The Accunet Mortgage Show (4-4-2021) Episode
This week’s Highlights:
- Milwaukee Metro Area home sale data for March
- Cash offers & Second home contingencies
- Wall Street Journal got it all wrong
Download a transcript of this week’s episode here.
Analysis of Numbers for the Five County Milwaukee Metro area
1,551 single-family detached and condos closed with the help of a realtor. That is only 96 fewer (5.8% decrease) from March of last year. If you actually go back and look at March of 2019, there are MORE homes that sold this past March. That is despite an absolute dearth of listings in February, which were down roughly 30%. The median sales price last month was up a whopping 19.5% compared to March of a year ago.
For condos, which typically sell for less than single family homes, $287,950 was the median sales price in the five County Metro area. Home values, according to FHF Home Price Index, median sales price went up 17% over two years in the Milwaukee area. Listings were down 323 homes, which is a 14% decrease in listings.
For people that got conventional financing in March, which is 66% of the market of home buyers in the Milwaukee area, got a Fannie Mae and Freddie Mac type loan. And they on average paid 102% of the asking price (so 2% above the asking price) and that average sold price was $322,000 for cash buyers, which represented 18.5% of the sales in 5 county area. There were 110 FHA loans that financed home purchases.
All in all, March looked way better than we expected after the mild dip we saw in February!
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Writing a cash offer in Wisconsin
Wisconsin is different from other states in the way that if write a cash offer, there is a preprinted clause in there that gives the seller the right to say essentially “Show me the money.” You need to prove you’re not bluffing. So you’ll need to give them a bank statement or a letter from your mortgage lender that says, “We have verified that Mr. Smith has $322,000 available that he could use.” If you do write a cash offer, that does not preclude you from getting a mortgage and the pre-printed information in the Wisconsin Offer to Purchase contract.
Real Client Story
Our long-time client is on the market for a $700,000 home, but does not want to sell his current Wauwatosa home as a contingency. We already know the maximum Fannie Mae loan he can get is 78% of his budget (because Fannie Mae maxes out at $548,002.50). One thing we’re up against, which happens quite often, is that even though he is a really strong buyer, he’s got a medical collection from a couple of years ago that put his FICO score just a hair under the 700 mark. So if we want to make him a jumbo loan, he’s going to either get penalized, or they won’t even look at him for being under the 700 minimum.
He needs about $151,000 to buy, and he mentioned he’s willing to dip into $150,000 he currently has in an inherited IRA. The issue with doing this is for every $10,000 he takes out of there, he will be paying an additional $3,200 to Uncle Sam. We get that inherited money can sometimes feel like free money so that might not be a big concern for some people, but if we can work around it, that’s our recommendation.
We ultimately decided to put a bridge loan on the Wauwatosa home. Remember folks, our bridge loan is just a special purpose home equity line of credit. We’re extracting equity up to 80% of the value of that house. Accunet has four banks that we work with on bridge loans. Each of them is a little different than the other. And part of the magic here is figuring out which bridge lender is the right fit for a particular home buyers situation, because they are complex and not all of them will be right for the same people.
Buying a new home? Start here so you know what to expect from the process!
Wall Street Journal writes incorrect mortgage article
We were looking at the digital issue of Wall Street Journal and a little bummed about some info they reported on. The headline reads “As Home Sales Soar, Mortgages are Tight.” They then tell the reader “Good luck!” to people with lower credit scores as if getting a mortgage is the world’s more impossible thing right now.
I’m going to cut to the chase: This article is extremely incorrect and outdated. They’re several months behind what is actually happening in the mortgage lending market. The truth is that back when COVID struck and unemployment jumped up to the highest it had been in who knows how long with 21 million people unemployed, YES, mortgage lenders did tighten qualification criteria quite a bit. This is especially true for the riskiest loans like FHA loans where the down payment requirement is only 3.5%. Your credit score can be theoretically as low as 550. Once the pandemic hit, they tightened credentials to 660 to protect themselves.
So there WERE updated criteria including a higher credit score and lower debt to income ratio. But that was a year ago. We’re not seeing all these requirements relax again as things start to pick back up and more people are finding stability in the job market.
Long story short: This article would have been relevant this time last year. Now? Not so much!
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