Freddie Mac’s results of its Primary Mortgage Market Survey® shows that “mortgage rates fell for the third consecutive week, continuing the general downward trend that began late last year. Wages are growing on par with home prices for the first time in years, and with more inventory available, spring home sales should help the market begin to recover from the malaise of the last few months.”
• 30-year fixed-rate mortgage (FRM) averaged 4.35 percent with an average 0.5 points for the week ending February 21, 2019, down from last week when it averaged 4.37 percent. A year ago, at this time, the 30-year FRM averaged 4.40 percent.
• 15-year FRM this week averaged 3.78 percent with an average 0.4 points, down from last week when it also averaged 3.81 percent. A year ago, at this time, the 15-year FRM averaged 3.85 percent.
• 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.84 percent this week with an average 0.3 points, down from last week when it averaged 3.88 percent. A year ago, at this time, the 5-year ARM averaged 3.65 percent.
Jammie pants and slippers. Dog curled up at your feet. Your favorite TV show playing in the background. Sound like a quality weekend day? Not so fast. For a growing number of Americans, it’s what a regular ‘ole workday looks like.
We’re not necessarily talking about a work-from-home scenario (although this is another growing workforce trend). And it goes beyond having flexibility to work from wherever you want (and wear whatever you want!). It’s self-employment, and it’s on the rise. FreshBooks’ second annual Self-Employment Report found that, “Some 27 million Americans will leave full-time jobs from now through 2020, bringing the total number of self-employed to 42 million,” said the New York Post. “The report defines self-employed professionals as those whose primary income is from independent client-based work.
But self-employment can also make it difficult to buy a home. “Lenders are primarily concerned that all applicants, including self-employed workers, have the ability to consistently repay the mortgage,” said U.S. News & World Report. “They’ll need to see that your income is high enough to pay for the mortgage and likely to continue, and that you have a good track record of repaying your debts.”
These tips can help you get yourself in a better position.
What do you need to show?
Showing two years of steady income is a basic requirement for just about any mortgage, but those who have an employer other than themselves may have more flexibility. Other factors, such as income, savings, down payment, and debt-to-income ratio can make that two-year rule less critical.
Those who are self-employed, however, will want to show as much income history as possible. “Mortgage lenders typically require self-employed individuals to show two years’ worth of self-employment income to prove that they have a steady revenue stream,” said The Motley Fool. In addition, “You’ll have to provide tax returns from the last two years, and you may also have to provide a list of your existing debts and assets. Business owners may have to provide profit and loss statements from the last couple of years.”
How to treat business expenses
Adding to the challenge is the fact that lenders are going to be looking at your income after deductions. “Self-employed workers also might write off a significant portion of their income as a business expense, minimizing the size of the mortgage they’re able to obtain,” said U.S. News. “Because mortgage underwriters typically look at income after expenses, your taxable income may be too small to qualify for the mortgage you want.”
Managing your debt-to-income ratio
“Most mortgage lenders will not give you a loan if that ratio is greater than 43%—that is, if more than 43% of your income is going toward paying off debt each month,” said The Motley Fool. That debt-to-income level is key in any mortgage approval scenario, but takes on added importance when everything is under a self-employment microscope.
“It’s important to make sure you keep your debts down to a manageable level. They should never exceed 43% of your income, and it’s best if you can keep your obligations under 36%,” they said.
How’s your credit score?
Credit scores are even more important if you’re trying to prove you’re worthy of being approved for a mortgage. “Even if you’ve been wildly successful after striking out on your own, having a lousy credit score will hinder your chances of getting a good rate on a mortgage,” said Bankrate. They recommend checking your credit before you start applying, which will give you an opportunity to pay down debts or spot errors on your report that could be dragging your score down.
Real estate professionals say 2019 may be the best time to purchase a high-end vacation home – and they’re already seeing buyers pick up on the cues.
“We are seeing sales up in the resort areas, including Hawaii and Vail,” Stephanie Anton, president of Luxury Portfolio International, told forbes.com. She notes that sales and prices in Vail, Colo., are up over 25 percent from a year ago. “I think we are seeing people pulling money out of the stock market and buying these properties. … People are now so exhausted by today’s world, they are looking at vacation homes as total retreats to shut everything out.”
Vacation markets such as Cape Cod, Mass., and Palm Springs, Calif., are reporting an uptick in potential buyers looking for a retreat.
