While economists and so called real estate market experts continue to struggle with where the residential real estate market is headed, with concerns of continued declining values, pending shadow inventory of bank foreclosures, and dismal unemployment figures, there are some bright spots for home buyers. When I visit real estate offices, their sales in process boards are full. The good news is Housing Affordability is RISING, and many move-up and first time buyers will be coming to the table.
An interesting thing happened last week. For the first time since April, the interest rate for a 30 year fixed mortgage increased two weeks in a row. It didn t increase much (.05%) but it was news because it had been so long since rates have ticked up. It will be interesting to see what the Fed reports today. We are not announcing that rates are headed higher. It is way too early to make that argument. However, the increase did make us look at what the bargain rates are today.
Home values have fallen to October 2003 levels as measured by the Case Shiller 20 City Index. You can buy a home today for the same PRICE you would have prior to the housing bubble. That s amazing!
The more amazing part is that it would COST you much less. You can purchase a home with a mortgage at a much lower rate than you would have in 2003. Research has found that the mortgage rate at that time was 5.95%. Today rates are at 4.5%. When we calculated what that would mean to a buyer s monthly mortgage payment.
How much would you save?
Let s assume for the sake of this example that you purchased a home and borrowed $200,000 via a mortgage. In 2003, your monthly mortgage payment (principle and interest) would have been $1,192.68. If you borrowed the same $200,000 today your monthly payment would be $1,013.37. Same house, same price but the COST is $179.31 less a month. That s a savings of over $2,000 a year! Over the life of a 30 year mortgage, you would save over $64,000.
Bottom Line, if you are considering the purchase of a home but believe that waiting is the prudent thing to do because prices may continue to soften, make sure you keep an eye on interest rates.
We have a tendency to look at just the PRICE of the house instead of the COST. The cost is actually more important.
Thursday, September 23, 2010
Saturday, September 18, 2010
10 Reasons Why Now is a Great Time to Buy a Home
Great article published in this week's Wall Street Journal. Clearly there is alot of gloom and doom sentiment to go around, but sometimes we have to see the glass as "half full".
Wall Street Journal - September 16th, 2010
Enough with the doom and gloom about homeownership.
Sure, maybe there's more pain to come in the housing market. But when Time magazine starts running covers that declare "Owning a home may no longer make economic sense," it's time to say: Enough is enough. This is what "capitulation" looks like. Everyone has given up.
But it's not enough just to be contrarian. So here are 10 reasons why it's good to buy a home.
1. You can get a good deal. Especially if you play hardball. This is a buyer's market. Most of the other buyers have now vanished, as the tax credits on purchases have just expired. We're four to five years into the biggest housing bust in modern history. And prices have come down a long way– about 30% from their peak, according to Standard & Poor's Case-Shiller Index, which tracks home prices in 20 big cities. Yes, it's mixed. New York is only down 20%. Arizona has halved. Will prices fall further? Sure, they could. You'll never catch the bottom. It doesn't really matter so much in the long haul.
Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy, said two years ago that home prices needed to fall another 17% to reach fair value in relation to household incomes. Case-Shiller since then: Down 18%.
.2. Mortgages are cheap. You can get a 30-year loan for around 4.3%. What's not to like? These are the lowest rates on record. As recently as two years ago they were about 6.3%. That drop slashes your monthly repayment by a fifth. If inflation picks up, you won't see these mortgage rates again in your lifetime. And if we get deflation, and rates fall further, you can refi.
3. You'll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you'll get a tax break on capital gains–if any–when you sell. Sure, you'll need to do your math. You'll only get the income tax break if you itemize your deductions, and many people may be better off taking the standard deduction instead. The breaks are more valuable the more you earn, and the bigger your mortgage. But many people will find that these tax breaks mean owning costs them less, often a lot less, than renting.
.4. It'll be yours. You can have the kitchen and bathrooms you want. You can move the walls, build an extension–zoning permitted–or paint everything bright orange. Few landlords are so indulgent; for renters, these types of changes are often impossible. You'll feel better about your own place if you own it than if you rent. Many years ago, when I was working for a political campaign in England, I toured a working-class northern town. Mrs. Thatcher had just begun selling off public housing to the tenants. "You can tell the ones that have been bought," said my local guide. "They've painted the front door. It's the first thing people do when they buy." It was a small sign that said something big.
.5. You'll get a better home. In many parts of the country it can be really hard to find a good rental. All the best places are sold as condos. Money talks. Once again, this is a case by case issue: In Miami right now there are so many vacant luxury condos that owners will rent them out for a fraction of the cost of owning. But few places are so favored. Generally speaking, if you want the best home in the best neighborhood, you're better off buying.
6. It offers some inflation protection. No, it's not perfect. But studies by Professor Karl "Chip" Case (of Case-Shiller), and others, suggest that over the long-term housing has tended to beat inflation by a couple of percentage points a year. That's valuable inflation insurance, especially if you're young and raising a family and thinking about the next 30 or 40 years. In the recent past, inflation-protected government bonds, or TIPS, offered an easier form of inflation insurance. But yields there have plummeted of late. That also makes homeownership look a little better by contrast.
.7. It's risk capital. No, your home isn't the stock market and you shouldn't view it as the way to get rich. But if the economy does surprise us all and start booming, sooner or later real estate prices will head up again, too. One lesson from the last few years is that stocks are incredibly hard for most normal people to own in large quantities–for practical as well as psychological reasons. Equity in a home is another way of linking part of your portfolio to the long-term growth of the economy–if it happens–and still managing to sleep at night.
8. It's forced savings. If you can rent an apartment for $2,000 month instead of buying one for $2,400 a month, renting may make sense. But will you save that $400 for your future? A lot of people won't. Most, I dare say. Once again, you have to do your math, but the part of your mortgage payment that goes to principal repayment isn't a cost. You're just paying yourself by building equity. As a forced monthly saving, it's a good discipline.
9. There is a lot to choose from. There is a glut of homes in most of the country. The National Association of Realtors puts the current inventory at around 4 million homes. That's below last year's peak, but well above typical levels, and enough for about a year's worth of sales. More keeping coming onto the market, too, as the banks slowly unload their inventory of unsold properties. That means great choice, as well as great prices.
10. Sooner or later, the market will clear. Demand and supply will meet. The population is forecast to grow by more than 100 million people over the next 40 years. That means maybe 40 million new households looking for homes. Meanwhile, this housing glut will work itself out. Many of the homes will be bought. But many more will simply be destroyed–either deliberately, or by inaction. This is already happening. Even two years ago, when I toured the housing slump in western Florida, I saw bankrupt condo developments that were fast becoming derelict. And, finally, a lot of the "glut" simply won't matter: It's concentrated in a few areas, like Florida and Nevada. Unless you live there, the glut won't have any long-term impact on housing supply in your town.
Wall Street Journal - September 16th, 2010
Enough with the doom and gloom about homeownership.
Sure, maybe there's more pain to come in the housing market. But when Time magazine starts running covers that declare "Owning a home may no longer make economic sense," it's time to say: Enough is enough. This is what "capitulation" looks like. Everyone has given up.
But it's not enough just to be contrarian. So here are 10 reasons why it's good to buy a home.
