housing

How is the 2017 Housing Market? by Matt Titus (Guest Blogger)

Last year, a mutual friend introduced me to Matt Titus with Re/Max Advantage in Fulton MD. Matt is one of those rare individuals who from the moment you meet them, you know you can trust their advice and that his intelligence and ethics will shine through in everything they do. When I asked Matt to contribute to the New Market Mortgages Blog, he jumped at the chance to share his insights and wisdom. Read on and learn how to understand the real estate market.

~Scott Shenton

How is the 2017 Housing Market? by Matt Titus

There’s always been a love/ hate relationship with the most common question for realtors; “how’s the housing market?”. However, this age-old conundrum persists for one simple reason; this question is not easily answered in a way that applies to everyone. Understanding the housing market is dynamic, ever-changing and different for each person you meet. What might be relevant to one buyer, may not be to another, therefore there is no one size fits all answer. To properly answer this question in a way that benefits everyone, I’ll provide some realistic guidelines to help you with your decision-making process, along with some factual data to act as a foundation for your choices as a house-hunter. Utilizing these strategies, you’ll be well armed to not only understand the current housing market, but to understand the elements that matter most to you.

Look at recent trends and decide what that means to you. The housing market reached its effective bottom a several years ago, with a very low volume of sales and little market activity. With the economic markets and consumer confidence on the upswing, it only looks to be trending upward at this point. While an increase in buyers is good for sellers, it can present a challenge for buyers. Decide what that means to you and adjust your strategy accordingly.

Current length of time a home takes to sell (close) approx. 2.5 months – historical healthy normal market length of time approx. 6 months

Recent years have provided historically low interest rates to consumers. However, many lenders and agents currently are now urging their clients to purchase or refinance sooner than later, because 2017 looks to be the year that rates start a long and steady climb into a more normal range (may not be a steep climb, but it’s not sloping downward). How does a rising rate environment affect your ability to buy?

The housing market has also seen prices increase over the past couple of years at steady pace, consistent with historical norms. That’s good news for both buyers and sellers, since anyone who owns a home stands to gain equity in their property. However, with more buyers set to begin the process obtaining home and a limited number of homes on the market to purchase, there could be an upswing in prices due to supply and demand. At the very least more competition between buyers, can result in sellers being less willing to provide closing assistance. Either way, this trend affects buyers and sellers differently. The trend is predicted to continue as well, so the window of opportunity for buyers is getting smaller.

Market activity – the blue bars represents purchases and the yellow bars provide an indicator of homes currently on the maket available to purchase in that period. Buyer demand is outpacing homes listed on the market.

To Summarize, here are a couple of quick notes to drive the points home and help you decide what these trends me to you.

Affordability will be reduced – higher interest rates/ tougher competition for buyers/ less seller assistance
Increased demand from buyers and limited supply of homes for sale will increase home sale prices
Interest rates raising, competition growing among buyers will create a fierce 2017 housing market for both Buyers and Sellers

The question then remains; what do you do about all this? Most importantly, speak with a professional Realtor and start a dialog about your needs, wants and concerns. Realtors know these trends better than anyone and can help you make good choices that’ll make sure you’re taking advantage of the market in a way that supports your unique goals. I hope you find this information useful and if you need more detail or clarification, please contact me. I’d be thrilled to help anytime!

Matt Titus, Realtor
Steve Allnutt Sales Group
Mobile: 443.445.0125
Direct: 240.295.0113
Fax: 240.295.0114
Email: MTitus@remax.net
Web: www.thinkforwardhomes.com

WHAT YOU NEED TO KNOW ABOUT FORGIVEN MORTGAGE DEBT IN 2014

The tax break for forgiven mortgage debt expired January 1, 2014. This means that you will be required to pay income taxes on any debt that’s forgiven you this year. For example, if the lender forgives you $50,000 in debt, and your income tax bracket is 25%, you would owe the IRS $12,500!

