Current Mortgage Rates and How to Compare Offers

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By: Ralph DiBugnara February 6, 2025 Mia Taylor Michele Petry January 27, 2025 Key takeaways Late spring and early summer are typically considered peak homebuying season. However, the increased competition among buyers can lead to higher prices. Buyers hoping to score a deal may want to wait until fall or winter, when competition — and prices — typically ease. Historically, spring and summer have been the busiest times in the real estate market. But the traditional seasonality of homebuying and selling was upended by the pandemic: Home sales slowed significantly amid stay-at-home orders, then dramatically spiked, and the market remained volatile for quite some time. The good news is, things have since returned to something closer to normal. One positive sign: After years of a distinct lack of available homes for sale, which kept homebuyers at a disadvantage, Realtor.com is forecasting an 11.7 percent increase in existing housing inventory for 2025. This increase would bring more balance to the supply-and-demand metric — and also more leverage for buyers. In other words, seasonality may once again become the most important factor in determining the best time of year to buy a house. Here’s what to know about buying in high season versus buying in a more traditionally slow period. Buying a house in spring or summer Spring and early summer are the busiest and most competitive time of year for the real estate market. There’s usually more inventory listed for sale than other times of year, and home prices tend to be steeper to reflect the increased demand. Since 2011, the months of February through June have been the most lucrative time to sell, according to a 2024 study by ATTOM Data Solutions, with May in particular earning sellers an average premium of 13.1 percent above market value. The other months in the range all yielded premiums ranging from 12.2 percent to 12.8 percent. “Typically, sellers choose spring and summer as the time to list as the majority of buyers are out in the market,” says Ryan Jancula, principal and lead broker with Jancula Group at Compass in Los Angeles. “This is a double-edged sword for a buyer, as you will be met with more opportunities but [also] much more competition, which may lead to further increase in prices or less desirable sale terms.” If you’re hoping to save some money and your timeline is flexible, consider waiting until the rush is over and not starting your home search until mid- or late-summer. Keep in mind: The most expensive month of the year to purchase a home is May, when seller premiums are as high as 13.1 percent above market value, according to ATTOM data. Pros More listings: The increase in springtime and summertime listings means buyers have more options. “Spring is when the most inventory comes to market and there is likely more choice,” says Victoria Vinokur, a broker with Brown Harris Stevens in New York City. Better weather: During warmer months, buyers are more easily able to get out and about to see homes. Home exteriors are easier to see with no snow, and interiors look more inviting when there’s plenty of sunshine coming in. More convenient timing: “If buyers have school-age kids, this is the best time to purchase so it doesn’t break up the school year,” says Jane Katz, a New York City real estate agent with Coldwell Banker Warburg. “The transaction should close by [the end of] summer, so kids can start in their new school in September.” Cons Increased competition: This is often the peak time for the real estate industry, which means more buyers are on the hunt — so expect plenty of competition. Higher prices: With increased competition comes multiple bids and, likely, higher home prices. Sellers have the upper hand when demand is strong. Moving costs: Moving is expensive, and moving companies’ prices are also impacted by supply and demand. Come summer, when demand increases, so will the prices you’ll pay to hire pro movers. The same move will cost you less during winter. Buying a house in fall or winter Buying off-season has its benefits, though. The ATTOM study, which analyzed 59 million single-family home and condo sales between 2011 and 2023, showed that October is the month with the lowest seller premium by far at 8.8 percent, compared to May’s 13.1 percent. The next lowest were September and November, both at 9.5 percent. That means October is when homebuyers are likely to get the best deal. In fact, a recent Zillow report declared early fall to be “the next housing sweet spot.” Keep in mind: The least expensive month of the year to purchase a home is October, when seller premiums are at their lowest, according to ATTOM. “Late summer and winter tend to be quieter, with a better chance for a buyer to find less competition and a deal,” says Ralph DiBugnara, a vice president at New American Funding and founder of Home Qualified. Pros Less competition: Fewer buyers are looking for homes during the winter, which means there’s less competition to face for available listings. Less-intense competition also typically means more time to spend making a decision. More leverage: With fewer buyers, there’s more opportunity to negotiate the best deal possible. “In winter and especially around national holidays, sellers will see less buyer traffic and be more willing to negotiate,” says DiBugnara. Motivated sellers: During the quieter fall and winter months, when fewer prospective buyers are shopping, home sellers may be more willing to lower their prices, or offer concessions, to attract those prospective buyers who are still looking. Cons Less inventory: Fewer homes are typically listed on the market during winter, which means fewer choices for buyers. Weather issues: Depending on where in the country you live, winter weather can make viewing homes far more challenging. Closings may even be postponed due to adverse weather conditions. Home inspection difficulties: It can also be more difficult to inspect homes in cold weather. If there’s snow coating a roof, for example, it can be challenging for an inspector to assess its condition. Best time to buy a house: Prices and seasonality Just because spring is the industry’s prime time doesn’t automatically mean it’s the right time for you. You have to consider your personal circumstances as well as seasonality — for example, if you are getting married or having a baby in August, you may not be able to wait nearly a year for a larger home. “While spring is typically referred to as the homebuying season, that doesn’t necessarily guarantee that it is an optimal time to buy,” says Mark Hamrick, Bankrate’s senior economic analyst. In addition, if price is of concern to you, you may in fact be better off waiting out the rush. This chart illustrates median home prices since the start of the COVID-19 pandemic, using data from the National Association of Realtors. Once the chaos of the early pandemic died down, the highest price spikes were uniformly in June or July, and the lowest prices occurred in the dead of winter. Other factors to consider A number of other factors can impact when might be the best time to buy a house. Here are a few more things to consider. Mortgage rates: Mortgage interest rates are not seasonal, but they certainly fluctuate. Throughout 2023, rates spiked sharply. They then dropped, then rose again. And despite high hopes, the Fed cuts in 2024 did not provide much relief for mortgage rates, which remain elevated. “While mortgage rates have edged down from their highs, they are likely to remain above their pre- and early-pandemic levels, when 3 percent to 4 percent rates were common,” says Hamrick. Lack of inventory: The shortage of available homes that plagued the country for the past few years has begun to ease, but home prices remain stubbornly high. Realtor.com predicts prices will continue to inch upward throughout 2025, albeit somewhat more slowly than previous years. Recession fears: When consumers feel nervous about the economy, especially amid talk of a possible recession, they tend to back off of spending. This holds particularly true for big purchases like a home. If you worry about your income or job security should a recession happen, waiting to buy might be wise, regardless of season.

