The Fed voted to raise its benchmark short-term interest rate by a quarter percentage point. This move will most likely push up rates on mortgages, credit card rates and other types of consumer loans in the short term.
Consumers with credit card debt, adjustable-rate mortgages and home equity lines of credit are the most likely to be affected by a rate hike, says Greg McBride, chief analyst at Bankrate.com. He says it’s the cumulative effect that’s important, especially since the Fed already raised rates in December 2015 and December 2016.
“These interest rate hikes could add up to hundreds of dollars per month in extra fees for credit card, adjustable-rate mortgage and HELOC borrowers,” McBride says.
The Fed’s likely decision to lift the federal funds rate, which is what banks charge each other for overnight loans, will have several effects on consumers. Here's how it may impact mortgage rates, auto loans, credit cards and bank savings rates:
The Fed’s key short-term rate affects mortgages and other long-term rates only indirectly.
Thirty-year fixed mortgage rates hit a 2017 high last week as the average jumped to 4.21% in anticipation of the Fed’s move Wednesday and another similar hike. That is up from a year ago when the average 30-year mortgage rate was 3.68%, according to Freddie Mac.
“For consumers currently shopping for a mortgage to purchase a property or refinance an existing loan,” says NerdWallet mortgage analyst Tim Manni, a Fed rate hike "shouldn’t feel like a real shock to the system since the rate move has already been 'baked' into the market.”
A third hike later this year could boost the rate by as much as another quarter-point or so, increasing the monthly mortgage payment on a $200,000 home by up to $30
There may be some green this Christmas, after all.
Retail sales in November got a surprise lift, rising 0.7%, the biggest gain in five months, the Commerce Department said on Thursday, raising hopes for a solid holiday shopping season and an improving economy.
November’s 0.7% jump follows a 0.6% gain in retail sales in October. Economists had been expecting a 0.6% increase in November.
The gains were across the board.
Sales at automobile dealers climbed 1.8%, the most since June, after gaining 1.1% in October. Revenue also grew at furniture stores, electronics shops and non-store retailers, including online retailers.
A rising stock market, improving home values and declining unemployment have helped lift consumer sentiment, boding well for the economy. Consumer spending accounts for nearly 70% of U.S. economic activity.
Signs of a strengthening economy could prompt the Fed to pull back sooner rather than later on its economic stimulus program.
But it wasn’t all good news on the economic front.
Another report, from the Labor Department, showed applications for unemployment insurance payments jumped by 68,000 last week to 368,000. It was the biggest increase in a year.
with News Wire Services
Funds for closing when you’re buying a home
Whenever you are buying a home utilizing a mortgage, your lender is going to need to know where your funds that will be used for the down payment and closing costs are coming from. And in most cases, they will want the funds to be “seasoned” (statements showing the funds have been in your account for a two month minimum).
A lender wants assurance that the borrower has enough funds for closing and ideally, enough savings when all is said and done after closing, to have a cushion (2-6 months of your proposed mortgage payment aka “reserves”). Typically a lender is looking for 2 months of asset account statements. If large deposits are shown on the statements, the lender (or underwriter) may require to have the large deposits explained and possibly documented. Many people have their paychecks go into their bank account and, like the tide, out goes the money. Whatever is shown as ending balance is what the lender will use for your loan application and approval purposes.Get your FREE Quote Now!
Depending on the mortgage program you’re utilizing for your financing, different types of funds for closing may or may not be acceptable. Here is an example of some traditional funds allowable for closing:
Cash on hand (also referred to as “mattress money”) is a no-no. If you’re planning on buying a home in the next 3-6 months, you’ll want to get your dough into a bank account where a “paper trail” can be established of your funds.
With today’s automated underwriting and all of the available mortgage programs, more or less documentation may be required from the lender. The above list is only a sample. The requirements for your personal financing may be different. It’s important that regardless of what funds you’re planning on using for your down payment and closing costs, that you discuss it with your Mortgage Professional.
If you are considering buying a home located anywhere in the State of Washington, I’m happy to help you with your mortgage needs, including reviewing your down payment options.
I am often asked this question during a refinance from homeowners. Your mortgage payment is paid in arrears. For example, your February payment is paying January’s interest. Remember when you bought or refinanced your home and the loan originator stated “you’re going to skip one month’s payment” or “you won’t have another payment due until the following month after closing”? Well this is where that payment essentially catches up with you. (Technically, it’s not “that” payment, you’re just always paying the previous month’s interest).
