HMDA Data Helps Boston Area Mortgage Market

In addition to other favorable signs, the Boston area mortgage market is expected to be one of the positive features in the recovery of the housing market. Experts say Home Mortgage Disclosure Act (HMDA) information indicates the housing improvement continues.

Continued Improvement in Boston Area Mortgage Market Expected

The Boston area mortgage market has received revised projections by the Home Mortgage Disclosure Act.

Because of the data trends, lending projections are expected to rise. And that could be even better for the real estate economy as it may stem any expected interest rate hikes by the Federal Reserve for awhile.

Mortgage lending dropped 27% last year to slightly over $1.25 trillion, but many economists had projected decreases of 40% compared to the previous year. The improvement was fueled in part by a larger percentage of purchases versus refinances at 51% compared to 49%. The trend has continued into this year, as well.

Refinances have increased to higher than expected levels as lower interest rates have held steady. Boston area mortgage market insiders say the refinancing spike is also due to the Federal Reserve’s recent hints at what was originally expected to be a slight increase in the federal funds rate.

The Mortgage Bankers Association has also improved its earlier forecast regarding loan originations, expecting them to rise 23%, citing a 25% spike in home purchases totaling more than $800 billion.

The resulting economy has given mortgage lenders a renewed optimism. A combination of lower down payment requirements that appeal to first-time homebuyers, and low interest rates for those seeking to refinance are reasons for the improvement in the Boston area mortgage market.

The HMDA information is compiled from reports from more than 7,000 lending institutions throughout the country. The data is utilized by state and federal compliance officials and bank regulators to — among other things — ensure that lenders make mortgages available to people living in minority neighborhoods.

Because the mortgage market can be volatile, economists and industry experts have historically projected conservative numbers. This is due in no small measure to interest rate fluctuations and the lag time inherent in obtaining disseminating public records data. Some lenders say that lag time can often be as long as nine months.

The improvement that’s been on the Boston area mortgage market horizon, however, isn’t universally expected to continue. Some industry experts say stagnant wage growth and higher home prices causing the current seller’s market will dissuade some buyers in premium-priced markets.

As one real estate economist put it, perhaps the real value of the HMDA data will be to reinforce the feeling that the market is sustainable and the “Chicken Little” concept of “the sky is falling” is not the current market condition.

For more articles pertaining to the Boston area mortgage market, check out other articles in the Boston Mortgage Info section of our site below our Boston Real Estate Categories in the column to your right. Remember, we also post tips daily on Twitter and Facebook. Check us out there too.

Boston Area Mortgage Misconceptions

Whether it’s a topic like the Boston area mortgage industry or another subject, we live in an information-rich environment. The Internet, 24-hour cable news stations and a burgeoning social media network keeps Americans in touch with available information almost instantly. Yet the endless wealth of information at our disposal also means there’s a glut of misinformation being disseminated as well. Much of that half-correct, or in many cases, blatantly incorrect information concerns the housing market and the mortgage industry. Let’s look at a few commonly-held Boston area mortgage misconceptions.

Boston Area Mortgage Myths Dispelled

There are many Boston area mortgage misconceptions, we dispel a few of them here.

Myth #1: You Have to Have Perfect Credit.

In a recent survey, nearly 67% of participants thought their credit had to be very good — nearly perfect — in order to qualify for a mortgage. The truth is there are loan programs available for borrowers with less than perfect credit scores. While it’s true that a higher credit score helps in getting a preferred interest rate, even if you have a few credit bruises and blemishes you can still qualify for a home mortgage. Experts say there are other factors that lenders consider like employment stability, income and debt ratios. Remember, every loan situation is different.

Myth #2: You Have to Have a 20% Down Payment.

This is another popular misconception in the Boston area mortgage market. For decades lenders have made home loans to borrowers with considerably less than a 20% down payment. Borrowers can avoid the required private mortgage insurance (PMI) if they have a down payment of 20% or more, but many Boston area mortgage lenders have loan programs designed for purchasers with little or no down payment. Industry experts continue to encourage homeowners to think of their houses as a home meeting a certain set of needs at a particular point in time — not as a financial investment with a guaranteed return or appreciation.

Myth #3: A Home is a Great Investment.

Owning real estate can be a sound investment over time. However, there are no guarantees. Many variables must be considered that may affect your home as an investment. In addition to the continued appeal of the neighborhood in which your property is located, other factors may impact your home’s value: the home’s age, its condition, and market supply and demand.

