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

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

Getting a Mortgage in 2016? Here’s What You Need to Know

As recently as two years ago, only 17 percent of all applications for a mortgage to buy a home were approved.[1]  Approval rates have improved greatly since then for two reasons.

First, borrowers are doing a much better job of getting their credit, debt, and documentation in order before they apply.  Second, lenders have slowly relaxed some of the standards they use to approve applications.

As you gear up to buy a house in 2016, here are a few things you should know about the mortgage industry.



More Easing of Credit Standards

Mortgage lenders expect to continue easing their standards in 2016, according to a fourth quarter survey of major lenders by Fannie Mae.[2]  The findings show that during the first quarter of the year, 16% of lenders expect to ease credit requirements for loans that conform to Fannie Mae’s and Freddie Mac’s underwriting standards and for government-backed loans like FHA and VA.

Meanwhile, the percentage expecting to tighten standards dropped to 2%.  However, for other loan types, such as conventional loans, fewer lenders said they would ease loans over the first quarter.

FHA and VA loans are already significantly easier to qualify for than conventional loans.  For example, the median FICO scores for purchase loans approved in December were 688 for FHA, 706 for VA and 754 for conventional—a huge difference.[3]  Based on the Fannie Mae survey, look for that difference to increase in the months ahead.

Rising interest rates

While standards slowly improve, interest rates are expected to slowly worsen for home buyers.  Most forecasts have rates ending the year between 4 and 5 percent on a 30-year fixed rate mortgage.

Ironically rates have actually fallen when most experts expected them to rise in the wake of the Federal Reserve’s decision in December to rates for the first time in nine years.  Though they will probably be higher a year from now than they are today, they will still be very low compared to historic rates.

Down Payments 

While easier lending standards and slowly rising rates don’t greatly increase the cost of buying a home, down payment requirements aren’t going to change much either.

The average down payment in the first quarter of last year was 14.8 percent of the purchase price, down from 15.5 percent a year ago to the lowest level since Q1 2012. However, the average down payment in dollars for 3.5 percent FHA purchase loans originated in the first quarter last year was $7,609 while the average down payment for conventional loans backed by Fannie Mae and Freddie Mac was $72,590.[4]

One of the reasons the average down payment declined last year was the popularity of low down payment loans.  Loans with 3 percent or lower down payments accounted for 27 percent of all purchase loans in the first quarter last year, up from 26 percent in the fourth quarter and also 26 percent a year ago to the highest share since Q2 2013. Low down payment loans accounted for 83 percent of FHA purchase loans originated in the first quarter, while 11 percent of conventional loans were low down payment loans.[5]

First-time buyers should check out the thousands of low or no down payment programs sponsored by state and local housing authorities.  Check out Down Payment Resource for more information.

Mortgage insurance in 2016

Fannie Mae and Freddie Mac both launched 3 percent down payment programs a year ago and these have been extended through 2016.  However, like FHA, they both require mortgage insurance, which adds to the monthly cost of homeownership.

To encourage first-time buyers, last year FHA announced a 50 percent reduction in the monthly mortgage insurance premium.  All three of these initiatives are being continued this year.  More good news: in the waning hours of 2015 Congress extended the deductibility of mortgage insurance payments; at least for 2016, you will be able to deduct your mortgage insurance premiums from your federal taxes, just like you mortgage interest.

This tax provision only has a one-year lifespan, but Congress has extended it for the past few years though there no guarantee it will continue in the future.


[1] Ellie Mae Origination Insights Report, January 2014

[2] http://fanniemae.com/portal/research-and-analysis/mortgage-lender-survey.html

[3] Ellie Mae Origination Insights Report, December 2015

[4] http://www.realtytrac.com/news/home-prices-and-sales/q1-2015-u-s-home-purchase-down-payment-report/

[5] Ibid

source: totalmortgage.com

Is a Second Mortgage a Good Idea?

To many home buyers the idea of taking out two mortgages on the same house sounds frightening. However, a second mortgage—also known as a second trust junior lien—makes good sense in the right circumstances and can actually save you money.

A second mortgage is simply a loan secured against your property as collateral. The term “second” indicates that the loan does not have priority on your home in case you default. Should that happen, your first mortgage has priority and that loan would be paid off before any funds go towards the second mortgage.

