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Good News for Homebuyers: It May Get a Little Cheaper to Purchase a Home

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These days, those hoping to buy a home have to contend with consistently rising home prices and mortgage rates that stubbornly refuse to come down. As a result, many are looking for any possible way to save money on the homebuying process.

Luckily, some good news is on the way. More homebuyers will soon be able to buy a home without needing to pay for an appraisal.

That could save certain homebuyers hundreds of dollars on their home loan.

Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) that back most of the new mortgages originated in the U.S., recently announced that they are expanding a program that will allow many buyers to purchase homes without appraisals.

The changes are designed to allow “more borrowers, particularly first-time and low- to moderate-income borrowers, to benefit from cost savings and reduced closing times,” according to an announcement from Fannie and Freddie’s regulator, the Federal Housing Finance Agency.

The appraisal changes are expected to take effect in the first quarter of 2025, although the GSEs did not specify the exact date.

The rise of alternatives to home appraisals

Homebuyers typically pay between $300 and $699 for an appraisal, although some may cost more or less, according to a 2023 survey from the National Association of Realtors. Appraisals are usually required for home purchases and some refinances.

However, appraisal alternatives have increased in popularity over the last few years, driven by the pandemic, development of property valuation technology, and a desire to lower costs for homebuyers.

Fannie and Freddie have helped lead this charge by agreeing to accept alternative forms of appraisals, helping to save borrowers billions of dollars.

According to Fannie Mae, its acceptance of appraisal alternatives has saved borrowers more than $2.5 billion since 2020. Freddie Mac estimates that its appraisal waivers have saved borrowers more than $1.63 billion.

However, only borrowers who had a 20% down payment were eligible for these alternative appraisals.

That’s about to change.

Expansion of appraisal waivers to more homebuyers

Beginning in 2025, homebuyers with a 10% down payment for a Freddie- or Fannie-backed loan will not have to pay for an appraisal.

But that’s not the only expansion of the appraisal alternative program.

Fannie and Freddie both back mortgages with as little as 3% down. Prior to this announcement, homebuyers with the minimum down payment were not eligible for any form of appraisal waiver.

These borrowers will be eligible for an “inspection-based appraisal waiver,” which allows for the onsite collection of property information rather than a full appraisal.

Inspection-based appraisals typically cost around $200. That means borrowers with a 3% down payment or above could save hundreds of dollars on their loan given the lower cost of the inspection compared to a full appraisal.

The GSEs state that these changes will help people save money when they’re buying a home.

“We have been working to create new technology features that simplify the mortgage process and reduce costs for both borrowers and lenders,” Sonu Mittal, SVP and head of Single-Family Acquisitions at Freddie Mac, said in a statement.

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The Back and Forth on Interest Rates

Hello everyone. Welcome back to the Mortgage Rundown. Today we are going to talk about what’s happening with interest rates.

The last month has been very interesting to say the least.  Just when it looked like lower rates were a certainty thanks to the 50bps move by the Federal Open Market Committee (FOMC) last month, we sit here today with the 10yr yield 60 basis points higher. So, what happened?

Since the last Fed meeting we have seen data that has somewhat contradicted the FOMC’s 50 basis point move.  September’s unemployment rate actually went down after rising relatively consistently for nearly the past two years. Wage inflation is still very high and job openings actually moved higher for August. All signs point to a strong economy and that will hurt bond yields.

Not to mention we have an election right around the corner and there is a lot of concern in the market about the potential for more deficit spending and a new administration that is willing to increase Treasury issuance right as the economy starts to slow down. Also a big negative for bonds.

Call it a string of concerns around bonds and that’s why we have seen rates back up over the past month plus. 

That being said, earlier this week we did see the job openings number for September actually take a pretty big hit, and more importantly we have the unemployment rate tomorrow which should cause a lot of attention. 

Rates have moved so far since the last report, so the big question will be whether or not September was a blip in the face of rising unemployment or has the jobs market found some footing and the economy is likely to have a very soft landing, which could really impact rates.

