Nation’s Top Wholesale Mortgage Lender Launches New Line of Adjustable-Rate Mortgages

Posted on May 13th, 2021

Declaring that ARMs are back, United Wholesale Mortgage (UWM) has just rolled out a new line of adjustable-rate mortgages for its mortgage broker partners.

The new offering from the nation’s largest wholesale mortgage lender includes a 5-, 7-, and 10-year ARM to flank the usual fixed-rate options, such as the very popular 30-year fixed and the shorter-term 15-year fixed.

What makes these loans interesting is the fact that they come with significantly better pricing than fixed-rate mortgages currently available with other lenders.

And that might be enough to change the ARM argument, which has been decidedly dour for years now thanks to record low fixed mortgage rates.

How Long Will You Actually Keep Your Home Loan?

  • Something like 90% of purchase mortgages are 30-year fixed loans
  • And roughly 80% of all mortgages including refinances are 30-year fixed loans
  • Yet less than 10% of borrowers actually keep their home loan for more than seven years
  • This means the bulk of homeowners with a mortgage are overpaying for the perceived safety of a fixed interest rate

UWM aptly points out that fewer than 10% of borrowers stay in the same mortgage for more than seven years, yet something like 80% of mortgagors hold 30-year fixed mortgages.

In other words, a large majority are paying too much for their home loan, yet never actually receiving the benefit of an interest rate that is fixed for the life of the loan.

And because many adjustable-rate mortgages come with a lengthy initial fixed-rate period, many of these homeowners could actually benefit from an ARM without ever worrying about a rate adjustment.

UWM notes that pricing on its 7-year ARM could be anywhere from 50 to 75 basis points (.50%-0.75%) better than a 30-year fixed loan.

For example, if a 30-year fixed is priced at 3%, it might be possible to get a 7-year ARM for 2.25%.

If we’re talking about a $350,000 loan amount, that’s a payment difference of about $140 per month and roughly $18,000 in interest saved over 84 months.

That’s the draw of an ARM – to save you money while also providing a lower monthly payment while you hold the thing.

And if you get rid of it during the fixed-rate period, which in the case of these loans is 5, 7, or 10 years, you essentially win.

Are ARMs Set to Get Popular Again?

  • Adjustable-rate mortgages have mostly been a home loan choice for the very rich lately
  • The ARM share was just 3.8% of total mortgage applications last week per the MBA
  • That may begin to change as mortgage rates rise and lenders embrace ARMs again
  • UWM has been a leader in mortgage innovation so this could be a sign of things to come in the industry

Chances are ARMs will gain in popularity as fixed rates begin to rise, assuming that happens over the next few years.

They may appeal to both new home buyers who want a lower interest rate, and existing homeowners who want to tap equity via a cash out refinance.

The adjustable-rate mortgage was super popular during the housing boom in the early 2000s, though they often featured extra-risky options like interest-only payments and negative amortization.

While an ARM is still a risk to some degree, given you don’t really know where interest rates will be at first adjustment, those who do have a clear vision can benefit, as illustrated above.

UWM’s suite of ARMs are all tied to the newly-launched Secured Overnight Financing Rate, otherwise known as SOFR, the LIBOR’s replacement.

Additionally, they all adjust every six months once they become adjustable, meaning they are 5/6, 7/6, and 10/6 ARMs.

This can be slightly more stressful than an annually adjusting ARM, such as the popular 5/1 ARM or 7/1 ARM.

The good news is the cap at each adjustment is just 1%, meaning the interest rate can’t increase by any more than one percent every six months.

And remember, the first adjustments don’t start for 60, 84, or 120 months, respectively, which as UWM noted, shouldn’t affect many homeowners who either sell their homes or refinance before that time.

The new ARMs are available on primary, second, and investment properties, for purchases, rate and term refinances, and cash out refis.

They are conventional loans (backed by Fannie Mae or Freddie Mac) and a minimum FICO score of 640 is required, with a maximum loan-to-value (LTV) ratio of 95% is permitted.

UWM has been a bit of a vanguard in the mortgage space, so there’s a good chance other mortgage lenders will soon follow suit and begin offering ARMs at a discount to their fixed-rate counterparts.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


Do Mortgage Payments Increase?

Mortgage Q&A: “Do mortgage payments increase?”

While this sounds like a no-brainer question, it’s actually a little more complicated than it appears.

You see, there a number of different reasons why a mortgage payment can increase, aside from the obvious interest rate change. But let’s start with the obvious and go from there.

And yes, even if you have a fixed-rate mortgage your monthly payment can increase.

