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At Home CEO Lee Bird will retire effective Dec. 31, the company said Wednesday.

Bird, 58, has been at the company for 11 years and transformed it from a tired Houston-based brand called Garden Ridge into a fast-growing home superstore concept. He moved the headquarters to Plano and rebranded it At Home. A year ago the company moved into a new headquarters in Dallas.

The departure is a surprise and most expected Bird to at some point lead the company out of private equity ownership with an initial public offering. At Home was taken private after a proxy challenge in July 2021 by Hellman & Friedman in a deal valued at $2.8 billion.

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At the time, Bird had said he believed At Home could more than double its store count to more than 600 locations and that it could do so faster as a private company.

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A CEO search is on, the company said in a statement.

In the meantime, an office of the CEO has been formed to run the business with Jeff Evans, president and chief merchandising officer; Jerry Murray, chief financial officer; and Ashley Sheetz, chief operating officer.

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Erik Ragatz, At Home’s lead director, will be the executive chairman. Ragatz was formerly a partner at Hellman & Friedman where he worked for more than 20 years and is listed as a senior adviser on H&F’s website.

“On behalf of the company, I want to thank Lee for his tremendous leadership of At Home over the last decade,” Ragatz said. “Lee helped build At Home into one of the great retailers across industries. As a leader and mentor, Lee has had a profound impact on At Home’s thousands of employees and will remain an important member of the At Home family for years to come.”

At Home CEO Lee Bird in the At Home store in Timber Creek Crossing shopping center last year. At Home took over a building left vacant by JCPenney. (Juan Figueroa / Staff Photographer)
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Bird joined the company as CEO in December 2012 after executive positions at Gap, Old Navy and Nike. He led At Home from a chain of 58 stores and $364 million in revenue to 268 stores with almost $2 billion in annual sales. It went private after a successful period during the pandemic when Americans were sprucing up their homes. Sales increased 27.4% in 2020 to $1.74 billion.

Bird wasn’t available for an interview.

At Home’s sales topped $2 billion last year. Here’s why Dallas shoppers are just discovering it

“Helping At Home become one of the nation’s top home decor retailers is one of the great honors of my career,” Bird said in a press release. He thanked staff who contributed to the company’s achievements.

“Together, we have created a valuable, differentiated business with even more room for growth, and I’m confident in this team’s ability to continue to build on At Home’s track record of success,” Bird said.

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Source: dallasnews.com

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From high prices to low inventory, potential home buyers know it’s gnarly out there. But if you’re ready for homeownership, the long-term benefit of buying often outweighs the pain of toughing out the search — even these days.

Think of it like your 5 a.m. spin class: You know it’s good for you, even if it takes grit (and leaves you feeling sore).

With some market savvy, you can make the most of today’s challenging conditions. Here’s your game plan for buying a house in 2024.

The challenge: Stubbornly high mortgage rates squeeze shoppers’ buying power

Buyers have been at the mercy of mortgage rates’ meteoric rise, holding on as the average 30-year fixed rate climbed from 3% to nearly 7% in 2022. In October 2023, rates topped 8% for the first time since 2000 — a surprise even many top economists didn’t predict. But throughout November, they dropped slightly, landing at an average of 7.03% for the week ending Dec. 7.

Higher interest rates make it more expensive to get a mortgage. To put that in perspective: Let’s say you can afford $1,800 per month in principal and interest. At a 3% interest rate, you could afford to borrow $426,900. But at a 7% interest rate, you could afford to borrow only $270,600. Why? Because you’d pay a full $156,300 more in mortgage interest with the higher rate.

For now, economic signals suggest more positive news for buyers in 2024. Dan Moralez, regional vice president at Dart Bank in Holland, Michigan, points to a cooling economy and the pause on Fed interest rate hikes. “All of that stuff really lends itself to mortgage rates getting better and the cost to borrow getting cheaper,” Moralez says.

Let’s set realistic expectations, though: No experts are forecasting a return to 3% rates anytime soon. More likely, we’ll see the 30-year mortgage rate decline modestly below 7% in the second half of 2024, according to forecasts from the Mortgage Bankers Association and the National Association of Realtors.

Your strategy: Do your research to find the best deal

Don’t let high rates keep you on the sidelines for too long. When rates go down, competition goes up — another reason there’s no time like the present to start house hunting.

And whichever way rates move in 2024, you’ll save money if you shop around. Aim to get an estimate from at least three mortgage lenders. The Consumer Financial Protection Bureau estimates borrowers can save $100 per month (or more) this way. And look at the annual percentage rate, or APR, to understand the total cost of the loan, which includes fees and other charges.

With buyers wincing at high rates, some lenders are advertising “buy now, refinance later” offers. Others are offering temporary buydowns, where the buyer’s effective monthly payment is reduced for a year (or a few). Before signing up for a discount, ask questions to understand how it works. Each option could potentially save money, but Moralez says it could also be “smoke and mirrors” if the flashy deal is offset by higher fees.

