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Mortgage savings that homeowners would have realized because of falling interest rates have been cut into deeply – and in some cases, canceled out entirely – by rising home prices.


Black Knight Financial’s monthly Mortgage Monitor report, released Monday, calculated how much per month it would cost to purchase a median-priced home. “All else being equal, interest rate declines would save borrowers significant money on a home purchase,” Black Knight stated in a release.

Unfortunately, all things are not equal, as Ben Graboske, Black Knight Data & Analytics senior vice president, explained. 

"Excluding home price movement, the interest rate decline since the start of the year would save borrowers approximately $44 a month when purchasing the median-priced home nationally,” Graboske said. “However, when you factor in estimated home price appreciation (HPA) – the most recent Black Knight Home Price Index Report for February showed annual HPA at 5.3 percent – those monthly savings fall to just $18.”

It’s not all bad news, Graboske stressed.

“The mortgage on a median-priced home is still more affordable than it was in December, despite rising prices, just not as much as one might expect given that rates are as low as they are,” he said. “This isn't to say that interest rate reductions aren't beneficial to buyers – they almost certainly are. If rates hadn't dropped over the past four months, it would cost an additional $28 to buy the median-priced home today as compared to December 2015. By and large, borrowers are still seeing net reductions in monthly payments across the country heading into the early home buying season. In some areas though, prices are appreciating so quickly that they may have fully offset any savings from rate declines. Assuming the HPA observed in February continues through March and April, it may actually cost home buyers more in monthly principal and interest to purchase the median-priced home in Washington, Colorado and Oregon than it did at the end of 2015, even with a 35 BPS drop in interest rates."

Original from: www.mpamag.com
Posted by Rose Tignor on May 3rd, 2016 1:03 PM

Applying For A Mortgage: Why So Much Paperwork? | Keeping Current Matters

We are often asked why there is so much paperwork mandated by the bank for a mortgage loan application when buying a home today. It seems that the bank needs to know everything about us and requires three separate sources to validate each and every entry on the application form.

Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.

There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

  1. The government has set new guidelines that now demand that the bank provebeyond any doubt that you are indeed capable of affording the mortgage. During the run-up in the housing market, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again
  2. The banks don’t want to be in the real estate business. Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.

However, there is some good news in the situation. The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a mortgage interest rate probably at or below 4%.

The friends and family who bought homes ten or twenty ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s). If you went to the bank and offered to pay 7% instead of <4%, they would probably bend over backwards to make the process much easier.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.



Posted by Rose Tignor on October 26th, 2015 11:46 AM

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