While that might sound like bad news, it’s good to know what’s coming so you can prepare accordingly.

Mortgage Payments Can Increase with Interest Rate Adjustments

  • If you have an ARM your monthly payment can go up or down
  • This is possible each time it adjusts, whether every six months or annually
  • To avoid this payment surprise, simply choose a fixed-rate mortgage instead
  • FRMs are actually pricing very close to ARMs anyway so it could be in your best interest just to stick with a 15- or 30-year fixed

Here’s the easy one. If you happen to have an adjustable-rate mortgage, your mortgage rate has the ability to adjust both up or down, as determined by the interest rate caps.

It can move up or down once it initially becomes adjustable (after the initial teaser rate period ends), periodically (every year or two times a year) and throughout the life of the loan (by a certain maximum number, such as 5% up or down).

For example, if you take out a 5/1 ARM, it’s first adjustment will take place after 60 months.

At this time, it could rise fairly significantly depending on the caps in place, which might be 1-2% higher than the start rate.

So if your ARM started at 3%, it might jump to 5% at its first adjustment.

On a $300,000 loan amount, we’re talking about a monthly payment increase of nearly $350. Ouch!

Simply put, when the interest rate on your mortgage goes up, your monthly mortgage payments increase. Pretty standard stuff here.

To avoid this potential pitfall, simply go with a fixed-rate mortgage instead of an ARM and you won’t ever have to worry about it.

Or you can refinance your home loan before your first interest rate adjustment to another ARM. Or go with a fixed-rate mortgage instead.

Or simply sell your home before the adjustable period begins. Plenty of options really.

Mortgage Payments Increase When the Interest-Only Period Ends

  • Your payment can also surge higher if you have an interest-only loan
  • At that time it becomes fully-amortizing, meaning both principal and interest payments must be made
  • It’s doubly expensive because you’ve been deferring interest for years prior to that
  • This explains why these loans are a lot less popular today and considered non-QM loans

Another common reason for mortgage payments increasing is when the interest-only period ends, an issue that was common prior to the last housing crisis.

Typically, an interest-only home loan becomes fully amortized after 10 years.

In other words, after a decade you won’t be able to make just the interest-only payment.

You will have to make principal and interest payments to ensure the loan balance is actually paid down.

And guess what – the fully amortized payment will be significantly higher than the interest-only payment, especially if you deferred principal payments for a full 10 years.

Simply put, you’ll be paying the entire beginning loan balance in 20 years instead of 30, assuming the loan term was for 30 years, because interest-only payments mean the original loan amount remains untouched.

This can result in a big monthly payment increase, forcing many borrowers to refinance their mortgages.

Just hope interest rates are favorable when this time comes or you could be in for a rude awakening.

Mortgage Payments Increase When Taxes or Insurance Go Up

  • If your mortgage has an impound account your total housing payment could go up
  • An impound account results in homeowners insurance and property taxes being paid monthly
  • If those costs rise from year to year your total payment due could also increase
  • You’ll receive an escrow analysis annually letting you know if/when this may happen

Then there’s the issue of property taxes and homeowners insurance, assuming you have an impound account.

Even if you’ve got a fixed-rate mortgage, your mortgage payment can increase if the cost of property taxes and insurance rise, and they’re included in your monthly housing payment.

And guess what, these costs do tend to go up year after year, just like everything else.

A mortgage payment is often expressed using the acronym PITI, which stands for principal, interest, taxes, and insurance.

With a fixed-rate mortgage, the principal and interest amounts won’t change throughout the life of the loan. That’s the good news.

However, there are cases when both the homeowners insurance and property taxes can increase, though this only affects your mortgage payments if they are escrowed.

Keep an eye out for an annual escrow analysis which breaks down how much money you’ve got in your account, along with the projected cost of your taxes and insurance.

It may say something like “escrow account has a shortage,” and as such, your new payment will be X to cover that deficit.

You can typically elect to begin making the higher mortgage payment to cover the shortfall, or pay a lump sum to boost your escrow account reserves so your monthly payment won’t change.

Fortunately these annual payment fluctuations will probably be minor relative to an ARM’s interest rate resetting or an interest-only period ending.

Ultimately, it’s usually quite nominal because the difference is spread out over 12 months and typically not all that large to begin with.

But it’s still good to be prepared and budget accordingly as your housing payments will likely rise over time.

The takeaway here is to consider all housing costs before determining if you should buy a home, and make sure you know how much you can afford well before beginning your property search.

You’d be surprised at how the costs can pile up once you factor in the insurance, taxes, and everyday maintenance, along with the unexpected.

