Owners have the largest mortgages in history!

It’s no secret that the housing market has been unbalanced over the past few years. Prices have been rising, and with them, so have average home loans.

mw-average mortgage size

According to The Mortgage Bankers Association (MBA), the average home loan size is the largest its been in the history of its survey, which began in 1990.

Additionally, the median mortgage size was only about 3.3 times the median annual income in 1990 – now, it’s more than 5 times as big. This is likely due to the increase in housing prices, buyers getting bigger homes and lower interest rates over the years.

Here’s a look at some housing market characteristics for select years.

Housing market data points
Courtesy Realtor.com (link in text above)

According to Mike Ervin of Supreme Lending, people are just waiting and waiting for mortgage rates to go down. People who are using securitizers like Fannie Mae and Freddie Mac have to wait until the Fed buys up more mortgage bonds so that rates will go down. It is unknown if that will happen, but rates have dropped in 2017.

Multiple factors can affect the bond and mortgage markets. The most recent major event was the Trump election and presidency, which saw a large immediate increase in mortgage rates, which have since rebounded, even with the Fed raising rates.

In California, we are in the wealth-building business and real estate in the Bay Area is going to be a good investment for years to come. I am here to advise, provide insight and help you build wealth through real estate.

Mortgage Terminology 101

mortgage-1 Buying a home, even for those with experience, is already a tricky process to navigate. Add choosing a mortgage on top of that and things can get really stressful. Luckily, Keith Loria of BHG posted a great list of basic mortgage terminology to help guide buyers through this process. Check out our lightly edited version:

“Mortgage Lenders” – lenders make the loan and provide the money you’ll use to buy your home. You’ll need a lot of financial background information when you meet with a lender so he or she can set mortgage interest rates and other loan terms accordingly.

“Mortgage Brokers” –  brokers work with multiple lenders to find you the best loan. This can be confusing, but their jobs are essentially to get you the best rate and terms on your loan.

“Mortgage Bankers” – most lenders are bankers, which means they don’t actually lend their own money, but borrow funds at short-term rates from warehouse lender. Some larger mortgage bankers will originate their own loans and sell directly to Fannie Mae, Freddie Mac or investors.

“Portfolio Mortgage Lenders” – they originate and fund their own loans, offering more flexibility in loan products because they don’t have to adhere to secondary market buyer guidelines. Once these loans are serviced and paid for on time for at least one year, they’re “seasoned,” and can be sold more easily on the secondary market.

“Hard Money Lenders” – this may be your last resort if you’re having trouble getting a mortgage and working with a portfolio mortgage lender. They are private individuals with money to lend, though interest rates are usually higher.mortgage-2

“Wholesale Lenders” – they cater to mortgage brokers for loan origination but offer loans to brokers at a lower cost than their retail branches offer them to the general public. For you, the loan costs about the same if it were obtained directly from a retail branch of the wholesale lender.

“Correspondent Mortgage Lenders” – these lenders have agreements in place with one or more wholesale lenders to act as their retail representative. They lend directly to buyers and use wholesaler guidelines to approve and close loans with their own money. They will also buy back any loans they close that deviate from those guidelines.

“Direct Mortgage Lenders” – direct mortgage lenders are simply banks or lenders that work directly with a homeowner, with no need for a middleman or broker.