Mortgage Rates (1 Viewer)

[SouthJersey]

Thanks fellas. I texted a realtor buddy in PA and asked about Rocket and got "I don't trust them. I've seen as many deals close with them as I've seen have major issues." Sounds about par for what @Chadstroma is saying.

That said, Chad what's the best rates you're seeing right now? 5.375% seems too good to be true. Though for context we're putting down a ton of cash, the loan amount only 40% of the purchase price (this was intentional because I waived the mortgage contingency to compete with the all cash buyers I'm up against around here). My wife and I have high 700/low 800 credit scores depending on the report that's run. Is this because of the Schwab discount?

 

[Chadstroma]

Thanks fellas. I texted a realtor buddy in PA and asked about Rocket and got "I don't trust them. I've seen as many deals close with them as I've seen have major issues." Sounds about par for what @Chadstroma is saying.

That said, Chad what's the best rates you're seeing right now? 5.375% seems too good to be true. Though for context we're putting down a ton of cash, the loan amount only 40% of the purchase price (this was intentional because I waived the mortgage contingency to compete with the all cash buyers I'm up against around here). My wife and I have high 700/low 800 credit scores depending on the report that's run. Is this because of the Schwab discount?

Yea, I don't make this stuff up. I know it may sound like I am jaded lover with my passion against them but they really are just a heaping pile of poo. The way I describe them is that they are an amazing marketing company that happens to do mortgages poorly and expensively.

5.375% seems pretty too good to be true to me. Any other company other than Rocket, I would say get the locked LE and heck- if they really are giving you that, great job. With Rocket.... and like I said... even if you do get that locked LE from them... you still have to make that choice.... "Do I want to chance it with Rocket".

It sounds like your market is still extremely competitive and these type of markets sellers aren't willing to give extensions usually. They will walk with your deposit and put the house up and close two weeks later with someone with cash or working with a broker. As confirmed by your buddy- I am not telling you how I feel or think about them. I am telling you the reputation that they have and that I have seen confirmed a thousand times over.

And no... it has NOTHING to do with your money at Schwab. This is an affiliate program that Rocket has done with numerous companies.... Allstate and Amex are two more examples. It was HUGELY lucrative for these companies to essentially hand over their company database to Rocket during the refi boom. They "take an app" and then hand it over to Rocket. When the loan closes, Schwab gets a taste. It is just marketing talking points that they are told to tell you.... say it is because "you are such a good client of Schwab and we have worked with Rocket to give you steep discounts as our valued client. Just another example of the perks we try to give our clients here at Schwab/Allstate/Amex/fill in the blank." So you feel confident that you are getting a special deal and are more likely to value your relationship with Schwab and then Schwab gets extra revenue from you from the kickback from Rocket. I don't blame the Schwab/Allstate/Amex at all. It is a legal kickback scheme at least in theory it is legal, I think it is still a violation of RESPA but Rocket lives in the gray areas of law and regulations when it comes to lending.

The only time your deposits actually matter is with an actual bank and not if you are doing a conventional, FHA, VA loan.... only jumbo. Because that is the only time most banks are willing to use their cheap deposit bases to lend in mortgages. Otherwise, they will lend of course but happily charge you a ton for the privilege of having your mortgage at Citi or Chase. I don't even really try to get jumbo loans. My doctor today all but asked me to give him a rate because he is in the process of buying. I could tell he was doing a jumbo with a large bank before he told me and I had no interest in even trying. (I was right, he is at Citi) but then I really was happy I didn't even give it a try when he told me he was going to pay off the loan in a couple of months after closing anyways. (another reason I don't like jumbo, I have seen this often)

 

[SouthJersey]

Why take a mortgage that you can pay off in a couple months and incur all the closing fees?

Also why don't you like loans that are quickly paid off?

 

[Chadstroma]

Why take a mortgage that you can pay off in a couple months and incur all the closing fees?

Also why don't you like loans that are quickly paid off?

Basically using it as a bridge loan. He is buying the new home, using the mortgage and then when the old home sells, he will take the proceeds and pay off the loan.

For brokers, if a loan is paid off within 6 months/6 payments (the usual terms but can vary) then that EPO (Early Pay Off) results in the lender taking back the commission that was paid on the loan. So you end up not only working for free on the mortgage but it is worst because you are actually paying costs out of pocket to have done the loan for the client. EPOs are the suck. About a year ago or so, I turned down a client that wanted to do their jumbo with me. To make a long story short.... they were buying a home and then would sell their old home later which had plenty of equity to pay off the new loan. There were a couple of things that made me suspicious (I flat out asked and they told me that was not their plan) but people don't tend to go from a free and clear home, buy a a new one and then sell the old house and keep the new mortgage. When they told me that they didn't care about the rate... yea, no thanks. A bank will be happy to help you. Good luck.

 

[Chadstroma]

@SouthJersey your guy isn't named Seth, is he?

 

[SouthJersey]

@SouthJersey your guy isn't named Seth, is he?

No, I'm not working with a Seth.

 

[Chadstroma]

@SouthJersey your guy isn't named Seth, is he?

No, I'm not working with a Seth.

Ok... I copied and pasted your original comment to a private group of brokers I am in. A broker named Seth said "I had this exact same thing happen to me today!" in response.... I thought it would he hilarious if it was him and you had talked to him earlier.

