Mortgage Rate Watch

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

Huge Housing Rebound, All-Time Low Rates, But At What Cost?
Thu, 02 Jul 2020 19:26:00 GMT -

This week's economic data included the biggest-ever gain in Pending Home Sales, a leading indicator for the housing market. Meanwhile, mortgage rates pushed down to new all-time lows yet again. 

But at what cost?

The most pessimistic way to explain the surge in home sales is to say it was only made possible by the record-setting declines in the past few months. 

That's mostly true, but it fails to give credit to what the industry and government officials have been doing to help jump start economic activity.  Would sales bounce back like this without all-time low mortgage rates and a stock market recovery (both made possible by emergency intervention from the Federal Reserve)?  Would consumers be as comfortable spending money without the promise of additional fiscal stimulus and other support programs already in place?

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Rates at All-Time Lows Ahead of Important Jobs Data
Wed, 01 Jul 2020 20:48:00 GMT -

Mortgage rates were generally unchanged today, thus leaving the average lender at all-time lows for conventional 30yr fixed scenarios.  It continues to be the case that loan scenarios with additional risk factors have NOT seen nearly as much improvement as those in the top tier.  In general, however, things are starting to improve.

When coronavirus rocked the financial markets in March, mortgage rates were particularly hard hit.  This had a lot to do with the anticipated inability of millions of homeowners to make their mortgage payments.  While the government and the mortgage industry rushed to put programs in place to help those homeowners, there were/are unavoidable consequences for mortgages in the eyes of investors.  Simply put, each additional risk factor that makes forbearance (a temporary non-payment agreement) more likely from a statistical standpoint also made the available rates incrementally higher.  

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Best Month Ever For Mortgage Rates
Tue, 30 Jun 2020 19:36:00 GMT -

Mortgage rates managed another slight improvement today, which means the average lender is offering new all-time low rates for the 4th time this month.  Even if rates had lurched unexpectedly higher today, June still would have gone down as the best month in the history of the mortgage market with many lenders now offering conventional 30yr fixed rates under 3% on top tier scenarios. 

The low rate environment has been made possible first and foremost by the economic contraction resulting from coronavirus.  In and of itself, however, that still likely wouldn't be sufficient to get rates as low as they are.  The rest of the heavy lifting has been done by the Federal Reserve, which stepped in when markets were experiencing the height of their recent volatility in early March 2020.  The Fed helped restore liquidity by buying Treasuries and mortgage-backed bonds directly.  This helps push interest rates down not only for mortgages, but also for the US government (which needs to borrower more heavily than ever before in order to finance the fiscal response to coronavirus).

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Mortgage Rates Continue at All-Time Lows, But Caveats Remain
Mon, 29 Jun 2020 19:52:00 GMT -

Mortgage rates were unchanged to slightly lower today, bringing the average lender right in line with all-time lows.  Averages aside, several lenders are slightly higher than they were on Friday.  Either way, the movement was minimal over the weekend. Beyond that, no conversation about all-time low rates would be complete without several of these recently relevant caveats:

1. Different borrowers will see different pricing.  This sort of goes without saying, but it's much more pronounced than it has been before coronavirus.  Specifically, we're talking about the big differences in mortgage rate quotes for borrowers with certain combinations of risk factors.  These include things like investment properties, cash-out, higher loan-to-value ratios, and the like.  The all-time low rates seen in 2012 (and almost again in 2016) were much lower than what these off-the-beaten path scenarios are seeing today.

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Mortgage Rates Are Headed Higher (Eventually)
Fri, 26 Jun 2020 20:44:00 GMT -

The fates of the economy, the housing market, and interest rates remain closely intertwined with coronavirus.  The pandemic is clearly responsible for the record-setting drop in economic activity (including the housing market).

If the market finds a reason for stocks and bond yields to move higher, mortgage rates are increasingly likely to follow.  

So will the market find that reason?  Again, we already know THAT it will.  We just don't know WHEN it will.  That answer depends entirely on coronavirus.  The point is to be ready to react when that happens. 

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Mortgage Rates Reflecting Market Concerns
Thu, 25 Jun 2020 20:13:00 GMT -

Mortgage rates moved modestly lower today, bringing the average lender very close to all-time lows.  The caveat continues to be that day-to-day rate changes have been small ever since hitting the confirmed all-time lows on June 11th.  Realistically, if you locked in a rate any time in the past 4 weeks, you did very well.  The same is true today, and it will continue to be true as long as the broader financial market remains concerned about the resurgence in covid-19 cases in several states.

Mortgage rates are primarily driven by the bond market.  They share many similarities with US Treasuries.  When investors are feeling cautious or seeking to prevent the loss of capital, the bond market offers a safe haven.  When demand for bonds increases, bond prices rise and bond yields fall.  "Yield" is another word for "rate."  In other words, the more investors want to buy bonds, the more we see downward pressure on rates, all other things being equal.  

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Record Low Rates For Some; Frustration and Confusion For Others
Wed, 24 Jun 2020 19:26:00 GMT -

Mortgage rates moved modestly lower today, but face an uphill battle in general.  They fell very quickly as coronavirus first hit financial markets.  They hit multiple new all-time lows in since March 9th and continued setting new records as recently as last week for some lenders.  In fact, there are a few lenders that are offering their best rates ever TODAY.  The catch is that these rates are very similar to those seen yesterday and the day before (and so on and so on).  Markets are waiting to see if we can prevent a massive 2nd wave of coronavirus cases while still reopening the economy.  To whatever extent that's possible, rates should begin to see gradual upward pressure.

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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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