Mortgage Rates Newsletter - Market Analysis

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

Rough Day For Mortgage Rates
Wed, 03 Jun 2020 20:06:35 GMT - Mortgage rates were decisively higher today as the bond market lost ground due to surprisingly strong economic data. Mortgage rate movement is mainly a factor of mortgage bond prices. In turn, mortgage bonds tend to move in broadly the same direction as the US Treasury market. That's why so many people think mortgage rates are based on 10yr Treasury yields. It wouldn't matter either way today as both mortgage bonds and Treasuries lost ground quickly after several economic reports came out much stronger than expected. Taken together, the reports (which still suggest the economy is heavily affected by covid-related shutdowns) point to an economic recovery that may be underway sooner and in healthier fashion than economists expected. Part of the reason rates have been as low as they are is the
Mortgage Rates Up or Down, Depending on Lender
Tue, 02 Jun 2020 20:09:12 GMT - Mortgage rates were mixed today with some lenders improving and others moving higher. This isn't so much a factor of anything that happened today as much as it is about what lenders did yesterday. Specifically, the bond market (which underlies rate movement) was stronger in the afternoon. This meant that mortgage lenders could adjust yesterday's mortgage rates slightly lower. Some of them did. Some of them didn't. Simply put, lenders who kept rates unchanged yesterday afternoon were able to offer slightly lower rates today. Lenders who dropped rates yesterday were forced to increase slightly. In the bigger picture, we're not talking about substantial movement. The average homeowner (or prospective homeowner) will be seeing rates that are effectively at all-time lows , albeit with closing costs
Mortgage Rates Start Higher But Finish Lower
Mon, 01 Jun 2020 20:57:04 GMT - Mortgage rates pulled off a repeat performance of last Friday's intraday drama. The average lender began the day in higher territory as bond markets were weaker in the morning. Bonds recovered nicely and mortgage lenders were more than willing to adjust rate sheets accordingly. After being in slightly weaker shape compared to Friday's latest levels, the average lender was noticeably better than Friday by the end of the day. What does "noticeably better" look like in objective terms? Depending on your existing rate and scenario, it might not look like much. The industry is pecking away at an all-time low rate range. Progress at these levels will continue to come in bits and pieces. Most prospective borrowers would see this change in the form of lower upfront costs to the tune of 0.1-0.2% of
Mortgage Rates Stage Nice Comeback, But Uncertainty Remains
Fri, 29 May 2020 22:02:49 GMT - Mortgage rates staged a nice little comeback today, moving back toward the all-time lows seen late last week. Mortgage rates are determined primarily by the bond market, and the bond market benefited from strong demand at the end of the month. Higher demand means higher prices, and higher bond prices equate to lower rates. There has been some concern that the overall bond market (which includes mortgage-specific bonds as well as benchmarks like US Treasuries) was gradually moving toward higher rates in the past few weeks. As of today, however, 10yr Treasury yields (the most quintessential benchmark for longer-term interest rate momentum) improved for a third straight day. This went a long way toward arguing against the recent, gentle uptrend in rates but fell short of suggesting a big drop
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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