Mortgage Rate Watch

Provided courtesy of: http://www.mortgagenewsdaily.com/consumer_rates/

Rates Reacted to Jobs Report, But Not Like You'd Expect
Fri, 07 May 2021 23:32:00 GMT -

Once a month, the government releases the Employment Situation, also known as "the jobs report."  No other piece of economic data is as consistently relevant for the bond market and, thus, interest rates. 

For most of the past year, the normal correlation between jobs and rates was on hold.  That makes sense, of course.  Initial lockdowns completely obliterated the labor market and we've been waiting to see how it would recover and how it would be reshaped ever since.

In the past 1-2 months, the bond market has finally shown some willingness to react to economic reports.  Notably, last month's exceptionally strong jobs numbers put obvious upward pressure on rates.  Because of that, anticipation was high for this week's report.

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Mortgage Rates Are Low and Stable, But Face Bigger Risks Tomorrow
Thu, 06 May 2021 20:06:00 GMT -

Mortgage rates moved lower today, bringing the average lender to the best levels since late February.  Despite the milestone, the day-over-day movement in rates has been pretty mild.  Most lenders are making changes that are only noticeable in the form of upfront costs (aka "points") as opposed to rates themselves.  If we use upfront costs and rates to extrapolate an "effective rate," the average movement has been 0.01-0.02% on any given day.

Rates have been more likely to move lower vs higher in the past 6 days, but that creates some risks in and of itself.  Market participants who trade the securities that underly mortgage rates tend to shy away from additional buying once these winning streaks get to be more than 7 days long. 

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Mortgage Rates Sideways Near 2-Month Lows
Wed, 05 May 2021 19:42:00 GMT -

Mortgage rates were mixed today, depending on the lender.  On average, rates were unchanged and remained very close to their lowest levels in nearly 2 months.  The bond market (which most directly impacts day-to-day rate movement) was calm.  Both of today's important economic reports came in weaker than expected, but close enough to forecasts to prevent significant volatility.  Beyond that, questions remain about just how ready the bond market may be to react to economic reports in general (historically one of the quintessential reaction functions in financial markets).  

If bonds aren't quite ready to link back up with economic data yet, it would be an issue of timing and priorities.  Several Fed speakers reminded us today that we're still a long way from even being able to assess the post-pandemic economy (one of the reasons they plan to keep rate-friendly policies in place until further notice).  As such, bonds/rates might react to near-term economic data with less enthusiasm than normal. 

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Mortgage Rates Fairly Steady Near Recent Lows
Tue, 04 May 2021 20:38:00 GMT -

Last week fired warning shots across the bow of April's mortgage rate rally.  New month, new momentum?  No, not just yet. 

In fact, we haven't seen much of anything so far this month.  Last week's initial threat of rising rates quickly gave way to a move back in the other direction, but not a big enough move to suggest any major changes for mortgage lenders. 

In yesterday's case, rates benefited from weaker economic data in the morning. In today's case, it was a bond-friendly move at the expense stocks this morning.  Stocks began losing ground due to earnings data before the bell and continued lower at the 9:30am NYSE open.  Bonds don't always follow stocks, but today they did.  In other words, bond yields fell in concert with stock prices.  Lower bond yields equate to lower mortgage rates, all other things being equal. 

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Moment of Truth For Rates and Housing
Fri, 30 Apr 2021 22:09:00 GMT -

This week's 6.4% reading on Q1 GDP reinforced the notion of a strong economic recovery. In turn, the recovery helps to justify the sharp move higher in rates seen during the same 3 months. Rates managed to recover quite a bit in April, but ended up rising slightly this week, by some measures. Is the intermission over?

The following charts offer several ways to look at the intermission (basically April's push back against the previous 3 months of significantly higher rates).  Mortgage rates have outperformed other parts of the bond market even though they remain highly stratified by loan type and investor.  As such, the intermission looks healthy at first glance.

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Mortgage Rates Recover After Some Morning Drama
Thu, 29 Apr 2021 20:19:00 GMT -

Mortgage rates were mixed today, depending on the lender.  Virtually every lender began the day with slightly higher rates, but most offered mid-day improvements in response to market conditions.  

As always, worth remembering that when we talk about "rates" moving higher or lower on almost any given day, the average mortgage borrower will not be seeing an actual change in their "note rate" (the rate at the top of a mortgage/promissory "note").  But note rates only comprise one side of the mortgage rate equation.  That's because the cost of borrowing also depends on any upfront costs required by the lender (or credits provided by the lender). 

Mortgage rates tend to be offered in 0.125% increments and it takes quite a bit of drama in the bond market to imply that big of a rate change in a single day.  Upfront costs, however, allow for much smaller adjustments.  

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No, The Fed Didn't Do Anything To Mortgage Rates Today
Wed, 28 Apr 2021 20:40:00 GMT -

The Federal Reserve released a new policy announcement today.  This is one of the 8 times per year where the Fed can opt to change "rates," or adjust its other policies that impact "rates."  Fed announcement days have a track record as being some of the best (or worst) days for mortgage rates.  That said, they can be completely meaningless as well, and that's the designation we'd pick for today's version (if we could only pick one).