As a result, second mortgages come with higher interest rates than first mortgages. Second loans require fees and closing costs, just like first mortgages. You may also be required to pay points (one point is equal to one percent of the loan value) which could make the loan less attractive. You’ll need a good credit score and documentation for enough income to make the payments.

Three popular ways buyers and homeowners save money with second mortgages:

Avoiding private mortgage insurance. Buyers lacking a large down payment can use a second mortgage to qualify for their first mortgage without having to pay expensive private mortgage insurance.

Staying within GSE loan limits. With prices rising in the nation’s more expensive markets, buyers can buy a home that exceeds the limits for a loan to be bought by Fannie Mae, Freddie Mac or Ginnie Mae without incurring the higher interest rates of a jumbo loan. That translates into a significantly lower rate of interest on the primary loan.

Consolidating high interest consumer debt. Some homeowners pay off high interest short term debt like credit cards with lower interest, long term debt through a second mortgage.

Additionally, taxpayers in higher tax brackets get to deduct the interest they pay on both mortgages on their federal and state returns.


However, second mortgages have their risks:

• By taking out a second mortgage, you are adding to your overall debt burden. Anytime you add on to your overall debt burden, you make yourself more vulnerable in case you then experience financial difficulties that affect your ability to repay your debts.
• If you cannot repay, you could potentially lose your home because you are using the equity in your home as collateral.
• If you are consolidating debt, it’s not wise to substitute short term debt for long term debt if you end up paying more over the life of the second mortgage.

 source: totalmortgage.com

Refinancing Redux: What Happens the Second Time Around?

Given persistent low-interest rates, some homeowners are asking if it’s worth it to refinance a second time before rates creep back up. Counting all types of refinances, Freddie Mac, the government-sponsored mortgage outfit, says the average loan refinanced in the first quarter of 2015 was about 5.6 years old, and homeowners cashed out a total of $7.6 billion.

Is it really advantageous to go through all that paperwork just to save a little bit each month? Here are five things to consider before any “redo-refinancing.”

1. Assess Your Penalty

Unlike the first time you refinanced, dipping back into the pool can come with special penalties. While you likely won’t have a no prepayment clause, the industry isn’t really set up for back-to-back refinancing. If you refinanced within the past 60 to 90 days, double check for any red flags. For example, an FHA Streamline refinance requires 60 days with the previous loan before you can refinance again.

2. Calculate Your Potential Savings

With any refinancing, it’s important to have a crystal-clear view of what you will save overall, not just in monthly payments. The general rule of thumb used to be that you refinanced when current interest rates fell two points lower than your loan. Today people are refinancing for less, so you really need to read the fine print. Some homeowners also refinance for a higher monthly note so they can pay off their loans faster.

3. Understand All Costs and Fees

You can’t get a decent picture of refinancing — once, twice or beyond — unless you understand every single cost and fee, like mortgage-recording taxes. Refinancing can reduce your principal owed, but it can also maintain the same loan amount. If you plan on moving any time soon, this is also a key consideration. Chances are you won’t recoup the costs unless you plan on sticking around.

4. Gather Documents

No matter how many times you choose to refinance, you still have to have all the paperwork ready to go. Required documents usually include driver’s license, pay stubs and tax returns. Unique situations, such as self-employment, may prompt a need for additional paperwork.

source: totalmortgage.com

What is an FHA loan?

In 1934, the long road to recovery began for the U.S. economy. For the housing market, this meant the creation of the Federal Housing Administration (FHA) loan.

The loans issued under this program are insured by the federal government, decreasing the risk of loss for lenders. With its less stringent rules, more borrowers were able to qualify, which gave a boost to the housing market.

Much has changed since 1934, but the FHA loan has basically remained the same. Here are eight things to know about this government-backed mortgage.

1. Down payment as low as 3.5%

Unlike most conventional mortgages, which require 5-20% down*, the FHA loan can have a down payment requirement as low as 3.5%. This makes it much easier for lower income borrowers to purchase a home. There are even government-assisted programs available that offer grants for down-payments.

*Fannie Mae and Freddie Mac now offer a conventional mortgage program that requires 3% down.

2. Perfect credit isn’t needed

When making any large purchase, your credit score is an important number. When it comes to FHA loans, a credit score of 580 or higher will get you a down payment around 3.5%.

