What’s Ahead For Mortgage Rates This Week – August 29, 2016

Last week’s economic reports included readings on new and existing home sales, a speech by Fed Chair Janet Yellen, and a report on consumer sentiment. Weekly reports on mortgage rates and new jobless claims were also released.

New Home Sales Rise in July as Pre-Owned Home Sales Fall

Sales of new homes jumped in July to a seasonally-adjusted annual rate of 654,000 sales, which surpassed expectations of 579,000 sales and June’s downwardly-revised reading of 582,000 sales. This was the highest reading for new home sales since 2008 and represented a 31.30 percent increase since July 2015.

Builders were seen by analysts as addressing the need for more affordable homes; this trend contributes to a healthy housing market by supplying homes for a wider range of buyers. First-time buyers play a vital part in housing markets as their purchases enable current homeowners to buy larger homes or relocate.

Sales of pre-owned homes fell 3.20 percent to a seasonally-adjusted annual rate of 5.39 million sales as compared to expectations of 5.59 million sales and June’s reading of 5.57 million sales. Year-over-year, sales were 1.60 percent lower. Limited inventories of available pre-owned homes have narrowed buyer options; increasing prices and narrow choices were seen as factors contributing to lower sales. There was a 4.60 month supply of available homes in July. Real estate pros typically consider a six months a normal reading for homes on the market.

Lawrence Yun, chief economist for the National Association of Realtors®, noted that a slowdown in home appraisals may have contributed to July’s lower sales reading for pre-owned homes. Low mortgage rates prompted a surge in refinancing which created a backlog in home appraisals. While low mortgage rates may entice home buyers, stricter mortgage requirements can also keep prospective buyers at bay.

Federal Reserve Chair Janet Yellen indicated that the stage could be set for a federal rate increase as early as next month. If the Fed hikes its target federal funds rate, interest rates for consumer credit and mortgages can be expected to rise.

Mortgage Rates Hold Steady; New Jobless Claims Fall

Freddie Mac reported that fixed mortgage rates for 30 and 15-year loans were unchanged at 3.43 and 2.74 percent respectively. The average rate for a 5/1 adjustable-rate mortgage was one basis point lower at 2.75 percent. Discount points averaged 0.60, 0.50 and 0.40 percent.

New jobless claims were lower last week. 261,000 new jobless claims were filed against expectations of 264,000 new claims and the prior week’s reading of 262,000 new claims filed. Declining jobless claims can indicate strengthening labor markets, but can also indicate that workers are leaving the labor markets.

Consumer sentiment declined slightly in August due to concerns over the upcoming presidential election. Analysts expected a reading of 91.0 for August, but the reading for August was revised from 90.4 to 89.80.

What’s Ahead

Next week’s scheduled economic news includes reports on pending home sales, inflation, construction spending and consumer confidence. National unemployment, non-farm payrolls and ADP payrolls are also scheduled.

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The Type of Home You Want to Buy Determines Your Closing Cost and Here’s Why

Savvy home buyers who are preparing to make a real estate purchase should do their research and understand that they need to save money for not only the down payment but the closing costs as well. The closing costs can account for as much as three to five percent of the sales price in some cases, so this can be a rather sizable amount of money. Some home buyers however, may not realize that the amount of closing costs can vary considerably based on the home that is purchased. With a closer look at why this is, home buyers can make a more educated decision when selecting a home to purchase.

Prepaid Taxes And Insurance

One of the most significant closing costs relates to prepaid taxes and insurance, and both of these expenses are directly tied to the location and value of the property. Consider that the property tax rate can vary based on the city, county, and state. Real estate insurance can also vary based on the type of construction of the home if the home is located in a flood plain and other factors. These are only a few examples of how the location and property type can impact these fees, and home buyers should consider the costs associated with the tax rates and insurance when selecting a property to purchase.

Third Party Reports

There are several third party reports that are commonly paid for at closing, and these include an appraisal, a survey, a pest inspection and a property inspection. The third party reports may vary in cost based on the size of the home, the amount of land that is being purchased, and even the condition of the property. Those who want to keep their closing costs lower may consider learning more about how these fees are calculated up-front before finalizing their plans to buy a specific home.

