Posts Tagged ‘Lehi mortgage’

Welcome to RateWatch for Thursday, August 05, 2010.  Here’s what’s happening:

Employment again is the news of the day, with new claims up another 20,000 or so to 479,000.  Continuing claims were down, though, to 453,700.  That was not as far down as the markets were expecting, however, and that’s meant that bonds have stayed strong.

Not too strong, though.  There really is no upside here.  Unless we get a truly shocking number tomorrow from the unemployment people, showing unemployment at, say 10.5%, there just isn’t any confidence in the bond market to cause a buying wave.

What that means for rates: nothing.  We’re down 6bps, which might just as well be flat.  There is no upside without huge news, and no downside because what news there is is bad.  So we’re hanging out with rates in the 4.5% range.

Anything else?: yep.  Sure is.  The big news today comes out of Washington, surprise surprise, with the Senate passing a bill that changes FHA fees.  Up-front MI will move from the current 2.25% down to 1%, a positive change, but more than made up for by the increase in monthly MI from an annual .55% to .9%, and the FHA gets authority to go all the way to 1.5%.

Bottom line: on a $200,000 loan, you are paying right now $4500 in UFMIP and $91.66/mo in monthly MI.  When these changes take effect, you’ll be paying $2000 UFMIP but $150/mo in MI.  For more commentary on that, see the blog at thechrisjonesgroup.com.

I’m Chris Jones, aka Agent Zero.  That’s RateWatch for today.  Until next time, we’ll be watching the rates.

Economic times are tough.  There are layoffs and threatened branch closings, all sorts of unrest in the labor markets.  The “recovery” hasn’t shown up at your door yet, and you’re considering going to work with your brother and opening that new office selling the supercool widgets he makes.

It might be a great idea.  Can I offer one thing, as a lender in Utah (and the rules are the same everywhere), for you to think about before you go?

If you’re going to refinance or buy a house, do it before you leave your job – before you even mention to anyone that you’re thinking of doing so.  Underwriters are unkind to the self-employed (and even more unkind to those whose verifications of employment come back with “we don’t think he’s staying here very much longer”).  There are no more stated-income loans (well, essentially), so you’re going to have to document all your income, and not with bank statements, either.  It will be tax returns. And those will be verified by an IRS transcript.

You’re going to want to have a long chat with your accountant.  She’ll probably have some suggestions for ways that you can minimize your tax liability while maximizing your adjusted gross income (AGI), and you definitely want to do that.  Underwriting is going to look hard at your AGI, and there are also add-backs for depreciation and amortization, so you can get some tax relief there without hurting your qualifying income.

But the big thing is that if you are self-employed, you have to have two years of tax returns showing this before you can be qualified for a loan under FNMA/FHLMC (Fannie/Freddie) guidelines.  So it’s going to be at least 24 months, and possibly longer, before you’ll qualify, once you leave.  And don’t try to claim that you’re not self-employed just because you get a W2.  If you own more than 25% of the business, you’re self-employed no matter how you get paid.

I’m not saying you shouldn’t do it.  I love self-employment.  I’ve been self-employed for a decade.  Small businesses are the heartbeat of the economy.  But before you go, get your house in order.  Literally.

Welcome to RateWatch for Thursday July 29, I’m your host, Chris Jones, and here’s what’s happening:

Today’s market: The benchmark bond is up 12bps today.  We’re trading in a very narrow channel.  Economic news today was all about employment, as in, there isn’t much of it.  Unemployment benefits have been extended, so continuing claims were up, which did not surprise anyone.  New claims were down, but not very much.  The recovery continues to fail to do the one thing that would really get the economy moving again – create jobs.

What that means to you: rates are holding steady.  It’s generally acknowledged that banks would like to raise rates, but competition is making that very difficult.  Remember, they don’t make money unless they lend it out to people.  Rates are therefore critical to attracting business.  There’s no central rate-making authority in mortgages.  The banks take their cues from the bond market and from each other.  So today’s rates are in the 4.5% range on conventional and FHA, with 15-year rates in the 4% range.

At some point, obviously, this is going to change.  We’ll have a terrorist attack (which would be mixed for bonds) or we’ll have IBM invent cold fusion (which would be very, very bad for bonds), and the market will break out of this channel and start moving, almost certainly upward.  We are trading right now at the bottom of the historical range, as in, it’s never been this good.  Ever.  So it isn’t as if there is a lot farther down we can go.

How long will it last? That’s the billion-dollar question.  Here’s the answer: NO ONE KNOWS.  Only one thing is certain: rates in this range will go away.  Do not wait to talk to a professional.  You can call us.  That’s what we’re here for.

That’s RateWatch for July 29, I’m your host, Chris Jones.  You can find us at thechrisjonesgroup.com or text us at 801-850-378.