At the same time, mortgage payments have the ability to go down for a number of reasons as well, so it’s not all bad news.

And remember, thanks to our friend inflation, your monthly mortgage payment might seem like a drop in the bucket a decade from now, while renters may not see such relief.

Read more: When do mortgage payments start?


Is Paying Rent in Advance a Good Idea?

Thinking about handing over a stack of money to secure an apartment or get a rent discount? Be sure you know what you’re getting into.

In some instances a landlord might offer, or you might propose, paying rent in advance. This could be done to secure a particular property that is on the rental market, or to get a discount on rent.

Paying in advance could be a good idea depending on the circumstances, but be sure you know what you’re getting into — especially if you’re paying a significant amount like a full year’s rent upfront.

Paying ahead to secure a unit

If you are vying to rent a particular property and you believe the competition is fierce, you might think offering to pay a large amount of rent upfront could help seal the deal. Or the landlord might encourage you to do this to get the place. It could be a good idea if the rental is a great place for you at the right price. However, you do want to be careful of a few issues.

First, as with any rental property, watch out for fraud. Sometimes scammers try to rent a property they don’t own. It might be done fully online, or they might meet you at the property, gain access somehow, pretend they’re the landlord, and take your security deposit. They could also push you into providing upfront rent for the place to secure it. Unfortunately, if they are a fraudster, you’ll never see a dime of your money again.

To protect yourself, research the landlord and the property, and talk to a real estate agent about any concerns. Go meet the landlord at their office if possible, never wire money, and watch out if the deal seems too good to be true.

Even if the landlord is reputable, if they ask for extra rent upfront, try to verify that they’re not going into foreclosure. If they do lose the property, you’re pretty well protected under many states’ laws if you’ve paid rent.

Paying ahead to get discounted rent

If you are already living in the property and the option comes up to pay advance rent, it should come with a sweetener like reduced rent or some other benefit to you. You are taking a risk by paying upfront. What if the place burns down, or there is a flood, or you have to move out? Do you want to fight with a landlord over getting your money returned? It’s not worth it in most cases.

Sometimes it may make sense if there is a benefit sweetener to you. You’ll have to determine whether or not it is the right incentive for you to jump on it. A 10-percent discount might make paying a full year in advance a good option, but only if you are sure the landlord is stable and you’ll be able to get your full year of residency. A smaller discount might not be worth the risk.

Overall, these pay-in-advance options are infrequently available, but if one comes up and it’s a good arrangement with low risk, it might be to your benefit to open up that checkbook and make the deal.

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.


What Is a Mortgagee? Hint: It’s Not a Typo

Are You a Mortgagee or Mortgagor?

It’s mortgage Q&A time! Today’s question: “What is a mortgagee?”

No, it’s not a typo. I didn’t leave an extra “e” on the word mortgage by mistake, though it may appear that way.

Despite its striking appearance, it’s actually a completely different word, somehow, simply with the mere addition of the letter E.

Don’t ask me how or why, I don’t claim to be an expert in word origins.

Seems like a good way to confuse a lot of people though, and it has probably been successful in that department for years now.

You can blame the British English language for that, or maybe American English.

Anyway, let’s stop beating up on the English language and define the darn thing, shall we.

A “mortgagee” is the entity that originates (makes) and sometimes holds the mortgage, otherwise known as the bank or the mortgage lender.

They lend money so individuals like you and I can purchase real estate without draining our bank accounts.

It could also be your loan servicer, the entity that sends you a mortgage bill each month, and perhaps an escrow analysis each year if your loan has impounds.

The mortgagee extends financing to the “mortgagor,” who is the homeowner or borrower in the transaction.

So if you’re reading this and you aren’t a bank, you are the mortgagor. It’s as simple as that.

Another way to remember this rather confusing word jumble; Who is the mortgagee? Not me!!

Mortgagor Rhymes with Borrower, Kind Of


  • Here’s a handy way to remember the word mortgagor
  • It kind of rhymes with the word borrower…
  • Or even the word homeowner, which is also accurate if you hold a mortgage on your property

I was trying to think of a good association so homeowners can remember which one they are, instead of having to look it up every time they come across the word.

I believe I came up with a semi-decent, not great one. Mortgagor rhymes with borrower, kind of. Right? Not really, but they look and end similar, no?

Anyway, the real property (real estate) acts as collateral for the mortgage, and the mortgagee obtains a security interest in exchange for providing financing (a home loan) to the mortgagor.

