Making the decision to purchase a home is one of the most significant investments most people will make in their life, and this automatically means there are a lot of questions that need to be answered before putting any money down. If you’re considering making the leap, here are some insights into some of the common questions you might have.
How Much Should You Put Down?
While many homebuyers have the option of putting as little as 3% down in order to purchase a home, there are benefits to saving up for a down payment and putting in 15 or 20%. Because your interest rate will be higher on a lower down payment, putting more down can mean a lower overall price tag and monthly payment.
Fixed or Variable Rate Mortgage?
While a fixed rate mortgage can be good for homeowners who are new to the market due to its stability, a variable rate can be hard to rely on because it can change all of the time. Fixed rates can end up costing more than variable rates in the event of low interest rates, but it’s important to determine your comfort level with the market is before deciding on your mortgage type.
How Will The Lender Assess You?
There are a number of different factors that lenders will assess you on including your income, personal debt load, employment and credit history. While it’s important to be in the good books for these reasons, a lower credit score does not mean you will not be able to qualify for a mortgage; it simply means that you may need to provide a higher down payment.
What Will The Monthly Payment Be?
One of the conundrums of home ownership is being able to determine what you’ll actually be paying per month to purchase your home, but this number is dependent on the size of your mortgage, your interest rate, and the frequency of your payments. There are also many handy online tools you can use to provide some estimates but it’s best that you consult your mortgage specialist about this.
Most homeowners, particularly those that are new to home ownership, have many questions when it comes to purchasing a home, but by being aware of what a lender looks at and what you should put down, you’re well on your way to a healthy attitude towards ownership. If you’re currently considering buying a home, contact your local real estate professional for more information.
When you’ve finally found the home you’re looking for at the right price, it’s easy to think that the hard part is over; however, there’s still a lot to do in order to ensure your purchase goes through without a hitch. If you’re tying up the loose ends on your home purchase, here are some things you should do to avoid any unnecessary delays.
Hire A Legal Professional
However much research you may have done in regards to buying a home, there’s still a lot of legal jargon in the closing documents that can be difficult for most people to understand. Instead of doing guesswork, you may want to use an attorney who will take the difficulty out of the documents for you so there will be no holdups with the paperwork.
Arrange A Home Inspection
A home inspection is a necessary step before the sale of a home, but this is an important one to get out of the way because it can seriously impact your home purchase. Because major problems can often be discovered during inspection, getting this out of the way and deciding if an item should be fixed or the total price knocked down will ensure there are no delays at the last minute.
Acquire Title Insurance
In order to make sure your property really belongs to you, it’s a good idea to have a title search completed to see if there are any claims to your future property that could invalidate your purchase. As this is a legal safeguard for your claim to your home, it will help you avoid unnecessary issues in the event of an unknown property claim.
Determine The Closing Costs
An escrow company is responsible for holding the funds until all aspects of a home sale are complete, but there are fees that go along with this service. Before you get to the end of the process, determine what exactly the company will be charging so that you can be prepared for the final total. While fees are legitimate, if you see a higher tally than expected, you may want to negotiate for a reduced cost.
Purchasing a home is a significant investment full of hurdles you might not be aware of, but by acquiring title insurance and having a legal professional look through your documents, you can make your home purchase go a little smoother. If you’re planning on purchasing a new home soon, contact your local real estate professional for more information.
Last week’s economic news was mixed, but economic reports for Non-Farm Payrolls and the National Unemployment rate suggest a strengthening labor sector. Pending Home Sales surpassed expectations in May and conversely, construction spending was lower than expected. Here are the details.
Pending Home Sales Reach Highest Level in Eight Months
The National Association of REALTORS® reported that pending home sales in May rose by 6.10 percent over April’s reading. May’s reading was 5.20 percent lower than for May 2013. The index reading for May reached 103.9 as compared to April’s index reading of 97.9. Results for all regions were positive for May:
– Northeast: 8.80%
– West 7.60%
– Midwest 6.30%
– South 4.40%
An index reading of 100 for pending home sales is equal to average contract activity in 2001; pending home sales are a gauge of upcoming closings and mortgage activity.
CoreLogic Home Price Index Reflects Slower Price Gains
National home prices rose by 1.40 percent in May and 10 states posted new month-to-month highs, while year-over-year reading slipped from 10.00 percent in April to 8.80 percent in May. Home prices remain about 13.50 percent lower than their 2006 peak.