1. You can get a good deal. Especially if you play hardball. This is a buyer's market. Most of the other buyers have now vanished, as the tax credits on purchases have just expired. We're four to five years into the biggest housing bust in modern history. And prices have come down a long way– about 30% from their peak, according to Standard & Poor's Case-Shiller Index, which tracks home prices in 20 big cities. Yes, it's mixed. New York is only down 20%. Arizona has halved. Will prices fall further? Sure, they could. You'll never catch the bottom. It doesn't really matter so much in the long haul.
Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy, said two years ago that home prices needed to fall another 17% to reach fair value in relation to household incomes. Case-Shiller since then: Down 18%.
.2. Mortgages are cheap. You can get a 30-year loan for around 4.3%. What's not to like? These are the lowest rates on record. As recently as two years ago they were about 6.3%. That drop slashes your monthly repayment by a fifth. If inflation picks up, you won't see these mortgage rates again in your lifetime. And if we get deflation, and rates fall further, you can refi.
3. You'll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you'll get a tax break on capital gains–if any–when you sell. Sure, you'll need to do your math. You'll only get the income tax break if you itemize your deductions, and many people may be better off taking the standard deduction instead. The breaks are more valuable the more you earn, and the bigger your mortgage. But many people will find that these tax breaks mean owning costs them less, often a lot less, than renting.
.4. It'll be yours. You can have the kitchen and bathrooms you want. You can move the walls, build an extension–zoning permitted–or paint everything bright orange. Few landlords are so indulgent; for renters, these types of changes are often impossible. You'll feel better about your own place if you own it than if you rent. Many years ago, when I was working for a political campaign in England, I toured a working-class northern town. Mrs. Thatcher had just begun selling off public housing to the tenants. "You can tell the ones that have been bought," said my local guide. "They've painted the front door. It's the first thing people do when they buy." It was a small sign that said something big.
.5. You'll get a better home. In many parts of the country it can be really hard to find a good rental. All the best places are sold as condos. Money talks. Once again, this is a case by case issue: In Miami right now there are so many vacant luxury condos that owners will rent them out for a fraction of the cost of owning. But few places are so favored. Generally speaking, if you want the best home in the best neighborhood, you're better off buying.
6. It offers some inflation protection. No, it's not perfect. But studies by Professor Karl "Chip" Case (of Case-Shiller), and others, suggest that over the long-term housing has tended to beat inflation by a couple of percentage points a year. That's valuable inflation insurance, especially if you're young and raising a family and thinking about the next 30 or 40 years. In the recent past, inflation-protected government bonds, or TIPS, offered an easier form of inflation insurance. But yields there have plummeted of late. That also makes homeownership look a little better by contrast.
.7. It's risk capital. No, your home isn't the stock market and you shouldn't view it as the way to get rich. But if the economy does surprise us all and start booming, sooner or later real estate prices will head up again, too. One lesson from the last few years is that stocks are incredibly hard for most normal people to own in large quantities–for practical as well as psychological reasons. Equity in a home is another way of linking part of your portfolio to the long-term growth of the economy–if it happens–and still managing to sleep at night.
8. It's forced savings. If you can rent an apartment for $2,000 month instead of buying one for $2,400 a month, renting may make sense. But will you save that $400 for your future? A lot of people won't. Most, I dare say. Once again, you have to do your math, but the part of your mortgage payment that goes to principal repayment isn't a cost. You're just paying yourself by building equity. As a forced monthly saving, it's a good discipline.
9. There is a lot to choose from. There is a glut of homes in most of the country. The National Association of Realtors puts the current inventory at around 4 million homes. That's below last year's peak, but well above typical levels, and enough for about a year's worth of sales. More keeping coming onto the market, too, as the banks slowly unload their inventory of unsold properties. That means great choice, as well as great prices.
10. Sooner or later, the market will clear. Demand and supply will meet. The population is forecast to grow by more than 100 million people over the next 40 years. That means maybe 40 million new households looking for homes. Meanwhile, this housing glut will work itself out. Many of the homes will be bought. But many more will simply be destroyed–either deliberately, or by inaction. This is already happening. Even two years ago, when I toured the housing slump in western Florida, I saw bankrupt condo developments that were fast becoming derelict. And, finally, a lot of the "glut" simply won't matter: It's concentrated in a few areas, like Florida and Nevada. Unless you live there, the glut won't have any long-term impact on housing supply in your town.
Survey Says: Why Over 70% of Americans Believe It's a Good Time to Buy
HOME PRICES: A large majority of Americans (78 percent) believe that home prices either will remain flat or go up over the next year, up five points from the beginning of the year. Forty-seven percent believe prices will hold steady, while 31 percent think they will go up. This is a notable shift from January 2010, when these numbers were 36 percent and 37 percent, respectively.
Thirty-nine percent think rental prices will increase over the next 12 months, while 46 percent said they will stay the same. Consumers continue to believe it is a buyers' market; 70 percent said it is a good time to buy a house, up six points from January. However, 83 percent believe it is a bad time to sell a house.
GOOD TIME TO BUY, BAD TIME TO SELL: 70% of Americans think it is a good time to buy a house, up from 64% in January 2010, and 36% think now is a very good time to buy a house. More than three-quarters of Mortgage borrowers and Underwater borrowers think it is a good time to buy. 83% of Americans think it is a bad time to sell a house. 91% of Delinquent borrowers think it is a bad time to sell a house, with 67% thinking it is a very bad time to do so...
MORTGAGE RATES: Americans expect home mortgage interest rates to go up rather than down over the next year by a ratio of 5 to 1.Among the sub-groups, the highest percentages expecting mortgage interest rates to rise over the next 12 months are among Mortgage borrowers and Underwater borrowers. Delinquent borrowers are more likely than other groups to think rates will remain the same or go down.
IS BUYING A HOME A SAFE INVESTMENT ?: Fewer Americans consider buying a home a safe investment than in January 2010 or 2003.Although 67% of Americans think buying a house is a safe investment, this is down 3 points from January 2010 and 16 points from 2003 – the largest declines among all tracked alternatives over both timeframes. The perception that buying a home being is a safe investment has decreased among all sub-groups since January 2010, especially among Delinquent borrowers, Renters, and Underwater borrowers (down by 8, 7, and 6 points, respectively). Mortgage Borrowers and Owners view purchasing a house as a safer investment than the General Population and the rest of the sub-groups
QUALIFICATION: Most Americans think it would be difficult to get a home loan today. However, this sentiment is waning: 42% of Americans think that it would be somewhat easy or very easy to get a home loan today up 7 points since January 2010. The vast majority of Delinquent borrowers continue to believe it would be difficult.
Thirty-nine percent think rental prices will increase over the next 12 months, while 46 percent said they will stay the same. Consumers continue to believe it is a buyers' market; 70 percent said it is a good time to buy a house, up six points from January. However, 83 percent believe it is a bad time to sell a house.
GOOD TIME TO BUY, BAD TIME TO SELL: 70% of Americans think it is a good time to buy a house, up from 64% in January 2010, and 36% think now is a very good time to buy a house. More than three-quarters of Mortgage borrowers and Underwater borrowers think it is a good time to buy. 83% of Americans think it is a bad time to sell a house. 91% of Delinquent borrowers think it is a bad time to sell a house, with 67% thinking it is a very bad time to do so...