That’s it everyone from the capital markets desk this week. Thank you all for watching and have a great day.

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Most Americans Would Purchase a Haunted Home—If the Price Was Right

Nearly three-quarters of Americans would buy a haunted home—if the price was right.

About 72% of folks would buy a home inhabited by ghosts if the property was discounted, according to a survey from the Real Estate Witch powered by Clever Real Estate. And they expect steep savings.

About 43% of potential buyers would offer a minimum of $50,000 less than market value to make up for those unwelcome occupants. Another 18% would have to get at least $100,000 knocked off the price.

Some brave buyers would also consider purchasing a haunted home if it was located in a safe neighborhood, had a big yard, or had recently been renovated or outfitted with newer appliances.

To come up with these findings, Clever Real Estate surveyed 1,000 Americans on Sept. 12 and 13.

“A haunted house would be a great option for those who want to save money by not paying full price for a home,” said Clever Real Estate spokesperson Jaime Seale in a statement. “It would be a no-brainer for budget buyers who also happen to like the supernatural or those who don’t believe or aren’t scared by the supernatural.”

Should you buy a haunted home?

However, haunted real estate isn’t for everyone.

Just over a quarter of folks living in a home inhabited by spirits regret purchasing that property. More than half, 54%, wouldn’t buy another home that comes with ghosts.

About two-thirds of folks living in haunted homes are stressed when they’re on their properties, about half say they’re scared, and just over a third say they don’t feel safe.

Many discovered something supernatural was going on when they heard weird noises; felt something touch or watch them; and saw odd shadows—or a ghost.

“Those who are scared of potential ghosts would really have to consider whether the savings are worth their peace of mind,” said Seale.

It may be harder to sell a haunted home

Buyers should beware. More than two-thirds of sellers said they wouldn’t tell buyers that their home was haunted unless they had to do so.

And nearly 70% of folks who have lived with ghosts say these properties are more difficult to sell and about 60% expect these homes will fetch a lower price.

That’s likely because almost half, 46%, of folks wouldn’t live in a haunted home. And two-thirds of Americans think sellers will cut the price of these homes.

“If a house has a known reputation for being haunted, buyers can likely get a pretty good deal,” said Seale.

Only four states have laws on the books about revealing that a home is haunted. They are Massachusetts, Minnesota, New Jersey, and New York.

“I can be difficult to determine ahead of time if a house is haunted,” said Seale. “It’s important for buyers to do their research to see if anything spooky or unusual has happened in the home so they have more negotiating power and don’t end up paying top dollar for a home that may not be worth the price.”

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What You Need to Know About FHA Streamline Refinances

Are you looking to lower the monthly payment on your FHA mortgage? A refinance could be the answer. And one of the nice things about Federal Housing Administration (FHA) loans is that they come with a relatively unique refinancing option, the FHA streamline refinance. 

These types of refinances are pared down and cost less than other refinancing options.

So, what makes this type of loan so different? Here’s what you need to know.

What is an FHA Streamline Refinance?

An FHA streamline refinance is a type of mortgage refinance specifically for FHA-backed loans. It’s simpler than other types of refinances, requiring fewer steps and verifications. According to the FHA, the loan is designed to provide a “net tangible benefit” to the borrower, meaning the borrower must benefit in some way from the new loan.

However, FHA streamline refinances have a few more stipulations on how you can refinance compared to other types of loans. For example, you typically can’t use an FHA streamline for a higher monthly payment or interest rate. 

Ralph DiBugnara, regional vice president with New American Funding, said this is because an FHA streamline refinance rarely requires an appraisal or an income or credit verification—something most banks or lenders require in typical refinances. 

But ensuring homeowners don’t end up with a higher monthly payment keeps the refinancing fairly low risk for the lender. It also helps to lower the cost for the borrower.

Pros of FHA Streamline Refinances

The fact that there is typically no need for an appraisal is one of the biggest benefits of an FHA streamline refinance. FHA streamline refinances base your new loan amount on how much you still owe on your mortgage, rather than how much your home is currently appraised for. 