The overall rate of construction spending slowed in May to an increase of 0.10 percent from April’s reading of 0.80 percent and against expectations of 0.70 percent. Residential construction spending dropped by 1.50 percent in May.
Freddie Mac’s weekly survey of average mortgage rates brought good news as the rate for a 30-year fixed rate mortgage dropped by two basis points to 4.12 percent. The average rate for a 15-year fixed rate mortgage was unchanged at 3.22 percent, as was the average rate for a 5/1 adjustable rate mortgage at 2.98 percent. Discount points were unchanged at 0.50 percent for a 30-year fixed rate mortgage and 15-year fixed rate mortgages. Discount rates rose from 0.30 to 0.40 percent for 5/1 adjustable rate mortgages.
Jobs Up, Unemployment Rate Lower
ADP payrolls, which measures private-sector job growth, reported 281,000 new jobs in June as compared to a reading of 179,000 new private-sector jobs in May. The Bureau of Labor Statistics’ Non-Farm Payrolls report for June surpassed expectations of 215,000 jobs added with an increase of 288,000 jobs against May’s reading of 224,000 jobs added.
The national unemployment rate fell to 6.10 percent against predictions of 6.30 percent and May’s reading of 6.30 percent.
No news was released on Friday, which was a national holiday.
This week’s scheduled economic is lean with no events set for Monday. Job Openings, the minutes from the most recent FOMC meeting, along with regularly scheduled weekly reports on mortgage rates and new jobless claims round out the week’s economic news.
Last week brought several economic and housing sector reports including Existing Home Sales, Case-Shiller and FHFA home prices for April, as well as New Home Sales. Freddie Mac’s weekly mortgage rates survey and the weekly report on new jobless claims were released on Thursday, and Consumer Sentiment for June rounded out the week on Friday.
Existing Home Sales Stronger than Expected!
Good news came from the National Association of REALTORS® Existing Home Sales report for May, which reported 4.89 million previously owned homes sold on a seasonally-adjusted annual basis. Analysts had projected a seasonally-adjusted annual figure of 4.75 million existing homes sold based on April’s reading of 4.65 million existing homes sold; April’s reading was later adjusted to 4.66 million. May’s reading represented a monthly increase of 4.90 percent over April’s reading and was the second consecutive monthly increase in previously owned home sales.
The median sales price for existing homes sold in May was $213,400, which represented a 5.10 percent increase year-over-year.
May’s reading for existing home sales was the highest in seven months, and mortgage rates trended down during May, but strict lending standards were cited as a significant obstacle to first-time homebuyers.
Federal Reserve Chair Janet Yellen recently said in a press conference that mortgage lenders “need more clarity” as to their potential liability for failed mortgages. Mortgage lenders and loan servicing companies can be required to repurchase defaulted loans or to reimburse Fannie Mae and Freddie Mac for losses associated with mortgage defaults and foreclosures.
Case-Shiller, FHFA Report Slower Pace for Home Price Growth
The S&P Case-Shiller Home Price Index and FHFA’s House Price Index for April documented slowing rates of home price growth. Case-Shiller reported a 10.80 percent year-over-year growth in home prices for April, and FHFA reported a year-over-year gain of 5.90 percent rate of appreciation for home sales associated with mortgages owned by Fannie Mae and Freddie Mac.
Analysts noted that home price growth is leveling out after last year’s steep appreciation in home prices. While homeowners may disagree, economists say that a slower rate of home price growth can actually bode well for housing markets. More buyers can afford a home, which adds stability to housing markets. First-time buyers provide a foundation for home sales; if they cannot buy homes, then homeowners can’t sell existing homes and buy new homes. A slower but consistent rate of home price growth allows homeowners to build home equity, but won’t likely lead to housing “bubble.”
New Home Sales Blast Past Expectations, Mortgage Rates Fall
The U.S. Department of Commerce reported that new home sales for May reached a six-year high with a reading of 504,000 new homes sold on an annual basis. April’s reading exceeded expectations of 440,000 new homes sold as well as April’s adjusted reading of 425,000 new homes sold. The month-to-month increase in new home sales from April to May was the largest monthly increase in home sales in 22 years.
