Author Archives: joeglez

A Mortgage Rate Strategy Ahead Of Friday’s Jobs Report

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Estimated NFP results September 2009

Mortgage rates are prepped to make big moves in the next 36 hours. Is it time for you to call in your rate lock?

Friday, at 8:30 AM ET, the Bureau of Labor Statistics will release the Non-Farm Payrolls report for September. Issued monthly, the “jobs report” offers sector-by-sector job creation figures from the month prior, and reports on the national Unemployment Rate.

Last month, exactly zero net new jobs were created, the government said. This month, economists expect a net 60,000 new jobs created.

Depending on where the actual monthly figure falls, FHA and conforming mortgage rates in King of Prussia may be volatile. The jobs reports tends to have out-sized influence on the mortgage bond market.

The connection between the jobs market and the mortgage market is fairly straight-forward. As jobs go, so goes the economy. This is because more working Americans leads to a stronger economic base.

  1. When more people work, consumer spending grows
  2. When more people work, governments collect more taxes
  3. When more people work, household savings increases

Each of these items are strengths to a recovering economy.

For rate shoppers, Friday’s job report could cause mortgage rates to rise — or fall. If the actual number of jobs created exceeded the 60,000 consensus estimate, look for mortgage rates to climb.

Conversely, if new jobs fell short of 60,000, expect that rates will drop.

Home affordability is at all-time highs because mortgage rates are at all-time lows. If you’re under contract for a home or looking to refinance, eliminate some of your interest rate risk. Lock ahead of Friday’s Non-Farm Payrolls release.

Get your rate lock in today.

Home Values Rose For the 4th Straight Month

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Home Price Index from April 2007 peak

The government is confirming what the private sector has already shown —  home values are on the rise.

The Federal Home Finance Agency’s Home Price Index shows home values rose 0.8% in July.

July marks the fourth straight month that home values climbed and the FHFA’s Home Price Index is the latest in a series of “rising home values” reports — an encouraging trend for buyers and sellers in Phoenixville and nationwide.

Last week, the S&P Case-Shiller Index showed home value up nearly 1 percent in July. CoreLogic reached a similar conclusion.

Nationwide, values are back to their highest levels since November 2010. Clearly, the housing market in Pennsylvania is moving in the right direction. Or is it?

Although the data from the government and from private firms such as CoreLogic is encouraging, it’s also flawed. As such, we have to be careful about the conclusions we draw from the data.

The flaws of Home Price Index are glaring :

  1. Only homes backed by Fannie Mae or Freddie Mac are included in the index. In today’s market, because of the FHA’s popularity, that leaves 1 of 3 homes “uncounted”.
  2. Only home resales are counted. New home sales are omitted entirely.
  3. The data comes with a 60-day delay. The October market is different from July’s.

Despite these shortcomings, however, the Home Price Index remains relevant. It’s among the most through home valuation models and it’s often used by economists and policy-makers.

When the Home Price Index is rising, Wall Street and Capitol Hill take notice. For residents of “Main Street”, however, the data may not be as important. To get local, up-to-date market statistics , talk with a professional real estate agent.

Since peaking in April 2007, the FHFA’s Home Price Index is off 17.6 percent.

Conforming Loan Limits Drop In High-Cost Areas

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Conforming Loan Limits lowered in 2011

For homeowners in high-cost areas nationwide, conforming and FHA loan limits have dropped by as much as 14 percent.

Effective October 1, 2011, the temporary mortgage loan limits that allowed for non-jumbo loan sizes of up to $729,750 are no longer.

$729,750 is above the “normal” loan limit of $417,000.

The elevated limits were put in place in 2008 as the economy and financial sector entered its crisis. At the time, there was little private money to serve buyers and would-be refinancers whose loan sizes exceeded Fannie Mae and Freddie Mac’s maximum $417,000 loan limits.

For most people whose loan sizes exceeded that threshold, mortgage financing was unavailable. There were no lenders to back the loan size.

This was of particular importance in places such as New York City, Los Angeles and Washington, D.C. where home prices routinely top $1 million. For people in these areas, unless they had a downpayment that could lower their respective loan sizes to $417,000 or lower, mortgages were mostly unavailable.

Congress recognized this and, as a result, gave Fannie Mae and Freddie Mac temportary authorization to purchase and securitize home loans of up to $729,750 in value, depending on where the subject property was located.

