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Economy stimulated by low mortgage rates

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Minneapolis, MN:  As mortgage rates continue to hover near the all-time historic low rates that we saw last November (2012), the nation’s overall economic outlook has seemed to improve.

saveIn November 2012, rates fell down to levels that had not been seen since 1971. While current rates are not at all-time lows, they are just slightly above those rates, and at levels that have not been seen since January.

The low mortgage rates are helping to stimulate the recovery of the housing market. They low rates have helped to increase home sales and home refinances. Many current homeowners have taken advantage of the low rates by refinancing their home loans, freeing up money to be spent elsewhere.

While the Federal Reserve plans to continue to keep mortgage rates low through the purchase of mortgage-backed security bonds, mortgage rates are not likely to stay this low forever. CNN Money expects that as the economy continues to improve over the course of the year, mortgage rates will begin to rise this fall – but just slightly.

Taking advantage of mortgage rates while they remain low is essential. First time home buyers can afford to purchase a property that is on average 20 percent more expensive than they were when mortgage rates were in the 4-5 percentile range. Refinancing to shorter term can also help buyers pay off their home in less time and lower their monthly mortgage payments.

Low down payment mortgage loans on the rise

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hammer_bankMore mortgage lenders are offering conventional loans with down payments well below the 20% or higher levels of recent years.

In another sign of the housing market’s brightening outlook, more home buyers are discovering conventional loans with down payments well below the 20% or higher levels of recent years.

Until recently, many borrowers had to go through a government guaranteed loan program, such as the Federal Housing Administration (FHA Loans) or the Department of Veterans Affairs (VA Loans), to get a mortgage with less than a 10% down payment.

READ THE FULL STORY ON USA TODAY

HARP Refinance program extended to 2015

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underwaterMinneapolis, MN:  The Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to extend the Home Affordable Refinance Program (HARP 2.0) by two years. The program was to expire at the end of 2013, but will NOW expire December 31, 2015.

The program is being extended so more underwater homeowners can benefit from refinancing to today’s low mortgage interest rates.  Already, some 2 million plus homeowners have successfully refinanced their homes using the HARP 2 refinance program.

FHHA also announced they will be launching a nationwide campaign to inform homeowners about HARP refinances, and eligibility requirements.

LEARN MORE about the HARP Refinance Program

To be eligible for a HARP refinance homeowners must meet the following basic criteria:

  1. The loan must be owned or guaranteed by Fannie Mae or Freddie Mac (Check and see for free)
  2. The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  3. The current loan-to-value (LTV) ratio must be greater than 80 percent.
  4. The borrower must be current on their mortgage payments with no late payments in the last six months and no more than one late payment in the last 12 months.

If your current loan is an FHA Loan, or a VA Loan, you also have refinance options if your home is underwater with a FHA Streamline Refinance, or a VA IRRRL Streamline Refinance.

 

Mortgage Rates down for the Week ending 4/11/2013

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arrow_percentFreddie Mac released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates edging down for the second consecutive week following weak employment reports. The average 30-year fixed-rate mortgage at 3.43 percent this week remains near its 65-year record low and continues to provide support for the housing recovery.

News Facts

  • 30-year fixed-rate mortgages (FRM) averaged 3.43 percent with an average 0.8 point for the week ending April 11, 2013, down from last week when it averaged 3.54 percent. Last year at this time, the 30-year FRM averaged 3.88 percent.
  • 15-year fixed rate mortgages this week averaged 2.65 percent with an average 0.7 point, down from last week when it averaged 2.74 percent. A year ago at this time, the 15-year FRM averaged 3.11 percent.
  • 5-year  adjustable rate mortgages (ARM) averaged 2.62 percent this week with an average 0.5 point, down from last week when it averaged 2.65 percent. A year ago, the 5-year ARM averaged 2.85 percent.
  • Interest rates for HARP refinance transaction slightly higher
  • Interest Rates for FHA Loans, and VA Loans slightly lower

Quotes
Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

“Mortgage rates fell further this week following a lackluster employment report for March. The economy added just 88,000 net new jobs last month, about one-third as many as February and the fewest since June 2012. In addition, approximately 496,000 people left the workforce causing the unemployment rate to fall to 7.6 percent. Further, average hourly earnings were unchanged in March, indicating income growth remains tepid.”