Although analysts caution that month-to-month seasonally-adjusted sales reports are volatile, this uptick in new home sales may help bolster builder confidence in housing markets. May prices for new homes also rose with the median home price at $282,000. This reading represents a year-over-year increase of 6.0 percent for new home prices.
The Northeast led regional results for new home sales with its reading of 54.50 percent; The West reported an increase of 34.00 percent. New home prices in the Southeast rose at an annual rate of 14.20 percent, and the Midwest region reported a 1.40 percent increase in new home prices. While analysts characterized the Northeast region’s May reading as exaggerated, overall results for new home prices indicate a comeback for new home prices.
Freddie Mac put some icing on the good news cake with its weekly mortgage rates report. Average rates for a 30-year fixed rate mortgage dropped to 4.14 percent with discount points lowered to 0.50 percent. The average rate for a 15-year fixed rate mortgage fell by eight basis points to 3.22 percent with discount points unchanged at 0.50 percent. The average rate for a 5/1 adjustable rate mortgage fell by two basis points to 2.98 percent with discount points lower at 0.40 percent.
Thursday’s Weekly Jobless Claims Report reading fell by 2000 new claims to a seasonally adjusted reading of 312,000 new claims filed. Analysts had expected a reading of 310,000 new jobless claims. 214,000 per month have been added to the economy from January to May 2014.
Positive economic developments were not lost on consumers. The Consumer Sentiment Index for June posted a reading of 82.5 against an expected reading of 81.9 and May’s reading of 81.2.
This Week’s News
Scheduled economic news includes Pending Home Sales, Construction Spending, the ADP Employment report, and the Non-farm Payrolls Report. The National Unemployment Rate report along with Freddie Mac’s PMMS and Weekly Jobless Claims round out the week. No news is scheduled for Friday’s Independence Day holiday.
Getting pre-approved for a mortgage loan is an integral part of having the ability to purchase a home in today’s society.
With most home prices well above what the majority of us have in the bank, getting approved for a mortgage can be the deal maker or breaker when it comes to purchasing a piece of property. Therefore, getting rejected for a mortgage can feel like a huge loss.
The first thing to realize, however, is that there are action steps you can take to get to “yes.” Here’s what to do if you’re turned down for a mortgage or other home financing.
Shop Around: Don’t Take “No” The First Time
If you get a “no” from your bank the first time around, don’t be fooled into thinking that everyone will give you the same answer.
Instead, be sure to shop around your mortgage with different banks, and opt to speak to a mortgage broker to leverage all of your options.
When looking at several different lenders, you’ll have a much higher chance of getting a yes since every lender adheres to different rules and restrictions. Though you may end up with a mortgage with a slightly higher interest rate, you’re likely to get approved for a mortgage or other home financing.
Ask Friends: Get A Co-Signer
If your “no” was the result of bad credit history or a low credit score, perhaps you should consider asking for the help of friends and family. Sometimes bringing a co-signer in on the deal who has better credit history and a higher credit score will change the response of your bank or lender significantly, and suddenly you’ll find yourself hearing the sought-after “y” word.
Ask Questions: Fix The Problem
If you’ve sought out several different banks and lenders, and still find yourself with rejected mortgage applications, be sure to understand why the “no” came in the first place. If it’s an issue of your credit history, which can’t be appeased with a co-signor, you may need to put in the time in order to correct some of your credit issues.
Other common reasons why people are rejected for a mortgage include unrealistic borrowing expectations, i.e. applying for a mortgage that is too high for you to satisfy, as well as an unreliable employment history or a general lack of credit history. Speak with your mortgage professional to determine the reason, and if shopping around or bringing in a co-signor doesn’t transform the “no” to a “yes,” seek to fix the problem instead.
Though it can be a daunting task to apply for a mortgage after you’ve been rejected, ensuring that you arrive at that ultimate “yes” is something you need to undertake in order to purchase a home and reach that next milestone in your life.
Having trusted professionals on your side is something that will surely ease the tension on all things involved in purchasing a home, including getting approved for a mortgage. For more information on how to get past “no” when searching for a home, call your trusted real estate professional today.
