Tuesday, December 16, 2014
The state of oil markets are in a tricky place right now - after several years of steady price increases, the strength of gas economics may finally be losing its oily sheen. With the United States catching up to Saudi Arabian and Russian oil powerhouses in terms of production, global supply is finally surpassing demand in such force that gas prices have been in a free fall over the past several weeks.
The effect of this shift has both positive and negative consequences: For American consumers, money saved filling the gas tank means more flexible cash to pump into the economy, boding well for a strong holiday season.
On the other hand, a surge in the oil & gas "fracking" industry in recent years has created thousands of jobs mostly in Colorado, Wyoming and North Dakota. If prices continue dropping too precipitously, demand for these jobs could also go away.
As of Tuesday this week, crude oil prices finally stabilized after an extended dropoff, also lifting up oil & gas stocks.
An additional point of concern is the state of Russia's economy, affected by lower gas prices and other political problems. More broadly, Russia figures to be a huge player in the European economic balance, so financial woes for Russia also mean potential financial woes for all of Europe.
With all of these changes in mind, it will be telling after the holidays how the U.S. economy holds up in light of oil prices and the global marketplace. Stay tuned to our blog for updates.
Friday, December 5, 2014
November job reports data rolled in Friday brimming with positive data: More than 321,000 new employees were added to U.S. payrolls, about 100,000 more than expected. Some industries expected this growth due to seasonal work - i.e. retail, leisure and hospitality - however, large gains were also noted in high-wage positions including financial, engineering and computer design fields.
According to one metric, which measures how much employers are expanding or shrinking their payrolls, November was the strongest month of improvement since 1998. The last two months of job gains have far exceeded predictions, suggesting that the economy is on a fast track to recovery.
How does jobs data affect mortgage rates?
The only potential downside to all of this growth: Some worry it will cause Fed officials to start raising central interest rates at least by mid-2015 to stave off excessive inflation. This means that the ultra-low mortgage rates we've enjoyed over the past few months could be gone in a flash, depending on how the Fed interprets various economic indicators.
A minor caveat to all of the rosy data was a slight lag in consumer credit spending, dropping from $15.4 billion in September to $13.2 billion the following month, likely indicating that Americans were monitoring their spending habits before the holiday season. However, wage growth also picked up 0.4% in November - much more of which will be needed before interest rates start to rise.
Friday, November 21, 2014
As the economy and home values gradually improve, so does borrower confidence in taking on more debt through cash-out refinances. What is the benefit of this transaction, and is it a good idea for you?
There are many reasons to refinance into a higher mortgage amount and get cash back: home improvement projects, paying for tuition, paying off student loan or credit card debt (often with higher interest than your mortgage), paying off a home-equity line of credit, travel costs - or you name it.
If you're looking to reduce other existing debt carrying higher interest rates or raise your home's worth, this can make a whole lot of financial sense. Additionally, with current mortgage rates as low as they are, you could still get a lower rate and payment than what you currently have and get cash out. That's a win-win refinance.
Of course, there are still inherent risks that comes with taking on more debt. Home values are never guaranteed to stay put and will almost certainly be different next year - for better or worse. Without a crystal ball, it's possible that your home's value could drop and you could get in over your head in debt.
If you have equity in more than 20 percent of your home's worth and need extra money to cover other expenses, though, getting a cash-out refinance could be a great (relatively low-risk) option. With the stock markets at all-time highs and the economic outlook bright, it's a great time to see if this makes sense for you.
Thursday, November 13, 2014
As of Thursday this week, the U.S. stock market stretched to new highs, with the Dow Jones closing at yet another all-time record above 17,000. Stocks have been hovering in this range for at least four weeks, responding positively to encouraging job reports data and the national unemployment rate dropping to 5.8 percent, the lowest point since 2008.
