Existing home sales surge as interest rates point higher

Sales of previously occupied U.S. homes bounced back in September to their strongest pace since January as mortgage rates tick higher, motivating buyers to get off the sidelines.

The National Association of Realtors said Thursday that existing homes sales rose 7% compared with August to a seasonally-adjusted annual rate of 6.29 million units. That was stronger than the 6.11 million units that economists had been expecting, according to FactSet.

Sales were down 2.3% compared with September last year, a time when home purchases surged as buyers who had held off during the early months of the pandemic returned in force.

“The increase in sales in the latest month I would attribute to mortgage rates,” said Lawrence Yun, the NAR’s chief economist. “This autumn season looks to be one of the best autumn home sales seasons in 15 years.”

Yun noted that a dip in mortgage rates in August gave buyers urgency to close deals on homes, which translated into the sharp September increase in completed transactions.

While the average rate for a 30-year mortgage remains near historic lows, it has been inching higher since August, when the weekly rate averaged 2.77%, according to mortgage buyer Freddie Mac.

This week, the average rate rose to 3.09%, the highest level since April, when it peaked at 3.18%. A year ago, the rate averaged 2.8%. When mortgage rates rise, it gives would-be homeowners less buying power.

Economists expect mortgage rates to rise up to 4% next year as the Federal Reserve takes action to control rising inflation. The central bank is widely expected to announce a timetable for reducing its monthly bond purchases at its policy meeting next month. Those bond purchases have helped keep mortgage rates at ultralow levels for much of the last 18 months.

The median home price jumped to $352,800 last month, a 13.3% increase from September last year. The rise in prices continued to weigh on first-time buyers, who accounted for 28% of all sales last month. That’s the lowest level since July 2015, the NAR said.

Homes purchased in cash rose 23% in September from the previous month. Individual investors, who account for many cash sales, accounted for 13% of all home sales last month.

Despite the sharp increase in sales last month, there are signs the housing market frenzy that drove 20% to 25% annual increases in the median home price is easing. Properties on the market are receiving fewer multiple offers and buyers increasingly are refusing to waive their right to a home inspection or appraisal, Yun said.

Still, the inventory of homes on the market remains tight in much of the country, which continues to support higher prices.

At the end of September, the inventory of unsold homes stood at just 1.27 million homes for sale, down 0.8% the previous month and down 13% from a year ago. At the current sales pace, that amounts to a 2.4 months’ supply, down from 2.7 months a year ago, the NAR said.

Homes continue to sell within days of being put up for sale. Homes typically remained on the market 17 days before getting snapped up last month. That’s held steady the past six months. In a market that’s more evenly balanced between buyers and sellers, homes typically remain on the market 45 days. All told, 86% of homes sold last month were on the market for less than 30 days.

The inventory of homes for sale should begin to improve next year, as builders continue to ramp up construction and the end of mortgage forbearance programs force homeowners in financial straits to put their home up for sale, Yun said.

“The days of inventory being down 20% or 25%, those days are over,” Yun said. “The decline is lessening and soon in 2022 we’ll begin to see inventories are higher year-over-year.”

-Associated Press

July sales of new homes surge 13.9%, far more than thought

SILVER SPRING, Md. (AP) — Sales of new homes jumped again in July, rising 13.9% as the housing market continues to gain traction following a spring downturn caused by pandemic-related lockdowns.

The Commerce Department reported Tuesday that July’s gain propelled sales of new homes to a seasonally-adjusted annual rate of 901,000, the most since 2006. That’s a far bigger number than analysts had expected and follows big increases in May and June. The government report has a high margin of error, so the July figures could be revised in the coming months.

The recent sales gains followed a steep dropoff in March and April as much of the country stayed home due to government restrictions intended to slow the spread of coronavirus.

In a report last week, the National Association of Realtors reported that sales of existing homes rose by a record 24.7% in July, thanks to historically low interest rates. It was the second big spike in as many months and has helped stabilize the housing market in an otherwise uncertain economic time.

Low inventory of existing homes is pushing buyers into the new homes market, but inventory there is also shrinking. What was a 6-month supply of new homes a year ago is now down to a 4-month supply, thanks to a red-hot market.

The Commerce Department reported last week that construction of new U.S. homes surged 22.6% in July as homebuilders bounced back from a lull induced by the coronavirus pandemic. New homes were started an annual pace of nearly 1.5 million in July, the highest since February. They’ve now risen three consecutive months after plunging in the spring. Last month’s pace of construction was 23.4% above that of July last year.

Sales are being fueled by ultra-low mortgage rates, which earlier this month dropped below 3% for a 30-year-fixed rate mortgage for the first time in nearly 50 years. The average rate on a 30-year fixed rate mortgage is now 2.99%, the mortgage buyer Freddie Mac said Thursday. A year ago, it was 3.55%.

Economists believe low rates and changes in home preferences brought on by the pandemic will continue to support sales, though perhaps not at recent levels.

“Sales may struggle to maintain their July pace going forward,” said Nancy Vanden Houten of Oxford Economics. ”While strong demand and lower mortgage rates are supportive of further growth in sales, the slow recovery and weak labor market pose downside risks.”

Regionally, construction of new homes fell only in the Northeast, which saw a 23.1% decline. The Midwest saw a whopping 58.8% increase, followed by the South’s 13% jump and an increase of 7.8% in the West.

The median price of a new home sold in July increased to $330,600, up 7.2% from one year ago.

Associated Press

More Americans signed contracts to buy homes in June

SILVER SPRING, Md. (AP) — The number of Americans signing contracts to buy homes rose for the second straight month after a devastating spring freeze brought on by the coronavirus outbreak.

The National Association of Realtors said Wednesday that its index of pending sales rose 16.6%, to 116.1 in June. That’s up from a reading of 99.6 in May.

Contract signings are now 6.3% ahead of where they were last year after being significantly behind last year’s pace due to the pandemic. An index of 100 represents the level of contract activity in 2001.

All four regions saw more contract signings for the second straight month. The Northeast led the way with a 54.4% increase. Sales in the Midwest, South and West all jumped around 12%.

“It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to one year ago,” said Lawrence Yun, NAR’s chief economist. “Consumers are taking advantage of record-low mortgage rates resulting from the Federal Reserve’s maximum liquidity monetary policy.”

Freddie Mac reported last week that average interest rates on a 30-year fixed rate mortgage rose to 3.01%. The average had been 2.98% the previous week, the first time in 50 years that it slipped below 3%. The Federal Reserve wraps up a two day meeting Wednesday and is not expected to change its main borrowing rate.

In May, the number of Americans signing contracts to buy homes rebounded a record 44.3% after plunging during the usually busy spring season as buyers and sellers were sidelined by coronavirus-related closures and regulations.

May’s recovery was the highest month-over-month gain in the index since since its inception in January 2001.

Last week, the government reported that sales of new homes jumped 13.8% in June, the second straight increase after two months when sales plunged as the country went into lockdown because of the coronavirus. June’s increase followed a 19.4% jump in May, further evidence the housing market has turned around.

Associated Press

Lower rates could boost housing stocks as risks remain: Wall Street outlook

NEW YORK -- Lower US interest rates could help support outperforming US homebuilder stocks, even as they raise worries about the economy, while a bonanza of industry data and Federal Reserve speakers next week are likely to help shape the outlook.