MORTGAGE RATES: Americans expect home mortgage interest rates to go up rather than down over the next year by a ratio of 5 to 1.Among the sub-groups, the highest percentages expecting mortgage interest rates to rise over the next 12 months are among Mortgage borrowers and Underwater borrowers. Delinquent borrowers are more likely than other groups to think rates will remain the same or go down.
IS BUYING A HOME A SAFE INVESTMENT ?: Fewer Americans consider buying a home a safe investment than in January 2010 or 2003.Although 67% of Americans think buying a house is a safe investment, this is down 3 points from January 2010 and 16 points from 2003 – the largest declines among all tracked alternatives over both timeframes. The perception that buying a home being is a safe investment has decreased among all sub-groups since January 2010, especially among Delinquent borrowers, Renters, and Underwater borrowers (down by 8, 7, and 6 points, respectively). Mortgage Borrowers and Owners view purchasing a house as a safer investment than the General Population and the rest of the sub-groups
QUALIFICATION: Most Americans think it would be difficult to get a home loan today. However, this sentiment is waning: 42% of Americans think that it would be somewhat easy or very easy to get a home loan today up 7 points since January 2010. The vast majority of Delinquent borrowers continue to believe it would be difficult.
Tuesday, September 7, 2010
Dear Clients,
There was an interesting article featured in the Wall Street Journal, that illustrates a change in mindset taking place with consumers as it relates to managing debt. There is a growing number of consumers, mostly older and financially established, who are choosing to pay down or pay off their mortgages at a faster rate - even if it means a substantial jump in their monthly payments.
I personally witness this mindset shift more often, as many clients look at the numbers I work up and see how a shorter mortgage term and relatively modest payment increase can save thousands of dollars in interest, while eliminating several years of mortgage payments. In addition, mortgage debt reduction becomes an integral part of their overall retirement strategy. Today's historic low mortgage rates are adding fuel to the fire.
I encourage you or anyone you know to contact a licensed mortgage advisor, such as myself, who can access your situation and produce a comprehensive analysis to save mortgage interest and accellerate term payoff.
Call me today at 714-478-3153 or visit my website www.HomeQuestMortgageCorp.com to fill out a confidential application.
Wall Street Journal - August 29th, 2010
A growing number of homeowners are choosing to pay down their mortgages at a faster rate--even if it means a substantial jump in their monthly payments.
Between January and June, 26% of homeowners who refinanced chose a 15-year fixed-rate mortgage, according to data from CoreLogic, a provider of financial, property and consumer information. During all of 2009, 18.5% of borrowers who refinanced opted for a 15-year term.
What's prompting the shift to shorter loans?
Historically low interest rates for fixed-rate mortgages.
Homeowners are doing the math and realizing that rates have fallen enough so the increase in payment between a new 15-year mortgage and their current loan is no longer unbearable for their budgets, says Bob Walters, chief economist.
The average rate on a 15-year fixed-rate mortgage was 3.86% for the week ending Aug. 26, according to Freddie Mac's weekly survey of conforming mortgage rates.
A Change in Thinking
The financial situation of those capable of refinancing today is a factor in the shift, Mr. Walters says. These people typically are homeowners with the best credit and the most equity -- and, therefore, most suited for a shorter-term loan.
But there might be some other psychology at work. "We're seeing a different view on debt than maybe we've seen in the past," he says. Today, homeowners are saying, "I really want to pay this off. I'm going to bite the bullet and take the payment and work toward paying this down."
A 15-year mortgage also acts as somewhat of a forced savings account for homeowners, says Leif Thomsen, chief executive of Mortgage Master, a privately owned lender, given that the higher payments help a borrower pay down the principal at a quicker clip.
This is a huge shift in borrower thinking. "There was a drive a couple of years ago to take out the biggest mortgage that you could and use all of the money you would have otherwise had in the house and put it into stocks and bonds--to think of your house and mortgage as part of your entire investment portfolio," says Amy Crews Cutts, deputy chief economist for Freddie Mac.
"That worked for people who do investment finance for a living and are good at managing accounts," she says. "But for the average person, debt is a drag on their psyche as well as their overall budget." Many Americans have reverted to the goal of paying off their house and getting rid of their mortgage, Ms. Cutts adds.
Doing the Math
Refinancing into a shorter-term mortgage isn't a strategy for everyone, however.
Choosing a shorter term usually means you'll get a better rate--and you'll pay much less interest over the life of the loan--but a shorter time frame ramps up monthly mortgage payments.
For example, with a 4.5% interest rate on a 30-year fixed-rate mortgage of $200,000, you would have a monthly payment of $1,015, including principal and interest, Ms. Cutts says. The monthly payment jumps to about $1,480 with a 4% interest rate on a 15-year fixed-rate loan.
Of course, if the refinancing borrower's current 30-year loan has a higher rate, the difference between the monthly payments could be lower. Still, you should count on some increase in monthly payments.
In general, Mr. Walters says, those who choose 15-year fixed-rate mortgages are older and have more equity and less debt than other folks. They also earn higher incomes and don't have some of the added expenses that younger homeowners typically do.
"People who are taking these loans are financially stable and can afford the payments, but at the same time are planning on staying in their home for an extended period of time," Mr. Thomsen says.Mr. Walters says you shouldn't take on a 15-year fixed-rate mortgage unless you have substantial savings, including at least a year's worth of living expenses in liquid accounts.Also, he recommends having a debt-to-income ratio below 35%. So if you have a gross salary of $5,700 per month, for instance, your monthly debt--including any mortgage payments, taxes, insurance, homeowners-association dues as well as auto and student loans and credit-card debt--would have to be a max of $1,995 to get a 35% ratio.
There was an interesting article featured in the Wall Street Journal, that illustrates a change in mindset taking place with consumers as it relates to managing debt. There is a growing number of consumers, mostly older and financially established, who are choosing to pay down or pay off their mortgages at a faster rate - even if it means a substantial jump in their monthly payments.
I personally witness this mindset shift more often, as many clients look at the numbers I work up and see how a shorter mortgage term and relatively modest payment increase can save thousands of dollars in interest, while eliminating several years of mortgage payments. In addition, mortgage debt reduction becomes an integral part of their overall retirement strategy. Today's historic low mortgage rates are adding fuel to the fire.
I encourage you or anyone you know to contact a licensed mortgage advisor, such as myself, who can access your situation and produce a comprehensive analysis to save mortgage interest and accellerate term payoff.
Call me today at 714-478-3153 or visit my website www.HomeQuestMortgageCorp.com to fill out a confidential application.
Wall Street Journal - August 29th, 2010
A growing number of homeowners are choosing to pay down their mortgages at a faster rate--even if it means a substantial jump in their monthly payments.
Between January and June, 26% of homeowners who refinanced chose a 15-year fixed-rate mortgage, according to data from CoreLogic, a provider of financial, property and consumer information. During all of 2009, 18.5% of borrowers who refinanced opted for a 15-year term.
What's prompting the shift to shorter loans?
Historically low interest rates for fixed-rate mortgages.
Homeowners are doing the math and realizing that rates have fallen enough so the increase in payment between a new 15-year mortgage and their current loan is no longer unbearable for their budgets, says Bob Walters, chief economist.
