What’s Ahead For Mortgage Rates This Week – July 9th, 2018

What’s Ahead For Mortgage Rates This Week – July 9th, 2018Last week’s economic releases included monthly readings on construction spending, public and private sector job growth and June’s national unemployment rate. Weekly readings included Freddie Mac mortgage rates and new jobless claims.

Construction Spending Rises in May

According to the Commerce, construction spending rose 0.40 percent in May; public sector construction spending rose 0.70 percent and private sector spending rose by 0.30 percent. Residential construction rose by o.80 percent, which analysts regarded as a good sign for the economy. Building more homes has long been identified as the only solution for persistent housing shortages that cause high demand for homes and rapidly rising home prices.

Analysts said that volatility and heavy revisions to government reporting, construction spending readings are subject to significant change. April’s reading of 1.90 percent growth was downwardly revised to 0.90 percent growth.

Mortgage Rates and New Jobless Claims Fall

Freddie Mac reported lower mortgage rates last week. Rates for a 30-year fixed rate mortgages were three basis points lower at an average of 4.52 percent. 15-year fixed rate mortgages averaged 3.99 percent and were five basis points lower than for the previous week. Rates for 5/1 adjustable rate mortgages averaged 3.74 percent and were 13 basis points lower than for the prior week.

First-time jobless claims fell last week to 231,000 new claims as compared to 200,000 new claims expected.and 244,000 new claims were filed in the prior week.

Unemployment ticks up as Public and Private Sector Job Growth Slows

ADP payrolls fell to 177,000 private sector jobs were added in June as compared to 189,000 jobs added in May. The Commerce Department reported 213,000 public and private sector jobs added in June, which beat expectations of 200,000 jobs added in June. 244,000 jobs were added in May.

The National unemployment grew to 4.0 percent in June as compared to May’s reading of 3.80 percent. Analysts attributed the rise in the unemployment rate to 600,000 new job seekers entering the market in June.

Whats Ahead

This week’s scheduled economic reports include readings on inflation, core inflation and consumer sentiment. Weekly readings on mortgage rates and new jobless claims will also be released.

4 Ways To Put Your Home’s Equity To Work For You

Top Uses Of A HELOCHomeowners who have equity built up in their homes can tap into that equity using a home equity line of credit, or HELOC. This financial tool can be a great way to accomplish a number of financial goals.

Here are four excellent uses of a HELOC for homeowners to consider.

Consolidating Costly Debts

Credit card debt and other types of consumer loans are costly, unless a debtor is lucky enough to have a no-interest card. Borrowers can consolidate that debt into a HELOC, which is much more affordable because it is a secured debt.

This advantage only works if the borrower stops adding to the debt problem. A HELOC becomes a valuable tool to get rid of debt quickly when used properly.

Create An Emergency Fund

Most people do not intend to end up in credit trouble, but emergencies happen. Emergency home repairs, job loss, or car repairs can quickly add up to unwanted debt.

A HELOC provides homeowners the option to have an emergency fund. Should one of these emergencies pop up, the homeowner can use the HELOC for an affordable source of funds.

Home Repairs That Add Value

Some home repairs add value to the property, but are also expensive. A HELOC can provide a source to fund these repairs. Because they put value back into the property, homeowners may be making wise use of their equity when using the HELOC in this way.

To make this work well, homeowners should choose repairs that do add to the home’s value. Since the cost of the repairs comes from the equity, the home’s owner should recoup the costs later when selling the home.

Funds For Investing

Finally, homeowners can use funds from a HELOC to get started in investment. This is risky, because the loan is paid regardless of how successful the investment is, but it can give a homeowner the chance to start investing for the first time.

Similarly, retirees can sometimes use HELOC funds to supplement retirement income if investments are struggling. This is a temporary solution to give investments a chance to recover, but for those living on a fixed income it is very helpful to have this option.

