A Millennial’s Guide to Homeownership

Open the PDF version here: MillennialeGuide


You have an important decision to make!

Thinking about Moving?

Thinking about Moving?

Want to know the monthly real estate changes in Hollister and surrounding areas? Know the real estate market before you decide to buy or sell a home. Kristen Jurevich with Intero Real Estate Services has the details to help you make an informed decision. Here is a hassle free example of the information you would get right to your email.  You have nothing to lose, so sign up today!

September Market Snap Shots

Keeping Mortgages Accessible

home ownershipAccess to mortgages has been a hot-button issue ever since the days of the housing boom. Back then, the issue essentially was loose underwriting that swayed so far in one direction that we ended up with a slew of borrowers who were in over their heads.

Then, as the housing recession set in and regulators started coming down on lenders, we saw a reverse in the opposite direction. For many months, lending became so tight that a lot of people no longer qualified to borrow money for a home.

A couple of interesting news items cropped up this past week on this story thread:

1. Federal officials came out and said they will delay any reduction in the maximum size of mortgage loans eligible for backing by Fannie Mae and Freddie Mac until next spring at the earliest.

This is significant because it enables more borrowers to qualify for loans that tend to have better terms. Loans within the limits (called “conventional”) typically carry slightly lower interest rates and easier qualification standards than so-called “jumbo” loans that are above the limits. It can be especially significant for those borrowers in high-cost areas.

2. A new academic paper was published that discusses how the latest reforms in housing finance have had a disproportionate impact on households with less wealth, and offers ways to ensure qualified borrowers in this category can get mortgages going forward.

Co-authors were Lewis Ranieri (the co-creator of the mortgage-backed security), Kenneth Rosen, Mark Goldhaber and Andrea Lepcio. Among their suggestions was having a borrower with a lower credit score complete a financial education course before becoming eligible for a loan. This would enable lenders to serve this group with restrictions rather than cut them out completely.

The authors also touched on offering more rental programs with an option to buy as a way of easing borrowers into the financial commitment of home ownership. You can read more detail about all of their ideas here.

This is a significant conversation because as noted above, we want to avoid a situation with lending standards that sways too far into either direction – too loose or too strict. Too loose and we risk creating another foreclosure crisis; too strict and we risk locking out an entire segment of borrowers who are qualified but can’t fit into the tight guidelines that have been set up for underwriting.

While many markets have plenty of demand to sustain housing sales right now, it’s still important to ensure qualified borrowers aren’t being shut out – especially for the lower end of the market. We’ll continue to watch these developments through next year.

By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.

Real Estate Watch: Home buyers may find the time is right

Low interest rates. Falling home prices. Rising rents. Is now the time to buy a house? Owning is a more attractive proposition than renting in many — perhaps even most — U.S. cities.

It’s more affordable to buy a house today than it has been in ages. In fact, the National Association of Realtors says houses were the most affordable in 2012 than they had ever been since the group began tracking the data in 1970.

Today’s high affordability combines two factors: low prices and low interest rates, says Leslie Appleton-Young, chief economist for the California Association of Realtors in Los Angeles.

“This is a once-in-a-generation opportunity to buy real estate. I emphasize that double bold and underline,” she says.

Still, some people in some places aren’t able to buy a house, or don’t want to become homeowners — at least not right away. They would rather rent.

“What’s subduing that attractiveness (of buying a house) a little bit has to do with how many people have bad credit, no credit, don’t have a down payment, don’t have a job or don’t want to undertake a big financial obligation, even if it’s a fire sale,” Appleton-Young says.

She adds that renting appeals to people who have just started a new job or who are uncertain about job security.

There’s a flip side: Rents are rising in some cities, partly because of increased demand for rental housing. Higher rent makes renting a less appealing option, particularly in places without controls on rent increases.

“The demand for rental housing is greater in areas where we’ve had significant foreclosures because there are families that have lost their home and renting is the only option,” Appleton-Young explains.

More renters might buy a house as the economy improves and employment strengthens, but that’s not expected to happen right away, says Jed Kolko, a housing economist in San Francisco.

“When you get a new job, you don’t buy a house the next day. You (wait until) you’ve saved a down payment and you’re sure enough of your job security that you can make the commitment. It will take some time before recovery in the job market carries over fully to the housing market,” Kolko explains.

What’s more, builders are putting up new apartment buildings to take advantage of the demand, and that could keep a lid on rent prices, though again, it’s a delayed reaction.

Lenders stuck with too many foreclosed houses, and investors who’ve been buying up these properties, also have plans to increase the supply of rental housing. But again there’s a glitch: Many of those homes aren’t located in cities where the jobs are.

“Converting vacant foreclosed homes to rentals doesn’t help renters who are suffering rising rents in downtown New York or San Francisco because that’s not where the foreclosed homes tend to be,” Kolko says.

One factor that hasn’t changed is that there are high transaction costs when you buy a house. Consequently, the stay-put-or-move-soon question is crucial. For people who plan to move within five years, it “starts to make a lot less sense” to buy a house, Kolko says.

“If you’re in a stable job, but (in) an industry where people move around often and you might have to move to another city in three years, you might not want to incur the costs of buying and owning a home,” he says.

Housing markets are notoriously local, so that’s another factor that complicates the decision to rent or buy a house. Longer-term economic and housing fundamentals are important determinants in the direction of most markets — even more so, Kolko says, than the proportion of foreclosure-related home sales.

Mortgage rates jumped this week as the labor market improved, and the economy gained momentum.

The 30-year fixed-rate mortgage rose 12 basis points to 3.85 percent. A basis point is one-hundredth of 1 percentage point.

The 15-year fixed-rate mortgage rose 7 basis points to 3.03 percent. The average rate for 30-year jumbo mortgages, or generally for those of more than $417,000, rose 12 basis points to 4.18 percent.

The 5/1 adjustable-rate mortgage rose 14 basis points to 2.82 percent. With a 5/1 ARM, the rate is fixed for five years and adjusted annually thereafter.

By Marcie Geffner

How To Buy A Home

Key real estate facts on how to buy a home. Do some research as a buyer to know the area and type of home you are looking for and get in touch with a local real estate agent to help you with the home buying process.  No matter the distance, I can direct you in the right real estate direction by connecting through RealtorKJ.com.

You May Still Qualify For a Loan Even With BAD Credit

Are you thinking about buying a home, but you are afraid you have bad credit and will not be approved for a loan?  While credit does play a part in home financing, home lenders take other items into consideration before you get approved.

  • Tax returns for the last 2 years-Helps determine your income
  • Pay stubs-Must have a steady job with an income to pay back the loan
  • Your ID-Verify your background to make sure you do not have fraudulent charges and you say who you are
  • Bank and Savings Statements-Shows your spending habits of funds going in and out of your account. Big amounts may need to have a gift letter if they are used for purchasing property
  • Living history-May verify or ask further details on where you lived
  • Credit-Checks your past ability to off debt and how likely you will pay the bank back

Rates are still at an all time low, so curious buyers should speak to a lender for home ownership advice.  Look at the rates that one mortgage lender provides. You can now afford a bigger home because it costs a buyer less to purchase.  Now you know a Realtor to help you purchase a property, and give you references for a lender.