If you have a credit score between 500 and 579, you’ll have to put at least 10% down. For those with credit scores under 500, unless you qualify for “nontraditional credit history or insufficient credit”, you will probably not qualify for an FHA loan.

Also, if you have ever made an appearance on the governments’s Credit Alert Interactive Verification Reporting System (CAIVRS), you will have to clear your name to become eligible for an FHA loan.

3. Financial relief is possible

If the borrower is struggling to make their mortgage payments due to a legitimate financial hardship, the lender can choose to offer a temporary period of forbearance, a loan modification, or a deferral of part of the loan balance.

4. Lender must be FHA-approved

While the FHA does insure the loans, they don’t lend them, so borrowers must find an FHA-approved lender. Just like with conventional loans, lenders will offer different interest rates and fees on identical loan types.

5. Two-part mortgage insurance is required

All FHA loans require two mortgage insurance premiums. There’s an upfront premium, paid once the borrower receives the loan, which is 1.75% of the total loan amount.

Then there is the annual premium, whose title is somewhat deceiving as it’s paid on a monthly basis. The length of the loan, the amount borrowed, and the initial loan-to-value ratio (LTV) all affect how much a borrower will have to pay.

6. Funds for a fixer-upper are available 

The FHA’s 203k loan is geared specifically toward buyers who plan to purchase and renovate their home. Structural alterations, modernization and improvements to the home’s function, a roof replacement, and septic system repair are all eligible projects, along with many others.

7. No closing costs are possible

Closing costs are another upfront fee that can be challenging for some borrowers to pay. Recognizing this fact, the FHA permits sellers/builders/lenders to offer deals around closing costs.

8. Loan could be assumable

FHA loans can be assumable, meaning a buyer will purchase the home and take on the mortgage of the current owner. Everything is the same: the rate, the repayment period, the principal balance.

In the right circumstances, this process can be simpler and less costly than getting a new mortgage. It’s particularly attractive when rates are rising.

If an FHA loan sounds like the option for you, click here and get started today.

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

Mortgages are Getting More Affordable for First-Time Buyers

Thanks to a series of recent decisions, authorities are opening up the mortgage marketplace to more first-time and low-income homeowners.

Last month, Fannie Mae and Freddie Mac announced that they will begin backing fixed-rate mortgages with down payments as low as 3%. Then, last Thursday, the President announced a 0.5 percent cut to the mortgage insurance premiums the Federal Housing Administration requires—making the already easier-to-qualify-for FHA loan even more affordable.

This comes at a time when lawmakers are looking for ways to jumpstart a slow-moving housing recovery. The theory is that tight lending is keeping thousands of buyers out of the game, and that relaxing certain requirements could be enough to coax the market back to its pre-2006 vigor.

However, this loosening trend has also sparked worries that lax lending may lead us to another housing bust. Fannie Mae and Freddie Mac have attempted to allay fears by explaining that borrowers will still have to meet strict criteria. They must have a credit score of at least 620, buy private mortgage insurance, and receive home ownership counselling.

Meanwhile, the projections for the president’s insurance premium cuts are impressive. The White House expects these cuts to allow up to 250,000 new people to take advantage of the FHA loan program, and the FHA’s reserve fund are projected to grow by 7 to 10 billion dollars this year with the cut—vital, as the FHA has needed hefty federal bailouts in recent years.

Wondering where we stand in all this? Take a look at our interest rates.

What does all this mean for you?

 

That depends on your needs. Because these cuts are aimed at attracting new buyers, those are the same people they benefit the most.

If you’re already considering going with an FHA loan for its low down payment option, the Fannie Mae/Freddie Mac down payment cuts gives you another choice to consider. FHA loans give you the option to put as little as 3.5% down, but they require borrowers to pay private mortgage insurance for the life of the loan. The Fannie and Freddie programs, meanwhile, will allow you to cancel your insurance once the mortgage balance drops below 80% of your home’s value, saving you money.

The Fannie Mae and Freddie Mac cuts take (or took) effect December 13^th and March 23^rd, respectively, and currently apply to just fixed-rate loans.

