Everyone knows times are tough, especially for college graduates just entering the workforce.
And though some prefer to be “funemployed,” others may be looking for opportunities; the Department of Housing and Urban Development seems to have them.
Yesterday, HUD Secretary Shaun Donovan told summer interns that 43 percent of the current workforce is eligible for retirement, freeing up nearly 6,000 positions in the next few years.
So if you’re interested in solving the current housing woes, or perhaps making the world a greener place, you may want to take a look at HUD.
“If you’re interested in stopping the foreclosure crisis putting the American Dream at risk for millions of families, HUD is the place for you,” said Donovan in prepared remarks posted on the HUD website.
“If your passion is green jobs, alternative energy and sustainable development, then HUD is the place for you.”
“Indeed, with 40 percent of our carbon emissions coming from our homes and buildings, HUD is going to be a big part of President Obama’s efforts to address climate change.”
They may also need you to figure out what to do about all those FHA loans sailing toward default, what with their market share approaching two-thirds of all single-family loans.
Oh, and Donovan noted that the population is expected to grow by another 50 percent in the first half of this century, requiring another 200 billion square feet of homes, office space, and other construction.
So maybe that inventory hangover isn’t as bad as we thought…
With sparkling blue waters, lush lakefront parks, towering skyscrapers, famous theme parks, and endless sunny days, Orlando is a fabulous place to live in Florida. Whether you’re moving to or have lived in the area for some time, you may be wondering if now is the time to buy versus rent a home in Orlando. In addition to Orlando’s real estate market conditions, there are always pros and cons to renting and buying, making your decision a little more difficult.
If you’re considering buying a home in Orlando, you’ll see the current median sale price for a home is $370,000, as of June. According to Redfin’s recent study, the estimated median monthly mortgage cost is $2,966 while the average rent price in Orlando is $2,566. For many potential homebuyers, this means renting a home costs less than buying a home in today’s market. However, it’s important to keep in mind there are still plenty of reasons why buying a home right now may be the right choice for you.
Ultimately, the decision between buying a house or renting an apartment in Orlando is personal and depends on several factors. Whether that’s your desire for flexibility or stability, your financial goals, or which one of the Orlando neighborhoods you want to live in, there is plenty to consider. We’ll help guide you along the way as you make the decision between renting vs buying in Orlando. That way, you can make the best decision for your goals.
Advantages of buying a home in Orlando
Buying a property in Orlando can offer several compelling advantages over renting. Let’s dive into some of the main advantages of buying in the current market.
Building equity
Firstly, homeownership provides long-term stability and the opportunity to build equity. Instead of paying rent that provides no return on investment, homeowners can invest in their own property and potentially benefit from appreciation in the real estate market.
Tax benefits
As a homeowner, there are a few potential tax benefits you may be eligible to receive. For example, mortgage interest and property tax payments may be tax-deductible, providing potential financial benefits. Speaking with a financial advisor or tax consultant can help you identify any possible tax benefits you may qualify for.
Freedom to design space
Owning a home also offers the freedom to personalize and modify the property to suit individual preferences without seeking permission from a landlord.
Market conditions
Finally, as Orlando continues to experience growth and development, homeowners can potentially capitalize on the area’s thriving real estate market. By purchasing a property in Orlando, individuals can secure a long-term asset while enjoying the benefits and pride that come with homeownership.
Disadvantages of buying a home in Orlando
High demand and competitive market
Orlando’s real estate market has experienced significant growth and demand in recent years, which can lead to increased competition among buyers. This high demand may result in bidding wars and inflated prices, making it more challenging to find affordable housing options. Additionally, limited inventory and a seller’s market can make it more difficult to find a property that meets your specific needs and budget.
Property insurance costs
Florida, including Orlando, is at risk of natural disasters like hurricanes. As a result, the state often experiences higher property insurance costs compared to other regions. Homeowners in Orlando may need to pay higher insurance premiums to adequately protect their property against potential storm damage or other weather-related risks. These increased insurance expenses can add to the overall cost of homeownership in the area.
Determining if you are ready to buy a house in Orlando
Deciding if buying a home in Orlando aligns with your goals can be a complicated question to answer. You’ll have to consider many factors such as your desired location, finances and budget, as well as the housing market conditions. Here are some of the main factors to consider:
1. Financial stability and affordability: Before beginning your homebuying journey, evaluate your financial situation and affordability. Consider factors such as mortgage interest rates, your credit score, and your ability to make a down payment. Lower interest rates can make homeownership more affordable, while higher rates could impact your purchasing power.
2. Long-term plans:Consider your long-term plans and how they align with buying a home in the greater Orlando area. If you plan to live in the area for a significant period, buying a home can be a good investment. However, if you’re uncertain about your future plans or have short-term goals, renting might be more suitable.
3. Housing market conditions:Consider the current state of the housing market in terms of supply and demand. If there is low inventory and high demand, it may indicate a seller’s market, which could lead to increased competition and potentially higher prices. On the other hand, if there is a higher inventory and less demand, it may be more favorable for buyers.
4. Housing preferences: Evaluate the type of property you’re looking for, such as single-family homes, condos, or townhouses, and assess their availability and affordability in the area. Consider factors like neighborhood amenities, school districts, and proximity to your workplace or desired locations.
5. Location: Orlando is a diverse metropolitan area with various neighborhoods and suburbs. Consider your preferred proximity to amenities, schools, workplaces, and entertainment options. Research the different neighborhoods to find the one that aligns with your lifestyle and preferences.
6. Employment opportunities: If you’re moving from out of the area, another factor to consider is employment. Orlando is known for its tourism industry, but it also has a diverse economy with opportunities in healthcare, technology, education, and more. Research the local job market to ensure there are opportunities in your field or industries of interest.
7. Climate: Orlando experiences a subtropical climate with hot and humid summers and mild winters. Take into account your preferences for weather and seasonal changes when deciding to move to the area.
Is it competitive to buy a home in Orlando?
If you’re considering buying a home now, you can expect to encounter some competition in the real estate market. Here are a few factors that can contribute to the competition among buyers:
Low housing inventory: One common factor driving competition is a shortage of available homes for sale in many areas. If there are fewer homes on the market, it means more buyers are vying for the same properties, which can increase competition.
