Get the latest mortgage industry news. Click here.
– Economy & Mortgages: A Strange Disconnect – Why are Home Prices still Up when Rates are this High?
– 4 Reasons to take a look at a Home Equity Line of Credit (HELOC)
– Mortgage Myths Misinformation and a few Half Truths
– Home Buying Remains Competitive: How we help you be Ready to “Pounce”
– Using a 401(k) loan for a Down Payment – Is this a good idea?
Copyright © 2023 Myers Capital Hawaii
Economy & Mortgages
A Strange Disconnect – Why are Home Prices still Up when Rates are this High?
Follow the industry buzz, and you’ll get a range of viewpoints — from “The housing market is cooling off as rising interest rates and inflation weigh on affordability” (NAR), to “Home prices are expected to continue to rise in 2023, but at a slower pace…” (CoreLogic), to “The bidding wars are starting to cool off…” (Redfin).
While high mortgage rates would normally stomp all over home prices, that\s not happening. The reason? The number of homes for sale in June 2023 was still 22.2% below the same month in 2021. It’s still a seller\s market. That kind of environment makes it a good bet that home prices should continue to rise, albeit slowly.
What drives the lack of inventory?
We’ve talked in previous issues about homeowners who are reluctant to move and let go of a 3% mortgage, and/or aging in place longer. Now, think back two years: The housing market sizzled in 2021 and 2022, with prices soaring.
Many homeowners rushed to sell their homes, cashing out much earlier than they might otherwise have. This front-loading of sales — pulling forward sales that would normally have happened later – has exacerbated the ongoing lack of inventory, putting us in an even deeper hole.
What goes up…
The Fed, as everyone expected, raised its benchmark Fed Funds rate for the 11th time in this 16-month effort, by a widely expected 0.25% to a target range of 5.25% to 5.50%, the highest level in 22 years. Fed Chair Jerome Powell indicated that that higher borrowing costs are working to slow inflation, down from over 9% a year ago to about 3% now (the Fed’s target is 2%), and that the Fed believes we will avoid a recession.
On the flip side, credit card debt is soaring, which may well result in some economic reckoning ahead for many. For now, most experts hope that the Fed will let the cumulative effect of all these increases take hold and stand down for the foreseeable future.
What’s ahead for mortgage rates?
Assuming that the Fed is done (we’ll see), mortgage rates may begin to trend downward towards year end — good news for purchasers with rates in the low 7% range. The old adage “marry the house and date the rate” should apply, and we expect these buyers to refinance when that occurs.
So should you or your family members wait to buy? The long-term wealth-producing effect of homeownership is usually strongest when started early. We can help you to pounce when your ideal property hits the market, with a solid loan pre-approval that will maximize your competitiveness.
Contact us today to get the conversation started!
Get the latest mortgage industry news. Click here.
Copyright © 2023 Myers Capital Hawaii
Get the latest mortgage industry news. Click here.
– Economy & Mortgages: Is The Fed Nearly Done? With Rates Expected to Soften Buyers See Opportunities Ahead
– A Deeper Look: Are High-Credit Borrowers Subsidizing Low-Credit Borrowers?
– The USDA Loan: What It’s For and How it Works
– Dreaming of a Second Home? What to Know Now That The Pandemic Rush is Over
– Low Down Payment Loans Increasingly Popular
Copyright © 2023 Myers Capital Hawaii
You have inherited a property and you and other heirs are deciding what to do with the home. While it’s good to receive a large asset, inheriting property can bring numerous legal, financial, and familial challenges in addition to dealing with the loss of a loved one.
You may need to work with legal and financial professionals to navigate probate procedures before your share of the asset can be claimed. Probate can take anywhere from months to years to settle the estate.
Here are three main options when inheriting property:
1 – Live in it as a primary residence
2 – Rent it out for passive Income
3 – Sell it for a windfall
Whether you plan to live in, rent or sell the home, it’s important to not delay as holding expenses like the current mortgage, taxes, and insurance will accumulate and need to be paid to keep the property from going into foreclosure.
How to Finance an Inherited Property
Here are ways to finance the home that could include funds to buy out your heirs or pay liens and debts associated with the property:
Mortgage Takeover
Legal heirs can assume a mortgage of the decedent and continue to make monthly payments. However, if there’s a living co-borrower or co-signer, this party is responsible for making payments regardless of whether they have an ownership interest in the home. In this case, the heirs would need to find another financing option.
