WASHINGTON — Average U.S. long-term mortgage rates arrested their five-week decline this week but the benchmark 30-year loan remained below 4 percent. Mortgage company Freddie Mac said Thursday the nationwide average for a 30-year mortgage rose to 3.98 percent from 3.92 percent last week. It remained at its lowest level since June 2013. The rate stood at 4.53 percent back in January.
The average for a 15-year mortgage, a popular choice for people who are refinancing, increased to 3.13 percent from 3.08 percent. The sustained decline in long-term rates sparked a boomlet of homeowners looking to refinance mortgages. Homeowners eager for a bargain rate fired off inquiries to lenders. Applications for “re-fi’s” jumped 23 percent in the week ended Oct. 17 — reaching their highest level since November 2013, according to the Mortgage Bankers Association. But refinance applications fell 7 percent in the latest week, ended Oct. 24.
In recent weeks concern over global economic weaknesses brought market turmoil and sent investors seeking safety by pouring money into U.S. Treasurys. Higher demand drives up prices for those government bonds and causes their yields to drop. The yield on the 10-year Treasury note touched new lows. Mortgage rates often follow the yield in the 10-year note.
This week, the 10-year note rose to 2.32 percent Wednesday from 2.22 percent the previous week. The note traded at 2.29 percent Thursday morning.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for a 30-year mortgage was unchanged from last week at 0.5 point. The fee for a 15-year mortgage also remained at 0.5 point. The average rate on a five-year adjustable-rate mortgage rose to 2.94 percent from 2.91 percent. The fee was steady at 0.5 point.
For a one-year ARM, the average rate edged up to 2.43 percent from to 2.41 percent. The fee held at 0.4 point.
In a divorce, it’s bad enough that you’re losing someone you once loved or may still love. It’s even worse when you find out you may lose your house, too. And finding a replacement, much like starting a love life all over, won’t be easy. After all, lenders tend to give mortgage loans to people with good credit and a solid stream of income. If you were previously a two-income household, you aren’t now, and if you’re paying alimony, you have less money than you did.
Whether you’re in the midst of a divorce or its aftermath, here are some things you can do to land a mortgage and what you can reasonably expect.
You may want to get your name or your ex’s name off the mortgage. But perhaps not; it depends. If you are planning to buy a house, and your ex is living in the home you co-own, then ideally, your ex
It can be difficult for a person paying alimony to buy a house because of the way lenders look at that alimony.
needs to refinance in his or her name. That will decrease your debt and increase your odds of being able to get a new mortgage.
What if your ex can’t refinance on her or his own? If you’d like to see your ex and the kids remain in the house, you may want to leave your name on the mortgage and co-own the house for a while with your ex.
“People do that all the time,” says Katie Connell, a family law attorney with Boyd Collar Nolen & Tuggle in Atlanta and a governor-appointed member of the Georgia Commission on Child Support. “I’m stereotyping, but often a woman who didn’t work full time and doesn’t have the income stream or the credit to buy her own house, she and her ex-husband have agreed, with their family transitioning and changing, that it’s in their better interest to keep mom and the kids in the house for, say, four or five years or when the kids go into their college freshman year,” she says. “The husband is often willing to essentially extend his credit to his ex-wife by letting his name stay on the mortgage.”
If you’re going that route, Connell says you’ll want to work out details about how profits will be split once the house is sold down the road. It may not be an equal split since one ex-spouse will be likely making the mortgage payments and possibly spending money to maintain the home for those extra years.
Connell says that arrangement tends to work better if the ex without the house still has enough income and good credit to buy a new home of his or her own.
Don’t buy a home during the divorce proceedings. Even if you’re rich beyond belief, and your credit and income stream are solid, it’s still a risky move. Connell says one of her clients lost $10,000 in earnest money when he tried to buy a house during his divorce proceedings.
“He had great credit, a very good income, but when the lender found out he was going through a divorce, they said, ‘Your alimony and child support payments are question marks,'” Connell says. “By the
Some lenders won’t even consider letting a divorced person who receives alimony use that alimony as evidence of income….
way, this client had a different lawyer back then. If I had been representing him, I would have said, ‘Don’t do it!'”
Connell adds that when the client’s ex learned he lost $10,000 in earnest money, the ex’s lawyer naturally felt that the ex was entitled to at least half of that money – it was, after all, money that otherwise would have been in the pot of assets to split.