High demand: Strong demand from buyers, coupled with low interest rates, can create a competitive environment. Factors such as population growth, job opportunities, and popular neighborhoods can drive up demand for housing, leading to increased competition among buyers.
Multiple offers: In a competitive market, it’s not uncommon for sellers to receive multiple offers on a property. This can lead to bidding wars, where buyers try to outbid each other to secure the home. In such situations, you may need to act quickly and offer competitive terms to increase your chances of success.
Cash offers and pre-approved financing: Buyers who can make cash offers or have pre-approved financing may have an advantage over others. Cash offers are attractive to sellers as they eliminate the risk of financing falling through, while pre-approved buyers have already taken steps to secure financing, making their offers more reliable.
Location and desirable features: Homes in highly sought-after locations or with desirable features like good school districts, proximity to amenities, or unique characteristics may attract significant competition. Buyers looking for properties with these qualities may face additional competition from others seeking similar homes.
Real estate market conditions: Market conditions can vary regionally, and some areas may be more competitive than others. It’s important to research and understand the local market dynamics, as they can greatly impact the level of competition you may encounter.
To navigate a competitive market, it’s essential to work with a knowledgeable real estate agent who can guide you through the process, help you make competitive offers, and identify suitable opportunities. Being prepared, flexible, and financially ready can also increase your chances of success in a competitive buying environment.
Advantages of renting a home in Orlando
If you’re contemplating renting a home or apartment in the Orlando area, there are a few advantages to consider:
Flexibility
Renting provides greater flexibility and mobility compared to buying a house. If you’re unsure about your long-term plans or expect to move frequently, renting allows you to easily relocate without the burden of selling a property or dealing with the real estate market. This flexibility is particularly advantageous for individuals who prioritize mobility due to job changes, lifestyle preferences, or other personal circumstances.
Lower upfront and ongoing costs
Renting typically involves lower upfront costs compared to buying a house. When you rent, you generally only need to provide a security deposit and possibly pay for any application or administrative fees. On the other hand, buying a house involves significant upfront expenses such as a downpayment, closing costs, home inspections, and potential repairs. Additionally, as a renter, you’re generally not responsible for major maintenance and repair costs, which can save you money and the hassle of dealing with unexpected expenses.
Disadvantages of renting a home in Orlando
Lack of long-term financial benefits
When you rent a house, you don’t build equity or gain potential long-term financial benefits like homeownership. Rent payments don’t contribute towards ownership or potential property appreciation. Instead, your money goes towards the landlord’s investment, providing no return on investment for yourself.
Limited control and restrictions
Renting a house often means you have less control over the property. You may face restrictions on making modifications or personalizing the space to suit your preferences. Additionally, your lease terms may subject you to rules and regulations set by the landlord or property management company. This lack of control can limit your ability to truly make the rental property feel like your own home.
Renting vs buying in Orlando: A real estate agent’s final thoughts
Historically, the greater Orlando area has been a popular destination for homebuyers due to its warm climate, attractions, employment opportunities, and overall quality of life. As you make the decision between renting vs buying in Orlando, make sure to consider the market conditions, your financial situation, long-term plans, and housing preferences.
Remember, real estate markets can be dynamic and subject to change. It’s crucial to conduct thorough research, consult with local experts, and assess your personal circumstances before making any decisions. At the end of the day, whether you decide to rent an apartment or buy a home, the Orlando area is a fantastic place to call home.
The Palos Verdes Peninsula — a land of rolling hills, jagged cliffs and sweeping views of the city and ocean — boasts some of the most beautiful terrain in Southern California.
It’s also long proven to be some of the most dangerous.
For hundreds of thousands of years, the peninsula has been plagued by an ancient landslide complex that slowly reshapes the topography. The earth lurches and warps, sometimes slowly, sometimes rapidly, destroying homes and infrastructure along the way.
The latest damage was dealt to Rolling Hills Estates, where a major ground shift led to 12 homes being evacuated after a fissure snaked its way through the neighborhood. Foundations cracked, walls collapsed and some homes were visibly leaning as the hillside upon which they were perched slowly descended into a canyon.
Land movement is a stubborn, if periodic reality for much of California, particularly the coastal hills of the South Bay and Orange County.
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Laguna Beach, Laguna Niguel and San Clemente have dealt with destructive slides. In the 1920s, a handful of homes in San Pedro slid into the ocean, creating what’s now known as the Sunken City. A mile south of Rolling Hills Estates, the city of Rancho Palos Verdes is hatching plans to avoid a similar fate.
“This remains an active situation,” said Rolling Hills Estates Mayor Britt Huff at a city council meeting on Tuesday, adding that due to a break in a sewer main, five additional houses were ordered to evacuate earlier that day.
At the meeting, the council declared a state of emergency in order to access broader resources from state and federal agencies.
“No one expected this. Landslides don’t really happen in this area,” said resident Lisa Zhang.
A landslide-prone peninsula
The peninsula’s bout with landslides is well-documented in the geological record, stretching back millenniums but coming to a head 67 years ago when an L.A. County road crew accidentally reactivated an ancient slide complex while building an extension of Crenshaw Boulevard in Rancho Palos Verdes.
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The crew dug up and shifted thousands of tons of dirt, throwing things off balance enough to send the land in the Portuguese Bend into a super-slow-motion descent and activating a landslide.
That’s just one ancient landslide complex. According to El Hachemi Bouali, assistant professor of geosciences at Nevada State University who co-authored a report on the Portuguese Bend landslide complex, there are areas all across the peninsula at similar risk.
Due to precipitation and geology, the hills are uniquely susceptible to movement. Layers of clay — bentonite and montmorillonite, to be specific — are found beneath the ground, interspersed between layers of bedrock. When water absorbs into the earth, it expands and lubricates the clay until it’s slippery enough for the land to ride downward with the force of gravity. Even thick layers of bedrock will slip.
Water infiltrating the earth is the most common cause of landslides, according to Brian Collins, a research civil engineer with the U.S. Geological Survey. In California, these types of landslides are typically triggered during a big rainy season.
But there is another factor at play. The Palos Verdes Peninsula — like Laguna Beach and San Clemente — is packed with people. Those people have sprinklers, gutters, irrigation systems and leaky pipes that all add water to the earth.
