U.S. Homes Sell Faster Than Buyers Can make Offers

U.S. home sales remain brisk, and strong, according to the National Association of REALTORS® and its August Existing Home Sales report, 5.48 million homes were sold on a seasonally-adjusted, annualized basis last month– the highest tally in more than 6 years.

Half of homes sold last month were sold in fewer than 43 days. Buyers are bidding up home prices as U.S. housing continues to support the broader U.S. economy.

Existing Home Sales Have Hit a 6-Year High

Each month, the National Association of REALTORS® publishes its Existing Home Sales report, a sales tally of previously-occupied U.S. homes.

In June, 5.48 million homes were sold on a seasonally-adjusted annualized basis, a two percent increase from the month prior and a 13% increase as compared to one year ago.

It’s the highest reading since February 2007, a month predating last decade’s housing market downturn and its $8,000 federal home buyer tax credit stimulus. Furthermore, home sales are coming at a time of scarce home inventory.

NAR reports just 2.25 million homes for sale nationwide at the end of August, a 6% decrease from one year ago and nearly one-third fewer than during 2010.

At the current rate of sales, the entire stock of U.S. homes for sale would be “sold out” in 4.9 months. This is a big deal because analysts believe that a 6.0-month supply of homes represents a market in balance between buyers and sellers. When supply dips below six months, sellers gain leverage over buyers which can lead home prices higher.

Home supply has been below 6.0 months since August 2012. The average home sale price has climbed 11% during that time.

Median “Days On The Market” Now 43 Days

The August Existing Home Sales report showed more than just “strong home sales”. It also showed that homes are selling much more quickly as compared to recent years.

The August report showed the median Days on Market for homes sold in August at 43 days for all sold homes. More than 4 in 10 homes sold in less than one month.

To put this into perspective, compare the last three years:

• August 2010 : Median 92 Days on Market
• August 2011 : Median 70 Days on Market
• August2012 : Median 43 Days on Market

If we remove foreclosure and short sales from the home sale data, Median Days on Market drops to 41 days.

Homes are selling quickly today. Multiple-offer situations are common and sellers have negotiation leverage over buyers in many U.S. markets. For today’s buyers to have the best chance of getting a “great deal”, a willingness to act quickly is important.

A mortgage pre-approval letter can help, too.

Get Your Mortgage Pre-Approval Letter Today

Give yourself a better chance of winning that home in negotiation. Get a mortgage pre-approval letter which shows how much home you can afford. You should also consider all of your mortgage options.

Low-down payment mortgages via the FHA and VA; the Conventional 95% program from Fannie Mae plus other programs available. Just go to www.0pointloan.com and apply.

30-Year Mortgage Rate Drops to 4.5%

The average U.S. rates on fixed mortgages declined this week amid signs the economic recovery is slowing.

The average rate on the 30-year loan fell to 4.50 percent from 4.57 percent last week. The average on the 15-year fixed mortgage came down to 3.54 percent from 3.59 percent last week.

The retreat in the average rate of a 30-year mortgage comes just a couple of weeks after the rate reached a two-year high of 4.58 percent on Aug. 22. The average rate on a 15-year mortgage also hit a two-year high — 3.60 percent — that day. But overall, mortgage rates remain low by historical standards. 
The Long-term mortgage rates have risen more than a full percentage point since May, when Federal Reserve Chairman Ben Bernanke first signaled that the central bank could begin reducing its monthly $85 billion in bond purchases this year if the economy looked strong enough.

Many economists had expected the Fed would to decide at its policy meeting last week to scale back the bond purchases. But on Wednesday, the central bank voted to continue the bond-buying program at the current levels.

They also cut the economic growth forecasts for this year and 2014, warning that the upcoming debt ceiling and budget battles between the White House and Congress could pose risks to financial markets and the economy.

Growth and hiring remain modest by the standards of a robust economic recovery. Employers have added an average of 180,000 jobs a month this year, about the same as last year and in 2011. From April through June, the economy grew at a 2.5 percent annual rate, little changed from its 2.8 percent rate in the quarter when the Fed began its bond buying.

Concerns over the possibility that interest rates will continue to rise have spurred some homeowners to close deals quickly. And U.S. sales of previously occupied homes rose 1.7 percent last month to a seasonally adjusted annual rate of 5.48 million, the National Association of Realtors said Thursday. That’s the highest level since February 2007.