“It’s one of those things where I tell folks, ‘There’s no free lunch, OK?’” he says. “You know, somebody is paying for it somewhere.”

The challenge: Low inventory means slim pickings for buyers

The rate of existing home sales is the lowest it’s been in 13 years, according to October 2023 data from the National Association of Realtors (NAR). The current market has a 3.6-month supply of unsold home inventory, meaning it would take listed homes 3.6 months to sell at the current sales pace. A balanced market has a supply of five to six months.

So why aren’t sellers selling? Octavius Smiley-Humphries, a real estate agent with The Smiley Group in Apex, North Carolina, points to higher prices and the “rate lock-in effect.”

“At this point, you’d be paying either double your mortgage for the same price house that you have, or a similar mortgage if you’re trying to even downsize,” he says. “So I think the more intelligent buyer is kind of thinking, ‘What’s the benefit?’ unless you absolutely have to move.”

Some hope: Single-family construction permits are on the rise, with more issued in October 2023 than at any other time in the past year, according to the Federal Reserve Bank of St. Louis, so we’ll see more new houses boosting supply soon. And despite larger shortages, 92% of markets have seen modest inventory growth over the last three months, according to a November 2023 report from ICE Mortgage Technology.

Your strategy: Cast a wider net

You can’t control who puts their house on the market. So focus on what you can change: your expectations.

Let go of the fantasy of finding the perfect home when a “good enough” home can get your foot in the door sooner. That’s especially true for first-time home buyers who are eager to build equity.

“Real estate has always been a really solid investment,” Smiley-Humphries says. “So what you essentially lose by waiting six months or a year could mean tens of thousands of dollars.”

For now, maybe you expand your search to include condos or townhouses. Maybe you settle for fewer bathrooms or a dated interior. Keep your chin up — even if you have to tolerate less square footage or weird linoleum floors for a while, you’ll have equity to remodel or sell in a few years.

The challenge: High prices push affordability to the worst it’s been in almost 40 years

Housing is the least affordable it’s been since 1984, according to a November 2023 report from ICE Mortgage Technology. Why? Home prices are growing faster than income, and on top of that, higher mortgage rates increase the cost of borrowing.

In October 2023, the median existing home sales price climbed to a record high of $391,800, according to the NAR. To buy a median-priced home at that time, buyers would need to shell out $2,567 per month just in principal in interest, ICE estimates. That’s another all-time high since ICE has been keeping track — and nearly double the median monthly payment of $1,327 just two years ago.

Until supply catches up to demand, prices are unlikely to fall. Realtor.com estimates prices will fall less than 2% next year. That’s another reason to jump in now: A big drop in prices could trigger more competition.

Your strategy: Make a budget and stick to it

If you’re Zillow-stalking houses you can’t afford, stop. Instead, channel that energy toward your plan to shop for a house in real life — starting with setting a realistic budget.

First, talk to a financial advisor or use an online calculator to see how much house you can afford. Understand how mortgage lenders will determine your eligibility, including analyzing your credit score, cash savings and monthly debt payments.

Next, find a buyer’s agent who knows how far your budget can go in your local market. An experienced agent can advocate for you and help you snag a good deal.

One bargain-hunting tip: Start searching in the winter, suggests Ellie Kowalchik, a real estate agent who leads the Move2Team with Keller Williams Pinnacle Group in Cincinnati, Ohio.

“There are good houses on the market now that aren’t getting the attention they may get in the spring with more buyer activity,” she says. “Less competition is good for buyers.”

The challenge: Multiple offers are common, and first-time buyers have less cash

More than one in four homes are still selling for above list price, according to October 2023 data from the NAR: 28% of homes sold for above list price that month. Homes for sale spent a median of 23 days on the market and saw an average of 2.5 offers, a sign that competition remains tough.

“Limited housing inventory is significantly preventing housing demand from fully being satisfied,” Lawrence Yun, NAR chief economist, said in a press release. “Multiple offers, of course, yield only one winner, with the rest left to continue their search.”

In general, first-time buyers come to the negotiating table with less cash than repeat buyers, reports the NAR. First-time buyers make a median down payment of 8%, while repeat buyers put down a median 19%.

And nearly one in three (29%) of sales were made in cash, reports the NAR, up slightly from 26% in 2022.

Your strategy: Use leverage where you have it

A good real estate agent can help you craft a strong offer, even if other buyers flash more cash.

Aziz Alhees, a real estate agent with Compass in Pasadena, California, has seen his share of wealthy investors making cash offers. He notes that they tend to bid below asking price since cash sales close faster. The promise of a quick closing is enough to get some sellers to turn down higher offers that ask for more time.

So Alhees competes on speed: With a mortgage preapproval and all other paperwork in hand, he prepares his buyers to close in 14 days.

“We’re not afraid of cash offers anymore,” he says.