 

[The Z Machine]

he told me he was going to pay off the loan in a couple of months after closing anyways

must be nice...

 

[Thorn]

As a title attorney who deals with many different lenders, I can confirm that Rocket has gone from "decent option if you are a very standard w-2 high credit score borrower" to "hot pile of garbage you will never hear back from anyone and seriously might not ever close."

YMMV

 

[Chadstroma]

As a title attorney who deals with many different lenders, I can confirm that Rocket has gone from "decent option if you are a very standard w-2 high credit score borrower" to "hot pile of garbage you will never hear back from anyone and seriously might not ever close."

YMMV

Yup. Overwhelmingly anyone dealing with RE industry know. I could probably count on my hand the number of realtors that were neutral on Rocket. The only one that I ever heard say anything good about them is a realtor doing their RESPA get around violation scheme where they basically get licensed and get 'legal' kickbacks for sending their clients to them.

Honestly, if southjersey had put his offer in with a Rocket pre-approval, the chances of him winning the bid would have been much, much, much less. If he did switch, if the market is as strong as he says, I could see the selling RE agent telling the sellers to pull out and go with one of the other offers once informed of the switch. Not saying it would happen but I also think it would be a possibility. Tons of RE agents I know view Rocket pre-approvals with contempt. They will advise their sellers to ignore the offer or ask them to get qualified elsewhere if there are no good offers being presented with other lenders. The reputation is earned. People in the industry know. People outside of the industry get marketed to death with their machine.

It is very, very, very rate that a Rocket deal actually is a great deal. When it is.... dude, you are rolling that dice. Not something I would do if I really wanted that house. Just not worth the risk.

 

[Chadstroma]

he told me he was going to pay off the loan in a couple of months after closing anyways

must be nice...

Yea.... and it is a $1.5MM home.

 

[Snotbubbles]

Thanks fellas. I texted a realtor buddy in PA and asked about Rocket and got "I don't trust them. I've seen as many deals close with them as I've seen have major issues." Sounds about par for what @Chadstroma is saying.

That said, Chad what's the best rates you're seeing right now? 5.375% seems too good to be true. Though for context we're putting down a ton of cash, the loan amount only 40% of the purchase price (this was intentional because I waived the mortgage contingency to compete with the all cash buyers I'm up against around here). My wife and I have high 700/low 800 credit scores depending on the report that's run. Is this because of the Schwab discount?

I used Amerisave for my refi in September 2021. Took 2 weeks, everything done online. They gave me a full range of different rates based on how much money I wanted closing to cost. Easy peasy.

 

[ghostguy123]

What rate would I expect for a 30 year mortgage right now for a house around 250k, Ohio?

 

[Chadstroma]

What rate would I expect for a 30 year mortgage right now for a house around 250k, Ohio?

Way too many variables to say. Most brokered loans are in the 7's been seeing some retail lenders in the 8's and have seen some unicorns in the high 6's.

Happy to help more with more info. You can DM if you would like.

 

[ghostguy123]

What rate would I expect for a 30 year mortgage right now for a house around 250k, Ohio?

Way too many variables to say. Most brokered loans are in the 7's been seeing some retail lenders in the 8's and have seen some unicorns in the high 6's.

Happy to help more with more info. You can DM if you would like.

I was just curious. Ouch.
It's certainly keeping inventory low. I imagine a ton of people currently have a 3% rate and have zero interest in selling only to take on a rate more than double their current rate.

I was looking around a bit shopping for another investment property but damn, doesn't seem like there's much money to be made doing that right now.

 

[FreeBaGeL]

What rate would I expect for a 30 year mortgage right now for a house around 250k, Ohio?

Way too many variables to say. Most brokered loans are in the 7's been seeing some retail lenders in the 8's and have seen some unicorns in the high 6's.

Happy to help more with more info. You can DM if you would like.

I was just curious. Ouch.
It's certainly keeping inventory low. I imagine a ton of people currently have a 3% rate and have zero interest in selling only to take on a rate more than double their current rate.

I was looking around a bit shopping for another investment property but damn, doesn't seem like there's much money to be made doing that right now.

Gotta be buying now with the intent to refinance a few years down the line if rates drop, I think. I wouldn't imagine there are a lot of cash flowing traditional LTR's right now.

I'm curious if rates drop in the future back into the 4's or so if it will spur another huge appreciation boost with people rushing to buy investment properties, or whether it could have the opposite effect with everyone that was unwilling to give up their cheap loan finally being willing to list.

 

[Chadstroma]

I just had a client putting in a $660K offer today ask me my thoughts on rates.

I started off by saying that this is my general position when it comes to rates and purchasing: That other than can you qualify/afford rates should not be a factor into buying or not. If rates go down, then you can take advantage of it and refinance. If rates go up or stay the same then waiting does nothing but hurt you.

Estimating future valuation is a factor in buying but with inventory levels as they are, demographics and demand data I just am not seeing any meaningful declines in the near future. The latest inflation data had rent up 8.3% YOY.

If I was a landlord... I would be in the market. I wouldn't be making offers willy nilly but I would be looking for properties because as long as the rental comps cover me plus add cashflow (even if $1), I know that I can lower those costs later and chances are that valuations will continue to have healthy increases.

