Month: July 2017

Debt To Income Ratio Limits Raised to 50%

Higher Deb To Income Ration Now Eligible:

On July 29th, 2017 the door to a new mortgage will be opened for thousands of potential homeowners and current homeowners that have a Debt-To-Income (DTI) ratio above 45%. The mortgage giant Fannie Mae will be making an adjustment to its Automated Underwriting System (AUS) so that those with a 45%-50% DTI will JB Mortgage Capital, Inc.be approved for a new mortgage. By some estimates this will open the door to nearly 100,000 new loans for lenders to process which is good news since the industry has had a slow start to 2017.

More Good News:

Additional good news is that it applies to loan applications with Loan To Value ratios above 80% which will really help those trying to purchase a home that only have a small down payment (such as 5% – 10%).  Mortgage rates are not directly addressed in this DTI change and it appears someone with a 45% DTI potentially have the same rate as someone with a 50% DTI.

The good news is not absent of concerns as a higher DTI means the loan applicant is devoting a high percentage of their income towards their home.  According to Fannie Mae they believe the risk of default does not increase that much between a DTI of 45% and one with a DTI of 50%.  Obviously the increase will be closely monitored and if proves to be too risky then it wouldn’t be surprising to see Fannie Mae revers course in 2018-2019. However if the default risk remains low it might open the door for Fannie Mae to try additional actions and expand opportunities for lenders even further.

Current Mortgage Rates:

If you are looking for current mortgage rates we have you covered on our current mortgage rates page. We’ll not only keep you up-to-date with where mortgage rates are at but also cover important bond market information and general economic news that may influence mortgage rates.

Fed Meeting July 26, 2017

First Time Home Buyer HomeThey Raised:

As expected the FOMC (the Fed) left short term interest rates alone and expressed some concern over the lack of inflation which is generally good news for the bond market.  However the market reaction was muted; the 10y yield moved from a 2.31% level down to 2.30% as many investors and analyst anticipated the outcome of today’s meeting.  To start the day the 10y yield was at the 2.33% level however after the 5 year auction, and before the Fed meeting, the yield moved down to 2.31%

There was a mention about the balance sheet reduction plan and that they plan to implement that “relatively soon”.  According to statements published by Reuters; the Fed has noticed that inflation is pulling away from their 2.00% target however they claim over the “medium term” it will reach that target however in the “short term” inflation will continue to run below target (are they trying to say they’re not concerned or are they saying they are concerned???).

If there is any additional information that comes out this afternoon we will certainly keep you posted.  It appears for now the bond market is viewing today’s events in a positive light and hopefully that will continue into the next few days.

Current Mortgage Rates:

If you are looking for current mortgage rates we have you covered on our current mortgage rates page. We’ll not only keep you up-to-date with where mortgage rates are at but also cover important bond market information and general economic news that may influence mortgage rates.

Fed Meeting and Mortgage Rates July 2017

Home with PoolTomorrow Is Decision Day:

Tomorrow afternoon the Federal Open Market Committee (commonly refereed to as the “Fed”) issues their decision about raising short term interest rates and their economic outlook.  Before we go into the market expectations and what may happen with mortgage rates after the FOMC issues their statement; lets cover a very basic point that most people don’t know – what is the FOMC? Per the Federal Reserve website: “The Federal Open Market Committee (FOMC) is the monetary policymaking body of the Federal Reserve System. The FOMC is composed of 12 members–the seven members of the Board of Governors and five of the 12 Reserve Bank presidents.”

Short Term Interest Rates:

As you know the FOMC has been raising short term interest rates over the last few years as the economy recovers from the mortgage crisis of 2007-2008.   Some people believe when the FOMC raises short term interest rates they are raising mortgage rates however that is not true.  The FOMC does not control mortgage rates; mortgage rates are determined on the Mortgage Backed Securities market (a bond market for mortgages) and individual lenders ability to loan money at a specific rate.  Interest Rate hikes from the FOMC directly affects things like home equity lines of credit, and credit cards.

Bond Investors:Low Mortgage Rates at JBMC

So are bond investors and mortgage lenders worried about the FOMC raising short term interest rates tomorrow? No; no one thinks they will.  Bond investors and mortgage lenders are going to be watching what the FOMC says about the economy and possible future hikes in short term interest rates.  The key word will be “inflation”….if they are concerned about inflation moving up too fast that will be bad for bonds and mortgage rates.  If they have concerns over inflation falling then that would be good for bonds and mortgage rates.  General expectations are that the FOMC will not raise rates; and issue a middle of the road guidance for future hikes and economic outlook.

