Keeping Score Can Lead to Better Borrowing Rates

By scott.affre@nafinc.com May 30, 2017

Keeping Score Can Lead to Better Borrowing Rates

 

Once you decide homeownership is in your future, getting preapproved for a mortgage and engaging a Real Estate Agent may be among your next steps. They shouldn’t be your first steps, however. Instead, start by taking a look at your credit score and, if necessary, getting it in shape to be reviewed.

6 Checkpoints to Establishing Good Credit

Checking your score is simple. You may already have free, monthly access to your FICO score if you have a credit card from a major finance company. You can also find it here, where you can order detailed reports from all three credit reporting agencies once a year, also for free. As you review your reports, here are seven key points you’ll want to check.

1. Verify your information and correct any errors. Closed accounts shouldn’t show up as open, and you should recognize all the accounts under your name. If you don’t recognize some of the entries, contact the company that granted the credit immediately along with the three credit bureaus (Experian, TransUnion and Equifax).

2. Check your limits and balances. You may not want to rush to close inactive accounts right before borrowing. The reason is that 30 percent of your FICO score is related to the total amount of credit you have access to—the limits on each of your credit cards versus to the total amount of the balance you currently have outstanding on these cards. If you close unused accounts that will raise your utilization rate. It’s best to keep this utilization rate below 30 percent and preferably around 20 percent.

Jacob Lumby from Cash Cow Couple mentioned, “You want to avoid a high utilization ratio. For example, if you have a $5,000 credit limit, try to avoid charging more than $1,000 at a time (a 20 percent utilization ratio). Using more than 20 percent of your total credit is often frowned upon by the credit bureaus.”

3. Review your payment history. For each open account, the reports should show 12 straight months of on-time payments. Having a clean record when you apply carries a lot of weight in your score—payment history accounts for 35 percent of your FICO score. If you have an imperfect record, the sooner you start improving it, the better.

4. Keep inquiries to a minimum. Resist the urge to open a new store account just so you can save 20 percent on your current purchase. It can end up costing you on your mortgage. Credit reports record recent credit inquiries, and the more you’ve initiated, the more it appears as if you have some sort of financial issue. Since inquiries account for 10 percent of your FICO score, keep them to a minimum until after your mortgage closes.

5. Have credit. The length of your history as a borrower accounts for 15 percent of a FICO score. Being a cash-only person or only using a debit card may have helped you save up for your down payment, but not having a history that demonstrates responsible use of credit could cost you in terms of your FICO score.

6. Mix it up. The remaining ten percent of your FICO score is based on the type of credit you have used. It helps your credit score to have experience with a mix of personal loans, credit cards, store cards, and even student loans. This history helps demonstrate that you can handle your financial obligations as promised and on time.

While you can take actions on your own that will improve your credit score, if you want more personalized advice consider talking to your banker, a Loan Officer, or seek out help from a nonprofit counselor. Just know you shouldn’t need to pay anyone to do this for you.

Nature vs. Nurture: What Helps Loan Officers Succeed

By scott.affre@nafinc.com May 30, 2017

Nature vs. Nurture: What Helps Loan Officers Succeed

 

Are successful Loan Officers born or made? Perhaps it’s a little bit of both. The profession definitely benefits from certain key traits, including a special blend of self-confidence and competence along with an engaging personality. Success also comes from a sense of self-determination and a commitment to following through.

To help nurture your natural drive and ambition, here are some observations we’ve made over the years on what leads to being successful in this area.

Tips for Greater Success

1. Turn criticism into an opportunity to improve. During the mortgage process, tension can run high. It’s not personal. Use any criticism, justified or not, to consider how you may be able to improve the way you conduct business and communicate in the future.

2. Keep learning. Even when you think you know it all, believe that you don’t. Keep learning about your craft and striving to do better.

3. Set expectations. It’s always better to under promise and then over deliver. Telling people what they want to hear can do more damage than laying out the facts and working on a plan to achieve better results.

4. Be proactive. Keep the loan process moving toward closing. Quarterbacking the process may not always be your job, but clients seek accountability and appreciate someone who can get them answers.

5. Stay hungry. Keep to your plan of introducing yourself and your services by calling or messaging two to four new professional contacts a day. From Real Estate Agents, builders and attorneys who specialize in closings to financial planners, continue building your professional network.