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By Ralph Dibugnara January 16, 2025 How to get a home equity loan with bad credit Linda Bell, Troy Segal January 8, 2025 Key takeaways A lower credit score doesn’t necessarily mean a lender will deny you a home equity loan. It does mean the loan will be more expensive, as you won’t get the lowest interest rate. It’s possible to get a home equity loan with a fair credit score — as low as 620 — as long as other requirements around debt, equity and income are met. Strategies for getting a loan despite your bad credit include taking on a co-signer, applying to a place where you currently bank, and writing a letter of explanation to the lender. Alternatives to a home equity loan include personal loans, cash-out refinances, reverse mortgages and shared equity agreements. Can you get a home equity loan with bad credit? Yes, you can. A lower credit score doesn’t necessarily mean a lender will deny you a home equity loan. Some home equity lenders allow for FICO scores in the “fair” range (the lower 600s) as long as you meet other requirements around debt, equity and income. That’s not to say it’ll be easy: Lenders tend to be stringent with these loans even more so than they are with mortgages. Still, it’s not impossible. Here’s how to get a home equity loan (even) with bad credit. Requirements for home equity loans Not all home equity lenders have the exact same borrowing criteria, of course. Still, general guidelines do exist. Typical requirements for home equity loan applicants include: A minimum credit score of 640 At least 15 percent to 20 percent equity in your home A maximum debt-to-income (DTI) ratio of 43 percent, or up to 50 percent in some cases On-time mortgage payment history Stable employment and income To learn a specific lender’s requirements for a home equity loan, you’ll need to do some research online or contact a loan officer directly. If you aren’t ready to apply for the loan just yet, ask for a no-credit check prequalification to avoid having the loan inquiry affect your credit score. What are “good” and “bad” scores for home equity loans? First, let’s define our terms. Here’s how FICO — the most popular credit scoring model — categorizes different scores: Score Classification 300-579 Poor 580-669 Fair 670-739 Good 740-799 Very Good 800-850 Excellent Source: MyFico.com When it comes to home equity loans, lenders set a high bar for creditworthiness — higher, even, than mortgages. That’s because they are considered riskier than mortgages: You, the applicant, are already carrying a big debt load. Should you default and your home get seized, the home equity loan — as a “second lien” — only gets paid after the primary (the original) mortgage. Furthermore, home equity loans don’t have a robust secondary market they can be sold on, like most mortgages do. So the lender usually bears all the risk of originating and then keeping them. Bankrate insight In June 2024, government-sponsored enterprise Freddie Mac began a pilot program that involved purchasing certain single-family, closed-end second mortgages (aka home equity loans), creating a trial secondary market for them. As a result, home equity lenders set stricter criteria, demanding scores squarely in the “fair” range. A score in the 500s – good enough for an FHA mortgage — will have a tough time qualifying for a home equity loan. Some lenders have loosened their standards of late and are approving applicants with scores as low as 620. But a “good” score, preferably above 700, remains the threshold for many institutions. It can vary even within one lender, depending on factors like the loan amount or other loan terms. And of course — as with any loan — the lower your credit score, the less likely you will qualify for the best interest rates. How to apply for a bad credit home equity loan Before applying for a home equity loan, remember that it’s not just a question of getting the financing, but also how you can overcome a lower credit score to get the best possible rate. Here are some steps to take: 1. Check your credit report Check your credit reports at AnnualCreditReport.com to get a sense of where you stand. If there are any errors, like incorrect contact information, contact the credit bureau — Equifax, Experian or TransUnion — to get it updated as soon as possible. 2. Determine your equity level To qualify for a home equity loan, lenders typically require that you own at least 15 percent or 20 percent of the home outright. The amount of equity you have, your home’s appraised value and your combined loan-to-value (CLTV) ratio help determine how much you can borrow. Home equity loan calculator Bankrate’s home equity loan calculator can estimate your potential home equity loan amount. Visit the calculator Here’s a quick way to calculate your equity: Take the value of your home and subtract the balance left on your mortgage. While lenders will only consider the official appraised value of your home when determining how much you can borrow, you can get an idea of your home’s value through Bankrate or a real estate listing portal or brokerage. Let’s say your home is worth $420,000 and you have $250,000 to pay on your mortgage: $420,000 – $250,000 = $170,000 In this example, you’d have $170,000 in home equity. That doesn’t mean you can borrow $170,000, however. If the lender requires you to maintain at least 20 percent equity, you’d need to preserve $84,000 ($420,000 * 0.20). That leaves you with the potential to take out a home equity loan of up to $86,000 ($170,000 – $84,000). Remember: When taking out the loan, make sure your combined loan-to-value (CLTV) ratio — the total of all your home-based debt — is within the lender’s limit, typically 80 percent or lower. 3. Find out your DTI ratio The DTI ratio is a measure lenders use to determine whether you can reasonably afford to take on more debt. To calculate your DTI ratio, simply divide your monthly debt payments by your gross monthly income. For example, say you bring in $6,000 a month in income and have a $2,200 monthly mortgage payment and a $110 monthly student loan payment: $2,310 / $6,000 x 100 = 38.5% To make things even easier, you can use Bankrate’s DTI calculator. For a home equity loan, most lenders look for a DTI ratio of no more than 43 percent. 4. Consider a co-signer If your credit score is making it tough for you to get a home equity loan, taking on a co-signer with better credit might score you an approval. A co-signer is just as responsible for repaying the loan as the primary borrower, even if they don’t actually intend to make payments. If you fall behind on loan payments, their credit suffers along with yours. The extra guarantee they provide might get you over the hump if your credit is iffy. But you still have to basically qualify on your own. “A co-signer can help with credit and income issues for an applicant who has a lower credit score, but ultimately the main applicant or primary borrower will have to have at least the bare minimum credit score that is required based on the bank’s underwriting guidelines,” says Ralph DiBugnara, president of Home Qualified, a real estate platform for buyers, sellers and investors. 