If the mortgagor doesn’t make their mortgage payments as agreed, the mortgagee has the right to take possession of the property in question, typically through a process we’ve all at least heard of called foreclosure.

Assuming that happens, the property can eventually be sold by the mortgage lender to a third party to pay off any attached liens, or mortgages.

So if you’re still not sure, you are probably the mortgagor, also known as the homeowner with a mortgage. And your lender is the mortgagee. Yippee!

What makes this particular issue even more confusing is that it’s the other way around when it comes to related words like renters and landlords.

Yep, for some reason a landlord is known as a “lessor,” whereas the renter/tenant is known as the “lessee.” In other words, it’s the exact opposite for renters than it is for homeowners.

But I suppose it makes sense that both landlord and mortgage borrower are property owners.

What About a Mortgagee Clause?

mortgagee clause

  • An important document you may come across when dealing with homeowners insurance
  • Stipulates who the lender (mortgagee) is in the event there is damage to the subject property
  • Protects the lender’s interest if/when an insurance claim is filed
  • Since they are often the majority owner of the property

You may have also heard the term “mortgagee clause” when going through the home loan process.

It refers to a document that protects the lender’s interest in the property in the event of any damage or loss.

It contains important information about the mortgagee/lender, including name, address, etc. so the homeowners insurance company knows exactly who has ownership in the event of a claim.

Remember, while you are technically the homeowner, the bank probably still has quite a bit of exposure to your property if you put down a small down payment.

For example, if you come in with just a 3% down payment, and the bank grants you a mortgage for 97% of the home’s value, they are a lot more exposed than you are.

This is why hazard insurance is required when you take out a mortgage, to protect the lender if something bad happens to the property.

Conversely, if you buy a home with cash, as opposed to taking advantage of the low mortgage rates on offer, it’s your choice to insure it or not.

But more than likely, you’ll want insurance coverage on your property regardless.

In summary:

Mortgagee: Bank or mortgage lender
Mortgagor: Borrower/homeowner (probably you!)

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


Renters Insurance Required: A Win-Win for Apartment Owners & Tenants

Why are more property owners requiring renters insurance? The truth is it’s a mutually beneficial necessity.

By Barry Bridges 

In years past, an apartment-hunter might have been able to find a place with little more than the first and last month’s rent and a handshake.

But today, the conditions for signing a lease might include anything from a criminal background check to a pet interview.

Times have changed, and the changes go beyond the vetting process. A prime example is renters insurance, which has gone from something that your insurance agent might recommend to a lease stipulation.

An estimated 44 percent of property management companies require renters insurance at all of their properties, with another 40 percent making it mandatory at some of their properties, according to the National Multifamily Housing Council.

Why have so many apartment communities adopted mandatory renters insurance, and how should renters feel about it? The answer could be that necessity sometimes leads to positive outcomes.

The economics of insurance and liability

The trend toward mandatory renters insurance started gaining steam more than a decade ago.

In 2004, The Wall Street Journal reported that apartment companies had seen average increases as high as 50 percent in their property and liability insurance rates. In response, more property owners began making renters insurance mandatory.

The companies’ goal was to relieve the economic pressure by requiring tenants to share more of the risk and financial responsibility, possibly getting a break on their own insurance rates in the process.

At the time, many commercial properties faced higher prices for terrorism insurance as a result of the Sept. 11 attacks. In addition to the threat of property-damaging catastrophes, they were also facing the perennial concern of liability.

A renters policy that includes liability coverage could help reduce legal exposure for both tenant and landlord — if, for example, a guest suffers an injury on the property.

Sharing a cost and receiving a benefit

What made good financial sense for apartment companies in the early 2000s continues to make sense today.

What about renters, though?

Naturally, the idea of an apartment community’s ownership passing along costs to its tenants might not seem fair to all concerned. However, renters insurance offers tangible benefits regardless of whether you have your policy voluntarily or as a requirement of your lease.

  • In addition to liability protection, renters insurance can offer contents coverage if your belongings are damaged, destroyed, or stolen — something that a landlord’s insurance typically doesn’t offer. And if you think an apartment can’t hold enough property to justify the cost of insuring it, consider the research suggesting that the typical renter of a 2-bedroom apartment has $30,000 worth of possessions.
  • Renter’s insurance remains a bargain. In 2013, the average yearly cost of premiums was estimated at $188, or about $15 a month. Average premiums have stayed stable for most of the past decade.
  • You might be able to save money if you bundle a renters policy with your auto insurance, so be sure to ask your agent about that option.

The fact that the estimated number of renters insurance policies increased from 29 percent to 40 percent between 2011 and 2015 suggests that more renters have come to realize its value, in every sense of the word.