As far as the president’s proposed mortgage insurance cuts go, they too will have the most impact for those looking at low down payment (or low credit rate) options, namely FHA loans. The White house expects the typical first-time homebuyer to save $900 a year on mortgage payments. The insurance cuts will affect buyers with FHA case numbers issued January 26^th or after, though at the moment, lenders will be allowed to cancel numbers issued before the 26^th.

If you’ve just closed an FHA, you may not be entirely out of luck. You will have to wait 210 days (or make 6 mortgage payments) before you’re eligible for a Streamline Refinance, but you will be able to get the insurance cut eventually.

Want to take advantage of these new requirements? Apply now for a personalized quote.

source: totalmortgage.com

Current Mortgage Rates for Monday, December 22, 2014

Mortgage backed securities have been quite volatile over the past month, but at the end of the day, there hasn’t been a tremendous net change in mortgage rates since the middle of October.  On the week of October 16th, Freddie Mac’s Primary Mortgage Market Survey showed the average rate on a 30-year fixed-rate mortgage at 3.97%.  Last week it was 3.80% (however, that survey was collected largely prior to Wednesday’s Fed meeting, which caused rates to rise).  On average, rates have plateaued for several weeks now.  With the next two weeks being holiday weeks with lots of people on vacation, I don’t believe we’ll see any great changes in rates between now and the end of the year.  So far this morning, rates are teetering right around unchanged.

Are you looking for a new mortgage?  Every big investment deserves a last look.  Give us a chance to beat another lender’s rate, and we’ll give you $25 just for calling (click here for terms and conditions).  Whether we can beat the rate or not.  Call us today!


Today’s Economic Data:

Not much today.  Some short term Treasury bond auctions, and the Existing Home Sales data for November.  Home sales missed expectations, coming in at a seasonally adjusted annual rate of 4.93M, compared to expectations of 5.20M.  This is a -6.1% month-over-month change from October, but a 2.1% year-over-year increase from November of 2013.  This could help our markets a bit, but again, I think the impact of any report this week is severely dampened by the holiday.

The week ahead:

Not a ton to say here.  There are a couple of significant releases this week, but their impact will most likely be dampened by the Thursday holiday and the sheer number of people that are already on vacation or will be on vacation in the immediate future.  I would caution that low-volume days can cause seemingly out-sized market movements, and that this is something you should be aware of if you are in the process of getting a mortgage but haven’t locked your rate.  Trying to time the market is largely a fool’s errand, and the best policy is probably to go ahead and lock your rate when the number makes sense for you, rather than wait around to see if MBS rally by a few basis points.  It really depends upon how risk averse you are.

This Week’s Significant Economic Data:

Monday:

• Existing Home Sales: Expected: 5.20M, actual, 4.93M.

Tuesday:

• Durable Good Orders
• GDP
• Personal Income and Outlays:

Wednesday:

• Weekly Jobless Claims

Thursday:

• Markets Closed for Christmas

Friday:

• No significant data.

 source: totalmortgage.com

Current Mortgage Rates for Friday, December 12, 2014

Despite the volatility we’ve seen in mortgage backed securities recently, mortgage rates are really not significantly changed since the middle of October.  This week’s Primary Mortgage Market Survey from Freddie Mac reported the average mortgage rate on a 30-year fixed-rate mortgage at 3.93%. The average rate on the week of October 16th?  3.97%. So far this morning MBS are rallying, and presuming the rally continues, we’ll see a slight improvement in rates today.


Today’s Economic Data:

There are a couple economic releases today.  First off, The Producer Price Index for November was released today.  Inflation continues to be low to non-existant.  The headline number showed a -0.2% decrease in PPI from October, just a little above expectations.  The core number (ex-food and energy) came in flat from October, and at 1.6% year-over-year.  Next week we get the Consumer Price Index for November, and I wouldn’t anticipate we’ll much inflation there, either.

The mid-month reading of consumer sentiment for November came in at 93.8, compared to a consensus expectation of 89.5.  Although this is not a particularly significant release, it’s another sign that the economy is trending in the correct direction.

Today’s Fed Speculation:

There’s a Fed meeting next week, and it’s widely anticipated that there will be a change in the forward guidance, specifically that the promise to keep rates low for an “extended period” will be changed to something indicating that the time frame for a rate hike will be determined by the data as opposed to the calendar.  I think the expectation is so widespread that any change is likely baked into bond prices, although I wouldn’t be surprised if things get a little volatile on the 17th.  If you are in the process of getting a mortgage and have a floating rate, it may be wise to lock prior to next Wednesday.

