Karl's Mortgage and Related Info Site

Mortgage Rate Update

Homebuyer Opportunities Nearing End

For prospective homebuyers who are on the fence about making a home purchase, the next few months represent a countdown of sorts for two reasons.

First, huge tax incentives are about to expire. April 30, 2010 is the last day to enter into a home purchase contract and still potentially qualify for a federal income tax credit of up to $8,000 for first-time homebuyers and up to $6,500 for repeat homebuyers. The credit can be claimed only on contracts that close by June 30, 2010.

Secondly, another form of stimulus will soon disappear, as the Federal Reserve winds down a program that has been keeping home loan rates artificially low. The fact is that the lowest rates of 2009 were driven down to their attractive levels because of the Fed's Mortgage Backed Securities (MBS) purchase program. The Fed has already used over 80% of the allocated funds for MBS, meaning less than 20% remains to be used over four months.

As the Fed's program winds down and ends, we'll likely see two things happen. First, we will probably see higher levels of volatility-with rates sometimes shifting dramatically in the middle of the day. Second, since MBS will have less support from the Fed, rates are likely to rise over time.

Mortgage Interest Rates for Fixed Rate Mortgages*

Rates as of Thursday, 17th December, 2009:

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

When a lender permits an extended lock-in period, the borrower will likely face a higher interest rate or additional fees that could be quoted as points. In other words, the borrower pays for the lender to take on the extended risk of being exposed to potential changes in the market.

For example, let's say a 30-day rate lock commitment costs the borrower one-half point, while a 60-day rate lock commitment costs one full point. If the borrower in this scenario needed the extended lock period, but did not want to pay points, then an alternative would be to accept a slightly higher interest rate. In this case, a 60-day lock would typically have a higher interest rate than a 30-day lock.

Our standard procedure is to lock in a rate as quickly as possible. My team and I want our clients to know that while interest rates fluctuate daily, most lenders do not want to lose any business because of it. If a significant rally causes interest rates to drop 0.25% or more, we know that we can most likely renegotiate the rate. In many cases, lenders prefer this option over losing the loan to another lender. On the other hand, if we'd allowed our clients to sit on the fence and not lock in their rate, we would have exposed them to market volatility without a safety net. Then, if rates were to increase, the borrower might no longer qualify for the loan they want - a situation that we want to avoid at all costs.

By knowing our clients' needs and working intimately with them to make the right decisions early on, my team and I are proud to say that we have helped them to achieve their home ownership dreams.

Rates Have Hit All-Time Low Levels Again!

First-Time Home Buyer Tax Credit Extended!

If you'd like to learn more about the loan programs we have available, please call me!

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

856-252-1224

kpeidl@pvhmconline.com

www.karlpeidl.com

www.pleasantvalleyhomemortgage.com

Mortgage pricing moved slightly higher last week by about 20 bps, but had at one point moved up 100 bps mid-week after fairly weak Treasury auctions and much stronger than expected Retail sales and Consumer Confidence readings. In fact, Retail sales were triple the expectations when excluding auto sales.

Mortgage rates still closed the week firmly under 5.00% on the Conf 30-Year Fixed for well qualified borrowers.

The very positive employment report from the previous week coupled with last weeks strong retail sales has added more confirmation that the economic recovery is underway.

The 10-year Treasury had dropped to 3.21% following the news out of Dubai, but has now rebounded to close the week at 3.55%

The Week Ahead:

This week is fairly busy in terms of the number of economic releases scheduled for release with five on the agenda in addition to the last Federal Open Market Committee (FOMC) meeting of the year. Two of the five economic reports are considered to be of high importance, so the data should have a heavy influence on the markets and mortgage rates this week.

Overall, expect to see a pretty volatile week in the financial markets and mortgage pricing. The most important day of the week is certainly Wednesday with the CPI and the FOMC meeting both scheduled.

Please maintain contact with your mortgage professional if you have not locked an interest rate yet because we may see sizable changes to mortgage pricing more than one day this week.

Tuesday:
The first relevant report of the week is one of the two highly important ones. The Labor Department will release November's Producer Price Index (PPI) early Tuesday morning. This index measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. If Tuesday's release reveals stronger than expected readings, indicating that inflationary pressures are rising, the bond market will probably react negatively and drive mortgage rates higher. If we see in-line or weaker than expected numbers, the bond market should fair well and mort gage rates should fall. Current forecasts are showing a 0.8% increase in the overall index and a 0.2% rise in the core data.