One weak sector for the stock markets that conversely has been a bonus for consumers are low oil prices. With domestic oil production booming - now producing more than 9 million barrels of crude oil a day - supply of oil has been surpassing demand, dropping the cost of gas prices at the pump. This translates to more flexible spending money for consumers leading into the holiday season, boding well for retail strength this December.
In other brighter economic news, the odds are looking good that many American workers will get raises in 2015. Lack of wage growth has been the biggest wrench thrown into the growing economy over the past year, causing many to feel less optimistic about economic improvement. However, many economic indicators, including short-term unemployment falling, are reason enough to believe that wages might start rising in the year ahead.
Please contact a Vertex loan officer to see how all of this economic news changes your ability to obtain a new mortgage now or in the months ahead, and also how your income, debt and home value levels affect your affordability. Feel free to call our office toll-free at any time at 877-939-0339.
Sunday, November 9, 2014
October job reports rolled in this week continuing the trend of stronger, but not booming economic growth. An additional 214,000 nonfarm jobs were added to U.S. payrolls, marking a couple of historic trends: the longest monthly streak of positive job growth since 1949 and the most consecutive months of more than 200,000 jobs added since 1995.
Despite these economic trends, U.S. voters decided to oust Democratic leaders in Congress, voting in a new wave of Republican congressmen and women during the midterm elections, for any number of possible reasons.
The question for anyone trying to get a mortgage is how all of these political factors affect the markets, and ultimately, how much money you can save on a new mortgage today (and how easy it will be to obtain). By the end of the week following the election, the Dow Jones and S&P 500 ended fairly flat, with the exception of health care stocks falling in response to potential GOP challenges to the Affordable Care Act.
In the meantime, interest rates for a 30-year fixed mortgage still average below 4 percent, among the lowest rates in decades, while home values have climbed. It's unclear how economic conditions will take shape once newly elected officials take office in January, but the current climate remains a great time to see what mortgage opportunities are available for you.
Sunday, November 2, 2014
To no one's surprise, U.S. Fed officials announced this week they will officially end its third round of quantitative easing, the stimulus program designed to help boost the economic recovery. This comes after months of gradually reducing the bond-buying program to ease the economy back onto more solid footing.
While the economy has slowly picked up steam, the housing recovery has remained rocky with lackluster growth in 2014 new home sales. A large problem area is the lack of new homebuyers: Those in their 20s and 30s buying homes for the first time. Part of this phenomenon can be attributed to cultural/generational shifts in which millennials are delaying these milestones, but in great part this delay is due to ever increasing amounts of student loan debt.
Growing student debt burdens
It is estimated that the average college graduate today walks away from a four-year degree with $29,400 of student loan debt. This amount of pre-existing debt can push a borrower's debt-to-income level beyond the 43 percent ratio threshold limited by the Consumer Financial Protection Bureau.
To help manage student loan debt and increase your ability to qualify for a mortgage, there are ways to adjust your payment plans for federal student loans. Getting on a "graduated" payment plan can put a cap on your monthly loan repayments based on income levels. Student loans can also greatly affect credit scores, so be sure you make payments on time every month to keep your credit scores high.
If you are concerned about qualifying for a mortgage due to student loans or other debt, consult a Vertex loan advisor. Some of Vertex's loan advisors also hold distinction as Certified Financial Planners and can help you manage your financial obligations with more ease. Feel free to call us anytime toll-free at 877-939-0339.
Saturday, October 25, 2014
After a few weeks of turmoil, U.S. stocks rose Friday on reports of stronger September housing data. The markets have been erratic in response to political conflicts abroad, the impending end of the Federal Reserve's quantitative easing stimulus program, and of course, fear of that "E-word" illness spreading even faster than the virus itself.
Although the housing market gains were not consistent in all areas, new home sales were the highest during the month of September since 2008, keeping housing data on an upward trajectory. Home value gains have finally slowed and interest rates have dropped, making new home purchases more affordable for many borrowers.
