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What’s Ahead For Mortgage Rates This Week – February 6, 2023

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What's Ahead For Mortgage Rates This Week - February 6, 2023Last week’s economic reporting included readings on home price growth from S&P Case-Shiller and the Federal Housing Finance Administration. Monthly reports on job growth and unemployment were released by the federal government and ADP. Weekly readings on mortgage rates and jobless claims were also released.

S&P Case-Shiller HPI: Home Prices Drop in November

S&P Case-Shiller Home Price Indices revealed that U.S. home prices fell for the fifth consecutive month in November. The National Home Price Index fell by -3.1 percent year over year in November as compared to a positive reading of 2.8 percent home price growth in October. Miami, Florida, Tampa, Florida, and Atlanta, Georgia held the top three places in the 20-City Home Price Index. Detroit, Michigan was the only city to post a positive reading for home price growth in November’s 20-City Home Price Index.

The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, reported that prices of homes owned or financed by the two government-sponsored enterprises fell by 0.10 percent in November. Analysts expect that home prices will continue to fall in the coming months.

Mortgage Rates and Jobless Claims

Average fixed mortgage rates fell last week. Freddie Mac reported that the rate for 30-year fixed-rate mortgages fell by four basis points to 6.09 percent. Rates for 15-year fixed-rate mortgages fell by three basis points to 5.14 percent.

183,000 first-time jobless claims were filed as compared to the expected reading of 195,000 new jobless claims and the previous week’s reading of 186,000 first-time jobless claims filed. 1.66 million continuing jobless claims were filed as compared to the previous week’s reading of 1.67 million ongoing jobless claims filed.

Public and Private Sector Job Growth

The federal government’s Non-Farm payrolls report for January posted 517,000 jobs added as compared to the expected reading of 187,000 jobs added and December’s reading of 260,000 jobs added.ADP reported 106,000 private-sector jobs added in January as compared to expectations of 190,000 jobs added and December’s reading of 253,000 private-sector jobs added.

The national unemployment rate for January was 3.4 percent; analysts expected an unemployment rate of 3.6 percent and December’s unemployment rate was 3.5 percent. 

What’s Ahead

This week’s scheduled economic news includes readings on consumer sentiment, inflation, and weekly readings on mortgage rates and jobless claims.

3 Tips To Consider When Buying A Home With An FHA Mortgage

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Tips to Sidestep Common FHA Loan Problems

FHA loans are becoming increasingly popular these days as potential homeowners may not able to qualify as easily for conventional mortgages.

The FHA insures some higher-risk loans, in turn allowing borrowers with low down payments and less than perfect credit to purchase homes and bolster the housing market.

However, while getting through the loan process with an FHA mortgage loan is not necessarily more difficult than with a conventional or conforming loan, there are some issues that you will want to be aware of.

Property Condition

You can’t buy just any property with a FHA loan, or any other loan for that matter. All lenders are concerned with the condition of a property, especially as it relates to livability and safety. 

Major deficiencies in a home will almost always be noted when the home is seen by the FHA appraiser. The appraiser must deem it to be livable, without any conditions that could jeopardize health or safety. 

Sometimes you can get the seller to make the needed repairs to pass the lender requirements. In other cases, you may want go an alternate route. The FHA 203K streamline loan allows you to borrow up to $35,000 for home repairs to bring the house up to code.

Low Appraisal

The primary role of the appraiser is to estimate it’s market value. These estimates are based on the property’s features and a comparison to similar properties that have sold recently. If the appraisal is low, the loan funding could fall through because the FHA underwriting guidelines (along with almost all conventional guidelines) will not let you borrow more than the home’s appraised value. You can, however, add to the amount you bring in to closing if you prefer to compensate for a low appraised value.

Rather than trying to scrape together a bigger down payment, you may want to take the information to the seller to renegotiate the purchase price. The seller will likely recognize that other buyers would be in the same boat, leading the seller to agree to a lower purchase price.

High Debt-to-Income Ratio

Debt to income ratios are a concern with virtually every type of mortgage loan on the market today. Your FHA loan may encounter a snag in the underwriting process if your total debt payments, including your new mortgage, would be a high percentage of your income.