November's Industrial Production data is also scheduled to be posted Tuesday morning, but a little later than the PPI. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Analysts are expecting it to show a 0.5% increase in output. A smaller than expected rise would be good news for bonds, while a stronger than expected reading may result in slightly higher mortgage pricing. However, the PPI release is more important to the markets than this data is.

Wednesday:
The week's most important economic data comes Wednesday morning when November's Consumer Price Index (CPI) is posted. It is similar to Tuesday's Producer Price Index, except it tracks inflationary pressures at the more important consumer level of the econ omy. Current forecasts call for an increase of 0.4% in the overall index and a 0.2% rise in the core data reading. The core data is watched more closely because it excludes more volatile food and energy prices, giving a more stabile reading for analysts to consider.

November's Housing Starts report will also be released Wednesday morning, but I don't see it causing much movement in mortgage rates. This report, which is expected to show a sizable increase in starts of new homes, gives us an indication of housing sector strength and future mortgage credit demand. However, it can be considered the least important of this week's news.

The last FOMC meeting of the year begins Tuesday and will adjourn at 2:15 PM ET Wednesday. There is not much debate about what the Fed will do at this meeting with little chance of them raising key short-term interest rates. Therefore, the post meeting statement will likely be the sole source of a market reaction. This statement has the potential to have a significant influence on the markets and mortgage rates as investors look for any indication of what and when the Fed may do next. Generally speaking, the bond market would like to hear something that indicates the Fed will not be raising rates anytime soon.

Thursday:
The last piece of economic news will be posted Thursday morning with the release of the Conference Board's Leading Economic Indicators (LEI) for the month of November. This 10:00 AM release attempts to measure or predict economic activity over the next three to six months. It is expected to show a sizable increase in activity, meaning that it predicts any expanding economy over the next several months. This probably will not have much of an impact on bond prices or affect mortgage rates unless it exceeds current forecasts of a 0.7% increase from October's reading. The lower the reading, the better the news for bonds. If it show s a smaller increase, the bond market may move slightly higher, improving mortgage rates slightly.

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 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 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. The minutes of their November 3-4 meetings reveal that all members continue to support the Fed's large scale assets purchase programs. 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.

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

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.

Mortgage Rate Update

Financial Reasons to Buy

There are a number of personal and emotional reasons to buy a home. But there are also some strong financial reasons to make the investment. Here are just a few of those reasons:

Increase Net Worth: Few things have a greater impact on net worth than owning a home. In a comparison of renters versus homeowners, the Federal Reserve Board of Consumer Finance found that the average net worth of renters was just $4,000 compared to homeowners at $184,400.

A Big Tax Deduction: One of the largest tax deductions available is the amount of interest paid on a mortgage. In fact, a $150,000 home at a 5.50% interest rate can add up to approximately $8,000 in first year's interest. This amounts to a significant savings - effectively reducing the amount of a homeowner's monthly mortgage payment.

Long-Term Appreciation: Over the last few years, home prices have corrected and become more affordable. While that's good news for potential buyers, it has overshadowed the long-term appreciation of a home's value. The reality is, despite market ups and downs between 1950 and 2002, US home prices appreciated at an annual growth rate of 4.8%. Even if you calculate a modest appreciation of 3%, a home purchased today for $150,000 will grow in value to $364,000 over 30 years.

In addition, don't forget that the government is offering a tax credit of up to $8,000 for first-time buyers through June 30, 2010. The tax credit has also been expanded so that qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years can receive a tax credit of up to $6,500.

Mortgage Interest Rates for Fixed Rate Mortgages*

Rates as of Thursday, 10th December, 2009:

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

Mortgage Rate Update

Homebuyer Tax Credit Extended and Expanded

Great news for homebuyers! The Homebuyers Tax Credit has been extended into the first half of 2010...and it has been expanded to include benefits for current homeowners!

Who Qualifies? First-time homebuyers may be eligible for the tax credit worth 10% of the purchase price of the home, with a maximum available credit of $8,000.

In addition, the program now gives current homeowners an additional reason to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Eligible Incomes: Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more can receive a partial credit; however, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more can receive a partial credit; however, joint filers who earn $245,000 and above are ineligible.

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Mortgage Interest Rates for Fixed Rate Mortgages*

Rates as of Thursday, 3rd December, 2009:

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

Rates Have Hit All-Time Low Levels Again!