I don’t know that I can summon up any more words on the Fed this morning.  I would direct you to Tim Duy’s December 8th blog post “Fed Updates Ahead of FOMC Meeting” if you want to read some pertinent (and fairly wonkish) insight into what the Fed may be planning for the next few months.  The long and short is that it still looks like the path is being cleared for a Mid-2015 rate hike.  Depending upon the data, of course.

This Week’s Significant Economic Data:

Monday:

• No significant data.

Tuesday:

• Job Openings and Labor Turnover Survey

Wednesday:

• No significant data.

Thursday:

• Weekly Jobless Claims: Expected: 295k, actual: 294k.
• Retail Sales (core, ex-gas and -auto): Expected: +0.5%, actual: +0.6%.

Friday:

• Producer Price Index – Final Demand (headline, month-over-month): Expected: -0.1%, actual: -0.2%.  Core expected: +0.1%, acutal: flat.
• Consumer Sentiment

source: totalmortgage.com

FHFA Policy Changes May Loosen Lending Requirements

Many prospective homeowners believe saving money for a down payment and filing out the requisite paperwork is all they need to become a homeowner. Unfortunately, some have learned that tough lending requirements stand in their way to achieve this dream.

But this could soon change thanks to new rules proposed by the Federal Housing Finance Agency (FHFA), the regulator who manages Fannie Mae and Freddie Mac. The FHFA is considering policy changes that aim to make credit more available to potential home buyers. This will encompass many of those who have been have been excluded from the housing market due to harsh lending requirements implemented after the housing crash.

For prospective owners ready to jump into the housing market, what will they find with the new rules?

Lower down-payment requirements
FHFA is currently reviewing guidelines that will decide whether Fannie Mae and Freddie Mac will cut down-payment requirements from the current five percent to three percent. According to Mel Watt, FHFA director, the two mortgage companies will, for some loans, guarantee down payments at three percent in an effort to help those homeowners who are underwater.

The regulator is expected to release its guidelines by the end of November. The changes are likely to open credit for those prospective homeowners who are first-time buyers, self-employed, borrowers who have recently switched jobs and those who have endured financial challenges in the recession, according to a press release.

Ease lending standards

Along with homeowners benefiting from the changes, the lenders may also be affected as the FHFA is considering potential changes that will have lenders bring down their standards.

But it isn’t well received so far.

This comes as Fannie Mae and Freddie had required the industry to buy back loans in billions of dollars after the housing crash. Lenders then placed tough demands of homeowners, asking for high credit scores and other high standards in an effort to protect themselves from possible financial penalties. Lenders have said they won’t relax them amid the potential easing. And w

Whether Fannie and Freddie can and will take action for this is unclear–something the FHFA will have to address.

Look for new doors to open for this group. Mark Zandi, chief economist at Moody’s Analytics, said of the possible new rules, “Creditworthy borrowers who have been locked out of the housing market will finally have an opportunity to become homeowners.”



Make a careful decision

For lenders and homeowners, these proposed changes may create a challenging environment as people who couldn’t afford loans in the past will now come out and try to borrow.

How will this work out? Probably not well, as $51,900 is the median household income in the U.S. and the U.S. median home price sits $188,000. This could pose challenges for the average homeowner, placing themselves in a situation that could have them spending beyond their means. However, with the market still attracting cash buyers, there’s still competition for properties from buyers who will outspend regular people for them.

But don’t fear prospective homeowners, there will be opportunities as the FHFA will promote more lending, which will then result in credit to those who had been previously denied.

If you feel the potentially lower three percent may open refinance doors for you, don’t quickly jump. Be sure to review your financial picture before placing yourself in a situation that could possibly put you underwater.

source: totalmortgage.com

Mortgage Rate News for Monday, November 3, 2014

“Day after day, day after day, we stuck, nor breath nor motion; as idle as a painted ship upon a painted ocean.” -Samuel Taylor Coleridge Taylor, The Rime of the Ancient Mariner.