Inland, an area as hilly and craggy as the Palos Verdes Peninsula might not be expected to house roughly 65,000 people. But anywhere with a view of the ocean, with secluded canyons to hike and ride horses in, will always be attractive — especially right next to L.A.’s flat sprawl.
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What caused the slide?
There’s no official diagnosis on what caused the landslide. According to city officials, a geologist will study the site and draw a conclusion from there, reviewing both the history of the area and any recent changes to the land.
But geologists and structural experts have suggested a few likely culprits: land grading, rainfall or something as simple as a broken pipe.
The townhomes destroyed in the landslide were built in the 1970s, and according to Kyle Tourje, a structural assessor with Alpha Structural, much of the land was graded and reshaped to make room for buildable lots starting in the 1950s.
So even though lots might be relatively flat, if land was moved in order to make it flat, the soil might not be as compact as it should be. When soil is looser, it’s more susceptible to water.
Tourje said the record rainfall of winter and spring didn’t help, but he thinks the slide was likely caused by a concentrated water source such as a broken pipe or sewer drain.
“On a big graded tract like this, one line that feeds one sink of one single house can affect the soil,” he said. “Next month, your water bill is extremely high. Next thing you know, your house is at the bottom of the canyon.”
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Tourje works on landslide damage every week but only comes across slides of this magnitude a few times per year.
“This is a total loss. These homes will have to be completely demolished,” he said.
Bouali, on the other hand, says unless a smoking gun appears, such as a burst pipe or a resident’s $1,500 water bill for June, he’s leaning toward rainfall as the primary culprit.
“My guess is that there has been a slow decrease of the slope’s resisting forces due to infiltration of precipitation into the clay layers,” Bouali said, adding that even though the rain fell in the spring, it might take until July for the water to flow through the layers of clay.
He points to California’s Landslide Susceptibility map, which shows almost the entire peninsula as highly susceptible. Given the area’s geological makeup, as well as the roughly 20-degree downward slope upon which the homes were perched, the landslide didn’t necessarily come as a surprise.
Since the ‘70s, regulations have become stricter with limits on how steep builders can grade lots and requirements for more subsurface drainage systems and more compact soil.
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But those measures might not help if the slippery layer is 60 feet underneath all the grading and maybe several strata of bedrock, according to Tony Lee, a local geologist who has worked in the area for 30 years.
Lee said most of his clients come from other areas of the peninsula where slides are more prevalent, but he’s already received multiple calls from homeowners in Rolling Hills Estates wanting to get their properties checked.
The allure of living in a landslide zone
Common sense might suggest that the land is uninhabitable — that building homes on terrain prone to landslides will inevitably lead to disaster.
But California is a beautiful place, and Californians love looking at it. It’s the same reason that hillside homes are perched on stilts in a region that deals with devastating earthquakes. The same reason buyers flock to the fire-prone hills of Malibu or the Western Sierra or cram beach houses onto the sand as ocean levels rise.
“I’ll be here until I can’t be here anymore. I’ll slide away with the land,” said Claudia Gutierrez, a longtime resident of Portuguese Bend, an area about a mile southeast of the slide site that has been dealing with landslide issues of its own.
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If the Rolling Hills Estates landslide is the hare, moving quickly and aggressively, then the Portuguese Bend landslide is the tortoise, with the land slowly shifting roughly eight feet per year for the last 15 years.
It has caused chaos in the community, with houses sliding across property lines and roads warping into roller coasters. But according to Gutierrez, that hasn’t kept people away.
“We had homes in the middle of the active landslide zone that sold for more than $2 million last year,” she said. “I’m amazed.”
For newcomers, the peninsula offers not only great views but stellar schools, cool coastal weather, larger lots and a more relaxed, rural feel compared to the bustling cities surrounding it. And for longtime residents, even though they’d be able to sell their houses, the peninsula has become home — even if that home is slowly slipping out from under them.
According to local real estate agents, the landslides have never been a major concern to residents of Rolling Hills Estates.
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“People think this was an isolated incident,” said Mingli Wang, a longtime real estate agent in the area. “People believe their homes are safe. They don’t think it’ll happen to them.”
She noted that during home sales in the city, sellers disclose natural hazards such as the area being high-risk for fires or a dormant earthquake zone. But landslides are not part of the disclosure.
Wang is a resident herself, and she’s not concerned about the community’s safety going forward.
Steve Watts of Vista Sotheby’s International Realty said that landslides are never part of the conversation during a sale in the city.
“If your house is hanging off the edge of a cliff, they’ll sometimes get a soil report to check how deep the bedrock is. But it’s very minor,” he said.
Watts said the gated neighborhood where the homes slid into the canyon might see a slow market in the short-term, but sales will be back to normal before long.
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Zillow puts the median home value in Rolling Hills Estates at $1.918 million, nearly double the $1.067-million mark set in 2015. Many homes in the city face Torrance, missing many of the ocean views featured elsewhere on the peninsula, but still fetch prices north of $5 million. The cheapest single-family home currently on the market is offered at $1.8 million.
When Bouali, the geologist, leads classroom discussions about hazardous areas, the conversation inevitably leads to the question, “Why do people even live there?”
He said it often comes down to the cost of moving. And Southern California has an additional factor: most of the region deals with some sort of natural disaster risk, whether it’s a landslide, flood, wildfire or earthquake. Pick your poison.
That said, he added that he wouldn’t personally live on the peninsula.
The average 30-year fixed-rate mortgage sank 10 basis points to 2.78% for the week ending on July 22, continuing several weeks of declines, according to mortgage rates data released Thursday by Freddie Mac‘s PMMS.
According to Sam Khater, Freddie Mac’s chief economist, concerns about the COVID-19 Delta variant and the recovery from the pandemic are taking their toll on economic growth.
While the economy continues to mend, Treasury yields have decreased, and mortgage rates have followed suit, said Khater. “Unfortunately, many homebuyers are unable to take advantage of low rates due to low inventory and high prices.”
While prospective homebuyers face a tough market, Khater added that declining mortgage rates give homeowners the chance to refinance and reduce their monthly payments.
Mortgage rates have mostly remained below 3% this year, despite predictions that they would return to higher levels earlier. Economists and investors are closely monitoring any indication from the Federal Reserve that it may begin tapering of mortgage backed securities and bond purchases.
