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Mortgage Rates
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Mortgage rates are low right now but pinning them down this week could be a challenge. As Labor Day Weekend nears and Wall Streeters take their head-start on the holiday, trading volume will fall, which will cause mortgage rates in North Georgia to get jumpy.
As mortgage rates change, so does the long-term cost of owning a home. Every 1/8 percent adjustment changes a household budget.
Meanwhile, the relationship between “vacation days” and mortgage rate volatility is an interesting one; based more in scarcity than market fundamentals.
Rates tend to get volatile near holidays because of two inter-related facts:
- Conforming mortgage rates are based on the price of mortgage-backed bonds
- Mortgage-backed bonds can’t trade without a buyer and a seller at a specific price
So, as the week progresses and more traders leave for their respective “extended” 3-day weekends, there’s fewer buyers and sellers left on Wall Street to connect for a trade. As a result, mortgage bond prices move across larger gaps than on a “normal” day which, in turn, translates into faster, larger changes in rates.
This phenomenon can be exaggerated during periods of economic uncertainty — like what we’re in now — and, furthermore, there’s a bevy of important data set for release this week including the FOMC Minutes, inflation data, and August jobs figures.
In other words, rates would have been volatile without the vacation week. The presence of Labor Day just piles on.
Mortgage rates may rise this week, or they may fall. Either way, if you have a chance to lock something favorable and within your budget, consider doing it. Rates are at all-time lows and likely won’t last.
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The number of home resales plunged by 1.4 million units in July, according to the National Association of Realtors® Existing Home Sales report.
It’s a drop of 27 percent from June; single-family home resales are at the report’s lowest levels since May 1999.
Furthermore, because of the sharp drop in sales volume, home inventories are spiking.
Homes for sale nationwide fell just short of 4 million units in July and, at the current sales paces, it would take 12.5 months for the existing inventory to be absorbed.
Home supply was just 8.9 months in June.
For home sellers in Hiawassee, Blairsville and Blue Ridge, the Existing Home Sales report is a bit of bad news. North Georgia Mountain Home Buyers are still waiting for the “bottom.” Fewer sales and larger inventories put negotiation leverage in the hands of the buyers which, in turn, creates downward pressure on home prices. It may also increase time-on-market.
For home buyers, however, the data is decidedly welcome. After a stimulus-driven spring buying season that favored sellers, the summer and early-fall market seem to favor buyers. More choices and more leverage is a positive.
It helps that home affordability is up, too.
Although there’s reports that home values are rising, their modest gains are more than countered by the ongoing rally in mortgage rates. Freddie Mac says that 30-year fixed rate mortgage rates are at their lowest levels in history and, at today’s rates, every one-eighth drop in mortgage rates roughly offsets a 1.5% increase to home price.
Mortgage rates are down 0.75 percent since mid-April.
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For the second time this year, the FHA is modifying mortgage insurance.
Beginning with FHA case numbers issued on or after October 4, 2010, the FHA is changing its upfront and annual mortgage insurance premium structure.
Under the new terms, assuming a 30-year fixed rate FHA mortgage with at least 5 percent equity:
- Upfront MIP drops to 1.000% of the amount borrowed from 2.250%
- Annual MIP increases to 0.850% of the amount borrowed from 0.500%
For homeowners in Blue Ridge, Blairsville and everywhere else , this switch in MIP decreases the upfront cost of an FHA-insured mortgage, but increases the loan’s long-term costs.
Using a $100,000 mortgage as an example, upfront MIP falls to $1,000 from $2,250; monthly MIP jumps to $70.83 from $41.67. The FHA expects the change will yield an additional $300 million in premiums monthly.
The update is a huge win for the FHA whose reserve funds are self-proclaimed to be “perilously low”. The extra monies should help recapitalize and stabilize the government group.
The FHA is on pace to back 1.7 million loans this year.
For the majority of refinancing FHA homeowners and home buyers, the MIP change is neither good nor bad — the borrowing landscape will just looks a bit different. Yes, loans will cost more to carry each month, but also they’ll be less expensive to procure. It’s a trade-off and you can apply math formulas to solve for the best time to apply FHA.
It may be wise to get your FHA case number before October 4, for example, depending on your time frame in the home and the expected life of the mortgage. Or, it may be better to wait until after October 4 to apply.
If you’re unsure of how the new FHA mortgage premiums will impact your mortgage, be sure to call or email your loan officer for help.
NOTE : The FHA originally announced an implementation date of September 7. It was subsequently amended to October 4, 2010.
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Mortgage rates have been falling since April but that momentum could reverse tomorrow.
The Bureau of Labor Statistics releases the July jobs report at 8:30 A.M. ET Friday. With a stronger-than-expected reading, mortgage rates should rise, harming home affordability in North Georgia. Jobs are a keystone in economic growth and growth is tied to rates.
Earlier this year, job growth went positive and reached as far north as 431,000 jobs created in May. That figure slipped negative last month, however, as the temporary, decennial census workers left the workforce.
Jobs matter to the U.S. economy. Among other concerns, unemployed Americans spend less on everyday goods and services, and are more likely to stop payments on a mortgage. These effects retard the economy, spur foreclosures, and harm home values.
The reverse is also true. More workers means more disposable dollars and, in theory, a stronger economy.
Analysts expect that a net 65,000 jobs were lost in July. Wall Street — and Main Street — have a big interest in those results.
Poor jobs data would likely result in a stock market sell-off which would, in turn, boost the value of government-backed mortgage bonds. This is because bonds tend to perform well when the economy is sagging and higher bond prices mean lower mortgage rates.
