Monday, December 30, 2013

Housing Trends

During the initial part of the recession recovery, the markets reacted to every nuance in the housing reports.  Today the stock market seems to be paying little attention to the housing market and all eyes are on employment and economic growth.

The stock market has been on a tear recently reaching another record high at the closing bell on Thursday.  The market jumped 122 points on Thursday due to a positive first time jobless claims report.  Claims plummeted 42,000 for the week of December 21st.  Employment claims have been moving back and forth in a very wide 75,000 range over the last 4 weeks.  Despite these large movements, the mood on Wall Street is that 2014 will be a better year for employment and the economy.  The Fed clearly reinforced this sentiment with their recent announcement that they will begin tapering the stimulus program starting in January.

The stock market loves the fact that expectations for 2014 are high.  On the other side is the bond market, which has been getting hammered lately.  The benchmark 10YR Treasury hit 3% which is the highest since September.  To make matters worse for bond investors, the expectation is that economic improvement will further drive interest rates higher which will create additional upward pressure on bond yields.  Mortgage rates are closely related to the movement in the bond market and mortgage rates have been steadily climbing for the last few weeks.

Rising mortgage rates are clearly impacting the housing and mortgage markets.  The Mortgage Bankers Association of American reported that for the week ending December 21st, purchase applications declined 4% while refinances dropped 8%.  This is on top of the prior week?s declines of 6% and 4% respectively.

The two positive housing reports this week came from the Federal Housing Finance Agency and the New Home Sales Report.  According to the FHFA home prices continued their upward trend for the month of October with an increase of ½%.  Additionally, home prices are up 8.2% from the same time last year.

Although on the surface, the new home sales data shows a decline of 2.1%, this number is very misleading.  September and October data was dramatically revised upward which creates the illusion that new home sales may be trending downward after this week?s report.  The reality is that new homes sales have been quite healthy and if the upward revisions of the last two months are any indication, we will likely see an upward revision to November?s numbers as well in the coming weeks. Despite tight supply of new home inventory, a surge in year end sales is good news for housing and construction related activity.

Next week?s market moving reports are:

·        Monday December 30th ? Pending Home Sales Index
·        Tuesday December 31st ? S&P Case-Shiller Home Price Index & Markets Close Early
·        Wednesday January 1st - New Year?s Day ? All Markets Closed
·        Thursday January 2nd - First Time Jobless Claims, MBA Purchase Applications & ISM Mfg Index

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate information.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Friday, December 27, 2013

Home Loan Mortgages With Bad Credit: Making Your Mortgage Affordable

It is an obvious assumption that getting a home loan mortgage with bad credit cannot be a simple task. The size of a mortgage alone means that repayments will be significant each month, and low credit ratings suggest a difficulty in making existing loan repayments anyway. But the good news is that even bad credit borrowers can get a mortgage.
Of course, some extra effort is needed to get mortgage approval despite low credit scores. And it is the steps that are taken before submitting your application that can make all the difference. In fact, a lot more is considered by lenders than the size of an income and the credit history of the applicant.
The key word amongst mortgage providers is affordability, and it is proving that a home loan is affordable over the long term that matters most of all. Thankfully, there are some measures that can effectively enhance the affordability of the terms.
1. Improve Your Debt-To-Income Ratio
As with any other loan, the debt-to-income ratio is the principal influence on a loan application, so when it comes to getting a home loan mortgage with bad credit, the healthier it looks the better chance there is of getting approved.
The ratio measures the monthly debt repayments due against the monthly income, and sets a 40:60 ratio that lenders stick religiously to. It means no more than 40% of income can be committed to debt repayments, leaving 60% to cover general monthly expenses and any unexpected bills. Securing mortgage approval despite low credit scores is possible if the 40% limit is adhered to.
Of course, income is closely related to this ratio with large monthly paychecks greatly benefiting the applicant. However, a home loan is not granted solely on the size of the income. A 12-month employment contract, for example, may be high paying but provides no guarantee of employment after it ends.
2. Promise A Bigger Down Payment
There can be no underestimating just how influential the down payment can be in the approval process. After all, it has a direct effect on the size of the required mortgage, and this can in turn make the home loan mortgage with bad credit affordable or not.
Real estate agents will usually look for down payments of at least 5% to seal the deal, but some mortgage providers are willing to grant no more than 90% mortgages. This is fine, but by committing a payment of 15% or even 20%, mortgage approval despite low credit scores becomes a far more possible outcome.
The only problem is raising the money involved. If a house is worth $200,000, a 20% down payment translates to a single lump sum payment of $40,000. Many people secure down payment loans from independent lenders online before applying for the home loan.
3. Agree A Longer Mortgage Term
Of course, when affordability is the premier concern, it all comes down to how large the monthly mortgage repayments will be. If the sum involved can be kept down, then the deal is more affordable, and makes the chances of securing a home loan mortgage with bad credit extremely good.
The best way to lower the repayment sum is to increase the number of ways the principal borrowed is divided - basically, lengthening the term of the mortgage. For example, a $200,000 mortgage repaid over 30 years will require repayments of over $600 per month, but over 40 years will cost $480.
That kind of savings can be significant and practically ensure mortgage approval despite low credit scores. But it is also important to note that with a longer term, more interest is paid over the lifetime of the home loan.

