Karl's Mortgage and Related Info Site

Those Who Wait Will Pay Thousands More This Spring

Waiting a few extra days or weeks to purchase a home this spring could cost buyers thousands of extra dollars as the office of Housing and Urban Development (HUD) implements several changes for loans guaranteed by the Federal Housing Authority (FHA).

Coming just weeks before the April 30 deadline for the Home Buyer Tax Credit and just days after the March 31 expiration of the Federal Reserve Board's mortgage backed securities purchase program (which has kept home loan rates artificially low for over a year), these FHA changes make it even more important to act now to save big.

Here are a few reasons why:

On April 5th, the cost of required up-front mortgage insurance for loans guaranteed by the FHA will increase from 1.75% to 2.25%. For a borrower purchasing a $200,000 home with a $7,000 down payment, the up-front mortgage insurance will increase by $965. Up-front mortgage insurance is typically financed in the final loan amount so the impact to a monthly payment will be minimal but overall, the increase is still borne by the borrower both upfront and monthly.

Later this spring, the amount of money that a seller can return to the buyer from their sale proceeds will be reduced from 6% to 3%. The reduction in these "seller concessions" can increase the amount of cash a buyer will be required to pay at closing by $6,000 for a home purchase of $200,000.

There is only one way to avoid being affected by all of these costly changes that lie ahead - submit all FHA mortgage applications by the last week of March.

If I can answer any questions you may have about how these changes could impact you, call me. I appreciate your business.

Sincerely,

Karl Peidl
Pleasant Valley Home Mortgage Corp.
856-252-1224
kpeidl@pvhmconline.com

New HUD Policy Created to Allow Quicker Foreclosure Re-sales!

Effective February 1, 2010 the Department of Housing and Urban Development (HUD) will relax FHA rules that prohibit insuring mortgages on homes that are owned by the seller for less than 90 days - a move that could help expedite the rehabilitation and resale of foreclosure properties.

In a housing market where tighter lending requirements have made FHA financing the only option for some buyers, this 90-day policy has (1) kept some homebuyers from being able to purchase affordable homes and (2) prevented the quick resale of foreclosed properties, which affects the ability of communities to stabilize and rebuild.

Research has shown that the buying, fixing, and reselling of foreclosed properties is often achieved in less than three months time.

The temporary waiver, which will expand access to FHA mortgage insurance to many, will be in effect for a period of one year, unless extended or withdrawn by the FHA. With this in mind, now may be an excellent time to contact clients who have recently purchased a foreclosed property and those who may be on the fence about purchasing a foreclosure as a short-term investment.

"FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties," said FHA Commissioner David H. Stevens. "This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity."

To ensure FHA borrowers are protected from inflated prices, the policy has certain restrictions, including:

• All transactions must be arms-length and there can be no identity of interest between the buyer and seller.
• If the sales price of the property is 20 percent or more above the seller's acquisition cost, the lender must meet specific conditions for the waiver to apply.
• The waiver is limited to forward mortgages, and cannot be used under the Home Equity Conversion Mortgage (HECM) purchase program.

You can read the full text of the waiver on HUD.gov.

Mortgage pricing ended the week slightly better by about .300 and kept the 30-year conforming fixed mortgage rate around 5.00%,

The Employment report was weaker than expected last week and the unemployment rate remained at unchanged at 10.0%.

The release of the Fed minutes was no surprise- they are committed to keep rates low "for an extended period of time." The minutes also revealed they care contemplating the continuation or extension of the MBS purchase program which has helped keep mortgage rates low through 2009. If they do not, the market will have to organically absorb $15-$20 billion per month on it's own- likely to increase rates due to supply/demand dynamics.

The Week Ahead:

While this week will bring us a few data points that could move markets, it will mostly be about the Treasury Note auctions. We have 3yr, 10yr, and 30yr Note auctions this week (Tues-Thurs) that will be very important. If these auctions go well- we could see mortgage pricing improve slightly more this week, but if these auctions do not go well, we could see mortgage rates back on the path to going higher.

On Thursday we will get a look at how retail sales are going as well as the weekly jobless claims.

On Friday we will get a look at how consumers are feeling and a view of how inflation is (or is not) working it's way through the economy with the CPI report.

Monday: No important data. We do have a 10-year inflation indexed note auction at 1:00.