The HELOC is a valuable tool for homeowners that allows them to tap equity when it is needed. Since they have spent years building up this equity, homeowners should not fear using it when it can help with their financial goals.

Contact us to find out if a HELOC may be right for you.

Understanding the Factors That Impact Your Credit Score

Understanding the Factors That Impact Your Credit ScoreMost consumers believe if they pay their bills on time, they need not worry about their credit score. Oftentimes, it is a rude awakening when they apply for a mortgage loan, car loan, or any revolving credit to learn they are not going to get the lowest rates available due to their credit score. This is because paying bills on time only accounts for 35 percent of your credit score. The remaining 65 percent is spread out among other factors that impact your credit score.

Credit Usage and Impact on Score

Nearly one-third, 30 percent, of your credit score is based on how much of your available credit you are using. For example, if you have combined credit available of $100,000 and you use $90,000, you will suffer a decline in your credit score. Those consumers who have similar credit lines and are using $9,000 will get a slight bump in their score.

New Credit vs. Old Credit

We seldom think about how long we have held a line of credit open. However, some consumers “exchange” credit lines for other credit lines due to special offers made by credit card companies. This is not necessarily a good idea since 15 percent of your credit score is determined by the age of your credit accounts. The longer you have had an account, the better in most cases. The calculation will take all open credit accounts, take the amount of time they have been open and get an “average age”. If you have six accounts which have been open less than a year and six that have been open five years, the newer accounts will count against you in this case.

Mixing up Credit Lines

A consumer who has only a mortgage and a single credit score will take a modest hit on their credit score versus a consumer who has multiple credit cards, a mortgage, and an auto loan. The types of credit you have will account for 10 percent of your credit score and the more varied your open credit lines, the better. While it is inadvisable to open new credit lines simply to show a variety of types, having installment loans, retail credit cards, and traditional credit cards is a good idea.

New Lines of Credit Opened

One danger many consumers are unaware of is suddenly opening new lines of credit. For example, a new homeowner may open a new account with a home improvement store, a general retail store, and a new credit card to help them furnish and repair their new home. This could be a red flag since the credit lines are new, and there is no established history on the mortgage, or the new credit lines. Since this factor accounts for 10 percent of your credit score, you could suffer a temporary decline in your credit score.

Consumers should be aware of the factors which impact their credit score, and also be aware of the factors that do not impact their scores. Understanding your credit score may be the most important tool you have when buying a home, or refinancing your current mortgage.

Please contact us to discuss how your credit score may be impacting your ability to finance your next home purchase.

Understanding Your Debt To Income Ratio

Understanding Your Debt To Income RatioWhen you are filling out a mortgage application, the lender will be asking you for specific financial information. One of the reasons they ask for this information is to enable the underwriter to calculate your debt to income ratio.

The debt to income ratio is what most mortgage lenders use to determine the level of risk they are taking when they agree to provide you a mortgage. Most mortgage lenders will use your debt to income ratio to determine your interest rate, down payment requirements, and in some instances, escrow requirements.

How Lenders Calculate Debt to Income Ratio

When your loan is being underwritten, the lender will look at both a “front-end” and a “back-end” debt to income ratio. There are two separate calculations for these ratios which are:

  • Front end – this calculation is based entirely on your housing costs. The lender will add up all housing costs including mortgage payments, interest payments on your mortgage, personal mortgage insurance, and insurance payments. The total will then be divided by your current monthly income before taxes and other deductions to find the ratio. Ideally, a lender would not want this number to exceed 36 percent.
  • Back end – the debt to income ratio on the back end includes all expenses including housing. Your lender will likely use your open credit accounts showing on your credit report which could include car loans, revolving credit lines, and student debt. For most mortgages, your debt to income ratio should be no higher than 43 percent.