Mutually beneficial solutions

Keep in mind that every requirement for renting an apartment serves some kind of purpose. While the list of prerequisites and procedures has grown longer — and arguably more tedious — something that might seem like a bother at first could turn out to be a blessing later on.

Don’t think of renters insurance as one more hoop to jump through. Try to see it as turning a mutual necessity into a mutual benefit.


Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.


New Fannie/Freddie Refinance Option Drops Adverse Market Fee, Offers $500 Appraisal Credit

Posted on April 28th, 2021

In an effort to undo some of the damage the Federal Housing Finance Agency (FHFA) basically caused itself, it’s throwing a bone to so-called low-income families to save on their mortgage.

It all spurs from the adverse market fee the very same agency implemented back in August 2020 to contend with heightened losses related to COVID-19 forbearance and loss mitigation.

The 50-basis point fee, which went into effect on September 1st, 2020, applies to all new refinance loans backed by Fannie Mae and Freddie Mac.

While it’s not a .50% increase in mortgage rate, the fee does get passed along to consumers in the form of either higher closing costs or a slightly higher mortgage rate, perhaps an .125% increase all told.

Either way, it wasn’t well received at the time, and still isn’t today, and this announcement is a somewhat bittersweet one, as it only applies to a certain subset of the population.

Still, the FHFA believes families who are eligible for this new refinance initiative could see monthly savings between $100 and $250 on average.

Who Is Eligible for Adverse Market Fee Waiver and Appraisal Credit?

  • Applies to homeowners with incomes at or below 80% of the area median income and loan amounts at/below $300,000
  • Must result in savings of at least $50 in monthly mortgage payment, and at least a 50-basis point reduction in interest rate
  • Must currently hold an agency-backed mortgage (Fannie Mae or Freddie Mac)
  • Property must be a 1-unit single-family that is owner-occupied
  • Borrower must be current on their mortgage (no missed payments in past 6 months, 1 allowed in past 12 months)
  • Max LTV is 97%, max DTI is 65%, and minimum FICO score is 620

Perhaps the biggest eligibility factor is the borrower’s income must be at or below 80% of the area median income.

This new refinance program specifically targets what the FHFA refers to as low-income families, which director Mark Calabria said didn’t take advantage of the record low mortgage rates.

Apparently more than two million of these homeowners did not bother refinancing, even though it would have been advantageous to do so (and still is).

He noted that this new refinance option was designed to help eligible borrowers who have not already refinanced save somewhere between $1,200 and $3,000 annually on their mortgage payments.

That’s actually a requirement as well – the borrower must save at least $50 per month in mortgage payment, and their mortgage rate must be at least .50% lower.

For example, if your current mortgage rate is 4%, you’ll need a rate of at least 3.5% to qualify.

Additionally, you must currently have a home loan backed by either Fannie Mae or Freddie Mac, and your property must be owner-occupied and no more than one unit.

I assume condos/townhomes work as well, as long as it’s your primary residence.

The adverse market fee is waived as long as your income is at/below 80% of the area median AND your loan balance is at/below $300,000.

If your loan amount happens to be higher, my understanding is you can still get the $500 appraisal credit.

You’ve also got to be current on your mortgage, meaning no missed payments in past six months, and up to one missed payment in past 12 months.

Lastly, there is a maximum loan-to-value ratio of 97%, a max debt-to-income ratio of 65%, and a minimum FICO score is 620.

Most borrowers should have no issue with those requirements as they are extremely liberal.

Is This New Refinance Option a Good Deal for Homeowners?

  • It’s an excellent deal for those who haven’t refinanced their mortgages yet
  • You get a slightly lower mortgage rate and/or reduced closing costs
  • And with mortgage rates already super cheap it could be a double-win to save you some money
  • Even though who don’t qualify for this new program should check to see if a refinance could be worthwhile

As Calabria said, many higher-income homeowners probably already refinanced, or are currently refinancing their mortgages to take advantage of the low rates on offer.

Meanwhile, lots of lower income borrowers haven’t for one reason or another, perhaps because they’re not aware of the potential savings or had a bad experience with a mortgage lender in the past.

Whatever the reason, those who haven’t yet and meet the income requirement can take advantage of a refinance without the pesky adverse market fee.

That means they could get a mortgage rate maybe .125% lower than other borrowers who aren’t eligible for this program.

Additionally, they’ll get a $500 home appraisal credit from the lender, assuming the transaction doesn’t already qualify for an appraisal waiver.