“Our market just turned in January, and we get really busy by March,” Erica Grossman, of Douglas Elliman Real Estate in New York’s Hamptons, told forbes.com. “Last year’s prices have been adjusted, depending on where you want to be in the Hamptons. Buyers who were sitting on the fence should come out and see what they can buy in their price range. Sellers are more realistic this year.”
Some luxury buyers are using their properties to then generate income from them when they’re not in use.
“When you are renting a luxury property, the guest expectation is very high,” says Andrew McConnell, CEO at rented.com. “You always must stay on top of maintenance. When you are decorating any vacation rentals, you have to be careful you don’t go too quirky or too cookie-cutter.”
Source: “2019 May Be the Best Time to Buy a Luxury Vacation Home,” forbes.com (Jan. 29, 2019)
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When buyers think of a green home, they think of features that will first save energy and second improve the quality of the air in the home, according to survey results released by the National Association of Home Builders (NAHB) at the NAHB International Builders’ Show in Las Vegas last week.
NAHB surveyed nearly 4,000 homebuyers, both recent and prospective, on the types of features they prefer to have in their home, including eco-friendly components and designs.
To achieve their energy efficiency goals, buyers would most like to have windows and appliances rated Energy Star, efficient lighting (using less energy than traditional bulbs), and insulation higher than required by code.
More than half of homebuyers also find these indoor air quality features essential or desirable: a home dehumidification system, an electronic air cleaner and low volatile organic compound (VOC) materials.
“It’s confirmation that the most attractive green features for homebuyers are those that help them save money on energy costs as well as those that improve the air quality inside their homes,” says Rose Quint, associate vice president of survey research at NAHB.
Green features buyers don’t care about
A roof partially or completely covered by plants is the least appealing green feature – only 24 percent of buyers would want it in their next home. Many homebuyers are simply indifferent toward other green features, too, such as roof-mounted wind turbines, rainwater collection systems and recycled material or prefabricated building components.
It’s largely about the money
Consumers like the cost savings green features provide. Nearly half of homebuyers are willing to invest between $1,000 and $9,999 for $1,000 annual savings on their utility bills, with 37 percent willing to spend upward of $10,000. The average amount increases based on the price of the home, ranging from $6,653 for homes priced under $150,000, to $10,560 for homes valued at $500,000 or more.
Survey findings also show that most homebuyers would prefer a number of green options versus the non-green alternative: 74 percent would rather have features and finishes made of more expensive materials that last longer versus 26 percent who would prefer them to be made of cheaper materials that need to be replaced more often.
Similarly, 65 percent would opt for low-maintenance landscaping versus 35 percent who prefer a conventional lawn.
© 2019 Florida Realtors®
In the last few years, student loan debt and rising housing costs have been cited as the chief reasons why many young adults move back in with their parents. But a new Homes.com study suggests the real trigger may be a broken heart.
Since the Great Recession thwarted many millennials’ plans to move out on their own, an improving labor market has not done much to lure these young adults out of their parents’ houses. Why do they stay? In a recent survey of 500 “boomerang” millennials, 33 percent of 26- to 30-year-olds who moved back home cited a divorce or breakup as the primary reason; 37 percent of 31- to 35-year-olds and 24 percent of 36- to 40-year-olds said the same.
For millennials, it might be a combination of a breakup and unstable finances. Couples who live together often help each other financially by splitting housing costs, but post-breakup, the costs may be too much for one person to carry. Young adults may also be moving back home for emotional support to help them recover post-breakup.
“Home is a safe place a lot of times,” Grant Simmons, vice president of Homes.com, told CNBC. “Perhaps it’s just a safe place to get your act together and start fresh.”
Potential house hunters in the South – an area that includes Florida – may suffer the most heartache: 25 percent of survey respondents in the region saying they moved home due to the end of a relationship, followed by 20 percent in the Northeast, 17 percent in the Midwest, and 16 percent in the West.
Among all generations, the most commonly cited reason for moving back in with their parents was to save money for a home purchase, followed by a breakup or divorce. Other commonly cited reasons include unemployment and debt.
Of those who moved back home, 45 percent live in their childhood bedrooms, 12 percent sleep in the basement, 4 percent sleep in the living room and 2 percent move into the garage. About one in four (22 percent) pay rent to their parents, according to the Homes.com survey.
Moving back home is not always easy as an adult. Privacy and noise issues were the most commonly cited causes of household conflict, according to the survey.
Source: “This is the No. 1 Reason Young Americans Move Home With Their Parents – and It’s Not the Cost of Rent,” CNBC (Feb. 14, 2019) and “The Broken-Hearted Move Back Home,” The Wall Street Journal (Feb. 14, 2019)
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