South Orange County Blog from Bob Phillips

What’s Ahead For Mortgage Rates This Week – August 29, 2016

Posted in Mortagage Tips by southorangecounty on August 29, 2016

Last week’s economic reports included readings on new and existing home sales, a speech by Fed Chair Janet Yellen, and a report on consumer sentiment. Weekly reports on mortgage rates and new jobless claims were also released.

New Home Sales Rise in July as Pre-Owned Home Sales Fall

Sales of new homes jumped in July to a seasonally-adjusted annual rate of 654,000 sales, which surpassed expectations of 579,000 sales and June’s downwardly-revised reading of 582,000 sales. This was the highest reading for new home sales since 2008 and represented a 31.30 percent increase since July 2015.

Builders were seen by analysts as addressing the need for more affordable homes; this trend contributes to a healthy housing market by supplying homes for a wider range of buyers. First-time buyers play a vital part in housing markets as their purchases enable current homeowners to buy larger homes or relocate.

Sales of pre-owned homes fell 3.20 percent to a seasonally-adjusted annual rate of 5.39 million sales as compared to expectations of 5.59 million sales and June’s reading of 5.57 million sales. Year-over-year, sales were 1.60 percent lower. Limited inventories of available pre-owned homes have narrowed buyer options; increasing prices and narrow choices were seen as factors contributing to lower sales. There was a 4.60 month supply of available homes in July. Real estate pros typically consider a six months a normal reading for homes on the market.

Lawrence Yun, chief economist for the National Association of Realtors®, noted that a slowdown in home appraisals may have contributed to July’s lower sales reading for pre-owned homes. Low mortgage rates prompted a surge in refinancing which created a backlog in home appraisals. While low mortgage rates may entice home buyers, stricter mortgage requirements can also keep prospective buyers at bay.

Federal Reserve Chair Janet Yellen indicated that the stage could be set for a federal rate increase as early as next month. If the Fed hikes its target federal funds rate, interest rates for consumer credit and mortgages can be expected to rise.

Mortgage Rates Hold Steady; New Jobless Claims Fall

Freddie Mac reported that fixed mortgage rates for 30 and 15-year loans were unchanged at 3.43 and 2.74 percent respectively. The average rate for a 5/1 adjustable-rate mortgage was one basis point lower at 2.75 percent. Discount points averaged 0.60, 0.50 and 0.40 percent.

New jobless claims were lower last week. 261,000 new jobless claims were filed against expectations of 264,000 new claims and the prior week’s reading of 262,000 new claims filed. Declining jobless claims can indicate strengthening labor markets, but can also indicate that workers are leaving the labor markets.

Consumer sentiment declined slightly in August due to concerns over the upcoming presidential election. Analysts expected a reading of 91.0 for August, but the reading for August was revised from 90.4 to 89.80.

What’s Ahead

Next week’s scheduled economic news includes reports on pending home sales, inflation, construction spending and consumer confidence. National unemployment, non-farm payrolls and ADP payrolls are also scheduled.

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Quicken Loan’s 1% Down Mortgage

Posted in Uncategorized by southorangecounty on August 17, 2016

From Colin Robertson of TheTruthAboutMortgage.com, dated August 17, 2016

Home-Buyer-Tips-1

It seems just about everyone is lowering mortgage down payment requirements to deal with rising home prices, this despite the near-record low mortgage rates still widely available.

You see, down payment is still the biggest hurdle to homeownership, and I suppose it was during the previous boom as well. That would explain why zero down mortgages were the norm back in 2006.

The major problem then was that you could also state your income, your assets, and not disclose your job, so long as you had a decent credit score. No skin in the game and no disclosure equals no good.

We’ve learned from those mistakes, I hope, and now underwriting is a lot more sound. Still, people want to buy homes, whether they’ve saved up a large down payment or not. And that would explain why Fannie and Freddie began offering 97% LTV mortgages.

Building off those programs are mortgages with grants that still give the homeowner a 3% down payment, but without the borrower actually having to come up with the three percent in funds.

Instead, many lenders are providing a 2% grant to homeowners and asking that they come up with the remaining one percent, which seems pretty fair.

The use of a grant is allowed under both Fannie’s HomeReady program and Freddie’s Home Possible Advantage, and some banks dole outs funds in accordance with the Community Reinvestment Act.

Quicken Loans 1% Down Payment Option

Interestingly, the largest non-bank mortgage lender in the country, Quicken Loans, quietly rolled out their 1% down payment option back in March, but there wasn’t a press release or any fanfare. There certainly wasn’t a Super Bowl commercial.

I don’t know why that is; I’m just here to tell you about the loan program in case you lack a down payment and are interested. If I had to guess, I’d say that it’s limited to certain types of buyers and thus a national rollout or major ad campaign might be misleading and/or a waste of money.

