Real Estate Mortgages

Mortgages Rates

Mortgage rates have dropped, providing a demand for homes at any price range. In October, the average rate was about 3% for 30-year fixed mortgages, dropping to an average of 2% in November. In a way this becomes a buyer’s market, great opportunity to set up a fixed rate mortgages. Yet due to the drop-in rates, it has contributed to a rise in price. The average price of a home was $300k in 2020, for some areas, others it was as high as $500k, not the average, but the most common. Prices depended a great deal on location, supply, and demand. There was a supply shortage, which added to the increase in prices. Despite that they sold quickly with the average days on market at about 27 days.

The sale of homes had decreased in November of 2020, the average sale price increased, and the supply decreased. Following the information provided by CNBC, by the end of November, the supply of homes for sale dropped to 1.28 million, down by 22% from the previous year.  The median sale price for a home was $310,800 by end November, making this a 14.6% increase over the year.  The drop was a gradual decrease over a five-month period.  The time spent on the market was an average of 21 days as compared to last year’s 38-day average.  The highest number of sales were homes priced over $750,000, at an 85% increase over last year.  Predictions put this as a seller’s market, with the current housing shortage, the greatest demand are for homes in the higher price range, with a lower demand for mid to lower price ranges. 

The average rates held firm through the first half of February.  According to First Tuesday the average 30-yr fixed mortgage rate held at 2.3% and the 15-yr fixed mortgage rate saw a slight decrease to 2.19%.  Some good news to add to this is the Feds are considering maintaining the benchmark through the year 2023, the rates will still depend on bond market investors and the next stimulus package. 

One way to track the current mortgage rates is to utilize the Mortgage Calculators.  Visit the website, explore the different calculators for investment properties, personal homes, refinancing, reverse mortgages, and several other options.  This is a great first step to researching a new home purchase, refinancing, and making the decision about monthly payment options. 

Using the Calculators

There are a wide variety of calculators used for different industries.  Insurance companies use them to assist clients in deciding in what insurance policy is a possible fit for their lifestyle and income.  Real estate companies utilize mortgage calculators to assist potential home buyers in their decision process.  Knowing what you need to earn, possible monthly payments and options will provide the information required to make an informed decision.

Considering purchasing investment properties?  Try this Residential Property Analyzer calculator to determine the CAP (Capitalization Ratio) rate, Debt Service Coverage Ratio (DSCR) and Net Operating Income (NOI), to list but a few options.  The more you know about the property, debt, expenses, income potential, interest rates, expected cash on return, the closer you are to making a wise investment. 

Investment Opportunities

Want to dig deeper and gain a greater understanding what shapes the mortgage industry?  Consumer Finance offers documentation on mortgage delinquencies.   So many different factors can affect the current mortgage rates and housing prices.  Delinquencies shape the mortgage market health, the charts offered by Consumer Finance show the trends over the years, going back to 2008.   If you are interested in tracking the delinquencies and reading further data, head over to the National Mortgage DataBase project page.

1031 exchanges are another investment that requires some homework, using an analyzer that is designed to offer an analysis of the tax deferment.  When you sell a property and wish to defer the taxes of the sale, you can use a trade for another property.  Using the 1031 calculator you can determine the 45- & 180-day property exchange deadlines you need to meet.   

There are many ways to build wealth in real estate, exchanges are one of those vehicles.  There are rules, Investopedia offers the necessary information to understand how 1031 exchanges work, the rules and restrictions you should be aware of.  If you decide you wish to sell your home, commercial property or other investment property begin with understanding the rules of deferring capital gains.

Debt to Income Ratios

When applying for a mortgage one of the questions asked is how much debt you owe.  The lender will look at the debt-to-income ratio to determine your level of risk.  Curious what yours is?  Try this calculator.  The greater your debt to income the least likely you will be approved for a loan.  

Lenders are concerned about the risk of loaning to anyone.  To determine the risk or lack of, they look at a few factors.  Your DTI (debt to income) is just one factor.  The usual percent that signals you are less risk is around 36%, this will get you a decent interest rate on your mortgage. 

NerdWallet offers further information to guide you in determining your readiness to apply for a loan.  When your debt is under or about 35% you stand a better chance of qualifying for a loan.  Not having a low debt ratio will not bar you form a mortgage; however, it can mean a higher interest rate and deposit, maybe even a co-signer.   The final determination would be your income, affording the mortgage payment each month and not defaulting. 

Where to go Next

The use of calculators is a great tool to guide you in your decisions no matter what you are seeking to purchase.  Head over to Mortgage Calculators and explore the various options available.  Determine if you can afford a mortgage?  What do you need for that 1031 exchange?  Is purchasing an investment property beneficial?   

The various options will provide the answers you are seeking.  Each one asks all the right questions.  Before you use them pull together your income, debts, research you uncovered on your property interest and other information you may need you can find by looking at each calculator.

Update to Mortgage Rates

Recently I came across an article with regard to the changes in current mortgage rates at CNBC. I have clients who are real estate agents so I tend to be on the watch for changes in the market to assist in their marketing.

The increase in rates may not seem like a huge number, up by 2%, but it can make a difference in mortgage loans. It was at 2.96%, adding that 2% brought it up to 2.98%, which in turn brought fewer buyers and sellers to the market.

Applications decreased decreased for purchases and refinance. While the average price of a home jumped from $300k to over $400k.

This quote sums it up:

“At a certain point market momentum becomes its own justification and bond prices snowball to lower and lower levels,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. “When bond prices fall, rates rise.”

As changes arise I may keep updating this article. Please, check the current rates and make use of the calculators at Mortgage Calculators.

Please leave comments and your insight to the current mortgage rates. Share in the discussion. All comments are moderated. Thank you for understanding.