After underperforming in 2018, the PHLX Housing Index is up about 30 percent for the year so far, roughly double the year-to-date gain of the benchmark S&P 500 index.

Mortgage rates have been declining with US Treasury debt yields, and the outlook for interest rates suggests further easing after the Federal Reserve lowered rates last month and indicated it could cut again this year, depending on data.

This week, US 30-year Treasury yields fell to a record low below 2 percent, while benchmark 10-year yields declined to a 3-year trough as trade tensions linger and global economic growth continues to slow.

The 30-year fixed mortgage rate has dropped to 3.60 percent from a peak of 4.94 percent in November, according to mortgage finance agency Freddie Mac. Mortgage rates are often tied to the benchmark 10-year Treasury yield.

Strategists said that could bode well for homebuilders and the housing market, which has been struggling because of land and labor shortages.

A report on Friday showed US homebuilding fell for a third straight month in July amid a steep decline in the construction of multifamily housing units, even as the data provided a positive sign for housing: a jump in permits to a 7-month high.

Next week, the US Commerce Department will release data on July new home sales.

Housing and homebuilding stocks should continue to do well as long as rates remain low, but the potential for slower demand is a risk, said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. "Lower interest rates lead to lower mortgage rates (which) lead to increased demand for homebuilders," he said. "You counter that with potential concerns that, if a recession is coming, even if rates are at historically low levels, demand for everything is going to be somewhat mitigated."

Eric Marshall, portfolio manager at Hodges Capital Management in Dallas, has seen relatively good traction in housing even with the turbulent markets. Lower rates are a plus, he said, along with an unemployment rate at its lowest level in years.

"Consumer savings have come up, household formation continues to grow faster than the supply of housing," Marshall said. "And I think all of those things coming together make for a more stable environment for the publicly traded housing stocks."

Recent results from some top homebuilders were mostly stronger than analysts expected, but some forecasts disappointed investors, underlining persisting problems in the housing market.

Last month, PulteGroup Inc forecast full-year home sales and gross margins below analyst expectations and cited rising land costs, while in June Lennar Corp forecast current-quarter earnings below Wall Street estimates and noted uncertainty triggered by the US-China trade war.

Multiples for some of the homebuilder stocks have jumped this year, but many remain below long-term averages. The S&P 500 homebuilding index, which includes PulteGroup, D.R. Horton and Lennar, is trading at about 9.5 times forward earnings, up from about 7 at the start of the year but well below a long-term average of 14.6, based on Refinitiv's data.

Wedbush analysts in a research note on Thursday said that builders have been reducing square footages as mortgage rates have declined, which has addressed affordability issues. The firm has a bullish bias on homebuilder shares, with an "outperform" rating on William Lyon Homes, Beazer Homes USA, Lennar and others.

Investors will pay close attention to comments from Fed Chairman Jerome Powell, who is set to give a speech on rates and policy at the annual Jackson Hole, Wyoming, policy symposium.

"The fact that the Fed has moved to a more dovish position suggests that those rates should remain relatively low compared to what ... we saw in late 2018," said Robert Dietz, chief economist for the National Association of Home Builders.Jerome Powell, who is set to give a speech on rates and policy at the annual Jackson Hole, Wyoming, policy symposium.

"The fact that the Fed has moved to a more dovish position suggests that those rates should remain relatively low compared to what ... we saw in late 2018," said Robert Dietz, chief economist for the National Association of Home Builders.

source: news.abs-cbn.com

An FHA-to-Conventional Refinance May Allow You to Ditch MIP

While refinance applications seem to be taking a backseat to purchase applications, there are still some good reasons to refinance your mortgage, even if rates aren’t currently at their best.

First off, let me preface this with the fact that mortgage rates are still spectacular. Yes, the 30-year fixed used to be in the mid-3% range, but a rate of around 4% was relatively unheard of until recently (and is still available today).

Unfortunately, the recent increase in rates has dented refinance applications as the pool of eligible borrowers begins to dry up.

Today, the Mortgage Bankers Association noted that refis slid another 4% in the latest week, pushing the refi share of total mortgage activity down to just 42.6% from 44% a week earlier.

Most industry participants saw this coming, which explains the recent trend of mortgage companies cozying up with real estate agents. Hello Motto Mortgage and Redfin Mortgage, to name just a couple.

But there are still opportunities for both homeowners and mortgage lenders to pick up the refi slack.

Refinancing Out of FHA and Into Conventional


One such opportunity is refinancing an FHA loan into a conventional loan (such as a Fannie Mae or Freddie Mac loan), the main benefit being the removal of the mortgage insurance that must be paid on the former.

Thanks (or not thanks) to the FHA’s stringent mortgage insurance rules, the annual mortgage insurance premium (MIP) must be paid monthly regardless of whether the loan balance falls below 80% loan-to-value (LTV) unless the loan is a 15-year fixed or came with a 10%+ down payment. Or if it’s an older FHA loan.

Most FHA loans are 30-year fixed mortgages with minimal down payments, meaning MIP often stays in-force for all 30 years unless you refinance out of the FHA.

This adds to an otherwise low monthly mortgage payment, making even a great mortgage rate a little less attractive.

Many folks took out FHA loans several years ago to take advantage of the low 3.5% down payment requirement, and because home prices have increased so much since then, some of these borrowers may have the necessary equity to refinance into a conventional loan at 80% LTV or less.

Doing so will allow them to ditch the MIP and avoid PMI on the new conventional loan, which could equate to substantial savings.


Let’s take a look at an example:

Sales price: $300,000
Down payment: $10,500 (3.5%)
Loan amount: $294,566.25 (includes upfront MIP of $5,066.25)
FHA monthly MIP: $205.06

Instead of subjecting yourself to ~$200 in monthly mortgage insurance premiums, you might be able to refinance to a conventional loan at 80% LTV or less and rid yourself of that burden.

Tip: Note that the Upfront Mortgage Insurance Premium (UFMIP) is non-refundable if you refinance out of the FHA to a conventional loan. It may be refundable if you refinance to a new FHA-insured mortgage.

Two Things Need to Happen for the FHA-to-Conventional Refinance to Make Sense

Not just anyone can take advantage of this type of refinance. Only those who have gained enough equity and who can obtain a comparable (or better) mortgage rate will win here.

Using our example, the home must now be worth X amount to get that LTV down to where it needs to be. I say X because it depends how long you’ve had the loan.

A combination of home price increases and the natural amortization of the loan will tell you what the value needs to be.

The loan balance above would drop to $277,000 in just three years, requiring a house value of $346,250 to get the job done.

Fortunately, home prices have surged in the past several years, so for many lucky borrowers the appreciation alone can push a relatively young loan to the magical 80% LTV mark upon refinancing.

Assuming you’re good to go there, you’ll need to consider the mortgage rate. That is, your former mortgage rate and the refinance mortgage rate.

If you previously had a rate of 3.75% on a 30-year fixed, and the best available rate today is 4.125%, you have to take into account that .375% bump in rate.

The good news is that it shouldn’t affect the mortgage payment by too much.

The old principal and mortgage payment was $1,322.73 plus $205.06 with MIP, making it $1,527.80 out the door (don’t forget taxes and insurance too!).

If the rate were 4.125% instead, the monthly P&I payment would be (based on a slightly lower outstanding balance of $277,000) $1,342.48.

