What’s Ahead For Mortgage Rates This Week-September 30, 2013

Last week broumortgage ratesght a variety of housing related news. Highlights included the S&P/Case-Shiller Home Price Index for July, which showed a 12.40 percent year-over-year increase in national home prices. This was up from 12.10 percent in June.

The FHFA Housing Price Index reading traces home prices on properties securing mortgages owned or backed by Fannie Mae and Freddie Mac. The year-over-year reading for July showed an increase of 8.80 percent as compared to a year-over-year reading of 7.80 percent in June.

Rising mortgage rates and rising home prices have caused some buyers to leave the market, while others are jumping in before mortgage rates move higher. Pent-up demand for homes and short supplies of homes for sale are expected to sustain buyer interest and home prices.

The Consumer Confidence Index for September fell to 79.70 percent for September as compared to August’s reading of 81.80 percent, but was slightly higher than the expected reading of 79.50 percent.

Sales Of New Homes Surpass Expectactions

Sales of 421,000 new homes in August surpassed expectations of 420,000 sales and the revised number of 390,000 sales of new homes in July. A short supply of existing homes for sale is attracting buyers to new homes.

Freddie Mac’s weekly Primary Mortgage Market Survey provided good news as average mortgage rates fell. The average rate for a 30-year fixed rate mortgage was 4.32 percent as compared to last week’s 4.50 percent.

The average rate for a 15-year fixed rate mortgage was 3.37 percent as compared to last week’s reading of 3.54 percent. Discount points were unchanged at 0.70 percent.  The average rate for a 5/1 adjustable rate mortgage was 3.07 percent, which was four basis points lower than last week. Discount points were unchanged at 0.50 percent.

Pending home sales fell by 1.60 percent in August as compared to July; the National Association of REALTOR cites higher home prices and mortgage rates along with depleted supplies of available homes as reasons for fewer signed contracts in August.

The West reported a drop of 1.60 percent in pending sales and the Midwest reported 1.40 percent fewer pending sales in August. The Northeast came out ahead with 4.00 percent more pending home sales in August.

Weekly jobless claims were reported at 305,000 new jobless claims as compared to expectations of 327,000 new jobless claims and the prior week’s reading of 310.000. The Federal Reserve recently cited the national unemployment rate of over seven percent as a clear indication that employment levels are not recovering quickly.

Next Week’s Economic News

While few housing and mortgage related reports are set for release next week, the calendar should provide indications of overall economic conditions. On Tuesday, Construction Spending for August will be released. Wednesday brings the ADP employment report for September. This report tracks private sector jobs.

Thursday brings Freddie Mac’s PMMS report of average mortgage rates and the weekly jobless claims report.

The federal Non-farm Payrolls and National Unemployment Reports for September are set for release on Friday.

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Simple Mortgage Definitions : Pre-Qualification And Pre-Approval

pre-approvalThe National Association of REALTORS® reports that roughly one-third of all homes are purchased with cash. The remaining two-thirds of buyers use mortgage financing.

For buyers using financing, getting a mortgage can be like everything else — in order to get the “best deal” possible, you have to get prepared.

Getting prepared can start with answers to these important questions :

  • “How much can I reasonably contribute toward a down payment?”
  • “How much am I comfortable spending on housing each month?”
  • “How long do I plan on maintain this home as my primary residence?

Then, once you can answer these questions, you’ll likely want to know whether a bank will approve your mortgage request. There are two ways to find out — one “good” way and one “excellent” way.

The good way is via pre-qualification. The excellent way is via pre-approval. Here’s what you need to know about both.

Why Is It Good To Get Pre-Qualified?

Getting pre-qualified for a mortgage is a quick and easy process. Via phone, email or internet, your lender will ask you for some basic information about yourself and — based on what you share — you can know whether you qualify for a mortgage.

Pre-qualification questions vary by lender but often include the following :

  • What is your annual income?
  • What is your credit score or credit rating?
  • Have you recently become self-employed?
  • Do you own more than 25% of a business?
  • How much money do you have “in the bank”?

Your lender may also ask whether you’ve had a bankruptcy, short sale or foreclosure within the last few years; and whether you’re a U.S. citizen.

The answers to these questions can a help a lender determine for what mortgage programs you may be eligible. For example, if you have very little money in the bank and plan to buy a home with 2-units or more, your lender will limit your pre-qualification to FHA mortgages and VA loans.

Similarly, if your credit rating is high with no outstanding judgments or liens, your lender may pre-qualify you for a wide range of mortgage products which are unavailable to buyers with low credit rating.

Based on the information you share, your lender will also assign your purchase to a maximum purchase price.

The strength of a mortgage pre-qualification is that it’s easy to process.

