Exciting news! We are thrilled to introduce First Look AI, our latest tool designed to simplify how you track your mortgage rates.
First Look AI combines cutting-edge artificial intelligence with our trusted mortgage analysis, delivering personalized, real-time updates on your mortgage rates. Our goal is to ensure you're always ahead of the curve, particularly with the highly anticipated rate drops expected by the Federal Reserve in 2024.
Key Features:
Being proactive about your mortgage can lead to significant financial benefits. With First Look AI, we're equipping you with the tools and information needed to make informed decisions and seize opportunities in the market.
To enroll or learn more, contact us and send a copy of your recent mortgage statement. Let's stay ahead in the dynamic real estate finance landscape of 2024 together.
Thank you for being part of the BeneGroup family. We're committed to your success and believe First Look AI will be instrumental in assisting you to better achieve your real estate financial goals.
If you have any questions or need assistance, feel free to directly reach out to me.
Last year CalHFA launched its $300 million down-payment assistance program for first time home buyers in California. The Dream For All Shared Equity program was so popular that the funds ran out in 11 days and the program came to a halt.
CalHFA recently announced that its 2024 Dream For All Shared Equity program will become available again in April 2024.
This is an extremely popular program and the funds allocated for this program usually run out very quickly and the program becomes no longer available for un unforeseen period.
If this is a good option for you or anyone you know who can benefit from this program, please contact me for more details so you can prepare ahead of time in order to be able to take advantage.
More about The California Dream For All Shared Appreciation Loan Program
The Dream For All Shared Appreciation Loan is a down payment assistance program for first-time homebuyers to be used in conjunction with the Dream For All Conventional first mortgage. It can be used for down payment and/or closing costs.
Upon sale or transfer of the home, the homebuyer repays the original down payment loan, plus a share of the appreciation in the value of the home.
In order to qualify you must:
Property Requirements:
Homebuyer Education Requirement
This is a very popular program and the funds allocated for this program usually run out very quickly and the program becomes no longer available.
If this is a good option for you or anyone you know who can benefit from this program, please contact me for more details.
Amazing news!
In 2020, amazing bills (SB 13, AB 68, AB 881) passed making it easier than ever to build Accessory Dwelling Units in California. These bills invalidated local ADU ordinances across the state and replaced them with state-mandated rules. They massively improved ADU regulations, and it feels like we’re reliving that moment all over again.
From height restrictions to setbacks, these are changes that are greatly improving homeowners’ experiences in building their dream ADUs.
Let’s walk through some of the Bills that passed in 2022 and the most important one that recently passed in October, 2023.
AB 2221 (January 2023)
We’ll start with the meatiest bill of the bunch, AB 2221. This is essentially a “clean-up” bill, meaning its main purpose is to clarify and define old legislation so that regulations are more clear-cut. But, that doesn’t mean it’s not a game-changer.
Cracking down on permitting agencies
One of the biggest regulations that came about from the landslide of changes in 2020 was the requirement that your city had to either approve or deny your permit application within 60 days.
Sounds like a nice idea, right? While this change was made with good intentions, it had an unsavory drawback. With cities facing immense pressure to pump out permits in a much shorter amount of time and incoming permit applications exponentially growing, a lot of planning departments resorted to just denying applications when their time ran out.
Once a lot of homeowners and designers caught wind of what cities were doing, they eased back on the pressure and just accepted that it was better to wait a bit longer than the 60 days than have their application rejected and have to resubmit.
To help remedy the situation, AB 2221 now, if cities end up rejecting an application, they are required to provide ALL the reasons why your application was denied. And NOT just some reason! With this change, cities are now forced to review your application more carefully, rather than rejecting it for minor reasons and calling it a day.
Additionally, the language was changed from “local agencies” to “permitting agencies”, so now every entity that has to issue a permit for your project is held to this 60-day requirement, not just your local planning department.
Height restrictions defined
AB 2221 now requires all cities to allow at least a 16 ft height limit for ADUs. Cities can allow higher, but they cannot restrict you from building your ADU any lower.