On the flip side, if the sellers need more time to move out, a flexible closing timeline can sweeten some deals, too. But don’t waive the home inspection when you’re negotiating. It can be tempting, but you’re only hurting yourself if you later discover expensive problems.

The bottom line: Set realistic expectations

It’s fair to feel bummed out about high costs and low inventory. That’s especially true for first-time buyers who have been putting off their search, only to see the market remaining rough.

The solution: Think long term. Holding out for lower rates likely means you’ll face steeper prices and more competition. So if you’re determined to buy, find a place that suits your needs and budget as-is. Expecting perfection often means setting yourself up for disappointment.

“Sometimes I have clients that think they’re going to hit a home run the very first house they buy,” Moralez says. “And a lot of times I tell clients, well, sometimes it’s OK to be happy just getting on base.”

Source: nerdwallet.com

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Aspiring home buyers grappling with the most difficult housing market in nearly 40 years are finally seeing some relief.

Borrowing costs for 30-year fixed-rate mortgages dropped below 7 percent this week for the first time in four months, according to the housing-finance giant Freddie Mac on Thursday. Just six weeks ago, the average rate for those home loans peaked at 7.8 percent, a high not seen since 2000; now it stands at 6.95 percent.

Pressure on the battered real estate market look poised to ease further. The Federal Reserve on Wednesday held off raising interest rates, extending its pause to three rate-setting meetings in a row, as its policymakers projected that they would cut their benchmark rate by 0.75 of a percentage point by the end of next year.

Investors see the move as confirmation that the central bank has ended its war on inflation and will take a more hands-off approach to guard against an economic downturn. For home buyers, the Fed’s decision should add momentum to an improved outlook, even though housing experts say meaningful mortgage-rate relief could still be months away.

Calculate how much more mortgages will cost as interest rates rise

Borrowing costs remain more than double what they were early last year, and real estate prices remain elevated. That has kept the inventory of for-sale home low because existing homeowners have more incentive to stay put if moving means taking on a costlier home loan.

But with rates starting to fall, there already are signs that buyers are rejoining the hunt. Mortgage applications, which in October sank to their lowest level since 1995, have been ticking up since, the Mortgage Bankers Association reported.

How did we get here?

The pandemic sent the housing market into overdrive, as Americans who were flush with cash and encouraged by low borrowing costs rushed to buy homes. Median home-sale prices surged by roughly 50 percent from the start of the pandemic to the end of last year, according to Fed data.

It wasn’t just real estate that overheated. Prices spiking across the economy prompted the Fed in the spring of 2022 to start raising interest rates in a bid to get inflation under control.

The effort has largely succeeded. Inflation has moderated, with prices climbing 3.1 percent in November over the previous year, down from a high of 9.1 percent in June 2022. But the Fed’s campaign has also helped foster the real estate conditions pushing would-be buyers back onto the sidelines.

How are mortgage rates set?

Mortgage lenders set borrowing costs by first considering what the federal government pays to those who buy 10-year Treasury bonds, a baseline that markets use to assess the risk of other investments. They add a premium to that rate to cover the extra risk of home buyers’ defaulting on their loans.

For most of the decade preceding last year, that premium — or “spread” — hovered around 1.5 percent. So in 2021, when the average payout on the 10-year Treasury bond was about 1.5 percent, most home buyers could secure a 30-year mortgage with around a 3 percent interest rate.

But starting a year ago, the spread started to widen and is now around 3 percent, double its typical level. The difference adds up to real money for borrowers: It translates into $352 more per month on a 30-year fixed-rate mortgage for someone who bought a $450,000 house with a 20 percent down payment, according to a Washington Post mortgage calculator.

Why are mortgage lenders charging borrowers so much extra right now?

Several factors contributed to this shift. A major reason relates to how lenders price home loans and account for the risk that borrowers will refinance their mortgages if interest rates fall.

The reason this is so important is that the U.S. real estate market is unique in the world for offering homeowners the option to renegotiate the terms of their mortgages if borrowing costs fall, notes Susan Wachter, a professor of real estate and finance at the Wharton School of the University of Pennsylvania. That privilege encourages borrowers to take out 30-year loans — another singular feature of the U.S. mortgage market — without fear of locking themselves into disadvantageous rates.

But the arrangement compels lenders to hedge against the possibility that falling interest rates will tear holes in their balance sheets. A borrower who refinances effectively strips a higher-yielding loan from the lender, which will struggle to find as profitable an investment amid the lower rates. The lender is “stuck with having to receive the money back when they don’t want it,” said Jacob Sagi, a finance professor at the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill.

In short: Borrowers effectively are paying more for their mortgages now because lenders expect them to be paying less soon.

When will interest rates go down for borrowers?

The answer depends on the Fed’s course in 2024. Most economists expect the central bank to start cutting its benchmark interest rate in the first half of next year, a message further reinforced Wednesday.