The weakness is that it’s only as good as the information given to your lender. You may think you’re telling your lender your income; or that you know your credit rating, but what if you’re wrong like so many buyers before you have been?

This is why pre-qualification letters are only “good”. They’re a non-verified guess of how much home you can afford. Guesses will do you very little good.

Pre-approvals are a better approach.

Why Is It Excellent To Get Pre-Approved?

Getting pre-approved for a mortgage takes more time than getting pre-qualified. The extra time pays off wonderfully, too.

In the mortgage pre-approval process, your lender will go deeper as compared to a prequalification. Instead of just being asked about your income, your assets, and your credit, you will be asked to prove it.

For example, your lender will ask about your money “in the bank” and whether it’s from your job; or, from a 401(k) withdrawal; or, from a cash gift for downpayment; or, from some other source.

The funds will be verified with bank statements.

Your lender will also ask to review your most recent W-2s and tax returns in order to confirm your “eligible income”. This figure is then compared to your credit report to determine your personal debt-to-income (DTI) ratio.

Debt-to-income is a key mortgage qualification standard.

Buyers with a debt-to-income ratio below 40% may be eligible for all available loan types include conventional financing, FHA and VA mortgages, and USDA. However, buyers with a DTI between 40-45% may be limited to products via the FHA or VA.

Pre-qualifications don’t verify debt-to-income. Pre-approvals do.

Pre-approvals also uncover hidden collections, judgments and liens which may stand between you and your approval.

More than 25% of Americans are harmed by “errors” on their credit report. If you turn out to be one of them, finding a credit report error after you’re under contract for home can carry significant costs — including the loss of your earnest money.

For all of these reasons, home sellers and their REALTORS® insist that home buyers submit a valid pre-approval letter along with their initial offer for the home.

Sellers don’t consider offers from people who haven’t taken the time to determine if they can even get approved for a loan in the first place.

This is why pre-approval letters are important. They’re typically required to even offer on a home.

Get A Binding Pre-Approval (For Free)

Sellers don’t accept an offer without an accompanying pre-approval letter. Thankfully, getting pre-approved is easy.

First, contact a lender. It can be any lender. It doesn’t have to be your “hometown” bank and it certainly doesn’t have to be the lender you’ll use when you ultimately get your home loan.

The important part is that you speak to a lender, and get the letter.

When you contact a lender, then, be open and honest about your financial background.

Today’s mortgage lenders perform tons of due diligence; much more than 10 years ago. Whatever you attempt to “hide” from a lender, they’ll ultimately uncover — and hiding information may be cause to deny your loan.

Even if it’s something as simple as a side-business you’ve recently started which currently earns absolutely no income, share it with your lender. Ultimately, the business may not affect your approval but let your lender determine what’s important and what’s not.

You should also alert the lender if you’re carrying non-credit reporting debts such as a personal loan from a friend or family member.

Lastly, allow the lender to “pull your credit”.

Credit checks can reduce your score but they represent a very small percentage of your overall FICO.

Many people believe that a credit check will affect your credit score by less than 5 points on a scale of 850 points. Without the credit check, though, you can’t be pre-approved, so let your pre-approving lender check it.

If you don’t have a lender to issue a pre-approval, you can get started with one here. There’s no cost to be pre-approved and there’s no obligation whatsoever.

What’s Ahead For Mortgage Rates This Week — September 23, 2013

What's Ahead For Mortgage Rates This Week – September 23, 2013Last week’s economic news was dominated by the Federal Reserve’s decision not to taper its $85 billion in monthly securities purchases.

Fed Chairman Ben Bernanke noted in a scheduled statement after the Federal Open Market Committee meeting that economic conditions were not yet adequately improved to withstand any decrease in the federal quantitative easing program.

The Fed also reaffirmed that the target federal funds rate would remain at 0.00 to 0.25 percent until the national unemployment rate reached 6.50 percent and inflation reaches 2.00 percent.

The national unemployment rate was 7.30 percent and the Fed projects that inflation will remain under 2.00 percent through 2015.

In both the FOMC statement and his press conference, Chairman Bernanke repeatedly emphasized that the Fed would take no action to reduce QE until the economy strengthens. No automatic reduction of QE purchases would take place without full consideration of the nation’s economy.

The QE program is intended to keep long-term interest rates low, and the announcement that QE would not be tapered brought mortgage rates down after they had increased by more than one percent since May.

Builder Confidence High, Mortgage Rates Lower

The National Association of Home Builders/Wells Fargo Housing Market Index for September revealed that home builder confidence in housing market conditions remained stable at 58; a reading of 59 was expected. Readings over 50 indicate that more builders are confident about market conditions than not.

Housing starts for August did not reflect the high level of builder confidence and fell short of expectations at 891,000. Expected housing starts were estimated at 921,000. There was good news in that August’s reading surpassed the July reading of 883 housing starts. Building permits for August also dropped to 918,000 against expectations of 955,000 and July’s reading of 954,000 building permits.