Yes, it’s a bit higher than the old P&I payment, by around $20, but you no longer have to pay the $200 in MIP. That’s a significant amount of monthly savings.

In reality, you might actually do even better if you started out with a higher mortgage rate thanks to a low credit score and/or high LTV, and have since improved upon those things.

250,000 Homeowners Expected to Refinance from FHA to Conventional This Year

CoreLogic recently noted that thanks to the FHA policy change of requiring mortgage insurance for life, FHA to conventional refinances have soared.

Last year, such refis accounted for about 8% of all refinance transactions, with about 20,000 loans originated per month.

In 2010, that rate was about 4,000 FHA-to-conventional refis per month, or just one percent of refinance transactions.

Since 2013, when the FHA’s mortgage insurance policy changed, about 2.9 million borrowers have taken out FHA loans. CoreLogic expects another 250,000 of these borrowers to go conventional in 2017, thanks in part to another 5% rise in home prices.

If you’re currently in an FHA loan, it might be time to consider a conventional loan instead if you stand to save a decent chunk of money each month.

Just be sure to take note of how long your FHA mortgage insurance will actually be in-force. Some borrowers with older FHA loans, 15-year fixed mortgages, or those who originally made large down payments might have more favorable insurance requirements.

(photo: Phil Leitch)

source: thetruthaboutmortgage.com

We are letting down existing borrowers

Given that even a hint of a change to (BBR) over the past seven and a half years has been rare, you can fully understand why the market has taken such a keen interest in MPC pronouncements over the past couple of months. This month’s cut to Bank Base Rate was widely anticipated but still seemed rather momentous given the lack of movement over that period.

The suggestion from many commentators is that the cut will herald something of a ‘new age’ for the remortgage market, which (we are told) has been waiting on a BBR move – in either direction – since January 2009. Whether this becomes reality is another matter, and will of course depend much on how lenders react.

That said, there are a group of borrowers – whose true size we are yet to get a full handle on – who will find themselves stuck in the same position regardless of whether rates fall or rise. These ‘mortgage prisoners’ appear locked in limbo, some for unfathomable reasons, and it was therefore no surprise to see the Association of Mortgage Intermediaries (AMI) recently hitting out at both the regulator and lenders for what they see as inertia when it comes to helping these borrowers move away from their current (often SVR) rates to those which are far more competitive in today’s mortgage market.

AMI puts the ‘mortgage prisoner’ number at somewhere near one million and says that in certain sectors there are great swathes of borrowers unable to do anything but stay put. These include (perhaps unsurprisingly) interest-only borrowers, those who want to borrow into retirement or are currently in retirement, the self-employed and contract workers, foreign currency workers (whose product access has been hit considerably by the changes brought about by the MCD), and expatriates.

While AMI believes these borrowers are the worst affected in this post-MMR environment which brought in far tighter affordability measures, there are of course what we might call, ‘standard mortgage holders’ who have also been turned down for a remortgage despite the fact the transitional arrangements brought in by the MMR were designed to allow lenders to smooth their path. Of course, this is only for those not wishing to add to their borrowing, but even now it seems incredibly odd that a borrower who is currently affording their higher monthly mortgage payment, is still being turned down by a lender for a product which would actually see them with a less costly mortgage.

Now, of course, to give the FCA a fair hearing it has been very vocal in urging lenders to use the transitional powers as set out and to ensure borrowers are not left on rates which clearly disadvantage them, when (technically at least) they should be able to remortgage to a more competitive rate. However, turning theory into practice is a rather different situation, and you can (sort of) understand why lenders are cautious – perhaps far too cautious – when it comes to determining affordability under the MMR rules, rather than those in place beforehand. After all, the regulator’s train of thought is on tightening affordability/underwriting rather than loosening it.

That said, something has to give and there has to be a considered appeal to lenders to treat customers fairly in these circumstances. The FCA appears to be suggesting that because it has only looked at those customers who had mortgages approved, it’s not in a position to comment on those who were turned away. This clearly needs to be changed, because as any intermediary will tell them, the numbers of rejected borrowers are substantial and, while they are living through a period of ultra-low mortgage pricing – which has just got lower – they are not able to benefit from it.

One can understand the situation where the existing borrower wants to borrow more – of course the necessary affordability checks need to be maintained – but a simple product transfer or remortgage to a new lender should not be out of the question for those who simply want to move to a different product/rate. AMI appears to be calling for this situation to fall within the regulator’s review of responsible lending, and it’s hard to disagree. At the moment we as an industry are letting down existing borrowers who could, and should, be allowed to move. It’s time we rectified this.

source: mortgageintroducer.com

A boost for the remortgage market

So June the 23rd delivered a momentous decision that few were expecting. The shock has not been the result so much as to how people have behaved subsequently: the Prime Minister has resigned, the labour shadow cabinet has thrown their toys out of the pram regarding the leadership of their party, while Nicola Sturgeon opportunistically wants to fragment the kingdom still further with, ironically, a vote for independence that will make the Scots less independent.

Ultimately however, democracy has taken its course and a vote has been taken, now it is time for everyone to pull together, regardless of political persuasion, or which way you voted.  It is time to look to the future of our great country and make it a success. This will only happen by everyone working together to make it so.  The more there is division the more that people who want to see the UK fail will start to gain a foothold.

So to the mortgage market. Mortgage rates were dropping for many weeks before the referendum and we had already seen the launch of the lowest ever fixed rate. Lenders have continued to lower interest rates, with a sub 1% rate being launched by HSBC before the referendum, and it looks like rates will not be going up any time soon.

In this respect it seems like what the politicians are forecasting and what is actually happening on the ground is pulling in separate directions and predictions are often little indication of what will actually happen.

In fact it is almost impossible to judge, partly because even the people meant to be making many of the pivotal decisions still do not know what decisions to make themselves. At the time of writing Mark Carney is unsure whether he will need to lower rates to boost spending or whether he will need to raise them as we may have an inflationary situation because the cost of oil will rise, as will other things dependent on the sterling/dollar exchange rate.

While swap rates have been falling for some time, giving banks access to cheap three and six month money, there is a chance that funds further down the line may be more expensive if UK banks find it harder to access money from the money markets. This would raise the cost of mortgages regardless of what the Bank of England does. However, there is certainly no shortage of money to be lent at the moment which is contributing to the incredibly low rates.

Either way this is arguably good news for the mortgage market right now as we may well see the number of remortgages rise. On the one hand we have the lowest mortgage rates we have ever had, on the other there is a prospect that they may rise in three to six months. Both of which mean if ever there has been a time for mortgage brokers to get in touch with their clients, now is it.

source: mortgageintroducer.com

Two Simple Ways to Boost Your Credit Score Before Applying for a Mortgage

About a month ago, I cautioned readers to avoid swiping the credit card before applying for a mortgage.

In short, the more you charge, the higher your outstanding balances. And the higher your balances, the lower your available credit and credit score will be.

That’s pretty straightforward stuff, but it may not apply to everyone because some folks may want a higher credit score despite making very few credit purchases.

However, there’s yet another way to give your credit scores a boost without simply doing nothing.

Increase Your Credit Limits

I’m talking about increasing credit card limits, something that is very easy (and fast) to accomplish thanks to the many credit card management tools now at our fingertips.