Last week’s scheduled economic news included the National Association of Home Builders/Wells Fargo Housing Market Index, Housing Starts and Building Permits. The Fed’s Federal Open Market Committee (FOMC) issued its usual statement at the conclusion of its meeting, and Fed Chair Janet Yellen also gave a press conference.
Home Builder Confidence Improves, but Housing Starts Slow
NAHB released its Housing Market Index report, which reached its highest reading in five months. The index moved up from 45 to 49; a reading of 50 indicates that more builders are confident about housing market conditions than those who are not. David Crowe, NAHB chief economist, said that builder confidence is in line with consumer confidence; he noted that consumers are waiting for a stronger economic recovery before buying homes and that builders didn’t want to build more homes than markets would bear.
According to the latest figures from the Department of Commerce, May housing starts fell to 1.00 million from April’s reading of 1.07 million on a seasonally adjusted annual basis, and missed the consensus reading of 1.02 million. Building permits issued in May fell by 6.40 percent to 991,000 permits issued for single and multi-family construction. In recent months, permits for single family homes have fallen, while permits for multi-family units are increasing. This concerns economists as single-family homes generate sales of retail goods including furniture and home improvement supplies, while multi-family housing is often occupied by renters and yields fewer home related purchases.
Warmer weather was expected to add to the pace of housing starts, but this did not occur during May.
Fed Reduces Asset Purchases, Mortgage Rates
FOMC members reduced the Fed’s monthly asset purchases by $10 billion, for a monthly volume of $35 billion in Treasury securities and MBS. The meeting minutes noted FOMC concerns that inflation has not yet reached the committee’s benchmark of 2.00 percent inflation as a benchmark of economic recovery.
The minutes reflected FOMC’s position that it will maintain the target federal funds rate at between 0.00 and 0.25 percent for a considerable period after the asset purchases under the current quantitative easing program have ended. While analysts previously associated “considerable period” with a time frame of six months, Fed Chair Yellen stated during her press conference that there was no formula for determining the Fed’s actions; she emphasized that the Fed and FOMC would monitor a wide range of economic indicators, economic reports and developments in support of any decisions to change current monetary policy.
In response to a question about tight credit, Chair Yellen cited banks’ reluctance to lend to all but those with “pristine” credit scores as a factor contributing to slower recovery in the housing sector.
Mortgage Rates, Jobless Claims
Freddie Mac reported lower mortgage rates on Thursday. The reading for a 30-year fixed rate mortgage was 4.17 percent, a decline of three basis points. Discount points were also lower at 0.50 percent. The average rate for a 15-year fixed rate mortgage was lower by one basis point at 3.30 percent; discount points were unchanged at 0.50 percent. The average rate for a 5/1 adjustable rate mortgage fell to 3.00 percent from last week’s reading of 3.05 percent. Discount points were unchanged at 0.40 percent.
New jobless claims were higher than expected at 312,000; analysts had predicted a reading of 310,000 against the prior week’s reading of 318,000 new jobless claims.
No economic reports were released Friday.
This week’s economic calendar includes several housing-related reports. Existing home sales, the Case-Shiller Housing Market Index and New Home Sales will be released along with multiple consumer-related reports and weekly updates for mortgage rates and new jobless claims.
Last week’s economic news was quiet in the housing sector, but retail sales and employment-related reports provided indications of less consumer spending and reduced consumer confidence.
On Monday, James Bullard, St. Louis Fed President, commented that inflation appears to be rising. Although not a voting member of the Fed’s Open Market Committee (FOMC), inflation has been a topic of concern to the FOMC in recent years. Mr. Bullard had previously noted that inflation was stable.
His remarks set the stage for this week’s FOMC meeting and press conference by Fed Chair Janet Yellen. Analysts expect the Fed to continue tapering its asset purchases as it winds down its quantitative easing program.
Labor related reports were mixed last week. Job openings in April rose to 4.46 million in April; this was the highest reading since September 2007 and exceeded the March reading of 4.17 million job openings in March.
More good news came from the U.S. Labor Department, which 4.71 million hires in April. This was the highest rate of hiring since June 2008 and represented a year-over-year increase of 6.00 percent. At the start of the recession at the end of 2007, about 5 million job openings were reported.
