“No-deposit” mortgage deals for first-time buyers refer to mortgage options that allow buyers to purchase a home without having to put down a deposit or a down payment. Here are the pros and cons of such deals:

Pros:

Lower upfront costs: The most significant advantage of a no-deposit mortgage is that it eliminates the need for a substantial upfront deposit. This can be beneficial for first-time buyers who may struggle to save a large sum of money for a deposit. It allows them to enter the property market sooner.

Increased affordability: With a no-deposit mortgage, first-time buyers can purchase a home with a smaller amount of savings. This can make homeownership more accessible, especially in areas where property prices are high.

Potential investment opportunities: By utilizing a no-deposit mortgage, first-time buyers can allocate their savings toward other investments or use the funds for home improvements. This flexibility may provide opportunities for additional financial growth.

Cons:

Higher borrowing costs: No-deposit mortgages typically involve higher borrowing costs, including interest rates and fees. Lenders often consider these deals riskier, so they may offset the risk by charging higher interest rates or requiring additional insurance or guarantees.

Limited mortgage options: No-deposit mortgage deals are not as widely available as traditional mortgages. Lenders may have specific eligibility criteria or restrict the types of properties that qualify for these deals. The limited options can make it more challenging for first-time buyers to find a suitable mortgage arrangement.

Negative equity risk: By not providing a deposit, buyers immediately start with little or no equity in their property. If property prices decrease, there is a higher risk of falling into negative equity. Negative equity occurs when the outstanding mortgage balance exceeds the value of the property. This can be problematic if the buyer wants to sell or remortgage the property in the future.

Stricter eligibility criteria: Lenders offering no-deposit mortgages may impose stricter eligibility criteria. They may require a higher credit score, proof of stable income, or additional financial commitments. First-time buyers with a limited credit history or irregular income may find it more difficult to qualify for these deals.

Long-term financial implications: Opting for a no-deposit mortgage means taking on a higher level of debt. Buyers must carefully consider their long-term financial situation and ensure they can comfortably afford the mortgage repayments. Failing to do so could result in financial strain or difficulties in meeting future financial goals.

It is essential for first-time buyers to thoroughly research and assess their individual circumstances before committing to a no-deposit mortgage. Consulting with a mortgage advisor or financial professional can provide further guidance and help make an informed decision.

Filed under: Real Estate by Julie Woodward
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Last week’s economic reporting included readings on home prices, sales of new homes, and pending home sales. Monthly and year-over-year readings for inflation were published along with weekly reports on mortgage rates and jobless claims.

February S&P Case-Shiller Housing Market Indices show slower home price growth

National home prices continued to rise in February, but at a slower pace according to S&P Case-Shiller home price indices. Month-to-month home prices rose by  0.40 percent in February and matched analysts’ expectations, but were lower than January’s reading of  2.50 percent home price growth.

S&P Case-Shiller’s 20-city home price index, which is frequently used by real estate professionals for tracking housing markets, rose by 0.10 percent month-to-month in February.  This was the first time home prices rose in eight months.

The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, reported an increase of  0.50 percent in home prices for homes owned and sold by Fannie Mae and Freddie Mac.Properties owned and sold by Fannie Mae and Freddie Mac are subject to loan limits and underwriting rules used by the two agencies.

In related news, the National Association of  Realtors® reported pending home sales fell by -5.20 percent in March compared to the expected reading of 0.50 percent growth and February’s reading of 0.80 percent in pending sales.

Mortgage Rates Mixed, Jobless Claims Fall

Freddie Mac reported mixed movement on mortgage rates as the average rate for 30-year fixed-rate mortgages rose by four basis points to 6.43 percent. Rates for 15-year fixed-rate mortgages fell by five basis points and averaged 5.71 percent.

Initial jobless claims fell to 230,000 claims compared to the expected reading of 246,000 claims and the previous week’s reading of 245,000 claims. Continuing jobless claims fell to 1.86 million filings from the prior week’s reading of 1.87 million ongoing claims.

The University of Michigan reported no change in consumer responses to its consumer sentiment survey for April. The index reading of 63.5 for March was unchanged in April and also matched analysts’ forecasts.

What’s Ahead

This week’s scheduled economic reporting includes readings on construction spending, the Federal Open Market Committee’s scheduled statement, and Fed Chair Jerome Powell’s post-meeting press conference. Readings on public and private-sector employment and national unemployment are also scheduled for release.

