Over the past few years the number of people who have decided to rent our their condos in Boston rather than sell them has certainly increased, and in some cases dramatically so. The side of effect of all this renting is just beginning to show it’s face. We’ve already talked about how rentals are now priced sky high, (see here) but there is now a second side that is starting to show it’s face.

Owner Occupancy Rates

Most people have never really focused on this little used metric when buying a home, but it’s incredibly important. The most important use of this statistic is when it comes to getting a mortgage. Most mortgage companies want to see minimally 50% owner occupancy and most would like to see more than 60%. For many condo buildings in Boston this has never been a problem but with the increase in de-facto landlords many buildings are now flirting with this number. The result, it’s become another obstacle for many buyers to overcome, not just from a mental standpoint but from a closing standpoint.

The mental aspect is that buildings with high owner occupancy rates are generally better maintained, since the people living there have a vested interest in how the property looks. Since so many owners have now become de-facto landlords however, this type of thinking might need to shift. It needs to be recognized that some of these people will not be landlords much longer as the market improves.

If you have questions about Owner Occupancy Rates or other questions related to buying a home, contact our office at 617-449-3642.

Mortgage requirements continue to tighten, but one thing remains constant; buying a home on a freelance salary continues to be more difficult than on a regular salary. The number of freelance workers is on the rise thanks to a tough job market. As a result mortgage companies are seeing a rise in this type of application. So what can you do  if your  a freelancer looking to qualify for a loan this fall?

First you can provide proof of a down payment. It doesn’t matter whether it’s a gift from a family member or account statement showing the money sitting in a 401k/savings account. The important thing is being able to prove in a verifiable way that you have the down payment ready and waiting.

Second you can prepare for a tougher review of your application. Gather your tax returns from the past 3 years. If your income had a big jump in the past year be prepared to answer questions on why. When you work on a freelance basis one of the most important things your application can show is that your income is on the rise. They want to see that you’ve had steady income bumps over consecutive years.

Third be prepared to seek out local banks. Local banks are often willing to go beyond what’s on application itself and look at the person applying for the loan. Local banks are the go to place when new developments need financing, because they are willing to look beyond typical lending restrictions.

Getting a loan on a freelance income isn’t impossible but it’s important to remember the three points above in order make the process easier. If you have more question on home loans or qualifications be please be sure to contact Pat Tobin at pwtobin@metlife.com .

The Federal Housing Administration has announced that on April 18th they will be raising the Mortgage Insurance Premiums on the their loans. If you are thinking about purchasing a home and getting FHA financing you will need to be under contract on the property you are interested in with an active loan application by April 18th. The time frame gives buyers the next month to find the home they are interested in and make an offer. Buyers who wait until after the 18th are likely to see higher monthly payments due to the rate increase. For more questions on FHA financing in Boston you can call our office at 617-449-3642.

The end of an era is coming, the death of the 4% interest rate is not far off. If you’ve been watching mortgage rates for the past few months you’re well aware rates are on the rise, but it looks like they are about leave the 4% arena for good. In the past few weeks here in Massachusetts we’ve seen mortgage rates dance above 5% for a little bit but come back down. It is unlikely though we will see them go back down to the 50 year lows they were at earlier in the year. As mortgage rates begin to rise you can expect to see a small surge in the market with people looking to make a purchase before rates get too high.

Today the FHA is set to announce that it’s raising its standards for the loans it’s willing to guarantee. The new guidelines have a few big changes, but the one that will impact everyone, is the rise in initial insurance premium paid. In the new guidelines, the amount of MIP (Mortgage Insurance Premium) paid will rise from 1.75% to 2.25% of the value of the loan. Additional restrictions now include: the seller’s ability to help pay closing costs and minimum credit score for down payments. The new loan guidelines say the maximum amount of closing costs that can be paid by the seller is now 3% reduced from 6%. There will also be a credit score requirement in order to get the attractive 3.5% down payment. Borrowers will need a credit score of at least 580 if they want to put only 3.5% down. So what does this all ad up to?

If you’re thinking about buying in the next year it would be best to do it sooner rather than later. The tougher standards for FHA loans won’t impact most people’s ability to get an FHA loan, but it will cost you more to get one. It’s best to try and get any potential purchase done before these new regulations kick in rather than waiting till later. The other reason to buy now rather than later, is rising interest rates. Below, I’ve included a graph of interest rates in Massachusetts for the past month. In this graph, you’ll notice that mortgage rates are on the rise. As of today the average for a 30-year fixed is higher than it was a month ago and if you think back to November rates were right around 5% or for some, below 5% you can see we’ve had quite an increase.

Don’t get caught paying more later than you would if you bought today!

Just wanted to give a quick update to those savvy buyers looking to buy this fall. Mortgage rates are currently around or below 5%. The current 30-year fixed rate is 5.12% and there are some rates as low as 4.875% paying some origination/points. I will update this post with more info as it becomes available.

I was talking with another agent the other day, when he told me the following story. The bank in question I won’t name, we’ll just use their initials.

“My client, is 5 days away from the closing and the bank is refusing to give him a mortgage. The guy is putting 50% down and BOA won’t give him a loan. It just doesn’t make any sense! Even if the guy defaults, the bank picks up the property for half of what it’s worth and they can easily flip the property. If I had the money, I’d loan it to him it’s such a good deal.”

Now, having heard that story all I can say is: BOA it’s time to loosen the purse strings! You guys took over $45 billion in TARP money and it’s time you use it to help keep the economy moving. Anyone else going through something similar let loose in the comments.