As prices rise, mortgage lenders are making it easier to buy a house.
Source: Los Angeles Times
Some prices are rising across the country and mortgage rates, though still historically low, are up since the presidential election.
Simply put, buying a home isn’t easy, especially in high-cost metropolitan areas such as Los Angeles County, where the median price of a home hit $569,000 in June.
But changes in the mortgage industry are afoot, with the goal of loosening some of the strict standards established after the subprime crisis — rules some blame for impeding sales.
“The reality has sunk in that there are buyers out there who will be able to buy homes and make the mortgage payments,” said William E. Brown, the president of the National Assn. of Realtors. The industry is “trying to give them more options to buy a house.”
Government-controlled mortgage giants Fannie Mae and Freddie Mac are paving the way by rolling out new programs to encourage home ownership.
The companies, with their congressional mandate to promote home ownership, don’t originate loans, but purchase mortgages from lenders to keep the market moving. And any changes they make in the underwriting standards for the loans they buy can have a big effect.
“While accumulating a large chunk of cash isn’t likely to happen overnight, if you start small, you can gradually build your savings so that you have a financial safety net in place. With that goal in mind, here are 10 ways you can save $300 a month — without having to make yourself utterly miserable in the process.”
Student debts have seemed to affect homeownership rates, according to the Federal Reserve Bank of New York.
About 32% of those in their 20s owned a home in 2007, but that’s fallen drastically to 21% in 2016.
While the poor labor market and memories of the housing bubble certainly played a role, student debt can explain up to 35% of the decline, according to a report from the Federal Reserve Bank of New York released Thursday.
The results suggest that the rise in college costs will result in “weaker spending and wealth accumulation among young consumers in the years to come.”
It’s consistent with surveys that have asked those with student debt if it affected their decision to buy a home. Half of those under the age of 35 surveyed by the National Association of Realtors in 2016 said it had delayed their purchase. And 25% told Pew Research Center that student loans had made it harder to buy a home in 2011.
It’s easy to be confused by all the different finance and money terms out there. Here are a few terms common to real estate:
Escrow is a safe, intermediary account for money when it’s moving between a buyer and seller. Placing funds there tells the seller: “I’m serious about this deal and I can pay.” During the time the down-payment is in escrow, a homebuyer can take care of due diligence, including a home inspection. If it turns out something is off about the house — like structural damage — the buyer can pull out.
You can also escrow money (yes, it’s a noun or verb) for fees beyond your mortgage, like property tax and mortgage and homeowners insurance. Federal Housing Administration-insured mortgages, for example, require escrow accounts. (“Money terms you’re too embarrassed to ask about.” Bahney, Anna. CNN Money. http://money.cnn.com/2017/07/11/pf/money-terms/index.html?iid=SF_River.)
Even if you already know that APR means “annual percentage rate,” you might not understand what it is. Lenders are required to disclose the APR when lending, which is great for transparency…
The APR is the rate charged annually for borrowing money. But unlike an interest rate, it includes fees and other costs the transaction may include. So the APR is usually higher than the nominal interest rate. Also, unlike annual percentage yield (APY), the APR doesn’t take into account compounding interest. (“Money terms you’re too embarrassed to ask about.” Bahney, Anna. CNN Money. http://money.cnn.com/2017/07/11/pf/money-terms/index.html?iid=SF_River.)