Article Source:

Saturday, December 21, 2013

It Was Bound To Happen.....

It was bound to happen.It was inevitable.  For well over a year the talk in the markets has been when is the Fed going to begin tapering the stimulus program?

As I am sure you have heard by now, the announcement finally came on Wednesday afternoon with the FOMC's policy announcement and FOMC market forecast.  It is official, the tapering will begin in January with a reduction of 10 billion dollars a month in bond purchases.  The reaction from the stock market was euphoria.  On the news, the DOW rose 262 point in the second half of the trading day on Wednesday.  The investor excitement stemmed from the upbeat forecast from the Fed on the expected growth of the economy.  Good economic news and expectations means good news for stock values.

While the sun shines in some parts of the world, it rains in others.  The bond market on the Fed news tanked.  The Fed stimulus program has been artificially keeping interest rates low.  With the beginning of the tapering interest rates will rise.  However bond investors know that rising rates will erode the values of their bond holdings which is why there was a flood of investors jumping out of the bond market once they heard the Fed plan.

Months ago it was thought that higher interest rates would kill the economic recovery and push housing activity and growth back to a crawl.  With the latest Fed report the belief seems now that the economy and housing market are strong enough to sustain slightly higher interest rates.  The Fed tapering plan is going to be extremely gradual so any large jump in rates should be averted.  Some experts are predicting that the whole tapering plan will take at least a couple of years before it is completely terminated.  Remember, the last thing the Fed wants to do is cut support for economic growth too quickly as that would have a devastating effect on the economy.

The Housing Market Index, which measures home builder sentiment on future housing growth, shot back up 4 points.  Currently the index is at the highest point it has been since the economic recovery began and it also ends a 3 month trend of declines in the index.

On the flip side, existing home sales fell a sharp 4.3% for the month of November.  This is the 4th straight month of disappointment.  The negative report is not due to a lack of buyers or the inability for them to obtain mortgage financing.  The decline is primarily because there are just not enough homes on the market for sale.  The worst part of the report is that existing home sales are actually 1.2% below where they were a year ago.  This is the first time since the beginning of the recovery that we have seen contraction in sales from the prior year.  Higher mortgage rates may be a small contributing factor to the decline as well
Next week's market moving reports are:

        Monday December 23rd  Consumer Sentiment
        Tuesday December 24th  Durable Goods Orders, FHFA House Price Index & New Home Sales
     Wednesday December 25th  Christmas Day ? Markets Closed
       Thursday December 26th  First Time Jobless Claims and MBA Purchase Applications

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate information.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Wednesday, December 18, 2013

Sunday, December 15, 2013

Be Still My Heart

Be still my heart, Is it possible that the government of the United States can actually get something done?

On Thursday the Republican controlled House of Representatives approved the proposed budget plan placed for a vote.  This budget actually appears to have the support of the majority of Republicans and just enough Democrats for it to be passed.  Next week the Democrat controlled Senate will vote on the bill which is expected to pass by a narrow margin.

It appears that Congress has finally realized that permitting, or even toying with a another possible government shutdown in January would create a firestorm of rebellion by the American public.  After the last shutdown in October it has been clear that the American people are fed up with government and that our elected officials would pay the price come the next election.

The response from the markets has been mixed.  The stock market has been dropping with the belief that the latest batch of positive economic data, combined with the government appearing to pass a budget, and finally a slowly improving job market, will likely move the Fed closer to tapering the stimulus program.  Bond yields have been rising on this news as well, moving interest rates higher over the last couple of days.

