On this week’s radio show, Brain and David take a dive into the Wisconsin housing market, forbearance and how you can take advantage of record-setting low rates.
This week’s highlights:
- For the third time in the last few months, mortgage rates hit another all-time low.
- What does the supply of homes look like, both nationwide and in Wisconsin? You might be surprised.
- You have the right to rescind your home refinance — but think twice before you do.
Wisconsin housing market update: June 2020
Recent data shows that, in SE Wisconsin, the average number of days between putting your home on the market and getting an accepted offer is just 42 days. Some municipalities are showing even higher demand:
|Municipality||Avg. Days until Accepted Offer|
|South Milwaukee||12 days|
|Oak Creek||17 days|
If you’re looking to buy a home in these areas, you need to make offers, and you need to make them fast. Accunet’s Rock-Solid Pre-Approval will help you get a leg-up on the competition, making your new dream home that much more likely.
The jobs report heard ‘round the world
The Bureau of Labor statistics’ jobs report was expected — the data it contained, not so much. Most people anticipated a spike in unemployment due to coronavirus-related job loss, however, we actually saw a drop in the employment rate from 14.17% to 13.3%.
The theory behind this drop is that employers were able to afford to keep employees on their payroll due to the Payroll Protection Program, where the government gave loans to small businesses for the express purpose of keeping their teams employed.
So, in true form, Brian did some digging. Here’s what he found:
According to the Bureau of Labor Statistics, there are currently 137.2 million Americans with jobs. 21 million people are officially unemployed (before COVID-19, 4.8 million were unemployed). But, in order to be considered unemployed, you need to be actively searching for work within the last four weeks. In addition, there are 10.6 million people working part-time who would prefer to be working full-time — something unofficially known as being “underemployed.” There are also 9 million other Americans who want a job, but are not counted as actively searching for a job in the last four weeks, meaning they can’t be considered officially unemployed.
So, with those numbers:
- 21 million officially unemployed
- 10.6 million underemployed
- 9 million unofficially unemployed
The more realistic unemployment rate is closer to 26% — not 14.17%.
How forbearance affects mortgage refinancing
Forbearance is an agreement between a borrower and their lender to delay foreclosure. Thanks to the CARES act, a borrower with a federally-backed loan can receive relief from making their mortgage payment entirely or partially if they have a COVID-19 related hardship. This means that, essentially, if your mortgage lender agrees to it, you can put off payments for up to 12 months.
This sounds fine and dandy, but there’s a catch: You have to pay back all the payments you missed. And, until you do, you cannot refinance your home or get a new mortgage. Why? Well, it all has to do with eligibility and security. A mortgage lender chooses their borrowers based on income, creditworthiness and likelihood of paying back the loan. If you are in such dire straits that you can’t afford a mortgage payment, mortgage lenders won’t give you a new loan.
So, with forbearance in mind, and with people looking to refinance mortgages due to the low rates, the two need to be reconciled.
According to Black Knight (a company providing mortgage data), as of April, 46% of borrowers in forbearance still made their payment. In May, that number dropped to 22%. This number surprised Brian and David, because once you enter forbearance, you’re on the clock — you don’t get a bonus for making your payment, and your ability to receive forbearance benefits is only so long.
“Don’t make a payment before you need it. Otherwise, you’re wasting the benefit of forbearance.”
Now, that being said, there’s a way to prematurely end forbearance, enabling you to get a new mortgage (including a refinance):
Step one: Pay back any payments you didn’t make.
Step two: Formally cancel the forbearance agreement with your servicer.
At that point, your credit report will reflect that you are no longer in forbearance, and lenders are that much more likely to help you out.
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