3 Financial Reasons To Buy Now

Here are three great financial reasons why you should not wait before taking the plunge into homeownership.

1. The 30-Year Mortgage May Disappear

There has been much debate regarding government’s role in providing support for homeownership. There are several experts who believe if Fannie Mae and Freddie Mac’s roles are eliminated, or even limited, it may be the end to the 30-year mortgage. This concern is addressed in MSN Real Estate’s, Is it curtains for the 30-year mortgage?

2. QRM Requirements Could Be Much More Stringent

Here are proposed changes to the requirements for a ‘qualified residential mortgage’:

· Certain mortgage types would be eliminated

· You would need to put a minimum of 20% down

· You would need a minimum 690 FICO score

· The ratios of income to both the mortgage payment and overall debt would become much more conservative (28% and 36%)

There would be loans available to purchasers who don’t qualify under the new rules. However, they will probably be more expensive to the buyer (both in rate and costs).

3. Rents are Expected to Increase

The supply of available rentals is decreasing and the demand is increasing. That will lead to an increase in rental costs throughout the year. The Wall Street Journal recently quoted a report by Reis, Inc in which it states, “Expect vacancies to continue declining, and rents rising through the rest of 2011 at an even faster pace.”

Bottom Line

You may be waiting on the sidelines to see if prices will continue to depreciate before you purchase a home. The mortgage expense is a major piece in the overall financial picture of homeownership. Make sure you consider it when timing your decision.

Mortgage Market Guide – July 25th, 2011

“The heat is on.” The title of that Glenn Frey song not only applied to the sweltering temperatures around much of the nation last week, it also applied to the debt ceiling debate, as the heat was on our leaders in Washington to finalize a solution to our debt situation. Why is this important? Read on for details.

It only takes a look at what is happening in Europe these days to understand why it’s crucial that the United States finds a solution to the debt ceiling issue. Not only have eight European banks recently failed a stress test, but last week there was news that Greek, Italian, Portuguese, and French “credit default swaps” (which are insurance policies against default) were trading at record levels. While the European Union is continuing to work to contain Europe’s debt problems and prevent a default in Greece (and elsewhere), these events bode a very important lesson for the US.

Why? Because solving our debt ceiling debate and finding a long-term plan for lowering our deficit and being fiscally sound will raise confidence in our debt and help the US keep its AAA credit rating from the various credit rating firms like Moody’s and Standard and Poor’s. This will help investors continue to see the US as the ultra safe haven for their money, which is a key aspect of our continued economic recovery.

Speaking of our economic recovery, there was some good news last week for the housing sector, as June Housing Starts and Building Permits were both reported better than expected. While this is only one number and one number doesn’t make a trend, this is a good figure, and I will be watching closely for follow through in future readings.

If you’ve been thinking about buying or refinancing a home, give me a call or send me an email to learn how you can take advantage of home loan rates that remain near some of the best levels we’ve seen this year. Or forward this newsletter on to someone you know who may benefit.

Forecast for the Week  
Earnings season continues, with reports from 3M, Ford, and Exxon, among others. Plus, a busy week is ahead when it comes to economic reports. Look for:

  • On Tuesday we’ll get an idea about how people are feeling about the economy with the Consumer Confidence Report.
  • Tuesday also brings a report on New Home Sales, which will be followed by the Pending Home Sales Report on Thursday.
  • Thursday also brings another weekly Initial and Continuing Jobless Claims Report. Last week’s Initial Jobless claims came in at 418,000, above the 400,000 mark for the 15th consecutive week. This leading indicator on job market health tells us that the labor market pains have not subsided.
  • Rounding out the week is a double read on the state of the economy with Wednesday’s Durable Goods Orders, which gives us an update on consumer and business buying behavior on big-ticket items, and Friday’s Gross Domestic Product Report, which is the broadest measure of economic activity.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

As you can see in the chart below, uncertainty in Washington and overseas caused volatility and anxiety in the markets last week, which put pressure on the Bond market and home loan rates. But remember, rates are still very attractive right now. Let me know if I can answer any questions for you.