Precisely when such moves translate into cheaper mortgages is up for debate. The Mortgage Bankers Association recently projected that the interest rate on 30-year mortgages would fall to 6 percent by the end of next year.

What effect will falling mortgage rates have on home affordability?

As mortgage interest rates track the Fed’s benchmark rate lower, borrowers can expect an added benefit from lenders trimming the premium they have been charging to cover the risk of refinancing. “The spread will narrow,” Wachter said. “There’s a double positive in our future for borrowers.”

But even as borrowing costs edge down, many current homeowners may remain unwilling to list. More than 82 percent of current homeowners have locked in mortgages with rates below 5 percent, according to Redfin data. Daryl Fairweather, the site’s chief economist, projects that listings will pick up next year, outstripping demand and causing home prices to fall by 1 percent.

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Source: washingtonpost.com

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Freddie Mac Chief Richard Syron addressed homebuilders in prepared remarks at the NAMB Annual Convention in Orlando yesterday, calling the current housing correction the worst seen in our lifetime, “unless you’re over 80.”

He noted that the housing boom was initially driven by cheap home sales and steady price appreciation that eventually got out of hand, leading to unaffordable housing and the emergence of exotic loan programs designed to bring monthly mortgage payments down.

“Eventually, the market began to get ahead of itself. Prices continued to rise faster than household incomes, stretching affordability not just in high-cost markets, but in other areas of the country as well.”

“In response, there was a proliferation of new “affordability” mortgage products aimed at lowering the initial costs of financing a home. While most of these products worked reasonably well when house prices were rising, many could be dangerous if prices stagnated and began to fall.”

Think option-arms, when appreciation tamed negative amortization.

“Part of the danger was the high debt levels people took on. For example, under today’s market conditions, a 95 percent loan-to-value (LTV) mortgage originated two years ago may be effectively 110 percent LTV today. By contrast, during the boom, this same 95 percent LTV mortgage would have been down to an 80 percent LTV after two years.”

Of course that led to an eventual credit tightening, with a lack of available credit outside of prime conforming mortgages further dampening slumping homes sales and making life difficult for homeowners in higher cost markets.

“Many observers have noted that the only part of the market behaving more or less normally is the conforming market, the one in which Freddie Mac and Fannie Mae – the government-sponsored enterprises, or GSEs – primarily operate.”

“By contrast, borrowers in the jumbo market are paying up to a full percentage point more for a mortgage. That’s a record high, and about four times the normal spread.”

Syron went on to explain that the conforming loan limit increase signed into law by President Bush yesterday was a positive initiative, but one that presents a series of challenges to the GSEs.

Should be interesting to see how this plays out, and how much cheaper jumbo loans will be once the system is ironed out.

(Photo: iluvrhinestones)

Source: thetruthaboutmortgage.com

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Mortgage rates and the 10-year yield

What a crazy week! Not too long ago, on jobs Friday, I was on the HousingWire Daily podcast saying it’s time to declare war on the Federal Reserve for being too restrictive; you can listen to the podcast here. A few days later, the Fed corrected its mistake — they didn’t go hawkish but instead made doves cry and bond yields acted correctly, sending the 10-year yield below 4% and mortgage rates under 7%.

Right after the Fed presser I did another podcast where I outlined why this was so positive for the U.S. economy. You can see it in the stats from last week, where the 10-year yield fell from 4.25% to end the week at 3.91%. Mortgage rates went from 7.10% to 6.62% and ended the week at 6.64%.

As I have said before, given the history of economic cycles, when the market believes the Fed rate-hike cycle is over, bond yields will rally and mortgage rates will fall. We have had an almost 1.5% move lower in mortgage rates without one rate cut happening, and that looks normal to me. We shall see if we can hold those gains next week.

Purchase application data

Even before mortgage rates dropped below 7.25%, we saw a positive move in purchase application data, which continued last week with another week of gains. That means we’ve had a positive trend for the last five weeks. Purchase apps were up 4% week to week, and as crazy as it might sound, we could end the year with more positive weekly prints than negative as the year-to-date count is 23 positive and 23 negative, with two flat prints.

During the last two weeks of the year, nothing much usually happens with purchase apps as we prepare for Christmas and the New Year, but I will always track the data! But the fact that we can even talk about a positive year when mortgage rates got to 8% demonstrates something that I have been talking about since Nov. 9, 2022, and for many years: It’s rare the U.S. to have existing home sales trends below 4 million with any duration post-1996. We have a core set of 4 million homebuyers every year for more than 25 years, and that hasn’t broken yet.

Weekly housing inventory data

Weekly active listing data is declining now like it always does every year at this time due to seasonality. Higher mortgage rates resulted in higher inventory during part of the fall and forced the seasonal decline in inventory to start later this year. However, the laws of seasonality always win in the end, and we are well on the road to a seasonal decline in inventory. 