 

[Chadstroma]

What rate would I expect for a 30 year mortgage right now for a house around 250k, Ohio?

Way too many variables to say. Most brokered loans are in the 7's been seeing some retail lenders in the 8's and have seen some unicorns in the high 6's.

Happy to help more with more info. You can DM if you would like.

I was just curious. Ouch.
It's certainly keeping inventory low. I imagine a ton of people currently have a 3% rate and have zero interest in selling only to take on a rate more than double their current rate.

I was looking around a bit shopping for another investment property but damn, doesn't seem like there's much money to be made doing that right now.

Gotta be buying now with the intent to refinance a few years down the line if rates drop, I think. I wouldn't imagine there are a lot of cash flowing traditional LTR's right now.

I'm curious if rates drop in the future back into the 4's or so if it will spur another huge appreciation boost with people rushing to buy investment properties, or whether it could have the opposite effect with everyone that was unwilling to give up their cheap loan finally being willing to list.

That is the other part of interest rates dropping.... demand always goes up. People jump into the markets when that happens. For FTHB, some are just priced out (or feel they are) but then get more hopeful with lower rates but the problem is that they aren't the only ones and then they are competing against multiple offers to try to win. Now when (not if, just a question of when) rates get into the 4's again the big question will be will people who had been holding off trading up will jump in and do that then.

If it wasn't for the low inventory then the absolute right move would be to do that trade up now assuming you can qualify/afford. With inventory low and demand still strong.... if you find that right property then go for it because you should be able to sell your home quickly and then refinance later when rates do go down and you aren't scrambling to buy like people were a couple of years ago with ridiculous over asking price offers waiving inspections, financing clause, etc... heck, I even heard of someone paying the sellers closing costs on top of over asking price offer and waiving everything under the sun.

 

[DevilDog919]

In the process of closing right now. Used USAA VA loan and locked in my rate on 7-5-23, and locked at 6.875%. I called around to shop rates and that was the best I could find. I didn’t buy down the rate because, to me, it wasn’t worth it if rates drop back down in a year or two and I refinance. Since I fully believe that will happen, I went with no buy down.

 

[Chadstroma]

In the process of closing right now. Used USAA VA loan and locked in my rate on 7-5-23, and locked at 6.875%. I called around to shop rates and that was the best I could find. I didn’t buy down the rate because, to me, it wasn’t worth it if rates drop back down in a year or two and I refinance. Since I fully believe that will happen, I went with no buy down.

Not a bad rate but I am pretty sure I would have got a little better for you then but not a huge difference.
I think you made the right choice in not buying down. A lot of lenders are pushing buydowns but the big reason for that is that they know rates will be going down and the lenders are trying to get what they can before the loan gets refinanced. There have been times/loans that were priced with no par pricing available. For you, doing a IRRRL on the VA is an option route to go when rates go down.

Congrats on the home purchase. Hoping everything goes smoothly for you. USAA doesn't have a bad rep (like NFCU) but not the best either. When you close, you can sign up for this monthly email digest that will provide things like valuation updates and an idea of current rates to keep an eye on refinancing. Over 80% of the emails get read each month so people find them valuable and interesting. (offer open to anyone, I have a ton of open seats on it right now) https://hmbt.co/aXP66A

 

[-OZ-]

@Chadstroma - not sure this is the right place, but if someone were to get into short term rentals, I assume 20% down is almost required, but how much else would you budget a year or two out? I assume an extra 5% for commissions and inspection, another 10-20% for any maintenance issues. Is that a fair estimate?

 

[DevilDog919]

@Chadstroma I thought I talked to you a year or two ago and you couldn’t do WV, but you gave me a guy. I did call him and his rate was in the 7’s at the time. Sorry if I remembered wrong though.

@-OZ- I have a lender that we do business with through an LLC for short term rentals, we can do 15% down if the numbers work out right. But 20% is pretty standard on rentals. I always hold out 10% monthly rent for maintenance and it works out well for us.

 

[Chadstroma]

@Chadstroma - not sure this is the right place, but if someone were to get into short term rentals, I assume 20% down is almost required, but how much else would you budget a year or two out? I assume an extra 5% for commissions and inspection, another 10-20% for any maintenance issues. Is that a fair estimate?

I am a little confused on exactly what you are asking... trying to follow it seemed like you went from a mortgage question to a budget management question?

For mortgage, yes 20% is pretty much where you are at though I haven't looked at one of these for a while.... there are always potential on loan types like these that someone will do 15% or everyone starts tightening and wanting 25% etc.

For budgeting on those... I am going to punt. I could give you an answer but it would be little better than an educated guess. I don't like to act like I know stuff when I really don't just to seem like more of an expert.

I know there are quite a few FBG landlords, they can chime in and give feedback based in more concrete info/experience.

 

[Chadstroma]

@Chadstroma I thought I talked to you a year or two ago and you couldn’t do WV, but you gave me a guy. I did call him and his rate was in the 7’s at the time. Sorry if I remembered wrong though.

@-OZ- I have a lender that we do business with through an LLC for short term rentals, we can do 15% down if the numbers work out right. But 20% is pretty standard on rentals. I always hold out 10% monthly rent for maintenance and it works out well for us.