What’s most interesting about this Bill is that there are added scenarios in which cities are required to allow you to build higher as well.
Front setbacks now fall under state exemptions
Front setbacks now fall under the list of restrictions that cannot be enforced if it prevents an ADU from being built if it is under 800 sq ft.
For example, floor area ratio and open space ratio also fall under these exemptions. If any of these regulations set by your city prevent you from building an ADU, they are not enforceable.
SB 897 (September 2022)
This is another “clean-up” bill and a lot of it overlaps with some of the others, so we’ll just cover some of the unique changes this bill brings up.
Unpermitted work is no problem
A lot of cities prohibit homeowners from building an ADU if they found any unpermitted work on the property. Often, bringing these errors up to code would take months, sometimes even years.
SB 897 eliminates that restriction unless the unpermitted work is a health or safety concern.
Demolition go!
It’s no surprise that there are some cities in California that still aren’t ADU-friendly. Although cities are required to issue building permits if all requirements are met, some cities found a loophole for garage conversions.
If you are tearing down your garage and building your ADU where that garage was (yes, this is still considered a garage conversion), cities could withhold the demolition permit.
Now, with SB 897, cities are required to issue the demolition permit if the ADU permit is issued. Under this new bill, you are also not required to post a public notice about the demolition.
Fire sprinklers?
Building an ADU will no longer trigger a group R occupancy change to your property. What does that mean?
It means that if you build an ADU, it will not trigger a requirement for fire sprinklers in the primary dwelling. We noticed this was a big annoyance for some of our clients in the past!
Honorable mention
We’re surprised this needed to be said. When you build a JADU (junior accessory dwelling unit) without a bathroom, the bathroom in the primary dwelling needs to be accessible to the JADU. SB 897 makes this more explicit.
AB 916 (September 2022)
While this bill isn’t ADU specific, it was originally drafted with ADUs in mind. Unfortunately, the ADU terminology language was removed after some controversy, but that doesn’t mean it’s not a great bill!
AB 916 allows you to convert an interior space within your primary dwelling into a bedroom without a public hearing.
This is great news for homeowners that are looking to increase the equity in their home. What does this mean for ADUs? Nothing at the moment, but we’re curious to see how this bill will improve over time.
AB 157 (September 2022)
We’ve all seen how beneficial the $40K CalHFA has been for so many homeowners. AB 157 is now requiring CalHFA to convene a working group to develop recommendations to assist homeowners in qualifying for loans to construct ADUs and JADUs on their property and to increase access to capital for homeowners interested in building ADUs.
Program Updates
10/26/2023 - The CalHFA Board of Directors approved final program details for the second round of ADU Grant funding at its October Board meeting. For this round, applicant income limits are 80% of the Area Median Income. Please see our list of Approved Participants; we anticipate the program being available for new reservations in early December, with the official program announcement coming in mid-November.
Source: Calhfa.ca.gov/adu
AB 1033 (passed October 11, 2023)
In recent years, cities across California have turned to backyards to increase housing stock. After pre-approving plans of architect designed accessory dwelling units (ADUs) in 2021, earlier this year, Los Angeles rolled out a free version to make it even easier to build a backyard home, whether as an in-law unit or rental.
On October 11, 2023, California passed legislation—Assembly Bill 1033—that now allows homeowners to sell an ADU built on their property, allowing them to leverage existing equity.
The bill requires cities to opt into the program. Property owners in participating cities will then be able to sell their ADU following the same rules as a condominium, namely that homeowners will need to notify utility providers and form a homeowner’s association for property maintenance. Taxes would be paid separately.
The legislation could be a major benefit to homeowners in the current high interest rate environment. Especially, fixed income families who often can’t afford to move, whether because of high interest rates or capital gains taxes incurred by selling a long-time home.
ADUs aren’t slowing down any time soon
We’re thrilled that ADUs have grown in popularity enough to warrant these positive changes.
Please contact us with any questions about ADU financing scenarios and options.
Dear Valued Clients,
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If you're ready to explore how our Home Equity Loan can help you consolidate your debts and embark on a journey toward a better financial future, we invite you to contact us. We are committed to helping you make informed decisions that support your financial well-being.