Last year, according to Altos Research, the seasonal peak for housing inventory was Oct. 28. The seasonal peak this year was on Nov. 17.

  • Weekly inventory change: (Dec. 8-15): Inventory fell from 546,424 to 538,767
  • Same week last year (Dec. 9-16): Inventory fell from 536,409 to 522,869
  • The inventory bottom for 2022 was 240,194
  • The inventory peak for 2023 so far is 569,898
  • For context, active listings for this week in 2015 were 1,037,129

New listing data in 2023 has been a positive story; even with higher mortgage rates, we didn’t see more sellers pull back as they did in 2022 after rates surpassed 6%. Because we saw stability in 2023, I was looking for some flat to positive year-over-year growth in the data during the second half of the year. This is what we see, and it’s much needed; we need more new listings and not fewer. Even though this data line has been trending at the lowest levels ever in history for 17 months, it’s positive that we are seeing growth on a year-over-year basis now. This was something I talked about on CNBC months ago. 

New listings data for last week in the last several years:

  • 2023: 39,613
  • 2022: 34,973
  • 2021: 39,936

Traditionally, one-third of all homes will have price cuts before they sell. When mortgage rates rise and demand decreases, more homes see price cuts. However, even with mortgage rates reaching 8% this year, we trended below 2022 levels the entire time. Now that mortgage rates have fallen almost 1.5%, it will be interesting to see what the spring season in 2024 will look like. If demand does pick up as we are seeing now, the percentage of houses taking price cuts will likely fall further.

Price cut percentages this week over the last few years:

  • 2023: 38%
  • 2022: 41%
  • 2021: 26%

The week ahead: Housing and Inflation 

Housing week is here so we have four reports: the builders confidence Index, housing starts, existing home sales and new home sales. Also, we have the Fed’s critical inflation data report in the PCE, and it will be interesting to see how the bond market reacts to this report now that the Fed is discussing rate cuts. We also have the leading economic index to report on.

So, tons of data coming out this week. One thing about existing home sales: purchase application data started to improve five weeks ago. This data line looks out 30-90 days, so this existing home sales report might be too early to take into account the entire positive move in the forward-looking data.

Source: housingwire.com

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Key takeaways

  • FHA loans and conventional loans are both issued by private lenders, but FHA loans are insured by the federal government, and conventional loans are not.
  • Due to their federal backing, FHA loans have more lenient criteria, making them better suited for borrowers with lower credit scores or who don’t have much money for a down payment.
  • Conventional loans require a higher credit score and stronger financials, but also come with lower costs, less-stringent home appraisals and cancellable mortgage insurance.

If you’re getting ready to buy a house, you have a lot of decisions to make. The same way that you can explore types of properties, you can (and should) explore different types of mortgages. The two most popular kinds of mortgages are conventional loans and FHA loans. Here, we’ll help you decide which might be better for your needs and situation.

Comparing FHA and conventional loans

Both FHA loans and conventional loans are mortgages originated by and issued through private lenders that allow you to finance the purchase of a home.

Conventional loans are what most people think of when they envision a mortgage. They are available through the majority of mortgage lenders in the U.S. — including banks, credit unions, savings and loan institutions and online mortgage companies — and can come in a range of terms, commonly 15 or 30 years, with a fixed or adjustable interest rate. They are not backed or guaranteed in any way by the government: The lender bears all the risk of the debt.

In contrast, FHA loans are insured by the Federal Housing Administration (FHA) and are geared toward homebuyers who might have difficulty obtaining conventional loan financing, primarily by requiring a lower minimum credit score, a smaller down payment, and other flexible qualification standards.

There are also substantial differences in loan limits, mortgage insurance terms and conditions, and debt-to-income maximum ratios. More on all that below.

Understanding FHA loans

FHA loans are insured by the FHA, a division of the U.S. Department of Housing and Urban Development — meaning, it will compensate the lender in case the borrower defaults. In return, the lender follows FHA’s more lenient underwriting criteria, allowing borrowers with lower credit scores to obtain approval, and requiring smaller down payments (usually between 3.5 and 10 percent of a home’s purchase price.)

Other than that, FHA loans work like most other mortgages, with either a fixed or adjustable interest rate and a loan term for a set number of years. FHA loans come with two term options: 15 years or 30 years. They do require you to pay mortgage insurance premiums (MIP) regardless of your down payment amount.

Understanding conventional loans

Conventional loans don’t have government backing. This means the underwriting criteria for approval are stricter, and you must have a higher credit score (at least 620) to qualify. Also, a 20 percent down payment tends to be the standard, though some lenders will allow smaller amounts. If you do put less than 20 percent down, the lender is likely to charge you private mortgage insurance until you are halfway through your loan term.