If you visit just about any credit card issuer’s website, you should be able to find an area to increase your credit limit online.

Put simply, you enter the desired amount you’d like (e.g. $10,000 if your current limit is $5,000) or you simply ask for an increase and get what you get and don’t get upset.

When it comes to credit card issuer Discover, you simply enter your gross annual income, employer name, and monthly housing/rent payment. Then they present you with your new credit line. It can take as little as a few seconds to get your new line of credit.

With other issuers, such as American Express, you are asked to enter your desired credit limit and then hope they extend it to you. Apparently you can get 3x your starting limit with little trouble.

So if you started with $5,000, you could get it increased to $15,000 simply by visiting the American Express website and filling out an online form.

The underlying goal of such moves is to lower your credit utilization, which is the percentage of credit you’re actively using at any given time.

A lower utilization, similar to a lower debt-to-income ratio, is viewed favorably.

So imagine you have that American Express credit card with a $5,000 limit.

If you currently have a $2,500 balance, even if it’ll be paid off on time and not revolved, you’re essentially using 50% of your available credit. This isn’t a good thing when it comes to credit.

You may actually want to keep your utilization below 25%, in this case, no more than $1,250, again, even if you pay it off in full by the due date.

But what if you naturally charge a lot on your credit cards each month, despite paying all of them off every month? What can you do to keep utilization low?

Well, if your credit limit happened to be $10,000 instead of $5,000, that $2,500 balance would only represent 25% utilization.

In other words, all you have to do is ask for higher credit limits, instead of spending less. Of course, spending less will sweeten the deal and ideally push your credit score even higher.

Tip: It’s easier to get credit limit increases approved if your balances are low because you’re viewed as a lower risk customer.

Pay Off Your Existing Balances

In conjunction with this tip, you can pay down any balances you may have, assuming you don’t pay your credit cards in full each month.

If implemented together, you can get higher limits and reduce balances, which will be a one-two punch in the credit utilization department.

So using our same example, if the person with the $2,500 balance lets it float from month to month and only has a $5,000 credit limit, imagine if they got a higher limit and started paying it down.

They could push their utilization down from 50% to say 15% if they got the limit increased to $10,000 and paid $1,000 off the balance.

These actions should result in a higher credit score, which generally means a better mortgage rate if you apply for a home loan.

Additionally, smaller credit card balances mean you’ll have more of your income available to use toward a mortgage payment. So you may actually be able to qualify for a larger mortgage and/or buy more house.

The only caveat here is that a credit limit increase request could result in a hard inquiry on your credit report, which could ding your credit slightly. It’s temporary, but could offset some of the expected gains of a higher limit.

So either request the higher limits several months in advance of applying for a mortgage, or ask the credit card issuer if it will result in a hard or soft pull before making the request. If it’s the latter, it won’t harm your credit score.

In any case, you’ll want to approach mortgage lenders with the highest credit score possible to ensure you have the best chance of approval and obtain the lowest interest rate.

source: thetruthaboutmortgage.com

Preparing for a Mortgage 101

You’ve paid rent year after year and what do you have to show for it? Zilch. Zero. Nothing.

If you’re starting to dream about building equity, now is a great time to make the leap. Interest rates are still low, and real estate prices haven’t started to spike yet. Before you apply to a lender, though, there are a few things you should know.

Applying won’t damage your credit

“If you are shopping around for a mortgage and worried that the inquiries will ding your credit score, don’t worry,” said Roman Shteyn, co-founder of Credit-Land.com. “The credit bureaus know that people may go to different providers to check interest rates especially for a big purchase like a house. Loan inquiries within 30 to 45 days of each other for the same thing are lumped together and treated as a single request, and your credit score should not be impacted.”

Your past matters to lenders

They will look at previous mortgages on your credit report to determine your creditworthiness

“We all know a foreclosure has a negative impact on your credit score,” says Shteyn “but many people don’t realize a short sale can be damaging as well. It can knock your score down 85 to 160 points depending on your score at the time and how it was reported to the credit bureau.” Occasionally, a lender will agree to report a short sale as paid which will not negatively affect a credit score. But this is rare.

A short sale is not as bad as a foreclosure, which will make it more difficult to get a loan. It will remain on your credit score for seven years, and lenders will see this black mark whenever you apply for credit during this period.

Lenders handle couples with different credit scores in a special way

If you’re applying for a mortgage loan as a couple, the mortgage lender will check both of your credit reports and credit scores. The bank reviews your debt, the length of your credit history and current credit activity.

Paying bills late and too much debt can negatively impact a mortgage approval, plus influence the mortgage rate. However, some couples believe that they’ll receive a low interest rate as long as one person has excellent credit — but this isn’t always the case.

Typically mortgage lenders use the lowest credit score to determine the mortgage rate. Therefore, if you have a 790 credit score and your partner has a 670 credit score, you’re not likely to receive the most favorable rate due to your partner’s less-than-perfect credit history.

To ensure the best rate, both of you need to maintain good credit before applying for a loan. This includes paying bills on time, paying off debt and checking your credit reports for errors.

For a lender, there’s nothing like responsibility 

Make other loan and debt payments on time, especially over the months leading up to the filing of your mortgage application. Every 30-, 60- or 90-day delinquency on a loan or credit card is going to reduce the credit score the lender considers as part of the loan file. That score, in turn, will determine how good a loan you get — if you get one at all.

You need to be strategic about your personal finances

Consider paying off more debt and putting down a smaller amount at closing. This move leaves borrowers with larger mortgages, but it will allow them to replace non tax-deductible, high-interest rate debt (like credit card debt) with lower-rate mortgage debt that features deductible interest.

If you have a financial setback and need to miss a payment on your other debts, miss the credit card payment first, followed by the payment on any installment loan you might have and finally, the payment for an existing mortgage. That’s because credit scoring systems look at the performance of similar loans first when deciding what type of score to assign.

Before you apply, think about the future

If your next few years are full of big life changes and multiple new financial obligations, apply for a mortgage first. Numerous credit inquiries, such as new applications for credit cards, can hurt a borrower’s credit score, especially if they’re filed in the months prior to the home loan review process.

The value of your potential home can make or break the deal

Sometimes it’s not your fault that your mortgage application is denied. If your home isn’t worth enough, lenders might not approve your request for a mortgage. Say you agree to pay $200,000 for a home and are asking for a mortgage loan of $190,000. If an appraiser determines that the home is worth only $160,000, a mortgage lender might not grant you a loan, even if you are willing to pay the higher amount.

The 3 big don’ts

We can talk about the things you should do when applying for a mortgage all day long, but realistically, avoiding the big mistakes should be your first concern. Here are five things you should remember.

1. Don’t make any big purchases over the next couple of months. It makes less money available for the down payment and it might require you to get yet another loan.
2. Don’t upgrade too fast. Lenders consider what’s known in the industry as “payment shock” when approving loans. Somebody who goes from a relatively small monthly housing payment to a huge one either won’t qualify for a mortgage or will end up having to cover too much loan with too little money.
3. Don’t just get pre-qualified for a mortgage, get pre-approved. Home buyers must allow their lenders to pull credit reports, check debt-to-income ratios and perform other underwriting steps. But that puts a borrower much closer to obtaining a loan and locking in a rate and term.

source: totalmortgage.com

How to Get Rid of Your PMI

Private mortgage insurance (PMI) can help you buy a home without a big down payment, but it’s expensive in the long run. An online PMI calculator reveals that a $300,000 house purchased with a $10,000 down payment can stick you with an extra $277 in PMI payments each month. That adds up quickly: in five years, you’ll have shelled out an extra $16,620.