The program helped housing, leading Congress to pass more permanent, location-specific loan limits. Later that same year, Congress passed the Housing and Recovery Act of 2009 which, in part, made high-cost loan limit pricing permanent, albeit at $625,500.

The $729,750 temporary limits expired Friday, September 30, 2011. Today, the maximum allowable conforming loan size is $625,500.

If you live in a high-cost area, therefore, take note. Mortgage rates may be low, but the amount of loan for which you qualify may be less than you expect, and you may find yourself ineligible.

The complete list of high-cost areas is available online.

I would like to buy a home but I think my credit is bad….

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While credit guidelines have tighten up quite a bit in recent years, there are many programs to help first time homebuyer’s purchase their home. One frequent question I run into is: “what if my credit is bad?”

My response: what is bad? There are differing levels of bad perceived bad. There are the following:

    • Your credit is fine – this normally is the accountant/bookkeeper (love that word & its 3 double vowels) that paid a credit 1 day after the grace period & thinks they’re condemned to credit hell for an eternity. Don’t let your OCD stop you from applying for a mortgage. Find out before you decide to never attempt to purchase a home.
    • Your credit needs some work but you still qualify – this person has sufficient good accounts but had an unpaid hospital bill, utility bill or a minor 30 day late with the last year. No worries you will still qualify.
    • Your credit needs work: You lost your job, had a few rough spots but you’re back on your way. I’ll tell you what accounts are there & which you need to clean up.
    • Your credit makes my eyes burn – You’ve run into some serious credit issues that may will take time to correct however don’t worry. I’ll recommend you to a reputable credit counselor who can help you make the necessary corrections.

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  • Your credit makes me scream Daaaaamn! – In this instance if I added your 3 credit scores together they still wouldn’t equal an acceptable score. No worries I only ever found 1 person like this in 15 years. This client lead deliberately avoided paying everyone & everything as long as they can remember because they simply didn’t give a (see side picture). In this case, stick to renting because you don’t deserve a home. You’ll even default on your rent. When you start to CARE, call me & I’ll be happy to help.

 

No matter what your plight, get your credit checked….except for daaaamn credit type people. Please only call me when you decide to care about your future & I am willing to help.

Programs such as PFHA understand that it’s not a perfect world but people are trying. The rates are slightly higher at the moment but still competitive. The bottom line is that you can qualify & start building real equity for yourself & your family.

For those who have hit rough times but DESIRE to get back on their feet, it may be a long & sometimes challenging road. If you have too many accounts & there’s no way you can ever pay them off, a Chapter 7 bankruptcy may be your best option. I would be happy to recommend an attorney. But again, get your credit checked first. It may be not as bad as you think. Always remember that anything worthwhile in life you have to work for.

Joe Gonzalez

What’s Ahead For Mortgage Rates This Week : October 3, 2011

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Jobs report due this weekMortgage markets deteriorated last week as optimism for a Greek rescue package increased, and as U.S. consumers showed that, despite falling income levels, spending will not be slowed.

As reported by the government, household income dropped in August, falling 0.1 percent and marking the first monthly dip since 2009. Yet, consumer spending still rose, tacking on 0.1 percent. Consumer spending accounts for 70 percent of the U.S. economy.

In addition, last week Eurozone leaders approved a funding increase for the European “bailout fund”. The additional funding raises the probability that Greece will avoid default on its sovereign debt, and that other nations including Italy, Spain, Ireland and Portugal will avoid similar default scenarios.

The moves drew money away from mortgage markets, causing rates to rise.

Conforming mortgage rates in Pennsylvania climbed last week, stymying would-be refinancers in search of the lowest mortgage rates in 60 years. Nationally, fixed rate mortgages were higher by as much as 0.25%.

This week, rates may continue climbing.

First, European leaders are expected to finalize the details of a Greek aid package, a move that would reverse the “safe haven” bid which has played a large role in keeping U.S. mortgage rates lows.

Second, the jobs report is due.

Economists are expecting 65,000 net new jobs in September and a slight increase in the Unemployment Rate. A deviation from either consensus expectation should cause mortgage rates to move. 

If it’s shown that more than 65,000 jobs were created last month, mortgage rates should rise on the prospect of a recovering economy. To the contrary, though, if it’s shown that fewer than 65,000 jobs were created, mortgage rates should fall.

The jobs report will be released Friday morning, 8:30 AM ET.

If you’re shopping for a mortgage right now, be aware that rates could move in either direction, but there’s a lot more room for rates to rise than to fall. The “safe” course of action is to lock a rate today.