Thank you for choosing BeneGroup, Inc. as your partner on this important journey. We look forward to assisting you in achieving your financial goals and dreams as we have done in the past 20 years.
Best regards,
The Federal Reserve announced today (Wednesday November 1st, 2023) that it will leave its key interest rate unchanged as expected, signaling that it is prepared to wait and see how the coming weeks play out for the economy before making its next move.
The central bank revealed today that the federal funds rate will remain at its current range of 5.25% to 5.5%. This is the second consecutive time it has left rates unchanged after a similar pause in September. The Federal Funds Rate has a direct impact on the rates for short term loans such as credit cards.
NOTE- Consider looking into our popular fixed HELOAN (Home Equity Loan) programs with rates in the 9% and use to pay off high interest rate credit cards that are hovering between 15% and 25%.
Its decision to keep rates where they are comes as no surprise, with markets having signaled virtually no chance that the Fed would either hike or cut rates in its latest deliberations.
Inflation remains well above the Fed’s target rate of 2% but is gradually decreasing, while the central bank seems ready to hold back on further rate increases as it weighs up the coming impact on the economy of its aggressive hiking campaign to date.
In its statement regarding the latest decision, the Fed said it would continue to assess additional information and its implications for monetary policy in order to determine whether further action was needed, with factors set to include data on labor market conditions, inflation, and financial and international developments.
Signs suggest economy may be softening
The Fed has increased interest rates 11 times since March of last year and although the economy has continued to grow at a rapid rate, data released Wednesday showed that the US private sector added a lower-than-expected 113,000 jobs in October.
That slowdown was despite the gross domestic product (GDP– a measure of all goods and services produced in the country) surpassing estimates in the third quarter, growing at an annualized pace of 4.9% compared with estimates of 4.7%.
New-home sales in the US, meanwhile, rose at their fastest pace in September since February 2022, although home resales remain at around a 13-year low thanks to surging mortgage rates and a continuing lack of supply.
The average rate on a 30-year fixed-rate mortgage is currently hovering at almost 8%, its highest level for nearly 25 years, with Fed officials suggesting high borrowing costs could lead to milder consumer spending and tap the brakes further on economic growth.
The Fed is scheduled to meet for its final decision on interest rates of 2023 on December 12-13.
The announcement today caused mortgage rates to come down a bit as the announcement is to the favor of the market.
Please contact me for your pricing scenario and find out how to take advantage of our competitive low rates.
The Federal Reserve announced today that it will keep interest rates the same for the second time since beginning its current rate hike cycle aimed at taming inflation last March. The Fed projected that rates will remain higher over the next two years than previously expected, providing some unwelcome news for investors who have been hoping for rates to come down sooner rather than later.
Since last March, the Federal reserve raised the federal funds rate 11 times in an effort to control inflation by slowing the economy, bringing it up from the near-zero levels they hovered at beginning in early 2020. The federal funds rate only technically determines the interest rate at which banks can lend to each other but heavily influences the borrowing costs across the economy. The rise in rates came as the Fed tried to tackle high inflation. The consumer price index (a key economic growth indicator) peaked at 9.1% last June but came in at a more modest 3.7% last month, still well above the Fed’s 2% long-term target. The central bank’s battle on inflation seems to be working but remains far from over.
The Federal Reserve has hinted on one more .25% interest rate hike this year peaking in the 5.50%-5.75% range before starting to lower rates. The updated projections see the Fed funds target rate coming down to 5.1% by the end of next year, and to 3.9% by the end of 2025.
According to analysts, the economic projections released today (Wednesday, September 20) indicate “the Fed is more confident that they can pull off a soft landing and that the economy can withstand higher rates for longer.
Why Are Mortgage Rates So High?
Below is brief explanation on what’s triggering mortgage rates to move up.
Mortgage rates have been on the rise in recent weeks.
This is primarily due to the stubbornly resilient inflation, an ongoing strong US economy and of course, a political showdown over the federal debt ceiling resulting in the US credit downgrade by Fitch ratings.