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But that is “still a ways off,” Federal Reserve Chair Jerome Powell said at a Congressional hearing last week. The U.S. central bank plans to continue its asset purchases until there is substantial progress on jobs.
That accommodative stance is bolstered by concerns about the Delta variant and the market outlook, an analysis from Goldman Sachs noted this week. The Federal Open Market Committee is scheduled to meet next week.
President Joe Biden also pushed back at concerns over rising inflation during a press conference this week. “No serious economist” is suggesting the economy is headed toward unchecked inflation, he said.
“If we were to ever experience unchecked inflation over the long term that would pose real challenges to our economy,” Biden said, adding that his administration would “remain vigilant about any response that is needed.”
Since March 2020, the Fed’s asset purchases have been split between $80 billion of U.S. Treasury bonds and $40 billion of mortgage backed securities each month, keeping the cost of long-term borrowing low, in turn depressing mortgage rates. A year ago at this time, the 30-year fixed-rate mortgage averaged 3.01%.
Despite the low cost of borrowing, the housing market is showing signs of sluggishness.
Ten-year Treasury yields declined sharply last week, in part due to investor concerns about the spread of COVID variants and their impact on global economic growth, according to a report from the Mortgage Bankers Association.
Mortgage applications for new home purchases decreased 3% from May to June, sliding 23.8% year over year, according to the latest report from the MBA.
New single-family home sales decreased 5% to 704,000 units from 741,000, the trade group found. New home sales also declined slightly, from 68,000 to 66,000 in May. Overall, sales of new homes are down 7% from last year.
Homebuilders have encountered price increases for some building materials and labor shortages have dampened new home sales and increased home price appreciation, according to Joel Kan, MBA associate vice president of economic and industry forecasting. Persistent low inventory is keeping competition for available units high, he added.
In June, the average loan price rose to a record $392,370, according to the MBA.
“In addition to price increases, we are also seeing fewer purchase transactions in the lower price tiers as more of these potential buyers are being priced out of the market, further exerting upward pressure on loan balances,” Kan said.
Average mortgage rates tumbled yesterday following a first-class inflation report. In some cases, they are now back below 7% for an excellent borrower wanting a conventional, 30-year, fixed-rate mortgage. Phew!
First thing, markets were signaling that mortgage rates today might fall but perhaps only a little. However, these early mini-trends often switch speed or direction later in the day.
Current mortgage and refinance rates
Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.122%
7.147%
+0.15
Conventional 15-year fixed
6.297%
6.321%
+0.1
Conventional 20-year fixed
7.34%
7.403%
+0.03
Conventional 10-year fixed
6.872%
6.985%
+0.05
30-year fixed FHA
7.065%
7.685%
+0.02
15-year fixed FHA
6.503%
6.972%
+0.16
30-year fixed VA
6.75%
6.959%
+0.25
15-year fixed VA
6.625%
6.965%
Unchanged
5/1 ARM Conventional
6.75%
7.266%
Unchanged
5/1 ARM FHA
6.75%
7.532%
+0.11
5/1 ARM VA
6.75%
7.532%
+0.11
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here.
Should you lock a mortgage rate today?
The chances of mortgage rates falling far and for long later this year improved yesterday. That day’s inflation report helped a lot.
But I reckon we’ll probably need a heap more similarly rate-friendly data in order to bring about that significant and sustained fall. And, while it’s possible such a heap will be delivered quickly, it’s probably more likely we’ll see any improvements late this year or sometime in 2024.
So, my personal rate lock recommendations remain:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
LOCK if closing in 60days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Market data affecting today’s mortgage rates
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data, compared with roughly the same time yesterday, were:
The yield on 10-year Treasury notes tumbled to 3.81% from 3.91%. (Very good for mortgage rates.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were higher. (Bad for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
Oil prices decreased to $75.65 from $75.94 a barrel. (Neutral for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices rose to $1,964 from $1,959 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — held steady at 81 out of 100. (Neutral for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are often better than higher ones
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic and the Federal Reserve’s interventions in the mortgage market, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today might fall. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
What’s driving mortgage rates today?
Yesterday
Yesterday’s consumer price index (CPI) was a real tonic for mortgage rates. Comerica Bank’s chief economist said that “the fever is breaking“ for inflation.
And The Wall Street Journal (paywall) suggested: “Inflation cooled last month to its slowest pace in more than two years, giving Americans relief from a painful period of rising prices and boosting the chances that the Federal Reserve will stop raising interest rates after an expected increase this month.“
Note that the Journal’s writers (and many others) still expect a rise in general interest rates on Jul. 26. And that might limit how far mortgage rates can fall in the short term.
But other things could also limit the extent and duration of further decreases in mortgage rates. More and more people are talking up the possibility of a “soft landing.“ That refers to the Fed successfully driving down inflation without throwing the country into a recession.
But those of us wanting lower mortgage rates were kind of hoping for a recession. Of course, we didn’t want the bad stuff for the wider population. But mortgage rates tend to fall when the economy is in trouble and rise when it’s doing well.
So, while some falls in mortgage rates might be on the cards later in the year or in 2024, they might not be as big as we’d once been able to hope.
The rest of this week
This morning’s producer price index (PPI) for June was nothing like as important to mortgage rates as yesterday’s CPI. It and tomorrow’s import price index (IPI) are generally seen as secondary inflation measures. But, with markets hyper-sensitive to inflation news right now, they’re worth observing.
Today’s PPI was probably good for mortgage rates. The headline figure (PPI for final demand) came in at 0.1% in June, compared with the expected 0.2%. Just don’t expect it to have as positive an effect as yesterday’s news.
Please read the weekend edition of this daily report for more background on what’s happening to mortgage rates.
Recent trends
According to Freddie Mac’s archives, the weekly all-time low for mortgage rates was set on Jan. 7, 2021, when it stood at 2.65% for conventional, 30-year, fixed-rate mortgages.
Freddie’s Jul. 6 report put that same weekly average at 6.81%, up from the previous week’s 6.71%. But Freddie is almost always out of date by the time it announces its weekly figures.
In November, Freddie stopped including discount points in its forecasts. It has also delayed until later in the day the time at which it publishes its Thursday reports. Andwe now update this section on Fridays.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the current quarter (Q2/23) and the following three quarters (Q3/23, Q4/23 and Q1/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. They were both updated in June.