5. Try a lender you already work with If your bank, credit union or mortgage lender offers home equity products, it might be able to extend some flexibility, or at least help with your application, since you’re an existing customer. “A loan officer familiar with the details of an applicant’s situation can help them present it to an underwriter in the best possible way,” says DiBugnara. 6. Write a letter to the lender Write a letter of explanation describing why your credit score is low, especially if it has taken a recent hit. This letter should matter-of-factly explain credit issues — avoid catastrophizing — and include any relevant paperwork, like bankruptcy documentation. If your credit score was impacted by late payments due to job loss, for example, but you’re employed now, your lender can take this context into consideration. Lenders that offer home equity loans with bad credit There are home equity lenders that offer loans to borrowers with lower credit scores. (See FAQ, below). Here are some to consider, along with their requirements: Lender Bankrate Score (scale of 1-5) Loan types Credit score minimum Maximum CLTV Maximum DTI Figure 4.2 HELOC 640 75%-90% Undisclosed Rate 4.1 HELOC 620 90%-95% 50% Spring EQ 4.1 Home equity loan, HELOC 640 for home equity loans, 660 for HELOCs 90% 43% TD Bank 3.8 Home equity loan, HELOC 660 90% Undisclosed Connexus Credit Union 4.2 Home equity loan, HELOC 640 90% Undisclosed Discover 4.0 Home equity loan 660 90% 43% Learn more: Home equity lender reviews and ratings Pros and cons of getting a home equity loan with bad credit Getting a home equity loan with bad credit has its benefits and drawbacks. You can tap your equity to help with expenses, but it’s also risky. Pros Access to funds: A home equity loan gives you a significant amount of cash at your fingertips, which can help you pay for home improvement projects, consolidate high-interest debt and tackle big-ticket expenses. You’ll pay a fixed rate: Home equity loans are for a fixed sum at a fixed interest rate, so you’ll know exactly how much your payment is each month. This can help you budget for and reliably pay down debt, which can help boost your credit score. You could get out of costlier debt: If you have high-interest debt — like credit card debt — you could pay it off with a lower-rate home equity loan, then repay that loan, with one payment, for less. Cons You’re taking on more debt: If you’ve had trouble managing money in the past, it might not be wise to take on more debt with a home equity loan, even if you qualify. It’ll be more expensive: A lower credit score won’t qualify you for the best home equity loan rates, meaning you’ll pay more in interest. You could lose your home: If you fall behind on loan payments, you’ll further damage your credit. Even worse: If you’re eventually unable to pay back the loan, your home could go into foreclosure. Learn more: Pros and cons of home equity loans What to do if your home equity loan application is denied If your application for a home equity loan is rejected, don’t despair. First, ask the lender for specific reasons why your application was denied. The answer can help you address any issues before applying in the future. If your credit was one of the deciding factors, you can improve your score by making on-time payments and paying down any outstanding debt. If you don’t have enough equity in your home, wait until you’ve built a bigger stake (mainly by making your monthly mortgage payments) before submitting a new application. Both these approaches may take a half-year to a year to make a significant difference in your credit profile. If you’re in more of a hurry, consider applying to other lenders, as their criteria may differ. Just bear in mind that more lenient terms often mean higher interest rates or fees. And of course, you can consider other forms of financing. Home equity loan alternatives if you have bad credit If you need cash but have bad credit, a home equity loan is just one option. Here are some alternatives: Personal loans Personal loans can be easier to qualify for than a home equity product, and they aren’t tied to your home. Personal loans have higher interest rates, however, and shorter repayment terms. This translates to a more expensive monthly payment compared to what you might get with a home equity loan. Cash-out refinance In a cash-out refinance, you take out a brand-new mortgage for more than what you owe on your existing mortgage, pay off the existing loan and take the difference in cash. Most lenders require you to maintain at least 20 percent equity in your home in order to cash out. A caveat, however: A cash-out refi makes the most sense when you can qualify for a lower rate than your current mortgage’s, and if you can afford the closing costs. With bad credit, getting that lower rate might not be possible. Reverse mortgage Reverse mortgages allow homeowners over the age of 62 to tap their home’s equity as a source of tax-free income. These types of loans need to be repaid upon your death or when you move out or sell the home. You can use reverse mortgages for anything from medical expenses to home renovations, but you must meet some requirements to qualify. Shared equity agreement Home equity investment companies might work with you even if you have a lower credit score, often lower than what traditional lenders would accept. These companies offer shared equity agreements in which you receive a lump sum in exchange for an ownership percentage in your home and/or its appreciation. Unlike with home equity lines of credit (HELOCs) or home equity loans, you don’t make monthly repayments in a shared equity arrangement. Some companies wait until you sell your home, then collect what they’re owed; others have multi-year agreements in which you’ll pay the balance in full at the end of a stated period. Make sure you understand all the terms of this complex arrangement. Technically, you’re not borrowing money, you’re selling a stake in your home — to a financial professional who naturally wants to see a return on their investment. How to get a HELOC with bad credit Applying for a HELOC is pretty much the same as applying for a home equity loan, but if you have bad credit, a loan might have a slight edge over the line of credit. That’s because home equity loans have fixed interest rates and fixed payments, so you’ll know exactly what you need to repay each month. This predictability could help you better manage your budget and keep up with payments. A HELOC, on the other hand, has a variable rate, which can