FHA has an automated underwriting program called TOTAL Scorecard which uses an algorithm to determine a borrower’s qualification. The process is quick, and often you can make up for a high debt-to-income ratio with other compensating factors, like a larger down payment or a cash reserve of several months of mortgage payments.

If you have any questions regarding FHA loans or any other home financing questions, please give us a call!

S&P Case-Shiller Home Price Indices: Home Prices Fall In November

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S&P Case-Shiller Home Price Indices: Home Prices Fall In NovemberU.S. home prices continued to fall in November according to S&P Case-Shiller’s month-to-month national and 20-city home price indices, but home price growth rates remained in positive territory year-over-year. The national home price index posted a  7.70 percent year-over-year home price growth rate as of November 2022.

20-city home price index posts 5th consecutive month-to-month decrease in November

The S&P Case-Shiller 20-city home price index for November reported that the top three cities for home price growth were Miami, Florida with a year-over-year home price growth rate of 18.4 percent; Tampa, Florida followed with a  year-over-year home price growth rate of 16.9 percent. Atlanta Georgia reported a  12.7 percent growth rate for year-over-year home prices.

Home prices tracked in the 20-city home price index rose at a 6.8 percent year-over-year- pace in November as compared to year-over-year home price growth of 8.6 percent posted in October 2022. 19 of 20 cities included in the S&P Case-Shiller  20-city home price index reported lower home prices in November; only Detroit Michigan reported a gain in month-to-month home price growth.

FHFA: prices drop for homes owned or financed by Fannie Mae and Freddie Mac

In related news, the Federal Housing Finance Agency, which oversees government-sponsored mortgage enterprises  Fannie Mae and Freddie Mac, reported that home prices for homes financed or owned by Fannie Mae and Freddie Mac dropped by 0.10 percent month-to-month and rose by 8.2 percent year-over-year.

Nataliya Polkovnichenko, Ph.D. and Supervisory Economist in the FHFA’s Division of Research and Statistics, said:  “ U.S. house prices were largely unchanged in the last four months and remained near the peak levels reached over the summer of 2022. While higher mortgage rates have suppressed demand for homes, low inventories of houses for sale have helped maintain relatively flat house prices.”

Changes in seasonally adjusted home price changes ranged across the nine Census Divisions from -1.1 percent in the Pacific Division to +0.5 percent in the West North Central Division.  Year-over-year home price gains ranged from  +2.4 percent in the Pacific Division to +12.0 percent in the South Atlantic Division.”

Data included in the FHFA House Price Index are gathered from reports on single-family home prices ranging from the 1970s to the present and include single-family home transactions in all 50 states and more than 400 U.S. cities.

Is It Worth It to Put More Than 20 Percent Down?

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Down Payments 101: Is It Worth It to Put More Than 20 Percent Down?Are you thinking of buying a new home this spring or summer? If so, you’re not alone. Many thousands of individuals and families alike will become homeowners this year. Whether you’re a first-time buyer or a seasoned veteran of the housing market, you probably know there are significant choices to make. One of the big decisions you will have to ponder is how much you want to invest in your down payment.

With that in mind, let’s try to answer the question of whether or not it is worth it to put more than 20 percent of the home’s price in your down payment.

Ask Yourself: How Liquid Are You?

Before you can decide how much to put down, you first need to determine how liquid your finances are. That is, how much cash do you have access to? For example, if you are considering a $300,000 home, a 20 percent down payment is $60,000. If you have more than $60,000, fantastic. However, if you have less than that, you might have to do a bit of work to save up the remainder.

Even if you do have enough available cash now, you won’t have access to it once you take possession of the home. It is important to leave yourself with some cash in case of emergencies or for other uses.

Higher Down Payment, Lower Interest Rate

If you do choose to invest more than 20 percent in your down payment, it’s possible that you will gain access to a lower interest rate for your mortgage. Many lenders look favorably on homebuyers that are investing more of their own money and borrowing less. Be sure to check with your mortgage advisor to find out if you qualify for lower rates.

