Mortgage rates drop as Wall Street plunges

rates drop (2)Mortgage rates are again dropping as world economic news has Wall Street selling off in virtually every category. (If you check your 401k or IRA balances, you might notice those balances are about the same as what you would have seen in 2013!) In fact, the DOW has now dropped to lows not seen since May 2014. Prior to this latest sell off, the DOW had topped 18000 and with strong jobs reports and economic news, and appeared to be headed for 19000 perhaps by year end.

Forget Greece. It’s all about the Chinese economy, or so many news outlets would have you believe. But there’s even more going on that is only starting to make the business headlines. Bloomberg news reported this week that Brazil’s stock market is nearing a bear market. Many economists believe that Brazil is headed towards a severe recession, perhaps the worst since 1930s.

And just this morning on CNBC, analysts were saying this sell off is a delayed reaction to the FOMC possibly raising interest rates next month. It appears that what is going on with Wall Street is what we have seen before – panic selling and scheduled sell offs of huge volumes of investments by Mutual Funds, Hedge funds and individual investors alike.

Mortgage Rates drop too

While our tumbling stock market is bad news for investors and savers, it should be music to the ears for home buyers as mortgage rates plunge below 4% for best qualified home buyers.(you might want to read: Do you qualify for best mortgage rates?)

In other better news for home buyers, Janet Yellen (FOMC Chairman) is now hedging on her very strong (almost commitment) to begin raising U.S. interest rates in September. Economic instability in 2 of the worlds’ leading economies outside the U.S. along with the Wall Street sell off will very likely will impact U.S. businesses, so the FOMC is watching China, Brazil, Greece and the rest of the world to try to determine ahead of September 15th, just how much impact all this news will have on our own economy to determine if next month IS a good time to start increasing interest rates. IF FOMC acts , mortgage rates are very likely to follow.

Where are Portland home values headed?

Just a few weeks ago, Wall Street sentiment was that home values will continue to rise for at least the rest of this year, and well into 2016. And, did you know that Oregon ranks #5 in the nation for most increased values since the recession? Did you know that just last month, Portland experienced the single busiest July in RMLS history for home sales?

Update 8/21/15 1:16pm

Wall Street just closed with the DOW down more than 500 points! After a 350 point drop yesterday, and drops everyday this week, Walls street has plunged more than 10% this week alone, S & P approximately 19%, and NASDAQ down 20% this month. So what does this mean for the housing market, here in Portland and in the U.S?

Unfortunately we don’t have answers yet. We never do, until the correction on Wall Street is over and investors start buying the drops rather than selling. We could see a lot of buyers move to the sidelines with a “wait and see” posture. Still, if history is any indicator, long term investors could do worse than buying homes right now. All previous corrections in history have always produced higher values over the long term. AND, mortgage rates did drop more today making homes more affordable. Also, with some buyers moving to the sidelines, there will very likely be less competition for the few houses out there right now.

As Warren Buffet has always said; “Buy when everyone else is selling, not when they’re buying.” If the Feds go ahead and raise rates in September, buyers may not see an opportunity like this one for many more years to come.

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Pre-approvals for mortgages – What you need to know

In a busy housing market, most people know that before you even go out to look at houses, you need to get a written pre-approval for financing. While you may have checked your credit scores recently, your scores don’t tell the whole story about your credit history. The truth is that since the recent recession and the consequent tightening of lending standards, there are many people out there with credit scores between 650-750 who do not qualify for a home loan. A prior bankruptcy, foreclosure or short sale could have your dream of home ownership on hold until the mandated waiting period. And those with old collections and even old judgments will have to pay those old debts prior to obtaining a pre-approval too.

In a sellers’ market, it is not uncommon for sellers to receive multiple offers on their homes. When this happens, sellers may opt to basically ignore offers that are not accompanied by a pre-approval (or proof of funds for cash buyers).Of course sellers are looking for the most money they can make on their homes, but their decisions are also based on the likelihood that an offer will actually close. For sellers, nothing says serious buyer more clearly than a signed pre-approval from a lender (on lender letterhead).

Your pre-approval process is usually fairly easy and with most lenders pretty fast too. You will need to provide (at a minimum) the following information to your lender:

  •  2 months most recent pay stubs
  •  2 months bank statements – all pages included (If pulled online, statement must show your name on the on the paperwork.)
  •  last 2 years tax returns – all pages and all schedules
  • most recent 2 years W2s or 1099s if self employed

Your lender will pull a tri-merge credit report (all 3 credit bureaus) to determine the amount and type(s) of financing that are available to you. Most lenders will use the mid-score from the 3 bureaus.

Not only do sellers require pre-approvals; your realtor needs this information as well.

  • We want to show you properties that you are qualified to purchase.
  • We need to know if, for example you are looking for FHA financing, that the property is FHA approved (many condos are not FHA approved, so why look at them?)
  • Once you find a house you want, we need to be able to present as strong an offer as possible.
  • We frequently communicate with your lender, usually even prior to finding you a home, so we need that contact information as soon as possible.