cause unexpected increases in your monthly payments. For this reason, lenders often have higher credit score criteria for HELOCs than home equity loans. Learn more: What is a HELOC (home equity line of credit)? Tips for improving your credit before getting a home equity loan To increase your chances of getting approved for a home equity loan, work on improving your credit score well before applying — at least several months. Here are three tips to help you rebuild your credit: Pay bills on time every month. At the very least, make the minimum payment, but try to pay the balance off completely, if possible — and don’t miss that due date. Don’t close credit cards after you pay them off. Either leave them open or charge just enough to have a small, recurring payment every month. Closing a card reduces your credit utilization ratio (CUR), which can decrease your score. The recommended CUR: no more than 30 percent. Be cautious with new credit. Getting a higher credit limit on a card or getting a new card can lower your credit utilization ratio — but not if you immediately max things out or blow through the bigger balance. Treat the newly available funds as sacred savings. FAQ on getting a home equity loan with bad credit Is it better to get a home equity loan or a HELOC if you have bad credit? In general, it’s better to get a home equity loan with bad credit. A home equity loan often has a lower credit score requirement compared to a HELOC, and it comes with a fixed interest rate, so your payment will be the same every month, making it easier to plan for. Can you get a better interest rate on a home equity loan with a higher credit score? Yes — in fact, this is the rule for any type of loan, including a home equity product. The higher your credit score, the lower your interest rate. Which banks give home equity loans with bad credit? When searching for a home equity loan with bad credit, check whether a lender indicates what its minimum credit score requirements are for applicants on its website – for any home equity loan, not just for the “as low as” rate (which will be reserved for high-scoring applicants). Often lenders require a minimum score of at least 620, but scores above 700 remain the standard for many institutions. It can also be a good idea to look for borrowing opportunities from non-qualified loan lenders. These types of loans come with more flexible income and credit requirements, but they also tend to have higher interest rates and fees. Many mortgage brokers work with non-QM wholesale lenders, or know of lenders specializing in applicants with iffy credit histories or scores. So a broker can be a good place to look, too.

By Ralph Dibugnara December 12, 2024 Boomers Have a New Retirement Problem Published Dec 09, 2024 By Aliss Higham Baby boomers have benefited from skyrocketing house prices over recent decades, with millions of homeowners born before 1964 watching their equity rise over recent decades. But now, thanks to a glut of unfavorable conditions in the U.S. housing market, boomers face a new retirement problem: affordable and accessible homes in which to age. As a result, boomers are now "aging in place" in their current homes—a trend likely to induce a knock-on effect for younger generations. According to a recent study conducted by Redfin, 78 percent of all boomers plan to stay in their current home for retirement. Another 2022 report from Redfin found that empty-nest boomers take up 28.2 percent of all "large homes"—three bedrooms or more—compared to 14.2 percent of millennials, who are much more likely to have their children still living at home. While data isn't available indicating how much this has changed over recent years, the tradition of downsizing into smaller homes designed with retirement in mind is becoming a distant, if not completely unlikely, prospect for America's aging boomer population. While some may not want to move on from a house they've lived in for years on end, retrofitting existing homes for the sake of accessibility is a costly endeavor, particularly for older Americans living on fixed incomes. "Baby Boomers are increasingly choosing to 'age in place,' meaning they remain in their homes longer instead of selling to downsize or relocate," New York City real estate broker Alexandra Gupta told Newsweek. "This trend is contributing directly to the housing shortage, as millions of homes that would otherwise be available to younger buyers remain occupied." A composite image created by "Newsweek" is shown. Boomers are aging in place, triggering a knock-on effect for other generations. Photo-illustration by Newsweek Shortage of Accessible Homes A lack of accessible homes required for some as they age are scarce—and a slowdown in new homes being built is a major factor. According to a report by CNBC in 2023, less than 5 percent of the U.S. housing supply is accessible. But the problem is not just restricted to accessible homes. U.S. housing inventory and the speed at which new homes are being built have still not recovered to the levels seen before the 2008 financial crash. In January 2006, some 2.2 million new units were started. That dropped to just 490,000 in January 2009. In October 2024, 1.3 million units have been started—still nearly 1 million shy of the 2006 level. The lack of homes for sale is a significant factor in today's high housing prices, which Ralph DiBugnara, founder and president of Home Qualified, told Newsweek is a key reason why boomers want to stay put, despite their homes likely being worth considerably more than when they bought them. "The biggest problem I see facing homeowners today is they are equity rich, cash poor and without as many options to fix it because of high interest rates and high home prices," he told Newsweek. "Baby Boomers are at a stage where they want to move or downsize but cannot because of the lack of homes for sale which has driven up prices. That combined with the high cost of a new home due to increased interest rates and insurance costs are keeping them locked in homes with equity. This is also a major factor in the inventory shortage problem the market is facing." Making Homes Accessible Fewer stairs, lifts, wider hallways, ramps and other modifications may come to be a necessity for many Americans as they grow older. And with them comes significant cost. While the size and scope of each refitting project is different, according to Thrive Homes, installing a stair lift can cost from $3,500 to $6,000. Concrete ramps can cost up to $500 per foot, and door widening could set you back as much as $2,500. As expensive as they are, home modifications can also be considered unattractive to prospective buyers if the time comes when a move is absolutely necessary, thus potentially pushing down the price of the property. In a 2021 National Association of Home Builders survey of homebuyer attitudes, 56 