Is the tide turning for the housing market? 

If 2023 saw homebuyers and sellers mostly treading water against waves of rising interest rates, 2024 has them preparing to swim into calmer waters.

What happened?

• Inventory rose but was still low. After stalling in the first quarter of 2023, the inventory of homes for sale continued an upward trajectory. November's inventory was about two-thirds of November 2019's level.

• Rates climbed to multi-decade highs. Pressured by Fed policy rate hikes and high inflation, mortgage rates continued their ascent. They reached their highest point in October.

• Price growth slowed. The inventory shortage pushed prices higher, though at a slower pace than in 2022. Homeowners continued to benefit from the market with increases in equity.

What's ahead in 2024?

If there's one thing we’ve learned from the last several years, it's that predictions are fallible. Here's what we can say with confidence.

• Rates will likely fall. As inflation cools, the Fed has indicated it will cut policy rates, which influence mortgage rates.

• Lower rates could lead to an uptick in price gains. Lower rates and improved affordability typically bring more buyers to the market. If potential home sellers stay out of the market, inventory shortages could bring back bidding wars, and prices could start rising faster.

Are you waiting for rates to fall before making a move?
Waiting too long could mean that price increases will offset the advantage of lower rates. Those who purchase a home now may gain the advantage of a better price with the ability to refinance later if rates drop.

Bottom Line:

The Greenway Team is here to help with any questions or home financing needs you may have. The offer extends to your friends, family and co-workers, too. Your referrals are always welcome and greatly appreciated.

 

Did know your first house could pay for itself?

Here are 6 reasons to make your first home a multifamily property.

1. Collecting rent for the unit(s) you will not occupy can go a long way to subsidizing, if not sometimes even covering, your monthly loan payment.

2. The portion of the property that is rented can be depreciated. This lowers your tax liability on the rental income.

3. Expenses for maintenance and repairs can also be deducted for the rented portion of the property.

4. You may be able to purchase a more expensive property. Over time, this may provide a larger accumulation of equity than a lesser priced property.

5. New guidelines have made it easier to purchase an investment property as an owner-occupant than as an investor. Down payment requirements are as low as 5%. To expand credit availability and access to affordable rental housing, Fannie Mae has relaxed the down payment requirements for owner-occupants on purchase and basic refinance loans for multifamily homes.  

Here's what you need to know:

• Past requirements of 15% and 25% are being changed, and you can now purchase a two-, three- or even four-family home as an owner-occupant with as little 5% down.
• This change takes effect for loans closing after November 18, 2023.

Applies To: 

• Regular Conventional Loans
• HomeReady Loans for low-income buyers
• HomeStyle Renovation Loans that combines purchase and rehab costs
• Not available for high balance loans

Click here to learn more about this change.

6. If you later decide to purchase and move to a single-family home, you can own the property purely as an investment. This is one of the easiest ways to become a real estate investor.

 

Reach out when you're ready, and we'll help you discover the benefits of a multifamily purchase for your scenario!

 

 

Is owning a home one of life’s big goals or is renting just fine?

In case you’re still deciding let’s see how they compare.

Many say renting accommodates a more flexible lifestyle and owning works for more settled lifestyles.  The truth is either can cost you if you need to move quickly.

Rent vs Own: The Differences 

Renters may have to pay to break a lease and owners may lose funds if they sell too soon. Renters may have freedom from maintenance chores like yard work or shoveling snow. If the water heater breaks or the roof leaks, they need only to call the landlord for a fix.

On the other hand, owners have the freedom to do as they please. From decorating to remodeling to welcoming pets without asking for permission from the landlord.

Renting is often considered more affordable than owning. The security deposit and first month’s rent typically required for a rental can be less than the downpayment and upfront costs for a home purchase. And average rent may be lower than the average monthly mortgage payment in some markets, though it is higher in many.

A home purchase may require more expendable funds for the transaction costs and ongoing expenses. However, the real cost of owning is typically less than the monthly payment for several reasons:

• A portion of your payment is principal which reduces your loan balance and adds equity back to your home.
• The interest you pay is part of a fixed rate loan payment that goes down each month.
• Interest and real estate taxes can be deductible which may reduce your income taxes.

Compare the Costs & Benefits of Renting and Owning

Our Renting vs Owning Calculator will show you how the costs and benefits might compare for your scenario.

When deciding keep in mind these key reasons why so many Americans continue to value homeownership. Let’s take a look at some financial benefits and non-financial benefits to owning a home.

Learn about the financial benefits and non-financial benefits of homeownership here.

Bottom Line:

Overtime, owning a home can pay back all the costs invested and then some. A rent payment can only do the same for the landlord. If homeownership sounds good but you’re concerned about limited cash to close, credit challenges, or uncertainty about the process we’re here to help. Please reach out when you’re ready to take the next step!