Ultimately, what drives success is an appreciation for clients’ property-owning aspirations and the underlying desire to help them acquire a home they can afford for years to come.

How to Find the Right Loan Officer

By scott.affre@nafinc.com May 19, 2017
How to Find the Right Loan Officer

When you are about to make the largest purchase of your life, you need someone who will not only find you a low rate, but who gets the significance and wants to help you succeed in the most affordable way possible. After all, the terms of your mortgage will impact your household finances for years to come.Recognizing the right individual takes meeting several, which you may want to do before you even start looking at homes. The right Loan Officer will prequalify you and help you determine which mortgage programs are right for you, since this could affect the homes you will want to look at.Here are some tips for spotting Loan Officers who will put your best interest ahead of theirs.

  1. Trust but verify. Whether you receive a referral from a friend, relative, or your Real Estate Agent, do your own background check. Verify your Loan Officer’s license and registration here. Then, check their online reviews.
  2. Don’t stop with just one. Different lenders offer different programs. Due to corporate initiatives, some mortgage companies may seek new business more aggressively than others by offering more attractive pricing. Little savings can add up over the lifespan of a mortgage, which is why comparison shopping is advisable.
  3. Never rely on an interest rate quote alone. To make an informed decision about which Loan Officer you want to work with and which product to use, you need to understand all the costs associated with your potential financing. Online calculators can help you determine how the closing costs and any fees might impact your monthly payments and enable you to see your total cost over time.
  4. Understand what will be expected of you. In addition to receiving a full breakdown of anticipated fees, determine what kind of down payment you will need and when money will be required from you.
  5. Explore communications options. Before you commit, ask the Loan Officer how they communicate and what hours they work. You need to be able to contact your lender at a time and using a method that is most convenient for you. For instance, if you work full time, you may want a lender who is available before or after regular business hours, as well as online.
  6. Understand the process. Find out what documents will be needed, when, and how long a decision takes so you can manage your time and expectations accordingly.

Don’t underestimate your own power when it comes to mortgages. Whether a Loan Officer approves your application or not has much to do with you, the steps you take before you apply, and with whom you choose to do business. Choose a Loan Officer based on how collaborative the relationship will be. Their focus should be on you and helping you make the best decisions for your financial situation and your long-term home-owning goals. Remember, you are in control.


Read more at https://www.newamericanfunding.com/blog/how-to-find-the-right-loan-officer/#K4lTETwwOrgIBPZh.99

FHA Versus Conventional Mortgages: How to Find Acceptance Even with Weak Credit

By scott.affre@nafinc.com September 21, 2016

Mortgage loans are like power tools: You get the best results by using the right one for the job at hand. For many borrowers that may mean bypassing the conventional route to find the one that fits your budget today and is the least likely to cause financial stress in the future.

Affordability and the Federal Housing Administration (FHA) Program

For a borrower having trouble pulling together a down payment or who may have a weak credit history—or no credit history—an FHA mortgage effectively levels the playing field. The program was designed to open up homeownership to as wide a group of borrowers as possible, even those who may have experienced some financial missteps, like a foreclosure or bankruptcy, in their recent past.

What most borrowers don’t realize is that the FHA doesn’t actually issue mortgages. The agency provides insurance on the payments for the issuing lender. This insurance helps make an application more attractive for a lender to approve since it addresses any concerns the lender might have regarding repayment.

Why You Might Want to Do This

It’s natural to think a government program would result in more paperwork and hassle than going the conventional route. FHA loans do require extra forms, but on the lender’s side of the transaction, not yours. Better yet, qualifying for an FHA loan is only slightly more cumbersome than applying for a conventional mortgage.

Here are some other things you should know about FHA mortgages.

 

Previously, FHA mortgages offered the added advantages of lower down payments and higher borrowing limits over conventional mortgages. Today, conventional mortgages can be made with as little as 3 percent down, and borrowing limits are now the same for both loan types at $625,500. Another advantage FHA mortgages offer is that they are still eligible for a “streamlined” refinancing at a lower interest rate. Now that regulatory changes have greatly lengthened the refinancing procedure for conventional mortgages, this aspect can save time and money. FHA mortgages can also make a property more attractive on resale since they are assumable by the new owner, unlike a conventional loan.