No, that tracks right. Although I am still not personally licensed in WV, the company I am with now is licensed there (all but 2 states now) so I can always get you to someone directly in my company for future reference. No worries. And I could be wrong on the pricing for that day as rates have had some jumps up and down over the last couple of months.

 

[DevilDog919]

Will definitely send you a PM when I go to refinance.

 

[-OZ-]

@Chadstroma I thought I talked to you a year or two ago and you couldn’t do WV, but you gave me a guy. I did call him and his rate was in the 7’s at the time. Sorry if I remembered wrong though.

@-OZ- I have a lender that we do business with through an LLC for short term rentals, we can do 15% down if the numbers work out right. But 20% is pretty standard on rentals. I always hold out 10% monthly rent for maintenance and it works out well for us.

Thanks. Just looking possibly 2-3 years out for a target to have before committing to buy a STR. Like if we were wanting to buy a place costing $800k, we’d target $160k for down payment, $24k realtor fees (or just roll those into the mortgage), $80k for any immediate improvements / maintenance / furniture in the first year, plus the first year or two in mortgage, HOA, etc costs as a cushion. Is that about right?

 

[unckeyherb]

@Chadstroma - not sure this is the right place, but if someone were to get into short term rentals, I assume 20% down is almost required, but how much else would you budget a year or two out? I assume an extra 5% for commissions and inspection, another 10-20% for any maintenance issues. Is that a fair estimate?

When we bought our beach home we labeled it a second home and didn't have to put down the 25% that we would if it was a commercial loan.

 

[FreeBaGeL]

@Chadstroma - not sure this is the right place, but if someone were to get into short term rentals, I assume 20% down is almost required, but how much else would you budget a year or two out? I assume an extra 5% for commissions and inspection, another 10-20% for any maintenance issues. Is that a fair estimate?

Lenders have tightened down on it a lot and the terms aren't nearly as good as they used to be, but a lot of people buy STRs as "second homes" with the intent to used the property themselves some as well, in which case there are 10% down products available. It's not like it was in the golden age post-covid where you could essentially get the same terms you could on a primary mortgage, but saves cash out of pocket.

STRs are my main business (I own several and am a property manager for others) so happy to help how I can on STR related questions.

 

[Chadstroma]

@Chadstroma - not sure this is the right place, but if someone were to get into short term rentals, I assume 20% down is almost required, but how much else would you budget a year or two out? I assume an extra 5% for commissions and inspection, another 10-20% for any maintenance issues. Is that a fair estimate?

When we bought our beach home we labeled it a second home and didn't have to put down the 25% that we would if it was a commercial loan.

Which would be mortgage fraud if not actually a second home.

To be considered a second home, you must reside there two weeks of the year. If you do that and finance as a second home then STR it out the rest of the year then you are good to go. If you are not staying there two weeks of the year then you are committing mortgage fraud. What are the chances of that becoming a thing? Not high. But if for any reason it does then you are in a bad spot real quick. Beyond any legal issues the lender can and will call the loan in. At that point, I think they time frame they give is two weeks but don't quote me on that time frame part.

Also, you have to be in full control of the property at all times. Meaning you must rent it out by agreement or management company.

 

[-OZ-]

@Chadstroma - not sure this is the right place, but if someone were to get into short term rentals, I assume 20% down is almost required, but how much else would you budget a year or two out? I assume an extra 5% for commissions and inspection, another 10-20% for any maintenance issues. Is that a fair estimate?

Lenders have tightened down on it a lot and the terms aren't nearly as good as they used to be, but a lot of people buy STRs as "second homes" with the intent to used the property themselves some as well, in which case there are 10% down products available. It's not like it was in the golden age post-covid where you could essentially get the same terms you could on a primary mortgage, but saves cash out of pocket.

STRs are my main business (I own several and am a property manager for others) so happy to help how I can on STR related questions.

Any chance you’d be around eastern South Carolina?

I’m a lawyer so definitely not playing loose with rules which could get me disbarred. But we’d plan to be there at least two weeks a year anyway.
Almost definitely using a management company.

 

[FreeBaGeL]

@Chadstroma - not sure this is the right place, but if someone were to get into short term rentals, I assume 20% down is almost required, but how much else would you budget a year or two out? I assume an extra 5% for commissions and inspection, another 10-20% for any maintenance issues. Is that a fair estimate?

Lenders have tightened down on it a lot and the terms aren't nearly as good as they used to be, but a lot of people buy STRs as "second homes" with the intent to used the property themselves some as well, in which case there are 10% down products available. It's not like it was in the golden age post-covid where you could essentially get the same terms you could on a primary mortgage, but saves cash out of pocket.

STRs are my main business (I own several and am a property manager for others) so happy to help how I can on STR related questions.

Any chance you’d be around eastern South Carolina?

I’m a lawyer so definitely not playing loose with rules which could get me disbarred. But we’d plan to be there at least two weeks a year anyway.
Almost definitely using a management company.

I believe 14 days is the number of days you need to reach per year so if you're there 2 full weeks that would probably do it, but I'm not a lawyer so not legal advice and all that.

Just be very upfront with the lender about it. There are some lenders that are more amenable to this than others (even STR focused lenders out there now that expect this kind of thing). I would imagine a big bank would scoff at it.