Current Rent and Housing Expenses

If you are currently paying more than 36 percent of your total income for rental expenses, the lender may consider this when calculating your front-end ratio. For example, if your current rent payment is 40 percent of your total gross income and you can demonstrate you have been making payments on time, as agreed for a long period of time, the lender may be more flexible with the terms of your loan. Keep in mind however, you could pay an interest premium if this is the case.

The back-end ratios are also important. This is because for a lender to have your loan backed by a Fannie Mae, or other approved mortgage backer, your ratio would have to be lower than 43 percent. There are exceptions to this rule but in general, a borrower would face challenges obtaining a mortgage if their debt ratios are too high.

Lowering Debt to Income Ratio

There are two ways to improve your debt to income ratio. The first is to earn more money and the second is to lower your debt. Lowering debt can be accomplished by paying off some of your outstanding debt, putting a larger down payment on your home purchase, or taking a mortgage with a lower interest rate. For most consumers, paying off debt is the best way to lower their ratio.

Keep in mind, even if you have open credit lines that are not being used, your mortgage lender may take them into consideration when calculating your debt to income ratios. Before closing an account however, talk to your mortgage lender about what options you should explore. In some instances, a lender may offer you a shorter-term loan or a loan with an adjustable rate to help you qualify.

Borrowers should be aware that their credit scores are not tied to their debt to income ratios. However, a lower debt to income ratio combined with a higher credit score can make a big difference when it comes to what loan programs a lender may be willing to offer to you.

Contact us to find out more about debt to income ratio and other factors necessary to qualify for a home purchase or refinance.

Home Updates That Make Good Multi-Generational Sense

Home Updates That Make Good Multi-Generational SenseMulti-generational households and the growing preference on the part of many retirees toward “aging in place”have altered home design in recent years. Interiors are more open, more functional and more adaptable that they were even a decade ago. Spaces tend to be less formal; living space is better integrated with work space like the kitchen, and rooms tend to serve more than once purpose, both for quiet pursuits and for family gatherings.

Universal Design

Home design has gained a new dimension — planning for the future and for a changing lifestyle. Universal design features and amenities that were once off the radar are now very much the focus. Even younger buyers are tuned in to accessibility concerns. Wider doors and hallways, easy to navigate stairs or single-level living, doorless and curbless showers, motion-activated faucets and lighting — these are just a sampling of what may soon become mainstream in American homes.

Add the popularity of home automation and connectivity, and today’s home is uniquely suited for all ages. If you’re thinking of remodeling an existing home, some of these features are well worth the extra cost. Not only do they offer living options, but they also promise great ROI should you wish to sell.

The New Face Of Home

If you are currently looking for a home to buy, view the existing floor plan with an eye toward modifications that would make it more accessible and multi-generation-friendly. Consider the possibility that you might someday share the home with aging parents or with grown children and grandchildren.

Integrated “apartments”with separate entrances, “granny pods”or separate guest houses, dual master bedrooms, and “au pair”quarters are just some of the ways to offer future flexibility. They are common across the country, but also across price ranges, as sensible and cost-effective alternatives to home health care or retirement housing.

Renovate For The Future

Renovations that reflect the changing face of family life are always good choices for return on investment in remodeling. Because the traditional family is no longer the norm, any home that offers such options is desirable. If you have questions about what features are important to buyers in a specific market, speak to a real estate professional about trends that go beyond energy savings and sustainability.

No matter what choices you make about a home update, rely on professional advice and insist on reliable contractors. There is no substitute for quality materials and first-class work. Whether you’re adding space or rearranging it, planning for your future in the home or hoping to appeal to the right buyer, spending a lot or a little, you won’t go wrong with universal design features. Aging is, after all, a reality that we all face sooner or later.

 

Smart Technology or Home Automation: What’s the Difference?

Smart Technology or Home Automation: What's the Difference?Is it worth it to add smart appliances or automated features if you’re selling a home? Just how much connectivity do buyers want? And what exactly do the terms refer to in terms of home updates.