Your pre-approval is usually good for 90-120 days. Once you have an accepted offer your lender will require all  new updated documentation, AND your credit will be re-pulled at that time too so please read on.

Managing your credit after you receive a pre-approval

Once you have your pre-approval from a lender, it is important that you manage your use of credit wisely. Most lenders should tell you:

  • DO NOT apply for any additional credit cards after your pre-approval is issued.
  • DO NOT make any large purchases ($100 or more) on existing credit cards.
  • DO NOT change jobs or give notice to your current employer. In fact, don’t use online services to search for a new job. Lenders are wise to all the online services, and often check social media sites to see what you’re up to that the loan application does not cover, and they do this just before the loan is scheduled to close.
  • Make sure that you pay all creditors on time.
  • Don’t file for a divorce or formal separation prior to closing a loan. Even if your spouse or partner will not appear on your application or loan, the legal ramifications of a divorce will affect your ability to finance a purchase.

Applying for new credit, large purchases on existing cards, and missed payments to creditors WILL lower your credit scores and will reduce the mortgage amount you qualify for.

You really should be using the time prior to home shopping to do any mortgage shopping before getting a pre-approval. Once you have an accepted offer with a seller, the Oregon contract does clearly spell out that you must notify the seller if you’ve changed lenders after mutual acceptance of your offer.

The credit bureaus allow up to 3 mortgage inquiries within a 90 day period without a 6 point drop in your scores for each inquiry. New sources of credit will lower your scores considerably more than 6 points.

If you know that you will need a new refrigerator for you new home, you have to put these purchases on hold until after your loan closes. You really can manage 1 or 2 days without a new refrigerator or washer/dryer or that big flat screen TV you now have the perfect wall for.

Virtually all lenders will pull a credit update and will verify your employment just before your loan is scheduled to close. Any negative changes to your credit scores, increases in your credit balances, or iffy news about your employment can kill your loan at the last minute.

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Factors that can increase the value of your home

street trees in a neighborhood

street trees in a neighborhoodReal estate agents know that valuing a home isn’t rocket science, but determining value is not nearly as cut and dried as the algorithms used by well-known property search sites in their estimated values.

According to House Logic, there are many factors that can influence the price buyers will be willing to pay for your home.

**Millenials cite “walkability” as the number 1 factor that influences their decision about location. In Portland, we are seeing more and more neighborhoods creating small shopping districts that home owners can walk to for groceries, coffee shops, fine dining, and boutique and retail shopping. Homes in walkable areas will see value increases of $4,000 – $34,000, depending on the type of shops and restaurants nearby. Clearly little boutique shops and dining are favored, and result in the higher valuations of neighborhoods. But just being able to walk to a local park is important too.

**Highly rated schools

**County or state parks or golf courses nearby can increase the value of a home more than you might imagine.

  • A public park within walking distance can increase the value 8-20%
  • A natural area can increase the value on average about $10,000
  • A nearby golf course can raise the value approximately $8,000.

**Here’s a surprise – House Logic says a nearby Walmart that stays open 24/7 could increase your home’s value 1-2% and if very nearby another 1%. In Portland, Walmart stores are not all that popular but are gaining traction. But watch for areas where a New Seasons or Trader Joe’s market is either proposed or ready to open. Those are sure signs that the neighborhood is either prospering or is definitely on the rise in desirability and values.

**Additional dwelling spaces (whether a separate building or a basement with a separate entrance) can increase your home’s value 24-34%. These separate units are in high demand but are relatively rare in the Portland metro area.

**Trees are a valuable asset – and trees in your own yard, or better yet, street trees throughout a neighborhood make the whole neighborhood appear lush and inviting and raise the values for all home owners in your neighborhood. According to a University of Washington research survey:

    • Mature trees in a yard add 2%
    • Mature trees on the street add at least 3% for all home owners on the street
    • Trees in the front yard add 3-5%
    • Mature trees in high-income neighborhoods add 10-15%

While all the above factors can influence the value of your home, you can’t move your home to a better location to attract buyers. Still, if you want to add value, something as relatively easy and inexpensive as planting a tree or two in your mowing strip can definitely enhance not only your house, but the looks of your entire neighborhood too. Imagine if everyone on your street planted just one tree today how much more inviting your street would look in just 5 years.

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Have you checked your credit recently?

Credit reportI’m sure it’s not a surprise to anyone that ID theft is alive and thriving these days.Did you know that approximately 1 of every 4 people in the U.S. has at least one error or derogatory item on their credit reports? And yet, with all the threats out there, most people are pretty lax about keeping tabs on their credit information. Just last week I personally received an updated report and found, much to my surprise, that someone else is using my social security number!

  1. Do you know if there is information on your credit report that is not yours? Or that was reported in error?
  2. Do you have a relative with a similar name? Or is someone else also using your social security number and causing information to reported on your report that isn’t yours?
  3. Do you have an old collection that was filed against you that you never cleared or that you thought you had cleared but was never reported as paid?