Filed under: Financial Reports by Julie Woodward
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If you are thinking about building your own home, you might be wondering how construction loans work. There are plenty of options available, but one of the most popular choices is a single-close construction loan. This type of loan allows you to close on not only the construction expenses but also your financing costs at the same time. Essentially, a single-close construction loan will convert into your mortgage after the construction on your home is finished. What are some of the top benefits of this type of loan?

Save Time

One of the first benefits of a single-close construction loan is that you can save a significant amount of time. If you need to get a separate loan for the construction and financing processes, you will have to submit all of your required documents twice. Then, you will need to wait for the lender to review them both times. You can avoid this process if you combine the loans together in a single-close construction loan.

Save Money

Of course, you could also save a significant amount of money by going with a single-close construction loan. Keep in mind that each loan is going to have some origination and closing expenses. If you have to go through the process twice, you will have to pay these expenses twice. With a single-close construction loan, you only have to pay potential origination and closing expenses once, which can help you save money.

Fix Your Interest Rate

What happens if the average interest rate goes up during the construction of your house? This means that your mortgage may have a higher interest rate, and it could make your house unaffordable. You can avoid this risk by getting a single-close construction loan with a fixed interest rate. Then, if the interest rate drops down the road, you may be able to refinance. 

Consider A Single Close Construction Loan

In the end, these are just a few of the top benefits of a single-close construction loan. While these loans are not necessarily for everyone, they could be right for you. Do not hesitate to reach out to an expert who can help you figure out if a single-close construction loan is right for your needs.

Filed under: Real Estate by Julie Woodward
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Even though interest rates have gone up significantly during the past few months, there are still opportunities for you to find a home at a great price. The high interest rate can be discouraging for some people, but as long as you know how to navigate the market, you can still put yourself in a position to be successful.

Put More Money Down

The easiest way to combat a high interest rate is to reduce the amount of money you borrow. That means that you might need to put more money down. Of course, this means that you might need longer to save up a down payment, but there are other benefits you might notice as well. For example, if you are willing to put 20 percent down or more, you no longer have to purchase private mortgage insurance, which can help you save some additional money.

Increase Your Credit Score

You may be able to secure a lower interest rate if your credit score is higher. Remember that the lender will give you a lower interest rate if you are of less risk to them. If you increase your credit score, you improve your financial health, which means that the lender may offer you a lower interest rate. You can increase your credit score by correcting mistakes on your credit report, paying down your existing debt, and reducing your credit utilization ratio.

Consider an Adjustable-Rate Mortgage

You may even want to consider going with an adjustable-rate mortgage, usually shortened to ARM. This means that the interest rate on your loan will change with the market. If you feel like the interest rates are going to go down, this may be a way to save money; however, keep in mind that you may end up owing more money if the interest rates go up.

Refinance Your Home Loan Down The Road

If you are not willing to take the risk with an ARM, keep in mind that you can refinance your home loan later if interest rates go down. You might need to pay closing expenses again, but it could save you tens of thousands of dollars over the life of the loan if you decide to refinance. 

Filed under: Real Estate by Julie Woodward
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Last week’s economic reporting included readings on inflation, retail sales, and the Federal Reserve’s Federal Open Market Committee meeting.  Fed Chair Jerome  Powell held his scheduled post-meeting press conference and weekly readings on mortgage rates and jobless claims were also released.

Federal Reserve Raises Target Interest Rate Range

The Federal Reserve’s Federal Open Market Committee announced its decision to raise the Fed’s target interest rate range to 4.25 to 4.50 percent from its previous range of 3.75 to 4.00 percent.

Fed Chair Jerome Powell said in remarks made during his scheduled press conference, “We’re going into next year with higher inflation than we thought.” Seven Fed officials predicted rising interest rates with the Fed’s interest rate range potentially reaching 5.75 percent. Analysts said that the Fed’s position of controlling inflation at any cost could result in a recession. Chair Powell said it was impossible to predict if a recession would occur and how deep it might go and how long it could last. He repeated the Fed’s commitment to controlling high inflation.

Mortgage Rates, Jobless Claims  Fall

Freddie Mac reported lower fixed mortgage rates last week as the average rate for 30-year fixed-rate mortgages dropped by two basis points to 6.31 percent. The average rate for 15-year fixed-rate mortgages dropped by 13 basis points to 5.54 percent.

Initial jobless claims fell to 211,000 first-time claims filed as compared to the prior week’s reading of 231,000 new jobless claims filed. Continuing jobless claims were reported as unchanged from the prior week with 167,000 ongoing unemployment claims filed.

The Commerce Department reported lower retail sales in November than in October. Retail sales decreased by -0.6 percent in November, which surpassed analysts’ estimates of -0.3 percent. Lower retail sales could suggest an impending recession as consumers hold back on paying rapidly rising prices for non-essential goods and services.

