Archives for February 2017

Pending home sales drop unexpectedly to lowest in a year January 2017

This article first appeared on CNBC:

Higher mortgage rates and near record low supply resulted in disappointing home sales to start the year.

House hunters signed 2.8 percent fewer contracts to buy existing homes in January compared with December, although December’s read was revised slightly higher, according to the National Association of Realtors. The group’s so-called pending home sales index is now just 0.4 percent higher than January 2016, and this is the lowest reading since then. Pending home sales are an indicator of closed sales in February and March.

“The significant shortage of listings last month along with deteriorating affordability as the result of higher home prices and mortgage rates kept many would-be buyers at bay,” said Lawrence Yun, chief economist of the NAR. “Buyer traffic is easily outpacing seller traffic in several metro areas and is why homes are selling at a much faster rate than a year ago. Most notably in the West, it’s not uncommon to see a home come off the market within a month.”

11 tips to get the lowest mortgage refinance rate

In the hunt for the lowest mortgage refinance rate, there are some things you can control and some you can’t. Rates moving up just when you’re about to refi? Can’t control that.

But there are at least 11 things you can do to get the best mortgage refinance rate.

best California mortgage rateGet the credit you deserve

The best way to earn the lowest rate on a mortgage refinance is to knock out the dents in your credit score and polish it up. Some steps can be as simple as making timely payments on your existing debt and perhaps paying down some balances. Other moves, like these three, take a bit more effort:

This article first appeared on NerdWallet and CSM : by Hal Bundrick, CFP

Hal Bundrick is a staff writer at NerdWallet

Want a low California mortgage rate?  Contact JB Mortgage Capital, Inc. at 1-800-550-5538.

1. LOOK FOR ERRORS IN YOUR CREDIT REPORT

“The other day, I ran credit for someone who had a state tax lien and a charge-off,” says Mary Anne Daly, senior mortgage advisor for Sindeo. “They said, ‘This isn’t mine. I don’t know anything about this.’” Daly says credit report errors happen more often than you might imagine.

Daly also cites clients who had a 623 credit score. Their credit report had mistakes, and the customers wondered if the improvement in their score would be worth all the effort to correct them. By wiping the errors from their history, their credit score improved to 660, and the borrowers saved $95 a month on their home loan.

2. KEEP CREDIT CARD BALANCES BELOW 25% OF YOUR AVAILABLE CREDIT

Daly also says to consider asking your credit card providers to increase your available credit. Using a smaller percentage of your available credit lowers your credit utilization ratio and can earn you a better interest rate.

3. DON’T QUIT USING CONSUMER CREDIT

Paying off consumer credit can be liberating, but continue making small purchases on your credit cards from time to time. Even if you pay the balances off each month, it shows you manage debt responsibly, which can actually improve your credit score, she adds.

Choosing the right refi loan

Another way to get the best refinance rate is to select the right loan product:

4. BE WARY OF “NO-COST LOANS”

“That always tickles me,” Daly says of such loan gimmicks. “There are no free lunches.” All lenders will charge fees, whether they are paid upfront, rolled into the loan balance or built into the loan’s interest rate.

5. RESIST THE URGE TO TAKE CASH OUT

A cash-out refinance will raise your interest rate, Daly says.

6. CONSIDER A SHORTER LOAN TERM

Burke notes that expanding your loan term may not be in your best interest.

“If you’ve already paid seven years into a 30-year fixed, for instance, putting you into a new 30-year fixed may not be the best financial decision,” he says.

Moving from a 30-year mortgage to a 20-year or even a 15-year term can earn you a lower mortgage interest rate.

“A lot of people don’t know that,” Daly adds. She tells of customers who were considering several options on a mortgage. They had 10 years left on their loan, and they thought it wouldn’t make sense to refinance. Daly showed them that refinancing to a 10-year loan term with a lower mortgage rate would save $45,000 in interest, without significantly changing their monthly payments.

“They were just thrilled,” Daly says, “paying a little bit more [each month] but saving all of that money.”

Time is money

And there are occasions when saving money can be a matter of good timing:

7. HUDDLE WITH YOUR LOAN OFFICER ABOUT WHEN TO LOCK IN YOUR REFI RATE

“Sometimes, believe it or not, we have a little bit of a crystal ball” about how mortgage rates may behave in the very short term, Daly says. That can be tied to major economic news, policy announcements or government reports.

