Lew Sichelman

You found the house, secured your loan, closed the deal and moved in. So, you never need to pay attention to mortgage rates again, right? 

Wrong! It pays to keep an eye on loan rates as they move up and down. A case in point: 

In early September, the average rate on a 30-year mortgage ticked up a mere 7 basis points to 3.56 percent. That small increase meant the number of high-quality candidates who could have refinanced dropped from 11.7 million to 9.8 million, according to figures from Black Knight. 

In other words, 1.9 million borrowers lost their financial incentive to refinance at a significantly lower rate. 

A week later, the typical rate jumped to 3.73 percent and the number of refi candidates slipped by 1.5 million more borrowers, to 8.3 million. 

Had any of those 3.4 million folks been following rates during that period, they might have been able to save themselves a passel of money: roughly $263 a month on average, the mortgage analytics firm reports. 

In the last week of October, a slight 3 basis-point uptick cut the potential refi population down to 6.8 million. Thats a 30 percent decline from September, and a 42 percent decline from the all-time high of 11.7 million during the first week of September. 

Black Knight defines refinance candidates as 30-year mortgage holders with a maximum 80 percent loan-to-value ratio and credit scores of 720 or higher, who could shave at least 0.75 percent off their current first lien rate by refinancing. 

What Causes Mortgage Denials? 

Nothing is more devastating to a homebuyer than to search for months and finally find the place they want, only to be rejected by their lender. But it happens. According to LendingTree, 1 in 10 would-be borrowers are turned down. 

Thats the lowest level since 2004, but it still hurts if you are part of the unfortunate 10 percent. 

Debt and credit history were the main reasons folks are denied. The amount of debt you carry compared to your income, a.k.a. your DTI ratio, is the biggest barrier to gaining approval. A third of all denials are because the DTI is too high. And a credit history pocked with late payments and bad debts is responsible for 23 percent of all denials. 

Nothing is more devastating to a homebuyer than to search for months and finally find the place they want, only to be rejected by their lender. But it happens. According to LendingTree, 1 in 10 would-be borrowers are turned down.

Collateral, meaning the property isnt worth what you are paying, is the third-highest reason for lenders saying no, followed by incomplete applications and unverifiable information. 

LendingTree also found that denial rates vary by race, ethnicity and even geographical location. According to the report, African American borrowers now have the highest denial rate, at 17.4 percent, while non-Hispanic whites have the lowest, at 7.9 percent. 

The government can go after lenders who dont follow fair lending laws. Still, you can up the odds youll be approved by making sure your credit file is in order: Dot every i and cross every t in your application and line up all the documents required to verify your earnings, bank accounts, tax returns and assets. 

Better Not List High 

Heres another reason to price your home correctly in the first place  rather than pricing it high, hoping someone will bite, and lowering it when that doesnt happen. 

According to a Redfin study, newly listed houses get 3.4 times the attention online as those that drop their price. 

The analysis found that a listing thats viewed by 100 people on the first day is looked at just 17 times after its been on the market for 30 days. A price cut bumps that up to 29 views on the day the drop is posted, but the next day, daily views drop back to just 18. 

Overall, Redfin found that online views drop off severely after the first day. On day two, views are half what they were on day one  and after a week, just a quarter.  

Of course, what’s considered a reasonable price varies by location. For what you pay for the median-price house in San Francisco – $1.196 million – you could buy five median-price houses in the other 49 largest cities in the country, according to a LendingTree analysis. In Detroit, you could buy the equivalent of 23 houses! 

Trades’ Wages on the Rise 

Rises in median wages in the various construction trades outpaced those for all workers in 2018 by 3.2 percent to 2.5 percent, according to the latest Bureau of Labor Statistics tally.  

But the median wage rose even faster for roofers helpers (6.7 percent) and laborers (3.2 percent). Wages of plasterers, stucco masons, floor layers and tapers increased about 7 percent, while stonemasons saw their wages rise by more than 6 percent. 

This is good news for workers, but not homebuyers. And since subcontractor bids historically increase faster than construction wages, adding more inflationary fuel to housing prices, builders have little choice but to boost their prices to absorb the higher costs.  

Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com. 

Odd Lots: Refis, DTIs and More

by Lew Sichelman time to read: 3 min