September 16, 2022
September 15, 2022
For Oregon residents: The 2022 the rental cap increase was 9.9%, in 2023 it goes up to 14.6%. This means someone paying $2000 a month for rent could see an increase of almost $300 per month.
Many homeowners are sitting pretty this year having refinanced last year and not feeling the need to sell in this market. Although inventory has gone up some, most homeowners don’t feel stressed to sell unless they want to take advantage of their equity. Many homeowners are overambitious and overpricing their homes; over 50% are selling for reduced prices in our current market.
Most renters are stuck between a rock and a hard place with rental prices rising and also the high interest rates, closing costs and monthly payments while trying to purchase a home.
If you’re sick of renting and are curious about the option of buying a home, here are some suggestions:
-Talk with a Mortgage Lender about options. Some lenders have the availability to help with down payment assistance and buying down your interest rate.
-Work with a credible Real Estate Broker who can negotiate asking the sellers to accept a lower price and/or pay towards the buyer’s closing costs.
My trusted Mortgage Advisor:
Pacific Residential Mortgage
Work 3550 Liberty Road S | Suite 210Salem OR 97302
Cell Phone: 503-905-4929
Work Phone: 503-391-2334
Work Email: nicole.Klingerman@pacresmortgage.com
Categories: Residential Mortgage
September 12, 2022
The limit for tax free gifts for 2022 is $16,000 and no tax is due to the donor or the donee. There are provisions that would allow gifts higher than this amount providing the total lifetime gifts above the annual exclusion of $12.06 million for 2022 has not be met.
The donor and donee can be separate persons so that the aggregate tax-free gift for one-year amounts to more money. For instance, a father and mother can gift $16,000 each to their married son in 2022 and an additional $16,000 each to the daughter-in-law for a total $64,000.
If the son and daughter-in-law used the money as a down payment to purchase a home, depending on how recent the gift occurred, the mortgage company might require a gift letter from the parents stating the amount was a gift and is not expected to be repaid. Lenders may ask the exact amount of the gift, where it came from and the relationship involved.
Family members and friends with financial resources can become the catalyst that allows buyers with good credit and income but without a down payment to purchase a home. Sometimes, the gift is looked at as an early inheritance that allows the recipient to show their gratitude and the donor to see the enjoyment and benefit of the gift.
In some situations, the buyers have saved enough money for a minimal down payment, but the gift allows them to put more money down that may help them get a lower interest rate or eliminate the need for private mortgage insurance.
The important thing involving gift funds is to have complete disclosure with the lender. It is best discussed during the pre-approval process. Your real estate professional should also know about it so they can guide you through the process.
September 12, 2022
September 10, 2022
September 8, 2022
September 7, 2022
September 6, 2022
Housing Affordability is negatively affected by both rising home prices and mortgage rates. A 20% increase in nominal home prices and a 2% increase in the 30-year fixed rate mortgage since January have contributed to a 46 point drop in the NAR Housing Affordability Index.
The Index was 143 in June 2021 and is 98.5 in June of 2022. The Housing Affordability Index indicates whether a median income family can qualify for a mortgage loan with a 20% down payment and 25% qualifying ratio for monthly housing expenses to gross monthly income.
100 points is considered the tipping point. As the Index rises above that point, housing is considered more affordable and as it declines, it is considered less affordable.
With affordability threatening to limit buyer’s ability to purchase, more borrowers are considering an adjustable-rate mortgage. For the last ten years, fixed-rate mortgages have been so low, only about 3% of borrowers used adjustable-rate mortgages.
There is a lot of misinformation about ARMs that keeps some would-be buyers from even considering them. Even before the housing crisis of 2007, many safeguards were put into place to protect borrowers.
“As long as the ‘spread’ between ARMs and fixed-rate mortgages continues, more first-time home buyers may choose ARMs because the lower mortgage rate gives them a purchasing power ‘boost’ over the 30-year fixed mortgage rate.” Mark Fleming, First American Chief Economist
The potential ARM candidate is probably not a first-time homebuyer. They should be tolerant to risk and more financially savvy with predictably increasing income. These buyers may recognize that they do not intend to stay in the home for a long time.
Adjustable-rate mortgages, generally start out at a lower-rate than a fixed-rate but can adjust, up or down, based on an independent index plus a specified margin and anniversary date that are referenced in the note. Most ARMs have stated interest rate caps that limit the amount of adjustment of the rate both on a periodic basis and a lifetime. FHA ARMs have a limit of 1% per adjustment period and a 5% lifetime cap over the original note rate. Conventional loans, more commonly, have a 2% per adjustment period and a 6% lifetime cap.
A particularly popular type of adjustable-rate mortgage is referred to as a 5/1 which means the rate for the first period lasts five years and then, each adjustment period after that is for one year. This allows a buyer to have stability in the rate during the first five years. If they plan to sell in less time than that, they will not have to deal with the adjustment.
A 5/1 ARM will have a lower payment for five years because of the lower initial rate and assuming a worst case scenario, a conventional ARM could increase a maximum of 2% at the end of the first period which would put the rate at higher than the fixed rate at the time they started. However, that is not where the breakeven point occurs. It is not until all the savings from the initial period have been exhausted, that the ARM will become more expensive than the fixed-rate alternative.
An ARM Comparison can help buyers to determine breakeven point. Let’s compare a 5.66% FRM with a 4.51% 5/1 ARM with 2 and 6 caps. A $450,000 30-year term loan amount will have a P&I payment of $2,600.41 for the fixed compared to $2,286.76 for the ARM. The $317.65 monthly savings will accumulate for 60 months plus a $6,673 lower unpaid balance on the ARM due to a lower interest rate.
The total savings in the first period would be $25,732. If you assume that the payment would increase to the maximum at each adjustment period, the breakeven point will occur at 7 years and 4 months. If you were to sell the property prior to the breakeven, the ARM would produce a lower cost of housing.
One of the benefits for lenders making adjustable-rate mortgages is that they have less risk because the yield can change to reflect the current market. Most ARMs must adjust down as well as up which means if rates do come down, the buyer can continue with the ARM at a lower rate or convert it to a fixed-rate at the, then, current rate.
September 6, 2022
September 2, 2022