The Accunet Mortgage Show (7/26/2020) Episode

Brian and David discuss the real meaning of “zero closing costs”, debunk a sensationalist news headline, and call attention to some important information from the U.S. Department of Housing and Urban Development.

This week’s highlights:

  • Brian teaches you the subtle differences between closing costs and loan costs
  • Brian and David dive deep into a shallow headline 
  • Many renters are at financial risk – can the next stimulus bill help keep them afloat?

Closing costs are not the same as loan costs

This week, Brian breaks down the big difference between ‘having zero closing costs’ and ‘not having to bring any money to your closing’.

Brian had a retiree customer who was looking to refinance their condo in Florida.
He offered them the option of a 2.99% rate on a 30-year-fixed refinance, which would drop their monthly payment by $144.

Due to Fannie Mae’s underwriting model – which renounces some refinance transactions – this customer qualifies to forgo a new property appraisal. Fannie Mae will use the previous appraisal on file, saving the customer hundreds in fees.

Furthermore, Accunet pledges to pay for $759 in transaction costs (i.e. updating the title and insurance for the mortgage lender, and running a credit report).

With Brian’s assistance, the customers ended up bringing $8,446 to closing.

How could this be?

Because they first paid off their principal balance on their old loan, factoring in the interest accrued for the previous month, and looked ahead for interest building on the new loan.

Next, they added in their closing costs (a nice low price of zero dollars), government fees on the property (~$2,000), and any remainder came from the escrow on their existing loan.

The customer requested to also add escrow to their new loan for tax and insurance purposes. This would need to be funded at the refinance closing so that when the tax bill comes in December there are 12 full months of taxes to pay in the account.

Accunet will fund their new account escrow, as the customer does not want to roll over that money into their new loan, and after all is said and done, they make out with an estimated $8,000 cash to close.

The moral of the story is: Closing costs are not the same as loan costs.

Have more questions about refinancing? Check out our compilation of Home Refinancing Basics!

‘Headline Busters’

Brian and David set out to debunk a sensationalist headline from the past week that claimed, “Existing home sales climb a record 20.7% in June!”

…Compared to what? David wanted to know.

The story, outlined by the National Association of Realtors, compared their data to May 2020, when the realty metrics were still in the throes of the economic downturn sparked by the coronavirus pandemic.

At a thousand-foot view, here are the actual statistics for inventory and home sales year-to-date:

Nation-wide home sales are down 11.3%.

In Wisconsin, home sales are down 4.9%, compared to the 1st 6 months of 2019.

The median home sales price nationwide is $295,300, up 3% from a year earlier.

Inventory remains 18% lower than June 2019 nationwide.

In Wisconsin, listings are down 23%.

The average number of days until an offer was made on a listed home was 24, and 62% of homes received an offer in less than a month after listing.

Only 3% of sales in June were from foreclosures, as the CARES Act helped people make their mortgage payments.

The annual pace of new home sales increased 13% since May, with a price range between $379,900 and $1.3 million.

If you are preparing to buy your first home, Accunet has outlined the best ways to plan your home purchase!

“We are not all in the same boat.”

Another important piece of housing data that made the news this week is the impending impact of Congress’ decision on federal unemployment insurance.

According to information from Zillow.com’s economic department and the U.S Department of Housing and Urban Development, the current $600/week federal unemployment pay is positively affecting renters who spend 50% or more of their income on housing costs. 

These renters are categorized as “severely housing burdened” due to their rent-income ratio.

In Milwaukee County, 1 in 3 renters are listed as already severely housing burdened, and if the federal unemployment benefits were to be discontinued in the latest stimulus bill, Milwaukee would jump to 56% of its renters barely able to make payments.

On a nationwide scale, the cities of San Jose, San Francisco, and San Diego lead in the total number of housing burdened renters – even with the current $600/week additional on unemployment checks.

As Brian pointed out, this type of federal assistance is gravely important; and while we are all ‘in the same ocean’ during this pandemic, we definitely are not all in the same boat. While the low mortgage rates triggered by the pandemic have positively impacted the mortgage world, it has caused a detrimental ripple effect for businesses, homeowners, and renters everywhere. 

Accunet urges you to stay safe and look out for your neighbors.