Last week mortgage rates declined slightly bringing some home buyers and refinance borrowers to take action.  Purchase applications increased 1.0% while refinances inched up 2.0% from the prior week.  With the latest jump in interest rates this week in response to the budget deal, it is likely that the MBA mortgage applications report will show declines next week.

Adding to the sentiment that the economy continues to recover is the latest report on retail sales.  Overall retail sales jumped 0.7% in November following a rise of 0.6 % in September.

At long last the foreclosure crisis is showing signs that is finally fading away.  The number of foreclosure filings dropped 15% down to 113,454 in November which is the largest decline since November 2010.  In addition, the total number of filings is the lowest since December 2006.  The number of filings is down 37% from the same time last year. 

I was speaking with a professional real estate agent the other day and they even said that they are noticing much faster responses from many banks when it comes to approving short sales.

Next week?s market moving reports are:

        Monday December 16th  Industrial Production
        Tuesday December 17th  Consumer Price Index
      Wednesday December 18th - MBA Purchase Applications, Housing Starts and FOMC Minutes
       Thursday December 19th  First Time Jobless Claims and Existing Home Sales
     Friday December 20th  GDP

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate information.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Thursday, December 12, 2013

This Weeks Highlights: December 12th 2013

Friday's employment report could be a big game changer if the data shows hiring continues to remain strong.  Last month 204,000 jobs were added which were more than expected.  ADP on Wednesday of this week released their report which showed private sector hiring to be quite strong.  With a strong ADP report, and if a strong employment report comes out Friday morning, that could very well put pressure on the Fed to once again begin discussing the tapering of the stimulus program.

As of late mortgage rates have risen almost to their highs for 2013 and it appears that any significant decline in the future is highly unlikely.   Although recent housing reports are not as strong as earlier in the year, other sectors of the economy seem to be doing better.  The Fed, for better or worse, does not make their future stimulus plans only based on the housing market.  They look at the overall health of the economy which can lead once again to investors trading on Fed stimulus speculation.

Auto sales for the month of November were at the highest level ever for the month.  When you combine that with lower first time jobless claims and higher than expected GDP, the signs are there that pressure could mount on the Fed to make at least some changes to the current stimulus program.

Housing which was once the bright spot of the recovery, then dipped, seems to be improving once again.  There were 2 new homes sales reports released on Wednesday.  The reason for the double reporting is that the September report was delayed due to the government shut down.

New home sales report sends a mixed message as sales for September declined 6.6%.  However October figures showed a 25.4% surge in new home sales.  The rate of sales annualized is 444,000 which is the highest pace since early this year.  Because of the big jump in sales the housing supply declined from 6.4 months down to 4.9 months.

The other report released this week on housing was regarding construction spending.  The latest report showed that spending increased .8% which was more than expected.  The concerning part of the report is that the majority of the increase was in the multifamily sector versus in single family homes.

On the flip side of housing the impact of higher mortgage rates is showing up loud and clear in the mortgage application index released by the Mortgage Bankers Association of America.  The latest report shows that purchase applications declined 4.0% and refinance apps plummeted 18%.  The continued trend of declining purchase applications could indicate weaker reports in new homes sales and existing home sales in future reports.

Next week?s market moving reports are:

  • Thursday December 12th  First Time Jobless Claims and Retail Sales
  • Friday December 13th  Producer Price Index

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate information.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Monday, December 9, 2013

Buy a Home in Winter and Save Money

While most people are accustomed to shopping for homes between Memorial Day and Labor day, that may actually be the worst time of the year to buy a house. The best time of year to go house hunting may be the dead of winter, rather than the summertime.
Most houses are bought and sold in the summer for a good reason. That's when children are out of school. Parents understandably want to avoid disrupting their children's' lives if they can possibly help it and moving when school is out of session is a big help towards avoiding some trauma.
Granted, one doesn't always have the opportunity to shop for houses at one's leisure; many people move because of job transfers or job changes, and with those, you pretty much have to move when the even occurs. But if you have control over when you start house hunting, you might do better to wait until the snow comes. Why is that?
The summer creates a seller's market. Buyers are working on tight schedules; they want to get settled into their new houses before school starts again. That being the case, sellers have an advantage, because most of the people who are shopping in the summertime want to get settled quickly. The opposite is true in the winter, when there are fewer homes for sale and far fewer buyers. Most people who have houses for sale in the winter months do so out of necessity. At this time of the year, the buyer has an edge, as sellers are more likely to be looking to sell their home quickly from a much smaller pool of potential buyers.
As such, buyers who shop in the winter may find sellers to be more flexible. They may be willing to haggle a bit more on the price, they may be more willing to allow concessions for paint or carpeting, and they may be more flexible on a closing date. All of these things work to the advantage of the savvy home shopper.
If it suits you to do so, the winter is a great time to buy a house.