In the past, we included Freddie Mac’s forecasts. But it seems to have given up on publishing those.
Forecaster
Q2/23
Q3/23
Q4/23
Q1/24
Fannie Mae
6.5%
6.6%
6.3%
6.1%
MBA
6.5%
6.2%
5.8%
5.6%
Of course, given so many unknowables, the whole current crop of forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Find your lowest mortgage rate today
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change, unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
For the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
In fact, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. This gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements, or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders — and it could save you thousands in the long run.
Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
It’s time for another mortgage review, this time we’ll take a hard look at “New American Funding” to see if they should be included in your home loan search.
They call themselves a family-owned business dedicated to helping other families improve their quality of life.
That sounds like they have your best intentions in mind, especially when navigating what is arguably one of the biggest life decisions, buying a home.
New American also refers to themselves as the “largest Hispanic-owned mortgage company in the United States.”
And their mission is to increase lending to underserved communities, including Black and Latino borrowers. Let’s find out more about them.
New American Funding Fast Facts
Retail direct-to-consumer mortgage company with 180 branches nationwide
Launched in 2003, headquartered in Tustin, California (Orange County)
Started by husband and wife team Rick and Patty Arvielo
Originally a 40-employee call center, workforce now close to 5,000
Offers home purchase financing and refinance loans
Licensed to do business in all states except Hawaii
Funded $31.5 billion in home loans during 2021 (nearly a top-25 lender nationally)
Services more than 200,000 loans worth approximately $54 billion
Ranked #1 loan servicer by J.D. Power in the 2022 study
New American Funding got started back in 2003, which was around the time the housing market was booming.
Just a few short years later, the subprime mortgage crisis hit, and hundreds of lenders didn’t survive.
So I suppose that’s a testament to the resolve of New American Funding, which is a DBA of parent company Broker Solutions, Inc.
Despite being a young company at the time, they were able to get through the Great Recession and become a mortgage powerhouse just a decade later.
As noted, they are a family company, with husband and wife team Rick and Patty Arvielo the founders. Rick is currently CEO, while Patty is the president.
The direct lender is based out of Tustin, California, which is in the heart of Orange County, home to scores of mortgage lenders and related real estate companies.
The pair grew New American Funding from a 40-employee call center into one of the largest mortgage lenders in the country in less than 20 years.
Today, they count 4,700 individuals as employees, have nearly 200 branches nationwide, and maintain a loan servicing portfolio consisting of over 200,000 loans worth about $54 billion.
Last year, the company funded more than $30 billion in home loans, which puts them very close to the top-25 mortgage lenders nationally.
Roughly two-thirds of their business consisted of refinance loans, with the remainder home purchase loans.
Note: They do not lend in the state of Hawaii at this time.
New American Is the #1 Hispanic Mortgage Lender
As noted, New American is on a mission to increase homeownership for underserved communities, especially Black and Latino borrowers.
Last year, 36% of their home purchase loans went to minority borrowers, compared to just 25.5% for all lending institutions, based on 2020 HMDA data.
They are also the #1 lender to Hispanic borrowers, with a larger percentage of their loans going to Hispanic borrowers versus any other lender in the top-25.
Additionally, their share of purchase lending to Black borrowers was 85% higher than the industry average, a result of their “New American Dream” initiative launched in 2016.
They are also committed to lending $25 billion in new mortgages to Hispanic borrowers by the year 2024, and $20 billion to Black borrowers over the next seven years.
When it comes to diversity at the company itself, 23% of the company’s workforce is Hispanic, 45% of the company’s employees are minorities, and 60% are women.
What Loan Types Does New American Funding Offer?
Home purchase financing
Home renovation loans
Refinance loans: rate and term refi, cash out refi, and streamline refis
Conventional loans: Conforming and jumbo
Government loans: FHA, VA, and USDA loans
ARMs: 5/1, 7/1, 10/1 varieties
Fixed mortgages: 30-year and 15-year options
Choose your own term mortgages
Renovation loans and Energy Efficient loans
Non-QM loans (self-employed borrowers)
Interest-only mortgages
HELOCs
Buydown Loans (such as a 3-2-1- buydown)
One great thing about New American Funding is that you can get pretty much any type of home loan under the sun.
This includes home purchase loans, home renovation loans, rate and term refinances, cash out refinances, and streamline refinances.
They are a Fannie Mae, Freddie Mac, and Ginnie Mae direct lender, seller, and servicer, so they’ve got all the conforming and government loan options you can think of.
That includes the usual suspects like conforming mortgages, FHA loans, USDA loans, and VA loans. But that’s not all.
They also offer interest-only mortgages, jumbo loans, non-QM loans, reverse mortgages, and some proprietary offerings like the “I CAN Mortgage.”
So what is an I CAN Mortgage you ask? Well, it’s simply a choose your own term mortgage, that allows for custom terms ranging from 8 to 30 Years.
For example, if you’re 7 years into a 30-year fixed and want to refinance your mortgage to take advantage of today’s low mortgage rates, you could go with a 23-year term instead of restarting the clock.
This also works for new purchases, so you can just start with a 24-year fixed instead of the standard 30-year fixed to save some dough and own more of your home sooner.
Their so-called Self Employed Mortgage, which may be considered non-QM, allows for the use of bank statements, asset depletion, or just one-year of tax returns to qualify.
They also offer HELOCs, including fixed-rate, adjustable, and hybrid options for those looking to tap equity, along with renovation loans such as the FHA 203k refinance loan and Fannie Mae Homestyle.
New American also operates both a builder and real estate lending division, so they may be a good fit for someone buying a brand-new home or building a home (new construction).
Lastly, they offer Energy Efficient Loans for those looking to finance a home that is already energy-efficient or to make an existing property simply greener.
Pathway to Homeownership Initiative
In February 2023, NAF launched its “Pathway to Homeownership” initiative to help customers purchase their first home in designated areas throughout the country.
It provides up to $8,000 in assistance that can be used for down payment or other closing costs. And best of all it doesn’t need to be paid back.
There are no income limitations, and it can be combined with other down payment assistance programs.
To qualify for Pathway, you must be a first-time home buyer with a minimum credit score of 620. And the property must be a one-unit, single-family home.