Once again, last week was kind of a boring one for mortgage rates.  Save for the excitement of October 15th, it’s been kind of a slow sideways grind for rates for about a month now. Last week’s Primary Mortgage Market Survey from Freddie Mac saw the average rate on a 30-year fixed-rate mortgage rise six basis points to 3.98%, putting rates a touch above 14 month lows.  From a broader perspective, rates have been trending lower for the past year (see above chart), but it’s not an extreme trend by any means.  Much closer to a sideways grind.  UPDATE: we’re seeing a sell-off in bonds this morning following some good manufacturing data.  If it is sustained, mortgage rates will tick up.

Today’s Economic Data:

U.S. Manufacturing picked up in October.  The Institute for Supply Management’s (ISM) Manufacturing Index came in above expectations, showing a reading of 59, compared to expectations of a reading of 56 (readings over 50 indicate expansion).  In particular, new orders were up significantly.  This is putting some upward pressure on rates this morning.

The Week Ahead:

As per usual, the first week of the month we are focused on the monthly employment report, which comes out Friday morning at 8:30.  The expectation is for +240k jobs in September, and the consensus range is +200k to +280k.  From a surface level, the employment picture is improving, when you dig a little deeper, the situation becomes less clear.  U-6 unemployment, which is a broader measure of employment that includes frustrated and marginally attached workers remains elevated.  Wages remain stagnant, which would seem to indicate that there is slack in the labor market (at least in the eyes of Janet Yellen and many members of the Fed).  With inflation also running below Fed targets, I don’t think that the employment report poses much risk to rates unless we see a really good print.

That said, there is some risk here, there always is as nonfarm payroll Friday approaches.  Usually rates will become volatile, even if the volatility levels out and we end up back where we started (which seems to be the rule these days).  If you are in the process of getting a mortgage but haven’t locked your rate, you probably want to keep a close eye on things this week.  Problem is that if we do see a strong print, and you go to lock on Friday, the damage will likely already be done.

And of course, there are the mid-term elections on Tuesday.  While I personally do not participate in rigged games, the outcome and the makeup of Congress following the elections will have some impact on rates.  Jon Hilsenrath actually has a pretty interesting take in this morning’s WSJ regarding the elections and possible ramifications regarding the Fed.  From the looks like we’ll see the GOP pick up seats in the House and Senate, and that two more years of gridlock will ensue.  So it goes.  Poo-tee-weet.
 
Scheduled Economic Data that May Impact Rates This Week:

As a broad rule of thumb, positive economic data, particularly data that exceeds expectations, correlates with a rise in interest rates.  Poor economic data or data that misses expectations correlates with a dip in rates.  As with most other things in life, this is not a hard and fast rule.

Monday:

    ISM Manufacturing Index: Expected: 56, actual: 59.

Tuesday:

    International Trade:

Wednesday:

    ADP Employment Report:

Thursday:

    Weekly Jobless Claims:

Friday:

    Nonfarm Payrolls:


source: totalmortgage.com

Mortgage Rate News for Friday, October 31, 2014 – Halloween Edition

Mortgage rates ticked back up over the past week, according to Freddie Mac’s Primary Mortgage Market Survey.  The average rate on a 30-year fixed-rate mortgage rose 6 basis points to 3.98%. Rates remain just above the lows of the year.  This is a minor fluctuation, and endeavoring to determine the root causes of the fluctuation is most likely a fool’s errand (one of my favorite type of errands).  We’re seeing some rate deterioration this morning (more on that below the fold), but fundamentally, very little has changed from an economic perspective over the past few months, and I would be surprised if we see mortgage rates deviate much from their current range in the near future.
 
Today’s Economic Data:

Before we get to today’s domestic data, it’s worth noting that the Bank of Japan unexpectedly announced additional stimulus measures last night, which put pressure on U.S. Treasuries in overnight trading.  It appears that we’ve recovered a lot of the ground that was lost, but this is one of the reasons that mortgage bonds have sold off this morning.  If you really want to get into the weeds on this one, I’d recommend starting with this Bloomberg article.  If you want to delve further, here’s some insightful commentary from Across the Curve – warning: it gets technical.

Beyond that, the most influential numbers of the day are within the Personal Income and Outlays report.  Everything came in more or less in line with expectations, and the main takeaway is that – and this will shock you – inflation is low, and not showing any real signs of picking up in the near future.  The Fed is under no real pressure to act anytime soon.