Mortgage Rates, New Jobless Claims Rise
Weekly jobless claims were reported at 317,000 as compared to expectations of 310,000 new jobless claims and the prior week’s reading of 312,000 new jobless claims. The four-week rolling average of new jobless claims rose by 4,750 new claims for a total of 315,250. The four-week gauge of jobless claims evens out weekly volatility and is viewed by analysts as a better indicator of labor market trends.
Mortgage rates were higher according to Freddie Mac. The average rate for a 30-year fixed rate mortgage rose by six basis points to 4.20 percent; discount points rose from 0.50 to 0.60 percent.
The average rate for a 15-year mortgage rose by eight basis points to 3.32 percent with discount points unchanged at 0.50 percent. The average rate for a 5/1 adjustable rate mortgage rose from last week’s reading of 2.93 percent to 3.05 percent. Discount points were unchanged at 0.40 percent.
The Fed’s quantitative easing program was implemented to control long-term interest rates, including mortgage rates. Gradual tapering of this program is allowing mortgage rates to rise. Other influences include investor concerns over recent decisions made by the European Central Bank.
Consumer sentiment slipped slightly for June according to the University of Michigan Consumer Sentiment Index. June’s reading was 81.20 as compared to an expected reading of 82.80 and May’s reading of 81.50.
Next week’s scheduled economic news includes the NAHB Housing Market Index for June and Housing Starts for May. These readings are important indicators for housing supplies, as a lack of builder confidence can translate to fewer housing starts. Housing markets were impacted by high demand for homes against low inventories of available homes during 2013 and into 2014.
Also noteworthy is the FOMC post-meeting statement and Fed Chair Janet Yellen’s press conference. The FOMC sets the Federal Reserve’s monetary policy and is expected to announce further tapering of the Fed’s quantitative easing program. It will be interesting to learn the Fed’s perspective on inflation, which has been stuck below the Fed’s target level of two percent.
Friday’s release of Leading Economic Indicators for May round out this week’s economic reports.
Last week’s economic news was mixed. Construction spending grew, but fell below the expected level. CoreLogic reported that April home prices continued to rise, but did so at their slowest growth rate in more than a year. Employment reports for private sector and government jobs indicated fewer jobs, but the national unemployment rate was steady. Here are the details:
Construction Spending, Home Price Growth Slows
Construction spending reported by the Department of Commerce reached $953.5 billion annually, and increased by 0.20 percent month-to-month against expectations of an 0.80 percent increase and the March reading of 0.60 percent growth.
According to CoreLogic, the rate of home price growth slowed to 10.50 percent year-over-year in April as compared to the 11.10 year-over-year rate of increase in April 2013. Home prices increased by 2.10 percent over March; these gains in home prices were the slowest posted in more than a year, but there was good news.
No states posted a drop in home prices, and eight states posted new record highs for home prices.
CoreLogic said that although a short supply of available homes has driven home prices up, price gains lost momentum due to affordability; CoreLogic expects home prices to increase at a slower pace and projects that home price growth will reach a pace of 6.30 percent by April 2015.
Mortgage Rates Mixed
Freddie Mac reported that mortgage rates for fixed rate mortgages rose while the average rate for a 5/1 adjustable rate mortgage fell. The average rate for a 30-year fixed rate mortgage increased by two basis points to 4.14 percent; discount points fell to an average of 0.50 percent. The average rate for a 15-year fixed rate mortgage also increased by two basis points to 3.23 percent; discount points were unchanged at 0.50 percent. Rates for a 5/1 adjustable rate mortgage averaged 2.93 percent, a drop of three basis points. Average discount points rose from 0.30 to 0.40 percent.
Jobs, Unemployment Data Suggest Economic Strength
Labor markets impact consumer decisions to buy homes; several labor-related reports released last week indicated that the economy continued to gain strength as more jobs were added and fewer workers filed jobless claims.
ADP reported that 179,000 private-sector jobs were added in May as compared to 215,000 jobs added in April. The Bureau of Labor Statistics released its Non-farm Payrolls report for May; 217,000 jobs were added as compared to projections of 210,000 jobs added and 288,000 jobs added in April.
New weekly jobless claims were reported at 312,000 as compared to expectations of 311,000 new jobless claims and the previous week’s 304,000 new claims. The four-week rolling average of weekly jobless claims fell by 2250 new claims to 310,250; this was the lowest reading since June 2007, and was 10 percent lower than the reading for the same week in April 2013 and was 17 percent lower than for the same week in 2012.