 

[Chadstroma]

@Chadstroma - not sure this is the right place, but if someone were to get into short term rentals, I assume 20% down is almost required, but how much else would you budget a year or two out? I assume an extra 5% for commissions and inspection, another 10-20% for any maintenance issues. Is that a fair estimate?

Lenders have tightened down on it a lot and the terms aren't nearly as good as they used to be, but a lot of people buy STRs as "second homes" with the intent to used the property themselves some as well, in which case there are 10% down products available. It's not like it was in the golden age post-covid where you could essentially get the same terms you could on a primary mortgage, but saves cash out of pocket.

STRs are my main business (I own several and am a property manager for others) so happy to help how I can on STR related questions.

Any chance you’d be around eastern South Carolina?

I’m a lawyer so definitely not playing loose with rules which could get me disbarred. But we’d plan to be there at least two weeks a year anyway.
Almost definitely using a management company.

I believe 14 days is the number of days you need to reach per year so if you're there 2 full weeks that would probably do it, but I'm not a lawyer so not legal advice and all that.

Just be very upfront with the lender about it. There are some lenders that are more amenable to this than others (even STR focused lenders out there now that expect this kind of thing). I would imagine a big bank would scoff at it.

So.... yes and no.

There are loan guidelines if you are doing a conforming conventional loan (which you typically are doing if doing a second home). Lenders can add to the rules but can't take away from the rules. Here is a copy and paste from Fannie Mae guidelines (Freddie Mac is basically the same) for what is considered a second home (and you agree to in the terms of the loan and not doing them would amount to mortgage fraud):

So more detail from what I gave here. The interesting thing is that they don't define the time limit here so that is given up to interpretation which I have always got back from lenders as being defined as two weeks. This, though, gives leniency. If the mortgage docs are written up as the guidelines then one week or a couple of long weekends etc would be "some portion of the year".

Second Home Properties​

The table below provides the requirements for second home properties.

✓	Second Home Requirements
	must be occupied by the borrower for some portion of the year
	is restricted to one-unit dwellings
	must be suitable for year-round occupancy
	the borrower must have exclusive control over the property
	must not be rental property or a timeshare arrangement 1
	cannot be subject to any agreements that give a management firm control over the occupancy of the property
	must be underwritten in DU and receive an Approve/Eligible recommendation, with the exception of high LTV refinance loans required to be underwritten in accordance with the Alternative Qualification Path (see B5-7-03, High LTV Refinance Alternative Qualification Path).

1. If the lender identifies rental income from the property, the loan is eligible for delivery as a second home as long as the income is not used for qualifying purposes, and all other requirements for second homes are met (including the occupancy requirement above).

An LLPA applies to certain loans secured by second homes. This LLPA is in addition to any other price adjustments that are otherwise applicable to the particular transaction. See the Loan-Level Price Adjustment (LLPA) Matrix.

- - -
For non-QM/portfolio STR loans, they can make up whatever rules they want to since they are either keeping them on the books or packaging into MBS directly to the secondary and not being sold to Fannie or Freddie but then again, the STR mortgages should normally be more restrictive than a second home would be as they would be considered riskier.

 

[unckeyherb]

@Chadstroma - not sure this is the right place, but if someone were to get into short term rentals, I assume 20% down is almost required, but how much else would you budget a year or two out? I assume an extra 5% for commissions and inspection, another 10-20% for any maintenance issues. Is that a fair estimate?

When we bought our beach home we labeled it a second home and didn't have to put down the 25% that we would if it was a commercial loan.

Which would be mortgage fraud if not actually a second home.

To be considered a second home, you must reside there two weeks of the year. If you do that and finance as a second home then STR it out the rest of the year then you are good to go. If you are not staying there two weeks of the year then you are committing mortgage fraud. What are the chances of that becoming a thing? Not high. But if for any reason it does then you are in a bad spot real quick. Beyond any legal issues the lender can and will call the loan in. At that point, I think they time frame they give is two weeks but don't quote me on that time frame part.

Also, you have to be in full control of the property at all times. Meaning you must rent it out by agreement or management company.

Sure I guess that makes sense. We’re down there way more than that, I assume that’s what most people do. Rent enough weeks to supplement and basically have a vacation home that funds itself.

 

[-OZ-]

@Chadstroma - not sure this is the right place, but if someone were to get into short term rentals, I assume 20% down is almost required, but how much else would you budget a year or two out? I assume an extra 5% for commissions and inspection, another 10-20% for any maintenance issues. Is that a fair estimate?

When we bought our beach home we labeled it a second home and didn't have to put down the 25% that we would if it was a commercial loan.

Which would be mortgage fraud if not actually a second home.

To be considered a second home, you must reside there two weeks of the year. If you do that and finance as a second home then STR it out the rest of the year then you are good to go. If you are not staying there two weeks of the year then you are committing mortgage fraud. What are the chances of that becoming a thing? Not high. But if for any reason it does then you are in a bad spot real quick. Beyond any legal issues the lender can and will call the loan in. At that point, I think they time frame they give is two weeks but don't quote me on that time frame part.

Also, you have to be in full control of the property at all times. Meaning you must rent it out by agreement or management company.

Sure I guess that makes sense. We’re down there way more than that, I assume that’s what most people do. Rent enough weeks to supplement and basically have a vacation home that funds itself.