It can be difficult for a person paying alimony to buy a house because of the way lenders look at that alimony. “Alimony is considered a debt,” says Susan Pryor, branch manager of Silverton Mortgage Specialists, a direct lender in Atlanta. “If you make $10,000 a month and give $3,000 to your ex-spouse, the lender doesn’t look at it like you’re making $7,000 a month. They look at it like you have a $3,000 car payment every month.”
Where should you live during the divorce proceedings? Assuming you aren’t selling the house immediately and you’re both looking for a place to rent, there are two common approaches couples take, according to Connell.
Stay in your house with your soon-to-be ex. “We definitely see more people grinning and bearing it and living together longer,” Connell says. “We saw a lot of that in this last recession.” It’s an idea that makes some sense. Living together awhile longer will save you both money. And especially if you have children, maintaining a civil relationship under the same roof may help with your post-divorce relationship.
You could nest. You hear “nesting” used a lot in pregnancy, but Connell says that in the divorce industry, the term refers to renting an apartment near the house and living there while a divorce is worked out. “We see a lot of couples who take turns living there, and the kids stay in the house,” Connell says.
Connell adds the latter arrangement may not work for couples who still harbor a lot of anger or suspicion. She recalls an instance where a wife was convinced the husband was unplugging lamps and cable cords throughout the house before he would leave for the week.
“No damage or harm was done, but [the wife felt] it was just to be a pest,” Connell says. Meanwhile, the husband said the cords came unplugged from his vacuuming, and that the wife was leaving dirty dishes in the sink.
Whatever you do, Pryor urges divorcing homeowners to not rush their decision of where to live next. “You may be under tremendous stress, and it’s an emotional situation. Divorce can shake your planning, and you may not be able to make the right decisions,” she says.
Besides, you may not be able to rush, even if you want to. Some lenders won’t even consider letting a divorced person who receives alimony use that alimony as evidence of income until there’s a six-month history of alimony payments being paid on time, Connell says.
You may be better off without a mortgage. This may be the last thing you want to hear if you want to hang onto your house or buy a new home. But the money math may not add up.
It’s a common mistake with divorced homeowners, says Jean Ann Dorrell, a certified estate planner in Sumter County, Florida. Many people, she says, are “trying to hold onto a house because it’s where the kids grew up or because you don’t want the kids to have to change schools, you don’t want to lose friends and you stay too long trying to afford something you never could have or should have.”
Pryor agrees. “We see it a lot,” she says. “It’s especially emotional when children are involved.” She adds that spouses who didn’t know a divorce was coming tend to be the ones who can’t face their new budget.
Pryor recommends professional help for anyone divorced and struggling to keep their home or figure out where to live next.
“I think it’s important to do some financial planning, and there are planners who focus on divorce, so you can see what money is coming in and what’s going out,” Pryor says. “Just because you can barely make that mortgage payment every month doesn’t mean you should stay in the house.”
Buying a house is a little like asking someone to marry you. In both cases, you make your offer believing there’s a good chance you’ll get a yes, but you know you could get a no. If the answer is yes in either situation, your fates will be linked for many years to come — possibly until death do you part. But if you don’t get an immediate answer, the wait can be excruciating. We may not be able to help you with your love life, but if you want your house offer to be greeted with a yes — and a quick one — here are four rules to follow.
Be likable. Money talks, but so do you. And you don’t want to say anything that could turn off a seller.
“You’re most likely buying someone’s home that they have memories and a lot of emotional ties to,” says Marc Takacs, a real estate agent with Keller Williams Realty in Atlanta. So if the seller is present when you see the house, keep quiet about your grand plans for landscaping or repainting the living room.
“Don’t tell someone how bad, ugly, stupid, etcetera, that someone’s house is, and then try to buy it. That doesn’t work,” Takacs says.
Well, it might, if the homeowner is desperate and primed to sell, but if there are other buyers circling, you’ve given the seller an excuse to reject your offer and accept someone else’s.
Another no-no, according to Takacs, is being high-maintenance. “Don’t overstay your welcome,” he advises. “I don’t think anything irritates a seller more than when a buyer visits a house too much or stays for too long.”
He also suggests that when you submit your offer, avoid making unreasonable demands such as a lightning-fast closing date. “Try to be considerate of the fact people are trying to carry on with their lives, move and all the other stuff that goes along with that. Being pushed out of your house can be very unsettling,” Takacs says.