Title Insurance Fees

Title insurance fees are another typically sizable expense for home buyers, and this insurance offers protection to the lender if the title is not clean. Title insurance can increase based on the size of the property as well as different factors that are revealed with a title search. This information can be difficult to learn with an initial home search, but home buyers should be aware that title defects can increase closing costs.

The location, size, age and construction of a property all impact the closing costs. Those who are shopping for real estate may be inclined to make a decision that keeps closing costs down, and they can reach out to their knowledgeable mortgage professional for more assistance with their particular situation.

What’s Ahead For Mortgage Rates This Week – August 22, 2016

Last week’s economic news included the NAHB Housing Market Index, Commerce Department releases on housing starts and building permits issued. Weekly reports on mortgage rates and new jobless claims were also released.

Shortages of available single-family homes have driven up home prices and increased competition among homebuyers; short inventories of homes for sale are affecting affordability in many areas, although buyers seem motivated by lower mortgage rates and some easing of mortgage requirements. Analysts have repeatedly said that the only solution to the shortage of homes is building more homes.

Fortunately, the National Association of Home Builders reported that builder sentiment concerning U.S. housing markets increased in August. The HMI moved up to a reading of 60 in August as compared to July’s reading of 58. Readings over 50 indicate that a majority of builders surveyed are confident about housing market conditions.

According to NAHB, home builders continued to face obstacles including shortages of buildable lots and skilled labor. Regulatory issues were also cited by some builders, but overall, builders remain optimistic about housing market conditions.

Housing Starts Up, Building Permits Issued Slip in July

Commerce Department reading s on housing starts and building permits issued were mixed; housing starts rose from July’s reading of 1.186 million permits issued to 1.211 million permits issued in August. July’s reading was the second highest since the recession but was driven by multi-family construction. Building permits were lower in August with a reading of 1.152 million permits issued against July’s reading of 1.153 million permits issued.

Analysts said that under present market conditions, there is little reason for homebuilders to increase single-family home production as current pricing has put many would-be buyers on the sidelines.

Mortgage Rates Mixed, New Jobless Claims Lower

Freddie Mac reported that average rates for 30-year and 15-year fixed rate mortgages dropped last week while the average rate for 5/1 adjustable rate mortgages rose. The average rate for a 30 year fixed rate mortgage was 3.43 percent and the average rate for a 15-year fixed rate mortgage was 2.74 percent; both readings were two basis points lower than for the prior week. The average rate for a 5/1 adjustable-rate mortgage was two basis points higher at 2.76 percent. Average discount points held steady for fixed rate mortgages at 0.50 percent; average discount points for 5/1 adjustable rate mortgages were lower at 0.40 percent.

New Jobless claims fell by 4000 claims to 262,000 new claims, which was lower than analyst expectations of 265,000 new claims and the prior week’s reading of 266,000 new claims. Job security is important to home buyers and signs of strong labor markets can help propel would-be buyers into the market,

Whats Ahead

This week’s scheduled economic news includes releases on new and existing home sales and consumer sentiment. Weekly reports on mortgage rates and new jobless claims will be released on schedule.

Video: What Is “Prime”?

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What Is “Prime”?

The Prime Lending Rate – sometimes just called “Prime”  – is the interest rate that banks charge each other for overnight loans. Some consumer rates – like ARMs – are set in relation to Prime.

In the US, Prime is affected by the Federal Reserve lending rate to banks; historically, Prime is about 3 percent above the Fed rate.

The video shows  an example.

  • The Federal Reserve loans to Bank A at 1%
  • Bank A loans to Bank B at 4%
  • Both banks – A & B – will recalculate variable-rate loans like ARMs on that 4% Prime figure.

ARM rates are frequently defined as “% above Prime” – that gap is usually called the “margin” or “spread.” Just remember those 3 layers in Prime: Federal Reserve Bank A Bank B And finally, YOUR rate.

What Is Prime

Who Is Exempt From The VA Funding Fee?

Who is NOT required to pay the VA funding fee?

This video could save some veterans thousands. VA loan applicants pay a funding fee – as of 2014, 2.15% of the total loan amount – which can be thousands of dollars. Some veterans and spouses are eligible for exemption.

Broadly speaking, veterans who received disability benefits – current or former and who are NOT currently in debt to the government may be exempt from the funding fee. Some spouses may qualify as well.

The key thing to understand is, exemption from the funding fee is NOT automatic! Borrowers must certify their veteran status, government debt, benefits and active service state on VA Form 26-8937.