Tuesday: We have the 3-year note auction at 1:00 and this could set the tone for the rest of the week, although the markets will be watching the 10-yr and 30-yr much closer on Wed and Thurs.

Wednesday: We get the very important 10-yr note auction at 1:00 and the Fed releases the Beige Book at 2:00.

Thursday: Retail Sales - we get a look at the retail sales report and traders will be watching closely. We also get the Weekly jobless claims report at 8:30 and the 30-yr note auction at 1:00.

Friday: We get a view of inflation at the consumer level with the CPI report at 8:30 as well as a look at how consumers feel with the Univ. of Michigan Consumer Sentiment report at 9:55.Mortgage pricing was a little volatile last week, but ended the week unchanged. However, mortgage rates moved up by .60 for the month of December, or down by about 200 bps in price/rebate. We are still hovering around 5.00% for a Conv. 30-Year fixed mortgage.

It appears low mortgage rates will be with us at least until the Fed's MBS purchase program comes to an end in March 2010 as scheduled. There are many speculating that the Fed may find a way to extend this program in some form to continue to support housing as it appears to be just getting legs under it. Low market rates in general will be with us for "an extended period of time" as committed by the Fed and Ben Bernanke. While there are discussions around possible exit strategies, none of the members seem to feel that any immediate or urgent action must be taken anytime soon relative to market rates.

If the data continues to support an economic recovery, we expect mortgage rates to wander in a range from about 5.00% to 5.25% on the Conv. 30-year fixed, but to be choppy over the next 60 days.

Mortgage Market Advisory Disclaimer

This is only our opinion and cannot be guaranteed to be in the best interest of any or all parties. This service is provided for informational purposes only and is not intended for trading purposes. None of the information provided constitutes a solicitation, offer, or recommendation by NHLA to buy or sell any security, or to provide legal, professional, tax, accounting, or investment advice. Every lender's price desk has their own strategies and reactions to market movements. Our information is simply based on market movements and does not predict or report potential pricing adjustments by particular lenders.

Karl Peidl
Accredited Loan Consultant
Pleasant Valley Home Mortgage Corp.
Phone: 856-252-1224
Cell: 609-254-6687
kpeidl@pvhmconline.com
www.karlpeidl.com

 Copyright © 2009 National Home Loan Advocates LLC                                                                                          

Mortgage Rate Update

FHA Loans Facilitate Home Ownership

The Federal Housing Administration (FHA) program first began in 1934 in an effort to encourage home ownership despite the difficult economic times of the era. The program enables consumers who may not qualify for a standard loan to obtain the financing they need to purchase a home without income limitations.

FHA loans differ from typical loans in that they are insured by the Federal Housing Administration, which is a part of the Department of Housing and Urban Development (HUD). Because this insurance reduces the lender's risk on the loan, lenders have greater flexibility with regard to approving loans. For example, FHA loans are not credit-score driven, so a client may be able to obtain a loan despite having had credit problems or even a bankruptcy in the past.

FHA loans also provide added flexibility when it comes to closing costs and the down payment. Many of the closing costs can be incorporated into the loan, and a down payment of just 3.5% of the purchase price is required. The down payment may be obtained as a gift from a family member.  FHA loans are processed just like any other loan, and they provide a wonderful opportunity for consumers who are seeking to achieve home ownership!

Mortgage Interest Rates for Fixed Rate Mortgages*

Rates as of Thursday, 7th January, 2010:

*Rates are subject to change due to market fluctuations and borrower's eligibility.

Karl Peidl
Pleasant Valley Home Mortgage Corp.
305 Harper Drive, Suite 3
Moorestown, NJ 08057

856-252-1224

kpeidl@pvhmconline.com

www.karlpeidl.com

Mortgage Rate Update
High Credit Score = Low Mortgage Rate

Credit scoring was developed in the 1960s as a means to determine whether or not consumers were likely to repay their loans. The score ranges from 350 to 850 with a higher score being extremely favorable. Essentially, a high credit score translates into lower interest rates for the borrower.

There are five factors that comprise the credit score. Payment history accounts for 35% of the score; outstanding credit balances have a 30% impact; credit history makes up 15%, type of credit factors at 10%; and inquiries influence the score by 10%. This gives the lender a snapshot of an individual's sense of financial responsibility and ability to pay back loans.

