Home Sales Only Going Up From Here!

Existing-home sales will likely rise about 7 percent this year, as a strengthening economy and job growth leads to a healthier market, according to the National Association of REALTORS®’ 2015 housing forecast.

“Home prices have risen for the past three years cumulatively about 25 percent, which boosts confidence in the market and traditionally gives current home owners the ability to use their equity buildup as a down payment towards their next home purchase,” says Lawrence Yun, NAR’s chief economist. “Furthermore, first-time buyers are expected to slowly return as the economy improves and new mortgage products are made available in the marketplace with low down payments and private mortgage insurance.”

Yun is forecasting growth in home prices, but at a more moderate pace than recent years. The national median existing-home price for 2014 will likely near $208,000, up 5.6 % from 2013, but it’s expected to moderate between 4 % and 5 % growth in 2015.

Source: National Association of REALTORS®

The One Expense Buyers Underestimate

Sixty-five percent of home owners with private mortgage insurance say that the additional cost of PMI prompted them to pay a higher monthly mortgage payment than they had originally expected, according to a new survey released by TD Bank of more than 2,000 Americans who purchased a home in the past 10 years.

“PMI has had a definitive impact on many home buyers – including making them rethink or delay the purchase of a home in light of not being able to meet monthly mortgage payments,” says Michael Copley, executive vice president of retail lending at TD Bank.

Borrowers are required to get PMI if the loan exceeds 80 percent of the home’s value. The insurance protects the lender in case the borrower defaults on their loan.

Many buyers say that PMI has an impact on their home purchasing decisions. For example, 35 percent of people who purchased a home in the past two years said that PMI influenced their decision of which house to buy. Also, 53 percent reported facing a negative impact due to the additional cost of PMI. About 40 percent of those surveyed said that having to pay PMI forced them to curtail small and daily purchases or larger household purchases.

The survey showed that PMI is fairly common: 37 percent of those who purchased a home in the past 10 years said they were required to have PMI, and 43 percent in the past two years. Forty-five percent of home owners aged 18 to 34 years old have PMI; 37 percent of home buyers aged 35 to 54 have it; and 23 percent of people older than 55 had required mortgage insurance on their loans over the past decade, the TD Bank study found.

On average, home owners reported that PMI cost about $100 extra a month, according to the study.

Source: TD Bank and “Most Homebuyers Don’t See This Cost Coming,” Credit.com (June 2, 2014)

More Banks Offering Loans with only 5% Down?

For the last few years, buyers have been hard-pressed to land a mortgage if they didn’t have a 20 percent down payment, unless they turned to the Federal Housing Administration’s low down-payment loans.

But a growing number of banks are now offering loans with just 5 percent down, CNNMoney reports. For example, Bank of America, Wells Fargo, and TD Bank are among the banks reportedly offering mortgages with down payments as low as 5 percent.

Banks that are offering 5-percent down payment loans, are requiring borrowers to purchase private mortgage insurance. Borrowers will have to keep PMI until they build up 20 percent equity in the home. That is typical, your comments?

Source: “Banks Offering Mortgages with Only 5% Down Payments,” CNNMoney 11/5/13