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Freddie Mac’s survey is the average of loans bought from lenders * last week, including discount points. Applicants must pay all closing costs at these rates. No cost loan rates higher.

Follow this link to view today’s best MN and WI mortgage interest rates.

 

Is it OK to make a lowball offer?

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welcome2_FTHB_1

Minneapolis, MN:  The spring real estate market is is upon us. The past few years have been tough in the real estate market, but like a roller-coaster, the market has plenty of ups and downs.  So where is the market today?  Can you make a lowball offer anymore?

As a general rule of thumb, it’s a bad idea for potential home buyers to make a low offer in the spring market, as multiple offers and increased sales activity mean sellers are more confident in rejecting your offer. In some cases, though, you might still be able to get away with making a low offer, depending on the specifics in your area and the home you’re considering.

Remember – all real estate is local.   In the Minneapolis / St Paul area, good inventory is low. Any home priced under $200,000 in good condition is going fast with multiple offers.

Local Sales Activity:  If sales activity in your region is low, you may be able to make a low offer on a home and actually have it accepted. The real estate market is in recovery phase in much of the country, but in some places, houses are still staying on the market for a long time, and sellers may be more willing to take a low offer in order to move the home. Your real estate agent can advise you on sales activity in your region. Are homes selling? How long are they on the market? Low activity may support a lower offer.

Inventory:  Inventory is a huge factor in whether you can get away with making a low offer. If there’s a surplus of inventory in your region, homes will sit on the market significantly longer, and sellers may be willing to entertain lower offers. If inventory is scarce or in high demand, though, sellers are probably getting multiple offers, so your low offer is likely to quickly be rejected.

neg_termPrices:  If homes are selling in your region, at what price point are they selling? It’s possible for a real estate market to be brisk, but a home that’s priced higher may sit on the market for months while the homes around it sell quickly. Evaluate the prices at which homes are selling, and if you’re willing to take a risk, make an offer on the home that is comparable to other sales. This is more likely to be successful if a seller had originally priced a home high to begin with.

Mortgage rates:   With current mortgage rates hovering at history lows, more people are able to afford homes, hence more people are in the market.  More people, more competition.

Phychological Warfare:  We all feel the need to “win”.  You want to win with your lower price, and the seller wants to win with their higher price. Don’t let emotions and personality interfere.

Also consider overall payment before being stubborn causes you to lose your dream house. At a  3.50% interest rate, $5000 more in purchase price is just $22.50 more a month.  Talked to your Loan Officer, or review the overall mortgage payment with a mortgage payment calculator.

Deal breakers after a pre-purchase home inspection

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St Paul, MN:  It is that time of year – and the spring housing market is off to a great start. Good inventory is low , so if you put your home up for sale, you might find that it is quickly scooped up by an eager buyer. As a home buyer, you might have to settle for a great home that doesn’t match all of your wish list items, and even then, may be in a multiple bid situation with other house-hungry buyers.

HORNot every home is perfect – and most buyers will do a home inspection BEFORE finalizing a purchase agreement. So what on an inspection is a deal breaker?

Common Deal Breakers

No home is perfect, but certain types of problems are serious enough to send buyers packing and force a seller who thinks he has a deal to renegotiate the selling price.

  • Foundation problems. The home may show a few minor cracks after settling but larger cracks may mean expensive trouble.
  • Wiring issues. Old wiring such as knob and tube or aluminum may present a fire hazard, while the fuse box or circuit box may show the wiring is inadequate for modern appliances.
  • Roof. Roofs have a lifespan that can be expanded by patching, up to a point. If the roof is past its prime, or if the flashing is in poor condition (or nonexistent), the roof can leak or admit water that causes damage before you even know you have a problem.
  • HVAC problems. A inspection can uncover ineffective and dangerous heating and cooling units.

Assessing What’s A Deal Breaker

Most of the repairs mentioned can cost a few thousand dollars – enough to make a buyer reassess whether to continue with the sale. While remodeling an outdated bathroom or upgrading the flooring does not have to be done immediately, the new owner must have serious problems fixed immediately to make the house safe for occupancy.

Some mortgage loan programs, particularly FHA, may not be willing to fund the loan if certain defects are not fixed BEFORE you can buy the house.