Either way, eligible homeowners won’t have to pay for the appraisal, which is another plus to save on the refinance itself via lower closing costs.

It’s actually a great deal for those who haven’t refinanced yet because you might wind up with an even lower mortgage rate and reduced closing costs.

And because your new mortgage payment must be at least $50 cheaper per month, there’s less likelihood of it being a meaningless refinance.

All in all, this is good news for the so-called low-income homeowners who’ve yet to refinance, but bittersweet for everyone else.

Still, mortgage rates remain very attractive for everyone, so even if you have to pay the adverse market fee (and the appraisal fee), it could be well worth your while.

The FHFA said the new refinance option will be available to eligible borrowers beginning this summer, though it’s unclear exactly what date that is as of now.

Read more: When to a refinance a mortgage.


5 Things That Might Happen When You Go From Owning To Renting

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5 Things That Might Happen When You Go From Owning To Renting

In the age of “renting by choice”, the debate between renting an apartment vs. buying a home is starting to heat up.  No matter where you stand, you can’t argue with the fact that renting comes with a set of perks that homeowners don’t necessarily enjoy.  Millennials are often the focus of this discussion as they start to build a life, settle down and go from renting by necessity to shopping for a house to buy.  On the other end of the spectrum, however, are the retired set who no longer want or need to own the home they’ve been living in.  Rather than downsizing to a smaller (purchased) home, empty-nesters and retirees are beginning to consider renting an apartment as a more attractive option.  Here are a few things that might happen when you go from owning to renting.  

You Might Enjoy A Newfound Sense Of Freedom

Owning a home means being locked in until you’re able to sell the house.  This comes with a lot of uncertainty – timing, price, and terms of the sale are all relatively out of your control, which can be scary.  As a renter, you’re only locked in to the lease term that you agreed to upon move-in, and even then you can break your lease, typically with a penalty of some sort, such as one full month of rent payment or forfeiture of your security deposit.  This means that when your lease is up, you’re free to explore a different floorplan, apartment building, neighborhood, or even a new city altogether.

You Might Save Money (Or At Least Have More Predictable Expenses)

Depending on where you live (and just how much you’re downsizing), trading in your mortgage payments for rent payments can add some extra padding back to your wallet.  Renting means eliminating your mortgage payments and property taxes, but it also means cutting out those often unpredictable and poorly timed expenses like replacing an old roof or fixing a plumbing issue.  Having more predictable expenses to deal with, particularly after retirement, can be a very attractive notion.

You Might Pare Down To Just The Essentials (And Be Happy About It!)

Owning your own home often comes with the not-so-pleasant side effect of accumulating a ton of stuff over time.   When there’s an abundance of storage space available to you, like an attic, basement, or garage, it can be very easy to just put something away to deal with later rather than really taking the time to think about if and when you’ll need or want that item again in the future.  The process of clearing out this accumulated clutter can be a daunting one, but once it’s done, you’re likely to be more mindful about letting the clutter build up again.  Plus, your apartment isn’t as likely to have the extra space for stuff, even if you were tempted to fall back into that bad habit.

You Might Seriously Upgrade Your Surroundings & Amenities

Apartment communities, particularly in metro areas, are becoming more and more luxurious in their finish packages and amenity offerings, but developers are moving beyond simple luxury and putting some real thought into the amenities and features being offered.  In an age where residents are choosing to rent as a long term plan, the focus has turned to creating a rental space that provides as many of the comforts of home ownership as possible.  In your individual apartment, downsizing to a smaller floorplan could mean that you are able to upgrade your space with nicer and newer appliances and finishes.  In your apartment community, you may be able to enjoy amenity offerings ranging from rooftop gardens and swimming pools to state-of-the-art fitness centers and dog washing stations, right in the comfort of your own (extended) home.

You Might Get Your Weekend Back

In addition to eliminating most unexpected home expenses, renting means that when an issue does come up, the landlord or management company will most often be responsible for addressing the issue.  In addition, regular maintenance items like replacing your AC filter and mowing the grass will be a thing of the past.  This means you get to reclaim some of your weeknight and weekend time and use it to do something you love!

Interested in further exploring the idea of renting as a retiree?  Check out our piece for the Allstate Blog about Things To Consider Before Renting for Retirees.

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HAMP Gets Extended for Another Two Years

Today, the Treasury and U.S. Department of Housing and Urban Development (HUD) announced the much anticipated extension of the Home Affordable Modification Program (HAMP).

The program, which was originally launched in March 2009, was set to come to a close on December 31, 2013, but thanks to this most recent extension it will be open to homeowners until December 31, 2015.

