Mortgage Rates Newsletter - Market Analysis

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

Victory For Rates; Hope For Housing Inventory?
Fri, 09 Apr 2021 23:39:30 GMT - 2021 hasn't been a great year for mortgage rates--at least not as far as their trajectory is concerned. But that could be changing . Even if things don't get any better from here, the past 3 weeks are collectively the best we've seen since January. Mortgage rates are primarily driven by day-to-day movement in the bond market. There is a particularly strong correlation between 10yr Treasury yields and mortgage rates. While this definitely wasn't the case for much of 2020, the correlation is now generally back intact. As such, the ability of 10yr Treasury yields to remain under a ceiling of 1.75% has coincided with resilience in the mortgage market. If we zoom in on the blue line, we can see 10yr yields departing their prevailing trend for 2021 and starting to move sideways in recent weeks. It
Mortgage Rates Lowest in Nearly a Month
Thu, 08 Apr 2021 20:19:29 GMT - Mortgage Rates had another decent day on Thursday with the average lender offering modestly better terms compared to yesterday. Improvements continue to arrive in fairly small doses, but they've been adding up . You'd have to go back nearly a month to March 12th to see anything definitively lower (although it's worth noting that today's rates are also roughly in line with those seen on March 25th). As far as specific levels, lenders remain widely stratified with purchases being quoted in a range of 3.00-3.125% and refinances in a range of 3.125-3.375 (conventional, 30yr fixed). Today's specific events and economic data releases did little to motivate the gains seen in rates, although a report showing higher-than-expected Initial Jobless Claims technically agrees with the move. There were also
Another Tentatively Decent Day For Rates
Wed, 07 Apr 2021 21:00:24 GMT - Mortgage Rates have been doing pretty well so far in April. They bounced at long-term highs on March 31st (matching the highs from 2 weeks prior), but have been descending gently since then. Today's move was definitely modest. The average borrower wouldn't see much of a difference--if any--versus yesterday's rate offerings. But given the rising rate reality of 2021, it's a victory to merely avoid hitting new highs. It's tough to say how long this interlude of stability will last. It could be over soon , or it could be weeks before we get back to recent highs. When it comes to how far rates might fall, it's easier to say that we'd need to see substantial motivation. That motivation could take the form of anything "bad" for the economy or the covid outlook (weaker economic data, lower inflation
Mortgage Rate Outlook May Be Improving
Tue, 06 Apr 2021 21:18:00 GMT - Things have been bad for mortgage rates in 2021. That assertion has nothing to do with the outright level of mortgage rates--indeed, that's still very low historically--and everything to do with the pace and duration of the rate spike. Like many things, there comes a certain point at which things have been bad enough for long enough that they can't help but improve. Have we reached that point with the rate spike of 2021 and is today the proof? Let's not tempt fate , and let's be realistic . As far as rate spikes go, there have been worse examples. In fact, even as recently as 2016, one could argue some of that movement was worse than what we've seen in 2021. And if we go back another few years, there's no question that 2013 was much tougher than the current environment. Things can definitely
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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