Meanwhile, mortgage backer Fannie Mae settled a lawsuit for $170 million for failing to disclose financial info to investors dating back to before the markets crashed in 2008. The missteps by Fannie Mae and Freddie Mac to effectively "manage risk" by taking on subprime credit loans, for example, are what led to much stricter mortgage regulations and standards.
Regulators agree to loosen the belt on mortgage lending rules
Following up on the theme of loosening mortgage standards discussed in last week's blog, U.S. regulators agreed to relax rules for approving new mortgage loans to borrowers. One of the biggest changes includes dropping a minimum 20 percent downpayment requirement of a home's sale price. Regulators want to ensure loans are approved only to credit-worthy borrowers while also encouraging healthy growth in the homeowner's market.
Saturday, October 18, 2014
Graph via Businessweek.com
In response to ultra-tight lending standards of the past few years, Federal Reserve officials said this week they would consider loosening criteria needed to extend mortgage credit. The issue is slated for discussion at this week's upcoming Fed meeting, and approval is also expected from the U.S. Securities and Exchange Commission and other financial regulators.
Relaxing of lending rules would be welcome news to anyone who has struggled to get a green light for new mortgage loans or refinancing since the industry was upended after the 2008-09 crash.
Following the collapse of the mortgage-backed securities market at the start of the recession, largely due to loose criteria for handing out mortgages, regulators swung to the other side of the pendulum to allow only borrowers with very high credit scores and comfortable income and assets to get new loans.
In the meantime, interest rates dipped below 4 percent (on average) this week for the first time since June 2013, opening the door for a large chunk of borrowers to refinance to a lower rate or purchase new homes at a more affordable rate. Anything could happen after the next week's economic and political news, however, causing rates to ricochet upwards just as fast, so be sure to take advantage of this opportunity if you may benefit by calling a licensed loan advisor at 877-939-0339.
Monday, October 6, 2014
Graph courtesy of Marketwatch.com/Labor Department
Unemployment drops but wages still stagnant
The September jobs report released Friday was greeted with a great deal of applause, boasting the lowest unemployment rate since 2008 at 5.9 percent. About 248,000 new jobs were also added to payrolls, a strong figure in comparison to the past year.
In response to the rosy report, stocks continued to rally, but after realization set in that not all data was glowing, the dollar's index dropped 1.1 percent Monday. Although the overall unemployment rate continues to drop, the percentage of Americans employed in the labor market has also dropped to 62.7 percent - the lowest rate since 1978.
While the data released in the jobs report was mostly positive - job gains were also marked for demographics including Latinos and African-Americans - a big concern remains stagnant wage growth.
Fed officials will want to see wage growth exceeding the roughly 2 percent inflation increase as a signal that the economy can withstand interest rate increases. All eyes and ears will be on the Fed in the coming months to determine when we can expect rates to move past this historic bottom-dwelling era.
Friday, September 26, 2014
Home values continue modest gains
Home values in many areas of the United States have just about recovered back to pre-recession levels by now, or getting closer to it. If you live in the Denver metro area, values have even exceeded all-time highs to reach new records.
Now that values have returned to near peak levels, the timing is great to cash in on your home's value by refinancing with a better loan-to-value ratio. As the economy gradually strengthens, U.S. consumer outlook is also increasing, meaning there's no guarantee how long interest rates will remain low. In addition, gas prices are also dropping, as they typically do in the fall, which is expected to further boost the economy.
Looking at the bigger picture, the rise in home values is still growing, but U.S. home prices moved upward just 0.8 percent in the second quarter of 2014. Looking back at growth from 2013 to 2014, though, values in Case-Shiller's 20-city composite jumped 8.1 percent.
For comparison's sake, compare your neighborhood's median home value with the highest county in each state on this map compiled by Business Insider. It's a good reminder that value is nearly all relative to location and is never promised to stay the same next year.