Of course, one has to wonder who hasn’t taken advantage of the widely available loan modification program four years after its launch, but I digress.

1.1 Million Homeowners Have Received Assistance

HAMP default

Since HAMP was launched, more than 1.1 million struggling homeowners have received a permanent modification via the program.

The median monthly savings for borrowers is $546, or 38% of the previous mortgage payment, which is supposedly larger than the median savings with private loan mods, per OCC data.

The total amount saved equates to a whopping $19.1 billion, which ain’t too shabby.

However, more than two million trial modifications were started through HAMP since its inception, meaning nearly half of borrowers couldn’t even keep up with modified payments set to a front-end debt-to-income ratio of 31%.

Additionally, the default data on HAMP loans is pretty bad. If you take a look at the chart above, you’ll see that a good chunk of HAMP loans were either 60+ or 90+ days delinquent in seemingly no time at all.

Sure, the numbers have been getting better over time, but they’re still highly elevated, and one has to wonder if the improvement is more the result of the housing market’s resurgence than anything else.

For example, 41.5% of HAMP loan mods that became permanent in the third quarter of 2009 were 90+ days delinquent after three years.

Conversely, of the HAMP loan mods that went permanent in the third quarter of 2011, just 18.8% were 90+ days delinquent after 18 months.

So the default figures are trending lower, which is a positive for the program that has failed to live up to expectations from the get-go.

Part of that could have to do with an increase in principal reductions, seeing that borrowers will be more hopeful if they actually have a chance of getting above water.

Earlier HAMP loan mods were mainly interest rate reductions and/or mortgage term extensions, both of which didn’t seem to entice homeowners facing steep home price declines.

HARP the Real Winner


Another key component of the Making Home Affordable Program is HARP, the Home Affordable Refinance Program, which was also extended until 2015 last month.

Since April 2009, about 2.4 million homeowners have benefited from a mortgage rate reduction through the program. As you can see from the graph above, HAMP holds a small share of total refinance activity.

Most HARP homeowners hold underwater mortgages, some with loan-to-value ratios well north of 125%, which was the original LTV cutoff.

This program appears to be a lot more successful, seeing that borrowers can snag today’s ultra-low mortgage rates.

Additionally, HARP borrowers must be current on their mortgages, so the success rate is clearly going to be better than HAMP.

One has to remember that HAMP borrowers must have a financial hardship, so even if they default on the HAMP loan, it’s possibly a better alternative to a short sale or foreclosure.

Still, instead of focusing on HAMP, lawmakers may want to actively pursue an extension for HARP, that is, allowing newly originated mortgages to take part, as opposed to just those sold to Fannie and Freddie before May 31, 2009. HAMP has the same eligibility cutoff.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


Don’t Be a Desperate Home Buyer

It’s no secret the housing market is hot at the moment, so much so that just about everyone is wondering when the next housing crash will take place.

The few homes that are out there are flying off the shelves, and bidding wars are becoming more and more common, if not a foregone conclusion.

Instead of home sellers delivering price reductions to prospective buyers, as they did just a couple years ago, properties are going way above asking.

While some are quick to scream “Another housing crisis!,” for me it just reinforces the housing market dynamic we’ve seen over the past year and change.

One driven by limited housing supply, low mortgage rates, and rising salaries for prospective buyers, all of which increase both home prices and purchasing power.

At the moment, it’s clear the home sellers have all the leverage, but that doesn’t mean you still can’t negotiate or get a better deal.

Sure, the past few years have been crazy – but you shouldn’t have to write a letter to the seller begging them to accept your offer.

And while it’s still easy to get caught up in all the excitement, don’t forget that you have power too as the home buyer, no matter the market conditions.

Simply put, don’t be a desperate home buyer. Or a desperate buyer of anything. If you are, you’ll likely get ripped off, or at the least pay more than you need to.

Here are some things to consider to avoid being that desperate buyer, which might lead to a lower price and better choice of property.

Buy a Home at the Right Time for You

First off, make sure it makes sense to buy a home at any given time, not just for financial reasons.

I’m not talking about timing the market – I’m talking about not rushing into homeownership unless it makes sense for YOU.

This is part personal based on your life goals, needs, etc., and partially to do with the housing market in the area where you want to live.

While we can’t all control the timing, there’s no need to rush in when we’re talking about a costly home purchase.

It’s a big deal, and as such a lot of time, thought, and preparation should go into it. Forget about what those iBuyers are attempting to do.

Once you actually know homeownership is for you, there are some seasonal patterns to consider that could provide an edge.

