Aug 31, 2023 | Real Estate
“No-deposit” mortgage deals for first-time buyers refer to mortgage options that allow buyers to purchase a home without having to put down a deposit or a down payment. Here are the pros and cons of such deals:
Pros:
Lower upfront costs: The most significant advantage of a no-deposit mortgage is that it eliminates the need for a substantial upfront deposit. This can be beneficial for first-time buyers who may struggle to save a large sum of money for a deposit. It allows them to enter the property market sooner.
Increased affordability: With a no-deposit mortgage, first-time buyers can purchase a home with a smaller amount of savings. This can make homeownership more accessible, especially in areas where property prices are high.
Potential investment opportunities: By utilizing a no-deposit mortgage, first-time buyers can allocate their savings toward other investments or use the funds for home improvements. This flexibility may provide opportunities for additional financial growth.
Cons:
Higher borrowing costs: No-deposit mortgages typically involve higher borrowing costs, including interest rates and fees. Lenders often consider these deals riskier, so they may offset the risk by charging higher interest rates or requiring additional insurance or guarantees.
Limited mortgage options: No-deposit mortgage deals are not as widely available as traditional mortgages. Lenders may have specific eligibility criteria or restrict the types of properties that qualify for these deals. The limited options can make it more challenging for first-time buyers to find a suitable mortgage arrangement.
Negative equity risk: By not providing a deposit, buyers immediately start with little or no equity in their property. If property prices decrease, there is a higher risk of falling into negative equity. Negative equity occurs when the outstanding mortgage balance exceeds the value of the property. This can be problematic if the buyer wants to sell or remortgage the property in the future.
Stricter eligibility criteria: Lenders offering no-deposit mortgages may impose stricter eligibility criteria. They may require a higher credit score, proof of stable income, or additional financial commitments. First-time buyers with a limited credit history or irregular income may find it more difficult to qualify for these deals.
Long-term financial implications: Opting for a no-deposit mortgage means taking on a higher level of debt. Buyers must carefully consider their long-term financial situation and ensure they can comfortably afford the mortgage repayments. Failing to do so could result in financial strain or difficulties in meeting future financial goals.
It is essential for first-time buyers to thoroughly research and assess their individual circumstances before committing to a no-deposit mortgage. Consulting with a mortgage advisor or financial professional can provide further guidance and help make an informed decision.
May 1, 2023 | Financial Reports
Last week’s economic reporting included readings on home prices, sales of new homes, and pending home sales. Monthly and year-over-year readings for inflation were published along with weekly reports on mortgage rates and jobless claims.
February S&P Case-Shiller Housing Market Indices show slower home price growth
National home prices continued to rise in February, but at a slower pace according to S&P Case-Shiller home price indices. Month-to-month home prices rose by 0.40 percent in February and matched analysts’ expectations, but were lower than January’s reading of 2.50 percent home price growth.
S&P Case-Shiller’s 20-city home price index, which is frequently used by real estate professionals for tracking housing markets, rose by 0.10 percent month-to-month in February. This was the first time home prices rose in eight months.
The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, reported an increase of 0.50 percent in home prices for homes owned and sold by Fannie Mae and Freddie Mac.Properties owned and sold by Fannie Mae and Freddie Mac are subject to loan limits and underwriting rules used by the two agencies.
In related news, the National Association of Realtors® reported pending home sales fell by -5.20 percent in March compared to the expected reading of 0.50 percent growth and February’s reading of 0.80 percent in pending sales.
Mortgage Rates Mixed, Jobless Claims Fall
Freddie Mac reported mixed movement on mortgage rates as the average rate for 30-year fixed-rate mortgages rose by four basis points to 6.43 percent. Rates for 15-year fixed-rate mortgages fell by five basis points and averaged 5.71 percent.
Initial jobless claims fell to 230,000 claims compared to the expected reading of 246,000 claims and the previous week’s reading of 245,000 claims. Continuing jobless claims fell to 1.86 million filings from the prior week’s reading of 1.87 million ongoing claims.
The University of Michigan reported no change in consumer responses to its consumer sentiment survey for April. The index reading of 63.5 for March was unchanged in April and also matched analysts’ forecasts.
What’s Ahead
This week’s scheduled economic reporting includes readings on construction spending, the Federal Open Market Committee’s scheduled statement, and Fed Chair Jerome Powell’s post-meeting press conference. Readings on public and private-sector employment and national unemployment are also scheduled for release.
Mar 10, 2023 | Real Estate
If you are thinking about building your own home, you might be wondering how construction loans work. There are plenty of options available, but one of the most popular choices is a single-close construction loan. This type of loan allows you to close on not only the construction expenses but also your financing costs at the same time. Essentially, a single-close construction loan will convert into your mortgage after the construction on your home is finished. What are some of the top benefits of this type of loan?