There are many quick tricks to improve the credit score, and I can provide borrowers with more information on this subject. If necessary, I guide them to a reliable resource for credit remediation. If a borrower has to pay a higher interest rate to close a loan, the tarnished credit rating will begin to improve once mortgage payments are made on time and in full. If that is the case, my team and I will be on the watch to alert the borrower when an opportunity arises to refinance and get a lower interest rate.

Mortgage Interest Rates for Fixed Rate Mortgages*

Rates as of Thursday, 31st December, 2009:

*Rates are subject to change due to market fluctuations and borrower's eligibility.

Mortgage Rate Update
Know Your Credit Score

In the past, it wasn't out of the question to obtain a mortgage with a FICO score in the low 500 range. In fact, if you were willing to accept the payment, you could even do so with little money down.

Today, however, if you have a low FICO score, you may not be able to get a mortgage. In fact, depending on how much of a down payment you can afford and the mortgage program you are applying for, you may be looking at a minimum score of 680 to obtain a mortgage.

The point is, your credit score is more crucial than ever-not just for getting a low rate, but for qualifying for a mortgage at all.

So, before you sign a purchase contract or apply for financing, take the time to have your credit profile checked out. Often, there are steps you can take to help correct and improve your credit score. But doing so, requires the insight and advice of a professional who knows what to look for and what to do to achieve the desired results.

If you think your credit score and credit profile could use even a little improvement, contact me to discuss your situation. With a short conversation, we can discuss what your credit score looks like and what options you have.

Mortgage Interest Rates for Fixed Rate Mortgages*

Rates as of Thursday, 24th December, 2009:

*Rates are subject to change due to market fluctuations and borrower's eligibility.

What Are Points and When Should You Pay Them?

Points are up-front fees paid by the borrower to obtain a better interest rate on a loan. One point equals one percent of the loan amount. And while a lower interest rate may result in a lower monthly payment, it is important to consider how long you intend to be in the loan and to compare current interest rates to historical market trends. This will help you to determine whether paying points is a worthwhile investment.

Let's look at a sample scenario. If you take out a $300,000 mortgage and decide to pay one point in order to lower your interest rate, this would translate into an up-front cost of $3,000. To keep things simple, we'll assume that paying this one point will save you $50 a month. This means it will take you 60 months to recoup the cost of that point. If you decide to refinance or sell the home before the 60-month mark, your money is lost - not to mention the opportunity cost of not having this money invested elsewhere. In this scenario, you would only benefit financially from paying points if you were to remain in the home for no less than 60 months.

It's also important to remember that interest rates run in cycles. When rates are at historical lows, it makes more sense to pay points if you plan to live in the home for an extended period of time. If it's unlikely that rates will go down in the near future, then there will be no need to refinance.

When interest rates are high, however, there is a strong likelihood that they will come down again before too long. Therefore, this is not a good time to pay points. The chances of refinancing in the near future are extremely high, and you will likely not be in the loan long enough to recoup the up-front cost of the points.

Tax deductibility is another thing to consider when choosing whether or not to pay points. For new purchases, interest from both points paid and your mortgage are tax deductible up front. For refinances, however, points are not deductible up front. Instead the deductions are spread out over the term of the loan (unless the entire loan is paid off early), making points more costly in comparison.

Ultimately, there's a lot to consider when it comes to points and whether or not they are a worthwhile investment. An experienced mortgage professional will work with you to determine the best course of action based upon your specific situation. Request a comprehensive cost comparison to see whether paying points could be financially beneficial to you.

If you or someone you know would like to learn more about points and whether they should be a part of your mortgage plan, give me a call. I would be happy to assist you!

Last week mortgage pricing held steady under 5% for a 30-year Conforming Fixed Rate after jumping mid-week prior to the FOMC Statement that was the most upbeat review of conditions in well over a year. The FOMC noted that "economic activity continues to pick up and the deterioration in the labor market is abating." They are still committed to leaving rates low for "an extended period of time", but do feel confident enough to stay on schedule with the sunsetting of a number of financial market support programs.. ie purchasing MBS which is scheduled to end at the end of March.

At the same time the Fed and all other economic indicators are pointing to a robust recovery yet. which will likely keep mortgage pricing from jumping outside of our 60-day forecast levels anytime soon.

