Same old housing market road or new one?

September 19, 2018

Geoffrey the Mortgage Guy speaks

Same old housing market road or a new one?

How many of you remember the Mortgage Meltdown and Financial Crisis that occurred around 2007? It was a perfect storm that not one product, industry or trend was 100% to blame.  Yes, people pointed fingers at each other saying it was sub-prime loans, inflated home prices, low down payment programs or appraiser working too closely with lenders. Basically, everybody in the business contributed to that debacle.

I won’t forget those times as I lived them as a mortgage loan officer here in Frisco since 2002!  What’s eerie is that I’m starting to see some of the same kind of practices that got everyone into trouble the last time. Are we about to see the second coming? I’m hearing nuggets like Dodd/Frank policy is loosening and stated income loans are back. Now, there’s a company that will buy your new home while you sell yours. And give you up thousands to fix up your previous home as well as your new one. This is Risky Business folks.

Meet Knock.

They’ll buy the house you want, and let you move into it, while you sell yours through them. No hassles showing your current home AND they’ll lend you up to $10k for the house you’re selling to fix it up and $10k on your new home to make the changes you want.

Things that make you go Hmmmmm…

This has so many things that could go wrong I don’t think I could fit them all here. The biggies for me are:

1. A group you do not know now owns your new primary residence. They could go bankrupt–yikes.

2. You cannot sell your original home for what you needed and now don’t qualify for the new loan.

3. If you were silly enough to borrow the $10k to improve on your new home, you just spent money on something that’s not yours yet.

4. You’ve borrowed the $10k to get your original home ready for sale and must pay the company back somehow

I haven’t even touched on the complexities of what happens if there are problems such as the appraisal not hitting value, you realize that you’re stuck with an awful Realtor you can’t fire or that they can totally have you over a barrel on financing. I cringe when I think about the possible outcomes.

Legit Ways to Buy that Next House

If you do have a client who wants to learn about other ways to qualify for a new purchase without having to sell their current home, here is a great article I posted last April.

Please feel free to share my posts, I just ask you leave in my name as the source.

Geoffrey Davis

Frisco Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034

      


Kids and their FICO

September 4, 2018

Increased Credit Protection for Children

As a self-declared mortgage nerd, I love keeping tabs on my credit score. Even more important than keeping tabs on your credit as an adult is keeping tabs on your children’s credit scores.

While parents actively manage their own credit scores, it often doesn’t occur to us to monitor our children’s credit as well. The good news is that a new law goes into effect September 21st that will make it easier to protect your children’s scores. The law will allow you to freeze your child’s credit free of charge. This freeze will help prevent lines of credit/accounts from being opened using your child’s information until the age of 16. Right now, this level of protection is offered in some States, but this new law offers the protection for everyone free of charge.

After your child turns 16, you can continue to freeze his/her credit, but you will need to generate a new credit freeze and PIN to “unfreeze” it when you are ready later.

This is a great step as kids identity fraud has been increasing year after year with us as parents not able to have the resources to help protect our kids. Last year the Federal Trade Commission took in more than 14,000 complaints of identity theft for kids 19 and younger!

Learn More about Credit and Identity Fraud.

Geoffrey Davis

Frisco Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034

      


Why the slowdown?!

August 28, 2018

Geoffrey the Mortgage Guy speaks

What’s the Slow Down?

Answer?

The “Cost of Money” (i.e., interest rates) and the “Cost of Homes”= Less Buyer Activity.

At last week’s Federal Reserve meeting, the Fed reinforced their intent to continue to slowly bring rates up to be more in line with historic norms. At this point, I’m expecting another increase in September and December of this year if the economy stays on its current path.  Meanwhile, home prices have gone up as a result of the relocation boom from the previous few years and the market has yet to course correct.  Many define a Market Correction as a drop of more than 10% and I don’t think we are heading that way, but we have for sure stumbled upon a flat line if you will.

The challenge is that a large chunk of buyers have only purchased a home when rates were at all-time lows. This creates a bit of sticker shock when one looks at moving up to a more expensive home at a higher interest rate. Then you have buyers who have gone through several up/down economic cycles and are questioning whether or not making a move is worth the potential exposure.

And–buyers stop buying. And wait. And wait.

I do think these buyers will enter the market at some point, especially young families in need of more space or who want different schools. The other buyers I think are going to sit on the fence and see what the future holds in terms of the economy’s health, home prices and rates.

Please feel free to share my posts, I just ask you leave in my name as the source.