Although smart homes and home automation are sometimes used interchangeably, they actually refer to two basically different concepts about how appliances and home systems can operate. Then there is the need for “connectivity,” adding another dimension to any discussion of futuristic home features.

Home Automation

According to a Texas-based Direct Energy blog, home automation has a long history, beginning with the first labor-saving devices that operated with electrical current. “Automatic” washing machines and hot water heaters certainly made life easier at the time, a time long before wireless technology and integrated home entertainment systems.That may be simplistic, but the truth is that any device that operates without human intervention can be termed automatic.

Today, however, automation commonly refers to home features that are controlled by computer, or that can be set to operate in specific ways: motion-detected lighting, robotic floor cleaners, dishwashers and ovens with delay settings, and the wide range of room monitors, security cameras and voice or motion-controlled devices.

Smart Technology

Computers introduced American homes to smart technology and the Internet of Things. Today, almost every home has several “smart” devices, even if they are simple ones.

Case in point: A programmable thermostat, common sensor-operated smoke detectors, and a backyard irrigation system with a timer control can be termed smart devices, albeit maybe only “elementary” smart.

Today, most smart technology is also controllable by wireless remote device. But the true definition of smart is any product that incorporates sensors or data storage, microprocessors or controls that allow autonomous operation. An internal operating system is employed to assure that the product operates as programmed, either through user interface or initial setup. Modern smart technology allows for broad integration of devices, in effect creating a “genius” network.

Connectivity

The third piece of the technology puzzle is connectivity. Both home automation and smart technology can be “connected,” for greater flexibility and integration, but it’s not necessary. And, just because homeowners can change a setting via smart phone or battery-operated remote doesn’t necessarily make an automatic appliance or home product smart.

Connected products interact with one another over a network; the network collects and shares data, and is designed to monitor and allow some degree of control over the functioning of network-connected products or systems.

For instance, a smart home with sophisticated lighting controls might automatically sense lower light levels at dusk, triggering an adjustment to window shades and turning on both interior and exterior lighting.

Confused? Actually, there’s no real need to be. No matter what you call them, the home features that make living better are all desirable!

5 Ways Millennial Buyers Can Snag Their Dream Home In This Sellers Market

5 Ways Millennial Buyers Can Snag Their Dream Home In This Sellers MarketAccording to the 2017 Home Buyer and Seller Generational Trends Report, Millennials bought 34% of the homes sold; the largest of any generation last year.

Millennials looking to buy their first or second home need to ready themselves for a surprisingly competitive market. Lack of supply causes attractive homes to garner multiple offers in just a few hours!

What can a Millennial buyer do to appeal to sellers and be the one who ends up with the home? Here are 5 ways they can snag their dream home in this seller’s market.

Get Pre-Approved

Figuring out what a home buyer can afford is a crucial step and no different for these savy Millenial home buyers. Sellers like to avoid nasty surprises. Being pre-approved shows the seller that the homebuyer is serious and financially able to purchase their home.

Meeting with a mortgage originator and getting pre-approved is how it’s done. This professional will pull credit history and look at current financial infomation to determine precisely how much of a mortgage is affordable. The pre-approval can then be used as part of their offer letter.

Be Decisive

A hot real estate market is no time for cold feet. Millennials should proactively create a list of must-haves and be ready with an offer when they find a home that meets their requirements.

Taking too long to mull over whether they like the house, the neighborhood, or the price can result in a dream house being sold right out from under them.

Get Real

Millennials should research pricing in the neighborhoods they like, and lean on their real estate agent for helpful guidance. Low-balling an offer is not likely to be received well in this competitive market. Making a fair, reasonable offer close to, or even above, the asking price is the best course of action to land the home they want.

Show Personality

If sellers feel like they know the buyer, they are more likely to choose them over a faceless offer. Include a personal letter with the offer. Go into detail about why the house is appealing. Add personal details about what the Millennial buyer wants to do in the house like raise children, plant a garden, or enjoy baking in the kitchen.