Everyone should monitor their credit on a continual basis. There are several credit monitoring services that you can purchase for as little as $10 a month, AND there are multiple free sources for obtaining your credit information as well. All three credit bureaus offer you one free report annually, and several businesses allow you to pull your credit at least several times a year at no charge.

As surprising as this may sound to many of you, the first time that many people learn there are errors on their credit reports is when they apply for a mortgage. Oops! Here you are, all all ready to go out house hunting and find a $5.00 collection on your report. No big deal, or so you think, but that $5.00 collection for cable TV service you were sure you had canceled on a prior move, can cost you a 100 points or more on your credit score. and can cost you thousands of dollars on your mortgage because of the higher rate you will have to pay, if in fact you qualify.

Fixing errors isn’t hopeless, but it takes time and could be more work than you might think. And if the $5.00 collection was a valid charge, paying it will help your score, but not nearly as much or as quickly as your score dropped due to the non-payment of a legitimate bill.

Be sure to check all credit that is being reported to make sure that it is yours. Look for names that your credit report shows using your social security number. Check to make sure the credit bureaus are showing your current address.

How to fix errors on your credit report – This article will outline the fastest, easiest way to fix errors on your credit report yourself, but be warned, it can still take 30 days or more to have errors removed. The reward is an immediate increase in your credit score, and a clean credit report. Errors that have been disputed and removed can never appear on your reports again. 

In March this year, “Eric T. Schneiderman, the New York State attorney general, announced that his office had reached a sweeping settlement with the agencies, affecting consumers nationwide, which was prompted by an investigation that began in 2012.” This is a huge victory for consumers because it will not only make correcting errors on your report easier to fix, but it will change how some information is weighted in computing your scores. The credit reporting agencies have announced that the changes will be implemented over the next 3 years, so don’t expect over night progress. But rather than outsourcing all disputes to employees overseas, the agencies have agreed to hire specially trained personnel to handle all disputes to make sure that they are handled correctly and promptly. AND best of all, information from collectors will no longer be given more weight than documentation from consumers.

While we’re waiting for these sweeping changes to take effect, please, if you haven’t done so recently – Check your credit report today. Don’t wait until you need credit to find out there are errors that can be fixed. The more frequently you monitor your report, the faster you will discover errors, and the easier those errors are to fix.

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Alert: Hackers target home buyers

Hacker at work - if buying a property weren’t stressful enough, the NAR (National Association of Realtors) has just advised us that Internet hackers are now targeting home buyers. It was only a matter of time before hackers went after the vast sums of money involved in purchasing a home, but this time the route to the hacking is a bit different than in most cyber crime-schemes.

Apparently hackers are now targeting realtors’ email accounts and silently watching those emails for information that will allow them to re-route buyers closing funds to their own bank accounts. As closing approaches, escrow officers send buyers instructions, including what to bring to closing, amount of funds required, and where and how to wire funds to close the transaction. The hacker will also send the buyer what appears to be an official looking email from the “title company” with “updated instructions” on where to wire funds. (Remember that your agent and escrow officer have been communicating frequently during your purchase, so hackers have the official signatures each has been using, and these are easy enough to copy to make your email with updated escrow instructions look legit.) Some hackers may even include other information about your transaction to make the email look even more like it has come from a trusted source.

Generally speaking, this will not impact the majority of buyers who hand carry a cashiers’ check to the title company at closing. But, for out of state buyers and cash buyers, it is not uncommon for funds required for settlement to be wired to the title company. By watching emails exchanged between buyers and their agents, hackers gain information about how the purchase will be financed as well as the scheduled closing date.

How can you protect yourself from hackers?

  1. Make sure that your realtor is taking every step possible to keep hackers out of their email. Personally I change my password frequently which makes watching my email much more difficult for hackers, and I use strong passwords that hackers would be unlikely to guess.
  2. It is very uncommon for a real estate agent to request sensitive information from buyers, especially via email. We don’t need your bank statements (unless you are a cash buyer) or any information with your social security number. That type of information should always be handled by your lender. When we do require proof of funds for a cash transaction, buyers should always redact most of your account number (leaving only the last 4 digits), and should send proof of only enough funds required to settle the purchase. If you are able to encrypt the email, that would be even better.
  3. Before wiring funds, always double check with your escrow officer to make sure that you have the correct wiring information for your bank. Be sure to keep and check old emails you have received from the title company to make sure you are calling or emailing the correct person, because hacker contact information is almost always included in the scam emails you receive.
  4. Don’t click on any links in the email, giving the hacker access to your email (if they don’t already have it).

It’s an Internet world out there, but there are always steps you can and should take to protect yourself, and that I take to protect you if you are my client. Unfortunately, once the funds are wired, even to an incorrect account, the money is gone.

The good news is that banks, title companies and realtors are all being notified of this new threat and are all taking whatever steps we can take to tighten security on your behalf. But at the end of the day, responsibility for issuing correct wiring instructions is still yours. So, be careful out there. Check and double check your information before you pass on wiring instructions to your bank, and you should be fine.

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