The escrow company will order the payoff from your mortgage company. The interest is prorated to the day of funding/closing. There may be additional fees included in your payoff that the lender will charge, such as:
Often times, the escrow company will request the payoff with a few additional days factored in to act as a cushion. The escrow company may (should) order an updated payoff closer to the signing date in order to provide the most accurate figures possible. The lender being refinanced will refund any difference in your favor. In addition, if you have an escrow reserve account for taxes and insurance, you will receive a refund from the lender in approximately 6-8 weeks after closing.
At your signing appointment, ask to receive a copy of your payoff statement. Check to see how recently it was requested. If it was ordered at the beginning of the transaction and you have since made a mortgage payment, you can ask the closer to order an updated statement prior to closing (with a refinance, there is a three day right of rescission that takes place, so there should be enough time for this to take place with most lenders).
A major cause of the housing crash in 2006 and 2007 were poorly documented mortgages and very loose lending standards that contributed to the 4.9 million defaults that ended up in foreclosure, costing families their homes.
Mortgage lenders who made bad loans paid dearly with massive losses that drove some, like Countrywide and Washington Mutual, out of business. The survivors changed their lending practices dramatically, raising standards on credit worthiness and ability to repay, and requiring better documentation. The result is that many homeowners who qualified for a mortgage to buy or refinance a home in 2005 could not qualify today.
With the housing recovery underway, pressure is growing to loosen credit, debt and income requirements. Currently, for example, the percentage is in the 50 percent range. Economists at the National Association of Realtors estimate that an additional 500,000 to 700,000 home sales could be made if credit conditions returned to normal.
Some policy makers, led by Fed Chairman Ben Bernanke, have repeatedly urged lenders to lay down the law on the tight lending standards that have made it difficult for home buyers with moderate credit and income to qualify for mortgages.
“Certainly, some tightening of credit standards was an appropriate response to the lax lending conditions that prevailed in the years leading up to the peak in house prices. Mortgage loans that were poorly underwritten or inappropriate for the borrower’s circumstances ultimately had devastating consequences for many families and communities, as well as for the financial institutions themselves and the broader economy,” Bernanke said in December.
“However, it seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery.”
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A condominium offers man advantages of home ownership with fewer of the hassles, unless you are talking about getting a mortgage for one.
Mortgages for condominiums have special rules that don’t apply to other types of home loans. Some of these involve the different fees that must be paid for a condo mortgage, while others raise the bar on qualifying for the mortgage itself.
Condominiums offer some very good deals right now, however there has only been a slight recovery in the housing market and many condominium prices now lag behind that of single family homes. That can be bad news for you. Although you may be getting a lower price, the bad news is lenders may be less likely to approve your mortgage in a market when the condo values are weak.
When you buy a condo, not only do you have to be approved for the mortgage, the condominium association has to be approved as well. So if the complex’s finances are not in good shape, the lender is going to take a pass.
The amount of outstanding student debt is nearly $1 trillion. And a recent report from the New York Federal Reserve shows that debt is having a negative impact on the U.S. economy. The housing market depends on college graduates as a major source of new home buyers.
About 6.7 million of student borrowers, or 17 percent, are delinquent on their payments by three months or more; with the average balance on their loans being above $25,000.
Compounding the problem is that many of these borrowers no longer qualify for home loans. In 2005, nearly nine percent of 25- to 30-year-olds with student debt were granted a mortgage. By late last year, that percentage was down to just above four percent. The hardest hit segment were were those who owe $100,000 or more. A Pew Research Center survey found that the share of millennials who own their homes had fallen from 40 percent to 34 percent during the recession.
Young buyers now make up their smallest share of the housing market in more than a decade. (source CNBC.com)
Homebuilders were a lot busier in February than they were a year ago, starting construction on 27.7 percent more units, according to Inman News.
Aside from the 982,000 mark seen in December 2012, February's seasonally adjusted annual rate of 917,000 home starts was the highest since July 2008 when it reached 949,000.
Housing starts of all types were up 0.8 percent from January to February, and have climbed by about 90 percent from a post-collapse bottom in early 2009. Single-family starts are up about 75 percent from their post-bubble low, pointed out Bill McBride on his blog Calculated Risk.