Another sign of economic growth was reported last week. Continuing jobless claims dropped to a seasonally-adjusted annual rate of 2.60 million for the week ended May 24; this was the lowest reading reported since October 2007.
The national unemployment rate for May matched April’s reading of 6.30 percent, and was lower than projections of 6.40 percent for May. The Federal Open Market Committee of the Federal Reserve (FOMC) has repeatedly cited an unemployment rate of 6.50 percent as a benchmark indication of economic recovery; it appears likely that the Fed may continue its tapering of asset purchases as it winds down its quantitative easing program.
This week’s scheduled economic news includes Retail Sales, Retail Sales without vehicle sales, and the Producer Price Index. Freddie Mac mortgage rates and Weekly Jobless Claims will be released Thursday, and the University of Michigan will release its Consumer Sentiment Index on Friday.
To refinance a mortgage means to pay off your existing loan and replace it with a new one.
There are many reasons why homeowners opt to refinance, from obtaining a lower interest rate, to shortening the term of the loan, to switching mortgage loan types, to tapping into home equity.
Each has its considerations.
Lower Your Mortgage Rate
Among the best reasons to refinance is to get access to lower mortgage rates. There is no “rule of thumb” that says how far rates should drop for a refinance to be sensible. Compare your closing costs to your monthly savings, and determine whether the math makes sense for your situation.
Shorten Your Loan Term
Refinancing your 30-year fixed rate mortgage to a 20-year fixed rate or a 15-year fixed rate is a sensible way to reduce your long-term mortgage costs, and to own your home sooner. As a bonus, with mortgage rates currently near all-time lows, an increase to your monthly payment from a shorter loan term may be negligible.
Convert ARM To Fixed Rate Mortgage
Homeowners with adjustable-rate mortgages may want the comfort of a fixed-rate payment. Mortgage rates for fixed-rate mortgages are often higher than for comparable ARMs so be prepared to pay more to your lender each month.
Access Equity For Projects, Debts, Or Other Reasons
Called a “cash out” refinance, Boulder homeowners can sometimes use home equity to retire debts, pay for renovations, or use for other purposes including education costs and retirement. Lenders place restrictions on loans of this type.
A refinanced home loan can help you reach specific financial goals or just put extra cash in your pocket each month — just make sure that there’s a clear benefit to you. Paying large closing costs for small monthly savings or negligible long-term benefit should be avoided.
Many lenders offer low- or no-closing costs options for refinancing. Be sure to ask about it.
With mortgage rates at all-time lows, purchase and refinance activity is climbing.
Home sales are at their highest levels since May 2010 as home buyers take advantage of favorable economic conditions. Home prices are low, household income is rising, and rents are up in many U.S. cities.
Low rates have stoked mortgage refinance applications throughout Colorado , too.
With loan volume high, banks are nearing their respective capacities for underwriting and approving home loans. As a mortgage applicant, therefore, you’ll want to make sure that you’re taking whatever steps necessary to ensure that your home loan closes on-time, and without hassle.
You most important responsibility? Be responsive to your lender.
When asked for paperwork and/or supporting documentation, providing a 24-hour turnaround can keep your loan “top of mind” with your underwriter. This is important because underwriters are people and, sometimes, people “forget”. The fewer times that an underwriter has to “relearn” your file and its nuances, the better your chances for a speedy approval.
A secondary benefit to being responsive to your lender is that you’ll be less likely to miss your rate lock deadline which, too often, is a costly proposition for a borrower. Even if the mortgage market has improved since your original lock date, your lender may assess rate-lock extension fees equal to up to one-half percent of your loan size.
Other tips to ensure an on-time closing include :
- Disclose everything upfront. Your lender will find out anyway, so don’t under-disclose important facts.
- Be accessible. Your lender will often want to contact you by phone or email. Don’t lose days playing “phone tag”.
- When required, schedule your appraisal for as soon as possible. It’s easy to lose days to this part of the process.
And, lastly, don’t challenge an underwriter’s request for “more paperwork”. Lenders want to see as little paper as possible. They don’t ask for information that’s not required to approve your loan.
Mortgage volume is expected to remain high through the end of 2012 and into 2013. Follow these steps to help close your loan on time, and with few headaches.