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What’s Ahead For Mortgage Rates This Week : July 19, 2010

July 19, 2010 By Leave a Comment

Housing starts June 2008 - May 2010Mortgage markets improved for the 5th straight week last week as consumer confidence waned and inflation data tamed. Investors ignored the news that 19 of 23 reporting S&P 500 companies beat their respective earnings estimates and sold off on stocks.

There’s concern about a potential economic slowdown for the months ahead and it may be well-founded.

Despite an improving jobs situation and booming retail sales, households are less optimistic about the future and so is the Federal Reserve. In its post-meeting minutes released last week, the Fed revised its U.S. growth estimates downward for 2010 and 2011.

For rate shoppers in Maine , this is excellent news.

Because of the weakness, conforming mortgage rates fell again last week, extending the current rally in rates to 16 weeks. Mortgage rates are lower than at any time in measured history.

This week, data will be housing market-heavy and mortgage rates could rise or fall.

  • Monday : National Association of Home Builders Index
  • Tuesday : Building Permits and Housing Starts
  • Thursday : Existing Home Sales

Strength in any, or all three, of these housing-related reports should push mortgage rates higher on higher hopes for the economy. Weakness, on the other hand, should have the opposite effect. 

Overall, though, mortgage markets are trending better.  Momentum is in effect and refinance activity is soaring. That said, it doesn’t mean that rates won’t rise — they could absolutely. It just takes a change in market sentiment. And that could happen quickly.

Mortgage rates are artificially right now so even the slightest jolt could cause them to spike. It would be similar to what happened in June 2009 when rates rose 1.125% in just 10 days’ time. Therefore, if you’re shopping for a mortgage and like the rate you’ve been quoted, consider locking in as soon as possible.

There’s very little room for rates to fall further but a lot of room for rates to rise. Make sure you’re on the right side of that bet.

Filed Under: Mortgage & Finance Tagged With: , ,

The Fed’s June Minutes Keep Mortgage Rates In Rally-Mode

July 16, 2010 By Leave a Comment

FOMC June 2010 MinutesAccording to Freddie Mac, mortgage rates made new all-time lows this week and the good news is that rates look poised to fall even more.

Since the Federal Reserve’s release of its June 2010 meeting minutes Wednesday, mortgage rates are dipping even more and one of the main reasons why is because of some choice Fed words.

If you’ve never seen a Fed Minutes release, it reads academic. The document is page after page of stats, facts and figures about the U.S. economy, accompanied by an in-depth recap of the intra-Fed member debates that shape the nation’s monetary policy.

At 7,333 words, the June Fed Minutes is the unabridged version of the more well-known, post-meeting press release.  The corresponding press release was just 360 words.

As it turns out, Wall Street didn’t like what it read in the minutes.  Specifically:

  1. The Fed expects below normal growth through 2012
  2. The Fed’s outlook for employment has dipped
  3. Credit conditions are easing only slowly

Furthermore, the Fed said its action may be needed if the economy were “to worsen appreciably”.

Overall, the economic optimism the Fed displayed earlier this year appears to be waning. The economy is moving forward — just not as quickly as expected.  That should bode well for mortgage rates and home shopping in Belfast.

Mortgage rates were down Wednesday afternoon and Thursday and remain historically low. All it would take to reverse rates, however, is a run of positive news on jobs, growth, and consumer spending.  Therefore, if you know you need to lock a mortgage rate in the near-term, it may be a good time to make the call. 

Lock your mortgage rate and move on.

Filed Under: Mortgage & Finance Tagged With: , ,

Foreclosure Activity Slows Again In June 2010

July 15, 2010 By Leave a Comment

Foreclosures per capita, June 2010

313,841 foreclosure filings were made in June, according to foreclosure-tracking firm RealtyTrac. The figure represents a 3 percent drop from May and 7 percent drop from June of last year. However, foreclosure filings remain relatively high nationwide.

June marks the 16th straight month the filings topped 300,000. 1 in every 411 U.S. homes received some form of notice last month with foreclosure density varying wildly from state-to-state.