What’s Ahead

This week’s scheduled economic reporting includes readings from the National Association of Home Builders on U.S. housing markets and Commerce Department data on building permits issued and housing starts. Reports on sales of new and previously-owned homes and weekly readings on mortgage rates and jobless claims will also be released.

Filed under: Financial Reports by Julie Woodward
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If you want to purchase a house, you will probably have to take out a mortgage. There are only a few people who have enough cash to purchase a house outright, so most will go to the bank for a loan. How do you know if the bank is giving you the best possible interest rate? Unfortunately, the bank does not always give you the best interest rate because the bank is looking for a way to make money. If they can get you to accept a higher interest rate, they will make more money on your home loan. What are some of the factors that dictate interest rates on loans, and how can you say money?

Bank Rates Are Dictated By Investors

In a lot of cases, mortgage rates are not necessarily dictated by banks, but they are dictated by investors. Many banks want to remove the risk of someone defaulting on their home loan, so they will sell the debt to an investor. This is a way for the banks to free up capital they can use to invest in other projects. Sometimes, the mortgage rates are dictated by the amount of money investors are willing to pay for this type of debt.

Interest Rates Are Always Forward-Looking

In other cases, banks will charge a higher interest rate because they are worried that rates will rise in the future. Essentially, the pricing on home loans right now is dictated by what banks think interest rates will be in the future. If the bank thinks that interest rates will go up, then it might raise interest rates now to hedge its risk. 

How You Can Get A Better Interest Rate

There are a few ways you can get the bank to give you a better interest rate. First, make sure your credit report is in order. Maximize your credit score to get a better interest rate. Then, make sure you have enough money to put down. The more money you put down, the lower the interest rate you will get. Finally, ask about discount points. You might be able to pay some of the interest upfront in exchange for a lower interest rate over the life of the loan. 

Filed under: Real Estate by Julie Woodward
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Buying a house is an exciting time, but homeowners also need to make the best financial decision to meet their needs. One of the biggest decisions potential homeowners will face is how much money to put down.

A down payment is the amount of money that homeowners pay upfront when they purchase a home. Many homeowners believe they need to put down 20 percent; however, this is not always the case. What do homeowners need to know about putting a down payment on a house? 

20 Percent Is Not Always Required

The reason why homeowners often believe they need to put down 20 percent is that lenders will often require a 20 percent down payment to avoid paying PMI. PMI stands for private mortgage insurance. If a homeowner puts down less than 20 percent, the lender takes on significant risk if the homeowner defaults. Therefore, the lender may require the homeowner to purchase PMI to protect the lender against the risk of default.

Homeowners might be able to secure a loan with 10 percent down if they are willing to pay PMI. First-time home buyers might be able to secure a home loan with as little as 3.5 percent down if they go with an FHA loan.

The Relationship Between Down Payments And Interest Rates

Homeowners might want to put down more money to earn a lower interest rate. Securing a lower interest rate could save homeowners tens of thousands of dollars over the life of the loan. If homeowners put down more money, the lender doesn’t take on as big of a risk. Therefore, the lender might be willing to charge a lower interest rate. 

Work With A Professional 

Ultimately, the size of the down payment is one of the biggest decisions potential homeowners have to make. It can take a long time to save up 20 percent for a home, but this is not always required. Homeowners need to know whether they need to pay PMI if they do not put 20 percent down, and they need to understand how the size of the down payment will impact the interest rate on a loan. It is a prudent idea to consult with a professional when deciding how much money to put down for a house.

Filed under: Real Estate by Julie Woodward
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Many first-time homebuyers are having a difficult time finding the right purchase. Therefore, a new trend is catching on. Some people are renting in the city, where property values are more expensive. Then, they buy a vacation home in the suburbs. Is it smart to buy a second home as a first home? 

The Advantages Of Buying A Vacation Home First

There are several advantages that come with buying a vacation home as a first home. First, buying a vacation home in the suburbs is usually less expensive than purchasing a house in the city. Furthermore, first-time homeowners can rent out their vacation homes the majority of the time, helping them cover monthly mortgage payments. Then, as the value of the vacation home rises, first-time homeowners build equity they can use to purchase a more expensive home in the city later. This can also help people save money on the cost of a vacation. 

Interest Rates On Vacation Homes Might Be Higher

At the same time, interest rates on vacation homes might be higher. Homeowners interested in getting the best interest rates need to live in the home they are buying. If they are not living in that specific home, lenders may charge a higher interest rate. Furthermore, first-time homeowners might have to put more money down to qualify for that loan. 