That’s the goal. Eventually spend 4-6 months there every winter. Rent it out April to September, any weeks it isn’t rented we’ll go.

 

[Chadstroma]

@Chadstroma - not sure this is the right place, but if someone were to get into short term rentals, I assume 20% down is almost required, but how much else would you budget a year or two out? I assume an extra 5% for commissions and inspection, another 10-20% for any maintenance issues. Is that a fair estimate?

When we bought our beach home we labeled it a second home and didn't have to put down the 25% that we would if it was a commercial loan.

Which would be mortgage fraud if not actually a second home.

To be considered a second home, you must reside there two weeks of the year. If you do that and finance as a second home then STR it out the rest of the year then you are good to go. If you are not staying there two weeks of the year then you are committing mortgage fraud. What are the chances of that becoming a thing? Not high. But if for any reason it does then you are in a bad spot real quick. Beyond any legal issues the lender can and will call the loan in. At that point, I think they time frame they give is two weeks but don't quote me on that time frame part.

Also, you have to be in full control of the property at all times. Meaning you must rent it out by agreement or management company.

Sure I guess that makes sense. We’re down there way more than that, I assume that’s what most people do. Rent enough weeks to supplement and basically have a vacation home that funds itself.

If the property is a second home, as described by Fannie/Freddie, then great. You used the word "label" which is concerning because it hints to calling it something without it actually being it. At the core, it doesn't matter what you call it, it matters what it is. It is a not uncommon perception that you can just say a property is whatever occupancy to get better mortgage terms. The most common is buying a second home or investment but saying it is a primary. But buying an investment and saying it is a second home is still occupancy fraud if it is indeed not a second home. Some people don't realize that that is indeed fraud and if caught there are consequences. Of course, like everything else, some just don't care if it is fraud or not. I would never knowingly help finance a property that I knew a client was committing occupancy fraud. Getting one loan done is not worth losing my license for life.

 

[Chadstroma]

Why so many Americans feel trapped in their homes by their low-rate mortgages

At today's rates, most homeowners would have to finance a new home at a higher rate than their current one, creating an incentive to stay put.

www.cnbc.com

 

[-OZ-]

Why so many Americans feel trapped in their homes by their low-rate mortgages

At today's rates, most homeowners would have to finance a new home at a higher rate than their current one, creating an incentive to stay put.

www.cnbc.com

Portable mortgages, seller financing, and even assumable mortgages would help alleviate the issue.
Although most people probably aren’t inclined to use seller financing.

 

[Chadstroma]

Why so many Americans feel trapped in their homes by their low-rate mortgages

At today's rates, most homeowners would have to finance a new home at a higher rate than their current one, creating an incentive to stay put.

www.cnbc.com

Portable mortgages, seller financing, and even assumable mortgages would help alleviate the issue.
Although most people probably aren’t inclined to use seller financing.

Portable mortgages is really a Canadian/UK/Aussie thing... I have never seen them here in the states.

Seller financing can be a whole can of worms.

Government backed loans (VA, FHA and USDA) are assumable. There are some big problems with that though. First, the biggest is that in order to do an assumable the buyer needs to have cash for the price shortfall. So, if the current mortgage is $100K and the purchase price is $400K then they need to bring $300K to the table along with closing costs. The second issue is that the processing has a reputation for being sucky/slow. Essentially the lender that the seller does the qualifying and really there is no incentive for them to really do it well/quickly. Finally, for VA in particular, a huge issue is that if a seller gives the VA as assumable then their benefits are locked up in that mortgage and they are unable to use their VA benefits to purchase a new home.

When rates get down around 5% this will not be as much of a thing. Current rates are slightly higher than 'normal' rates (which historically is considered around the 6's).

 

[Buckna]

“Wood said he’d be more likely to move if rates came down to “the 4%-5% range.”“

Aye, there’s the rub though. If rates came back down to that level I guarantee we’ll be right back to the insanity and bidding war we saw in much of the country just 18 months ago. There’s still a massive supply issue in many areas, only difference is most people are sitting on the sidelines now waiting for rates to come down which is building up a backlog of demand. Unless we see a real recession which doesn’t seem to be happening the demand for SFH’s is still very much out there, it’s just hibernating for now.

 

[Chadstroma]

“Wood said he’d be more likely to move if rates came down to “the 4%-5% range.”“

Aye, there’s the rub though. If rates came back down to that level I guarantee we’ll be right back to the insanity and bidding war we saw in much of the country just 18 months ago. There’s still a massive supply issue in many areas, only difference is most people are sitting on the sidelines now waiting for rates to come down which is building up a backlog of demand. Unless we see a real recession which doesn’t seem to be happening the demand for SFH’s is still very much out there, it’s just hibernating for now.

Yea, not as much but yea....

I keep telling people that the interest rate shouldn't be a factor in your buying decision (selling is different) other than you can afford/qualify with that rate. Once you have the house, if rates go up or stay the same then waiting did nothing for you. If rates go down then you can refinance and then you aren't beating off other potential buyers who jump back into the market to try to win a house bid.