Like everything else in real estate, it seems, foreclosures are a local phenomenon.

The states with the highest foreclosures per capita were:

  • Nevada : 1 foreclosure filing per 88 homes
  • Florida : 1 foreclosure filing per 171 homes
  • Arizona : 1 foreclosure filing per 189 homes

The states with the lowest foreclosures per capita were:

  • Vermont : 1 foreclosure filing per 26,051 homes
  • West Virgina : 1 foreclosure filing per 8,058 homes
  • South Dakota : 1 foreclosure filing per 6,528 homes

Overall, 40 states beat the national Foreclosure Per Capita average and 10 states fell below. The sheer volume of REO, though, is creating interesting buying opportunities for first-timer buyers, move-up buyers, and real estate investors in Belfast.

Homes bought from banks are usually less expensive than non-foreclosure homes. This is one of the major reasons why distressed sales account for roughly 30 percent of all home resales. Less expensive, though, doesn’t always mean “cheaper”. Foreclosed homes are often sold as-is and may be defective or otherwise uninhabitable.

Making repairs to get these homes into “living condition” can be costly.

Therefore, if you’re buying a foreclosed home, make sure you know what you’re buying before you make your bid. Have a certified professional inspect the home to check for damage, and consider enlisting the help of a real estate agent to assist with negotiations and management of the contract.

The process of buying a foreclosed home is different from buying a typical resale. Make sure you do your homework.

Filed Under: Mortgage & Finance Tagged With: ,

Staging on a Budget

July 14, 2010 By Leave a Comment

Set the stage

Some of the best staging techniques are free. Getting rid of clutter and rearranging furniture can go a long way toward improving the way potential buyers view a room or home. Sometimes, however, you might need to invest a little cash to achieve the desired look. But you won’t bust your budget with these ideas under $25.

  • Plants and bowls of fruit: They add warmth and a splash of color to a room.
  • Lighting: Replacing heavy, dark shades with sleeker, lighter versions can add more light to a room. Lighting should blend in and complement a room, not dominate it. And make sure hallway fixtures aren’t too dated.
  • Excess fabric: A versatile tool for any stager, fabric can be used in a variety of ways. For example, pin it around pillows for makeshift shams, use it to cover a dirty seat cushion, or hang it as temporary window treatments.
  • Artwork: Look for oil paintings, watercolors, and posters at flea markets, secondhand stores, or discount retailers or have a photo enlarged at an office services center to add just the right finishing touch to a room. If you do a lot of staging, keep such artwork on hand to use as needed.

Remember less is more.  Keep it simple and it will sell.

Filed Under: Home Selling

Mandatory Loan Fees Keep Borrowers From Getting Their Absolute Lowest Rate

July 14, 2010 By Leave a Comment

Loan-level pricing adjustments add to mortgage costsConforming mortgage rates may be posting all-time lows this week, but that doesn’t mean you’ll be eligible for them. You may have already called your loan officer and found this out the hard way.

It’s because of a federally-mandated mortgage-pricing scheme known as “loan-level pricing adjustments”.

In effect since April 2009, loan-level pricing adjustments are changes to a loan’s base rate and/or fee structure based on that loan’s inherent risk to Wall Street. It’s similar to auto insurance pricing adjustment in that a sports car, all things equal, will cost more to insure than a comparably-priced minivan.

More risk, more cost.

In mortgage lending, loan risk can be loosely grouped into 5 categories. Mortgage applications in Houlton featuring any of the five traits are subject to price adjustments:

  1. Credit Score (i.e. the borrower’s FICO is below 740)
  2. Property Type (i.e. the subject property is a multi-unit home)
  3. Occupancy (i.e. the subject property is an investment home)
  4. Structure (i.e. there is a subordinate/junior lien on title)
  5. Equity (i.e. mortgage insurance is required by the lender)

Furthermore, loan-level pricing adjustments are cumulative.