Managing A Vacation Home

First-time homeowners also have to think about how they will bring in rental income. It might be helpful to work with a property management company that can handle this from start to finish. Or, services such as VRBO or Airbnb might be helpful. Homeowners need to have a plan for how to maximize rental income. The more the home is rented out, the easier it will be to afford the mortgage payments.

Have An Emergency Fund Set Aside

First-time homeowners still need to have an emergency fund set aside for the vacation home. What happens if the roof needs a repair? What happens if the HVAC system has to be replaced? Homeowners need to think carefully about how they can cover these expenses. Not all of them are covered by home insurance, and some of them can cost thousands of dollars. 

Filed under: Real Estate by Julie Woodward
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There are a lot of people who are wondering if now is the right time to move or refinance their current home loan. With interest rates still favorable, a lot of homeowners have the potential to save a lot of money if they are able to secure a home loan with a lower interest rate. There are two ways homeowners can secure a home loan with a lower interest rate. The first is to refinance. The second is to move. Which option is better? There are a few key points to keep in mind.

Taking A Closer Look At Refinancing

There are a lot of homeowners who have an abundance of equity currently built up in their homes, making this a great time to refinance. With a refinance, there are multiple options available. Some homeowners might refinance to access the equity in their homes, allowing them to complete a project. Some homeowners might refinance in an effort to pay off their home loan sooner. If homeowners are trying to access more equity, or are trying to shorten the term of the loan, then refinancing might be the smart move.

Looking At The Option Of Moving

The other option is to get a new home loan entirely by moving. This is an attractive option for homeowners who might have a dream house they would like to move to. In particular, any homeowner who currently has a home loan with a high interest rate should consider moving into their dream home now. Because mortgage rates are low right now, this is a chance for homeowners to move into a larger house while keeping their mortgage payments the same or less by obtaining a lower interest rate.

Every Situation Is Different

In the end, every situation is different. Because interest rates right now are so low, now could be the time for homeowners to consider moving or refinancing. Switching to a home loan with a lower interest rate could save tens of thousands of dollars over the life of the loan. Anyone with questions or concerns should reach out to a professional for help.

Filed under: Real Estate by Julie Woodward
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The Federal Open Market Committee of the Federal Reserve said in its post-meeting statement that the Federal Reserve expects to raise its benchmark interest rate range twice during 2023. No rate changes will be made during 2022 as the economy continues to recover from the Covid-19 pandemic. The Fed’s current interest rate range is 0.00 to 0.25 percent.

Fed Expects “Transitory” Inflation

The Fed’s post-meeting FOMC statement said that although Committee members adjusted their forecast for raising the Fed’s benchmark interest rate range, members did not predict long-term inflation and described current upward inflation as “transitory.”

The Consumer Price Index reported that the cost of living jumped in May and drove inflationary growth to a 13-year high of five percent.

11 of 18 FOMC members currently expect two or more rate hikes in 2023; in March, seven members expected one rate hike in 2023. Former Treasury Secretary Larry Summers said that the Fed needs to reconsider its monetary policies based on the two stimulus payments provided to Americans. The Fed has held its benchmark interest rate range to 0.00 to 0.25 percent and continued its monthly purchases of $80 billion in Treasurys and $40 billion in Mortgage-Backed Securities in efforts to support the economy and stabilize financial markets.

The Committee will follow economic news and developments through readings on public health, labor market conditions, inflation, and financial and global news to determine monetary policy adjustments.

Fed Chair Suggests Future Tapering of Bond Purchases

Federal Reserve Chair Jerome Powell said in his post-FOMC meeting press conference that members had their first discussion of tapering the Fed’s bond purchases. Although the Fed has indicated it wants to see “substantial further progress” in the economy before it starts to taper its bond purchases, analysts expected further discussion of tapering bond purchases in FOMC’s July meeting. Reducing bond purchases is considered the first step in moderating the Fed’s accommodative stance on monetary policy.

Chair Powell said that the FOMC will continue to develop monetary policy in consideration of the FOMC’s dual mandate of achieving maximum and an annual inflation rate of two percent over the longer term. Inflation has run below two percent for some time before the pandemic; so a current inflation rate running above two percent would help raise the average inflation rate to the two percent requirement.  

The unemployment rate is improving as businesses and other employers open their doors and restore service to full capacity. Chair Powell cautioned that the economy remains strongly connected to how the Covid-19 virus progresses and said that monetary policy would be adjusted according to how the pandemic impacts the economy.

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