Friday, September 19, 2014
Photo credit: Jin Lee/Bloomberg/Getty Images
The Federal Reserve committee held a two-day meeting this week, voting as expected to cut their bond-buying program down by another $10 billion per month. Over the past year, the Fed has voted consistently to reduce its bond-buying program, called "quantitative easing," by $10 billion each month as the economy gradually improves and the stimulus program has become less necessary.
By next month, Fed officials are expected to vote to end the program completely, dropping purchases down to $5 billion for the last month. Despite predictions for a big economic rebound year, growth has remained slow and steady, lowering pressure on the Fed to raise interest rates soon.
The key words to watch for hints as to when we can expect rate changes: a "considerable time." This is the phrase Fed officials are sticking to in regard to determining when the time is right to finally raise central interest rates. They maintained the verbiage in their statements this week to keep rates low for a "considerable time" after the QE program comes to an end, indicating the economy is not strong enough to withstand rate changes yet.
What does this mean for mortgage rates? Mortgage rates rose modestly this week to about 4.23 percent on average for a 30-year fixed loan, up about 0.1 percent from a week ago but still significantly lower than where they stood a year ago. For the considerable amount of time to be up, though, depends on how much the meters move on unemployment, household wealth gains, consumer purchasing power, and a variety of other economic factors before major adjustments are made.
Friday, September 12, 2014
Graph courtesy of www.FHFA.gov
After a week of political unrest in which President Obama announced plans for the U.S. to take renewed military action against terrorist groups in Syria and Iraq, the stock market has remained relatively calm, with little reactionary movement. After five straight weeks of overall gains, the Dow Jones industrial average ended the week with a modest drop.
The stock market's dip is likely more linked to speculation on next week's Fed meeting rather than jitters over potential conflict in the Middle East, while oil prices dropped. Perhaps it is too soon to tell what kind of toll increased military conflict would inflict economically.
Meanwhile, interest rates continue to cruise at low levels into the fall, staying fairly flat at roughly 4.12 percent on average. This low interest-rate trend is defying earlier 2014 predictions that a resurgent economy would raise interest rates into the 5 percent range.
Any updates at next week's Fed meeting will be telling for the mortgage industry's immediate future. The Fed's bond-buying program is scheduled to end in October, but officials say that rates will remain steady for a "considerable time," a definition certainly open to interpretation.
Friday, September 5, 2014
Graphic courtesy of CNN.com
Job gains at slower pace in August
Employment reports for the last month, released today, were somewhat less than stellar. A total of 142,000 new jobs were added to U.S. payrolls in August, which is below the average of roughly 207,000 new jobs per month for the past year. Still moving in the right direction, but not robust enough to keep up with population growth - or to convince the Fed to raise rates yet.
The tug and pull managed to push stocks higher on Friday, however, as stock brokers interpreted the weak jobs report to mean that interest rates will continue dwelling at historic low ranges. Lower interest rates typically foster more economic growth, in terms of stimulating new business and activity in the mortgage industry.
Federal Reserve chief Janet Yellen has expressed concerns that although unemployment rates have been slowly dropping or remaining steady - currently at 6.1 percent - the truth is that many people have simply stopped looking for jobs. Another problem is that wage growth is still failing to keep up with the rising costs of housing and other goods. There may be more jobs in the market, but a key issue remains a lack of well-paying jobs, or upward mobility within companies.
As for economic benchmarks the Federal Reserve seeks before big changes are made, check out this dashboard of current market conditions, recession low points and future goals. A longer term analysis of market data helps put into perspective how far we've come, but also how far is left to go before the economy is on truly stable ground.
Friday, August 29, 2014
Chart courtesy of the Fair Isaac Corporation, aka FICO
If you have ever looked into getting a home mortgage, you're aware that your credit score is a critical part of the lending equation. A less than excellent credit score can cost you extra money on your payments each month or even prevent you from taking out a new loan altogether.
