Crucial Week for Mortgage Rates: July 30, 2012

Mortgage rates are facing a crucial week.  After last week produced the largest increase in rates in almost a year, all eyes will be watching this week to see if an upward trend is indeed in place or we revert to near all-time lows.

What happened last week was a result of European leaders showing their determination to preserve the European Union. Mortgage rates jumped Thursday and Friday as investors sold positions of relative safety, including bonds, and moved their money into stock markets.

Mortgage rates closed the week at a 14-day high and, if not for last week’s GDP figures, conforming mortgage rates would likely have closed even higher.

The Commerce Department said GDP slipped to +1.5% last quarter, down from +2.0% from January-March. The slowdown suggests that the U.S. economy may not meet analyst’s 2012 projections, and gives the market hope that the Federal Reserve will add new stimulus at its scheduled, 2-day meeting this week.

The Fed meeting is just one of the story lines affecting mortgage rates this week. For rate shoppers nationwide, it will be a risky week to float a rate.

For a brief run-down of the events of the week :

  • Wednesday afternoon, the Federal Open Market Committee adjourns. Wall Street believes that the economy has slowed enough to justify new market stimulus. It’s unclear whether the Federal Reserve agrees. If new stimulus is added, and if the package is sufficiently large, mortgage rates should drop. Otherwise, mortgage rates should rise.
  • Thursday, the European Central Bank meets, after which the ECB is expected to announce an aid package for Spain, and a general plan to hold the European Union together. If the plan is well-received by markets, mortgage rates will rise. If the plan is panned, mortgage rates will fall.
  • Friday, the Bureau of Labor Statistics releases its July Non-Farm Payrolls report. Economists expect 100,000 jobs created in July. If the actual figure falls short, mortgage rates should fall.

It’s important to understand that each of these three events represents major risk to rate shoppers. Mortgage rates will be volatile this week, and that volatility is expected to continue until mid-September, at minimum.

If you’re shopping for a mortgage, therefore, the longer you wait to lock, the bigger your mortgage rate risk. Especially with rates at all-time lows; rates have been falling for so many weeks, there’s a lot of ground to cover on the way back up.

Too Good To Be True?

Too good to be true?

You’ve scraped together a down payment, with just enough money left over to pay closing costs. What you’re unlikely to have, as a first-time homebuyer, is a big pot of cash to pay for repairs — or a clear understanding of how much certain home flaws can cost you down the road.

With that in mind, I consulted with appraisers and inspectors from across the country to uncover the major home problems first-time homebuyers should watch out for and avoid.

Novices should be particularly cautious about “bargain” homes, according to appraiser Dan Fries, of Daniel Fries & Associates in Cumming, Ga. They may come with problems that are expensive to repair or impossible to fix.

“Avoid the killer deal, as the chances are good there is some issue that made the other owner walk,” said Fries. “Buying a dog of a house will always be less desirable than the cream puff with a good location.”

Read on for some of the bigger issues to beware.

7 Steps to Buying a Home

So you’ve decided that you want to buy a new home – but are you ready to do so? This article will give you the steps towards helping you decide, so that you can either begin preparing yourself for a home purchase later on, or kick start an easy house hunting experience!

1. Before all else, define your current financial status.  This includes your current monthly net income, current monthly expenses and any other resources you may have in savings.  By figuring out what you have to work with each month, you’ll be able to budget how much you’ll be able to afford for a monthly mortgage payment.

2. In addition, make sure to check your credit score before you do any big steps towards finding a new home.  An old item you may have forgotten about or even a mistake you didn’t realize was on there could be hurting your score and potentially your future home loan.  By checking it ahead of time, you’ll be able to identify any problems ahead of time and correct them before moving forward with Life’s Biggest Purchase.

Hint: Get your report from three main credit reporting agencies to make sure your report is correct.

3. From the above two steps, decide how much you can afford when it comes to a mortgage payment.  If you want some additional help, call me and I can go over various options with you.

4. Once you’ve figured out how much you can afford and still are deciding to move forward in your preparation towards becoming a home owner, you should sit down and decide what you want in a home.

