Mortgage Rate Watch

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

Mortgage Rates Tiptoe Near Multi-Year Lows
Mon, 27 Jan 2020 22:05:00 GMT -

Mortgage rates continued lower to start the week as Wuhan Virus continues to be diagnosed at an exponential rate.   As we discussed last week, interest rates in general should continue to take cues from the spread of the virus.  Why are rates being driven by something that doesn't seem to be at all related to rates?  Simply put, the global financial market is accounting for the impact that a potential epidemic disease could have on the global economy.  A weaker economy generally promotes lower stock prices and lower bond yields (aka rates).  

This raises risks and opportunities for prospective mortgage borrowers.  If the virus situation continues to get worse before it gets better, rates could certainly go even lower. 

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Mortgage Rates Drop to 4.5-Month Lows on Virus Fears
Fri, 24 Jan 2020 22:25:00 GMT -

Mortgage rates moved meaningfully lower over the past 2 days as panic over the coronavirus outbreak continues affecting financial markets.  If this epidemic ends up being similar to SARS in 2003, it ultimately won't be worth as much of a drop in interest rates as we've seen so far.  But the thing about brand new strains of deadly viruses is that neither the market nor the medical community knows exactly how this will unfold.  Until that picture becomes clearer, the market is preparing for more dire outcomes. 

For whatever it's worth, the timeline of the SARS outbreak spanned 2 calendar years (2002 - 2004) but the most notable market impact was confined to the space of a single month (March 2003).  

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Mortgage Rates Maintaining Longer-Term Lows For Now
Wed, 22 Jan 2020 21:22:00 GMT -

Mortgage rates remained in line with 3-month lows today for the average lender.  Several lenders offered marginally better terms compared to yesterday, but in those cases, the only changes were to the upfront costs associated with the same rates quoted yesterday. 

It's a pleasant surprise to see rates as low as they are considering several economic reports have been quite strong recently.  In general, stronger economic data tends to put upward pressure on rates.  That was a risk today with today's Existing Home Sales report coming in at the best levels since early 2018.  But econ data isn't the only consideration for the bond market that underlies day-to-day rate movement. 

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Mortgage Rates Back to 3-Month Lows
Tue, 21 Jan 2020 22:08:00 GMT -

Mortgage rates dropped to begin the holiday-shortened week as markets expressed a bit of panic over the coronavirus outbreak in China.  This is similar to the SARS outbreak in 2003, which certainly had an impact on both stocks and bonds.  While it's too soon to know if the new iteration of the disease will run a similar course, it's not too soon for markets to begin heading in that direction preemptively.

Specifically, fears surrounding the outbreak lead investors to expect commerce, in general, to take a hit.  Sure, the average person may not change their daily routine because of Coronavirus, but many will (and have).  A decrease in the level of commerce implies lower stock prices.  Simultaneously, investors can seek safe havens for their money in the sovereign bond market (such as US Treasuries). 

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Mortgage Rates Off Recent Lows
Fri, 17 Jan 2020 23:48:00 GMT -

Mortgage rates moved slightly higher over the past two days as strong economic data and corporate earnings coaxed investors into riskier assets like stocks.  Bonds (which dictate interest rates) are always being bought and sold, but demand varies depending on investors' risk appetite.  If demand for bonds falls as it has in the 2nd half of this week, rates move higher.

Fortunately, this move has been very small in the bigger picture.  Mortgage rates, specifically, have moved even less than rates associated with other bonds.  The average lender is still able to offer 30yr fixed rates of well under 4% on top tier scenarios.  And the average borrower wouldn't see more than 0.00125% of difference from the lowest rates in more than 3 months.  Bottom line, while rates are slightly higher than their best recent levels, you'd have to go back to early October or before to see anything significantly better.

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Mortgage Rate Volatility Still a No-Show For 2020
Wed, 15 Jan 2020 19:37:00 GMT -

Mortgage rates improved modestly today, adding to yesterday's slightly less compelling improvement.  Taken together, they keep an air of calm and steady progress intact during a week that ran the risk of stumbling across volatility. 

One of the key sources of potential volatility was today's signing of the US/China "phase 1" trade deal.  Granted, it was only much of a risk in the event that something unexpected happened.  Needless to say, nothing unexpected happened!  Mortgage rates and the underlying bond market reacted accordingly as they merely went about their business for reasons known only to the traders pushing the buttons behind the scenes (i.e. market movement was so well contained today that we're not able to connect any underlying events with the movement). 

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Mortgage Rates Face More Volatility Later This Week
Mon, 13 Jan 2020 22:32:00 GMT -

Mortgage rates didn't do much today, and that's good enough news considering the average lender is closer to the lower end of the rate range since early October.  The only counterpoint would be that there isn't much distance between the highs and the lows during that time (not a bad thing, just a bit of context).   In other words, rates are "pretty close" to the lowest levels of the past several months, but they're also not too far from the highest levels.  

Rates move when the underlying bond market moves, and it's not uncommon to see a slow start on Monday's that lack meaningful data or headline developments (like today).  Potential volatility will be increasing from here, however, with several important economic reports by Thursday morning along with the signing of the US/China phase 1 trade deal on Wednesday.  There's a chance we'll see some upward pressure on rates if ...

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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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