Mortgage Rates Newsletter - Market Analysis

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

Rates Reacted to Jobs Report, But Not Like You'd Expect
Fri, 07 May 2021 23:59:37 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. Indeed, there was a very big reaction . Economists were expecting the
Mortgage Rates Are Low and Stable, But Face Bigger Risks Tomorrow
Thu, 06 May 2021 20:35:53 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. With all of the above in mind, our potential 7th winning day in a
Mortgage Rates Sideways Near 2-Month Lows
Wed, 05 May 2021 20:19:43 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
Mortgage Rates Fairly Steady Near Recent Lows
Tue, 04 May 2021 20:52:07 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
Moment of Truth For Rates and Housing
Fri, 30 Apr 2021 22:10:21 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. The 10yr Treasury yield (the quintessential benchmark of broad longer-term rate momentum) does a better job of showing this week's modest
Private Mortgages

Private Mortgages

5 tips for doing a private mortgage

It's tough to find certificates of deposit that pay 2% a year. But if you're a bank lending to 30-year fixed-rate mortgage borrowers, you can earn 4%. At I Want a Better Mortgage, our specialists can help cut through the red tape and help you succeed in getting the loan you want.

Wouldn't it be great to be a bank?

Pros and cons

When Pittsburgh accountant and attorney James Lange bought his mother's house, he paid her half the purchase price over time, using what's often called a family or private mortgage. The transaction, he says, "worked out beautifully."

Yet he sounds a note of caution. "With this one, I've seen more problems than good situations," Mr. Lange warns. "If it's a choice between making a car payment and paying Dad, the kid will make the car payment, because Dad isn't going to foreclose."

Failing to pay is clearly the biggest potential problem—and it could have financial reverberations. If the child miss's payments, the parents will likely want to make it up to their other children, either by making gifts or adjusting their estate plan.

Even if the child pays on time, the deal may create family tension, perhaps because the parents start questioning the child's financial decisions or because the child fears their disapproval. On top of this, the child's regular mortgage payments won't help his or her credit score. To set up the private mortgage, you may need legal help—and the attorney involved could charge a hefty sum, given that this isn't your typical real-estate deal.

Set against these pitfalls are some key advantages. "It saves on closing costs and private mortgage insurance," notes Allan Roth, a financial planner in Colorado Springs, Colo. "I've set it up as a win-win, where the kid gets a low-cost mortgage and the parents get cash flow. But I've also done it as a wealth transfer, so you charge the lowest interest rate the government allows."

Five Tips

I have mentioned the notion of private mortgages to many folks, and the reactions are all over the place. Some think it's financially foolish. Others find the idea clever. Are you among those who are intrigued? Here are five tips:

You have to charge interest

To avoid tax headaches, you need to collect at least a minimum amount of interest, which is the IRS's "applicable federal rate."

You'll need a promissory note

This spells out the terms of the mortgage, including the interest rate and the repayment period.

You'll need a deed of trust

Also known as a mortgage or security deed, this establishes that the loan is secured by the property and the lender has the right to take the property back, should the borrower fail to pay. For your son or daughter to deduct the loan's interest payments, the deed of trust needs to be recorded with the appropriate local authority.

All this might sound complicated, but there's a four-year-old firm, National Family Mortgage, that will do the necessary paperwork for $725. The Waltham, Mass., company will also oversee payments for a fee of $15 a month and up, including providing monthly statements and annual tax reporting. "For a lot of families, it's all about keeping this relationship as business-like as possible," says National Family Mortgage's chief executive, Timothy Burke.

Get title insurance

Your child should talk to his or her attorney about getting title insurance, but you might save money by not bothering with a separate lender's policy, Mr. Burke says.

Think through the risks involved

As a rule, if your child couldn't qualify for a mortgage from a bank, you probably shouldn't be lending, either. Sure, there may be circumstances that you know about that perhaps a bank would be reluctant to consider. For instance, maybe your daughter is about to graduate and start a well-paying job.

You also shouldn't write a private mortgage if you can't afford to lose the money involved.

Pros and cons of private-mortgage loans

The problem for most borrowers in recent years hasn't been low mortgage rates, it has been the strict lending requirements imposed by most lenders. If you're having trouble qualifying for a conventional mortgage, a private-mortgage lender may be an option.

Private money funds, also known as "hard money," usually come from private investors or private lending companies who are willing to loan homebuyers money to purchase a specific property.

Homebuyers can often find these lenders by joining a real estate investment club in their area, Martin says, but these loans are most often secured by home investors. Unfortunately, not every homeowner will be successful getting money from a private lender.

Here are the pros and cons regarding private mortgage loans:

Pro: Easy to qualify

The loans could be a great option for homebuyers who are not able to qualify for a traditional mortgage because of less-than-perfect credit, debt or for self-employed individuals who can't always provide proof of a steady income.

The underwriting of the hard money loan is not so 'person' focused as it is 'property' focused. A person with poor credit can get a hard money loan if the project shows a likely profit."

Con: Short payback period

Private loans aren't paid back over 30 years like a traditional mortgage. Many private-money lenders expect the loan to be repaid within an extremely short time period, such as six to 12 months

Private lenders are often looking for a quick return for their money, and they usually aren't set up to service a loan for several years the way a typical mortgage company is.

For this reason alone, most homebuyers should look elsewhere for mortgages.

Pro: Great for 'flippers'

However, you might consider such a short repayment period if you plan to sell or "flip" the house within that timeframe, or expect to be able to qualify for a conventional refinance within a few months after acquiring the property.

If you plan to make extensive renovations in a short time period that will boost the value of the home, it is possible that you could sell or refinance the property fairly quickly.

Pro: Geared toward 'fixer-upper' properties

Homes that need extensive renovations generally can't qualify for conventional mortgages, no matter how good the borrower's credit is. In those cases, private money can play an important role, he says.

Some vacant homes may have been vandalized or someone may have stolen the plumbing. A private lender could step in and provide financing to get the house in sellable condition, and then "flip" the house.

Con: High interest rates

Interest rates are much higher with private-money lending than with conventional loans, Curtis says. In fact, mortgage rates are sometimes more than double typical 30-year mortgage rates, often 12 to 20 percent per year, he says.

Mortgage rates are so high because private lenders don't usually require perfect credit. Loans from private lenders are generally secured by the property in question, so it's usually not as important to the lender if the borrower has pristine credit.

Pro: Short approval process

If you have a house that you believe is a candidate for a private loan, the approval process often takes just a couple of weeks, as opposed to 30 to 45 days for a conventional loan.

For many borrowers, getting a loan that quick is a good tradeoff for higher interest rates. Private money lenders don't require a long drawn-out loan process like a conventional mortgage does.

If you have a house you want to rehab, and you feel that you could improve it enough to boost its worth in a short period of time that would allow you to pay off a private loan and replace it with a conventional refinance or sale, then getting a private loan is a viable option.

As long as you understand the caveats and do your research, it is possible to successfully secure a property without a conventional loan.

Having problems securing a mortgage? You're not alone. There are many reasons why someone may fall outside of the borrowing guidelines of institutional lenders. At iWantaBetterMortgage, we can help find the right lender for you.

Whether you have less than perfect credit, a reduced income, or a life event that has impacted your current financial situation, a private mortgage may be an option for you.

We'll sit down with you and discuss your current situation, and we'll look into financing options that may be suited to your needs.  Star your search at I Want a Better Mortgage.

 

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