Are you looking for a specific size?  Does the home need to have a certain amount of rooms?  Are you hoping to have special amenities such as a garage, general design or type of lot?

Most importantly, what location are you considering to live in?

All your home qualities should be addressed and in the back of your mind for the remainder of your home buying experience.

5. Now it’s time to get in touch with a real estate agent!  A real estate agent can help you prioritize the list you came up with in step four and among other things.  I can recommend several realtors if you are not already working with someone.

6. No matter how prepared you are at this point, you should make sure you get a mortgage pre-approval (not a pre-qualification, there is a difference).  A pre-approval will not only allow you to discuss what mortgage options may be best for you once you find your home, but will help you appear more serious to the sellers you come across.  Call me to get started on your pre-approval.

7. And of course the last step is to enjoy the house hunting experience!  Make sure you check out several houses before making a decision, even if you find your dream home right away.  It’s one of the most common mistakes made by emotional homebuyers – something you definitely do not want to be.

Is There a 3.8% House Seller Tax in the Health Care Bill?

by The KCM Crew on July 17, 2012

The political rhetoric surrounding the presidential election has renewed the debate about the Administration’s Health Care Bill. We are again getting many questions about a possible 3.8% tax on home sales that some claim is in the bill. To answer these questions, we have decided to re-run a blog we posted earlier this year. – The KCM Crew

We have received many questions about a possible 3.8% tax which will be put on home sales beginning in 2013. We want to do our best to clarify this situation for everyone. We are not accountants and give you this information just as a simple answer to the misconception. Understand that, when it comes to IRS regulations, you should check with your accountant for the most accurate and up-to-date information.

A little history on the confusion

Fact explains it this way:

The truth is that only a tiny percentage of home sellers will pay the tax. First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won’t apply to the first $250,000 on profits from the sale of a personal residence — or to the first $500,000 in the case of a married couple selling their home.

We can understand how this misconception got started. The law itself is couched in highly technical language that only a qualified tax expert can fully grasp. (This provision begins on page 33 of the reconciliation bill that was passed and signed into law.) And it does say the tax falls on “net gain … attributable to the disposition of property.” That would include the sale of a home. But the bill also says the tax falls only on that portion of any gain that is “taken into account in computing taxable income” under the existing tax code. And the fact is, the first $250,000 in profit on the sale of a primary residence (or $500,000 in the case of a married couple) is excluded from taxable income already. (That exclusion doesn’t apply to vacation homes or rental properties.)

The Joint Committee on Taxation, the group of nonpartisan tax experts that Congress relies on to analyze tax proposals, underscores this in a footnote on page 135 of its report on the bill. The note states: “Gross income does not include … excluded gain from the sale of a principal residence.”

And just to be sure, we checked with William Ahern, director of policy and communications for the nonprofit, pro-business Tax Foundation. “Some home sales would see a tax increase under this bill,” Ahern told us, “but it would have to be a second home or a principal residence generating [a gain of] more than $250,000 ($500,000 for a couple).”

Click on this link to see the rest of the article: KCM Blog


July 1st Storms

Here are some pictures from the recent storm that hit Wheaton.  All told we lost 5 trees and heavy damage to two others.  The fence in our backyard is down but doesn’t look too bad.  The tree that landed on the roof caused some minor damage to the shingles and gutter but it hasn’t rained so no leaking at this point.

I am extremely thankful that it wasn’t worse.  I was watching out the front window when the micro burst hit.  I really thought I was looking at a tornado about to hit my house so after a few seconds of panic I realized it was going to be okay.  Trees can be replanted, fences and roofs repaired.  The family is okay and that’s all that really matters.

It’s moments like this that you really appreciate having great neighbors and friends.  Within a short period there were a handful of us out with our chainsaws cutting down our own limbs as well as helping each other with the larger trees.  Everyone pitched in and made a bad job that much better.  A big thanks to all my neighbors and friends who offered to help cut, haul, cook for us, etc.  Everyone’s lives are extremely busy but I still had 6 guys taking time yesterday (4th of July) to help me finish the job.