The housing market has been one of the most affected areas of the economy by the coronavirus pandemic. As the economy sunk to unprecedented levels in the last couple months, certain signs indicate the housing market may be coming back to life. While we have been here for our borrowers who have continued to refinance and purchase their dream homes, there are signs the housing market is headed toward growth.
Increased Purchase Applications
Purchase applications were one of the most affected areas of the economy since the pandemic, making them a sensitive and strong indicator of a rebounding economy. The Mortgage Bankers Association shows that mortgage purchase applications rose 6.7% higher than a year ago, which says a lot considering we were not in the thralls of a pandemic last year. Plus, purchase applications have been increasing for 6 weeks in a row. This increase in purchase applications tells us that growth may be on the way.
A Flattening Curve
Another indication we can look to in order to determine the status of our economy’s recovery is the status of the curve – is it flat or flattening? As long as the virus is still being spread and isn’t contained, we cannot go back to work and work on reopening our economy. When we see the curve flatten, more and more people will resume their home purchasing and selling activity, and we can begin to rebuild our housing market. We have seen significant improvement in the containment of the virus, and we may be getting close to a flat curve, but we still have work to do and must continue our efforts.
The End of Sheltering in Place
Once businesses reopen and the stay at home order is revoked, that will be a strong indication of movement toward economic growth. We are just entering the early stages of reopening, and as people begin to leave their homes once again, we will likely see many of them participating in the housing market.
Decrease in the Stress Index
One metric commonly used to measure the state of the economy is the St. Louis Financial Stress Index. This metric showed a spike in financial stress on March 20th. However, since then, we are seeing a decrease in financial stress. While we are not there yet, we are on our way to more stable economic conditions that help lead to a healthy housing market.
Decrease in the Rate of Unemployment Growth
With over 38.6 million Americans filing for unemployment suddenly due to the coronavirus pandemic, this was a major measure of the state of the economy and housing markets. The rate at which unemployment was growing has decreased in the last week, hopefully pointing toward a trend of economic improvement as the unemployment growth slows down. As long as unemployment continues to slow down, this may be an indication that we are heading back to stable conditions.
The 10-Year US Treasury Yield Increases
A common method of determining the state of the economy is through the 10-Year Yield. Once we see a 10-Year Yield above 1%, we can take that as a good sign of a growing economy and housing market. With 10-Year Yields below 1%, we’re not there yet. However, despite the negative economic impact of the pandemic, the 10-Year Yield remained relatively high, perhaps in expectation of improved times ahead. As other factors such as decreases in unemployment, lifting of the stay at home order, and the flattening of the curve come into play, we may see this metric increase which would further signify a strengthening economy.
As we pay attention to these indicators and we notice the housing market rebound, you may find yourself stepping into the housing market once again. Whatever your needs are, we are here to help you, no matter how difficult and confusing the times are. Contact us today to find out how we can help you achieve your ownership goals.
As you move through the home buying process, there are many things you should keep in mind. Here are the Top Ten financial pitfalls you should avoid when purchasing a house.
#1) Changing jobs
Change in your job status will cause your file to be re-underwritten and reconsidered. This may cause a delay with your loan process or possible denial of your loan application.
#2) Co-signing a loan
During the loan process, changes to your credit report or status could negatively affect your ability to close your loan on time or at all.
#3) Buying a vehicle
Applying for credit to purchase a vehicle will be recorded as an inquiry into your credit. This may decrease your credit score or decrease the amount of money that you may qualify for when purchasing a home.
#4) Using charge cards excessively or making late payments on ANY of your accounts
Excessive use of credit cards can have negative effects on your credit rating. Inquires are recorded by credit bureaus and balances on credit cards exceeding 35% both affect your debt to income ratio and decrease your credit score. Also, late payments of any type can decrease your credit score, increase your home loan interest rate, delay loan closing, or cause loan denial.
#5) Spending money you have set aside for closing
Most conventional loans require 2 months of reserve money to be verified in your available financial accounts. Once it has been verified for use at closing, spending these reserve funds may result in loan closing delays or loan denial.
#6) Omitting debts or liabilities from your loan application
Please be honest and clear about ALL of your debts or liabilities early in the loan application process. Having the right information will allow your Loan Originator to provide you the best qualifying loan value. Unrecorded debts or liabilities that are found later in the process may affect the amount of money you qualify for in addition to causing delays or denials of your home loan.
