Don’t Fight the Fed… Words from our Expert

As you know, I like to keep you posted on the mortgage market via news from the desk of Monica Jones- Certified Mortgage Planner with RPM Mortgage.  In my opinion, she’s one of the best in the business and this is what she has to say this week:

“You sound like a broken record…” or so the cliché goes. And lately that saying certainly applies to the phrase the media has been repeating recently: Don’t fight the Fed.

So what does “Don’t fight the Fed” mean exactly, especially when it comes to home loan rates? Let’s answer that by going back a few months. In early November, when home loan rates were at all time lows, the Fed announced their plan to purchase $600 Billion in Treasuries through mid-2011. Dubbed Quantitative Easing 2 or QE2, the Fed had three goals:

  1. Boost Stock Prices
  2. Lower unemployment
  3. Create inflation

After just two and a half months, an argument could be made that the Fed has been somewhat successful so far. Stocks are higher, the unemployment rate has improved (though more improvement is certainly needed), and as we saw last week inflation has ticked higher.

Both the Consumer Price Index (CPI) and Producer Price Index for January were hotter than expected and, as the chart shows, the more closely watched Core CPI, which strips out food and energy, came in at the highest level since March 2010. And we’re not just seeing hotter inflation here. Reports last week showed inflation is heating up in China and England, too.

So what does all of this mean for home loan rates? Inflation is the arch enemy of Bonds and home loan rates, and usually any hints of inflation cause both to worsen. Yet, you may be wondering why Bonds and home loan rates improved slightly last week. There are two things to note: First, while last week’s inflation data was a touch hotter than expected, overall, it’s still on the tame side. Second, last week’s Initial Jobless Claims was a disappointment, suggesting that the labor market continues to improve but at a very choppy and sluggish snail’s pace.

The bottom line to remember is the phrase we started out with: Don’t fight the Fed. If the Fed wants to create inflation as one of its three-fold goals for QE2, it will likely succeed…and Bonds and home loan rates will likely worsen over time as a result. That’s why if you have been thinking about purchasing or refinancing a home, this is a great time to get started! Call or email me if you have any questions at all – I’m always happy to talk to you!

 

 

 

 

 

 

From the first time home buyer to the savvy investor – from the seller with equity to the seller underwater and needing options – I am here for you.


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Tips for First Time Homebuyers

Buying your first home may seem daunting, but it doesn’t have to be. With a few helpful tips, you’ll be on your way to purchasing a home in no time!

From the first time home buyer to the savvy investor – from the seller with equity to the seller underwater and needing options – I am here for you.

What Makes For A Winning Offer?

 

 

 

1. Get pre-approved

Before writing an offer – and ideally before you even begin your search – meet with your bank or other financial advisor; the one who will be giving you your mortgage, and get pre-qualified or pre-approved. When it’s time to put forth an offer, the seller will know it’s serious.

As you can see by reading other posts on my blog, I often refer Monica Jones with RPM Mortgage as excellent Certified Mortgage Planner.  You can actually apply for your pre-approval online at MortgagesByMonica.com.

2. Understand the local context

List prices are often subjective. Look to your Better Homes and Gardens® Real Estate sales associate to advise you on pricing strategy. In the end, it’s important that you know the real estate situation yourself to determine if the property is fairly priced, based on comparable, recently sold properties. There’s no rule of thumb that says going in under asking is expected. Market conditions will dictate the selling price. Keep in mind that homes will also occasionally be under-priced to attract multiple offers. This circumstance may call for a bid over the initial asking price.

3. Understand and adjust to the seller’s interests

Asking the right questions prior to writing an offer can often make the difference between an accepted offer and a stalled negotiation. Some contract terms may be of great significance to the seller, whereas only a slight inconvenience for you. Should the seller want to rent the place back, for example, for a few days or weeks after escrow, your written flexibility on the move out/in date could close the deal in your favor.

