Posts Tagged salt lake city

Freddie Mac says home affordability is lessening at rates increase

Freddie Mac’s December U.S. Economic & Housing Market Outlook reported in June on how rising rates would affect home affordability throughout the U.S. Freddie Mac determined that the answer is “it depends”. Mostly it depends on what area of the country you live in and how quickly the home prices are rising in that area.

Freddie Mac determined that in most markets rates would have to rise to 7% before home became unaffordable to the typical family. What we do see though is rising rates affects how much home a buyer qualifies for, and as home prices and rates increase, the quality of home the typical buyer can afford will decrease.

Right now at least 50% of Utah households would qualify for mortgage loan of $248,000, which with 5% down on a Conventional loan would equate to roughly a $261,000 purchase price.

If interest rates rise 0.5% the purchase price drops to $247,000. If they rise a full percent above the current level home purchase power drops to $236,0000.

The good news is that right now this still puts most homes in Salt Lake County within the budget of 50% of Utah households. I think what we are going to see if rates continue to rise is a stabilizing of home prices, or at least not the double-digit gains of the past couple of years. With affordability going down, offering prices will be lower and thus home values in general will not continue to increase at their current rate.

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Commission Income and Mortgages

Many people earn part or all of their income from commissions. Commission income is permissible for mortgage loan qualification if a few requirements are met.

Generally, Conventional, FHA and VA loans require that the applicant have received the commission income for at least two years. The amount of income used to qualify will be based on an average of the past two years of commissions. Commission income should for the most part also show increases from year to year.

There are some borrowers that will qualify with less than the two years of commission income. These would be people that work for a company on a regular basis, but get paid piece work; such as auto mechanics, auto body repair technicians, medical billing transcribers and others that work a steady job for a company, but that company has chosen to treat their employees as private contractors. In such cases less than two years of commission income is permissible, however there must be at least twelve (12) months of commission income and a year of tax returns filed with commission income.

It is by no means a deal-killer if you’ve recently gone from being W-2’d to 1099’d, but you do have to have received 1099 income for at least twelve (12) months and filed tax returns with such before it can be counted as qualifying income for a mortgage loan, and must be documentable as continuing in the future.

As always, don’t hesitate to contact me with any questions you may have.

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Salt Lake City and Provo added to the Improving Market List

Salt Lake City and Provo have been added to the Improving Housing Markets (IHM) list maintained by the National Association of Home Builders (NAHB). Since December the list has added 57 metro areas around the U.S., signaling at least a stabilization, if not a recovery, of the housing market in America.

Building permits for the Salt Lake City metropolitan area have increased 2.3% since it’s lowest point in March 2009, home prices are up 0.4% from it’s lowest point in March 2011 and employment is up 3.6% since February 2010.

Building Permits for the Provo metropolitan area are up 2.7% from it’s low in February 2009, home prices are up 1.1% since March 2011 and employment is up 4.6% since December 2009.

The Improving Housing Markets list identifies metropolitan areas that have shown improvements in employment, housing permits and home prices for at least six consecutive months. To measure market performance, the National Association of Builders gathers information from Freddie Mac, U.S. Census Bureau and the Bureau of Labor Statistics.

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