Depending on the characteristics of the loan, a conventional mortgage is either conforming or nonconforming. Often, conventional lenders sell these types of mortgages to Fannie Mae or Freddie Mac, the  secondary mortgage market-makers, after they’re funded. In order to do this, the loan has to conform to, or meet, Fannie and Freddie standards around loan size, borrower financials, and other factors. If it doesn’t, the mortgage is considered nonconforming.

FHA vs. conventional loan requirements

FHA loans Conventional loans
Credit score minimum 580 (with 3.5% down) or 500 (with 10% down) 620
Debt-to-income (DTI) maximum 50% 43%
Down payment minimum 3.5% (with a 580 credit score) or 10% (with a 500 credit score) 3% for fixed-rate loans or 5% for adjustable-rate loans
Loan limits $498,257 in most areas $766,550 in most areas
Mortgage insurance Mortgage insurance premiums (MIP) required on loans with less than 20% down; unremovable Private mortgage insurance (PMI) required on loans with less than 20% down; removable
Interest rates FHA loan rates Conventional loan rates

FHA vs. conventional credit score requirements

FHA loan borrowers can qualify with a credit score as low as 500 or 580 depending on their down payment amount: as low as 500 with 10 percent down, or as low as 580 with 3.5 percent down. Conventional loans require a credit score of at least 620. If you have excellent or good credit, a conventional loan is often the better choice.

FHA vs. conventional DTI ratio requirements

Another FHA vs. conventional loan differentiator: the debt-to-income (DTI) ratio maximum. This ratio is the measure of all your debt (the mortgage included) relative to your monthly income. For a conforming conventional loan, the maximum DTI ratio is 43 percent. For an FHA loan, the DTI ratio can go up to 50 percent.

FHA vs. conventional down payment requirements

Depending on the lender and program, some conventional loans require as little as 3 percent or 5 percent for a down payment. However, 20 percent is usually the standard amount; many lenders won’t finance more than 80 percent of the home’s price.

In contrast, small down payments are more the norm with FHA loans. If your credit score is at least 580, you can put down just 3.5 percent for an FHA loan; if your score is below 580 (but not lower than 500), you’ll be required to put down 10 percent. Here’s more on minimum down payment requirements.

FHA vs. conventional loan limits

Depending on your location, choosing between an FHA versus conventional loan might come down to the price of the house you want to buy.

Both types of loans have limits on the amount you can borrow. The conventional conforming loan limit, set by the Federal Housing Finance Agency each year, starts at $766,550 in 2024 and goes up to $1,149,825 in more costly housing markets. A conventional loan can exceed these limits, but at that point, it’d be considered a nonconforming jumbo loan.

The FHA loan limit is also adjusted each year, and there are different limits based on location and property type. In 2024, the FHA loan limit for a single-family home is $498,257 in most markets and goes up to $1,149,825 in higher-cost areas.

FHA vs. conventional mortgage insurance

If you don’t have 20 percent of the home’s purchase price for a down payment, you’ll be required to pay for mortgage insurance whether you’re getting a conventional or FHA loan. Both premiums are typically paid via your monthly mortgage payment.

FHA mortgage insurance includes an upfront premium equal to 1.75 percent of the amount you’re borrowing. Then, you’ll pay an annual premium, which is determined by the size of your down payment, how much you borrowed and the length of the loan (15 years versus 30 years).

Aside from differences in premium structure, conventional loan borrowers don’t have to pay for mortgage insurance forever — it can be canceled halfway through a loan term, or once the borrower achieves 20 percent equity (outright ownership) in the home. You can achieve this simply by following your repayment schedule to pay down the loan balance, making extra payments, or refinancing or getting a new appraisal if your home’s value has risen substantially.

In contrast, FHA mortgage insurance can’t be canceled unless you put at least 10 percent down (if so, it’ll end after 11 years), or you refinance to a different type of loan.

FHA vs. conventional appraisal process

When financing your home through a conventional mortgage, your lender requires a home appraisal. They mandate this estimation of the home’s value to ensure it is worth the amount of money they’re extending to you.

Meanwhile, FHA lenders require a more thorough process relating to appraisals, including assessing value and the condition of the property to ensure it’s HUD- compliant. This can hurt your chances of buying a home, since listing agents might suggest their sellers look elsewhere given the time it takes to do an FHA appraisal. Also, sellers must disclose any significant inspection findings to other prospective buyers.

FHA vs. conventional interest rates

With both types of loans, the lender sets the interest rate, determined primarily by your credit score. FHA loans sometimes have more favorable interest rates than conventional loans — but the difference is often offset by the greater number of fees, including the MIP charges, that they have. In fact, the FHA loan’s annual percentage rate (APR), which includes both the cost of the interest rate and all the fees, might actually be higher than that of a comparable conventional loan.

Should you get an FHA loan or conventional loan?

Which loan is better: FHA or conventional? To a large extent, that depends on you. If your credit score is below 620, a loan backed by the FHA might be your only option. It might also be a better deal if you can’t manage a 20 percent down payment, which — given the current $431,000 median price tag on homes — can be over $85,000.