percent of respondents said they would not buy a home if it had an elevator installed—a necessity for wheelchair users living in multiple-floor properties. But other modifications such as wide hallways and step-free entries were considered desirable by the majority of those surveyed. Knock-on Impacts With boomers choosing to stay in place instead of buying new homes at high prices, younger generations are feeling the effects in an already squeezed housing market. Boomers own the lion's share of U.S. housing, a trend that has broadened since the 2008 financial crash and the ebbing away of their parents in the Silent Generation. It again expanded during the coronavirus pandemic and its aftermath, with Gen X and millennials also widening their share of America's real estate market. "Boomers' control over a large share of the housing market also has a broader economic effect," Gupta said. "Many Boomers hold substantial home equity, which has allowed them to leverage their property for wealth or to secure retirement. Younger generations, however, may struggle to build similar wealth through homeownership. As real estate remains increasingly out of reach for younger buyers, the wealth divide between Boomers and subsequent generations may widen, with homeownership becoming an even more significant driver of financial inequality." The result, Gupta explained, is likely to keep their children—millennials and Gen Z—in the rental market for longer, and could also put some boomers back in rentals if they cannot find an affordable property to buy with the right home modifications. This could have even further ramifications in the cost of renting. "As more Boomers age in place or choose to downsize into more accessible housing options, the rental market may see an uptick in demand for senior-friendly housing," she said. "Millennials and Gen Z, who are already delaying homeownership due to rising prices, may increasingly turn to rentals for longer periods. This could lead to rising rents, especially in desirable metropolitan areas, as younger people delay purchasing homes, further challenging their ability to save for down payments." Solutions in Sight While the federal government has some options on the table to ease housing woes, such as the U.S. Department of Agriculture's Rural Housing Service and special home-buying programs offered by the Department of Housing and Urban Development, Jesse Saginor, associate professor of real estate development in the University of Maryland School of Architecture, Planning and Preservation, said more needs to be done. "One solution is to significantly increase funding, subsidies, tax credits, and/or zoning flexibility to allow for the construction of affordable senior housing so that seniors have somewhere affordable to move, given that many may only live on Social Security and little else," he told Newsweek. "So, that solution focuses on building housing for seniors that is affordable, and, assuming they are willing to move, also attainable. It removes the cost-prohibitive nature of moving to housing given their fixed incomes." But Saginor added that "until we build for all segments of population in terms of income and age, there are bound to be shortages irrespective of mortgage rates and inflation, because the demand for housing tends to be dynamic while the supply of housing is largely static."

By Ralph Dibugnara December , 2024 By Mia Taylor and Michele Petry November 19, 2024 Key takeaways iBuyers are online companies that buy homes directly from the owner, typically in a quick all-cash transaction. Selling to an iBuyer speeds up the home-sale process considerably, making it a good choice if you’re in a rush or need the cash fast. However, they usually offer a much lower price for your home than you might make in a traditional home sale. Homeowners who want to sell quickly and skip the hassle of showings, repairs and wading through a lengthy closing can speed up the process by using an iBuyer. These speedy sale platforms — the “i” stands for instant — are online tech companies that purchase homes from sellers directly, without any third-party involvement (like a lender or a real estate agent). An iBuyer company can make an all-cash offer on your home within 24 hours, or sometimes even faster, and can typically close within two or three weeks. They can often schedule closing dates at your convenience as well. But, if this all sounds too good to be true, be aware that iBuying transactions do come with financial drawbacks. Read on to learn more. What is iBuying? The iBuying approach to selling a house has roots that predate the internet. Years before real estate websites came along, local companies would put up signs around town offering to pay cash for homes — they’d then flip the properties for a higher price, making a tidy profit. Today these companies can be easily found online, following the same general approach: making quick cash offers for homes and reselling them. “The iBuyer is typically a company whose business model is to buy properties from homeowners, do minor, usually cosmetic repairs, and then sell at a profit,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence firm. “For the home seller, the benefits are speed — the transaction typically happens very quickly once the offer has been accepted — and certainty, as the deal closes immediately, as opposed to putting a property on the local multiple listing service and waiting for offers.” This approach can be very attractive to sellers who need to close a sale quickly, whether for lifestyle or financial reasons. If you need to relocate ASAP for work, inherited an elderly relative’s home and don’t want to keep it, or simply need the cash from the sale as quickly as possible, for example, an iBuyer can be a good choice. Popular iBuyer companies While iBuying grew amid the highly competitive post-pandemic housing market, it has receded since and represents a very small share of the overall real estate market. According to data from CoreLogic, iBuyers accounted for less than 0.5 percent of all home purchases in 2023, buying approximately 1,000 homes per month over the course of the year. In 2021 and 2022, that number ranged as high as 9,000 homes per month. “iBuying represents a pretty minuscule percentage of overall home sales,” says Sharga. Historically, just four companies have accounted for the lion’s share of iBuying business: Opendoor, Offerpad, Redfin and Zillow. Combined, they made up more than 95 percent of iBuyer purchases from 2017 to 2021, according to another CoreLogic study. However, while Opendoor and Offerpad remain two of the biggest players in the industry, Redfin and Zillow have since bowed out of this sector of real estate. Other popular companies offering iBuyer-like services include Clever, HomeLight, Orchard and Knock. How iBuyer companies work The iBuying process itself is very