Credit Restrictions to Ease in the New Year/Longer Timeframes for Real Estate Transactions

Mortgage lenders expect to further relax credit standards in the coming year, which could help some first-time buyers who have been shut out of the market finally get a foot in the door.

Fannie Mae’s fourth-quarter 2015 Mortgage Lender Sentiment Survey found that 16 percent of lenders plan to ease credits standards for GSE-eligible loans in the next three months compared with 2 percent that expect to tighten them. In a statement accompanying the report, Fannie Mae Senior Vice President and Chief Economist Doug Duncan noted that loosening standards could spur an uptick in first-timer buyers, who have been hampered by limited inventory, rising mortgage rates, and home prices that are growing faster than incomes.

“Thoughtful easing will help mitigate some of the affordability decline moving into 2016,” he said.

On the other hand, new mortgage regulations implemented by the Consumer Financial Protection Bureau are responsible for longer closing periods and for the substantial November drop in U.S. existing-home sales, which fell to their lowest level in a year and a half.

According to a report from the National Association of Realtors, there were 4.76 million existing-home sales in November, a decline of 10.5 percent from October and the fewest since April 2014. NAR Chief Economist Lawrence Yun explained that because signed sales contract have remained steady over the past few months, the decrease may be more of aberration as the industry adapts to the new mortgage regulations.  Nearly half of all respondents to a NAR survey reported longer closing time frames in November compared with 37 percent in the previous month.

“It’s possible the longer timeframes pushed a latter portion of would-be November transactions into December,” Yun said. “As long as closing timeframes don’t rise even further, it’s likely more sales will register to this month’s total, and November’s large dip will be more of an outlier.”



Source: Pacific Union Blog


Average U.S. Credit Score Reaches Record High

The average consumer credit score has reached an all-time high, enabling more Americans to leverage today’s low mortgage rates and save big bucks over the life of their home loans.fico

According to recent numbers from credit-data company Fair Isaac Corp., the average U.S. credit score was 695 in April of this year, the highest since the company began tracking the metric in 2005. FICO says that while the national credit score has been steadily rising for the past two years, it appears to be leveling off.

Nearly one in five Americans – 19.9 percent – now has a credit score of 800 or higher, which the company deems “exceptional.” The number of consumers with top-notch credit has climbed each year since the depths of the recession in October 2010, when 17.9 percent of Americans had 800-plus credit scores.

Further encouraging, FICO says, is that fewer consumers are scoring less than 550, which indicates that more of them are managing their credit responsibly. In October 2010, 9.0 percent of Americans had credit scores between 500 and 549, compared with 7.6 percent in April 2015.

Serious delinquencies – defined as total accounts more than 90 days past due — have also been falling over the past few years, from 19.4 percent in October 2013 to 18.2 percent as of April. However, FICO points out that the overall decline has been primarily driven by the real estate sector, where delinquencies have dropped from 6.8 percent in 2013 to 5.1 percent in April.

“This suggests that we are getting further and further from the worst of the housing downturn,” FICO researchers wrote. “By contrast, the auto and bankcard industries show relatively little, if any, drop in delinquency over the past few years.”

The 20 percent of Americans who have excellent credit will be rewarded for their fiscal responsibility with lower mortgage rates, resulting in substantial long-term savings on a home purchase. In a recent blog post, FICO says consumers with a credit score of more than 760 could qualify for a 3.57 percent interest rate on a 30-year, fixed-rate, $300,000 home loan. That translates to a monthly payment of $1,359 and $189,259 in total interest paid over the life of the loan. On the other end of the spectrum, homebuyers with scores between 620 and 639 would likely get a mortgage rate of 5.16 percent for that same home purchase, which equates to $1,640 in monthly payments and $290,374 in interest paid over the life of the loan.

FICO offers tips for consumers hoping to better their credit score, including paying down high-interest accounts first and prioritizing smaller debts over larger ones.

(Photo: Flickr/Simon Cunningham)

Source: Pacific Union blog

Bay Area Housing Markets Highly Unaffordable for Low-Down-Payment Buyers

Although nine out of 10 U.S. homes are more affordable than their historic averages for buyers using low-down-payment programs, that’s not the case here in the Bay Area, according to a recent report.twenties

In a study conducted with Down Payment Resource, RealtyTrac analyzed 370 U.S. counties for affordability and accessibility to buyers making down payments of 3 percent. Typically, buyers who leverage programs like the ones introduced by Freddie Mac and Fannie Mae late last year include first-time buyers and boomerang buyers – those who underwent foreclosure during the housing bust and want to purchase property again.

The report says that 90 percent of those counties were more affordable for low-down-payment homebuyers in April when compared with their historic averages, based on the percentage of income necessary to purchase a median-priced home with 3 percent down. San Diego ranked as the No. 1 U.S. county where homes were the most affordable compared with their historic averages, with the average low-down-payment homeowner spending 52.7 percent of their income on mortgage payments. Southern California’s Riverside County placed No. 2 for best low-down-payment affordability, with 39.3 percent of income earmarked for housing costs.

Here in Northern California, it was a completely different story, with four Bay Area counties ranking among the country’s 10 least affordable for first-time and boomerang buyers when compared with historic numbers. Perhaps not surprisingly, San Francisco was the least affordable U.S. market for low-down-payment buyers. A San Francisco homebuyer who placed a 3 percent down payment would actually need to pay more than they earn to afford a mortgage: 113.97 percent of income, compared with the county’s historical affordability of 83.48 percent.

San Mateo County was the nation’s fourth least affordable down-payment market, requiring 87.17 percent of income to purchase a home compared with the historic average 69.98 percent. Marin County followed in the No. 5 spot, with the average owner spending 71.78 percent on housing compared with 66.5 percent historically.Santa Clara County was the nation’s seventh least affordable low-down-payment market, with 62.37 percent of income necessary to make mortgage payments, compared with a historical average of 52.36 percent.

ReatlyTrac says that the average U.S. down-payment assistance benefit was $10,443 in April. San Francisco buyers using such a program can expect to receive $51,713 in funds, the most of any county in the nation. Homebuyers in Lake Tahoe‘s Placer County had the nation’s fourth highest levels of down-payment help at $35,475.

In a statement accompanying the report, Down Payment Resource CEO Rob Crane said that low-down-payment buyers likely have options in most U.S. metro areas, even those that rank among the least affordable. Still, as RealtyTrac Vice President Daren Blomquist cautioned, some first-time and boomerang buyers hoping to realize or regain their homeownership dreams might have to trade short commutes for down-payment assistance.

“This analysis demonstrates that low-down-payment borrowers can find affordable housing and good accessibility to down payment help in a wide variety of markets nationwide,” he said. “However, within many major metro areas the most affordable and accessible markets for low down payment buyers are often those furthest from jobs and other amenities that many buyers want.”

(Photo: Flickr/The Comedian)