So now that investors fell secure that the Feds are going to keep buying the 85 Billion in bonds each month we are seeing the 10 year Bond pricing stabilize and come down,  which in turn has helped lower Mortgage Rates. No one has a Crystal Ball into the future but for now it seems we are headed lower at least for the time being.

 

 

What You Need to Know About Mortgage Insurance

If you are on the verge of buying real estate, you’ve probably heard the term Private Mortgage Insurance. Mortgage professionals talk about it a great deal, but you may be asking, “What is it exactly? And why should I care?”

Private Mortgage Insurance Defined

PMI is required by lenders if the down payment of a purchase is less than 20 percent of the home’s value. It protects the lender if the borrower defaults on the loan.

With that said there are a few types of PMI you can choose from each have a unique benefit to them.

1. The traditional where you will have a monthly Private Mortgage Insurance (PMI) payment until you can show your home has 20% or more equity against your mortgage balance. I.e. $400,000 loan amount and a value of $500,000 or more gives you 20%+ loan to value. With this type PMI there is not tax deductable advantage, it is and added cost to your monthly mortgage payment.
2. Lender Paid Mortgage Insurance (LPMI) in which the cost will be rolled into the Interest Rate, this rate would be a little higher than if you chose the Traditional Monthly Private Mortgage Insurance. But with LPMI your PMI is part of your Interest Rate in which you have the ability to get a tax deduction, on your primary residence.
3. Borrower Paid Mortgage Insurance allows the borrower to pay the cost up front which can increase your closing cost but does not increase your Interest Rate.

Each of the Private Mortgage Insurance coverage’s have a unique advantage, and our staff at 0PointLoan.com will help each client choose which one may be best for their particular circumstance.

How to Increase and Manage Your Credit Score

Are among the thousands who have been devastated by the economic blight that has swept across America over the last 5 years and are now looking to improve your credit score?

Now before you sprint into the credit race, first take a step back and form a spending plan or budget based on your income and fixed living expenses. Late payments are the single-most common factor that hurts credit scores! Make sure all your credit card payments on time and try to automate regular monthly payments so you don’t miss any.

The ratio of credit you use to available credit is just as important as your on-time payment history. If unpaid balances are more than 30 – 35 % of your available credit, that can lower your credit rating. Try not to carry large revolving balances on credit card accounts.  Ideally, try to zero out the balance at the end of each payment period so you don’t pay interest or at least bring your balance below 50% of your credit limit.

Length of your credit history accounts for the next biggest piece of your Credit score. The longer you’ve held an account in good standing, the better that is for your credit score. To credit agencies, new accounts imply that you need credit. That lowers your credit rating over the short-term — for 12 months from the time you open a new account — as well as the average age of your credit card accounts. Keep existing credit card accounts open!

Because lenders like to see a mix of card accounts, rather than one or two large revolving general-use credit card accounts, keep a good mix of accounts, including general credit, store credit and loans.

Mixing it up

Credit rating agencies divided account types into three major categories:

1. Revolving accounts, which include all basic credit card accounts, both general and store cards along with home equity lines of credit.
2. Installment accounts, which include auto, mortgage, home equity and student loans.
3. Open accounts, which included home utility, internet, cable, and cell phone service accounts.

Remember that once you start using credit cards, you’re beginning the lifelong journey of compiling your credit score. Make sure you lay down a strong foundation: that way your “credit Score” will increase in value and stand the test of time.

Fixed-Rate Mortgage Or An Adjustable-Rate Mortgage? Which One is Better for You.

Each one has its benefits and the informed home buyer or refinancer will want to understand how both loan types works to enable the home buyer or refinancer to make the best choice.

Fixed Rate Mortgages

A fixed-rate mortgage is exactly what it sounds like. It’s a mortgage for which the interest rate is fixed for the life of the loan.

Fixed rate mortgages are available in multiple terms, where “term” is used to describe the length for which the mortgage contract is in place. With a fixed-rate mortgage, when the term is complete, the loan is paid-in-full.

As you may suspect, the monthly payment required for fixed-rate loans increase as the loan term reduces. This is because, with a shorter loan term, the homeowner is repaying the mortgage lender over a lesser period of time.

The upside of assuming the larger payment that comes with a shorter fixed rate loan term is that mortgage rates are often lower, and the amount of mortgage interest   paid over the loan’s lifetime is less, too.

The main benefits of a fixed rate mortgage are linked to its predictability. With a fixed-rate mortgage, your mortgage payment is set on Day 1 of your home loan, and never changes until the loan is paid-in-full. Some homeowners like this.