Article Source:

Friday, December 6, 2013

How Does a Reverse Mortgage Work? A Simple to Understand Explanation of the Reverse Mortgage Process

If you're looking into a reverse mortgage, chances are you're interested in the immediate cash it can give by releasing the equity in your home. But how does it work? The whole process is relatively simple, but there are a few key points to keep in mind.
First of all, you should note that a reverse mortgage is not a good idea if you still owe a large balance on your regular mortgage. This option should only be considered if you own your home outright (you're not making mortgage payments anymore), or if you have just a small balance left. If you've lived in your home a long time and have finally paid it off, at that point a reverse mortgage is something to consider. Also, in the United States, you must be at least 62 years old to take advantage of this option.
Basically, the amount of equity in your home is converted into cash that can be paid to you in several ways. You can opt for one lump sum, a monthly payment, or a line of credit in which you can withdraw any amount at any time until the credit is exhausted. The money that is given to you must first be used to pay off an existing regular mortgage, if you still have one. Afterward the remaining balance can be used for anything you want.
The biggest benefit of a reverse mortgage is that you don't have to repay the money as long as you continue to live in the home. The payments are deferred until one of the following happens: 1) You or your surviving spouse pass away; 2) You sell the house; or 3) You move out of the home for longer than 12 months. Once any of these occur, the money from the reverse mortgage must be repaid.
However, you may not personally be responsible for the repayment. Obviously, if you pass away, the debt is passed on to your heirs. The same is true if you move into a retirement home and are incapable of repayment. If you do not plan on repaying the mortgage yourself, you should make sure your heirs or spouse are financially able to take on the debt.
A reverse mortgage is certainly a great way for seniors to take advantage of the equity in their home. We encourage you to look into this option if you are interested in accessing the value in your home.

Article Source:

Tuesday, December 3, 2013

Reverse Mortgages - What Does the Term Principal Limit Mean?

When explaining a reverse mortgage to a senior homeowner, one of the most important terms a reverse mortgage loan officer will discuss is the "Principal Limit."
What is the Principal Limit and why is it important?
The Principal Limit (PL) is the gross amount of money the lender is willing to lend to the borrower of a Home Equity Conversion Mortgage or HECM reverse mortgage, based on a formula derived from Congressional legislation and implemented by the Department of Housing and Urban Development (HUD) and using the following three criteria: 
  • The lower of the Maximum Claim Limit or the Federal Housing Administration (FHA) appraised value of the home;
  • The age of the youngest borrower (must be 62 or older);
  • The current expected interest rate (based on the current 10 year London Interbank Offered Rate, or LIBOR rate, plus a stated margin for the adjustable rate HECM and based on the current fixed interest rate for the fixed rate reverse mortgage).
The three listed criteria affect the PL in the following ways:
  • The higher the value of the home (up to the maximum claim limit of $625,500) the higher the amount of the PL will be;
  • The older the youngest borrower (age is always based on the youngest borrower's age, not a blending of multiple borrowers' ages) the higher the amount of the PL will be;
  • And, conversely, the higher the current expected interest rate, the lower the amount of the PL will be.
The reason potential borrowers should become familiar with the term Principal Limit and what it means is because it is from this cash figure that all fees and set asides will be subtracted in order to arrive at the maximum cash or loan proceeds available to the borrower.
Congress Plans to Lower the Principal Limit
Congress lowered the Principal Limit for the fiscal year 2010 signifantly to make up for a perceived budget shortfall of approximately $798 million for HECM reverse mortgages put in place within that fiscal year. HUD has announced that for the fiscal year 2011 there will likely be decreases in the Principal Limit as well. The 2011 year begins in October 2010 for budgetary purposes.
 Until the budget bill has made it through the joint Senate and House committee, been voted on and signed, we do not know what the exact amount of the cut in the principal limit will be. Senior homeowners who have investigated HECM reverse mortgages prior to October 1, 2010 should contact a reverse mortgage lender to learn how the decreases in Principal Limits could impact  them personally if they pursue a reverse mortgage.

Article Source: