Mortgage Rates Newsletter - Market Analysis

Provided courtesy of: http://www.mortgagenewsdaily.com/reports/mortgage_rates/archive

Rates Begin Week Unchanged at July's Lows
Mon, 24 Jul 2017 21:18:02 GMT - Mortgage rates held steady today, which leaves them in line with the lowest levels in July. In underlying bond markets (bond movement directly impacts lenders' rate offerings), it was an exceptionally quiet day--especially for mortgage-related bonds. Activity should increase somewhat as the week progresses. That's a typical pattern for most weeks--all other things being equal (Mondays and Fridays tend to be slower)--but we'll also get events that tend to draw out more participation among traders. The most obvious calendar item is the Fed Announcement on Wednesday. Keep in mind, there are two different varieties of Fed Announcements. Of the 8 announcements each year, 4 of them are accompanied by a press conference with the Fed Chair, as well as economic projections. Whether by design or otherwise
Mortgage Rates Lowest in July
Fri, 21 Jul 2017 22:09:10 GMT - Mortgage rates moved lower today, setting yet another new low for the month of July. For the past 2 weeks, rates have been pushing back against a fairly abrupt spike that took place heading into the month. Concerns over the European Central Bank's (ECB's) bond buying plans sparked the move higher, but those concerns were officially put to rest as of yesterday. In simpler terms, extra demand for bonds pushes bond prices higher and rates lower. The ECB buys LOTS of bonds. This puts downward pressure on rates around the world (more so in Europe than in the US, but we still get some indirect benefit). There was some concern at the end of June that the ECB was getting closer to announcing it would buy fewer bonds (thus the rate spike heading into July). While that day will likely come eventually
Mortgage Rates Hold 3-Week Lows After Central Bank Announcements
Thu, 20 Jul 2017 23:06:28 GMT - Mortgage rates held relatively steady today, keeping them in line with the lowest levels in more than 3 weeks. There was relatively little market movement in response to the policy announcement from the European Central Bank (ECB). That's a good thing considering much of the recent gains in rates can be attributed to traders growing more optimistic about the ECB's stance. To put all this in plain English , the ECB buys bonds. This puts downward pressure on rates around the world (more so in Europe than in the US, but we still get some indirect benefit). There was some concern at the end of June that the ECB was getting closer to announcing it would buy fewer bonds. While that day will likely come eventually, today's announcement assures markets that it hasn't been discussed yet. The relatively
Mortgage Rates at 3-Week Lows
Wed, 19 Jul 2017 21:58:56 GMT - Mortgage rates moved lower today, despite slightly weaker underlying bond markets. This has been an ongoing phenomenon in recent days. Bonds improve, implying lower mortgage rates, but lenders wait to drop rates until bond market improvement is vetted. In the current case, yesterday's market gains remained relatively intact despite today's market losses, thus giving lenders the green light to pass the gains through to mortgage rate sheets. Although today's rates aren't appreciably lower than yesterday's, they're technically the best we've seen since June 28th. More lenders are quoting top tier conventional 30yr fixed rates of 4.0% instead of 4.125%, and some of the aggressive lenders are back down to 3.875%. If there's been an underlying reason for the hesitation on the part of lenders, the
Buying a Second Home

Buying a Second Home

Does it Make Sense to Buy a Second Home?

It may sound sweeter than it actually is.

Owning a second home may sound like something only the wildly rich do, but that isn't always so. Sometimes people buy a new house when they haven't had success selling the first. Other homeowners might like the idea of buying a second home to fix up and sell at a fat profit – or to rent out.

For the right individual, two homes may be a great plan. But for the wrong homeowner, plenty can go awry. If you're thinking of getting a second mortgage for practical or profitable reasons, now is a good time to have second thoughts, because... 

1. You need to have plenty of money. You don't have to belong to the 1 percent to pull this off, but for a bank to allow you to purchase a second home without plans to sell the first, you can't be just getting by, hoping a second house will fix your financial picture.
 
"Underwriters will want to know you have significant reserves – potentially a buffer worth six months of payments on both properties – before approving the loan," says Brian Seibert president of Michigan First Mortgage in Waterford, Michigan.
 
And while every lender will be different, as a general rule, you'll need to pay a higher down payment for a second home than you would a first.

2. You shouldn't have too much debt. You're taking on more debt when you buy a second home – something lenders take into account.

In most cases, the debt ratio can be 36 percent to 42 percent. That means, of course, that your debt – including mortgages, credit card debt, car loans and student loans – shouldn't exceed that 36 to 42 percent.

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Of course, if you're planning to offset some of that debt by bringing in monthly rental income from your second home, mention that to your lender, Markowitz says.

Renting out a home certainly lowers the risk of being rejected by a mortgage lender ... the general rule of thumb is to provide as much reassurance as possible.

3. You have to spend money to make money. It isn't just that you'll need a hefty down payment. Your monthly mortgage may well be higher than it would be if you just had one home.

Investors are viewed by banks as riskier customers; they are often subjected to higher interest rates. To avoid financing issues, many investors use cash financing or existing lines of credit to purchase investments."

You are also going to be maintaining two homes. You thought it was hard to make sure the bushes were trimmed for one house? Now, you get to double the fun.

Most people grossly underestimate the carrying costs of the investment in real estate. It's more than just taxes and insurance. Consider this scenario: Eventually – assuming you are hanging onto the second house and not selling it soon – you'll have two roofs to replace, two homes to paint and twice as many appliances, such as hot water heaters and refrigerators, to purchase, she says.

If you're spending money and losing money on the house but are truly looking at the property as a long-term investment, it may not matter to you to do that for a while, Duffy says. Some homeowners "are happy to take a loss on a property in the short term, and build up equity for a future period, such as retirement."

4. The buyers and renters may not come. Just because you have grand plans of renting out or selling a second home doesn't mean things will work out that way. If you're investing money into fixing up a property, that takes time – time that translates into money, Duffy says.

"Every day that an investment property sits empty means a loss in profitability to an investor," she says. "All repairs and renovations must be completed quickly in order to have the fastest turnaround ... Even with quality contractors, investors typically spend a significant amount of time working on houses, selecting paints and flooring, purchasing appliances or attending to the other details required to transform a home."

Even if you bought a fixer-upper that's all fixed up, you have to hope a renter or seller signs on the dotted line as soon as possible. And then, if you're renting the place, you have to hope your tenant sticks around.

"Personally, I don't recommend that my clients rely on sources of income that could suddenly stop. You have to be comfortable that if the property is not rented out, you'll still be on solid footing," says Kurt Fillmore, president of Wealth Trac Financial Group in Southfield, Michigan. (And back to the having-plenty-of-money point – Fillmore recommends having six months of emergency funds to cover the mortgages of both houses, in case something goes wrong.)

5. All of this is harder than it looks. Even if you sell or rent out a second home fairly quickly, you could have plenty go wrong later.            

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Real estate, even on a small scale, should be seen as another job or career. While it may be the right fit for some, it's not for everyone.         

It gets even harder if you're trying to flip houses and are solely thinking of them as investments. You should "understand the tax implications of short-term gains and non-primary-residence sales.

Buying a second house unless you are a real estate developer: "I would warn the average person not to get involved unless they have a unique expertise."

 

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