straightforward. In most cases, a seller provides some basic information about their home, or sometimes even just a street address, and within a short period of time, the iBuyer makes an offer — sight unseen. These companies use algorithms to base their valuations on a property. “Then, an iBuyer makes a cash offer, sometimes as quickly as within 24 to 48 hours,” says Jade Lee-Duffy, a San Diego–based Realtor. “This process is meant to streamline buying and selling property, essentially cutting out the middlemen of banks and real estate agents.” The process is indeed streamlined — iBuying transactions close much more quickly than traditional ones do. However, the convenience of this process comes at a price for sellers. Because iBuyers need to make a profit, they typically purchase homes for much less than their estimated market value. “Keep in mind iBuyers are not going to pay premium prices for homes, so the offer will most likely be low,” says Ralph DiBugnara, president of Home Qualified and vice president at mortgage company New American Funding. In addition, while an iBuyer’s offer is made sight unseen, if the seller accepts, the next step is typically an in-person home evaluation. If any unexpected or costly issues are discovered during the in-person visit, that will likely impact the initial offer. “It could cause them to lower the offer, or cancel it,” says DiBugnara. These types of companies can often be picky about what types of homes they’re willing to buy, as well. Since they need to make a profit on each transaction, they are not likely to be interested in homes that need major amounts of work or that don’t meet other specific criteria. iBuyers vs. other homebuying companies If you want to sell your home fast but are unsure whether iBuyers are the best approach, there’s another option: companies that proclaim, “we buy houses.” Similar to iBuyers, these operations will make a quick, all-cash offer for your home and can close the deal very quickly. And also similarly, the offer you’re likely to get could be far less than fair market value. Unlike most iBuyers, though, cash-homebuying companies will typically purchase homes as-is, meaning you won’t need to do any sprucing up or make any repairs at all, even if it’s in very poor condition. This can make them a good option for sellers whose property needs more work than they are willing, or able, to put into it. iBuying pros and cons The iBuying process is different from a traditional home sale in many ways. Here are the main benefits and downsides: Pros More certainty: In addition to closing more quickly than a typical transaction, which involves real estate agents and lenders and scheduling hassles, there are fewer uncertainties associated with iBuying. “There are [less] little headaches from a seller’s standpoint: no showings, no open houses and fewer potential contingencies to deal with,” says Bill Gassett, a RE/MAX Realtor and owner of Massachusetts-based Maximum Real Estate Exposure. No financing: Selling to an iBuying company means an all-cash deal that is not contingent on a buyer successfully securing financing. This eliminates the waiting time of the underwriting process, as well as the possibility that the loan won’t be approved. Greater efficiency: In these transactions, sellers deal directly with just the one company throughout, rather than a succession of mortgage lenders, real estate agents and others. Most importantly, the speed with which the deal goes through means the seller gets their money that much faster. Cons Lower profit: The flipside, however, is that a seller will net less money when working with an iBuyer than they likely would if selling the traditional way. In addition to the lower offer price, you could get hit with fees that can add up to the same amount you would have paid in real estate commissions, or even more: iBuyers can charge fees that amount to 6 to 8 percent of the home’s purchase price, says Gassett. You may still have to pay closing costs as well. More selectiveness: iBuyers don’t operate everywhere, so depending on your location, selling to one may not be an option. And even if an iBuying company does buy homes in your area, your home may not qualify — they tend to have very specific, and sometimes narrow, criteria for what types of properties they are looking for. Less personal attention: In iBuying, much of the process is done online with very little human contact. Sellers typically get less personal service or one-on-one attention than they would with a traditional sale, in which a real estate agent spends time consulting with and advising the homeowner over the entire course of the sale process. Is selling my house to an iBuyer worth it? Selling your home this way may be worth it if you have to relocate quickly, need the money fast, or don’t want to deal with the hassle of showings and a lengthy closing process. Selling to iBuyers also does away with any uncertainties about when your home will sell, and because they pay in cash, you don’t need to worry about a buyer’s financing potentially falling through. However, if your main goal is to earn top dollar for your property, iBuyers are not the best choice. If getting the best possible price for your home sale is more important to you than speed or convenience, the best option is selling the traditional way, with the help of a real estate agent who knows your local market well.

By Ralph Dibugnara November 14, 2024 By Homes.com Buying down your interest rate involves paying an upfront fee to your lender to reduce the interest rate on your loan. The key advantages of a buydown are that it increases your purchase power and reduces your total cost over the life of the loan. However, you must consider your long-term goals and if the expense is worth the cost. How Does Buying Down Your Rate Work? When you apply for a mortgage, you’ll be offered an interest rate that’s influenced by factors like market conditions, your credit score and the mortgage type. If you want to lower your rate, you can buy it down by paying a one-time fee at closing in exchange for a rate cut. “Buying an interest rate down is also known as paying discount points,” says Ralph DiBugnara, a mortgage banker and president of Home Qualified in New York City. “This is a way to get a lower interest rate upfront and it will give the applicant a lower rate than market rate or that they qualify for.” Understanding Points: The Cost of Buying Down When you buy down the interest rate on a mortgage, you’re buying mortgage points, which are also referred to as discount points. Points are essentially prepaid interest that can be purchased at closing to lower your mortgage interest rate for the life of the loan. One point, or 1% of the loan amount, typically reduces the interest rate by about 0.25%. How Much Will I Save If I Buy One Mortgage Point? “On a $500,000 loan amount, a 1% point