Never Assume

The impact FHA insurance premiums have on the overall cost throughout the life of mortgage usually makes a conventional mortgage cheaper in the long run. Even when a conventional mortgage carries insurance, more commonly referred to as “private mortgage insurance (PMI),” PMI is only required until the borrower’s equity in the home reaches 20 percent. If you are only expecting to stay in your home for a few years, the FHA mortgage can be the better bet, even with the insurance.

With so many moving parts making up each loan, always have your lender run a comparison across all of the mortgage programs available to you. There is no reason your mortgage shouldn’t provide a custom fit to your current circumstances and your long-term plans.  

Selling Points: 6 Apps to Help Buyers Find Their Way Home

By scott.affre@nafinc.com August 25, 2016

Selling Points 6 apps to help home buyers

Real estate has always been about location, location, location. That hasn’t changed. What defines a good location, however, may have changed as features like walkability, proximity to coffee houses, and accessibility to public transportation have become more important to many buyers.

The way buyers access information about potential neighborhoods and homes has also changed. Millennials in particular, who account for 67 percent of today's homebuyers, are used to having a world of data at their fingertips. Unlike their parents, who may have relied on Real Estate Agents to cull through the data and select the homes to be viewed, these infocentric adults are more likely to prefer sorting through the specifics themselves before selecting the homes they want you to show them. This is why having a collection of apps to refer them to is becoming just as important as a fistful of listing sheets.

To help you direct your clients to resources that can refine the search for that one, perfect home in the best neighborhood for each buyer’s lifestyle preferences, we created a list of some of the most useful tools available. All of these apps may be accessed online or downloaded to a mobile device.

Tools for Happier House Hunters

#1 Walk Score®

Many Real Estate Agents have already added scores from this company to their websites due to the importance of what is nearby holds for today’s younger homebuyers.

#2 AroundMe

How close is the nearest Starbucks? This app maps it out, giving potential buyers a sense of their prospective home’s proximity to the places and services they are most likely to want to frequent.

#3 dwellr

Reminiscent of a dating app, dwellr uses U.S. Census Bureau data to match users to areas that are most likely to appeal to their lifestyle preferences and interests.

#4 Homefacts®

This app provides data on specific areas and addresses, including the likelihood for specific natural disasters and environmental risks to the names, proximity, and photos of any offenders in the area.

#5 NeighborhoodScout®

Like other sites offering demographic information, this search engine allows for a deep dive into an area’s composition and historical home appreciation rates and provides links to properties that are currently on the market.

#6 GreatSchools Finder

Although packed with information about an area’s public and private school options, the best part of the site is that it provides access to parent reviews. Being able to read about actual experiences with the schools is highly desirable, especially for younger buyers who have grown up relying on and communicating with others through user reviews.

There is no substitute for the knowledge a Real Estate Agent brings to each transaction. By equipping buyers with the tools they need to confidently make what could be the biggest purchase of their lives, you can easily enhance your ability to bring it all home for them and for you.

Tips for Increasing Your Home's Curb Appeal

By scott.affre@nafinc.com August 2, 2016

When sprucing up your home before a sale, make sure you do not forget about the exterior.When sprucing up your home before a sale, make sure you do not forget about the exterior. It is easy to become preoccupied staging the home's interior and updating key rooms, but failing to think about the curb appeal of your property could cost you. The outside of your home is the first thing people see when they arrive. You only get one chance to make a first impression, which is why a well-maintained exterior can contribute substantially to the value of a home and help it sell faster. 

Even if you are not thinking about selling anytime soon, improving your home's curb appeal can be a good idea. After all, you also have to see the outside of your home every day, and the nicer it looks the more pleased you will be when pulling into your driveway. 

There are many ways to give your home's exterior a fantastic makeover: 

A clean exterior can raise your sale price by $10,000 and $15,000.

1. Clean It 

No one likes to look at dirt and grunge, and it may surprise you to learn that giving the outside of your home a simple clean can make a big difference.