One tip here is that spring tends to be the worst time to buy a home because it’s a time when the most prospective buyers are active.

While there might be more listings to offset the surge in buyers, it can be in your best interest to shop for a home during fall or winter, when competition is generally lower.

You could have an easier time negotiating with the seller, snagging a price reduction, getting repair requests approved, and so on.

The mortgage process might also be smoother if your lender, loan officer, underwriter, appraiser, and escrow officer aren’t totally swamped.

In summary, less stress and potentially a lower sales price if you can exercise some patience.

Get Pre-Approved for a Mortgage Before You Shop

This is a no-brainer, and one I’ve mentioned on many occasions. Without a pre-approval letter in hand, sellers won’t take you seriously, especially in today’s hot market.

The real estate agents won’t either, knowing a mortgage isn’t a sure thing. So take the time to get pre-approved first.

In fact, look for a mortgage before you search for a house!

This will also help you narrow down your property search to ensure you only consider homes in your price range.

It’ll also let you determine if you can bid a little extra if need be, knowing you’re approved for larger loan amounts.

Tip: With bidding wars common at the moment, lower your maximum purchase price in the Redfin/Zillow apps to allow for above-asking offers.

Set Aside Cash for Down Payment and Closing Costs

One key component of a mortgage approval is cash on hand. Without it, you won’t have funds to cover the down payment and/or the closing costs.

Sure, there are lots of loan programs that require very little, such as Fannie Mae HomeReady or the FHA’s flagship 3.5% down mortgage, and even zero options from the VA or USDA.

But it helps to have money in the bank so you can present a stronger offer to the seller, and give yourself the ability to negotiate.

If I’m a seller in a hot market, I’m going to want the buyer who can put 20% down on the purchase versus the buyer scraping together just enough funds to close.

That extra cash could also come in handy if the appraisal comes in low, which is probably happening more often as the market eases and overinflated prices drift back down to earth.

[What’s the Best Mortgage for First Time Buyers?]

Always, Always Negotiate, Even in a Seller’s Market

Speaking of negotiating, do it. Always. It doesn’t matter if it’s rent, a mortgage, or you’re getting a cavity filled. Always ask for a lower price.

Most times, folks will oblige just due to human nature, even if it’s a nominal discount.

It irks me that most people are happy just to accept whatever price is thrown at them. Or whatever price the listing agent says the seller is willing to accept.

You can almost always go lower. In most cases, the seller is going to be more desperate than you, even if they’ve supposedly got multiple offers.

They likely need to sell their home because they’ve made the commitment to do so, and you don’t need to buy their particular home.

The same is true for a brand new property, even if you’re told by the home builder that prices are firm.

Of course, it depends how much demand there is for their properties; if there’s a lot, they might not budge on their price. But it’s always worth a try regardless.

There will always be other homes on the market, so keep that in mind.

Don’t Show Your Hand to Anyone

A key tactic in the negotiating department is never showing your hand. And I mean never, ever, showing it, to anyone.

This includes your own real estate agent. If they know you’re in love with a particular house, they might not fight as hard to ask for credits or a lower price.

Sure, they should and might, but if you make it appear that you’re more than happy to walk, they’ll be on the phone with the listing agent warning them that the buyer is ready to walk.

That could be enough to get the sellers to act, and give into the buyer’s demands.

Basically, whatever you express to your own agent will likely be passed along to the listing agent.

Another approach is to peruse listings without a buyer’s agent, then simply contact the listing agent directly if you come across something you like.

This could provide an edge above other bidders if you’re represented by the listing agent’s brokerage.

Just be sure they have your best interests in mind and you don’t overpay for the house.

Be Willing to Move On No Matter What

Lastly, it is perfectly okay to walk away, whether it’s at the car dealership or the negotiating table with your real estate agent.

There are plenty of houses in the sea, and while it’s easy to get hung up on one particular property, it’s amazing how we often fall in love again and again.

More often than not, if a first property falls through or you don’t win the bid, you may look back grateful that it didn’t work out.

Typically, I hear something along the lines of “I’m glad we found this house.” Not “I wish we hadn’t missed out on that other home.”

Try to remember that when shopping homes and making offers.

It’s decidedly a seller’s market at the moment, which isn’t great for those entering the market, but that doesn’t mean you can’t employ the tactics above.

While home prices might appear steep, they aren’t so bad when you consider real housing prices adjusted for inflation.

And with mortgage rates so cheap, it could be a great time to lock in an absurdly low rate for the next 30 years.

Read more: When should you start looking for a house?