In case you haven't caught the news, home loan rates have done it again, dropping to their lowest level...ever. Not only has the 30 Year Fixed rate returned to its lowest all time level, rates across the board are at their lowest levels.

Yes, that means, go ahead and choose your flavor - 30 Fixed, 15 Fixed, 5/1 ARM or 1/1 ARM - all loan types hit their lowest levels of the year! For the weekly Freddie Mac survey of all lenders, this is the first time that all have been at their lowest level.

You must understand, though, that rates are artificially low! Last November, Ben Bernanke and the Fed put into place a program to lower rates. That program though is nearing its end, as the Federal Reserve has purchased over $1 Trillion of mortgage backed securities this year and with less than 20% of allocated funds left in the program, rates are sure to increase. The only questions remaining are by how much and when.

The chart above shows the 30 Year Fixed Rate over the last 11 months. The first red arrow shows what took place when interest rates shot up in May, rising nearly 0.75% in a matter of days. And just as when the holidays come and go this month, the rates that are available today are likely to take off as well, only this time for good.

Interest rates that were in effect prior to the implementation of the announcement of the Fed's program last year were well above 6.00% and a return to those levels cannot be ruled out. If you are looking to refinance or currently shopping for a loan, lock your loan quickly to take advantage of the lowest rates we are likely to ever see in the future.

Remember, the reason I wanted you to see where rates have been this year is also to see how quickly they can rise. If you would like to know how I can help you, call me today. Waiting could cost you an opportunity to have an even bigger smile on your face when you say "Happy Holidays!" this month.

ON-Time
Take Time Out for Planning

Have you ever had days, weeks, or even months go by when you were frustrated in your work activities because you failed to implement the things that you know you need to do in order to be more successful? Perhaps you've taken pages and pages of great notes at seminars on the subject of how to improve your business, only to return to the office the next day and implement none of it. The reason this happens to people is because they lack a plan. More importantly, it happens because they are not practicing ON-Time.

ON-Time is a time you set aside to work on your business instead of in your business. The simple fact is that in our daily routine, we are typically in a reactive state. The phones are ringing, the emails are coming in, there are voice mails to check, clients to meet with, staff members to assist. On and on it goes. During all this reactive behavior, we have very little time to work on the things that we need to put into place to take our business to the next level.

Get into a good habit by practicing ON-Time!

Leaving the office on a regularly scheduled basis to work on your business in a totally quiet, serene, and proactive environment is critical to your success in the long run. All successful business people practice some form of ON-Time.

Here's a suggestion on how to construct your own ON-Time schedule. Take out a folder and put it in your briefcase. Call this your ON-Time Folder. Every time during your normal work week you come up with an idea, hear about something or see something that could increase your business, throw it into your ON-Time Folder.

At least one full day per month, schedule time to leave the office and spend that entire business day somewhere outside the office. Make sure it is a serene place, or a meditative place, where you can practice ON-Time with a clear head. That means no cell phones and no interruptions! Take out your ON-Time Folder and work on the things you need to address to take your business to the next level. If you discipline yourself to doing this 12 times per year, the difference will be profound. Your level of success and your ability to take your business further will increase, hand in hand.

Stay tuned for more great ideas to build and manage your business!

Upside Down?
You Can Refinance Up to 125% of Your Home's Value

Even if you owe up to 125% more on your mortgage than your home is worth, you may be able to refinance. For example, if your home is worth $200,000 but you owe more than that, qualifying homeowners can now refinance up to $250,000.

According to First American Core Logic, more than 15.2 million homes had negative equity in June 2009. This represents nearly 33% of all mortgaged properties across the country. Where in the past, being upside down on your loan would have precluded your ability to seek relief, you now may have an opportunity.

The Making Home Affordable program was initially structured to accommodate homeowners with a new loan to 105% of their home's value. However, that amount has been increased to 125%. There are requirements to qualify including whether your loan is currently owned by either Fannie Mae or Freddie Mac. You can find out if your loan is held by either agency by visiting http://makinghomeaffordable.gov/loan_lookup.html.

Mortgage Interest Rates for Fixed Rate Mortgages*

Rates as of Monday, 30th November, 2009:

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

How Purchase Loans Are Made
A Step-By-Step Walkthrough

If you'd like to learn more, please give me a call. I'd be happy to speak with you!

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

856-252-1224

kpeidl@pvhmconline.net

www.karlpeidl.com

www.pleasantvalleyhomemortgage.com