Down payments as low as 3% are acceptable. Be sure to inquire with your NAF loan officer to determine if you’re eligible.
NAF also recently partnered with Uqual, “a full-service loan readiness company,” to help prospective home buyers make the leap from renting.
It seeks to turn a loan denial into an approval by improving an applicant’s credit, lowering their debt, and increasing their savings.
Those who complete the loan readiness program and use NAF for their mortgage needs are eligible for a $500 lender credit.
Exclusive Mortgage Provider for Patch
In late February 2023, New American Funding announced that it became the exclusive mortgage provider for “hyper-local news” website Patch.
The partnership will result in NAF placements on the mortgage and real estate hub on each of Patch’s community websites.
And the lender will feature in Patch’s weekly newsletters in over 1,200 communities nationwide.
The link up makes sense because NAF is licensed in all 50 states and has loan officers located throughout the country.
Applying for a Mortgage with New American Funding
They have a short form you can fill out on their website to get started
Then a loan officer will call you to go over your loan scenario and options
You can also call them directly or use their branch/loan officer directory to find someone specific in your area
Loan process appears to be somewhat digital, allowing for document uploading and loan tracking online
New American Funding a direct-to-consumer retail mortgage lender, meaning you work directly with the company to close your loan.
At one time, they ran a wholesale division, but chose to close it in 2016 to focus on their growing retail operations.
They say you can get pre-approved for a mortgage in as little as 24-48 hours, which is a bit slower than some fully digital lenders that can do the same in minutes, such as Rocket Mortgage or Better Mortgage.
But they do offer the ability to apply online or over the phone. If you get started via the website, you basically fill out what amounts to be a lead form. Then someone will contact you by phone.
You can also look up specific loan officers via the branch directory on their website if you want to ensure you get someone local and highly recommended.
Once your loan is submitted, they offer a digital process that includes uploading necessary loan documentation, along with the ability to track your loan progress online via the borrower portal.
You also get a dedicated loan officer that will help you along the way, which differs from some of the startups that only provide assistance as needed.
New American Funding’s Mortgage Rates
I’m all about transparency, and fortunately New American is too when it comes to their mortgage rates.
They openly advertise them right on their website for all to see. You can check rates daily for the 30-year fixed, 15-year fixed, FHA 30-year fixed, and VA 30-year fixed.
It should be noted that their rate assumptions are very tough, calling for a 740+ FICO score, 60% LTV, primary residence, with up to one discount point on their standard 30-year fixed mortgage.
In other words, if you have a lower credit score, less equity in your home, need cash out, or don’t occupy the property, the interest rate could be substantially higher.
The good news is their advertised rates appear to be quite low, so if you are a good borrower, they might be quite competitive.
As always, take the time to check out the rates of other lenders to ensure you do your due diligence.
In terms of lender fees, it’s unclear if they charge a loan origination fee or separate fees for underwriting and processing. Be sure to inquire when speaking with your loan officer.
New American Funding 14 Business Day Close Guarantee
If you happen to be buying a home, the company has a “14 Business Day Close Guarantee” to ensure you get to the finish line quickly, especially in a competitive market.
They say they have industry leading turn times because they’re an “all-inclusive mortgage banker.”
Their operations staff, including loan underwriters, doc drawers and funders, work under one roof, enabling them to close loans fast.
They offer 24-hour credit approval by senior underwriters and 24-hour underwriting turn times on conditions.
The 14-day window begins when your initial application package is complete and you have authorized credit card payment for your home appraisal.
If they fail to perform as agreed, a credit of $250 will be applied toward closing costs. While it’s not much money, the fact that they can close purchase loans in just two weeks is pretty attractive.
New American Funding and EasyKnock
In late January 2023, New American Funding and EasyKnock announced partnership “to offer innovative solutions to underserved communities.”
It’s unclear exactly what those solutions are, but my assumption is that the lender will offer home loan programs to EasyKnock customers.
These will allow borrowers ” to access their home equity through credible and non-traditional means,” which in turn helps keep them in their local communities and schools.
This tells me it might be a home equity product, such as a HELOC.
EasyKnock allows homeowners to sell to EasyKnock but remain in the properties as renters.
New American Funding Reviews
New American has a 4.87-star rating out of 5 on Experience.com from around 180,000 reviews.
Yes, nearly 200,000 customer reviews and a near-perfect rating. That’s truly impressive.
They also have a 4.91-star rating out of a possible 5 on Zillow from 8,500+ customer reviews.
Many of their reviews on Zillow indicate a lower interest rate and/or lower closing costs than expected.
Similarly, they have a 4.9/5 rating on LendingTree from nearly 60,000 reviews, with 99% of customers saying they’d recommend them to others.
Lastly, the company boasts an A+ Better Business Bureau rating and has been accredited since 2004.
So they appear to be very well-liked, though experiences can always vary based on individual circumstances, especially at a large company.
Tip: You can view the ratings of specific loan officers near you if you go the branches tab on their website, select a location, then scroll down to “Meet the Team.”
This allows you to see the staff who work in a particular office, along with their individual ratings as loan officers.
If you like what you see, you can apply for a home loan directly with that individual, or simply get in touch if you have questions.
Pros and Cons of New American Funding
The Good:
Offer virtually every home loan type imaginable including reverse mortgages and HELOCs
Can select your loan officer from an online directory and/or visit a physical branch
Direct lender, seller, and loan servicer with quick turn times and fast closings
Appear to offer competitive mortgage rates
Excellent customer reviews across all ratings websites
A+ BBB rating, accredited company since 2004
14 Business Day Close Guarantee for home purchase loans
Can manage your funded loan with the New American Funding My Mortgage App
They service their own loans instead of transferring them
Free mortgage calculators, mortgage glossary, and market update on their website
Potential Bad:
You must speak to a loan officer before you can apply
Not available in Hawaii
New American Funding vs. AmeriSave
AmeriSave
New American Funding
Digital application
Yes
Yes
Branch locations
No
Yes
Loan types offered
Conventional, FHA, USDA, VA, jumbo
Conventional, FHA, USDA, VA, jumbo, reverse, HELOC
Households led by people of color residing in King County, Washington — the area that Seattle sits in — lost an estimated $12 billion to $34 billion in wealth since 1950 due to racist housing policies. This is according to a report commissioned by King County, which was first reported on this week in the Seattle Times.