Handling Deal Breakers If You’re A Buyer Or A Seller

For buyers, finding problems like this on a home inspection means that unless you can negotiate repair costs with the seller, you will have to make repairs out-of-pocket if you stick with the deal. Many buyers, especially first-time buyers, cannot absorb a hit of several thousand dollars after buying a home. Even if you love the home and are feeling pressured to move, financial realities may make you reconsider whether you can afford a particular house, no matter how much you love it. House love can turn to hate very quickly if your dream home turns out to be a money pit. Before finalizing your home purchase, always be sure to have a home inspection done

For sellers, the possibility of unknown costly defects underscores the importance of having your home inspected before the house goes on the market. If the inspector finds a major flaw, you must disclose it, but you can list the house. “as-is” if you are unable to make repairs. Upgrading the electrical system or fixing other costly issues may net you a better selling price, but in any case, a pre-listing inspection will save you the grief of having to make repairs or lower the price after the buyer’s home inspection is complete.

Lack of quality homes for sale causing problems

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Minneapolis, MN:  Who would have thought we would be saying this, but strong demand for housing is now running into supply problems, according to the National Association of Realtors® (NAR), and what I see and hear from my mortgage clients everyday.
real1Homes For Sale:
The lack of quality supply in homes for sale, especially in the under $150,000 price range in the Minneapolis / St Paul area if very evident with the number of clients unable to find a home that doesn’t need a lot of repair.  Any home in good condition, and priced right for today’s market is selling very fast, with multiple offers, and within just days of being put on the market. Home buyers need to be pre-approved, and ready to immediately offer full price.
Nationally, signed purchase agreements  in February and NAR’s Pending Home Sales Index slipped 0.4 percent from the previous month.

The Index, an indicator of future home sales, dropped to 104.8 from a revised 105.2 in January, but is still at a recent high, second only to April 2010 when it reached 110.9 shortly before the end a government home buyer tax credit program.  The index was 8.4 percent higher than a year earlier when it was 96.6 and February marked the 22nd month that contract activity increased on an annual basis.

On a regional basis the Index declined 2.5 percent in the Northeast but was 6.8 percent higher than a year earlier at 82.8.  The Midwest was up 0.4 percent month over month to 103.6 and 13.2 percent year over year.  Pending home sales in the South slipped 0.3 percent to an index of 118.8 in February but are 12.1 percent above February 2012.  In the West the index increased 0.1 percent in February to 101.4 but is 0.8 percent below a year ago.

The National Association of Realtors expects existing-home sales to rise about 7 percent in 2013 to approximately 5 million sales, which is near the current level of activity.  The volume of home sales appears to be leveling off with the quality inventory problems, and the leveling of the index means little change is likely in the pace of sales over the next couple months.

Because of limited inventory of quality homes,  NAR also expects the median existing home price to increase about 7 percent, while they expect mortgage nterest rates to slowly move up to closer to 4% by the end of the year.

Mortgage Rates for week ending March 16th, 2013

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Minneapolis, MN: Freddie Mac yesterday the results of its Primary Mortgage Market Survey(R) (PMMS®), showing average fixed mortgage rates rising this week on stronger signs of jobs growth and consumer spending. ir-2The 30-year fixed averaged 3.63 percent, its highest reading since the week of August 23, 2012. The 30-year fixed hit its average all-time record low of 3.31 percent the week of November 21, 2012.

News Facts

  • 30-year fixed-rate mortgage rates averaged 3.63 percent with an average 0.8 point for the week ending March 14, 2013, up from last week when it averaged 3.52 percent. Last year at this time, the 30-year FRM averaged 3.92 percent.
  • 15-year fixed rate mortgages this week averaged 2.79 percent with an average 0.8 point, up from last week when it averaged 2.76 percent. A year ago at this time, the 15-year FRM averaged 3.16 percent.
  • 5-year adjustable rate mortgages (ARM) averaged 2.61 percent this week with an average 0.6 point, down from last week when it averaged 2.63 percent. A year ago, the 5-year ARM averaged 2.83 percent.

Quotes
Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

“Fixed mortgage rates rose this week on stronger signs of jobs growth and consumer spending. The economy added 236,000 new workers in February which helped push down the unemployment rate to 7.7 percent. This helped offset the effects of the payroll tax holiday expiration and led to a 1.1 percent increase in retail sales, which was well above the market consensus forecast.”

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four homebuyers and is one of the largest sources of financing for multifamily housing.