Fortunately, there are ways to save on PMI costs. Before you buy your dream home, consider your PMI exit strategy to save big in the long run.

1. Avoid an FHA

The best way to avoid paying PMI is to make a 20 percent down payment on your home so that you don’t need it at all. Failing that, you should do your best to stay away from FHAs. Because they’re intended for riskier borrowers, you end up paying PMI for the life of the loan, regardless of how much equity you’ve built.

If you’re an otherwise well-qualified borrower looking for a low down payment option, take a look at a conventional loan. Recent changes over the last year have made it possible for borrowers to put as little as 3% down, and once you have built up enough equity (generally 22% of the loan) you can cancel the PMI.

2. Make Extra Mortgage Payments

By paying extra on your mortgage each month, you’ll be increasing your equity at a faster rate than if you just paid the minimum. Any extra payment you make goes directly to paying down your principal, and you’ll save by not owing additional interest on that portion of your mortgage. Once you owe less than 78-80% of the original value of your home, you can call your bank and request they cancel the PMI charges. The sooner you can pay down your debt, the sooner you can get rid of PMI payments.

3. Re-Financing Your Mortgage

Keep an eye on the housing market in your neighborhood and on mortgage rates from other lenders. If home values have gone up since you bought your house, you may have more equity than you think. Think of it this way: if your $300,000 home is now worth $400,000, you have an extra $100,000 in equity. If the amount you owe on your mortgage comes to under 80 percent of the new appraised value, you can refinance your mortgage to get a new loan with no PMI. Just make sure your new interest rate isn’t too high and you’ll come out ahead.

With a little planning and discipline, you can take advantage of these tips to reduce or even eliminate your PMI costs. The savings can be enormous, so it pays to crunch the numbers and get focused on the goal of kissing your PMI goodbye.

source: totalmortgage.com

6 Ways to Fight Rising Interest Rates

Mortgage interest rates have been hovering between 3.5 and 4 percent for the past 18 months, refusing to rise as quickly as many forecasters had predicted. That means many have been able to lock down favorable rates without the threat of a drastic increase hanging over their heads.

However, later this year, the Federal Reserve is expected to raise its benchmark rate, which has held near zero since December 2008. This can happen as soon as its next policy meeting in mid-September or, more likely, in December.

The long awaited increase is a good sign for the economy as a whole; it’s continuing to expand at a moderate pace, driving solid job gains and declining unemployment. For real estate markets, though, the news isn’t so great.


Likely, the rate hike will be enough to drive rates on 30-year fixed mortgages to well over 4 percent and perhaps closer to 5. With this hike looming, now is a good time for buyers and refinancers to consider their options. These include:

1. Adjustable Rate Mortgages (ARMs). ARMs are a great way to keep rising rates from busting your budget, at least for the first five years of the loan, when you pay little or no interest. When it resets, you can take sell or take your chances on a refi if you have enough equity. ARMs are a good idea if you don’t plan to own the house a long time.

2. Fix up Your FICO. When they get loan terms from their lender, many buyers wonder what happed to the super low teaser rates their lender promised in its advertisements. Those “bait” rates are real, but they’re just not available to everyone—just those with fantastic FICOs and moderate-sized loans.

Lower FICO scores translate into higher risk for lenders and their investors, so they raise rates to compensate for the risk. By working hard to improve your credit score—reviewing your history, paying bills on time, avoiding taking too much credit, keeping credit card balances down—you can raise your FICO and lower the interest rate on your mortgage.

3. Increase Your Down Payment. By increasing your down payment, you fight rising rates two ways. First, you reduce the amount you will have to borrow and, in turn, the amount of interest you will have to pay. With a smaller loan you may also get a lower interest rate; smaller loans reduce lenders’ risk and a lower rate can result.

4. Lock Your Best Rate. Rates change every day and they vary slightly by location. You can improve your chances of getting the best possible rate during the time that passes between your loan approval and closing by asking your lender for the right lock your rate, usually within a 30 day period. Follow mortgage rates as closely as you can and time your lock to coincide with a low point.

5. Buy a Cheaper House. If the house costs less, your loan is going to be smaller. With a less expensive house, you may also be able to put more down, reducing your principal even more. With a smaller loan, you should also realize a lower rate.

6. Shop for Rates. Lenders compete aggressively by the rates they offer. Like any business, some will offer more favorable rates than others to bring in more business. Also, lenders with access to capital at lower cost can afford to charge lower rates. Shop around for the best rates by sharing your FICO score with the lender so that they don’t quote you a “bait” rate you will never see.

source: totalmortgage.com

What to know about APR & Mortgage Fees

Mortgage terms can be confusing. But when you break them down into digestible pieces of information, they actually make sense. And the more informed you are, the greater the chance you’ll make a wise home-buying decision.

One term guilty of constantly confounding hapless homebuyers is APR. It stands for Annual Percentage Rate, and can be spotted in a mortgage rates table (thanks to the Truth in Lending Act) next to its partner in crime, the interest rate. While both terms share the prized percentage sign, they have an important distinction.

APR vs Interest Rate

 

It all has to do with fees. The interest rate is what it costs you to borrow money from your lender without fees. On the other hand, the APR is what it costs to borrow money from your lender with fees. This is why the APR is always higher than the basic interest rate.

So what are the fees?

 

Fees are a tricky beast. Different states, markets, and lenders all have their own variations, which make it harder to discern if you’re getting a good deal. As always, the more you know makes it less likely you’ll get swindled. At the very least, you should be aware of these basic fees.

Closing costs are miscellaneous fees paid to all parties involved with the sale of the home (e.g. lender processing loan, title company for handling the paperwork, a land surveyor, local government offices for recording the deed etc.). These costs can amount from anywhere between 1% and 8% of your loan amount, but usually fall between 2% and 5% of your loan amount.

Broker fees are just what they sound like: a fee charged for the service of a broker. Generally, the fee is between 1% and 2% of the loan amount. There shouldn’t be any surprises either, the broker is required to disclose all fees up front, and should be able to tell you exactly what each fee is for.

One advantage of choosing a direct lender, is you don’t have to pay for broker fees. Because with a direct lender, you are the one doing the labor, and therefore, don’t have to pay for the work the broker would be doing. There are still fees for processing the loan, but a broker may still be more expensive.

Mortgage points

 

There are two types of mortgage points.

Discount points are prepaid interest on the mortgage loan. For every point, your mortgage rate drops down (usually .25%). Typically, borrowers can pay between 0 and 4 points. And because the Annual Percentage Rate is the total cost (mortgage rate + fees) of your mortgage, lowering your mortgage rate translates into a lower APR. Discount points are also tax-deductible.

The main takeaway is that by paying more up front, you get a lower interest rate. This is most useful a) if you have the available cash to put down, and b) if you plan on staying in your home long term. If you’re trying to pay the lowest possible price upfront, then choose the zero-point option.

Origination points exist so the lender can cover the cost of evaluating, processing, and approving your mortgage. They are not set in stone, so depending on your lender, you might be able to negotiate the number of points.