discount buydown will cost $5,000,” explains DiBugnara. “And as an example, if this reduced the interest rate from 6.75% to 6.5%, the principal and interest mortgage payment would be reduced from $3,242.99 to $3,160.34.” That represents a savings of roughly $83 per month, which is about $992 per year and $29,754 over the course of a 30-year mortgage. If you buy down a mortgage with these terms, you will recoup the upfront cost of purchasing a discount point in a little more than five years. Lender Credits vs. Mortgage Points Some mortgage lenders may offer lender credits, which represent cash paid by the lender to cover some of your out-of-pocket closing expenses. However, lender credits will increase your monthly payments while buydowns will reduce them. You’ll typically be locked into a higher interest rate with a lender credit. Does Buying Down Make Sense with Current Mortgage Rates? Mortgage rates have made buying a home more challenging in recent years. Amid the current market, rates are ticking upward once again. The average interest rate for a 30-year conventional mortgage is currently 6.9%, while 10-year fixed-rate mortgages are offered at around 6.17%. There’s a similar trend with adjustable-rate mortgages (ARMs), where the average rate is currently 6.18%. For context, the average rate for a 30-year conventional loan in January 2021 was 2.65%. When combined with record-high home prices, some prospective homebuyers find that these interest rates have potentially priced them out of the market. Moreover, many homebuyers seek ways to make their monthly mortgage payments more affordable. The advantage of buying down your mortgage rate is that you can potentially reduce the total cost of your home over the life of the loan. What Is a 3-2-1 Buydown Mortgage? A 3-2-1 buydown mortgage is a home loan where the borrower receives a lower interest rate over the first three years. The interest rate is cut by 3% in the first year, 2% in the second year and 1% in the third year. After the buydown period ends, the borrower pays the full interest rate for the remainder of the loan. This type of mortgage is different from the process of buying down your rate. A lender, homebuilder, or seller typically covers the cost of a 3-2-1 buydown to make a home more affordable to potential buyers. How Much Should I Buy Down My Interest Rate? The decision to buy down your rate will depend on several factors, including your down payment and closing costs, the purchase price of the home, the interest rate you qualify for, and how long you plan to keep the home. Long and Short-Term Benefits There are two benefits to buying down your interest rate. The short-term benefit is an increase in buying power, and the long-term benefit is paying less interest over the life of the loan. Short-Term Benefits A reduced rate lowers the cost of monthly mortgage payments, which can make it easier to qualify for a home loan. A buydown can also help you qualify for a larger mortgage, allowing you to buy a more expensive home. Long-Term Benefits Over the long term, a mortgage buydown means you’ll spend far less on interest. “The long-term savings from a lower interest rate can be substantial,” says Carl Holman of A&D Mortgage. “Even a small reduction, like 0.25%, can result in thousands of dollars in interest savings over the life of the loan. For example, on a $300,000 loan with a 30-year term, lowering the interest rate from 6% to 5.75% could save you over $15,000 in interest payments.” A lower interest rate also has another benefit: It allows you to build equity in your home more rapidly than you would with higher interest payments. “Lowering your interest rate means that more of your monthly payment will go toward the principal balance you owe. This will build your equity more quickly,” says Rose Krieger, a home loan specialist for Churchill Mortgage, a national mortgage lender. Determining the Break-Even Point Another important factor to consider when buying down your mortgage rate is the “break-even” point for the money you’re spending to secure a lower rate. In other words, how long will it take for you to recoup the expense associated with the buydown? “The break-even point is when the amount you save on your monthly mortgage payments equals the upfront cost of buying down the rate,” explains Holman. For example, if it costs you $4,000 to buy down the rate and you save $50 a month on your mortgage, your break-even point would be 80 months into the mortgage, or just over six and a half years. If you stay in the home longer than the break-even point, the money saved will outweigh the upfront cost you paid to buy down your mortgage rate. The Opportunity Cost of Buying Down Buying down a mortgage interest rate can be costly. Before spending a large sum of money, it’s important to consider the expense in light of your overall financial plans and goals. You should determine if a reduced interest rate is the best use of your free cash. “The funds used to buy points could instead be invested elsewhere, like in retirement savings or paying down higher-interest debt,” says Holman. “It’s important to weigh the potential returns from those other uses against the long-term savings from buying down your mortgage rate. Sometimes, those other goals might offer a better return on your investment.” Additionally, it’s wise to speak with a lender to determine if there is a better way to use the money as part of your home purchase. For example, using the funds to provide a more substantial down payment could have a bigger financial benefit. “Putting a larger down payment on the home may reduce the mortgage interest rate anyway and depending on the amount, it may eliminate the requirement for mortgage insurance, which would in turn, lower your overall monthly payment,” says Krieger. When to Buy Down Points There are indeed times when buying down mortgage points can be beneficial. A mortgage buydown is generally worth it if you plan to stay in the home for a long time since a lower interest rate means you’ll recoup the upfront cost. If you plan to sell in a few years or refinance to obtain a lower interest rate, a mortgage buydown is much less likely to pay off. It’s also important to ensure that you have sufficient cash reserves to handle emergencies as a homeowner before depleting savings in pursuit of a lower interest rate. Review your financial picture and establish a firm understanding of your cash flow, savings and homeownership goals. If you have questions about the best approach, consult a mortgage professional for personalized advice. Is it Worth it to Buy Down Your Rate? Buying down the interest rate on a mortgage can reduce monthly mortgage payments and allow you to qualify for a larger mortgage. However, you should weigh the expense against your long-term goals before spending the money to bring your rate down a quarter-point or more.