A 3-unit investment home will face larger adjustments than an owner-occupied 3-unit home, for example. It’s these adjustments that explain why you may not be eligible for the rates you see advertised online and in the newspapers — your particular loan may be subject to this risk-based pricing that raises your mortgage rate and closing costs.

The government’s loan-level pricing adjustment schedule is public information. See what your lender and how your loan quote is made at the Fannie Mae website. Or, if you find the charts confusing, just call or email your loan officer for help with interpretation.

Filed Under: Mortgage & Finance Tagged With: , ,

Should You Refinance Your ARM, Or Let It Adjust Lower?

July 13, 2010 By Leave a Comment

ARM adjustment schedule 2008-2010

If your adjustable rate mortgage is due to adjust this year, don’t go rushing to replace it just yet. Your soon-to-adjust mortgage rate may actually go lower. It’s related to the math behind the ARM.

Conventional, adjustable-rate mortgages share a common life cycle:

  1. There’s a “starter period” in which the interest rate remains fixed
  2. There’s an initial adjustment period after the starter period called the “first adjustment”
  3. There’s a subsequent annual adjustment until the loan’s term expires — usually at Year 30.

The starter period will vary from 1 to 10 years, but at the point of first adjustment, conventional ARMs become the same. A homeowner’s new, adjusted mortgage rate is determined by the sum of some constant, and a variable. The constant is most often 2.25% and the variable is most often the 12-month LIBOR.

As a formula, the math looks like this:

(Adjusted Mortgage Rates) = (12-Month LIBOR) + (2.250 Percent)

LIBOR is an acronym standing for London Interbank Offered Rate. It’s the rate at which banks borrow money from each other and, lately, LIBOR has been low. As a result, adjusting mortgage rates have been low, too.

Last year, 5-year ARMs were adjusting to 6 percent or higher. Today, they’re adjusting to 3.375%.

Based on the math, it may be wise to just let your ARM adjust this year. Or, depending on how long you plan to stay in your home, consider a refinance to a new ARM.  Starter rates on today’s adjustable rate mortgages are exceptionally low in Bangor , as are the rates for fixed rate loans.

Either way, talk to your loan officer about making a plan. With mortgage rates as low as they’ve ever been in history, homeowners have some interesting options. Just don’t wait too long. LIBOR — and mortgage rates in general — are known to change quickly.

Filed Under: Mortgage & Finance Tagged With: ,

What’s Ahead For Mortgage Rates This Week : July 11, 2010

July 12, 2010 By Leave a Comment

Consumer Price Index May 2009-May 2010Mortgage markets improved again last week — if only barely — throughout a holiday-shortened week devoid of “major” data and market conviction.

Up-and-down trading characterized the week which ended with Maine mortgage rates slightly lower versus the week prior.

Mortgage rates have fallen in 4 consecutive weeks and are on an extended rally that dates back to mid-April.

This week, however, data returns and rates could reverse. Especially with inflation numbers are in play.

Inflation is the enemy of mortgage rates.

Inflation is bad for mortgage rates because mortgage rates based on the price of mortgage-backed bonds.  When inflation pressures mount, the demand for mortgage-backed bonds wanes and that pushes bond prices down which, in turn, pushed bond yields (i.e. rates) up.

There’s three pieces of inflation-related news this week.

The first inflation-related story is the Federal Reserve’s Wednesday release of the minutes from its last meeting. Now, when the Fed adjourned June 23, it said “underlying inflation has trended lower“. However, there was more to the conversation that what the FOMC released in its post-meeting statement. 

Markets will be looking for clues.

Then, Thursday, the Producer Price Index is released. The Producer Price Index is a measure of business operating costs. When PPI is increasing, it means that “doing business” is more expensive — an inflationary situation. It’s inflationary because higher business costs are often absorbed by consumers in the form of higher prices for goods and services.

A rising PPI is usually bad for mortgage rates.

And lastly, Friday, the Consumer Price Index is released. The CPI measures the average American’s “cost of living”. Like PPI, when the Consumer Price Index is rising, mortgage rates tend to follow.

Other releases of import this week include Retail Sales and two consumer confidence surveys.