Geoffrey Davis

Frisco Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034

      


Buyers Assistance on Down Payment

August 21, 2018

Geoffrey the Mortgage Guy speaks

Up to 5% Buyer Assistance Programs Available

As home prices continue to rise, it can be tricky for people in our community to afford a home. Luckily, there are some new buyer assistance programs that provide up to a 5% grant to those who serve in our communities as well as those who are low to medium income. I wanted to share some of the program information with you as well as give a current example of how one client was able to take advantage of the program.

$141k Purchase Price with $850 at Closing

The purchase contract was set at $141,000 using a 3% down conventional loan, making the loan amount $136,770.  Client put down $1,500 in earnest money and a $100 option. The client selected the $4103.10 grant amount from Texas State Affordable Housing Corp. (TSAHC). In addition, their Realtor negotiated a $3000 seller credit after the inspection. This left the buyer coming to the closing table with around $850!

Who Qualifies for Assistance?

There are two major groups involved: TSAHC and SETH.  To qualify your clients generally need a 620+ credit score, must serve in our community (e.g., firefighters, teachers) or Texas (e.g., correctional officers, certain medical roles) or be low to medium income. Assistance is between 3-5% contribution depending upon the product. The Catch? The rate is generally a pinch higher than a traditional loan.

If you have a client who might qualify under one of these programs, let’s talk and see how they might be able to leverage these programs to their benefit.

Geoffrey Davis

Frisco Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034

      


The Rental Game!

August 15, 2018

Mortgage Market Review, as of 08.14.18

The Rental Game!!

Rental properties can be a great investment. Over the years, working with various clients, there’s three people I suggest they visit with (besides their Realtor and yours truly) before investing in rental property.

1. CPA: Asses ability to cash flow, review potential write-offs and overall tax implications

2. Financial Planner: Review investment alternatives to ensure real estate will deliver a good return

3. Attorney: Review the benefits of forming a Limited Liability Company (LLC) to provide personal protection

And last, but not least, their Mortgage Guy!

Because rental properties aren’t someone’s personal home the interest rate is typically a pinch higher. The rate on rental properties is driven by the investor’s credit as well as how much cash they’re putting down. Buying with 20% down would be around 5.75% on a 30yr fixed and with 25% down, that rate drops to 5.25%. When making trade-offs between putting more or less down, it’s really a game of numbers. Many serious investors will keep the extra 5% cash to buy another rental or put into reserves for a rainy day.

If a client opts to buy through their LLC, banks will typically require a term less than 30 years and charge a rate higher than with a personal investment loan. An LLC does offer some protection, but its incremental cost turns off many buyers.

What have your clients’ experiences been who’ve purchased rental properties?

Geoffrey Davis

Frisco Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034

      


Pre Listing inspection??

August 7, 2018

Mortgage Market Review, as of 08.07.18

 

Pre-Listing Inspection: Yay or Nay?

Lately I’ve had several contracts fall through after the home inspection, where there were enough issues that it turned my buyers off and they went in search of another property. When I hear about the issues that the inspector uncovered, the vast majority are easily repaired. I recognize that repairs are negotiable, but it makes me wonder why the sellers didn’t check some of this out before hand and address items proactively? And, why are Pre-Inspections not leveraged more broadly?

Here’s why I ask–if it’s evident that a home has been well maintained or neglected…doesn’t that affect buyers’ perceptions? Price? A clean inspection report? If issues could all be managed proactively, doesn’t this drive a better price and keep the contract moving more smoothly?

Pre-Listing Inspection: Yay or Nay?

-I love them!

-Absolutely not.

Geoffrey Davis

Frisco Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034

 

      


Market Compression Interacts with Mortgage Rates

July 24, 2018

Mortgage Market Review, as of 07.24.18

 

Market Compression Interacts with Interest Rates

The Fed uses interests rates as a way to throttle the economy but for those of us tied to the real estate market it has a more direct impact. As a lender, higher rates generally mean a smaller pool of buyers as more of the payment goes to interest vs. the actual house.

Luckily, our rates have increased gradually, and it hasn’t affected home purchases dramatically. Last week I posed the question around why pre-existing homes were sitting on the market and appreciate everyone’s thoughts. With a shortage of lower price homes and ample inventory at the upper range I suspect that we’re going to see some market compression intersecting with interest rates. This will cause price pressure on the upper range and a degree of pricing stagnation around the median price for an area.

This creates opportunity for investors to take advantage of premium properties if they can afford to hold them long-term and cherry pick from increasing volume of distressed real estate. And with the above chart via the Federal Housing Finance Agency (FHFA) we are still going the right direction via equity!!!

Real Estate is never boring!!

Geoffrey Davis

Frisco Mortgage Loan Officer

NMLS #206192

geoffrey.davis@Movement.com

Cell: 214-529-9622

6801 Gaylord Parkway #202

Frisco, TX 75034