When obtaining a home loan, you’ll receive two important documents from your lender: a loan estimate and a closing disclosure. On the surface, these documents are very similar, but they both serve different purposes. Here’s what you need to know about the differences between these two forms and what each means for you:
Why Americans’ Confidence in the Housing Market is Rising
The housing market and the economy are closely related. If people are not confident in the market and aren’t buying homes, home sales will drop whether they are being sold or not. As a consequence, many homeowners will be at risk of going underwater.
The 2008 recession was, in part, triggered by falling home prices and many loans issued at the time were at risk of defaulting. Many people who could afford to pay their loans chose to walk away when they sold their homes. Luckily, confidence in the housing market is rising once again:
- Loan delinquency and foreclosures are decreasing
- Home construction jobs are increasing
- Mortgage rates are rising
Decreasing Delinquencies & Foreclosures
According to the HUD National Housing Market Summary, loan delinquencies and home foreclosures are at their lowest since 2007. Loan delinquencies dropped from 6.39 to 5.68 percent (the historical average is around 5 percent). Just the same, foreclosures are down from 4.64 percent in 2010 to 2.27 percent.
More Home Construction Jobs
The construction of new houses indicates that the demand for housing is rising, and by extension, so is confidence in the market. When homes are built, or even just remodeled, jobs are created. The National Association of Homebuilders estimates that for every 100 single-family homes built it generates:
- 297 jobs
- $28 million in salary income
- $11 million in federal, state, and local taxes and revenue
The increase in jobs means more people can begin to save up to own their own home. This is especially true for first time homebuyers who will be looking for new homes.
Rising Mortgage Rates
It may not sounds like a good thing, but when mortgage rates increase it generally means incomes are as well. While rising mortgage rates can also increase the price of a home, higher incomes means people will be more likely to afford it. As stated, lower home prices generally means that no one is buying homes because they are not confident that owing a home will be a good investment.