Don’t be stingy with your offer, but don’t overreach. If you offer exactly what the seller is asking, you will get his or her attention and probably their respect and appreciation. In many cases, your offer
“If you buy it for more than you can afford, you’ll end up hating the house and yourself in the long run.”
will be accepted. Offer a tad bit more, and you may chase other buyers away whose offers are at or below the list price.
At the other end of the spectrum, a lowball offer may insult the homeowner. In some instances, it may be shrewd to offer significantly less than the list price, but first consult your real estate agent, who will probably have the best read on what your seller is likely to accept.
If you’re looking to make the strongest offer possible, make sure it’s not so high that you can’t afford it, warns Kelly Long, a Chicago-based money coach and member of the National CPA Financial Literacy Commission. “Don’t offer more than you can practically afford, even if you’re approved for more,” she says, adding that this can easily happen if you’re looking at a house that’s out of your price range.
“If you buy it for more than you can afford, you’ll end up hating the house and yourself in the long run,” she says.
That’s because the more expensive your house is, the higher your monthly payments will likely be. Long cites the rule of thumb that a monthly payment shouldn’t exceed more than 28 percent of your gross income. That includes taxes and insurance, she adds.
Be ready for a yes. If the seller says no, the next steps are clear enough: You make a better offer, or continue house-hunting. But even if the seller accepts the offer, you don’t have those front door keys yet.
“You may be pre-approved based on your credit report and supplying your W-2, but the [mortgage] application process is much more involved and requires extensive documentation in a short window of time,” Long says. “Make sure you have some time set aside to gather all the necessary information in the week following the offer’s acceptance. You’ll also need to schedule, attend and pay for an inspection in that first week, so make sure you have the money on hand to pay for that.”
You may also be asked to offer earnest money, a deposit you give a homeowner to show you’re serious about your offer. Generally, earnest money is anywhere from 1 percent to 3 percent of the house’s total purchase price. You can get the money back if the sale doesn’t go through, but you can also lose it if you flake out and decide not to buy the house for no reason, or you don’t follow what you’ve agreed to in the purchase contract.
Don’t sabotage yourself to seal the deal. Speaking of that contract, be careful about what you put in it.
Yes, you want the house. You want the sellers to like you. But in an effort to get those keys from the sellers, don’t be their doormat.
According to Kent Sisk, an account executive at NexTitle, a title and escrow agency based in Bellevue, Washington, “the market is so hot right now [that] many buyers are waiving the inspection period, sometimes waiving the inspection altogether, in order to get their offer approved.”
After all, you don’t want to learn after you buy the house that the roof leaks or there’s mold hidden away in the ventilation. Or you may end up berating yourself if you waive the appraisal contingency, which lets you back out of the deal if the lender concludes the appraised value is less the sale price, and later learn that you vastly overpaid for your home.
Ideally, your offer will be one that makes everyone, the seller and you, happy and reassured that everything between now and the closing will go smoothly. If you feel like you need to win this house at all costs and things go badly after your offer is accepted, not only will you lose — it will definitely cost you.
Demand for real estate is growing in many markets across the country. That’s great, but it creates competition in the form of all-cash offers, offers for thousands of dollars over list price, and a growing gap between affordability and prices in a given area. This dynamic only adds to the frustrations many buyers face in the market. If you are a part of the majority who are buying a home with financing, these following tips can help you solidify the deal.
Note that price is certainly a factor — if not the factor — most sellers are concerned about. However, while price is crucial, there are other factors that can give you an advantage when you’re trying to secure an initial commitment from the seller.
1. Get the Right Lender. Gone are the days when you could simply get pre-approved to buy a home, use that pre-approval letter to make offers and expect to get into contract quickly. Your loan officer’s reputation in the community is critical, especially among the agents who are controlling the deals. If your loan officer has a trusted name, recognition and a favorable presence in the local market, this can
“Even if another offer is higher than yours, the offer with 20 percent down still looks stronger on paper to agents.”
be communicated via the listing agent, who has a direct influence on what offer the seller takes.
2. Get the Right Buyer’s Agent. You’ll need a real estate agent to represent you if you’re going to be making offers on properties listed on the open market, and picking an agent to represent you in your house hunt can be no easy feat. Getting personal recommendations from family or friends is a great start. Another possibility is to explore review sites and pick an agent who has experience and has open-ended honest reviews by other consumers. Ideally, the person you’re going to want representing you is someone who has a reputation for delivering in the local market. This is especially important as many real estate agents network with each other and work with each other on a regular basis. If your buyer’s agent has a favorable reputation not only in the local community, but with the listing agent in a previous transaction, for example, this is a very good sign that person can influence the seller because they know the offer is strong and they trust the other side.