Myth #4: You Own Your House When You Close the Sale.

The term “homeowner” is used loosely to describe those who have bought homes. However, the simple truth is — unless you paid cash or traded for some other consideration — the majority of homeowners are “still buying” their homes. Because a Boston area mortgage institution loaned you the money to purchase your home, you don’t really own it until the mortgage is repaid. The old joke about “the bank owns it” isn’t just a joke… it’s true.

Myth #5: Home Ownership is the American Dream.

While aspiring to own a home is an important goal to many, it’s not everybody’s cup of tea. A great number of people in the United States will probably never be able to buy a home — and many simply prefer not to own. Some survey respondents cite upkeep or maintenance issues, resale concerns, problems with job relocation and other reasons they are content to rent instead of own. The “American Dream” can turn into a veritable nightmare in a recessionary economy or crumbling job market. Sadly, millions of home owners who experienced foreclosures during the most recent housing crash would agree.

See more articles pertaining to the Boston area mortgage market in the Boston Mortgage Info section, of our site below Boston Real Estate Categories in the column to your right. Remember, we also post tips daily on Twitter and Facebook. Check us out there, too.

HARP 2.0 and the Boston Area Mortgage Market

The Home Affordable Refinance Program, or HARP, was instituted in March, 2009 and became a moderately successful tool for homeowners in the Boston area mortgage market as well as other markets all across the United States.

Help for Boston Area Mortgage Borrowers

Because of fairly conservative loan-to-value restrictions, HARP was improved to HARP 2.0 in 2011 with LTV ratios higher than 125%.

Investment owners in the Boston area mortgage market can enjoy great savings by refinancing with HARP 2.0

HARP’s primary existence is for homeowners who are underwater — that is, where the mortgage balance exceeds the free-market value of the home — to refinance their loans and save money over the long haul. Until recently, the program was not often utilized for investment properties. In a newly announced Federal Housing Finance Agency (FHFA) report, roughly 11% of HARP 2.0 loans were used to refinance investment properties. By refinancing, real estate investors could potentially reduce their monthly Boston area mortgage payments by two full percentage points. This would equate to a savings of several hundred dollars a month — and thousands over the life of the loan.

HARP Guidelines

Interestingly, HARP guidelines make no distinction between owner occupied properties and investment rental properties. The mortgage must be owned by Freddie Mac or Fannie Mae. All a borrower needs to do is check with a lender to find out its status. Alternatively, this information is also available online. Other requirements include a mortgage balance that is greater than 80% of the value of the property; the borrower cannot have been more than 30 days past due in the last six months. In addition, the borrower can not have already used a HARP refinance on the property.

HARP Benefits

The benefits of a HARP refinance are many, for both investment properties and primary residences. Regardless of whether you owe more than 80% LTV on your mortgage, a HARP refinance doesn’t require private mortgage insurance (PMI.) Plus, there are no closing costs that need to be paid up front. Borrowers can include them in the loan amount. Couple those savings with the interest rate savings and an investor can save thousands of dollars that can be pocketed or reinvested in the purchase of additional rental properties.

To date, the HARP program has produced savings for more than 400,000 investors. If interest rates remain fairly low there’s plenty of reason to think that total will continue to rise.

So if you’re a savvy investor, it’s probably a good idea to look into whether you are eligible for a Boston area mortgage refinance using HARP 2.0. After all, saving money on your rental property, increasing cash flow and freeing up money for other potential investments are probably reasons you bought investment property in the first place!

Many lenders offer HARP loans for rental properties, so shop around. Remember, if your application is denied by one lender it doesn’t mean it will necessarily be rejected by another. Most Boston area mortgage lenders will require copies of your income tax returns for the past two years, a copy of your lease agreement on the rental property, proof of the rental income, proof of your normal income, and verification of other assets in the event your rental income ends or is interrupted.

You can get more information about news that may affect the Boston area mortgage market in our section on Boston Mortgage Info to your right under Boston Real Estate Categories.

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Boston Area Mortgage Down Payment Myths

One of the most important components to obtaining a good Boston area mortgage is the down payment. Unfortunately, many homebuyers have misconceptions about down payments and how they impact their ability to obtain home financing. Let’s examine some of the down payment myths that are prevalent in the Boston area mortgage arena.

4 Boston Area Mortgage Untruths

1. You have to have a 20% down payment.

To get a Boston area mortgage, a 20% down payment used to be required, such is not the case today.