Investment Property Loan
If you want to use the home as a rental, a rental property loan can help you finance the home while earning passive income, tax benefits, and property appreciation. Loan programs like DSCR (Debt Service Coverage Ratio) are available that allow borrowers to qualify based on the cash flow of the property versus personal income.
Rate-and-Term Refinance
Refinance the current mortgage with another with a better interest rate or different term (15 years versus 30 years). A home with a reverse mortgage can be refinanced to cover the outstanding balance.
Cash-Out Refinance
Acquire a mortgage that is higher than the current home loan and use the additional funds to make needed improvements, pay off debts/liens associated with the home, or to purchase another property.
We Are Here to Help
We are experts in helping clients who have inherited property to come up with solutions that best fit their situation and goals. Contact us for a no-obligation consultation.
*The information to be provided is for informational purposes only. Myers Capital does not provide tax, legal or accounting advice. Borrowers should consult with their own tax, legal and accounting advisors before engaging in any transaction.
Get the latest mortgage industry news. Click here.
– Economy & Mortgages: Getting (Slowly) Back to Normal…
– 2023 Higher Conforming Loan Limits
– Always Going the Extra Mile! It’s My Team’s Commitment to You.
– Financing an ADU on Your Property
– It’s Home Equity Revival
Copyright © 2023 Myers Capital Hawaii
With the rise in rates, the power is shifting to buyers in real estate. This could present buying opportunities for qualified borrowers. To get the most attractive financing, though, you will need to keep your financial profile in tip-top shape. Though several factors play a role, high credit scores and low DTIs (debt-to-income ratios) typically dominate the calculation lenders use in determining your rate.
Take Great Care of Your Credit Score
• Always pay your bills on time. People who never miss a payment date, even making minimum payments, earn higher credit scores.
• Pay down or pay off credit card balances and personal loans. Low utilization of your available credit is a plus with credit agencies. If you use a credit card for all your expenses, and if your utilzation is high relative to your credit limits, switching some spending to cash can help.
• Keep older credit accounts open, and don’t keep switching creditors. A long track record of responsible use of credit has great value. If you want to cancel some credit lines, cancel the newer ones first.
Improve Your Debt-to-Income Ratio (DTI)
In getting a mortgage, a lender considers the ratio of all of your current monthly debt obligations (including your new mortgage payment) versus your income. The (rough) rule of thumb is to have your DTI at or below 43% of income. Lower is better, so:
• Pay down outstanding credit card balances.
• Avoid making major purchases with credit for several months before applying for a home loan.
• Consider paying down a car loan. Car loans often carry lower interest rates than other debt so paying down other debt first makes more sense.
• Restructure Federal student loans, if possible. Consolidation of multiple federal loans into one federal loan may allow you to lower your payments by extending the loan term (though your interest costs will increase). This can include income-driven repayment plans that may significantly reduce your monthly payment. You can also combine private and federal loans into one private loan which may save money and reduce those payments.
“Rapid Rescore”
During the loan process, I also have the option of helping you with a “rapid rescore” with the credit scoring agencies to accelerate the improvement of your credit score. Note: Rapid rescoring may only be done with the help of a mortgage professional, not “credit repair” companies.
Also, rapid rescoring is not a means of removing negative information such as late payments or bankruptcies. Contact us for guidance on how, and in what order, to pursue these strategies.
Let’s Start Today
These updates and improvements can take several weeks to impact your credit and DTI’s, but the efforts are well worth it, because they directly affect the cost of home financing. It’s never too early to start, so if buying or investing in real estate is in your future (even a long time from now), contact us for further details.
Copyright © 2022 Myers Capital Hawaii
New 2023 loan limits for conforming mortgages will be $726,200 and exceed $1 million in higher-cost areas like Hawaii. The Federal Housing Finance Agency (FHFA) recently announced these conforming loan limit amounts for mortgages to be acquired by Fannie Mae and Freddie Mac.
The 2023 baseline conforming loan limit of $726,200 is up $79,000 from this year’s limit of $647,200. In higher-cost areas, the loan limit is $1,089,300, or up to 150% of the baseline national loan limit. This year’s loan limit in high-cost areas is $970,800.