The main distinction between different types of debt is whether there is any type of collateral associated with it. Think stuff that is tangible - a car or a house. Debt taken out for these types of purchases is called "secure," since the lender could repossess the items if a borrower can no longer make payments.
On the other hand, debt that is associated with student loans or credit cards is considered "unsecure," because a lender cannot immediately recoup money lent. However, this isn't necessarily bad for credit: As long as you are making minimum payments on time every single month, these liens can gradually strengthen your credit, regardless of being secure or unsecure. A borrower who faithfully makes payments each month demonstrates to a lender he or she can handle the responsibility of taking on a new loan.
The only real "bad" debt is debt that you cannot afford to pay off in a timely manner. If your minimum monthly lien payments owed are more than 43 percent of your monthly income, your chances of obtaining a new mortgage will be slim to none - you will need to work on paying off existing debt first.
If you have any questions regarding liens on your credit report or things you can do to improve your credit score, don't hesitate to contact a licensed loan advisor, whose goal it is to help you make prudent financial decisions. As always, call us toll-free at 877-939-0339 for more information.
Friday, August 22, 2014
Interest rates this week reached an all-year low for 2014, dropping to 4.1 percent, the lowest level since June 2013. Despite the very attractive rates, new mortgage applications have stayed relatively flat. Chalk it up to a late summer August malaise?
On the other hand, new home construction soared in July, climbing nearly 16 percent. This was good news after a few straight months of sluggish growth for home permits. Home construction also correlates to a boost in sales for home improvement stores such as Lowe's and Home Depot, another sign of a healthy economy.
In other encouraging news, median incomes have finally grown this year - one of the sticking points of the recovery thus far. Income gains are crucial for home sales and home improvement projects, which can raise your home's value over the long term.
Despite these gains, consumers are still proving to be cautious in where they spend their dollars. Retail sales were stagnant from June to July, suggesting consumers are still too wary to spend freely. August spending reports will be an important indicator with back-to-school sales critical to easing into a strong fall economy.
Friday, August 8, 2014
Strap in for the market ride
Just like the IRS tax man chasing after you, constant market fluctuation is a natural part of life. For every down period there will follow a corresponding up, and so on and so forth.
For about three decades, homeowners enjoyed a roller coaster drop on mortgage rates that seemed like it would never stop falling. Peaking at a whopping 18 percent in the early 1980s, interest rates plummeted to less than 3.5 percent in 2013 before finally hitting rock bottom. Next came the inevitable (but scary) transition into rates moving the other direction.
Fortunately, so far the climb has been minimal, more like hiking up the block rather than hiking a Colorado 14'er. Rates are currently rivaling levels in the low 4 percent range similar to this time last year - still a steal from a historical perspective. However, the change has caused broader implications on the market in terms of housing turnover. Homeowners locked into ultra-low mortgage rates have less incentive to sell, creating a tight market and even higher prices.
As long as various economic factors prevent new buyers from being able to bid into the market, though, interest rates will have to stay low to maintain balance. Along those lines, potential borrowers suffering from the tightened lending standards of the past few years may get some relief with changes to how credit scores are calculated.
FICO to lessen impact of medical bills on credit
According to reports this week, the Consumer Financial Protection Bureau - which dictates rules the mortgage industry must follow - has decided to lessen the hit medical debt takes on credit scores. This is welcome news for anyone who has dealt with unexpected medical expenses not covered by insurance, improving your ability to get the best rates available.
The market is eternally responding to and compensating for changes, and if you can expect anything, it's for a different story each month. Stay tuned to see how the industry keeps evolving in the months ahead.
Friday, August 1, 2014
Companies added more than 200,000 jobs to U.S. payrolls last month, yet the overall unemployment rate also ticked upward from 6.1 percent to 6.2 percent. If you look at the numbers more closely, however, the higher unemployed figures could signify more people actively job searching this month as opposed to previous months.