Single-family housing starts in February were at a rate of 618,000, a 31.5 percent jump from a year ago and up 0.5 percent from January.
Beginning on 3/1/13 Fannie Mae and Freddie Mac are allowing many homeowners (even if they’ve been making on-time mortgage payments) to apply for a deed-in-lieu of foreclosure. Until just recently Fannie and Freddie only allowed homeowners to apply if they were 90 days or more delinquent.
A deed-in-lieu of foreclosure is when a homeowner can no longer afford their mortgage voluntarily and gives back their home to the bank in exchange for having their mortgage debt wiped clean. This will still have a negative impact on your credit score, but it can be the fastest way to escape an unavoidable situation.
The Consumer Financial Protection Bureau has adopted a new rule that lenders must provide free copies of the appraisal of your home or of the home you want to purchase prior to the closing.
The information is important because a too-high valuation might lead you to over-pay for a home you want to buy, or a low appraisal might derail your plan to refinance your exisiting loan.
The copy must be given to you promptly after the report is completed or at least 3 days prior to closing, whichever is earlier. The new rule will become effective on January 18, 2014. You can always waive the right to receive a report during the required timeframe. However, if you waive that right, the lender must still provide a copy of the report to you one of two days before closing.
Establishing a good credit history has never been as important as it is today.
It’s not just that you’ll need good credit to get decent rates when you’re ready to buy a home or a car. Your credit history can determine whether you get a good job, a decent apartment or reasonable rates on insurance. It’s a classic Catch-22: You’ve got to have credit to get credit. So where do you start?
If you’re just starting out, you have a once-in-a-lifetime opportunity to build a credit history the right way.
Piggyback on someone else’s good credit, Apply for a secured credit card, Get an installment loan, Use revolving accounts lightly but regularly.
A seven-year waiting period is required, and is measured from the completion date of the foreclosure action as reported on the credit report or other foreclosure documents provided by the borrower.
Qualifying for FHA Loan after Foreclosure:
You need to wait for 3 years after the foreclosure to qualify for an FHA loan.
Qualifying for VA Loan after Foreclosure:
To qualify for VA loan after foreclosure, the wait period is two years.
A pre-foreclosure or short sale is the sale of a property in lieu of a foreclosure resulting in a payoff of less than the total amount owed, which was pre-approved by the servicer.
The waiting period requirements for applying for a conventional mortgage backed by Fannie Mae are:
2 years for transactions with a minimum of 20% down, 4 years for transactions with a max ltv of 90%, and 7 years for transactions with an ltv greater than 90%.
FHA qualifications are a little bit different, you need to wait 3 years after a short-sale to qualify for an FHA loan. You can’t be late on any mortgage or installment loans during the 12 months prior to the short sale.
For a VA loan, you need to wait 2 years after a short sale to qualify for a VA loan.
If you are an heir to a property and you would like to keep the property, you can refinance into a new mortgage loan as well as take title to the property from the estate at the same time. If there are multiple heirs and you want to refinance the property for yourself, you can use the proceeds of the refinance to pay each heir their value of their share. This transaction is technically a refinance and a purchase. Since you have at least one share of the ownership of the property, you can usually use that share of ownership as your downpayment or equity into the transaction so you won’t need to make a cash deposit at closing. It’s important you consult with a lawyer and loan officer if you inherit property that needs to be refinanced. They will be able to make you aware of any state and federal laws that will be able to guide you on your best course of action.
FHA loans are the new most popular mortgage loan. During the housing boom, subprime mortgages were all the rage. But as the housing market fell apart, lending standards tightened and the benefits of FHA mortgages are more prevalent. You can borrow 96.5% of the value of the home. You only need to come up with a 3.50% downpayment. Minimum credit scores are typically lower, as well as you won’t be disqualified if you have a bankruptcy or foreclosure. With FHA loans, you can also refinance with them. You need to be current on your payments, but you may not need to get your home appraised. And typically there is a lot less paperwork involved. FHA currently allows sellers to contribute up to 6% towards the buyers closing costs. Lastly, FHA loans come with fixed rates. Many reasons homeowners got into trouble was their mortgages were adjustable rates and their monthly payments became very unstable.