Chicago PMI came in above expectations, as did Consumer Sentiment.  Bonds appear to be losing some ground in the wake of these numbers, but again, I don’t anticipate that we’ll see much change in rates over the next few days.  The next real risk to rates is likely next Friday’s employment report.

Today’s Idle Fed Speculation:

I think we’ve spilled enough virtual ink on the Fed, and honestly, I’m finding it difficult to gin up the enthusiasm to repeat myself over and over this morning.  As expected, the Fed announced the end of the QE program, but retained forward guidance language saying that policy will remain accomodative for a “considerable time.”  If you want to read more, I’d highly suggest reading Tim Duy’s recap of the Fed statement from earlier in the week.


For the purposes of mortgage rates, it’s pretty much the status quo for right now, and there is no real clarity on the timing of a rate hike in 2015.  The Fed is keeping its options open.  Everything is data dependent*.

*Saying that something is data dependent strikes me as very much in the same vein as saying a given athlete is day-to-day. Almost everything in life is data dependent.  What I have for lunch is data-dependent.  My route home is data dependent.  The pair of pants I chose to wore this morning – yup, that choice was data dependent.  /end rant. 

Events that May Impact Rates This Week:

Monday:

    Pending Home Sales: Pending homes sales were up 0.3% from August to September.

Tuesday:

    Durable Goods Orders: Headline anticipated: +0.9%, headline actual: -1.3%.  Core anticipated: +0.5%, core actual: -0.2%.
    S&P Case-Shiller Home Price Index: 20-city, seasonally adjusted anticipated: +0.1%, actual: -0.1%.  20-city not seasonally adjusted anticipated: +0.4%, actual: +0.2%.
    Consumer Confidence: expected: 86.8, actual: 94.5.

Wednesday:

    FOMC Meeting

Thursday:
    GDP: Expected: 3.0%, actual: 3.5%.
    Weekly Jobless Claims: Expected: 280k, actual, 287k

Friday:

    PCE Price Index: Expected: +0.1%, actual: +0.1%.
    Core PCE Price Index: Expected: +0.1%, actual: +0.1%
    Chicago PMI
    Consumer Sentiment

source: totalmortgage.com

Average U.S. Rate on 30-year Loan Rises to 4.53%

WASHINGTON -- Average U.S. rates for fixed mortgages edged higher this week for the third straight week but remained low by historical standards.

Mortgage buyer Freddie Mac said Thursday hat the average for the 30-year loan rose to 4.53 percent from 4.48 percent last week. The average for the 15-year loan increased to 3.55 percent from 3.52 percent.


Mortgage rates peaked in August at 4.6 percent amid expectations the Federal Reserve would reduce its $85 billion a month in bond purchases. The purchases push mortgage and other long-term rates lower. Last month the Fed deemed the economy strong enough for it to reduce the monthly purchases by $10 billion.

Mortgage rates are sharply higher than they were a year ago when the 30-year fixed rate was 3.35 percent and the 15-year was 2.65 percent. That's contributed to a decline in home sales over the past three months.

Still, the average for the 30-year loan has been below 5 percent for nearly three years, a trend that has made home-buying more affordable.

Separately, the Commerce Department reported Thursday that U.S. construction spending rose in November at the strongest pace in more than four years, driven by solid gains in home construction and commercial projects.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

* The average fee for a 30-year mortgage rose to 0.8 point from 0.7 point. The fee for a 15-year loan remained at 0.7 point.

* The average rate on a one-year adjustable-rate mortgage was unchanged at 2.56 percent. The fee stayed at 0.5 point.

* The average rate on a five-year adjustable mortgage increased to 3.05 percent from 3 percent. The fee was unchanged at 0.4 point.

source:  dailyfinance.com

Average U.S. 30-Year Mortgage Rate Slips to 4.22%

WASHINGTON -- Average U.S. rates on fixed mortgages fell for the third straight week to their lowest point in three months, as a decline in consumer confidence and the onset of the government shutdown forced rates down.

Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year loan dropped to 4.22 percent from 4.32 percent last week. The average on the 15-year fixed loan declined to 3.29 percent from 3.37 percent.

Both are the lowest averages since early July.