Generally, a conventional loan is best for those with strong credit and a bigger home buying budget. Ultimately, the decision comes down to the type of home you want, your finances and how much of your funds you want to tie up in real estate.

Source: bankrate.com

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MGIC Investment Corp, the leading U.S. mortgage insurer, posted a larger-than-expected $1.47 billion fourth quarter loss as more homeowners fell behind on their mortgage payments.

The company lost $18.17 per share, much higher than the $8.13 per share analysts polled by Reuters had expected, and a far cry from profit of $121.5 million, or $1.47 per share, a year earlier.

For the entire year, MGIC lost $1.67 billion, or $20.54 per share, as claims almost quadrupled to $2.37 billion from $613.6 million.

Revenue for the fourth quarter was $399.1 million, up 8.7 percent from $367.2 million a year ago.

Net premiums written increased nearly 25 percent to $380.5 million during the quarter, up from $367.1 million in the same quarter in 2006.

New insurance written was $76.8 billion, compared to $58.2 billion in 2006, with $211.7 billion primary insurance in force at the end of 2007, compared with $176.5 billion the previous year.

MGIC said claims totaled $1.35 billion during the fourth quarter, up from $187.3 million a year earlier and $50 million more than it had estimated last month, with larger losses realized in places like Florida and California.

It also set aside $1.2 billion for losses related to securitizations and took a $33 million charge for collapsed subprime mortgage venture C-BASS.

The company also revealed that it had hired an advisor to explore ways to shore up capital, but noted that it has “adequate” capital to meet its claim obligations.

Starting March 3, MGIC will require at least 5 percent down on homes in so-called restricted markets, including entire states like Arizona, California, Florida and Nevada.

It’s been a terrible year for mortgage insurers, as both Radian and Milwaukee-based MGIC recorded their first ever quarterly losses.Shares of MGIC fell $2.07, or 14.60%, to $12.11 in early afternoon trading on Wall Street.

Mortgage insurance is typically required by mortgage lenders when the loan-to-value exceeds 80 percent.

(Photo: dreamsjung)

Source: thetruthaboutmortgage.com

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Welcome to Lake Oswego, a city in the heart of Oregon’s Willamette Valley, known for its serene waterfront living, upscale neighborhoods, and vibrant community spirit. With Oswego Lake as its centerpiece, this charming city offers a unique blend of picturesque landscapes, stunning lakefront properties, and a thriving cultural scene. Whether you’re drawn to the tranquility of lakeside homes for sale or seeking engaging community events, this Redfin article will dive into the distinctive charm Lake Oswego holds.

1. Oswego Lake

Oswego Lake defines the city’s identity, offering residents exclusive access to waterfront living and recreational activities. This pristine lake, surrounded by upscale homes and picturesque landscapes, serves as the focal point of the community, fostering a lifestyle centered around its serene waters. Oswego Lake’s tranquil beauty and the myriad of activities it offers contribute to Lake Oswego’s reputation as a coveted destination for lakeside living.

2. Historic neighborhoods and charming architecture

Lake Oswego is celebrated for its historic neighborhoods and captivating architecture. Areas like the Old Town District exemplify it with its well-preserved early 20th-century buildings and the First Addition neighborhood showcasing charming craftsman-style homes. These areas reflect the city’s rich history and architectural diversity, drawing residents and visitors alike to appreciate their unique character and timeless appeal.

3. Booming culinary scene

Lake Oswego’s culinary scene offers diverse dining options catering to every taste. From upscale spots like Tucci Ristorante and Five Spice Seafood + Wine Bar to local favorites like Nicoletta’s Table, there’s a wide range to explore. With its emphasis on farm-to-table cuisine and inventive flavors, Lake Oswego presents an enticing dining experience.

4. Recreational activities

There are plenty of recreational activities in Lake Oswego, offering residents an array of options to embrace the outdoors. From kayaking and paddleboarding on Oswego Lake to exploring the expansive network of hiking trails at Tryon Creek State Natural Area, the city caters to outdoor enthusiasts. Additionally, golfing at Oswego Lake Country Club or simply enjoying the numerous parks and green spaces, Lake Oswego provides diverse recreational pursuits for all interests.

5. Beautiful waterfront properties

Lake Oswego is renowned for its stunning waterfront properties that grace the shores of Oswego Lake, offering residents an unparalleled lakeside living experience. The waterfront homes in Lake Oswego exude elegance and exclusivity, from luxurious estates with private docks to charming cottages and contemporary homes. With picturesque views and direct access to the serene waters, these properties epitomize lakeside luxury, drawing those seeking a peaceful and sophisticated lifestyle in a breathtaking natural setting.

6. Active community organization

From the Lake Oswego Community Center hosting diverse events to the Lake Oswego Preservation Society dedicated to conserving the city’s heritage, these organizations play a vital role in enhancing community bonds. Whether through volunteer opportunities, cultural initiatives, or neighborhood associations, Lake Oswego’s active community organizations actively contribute to the city’s vibrant and inclusive atmosphere.