3. Get an Introduction to the Listing Agent. Upon your buyer’s agent (who’s representing you) offer submission, your loan officer calls the listing agent to introduce themselves and explain how well-qualified you are to purchase that property. There is tremendous opportunity to create a relationship from the financing side in further supporting a strong offer. Many listing agents inevitably call the lenders of the buyers whose offers are strong on paper in an attempt to feel them out about the buyer’s qualifications. Preemptively, taking this step is a favorable approach that makes it easier for the listing agent to influence the seller to accept your offer.
4. Understand How You Appear on Paper. It doesn’t matter if you have $500,000 in income; if you’re buying a home and putting less than 20 percent down, even if another offer is higher than yours, the offer with 20 percent down still looks stronger on paper to agents. The old 20 percent down approach is still king. Granted, you can still buy a house with as little as 3.5 percent down on an FHA Loan, and if your offer is higher, that can help offset the perceived lower financial strength indicative of a less than 20 percent down offer.
Another approach to take to increase your odds of getting the seller to accept: Don’t request a credit for closing costs in your initial purchase offer. When you ask for a credit for closing costs based on whatever purchase price amount you are looking for, that gives the seller less net proceeds at closing — that is, unless you offer a higher purchase price and ask for a credit that way. But be aware, doing the latter means the house must appraise for a higher value to support your higher offered amount with your requested credits for cash to close.
5. Offer a Short Closing. Upon making an offer to buy a property, making an offer to close in less than 30 days is an aggressive approach, communicating to the seller that your financing is lined up and it’s time to play ball. Know that lenders are up against federal mandatory disclosure time frames and, as such, have certain thresholds they have to meet in order to be federally compliant with recent regulatory changes. As a homebuyer, this means you will need to jump through the hoops faster to meet the contractual stipulations. For example, if your lender needs an explanation about your income or needs a bank statement, proactively providing whatever condition is needed for underwriting by the lender within a 24-hour period of time will dramatically aid your lender in helping you close faster.
It can also help, several months ahead of when you expect to buy, to check your credit reports and credit scores to see what condition your credit is in. Giving yourself time correct any errors or work through any other problems that are hurting your credit can possibly mean the difference between qualifying for a loan … or not. You’re entitled to one free credit report a year from each of the three major credit bureaus, and you monitor your credit scores for free through a service like Credit.com.
When you plan to buy a home, making sure you’re covering all these bases when you’re making offers and getting acclimated to the local housing market could dramatically increase your odds of getting your offer accepted, and you can go get your officially approved loan with the lender of your choice.
Mortgage rates for 30-year fixed mortgages dipped slightly this week, with the current rate borrowers were quoted on Zillow Mortgage Marketplace at 3.98 percent, down 5 basis points from this time last week. The 30-year fixed mortgage rate hovered around 4 percent for the majority of the week, before dropping slightly to the current rate on Tuesday morning.
“Last week, rates hit 4-week lows after a weaker-than-expected gross domestic product report suggested some softness in the U.S. economy,” said Erin Lantz, vice president of mortgages at Zillow. “This week, we expect mortgage rates to remain fairly flat unless the jobs report, out Thursday rather than Friday this week, reveals an unexpectedly strong gain in the labor market.”
Additionally, the 15-year fixed mortgage rate this morning was 2.98 percent, and for 5/1 ARMs, the rate was 2.77 percent. What are the interest rates right now?
Buying a primary home? The 20-percent-down rule is yesterday’s news. More down payment options exist now, including both government and private sector alternatives, allowing more flexible choices for homebuyers. Don’t be fooled however, as most of the programs that allow for less than 20 percent down include private mortgage insurance, aka PMI — which is an added premium built into the mortgage payment.
PMI is meant to protect the lender if you have less than 20 percent equity in the home and default on your mortgage. Your PMI is a percentage of the loan amount added to the monthly payment. For example, with conventional mortgages, a loan of $400,000 may carry $166 or so per month in PMI, so that’s $166 added to the principal, interest, homeowners insurance and property taxes. And a typical FHA mortgage with a loan amount of $400,000 will carry $450 per month in PMI. (The PMI is higher on FHA loans because they tend to carry lower interest rates, more flexible credit requirements, and lower down payments than conventional loans.)