By Ralph Dibugnara November 7, 2024 By Brian OConnell Home insurance seems to be a low priority for new homeowners, but adopting that mindset could be a serious mistake. Why? Because of costs related to home insurance and the reasons homeowners need insurance in the first place. You're going to want to protect yourself and your assets. Do you think you need home insurance? If so, you're going to want to evaluate your personal finances and determine how to budget for home insurance payments. Before you get out your wallet, here's what you need to know. How much does home insurance cost? Price-wise, new home buyers can expect to tack on $1,200 to the cost of a new home, in the form of proper home insurance. That cost, however, depends on several key factors including: Age and price of the home Amount of cash put down via a down payment State or municipality where the home is located Since real estate is primarily about location, where you buy your new home largely dictates how deeply you’ll have to dig in your pocket for home insurance payments. For example, homeowners in Louisiana face the highest home insurance rates in the U.S., at $1,958 (on average) per year. Compare that to $677 in Oregon or $692 in Utah. RECORD-LOW MORTGAGE RATES WON'T LAST — REFINANCE BEFORE IT'S TOO LATE What does a typical homeowners policy cover? No matter where you live home insurance shares some basic commonalities. "Good home insurance policies will mainly cover two types of liabilities - loss of personal property as well as liability for any other damages," said Ralph DiBugnara, president at Home Qualified, a digital platform for home buyers, sellers, and investors. "Yet every carrier has some common standards as well as items and scenarios that they deem to be high risk or low risk." That’s why it’s important a shopper should get at least three quotes because costs and coverages will vary from carrier to carrier. The idea is for shoppers to compare different rates from different companies, and the best way to accomplish that is by going online. To get the best home insurance policy at the best price, DiBugnara advised asking – and answering – three key questions before signing on the dotted line: How much insurance coverage do you actually need? What exactly does that coverage protect me from happening? How much of a deductible should I take and still be safe? "Answering these questions correctly can help you avoid major issues in case of disaster or damage to your home," he said. HOW TO FIND THE BEST MORTGAGE RATES AND FASTEST CLOSINGS What type of home insurance coverage do you need? Some home insurance experts say homeowners put too much emphasis on monthly payments and not enough on getting the right coverage. In that scenario, costs escalate in the form of high out-of-pocket expenses when a disaster strikes and the house incurs major damage. "Just like auto insurance, there can be great variance in the cost from one home insurance company to another," said Jeff Zander, founder of Zander Insurance, in Nashville, Tenn. "In many cases, people have paid less attention to their home insurance cost since it is often included in the escrow payment portion of the mortgage." "For most people, a home is their greatest asset, but the bank is only concerned about getting them their money and not about any of their contents, personal property, or liability risks that arise from owning a home," Zander said. Homeowners looking for quality home insurance at a decent price also need to make a distinction between covering select risks or covering all risks. Fortunately, home insurance policies have you covered. "There are really two types of home insurance policies," Zander noted. A "named perils" policy: This lists the perils that are covered. "If the peril is not listed, then it is not covered," he said. An all-risk policy: "This is the most preferred homeowner insurance policy since it lists the exclusions," Zander added. "Basically, if it is not excluded then it is covered. An all-risk policy is a much broader policy form and includes better protection." The takeaway on getting good home insurance for the best price? Think value and not cost. "Don’t cut corners when purchasing home insurance," said Orlando Frasca, an insurance specialist at Rogers Insurance Services in Danville, Cal. "Consumers often look at the lowest price as opposed to what they are getting for that price, only to find out certain coverages they thought they have were not included on the policy."

By Ralph Dibugnara November 7, 2024 By Brian OConnell Home insurance seems to be a low priority for new homeowners, but adopting that mindset could be a serious mistake. Why? Because of costs related to home insurance and the reasons homeowners need insurance in the first place. You're going to want to protect yourself and your assets. Do you think you need home insurance? If so, you're going to want to evaluate your personal finances and determine how to budget for home insurance payments. Before you get out your wallet, here's what you need to know. How much does home insurance cost? Price-wise, new home buyers can expect to tack on $1,200 to the cost of a new home, in the form of proper home insurance. That cost, however, depends on several key factors including: Age and price of the home Amount of cash put down via a down payment State or municipality where the home is located Since real estate is primarily about location, where you buy your new home largely dictates how deeply you’ll have to dig in your pocket for home insurance payments. For example, homeowners in Louisiana face the highest home insurance rates in the U.S., at $1,958 (on average) per year. Compare that to $677 in Oregon or $692 in Utah. RECORD-LOW MORTGAGE RATES WON'T LAST — REFINANCE BEFORE IT'S TOO LATE What does a typical homeowners policy cover? No matter where you live home insurance shares some basic commonalities. "Good home insurance policies will mainly cover two types of liabilities - loss of personal property as well as liability for any other damages," said Ralph DiBugnara, president at Home Qualified, a digital platform for home buyers, sellers, and investors. "Yet every carrier has some common standards as well as items and scenarios that they deem to be high risk or low risk." That’s why it’s important a shopper should get at least three quotes because costs and coverages will vary from carrier to carrier. The idea is for shoppers to compare different rates from different companies, and the best way to accomplish that is by going online. To get the best home insurance policy at the best price, DiBugnara advised asking – and answering – three key questions before signing on the dotted line: How much insurance coverage do you actually need? What exactly does that coverage protect me from happening? How much of a deductible should I take and still be safe? "Answering these questions correctly can help you avoid major issues in case of disaster or damage to your home," he said. HOW TO FIND THE BEST MORTGAGE RATES AND FASTEST CLOSINGS What type of home insurance coverage do you need? Some home insurance experts say homeowners put too much emphasis on monthly payments and not enough on getting the right coverage. In that scenario, costs escalate in the form of high out-of-pocket expenses when a disaster strikes and the house incurs major damage. "Just like auto insurance, there can be great variance in the cost from one home insurance company to another," said Jeff Zander, founder of Zander Insurance, in Nashville, Tenn. "In many cases, people have paid less attention to their home insurance cost since it is often included in the escrow payment portion of the mortgage." "For most people, a home is their greatest asset, but the bank is only concerned about getting them their money and not about any of their contents, personal property, or liability risks that arise from owning a home," Zander said. Homeowners looking for quality home insurance at a decent price also need to make a distinction between covering select risks or covering all risks. Fortunately, home insurance policies have you covered. "There are really two types of home insurance policies," Zander noted. A "named perils" policy: This lists the perils that are covered. "If the peril is not listed, then it is not covered," he said. An all-risk policy: "This is the most preferred homeowner insurance policy since it lists the exclusions," Zander added. "Basically, if it is not excluded then it is covered. An all-risk policy is a much broader policy form and includes better protection." The takeaway on getting good home insurance for the best price? Think value and not cost. "Don’t cut corners when purchasing home insurance," said Orlando Frasca, an insurance specialist at Rogers Insurance Services in Danville, Cal. "Consumers often look at the lowest price as opposed to what they are getting for that price, only to find out certain coverages they thought they have were not included on the policy."