4. Make a strong deposit part of your offer

You’ll want to submit an earnest money deposit when writing an offer, payable to a reputable escrow company, to be delivered by your agent no more than three business days after the acceptance of the offer. Even when delivering an offer below asking price, offer a large deposit if possible, and it will pay dividends in the end. Down payment strategies however may vary. In some areas, a smaller deposit is the norm. Regardless of location, a higher deposit will most likely strengthen your negotiating power.

5. Provide an appropriate time for the seller’s response

Time is of the essence once you decide to take the plunge, especially regarding a newer listing in which the risk is high that other buyers will potentially submit offers. Typically, the seller is given until 5PM on the third day from receipt of the offer to respond, unless you write in a different date and time. If the offer is strong, speed up the response time. Your Better Homes and Gardens Real Estate sales associate can advise you on what strategy will work best.

Prepared Home Buyer 101

In today’s market, potential home buyers need to be prepared for the stringent guidelines enforced by mortgage companies.  If you have any concerns about your ability to qualify for financing contact Monica Jones today at MortgagesByMonica.com or call her at 925-339-1764.  She is always my first go-to person in the lending arena, and she will happily guide you through the process of credit repair.

From the first time home buyer to the savvy investor – from the seller with equity to the seller underwater and needing options – I am here for you.

Mortgage Rate Update!

One of the many ways I strive to serve my clients is by surrounding myself with an outstanding team of professionals with your best interest in mind.  I have the utmost respect for Monica Jones as an expert in her field.  Below is a a mortgage rate update from Monica.

The message to take home here, is that home ownership is affordable, more-so now than ever before!  Take a look at the estimated payment per $1,000 loaned for a 30 year fixed mortgage!  That means if you’re looking for $200,000 loan your payment will only be around $1,028 per month! Or just $514 per month for a $100,000 loan! (There’s a good chance that’s less than your rent)

Even if your credit isn’t great, Monica and I may be able to work with you to improve your Fico scores enough for you to qualify.  Call me today!

From the first time home buyer to the savvy investor – from the seller with equity to the seller underwater and needing options – I am here for you.

Mortgage Interest Rates for Fixed and Variable Rate Mortgages* as of Friday, 28th January, 2011:

Term

Conforming

APR

Payment per $1,000

Jumbo

APR

Payment per $1,000

ARM

Reset Term

30 Year Fixed

360

4.625%

4.663%

$5.14

4.875%

4.892%

$5.29

15 Year Fixed

180

4.375%

4.412%

$4.99

4.500%

4.516%

$5.07

5/1 ARM

360

3.750%

3.786%

$4.63

4.125%

4.141%

$4.52

60

3/1ARM

360

3.250%

3.285%

$4.35

3.625%

3.640%

$4.56

36

*rates are subject to change due to market fluctuation and borrower’s eligibility 

Why have I seen lower rates advertised on TV? Rate Lock Duration

Lock durations can vary from mortgage financing, but most lenders lock in the interest rate for 60 days from the date the loan application is submitted.  As long as the loan is closed within that lock-in period, the lender honors the agreed upon interest rate.

Some consumers are misled by advertising that quotes unrealistically low rates based on 15- or 30-day lock durations.  This is called ‘short-pricing.’  The lender basically knows the borrower doesn’t have time to meet their conditions and have all the necessary paperwork in order withi that brief time period.  As a result, the lender is not obligated to honor the low rate that was listed in their advertising.

For simple refinance transactions, a 45-day lock-in period is more realistic.  For purchase transactions, which are typically much more complex, you’re much safer going with a 60-day lock, even though the interest rate might be a little higher than the rate you see quoted on billboards and the internet.

Borrowers should make sure they have a written rate lock agreement, and allow themselves a reasonable amount of time to close their loan.  Monica prefers to lock all clients as soon as their application is filed, rather that gamble with predicting short-term interest rate movement.  My team and I focus more on assisting clients with long-term goals and management of their mortgage debt to secure strong  financial future.