If all buyers are equal, a heartfelt letter just might tip the scales.

Agree to the Sellers Timetable

Some sellers prefer unloading their house fast. Others may want to wait to move until their kids are out of school or the new home they are building is ready.

Millennial buyers may need to dig to get this information but it can be used to their advantage. Being flexible might just set them up to be the best choice for the seller.

While challenging, it’s not impossible for Millennials to end up with the house of their dreams. With a bit of planning, decisiveness, flexibility, and a preapproval from their trusted mortgage professional, Millenials can make homeownership a reality in the very near future!

 

 

5 Key Factors That Affect Your Mortgage Rate

5 Key Factors That Affect Your Mortgage RateMany first time home buyers often wonder what factors determine their mortgage rate. Is it their credit score? Is it the type of loan chosen? Is it the size of the loan?

The truth is, there are many factors at play. Mortgage interest rates are not standardized across the board, so they vary from lender to lender and from borrower to borrower.

Here are 5 common factors that determine or affect your mortgage interest rate:

1.    Default Risk

Risk is a key consideration when determining mortgage interest rates. Banks and other lenders are in a risky business because there is always a chance of a borrower defaulting on their loan repayments. This is known as default risk.

Banks and lenders therefore charge riskier borrowers higher interest rates to discourage them from borrowing, as well as to be able to average their returns between risky and non-risky borrowers. Risk is one of the prime factors that influence your mortgage rate.

2.    Credit Score

Perhaps you are wondering how banks and other lenders determine if you are a risky or non-risky borrower. There are many tools they can use, but your credit score plays a big role. You credit score is based on the borrowing history in your credit report, which summarizes all details about your credit card balances and timely bill repayment.

If you pay your bills on time and sustain relatively low credit scores, your credit score stays high and lenders view you as a low-risk borrower. Consequently, your mortgage interest rates tend to be lower than a person with a low credit score.

3.    Type of Property You Are Purchasing

Some properties have a higher risk of default compared to others. This is determined by analyzing the historical likelihood of default on different properties; lenders use this analysis as the reason to charge higher mortgage interest rates on riskier ones.

For example, vacation homes tend to have a higher rate of default compared to single-family homes and lenders charge higher rates for such homes.

4.    Size of Down Payment

The amount of money you pay upfront on the mortgage also influences its interest rate. A large down payment gives you a lower LTV ratio (loan-to-value), which also decreases the level of risk borne by a lender. A small down payment, on the other hand, gives you a high LTV ratio and thus a higher mortgage interest rate.

5.    Loan Amount

A large loan bears a higher risk than a smaller one simply because there is more money at risk. Most lenders therefore charge higher interest rates on large property loans as compared to smaller ones.

All in all, different lenders offer different rates depending on their style of operation, appetite for risk, or competitiveness in the market. It’s important to search intensively for offers from different lenders for the best mortgage rate.

Contact us to help you find out more about mortgage rates and what that means for your next home purchase.

 

What’s Ahead For Mortgage Rates This Week – April 30th, 2018

What's ahead for mortgage rates april 30 2018Last week’s economic reports included readings from Case-Shiller Home Price Indices, new and existing home sales and weekly readings on mortgage rates and first-time jobless claims.

Case-Shiller: Home Prices Rise to Near Four-Year High

February home prices rose 6.30 percent year-over-year and 0.50 percent month-to-month. Home prices rose just shy of a record set in 2014. The 20-City Home Price Index reported home prices were 6.80 percent higher year-over-year and rose 0.80 percent month-to-month in February. The year-over-year reading surpassed the peak reading in 2006. Home prices accelerated in contrast to analyst expectations that they nay slow as buyers deal with a short supply of homes for sale.

Cities with the three highest readings in year-over-year home price growth were Seattle, Washington with 12.70 percent growth, Las Vegas, Nevada home prices rose 11.60 percent, and San Francisco, California home prices rose by 10.10 percent according to Case-Shiller’s 20-City Home Price Index for February.