The report, conducted by consulting firm ECONorthwest, found that the sizable totals of lost wealth were not only attributable to racially discriminatory policies and practices including redlining, but also to money that went to rent payments that did not help to establish the growth of a household’s wealth.
The report also accounts for “wealth lost because of lower home value appreciations for homes owned by people of color compared with white people,” according to the reporting.
When specifically looking at King County’s Black households, the estimated intergenerational wealth loss since 1950 is estimated to be between $5.4 billion and $15.8 billion, and also included a rundown of some of the policies the report identified as racist.
“The lower estimate is based on inflationary adjustments and the higher estimate is based on the growth of the S&P 500,” a summary of the report issued to county leaders said.
This includes a policy going back as far as 1855, 34 years prior to the admission of the territory to the Union as a state, when “Washington’s first territorial governor compelled Indigenous Tribes in the area to cede their lands and move to reservations,” according to the summary.
The report also identified federal policies tolerated by state and federal governments that contributed to the depression of wealth for people of color, including the 1934 establishment of the Federal Housing Administration (FHA) which “incentivized communities to embrace single-family zoning and racial deed restrictions to be considered for mortgage insurance, feeding into the practice of redlining,” the summary said.
“Discriminatory practices and policies in government, the banking, and real estate industries continue to impede access to homeownership for [Black, Indigenous, People of Color (BIPOC)] households today,” the summary explained. “These discriminatory practices negatively affect credit scores, mortgage access, and the general financial security of BIPOC households, such that obtaining homeownership has been, and continues to be, a significant and unacceptable hurdle.”
In May, Wash. Gov. Jay Inslee (D) signed a series of bills designed to address the state’s housing issues, relating particularly to supply and housing affordability.
One such bill is intended to “help people who were affected by racist housing covenants designed to keep ethnic and religious minorities out of certain neighborhoods, as well as their descendants, with down payments and closing costs,” according to previous reporting by the Seattle Times. Sponsors say it’s the first statewide bill of its kind.
A company called Point wants to give you “early access to your home equity” without ever having to make monthly payments, similar to how a reverse mortgage works.
While at first glance it sounds pretty good, you’ve got to dig into the details to see what you’re actually getting.
Ultimately, you’re sharing your future home price appreciation with the company in exchange for a piece of the action today.
Let’s learn more about how it all works to determine if it might be a better alternative to a traditional home equity loan or HELOC.
How Point Works to Tap Home Equity
Point makes an investment in your home in exchange for cash today
No monthly payments are made during the 30-year loan term
You pay back their investment at any time via sale, refinance, etc.
Buyback cost includes amount originally received plus portion of your home’s appreciation
Instead of taking out a loan to access your home equity, Point “invests” in your property via a Home Equity Investment (HEI) and gives you cash today for some of that sweet, sweet home appreciation tomorrow.
Like a traditional first or second mortgage, you need to answer the usual questions like how much you make, what your home is worth, and what your credit scores are.
They say you can pre-qualify for Point in less than two minutes, then you’ll be presented with a pre-offer to see how much you can borrow. Funds can be received in as little as 15 days.
Their investments range from $35,000 to $350,000, though they can exceed that max in some cases.
The amount of money you receive will depend on your available home equity, with 20% of your home’s value generally the limit.
Additionally, you’re required to have at least 20% equity after the Point investment. In other words, the max CLTV is 80%.
Once you proceed with the application, they’ll pull your credit and order a third-party home appraisal to determine your property’s starting value.
The appraisal is key in determining how much you can borrow, and also how much Point will receive when you eventually repay them.
How Much Does Point Cost?
While there are no monthly payments to worry about
You do pay anywhere from 3-5% at the outset as a transaction fee
And they share in the upside value of your home over time
Total cost will vary based on how much your property appreciates and when you pay them back
As noted, there are no monthly payments associated with the Point investment, nor is there an associated interest rate because it’s not a loan.
However, they do charge a transaction fee of anywhere from 3-5%, which is deducted from your proceeds along with an appraisal fee and escrow fee. Think of it as an origination fee, similar to what Figure charges.
They say your specific offer is determined by “special pricing equations,” which I assume takes into account things like your credit score, DTI ratio, LTV ratio, housing market expectations, how you plan to pay them back, etc.
My guess is it’s similar to a typical mortgage rate in that the less risk you present, the better the terms will be.
How Do You Repay Point?
This is an important question seeing that you don’t have to make monthly payments via their investment in your property.
As noted, Point’s investment comes with a 30-year term, just like most mortgages. At any time, you can pay them back via several different methods, including:
When you’re ready to pay Point back, they rely upon the sales price if you sell the property, or in the case a refinance, the appraisal, AVM, or a broker price opinion (BPO).
If the term is up and you don’t want to sell, you can buy Point out using the appraised fair-market-value.
Or you can pay off their investment with another source of financing, such as a home equity loan, HELOC, or a reverse mortgage.
That’s the easy part. Determining how much you owe is a different story. For one, the appraised value isn’t the starting point.
Instead, they use a “Risk-Adjusted Home Value,” which can be as much as 20% of the appraised value to account for the decline in home values to protect Point.
In the example on their website, they use a home valued at $500,000 with a Risk-Adjusted Home Value of $425,000, as seen above.
They give the homeowner $50,000 payment-free in exchange for 20% of their future appreciation, using that Risk-Adjusted Home Value.
This value can range based on borrower and property profile, as determined by their underwriters.
Anyway, as you can see, how much Point takes will vary based on when you sell or buy back your equity, and how your property value fares during that time.
One negative is you’re basically already in the hole thanks to the Risk-Adjusted Home Value. Even if home prices were flat after five years, you’d owe $15,000 on that $50,000 investment.
And you have to factor in the fees taken from your initial investment as well.
If your property saw “average appreciation” and rose to $608,300, you’d wind up with a share of just $521,600, while Point would get $86,700.
They’d get 20% of the $183,300 rise in value from the Risk-Adjusted Home Value, or roughly $36,700, plus their $50,000 original investment back.
Simply put, the more your home value increases, the more Point makes, and the less you get in a sale.
However, Point is also taking a risk if the property decreases in value because they will share in losses. If the home somehow manages to drop in price to $375,000, Point would only receive $40,000.