NOTE- Fitch ratings is a credit rating agency that rates the viability of investments relative to the likelihood of default. Fitch is one of the top three credit rating agencies internationally, along with Moody's and Standard & Poor's.
In times of uncertainty, another contributing factor for the 30-year mortgage rate is the gap between the 10-year Treasury Yield. This gap between 30-year mortgage rates and their closest proxy, the 10-year Treasury yield is known to economists as “the spread,”. This gap typically runs between 1.5 and 2 percentage points under normal economic circumstances. for example, if the 10-year yield sits at 4 percent, the 30-year rate should be close to 6 percent.
Now, what’s happening?
Over the past year and a half, spreads have gotten wacky. As of early August, the average 30-year rate was 6.84 percent, but the 10-year yield was just 3.7 percent. The gap had widened to 3.14 percentage points — or, in finance jargon, 314 basis points. That, statistically, was the highest level since 2009, when the global economy was in a meltdown.
These days, the mortgage spreads are “abnormally high.
In fact, current spreads match or exceed those historically seen only at times of intense crises, such as the global financial crash of 2009 and at the beginning of the Coronavirus pandemic when the world was going into lockdown.
In both past cases, lenders and investors were afraid to take on risk, and that fear translated to an extra fee to the borrower. This is similar to what we are seeing nowadays.
For example, your lender promises you a rate weeks before you finalize your home purchase. You lock in that rate today, even though you probably won’t find a home and close on the loan for another month or so. The gap creates a problem for your lender. If rates drop in the coming weeks, you simply ditch the loan for a better rate elsewhere. And, if rates go up, you’ll keep the loan and congratulate yourself for locking in a rate that’s favorable to you and unfavorable to the lender.
Mortgage originators typically package their loans and sell them off to investors as mortgage-backed-securities (MBS). During the pandemic, the Federal Reserve stepped in to buy billions of dollars’ worth of mortgage bonds to stabilize the economy. This caused mortgage rates to drop as the Federal Reserve was artificially supporting the economy through their massive bond buying program.
The Federal Reserve has stopped that bit of stimulus. And the MBS buyers are insisting on a better deal. If you lock in your rate at 6.5% today and your lender sells your loan at 7%, it suddenly looks less attractive to the investor. Again, this is all due to instability in the economy this time caused by inflation.
The more volatile rates are the more difficult it is to hedge that rate.
We are hoping to eventually see the US economy reach the Federal Reserves’ expected stability threshold and allow the Federal Reserve to begin lowering rates by one percent in 2024 and another one percent in 2025. This should put mortgage rates in the low to mid six percent in 2024 and mid to high 5% in 2025.
8/4/2023
This week mortgage rates reached their 22 year high and we asked if there was any hope for relief and concluded that the only question was about timing. Timing would depend on economic data and inflation. Mortgage rates got a glimpse of friendly economic data today following the jobs report from the Labor Department (The Bureau of Labor Statistics or BLS report). It was still very strong in a historical context, but not quite as strong as economists had predicted. The not so quite strong numbers indicate a slowdown in hiring.
Up until todays BLS report, rates were in a bit of a panic mode this week due to combination of other data and events. Wednesday was saw the biggest jump after the ADP employment data and an announcement regarding the government's anticipated borrowing needs (via Treasuries). Private businesses in the US hired 324,000 workers in July 2023, surpassing market expectations. This was an indication that the economy is still strong.
The main difference between the ADP Employment Report and the official BLS report is that ADP only covers non-farm, private employees. As a government body, the BLS survey also includes government employees
U.S. Treasuries are at the core of the rate market. When investors become less interested in buying them or when the government becomes more interested in selling them, rates rise. The ADP data hit the demand side of the equation and the Treasury announcement hit the supply side. We can see how things played out in the following chart of 10-year Treasury yields as well as the much-needed response to Friday's more important jobs report.
Despite Friday's recovery, current rate levels are still uncomfortably close to long-term highs. Mortgage rates only made it back to Monday's levels (30yr fixed index still over 7%). In order to get meaningfully into the 6's, we'll need more data that comes in cooler (weaker) than the market expects.