Back to the APR

If two loans are set for the same period of time, the borrower can compare APRs, or interest rates, and find out which loan is the better deal. For example, a loan with a 3 percent interest rate will have a lower monthly payment than with a 5 percent interest rate. Similarly, a loan with a 3 percent APR will have a lower total cost than it would with a 5 percent APR.

It’s important to note that APR assumes you will stay in your home for the full duration of the loan. And since it would be impossible to factor in whether or not a borrower will refinance, it assumes the borrower will not. If that wasn’t enough, it also assumes that the borrower doesn’t make any extra payments toward their mortgage. These assumptions are why some say that APR can be misleading.

Things can also get a little tricky when you take into consideration the fact that most homeowners only end up staying in their home for a relatively short period of time. What’s the big deal? Well, a loan with a higher APR actually has lower costs over the first few years (because you didn’t pay for discount points, which would have lowered your APR).

So if you know you’re only going to stay in a home for a little while, a higher APR would be your best bet. But if you know you’re going to stay in your home for the entire life of the loan, the lower APR is what you want (because over time, paying upfront for the discount points to lower your interest rate will save you money).

It can definitely get complicated when you plan on staying longer than a few years, but not for the whole life of the loan. With situations like that, it pays to have a competent lender who will help you work out which loan is best.

The bottom line:

 

When searching for the best deal on a mortgage, comparing APRs, due to some possibly false assumptions (e.g. not refinancing, no extra mortgage payments, staying for the full life of the loan), might not be as prudent as say, comparing mortgage rates and fees.

But if you still want to exercise all options, and choose to compare APRs, it’s crucial that you take into consideration how long you plan on staying in your home. Also, because some of the calculations can be complex, make sure you choose a lender that is willing to walk you through the math.

source: totalmortgage.com

6 Ways to Lower Your Interest Rate

If you’re in the market to buy a house, you probably see dozens of advertisements from lenders trumpeting interest rates that seem impossibly low.

Actually those are real rates—but they are reserved for a very elite few borrowers with the best credit, the largest down payments, and the ability to qualify for pretty much any loan amount. The rest of us never see those kinds of rates.

Many factors determine the rates lenders charge. These include their cost of money, which is a function of a long list of factors ranging from the prime rate that the Federal Reserve charges banks to the cost of money in the global economy. The amount they want to make on the loan, the risk each borrower presents, and even the lender’s location all impact the actual rate that the lender will quote you when you apply for a loan.

You can’t do much about these factors, which is why it is wise to shop around widely for a lender. After all, you are about to take out the biggest loan of your life. However, there are a number of factors that determine your interest rate that you CAN do something about.

Knowing what they are and know how to influence them can save you hundreds of thousands over the life of your mortgage.

1. Credit score

Your credit score helps lenders predict how reliable you’ll be in paying off your loan. Your credit score is calculated from your credit report, which shows your payment history on loans and debt over the past seven years.

Other factors, such as the amount of credit you can access and recent requests for credit reports from lenders, also impact your credit score. In general, if you have a higher credit score, you’ll be able to get a lower interest rate.

Before you begin shopping for a home, review your credit report carefully. Clean up errors. Make sure you pay every bill promptly and don’t take out credit cards or lines of credit that you don’t need. If you have too much credit, pay off some of your cards and close the accounts. Avoid applying for new credit until after you close on your home.

Only apply for your mortgage with lenders you have researched and are serious about; every time your credit history is pulled, even if you never do business with the lender who makes the inquiry, it hurts your credit rating

2. Loan amount

Typically, you’ll pay a higher interest rate if you’re taking out a particularly small or particularly large loan. If your loan exceeds the loan limits for FHA, Fannie Mae and Freddie Mac, you will have to take out a jumbo loan, which could raise your rate by several points.

In 2015, the loan limits for single family homes range from $417,000 to $625,000, depending on location. Just because you are pre-approved by a lender to borrow a large amount, be prepared to pay a higher rate if you decide to borrow the maximum.

As a general rule, it is not wise to end up with a mortgage at the upper limits of your pre-qualified or pre-approved ceiling. You are taking more risk in a depressed market, like the one that hit in 2007, you could find yourself “house poor” and under-equitied, leaving yourself vulnerable to foreclosure.

3. Down Payment

The amount of your down payment affects your interest rate because larger down payments lower the amount of the loan and, therefore, lower the risk that the lender incurs.

Lenders will reward larger down payments with better rates; they want borrowers who are willing to put a larger personal stake in the property. So if you can put 20 percent or more down, do it—you’ll usually get a lower interest rate. You will also pay less interest over the life of the mortgage.

4. Loan Terms

Shorter term loans have lower interest rates and lower overall costs but higher monthly payments. Interest rates come in two basic types: fixed and adjustable.

Fixed interest rates don’t change over time but adjustable rates have an initial period—usually five to seven years–that is lower than a fixed rate. At the end of the initial period, they “reset” and fluctuate based on market factors.

5. Loan Type
You may have wider variety of loans from which to choose than you realize and these may have different interest rates. If you are a veteran, you may qualify for a VA loan. An FHA loan will get you a lower down payment than a conventional loan because the government is taking on most of the risk.

Many state and municipal housing authorities offer loans similar to FHA loans at lower down payments and rates than commercial lenders. Most have income limits and some down payment assistance programs are limited to first-time home buyers.

6. Timing and Locking

In mortgages, timing is everything. Mortgage rates can change quickly and missing a “bottom” as interest rates change can cost you a lot over the life of a mortgage. Follow the financial news carefully. Try to time your house search to correspond with changes in rates. If you think rates are going to rise, act quickly. If they are falling, take hour time until you think they won’t fall further.

When your loan application is approved, lenders are obligated to offer you an agreed-upon rate regardless of whether mortgage rates have changed between the time of the loan approval and the closing date.

However, many lenders will let your rate continue to float until you close so that you can lock in the best rate during the lock-in period. A rate lock is a guarantee from a mortgage lender that they will give a mortgage loan applicant a certain interest rate, at a certain price, for a specific time period.

The price for a mortgage loan is typically expressed as “points” paid to obtain a specific interest rate. (Points are basically prepaid interest, so the more points you pay, the lower the interest rate; 1 point equals 1 percent of the loan amount.) Locked in rates are good for 30, 45 or 60 days and can be extended if closing takes longer.

source: totalmortgage.com

How to Simplify the Home Buying Process

As a first­-time home-buyer, the home buying process can be intimidating and stressful. This is brand new territory for you. And since you don’t know what to expect, you might not realize how slow and complicated the process can be.

But even if you’re new to the “home buying game” and slowly learning the ropes, there are simple ways to streamline a purchase and minimize stress.

1. Organize your documents ahead of time

 

When you apply for a mortgage loan, the first thing a lender will do is request financial documents. This includes your tax returns from the past two years, recent paycheck stubs and copies of bank account statements.

If you’re not organized, finding these documents can be tedious and time-consuming. So make sure you have a system where all your financial information is located in one place and easily accessible.


The sooner you locate and forward these documents to the mortgage lender, the sooner the bank can process your application and get you approved for a loan.

2. Get pre­-approved before shopping

 

Some first­-time home-buyers don’t understand the importance of a mortgage pre-approval. Pre­approvals aren’t required to make an offer on a house, but they can streamline the process since you’ll already have financing in place. 