The “Insolvency” Exception

Here’s an interesting twist: there’s no tax on the forgiveness of debt if you are “insolvent” at the time of debt cancellation. Insolvent simply means that your total debts are greater than your total assets. In our example, assume your total assets are $20,000 and your total liabilities are $70,000. This means that your net worth would be negative $50,000. This would make you “insolvent” according to the IRS, and you wouldn’t have to pay any taxes at all on the $50,000 in forgiven mortgage debt! Keep in mind that when you calculate your assets, you need to include everything you own, including exempt assets beyond the reach of creditors under the law, such as interest in a pension plan and the value of your retirement account.

PLEASE NOTE: THIS LETTER AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. FOR MORE INFORMATION ON ANY OF THESE ITEMS, PLEASE REFERENCE IRS PUBLICATION 4681.

Scott Shenton
NMLS Number: 1039731
Apex Home Loans
Corporate NMLS Number: 2884
sshenton@apexhomeloans.com
https://www.apexhomeloans.com/scottshenton
(240) 268-3156
3204 Tower Oaks Blvd, Suite 400,
Rockville, Maryland 20852

NMLS #2884 (www.nmlsconsumeraccess.org): Licensed as a Mortgage Lender and Broker by the Virginia State Corporation Commission, License #MC1278; Licensed in the District of Columbia as a Mortgage Lender and Broker by the DC DISB License # MLB2884; Licensed in Maryland as a Mortgage Lender and Broker by the DLLR, License #06-4989; Licensed in Delaware as a Mortgage Lender and Broker by the Office of the State Bank Commissioner, License # 011603.

FHA, VA and Conventional financing, oh my!!!

What’s the real difference between FHA, VA and Conventional financing anyway????

I get this question a lot. Future homebuyers are constantly bombarded with information about the various programs out there, usually resulting in an even more confusing situation. To that end, here’s a high-level, very basic breakdown, so everyone can get a basic handle on when and why FHA, VA or conventional financing is the best choice for their purchase.

Conventional Financing:

This is your basic loan offered by most banks. Conventional loans are not supported by any 3^rd party programs.

Best choice for most non-veteran borrows who can put at least 5% down.
Although rates are a bit higher than FHA, the cost of the loan is far less due to several reasons.
- No upfront mortgage insurance premium
- Far lower monthly mortgage insurance premiums
- Options for eliminating monthly mortgage insurance exist

FHA Financing:

FHA loans are insured against default by the Federal Housing Administration, allowing borrowers that would otherwise be unable to obtain a conventional loan, to finance their homes.

Can be done with as little as 3.5% down
Qualified purchase price can sometimes be higher due to lower down payment requirements.
Can used to overcome lower credit scores and other credit issues
Rates are typically a bit lower than a comparable conventional product.
- A 1.75% upfront mortgage insurance premium is added to the balance of the loan
- Monthly mortgage insurance premiums are typically 150-200% higher than comparable conventional options

VA Financing:

VA Loans are guaranteed by the Veterans Administration, allowing eligible veterans to obtain home financing with certain advantages.

Potential for 0% down
Reduced fees
Rates are typically lower than conventional financing
- A funding fee is charged upon origination (waived for disabled vets)
- Homes must meet special VA standards

Under most circumstances a veteran will benefit from VA financing, due to the lower fees and rates available exclusively to them. However non-vets may not use VA financing, so they must choose FHA or conventional financing. If a borrower has adequate credit qualifications and down payment to choose conventional financing, it’s the best choice 99% of the time, due to the lower mortgage insurance costs. There are always exceptions to these rules, so before you make any home finance decisions, be sure to speak with a qualified local mortgage professional to go over your options. Although this serves as a topical overview of the choices, a good loan officer should be able to go over each option, to allow you make an educated decision.