Adjustable-Rate Mortgages

The adjustable-rate mortgage (ARM) is a mortgage for which the interest rate can vary over time.

Mortgage rates are often lower with an adjustable-rate mortgage versus for a comparable fixed rate loan because the homeowner assumes some of the long-term interest rate risk which is fully-assigned to the bank with a fixed-rate loan.

Most ARMs works like this:

• For some preset, fixed number of years, the ARM’s mortgage rate remains unchanged
• After the fixed period ends, the mortgage rate changes based on a preset formula
• Annually, the ARM’s mortgage rate changes again based on the same formula

Adjustable-rate mortgages adjust once per year until the original loan balance is paid in full, usually in 30 years. Note that some ARMs exist which adjust every six months, but they are uncommon. Annual adjustments are most prevalent.

When ARMs adjust, the “adjusted mortgage rate” is a sum of two numbers — a constant figure called a margin and a variable figure called an index. When you add the (margin) to the (index), you get your new rate.

The most common index used for ARMs is the 12-month LIBOR rate, which is currently 0.67%. Margins are typically 2.5%. Today’s homeowners with adjusting mortgage rates, therefore, get new mortgage rates near 3.17%.

The good news is that adjustable-rate mortgages cannot adjust too high, too quickly. This is because ARMs come with “adjustment caps” — limits in how far an adjustable-rate mortgage’s mortgage rate can change during any one adjustment period.

The adjustment caps often vary by the ARMs initial fixed-rate period.

• 3-Year ARM : Rate doesn’t change for the initial 3 years, after which it can change up to ±2% annually, and after which it may never be more than ±6% from the initial mortgage rate.
• 5-Year ARM : Rate doesn’t change for 5 years, after which it can change up to ±5% at the first adjustment, and after which it can change up to ±2% annually, and after which it may never be more than ±5% from the initial mortgage rate.
• 7-Year ARM : Rate doesn’t change for 7 years, after which it can change up to ±5% at the first adjustment, and after which it can change up to ±2% annually, and after which it may never be more than ±5% from the initial mortgage rate.

Adjustment caps protect homeowners from a rapidly-rising index such as LIBOR, limiting how far an ARM can adjust in any given year.

Which Is Better For You: Fixed Or Adjustable Rate Mortgage

There are a lot of reasons to choose a fixed-rate mortgage over an adjustable-rate mortgage; just as the reverse is true. The “best” product will depend on your individual risk tolerance and your short- and long-term financial goals.

Though, in recent years, as fixed rate mortgage rates have dropped, the relative value of an ARM’s low starting mortgage rate has diminished.

Furthermore, certain ARMs including those made in “high-cost areas” may require larger down payments than comparable fixed-rate loans.

Lastly, with ARMs, there are fewer low-closing cost and zero-closing cost mortgage options so talk with us about which product fits you best.

Time Your FHA Streamline Refinance Closing

The Streamline Refinance allows a limited amount of paperwork; the FHA Streamline Refinance can be among the simplest, fastest refinance programs out there. According to FHA guidelines, there is no appraisal, no income to verify; and no credit to review (be aware some lenders do ask for tax returns).

This is a simple and quick refinance; however, to close on a FHA Streamline Refinance, it requires vigilance. Mainly, the homeowners need to pay close attention to their expected mortgage closing date so they don’t waste any of their hard earned cash.

What’s at stake is up to 30 days of prepaid mortgage interest which may be double-paid without your knowledge. It’s because of the FHA guideline which allows mortgage lenders to collect a full month of mortgage interest, regardless of whether the loan’s been paid off prior to the month end; this is different from a conventional refinance for which a mortgage lender will only collect through the payoff date.

To put this FHA rule to an example, assume a homeowner in Orange, California is doing the FHA Streamline Refinance to refinance a $450,000 mortgage; and assume the new FHA loan will fund on the 10th of the month.

• 20 days of per diem interest paid to new lender, to cover the rest of the month
• 30 days of per diem interest paid to old lender, because the FHA prescribes it

The homeowner who funds an FHA Streamline Refinance on the 20th day of the month, therefore, is paying 50 days of mortgage interest for 30-day month — a waste of 20 days of interest.

The better plan is to fund the loan on the 30th of the month such that only 1 day of mortgage interest is paid to the new lender, reducing the total interest paid to 31 days and this will save a good amount of money.