The average rate on a 15-year fixed-rate mortgage was 3.86% for the week ending Aug. 26, according to Freddie Mac's weekly survey of conforming mortgage rates.
A Change in Thinking
The financial situation of those capable of refinancing today is a factor in the shift, Mr. Walters says. These people typically are homeowners with the best credit and the most equity -- and, therefore, most suited for a shorter-term loan.
But there might be some other psychology at work. "We're seeing a different view on debt than maybe we've seen in the past," he says. Today, homeowners are saying, "I really want to pay this off. I'm going to bite the bullet and take the payment and work toward paying this down."
A 15-year mortgage also acts as somewhat of a forced savings account for homeowners, says Leif Thomsen, chief executive of Mortgage Master, a privately owned lender, given that the higher payments help a borrower pay down the principal at a quicker clip.
This is a huge shift in borrower thinking. "There was a drive a couple of years ago to take out the biggest mortgage that you could and use all of the money you would have otherwise had in the house and put it into stocks and bonds--to think of your house and mortgage as part of your entire investment portfolio," says Amy Crews Cutts, deputy chief economist for Freddie Mac.
"That worked for people who do investment finance for a living and are good at managing accounts," she says. "But for the average person, debt is a drag on their psyche as well as their overall budget." Many Americans have reverted to the goal of paying off their house and getting rid of their mortgage, Ms. Cutts adds.
Doing the Math
Refinancing into a shorter-term mortgage isn't a strategy for everyone, however.
Choosing a shorter term usually means you'll get a better rate--and you'll pay much less interest over the life of the loan--but a shorter time frame ramps up monthly mortgage payments.
For example, with a 4.5% interest rate on a 30-year fixed-rate mortgage of $200,000, you would have a monthly payment of $1,015, including principal and interest, Ms. Cutts says. The monthly payment jumps to about $1,480 with a 4% interest rate on a 15-year fixed-rate loan.
Of course, if the refinancing borrower's current 30-year loan has a higher rate, the difference between the monthly payments could be lower. Still, you should count on some increase in monthly payments.
In general, Mr. Walters says, those who choose 15-year fixed-rate mortgages are older and have more equity and less debt than other folks. They also earn higher incomes and don't have some of the added expenses that younger homeowners typically do.
"People who are taking these loans are financially stable and can afford the payments, but at the same time are planning on staying in their home for an extended period of time," Mr. Thomsen says.Mr. Walters says you shouldn't take on a 15-year fixed-rate mortgage unless you have substantial savings, including at least a year's worth of living expenses in liquid accounts.Also, he recommends having a debt-to-income ratio below 35%. So if you have a gross salary of $5,700 per month, for instance, your monthly debt--including any mortgage payments, taxes, insurance, homeowners-association dues as well as auto and student loans and credit-card debt--would have to be a max of $1,995 to get a 35% ratio.
Thursday, August 5, 2010
Credit Score Improvement Tips
A recent report by FICO shows more than 25% of Americans have a credit score lower than 599. With a credit score that low, it makes it very difficult to take advantage of the current record-low interest rates. Below are the main factors, and the percentage of importance of each, that are used to determine your credit score.
1. Payment history = 35% – The most important thing is to pay your bills on time.
2. Amounts owed = 30% – This is the amount of money you owe versus the amount of credit you have available to you. A 20% debt-to-credit limit ratio is optimal.
3. Credit history = 15% – It’s better to keep old credit accounts than to close them.
4. New credit = 10% – Don’t apply for new credit without a good reason.
5. Credit mix = 10% – Try having a good mix of credit, such as credit cards, retail accounts, mortgage, installment loans, and consumer finance accounts.
1. Payment history = 35% – The most important thing is to pay your bills on time.
2. Amounts owed = 30% – This is the amount of money you owe versus the amount of credit you have available to you. A 20% debt-to-credit limit ratio is optimal.
3. Credit history = 15% – It’s better to keep old credit accounts than to close them.
4. New credit = 10% – Don’t apply for new credit without a good reason.
5. Credit mix = 10% – Try having a good mix of credit, such as credit cards, retail accounts, mortgage, installment loans, and consumer finance accounts.
Saturday, July 24, 2010
Doubling Down on Housing
Dear Clients:
I am seeing more of my clients actually put money into their homes, or "Cash In" to take advantage current lifetime low interest rates by either refinancing their current residence or buying up to their dream home, while home prices remain low. If they do not have the required 20% equity position needed to refinance, they are coming in with cash to reach the 20% level plus closing costs.
I am happy to review your situation and present a cost benefit analysis to determine if this financing strategy is right for you. Simply call, click or email me for a full mortgage review, or go to my website at www.HomeQuestMortgageCorp.com to apply.
Regards,
Tom
714-478-3153
Wall Street Journal
Record-Low Interest Rates and a Scary Stock Market Are Prompting Investors To Sink Even More Money Into Their Homes.
The housing crash has left at least 11 million people in the unenviable position of owing more on their homes than they are worth—and many more millions with properties worth far less than they paid for them.
But some might not be as trapped as they think.
Record-low mortgage rates and a new slump in home prices are presenting unusual opportunities in the housing market these days—even for so-called underwater borrowers.
Larry and Mary Schuck paid about $29,000 to refinance into a 15-year mortgage at a rate of just 4.5%. That's like an investment return of about 10% a year over five years. They also reduced their total interest payment by more than $95,000.
Some intrepid homeowners are intentionally taking a loss on their current house—and writing a big check to retire their old mortgage—in order to buy twice the home for not much more money. Others, eschewing conventional personal-finance advice, are even opting for "cash-in" refinancings, paying thousands of dollars out of pocket to settle old loans—and then taking out new mortgages with lower payments, shorter durations or both.
Katie Everett, a real-estate broker in Denver, says none of her clients kicked in cash when selling their homes last year. This year, "about half are willing to bring money to closing, anywhere from $5,000 to $45,000," she says.
Are these people crazy to be tying up even more of their cash in their homes, in effect doubling down on what has been a losing bet thus far? After all, any number of variables, from the employment picture to the credit markets, could weigh on housing for years to come.
Yet economists say trading up to new homes or refinancing existing ones can be smart—even if it means plunking down more cash to get out of old mortgages. People living in less-desirable neighborhoods might be able to find better homes in tonier ones that offer better appreciation potential. And with mortgage rates so low, such buyers can keep their monthly payments manageable, even though the new homes are more expensive.
."If you are trading up, what better time than when interest rates are at record lows and the cost of the trade-up is much less than it used to be?" says Christopher J. Mayer, a Columbia Business School economist.
The refinancing equation is changing, too. Thanks to rock-bottom interest rates and liberal lending terms for Federal Housing Administration loans, a person who plunks down cash to retire a higher-rate mortgage might be able to reduce his monthly payments, even as he shortens his loan term to 20, 15 or 10 years.
In the past, financial planners typically recommended that homeowners devote as little cash to real estate as possible, and to invest it in the financial markets instead. But with stocks essentially where they were 11 years ago and market volatility seemingly on the rise, people are rethinking that wisdom. Devoting extra cash to repay a mortgage early is among the safest ways to produce an investment return.