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Freddie Mac’s survey is the average of loans bought from lenders * last week, including discount points. Applicants must pay all closing costs at these rates. No cost loan rates higher.

Follow this link to view today’s best MN and WI mortgage interest rates.

First time home buyer tip

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Minneapolis, MN:  As we start to enter the spring home buying season here in Minnesota, I have one big tip for first time home buyers.

welcome2_FTHB_1Buying now makes sense. If you have OK credit, a little bit of money for down payment, and you’ve been successfully renting for a year or two, you are ready to buy now. With the combination of affordable housing prices and low mortgage rates, there has never been a better time to become a home owner.

First Time Home Buyer Tip: Talk to a Loan Officer FIRST.

Most people do it wrong. They start looking at homes on the internet. Then they contact a Real Estate Agent and start looking at homes. Seems logical, but wouldn’t it make more sense to know if you can even get a loan, how much you can afford, what down payment is required, and what purchase prices you can qualify for first?

With that knowledge in hand, now you can start looking for homes you know you can afford, and what the payments, and loan programs would look like for you.

I feel bad when people have already found a dream home, only to be told for various reasons they cannot buy it. Don’t let this happen to you.  Get pre-approved with a local mortgage broker BEFORE talking to a Realtor.

Not only does it make sense, but your Real Estate Agent will appreciate that fact you are pre-approved so they can immediately focus on providing the best service to you without slowing things down while you get approved. Or, worse yet, having to completely refocus the search because of newly discovered information from a mortgage lender.

Mortgages for Self-employed about to be even harder to obtain

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If you’re self-employed or own a small business, getting a mortgage will become a whole lot harder soon.

Beginning in January, new lending rules go into effect that might make it more difficult for a small-business owner or self-employed individual to buy a house or refinance an existing mortgage.

READ THE FULL STORY at Deleware Online

 

What is your home worth? Find out for free…

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banner_ad_appraisalWhat’s the value of your home? (MN & WI Only)

Many homeowners are curious about the appraised value of their home. An actual appraisal is expensive, and county tax records do NOT always reflect true market value. As you may be aware, home values are constantly fluctuating, and with the decline in average values, everyone has lost value.

But things are changing, average home values the past 12 months in the Minneapolis / St Paul, MN area have risen on average 14.1%.  So what your home is worth today?

There are many sites that claim to give you are idea, including Zillow, Trulia, and more. It is also a well known fact those sites have very questionable data, giving values that range from close, to crazy far off. The big problem is, where is the data they use coming from and how accurate is it?

We have a different tool to answer the estimated appraised value of your home question. Our system uses the Freddie Mac Home Price Index ( FMHPI ). FMHPI is calculated using a repeat-transactions methodology. Repeat transactions indexes measure price appreciation while holding constant property type and location, by comparing the price of the same property over two or more transactions. The change in price of a given property measures the underlying rate of appreciation because basic factors such as physical location, climate, housing type, etc., are constant between transactions. Averages of appreciation rates for different geographic areas and time periods are calculated using statistical regressions and the index values are derived from these averages

While the estimate may not be the actual or appraised value of your property, this can be a much more useful too than Zillow to gauge fluctuations and trends in your market which affect your home’s value.

Want to check your homes value? Simple click the link below! (MN and WI homes only)

FREE HOME VALUE ESTIMATE

 

De-Bunking 3 Mortgage Myths

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I hear things all the time, that as a Minnesota Based Mortgage Loan Officer, drive me crazy.  Here are a few things that seem to be high on the need to be de-bunked list.

Myth #1 – Banks are not lending.
NOT TRUE:  We are very busy! Mortgage companies continue to see a record number of home buyers applying and qualifying for mortgage loans, and refinance loans are still popular with our current low mortgage rates.  BAD credit loans are not available, so I suppose if you are a bad credit customer, yes, banks are not lending to you.

qualifyMyth #2 – APR & Interest Rates are the same thing / Shop by APR
NOT TRUE: The interest rate is the price you pay to borrow money. APR (annual percentage rate) includes other fees that you may have financed into your mortgage loan, like closing costs and mortgage insurance. Don’t be fooled when shopping for a mortgage. When the rate is below everyone else, you are likely paying higher closing costs and discount points to “buy” that rate. Paying discount points is a personal decision based current cash flow,  time in the property, loan-to-value, and more. Talk to your Minnesota mortgage lender to determine what financing options are best for your specific situation.

