All day, every day, conforming and FHA mortgage rates are in flux. Rates move in response to hundreds of factors which exact varying levels of influence.
Among the biggest influences on mortgage rates is inflation. When inflation is unexpectedly high, mortgage rates tend to rise quickly. Conversely, when inflation is unexpectedly low, rates tend to fall quickly.
But what is inflation?
By definition, inflation is when a currency loses its value; when what used to cost $1.00 now costs $1.10.
As consumers, we recognize inflation by the items we buy on a daily basis becoming more expensive. However, it’s not that goods are more expensive — it’s that the dollars we’re using to buy them have become worth less.
With respect to mortgage rates, this is a big deal because mortgage rates are directly related to the price of a special type of bond called a mortgage-backed bond.
On Wall Street, mortgage-backed bonds are priced, bought, and sold in U.S. dollars so as inflation renders those dollars less valuable, so it does to mortgage-backed bonds as well. It’s a chain reaction by which mortgage bonds lose value, leading investors sell them, causing bond prices to fall on the excess supply.
And, because mortgage rates move opposite of bond prices, as inflation takes hold, mortgage rates rise.
The Cost of Living is up just modestly this year and it’s helping mortgage rates stay low. And, so long as it lasts, the cost of owning a home will remain relatively inexpensive.
Single-family housing starts plummeted to a one-year low in May, just 30 days after soaring to a 20-month high. It’s no wonder home builders are confused.
It’s the worst showing for Housing Starts sinceMay 2009, a surprise to builders and economists alike.
Furthermore, single-family Building Permits plunged in May, too — down 10 percent from April. A permit is a certification from local government that authorizes home construction.
Housing permits are a precursor to Housing Starts with 82% of homes starting construction within 60 days of permit-issuance. Fewer permits, therefore, directly reduces the number of new homes coming to market in the coming months.
For home buyers , this should create a sense of urgency.
Home prices are based on supply and demand and supply appears to be falling about the same time that economists predict a surge in home demand. It could spell rising home prices and a complete loss of negotiation power with home sellers.
For now, though, home affordability remains high with properties cheap and mortgage rates near all-time lows. If you plan to buy a home later this year, the May 2010 Housing Starts data may be a reason to move up your timeframe a bit.
If you plan to finance your home with a conforming interest only mortgage, get your loan application submitted no later than this Friday, June 18.
Starting next week, Fannie Mae is clamping down on the popular loan product.
An “interest only” mortgage is exactly what its name implies — a mortgage for which the monthly payments consist entirely of interest with no principal reduction. Because there’s no amortization, payments are less costly on a month-to-month basis.
For example, assuming principal + interest payments at 5 percent, a $250,000 mortgage carries a monthly payment of $1,342. The payment on a comparable interest only mortgage, however, drops to $1,042.
That’s a payment difference of $300 and the size of the cost savings, not surprisingly, is the biggest reason why Fannie Mae is making its changes.
In its official announcement, Fannie Mae says it wants the give the interest only option to “borrowers who are in a position to choose it as a financial management tool” rather than allowing homeowners use it as an affordability tool for their budgets.
Going forward, there are new minimum standards for interest only home loans.
Applicants must have a 720 credit score or better
Applicants must have at least 24 months of reserves
The property type may not be a 2-unit, 3-unit or 4-unit
The property must be a primary residence, or vacation home
Furthermore, only purchase and rate-and-term refinances are eligible. Cash out refinances are prohibited.
Interest only home loans aren’t for everyone, but if you plan to finance with a Fannie Mae mortgage and interest only is your preference, get your loan application submitted as soon as possible. Starting Monday, approvals will be tougher to come by.
Posted by Rosemarie Litoff on June 15, 2010 under Uncategorized | Comments are off for this article
In May 2010, Retail Sales at non-store retailers — a category that includes Amazon and eBay — topped $29 billion, up 16 percent from May 2009. Clearly, Americans are doing an increasing amount of shopping online. And we’re paying our bills online, too.
But how well are we protecting our identities?
In this 5-minute piece from NBC’s The Today Show, you’ll learn the basics of online fraud and methods to minimize the likelihood of identity theft. Furthermore, the tips go beyond the basic “choose a challenging password”. For example, you’ll hear about:
Why you shouldn’t pay bills from a coffee shop
Who might be hiding behind an unprotected public wifi network
The dangers of storing credit card numbers with an online retailer
And, although, at one point, the interviewee goes over the top with respect to spyware and anti-phishing prevention, the point being made is a good one — you can’t be too careful with your online financials and common sense goes a long way.
Posted by Rosemarie Litoff on June 14, 2010 under Uncategorized | Comments are off for this article
Mortgage markets posted four good days last week and one awful one. Unfortunately for rate shoppers , that one bad day outweighed the gains of the other four and mortgage rates worsened on the week overall.