"At this point," says Jay Brinkmann, chief economist of the Mortgage Bankers Association in Washington, "if they don't have anything else that is bringing a tremendous return, then they are buying themselves an annuity by paying their house off sooner than they needed to."
During the fourth quarter of 2009, 33% of refinancings were of the cash-in variety, the highest percentage since Freddie Mac began tracking the characteristics of refinance transactions in 1985. Figures for the second quarter are due next week.
"Historically high percentages of borrowers are paying down their principal when they refinance their mortgages," says Brad German, a Freddie Mac spokesman.
It helps that interest rates are lower than they have been in decades. The average rate on a 30-year fixed-rate loan was about 4.74% on July 21, according to Bankrate.com. That is down from 5.26% in January. Rates on 15-year loans averaged about 4.18%.
The Mortgage Bankers Association said Wednesday that low interest rates sent the volume of mortgage applications 7.6% higher during the week ended July 16. Purchase applications increased for just the second time since the expiration of a temporary federal tax break in May. Refinance applications grew 8.6%, to the highest level since May 2009.
The attractive terms are spurring people like Scott Ayler, 35 years old, into action. He and his wife, Jaclyn, 33, recently decided to trade up to a larger home in their native Denver, despite taking a loss on their current house. In 2004, they paid $234,000 for a three-bedroom, 2½-bath house builtthat same year in Green Valley Ranch, a subdivision that has among the highest foreclosure rates in the city and lacks upscale amenities. They are in contract to sell the home for about $204,000.
Their new home, built this year, cost about $323,000, comes with four bedrooms and three baths, and sits on a corner lot overlooking a reservoir. The house, which was initially listed at $379,000, is in Denver's desirable Cherry Creek area, known for excellent schools, plentiful amenities and few foreclosures.
With $195,000 remaining on their original 6.625%, 30-year fixed-rate loan, the Aylers estimate their total paper loss will be around $45,000. They are putting down only $11,500 on the new house. But because the new FHA loan carries a 4.5% rate, their monthly payment will rise by only $290 a month.
.They say they expect better price appreciation in their new home. And with a young daughter and plans for another child, they need more space anyway.
"We don't want to wait for the market to come back," says Mr. Ayler, general counsel for an energy company. "We wanted a better quality of life now."
Of course, many homeowners in states like Arizona, Florida and Michigan are seriously underwater, having overpaid for houses now worth as little as half their value at the market's peak. Making up that yawning gap and scraping up additional cash for a new down payment is beyond their means.
Some of those people are going to extremes by engaging in "strategic defaults," a highly controversial strategy in which they stop paying their mortgages and go into foreclosure to get out of their obligations. But while cutting losses on a bad housing investment might seem liberating, it can stain a person's credit report for years.
The vast majority of homeowners remain reluctant to sell their primary residence at a loss, perhaps irrationally so. In a study of seller behavior in condominium transactions in downtown Boston from 1990 to 1997, economists David Genesove of Hebrew University in Jerusalem and Prof. Mayer of Columbia showed that sellers were so "averse to nominal losses" that it affected their behavior. Those who were selling their homes in down markets and faced the possibility of nominal losses kept their homes on the market for much longer than other sellers, in some cases to their detriment.
I am seeing more of my clients actually put money into their homes, or "Cash In" to take advantage current lifetime low interest rates by either refinancing their current residence or buying up to their dream home, while home prices remain low. If they do not have the required 20% equity position needed to refinance, they are coming in with cash to reach the 20% level plus closing costs.
I am happy to review your situation and present a cost benefit analysis to determine if this financing strategy is right for you. Simply call, click or email me for a full mortgage review, or go to my website at www.HomeQuestMortgageCorp.com to apply.
Regards,
Tom
714-478-3153
Wall Street Journal
Record-Low Interest Rates and a Scary Stock Market Are Prompting Investors To Sink Even More Money Into Their Homes.
The housing crash has left at least 11 million people in the unenviable position of owing more on their homes than they are worth—and many more millions with properties worth far less than they paid for them.
But some might not be as trapped as they think.
Record-low mortgage rates and a new slump in home prices are presenting unusual opportunities in the housing market these days—even for so-called underwater borrowers.
Larry and Mary Schuck paid about $29,000 to refinance into a 15-year mortgage at a rate of just 4.5%. That's like an investment return of about 10% a year over five years. They also reduced their total interest payment by more than $95,000.
Some intrepid homeowners are intentionally taking a loss on their current house—and writing a big check to retire their old mortgage—in order to buy twice the home for not much more money. Others, eschewing conventional personal-finance advice, are even opting for "cash-in" refinancings, paying thousands of dollars out of pocket to settle old loans—and then taking out new mortgages with lower payments, shorter durations or both.
Katie Everett, a real-estate broker in Denver, says none of her clients kicked in cash when selling their homes last year. This year, "about half are willing to bring money to closing, anywhere from $5,000 to $45,000," she says.
Are these people crazy to be tying up even more of their cash in their homes, in effect doubling down on what has been a losing bet thus far? After all, any number of variables, from the employment picture to the credit markets, could weigh on housing for years to come.
Yet economists say trading up to new homes or refinancing existing ones can be smart—even if it means plunking down more cash to get out of old mortgages. People living in less-desirable neighborhoods might be able to find better homes in tonier ones that offer better appreciation potential. And with mortgage rates so low, such buyers can keep their monthly payments manageable, even though the new homes are more expensive.
."If you are trading up, what better time than when interest rates are at record lows and the cost of the trade-up is much less than it used to be?" says Christopher J. Mayer, a Columbia Business School economist.
The refinancing equation is changing, too. Thanks to rock-bottom interest rates and liberal lending terms for Federal Housing Administration loans, a person who plunks down cash to retire a higher-rate mortgage might be able to reduce his monthly payments, even as he shortens his loan term to 20, 15 or 10 years.
In the past, financial planners typically recommended that homeowners devote as little cash to real estate as possible, and to invest it in the financial markets instead. But with stocks essentially where they were 11 years ago and market volatility seemingly on the rise, people are rethinking that wisdom. Devoting extra cash to repay a mortgage early is among the safest ways to produce an investment return.
"At this point," says Jay Brinkmann, chief economist of the Mortgage Bankers Association in Washington, "if they don't have anything else that is bringing a tremendous return, then they are buying themselves an annuity by paying their house off sooner than they needed to."
During the fourth quarter of 2009, 33% of refinancings were of the cash-in variety, the highest percentage since Freddie Mac began tracking the characteristics of refinance transactions in 1985. Figures for the second quarter are due next week.
"Historically high percentages of borrowers are paying down their principal when they refinance their mortgages," says Brad German, a Freddie Mac spokesman.
It helps that interest rates are lower than they have been in decades. The average rate on a 30-year fixed-rate loan was about 4.74% on July 21, according to Bankrate.com. That is down from 5.26% in January. Rates on 15-year loans averaged about 4.18%.
The Mortgage Bankers Association said Wednesday that low interest rates sent the volume of mortgage applications 7.6% higher during the week ended July 16. Purchase applications increased for just the second time since the expiration of a temporary federal tax break in May. Refinance applications grew 8.6%, to the highest level since May 2009.