While job growth remains steady, wage growth seems to have stalled in the past year. With inflation rising about 2 percent in the past year, wages should be outpacing that at somewhere between 3.5 to 4 percent raises. Wage growth is a key driver in homeowners seeking out new properties and building up assets for down payments.
Another key component in the housing market, as has been mentioned previously in this blog, are the job and financial concerns facing young adults. Burdened with student loan debt and competing against a more educated applicant pool for jobs, adults ages 25 to 34 continue to struggle at maintaining steady, well-paying jobs. Until the landscape improves for this demographic, it might be a while until we see strong movement carried into the housing market.
Saturday, July 26, 2014
After the housing market collapse during the Great Recession, many homeowners found themselves struggling when home values dropped dramatically. Foreclosures and short sales rose sharply as millions of Americans could no longer afford their monthly payments, with unemployment rates doubling. As a result of this crisis, FHA mortgage loans became a more attractive option to get into a new loan with as little as 3.5 percent down and lower interest rates.
FHA loans, backed by the Federal Housing Administration, enable potential new homeowners to qualify for mortgages who otherwise may not be able to. The caveat is that the homeowner then pays a monthly mortgage insurance in addition to the principal and interest, which helps protect the FHA in the event a borrower must foreclose on the loan.
Applying for an FHA loan can help you build equity in a home with less than a 5 percent down payment upfront, not possible with conventional loans. Once you've established 20 percent equity in the home's value, however, you have the ability to refinance into a conventional loan and quit paying that monthly mortgage insurance. Instead of paying the extra insurance, you can apply that money towards the mortgage balance itself or keep it in your bank account. Sounds like a no-brainer, right?
If you have been building up your home equity with an FHA loan and are interested in switching to conventional, call a Vertex loan officer at 877-939-0339 to get more information. If you can save money on skipping mortgage insurance, why not? On the flip side, if you are interested in buying and can only qualify through an FHA loan, interest rates remain at the best they've been in over a year. Don't waste time on taking advantage of these extremely low rates, because they won't last forever.
Saturday, July 19, 2014
Charts via Reuters.com
With a booming stock market and rising inflation growth, you might think the U.S. economy was blossoming with new opportunity out of every possible corner. Despite these gains, however, challenges remain in several sectors, most notably in home growth.
Reports show that home construction fell 9.3 percent last month, continuing a downward trend from May along with a drop in new home builder permits. Statistics like this, along with slow wage growth, are among reasons Fed leaders have stressed it's still not time to bump up interest rates.
The number of factors affecting economic growth and ultimately, home interest rates, are as varied as changes in the Colorado weather. The stock markets rebounded on Friday after a sharp drop on Thursday this week due to the loss of a Malaysian Airlines jet, stoking fears of increased geopolitical conflict with Russia. If such tensions with Russia or in the Middle East heighten, it could adversely affect the stock market and keep home interest rates low.
Aside from political concerns abroad, several problems hindering growth on U.S. soil include stubbornly high numbers beneath the poverty line, conservative consumer spending, and a lack of new homebuyers. CNNMoney.com compiled a list of 17 charts that show how the economy has flourished in some areas and struggled in others since the Great Recession officially ended. Such mixed reviews demonstrate how tricky it is to forecast how the markets could develop in the weeks and months ahead.
Friday, July 11, 2014
Have you heard the big news this week? No, not about LeBron going back to Cleveland. He will continue being rich no matter where he goes, no doubt.
The REAL big news, about the U.S. budget gap shrinking to its narrowest spread since 2008. What this means - in addition to reined-in spending - is that tax coffers are getting fuller, thanks to a growing economy. More Americans are employed than a year ago, and consumers have responded by purchasing more goods. In addition, the government is paying out fewer unemployment claims than it has the past several years.
The irony here is that home values have rebounded so much since the recession started that some homebuyers have been priced out of the market. This is compounded by another problem: Interest rates have dropped so low that owners are now wary of selling, creating a supply shortage. Lots of homeowners are instead opting to turn houses into investment properties, looking to make profits on mortgage payments via monthly rent.