As always we’ll keep an eye on the events and the market reaction.

Current Mortgage Rates:

If you are looking for current mortgage rates we have you covered on our current mortgage rates page. We’ll not only keep you up-to-date with where mortgage rates are at but also cover important bond market information and general economic news that may influence mortgage rates.

 

ECB Meeting and Mortgage Rates July 2017

Low Mortgage Rates at JBMCECB Meeting:

On Thursday there was an ECB meeting and news from the meeting was bond friendly.  Although some of the newsworthy items that hit the news wires seem to be both bond friendly and not bond friendly and because of that bond yields missed a chance at a big move down which would have been helpful for current mortgage rates.

Essentially the ECB and more specifically Mario Draghi signaled to the market was that at some point they will stop their accomedations but down’t worry we’ll make sure you’re well informed and well prepared for the event.  German Bunds loved the news as the 10y yield dropped from 0.60% to 0.50% and US bond yields dropped as well.

So what does this mean going forward?

Hopefully stability as far as mortgage rates are concerned.  Mortgage Backed Security investors and mortgage lenders love stability and the news from the ECB should help bring that back.  Are we going to push below the best mortgage rates seen earlier in the year?  No one really knows the answer to but generally speaking; new lows in mortgage rates sometimes occur after a period of stability so it’s possible.

Current Mortgage Rates:First Time Home Buyer Home

If you are looking for current mortgage rates we have you covered on our current mortgage rates page. We’ll not only keep you up-to-date with where mortgage rates are at but also cover important bond market information and general economic news that may influence mortgage rates.

From Reuters:

RTRS – DRAGHI SAYS AFTER A LONG TIME, EXPERIENCING ROBUST RECOVERY AND ONLY HAVE TO WAIT FOR PRICES AND WAGES TO MOVE TO OBJECTIVE

RTRS – DRAGHI SAYS CYCLICAL MOMENTUM RAISES CHANCES OF STRONGER UPSWING

RTRS – DRAGHI SAYS VERY SUBSTANTIAL DEGREE OF ACCOMMODATION STILL NEEDED

RTRS – ECB SAYS THE NET PURCHASES ARE MADE ALONGSIDE REINVESTMENTS OF THE PRINCIPAL PAYMENTS FROM MATURING SECURITIES PURCHASED UNDER THE ASSET PURCHASE PROGRAM

RTRS – ECB SAYS THE GOVERNING COUNCIL EXPECTS THE KEY ECB INTEREST RATES TO REMAIN AT THEIR PRESENT LEVELS FOR AN EXTENDED PERIOD OF TIME, AND WELL PAST THE HORIZON OF THE NET ASSET PURCHASES

Growth In The Number Of Renters

Pew Research:

A new study is out from the Pew Research Center that claims more Americans are renting now then at any time in the last 50 years.  he percentage of households renting rose to 37% which is an increase from the 31% in 2016. The age group most likely to rent is the 35 and younger group.  65% of all households headed up by First time home buyer homesomeone 35 or younger were renting.

Why are so many people renting?

It appears the median price is too high and wages are too low. Mortgage rates have been near all time lows for the last few years; and from a historical perspective they are very low compared to mortgage rates seen 10 years ago and ridiculously low compared to mortgage rates in the 70’s and 80’s. I believe one can safely assume this number will be higher next year if home values continue to climb; especially in states like California, Florida and Texas. The number of homeowners has only slightly decreased over the last 10 years and currently sits around the 75 million level while the number of renters is around 44 million. It’s an interesting study since we’re currently experiencing a housing shortage that many feel is like a housing crisis.

According to Pew Research: Low Mortgage Rates at JBMC

“The total number of households in the United States grew by 7.6 million between 2006 and 2016,” it found. “But over the same period, the number of households headed by owners remained relatively flat, in part because of the lingering effects of the housing crisis.”

Current Mortgage Rates:

If you are looking for current mortgage rates we have you covered on our current mortgage rates page. We’ll not only keep you up-to-date with where mortgage rates are at but also cover important bond market information and general economic news that may influence mortgage rates.

Strong Growth In Foreign Home Buyers

National Association Of Realtors:

According to a study from the National Association of Realtors, which was conducted during a 12 month period that ended in March 2017, foreign home buyers jumped to it’s highest level ever.  The biggest group of foreign buyers were from Canada.  Furthermore almost half of all foreign home buyers bought in homes in Welcome Homethree states California, Texas and Florida.