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Chart: Fannie Mae 4.0% Mortgage Bond (Friday Jul 22, 2011)
Japanese Candlestick Chart

July 26th Moorings Column

Hello and welcome to this week’s edition of Moorings. Once again the main topic of conversation continues to be the United States Debt Ceiling which has still yet to be increased. The heat is definitely on legislators on both sides of the political aisle to come to a compromise and put this issue behind us. It only takes a look at what is happening in Europe these days to understand why it’s crucial that the United States finds a solution to the debt ceiling issue. Not only have eight European banks recently failed a stress test, but last week there was news that Greek, Italian, Portuguese, and French “credit default swaps” (which are insurance policies against default) were trading at record levels. While the European Union is continuing to work to contain Europe’s debt problems and prevent a default in Greece (and elsewhere), these events bode a very important lesson for the US.

 

Why? Because solving our debt ceiling debate and finding a long-term plan for lowering our deficit and being fiscally sound will raise confidence in our debt and help the US keep its AAA credit rating from the various credit rating firms like Moody’s and Standard and Poor’s. This will help investors continue to see the US as the ultra-safe haven for their money, which is a key aspect of our continued economic recovery.

 

Speaking of our economic recovery, there was actually some good news last week in the housing industry, as Building Permits and New Construction Starts were reported better than expected. While this is only one small piece of the puzzle, we’ll take every bit of positive news we can.

 

With that being said, interest rates continue to be at their lowest levels ever. A client looking to purchase or refinance a home with a thirty year fixed conventional mortgage can expect an interest rate of approximately 4.75% as of Monday. While this is a slight quarter percent jump from last week’s low of 4.5%, this is still a huge bargain for anyone looking for a home loan. It astounds me that we still have clients calling up who haven’t already refinanced their home when their rate is in the fives or even occasionally the six’s. The savings they get on a yearly basis is often in the thousands of dollars, not to mention the tax-benefit. Speaking of which, I thought I would bring up a conversation I recently had with a friend who wanted to pay off their thirty year mortgage as quickly as possible. He had a plan to pay it off in seven years by doubling up on payments and refinancing to a fifteen year. While this may be best for some, I would highly recommend that anyone considering paying off their mortgage talk to their CPA or tax specialists to determine if it’s really in their best financial interest. Well that’s it for this week, until next, Be Blessed and Numbers 6:24-26 be on you.

July 18th Moorings

Hello and welcome to this week’s edition of Moorings, your source for local and national news from the Mortgage Industry. Let’s jump right in to rates which have come down yet again to 4.5% for a thirty year fixed conforming loan. This is an exceptionally good deal for anyone looking to purchase or refinance a home. Rates have only been this low a handful of times in the history of the mortgage industry and anyone who doesn’t take advantage of this opportunity will surely regret it. As to why rates are so low, we jump over to the national economic news.

Obviously the biggest story on the news of late has been the ongoing struggle between democrats and republicans to agree or not to agree on whether or not the debt ceiling of the United States should be extended. In the simplest terms, this is a limit as to how much debt the country can go into, and congress must approve the end amount of debt allowed. With major economic issues like this that negatively impact the economy, investors move their money from riskier arenas like the stock market into more secure investments like mortgage backed securities. With this move come lower interest rates as there are more buyers of these packaged securities and therefore less risk.

On a separate topic, I wanted to discuss a rarely used loan program called Pledged Asset. This is a great program for borrowers looking to purchase or refinance higher value homes, whose assets and income may not be your standard W-2 income. A good example of a use for this program is a client with a great deal of money in stocks, bonds, mutual funds, etc., but they don’t necessarily have tons of cash on hand to buy a home. By utilizing this creative loan program, the client can “pledge” their assets that are tied up (and not normally utilized) as collateral when purchasing a home. This saves a client from needing to make liquid their investment portfolio which will inevitably make them more money than cash. In addition, a client can pledge their assets for another person such as a child or parent, you can get financing up to 90%, mortgage insurance may not be required in some cases, and you can defer capital gains since the investments are staying in place. Loan programs like this are designed for a borrower with a more complicated asset and income structure and it makes it all that more important for such a client to work with an experienced mortgage banker. When you are discussing making a huge investment such as a personal residence or vacation home, make sure your mortgage advisor knows the ins and outs of the guidelines of your mortgage program. At the end of the day it’s your name on the mortgage and you are responsible for it, so be comfortable with the decisions your making and the contracts you are signing. Well that’s it for this week, until next, Be Blessed and Numbers 6:24-26 be on you.