This week’s Highlights:
- A Continuing Theme: First time home buyers competing in the market
- Fox Business refinancing article: Really as bad as it seems?
- Federal Housing Financing Agency stats and figures
It’s not easy being a first time home buyer… but not impossible!
We’ve noticed a trend over the years that first time home buyers don’t usually have an in-depth understanding of the approval process when buying a home. This is perfectly understandable and very normal! With constant access to popular MLS sites, a lot of our first-time buyers seem to think it’s a lot easier and more straightforward than it is. Unless you talk to an expert loan consultant (ahem…) there’s a lot more information out there that can quickly lead to things going south.
Real Client Experience
A couple interested in buying their first home saw a presentation we did at their place of employment (side note: we do presentations! Contact us if you’d like us to give your employees mortgage guidance). The couple was looking for a home in the $200,000-$250,000 range in Wauwatosa or Greendale, and they had 5% to put down.
Knee jerk reaction? There’s not enough juice in that downpayment. The seller is never going to accept that because that’s not enough of a down payment to instill confidence in the seller that you can make the monthly payments. They thought they had a really solid strategy based on what they found online, but the ins and outs of mortgage lending paints a clearer picture.
After looking for additional money sources, we realized they had an additional $50,000 in savings, but they aren’t planning on using it toward the downpayment. That’s okay! You don’t need to use the money you use for your pre-approval in the down payment; you just need to have it to prove you will be able to make monthly payments.
Learn how to get the best rate for you with Accunet Mortgage and our team of refinance experts—click here to get started.
Fox Business News published a scare-tactic piece on refinancing
Fox Business News posted a story titled something to the effect of “You can refinance a home with no closing costs BUT THERE’S A MAJOR DOWNSIDE.” Let’s just say this article is littered with terrible information. Let’s take a look at the facts:
- Let’s say you want to refinance $250k and you have 25% equity in Wisconsin.
- We can give you 2.7% and you will pay one half of one percent upfront in interest points and an extra $1,250.
- The rates you hear every week is to BUY a home. That is completely different from refinancing a home. So your total loan costs will be $2,484, assuming we need an appraisal.
- If property taxes are $6,000/year, you’ll need to set up an escrow account. About $3,500. In this hypothetical, you’d need $7,832 at closing.
- In order to have principle stay the same and get a lower rate, your cost to get the loan is $2,500, BUT you’ll need to write a check for that $7,832, because of all the extra stuff.
- Compare to 2.99%; we will engineer a new loan so you don’t bring any cash to closing.
- The payment difference is $55/mo. If you take $7,800 divided by payment difference, how many lower monthly payments does it take to replenish that money you took out of checking? The answer is 142 (11.8 years). That is a very, very long time.
Long story short: Refinancing a home and buying a home are two completely different things, and you need to be smart about how you approach acquiring loans for either. The smartest thing you can do? Don’t buy into scare-tactic articles; contact an expert instead.
Learn more about the rules of refinance with Accunet’s refi rules of thumb.
Federal Housing Financing Agency releases 2020 housing data
The FHFA provides the best data on how homes change value over time. This data is historically better than the average MLS data, because not only does it track home sales, but it tracks the same home over multiple sales so it knows how and why the average homes increase in value.
Data from 9/30/20 to 9/30/21 (1 year)
- Wisconsin: Home value increased 7.3%
- Minnesota: Home value increased 7.1%
- Illinois: Home value increased 5.4%
- Florida: Home value increased 8.4%
Data from 9/30/2016 to 9/30/21 (5 years)
- Wisconsin: Home value increased 36%
- Minnesota: Home value increased 35%
- Florida: Home value increased 47%
- Illinois: Home value increased 19.7%
Buying a new home? Start here so you know what to expect from the process!