While it’s true in days gone by a 20% down payment was required for a conventional mortgage, such is not the case today. Homebuyers have a much larger array of mortgage options available that don’t require such a hefty down payment percentage.

In a recently-published Consumer Protection Financial Bureau finding, approximately 50% of prospective home purchasers fail to explore all their options when shopping for a mortgage. From conventional loan offerings with a lower down payment to Fannie Mae, Freddie Mac and other products with down payments ranging from 0% to 3.5%, buyers can find Boston area mortgage loans that meet their needs, and their pocketbooks.

2. Making a large down payment is always best.

While some Boston area mortgage lenders suggest a down payment of at least 20%, sometimes it may not be the best thing to do. A smart homebuyer should weigh all the factors and expenses involved in a real estate purchase. Don’t forget big-ticket items such as loan closing costs, moving expenses, repairs or cosmetic improvements, or additional furnishings. Even though a larger down payment will make your monthly payments smaller, it could deplete your financial reserves. Consider finding the proverbial “happy medium.” Put down what you feel comfortable with. Don’t empty your savings — even if it means a slightly larger monthly payment. You’ll sleep better.

3. Sellers won’t accept offers with a gift or homeownership program for the down payment.

Home sellers often operate under the misconception that cash is king — and for good reason. However, today’s buyers equipped with a homeownership program, a gift or a grant can more readily compete on a level playing field with other prospects when it comes to the seller’s asking price and costs sellers may pay. The advantage, therefore, to the seller is that he stands more to gain by broadening his pool of potential purchasers.

4. Financing a home with a down payment programs is difficult.

Let’s face it, in today’s Boston area mortgage market, paperwork and processing time is just the nature of the beast. The simple truth is that the qualification process for a homebuyer down payment program isn’t much different than the required process of any mortgage loan. Down payment programs are often available through local or state housing finance entities, who in turn approve certain qualified mortgage lenders. Getting an early start with the process will ensure a smoother transaction.

Knowing the “ins and outs” of down payment requirements will better equip a prospective home purchaser and make searching for a home — and the best Boston area mortgage loan — more enjoyable and more affordable.

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Minimizing Boston Area Loan Closing Costs

Congratulations! After a few weeks of gathering documents and waiting for your mortgage loan to be processed you’ve finally been approved! Soon it will be time for the loan closing, the culmination of the process. Now it’s time to think about Boston area loan closing costs and, more importantly, minimizing them and keeping more money in your pocket. After all, you’re getting ready to make the down payment and now you have to come up with even more money to close the deal?

Saving on Boston area loan closing costs

Ways to Reduce Your Boston Area Loan Closing Costs

Exactly What Are The Boston Area Loan Closing Costs Anyway?

At the loan closing, most borrowers are required to pay a certain amount of money to cover these and potentially other items required by your lender:

Real estate taxes and homeowners insurance paid into an escrow account

Interest points purchased to bring down your interest rate

Title transfer fees or title insurance premiums

Appraisal costs and survey fees

Homeowners association dues

Why Do These Amounts Vary From What Was Estimated?

Remember when you applied for your mortgage? You probably received a Good Faith Estimate of what the Boston area loan closing costs would be based on typical mortgage transactions. The key word here is “estimate.” There is only a slight variation, if any, from what the lender may change you in the way of origination fees, processing fees, etc, However, the third-party fees like appraisals, surveys and home inspections may vary.

In addition, if you’re refinancing, it’s possible that the property may appraise lower than anticipated, causing your loan-to-value ratio to be higher than expected. Your lender may require that you pay more in prepaid interest points at the loan closing to secure a specific interest rate.

How Can You Keep Closing Costs Down?

So what are your alternatives if your Boston area loan closing costs are simply more than you can afford? Consider these options.

Many times purchasers are able to negotiate with the seller or his agent that some or even all of the closing costs will be paid by the seller. A motivated seller may be open to such a proposition as a necessity to sell his property. Usually what happens is the seller agrees to certain concessions — to pay certain closing costs — in exchange for the purchaser paying a slightly higher price for the property. This allows the buyer to “finance” the closing costs into the total mortgage amount and amortize it over the loan’s term rather than having to have the extra money at the loan closing.

Find more articles pertaining to saving money on your Boston area mortgage under our Boston area Mortgage Info to your right just below our Boston area Real Estate Categories.

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