Anyway, let’s talk about Quicken’s 1% down loan program to see if you might qualify based on what I know about it.

First off, this program can only be used for the purchase of a home, no refinances are permitted. Quicken Loans provides a 2% grant and the borrower brings in the remaining 1% to make it a 97% LTV loan.

I’m not sure if the grant has to be paid back if the borrower sells or refis before a certain period of times passes. Inquire with Quicken about that.

Secondly, the property must be a one-unit owner-occupied property, which includes single-family homes and condos (and townhomes), but not co-ops.

When it comes to credit, the minimum FICO score required is 680, which is considered average (or perhaps a bit below average). So it’s pretty flexible in terms of creditworthiness.

Perhaps more importantly, you must make less than or equal to the median income for the county in which you’re purchasing the home. If the income limit is $75,000, you must earn that or less to qualify for the 1% down payment program.

Speaking of income, the maximum DTI ratio is 45%, which is standard.

Quicken’s 1% Down Might Not Require Any Funds from the Borrower

If there aren’t any additional overlays on this program versus the ones offered by Fannie and Freddie, no minimum borrower contribution is required, meaning the down payment funds and any reserves can be gifted.

The Quicken program also comes with a free “introduction to homeownership” course that is required for first-time home buyers, but available to everyone at no cost.

When it comes to loan types, you’re likely going to be limited to fixed products with a 30-year amortization. Put simply, probably the 30-year fixed unless you can afford and desire a 15-year fixed. That wouldn’t really make sense for someone lacking a down payment.

There will be mortgage insurance, seeing that the loan is well north of 80% LTV, but it might be at a reduced rate as it is via the Fannie/Freddie 97 programs.

I have no idea what the mortgage rates are like, but I assume higher than what you see advertised to account for the higher risk of putting just one percent down. But seeing that rates are so low at the moment, they’ll probably still look pretty favorable.

For the record, Quicken is just one of many lenders out there offering grants to home buyers to push the down payment requirement down to just 1%, so you can always shop around to compare different interest rates and program requirements by lender.

Recently, Guaranteed Rate launched a similar program, as did United Wholesale Mortgage (if you’re using a mortgage broker).

Other regional lenders, such as Fifth Third and BancorpSouth, have introduced zero down offerings.

The mortgage market is changing rapidly to account for higher home prices. So take the time to compare all options, including FHA loans, to see what the best fit is for your situation. ( End of Colin’s article.)

Need a lender, for this, or any other type of real estate loan?  I have some excellent names I can recommend – just give me a call, a text, or an email.

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What’s Ahead For Mortgage Rates This Week – August 15, 2016

Posted in mortgage rates by southorangecounty on August 15, 2016

Last week’s economic news included reports on job openings, retail sales and recurring reports on mortgage rates and new jobless claims. Job openings and hiring increased, which provided further evidence of stronger economic conditions. Retail sales were flat in July, new unemployment claims dropped and mortgage rates changed little.

Labor Reports Suggest Stronger Economic Trends

The Labor Department reported more job openings in June with 5.60 openings as compared to 5.50 million job openings in May. According to the Job Openings and Labor Turnover Survey, 5.13 million workers were hired in June as compared to May’s reading of 5.15 million hires. June’ JOLTS report also showed that voluntary quits were nearly double the rate of quits during the worst part of the recession. Analysts consider quits an indicator of worker confidence in job markets; in times when jobs aren’t easily found, workers are more likely to stay with current jobs rather than risking uncertainties associated with quitting.

New jobless claims were lower with 266,000 new claims filed against the prior week’s reading of 267,000 new claims filed and expectations of 265,000 new claims filed. Last week’s reading continued a long streak of new jobless claims under 300,000 per week. Labor market trends impact housing markets, as prospective homebuyers typically consider job security as a significant factor in decisions to buy homes.

Mortgage Rates Show Little Change

Freddie Mac said that average mortgage rates held near steady readings last week. The average rate for a 30-year fixed rate mortgage rose by two points to 3.45 percent; the average rate for a 15-year fixed rate mortgage was also two basis points higher at 2.76 percent and rates for a 5/1 adjustable rate mortgage averaged 2.74 percent. Discount points averaged 0.50 percent for all three loan types reported. Consistently low mortgage rates help to ease concerns caused by rapidly rising home prices caused by short supplies of available homes.

Consumer sentiment fell short of the expected index reading of 91.50 with a reading of 90.40 but surpassed July’s index reading of 90.00. Participants in the University of Michigan Survey cited concerns over increasing prices coupled with slow income growth. Analysts said that consumer participants had grown acclimated to low mortgage rates, which may have offset consumer concerns about stagnant wages and higher prices.

What’s Ahead

This week’s scheduled economic releases include the National Association of Home Builders Housing Market Index, Commerce Department Consumer Price Index and Core CPI reports along with weekly readings on mortgage rates and new jobless claims.

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