Lawrence Yun:

The National Association of Realtors chief economist (Lawrence Yun) said: “The political and economic uncertainty both here and abroad did not deter foreigners from exponentially ramping up their purchases of U.S. property over the past year. While the strengthening of the U.S. dollar in relation to other currencies and steadfast home-price growth made buying a home more expensive in many areas, foreigners increasingly acted on their beliefs that the U.S. is a safe and secure place to live, work and invest.”

Foreign Investors:

Yun makes an interesting point that foreign investors are buying real estate in the United States because “….it is a safe and secure place to live, work and invest.”  Yun does not mention anything about mortgage rates being a factor in the buying process.  So despite the strong dollar and high home prices; foreign investors are buying homes at a record pace and mostly in three of the largest states in the country.

Inventory Shortages: Low Mortgage Rates at JBMC

Yun when on to say: “Inventory shortages continue to drive up U.S. home values, but prices in five countries, including Canada, experienced even quicker appreciation. Some of the acceleration in foreign purchases over the past year appears to come from the combination of more affordable property choices in the U.S. and foreigners deciding to buy now knowing that any further weakening of their local currency against the dollar will make buying more expensive in the future.”

Buyers from Canada increased significantly; from $8.9 billion to $19.00 billion of real estate purchase during the study time frame.  Buyers from China spent the most; $31.7 billion.

Current Mortgage Rates:

If you are looking for current mortgage rates we have you covered on our current mortgage rates page. We’ll not only keep you up-to-date with where mortgage rates are at but also cover important bond market information and general economic news that may influence mortgage rates.

Some Homeowners Have Buyers Remorse

A Study By Trulia:

An interesting study is out by Trulia; in a poll of 2,000 people 40% of homeowners expressed remorse about the home they purchased.  40%?  That seems really high and somewhat surprising that 40% of people were not satisfied with the home they purchased.  And what was the biggest issue for these homeowners? Home size; Home Kitchenbuying a home that was too small.

As we all know, purchasing a home is one of the biggest and most important financial transactions for most Americans.  Going from not knowing anything about who has the best mortgage rates, and which home is right for you to picking a home and signing loan documents can be a stressful thing even for those who have purchased homes before.

Featured On CNBC:

The Trulia study, which was featured on CNBC, provides a glimpse into what many Americans want – more space.  However with high home values and stagnant wages it’s hard for the average American to achieve that goal so they are settling on homes that may not be ideal for them.  Also new homes are expensive to build and adding a few extra hundred square feet can cost thousands and thousands of dollars which is risky for builders since price is so important (and margins are thin).

Hard Time Moving Up:JB Mortgage Capital, Inc.

Also people are having a hard time “moving up” from starter homes to bigger more expensive homes as families are formed and grow.  “Moving up” is an essential part of the real estate market as it allows for the growth of home sold in the middle and higher ends of the market.  In many areas of California the entry level and some mid level homes have been selling super fast however high end homes have not.

Current Mortgage Rates:

If you are looking for current mortgage rates we have you covered on our current mortgage rates page. We’ll not only keep you up-to-date with where mortgage rates are at but also cover important bond market information and general economic news that may influence mortgage rates.

Two Treasury Reforms Will Not Work Says Yellen

Thursday July 13, 2017:

Janet Yellen testified for a second day in front Senate Banking, Housing and Urban Affairs Committee.  Prior to her first day of testimony her prepared comments started a bond rally as investors believe her comments were a bit more dovish (bond friendly) then her previous comments over the last few months.  This was not too Low Mortgage Rates at JBMCsurprising since overall the data has been getting weaker however bond traders wanted to hear the softer tone directly from her before reversing course from selling bonds to buying bonds.

The two reforms:

Janet Yellen believes will have a negative affect on the economy are weakening the Consumer Financial Protection Bureau (CFPB) and easing lending standards.  She claimed that if the Treasury was successful in these areas the economy would go into recession.  It’s hard to argue against her point since the CFPB and tougher underwriting standards were created from the 2008 banking disaster.  The CFPB is an agency that  protects consumers against lenders who don’t follow the rules and/or take advantage of consumers.

One area the CFPB has really helped consumers when it comes to getting a new mortgage:  it is now illegal for a loan officer to be paid more money for charging a higher rate.  Why would the Treasury want to get rid of that?  Getting rid of that protection will not spur economic growth; it will just send us back to pre-2008 where some borrowers will pay a lot more for loans than they should have.

As for underwriting standards:Mortgage Pre-qualify

If someone doesn’t qualify for a mortgage do we go back to the days of changing standards to allow that person to get a loan?  Right now someone with a 50% Debt-To-Income ratio can buy or refinance a home….that is a fairly high percentage.  Why does it need to be higher when it could cause long term financial hardship for the borrower?  Keep in mind that before 2008 borrowers were able to get loans with 60% debt to income ratios, with no (or very little) money down and we all know how well that worked out.