Last week, mortgage rates again made new all-time lows. If you haven’t checked with your loan officer about the possibility of a refinance, make that call this week.  Mortgage rates can stay low for a long time, but they can’t stay low forever. Lock your rate while you can.

Filed Under: Mortgage & Finance Tagged With: , ,

The Value of a Real Estate Agent

July 9, 2010 By Leave a Comment

Can you save money by not having a real estate agent?

These days everyone is thinking of ways to save money. But doing without a real estate agent would not be a wise decision. You know, you’ve heard it “Buying or selling a home may be the biggest financial transaction of your life.”  So here is why it makes sense to have educated help.

 IF YOU ARE BUYING

-A real estate agent will make sure you don’t pay too much for your house.  This is, perhaps, the best reason to have a real estate agent’s help. A good real estate agent knows what homes are selling for right now based on the home and where it is.  Remember, establishing a good price is half the battle.  The other half is negotiating to make sure you get it.   Your real estate agent can help you here too.

-A real estate agent can find the home for you quickly and easily.  You might enjoy spending an hour or so a day surfing the net or leafing the classifieds looking for homes but the fact is, that most homes sold are listed first on the Multiple Listing Service (MLS).  Your real estate agent can constantly monitor this source and contact you as soon as a property is listed that meets your criteria.

-A real estate agent can tell you what you don’t know you don’t know and keep you out of trouble.  Does a home inspection make sense?  Do you need to understand a condition or easement in the deed before you make an offer?  What does that provision in the sales contract mean?  Does the language of the sales agreement need to be adjusted to protect your special interests or concerns?  Should you be concerned about that item on the seller’s disclosure form?  A real estate agent is apt to bring things to your attention that you are likely to have missed as a novice and be an invaluable source of information here.

-A real estate agent knows who to call. Perhaps you’ve decided to have a home inspection on the property you made an offer on.  You can open up the yellow pages to find out who does inspections in your area, but which one do you choose?  Wouldn’t it be nice to know which one has a history of being the most thorough, can do the job in the time you need, provides the best value (and which doesn’t)?  Your real estate agent can put you in touch with a lender that may have just the program you need, the title company that is going to do the best job for you or the homeowner’s insurance company that can meet your special needs or provide you the most value.  They work with these people every day.

-A real estate agent can fill in the blanks.  The internet is a great place to start to check up on what may be your new hometown but there’s no substitute for a living breathing critic (your real estate agent).  I have never seen a town’s website that described what was bad about the town.

 IF YOU ARE SELLING:

-A real estate agent will help you make sure that you get full value for your house.  Is the price you want realistic?  Have you been looking at the classifieds, surfing the net?  Are the houses that look like yours, really like yours?  Have you been spending your weekends looking at other homes for sale?  An experienced real estate agent can give you an objective opinion of what your home is worth, and why.  The agent may also have some proven ideas for things that you can do to your home to make it more saleable.  It doesn’t take much to cover the cost of a real estate commission if you’ve sold your house for too little.  It’s going to be a long winter if your house doesn’t sell because it’s overpriced.

-A real estate agent can market your home in ways that you can’t.  Doesn’t everyone buy and sell on the internet these days?  Aren’t the classifieds full of houses for sale?  The fact of the matter is, most homes today are marketed and sold through the Multiple Listing Service (MLS).  Your real estate agent will post your property on the MLS as soon as you list.  Real estate agents who have buyers review these listings constantly. 

-A real estate agent will save you time.  Maybe you have found prospective buyers that you feel pretty good about.  They want to look at your house tomorrow, along with another house they are seriously considering.  The problem is, they want to come by at 10:00 in the morning.   Do you take the morning off from work (this may get old quick with your employer)?  Do you ask them to come by at 6:00 that night instead? (Oops, looks like they made an offer on the other house in the meantime.)  You are going to need a lot of free time to show your own home.  A real estate agent will also protect you from “tire kickers”.  You don’t want to spend your time showing your house to people who aren’t qualified to buy it in the first place!

