Breaking up is hard to do

Plus, Another good reason to pay your rent on time + Appraisal gap

September 25, 2021 | Issue #10

Presented by  An easier way to buy, sell or refi your home LEARN MORE

Hi, Daily Money reader! Are you planning to buy a home — or simply just love peeking into the world of real estate and how people live? We've added you to the list for our free real estate newsletter. Money Moves keeps you in the loop on important housing news and guides you to smart decisions. We hope you find it useful! If you'd like to opt out, click here. Good morning! This week we're talking about seller's remorse, appraisal gaps and the latest news from the Fed. Breaking up is hard to do Kiersten Essenpreis for Money Buyer's remorse has been on the rise over the last year — people have snatched up homes at ridiculous prices only to find out they really can't stand the suburbs. In today's fast paced and high-pressure housing market, it turns out that seller's are feeling regret too. We explored the trend in a popular story out this week. "I realized I was still attached to this house, and that I jumped too soon based on the high offers I received," said one homeowner who managed to get out of a deal to sell her Maryland home (a rare feat). On one hand, it's hard to feel too bad for people who decide to sell and stand to make a lot of money. Listing a house doesn't happen overnight, so it's hard for sellers to argue they didn't have time to consider the decision or know what they were getting into. A more sympathetic view is that it's hard to break up with a home — especially one where you've lived for a long time and made a lot of memories in — no matter how good the payday. Unfortunately for these homeowners, once you've signed a contract to sell it's really tough to get out of it. "The contract always works in favor of the buyer," says Pennsylvania-based real estate agent Cherie Altsman. For more on this trend and the (few) options sellers do have: Some Homeowners Are Wishing They Never Agreed to Sell For the many flavors of buyer's remorse: We have stories on FOMO, burnout and tips to avoid hating your home. Sponsor's Spot How to Choose the Best Mortgage For You Presented by  For many people, and particularly young adults, buying a home seems way expensive. Down payments, insurance, property taxes ... even doing the math can be confusing. But right now it's actually cheaper to buy than rent in nearly half of the country's biggest cities.* And if you work with a digital lender like Better Mortgage, you can apply online, close faster and avoid costly fees. How to get started: Find out how much house you can afford using Better's affordability calculator. Another good reason to pay your rent on time Rent is by far the biggest line item on my budget — by a longshot. So it seems pretty crazy that when I buy a home, my decade or so of diligent rent payments may have no bearing on my ability to qualify for a mortgage. Rude. For renters with low credit scores or limited credit histories, the fact the lenders haven't considered rent payments is more than a head scratcher. For 17% of people denied a mortgage recently, on-time rent history could have been the difference between getting and not getting the loan. This could change soon though. Now, federally-backed home loan investor Fannie Mae is encouraging lenders to give renters another shot. The hope is that this will be a step (albeit a small one) toward making homeownership more equitable. Non-white applicants are less likely to rely on the forms of credit typically used in the mortgage underwriting process (think credit cards), so including rent could help chip away at the homeownership gap. For more: Paying Your Rent on Time Can Now Help You Qualify for a Mortgage Appraisal gap It turned out to be a big week for exposing racial bias in the mortgage industry. Freddie Mac research released Monday confirms what many have long suspected: Home appraisal values are significantly more likely to fall below the agreed upon sale price in areas with a higher share of Black and Latino households. After analyzing 12 million transactions, the mortgage giant found that some 15.4% of appraisals on homes in Latino areas and 12.5% of homes in Black areas were for less than the contract price, compared to just 7.4% for white areas. Lenders rely on appraisals to decide how large a mortgage to make. Low appraisals can prevent buyers from getting the financing they need or kill a deal altogether. Persistently low appraisals may keep down home values in a particular neighborhood unnecessarily. Closing this racial gap will be challenging, but recognizing it is the only place to start. For more: Freddie Mac Confirms There's a Major Racial Gap in Home Appraisals Tips: What to do if a Bad Appraisal Threatens Your Deal Pencil this in Don't know what you'll be doing a year from now? The Fed has a few ideas. This week, Federal Reserve officials put the financial world on notice that they may start raising interest rates as soon as 2022 — a year earlier than they'd suggested back in June. Fed Chair Jerome Powell also said that it's time for the central bank to start cutting back its bond purchases. It appears the Fed could start "tapering" as soon as November. These policies have been in place since the start of the pandemic, nudging mortgage rates down and home prices up (among other economic impacts). No one knows for sure what mortgage rates will do next, but it would make sense for rates to move higher as the Fed's support is pulled back. If locking in a super low interest rate is important to you, it may be time to start your search. For homeowners, it's also a good time to look into refinancing. If you can reduce your rate by half a percentage point or more, it may be worth the hassle. You can track mortgage rate changes every day on Money or sign up for our weekly text updates. Happy hunting, P.S. Share your real estate regrets with me on Twitter @samsharf or via email at sam.sharf@money.com. P.P.S. Have a friend who loves real estate or is looking for a home of their own? Please forward them this e-mail or send them to the Money Moves subscription page. Money's Essential Home Buying Resources: Fall 2021 On the hunt? Check out Money's Mortgage Calculator, see The Best Mortgage Lenders and look at the latest mortgage rates Thinking of refinancing? Our list of The Best Mortgage Refinance Companies can help. You can also use our Mortgage Refinance Calculator or these refi tips Key question: How much house can I afford? ICYMI, one of our most popular real estate stories of the year (so far): 'FOMO Took Over.' Some Buyers Who Caved to a Hot Housing Market Now Regret It

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