That 20% loss based on the $425,000 Risk-Adjusted Home Value means they give up $10,000 of their original $50,000 investment.
Who Qualifies for a Point Home Equity Investment?
Home must be located in an eligible area and valued above $200,000
Must have 20% of your home equity after Point’s investment
Requires a credit score above 500
Owners of single-family residences, condos/townhomes, and multi-unit properties may qualify
Point says it invests in most types of residential real estate, including single-family residences, condos, townhomes, and multi-unit properties (1-4 units).
Additionally, they allow title to held by individuals, in trusts, and by LLCs, the latter two being subject to their approval.
Unfortunately, Point is unable to invest in the following types of properties:
manufactured homes
mobile homes
properties with 5 or more units
tenants-in-common (TiC) properties (unless owners are immediate family members)
Speaking of title, Point isn’t added to the title of your property, and you retain sole ownership. However, their investment is secured by a Deed of Trust and a Memorandum of Option.
Homeowners must have credit scores above 500, which is very low, and must retain 20% home equity after Point’s investment. In other words, you need to be fairly equity rich.
Additionally, your property must be worth at least $200,000 and located in an eligible area.
Where Is Point Available?
At the moment, Point isn’t available nationwide, but they are working to expand to new regions of the country.
Currently, the service is live for homeowners in select areas of:
Arizona California Colorado Florida Illinois Maryland Massachusetts Michigan Minnesota New Jersey New York North Carolina Ohio Oregon Pennsylvania Virginia Washington Washington D.C.
They expect to bring Point to more homeowners in coming months, and ask that you contact them if you’re interested and outside their present service area.
Point vs. a Reverse Mortgage
No minimum age requirement
Not a loan and does not accrue interest
Can be in first lien position or junior lien
Can’t be underwater because Point shares in losses
Point agreement is assumable by heirs
As I noted earlier, Point works kind of like a reverse mortgage in that you’re able to tap your home equity without having to make payments.
However, there is a no minimum age to use Point, which differs from the 62+ age requirement to take out a reverse mortgage.
Additionally, Point’s HEI isn’t a loan, nor does it charge interest. To that end, they also say you’ll never wind up in an upside-down position on your investment from Point because they share in losses.
A reverse mortgage also requires a first lien position, whereas Point’s investment can be subordinate to existing loans.
Lastly, Point’s investment is assumable, unlike a reverse mortgage, so your heirs could potentially assume your Point agreement.
Who Is Point Actually Good For?
If you’ve read how Point works above, you’re aware it’s a pretty unique way of tapping equity. The company even says it themselves.
On their website, they note that “homeowners who aren’t a good fit for a traditional home equity product” may turn to Point to get their finances in order.
Then once their situation improves, they might obtain more traditional financing that can be used to pay back Point.
The biggest downside to Point is that you’re giving them a sizable chunk of your future home price appreciation, even if you don’t have to make monthly payments on the quasi-loan they give you.
For me, wealth creation is one of the best parts of homeownership. It’s a big reason why people invest in real estate.
Point can take between 25-40% of future appreciation, so it could be a very big price to pay. However, there are situations where Point may make sense.
For someone deep in debt, the lack of monthly payments will be helpful. Point might also be a viable option if unable to qualify for other home equity products and in need of cash.
Additionally, the Point investment doesn’t show up on your credit report, nor does it increase your debt load.
So for someone between a rock and a hard place, it could provide some relief, but be sure to do the math and explore more traditional alternatives like home equity loans, HELOCs, a cash out refinance, and more.
[Note from editor: The “Mastermind Showcase” highlights companies and news from members of the GEM. Today’s showcase: Onerent.]
Onerent offers contactless rentals and property management for over $1.4 billion in residential rental properties, managing 7-10% of single-family rentals in 7 major west coast markets; serving over 10,000 homeowners and 50,000 renters in our five years since founding. The end-to-end logistics platform offers solutions such as instant showings, credit/income and background checks, listing performance metrics, digital lease signing, maintenance recommendations, and guaranteed rent payment on the 1st of the month.
They have received $16 million in funding, with its $10M Series A coming in February of 2019. We profiled them in our founder interview series in 2018 and we previously shared a podcast with Chuck Hattemer from 2018 as well.
GEM Representation: Chuck Hattemer
What we like: They recently unveiled Onerent 360 which gives landlords $3,000 in credit, $1,000 in credit for home improvement, and a home warranty system; reducing maintenance efforts and increasing property value for owners.
For the first time, San Diego has surpassed San Francisco for average rental rates, making the All-American City the nation’s third most expensive rental market, according to a Zillow report.
San Diego’s typical monthly rental rate in June was $3,175, exceeding San Francisco’s rent of $3,168. The rates represent a significant jump since February when San Francisco’s rents were 29% higher than San Diego’s, according to the online real estate site Zillow.
Still, San Diego and San Francisco rents were not the highest.
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San Jose had the nation’s highest monthly rent with $3,411, followed by New York City’s at $3,405. Zillow’s monthly rental report for June includes single-family homes, apartments, condominiums and townhouses.
Three other California cities were among the country’s 10 most expensive rental markets: Los Angeles had a typical rent of $2,983, while Riverside had a monthly rent of $2,573 and Sacramento’s was $2,319.
Rents across the country increased 0.6% from May to June, according to the Zillow Observed Rent Index, bringing the nationwide average rent to $2,054 — 4.1% higher than a year ago.
Rent in California is becoming increasingly difficult to afford, and low-rent units are harder to find. Sophia Wedeen, a research analyst at the Harvard Joint Center for Housing Studies, wrote in a blog post that the supply of rental units in California that are priced below $1,400 per month has gone down between 2011 and 2021.
During that decade, California lost 152,000 units that rented for less than $600. It also lost 633,000 units renting for between $600 and $1,000 and 677,000 units renting for between $1,000 and $1,399 per month.
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The percentage of Californians paying more than 30% of their income for housing — known as rent burden — has increased in recent years.
According to Harvard University’s 2023 State of the Nation’s Housing report, 54% of renter households were rent-burdened in 2019. In 2021, 57% of renter households in Los Angeles were rent-burdened.
In San Francisco, 43% of rental households were rent-burdened in 2019. That rate increased to 49% in 2021.