Now, a truly good clean could cost you several hundred dollars if you hire professionals, as you want to make sure every inch of your home's exterior, including the garage doors, is scrubbed and spotless. You can also rent power washers for about $75 per day. This investment can be well worth it. A thoroughly cleaned outside can result in a rise in sale price of between $10,000  and $15,000.1

2. Upgrade the Hardware 

Your mailbox and house numbers provide great opportunities to get creative and give your home's exterior some extra flare. If either of these appear old or in disarray, it could be a turnoff to buyers, so the first thing you should do is at least make sure they're clean and well put together.

Beyond that, you can make them an integral part of your home's exterior design by coordinating their colors with that of the house, adding some flowers around the mailbox or incorporating some other visually appealing decorative technique.

3. Give it a Fresh Coat of Paint 

Giving your home a fresh paint job is costly, but it can make the property very appealing to homebuyers. If you do decide to repaint, it is best to stick with neutral colors. You want your home to stand out in a good way, and painting it an extremely bright color, especially if it strongly contrasts the house's trim, can accentuate its flaws. It is best to use similar colors for the property's trim and body and also to choose colors found in nature, such as a deep red or muted green.

4. Add Lighting 

Lighting is not only a fantastic addition for aesthetic reasons, but it can also be appealing for the extra security it provides. It is hard to feel safe walking through a pitch-black front yard at night, and showing homebuyers they won't have to deal with installing their own front lighting when they move in could help increase interest in your property. 

Use low-voltage landscape lighting to brighten up a walkway, or as accent lighting in the trees. Solar fixtures are a good alternative for those who cannot use lights involving wiring outside, though they tend to have a lower brightness.3

5. Update the Front Door 

As with all other elements of your home's exterior, your first task is to make sure the front door is completely clean. Beyond that, consider replacing it with a custom wood door or even painting it a bold color. You may not want your entire house to stand out with a bold paint job, but giving the door something a little stronger than neutral, perhaps a nice red or blue, could provide your home with just the right amount of pizzazz it needs. 

https://youtu.be/2gsPCmofw5A 

6. Maintain the Lawn 

Your lawn should be well cared for, with healthy green grass and no overgrown plants. Adding a garden is also a great idea. If gardening is not your thing, consider creating a container garden by purchasing plants in ready-made containers that can help you create a garden with ease. 

7. Fix Up the Roof 

Roofs that are not maintained well can cause problems, and buyers will notice if your roof does not look like it has been taken care of. Hire a professional to give it a good clean as well as to replace any damaged or missing shingles. In addition, consider replacing or updating your gutters and downspouts. 

The exterior appearance of a home should be a priority, not an afterthought for sellers, and while there are many more ways to increase curb appeal, these seven options are certainly a great place to start. 

Sources 

1HouseLogic
2Time
3Better Homes and Gardens

Mortgage Refinance Opportunities Abound

By scott.affre@nafinc.com July 26, 2016

It's a great time to get a home loan or refinance.The summer of 2016 is shaping up to be one of the best seasons for home loans in years. The average interest rate on a 30-year fixed mortgage is at 3.52 percent as of July 7. That's significantly lower than what could be found just a year ago, and among the lowest rates seen since 2013. In a survey of economists, more than half said they expected average rates to continue falling in the days and weeks ahead.

For homeowners currently paying a mortgage, this is terrific news. For prospective borrowers, it may be even better. Even though many expect interest rates to remain at historically low levels for a while, it's impossible to know for sure. Therefore, frugal mortgage borrowers should be aware that time is of the essence.

What's causing low rates?

Anyone paying attention to the news in the first days of July has probably become very familiar with a recently made-up word: Brexit. The U.K.'s unprecedented decision to leave the European Union sent shockwaves throughout the global economy when the results of the vote were announced June 24. Investors and financial institutions the world over reacted negatively to the vote, not just because it was unexpected, but also from sheer uncertainty. No country has ever left the EU since it was created in 1971, and as one of the biggest players in international finance, the implications of Great Britain's move are still not fully known.

After #Brexit, mortgage rates in the U.S. have approached record lows https://t.co/9y3FagAB0H pic.twitter.com/9BNE6EkWO8

— Bloomberg (@business) July 7, 2016

 

What does this mean for consumers?

Although the stock market took an initial hit from the Brexit decision, most Americans don't need to worry too much about the situation in the short term. In fact, many stand to benefit from the lower interest rates on loans now being seen everywhere.