It’s important to tell your mortgage company that they need to submit this form EARLY in your home-buying process – if they just look up your records without submitting the form the VA will not begin the review and approval process and your home purchase could be delayed by weeks. Who Is Exempt From The VA Funding Fee

Video: What Steps Need To Be Taken To Secure A Loan

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What Steps Need To Be Taken To Secure A Loan

You’ll see some pictures in this video to help you remember later, but the first step in securing a loan is to complete a loan application.

To do so, you’ll need the following information.

  • Pay stubs for the past 2-3 months.
  • W-2 forms for the past 2 years.
  • Information on long-term debts.
  • Recent bank statements tax returns for the past 2 years.
  • Proof of any other income.
  • Address and description of the property you wish to buy.
  • A sales contract on the home you want to buy.

During the application process, the lender will order a report on your credit history and a professional appraisal of the property you want to purchase. The application process typically takes between 1-6 weeks.

What Steps Need To Be Taken To Secure A Loan

Video: Are There Special Mortgages For First-Time Homebuyers?

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Yes. Like the video shows, lenders now offer several affordable mortgage options which can help first-time homebuyers overcome obstacles that made purchasing a home difficult in the past.

Lenders may now be able to help borrowers who don’t have a lot of money saved for the down payment and closing costs, have no or a poor credit history, have quite a bit of long-term debt, or who have experienced income irregularities.

Video-FirstTimeMortgages

How Are Pre-Qualifying And Pre-Approval Different?

How Are Pre-Qualifying And Pre-Approval Different? Watch this video and it’ll make sense.

Pre-qualification is an informal way to see how much you maybe able to borrow. You can be ‘pre-qualified’ over the phone with no paperwork by telling a lender your income, your long-term debts and how large a down payment you can afford. Without any obligation, this helps you arrive at a ballpark figure of the amount you may have available to spend on a house.

Pre-approval is a lender’s actual commitment to lend to you. It involves assembling financial records and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.

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Assessing Your ‘Debt-to-Income Ratio’ and Why This Number Matters When Getting a Mortgage

Assessing Your Debt-to-Income Ratio and Why This Number Matters When Getting a MortgageIf you are looking to buy a home, you may want to consider shopping for a loan first. Having your financing squared away ahead of time can make it easier to be taken seriously by buyers and help move along the closing process. For those who are looking to get a mortgage soon, keep in mind that the Debt-to-Income ratio of the borrower plays a huge role in the approval of your mortgage application.

What is a Debt-to-Income Ratio?

A debt-to-income ratio is the percentage of monthly debt payments compared to the amount of gross income that a person earns each month. Your gross monthly income is typically the amount of money you earn before taxes and other deductions are taken out. If a person’s monthly gross income is $2,000 a month and they have a monthly debt payments of $1000 each month, that person would have a DTI of 50 percent. The lower the DTI the better. 43 percent is in most cases the highest DTI that potential borrowers can have and still get approved for a mortgage.

What Debt Do Lenders Look At?

The good news for borrowers is that lenders will disregard some debt when calculating a borrower’s DTI. For example, utilities, cable, phone and health insurance premium would not be considered as part of your DTI. What lenders will look at are any installment loan obligations such as auto loans or student loans as well as any revolving debt payments such as credit cards or a home equity line of credit. In some cases, a lender will disregard an installment loan debt if the loan is projected to be paid off in the next 10-12 months.

What Is Considered Income?

Almost any source of income that can be verified will be counted as income on a mortgage application. Wage income is considered as part of a borrower’s monthly qualifying income. Self-employed individuals can use their net profit as income when applying for a mortgage, however, many lenders will average income in the current year with income from previous years. In addition, those who receive alimony, investment income or money from a pension or social security should make sure and include those figures in their monthly income as well when applying for a loan.

How Much Debt Is Too Much Debt?

Many lenders prefer to only offer loans to those who have a debt-to-income ratio of 43 percent or lower. Talking to a lender prior to starting the mortgage application process may help a borrower determine if his or her chosen lender offers such leeway.

A borrower’s DTI ratio can be the biggest factor when a lender decides whether to approve a mortgage application. Those who wish to increase their odds of loan approval may decide to lower their DTI by either increasing their income or lowering their debt. This may make it easier for the lender and the underwriter to justify making a loan to the borrower.