Lower Monthly Payments Await

Finally, choosing a down payment higher than 20 percent means that you will have lower monthly mortgage payments in the future. You are borrowing less so you will owe less. This can provide a nice boost to your monthly budget moving forward as you will have more free cash flow each month.

Try to keep in mind that there is no perfect answer to the question of how big your down payment should be. Choosing the best course of action means taking a good, long look at your current financial situation and deciding what your goals are. When you’re ready to discuss buying a new home contact us. Our professional mortgage team is happy to share our experience!

What You Need To Know About A Closed-End Second Mortgage

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What You Need To Know About A Closed-End Second Mortgage

A home is probably one of the most expensive purchases you will ever make. It is important for you to understand all of the options available to you, particularly if you need a quick source of cash, and you might be thinking about taking out a second mortgage. You can use a closed-end second mortgage to cover the cost of repairs, medical debt, and even consolidate your other sources of debt. How do you know if this option is right for you?

An Overview Of A Closed-End Second Mortgage

If you decide to take out a second mortgage, you will typically withdraw the cash you need. Then, if you need more cash in the future, you can take out more down the road. In contrast, with a closed-end second mortgage, you will receive the entire loan amount upfront. Then, you will not be able to withdraw any additional cash if you need more because you have already withdrawn the maximum limit. Generally, you can withdraw up to 80 percent of your home’s equity value, but there are many factors that will dictate your limit.

The Pros

Before deciding whether this is the right option for you, you must weigh the benefits and drawbacks. The biggest benefit is that it gives you access to a quick, large, lump sum payment. You can use this to cover home renovations and pay off debt. You also get access to a fixed interest rate. Unlike other options, you don’t have to worry about the interest rate changing.

The Cons

On the other hand, there are some drawbacks you might notice. You have to use your home as collateral, so you risk losing your home if you can’t meet the payments. In addition, you will probably incur higher closing expenses, and you may have to pay a higher interest rate. This is particularly true if you are taking out a large amount of money.

Weigh Your Options Carefully Before Deciding On A Second Mortgage

If you are looking for a second mortgage, you need to think about all of your options carefully before you decide which one is right for your needs. Consider reaching out to an expert who can help you.

What’s Ahead For Mortgage Rates This Week – January 30, 2023

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What's Ahead For Mortgage Rates This Week - January 30, 2023Last week’s economic reporting included readings on new and pending home sales, inflation, and consumer sentiment. Weekly readings on mortgage rates and jobless claims were also released.

New home sales increase in December

The Commerce Department reported new home sales rose to a seasonally-adjusted annual pace of 616,000 sales in December as compared to the expected pace of 615,000  new homes sales and November’s revised reading of 602,000 annual sales. December was the third consecutive month that the pace of new home sales rose, but new home sales remained well below the 1.04 million sales peak reported in August 2020.

Pending home sales rose by 2.5 percent in December, which outpaced expectations of a one percent decrease in pending sales and November’s seasonally-adjusted annual decrease of  -2.6 percent in pending home sales. New home sales are 26.6 percent lower than they were one year ago.

Month-to-month inflation slows in December

The Commerce Department reported that month-to-month inflation rose by 0.1 percent in  December, which matched November’s month-to-month reading. Core inflation rose by 0.1 percent in December to 0.3 percent and matched analyst expectations. Core inflation readings exclude volatile food and fuel sectors that comprise major expenses for many U.S. households.

Year-over-year inflation rose by 5.0 percent in December as compared to November’s pace of 5.5 percent. Core inflation rose  4.4 percent in December, which matched analyst expectations, but fell short of November’s year-over-year reading of 4.7 percent for core inflation.

Mortgage rates, initial jobless claims fall

Freddie Mac reported lower average mortgage rates last week as the rate for 30-year fixed-rate mortgages fell by two basis points to 6.13 percent. The average rate for 15-year fixed-rate mortgages fell by 11 basis points to 5.17 percent.