A pre-­approval involves completing an official mortgage loan application and going through the underwriting process, with the lender checking your credit and verifying your employment and income.

 

Once you’re pre­-approved, you know exactly how much you can spend on a property, plus you know your estimated mortgage rate before shopping for a home.

3. Check your credit beforehand

 

You might think you have excellent credit, but your credit report can paint a different picture. To avoid any surprises when applying for a home loan, check your credit report beforehand.

You can order a free report each year from AnnualCreditReport.com. Check the report for errors and unfamiliar account activity which can be a sign of identity theft. Mistakes on your credit report can lower your credit score and jeopardize qualifying for a mortgage.

4. Know what you’re expected to pay a lender

 

Speak with your mortgage lender to find out how much you’ll need for a down payment. Down payment minimums vary depending on the type of mortgage.


For example, a conventional mortgage loan requires a down payment between three percent and 20 percent, whereas an FHA home loan requires a 3.5 percent down payment.


You will also need cash for closing costs, which can be as much as two percent to five percent of the sale price (unless the seller agrees to pay all or a percentage of your closing costs).

5. Make sure your realtor understands your needs

 

Be as specific as possible when speaking with your realtor. If your realtor understands exactly what you’re looking for in a property, you won’t waste time looking at homes that don’t meet your needs.

For example, how many bedrooms and bathrooms do you need? Are you seeking new construction or a resell? What type of square footage do you have in mind? What’s your price range? Do you prefer a specific neighborhood or school district?

Bottom Line

 

There’s nothing more thrilling than buying a home — especially if you’re a first-time buyer. But the stress of getting a mortgage and negotiating a purchase can overshadow the excitement. The above tips, however, can reduce the risk of setbacks and speed the process so you can quickly move into your new place.

source: totalmortgage.com

Thinking of Refinancing? 4 Good Reasons to Follow Through

For the past couple of years, mortgage rates have been lower than they’ve been in decades. So if you’re thinking about refinancing your home loan, now’s as good a time as ever.

Refinancing involves getting a new home loan to replace an existing one. If you’re unfamiliar with refinancing or if you don’t understand the benefits, trading one mortgage for another might seem pointless. However, refinancing a mortgage loan is one of the most effective ways to modify your mortgage terms. Here’s a look at four things you can accomplish by refinancing your home.

1. Get a cheaper interest rate

Since mortgage rates can change from year-to-year, the rate you’re paying might be higher than current mortgage rates. You might also have a higher rate if you didn’t have the strongest credit score when originally applying for the loan. If your credit has improved since buying the home, this is your chance to get a cheaper rate. Unless you’re able to get a mortgage modification, refinancing is the only way to take advantage of lower mortgage rates, which can save thousands in interest over the life of your loan.

2. Get a lower mortgage payment

Not only can refinancing lower your mortgage rate, it can lower your mortgage payment. Your monthly payment is based on your loan amount and your interest rate. And if your monthly interest charges decrease due to a lower rate, so does your mortgage payment.

Depending on the difference between your old and new mortgage rate, refinancing can potentially reduce your mortgage payment by hundreds every month. This creates additional cashflow that can be used for other purposes, such as paying off credit cards, saving for retirement or building an emergency fund.

3. Get a fixed-rate mortgage

If you have an adjustable-rate mortgage, refinancing to a fixed-rate home loan is the only way to get a fixed, predictable mortgage payment. Adjustable-rate mortgages have a fixed-rate period, which is typically between three and five years. After this period, the interest rate resets every year, either increasing, decreasing or staying the same. Locking in a fixed-rate offers protection from rising interest rates.

4. Get cash from your equity

If you’re sitting on thousands of dollars of equity, you don’t have to sell your property to get this money. A cash-out refinance puts equity in the palm of your hands. You can use the money for debt consolidation, college expenses, a wedding, home improvements or start a business. You can borrow up to a percentage of your available equity, usually 80 percent. Just know that a cash-out refinance increases your mortgage balance, often resulting in higher monthly payments.

The Bottom Line?

There’s plenty to think about before refinancing your mortgage loan. It’s important to understand exactly why you’re refinancing, and you need to weigh the pros and cons. There’s no way to know for certain when rates will rise again. So take advantage of low mortgage rates and save money while you can.

source: totalmortgage.com

How to Recognize a Bad Mortgage Refinance Loan

As mortgage rates drop, you might anticipate refinancing your mortgage and getting a lower rate and payment. Your current home loan lender may encourage refinancing, and you might receive unsolicited offers from other banks in the area.

With so many financial institutions offering refinancing, and given how it’s a common mortgage practice, it’s easy to assume that any loan is a good one. Fortunately, not all re-financing offers are favorable, and if you’re not careful, you might refinance into a loan with undesirable terms. Here’s a look at three signs of a bad mortgage refinance.

1. Going from a fixed-rate to an adjustable-rate  

If you tell a mortgage lender you want the lowest interest rate and monthly payment possible, the lender might suggest refinancing into an adjustable-rate mortgage.

These mortgages typically offer lower rates than fixed-rate mortgages during the initial years, which can dramatically reduce your home loan payment. This is a godsend if you’re experiencing payment problems. The problem, however, is that these low rates aren’t permanent. Sure, you might have an attractive fixed rate for the next two or three years, but your rate will adjust every year thereafter. And with each rate adjustment, the interest rate can increase or decrease. If the rate increases, so does your home loan payment.

2. Lender encourages borrowing too much

When refinancing a mortgage loan, there’s the option of cashing out your equity. You can use the money for debt consolidation, home improvements or build your rainy day fund.

There’s nothing wrong with a cash-out refinance. If you have plenty of equity, it’s an affordable way to put quick cash in your pocket. The problem is that some people cash out too much of their equity.

A cash-out refinance increases how much you owe, so instead of dropping your mortgage payment, it might increase. And unfortunately, some lenders encourage borrowers to cash out as much of their equity as possible. A loan officer might excite a borrower by explaining the many uses for cash, and unfortunately, some people can’t see past dollar signs. As a rule of thumb, only consider a cash-out refinance if you can comfortably afford a higher monthly payment, or else you’ll risk losing the home.

3. Overly expensive closing costs

Closing costs vary, and you can expect to pay between two percent and five percent of the mortgage balance. If you’re refinancing for the first time, you may assume closing costs are the same no matter where you go. However, different banks charge different fees for common services, such as the loan origination, the appraisal, the title search, etc. And some lenders bet on the fact that you’re not going to do your homework and compare costs.

Even if you have a long-term relationship with your current bank and you’re using this financial institution for your refinance, make sure you get at least two or three quotes from other lenders. Since closing costs are paid out-of-pocket or wrapped into the mortgage loan, comparison shopping is the only way to protect against getting ripped off.

Bottom Line

Refinancing a mortgage loan can be the answer if you need a lower house payment. However, if you take a chance with an adjustable rate mortgage, borrow more than you can afford or get stuck with high fees, refinancing might not be as financially beneficial as you think.

source: totalmortgage.com

Mortgage Rates on the Rise?

According to data recently released by Zillow, 30 year fixed mortgage rates are currently around 3.73%. After rising to 3.83% over the course of last week, they dropped slightly at the start of this week.