The good news is that logically, the market has to correct itself if home sales fall much more. The rise in home prices has more or less plateaued, and interest rates have stayed fairly steady as well, despite the Fed announcing it will end its quantitative easing stimulus by October.
Ebbs and flows in the market are naturally to be expected, and it's hard to predict when the "perfect" time is to buy a home. Having all the pieces line up at once - stable, high-wage jobs; strong credit; low interest rates; moderate home prices - are difficult to nail down. This might actually be one of those rare times that for lots of people, many of these pieces have fallen into place.
Saturday, July 5, 2014
There was no shortage of fireworks this week, both in the sky and lighting up the U.S. economic dashboard. The Dow Jones Industrial Average closed early at 1 p.m. Thursday before the Fourth of July, but it was enough time to cross a first-ever threshold of 17,000.
Stocks reacted positively to news of a robust jobs report clocking in at 288,000 jobs added in June, far exceeding expectations. In addition, the overall unemployment rate dropped to 6.1 percent, a mark not reached since 2008. After a sluggish winter for jobs growth, the report shows promise for an economy on the mend.
Another indicator of growing confidence is the "quit rate," or people voluntarily leaving their jobs to seek better opportunities. Instead of being fearful of not being able to land a new job, this measure shows more people are willing to take the risk of leaving job security behind. According to the U.S. Bureau of Labor Statistics, the quit rate climbed to 2 percent in April 2014 in the private-labor sector.
All of this positive economic data could mean mixed messages for the housing market: While interest rates remain lower than where they stood a year ago, it's entirely possible that rates will rise along with the stock market. However, Federal Reserve chief Janet Yellen has made it clear that more housing strength is needed before interest rates will dramatically change. In the meantime, rates continue dwelling at historic lows while the stock market soars to new highs.
Friday, June 27, 2014
Graphic courtesy of S&P Dow Jones Indices
Home values leveling off after a year of strong gains
Here's some news that may not have been expected six months ago: Mortgage interest rates are currently lower in June 2014 than they were in June 2013, averaging at 4.14 percent for a 30-year fixed.
As we have seen in the last couple of months, the number of homes selling on the market has dropped off, and subsequently, fast-increasing home prices have finally tapered (see graphic above). All of this shows that the economy has not officially recovered as much as many believed a year ago.
After last year's rapid rate and value run-up, economists now predict a much more tortoise-like pace, either up or down for the rest of 2014. Slower growth would more closely match steady but slow increases in wages and overall personal wealth - a healthier sign for a stable economy.
As home prices stabilize and interest rates remain in historic low 4-percent ranges, the time is ripe to buy or refinance. Let us know any way we can assist in your home purchase or refinancing process at 877-939-0339.
Saturday, June 21, 2014
Yellen: Not time to raise rates yet
While some economic indicators such as recent falling unemployment rates signal market improvement, Fed chief Janet Yellen maintains that it's not enough to start raising interest rates.
Despite forecasts of a resurgent housing market in 2014, the reality is that sharply rising home prices, high debt and stagnant wages have prevented a full-blown housing recovery. By late June, the Mortgage Brokers Association flipped its predictions of a housing boom on its head and now instead forecasts a decline by the end of the year. A sluggish housing market reveals there are still chinks in the U.S. economic armor.
As has been previously mentioned on this blog, a big chunk of typical first-time homebuyers are missing: 20- and 30-somethings. With student loan debt at all-time highs and a shortage of well-paying jobs, millennials today are putting off buying homes - either out of desire or necessity. Due to this combination of factors, first-time homebuyers remain well below historic "average" levels, market analysts say.
However, if you are looking to buy your first home or just a new home, don't give up! There are many mortgage programs that can help you finance your home, and remember that at Vertex, we can utilize a lender-paid credit to cover all, or nearly all, of your closing costs. This is a feature that sets Vertex apart from other mortgage brokers. Please contact one of our licensed Loan Officers to get more information on what kind of new home you can afford.