 

A good credit score is important for more reasons than just obtaining new credit. These days, it can factor into everything from landing a new job to getting the best deal on your insurance policies. It's more important than ever to avoid late payments on your mortgage!

A 100 point drop for one late mortgage payment?

It’s true. A single 30-day-late mortgage payment can cause your score to drop by as much as a hundred points. Credit scoring algorithms vary based on many factors, and in some instances, the damage may be even greater and last for years.

The Costs Accumulate

At the time, a single missed payment will cost you only a late fee, but the expense really adds up on your next loan or missed opportunity. Low credit scores typically mean a higher rate and cost. Higher rates can mean hundreds or thousands of dollars of extra expense over the life of a loan.

Missed payments are usually unplanned.

Usually, events beyond our control lead to late payments, such as an accident, illness, job loss or family issue. At other times, carelessness or a hectic life may result in a forgotten payment.

What can you do?

• Plan for the unexpected. Maintain an emergency cash reserve account equal to at least 3 months of living expenses or more.
• Automate. If you're prone to forgetting or don't have a scheduled time to sit down and pay bills, set up auto payments through your checking account or put a perpetual reminder on your calendar.

Little other than time will decrease the negative impact of a late payment, so prevention is the one sure remedy. If you don't already have a good system in place to assure timely payments and are not sure what's best, reach out anytime. We'll be happy to help!

Helpful Credit Resources

• How to Manage Your Credit Score
• How Much Can You Save by Improving Your Credit Score
• An Easy-To-Understand Guide To Your Credit Score and the Factors that Influence It
• Did You Know You Have Multiple Credit Scores?

 

 

If you're on the journey to homeownership, you've likely encountered the terms "principal" and "interest" in relation to your mortgage. These terms represent the fundamental aspects of what you're borrowing and the associated costs. However, there's more to your mortgage payment than just these two elements. Collectively, these expenses are referred to as "PITI."

What does PITI Stand For?

PITI is short for principle, interest, taxes, and insurance. This is what makes up your monthly mortgage payment.

Deconstructing the Four Components of a Typical Mortgage Payment

While most mortgages include these four core components, it's worth noting that certain loan types, like interest-only loans, may exclude the principal component. Additionally, some mortgages require private mortgage insurance (PMI) or mortgage insurance (MI), and properties such as condominiums and cooperatives may come with common/maintenance charges or homeowner's association (HOA) fees.

• Principal: The amount that pays back and reduces the loan balance. For instance, if you purchase a $500,000 house with a $100,000 down payment, your principal amount would be $400,000, calculated as $500,000 minus $100,000.

• Interest: The ongoing cost of borrowing the money.

• Taxes: Real estate or property taxes, held in an escrow account.

• Insurance: Homeowners or hazard insurance, held in an escrow account. Can also include mortgage and/or flood insurance. If your down payment is less than 20% on a conventional mortgage, you'll likely need to pay for private mortgage insurance (PMI). However, once you've accumulated 20% home equity, you can eliminate PMI, reducing your overall PITI payment. If you put down 20% or more, you can bypass PMI altogether.

Beyond your payment, it is wise to budget for some maintenance expenses. The cost of upkeep for your home will vary with the age, type, size, structure, and materials used.

Why is PITI Important to Lenders?

Mortgage lenders, such as Greenway Mortgage, set limits on how high your debt-to-income (DTI) ratio can be. If your PITI payment exceeds your DTI, it could result in a smaller mortgage pre-approval or, in the worst case, loan denial.

There's a general rule of thumb suggesting that your total monthly debt, including mortgage payments, car payments, credit cards, utilities, and more, should not exceed 36% of your gross monthly income. Lenders usually follow a similar guideline when assessing a borrower's eligibility for a mortgage, though the specific criteria depend on the lender, borrower, and mortgage program.

First, let’s clarify what the lender does when qualifying a borrower for a mortgage. The lender qualifies a borrower for a maximum monthly payment that they can afford based on the borrower’s current financial situation, as well as the down payment amount.

Remember, your monthly mortgage payment includes PITI – principal, interest, taxes, and insurance. Many online mortgage calculators don’t include all four components. Again, just because you qualify for a certain monthly payment, that doesn’t mean you should purchase a home that puts you right at that limit or anything close to it.

To determine how much you can borrow from a lender, consider using our Mortgage Affordability Calculator. It provides a lender's perspective on the amount you can comfortably afford.

What’s Not Included In your PITI?

• Utilities
• Maintenance and Repairs
• Condo or HOA Fees

Bottom Line:

In summary, PITI—comprising principal, interest, taxes, and insurance—forms the foundation of your monthly mortgage payment. Understanding and managing these components is crucial when pursuing homeownership. Lenders evaluate your PITI payment in relation to your income and debt to determine your mortgage eligibility. Remember that your PITI doesn't cover utilities, maintenance, or condo/HOA fees, so a comprehensive budget is essential for responsible homeownership.