Despite re-touching all-time lows on Tuesday and Wednesday, Conforming and FHA mortgage rates moved higher on the week.
There wasn’t much domestic data on which for mortgage markets to move so rates took their cues from global economic activity. Strong data from Japan and China, plus an improving outlook from the Eurozone, sparked optimism among Wall Street investors. Cash poured into the stock market and it happened at the expense of bonds — including the mortgage-backed ones.
Often, weak Retail Sales data causes mortgage rates to fall. Last week, however, that wasn’t the case.
This week, there’s cause for rates to rise again with Wednesday emerging as a “data day”.
First, at 8:30 AM ET, the government releases two key housing statistics and one major gauge for inflation — Housing Starts, Building Permits and Producer Price Index, respectively. Strength in any or all three should lead mortgage rates higher.
Then, at 5:45 PM ET, Fed Chairman Ben Bernanke makes a public speech and anytime Bernanke speaks, mortgage rates can move.
Mortgage rates remain unnaturally low and a lot of Americans have taken advantage already. If you’re a homeowner and you’ve wondered whether or not a refinance makes sense, talk to your loan officer straight away. Low rates like this can’t last forever so lock one in while you can.
Posted by Rosemarie Litoff on June 11, 2010 under Uncategorized | Comments are off for this article
Starting sometime later this year, the monthly cost to carry an FHA-insured mortgage is expected to rise.
In a near-unanimous vote, the House of Representatives gave the FHA power to raise the monthly mortgage insurance premiums it charges to its borrowers.
Currently, monthly mortgage insurance premiums are 0.55% of the unpaid loan balance, divided by 12. The recently approved Federal Housing Administration Reform Act provides for an increase in monthly premium of up to 1.55 percent, among other details of the bill.
Despite the ability to charge 1.55 percent, FHA officials say an increase to 0.90 percent would be sufficient to self-insure its loans.
In everyday terms, assuming a $200,000 mortgage, the math to a homeowner looks as follows:
Current Premium (0.55%) : $91.67 monthly mortgage insurance premium
Maximum Increase (1.55%) : $258.33 monthly mortgage insurance premium
A increase in monthly mortgage insurance premiums will reduce home affordability and strain household budgets.
The news isn’t all terrible, however.
Because higher monthly insurance premiums are expected to pad the FHA coffers sufficiently, the FHA has said it plans to reduce its upfront mortgage insurance premium paid at closing from 2.25 percent down to 1.000 percent.
On the same $200,000 mortgage, a move like that would reduces closing costs by $2,500.
The bill awaits companion legislation in Senate and final approval into law, but considering the House’s lopsided vote Thursday, it could happen rather quickly. If you’re planning to buy or refinance a home using an FHA mortgage, you may find that waiting to take the next step could be a costly one, long-term.
Posted by Rosemarie Litoff on June 10, 2010 under Uncategorized | Comments are off for this article
According to foreclosure-tracking firm RealtyTrac.com, bank repossessions reached record levels for the second straight month in May, topping 93,000 properties nationwide.
As compared to May 2009, all 50 states now show an increase in annual REO activity.
Furthermore, total foreclosure actions — the sum of REO, default notices, and foreclosure auctions in May — topped 300,000 for the 15th straight month.
Foreclosures remain a huge influence on the housing market.
However, two interesting trends emerged in the data:
9 of the top 10 metro areas for foreclosure posted annual activity decreases
Each of the top 4 states for Foreclosures per Household posted annual activity decreases
We can infer, therefore, that foreclosure activity may be in permanent decline in the areas hardest hit through 2007, 2008, and 2009. In 2010, the data shows, foreclosures are waning.
This is reason for optimism — especially as FHA delinquencies slow nationwide. As fewer homeowners go delinquent, the pace of foreclosures will slow further and that should help boost home values on every block in the country.
If you’ve been considered bank-owned homes for your own purchase, give a look at the RealtyTrac foreclosure report. It’s provides insight on a state-by-state level, and in the nation’s largest metropolitan areas.
Then, to complement your research, talk to your real estate about the foreclosure market and what opportunities may exist. Competition for bank-owned homes can be fierce at times, but there’s plenty of “deals” out there.
Posted by Rosemarie Litoff on June 9, 2010 under Uncategorized | Comments are off for this article
Mortgage rates may be dropping, but mortgage costs are not.
According to Freddie Mac, the average required discount points on a conforming mortgage rate are higher by 0.1 percent since early-May.
A “discount point” is prepaid mortgage interest; an up-front fee paid by a borrower in exchange for a lower mortgage rate. In most cases, discount points are tax-deductible.
Tax-deductible or not, though, rising costs are rising costs and Freddie Mac glosses over it. In its weekly press release, the government group offers mortgage rate comparisons to weeks prior, but doesn’t do the same for required points.