Is it true that the Fed kept rates unchanged at 0-0.25%?  Yes, but it's important to understand that refers to the Fed Funds Rate--a target rate for overnight lending between big banks.  Mortgage rates can loosely correlate with the Fed Funds Rate over very long time horizons, but they frequently move in the opposite direction.  More importantly mortgage rates are constantly moving whereas the Fed Funds rate hasn't changed in more than a year now (and is only usually capable of changing once every 6 weeks, outside of extraordinary circumstances).

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First Time Home Buyers

First Time Home Buyers

The challenge of buying a home for the first time can seem so daunting that it's tempting to either just go with the first house that falls in your price range or continue to rent. To help you demystify the process and get the most out of the purchase, we'll examine what you'll need to consider before you buy, what you can expect from the buying process itself, and some handy tips to make life easier after you purchase your first home.

Mortgage Basics

Considerations Before You Buy

The first thing you'll need to determine is what your long-term goals are and then how home ownership fits in with those plans. It could be that you're simply looking to transform all those "wasted" rent payments into mortgage payments that actually give you something tangible. Others see home ownership as a sign of their independence and enjoy the idea of being their own landlord. Narrowing down your big-picture homeownership goals will point you in the right direction. Here are five questions to ask yourself:

  1. What type of home best suits your needs?
    You have several options when purchasing a residential property: a traditional single-family home, a townhouse, a condo, or a multi-family building with two to four units. Each option has its pros and cons, depending on your homeownership goals, so you need to decide which type of property will help you reach those goals. You can also save on the purchase price in any category by choosing a fixer-upper, although the amount of time, sweat equity and money involved to turn a fixer-upper into your dream home might be much more than you bargained for.
  2. What specific features will your ideal home have?
    While it's good to retain some flexibility in this list, you're making perhaps the biggest purchase of your life, and you deserve to have that purchase fit both your needs and wants as closely as possible. Your list should include basic desires, like neighborhood and size, all the way down to smaller details like bathroom layout and a kitchen that comes with trust-worthy appliances.
  3. How much mortgage do you qualify for?
    Before you start shopping, it's important to get an idea of how much a lender will actually be willing to give you to purchase your first home. You may think you can afford a $300,000 home, but lenders may think you're only good for $200,000 depending on factors like how much other debt you have, your monthly income and how long you've been at your current job.
  4. How much home can you actually afford? 
    On the other hand, sometimes a bank will give you a loan for more house than you really want to pay for. Just like with the purchase of a new car, you'll want to look at the house's total cost, not just the monthly payment. Of course, looking at the monthly payment is also important, along with how much down payment you can afford, how high the property taxes are in your chosen neighborhood, how much insurance will cost, how much you anticipate spending to maintain or improve the house, and how much your closing costs will be.
  5. Who will help you find a home and guide you through the purchase?
    A real estate agent will help you locate homes that meet your needs and are in your price range, then meet with you to view those homes. Once you've chosen a home to buy, these professionals can assist you in negotiating the entire purchase process, including making an offer, getting a loan, and completing paperwork. A good real estate agent's expertise can protect you from any pitfalls you might encounter during the process.

The Buying Process
Now that you've decided to take the plunge, let's explore what you can expect from the home buying process itself. This is a chaotic time with offers and counter-offers flying furiously, but if you are prepared for the hassle (and the paperwork), you can get through the process with your sanity more-or-less intact. Here is the basic progression you can expect:

1) Find a home.
Make sure to take advantage of all the available options for finding homes on the market, including using your real estate agent, searching for listings online and driving around the neighborhoods that interest you in search of for-sale signs. Also put some feelers out there with your friends, family and business contacts. You never know where a good reference or lead on a home might come from.

2) Consider your financing options and secure financing.
First-time homebuyers have a wide variety of options to help them get into a home, including federally-backed loans and loans for homebuyers who don't have the standard 20% minimum down payment. Your state may also have its own programs for first-time homebuyers. Your mortgage interest rate will also have a major impact on the total price you pay for your home, so shop around.

3) Make an offer.
Your real estate agent will help you decide how much money you want to offer for the house along with any conditions you want to ask for, like having the buyer pay for your closing costs. Your agent will then present the offer to the seller's agent; the seller will either accept your offer or issue a counter-offer. You can then accept, or continue to go back and forth until you either reach a deal or decide to call it quits. If you reach an agreement, you'll make a good-faith deposit and the process then transitions into escrow. Escrow is a short period of time (often about 30 days) where the seller takes the house off the market with the contractual expectation that you will buy the house - provided you don't find any serious problems with it when you inspect it.

4) Obtain a home inspection.
Even if the home you plan to purchase appears to be flawless, there's no substitute for having a trained professional inspect the property for the quality, safety and overall condition of your potential new home. If the home inspection reveals serious defects that the seller did not disclose, you'll generally be able to rescind your offer and get your deposit back. Negotiating to have the seller make the repairs or discount the selling price are other options if you find yourself in this situation.