First-time jobless claims fell to 186,000 filings as compared to the expected reading of 205,000 initial jobless claims and the previous week’s reading of 192,000 new jobless claims filed. Continuing jobless claims rose to 1.68 million ongoing claims as compared to the previous week’s reading of 1.66 million continuing jobless claims filed.

Consumer sentiment strengthens in January

The University of Michigan’s Consumer Sentiment Index rose to an index reading of 64.9 in January, which surpassed the expected reading of 64.6 and December’s final index reading of 64.6. Readings over 50 indicate that a majority of consumers surveyed have a positive outlook on the economy. Falling gasoline prices contributed to an improved consumer outlook, but grocery prices remained high.

What’s ahead

This week’s scheduled economic reporting includes readings on U.S. home prices, The Federal Reserve’s Federal Open Market Committee meeting, and Fed Chair Jerome Powell’s scheduled press conference. Labor-sector reports on job growth and the national unemployment rate will also be released.

Getting A Mortgage When Self-Employed: What You Need To Know

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getting-a-mortgage-when-self-employed-what-you-need-to-knowThere is a common misconception that someone who is self-employed will not have the tax records or income necessary to qualify for a mortgage; however, that is not necessarily the case. In reality, if you are self-employed, there are a lot of home loan options available to you. It is true that it might require some additional paperwork and planning, but as long as you have the necessary information, you should be able to qualify for a mortgage. 

What Is Necessary To Qualify For A Self-Employed Mortgage Loan?

If you are interested in taking out a mortgage when you are self-employed, you will be held to the same standards as everyone else. This means that the lender is going to require a solid credit score, a long credit history, a favorable debt-to-income ratio, and enough money to cover the down payment. In addition, you will also have to demonstrate a solid income history, just like everybody else. 

That is where the difference comes into play. A W-2 employee may be able to provide a few pay stubs, but someone who is self-employed may be required to provide up to two years of self-employment income. 

How Do I Maximize My Chances Of Getting Approved?

If you are self-employed and want to maximize your chances of getting approved for a self-employed mortgage, there are a few steps you should take. First, you need to make sure your debt-to-income ratio is as low as possible. That way, you can reduce the risk to the lender. You can also improve your chances by preparing financial documents ahead of time. That might mean including profit and loss statements, two years of tax returns, and 2 years of business taxes if you have them. Do not forget that improving your credit score and putting more money down can improve your chances of getting approved. 

Lengthen Your Income History

Finally, if you are serious about getting approved, lengthen your income history. Show that you are willing to provide a longer track record of income, and the bank will feel better about providing you with a self-employed mortgage loan. That way, you have the financing to purchase the house of your dreams. 

 

On Time, Every Time: How Being Late on Monthly Payments Can Affect Your Mortgage

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On Time, Every Time: How Being Late on Monthly Payments Can Affect Your MortgageAre you the type of person that struggles with remembering to pay their bills on time? You’re not alone. People across the country regularly submit late monthly payments, inflicting terrible damage to their credit. Let’s take a quick look at how paying your loan or other monthly payments late can have a negative impact on your mortgage.

Your Credit Score Is At Risk

As you already know, almost all banks, credit cards, mortgage companies and other lenders rely on your credit score to help assess the risk of lending money to you. Paying any of your payments late – even something as small as your mobile phone bill or a department store credit card – can result in negative marks showing up on your credit report. If you are late enough times or fail to repay the late payment in full, then your score will start to drop.

Refinancing Can Be Affected

If you already have a mortgage, then a lower credit score can be a problem when you try to refinance. The process of refinancing involves taking out a new mortgage, in which your lender will reassess your risk using your credit score as one of the indicators. If you have been making late payments, you might end up having to settle for a higher interest rate or you may even be declined for the new mortgage.

Making A Late Payment? Contact Your Lender

If you are caught in a bind and have to make a late payment, it is best to get a call in to your lender as soon as possible. First, there may be a grace period in which you can be a few days late without any penalty. If that little bit of breathing room is all you need to get caught up, you’re set. If not, you can let them know your circumstances and discuss what options you have.