Mortgage rates remain at record lows, yet the housing market remains weak. Low interest rates aren’t helping the housing market anymore. With the rates are record lows and the economy is falling, the housing market remains stuck. The main thing missing for a housing recovery is the consumer access to credit, not low mortgage rates. When rates rise to their natural level, lenders will be incentivized to lend and credit won’t be such an issue. The Philadelphia lending market is not as right as many other lending markets. Some analysts think that until the Fed changes it’s view, there is no incentive for banks to change their behavior and housing will continue to suffer.
One of the most important factors in determining if you can qualify for a mortgage is your credit score. Lenders typically use the “middle” score when qualifying your loan. There are 3 scores, but they use the middle score, regardless of which credit reporting agency it is. Most lenders have a minimum credit score these days with 620 as the lowest score you can have and still obtain a new mortgage or refinance loan. The lower your credit score, the higher your interest rate, the two go hand in hand. So in order to qualify for the best rates, make sure you check your credit for any errors that may be on your report, but most importantly make sure you pay your bills on time.
When an appraisal comes in low when applying for a Pennsylvania mortgage, here are a few things to consider. First check the report for accuracy in the details. Make sure the rooms are calculated correctly, appraisers sometimes miscount and leave off a room. Also, check the comparables used. There are times when appraisers used an area that is poorer where homes sell cheaper. Negotiate the price between buyer and seller based on the appraisal figure. This will help both of you come to an agreement fairly, and your Pennsylvania mortgage will be based off the appraisal report. The only other option is to cancel your transaction. If the buyer won’t consider lowering the price, the buyer could always consider switching lenders. Get your FREE Quote Now!
There are both positives and negatives in doing this. By withdrawing money from your 401k you will have to pay early withdraw fees as well as taxes on the money you take out. On the other hand, it may be worth it if you found the right house.
As a first time homebuyer you can often avoid the penalties, but you will have to pay taxes on the money. However, you can usually take the money out of your 401k without a penalty if you basically take out a loan on the money,( if your employer permits loans.)Get your FREE Quote Now!
Also, unless you are putting at least 20% down on the home purchase, you will more than likely have pmi insurance. Since there isn’t going to be a huge difference in the monthly payment on the insurance itself, it may be in your better interest to consider not borrowing from the 401k unless you have enough to put the entire 20% down to avoid the insurance all together.
If you have an accountant I would suggest you sit down with them and see what this impact would have on each situation in relation to your taxes.
PA Mortgage borrowers may benefit from Fed stimulus package.
WASHINGTON — The Federal Reserve took its strongest step to date to try to bolster the sluggish U.S. job market, launching a new stimulus program aimed at firing up one of the economy's long-idled engines: the housing market.
The central bank said it would immediately start buying billions of dollars of mortgage-backed securities — essentially bonds that are made up of a bunch of home loans, packaged and then sold to investors.
And in an unexpected move, the Fed left the program open-ended and said it was prepared to do even more "if the outlook for the labor market does not improve substantially."
The Fed's hope is that heavy intervention in the real estate market would push already historically low mortgage rates down further for a longer period, spurring refinancing activity and home sales.Get your FREE Quote Now!
Qualifying details for a HARP 2.0 mortgage
Mortgage must be current last 12 months, owned by Fannie or Freddie Mac prior to June 2009.No LTV restrictions if new term is 30 years or less. If ARM, 105% LTV restriction. You must have less than 20% equity in the property. No Jumbo or Alt-A mortgage loans. No VA loans, FHA loans, Ginnie mae, etc. Harp 2.0 mortgage rates similar to conventional mortgage rates. Can do Harp 2.0 mortgage loan through approved Pa mortgage lender. Get your FREE Quote Now!
A question we hear often is what moves interest rates. While there are many indicators besides the 10 year treasury yield; Unemployment, the stock market, foreclosures, housing starts, sales time on market, availability of credit to non-prime and first time borrowers for just a short list. Besides the fact that it’s an election year and politics will always figure in. IMHO it’s way too early to begin any serious predictions on rates over the next several years. There are simply too many unanswered questions.
We’ve been following the Mortgage Bankers Finance Forecast for nearly ten years, and only one thing is for sure… Predictions can often be deceiving. Have a look for yourself.
http://www.mortgagebankers.org/files/Bulletin/InternalResource/75318_.pdf
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Getting a Mortgage in Pennsylvania getting easier. After the mortgage market tightened over the last few years, wholesale and retail lenders are beginning to show signs of easing.