How the 2014 Mortgage Rules Impact You

Imagine that you’re playing a game where the rules constantly change, and everybody is always confused about them (including the rule makers). Welcome to the 2014 mortgage industry! Here’s the inside scoop: federal regulators came out with “final” mortgage rules in January 2013. They gave the mortgage industry a full one year to comply. Then, the regulators literally changed the rules 4 times since then. The latest changes came out in November, 2013… just two months before the deadline for compliance.

We asked the regulators for a final, final, final version of the rule so that we could read it in its entirety without getting confused by all the different versions. Their staff-lawyers replied, “Good idea! We don’t have a final, final, final version of this created yet, but if you figure it out, please send us a copy!” This is NOT a joke. No wonder why everyone is so confused… So here’s what we did: we broke down the new rules into three areas that impact your business as a real estate professional.

#1 – The QM and ATR Rule: Three Buckets

The US government has written some mortgage underwriting guidelines into federal law in order to make sure that borrowers have the “ability to repay” their mortgages. These guidelines are collectively known as the Ability-to-Repay (ATR) and the Qualified Mortgage (QM) Rules. Generally, mortgage companies are now only allowed to originate mortgages that fit into one of three buckets:

	Bucket #1: Fannie Mae, Freddie Mac, FHA, VA, or RHS “Qualified Mortgages”	Bucket#2: Non-Agency and Non-Government “Qualified Mortgages”	Bucket #3: “Non-Qualified Mortgages”
Examples	Most Agency or Government Loans (including ARMs)	Loans that have unique features like balloons or pre-payment penalties	Loans that have higher APRs or don’t otherwise meet the criteria in the previous two columns
Maximum Debt-to-Income (DTI) Ratio	Flexible, based on whatever Fannie, Freddie, FHA, VA or RHS guidelines are at any given moment	43%	Flexible, based on each bank or mortgage company’s criteria
Lender’s Legal Liability	Lenders Have a “Safe Harbor” When Making Most of These Types of Loans	Lenders Have a “Safe Harbor” When Making Most of These Types of Loans	Lenders Open Themselves Up to a Little More Legal Liability When Making These Types of Loans

#2 – The QM and ATR Rule: DTI and APR Requirements

As you can see from the chart above, the one major difference between the new ATR rules and the lending guidelines as they currently stand, is that non-agency and non-government loans have a maximum 43% debt ratio. It’s possible that Fannie Mae, Freddie Mac, the FHA, the VA and the USDA/RHS may lower their maximum debt ratios in the future. However, most of these groups have come out recently and said that no change in maximum DTI (from current requirements) is imminent. Even so, it’s probably a good idea for you and your mortgage professional to help borrowers lower their DTI and their APR. Here’s how:

Consider a different down payment scenario
- Less of a down payment in order to use the funds to pay off other debt and lower the overall DTI; or,
- More of a down payment to lower the mortgage payment
Consider seller-paid points to reduce the borrower’s monthly payment and/or the APR on the borrower’s mortgage. Added bonus with this strategy: seller-paid points are NOT required to be included in the borrower’s APR. Loans with a lower APR are more likely to fall under the coveted “qualified mortgage” category (buckets #1 or #2)!

Either way, borrowers should seriously evaluate these options with a Certified Mortgage Planning Specialist (CMPS®) who is skilled in this area. Remember, a lot of lenders will be scrambling to fit their loans into one of the two “qualified mortgage” buckets. It’s much better for you to work with a mortgage professional who is skilled in helping borrowers reduce their DTI and their APR using some of these strategies.

#3 – The New Appraisal Rules Under the Equal Credit Opportunity Act (ECOA)

The new appraisal rules require mortgage lenders to provide a copy of the appraisal to the borrower three (3) business days prior to closing. However, borrowers can waive this requirement if they sign a waiver 3 business days before closing. Either way, this could be a problem for you if the mortgage company doesn’t get the appraisal or waiver to the borrower in a timely fashion. Be sure to check with your mortgage professional to determine his/her policy in this area in order to make sure that your closings don’t get delayed over this issue.

Please feel free to contact me for further information on any of these topics!

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