The attractive terms are spurring people like Scott Ayler, 35 years old, into action. He and his wife, Jaclyn, 33, recently decided to trade up to a larger home in their native Denver, despite taking a loss on their current house. In 2004, they paid $234,000 for a three-bedroom, 2½-bath house builtthat same year in Green Valley Ranch, a subdivision that has among the highest foreclosure rates in the city and lacks upscale amenities. They are in contract to sell the home for about $204,000.
Their new home, built this year, cost about $323,000, comes with four bedrooms and three baths, and sits on a corner lot overlooking a reservoir. The house, which was initially listed at $379,000, is in Denver's desirable Cherry Creek area, known for excellent schools, plentiful amenities and few foreclosures.
With $195,000 remaining on their original 6.625%, 30-year fixed-rate loan, the Aylers estimate their total paper loss will be around $45,000. They are putting down only $11,500 on the new house. But because the new FHA loan carries a 4.5% rate, their monthly payment will rise by only $290 a month.
.They say they expect better price appreciation in their new home. And with a young daughter and plans for another child, they need more space anyway.
"We don't want to wait for the market to come back," says Mr. Ayler, general counsel for an energy company. "We wanted a better quality of life now."
Of course, many homeowners in states like Arizona, Florida and Michigan are seriously underwater, having overpaid for houses now worth as little as half their value at the market's peak. Making up that yawning gap and scraping up additional cash for a new down payment is beyond their means.
Some of those people are going to extremes by engaging in "strategic defaults," a highly controversial strategy in which they stop paying their mortgages and go into foreclosure to get out of their obligations. But while cutting losses on a bad housing investment might seem liberating, it can stain a person's credit report for years.
The vast majority of homeowners remain reluctant to sell their primary residence at a loss, perhaps irrationally so. In a study of seller behavior in condominium transactions in downtown Boston from 1990 to 1997, economists David Genesove of Hebrew University in Jerusalem and Prof. Mayer of Columbia showed that sellers were so "averse to nominal losses" that it affected their behavior. Those who were selling their homes in down markets and faced the possibility of nominal losses kept their homes on the market for much longer than other sellers, in some cases to their detriment.
Tuesday, July 20, 2010
Major Lenders Are Beginning to Loosen JUMBO Guidelines
One of my National lenders announced today they will be offering loan amounts of 80% Loan-to-Value up to $2,000,000.
This represents a very good sign, that lenders are beginning to loosen guidelines to low risk borrowers who qualify and want to take advantage of today's lifetime low interest rates.
This program applies to 15,20,30-year fixed rate and 5/1,7/1, and 10/1 LIBOR ARMS. Interest-Only loans do not apply.
Borrower requirements include: Maximum Debt-to-Income ratio of 45%; 720 Minimum FICO; Full Doc; subordinate financing not permitted; Purchase or Rate and term Refinance and program ALLOWS up to 6% seller closing cost contribution.
Call me today at 714-478-3143 to learn if you qualify!
This represents a very good sign, that lenders are beginning to loosen guidelines to low risk borrowers who qualify and want to take advantage of today's lifetime low interest rates.
This program applies to 15,20,30-year fixed rate and 5/1,7/1, and 10/1 LIBOR ARMS. Interest-Only loans do not apply.
Borrower requirements include: Maximum Debt-to-Income ratio of 45%; 720 Minimum FICO; Full Doc; subordinate financing not permitted; Purchase or Rate and term Refinance and program ALLOWS up to 6% seller closing cost contribution.
Call me today at 714-478-3143 to learn if you qualify!
Friday, July 16, 2010
June Housing Inventory Numbers RISE!
Housing Inventory Rises in Many Markets in June
The number of homes listed for sale grew in many U.S. cities in June, a month that typically brings a slowdown in listings. Inventory grew amid signs that demand plunged after the expiration of the home-buyer tax credit.
The supply of homes available for sale in 27 major metropolitan areas at the end of June was up 3.7% from one month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The data includes all single-family homes, condominiums and townhouses listed on local multiple-listing services in markets where the firm operates. (See all the inventory data.)
Inventories typically decline modestly in June, as the summer slowdown begins. Zelman & Associates, a research firm, says June listings nationally have fallen an average of 0.5% from May over the past 27 years.
Compared to one year ago, the June inventory in the 27 markets covered by ZipRealty was up 2.1%. Western markets saw the biggest month-over-month uptick in inventory, rising by 10.5% in Las Vegas, 9.4% in San Diego and 7% in Orange County, Calif.
Compared with the previous month, inventory fell in just one of the markets covered by Zip, declining by 1.5% in Jacksonville, Fla.
Inventory could continue to rise over the second half of 2010 as more banks take title to homes through foreclosure. More than seven million households are behind on their mortgage payments or in some stage of foreclosure.
Meanwhile, demand appears to have fallen sharply in the months following the expiration of the tax credit. New home sales fell to a record low in May, while pending sales were down 30% from April. Mortgage rates remain near 60-year lows, and yet demand for home-purchase loans fell to a 14 year low last week, according to the Mortgage Bankers Association.
The number of homes listed for sale grew in many U.S. cities in June, a month that typically brings a slowdown in listings. Inventory grew amid signs that demand plunged after the expiration of the home-buyer tax credit.
The supply of homes available for sale in 27 major metropolitan areas at the end of June was up 3.7% from one month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The data includes all single-family homes, condominiums and townhouses listed on local multiple-listing services in markets where the firm operates. (See all the inventory data.)
Inventories typically decline modestly in June, as the summer slowdown begins. Zelman & Associates, a research firm, says June listings nationally have fallen an average of 0.5% from May over the past 27 years.
Compared to one year ago, the June inventory in the 27 markets covered by ZipRealty was up 2.1%. Western markets saw the biggest month-over-month uptick in inventory, rising by 10.5% in Las Vegas, 9.4% in San Diego and 7% in Orange County, Calif.
Compared with the previous month, inventory fell in just one of the markets covered by Zip, declining by 1.5% in Jacksonville, Fla.
Inventory could continue to rise over the second half of 2010 as more banks take title to homes through foreclosure. More than seven million households are behind on their mortgage payments or in some stage of foreclosure.
Meanwhile, demand appears to have fallen sharply in the months following the expiration of the tax credit. New home sales fell to a record low in May, while pending sales were down 30% from April. Mortgage rates remain near 60-year lows, and yet demand for home-purchase loans fell to a 14 year low last week, according to the Mortgage Bankers Association.
Wednesday, July 14, 2010
Jumbo Loan Rates Plunge
Attention Jumbo Home Loan Borrowers:
Nearly two years after the credit crunch virtually froze mortgage markets, high-end borrowers are seeing some relief: Rates for "jumbo" mortgages on pricier homes are at their lowest since 2003.
Just a year ago, the average rate on a 30-year jumbo mortgage—a loan of more than $729,750 not backed by government-sponsored agencies Fannie Mae or Freddie Mac—was 6.86%. Now it is 5.48%—a rate that rivals those available during the height of the credit bonanza.
"In just the past couple of months, jumbo loans have really started to be competitively priced," says Keith Gumbinger of HSH Associates, a publisher of consumer-loan information.
Cheaper mortgages could provide a spark to the market for high-end homes. The lower rates signal relief for homeowners looking to shed an onerous mortgage—and for the high-end housing market itself. More-affordable jumbo loans will likely whet appetites for new home purchases, helping to stabilize prices at the upper end of the market. For consumers, the lower rates will make home purchases more affordable and enable existing homeowners to trim their monthly bills by refinancing.