“Rates remained flat for most of last week but jumped sharply after Friday’s exceptionally strong jobs report, before easing back down early this week,” said Erin Lantz, vice president of mortgages at Zillow. “We expect rates to hold steady this week due to little incoming data and the official start of the European Central Bank’s bond purchases.”

Though rates still remain low, many in the industry still expect them to rise later this year, thanks to a slowly improving economy. If you’re considering buying a new home or refinancing, now is the time to do it. To take a look at the rates we can offer, head over to our rates page.

source: totalmortgage.com

Current Mortgage Rates for Wednesday, January 28, 2015

Despite your standard intraday swings, mortgage backed securities were largely flat yesterday. Mortgage rates were effectively flat.  A lot of domestic data was issued yesterday, and it was largely mixed.  The Durable Goods report for December was very poor, and the Richmond Fed Manufacturing Index showed weakness, while Consumer Confidence and New Home Sales jumped. Very low trading volumes (largely a result of the snowstorm that shut down a lot of the transportation in the northeast), the prospect of today’s Federal Reserve meeting announcement, and overseas events pretty much kept our bond markets on an even keel yesterday.

This morning, mortgage backed securities are just slightly in the green, and I think things are going to be choppy.  Not a lot of data is being issued with the exception of today’s Fed announcement (which I guess could be termed “data.”). Any improvement that we’re seeing is likely a result of a flight to safety from the disaster that is Europe at the moment.

Click here to see our current mortgage rates.


Today’s Economic Data:

Not much today, but since we have space to fill, it’s worth discussing Greece and Europe for a bit. This is going to be a simplified explanation (I’m not an expert in the Eurozone), but here goes: As part of a bailout deal back in 2012, the European Central Bank, the IMF, and the European Commission imposed very severe austerity measures on Greece (the Germans, in particular, had a big hand in these austerity measures).  the austerity measures caused widespread unemployment to become worse, and sent poverty levels soaring.





In response the Greek people elected new Prime Minister Alex Tsipras from the anti-austerity Syriza party (which is an acronym for “The Coalition of the Radical Left).  Jacobin Magazine – yes I know, hardly an unbiased source – has a pretty good rundown of the party’s platform and what it could mean for Greece moving forward here.

Tsipras has already began fighting the austerity measures, remarking “We won’t get into a mutually destructive clash, but we will not continue a policy of subjection.”  He has said that Greek will not default on its debts, but the markets don’t seem to be buying, and a Bloomberg article says that Greek credit-default swaps are signalling a 70 percent probability of some form of default in the next five years.  Furthermore, there is a concern that this win will embolden leftists in some of the other countries where austerity has been imposed, particularly Spain, Italy, and Ireland.  If Greece’s creditors blink, it may embolden the populist movements in these countries.  A disorderly break-up of the Eurozone still seems pretty unlikely to me, but it’s a little more in play than it was before the weekend.

TL; DR: Greece’s rejection of austerity measures is roiling European debt markets, and we’re seeing a flight to the safety of U.S. bonds.  This should be of benefit to mortgage rates.

Today’s Fed Meeting:

I don’t know that I can bring myself to recap this again.  For more background, you could read yesterday’s blog, Tim Duy’s recent work, or Jon Hilsenrath’s preview.  Long and short is that while there is some risk to rates today, I don’t think there will be much impact from the statement.  If it is interpreted as being more dovish, we’ll benefit a little, and if it is more hawkish, rates will rise a bit in response.  But I expect that this will be more of a “stay the course” type deal, and that the Fed is still balancing what to do in the face of global headwinds, inflation that is low and likely to be going lower, a stronger dollar, low oil prices, and weak wage gains.  I don’t think we’ll glean much today.  If there’s something of interest, perhaps I’ll write up something additional this afternoon.

This Week’s Scheduled Economic Data That Could Impact Mortgage Rates:

Monday:

• Greek election: Syriza wins – ultimate outcome very uncertain.

Tuesday:

• Durable Good Orders: Headline expectation: 0.7 percent, actual, -3.4 percent.  Core expectation: 0.8 percent, core actual: -0.8 percent.
• S&P/Case-Shiller Home Price Index for November: Expected seasonally adjusted month-over-month expectations: 0.6 percent.  Actual: 0.7 percent.
• New Home Sales: Expectation: SAAR of 452k.  Actual: 481k.
• Consumer Confidence:  Expectation: 96, actual: 102.9.

Wednesday:

• Fed meeting:

Thursday:

• Weekly Jobless Claims:

Friday:

• Advance Estimate Q4 GDP:
• Chicago PMI:
• Consumer Sentiment:

source: totalmortgage.com
 

New FHA Home Loan Guidelines for 2015

If you need a low-down payment mortgage and you don’t have the best credit score, an FHA home loan can help you get the keys to homeownership. The FHA home loan program has been around since 1934 making homeownership affordable for many.

With the new year underway, the Federal Housing Administration recently announced changes to its program for 2015—changes that benefit many would-be buyers and anyone refinancing to an FHA home loan.

1. Reduced Mortgage Insurance Premiums

FHA home loans only require a 3.5% down payment, which has been a godsend for borrowers who can’t save the traditional 20%. Unfortunately, anyone who puts down less than 20% is required to pay an annual mortgage insurance premium (MIP), which is paid over 12 installment payments and included in the mortgage payment. Borrowers who pay MIP have higher monthly payments than those who don’t, but there’s good news for anyone who closes on an FHA home loan after January 26, 2015.

On January 9, 2015, the Federal Housing Administration announced an upcoming reduction in annual mortgage insurance premiums. For borrowers, this means more money in their pocket every month. This change applies to mortgages greater than 15 years. The reduction of 5% will reduce current mortgage insurance premiums from 1.35% to 0.85% for borrowers to put down less than 5%, and from 1.30%  to 0.80% for borrowers who put down more than 5%.

2. Elimination of Post-Payment Interest Charges

Some conventional mortgage loans charge a prepayment penalty, which is a fee borrowers pay their lender for paying off the mortgage in full within the first two to three years. FHA home loans have something similar, called a post-payment interest charge.

Basically, if you pay off your mortgage early either by selling or refinancing, your mortgage lender might charge interest for the entire month, regardless of when you actually paid off the mortgage. For example, if you paid off a mortgage on September 3, your lender would charge interest through September 30. New rules, however, get rid of this extra cost. Post-payment interest charges are eliminated beginning January 21, 2015. Lenders can only charge interest up until the date a borrower pays off his loan.

3. Advance Notice for Rate Adjustments

Adjustable-rate mortgages typically start with a rate lowered than fixed-rate mortgages. Unlike a fixed-rate, which has a set rate for the life of the loan, an adjustable-rate mortgage has a temporary fixed rate —  one to five years — and then the rate adjusts annually depending on the market. Previously, FHA home loan lenders gave borrowers a 25-day notice of rate increases. Effective January 10, 2015, lenders must give borrowers with an FHA-insured adjustable-rate mortgage a 60- to 120-day notice of any changes to the monthly payment. This provides borrowers additional time to prepare for higher mortgage payments.

Buying a house is arguably one of the most expensive transactions you’ll ever make in your life. And unfortunately, lack of funds is a home buying hurdle for many people. However, with an FHA home loans, affording a property has become much easier.

source: totalmortgage.com