-A real estate agent knows things you don’t.  When it comes to preparing the sales agreement, just what do the provisions of the agreement mean?  Is the buyer’s special request reasonable?  Have you protected yourself in the event that the buyer backs out?  Have you given yourself an exit strategy if the buyer can’t make things happen? What is your obligation to disclose information to the buyer at the time the sales contract is signed? (this is controlled by Maine law)

 TAKE SOME ADVICE FROM AN INSIDER – John Wilson, Esq. at Consumer Title says: “As a Title Attorney with over 20 years experience, I’ve participated in thousands of sales.  There’s a saying in law that “a lawyer who represents himself (herself) has a fool for a client”.  In large part I think the same may be said of someone who tries to sell his or her own home.  In my experience it’s a pleasure for all involved when a sale is guided by knowledgeable, skilled and experienced real estate agents.  It can be one of the most painful experiences one can have when buyers and sellers attempt this on their own.   So, don’t do your own fillings, don’t perform your own surgery, and don’t buy or sell a house without a real estate agent.  What you need to do on your own, is find a real estate agent who is knowledgeable, skilled and experienced.  Ask everyone you know, check with your local Real Estate Board, call the local Chamber of Commerce, talk to lenders, lawyers and other people in the business and ask for a referral.”

At Consumer Title we maintain an extensive website full of information, charts and worksheets to help you make your decisions about  the whole process of buying or selling a home. Check out www.ctmaine.com

Filed Under: Home Buying, Home Selling, Real Estate Investing

The Flawed Home Price Index Shows Home Values Up 0.8 Percent

July 9, 2010 By Leave a Comment

Monthly change in Home Price Index from April 2007 peak

Last week, the Case-Shiller Index reported home values up 0.8 percent across 20 tracked markets. The public-sector Federal Housing Finance Agency has reached a similar conclusion.

Reporting on a two-month lag, the government’s Home Price Index shows home values up 0.8 percent in April, buoyed by the expiring federal home buyer tax credit and low mortgage rates.  It’s a positive signal for a recovering housing market — in Houlton and everywhere else.

But just because the Home Price Index says home values are rising, that doesn’t mean they are. The Home Price Index methodology is flawed on multiple fronts.

First, the Home Price Index reports on a 60-day delay. This two-month lag turns the HPI a trailing indicator for the housing market instead of a forward-looking one. If you’re a home buyer looking for direction, HPI won’t give it to you — you’ll have to get that analysis from your real estate agent.

Second, HPI only accounts for home values in which the home’s attached mortgage is backed by Fannie Mae or Freddie Mac.  As the FHA market share grows, fewer homes get included in the HPI sample set, and HPI values may be skewed high or low.

And, third, HPI doesn’t account for new home sales — only repeat ones.  This, too, eliminates a major segment of the market.

All of that said, though, the Home Price Index remains important to housing.  It’s still the most comprehensive home valuation model in print and it’s been giving strong readings since the start of year.  You can’t ignore that on any level.

It’s July and you may have missed the “rock bottom” home prices from earlier in the year, but homes are still relatively inexpensive. Couple that with all-time low mortgage rates and home affordability looks excellent. Consider making an offer while the terms are right.

Filed Under: Mortgage & Finance Tagged With: , ,

Household Finances : Which Bills Should I Pay First?

July 8, 2010 By Leave a Comment

Morning television can be “light”, but as far as personal finance interviews go, this Suze Orman segment from The Today Show is loaded with practical financial planning advice.

Titled “What Should You Do First?”, Ms. Orman addressed the real-life, money management conundrums households face, such as:

  • Should I pay off credit card bills, or create an emergency cash fund?
  • Should I pay off student loan debt, or pay off credit card bills?
  • Should I save for a child’s college tuition, or save for my retirement?

In 5 minutes, the segment covers a half-dozen scenarios like the ones above, explaining what to do, and why to do it.

Ms. Orman’s style may not interest you and financial advice is rarely universal, but the piece is worth watching.

Watch the clip on the NBC website.

Filed Under: Mortgage & Finance Tagged With:
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