Applications Are Up
More lenders are expected to make jumbo loans a "top priority" as they view it as a safe and profitable business to get into because jumbo loans are only going to borrowers with pristine credit.
Competitive pricing has spurred an uptick in activity among borrowers around the country, say mortgage brokers. "In the last couple of months alone, I've seen almost a 50% rise in sales of homes that need jumbo mortgages," says Frederick Wohlfarth, president of Manhattan real-estate broker Wohlfarth & Associates.
After the financial crisis struck, the market for jumbo loans ground to a halt. Instead of selling loans into the secondary market, lenders had to hold them on their balance sheets. With housing prices on a dizzying dive, most lenders weren't willing to take the risk of keeping potentially risky new loans on their books, which crippled the market for higher-end homes. Investors headed for the safety of government-backed home loans and steered clear of the private-lender variety.
"Now banks have more capital and are beginning to lend," HSH's Mr. Gumbinger says. "My ultimate question is: How long will these rates really last?"
Big Savings for Borrowers
A single percentage drop spells big savings for borrowers—and that is good news for the housing market. For example, a homeowner with a 30-year fixed-rate $800,000 mortgage at 6.86% pays $5,247 a month. If he were to refinance at 5%, his monthly payments would be reduced by $952.
While financial experts advise caution, prudent borrowers also can use lower rates to refinance existing mortgages and cash out some of their equity, while still ending up with an affordable mortgage.
Along with favorable rates, well-heeled borrowers are finding it easier to qualify for new jumbo loans and refinance existing loans at attractive terms. Underwriting standards are still strict, with most major lenders requiring a credit score in the 700s and down payments of up to 40%, but those with good credit can find good deals.
A borrower in Laguna Beach, Calif., is trading in his 30-year interest-only mortgage for a cheaper one. Four years ago, the 50-year old real-estate developer took out the mortgage, which had a fixed rate for 10 years, to buy his dream home, which has 180-degree views of the Pacific. The $1.5 million loan, which was issued by Countrywide Financial, required him to pay $7,500 a month—causing him more distress than he expected.
With the help of his mortgage broker, the borrower is now in the process of refinancing into a new 30-year loan with a fixed rate of 4.875% for seven years. "I am working to save some money, and this enables me to do that," he says. "I am thrilled."
Nearly two years after the credit crunch virtually froze mortgage markets, high-end borrowers are seeing some relief: Rates for "jumbo" mortgages on pricier homes are at their lowest since 2003.
Just a year ago, the average rate on a 30-year jumbo mortgage—a loan of more than $729,750 not backed by government-sponsored agencies Fannie Mae or Freddie Mac—was 6.86%. Now it is 5.48%—a rate that rivals those available during the height of the credit bonanza.
"In just the past couple of months, jumbo loans have really started to be competitively priced," says Keith Gumbinger of HSH Associates, a publisher of consumer-loan information.
Cheaper mortgages could provide a spark to the market for high-end homes. The lower rates signal relief for homeowners looking to shed an onerous mortgage—and for the high-end housing market itself. More-affordable jumbo loans will likely whet appetites for new home purchases, helping to stabilize prices at the upper end of the market. For consumers, the lower rates will make home purchases more affordable and enable existing homeowners to trim their monthly bills by refinancing.
Applications Are Up
More lenders are expected to make jumbo loans a "top priority" as they view it as a safe and profitable business to get into because jumbo loans are only going to borrowers with pristine credit.
Competitive pricing has spurred an uptick in activity among borrowers around the country, say mortgage brokers. "In the last couple of months alone, I've seen almost a 50% rise in sales of homes that need jumbo mortgages," says Frederick Wohlfarth, president of Manhattan real-estate broker Wohlfarth & Associates.
After the financial crisis struck, the market for jumbo loans ground to a halt. Instead of selling loans into the secondary market, lenders had to hold them on their balance sheets. With housing prices on a dizzying dive, most lenders weren't willing to take the risk of keeping potentially risky new loans on their books, which crippled the market for higher-end homes. Investors headed for the safety of government-backed home loans and steered clear of the private-lender variety.
"Now banks have more capital and are beginning to lend," HSH's Mr. Gumbinger says. "My ultimate question is: How long will these rates really last?"
Big Savings for Borrowers
A single percentage drop spells big savings for borrowers—and that is good news for the housing market. For example, a homeowner with a 30-year fixed-rate $800,000 mortgage at 6.86% pays $5,247 a month. If he were to refinance at 5%, his monthly payments would be reduced by $952.
While financial experts advise caution, prudent borrowers also can use lower rates to refinance existing mortgages and cash out some of their equity, while still ending up with an affordable mortgage.
Along with favorable rates, well-heeled borrowers are finding it easier to qualify for new jumbo loans and refinance existing loans at attractive terms. Underwriting standards are still strict, with most major lenders requiring a credit score in the 700s and down payments of up to 40%, but those with good credit can find good deals.
A borrower in Laguna Beach, Calif., is trading in his 30-year interest-only mortgage for a cheaper one. Four years ago, the 50-year old real-estate developer took out the mortgage, which had a fixed rate for 10 years, to buy his dream home, which has 180-degree views of the Pacific. The $1.5 million loan, which was issued by Countrywide Financial, required him to pay $7,500 a month—causing him more distress than he expected.
With the help of his mortgage broker, the borrower is now in the process of refinancing into a new 30-year loan with a fixed rate of 4.875% for seven years. "I am working to save some money, and this enables me to do that," he says. "I am thrilled."
Friday, July 2, 2010
Mortgage Rates Hit Lifetime Lows
Mortgage rates have sunk to the lowest level in decades. If your current mortgage interest rate is above 5% on either investment, 2nd home, or primary residence, now is the time to find out if you qualify.
The reason rates are dropping is that investors are seeking out mortgage bonds backed by the U.S. government as a safe haven from the tumult of the global economy, a reversal of fortune that has helped drive mortgage rates for consumers to record lows.
Thursday saw a slew of downbeat data, with the Institute for Supply Management saying its index of manufacturing activity fell unexpectedly to its lowest level of the year; auto makers reporting lower U.S. sales in June; and the Labor Department announcing a rise in weekly claims for jobless benefits.
The average rate for a 30-year fixed-rate mortgage tumbled this week to 4.58%, government-sponsored mortgage agency Freddie Mac said Thursday, from 4.69% last week. That is the lowest rate since Freddie Mac started keeping track in 1971.
A refinancing wave would be welcome now, with the economy appearing to lose momentum. The housing market has been a particular source of worry. A report Thursday from the National Association of Realtors showed that pending home sales sank 30% in May from the month before, far worse than economists expected.
If you or anyone you know who wants to take advantage of these rates and secure a lower payment or shorten their term to a 15yr fixed, without seeing a payment increase, please call me today at 714-478-3153.
Tom
The reason rates are dropping is that investors are seeking out mortgage bonds backed by the U.S. government as a safe haven from the tumult of the global economy, a reversal of fortune that has helped drive mortgage rates for consumers to record lows.