Strong jobs data, however, would likely push stock markets up and bond markets down. This would cause mortgage rates to rise. The stronger the employment figures, the higher mortgage rates should go.
So, if you’re happy with where mortgage rates are today and you’re concerned about what the jobs report may do to them tomorrow, consider talking to your loan officer about locking your rate as soon as possible.
Once the jobs report is released, it may be too late.
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No doubt you’ve heard that mortgage rates are low. They’re lower than they’ve ever been in history. The news is everywhere.
Just check out some of these headlines from the last 24 hours:
- Mortgage rates set new lows for the 6th straight week (Reuters)
- Mortgage rates fall again; 30-year fixed at 4.54% (Wall Street Journal)
- Mortgage rates hit another low : 4.54% (NPR)
Fixed mortgage rates are now down more than 1/2 percent from the start of the year, and 3/4 percent from just 1 year ago. The drop has dramatically improved home affordability for home buyers in Blue Ridge and Blairsville while creating refinance opportunities for existing homeowners.
From a payment perspective, a conforming, 30-year fixed rate mortgage is now cheaper by $41.94 per month per $100,000 borrowed versus July 2009.
A homeowner with a $300,000 mortgage, therefore, is saving $45,295.20 over 30 years.
Low mortgage rates rarely last long and rates appear to have troughed. After a big downhill between April and July, they’re now flat. This could mean rates have finished falling, or that they’re gearing up for another drop lower. Either way, if you haven’t talked to your real estate agent about home affordability, or your loan officer about refinancing, it may be time to make that call.
If today’s market marks the end of low rates, rates are expected to rise quickly.
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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
- Expected Increase (0.90%) : $150.00 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 for home buyers in Blue Ridge and Blairsville, and will put a strain on 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.
The FHA insured close to a quarter of all mortgages made in the first three months of 2010.
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A new loan quality initiative from Fannie Mae is making it harder for Blairsville 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 turn down.
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.
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As lenders tighten mortgage guidelines for Blairsville Home Buyers, minimum down payment requirements are increasing. Several years ago, you could finance a home with nothing down. Today, most conventional mortgages require at least 10 percent.
Anecdotally, guideline changes have led to an increase in the number of home buyers accepting cash gifts from family.
Gifts are allowed in most cases but the problem is, if you don’t accept the gift in a “lender-friendly” way, the mortgage underwriter could reject it, and negate it.
You can’t just deposit a cash gift into your bank account. You have to follow a series of steps and keep records.
- Provide an acceptable gift letter signed by all parties
- Provide documentation of the gifter’s withdrawal of funds via teller receipts
- Provide documentation of the giftee’s deposit of funds via teller receipts
Lenders require these 3 steps for two basic reasons. First, they want to make sure that the cash gift is “clean” (i.e. not laundered). Second, they want to make sure the gift is really a gift and not a loan-in-disguise.
It’s why lenders typically require that the loan application be accompanied by a signed, dated letter.
For example:
I am the [relationship to recipient] of [name of recipient] and this letter serves as evidence that I am gifting [name of recipient] [amount of gift] to be used for the purchase of the home at [complete address of property].
This is a gift — not a loan — and there is no expectation of repayment.
Signed,
[Signature of gifter]
As an additional step, home buyers receiving cash gifts should make sure that gifted funds are not commingled at the time of deposit. If the cash gift is for $10,000, therefore, the bank’s deposit slip should indicate that a $10,000 deposit was made — nothing more, nothing less. Don’t add a random $100 deposit to the transaction, in other words. The $100 deposit should be a separate transaction.
It’s also worth noting that gifting funds between family members can create both legal and tax liabilities. If you’re unsure about how donating or receiving a gift may impact you, call or email me directly. If I can’t help you with your questions, I can refer you to somebody that can.
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United Community Banks Inc. was the highest ranked Southeastern bank in terms of customer satisfaction, according to the J.D. Power and Associates 2010 U.S. Retail Banking Satisfaction Study published Thursday.
Blairsville, Ga.-based United Community Banks (NASDAQ: UCBI) scored an 815 and “among the best” ranking in the annual study. The Southeast average score was 768.
The scores are based on an 1,000-point scale. The study analyzes customer satisfaction with the retail banking experience based on account activities, account information, facility, fees, problem resolution and product offerings.
Congratulations UCB!
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As the federal home buyer tax credit nears its April 30 end-date, there’s a lot of would-be home buyers in Blairsville and Blue Ridge, GA. still working to get under contract.
A piece of advice for all of them : If your pre-qualification and/or pre-approval letter is more than 8 weeks old, it would be prudent to have your lender “re-pre-approve” you. Mortgage guidelines have been in flux and your original lender letter may now be invalid.
For example, over the past half-dozen months, the majority of mortgage lenders have reduced their risk tolerance with respect to:
- Maximum debt-to-income ratios
- Minimum allowable credit scores
- Calculation of “assets in reserve”
For buyers of condominiums and co-ops, even the subject property itself is coming under tougher scrutiny.
Today’s mortgage applicants need to be a complete package. It takes more than just good income and credit to get approved anymore and today’s buyers should revisit their qualifications. What passed underwriting in January may not pass in May.
Being pro-active brings other advantages, too. If a mortgage re-pre-approval does unearth an issue, it’ll be easier for every party to the transaction to address and correct it up-front versus trying to clean up a mess once a home’s already under contract.
Contact Me and I will get you in touch with a loan officer within my team about your pre-qualification/pre-approval letter before you bid on a North Georgia Mountain Home.
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