With the cost of a fixed-rate mortgage now at the lowest level in three years, it makes sense that applications for such products have also risen to their peak in the same timeframe. Much of this is being driven by current homeowners looking to refinance their current mortgage. Indeed, applications for refinancing are now almost double what they were in July 2015.

Clearly, it's in a borrower's best interest to get the best deal possible on their mortgage. But Realtor.com cautions against making big decisions without doing the requisite research. Refinance-seekers should calculate their savings with the up-front refinancing fee in mind. This initial fee can often exceed $2,000.

For those who are in the market for a new home altogether, patience and diligence pays off in the end. A mortgage is a vital financial asset that will stick around for a long time. Although refinancing may be an option down the road, it pays off in the long run to make an informed choice the first time around. By finding a lender you can trust, dealing with one of the most important decisions in life will get a whole lot easier.

Everything You Need to Know About VA Home Loans: Part 2

By scott.affre@nafinc.com July 20, 2016

Before applying for a VA Loan, it is vital to confirm your eligibility.

VA loans have a number of incredible benefits, including no requirements for down payment or primary mortgage insurance. Before applying for a VA Loan, however, it is vital to confirm your eligibility.

Servicemember VA Home Loan Eligibility

There are a few different ways to be eligible for a VA home loan.

First, you can be a veteran. Depending on the war in which you fought or the time period in which you were on active duty, there are different minimum active-duty service requirements that make you eligible for a VA loan. For example, the  requirement for those who fought in the Vietnam War is 90 total days. If you were active during the period known as post-Vietnam War (from May 8 1975 to September 7, 1980), your minimum active-duty service requirement is 181 continuous days. Check out this chart to determine whether you are eligible based on when and how long you served.

The second way to be eligible for a VA loan is to currently be on active duty. The minimum requirement for current active duty is 90 continuous days.

The third group of eligible borrowers consists of those in the National Guard or Selected Reserve for at least six years who are now retired, were discharged honorably, continue to serve today or are now part of an element of the Ready Reserve (other than the Selected Reserve) or Standby Reserve after honorable service.

Under any of these three eligibility conditions, the military member or veteran cannot have been discharged under dishonorable conditions.1

VA: Gulf War Vets Most Likely To Use VA Home Loan Program https://t.co/4mXa5FQjbd

— Brett Synicky (@BrettSrealtor) May 4, 2016

 

VA Home Loan Eligibility for Spouses

There are three conditions under which a servicemember's spouse would be eligible for a VA loan without the veteran or servicemember:

  1. The servicemember is a prisoner of war or missing in action.
  2. The veteran died while in service or from a disability as a result of service, and the spouse has not remarried.
  3. The veteran was totally disabled and has died, though the disability was not necessarily the cause of death.

Other Ways to Be Eligible 

It is possible to be eligible for a VA loan if you have served in organizations like the Air Force, Coast Guard Academy, National Oceanic & Atmospheric Administration, the Department of Public Health Services, and more.

Another way to qualify is by having served in an army that was allied with the U.S. during World War II.

Anyone who is eligible for a VA loan must obtain a Certificate of Eligibility to present to lenders.

There is also something known as "restoration of entitlement," which allows those who have sold their home that was purchased with a VA loan or paid the loan off in full to qualify for another one. The entitlement for a loan can also be transferred to another eligible borrower. 

VA loans close up to two day days quicker than traditional loans.

VA Loan Misconceptions

Sellers can be hesitant about accepting an offer involving a VA loan because they believe they take longer to close. In reality, VA loans actually close up to two days quicker than traditional loans. Urgency shouldn't be a reason for a seller to turn down a VA-backed offer.

Another misconception is that VA loans don't offer enough financing for ample affordability in many neighborhoods. There are actually not many neighborhoods for which a VA loan would not be enough.2

In most areas, $417,000 is the VA loan limit, but in higher-cost areas it the limit can increase up to as much as $1,094,625.3

Getting Approved for a VA Loan 

Once you've determined that you're eligible for a VA loan and have obtained a Certificate of Eligibility, you still have to qualify. You will, however, have an easier time qualifying for a VA loan than a conventional loan, as lenders' requirements are more flexible because the loans are guaranteed by the U.S. Department of Veterans Affairs.