 

[Chadstroma]

“Wood said he’d be more likely to move if rates came down to “the 4%-5% range.”“

Aye, there’s the rub though. If rates came back down to that level I guarantee we’ll be right back to the insanity and bidding war we saw in much of the country just 18 months ago. There’s still a massive supply issue in many areas, only difference is most people are sitting on the sidelines now waiting for rates to come down which is building up a backlog of demand. Unless we see a real recession which doesn’t seem to be happening the demand for SFH’s is still very much out there, it’s just hibernating for now.

Also, recessions actually, as a rule, drive RE valuations higher. The last one, 2008 which RE was the cause of the recession was the outlier. If I remember, right, if you look at the last 10 recessions for the last few decades, RE valuations increased in 8. (I am going off memory here so I could be off on the specifics of those numbers but you get the gist even if I may be a little off)

The reason is rates. Recession means lower rates and that drives RE activity.

 

[-OZ-]

Why so many Americans feel trapped in their homes by their low-rate mortgages

At today's rates, most homeowners would have to finance a new home at a higher rate than their current one, creating an incentive to stay put.

www.cnbc.com

Portable mortgages, seller financing, and even assumable mortgages would help alleviate the issue.
Although most people probably aren’t inclined to use seller financing.

Portable mortgages is really a Canadian/UK/Aussie thing... I have never seen them here in the states.

Seller financing can be a whole can of worms.

Government backed loans (VA, FHA and USDA) are assumable. There are some big problems with that though. First, the biggest is that in order to do an assumable the buyer needs to have cash for the price shortfall. So, if the current mortgage is $100K and the purchase price is $400K then they need to bring $300K to the table along with closing costs. The second issue is that the processing has a reputation for being sucky/slow. Essentially the lender that the seller does the qualifying and really there is no incentive for them to really do it well/quickly. Finally, for VA in particular, a huge issue is that if a seller gives the VA as assumable then their benefits are locked up in that mortgage and they are unable to use their VA benefits to purchase a new home.

When rates get down around 5% this will not be as much of a thing. Current rates are slightly higher than 'normal' rates (which historically is considered around the 6's).

I’m just suggesting that the Feds could do something to address this, first by changing the VA rules when someone assumes your mortgage. Couldn’t Someone just take a second mortgage for the difference?
I’m not sure what all would go into the program but if portable mortgages work in Canada why not the US?
I realize these are systemic issues but one would think they could be worked through, if enough people cared.

 

[Buckna]

“Wood said he’d be more likely to move if rates came down to “the 4%-5% range.”“

Aye, there’s the rub though. If rates came back down to that level I guarantee we’ll be right back to the insanity and bidding war we saw in much of the country just 18 months ago. There’s still a massive supply issue in many areas, only difference is most people are sitting on the sidelines now waiting for rates to come down which is building up a backlog of demand. Unless we see a real recession which doesn’t seem to be happening the demand for SFH’s is still very much out there, it’s just hibernating for now.

Also, recessions actually, as a rule, drive RE valuations higher. The last one, 2008 which RE was the cause of the recession was the outlier. If I remember, right, if you look at the last 10 recessions for the last few decades, RE valuations increased in 8. (I am going off memory here so I could be off on the specifics of those numbers but you get the gist even if I may be a little off)

The reason is rates. Recession means lower rates and that drives RE activity.

Yes, i very much agree. There’s an inherent supply/demand imbalance that these rate fluctuations aren’t really solving or addressing. A deep job-loss recession might help bring prices down and force more foreclosures or distressed sellers but then there are bigger problems to worry about. Once rates start going down in a recession though people will start putting houses back on the market to help supply but nearly every person putting on the market is also going to be a buyer either upsizing or downsizing or relocating further driving demand along with all the folks that were sitting on the sidelines waiting for rates to come down.

About the only thing this fighting inflation is doing is buying time for the homebuilders and multifamily folks to put more stock out there to help address the imbalance. but its still going to take years to catch up after all the non-building for nearly a decade.

 

[The Z Machine]

its still going to take years to catch up after all the non-building for nearly a decade.

Like an entire decade where demand outstrips supply, levering up prices. The Gen Z kids are getting boned right now. They better hope their boomer grandparents leave them some $.

 

[stbugs]

“Wood said he’d be more likely to move if rates came down to “the 4%-5% range.”“

Aye, there’s the rub though. If rates came back down to that level I guarantee we’ll be right back to the insanity and bidding war we saw in much of the country just 18 months ago. There’s still a massive supply issue in many areas, only difference is most people are sitting on the sidelines now waiting for rates to come down which is building up a backlog of demand. Unless we see a real recession which doesn’t seem to be happening the demand for SFH’s is still very much out there, it’s just hibernating for now.

Also, recessions actually, as a rule, drive RE valuations higher. The last one, 2008 which RE was the cause of the recession was the outlier. If I remember, right, if you look at the last 10 recessions for the last few decades, RE valuations increased in 8. (I am going off memory here so I could be off on the specifics of those numbers but you get the gist even if I may be a little off)

The reason is rates. Recession means lower rates and that drives RE activity.

Yes, i very much agree. There’s an inherent supply/demand imbalance that these rate fluctuations aren’t really solving or addressing. A deep job-loss recession might help bring prices down and force more foreclosures or distressed sellers but then there are bigger problems to worry about. Once rates start going down in a recession though people will start putting houses back on the market to help supply but nearly every person putting on the market is also going to be a buyer either upsizing or downsizing or relocating further driving demand along with all the folks that were sitting on the sidelines waiting for rates to come down.