Current Mortgage Rates:

If you are looking for current mortgage rates we have you covered on our current mortgage rates page. We’ll not only keep you up-to-date with where mortgage rates are at but also cover important bond market information and general economic news that may influence mortgage rates.

Yellen Testimony Congress July 2017

Early this morning:

Janet Yellen released her prepared remarks and the bond market proceeded to rally. Yields dropped and so did mortgage rates.  Later in the day she testified before Congress and provided additional commentary that helped maintain the rally into the afternoon. The 10y yield hit the 2.30 level before settling at the 2.32% which is a significant improvement to levels seen last week.  The two main comments that supported a drop in yields were: the Fed is near its neutral rate and two the Fed is Federal Reserve Ratecautious on inflation.  The “neutral” rate is the rate at which it neither boosts nor slows the economy.  Current mortgage rates and terms improved and are set to finished the day at the best levels of the week.

To get back to levels seen a few weeks ago it’s going to take more than her comments today however this is a solid first step in the right direction.  Tomorrow we have the Core Producer Prices and the 30 year bond auction.  We end the week with Retail Sales, Core CPI and Industrial Production.

Here are some of her comments from her testimony and prepared statement:

“Temporary factors appear to be at work. It’s premature to reach the judgment that we’re not on the path to 2 percent inflation over the next couple of years. As we indicate in our statement, it’s something we’re watching very closely, considering risks around the inflation outlook.”

“With regard to inflation, overall consumer prices, as measured by the price index for personal consumption expenditures, increased 1.4 percent over the 12 months ending in May, up from about 1 percent a year ago but a little lower than earlier this year. “

“Looking ahead, my colleagues on the FOMC and I expect that, with further gradual adjustments in the stance of monetary policy, the economy will continue to expand at a moderate pace over the next couple of years, with the job market strengthening somewhat further and inflation rising to 2 percent.”

Current Mortgage Rates:

If you are looking for current mortgage rates we have you covered on our current mortgage rates page. We’ll not only keep you up-to-date with where mortgage rates are at but also cover important bond market information and general economic news that may influence mortgage rates.

When Not To Do A Refinance

Deciding To Do A Refinance:

It doesn’t always make sense to refinance your current mortgage and here are some guidelines to follow when making that determination.  We all want the lowest rate and payment possible but sometimes doing a refinance is not good idea and it’s important to make sure you’re making informed financial decisions – especially when it comes to Mortgage Home Informationyour most or one of your most valuable assets. Obviously getting a great rate and a term you can afford are of super importance when making the decision to refinance.  But other factors come in to play as well so it’s equally important to evaluate the big picture to make sure a refinance makes sense.

Here are six instances where a refinance of your current mortgage does not make sense:

You’re Moving:

If you’re moving in the next 1-2 years you may not want to refinance.  If rates are so low; and you can lock in that rate with little to no cost then maybe…but generally speaking if you’re moving or about to move than you’ll probably want to skip a refinance.

Not Much Savings:

This is a no brainer – if you are not saving enough money than don’t do the refinance. Current mortgage rates change daily; weekly and monthly so if the rate is not low enough and there is little to no savings than wait until rates move down.

The Payment Is Too High:Home Kitchen

You might think this is even more of a no brainer however I’m referring to a situation in which a client was moving from a 30 year fixed rate to a 15 year fixed rate.  The rate will be lower however the payment usually is always higher so it’s important to make sure you can afford the payment.

Paying Too Much In Closing Costs:

We’re not big believers in paying a lot of closing costs.  It’s important to keep the costs down when doing a refinance.  If you paying points; make sure you make up the cost to buy down the rate in a respectable time frame.  If it takes more than 2-4 years you might want to reconsider paying points.

Not Understanding The Loan Terms:

Personal ServiceIf you are looking to do a refinance and switching over to a lower rate adjustable rate mortgage; do not do the loan until you fully understand the loan terms.

Your In The Middle Of Remodeling Your Home:

Usually when you refinance you’ll have to do an appraisal (not always though) and if you’re remodeling your home that could present some issues in underwriting.  An underwriter may ask for the remodel to be finished prior to the closing of the loan.

JB Mortgage Capital, Inc.:A+ Rating

If you would like to go over your specific situation, ask questions or even get a quote please contact us directly at 1-800-550-5538.  We’re a top rated company, we have industry low mortgage rates and provide a high level of customer service.