8. RESPOND QUICKLY TO DOCUMENT AND INFORMATION REQUESTS

Quick answers can save you the cost of paying for an extended rate lock period if the paperwork process bogs down. It might even be a good idea to stay available and in town during a refi, Daly adds.

9. CONSIDER THE FUTURE

“One of the questions that we’re always asking people is, ‘How long do you plan on staying in the home?’” Burke says. “I think that’s a very important question that a lot of people don’t ask.”

For example, if you know you are going to be selling your home in five to 10 years, an adjustable rate mortgage, with an introductory rate lower than that of a fixed-rate loan, may be the right choice, Daly adds.

You have to apply yourself

And finally, snagging the best refinance rate takes finding the right lender and the right mortgage professional:

10. SHOP RATES — AND KNOW WHAT THEY MEAN

Advertised rates that seem unusually low may have discount points built in — that’s when you pay upfront to get a lower interest rate. For the lender, factoring in discount points may be a ploy to drive business, but for borrowers, the points can be a part of a loan strategy.

“Most of the time, we find that the buy-down doesn’t make sense,” Daly says. To see if discount points work in your situation, consider your monthly payment savings against how long it will take to recoup the fees — and how long you expect to stay in a home.

Burke says borrowers often fixate on a low rate but miss important details in loan terms disclosed in the fine print.

“Looking at APR is absolutely one of the best ways to go,” he says. The stated annual percentage rate of a loan includes the interest rate you’ll pay on the loan, plus all fees. You’ll have to complete an application with each lender you’re considering to get all the information that impacts your offered APR.

11. FIND A SAVVY MORTGAGE PRO

That means “making sure you’re working with somebody that’s reputable and isn’t just hanging teaser rates out there for you,” Burke says.

And you want a knowledgeable loan professional who’s willing to help you find your best rate. As an example, Daly points to government-backed loan programs that are offered in some regions.

“The mortgage professional has to know to look for that,” she adds. Daly says she’s had clients who would have ended up with a higher mortgage interest rate if their loans hadn’t been flagged as being in an eligible area for one of these programs.

Refinance Apps Share Keeps Pushing Post-Crisis Lows

This article first appeared at Mortgage News Daily:

Mortgage applications activity was down slightly during the week ended February 17 compared to the previous week. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, was down 2.0 percent on a seasonally adjusted basis although it was 1 percent higher on a non-adjusted basis. The Refinance Index fell a modest 1 percent vs last week to the lowest level since January 2017.

The seasonally adjusted Purchase Index decreased 3 percent from one week earlier to the lowest level since November 2016. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 10 percent higher than the same week one year ago, a week which included the President’s Day holiday.

Refinancing applications had a 46.2 percent share of the total, down from 46.9 percent the week before and the lowest level since November 2008. The refinancing share has declined in every week but two since December 16.

The FHA share of total applications decreased to 11.6 percent from 11.9 percent the previous week while the VA share increased to 12.1 percent from 11.8 percent. The USDA share was 0.9 percent. down from 1.0 percent a week earlier.

Average contract interest rates increased for all fixed rate mortgages (FRM) compared to a week earlier. Effective rates increased for all products tracked by MBA.

The average rate for 30-year FRM with conforming loan balances of $424,100 or less was 4.36 percent with 0.35 point. During the week ended February 10 the rate was 4.32 percent with 0.34 point.

Jumbo 30-year FRM, loans with balances greater than the conforming balance, had a rate of 4.29 percent, up 1 basis point week-over-week. Points increased to 0.28 from 0.27.

The average contract interest rate for 30-year FRM backed by the FHA increased to 4.14 percent from 4.12 percent. Points increased to 0.33 from 0.31.

Fifteen-year FRM saw a 1 basis point increase in the average contract interest rate, to 3.56 percent. Points dipped to 0.36 from 0.37.

Applications for adjustable rate mortgages (ARMs) had a 7.3 percent share of all application activity, down from 7.5 percent a week earlier. The average contract interest rate for 5/1 ARMs decreased to 3.31 percent from 3.34 percent, with points increasing to 0.31 from 0.19.