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Units
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Baseline Limits
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High-Cost Area Limits
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One
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$726,200
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$1,089,300
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Two
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$929,850
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$1,394,775
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Three
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$1,123,900
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$1,685,850
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Four
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$1,396,800
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$2,095,200
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Loan limits are tied to average U.S. home prices, and 2021 and 2022 featured price increases at record levels. In the third quarters of 2021 and 2022, home prices jumped 12.21%, requiring 2023 baseline loan limits to increase by the same percentage, according to the FHFA. In Hawaii, the highest median sales price in 2022 for a single-family home was recorded at $1,153,500 in May.
2023 conforming loan limits are available by clicking here.
Benefits of Higher Loan Limits
Homebuyers
-Lower Monthly Payment and Overall Loan Costs: Purchasing a home with a conforming loan versus a higher-cost jumbo loan can lower your borrowing costs. Conforming loans generally have better interest rates, lower costs, and flexible down payment, credit and qualification guidelines.
-Increased Purchasing Power: Apply for a larger loan to buy a better home with a remodeled kitchen, extra bedroom, more space, or in a preferred location.
Homeowners
-Tap into more equity with a cash-out refinance to pay down debt, cover college tuition, or make home improvements.
–Refinance: If you have a jumbo loan with a balance near a new loan limit in your area, you may benefit by refinancing to a conforming loan.
Ready to Discuss Your Mortgage Options?
If you’re considering a new home purchase or refinance, reach out to our seasoned mortgage advisors to discuss your loan options. Call 808-566-6611 or request a no-obligation consultation online.
Get the latest mortgage industry news. Click here.
– Economy & Mortgages: Are Peak Mortgage Rates Just Ahead?
– Polish Up Your Credit Scores and DTI’s to Get the Best Rates
– Resist Mortgage Rate Lockdown Mentality
– Is it a Buyer’s Market Yet?
– ARM yourself with a great deal
Copyright © 2022 Myers Capital Hawaii
Get the latest mortgage industry news. Click here.
– Economy & Mortgages: The End of a Punishing Seller’s Market
– Rate Buydowns Can Keep Payments Down When It Counts
– The Loans You Forgot About (Being Discovered Again!)
– Business Owner? Self-Employed? Semi-Retired? Could you benefit from a Non-QM loan?
Copyright © 2022 Myers Capital Hawaii
With the rapid rate of home value increases across the country, many homeowners have found themselves sitting on a substantial amount of home equity. So called “tappable equity,” the amount a homeowner can access while still retaining at least 20% equity, rose by a whopping 32% between late 2020 and 2021, with further increases this year, according to Black Knight, a real estate analytics company.
If you have decided to stay put, rather than try to purchase an upgraded home, there may be a reason to use some of that equity to improve how your home supports your desired lifestyle.
Upgrade in place? With limited inventory and bidding wars, sometimes the grass isn’t greener on the other side of the fence. Expanding, or upgrading the features of your current home may be just the ticket.
Work at home? All office workers cherish the chance to work from home part of the time, but a clear separation between family activities and work time makes working from home less stressful and more productive. Adding dedicated office space or reconfiguring rooms to create separation between workspaces and family spaces could be a smart move.
Aging in place? You can make modifications to improve mobility and accessibility, so you are able to stay in your home into your later years. In effect, investing now in upgrades extends the time the home can support your retirement lifestyle! This can also the time when expensive long-term care must begin.
Space for parents? Many properties are zoned to allow an “accessory dwelling unit” (ADU) to be built. Also known as “mother-in-law units,” these separate studio or one-bedroom units allow you to house aging parents, other family members, and even renters. These can add significant long-term value. Many municipalities are rezoning properties to allow for these, in order to address the housing inventory crunch.
So, how best to tap your home equity to upgrade your home? Fortunately, you have a number of options. We can help you work the numbers to decide which is best for your situation.
• The cash-out refinance often makes the most sense, especially for larger projects, even at rates over 5%. Advantages? A fixed rate, and you just have one mortgage.
• A home equity loan, which borrows a fixed amount at a fixed interest rate is often good for medium-sized projects. It’s a second lien, which sits on top of your existing mortgage.
• A home equity line of credit, also a second lien, lets you spend money on your project on-demand, up to its maximum line limit. It remains open for future expenses once you pay the balance down. But it comes with a variable interest rate. For that reason, we don’t usually recommend these for larger projects that will take time to pay off.
So “we need to do the math” to see which of these options would work best over time. With all the tools we have available, we can craft an excellent solution that will allow you to tap into that equity while minimizing the total interest you pay over time.
Copyright © 2022 Myers Capital Hawaii