So what's the next big economic report to watch? Easy! The Consumer Price Index (CPI) on Thursday, August 10th. CPI is the only other piece of scheduled monthly economic data that could compete with the jobs report over the past 2 years when it comes to impact on rates. The last CPI report was good for rates, but the market needs to see a pattern that's repeated for several consecutive months. If inflation is lower than expected this time around, it would be a solid step in that direction, one that likely allows rates to continue to moderately come down after this week's push toward long-term highs.
Washington, DC-CNN —
Federal Reserve Chair Jerome Powell doubled down Wednesday on the hawkish view that the central bank isn’t done with fighting inflation and could even implement further rate hikes at its upcoming monetary policy meetings.
“If you look at the data over the last quarter, what you see is stronger than expected growth, a tighter than expected labor market and higher than expected inflation,” Powell said during a central banker panel hosted by the European Central Bank in Sintra, Portugal. “That tells us that although policy is restrictive, it may not be restrictive enough and it has not been restrictive for long enough.”
Powell said officials haven’t decided how and when they will raise rates again, including if they will hikes rates at every other meeting or do back-to-back rate hikes.
“I wouldn’t take moving at consecutive meetings off the table at all,” he said.
The Fed’s position could mean as many as two more quarter-point rate hikes sometime this year, according to the latest Summary of Economic Projections. But it’s not clear at what meeting officials will vote to raise interest rates, especially given that they won’t learn much about the economy before their upcoming meeting in July.
Some Fed officials have made it clear in recent speeches that inflationary pressures persist, pointing to core inflation, which excludes volatile food and gas prices, not decelerating as fast as overall inflation. At the European Central Bank (ECB) conference in Sintra, Powell echoed that sentiment pointing to services inflation — which includes labor-intensive businesses such as restaurants and health care facilities — remaining stubbornly high.
Powell said part of the reason why Fed officials voted to hold rates steady had to do with the bank stresses that emerged in the spring.
“Part of the decision, in my thinking anyway, was the bank stress that we experienced earlier this year,” he said. “There’s a fair amount of research showing that when something like that happens, bank-credit availability and credit can move down a little bit, with a bit of a lag, so we’re watching carefully to see whether that does appear.”
The Fed’s latest survey of senior loan officers showed that banks were toughening their lending standards even before the bank failures. Powell argued that it’s still unclear whether that intensified after the turbulence in March.
Economists and some Fed officials have said that bank stresses can have the same effect on financial conditions as a rate hike.
This is a good time for homeowners who currently have HELOC’s with balances that carry a high interest rate to either strategize to pay them off or consider converting into a HELOAN with a fixed interest rate before the rates on HELOC’s go any higher.
What is a Rate Buydown
A 3–2–1 rate buydown is a type of mortgage financing option that allows borrowers to temporarily reduce their interest rate and monthly mortgage payments buy buying down their interest rate during the initial years of the loan.
This is a good strategy in the current high interest rate environment for home-buyers where it is expected for interest rates to come down once the government is able to get inflation under control and stabilize the economy.
Here’s how it typically works.
For example, let’s say you have a 30-year fixed rate mortgage with a 3–2–1 rate buydown. The lender might offer you an initial interest rate of 6.125%, but with the buydown your interest rate for the first year would be reduced by 3%, resulting in a rate of 3.125%.
In the second year, the interest rate would be reduced by 2% making it 4.125%.
In the third year the interest rate would be reduced by 1% making it 5.125%
At the end of the third year, the interest rate would go to the original rate of 6.125%.
The purpose of a 3–2–1 rate buydown is to provide borrowers with lower initial monthly mortgage payments, making homeownership more affordable in the early years of the loan. This can be particularly beneficial if you expect your income to increase in the future, or if you want to allocate more funds to other expenses during the initial stages of homeownership.
There are also 2-1 and a 1 year rate buydown as well.
In a buyer’s market, the rate buydown cost can be split between the buyer and seller. Or, sellers are willing to pay for the buydown cost instead of lowering the sale price.
For a 3-2-1 rate buydown calculator please click here.