Myth #3 – You can be pre-approved for a mortgage without submitting documents.
NOTE TRUE: If you’ve been told you that are pre-approved for a mortgage loan, but you never sent W2’s, pay stubs, bank statements, etc to the lender, YOU ARE NOT PRE-APPROVED, regardless of what they tell you.

First Time Home Buyers, Get Pre-Approved BEFORE you talk to a Realtor
First Time Home Buyers, Get Pre-Approved BEFORE you talk to a Realtor

Disputed Items on Credit report Killing your Mortgage Application

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Minneapolis, MN:  It is a fairly common practice recently, and people with credit report issues are told to do it on a regular basis, but disputing an item on your credit report may just end up getting your mortgage application denied!

fico_graphDisputing bad credit really is the the heart of credit repair, but mortgage underwriting system have been improved and upgraded to deal with this issue.  All mortgage loans start out by being run thought an automated underwriting system (AUS). The AUS looks at your overall application and your credit report to make a lending decision.

Having disputed items on your credit report will prevent an automatic approval, and force your loan to be down graded to an manual underwrite. It doesn’t matter if your score is acceptable.

A manual underwrite on your mortgage application is DRAMATICALLY more restrictive in guidelines than an automatic underwrite. You will be required to pay off collections, supply more documentation, and the whole process will take longer!

A good example would be debt-to-income ratios.  On a computer approval, you may be approved with a 45% debt ratio.  But if it a manual underwrite, it is 41% of bust.

I just had this occur to one of my clients (which is why I am writing this post).  The client has an old car repo on his credit report with a $10,000 deficiency balance.  With the computer approve, he would NOT have to pay the old item off to buy his house.  Unfortunately, he tried disputing the repo and hoped it would magically go away.  Well, it didn’t – and shouldn’t.  So the dispute on the credit report turned his application into an manual underwrite, and under the manual underwrite guidelines, he MUST PAY IT OFF in order to buy his house.  Ouch…

New FHA Rules – 3 major changes coming soon

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Minneapolis, MN: If you are a first-time home buyer, you may already be leaning towards an FHA-backed mortgage to finance your Minnesota or Wisconsin home. Recently, the Federal Housing Administration announced changes to their mortgage guidelines, which are being made to stem the losses from all the foreclosures the past few years.

updateFHA does not provide loans, rather FHA is a government entity that insures mortgage loans made by banks and non bank lenders. Needless to say, if a lender can get an FHA guarantee on a portion of a loan, they are much more willing to provide a loan to someone.

Without the FHA, home buying would be a bit tougher for many home buyers buyers who cannot meet the slightly higher down payment and credit score requirements of a conventional loan. After the collapse of subprime lending in 2008, and the tightening of credit that followed, FHA-backed mortgages became the only game in town for many first-time home buyers.

FHA guidelines are a little more forgiving when it comes to credit history, making it the only practical option for some  home buyers who had a prior bankruptcy, foreclosure, or short sale in the past few years.

Here are 3 major FHA rule changes slated for 2013, and how they may affect you:

1. All FHA loans initially require mortgage insurance.  Just like conventional loans, mortgage insurance could be dropped below 80% loan-to-value.  After June 3rd 2013, this is no longer the case. Mortgage insurance on FHA loans will be on your mortgage payments for the life of the loan.

2. The cost of monthly mortgage premiums is going up slightly on April1, 2013. While it is  a relatively small amount; it would add an extra $20 a month to a $200,000 mortgage.  This will only effect new loans.

3. Few lenders allow for score below 640, but for those lender who do offer very poor credit score FHA loans (580-620 range) home buyers will face stricter debt-to-income ratios in 2013. In other words, the less debt you have, the better.

The good news is, these changes shouldn’t derail anyone’s plans to buy a home in MN, WI, or the rest of the country. Even with the new changes in 2013, FHA-backed mortgages remain attractive for many at least for the first 10-years or so of home ownership.

Finally, if you are buying a home, remember to get pre-approved by a local Minnesota or Wisconsin mortgage lender first…  You need to know what loan programs you qualify for, down payment options, FHA mortgage interest rates and how they will effect you, and an acceptable price search range to be looking at BEFORE you spend any time with a Realtor.