MBA’s Weekly Mortgage Applications survey has been conducted since 1990. It covers over 75 percent of all U.S. retail residential mortgage applications. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100 and interest rate information is based on loans with an 80 percent loan-to-value ratio and points that include the origination fee.

The Fed plans to raise rates ‘fairly soon’

This article first appeared at Business Insider:

The Federal Reserve plans to raise interest rates “fairly soon” if the economy remains on track, according to minutes from the January 31/February 1 policy meeting released Wednesday.

At that meeting, the Federal Open Market Committee voted to leave its benchmark interest rate unchanged, just as markets had expected.

The Fed would like to see more progress towards its target of 2% inflation, and even more evidence that the labor market is improving.

Its staff’s assessment of the economy in Wednesday’s minutes included several references to “downside risks” to the economy. However, the meeting was held before data releases on jobs and inflation early in February that crushed estimates.

The next rate hike is unlikely to be in March even after recent hawkish commentary from several Fed officials including Chair Janet Yellen. It has raised rates from zero twice since the end of the recession but is patiently normalizing rates because of continuing risks to the economy including the uncertainty of policy outcomes from the Trump administration.

According to Bloomberg, futures traders priced in a 38% chance of a rate increase at the March 14-15 meeting, and a 62.7% chance of one at the gathering in June after the minutes crossed.

There’s renewed interest in how the Fed plans to shrink its balance sheet. After the recession, the Fed launched bond-buying programs to help keep interest rates low and expanded its holdings to about $4.5 trillion as a result.

“The shrinking of the balance sheet may start in the not too distant future,” said Neel Kashkari, the Minneapolis Fed president, on Tuesday. Yellen was similarly vague during congressional testimony on Valentine’s Day, saying the Fed would gradually unwind its balance sheet when the process of normalizing rates is well underway.

“It is clear that policymakers have not reached a consensus on the particulars of the Fed’s reinvestment policy at this point,” said Deutsche Bank economists in a note on Tuesday. Economists at BNP Paribas forecast that the Fed will start trimming its balance sheet once rates are in the 1%-1.5% range; the benchmark fed funds rate is in a range of 0.50%-0.75%.

Fed minutes set stage

This article first appeared at The Hill:

On Wednesday, the Federal Reserve released minutes from the Federal Open Market Committee’s most recent meetings, which occurred on Jan. 31 and Feb. 1, respectively.

The minutes show that both short- and long-term interest rates will be moving up over the next few years, which will make it more expensive for American consumers to borrow, but will benefit savers.

The Federal Open Market Committee (FOMC) is the Federal Reserve’s monetary policy-making body; it sets short-term interest rates to meet its dual mandate of price stability and maximum, stable employment.

According to the meeting minutes, the FOMC believes it is making progress toward these goals. Inflation has been below the FOMC’s 2 percent target (measured using the personal consumption expenditures price index) for years, the result of significant slack in the economy that has limited the ability of businesses to raise prices.

In addition, weak wage growth, a strong U.S. dollar and the big drop in energy prices from mid-2014 to mid-2016 have all contributed to the tepid inflation numbers.

But with energy prices rising over the past half-year and wage growth picking up as the job market tightens, inflation is moving toward that 2 percent target.

The minutes state that, “Information on inflation received over the intermeeting period was broadly in line with participants’ expectations and was consistent with a view that PCE inflation was moving closer to the Committee’s 2 percent objective.”

The second part of the dual mandate is more difficult to define because the unemployment rate associated with “maximum and stable employment” can fluctuate over time.

According to the minutes, “at 4.7 percent in December, the unemployment rate remained close to levels that most participants judged to be consistent with the Committee’s maximum-employment objective.”

The unemployment rate moved up to 4.8 percent in January, but that type of month-to-month fluctuation is normal and doesn’t change the overall labor market picture. The FOMC also looks at other labor market indicators, and according to the minutes, they also show a job market that is close to full employment.

The minutes say that the job market should continue to improve: “Most participants still expected that if economic growth remained moderate, labor markets would continue to tighten gradually, with the unemployment rate running only modestly below their estimates of the longer-run normal rate.”