Rates began to fall last month after the Federal Reserve held off slowing its $85-billion-a-month in bond buys, which have kept rates low. They fell further this week as the shutdown prompted investors to sell stocks and buy Treasury bonds. Mortgage rates tend to follow the yield on the 10-year Treasury note.

The 10-year note traded at 2.63 percent Thursday morning, down from 2.71 percent on Sept. 23.

The Federal Housing Administration, which guarantees about 30 percent of U.S. home mortgages, says that if the partial shutdown continues for an extended period and the agency's funding runs out, it wouldn't be able to continue approving loans.




In that case, "We do expect that potential homeowners will be impacted, as well as home sellers and the entire housing market," the FHA said in a contingency plan.

Buyers wouldn't disappear. But some would linger in limbo until the government reopened and a backlog of applications cleared.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

* The average fee for a 30-year mortgage was steady at 0.7 point. The fee for a 15-year loan also was unchanged at 0.7 point.

* The average rate on a one-year adjustable-rate mortgage was unchanged at 2.63 percent and the fee held at 0.4 point.

* The average rate on a five-year adjustable mortgage dipped to 3.03 percent from 3.07 percent. The fee rose to 0.6 point from 0.5 point.

source: dailyfinance.com

30- and 15-year fixed mortgages at 2-year high

Average U.S. rates for fixed mortgages rose this week to their highest levels in two years, driven by heightened speculation that the Federal Reserve will slow its bond purchases later this year.

Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year loan jumped to 4.58 percent, up from 4.40 percent last week.

The average on the 15-year fixed loan rose to 3.60 percent from 3.44 percent. Both averages are the highest since July 2011.



Rates have risen more than a full percentage point since May. Last week's spike comes after more Fed members signaled they could be open to reducing the bond purchases as early as September.

The purchases have helped keep long-term interest rates low, including mortgage rates.

Despite the increase, mortgage rates remain low by historical standards. And recent reports suggest the jump in rates has yet to sap the housing recovery's momentum.

In July, previously occupied homes in the United States sold at the fastest pace since 2009.

Sales jumped 6.5 percent last month to a seasonally adjusted annual rate of 5.4 million, the National Association of Realtors reported Wednesday. Over the past 12 months, sales have surged 17.2 percent.

On Long Island, home sales in July were also strong, the Multiple Listing Service of Long Island has reported previously.

Nationally, the National Association of Home Builders said last week its measure of confidence among builders rose this month to its highest level in nearly eight years.

Mortgage rates are rising because they tend to follow the yield on the 10-year Treasury note.

The yield has also surged on speculation that the Fed's stimulus will slow. It rose to 2.90 percent Thursday morning, its highest level in two years.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage rose to 0.8 point from 0.7 point. The fee for a 15-year loan increased to 0.7 point from 0.6 point. The average rate on a one-year adjustable-rate mortgage was unchanged at 2.67 percent.

The fee edged up to 0.5 point from 0.4 point.

The average rate on a five-year adjustable mortgage declined to 3.21 percent from 3.23 percent. The fee held at 0.5 point.

source: newsday.com

Freddie Mac: Mortgage rates set record low for sixth week in row

Mortgage rates fell to new lows for the sixth straight week, with lenders offering the 30-year fixed-rate loan at an average 3.67%, down from 3.75% a week ago, home finance giant Freddie Mac said.

The 15-year fixed-rate loan averaged 2.94%, down from 2.97% last week, according to Freddie's latest weekly survey.

Freddie Mac economist Frank Nothaft attributed the decline to reports showing weak growth in jobs and the economy. Those factors make inflation less likely and pressure central bankers to keep rates down.

The gross domestic product, originally reported as rising 2.2% during the first quarter, was cut back to 1.9%, Nothaft noted. What's more, the economy in May added fewer than half the jobs than had been expected.

Freddie Mac polls lenders each Monday through Wednesday on the terms they are offering solid borrowers on popular loans. In the latest survey, the borrowers would have paid 0.7% of the loan amount to the lenders upfront to obtain the fixed-rate loans.

The next survey appears likely to reverse the downward trend. The economic news has looked brighter over the last two days, sending stocks higher and driving up the yield on the 10-year Treasury note -- a benchmark for fixed mortgage rates -- from 1.47% last Friday to 1.66% Thursday morning.

source: latimes.com