing fees, fixes and repairs, monthly mortgage payments, property tax, insurance, property management, maintenance, and others. In this way you will be able to figure out exactly how much you can afford to spend on a property without risking a foreclosure.

Tip #3: Find the Best Financing Method

One of the great things about real estate investing is that you have many financing options to choose from. You can go for a conventional mortgage, a hard money loan, a private money loan, a syndication, or a partnership, to mention a few possible choices. You should study each option carefully and decide on the best one for your particular case, based on their pros and cons and your specific situation.

Most probably, as a first-time investor, you will end up taking a mortgage loan. In this case, it is advisable to make the down payment as big as possible, without overspending on it of course. The higher your down payment is, the faster you will be able to repay your loan and the less money you will end up spending on repayment. Figuring out the best financing method is crucially important for profitable real estate investing.

Tip #4: Use Different Sources for Your Property Search

To find a property for profitable investing, you should put efforts into searching for properties for sale far and wide. Now that you know where you want to buy an investment property and how much you can afford to spend on it, start checking out local newspapers and real estate websites with both MLS listings and off market properties, talk to your friends and acquaintances, network with other investors in the area who might be selling a property, and connect with a local real estate agent. Each one of these sources will have access to a different kind of properties, and you should check them all out before deciding on the best type of investment property for you and narrowing down your choice.

Tip #5: Consider Investing in a Foreclosure

The most lucrative investments in real estate are those properties which you can buy below market value. Thus, you should consider investing in a foreclosed property. Forget the popular myth that foreclosures are always houses in a dire situation which makes them bad real estate investments. To the contrary, it is feasible to find a foreclosed property in a good shape which will bring you high return on investment. The reason is that you will most likely pay only a fraction of the fair market value of the property as the bank or other financial institution is trying to get rid of it quickly, while you can still charge full market value rental rate.

To find foreclosed properties to invest in, talk to the banks in the area, search for specialized real estate websites with foreclosed property listings (including government agencies’ websites), and look for agents who work with foreclosures.

Tip #6: Hire a Real Estate Agent

Avoid the mistake of many first-time real estate investors who think they can manage the whole process of finding and buying a property on their own. It is recommended to look for an agent who works mostly with property investors and hire him/her to help you along. Your agent will be able to help you find lucrative properties for sale, connect you with lenders, prepare the offer, negotiate the best price, and close the deal quickly and smoothly. Moreover, you don’t have to worry about inflating your budget as agent fees are usually covered by the property seller and not the property buyer.

Tip #7: Conduct Thorough Property Analysis

An indispensable step in the process of making the most profitable real estate investments is performing an investment property analysis. Once you have narrowed down your choice to a few top properties, you should study them in detail to calculate exactly how much return on investment you can expect from them, based on your preferred rental strategy. Find out the cash flow, the cash on cash return, and the capitalization rate which you can expect. To beat the competition in the local real estate market and find the best property for profitable investing, make sure to use real estate investment tools such as a rental property calculator. This will save you a lot of time in analyzing properties and allow you to make an offer before the other investors in the area.

Tip #8: Choose the Best Rental Strategy

You can rent out your investment property on short-term basis as an Airbnb rental or long-term basis as a traditional rental. The optimal strategy in each case depends on the location, the demand, the rental rates, and other factors. So, in your investment property analysis you should see which rental strategy will bring you a higher return on investment. If you decide to go for a short-term rental, don’t forget to study the local regulations carefully as many places have adopted major restrictions on this type of rentals in recent years. Ideally, you should look for a location where both owner-occupied and non-owner occupied properties can be rented out on short-term basis in all residential neighborhoods. For example, the Dallas real estate market is one of the major cities with the least Airbnb legal issues in the US at the moment.

Tip #9: Select the Best Property Management Strategy

Profitable investing in real estate doesn’t end with finding and buying a property with a high potential for return. Afterwards, you have to manage your rental property in the best possible way. If you invest in your local housing market, have some free time, and exhibit the right personality (welcoming and kind but also assertive), you can become a landlord and deal with a rental property and tenants on your own. However, before you decide to manage your property by yourself, you should know that this can take a lot of time and efforts and can turn into a real headache.

If, on the other hand, you invest out of state, have a busy job and a family to take care of, and/or are simply not fit to be a landlord, you can hire a property management company to deal with your investment property. You should be prepared to pay them a monthly rate, but it will be worth it as they will be able to maximize your profit while you can enjoy the positive cash flow in your free time.

How to find a profitable investment property is the first thing you have to learn as a real estate investor in order to make money. The good news is that it is absolutely feasible and doable if you follow our 9 tips above.

WRITTEN BY DANIELA ANDREEVSKA

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