Severe shortages of homes and high demand in the west and in areas impacted by the housing bubble burst are driving the rapid rise of home prices; while it appears that homebuyers may be sidelined by high home prices, increasing home sales suggest that buyers may be buying before higher prices cut them out of the market.

Sales of New and Existing Homes Surpass Expectations in March

Sales of pre-owned homes rose to 5.60 million sales on a seasonally-adjusted year-over-year basis. Analysts expected a reading of 5.52 million sales based on February’s reading of5.54 million pre-owned homes sold. Sales of new homes also exceeded expectations with a sales rate 0f 694,000 sales on a seasonally-adjusted annual basis. Analysts expected a reading of 634,000 new hone sales. February’s reading was 667,000 new home sales. As with the boost in sales of pre-owned homes, analysts said that buyers are anxious to buy before they’re priced out of the market or cannot qualify for mortgage loans.

Mortgage Rates Rise, New Jobless Claims Fall

Freddie Mac reported higher average mortgage rates for the third consecutive week. Rates for a 30-year fixed rate mortgage averaged 4.58 percent and were 11 basis points higher. The average rate for a 15-year fixed rate mortgage was 8 basis points higher at 4.02 percent; The average rate for a 5/1 adjustable rate mortgage was seven basis points higher at 3.74 percent. Rising Treasury yields were driven by higher commodity prices drove mortgage rates higher.

Economic indicators have steadily strengthened, which traditionally boosts home prices. While analysts have shown concerns over rapidly rising home prices and mortgage rates, the Mortgage Bankers Association reported mortgage applications were 11 percent higher year-over-year.

New jobless claims fell to 209,000 first-time claims filed as compared to expectations of 230,000 new claims, and the prior week’s reading of 233,000 new claims filed. Lower jobless claims indicate fewer layoffs and strengthening labor markets.

What’s Ahead

This week’s economic releases include readings on inflation, job growth, and national unemployment. Weekly readings on mortgage rates and new jobless claims will also be released.

Five Reasons Why Spring Is The Perfect Time To Sell

5 Reasons Spring Is The Perfect Time to SellSpring is many people’s favorite season of the year. Obviously, there are many valid reasons why this is so. One of the best things about spring is that it is an ideal time to sell your home.

If you have considered putting your home on the market any time in the next year or so, check out these five reasons which make spring the ideal time.

  • Buyers are searching – A huge majority of home buyers want to move during summer. Many families have school or work vacations that make the moving process a little easier during this time. If you put your home on the market during spring, you ready things for someone to purchase and move in during this prime time.
  • The weather is cooperative – Yes, there may be a few spring rain showers here and there, but during the spring season (in most parts of the country), you’ll find that the weather is neither too hot nor too cold to keep buyers from searching. In addition, the spring sunshine makes for beautiful listing photos.
  • It’s a great time for home improvement – Whether you want to make improvements to your house to make selling easier, or you plan to sell your home as a fixer-upper, the knowledge that spring and the coming summer months is the perfect time to attend to these tasks will benefit you during the listing and sales process.
  • Your yard will look great – They say that curb appeal is one of the most important things that is considered when someone purchases a home. When you sell in springtime, the grass is green, the flowers are in bloom and your yard will look it’s very best. You may find that it’s a little easier to sell during this time just because of the extra “wow factor” your yard brings to the table.
  • The market is prime – Listen to any news or finance program and you’ll hear that the real estate market is booming. Take advantage of this benefit and pair it with all the other reasons to sell your home this spring. You may find that selling your property quickly and at your asking price is much easier than you ever imagined it would be.

As you can see, spring really is an excellent time to sell a home. However, don’t wait until the peak of the season to think about putting it on the market and expect to reap all the benefits. Act now and be ready to make a splash when the weather warms up and the sun comes out to shine.