To qualify for a VA loan, you must intend to live in the property you want to purchase. In general, the borrower must agree to move into the home within 60 days of closing, but these rules are flexible based on whether the borrower is deployed in a location far away from the property. If so, he or she will be able to move in within 12 months of closing, rather than 60 days. In addition, the servicemember's spouse can satisfy the move-in requirements in his or her place.

You must also verify the property you want is eligible to be financed through a VA loan. Fortunately, there is a wide variety of property types a VA loan can finance, like single-family homes, multi-family homes with up to four units per borrower, townhouses and certain approved condos. 

The final qualification requirements are a solid income, a good credit score and a low debt-to-income ratio. Again, these requirements will be less rigid than for conventional loans and will depend on the lender.4

If you are interested in a VA loan, contact New American Funding. Our Loan Officers will help you gather everything you need to apply. We can make sure you obtain the best possible VA loan based on your current personal and financial situation, and we can even help you find a Real Estate Agent. We will take care of the home appraisal utilizing a VA-assigned appraiser, and we don't have to wait for the VA to review your credit application before approving and closing your loan. 

Contact New American Funding today to make one giant step toward owning your own home. 

Sources 

1U.S. Department of Veterans Affairs
2Chicago Tribune
3Bankrate
4Military.com

Everything You Need to Know About VA Home Loans: Part 1

By scott.affre@nafinc.com July 13, 2016

Those who qualify for a VA loan receive a host of benefits that make this loan one of the most attractive options out there.

The VA loan program was created in 1944 as a way to help veterans and active members of the U.S. military achieve the American Dream of homeownership. As Memorial Day approaches, it's a great time to say thank you to the military veterans or servicemembers in your life by making sure they know about this wonderful opportunity available. After all, these servicemen and women fought for our dreams, and now it's time we help theirs come true. 

A VA loan does not require a down payment or private mortgage insurance.

Main Benefits of a VA Home Loan 

Those who qualify for a VA loan receive a host of benefits that make this line of financing one of the most attractive options out there:

  1. A VA loan is offered by private lenders but backed by the U.S. Department of Veterans Affairs. This guarantee makes lenders more willing to approve riskier borrowers, such as those with credit scores that are lower than the ideal range. In addition, the government guarantee often allows the lenders to provide better loan terms, including significantly lower interest rates. 
  2. It does not require a down payment. The borrower can receive a loan of up to 100 percent of the home's value. 
  3. VA loans are accompanied by an upfront funding fee, but certain borrowers, like those who get disability compensation, don't have to pay it all. Those that do have to pay the fee can wrap it up into the loan rather than pay it as cash at closing. 
  4. There are no early-exit fees or prepayment penalties. 
  5. It can be used to purchase a wide variety of property types as well as to conduct repairs and renovations. 
  6. It can be used to make energy-efficient upgrades.
  7. Despite the fact that there is no down payment, borrowers still do not have to pay private mortgage insurance. For a conventional loan, PMI is required for anyone who puts less than 20 percent down. 
  8. A VA loan can be refinanced into another VA loan or can help refinance an existing mortgage. 
  9. Closing costs tend to be lower than they are for conventional loans.

?Additional Benefits Based on Location

There are many states that provide extra advantages for those who finance a home with a VA loan. In Maryland, for example, permanently and totally disabled veterans do not have to pay property taxes and retired service members do not have to pay state income taxes for the first $5,000 of their retirement income.

In Arizona, disabled veterans as well as widows and widowers of veterans receive property tax exemptions. In addition, any compensation received by active-duty service members is not subject to income tax for any month the member is paid while on active duty.2

Be sure to do some research to see what additional benefits your state or county might offer. 

Monthly Mortgage Payments: the Basic Allowance for Housing

If you are an active-duty member who is not living in government housing and has been assigned to permanent duty in one of the 50 states, you will also be entitled to receive the Basic Allowance for Housing. Not only can a BAH be used to make your monthly mortgage payments, but it also can be counted as income. This is important because it can raise your income level to help you qualify for the best loan. 

Types of VA Home Loans

There are four main types of VA Home loans: 

  1. Purchase Loan - used to purchase a property 
  2. Interest Rate Reduction Refinance Loan - used to refinance one VA loan into another 
  3. Native American Direct Loan - used to help eligible Native American veterans either obtain low interest rates on a VA loan to purchase a home or fund renovations of properties on Federal Trust Land
  4. Adapted Housing Grants - used to purchase, build or renovate a home to accommodate a veteran's disability3

If you are eligible for a VA home loan, you will find yourself with greater flexibility in loan termsand fees, and you will also experience an increased ease in the ability to qualify for a loan. 

