Equity Cushion

You may remember the term “Home ATM” from the mid 2000’s. This term stemmed from the abundance of homeowners who pulled significant amounts of equity from their homes in the form of Home Equity Loans and Lines of Credit. Home values dropping in 2008, 2009 and 2010 caused many homeowners to be ‘underwater’ meaning that, all at once, their home was worth less than they owed.

Today, there are two big differences compared to the Home ATM years.

First, homeowners today have a lot of equity and very few homeowners are underwater. Of all the properties in the U.S. with mortgages, only 2.1% have negative equity. At the end of 2009, 24% of properties were underwater.

Second, homeowners are not pulling cash out of their homes like they were in the mid 2000’s. Net Equity Extraction is only 1.6% of disposable income compared to 8% during the housing bubble years.

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Equity Cushion

You may remember the term “Home ATM” from the mid 2000’s. This term stemmed from the abundance of homeowners who pulled significant amounts of equity from their homes in the form of Home Equity Loans and Lines of Credit. Home values dropping in 2008, 2009 and 2010 caused many homeowners to be ‘underwater’ meaning that, all at once, their home was worth less than they owed.

Today, there are two big differences compared to the Home ATM years.

First, homeowners today have a lot of equity and very few homeowners are underwater. Of all the properties in the U.S. with mortgages, only 2.1% have negative equity. At the end of 2009, 24% of properties were underwater.

Second, homeowners are not pulling cash out of their homes like they were in the mid 2000’s. Net Equity Extraction is only 1.6% of disposable income compared to 8% during the housing bubble years.

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Forbearance Falls

The number of loans in forbearance just fell to their lowest level since mid-April.

 

This is good news for the real estate market.

 

Less and less people are seeking payment relief on their mortgages.

 

The number of loans currently in forbearance stands at 7.16%.

 

This news coincides with the U.S. Unemployment Rate falling to it’s lowest level in 5 months as more people are getting their jobs back.

 

The economy has added back roughly half of the 22.2 million jobs that were lost in March and April of this year.

waterfall

At Windermere Real Estate we are taking Safer at Home and Social Distancing very seriously.  Our people are following our Safe Showings protocol, staying connected to their clients, and providing help wherever needed.

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Corona Rates

Interest rates on a 30-year mortgage right now are just about the lowest they have ever been in history.

  • The rate today is 3.45%
  • The lowest-ever in November, 2012 was 3.31%
  • A year ago they were 4.35%

So, what gives?  Why are rates so low?  It turns out that the coronavirus is pushing rates down to historic lows.

The virus is causing uncertainty in the global financial markets.  When there is uncertainty, there tends to be a flight from stocks into bonds.

Specifically, there tends to be a flight to U.S. Treasuries.

High demand for U.S. Treasuries means that the interest rates on those bonds goes down.

30-year mortgage rates track the rates on the 10-year Treasury and the 10-year Treasury just hit their lowest rates ever at 1.31%.

The uncertainty around the virus will likely keep rates down for the foreseeable future.

If you haven’t done so already, we encourage you to reach out to your mortgage lender to see if you would benefit by refinancing your loan.

If you would like to see a video recap of our annual Market Forecast you can watch that HERE.

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How to Cover Unexpected Costs with a Personal Loan

By Jennifer Calonia

Owning a home comes with its rewards — it’s an investment, a cozy haven to kick-up your feet after a long day of work, and a welcoming place to bring family and friends together. Although all of this makes homeownership fulfilling, owning a home also opens the door for unexpected (but necessary) expenses.

If you’ve suddenly been hit with a home improvement project that’s pinching your budget, like a roofing issue or heater malfunction, a personal loan might be an option to help cover the cost.

What is a personal loan?

A personal loan is an installment loan that’s typically issued by a bank, credit union or online lender. According to the Federal Reserve, the average interest rate on a two-year personal loan is 10.70% but varies depending on your credit score and other criteria. Some lenders offer repayment terms anywhere from 12 months to five years.

A benefit of using a personal loan for emergency home improvement projects is that the approval process is generally quick so you can address urgent home repairs sooner. Some online lenders can run a credit check, approve your application and send funds your way with a couple of days. The approval process for banks and credit unions, on the other hand, can take anywhere from a couple of days to a couple of weeks, if the lender needs additional information.

How to find a personal loan

If you’ve decided that a personal loan makes sense to fund your next home project, make sure you’re aware of these next steps.

1. Assess your budget

 

The last thing you need is taking out a personal loan only to realize after the fact that you can’t afford to repay it. Calculate how much you realistically need for your home improvement project, giving yourself a reasonable buffer for unforeseen repair expenses (e.g. permit fees, price changes for a specific material, etc.)

Then, tally your monthly income and financial obligations to ensure you still have enough cash on hand to keep the lights on and make monthly installments toward your loan. Using a spreadsheet or budgeting app can help you track these numbers easily.

2. Know your credit score

 

Generally, you need a good credit score to get approved for a personal loan. Your credit score is one of the key factors that lenders use to determine whether your application is approved, and a higher credit score results in a lower interest rate offer.

Check your credit score with the three credit bureaus to ensure there isn’t an error or suspicious activity that might inadvertently lower your credit score. For a free credit report, go to AnnualCreditReport.com to see where your credit stands before moving forward in the process.

3. Compare rates and terms

 

When you’ve confirmed that you have a good credit score that can get you competitive interest rates, it’s tempting to accept a loan from the first lender that approves you. But like other major purchases, it’s important to shop around.

Compare interest rates, annual percentage rates (APR), and term durations available, and read the fine print for any conditions or fees that might offset any benefits.

To start, try reaching out to your existing financial institution first to see what they can offer; sometimes credit unions, in particular, offer rate incentives for loyal members. Also, consider using a personal loan aggregator website to compare offers from multiple online lenders at once (just do your due diligence to ensure the site is legitimate).

4. Submit an application

 

If you’re ready to submit an application, you can either complete a form online or apply in-person, depending on your lender. Although all lenders require different information to process a loan application, some common information to prepare ahead of time include:

  • Personal information
  • Income
  • Employment information
  • Reason for the loan
  • Amount you want to borrow

 

To minimize any delays on your end, it’s helpful to prepare copies of verification documents, such as a driver’s license, proof of address like a utility statement, information about your home and pay stubs. Your prospective lender will likely reach out to you if they need any other information to make a decision.

Although it’s always best to have emergency savings set aside for a sudden home improvement project, turning to a personal loan is a useful option when you’re pressed for funds and time. As urgent as your project might feel, however, always take the time to do your research to ensure you’re making the right move for your situation.

 

Jennifer Calonia is a native Los Angeles-based writer for Upstart whose goal is to help readers get excited about improving their financial health and lifestyle. Her work has been featured on Forbes, The Huffington Post, MSN Money, Business Insider, CNN Money, and Yahoo Finance. When she’s not wordsmithing, you can find her outdoors, exploring state and national parks.

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Good Loan News

 

Here are two recently-announced pieces of really good news for home buyers.

• The Colorado Housing and Finance Authority recently raised the income limit for their down payment assistance program to $115,600.

Now more people can get help with a down payment.

• Fannie Mae and Freddie Mac raised their conforming loan limits so that more people can use a conforming loan and not be forced to use a ‘jumbo’ loan.

Contact us if you would like to hear how these pieces of news could help you.

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