1. The Old-School 80/10/10 Method: Popularized in the lending heyday from 2004-2007, the 80/10/10 program allows a buyer to put down just 10 percent of the purchase price of the home. In most cases, a 10 percent down payment would require monthly PMI. Using the 80/10/10 approach, your lender would provide 80 percent first mortgage, that same lender and/or a subsequent lender would provide a 10 percent second mortgage in lieu of the monthly PMI, while you contribute the 10 percent down payment, sealing the deal.
Most lenders will allow for secondary financing up to 90 percent combined loan-to-value (combined loan-to-value meaning first and second mortgage combined loans) up to the maximum conforming loan limit for the county in which the property is located. While the majority of mortgage lenders typically do not offer second mortgages, smaller pocket-size lenders are entering the marketplace aggressively with the 80/10/10 solution. You’ll likely have to meet at least a 700 credit score requirement and 10 percent down of your own funds to close escrow.
Also, some lenders may even still allow 10 percent to be gift funds, so check with a qualified mortgage professional.
2. Prepaid Private Mortgage Insurance: Alternatively, rather than electing for the monthly payment option, a buyer with as little as 5 percent down can chose to prepay the mortgage insurance upfront in a one-time premium called single-pay mortgage insurance. Not all lenders offer it, so buyers should shop around. The program works by simply pre-paying a chunk of the future PMI payments upfront as a fee at the closing table. This can be anywhere from 1.75 percent to 3 percent of the loan amount.
Like the 80/10/10 program, a 700 credit score would be required and the single pay mortgage insurance amount can be gifted.
3. Gift of Equity: Do you live in a family-owned property? Or do you have the ability to purchase the property you rent from your landlord? In either instance, the owner of the property — whether a family member or a landlord — can provide a gift of equity for at least 5 percent of the purchase price, as well as for closing costs and single-pay mortgage insurance. A gift of equity is simply the seller of the property providing funds for the benefit of the buyer and accepting less net proceeds at closing.
The lender will require a letter of motivation on why the family member or the landlord is selling their property to a buyer with whom they have a personal relationship. There could be a variety of reasons, so it’s crucial to make sure the deal is properly reviewed by a qualified mortgage professional. This letter of motivation will address what’s called a non-arm’s length transaction, when there is a relationship between the buyer and seller. In these situations, the lender places more scrutiny on the transaction due to the potential for fraud.
4. Military Veteran Perks: Do you have previous military experience with a general or honorable discharge? The Department of Veterans Affairs allows eligible veterans with a certificate of eligibility from the VA (which shows their loan eligibility) to purchase a home with no money down as well as no monthly PMI, with loan sizes even as high as $1,050,000 in some high-cost areas.
Eligible veterans will typically pay a 2.15 percent guarantee fee of the loan amount to the Department of Veterans Affairs, which is added to the loan amount and then re-amortized over the term of the loan. For example, on a loan of $500,000, that’s $10,750 added to the loan amount, making the financed loan amount $510,750. That’s still the most attractive option, compared to a PMI premium on another program.
If you plan to buy a house in the near future, these possibilities represent a tangible alternative to simply putting down funds and taking PMI on a monthly basis. While you might elect to do that anyway, PMI — depending on the loan program — may be removed in the future. Check with your lender on PMI removal, and how it may apply to your initial down payment and mortgage loan program.
Finally, because credit scores are also an important factor in some of these approaches, it can help to know where you stand and whether you’ll qualify for these programs. Checking your credit in advance of buying a home can help you determine whether you need to take some time to build your credit before applying for a mortgage. You can pull your credit reports for free once a year through AnnualCreditReport.com — and you should check for any errors or problems that are dragging your credit score down. (You can also check your credit scores for free through Credit.com, as well as get an overview of what’s affecting your scores and a plan to improve them.)
Mortgage rates for 30-year fixed mortgages remained stable this week, with the current rate borrowers were quoted on Zillow Mortgage Marketplace at 4.04 percent, up only three basis points from this time last week. The 30-year fixed mortgage rate peaked at 4.12 percent on Thursday before dropping to 4.03 percent on Friday, where rates hovered for the remainder of the week.
“Mortgage rates were flat last week as two highly anticipated announcements, the European Central Bank’s stimulus plan and the latest U.S. employment report, confirmed the outcomes the markets were expecting,” said Erin Lantz, vice president of mortgages at Zillow. “Next week there is a limited number of market-moving news or events scheduled, so we expect rates to remain stable.”
Additionally, the 15-year fixed mortgage rate this morning was 3.03 percent and for 5/1 ARMs, the rate was 2.78 percent.