An increase of 1/10 percent in discount points costs homebuyers and refinancing households an extra $100 per $100,000 borrowed.
The hike reminds us that there’s more to a mortgage than just its rate — costs matter, too. And if you’ve only been watching the headlines, you would have missed how costs are rising.
Posted by Rosemarie Litoff on June 8, 2010 under Uncategorized | Comments are off for this article
A new loan quality initiative from Fannie Mae is making it harder for home buyers and refinancing homeowners everywhere to close on a mortgage.
Beginning June 1, 2010, with all new applications, Fannie Mae wants lenders to verify that borrowers have not taken on new debt during the underwriting phase of the mortgage.
If new debts are found, the mortgage is subject to a re-underwrite and a possible turndown.
For Fannie Mae, the goal is to reduce the number of loans that go bad because of new, non-disclosed debt. Lenders have the freedom to verify in whatever manner they wish, but in most cases, the verification process will amount to a credit re-pull made just prior to closing.
The underwriters will be looking for 3 things in particular — even after your loan is approved.
First, your updated credit report will show your current credit card bills and minimum monthly payments. Those numbers will replace your original numbers made at the time of application. If the debts exceed a certain threshold, your loan will be denied.
Second, underwriters will be looking at your updated credit score. If your FICO has dropped below minimum lending standards, your loan will be denied. Or, you may be subject to a new loan-level pricing adjustment.
Loan level pricing adjustments are mandatory loan fee based on your credit score.
And, lastly, underwriters will be looking at your credit report’s Credit Inquiry section. The goal is to see if you’ve been applying for credit elsewhere. Underwriters can use this information at their discretion.
Fannie Mae’s Loan Quality Initiative is just one more way that the government-backed group is trying to improve its loan pools. Unfortunately, it’ll mean more turndowns for mortgage applicants.
Therefore, take extra care of your credit between the time of application and the time of closing. Don’t buy new cars, don’t buy new appliances, and — most definitely — don’t open new credit cards. Be extra safe with your credit because a mortgage application that’s supposedly cleared-to-close can be revoked at the eleventh hour.
When in doubt, talk to your loan officer about what may or may not trigger the Loan Quality Initiative. Your loan approval is at stake.
Posted by Rosemarie Litoff on June 7, 2010 under Uncategorized | Comments are off for this article
Rate shoppers caught another break last week as mortgage markets improved on weak jobs data.
The May Non-Farm Payrolls report fell well short of expectations while ongoing jobless claims rose. The two combined to cast doubt on the speed of the U.S. economic recovery, hurting stocks and helping bonds.
Conforming and FHA mortgage rates dropped for the fifth time in six weeks and, once again, rates are trolling back near all-time lows.
No doubt you’ve heard that before — “mortgage rates at all-time lows”. Mortgage rates have dipped to these levels four times in the last 19 months. However, on each occasion, it wasn’t long after touching bottom before rates reversed higher.
November 2008 : Roughly 90 minutes
March 2009 : Roughly 6 hours
May 2009 : Roughly 1 day
May 2010 : Roughly 3 hours
This week, rates could stay low for a matters of hours, or days — we can’t really know. Especially with no “major” data due for release. Instead, most of this week’s economic news is incidental. That means that mortgage markets will move based on trader sentiment and “gut feel”.
The good news is that the market momentum is currently in the rate shoppers’ favor. We entered the weekend with rates falling and they look poised to open Monday no worse.
Here’s a look at what’s ahead this week:
Monday: Consumer credit, a critical piece of consumer spending
Wednesday : The Beige Book, a regional economic report from the Fed
Thursday : Initial and continuing jobless claims
Friday : Retail Sales and the Consumer Sentiment report
Market sentiment is a strange animal. One minute it can be your friend and, the next, it can be your enemy. Opinions change swiftly on Wall Street and so do mortgage rates.
If you’re still not locked in, consider making your move. Rates have a lot farther to rise than they do to fall. You won’t want to be on the wrong side of the bet when rates start rising.
Be the First to Comment 
All day, every day, conforming and FHA mortgage rates are in flux. Rates move in response to hundreds of factors which exact varying levels of influence.
Single-family housing starts plummeted to a one-year low in May, just 30 days after soaring to a 20-month high. It’s no wonder 
If you plan to finance your home with a conforming interest only mortgage, get your loan application submitted no later than this Friday, June 18. 
Mortgage markets posted four good days last week and one awful one. Unfortunately for rate shoppers , that one bad day outweighed the gains of the other four and mortgage rates worsened on the week overall.
Starting sometime later this year, the monthly cost to carry an FHA-insured mortgage is expected to rise.
Mortgage rates may be dropping, but mortgage costs are not.
A new 
Rate shoppers caught another break last week as mortgage markets improved on weak jobs data.