The Week Ahead:

This holiday-shortened trading week brings us the release of six monthly or quarterly economic reports. Only a couple of the reports being released are considered to be of high importance to the markets. With the Christmas holiday falling during the week we can expect very thin trading, meaning that we may see a larger reaction than normal to some news because there will be fewer traders working and less transactions being made.

Overall, we are expecting to see some movement in the markets and mortgage rates, but nothing drastic unless we get some surprising results from the week's data. The bond market will close early Thursday (2:00 ET) and will be closed all day Friday in observance of the Christmas Day holiday. This means that firms that trade bonds will likely be keeping only a skeleton staff the latter part of the week and raises the possibility of a stronger reaction to surprises in the economic data than we normally would see. Accordingly, proceed cautiously and stay close to your Loan Officer this week if still floating an interest rate and closing in the immediate future.

MONDAY:  There is no relevant economic news scheduled for release today, so look for the stock markets to help drive bond trading and mortgage rates.

TUESDAY: Two of the week's reports are scheduled for posting Tuesday. The first is the final revision to the 3rd Quarter GDP. We don't think this data will have an impact on mortgage rates unless it varies greatly from its expected reading. Last month's first revision showed that the economy expanded at a 2.8% annual pace during the quarter and this month's revision is expected to show the same. A significant upward revision would be considered bad news for bonds, but since this data is quite aged at this point I don't think it will have much of an impact on mortgage rates Tuesday.

The second report of the day is November's Existing Home Sales report. This release will come from the National Association of Realtors while Wednesday's New Home Sales data is a Commerce Department report. Both give us a measurement of housing sector strength and mortgage credit demand, however, neither are considered to be of high importance. And both o f the reports are expected to show a small increase in sales. Weaker than expected readings would be considered positive for bonds and mortgage rates because they hint at a weakening housing market, but unless the actual reading varies greatly from forecasts the results will probably have little or no impact on mortgage rates.

WEDNESDAY: Wednesday brings us the release of three reports. The first is November's Personal Income and Outlays data. It will give us an important measurement of consumer ability to spend and current spending habits. Since consumer spending makes up two-thirds of the U.S. economy, any related data usually has a noticeable impact on the financial markets and mortgage rates. Current forecasts are calling for a 0.5% increase in income and a 0.7% increase in spending. If this report reveals weaker than expected readings, we should see the bond market improve and mortgage rates drop slightly Wednesday morning.
The second report of the day comes late morning when the revised University of Michigan Index of Consumer Sentiment for December is posted. Current forecasts are calling for a small upward revision from the preliminary reading of 73.4. This is fairly important because rising consumer confidence indicates that consumers may be more apt to make large purchases in the near future. An unexpected upward revision could lead to slightly higher mortgage rates Wednesday.

The last report of the day is November's New Home Sales. It is this week's least important report and is unlikely to influence mortgage rates.

THURSDAY: November's Durable Goods Orders will be posted early Thursday morning. This data gives us an important measurement of manufacturing sector strength by tracking orders for big-ticket items or products that are expected to last at least three years. Analysts are expecting the report to show a 0.5% increase in new order s. A decline in orders would indicate that the manufacturing sector was weaker than many had thought. This would be good news for the bond market and should drive mortgage rates lower. However, a larger than expected rise in orders could lead to mortgage rates moving higher early Thursday morning.


Two-Month Rate Forecast:
With rates at multi-year or near historic and all-time lows, it's tough to expect that they have considerable space to decline much from here, especially in the face of a modestly improving economic climate and an improving corporate earnings picture.

It appears low mortgage rates will be with us at least until the Fed's MBS purchase program comes to an end in March 2010 as scheduled. There are many speculating that the Fed may find a way to extend this program in some form to continue to support housing as it appears to be just getting legs under it. Low market rates in general will be with us for "an extended period of time" as committed by the Fed and Ben Bernanke. While there are discussions around possible exit strategies, none of the members seem to feel that any immediate or urgent action must be taken anytime soon relative to market rates.

We expect mortgage rates to likely wander in a range from about 4.75% to 5.25% on the Conv. 30-year fixed, but to be choppy in that range as the stock and bond markets search for new trend lines. 

Mortgage Market Advisory Disclaimer

 Copyright © 2009 National Home Loan Advocates LLC                                                                                          

ARM Indexes: A 10-Year Comparison