Buy Now or Later??

Anyone that lived through the 80’s remembers the song by the Clash “Should I stay or Should I go”.  https://www.youtube.com/watch?v=GqH21LEmfbQ

While country music was more my go-to rhythm, this song by the Clash transcended  all the high school clicks.  Remember the Mods, the Hicks, the Surfers, the Jocks, and all the others………..which were you?

Back on topic………  I just spoke to a gentleman who purchased a home in Monterey in 1990 for $275k.  It is currently in escrow for $945k.  Pretty good return huh?  It’s even better if you consider he only put down 20% (or $55,000) and is leaving the table with $670k in profits after 26 years.

With the current hot housing market we are hearing a lot people trying to decide “should I buy or should I rent now”.  And a little like the song from the Clash (you knew I would tie this all in), there isn’t always a black and white answer.  I can sit here and write about why I think it is still a great time to buy;  more people are entering CA than leaving, wages for trades people are on the rise, land is scarce, raw material costs are rising, rents are up and rates are low but here are two articles that I hope will make the decision making process easier for buyers that are on the fence:

which way

 

$217,726: That’s What You’ll Save (Give or Take) If You Buy a Home Now

http://www.realtor.com/news/trends/financial-benefit-buying-a-home-now/

House prices: Buy now or later?  A lack of supply means that America’s lofty house prices are unlikely to fall far:

http://www.economist.com/news/united-states/21601296-lack-supply-means-americas-lofty-house-prices-are-unlikely-fall-far-buy-now-or

Modular vs. Manufactured…..what is the difference

I always used to get confused on these two but this is a nice short explanation……….enjoy

Modular vs Manufactured…..what is the difference

Modular homes are residences constructed entirely in factories and transported to their sites on flatbed trucks. They are built under controlled conditions, and must meet strict quality-control requirements before they are delivered.

Manufactured is the most recent label for what were once called “mobile homes” or “trailers.

Manufactured Homes are now allowed on Conventional loans.

mobile

General Requirements:

    • Designed and constructed to meet the Federal Manufactured Construction and Safety Standards

 

  • Designed as a single family dwelling and classified as real estate

 

  • Constructed after June 15, 1976
  • Must have a permanent foundation system in accordance with manufacture’s requirements for anchoring, support, stability, and maintenance. Must meet local and state codes
  • Towing hitch or running gear must be removed (including tongues, axles, brakes, wheels and lights)
  • Must be permanently connected to a septic tank or other sewer system and other utilities according to local and state requirements
  • Manufactured home installed on site for less than one year is not allowed unless borrower is:
  • the 2nd purchaser of the property  OR
    • Refinancing their current manufactured home
    • Seller cannot be the builder/contractor or manufactured housing dealer who installed the unit on site

Word of the week… “Trended Data”

Word of the week –  Trended Credit Data

Just like your upgraded phone, so too does Fannie Mae update their electronic underwriting system from time to time.  This underwriting system is the most widely used system in the world for underwriting loans.  Even though Fannie Mae (and baby brother Freddie Mac) only purchase loans up to the County maximum, most Jumbo lenders follow their recommendation in some ways.

What is trended credit data?  

Currently credit reports only indicate the balance, the amount of available credit, and if a borrower has been making their payments on time. Trended credit data provides historical information on the balance, scheduled payment, and actual payment made each month.

Why did Fannie Mae add trended credit data to the credit risk factors analyzed by DU?

Fannie Mae used 3.7 million credit reports with trended data to conduct modeling and analytics to support a comprehensive review and redevelopment of DU’s credit risk assessment. Including trended data materially improved modeling of loan performance.

Q)       Will loans for borrowers that make only the minimum payment on their credit card each month be able to receive an Approve recommendation from DU?A)        Yes. The use of the actual payment information will impact the analysis of the borrower’s credit. However, the actual payment information is used in just one of the credit risk factors analyzed by DU (see Appendix A of the DU Version 10.0 Release Notes). DU will continue to perform a comprehensive evaluation of all of the credit and non-credit risk factors on the loan to determine the recommendation.

Q)       How does the amount a borrower pays on their credit card account demonstrate how they will pay their mortgage?

A)        The trended credit data will be used by the DU risk assessment to evaluate how the borrower manages his/her revolving credit card accounts. A borrower who uses revolving accounts conservatively (low revolving credit utilization and/or regular payoff of revolving balance) will be considered a lower risk. A borrower whose revolving credit utilization is high and/or who makes only the minimum monthly payment each month will be considered higher risk.

 Graph

 

To put it into perspective, holding all else equal on a loan…

Research has shown that borrowers who…. Are…… Than borrowers who…..
Never exceed their limit 75% less likely to become delinquent Exceeded their credit card limit in the last 12 months
Pay off their credit card every month 60% less likely to become delinquent Only make their minimum payment each month