Sources

1The Mortgage Reports
2Chicago Tribune
3U.S. Department of Veterans Affairs 1

Who Is Fueling the 2016 Housing Market?

By scott.affre@nafinc.com June 24, 2016

Mortgage lending professionals are feeling optimistic about the 2016 housing market.

A March survey from the Lenders One mortgage barometer found that lending professionals are feeling optimistic about the 2016 housing market.Sixty two percent of mortgage professionals believe mortgage purchase production will rise this year.1

Millennials, Hispanics and Non-Traditional Buyers are the Keys to Growth

(Click Headline above to Tweet)Tweet: Millennials and Hispanics are the Keys to Market Growth http://ctt.ec/2K_8W+

Of the 200 participating lending professionals, 62 percent believe mortgage purchase production will rise this year and 87 percent believe the mortgage purchase market will be somewhere between somewhat and extremely active. 

Daniel T. Goldman, Interim CEO at Lenders One, explained the significance of these numbers: 

"The strong confidence levels we're seeing among lenders highlight the continued bounce back from one of the most challenging real estate and lending environments in U.S. history," Goldman said. "In an environment where lenders can once again focus on business growth initiatives, it will be more important than ever for mortgage professionals to have access to the tools and ongoing training they need to capitalize on these emerging trends."  

These emerging trends include the influx of millennials, Hispanics, non-traditional and boomerang buyers into the housing market. When asked which groups present the best growth opportunities, 79 percent of mortgage professionals named millennials and 71 percent identified Hispanics. Trailing just behind these two groups were non-traditional buyers - those who purchase rental and vacation homes - and boomerang buyers, those who are now able to obtain a mortgage after a bankruptcy or foreclosure. Seventy percent of mortgage professionals said the former represent a key growth opportunity and 68 percent mentioned the latter.

The Idea that Millennials aren't Buying is a Myth 

It is no surprise to see that mortgage professionals have identified the Hispanic buyer market as home to a key growth opportunity in 2016. Many reports have been released demonstrating that Hispanic homeownership is indeed on the rise, but there seem to be more conflicting opinions about what's going on with millennials and the housing market.

Some experts say millennials are entering the housing market in droves, while others maintain they are being edged out. It's starting to seem like it's possible for both sides to be right. What is known, however, is that a large portion of millennial homebuyers are a huge force in the housing market right now. In fact, they currently comprise 35 percent of all homebuyers in the U.S., making them the largest home buying generation in the country.2

Millennial homeownership is on the rise as renting increasingly becomes less affordable than buying. Also, millennials are saving money - about 8 percent of their income on average - and have begun saving at earlier ages than the generations who came before them. Through activities like coupon sharing and decisions like living with their parents, millennials are finding ways to save up for that down payment.

Finally, it is getting easier to qualify for loans as new programs - like the Fannie Mae HomeReady program that requires only a 3 percent down payment - spring up to help cash-strapped buyers. Many millennials are settling down in the suburbs, where it has proven to be cheaper to own a home than in urban areas.3

Millennials grew up during a time of great economic disparity, and as a result they are more motivated to save. According to a Bankrate report, millennials are the generation that is currently most comfortable with their financial situation, including savings, net worth and debt.4

"Millennials have a greater inclination toward saving, for both emergencies and retirement, than we've seen from previous generations," explained Bankrate Chief Financial Analyst Greg McBride. "Much of this is attributable to the financial crisis and Great Recession coming during the financially formative years for many millennials."

The Bottom Line

Unemployment rates are decreasing in the United States, and as such, the amount of disposable income is rising for many Americans. That availability, along with low mortgage rates, should lead to an active housing market. So far, this spring has in fact been a seller's market, with buyer demand high and inventory remaining low. 

As the economy continues to improve and more Americans look to achieve the American Dream of homeownership, it seems millennials, Hispanics, non-traditional buyers and boomerang buyers will be leading the charge. 

Sources 

?1LendersOne
2National Association of Realtors
3The Mortgage Reports
4Bankrate