It is essential to pay your monthly payments on time, even if it means making some small sacrifices in other areas. The better your credit score looks, the more opportunities you will have to make positive financial moves in the future. To learn more about monthly mortgage payments or to take out a mortgage on a new home, contact us today. Our team of mortgage professionals is here to help you find a mortgage to buy the home of your dreams.

What Is A Loan Contingency: An Overview

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What Is A Loan Contingency: An OverviewIf you are in the process of looking for a new home, you need to find the right one to meet your needs. Sometimes, you want to learn more about specific properties before you decide if it is right for you. As a result, a lot of prospective buyers will include contingencies in their home offers that may allow them to back out without losing their earnest money. What are a few examples of loan contingencies, and how can you use them to protect yourself during the process? 

Examples Of Common Loan Contingencies

Even if you have agreed on a purchase price for the house, the closing date is probably not going to be for one or two months. This will provide you with time to complete your due diligence and make sure no issues come up. For example, there may be a contingency that allows the closing date to be extended if there are any issues with the financing process through the lender. 

You might also decide to include a contingency clause in case something develops with the home inspection. If something is wrong with the home inspection, you may provide yourself with an opportunity to pull out of the deal without losing your earnest money. 

How A Loan Contingency Clause Protects The Buyer

It is important for buyers to work with real estate agents who understand how loan contingencies work because this is an important protective measure. A contingency clause can protect the buyer because it provides the buyer with a way to back out of the contract without losing his or her earnest money. 

Typically, if the buyer backs out of the contract, he or she will lose his or her earnest money; however, if the buyer backs out for a reason that is protected by the contingency clause, then his or her earnest money might be protected. 

Some Buyers Waive Their Loan Contingency

If the housing market is particularly competitive, and you know you are going to purchase the house no matter what, then you might want to waive your loan contingency as a way to strengthen your offer. On the other hand, keep in mind that waving your loan contingency means sacrificing this important layer of protection. 

 

What’s Ahead For Mortgage Rates This Week – January 23, 2023

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What's Ahead For Mortgage Rates This Week - January 23, 2023

Last week’s economic reporting included readings from the National Association of Home Builders on U.S. housing markets, and Commerce Department data on housing starts and building permits issued. The National Association of Realtors® reported sales of previously owned homes, and weekly readings on mortgage rates and jobless claims were also released.

NAHB: Homebuilder Sentiment Rises in December

The National Association of Home Builders reported increased homebuilder confidence in U.S. housing market conditions in December; this was the first time in 12 months that homebuilder confidence rose. Builder confidence in current housing market conditions rose by four points; builder confidence in home sales conditions over the next six months increased by two points. Builder confidence in prospective buyer traffic in new housing developments rose by three points.

Jerry Konter, a Georgia home builder and chairman of NAHB, said: “It appears that the low point for building sent in this cycle was registered in December, even as many builders continue to use a variety of incentives including price reductions to bolster sales.  The rise in builder sentiment also means that cycle lows for permits and starts are likely near, and a rebound for homebuilding could be underway later in 2023.”

Robert Dietz, the NAHB’s chief economist, predicted that single-family home building will increase as mortgage rates are expected to trend lower and boost housing affordability. Mr. Dietz said, “Improved housing affordability will increase housing demand as the nation grapples with a structural housing deficit of 1.5 million units.”

Mortgage Rates, New Jobless Claims Fall

Freddie Mac reported lower mortgage rates last week as the average rate for 30-year fixed-rate mortgages fell by 18 basis points to 6.15 percent. Rates for 15-year fixed-rate mortgages averaged 5.28 percent and were 24 basis points lower on average.

First-time jobless claims fell to 190,000 claims filed as compared to expectations of 215,000 initial claims filed and the previous week’s reading of 205,000 new jobless claims filed. Ongoing jobless claims increased to 1.65 million claims filed compared to the previous week’s reading of 1.63 million continuing jobless claims.

What’s Ahead

This week’s scheduled economic reporting includes readings on new and pending home sales, consumer sentiment, and predictions on inflation. Weekly readings on mortgage rates and jobless claims will also be published.