About the only thing this fighting inflation is doing is buying time for the homebuilders and multifamily folks to put more stock out there to help address the imbalance. but its still going to take years to catch up after all the non-building for nearly a decade.

Prices have gone up too much and all the non-sellers have great rates. 2008 was driven by so many people buying houses they couldn’t afford with low or no down payments. The walk away rate was huge even with a small drop in value and that’s not anywhere close to the current situation.

I think the supply issue and the great position most homeowners are in will keep any real big drops/foreclosure rates from happening.

Rates will matter to me in about 3 or so years. Bought a lakefront lot and the plan is to move (semi-retire/kids out of the house) and work from there. My wife had to be in the office now so that complicates it so hopefully that’s resolved by then and hopefully the equity in the house covers the new one.

 

[Chadstroma]

its still going to take years to catch up after all the non-building for nearly a decade.

Like an entire decade where demand outstrips supply, levering up prices. The Gen Z kids are getting boned right now. They better hope their boomer grandparents leave them some $.

Generational wealth is mostly found in RE for most Americans. If they are getting an inheritance, it most often is from a home.

 

[skol asylum]

I don't understand how it works but I recently heard from a dad on our kids softball team that he just bought a house. He tried to get the seller to somehow transfer the current loan over to him at the lower existing rate. Didnt know this was a thing They were hesitant to do so and instead he did the math and showed them what a higher rate does to him and instead negotiated a couple hundred thousand off the price to account for the higher rate. (1 mil plus loan). He said he then Bought down the rate for the first couple years (also didn't know you could do that) with the idea that rates will come down in 2-3 years and then he can refi. He's in the commercial real estate development business and obviously has a lot of knowledge on how to swing deals.

 

[Chadstroma]

I don't understand how it works but I recently heard from a dad on our kids softball team that he just bought a house. He tried to get the seller to somehow transfer the current loan over to him at the lower existing rate. Didnt know this was a thing They were hesitant to do so and instead he did the math and showed them what a higher rate does to him and instead negotiated a couple hundred thousand off the price to account for the higher rate. (1 mil plus loan). He said he then Bought down the rate for the first couple years (also didn't know you could do that) with the idea that rates will come down in 2-3 years and then he can refi. He's in the commercial real estate development business and obviously has a lot of knowledge on how to swing deals.

Some loans can be assumed.

Government backed loans (VA, FHA and USDA) are assumable. There are some big problems with that though. First, the biggest is that in order to do an assumable the buyer needs to have cash for the price shortfall. So, if the current mortgage is $100K and the purchase price is $400K then they need to bring $300K to the table along with closing costs. The second issue is that the processing has a reputation for being sucky/slow. Essentially the lender that the seller does the qualifying and really there is no incentive for them to really do it well/quickly. Finally, for VA in particular, a huge issue is that if a seller gives the VA as assumable then their benefits are locked up in that mortgage and they are unable to use their VA benefits to purchase a new home.

It sounds like he got sellers concessions and used it to do a temp buydown. It is fairly simple to do where you are paying points to buydown the rate but instead of buying down the rate a little bit for the life of the loan, you are buying it down for the first couple of years with the intention of refinancing if/when rates get lower. If not and you keep the loan, the rate goes up similar to an ARM but in this case there is no index and the rate will go up to the specific amount and be there for the life of the loan.

 

[-OZ-]

I don't understand how it works but I recently heard from a dad on our kids softball team that he just bought a house. He tried to get the seller to somehow transfer the current loan over to him at the lower existing rate. Didnt know this was a thing They were hesitant to do so and instead he did the math and showed them what a higher rate does to him and instead negotiated a couple hundred thousand off the price to account for the higher rate. (1 mil plus loan). He said he then Bought down the rate for the first couple years (also didn't know you could do that) with the idea that rates will come down in 2-3 years and then he can refi. He's in the commercial real estate development business and obviously has a lot of knowledge on how to swing deals.

Every so often I’ll window shop Redfin. One listing yesterday included the assumable VA loan at 2.75%. I’ll assume that’s a big time selling point even if it’s just half the mortgage (due to growth / paying down the mortgage).

 

[Chadstroma]

I don't understand how it works but I recently heard from a dad on our kids softball team that he just bought a house. He tried to get the seller to somehow transfer the current loan over to him at the lower existing rate. Didnt know this was a thing They were hesitant to do so and instead he did the math and showed them what a higher rate does to him and instead negotiated a couple hundred thousand off the price to account for the higher rate. (1 mil plus loan). He said he then Bought down the rate for the first couple years (also didn't know you could do that) with the idea that rates will come down in 2-3 years and then he can refi. He's in the commercial real estate development business and obviously has a lot of knowledge on how to swing deals.

Every so often I’ll window shop Redfin. One listing yesterday included the assumable VA loan at 2.75%. I’ll assume that’s a big time selling point even if it’s just half the mortgage (due to growth / paying down the mortgage).

Hopefully someone told that vet that their benefits will be tied up in that mortgage if they are looking to buy after selling. Unfortunately, and infuriating so, vets get used and abused by realtors and lenders all the time.