Emanuel Stewart - Reliant Home Lending

How Much Income Should People Spend On A Mortgage?

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How Much Income Should People Spend On A Mortgage?When people are looking for a home, this is an exciting process. There is always something fun about looking at potential homes and envisioning a future there. This is a big decision. At the same time, it is just as important for people to think about how much of their money they should be spending on their mortgage. There are a few rules of thumb that people should keep in mind. 

The 28 Percent Rule

One of the most common rules that financial advisors and lenders are going to talk about is going to be the 28 percent rule. This rule states that people should not be spending any more than 28 percent of their pre-tax income on their monthly housing payments. This includes not only the mortgage but also any potential homeowners association fees, real estate taxes, and home insurance payments. Once people figure out how much they can afford on their monthly mortgage payment, they can work backward to see how large of a house they can afford. 

The 36 Percent Rule

The other rule that homebuyers are going to hear is the 36 percent rule. This is a rule that pertains to all debt. Therefore, this rule includes not only the monthly mortgage payments but also any car payments, credit card payments, utilities, and student loans. In general, no more than 36 percent of someone’s pre-tax income should be going toward debt. This is very important for taking out a home loan because it is going to impact someone’s debt to income ratio. If the debt to income ratio is too high, then potential homeowners are going to have a hard time getting a great deal on a mortgage. Furthermore, they could even be denied completely. 

Find The Right House

For those who are looking for a home, this is an exciting time. At the same time, it can also be hard to find the right home when people don’t know exactly what they’re looking for. When potential homeowners understand what their budget is, this process gets much easier. Therefore, everyone needs to think about how big of a monthly mortgage payment they can afford. This will help them make the right decision.

 

The Required Steps For A Smooth Mortgage Refinance Process

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The Required Steps For a Smooth Mortgage Refinance ProcessThere are lots of people who have heard that one of the top ways to ensure the best mortgage rate possible is to refinance. At the same time, it is critical to make sure that this process is planned out accordingly.

Therefore, there are a few steps that everyone has to follow to make sure they are able to handle the mortgage refinancing process in a smooth manner that leads to the best rate possible.

Ask If A Refinance Is The Right Step

There are a lot of people who assume that a mortgage refinance is a financial win; however, it is important to keep the added costs in mind. For example, the refinancing process is going to lead to another closing. When this happens, there are going to be closing costs that must be considered.

Therefore, the refinancing process could lead to a higher mortgage payment if the money saved on interest payments is not enough to offset these costs.

Check The Credit Score First

Many people get lured into the refinance process by looking at low mortgage interest rates and assuming they are going to qualify for them; however, this is not always the case. Only the people with the top credit scores are able to qualify for these low rates. Therefore, everyone needs to take a look at their credit score and make sure that their credit report has been cleaned up. This is the only way that people are going to be able to qualify for these low rates.

Talk To A Trained Professional

Finally, many people are going to be going through the refinance process for the first time. It is important to work with a trained professional who can walk everyone through this process, ensuring that they know what they are doing as the process unfolds. This can go a long way toward ensuring that everyone has a successful refinancing experience.

Go Through The Right Steps

Following these steps can maximize everyone’s chances of making sure they end up with a refinance that works for them. By planning out the process ahead of time, everyone can go through the steps they need to make sure that the refinancing process proceeds as smoothly as possible.

Case-Shiller Reports Fastest Home Price Growth in Two Years

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Case-Shiller Reports Fastest Home Price Growth in Two YearsHome prices rose at their fastest rate in two years according to Case-Shiller Home Price Indices. The National Home Price Index for August showed 5.70 percent home price growth year-over-year as compared to 4.80 percent growth reported in July.

The Case-Shiller 20-City Home Price Index showed that home prices rose to a 5.70 percent year-over-year pace from July’s growth rate of 4.10 percent. Phoenix, Arizona held the top home price growth rate for the 15th consecutive month with year-over-year home price growth of 9.90 percent. Seattle, Washington held second place with 8.50 percent growth in home prices. San Diego, California took third place with 7.60 percent year-over-year home price growth.

According to the 20-City Home Price Index, 19 of 20 cities reported growth in home prices. Detroit, MI has not reported home price information in recent months. Analysts said that low mortgage rates, short supplies of available homes, and changing consumer preferences drove home prices higher. The COVID pandemic caused homeowners and buyers to change preferences for home location, square footage, and amenities as working from home, school closures, and avoiding crowded urban areas adjusted family priorities.

Craig Lazzara, global head of index investment strategies for S&P Dow Jones Indices, said “If future reports continue in this vein,[positive index readings], we may be able to conclude that the COVID-related deceleration is far behind us.” It’s also possible that seasonal weather conditions and resurging COVID cases could slow home sales and home price growth.

Federal Housing Finance AgencyReports Highest Home Price Growth Rate Since 2006

August readings reported by FHFA also showed higher home prices. The agency, which oversees mortgage giants Fannie Mae and Freddie Mac, reported year-over-year home price growth of 1.50 percent from July to August; home prices for homes mortgaged or owned by Fannie Mae and Freddie Mac rose by eight percent annually. 