Save Time
One of the first benefits of a single-close construction loan is that you can save a significant amount of time. If you need to get a separate loan for the construction and financing processes, you will have to submit all of your required documents twice. Then, you will need to wait for the lender to review them both times. You can avoid this process if you combine the loans together in a single-close construction loan.
Save Money
Of course, you could also save a significant amount of money by going with a single-close construction loan. Keep in mind that each loan is going to have some origination and closing expenses. If you have to go through the process twice, you will have to pay these expenses twice. With a single-close construction loan, you only have to pay potential origination and closing expenses once, which can help you save money.
Fix Your Interest Rate
What happens if the average interest rate goes up during the construction of your house? This means that your mortgage may have a higher interest rate, and it could make your house unaffordable. You can avoid this risk by getting a single-close construction loan with a fixed interest rate. Then, if the interest rate drops down the road, you may be able to refinance.
Consider A Single Close Construction Loan
In the end, these are just a few of the top benefits of a single-close construction loan. While these loans are not necessarily for everyone, they could be right for you. Do not hesitate to reach out to an expert who can help you figure out if a single-close construction loan is right for your needs.
Mar 9, 2023 | Real Estate
Even though interest rates have gone up significantly during the past few months, there are still opportunities for you to find a home at a great price. The high interest rate can be discouraging for some people, but as long as you know how to navigate the market, you can still put yourself in a position to be successful.
Put More Money Down
The easiest way to combat a high interest rate is to reduce the amount of money you borrow. That means that you might need to put more money down. Of course, this means that you might need longer to save up a down payment, but there are other benefits you might notice as well. For example, if you are willing to put 20 percent down or more, you no longer have to purchase private mortgage insurance, which can help you save some additional money.
Increase Your Credit Score
You may be able to secure a lower interest rate if your credit score is higher. Remember that the lender will give you a lower interest rate if you are of less risk to them. If you increase your credit score, you improve your financial health, which means that the lender may offer you a lower interest rate. You can increase your credit score by correcting mistakes on your credit report, paying down your existing debt, and reducing your credit utilization ratio.
Consider an Adjustable-Rate Mortgage
You may even want to consider going with an adjustable-rate mortgage, usually shortened to ARM. This means that the interest rate on your loan will change with the market. If you feel like the interest rates are going to go down, this may be a way to save money; however, keep in mind that you may end up owing more money if the interest rates go up.
Refinance Your Home Loan Down The Road
If you are not willing to take the risk with an ARM, keep in mind that you can refinance your home loan later if interest rates go down. You might need to pay closing expenses again, but it could save you tens of thousands of dollars over the life of the loan if you decide to refinance.
Dec 19, 2022 | Financial Reports
Last week’s economic reporting included readings on inflation, retail sales, and the Federal Reserve’s Federal Open Market Committee meeting. Fed Chair Jerome Powell held his scheduled post-meeting press conference and weekly readings on mortgage rates and jobless claims were also released.
Federal Reserve Raises Target Interest Rate Range
The Federal Reserve’s Federal Open Market Committee announced its decision to raise the Fed’s target interest rate range to 4.25 to 4.50 percent from its previous range of 3.75 to 4.00 percent.
Fed Chair Jerome Powell said in remarks made during his scheduled press conference, “We’re going into next year with higher inflation than we thought.” Seven Fed officials predicted rising interest rates with the Fed’s interest rate range potentially reaching 5.75 percent. Analysts said that the Fed’s position of controlling inflation at any cost could result in a recession. Chair Powell said it was impossible to predict if a recession would occur and how deep it might go and how long it could last. He repeated the Fed’s commitment to controlling high inflation.
Mortgage Rates, Jobless Claims Fall
Freddie Mac reported lower fixed mortgage rates last week as the average rate for 30-year fixed-rate mortgages dropped by two basis points to 6.31 percent. The average rate for 15-year fixed-rate mortgages dropped by 13 basis points to 5.54 percent.
Initial jobless claims fell to 211,000 first-time claims filed as compared to the prior week’s reading of 231,000 new jobless claims filed. Continuing jobless claims were reported as unchanged from the prior week with 167,000 ongoing unemployment claims filed.
The Commerce Department reported lower retail sales in November than in October. Retail sales decreased by -0.6 percent in November, which surpassed analysts’ estimates of -0.3 percent. Lower retail sales could suggest an impending recession as consumers hold back on paying rapidly rising prices for non-essential goods and services.
What’s Ahead
This week’s scheduled economic reporting includes readings from the National Association of Home Builders on U.S. housing markets and Commerce Department data on building permits issued and housing starts. Reports on sales of new and previously-owned homes and weekly readings on mortgage rates and jobless claims will also be released.