Welcome to RateWatch for Thursday July 22, and here’s what’s happening:

Today’s market: The benchmark bond is down 15bps today.  We’re trading in a narrow channel.  It’s a huge day for economic news, with jobless claims coming out worse than expected – at least, worse than the experts expected – and existing home sales numbers showing the housing market still weak but not as weak as expected. All that bad economic news is bad for stocks and good for bonds.

What that means to you is worse mortgage rates, but not very much worse.  We’d need to be down 30-40 bps before banks would react with worse rates.  There’s a certain fatigue on the part of banks, who don’t really want to make loans in the low 4% range, so they’re not going lower on rates unless we have a huge move in the market.  That’s not happening.  Moves higher are very possible, however, so stay tuned.  To you all this means that rates are holding steady in the 4.5% range on most loans, down in the 4% range on 15-year terms.  Those rates are truly ridiculous, by the way.  At 4.5%, you can buy 20% more house than you can at 6% for the same payment.  An example:

6%, $200,000 loan, payment $1200/mo

4.5%, $240,000 loan, payment $1216/mo

So let’s all be grateful.

What’s in it for you? Money.  It’s going to take you 60-90 days to be able to complete a sale, so start the process right now.  For many of you it will take as much as six months.  Sound like a lot?  It isn’t.  And January is traditionally one of the cheapest times of the year to pull the trigger.  Do not wait to talk to a professional.  You can call us.  That’s what we’re here for.

That’s RateWatch for July 22, I’m your host, Chris Jones.  You can find us at thechrisjonesgroup.com or text us at 801-850-3781. ‘Til next time, we’ll be watching the rates.

Okay, so I was wrong. At least I wasn’t the only one.

Last month I wrote about how the expiration of the $8000 and $6500 tax credits for new home buying wouldn’t have much impact on the housing market. Those expired, for the uninitiated, on April 30, and since then sales on new homes have dropped to their lowest levels in history. So that wasn’t one of those really good predictions, and I’m sorry, and I admit I was wrong.

Pundits are saying that the drop is caused by buyers moving their purchases forward to take advantage of the tax credit, so that sales just moved from May to April. That surely took place. But at least here in my shop, there were a good number of people that couldn’t get the deal done in time, and who still are in the process of buying. That should have put some shims under the falling market.

So I have a different explanation for why what happened…happened. See, it wasn’t so much about the money. Markets are really smart. They compensate pretty fast for price-altering events like tax credits and artificial purchase incentives (see “Clunkers, Cash for”). When someone offers $8000 as an incentive for you to purchase a home, then the seller of that home adjusts his price upward to meet the new reality that you have more cash to spend, so most of the $8000 does you no good at all. As an aside, this is what the eggheads call “inflation”.

That did happen in this case, though not by anything like $8000 worth. No, the spike in home buying was not caused by the cash incentive as a dollar amount; rather, it was caused by the application of that dollar amount. As in, the $8000 was not a reduction in the price of the home; it was a boost in cash for down payment and closing costs. Yes, I know the government specifically said that the credit could not be used as a down payment. But, humans being what they are, and being waaaaaaay smarter than the government, they got “gifts” to cover the down payment and closing costs, then repaid those “gifts” with the tax credits. Voila! A temporary reinstatement of the zero-down loan programs the government killed last year.

The reason we’re in the economic mess we’re in is really quite simple: we borrowed too much money, and nobody saved a nickel. Now we can’t make the payments on the things we bought, so they’re being repossessed and foreclosed on. For a business, that means money is drying up and that means firings and layoffs. That exacerbates the personal financial problems, which means people stop spending, which further reduces the money for business, and around and around the mulberry bush.

If you have no cash, you can’t buy a home, because there are no zero-down programs outside of USDA Rural – which, not coincidentally, ran out of money 6 months before the end of the fiscal year – and Veterans’ Administration. But this program made it possible to fudge that, and brought a lot more buyers into the game. Until it ran out.

If you parsed the data, and nobody will actually give it to you so you can do this, but what you would find almost immediately is that the large majority of those tax credits were claimed by people whose down payments were smaller than the $8000 credit. Personally, I would bet that almost half of the loans that closed on which the credit applied were closed with gifts as the means of down payment. That was certainly true in our shop. I have no idea how many of those gifts were legitimate. Perhaps all of them. I hope so. But I doubt it.

Then, of course, the gravy train reached the terminus and everyone had to get off. Immediately, home sales dropped off a cliff. This doesn’t happen in market conditions where nothing hinky is going on. The market simply adjusts – prices fall, in this case – and people move on. Really, folks, the $8000 is not a big deal. It represents a payment increase of only about $40/mo for a borrower at today’s rates. That might have a small depressive effect on the market, but nothing like what we’re seeing.

Conclusion: the $8000 credit had the impact it did because it filled a market niche where there is huge demand, and that is the niche for 100% loans. The loss of the credit has taken out a very large part of the borrowing pool, those people that cannot come up with $7000-10,000 to put down on a house. Until something fills that gap again, don’t expect a huge market rebound.