Thursday saw a slew of downbeat data, with the Institute for Supply Management saying its index of manufacturing activity fell unexpectedly to its lowest level of the year; auto makers reporting lower U.S. sales in June; and the Labor Department announcing a rise in weekly claims for jobless benefits.
The average rate for a 30-year fixed-rate mortgage tumbled this week to 4.58%, government-sponsored mortgage agency Freddie Mac said Thursday, from 4.69% last week. That is the lowest rate since Freddie Mac started keeping track in 1971.
A refinancing wave would be welcome now, with the economy appearing to lose momentum. The housing market has been a particular source of worry. A report Thursday from the National Association of Realtors showed that pending home sales sank 30% in May from the month before, far worse than economists expected.
If you or anyone you know who wants to take advantage of these rates and secure a lower payment or shorten their term to a 15yr fixed, without seeing a payment increase, please call me today at 714-478-3153.
Tom
Monday, June 28, 2010
Factors Needed to Heal Housing Market
As expected, the expiration of the Homebuyer Tax Credit incentive is borrowing buyers from the future. Many of these buyers would have been in a position to purchase in the months ahead, given continued low interest rates and buyer-friendly home prices; this is reflected in recent home sales and mortgage application reports. For this to reverse five things need to happen:
1. Interest rate must remain low. - I believe interest rates will remain low for the unforeseeable future, at least until 2011.
2. Private-sector wages will need to rise, enabling the current employed to better qualify for mortgages. - Most of 2010 job growth has occurred in the government sector, ie. 230,000 Census workers.
3. New jobs must to be created in the private-sector to bring new households into the homebuying ranks. - Economists expect a decline of 115,000 jobs for June.
4. The consumer savings needs to increase thus creating the down payment and closing costs for home purchases. - the savings rate did increase in May from too 4% from 3.8% in April.
5. Consumer Spending must increase. - Latest statistics show consumer spending as flat in May at only .2% growith.
Steve Wood of Insight Economics concludes: "The growing economy, which is now creating private sector jobs with a lengthening workweek, combined with ongoing monetary and fiscal stimulus, has strengthened growth in personal income and wages and salaries. Although still soft, they are much stronger than they were just 6 months ago."
So, it appears that the US economy is modestly advancing on all five points. If it continues to improve it will still take time to create qualified homebuying households.
1. Interest rate must remain low. - I believe interest rates will remain low for the unforeseeable future, at least until 2011.
2. Private-sector wages will need to rise, enabling the current employed to better qualify for mortgages. - Most of 2010 job growth has occurred in the government sector, ie. 230,000 Census workers.
3. New jobs must to be created in the private-sector to bring new households into the homebuying ranks. - Economists expect a decline of 115,000 jobs for June.
4. The consumer savings needs to increase thus creating the down payment and closing costs for home purchases. - the savings rate did increase in May from too 4% from 3.8% in April.
5. Consumer Spending must increase. - Latest statistics show consumer spending as flat in May at only .2% growith.
Steve Wood of Insight Economics concludes: "The growing economy, which is now creating private sector jobs with a lengthening workweek, combined with ongoing monetary and fiscal stimulus, has strengthened growth in personal income and wages and salaries. Although still soft, they are much stronger than they were just 6 months ago."
So, it appears that the US economy is modestly advancing on all five points. If it continues to improve it will still take time to create qualified homebuying households.
Friday, June 25, 2010
June 28th Key Mortgage News Bites
The Good,The Bad, & The Ugly
The Good - The Fed's kept the fund rate at the 0%-25% level given slow improvement in the economy.
Good and Bad - Due to record low interest rates of sub-5%, refinancing applications have increased over 51% since the end of April and they account for 74% of all mortgage applications.
The Bad - Existing home sales declined 2.2% in May.
The Ugly - New home sales declined 32.7% in May, the lowest level since this data was tracked in 1962.
Call Today for Personalized Mortgage Services
We are a full service mortgage brokerage firm offering Conventional, FHA, VA, CalPERS, CalSTRS and Jumbo mortgage programs up to $3,000,000.
Tom Drasler - (714) 478-3153 - Lincensed Mortgage Specialist DRE#01775516
"Serving Southern California Since 1996"
The Good - The Fed's kept the fund rate at the 0%-25% level given slow improvement in the economy.
Good and Bad - Due to record low interest rates of sub-5%, refinancing applications have increased over 51% since the end of April and they account for 74% of all mortgage applications.
The Bad - Existing home sales declined 2.2% in May.
The Ugly - New home sales declined 32.7% in May, the lowest level since this data was tracked in 1962.
Call Today for Personalized Mortgage Services
We are a full service mortgage brokerage firm offering Conventional, FHA, VA, CalPERS, CalSTRS and Jumbo mortgage programs up to $3,000,000.
Tom Drasler - (714) 478-3153 - Lincensed Mortgage Specialist DRE#01775516
"Serving Southern California Since 1996"
Modified Loans See High Default Rate
Credit Rating firms forecast 65% to75% of borrowers who receive lower mortgage payments as a result of loan modifications will default within 12 months. These are loan modifications supported under President Obama's Home Affordable Modification Program (HAMP).
The median debt to income ratio using debt payments to pretax income, still averages 64%, well above today's conventional lending standards of 45%.
Experts believe these failures are likely to be high largely because most of the borrowers are mired in credit-card debt, car loans and other obligations, leaving little left over for
The Treasury Department has said even with the modifications it often means little money is left over for food, clothing or such emergency expenses as medical care and car repairs.
The median debt to income ratio using debt payments to pretax income, still averages 64%, well above today's conventional lending standards of 45%.
Experts believe these failures are likely to be high largely because most of the borrowers are mired in credit-card debt, car loans and other obligations, leaving little left over for
The Treasury Department has said even with the modifications it often means little money is left over for food, clothing or such emergency expenses as medical care and car repairs.
FHA Reform Act - Update
H.R. 5072 & H.R. 4213 - FHA Reform Act of 2010
The House overwhelmingly passed reform legislation on June 11th that is believed will strengthen the FHA loan insurance program while keeping it available and affordable to responsible home buyers. Changes include:
• FHA to raise monthly insurance premiums and lower up-front premiums that place burdens on cash strapped borrowers.
• Amendment to increase FHA minimum down payment requirement from 3.5% to 5% was defeated; if approved it is estimated 300,000 homebuyers would be disenfranchised.
• Home Buyer Tax Credit CLOSING deadline is extended from June 30th to September 30th; Amendment does NOT extend the deadline for home buyers to qualify.
• The extension is expected to allow over 180,000 transactions to close that would not have otherwise made the June 30th deadline.
The House overwhelmingly passed reform legislation on June 11th that is believed will strengthen the FHA loan insurance program while keeping it available and affordable to responsible home buyers. Changes include:
• FHA to raise monthly insurance premiums and lower up-front premiums that place burdens on cash strapped borrowers.
• Amendment to increase FHA minimum down payment requirement from 3.5% to 5% was defeated; if approved it is estimated 300,000 homebuyers would be disenfranchised.
• Home Buyer Tax Credit CLOSING deadline is extended from June 30th to September 30th; Amendment does NOT extend the deadline for home buyers to qualify.
• The extension is expected to allow over 180,000 transactions to close that would not have otherwise made the June 30th deadline.
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