This may make it an attractive option for homeowners whose mortgages are underwater (aka, the borrower owes more on the home than it is currently worth). 

Credit checks are not always required either on streamline refinances. This may help homeowners with lower scores.

“There are no minimum credit score requirements, as long as the mortgage holder has made at least six mortgage payments,” said DiBugnara. 

Depending upon the type of FHA refinance, your income may not need to be verified, either. 

This simpler refinancing process is what gives the FHA streamline refinance its name—it’s a refinance with fewer steps, less paperwork, and a faster closing time than other types of refinancing. 

Armine Arutunian, a loan consultant with New American Funding who is based in Downey, Calif., added that the “FHA streamline is great for those families who want to reduce their interest rate without taking cash out.”

FHA streamline refinances also allow borrowers to change the type of loan they have—they can convert their adjustable-rate mortgage to a fixed-rate mortgage and vice versa. 

Homeowners can also use an FHA refinance to lengthen the term of their loan by up to 12 years, lowering the monthly payment in return.

Cons of FHA Streamline Refinances

The uniqueness of an FHA streamline refinance comes with a few downsides, too. Homeowners typically can’t use an FHA streamline refinance to shorten their loan term unless it also decreases their monthly payment by $50 or more. 

This means that a borrower looking to reduce the amount of interest they pay over time by paying more in principal (the amount originally borrowed from the lender) each month wouldn’t be able to take advantage of an FHA streamline refinance. 

In addition, if you’re looking to get cash out of your equity by refinancing, FHA streamline refinances aren’t a great option. That’s because you can only get up to $500 cash back on an FHA streamline refinance. 

Consider a home equity line of credit or a cash-out refinance instead if you’re hoping to get some cash via refinancing. 

Streamline refinances also require you to continue paying mortgage insurance if your down payment was 10% or less. Down payments above this amount will still need to pay mortgage insurance for 11 years. 

And of course, FHA streamline refinances come with one major downside that “you will see in most refinances: There are still closing costs,” said DiBugnara. 

But he noted that these costs can be rolled into the equity or principal of the home, often in return for a higher mortgage rate.

Ralph DiBugnara NMLS # 19269

Armine Arutunian NMLs # 251075

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The Impact of Lower Mortgage Rates: Home Sales Set to Rise After September Rate Retreat

If anyone ever doubted the impact of lower mortgage rates on the housing market, consider what happened in September.

Pending home sales, an indicator of future home sales based on contract signings, increased substantially in September, according to a new report from the National Association of Realtors (NAR).

The number of homes going under contract jumped by 7.4% from August to September, representing the biggest monthly increase in four years. In addition, September had the most homes going under contract since March. Contract signings were also up 2.6% compared to September of 2023.

The reason for the increase in pending sales was that mortgage rates fell precipitously in anticipation of the U.S. Federal Reserve cutting its interest rates for the first time in four years in September. When that happened, mortgage rates fell to a two-year low.

They averaged 6.08% for 30-year, fixed-rate loans in the week ending Sept. 26, according to Freddie Mac.

Those lower rates, down from a recent peak of 7.79% in the week ending Oct. 26, 2023, incentivized more buyers to jump back into the market.

“Contract signings rose across all regions of the country as buyers took advantage of the combination of lower mortgage rates in late summer and more inventory choices,” said NAR Chief Economist Lawrence Yun. “Further gains are expected if the economy continues to add jobs, inventory levels grow, and mortgage rates hold steady.”

The increase was most seen in the western part of the country, where pending home sales jumped by nearly 10% in September. That may be at least partially because homes are generally more expensive in that region. So, even small drops in mortgage rates can make a big difference in a buyer’s monthly payments.

Contract signings were up by 7.1% in the Midwest, 6.7% in the South, and 6.5% in the Northeast.

However, mortgage rates have risen in recent weeks averaging 6.54% in the week ending Oct. 24, according to Freddie Mac. That could lead some would-be homebuyers back to the sidelines as they wait for rates to come back down.