The Mortgage Bankers Association releases Weekly Mortgage Market Index at 1100 GMT for the week ended March 9. The mortgage market index read 754.4 and the refinancing index was at 4,141.7 in the previous week.
Before applying for a Pa mortgage loan, Do Not make Major Purchases of any kind or take on any unnecessary debt if you can avoid it. Reason being that bills for appliances, jewelry, ,furniture, vacations, cars orany of these expenses that may show up on a credit report can affect your DTI. (debt ratio) A 0% interest free loan for a year on some appliances from Home Depot still may need to have a monthly figure attached to it on your credit bureau, often 5% of total balance. That seemingly insignificant amount could be the difference on what rate your lender is able to approve you at, or worse yet, whether you get approved for the mortgage loan at all. Better safe then sorry. Get the loan then buy the appliances (or whatever else) later. You'll be glad you did. Get your FREE Quote Now!
Keep your funds where they're at. That includes checking, savings, money markets, CD's, retirement funds, 401k savings, mutual funds or stocks. Remember that a loan officer may need a paper trail of each account and transaction you make and it can be very messy. All loans require proper documentation especially these days. Lenders, banks and credit unions triple check every loan file for quality control, accuracy and fraudulent activity so leave your cash parked where it's at until you get solid advice from your lending professional. And by the way, consider not changing banks either.
Getting the best mortgage rate
When people call a bank or brokerage and ask what’s the best rate available, we’re usually going to need some information to determine that. One key factor that makes shopping for the best mortgage rate so challenging is that many banks rates change twice per day and some more than that. Add the number of banks you’re trying to compare mortgage rates for, and it gets tricky in a hurry.
Most online mortgage rate quotes are based on the best case scenario, which hardly reflects the average person’s financial situation, especially in today’s economy. There are many important factors that will influence the final interest rate charged. Here is a short list of basics.
Debt to income ratio (Front end)– How much of your monthly income is being spent on the mortgage, taxes and insurance expressed as a percentage. i.e. 28%
Debt to income ratio (Back end) – How much of your monthly income is being spent on the mortgage, taxes and insurance, plus other recurring monthly expenses like credit card payments, car loans, student loans, home equity loans, but not electric, cable, groceries, etc. i.e. 36%
Loan to value ratio- The percentage of the loan amount as compared to the purchase price or appraised value of the property. Typically 80% is a conventional loan standard but there are lower rates available for borrowers who are borrowing less than 60% of the value of the property. Borrowing 95% is generally going to get you a higher rate of interest due to the greater risk to the lender.
Credit Scores- The middle score pulled from a bank or broker from all three major credit reporting agencies. Transunion, Experian, and Equifax. Often these scores will differ from scores you pull yourself from online services. A middle score above 740 will generally see the lowest rates. Remember also that if there is a co-borrower, a lender will use the lower of each applicants middle score.
Job history- Lenders are looking for a stable job history and documentable income. 2 years tax returns, a month’s worth of pay stubs, and 2 years W-2’s or 1099’s is a standard underwriting criteria today.
So those are the biggies. Where it gets confusing is when you mix all those criteria together. For instance, a borrower may have perfect credit and an 800 mid score, tax returns, documentable income, verified employment, which is great. But he may have a higher than normal debt to income ratio and a lender is going to price that added risk into their interest rate. He could pay anywhere from a ¼ to a full point higher depending upon loan term, amount financed, etc. Watch a short video
Best interest rates
Still other considerations that figure into the calculation are: Loan type: Conventional, FHA, Home equity? Is the borrower paying points to lower their rate? Are you escrowing your taxes and insurance with the lender? If not, expect to pay ¼ to a ½ point higher than the lowest market rates, even if you qualify perfectly in every other category. Get your FREE Quote Now!
So as you can see,
is unfortunately not a simple process. Use the rate shopping you do online as a guideline since there are many components to the formula that will affect your rate. Our Net Equity Loans brokerage shops dozens of wholesale banks rates every day and we realize how confusing this can be. Your best best is to speak with a qualified mortgage professional about your borrowing needs. Our mortgage experts will be able to determine how you will qualify and then shop rates and programs for you through many different banks. This approach will save you time, and give you the flexibility of selecting a loan program and terms that are right for you. Rather than winning the rate war, your most important goal should be to be in the right loan program that fits your needs and that you can afford.
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