FHFA home price data is tracked nationally by census divisions, states, and metro areas. Information is also available by county and zip code.

How Everyone Can Reduce Their Monthly Mortgage Payment

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How Everyone Can Reduce Their Monthly Mortgage PaymentFor many people, their biggest monthly bill is their mortgage payment. Therefore, it should come as no surprise that there are a lot of people who are looking for ways to reduce their monthly mortgage payment. The positive news is that there are several ways to do so.

By putting some of these tips to use, everyone can find a way to pay less every month on their mortgage, helping them save money for other expenses such as a new car, college expenses, or that next vacation.

Shop Around Before Getting A Mortgage

For those who are still in the process of buying a home, it is a great idea to shop around and see what the options are. Even though there are rates advertised in the industry, it is always a smart idea to visit multiple potential lenders and see what they are offering. Then, with multiple offers in hand, it might be possible to leverage the offers against each other to see if they are willing to come down on their interest rates. This can help people reduce their monthly mortgage payment.

Put More Money Down

This is the most direct way that someone can lower their monthly mortgage payments. Even though this is a zero-sum game (taking more money out of the bank account and paying it sooner), this will directly reduce the monthly mortgage payment. Furthermore, this could get a lender to reduce the interest that he or she is charging, which could help homeowners save more money overall.

Refinance An Existing Mortgage To A Lower Rate

Finally, it is also possible for people to refinance an existing mortgage to a lower interest rate. This can help people who already have a mortgage save money by essentially replacing their old loan with a new one, accompanied by a lower monthly mortgage payment. Refinancing could also help people pay off their mortgage sooner.

Save Money On Monthly Mortgage Payments

These are a few of the top tips that everyone can follow to make sure they save money on their monthly mortgage payments. By shopping around, putting more money down, and refinancing an existing mortgage, everyone has the opportunity to save money on their monthly bills.

What’s Ahead For Mortgage Rates This Week – October 26, 2020

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What's Ahead For Mortgage Rates This Week - October 26, 2020Last week’s economic reporting included readings from the National Association of Home Builders on housing markets, and Commerce Department readings on housing starts and building permits issued. Data on sales of previously-owned homes were also released. Weekly readings on mortgage rates and jobless claims were also released.

NAHB Housing Market Index Rises in October

The National Association of Home Builders reported an index reading of 85 for their Housing Market Index in October. This was the third consecutive month the HMI had a record reading and was the second consecutive month the index achieved readings over 80. Readings over 50 indicate that most home builders are confident about housing market conditions.

Component readings of the Housing Market Index also rose in October. Builder confidence in current housing market conditions rose two points to 90. Builder confidence in housing market conditions over the next six months rose three points to an index reading of 88, and builder confidence in buyer traffic in single-family housing developments was unchanged at an index reading of 74. Until recently, buyer traffic readings typically remained below 50.

Regional confidence readings were mixed; builder confidence in the Northeast rose by seven points to an index reading of 88. Builder confidence also rose by seven points in the West but was one point lower in the Midwest with a reading of 77. Builder confidence was two points lower in the South with an index reading of 83.

Commerce Department Reports Increases in Housing Starts and Building Permits

Housing starts and building permits issued rose in September; housing starts rose to a seasonally-adjusted annual pace of 1.415 million starts. Analysts expected a reading of 1.45 million housing starts based on August’s reading of 1.388 million new single-family homes started.

Building permits issued also rose in September with 1.553 million permits issued on a seasonally-adjusted annual basis and exceeded August’s reading of 1.476 million permits issued and 1.518 million permits expected.

Mortgage Rates, Jobless Claims Fall

Freddie Mac reported lower average mortgage rates last week as the rate for 30-year fixed-rate mortgages fell by two basis point s to 2.80 percent; mortgage rates for 15-year fixed-rate mortgages averaged 2.33 percent and were two basis points lower. The average rate for 5/1 adjustable rate mortgages fell by three basis points to 2.87 percent. Discount points averaged 0.60 percent for fixed-rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages.

Initial jobless claims fell to 787,000 new claims filed as compared to the prior week’s reading of 842,000 new claims filed. Last week’s reading for all initial claims filed fell below 800,000 claims for the first time since the pandemic started. Ongoing jobless claims also fell last week with 8.37 million continuing claims filed as compared to 9.40 million continuing jobless claims filed in the prior week.

Sales of previously-owned homes rose in September at a seasonally-adjusted annual rate of 6.54 million sales. Analysts expected 6.36 million sales based on August’s reading of 5.98 million sales. Low mortgage rates and demand for homes continued to boost home sales.

What’s Ahead

Readings on new and pending home sales, Case-Shiller Home Price Indices, and consumer sentiment will be released this week. Weekly readings on mortgage rates and jobless claims will also be published.

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Baton Rouge, LA 70809