#7) Buying furniture, appliances, or household items before closing
Large purchases causing deductions in your banking accounts or additional debt on credit cards can negatively affect your loan process resulting in delays or denials.
#8) Originating any inquiries into your credit
Multiple inquires into your credit may decrease your credit score and any credit checks could negatively affect your ability to qualify for a home loan.
#9) Making large deposits without first checking with your Loan Originator
Abnormal deposits or large deposits into checking, savings, or any financial account beyond normal payroll deposits must have money sources verified by Underwriting. Making these deposits could result in loan processing delays or denials.
#10) Changing bank accounts
Because the loan process requires a 2 month history of reserve funds, opening new financial accounts near a closing date may void this history. New bank accounts will not have the 2 month history available and cannot be used. This may result in loan closing delays or denials.
Once you know what equity is and how you can use it, the next step is figuring out how to build it so you can take advantage of its perks. Since equity is the percentage of your home that you own, building equity means increasing cash resources that are available to you.
1. Make a Large Down Payment
Putting more money down in the beginning is a good way to get a head start on building home equity. Plus, if you put down 20% or more, you can avoid having to take out private mortgage insurance.
2. Pay Extra on Your Mortgage
When you pay more than your regular payment on your mortgage, you can increase your home equity as long as your extra money is going toward the principal. Ask your mortgage servicer how to apply the extra payment so it’s covering the principal. This way, you can be sure you’re increasing your home equity.
3. Make Improvements that Increase the Property Value
You can boost your home equity by renovating, remodeling, or making improvements on the home. When you make improvements that increase property value, you also increase your home equity. Consult with a home professional before you do any renovations so you have a good idea of which type of project should get you the best return.
While building equity is a process that takes time, it can be beneficial in the long run. The faster you can grow your home equity, the quicker you can enjoy the benefits. Whether you consider putting down more money in the beginning, paying a little extra toward your mortgage, or making renovations that increase your property value, these are all great ways to boost your home equity.
To learn more about how you can build home equity or how we can help you achieve your specific financing goals, contact us today. Our Loan Originators are happy to answer all your questions!
This amazing fresh Summer Fruit Tart is an easy to make dessert the whole family can enjoy. So, celebrate warmer weather and take advantage of delicious summer produce with this festive treat.
1 tablespoon cornstarch
1 tablespoon maple syrup
1 cup Unsweetened Vanilla Almond Breeze Almondmilk
1 prepared tart shell
1/2 cup sliced fresh strawberries
1/2 cup fresh raspberries
1/2 cup fresh blueberries
- To make custard whisk egg, corn starch and maple syrup together in a pan. Slowly whisk in almond milk over medium heat. Bring to a boil, whisking continuously, remove from heat and cool 5 minutes.
- Pour custard into tart crust and top with fruit.
- Refrigerate 30 minutes before serving.
Source: allrecipes - recipe by Almond Breeze
Understanding home equity and how you can use it is important for making the most of your experience as a homeowner. You can use it to pay off debt, pay for college, make improvements on your home, remove private mortgage insurance, and more.
What is Home Equity?
Home equity is the difference between what your home is worth and what you still owe the lender. In other words, home equity is the percentage of your home that you actually own. You build equity as you reduce the principal on your loan by making payments on your home. Home equity can also grow when your home’s value increases.
What Can You Do with Your Home Equity?
There are many reasons you would want to tap into your equity and many advantages you can enjoy when you do so.
You can use cash from your home equity to pay off other bills such as credit cards, auto loans, or personal loans. This can help you save money if your mortgage interest rate is lower than the interest rates on those other loans. This also means you’ll have just one debt payment instead of multiple bills.
If you don’t have extra cash available to make home improvements, you can use your home equity to finance renovations. This way, you’ll be funding those renovations with the interest rate of your mortgage instead of using a credit card or personal loan with higher interest rates.
Pay for College Tuition
If you need to borrow money for college tuition or other college expenses like books, using your home equity can be a great way to finance these costs. Because student loans may not be the option with the lowest interest rate, using your home equity may be able to help you save some money. You can also use your home equity to pay off student loans you already have.
Remove Mortgage Insurance
If your mortgage required private mortgage insurance (PMI), you might be eager to cancel it. With a conventional loan, your PMI is canceled automatically as soon as you earn 22% equity, but you can request a cancellation at 20% equity. So, if you’re looking to stop paying for PMI, building equity is a great way to cancel it.
Want to learn more about your options as you build home equity? Contact us today to find out how we can help you achieve your goals.