Mortgage Rates Newsletter - Market Analysis

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

Mortgage Rates Move Up Despite Market Gains
Tue, 23 Apr 2019 20:13:16 GMT - When bonds make "gains," it means that bond prices are moving up. The price of a bond is like the amount that a lender is willing to pay for the right to collect a certain amount of interest. The more the lender is willing to pay, the lower that lender's "yield" will be. Looked at another way, the lower your interest rate would be in the case of a lender making you a mortgage loan. For that reason, we expect to see mortgage rates fall when bonds are making gains (mortgages are based primarily on bond prices/yields). But in today's case, rates went a bit higher even though bonds improved. As is often the case, the discrepancy results from the timing of bond market movement over the past few days. Bonds weakened yesterday and rates logically moved higher. The catch is that bonds continued to
Mortgage Rates Modestly Higher to Start The Week
Mon, 22 Apr 2019 21:40:37 GMT - Mortgage rates were higher again on Monday, but just barely. The average lender was still in worse shape on Tuesday or Wednesday of last week when rates were the highest they'd been in about a month. Rates reflect demand in the bond market. Bonds can be bought or sold for a variety of reasons, but one of the key reasons is the general levels of fear and optimism surrounding the economy. When investors are less certain about positive economic outcomes, they tend to buy more bonds. This results in rates moving lower. That sort of uncertainty reached a bit of a boiling point at the end of March when the Fed called out economic uncertainty in Europe and China as one of the biggest risks to the global economic outlook. Since then, however, some of the data suggests the sky may not be falling just
Mortgage Rates Recover Modestly After Big Losing Streak
Thu, 18 Apr 2019 18:32:19 GMT - Mortgage rates have generally been moving higher since March 28th after they bottomed out at the lowest levels in well over a year. At the time, investors were tuned-in to the Fed's concerns about the global economy. Granted, the US economy might not have been suggesting an imminent recession, but that was far more difficult to say about China and Europe. Both economies were clearly decelerating by the end of 2018 and into the first few months of 2019. That deceleration was the biggest risk factor for the global economy and the biggest boon for mortgage rates. Weak European economic data at the end of March helped drive the long-term low rates on March 27th. But that marked the apex of panic. We haven't seen any data quite as alarming since then and thus, the gradual increase in rates (economic
Mortgage Rates Quickly Find Themselves at 1 Month Highs
Wed, 17 Apr 2019 21:06:05 GMT - Mortgage rates continued higher for the 5th day in a row today. This brings the average lender to the highest levels in exactly one month. At issue: a series of stronger economic reports at home and abroad have eased concerns about global growth. Not only is a strong economy associated with higher rates in general, but those "concerns" were a big part of the Federal Reserve's decision to be more bond-friendly back in March. With concerns arguably lessened by recent data, investors may be assuming the Fed won't be quite as bond friendly going forward. All that having been said, the Fed is NOT likely to make any big changes after one solid month of global economic data. The most immediate cause for pressure toward higher rates came overnight in the form of Chinese economic data. Along with Europe
Mortgage Rates Highest in Nearly a Month
Tue, 16 Apr 2019 21:12:30 GMT - Mortgage rates rose again today, albeit at a slightly slower clip compared to yesterday. Still, that's little consolidation considering this is the 4th straight day spent moving in that unfriendly direction. The average lender is now back to levels not seen since March 19th. On the bright side, March 19th's rates were the lowest in more than a year at the time. So what's going on? In general, the month of March saw the confluence of 2 great things for rates. Not only was there a generally high level of concern/uncertainty surrounding the global economic outlook, but the Fed was also surprisingly helpful. This was a bit of a double-edged sword because the Fed's helpfulness was predicated on that same sort of concern/uncertainty. In other words, if events unfold in such a way as to ease that
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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