7. Thriving art scene

Lake Oswego is known for its vibrant art scene, showcased through its galleries, public art installations, and the annual Lake Oswego Festival of the Arts. With venues like the Arts Council of Lake Oswego and Gallery Without Walls, the city celebrates local and regional artists, fostering a dynamic creative community. From sculpture walks to art classes and exhibits, Lake Oswego’s thriving art scene enriches the city’s cultural fabric, inviting residents and visitors alike to explore and appreciate diverse artistic expressions.

Source: redfin.com

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If you’re interested in the world of real estate, the first thing you must do is become licensed. Once you meet the requirements and take and pass the licensing test, you can begin to sell houses to happy families, and with hard work, you can make a good living. Many people give up before they start because they fear taking the licensing exam, but with proper research and an understanding of the job, you can pass the test and start building your brand. 

What To Know Going In

Before hitting the books and taking the time to get your real estate license, you must know what you can do with that certification and the other skills you’ll need that aren’t always taught in school. First, know that there are many different jobs that you can perform once you get your license. In addition to selling houses, you can work as a property manager, real estate attorney, home inspector, real estate photographer, and more. So, if any of those titles interest you, read on and consider your license.

Stay On Top Of Trends

While you’ll be learning a lot during your license classes, remember that your education doesn’t stop just because you passed the test. As time goes on, it’s necessary to stay on top of current news and trends so you can be the best agent you can be. For instance, you’ll want to learn how climate change impacts the real estate industry. Weather and rainfall can impact desirable locations around the country, and you may get questions about how climate change can affect property values.

Along those lines, you should keep up-to-date on industry data and trends such as the growing interest in eco-friendly homes. You should know which sustainable home upgrades have the greatest return on investment such as solar panels and energy-efficient doors and windows. If you are working with a seller, you can advise what financing options your client has to finance upgrades such as home equity and Federal Housing Administration loans. Home buyers will likely have questions in this regard, and you’ll want to have the answers.

A Positive Self Image Is Essential

While certification and a license are essential, so is having a positive self-image because it’s a way to enhance your professional opportunities in the real estate world. When you’re confident in yourself, and it shows, your clients will have more confidence in you. By practicing self-care and dressing for success, you give off the impression that you care about yourself and what you do, and clients will respond positively to what they see. 

You can build your self-confidence by setting goals for yourself, like selling a house in a certain price range and then celebrating that accomplishment. 

Application Steps And State Requirements

When you’re confident that you want to continue a career path as a real estate agent, you need to get your license. Note that every state may have different requirements, so do your research to ensure you follow the right steps. In many cases, you may first be required to pass a background check so the state can ensure that you’re honest and have the integrity necessary to handle a client’s personal information and discuss sensitive financial topics. 

Next, you will likely need to complete various classes to learn about real estate and get the information necessary to pass your licensing exam. Some states require over 100 hours of pre-licensing courses, including those about real estate principles, finance, and how to complete essential forms. Keep in mind that these classes and the eventual application will cost money. According to The CE Shop, you can expect to pay between $300-$1,000, depending on the state.

After completing those classes, most states will require you to pass a pre-license course final exam to ensure that you’ve retained the information you’ve been taught. Get past that, and it’s time to apply for a license. The application will ask about your personal information, and you’ll also need to submit copies of your exam score and work authorization.

Finally, you’ll take your state licensing exam. You’ll have a certain time frame to take the test, and you’ll need to get a score according to your state guidelines. After you pass, you can join a real estate broker and gain experience out in the field.

What To Do Moving Forward

While obtaining your real estate license is a significant task, this is only the first step you’ll need to take during your long career as a real estate agent. Your education is far from over. Your particular state may require that you follow continuing education requirements. For example, in Delaware, you’ll need to take post-licensing courses 90 days after you’ve received your initial license, and in Indiana, you’ll be required to take 30 hours of post-licensing education within the first two years of being licensed.

There are also additional titles that you can gain over time to supplement your education and potentially earn more money. Some of these designations and certifications include a GREEN Designation, which provides the tools to help you understand and market properties with green features that customers are so excited about. You could also become a Certified Residential Specialist. Doing so will help you to learn more about the industry and potentially earn three times as much as agents who don’t have the designation. 

Finally, while securing your license and certifications and learning the ropes, take the time to build your brand and make a name for yourself. Invest in professional photos and create a website to build your online presence. Start networking with other agents by attending industry events and seminars. Remember that you won’t be a success overnight, but by working hard and keeping your eye on the prize, you will find success. 

Conclusion

These are the basic principles to remember when applying for and obtaining your real estate license. Remember to research the rules in your state to ensure you’re fully compliant. Once licensed, take on the world one property at a time. 

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Source: realtybiznews.com