5) Close or move on.
If you're able to work out a deal with the seller, or better yet, if the inspection didn't reveal any significant problems, you should be ready to close. Closing basically involves signing a ton of paperwork in a very short time period, while praying that nothing falls through at the last minute.

Take these 5 steps to help make the process go more smoothly.

Now that you know how much you can afford, check out our current mortgage rate comparison-shopping tool today.

Check your credit

Evaluate assets and liabilities

So you don't owe too much money and your payments are up to date. But how do you spend your money? Do you have piles of money left over every month, or are you on a shoestring budget?

A first-time homebuyer should have a good idea of what is owed and what is coming in.

You've decided to go for it. Buying a home can be thrilling and nerve-wracking at the same time, especially for a first-time homebuyer. It's difficult to know exactly what to expect. The learning curve can be steep, but most of the issues can be resolved by doing a little financial homework at the outset.

Take these 5 steps to help make the process go more smoothly.

The homebuyer's credit score is among the most important factors when it comes to qualifying for a loan these days.

To get a sense of where your credit stands, go to Kredit Karma to collect your credit report and score today, free and with no obligation.

Scour the reports for mistakes, unpaid accounts or collection accounts.

Just because you pay everything on time every month doesn't mean your credit is stellar, however. The amount of credit you're using relative to your available credit limit, or your credit utilization ratio, can sink a credit score.

The lower the utilization rate, the higher your score will be. Ideally, first-time homebuyers would have a lot of credit available, with less than a third of it used.

Repairing damaged credit takes time -- and money, if you owe more than lenders would prefer to see relative to your income. Begin the process at least 6 months before shopping for a home.

Evaluate assets and liabilities

So you don't owe too much money and your payments are up to date. But how do you spend your money? Do you have piles of money left over every month, or are you on a shoestring budget?

A first-time homebuyer should have a good idea of what is owed and what is coming in.

"If I were a first-time homebuyer and I wanted to do everything right, I would probably try to track my spending for a couple of months to see where my money was going," he says.

Additionally, buyers should have an idea of how lenders will view their income, and that requires becoming familiar with the basics of mortgage lending.

For instance, some professionals, such as the self-employed or straight-commission salesperson, may have a more difficult time getting a loan than others

Organize documents

When applying for mortgages, homebuyers must document income and taxes.

Typically, mortgage lenders will request 2 recent pay stubs, the previous 2 years' W-2s, tax returns and the past 2 months of bank statements -- every page, even the blank ones.

Buying a home can take a long time, but knowing what you need and where to find it can save time when you're ready.

Qualify yourself

Ideally, as a first-time homebuyer, you already know how much you can afford to spend before the mortgage lender tells you how much you qualify for. "How much house can I afford?" calculator will help.

By calculating debt-to-income ratio and factoring in a down payment, you will have a good idea of what you can afford, both upfront and monthly.

Though there's not a fixed debt-to-income ratio that lenders require, the old standard dictates that no more than 28 percent of your gross monthly income be devoted to housing costs. This percentage is called the front-end ratio.

The back-end ratio shows what portion of income covers all monthly debt obligations. Lenders prefer the back-end ratio to be 36 percent or less, but some borrowers get approved with back-end ratios of 45 percent or higher.

Figure out your down payment

It takes effort to scrape together the down payment.

There are programs that can assist buyers with qualifying incomes and situations.

Finally, speak with mortgage lenders when you're starting the process. Check with friends, co-workers and neighbors to find out which lenders they enjoyed working with and ask them questions about the process and what other steps first-time homebuyers should take.

Congratulations New Homeowner ... Now What?

You've signed the papers, paid the movers and the new place is starting to feel like home. Game over right? Not quite. Let's now examine some final tips to make life as a new homeowner more fun and secure.

  1. Keep saving.
    With homeownership comes major unexpected expenses, like replacing the roof or getting a new water heater. Start an emergency fund for your home so that you won't be caught off-guard when these costs inevitably arise.
  2. Perform regular maintenance.
    With the large amount of money you're putting into your home, you'll want to make sure to take excellent care of it. Regular maintenance can decrease your repair costs by allowing problems to be fixed when they are small and manageable.
  3. Ignore the housing market.
    It doesn't matter what your home is worth at any given moment except the moment when you sell it. Being able to choose when you sell your home, rather than being forced to sell it due to job relocation or financial distress, will be the biggest determinant of whether you will see a solid profit from your investment.
  4. Don't rely on making a killing on your home to fund your retirement.
    Even though you own a home, you should still continue to save the maximum in your retirement savings accounts each and every year. Although it may seem hard to believe for anyone who has observed the fortunes some people made during the housing bubble, you won't necessarily make a killing when you sell your house. If you want to look at your home as a source of wealth in retirement, consider that once you've paid off your mortgage, the money that you were spending on monthly payments can be used to fund some of your living and medical expenses in retirement.

Conclusion

This brief overview should help put you on the path towards filling in any gaps in your home-buying knowledge. Remember that the more you educate yourself about the process beforehand, the less stressful it will be, and the more likely you will be to get the house you want for a price you can afford - and with a smile on your face.

 

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