Number of homeowners set to explode

 Real Estate Market, Residential Mortgage  Comments Off on Number of homeowners set to explode
Oct 272015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

If you’re worried about the strength of the housing market, you may want to look at the Mortgage Bankers Association’s recently released Housing Demand report. The report predicts as many as 12.7 million new home-owning households by 2024, and it provides the statistics to back it up. That’s roughly 1.3 million a year – pretty significant.

MBA considered two scenarios. In the first, it held homeownership rates at 2014 levels, which were the lowest in decades. Under this scenario, MBA predicts 10.3 million new owner households by 2024. In the second scenario, it assumed that homeownership rates will revert to their long term averages, which are less than the pre-crash highs but higher than today’s low. Under this scenario, MBA predicts 12.7 million new owner households.

As you might imagine, the Millennial generation contributes positively to homeownership under both scenarios. However, it may surprise you that Baby Boomers are the main source of growth, 9.9 million households (96%) under the first scenario to 9.6 million (76%) under the second scenario.

Based on other recent studies that show Baby Boomers preferring to age in place, I’d suggest the results may underestimate the already enormous effect of that generation on the number of new owner households.

Regardless of which scenario plays out, it appears the next decade will witness much stronger housing demand and one of the largest expansions in the history of the US housing market.

Click here to view the report.

Tapping the Bank of Mom and Dad

 Owner-occupied, Residential Mortgage  Comments Off on Tapping the Bank of Mom and Dad
Apr 152015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

With studies showing millennials earning less than earlier generations of potential homebuyers, it’s reasonable to worry that they won’t be able to afford the down payment to purchase a home. With lower earnings, higher student debt, and higher rents, it seems unlikely they’ll have much left to save.

A new study by loanDepot suggests another source may be available: the Bank of Mom and Dad. The study shows that 17% of parents of millennial-aged children expect to help them purchase a home in the next 5 years. Half of those say they’ll contribute towards the down payment. Interestingly, this number is lower than in past years. However, a larger share of parents says they’ll help their kids pay student loans or other expenses.

Being an empty-nester, it surprised me that 22% said they would let their kids move back home to save money. Amd 20% said they’re likely to co-sign a loan for their children.

One of the more interesting results of the survey concerned attitudes about parental assistance. While more than two-thirds of parents viewed their financial support as a gift, less than a third of the kids agreed. Does requiring naming rights for the grandchildren really negate the generosity of the gift?

Qualifying for mortgage easier with new student loan guidelines

 Loan Guidelines, Residential Mortgage  Comments Off on Qualifying for mortgage easier with new student loan guidelines
Feb 022015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

Given all the media coverage about student loan debt keeping millennials out of the home purchase market, I thought it would be good to review some updated loan guidelines from Fannie Mae and USDA concerning this type of debt.

One important point to remember is that both loan programs treat deferred student loans the same as loans in active repayment, meaning we have to include the loans in our debt calculations.

Also, the guidelines recognize that income-based and graduated repayment plans, which have become popular, may not provide an accurate estimate of the loan’s impact on the borrower’s finances because the payment may rise. As a result, the guidelines require that we use a fixed percentage of the loan balance in our debt calculations.

On a very positive note, the updated guidelines cut that fixed percentage from 2% to 1% of the loan balance. This is a big deal because it reduces the impact of student loan debt by 50%. Further, if the actual payment is less than the 1% calculation, the guidelines state that we can use that payment, but only if it fully amortizes the loan. If the actual payment is greater than 1%, we must use the actual payment.

While USDA already has implemented the new guidelines, the changes won’t apply to Fannie loans until 4/1.