Higher labor and materials costs and concerns over tight mortgage credit and rising mortgage rates likely contributed to the lower than expected readings for housing starts and building permits.

Freddie Mac’s Primary Mortgage Market Survey reported that average mortgage rates dropped across the board on Thursday. The average rate for a 30-year fixed rate mortgage fell by seven basis points to 4.50 percent with discount points moving from 0.80 percent to 0.70 percent.

The average rate for a 15-year fixed rate mortgage fell by five basis points from 3.59 percent to 3.54 percent with discount points unchanged at 0.70 percent.

The average rate for 5/1 adjustable rate mortgage was lower by 11 basis points to 3.11 percent. Discount points were unchanged at 0.50 percent. This provides a break for home buyers who’ve been faced with rising mortgage rates and home prices amidst a shortage of available homes in many areas.

This Week

Economic news scheduled for this week includes the Case/Shiller Home Price Index for July, the FHFA Home Price Index also for July. New home sales and the pending home sales index will be released.

Freddie Mac will release its weekly summary of average mortgage rates and weekly jobless claims will also be released Thursday. The week will end with consumer related data including personal income and consumer spending for August along with the University of Michigan’s consumer sentiment index for September.

Thinking of Selling Your House? 5 Reasons to Do it Now

Many now realize that it is a great time to buy a home. Today, we want to look at why it might also be an opportune time to sell your house. Here are the Top 5 Reasons we believe now may be a perfect time to put your house on the market.

1.) Demand Is High

The most recent Existing Home Sales Report by the National Association of Realtors (NAR) showed a 17.2 percent increase in sales over July 2012; sales have remained above year-ago levels for 25 months. There are buyers out there right now and they are serious about purchasing.

2.) Supply Is Beginning to Increase

Total housing inventory last month rose 5.6% to 2.28 million

via Thinking of Selling Your House? 5 Reasons to Do it Now.

What’s Ahead For Mortgage Rates This Week – September 9, 2013

What's Ahead For Mortgage Rates This Week - September 9, 2013Last week was relatively calm due to the Labor Day Holiday on Monday providing little mortgage and housing related news. However, there were several positive indicators for overall economic conditions.

Construction spending rose by 0.60 percent in July and surpassed economists’ expectations of 0.30 percent and June’s zero percent growth. While this may seem a small increase, any indication that construction spending is increasing could indicate that residential construction is ramping up.

This would be good news for home buyers, who’ve been facing a shortage of available homes in many areas of the U.S.

The Fed Released Its Latest Beige Book Report

Federal Reserve districts reported rising consumer spending in most districts, modest expansion in manufacturing and moderate residential real estate sales. Higher mortgage rates may have dampened home buyer enthusiasm, but an ongoing shortage of available homes is also likely to have contributed to slower sales.

Mortgage rates will likely rise if the Fed tapers its $85 billion monthly purchase of mortgage-backed securities and Treasury bonds as demand for bonds is expected to decrease. When bond prices fall, mortgage rates usually rise.

ADP released its report on private sector jobs added for August; 176,000 jobs were added against expectations of 185,000 jobs added and July’s 198,000 jobs added. The three-month rolling average of private sector jobs added shows steady job growth as jobs added rose from 140,000 in May to 188,000 jobs for August.

Freddie Mac’s Primary Mortgage Market Survey reported that the average rate for a 30-year fixed rate mortgage rose by six basis points to 4.57 percent with discount points unchanged at 9.70 percent.

The average rate for a 15-year fixed rate mortgage rose by five basis points to 3.59 percent with discount points unchanged at 0.70 percent. The average rate for a 5/1 adjustable rate mortgage rose by four basis points to 3.28 percent with discount points unchanged at 0.50 percent.

According to the Bureau of Labor Statistics Non-Farm Payrolls Report for August, 169,000 jobs were created, which fell shy of expectations of 173,000 new jobs. Expectations were based on the original number of 162,000 jobs created in July, but July’s number was revised downward to 104,000 jobs created.

The unemployment report for August was 7.30 percent, down 0.10 percent from July’s reading of 7.40 percent.

The combination of higher mortgage rates, persistently high unemployment and fewer jobs created could signal the Fed to postpone its plan to start reducing its monthly securities purchases.

What’s Coming Up

This week’s scheduled mortgage and housing news is relatively flat, but Freddie Mac’s Primary Mortgage Market Survey will provide the last indication of mortgage rates’ direction before the FOMC meeting on September 18.

The Fed will also likely be watching the Weekly Jobs report and the University of Michigan’s Consumer Sentiment Index as part of its decision-making process on whether to taper or maintain current QE securities purchases.