Thursday, June 12, 2014
For a first-time homebuyer, navigating the mortgage process can be difficult enough - especially if you've never heard of half the terms thrown around by your real estate agent or loan officer. They want your bank statements, credit history, W-2s and 1040 tax returns, and that's not even getting into your DTI, LTV, PMI and PITI.
But once you understand the terminology used to determine your loan approval, you will be more empowered to make the best choice for you. As a brief refresher for the acronyms mentioned above, get familiar with the following terms:
- DTI: Your debt-to-income ratio is a critical number that can make or break your loan eligibility. As of January 2014, the DTI rate is generally capped at monthly debt payments making up a maximum of 43% of your monthly income. If your DTI exceeds 43 percent, you will likely need to focus on reducing your overall debt before refinancing or purchasing a new home.
- LTV: Your loan-to-value ratio is another important figure determining what interest rates you can qualify for and even what loan programs you may want to sign up for. As a general rule, a loan amount totaling 80 percent or less of your home's value is a goal to strive for. If you don't have 20 percent equity in what your home is worth, you can look into programs such as FHA to qualify for a mortgage. Vertex Loan Officers can see if you're qualified for VA, FHA, Conventional and other loan programs.
- PMI: Private mortgage insurance is often used for borrowers whose LTV is greater than 80 percent. In many cases, you can still qualify for a loan if you're willing to pay an additional monthly mortgage insurance on top of your base mortgage payment. Once you've paid down the loan enough and gained more equity, you can refinance to get rid of PMI payments. (Hint: Vertex LOs would be happy to help you refinance and eliminate your PMI!)
- PITI: The basis of all mortgage payment calculations combines your principal, interest, taxes and insurance. Your lender will want assurance that you can safely cover the PITI payment each month given your monthly income and assets presented, in case you lose some of that income. Paying your property taxes and homeowner's insurance is mandatory and can be "escrowed," or rolled into your monthly mortgage payment, or paid separately.
Friday, June 6, 2014
Graph courtesy of CNN.com
While this doesn't cover every economic benchmark, it's a sign of positive changes nonetheless. The stock market responded well to the jobs report and has continued to rally and reach new record highs with consistent frequency.
Despite the steady job gains, however, analysts point out that growth still has not matched population growth and thus, more improvement is needed for real market strength. Because of this fact and a few other sticking points, mortgage interest rates remain at very low levels.
If the economy continues picking up speed over the coming months, interest rates could start creeping up again. If you missed out on the opportunity to lock in a low interest rate in the past year, it is an excellent time to "strike while the iron's hot" and take advantage of today's very competitive rates. Call a Vertex loan officer to get more info at 877-939-0339.
Friday, May 30, 2014
Charts courtesy of Andrew T. Levin, International Monetary Fund
To the surprise of many economic analysts, mortgage rates have not begun a Rocky mountain hike to the 5 percent range. Instead, they've even dipped to new 2014 lows, hovering around the low 4 percent level. The truth is, the economic and housing recovery is not as strong as some expected, despite a raging stock market.
Reports released Friday show consumer spending dipped last month as inflation creeps up. This may be a temporary dip as unemployment levels continue falling, but the unemployment charts don't tell the full story.
Andrew Levin, a researcher at the International Monetary Fund, presented a couple of charts (shown above) that demonstrate how GDP growth has not matched unemployment drops. In other words, more well-rounded economic growth will be needed to produce a real shift in the housing market.
Friday, May 23, 2014
It's not quite time to declare 2014 the year of the housing comeback. At this point, just breaking even with last year's pace would be welcome. Market analysts had predicted a spring building boom to jumpstart increased investment in housing, but it's been a slow build. Finally, new home sales climbed in April after several months of decline.
It's safe to say that a sharp spike in interest rates in 2013 are closely correlated to the struggle. In addition, rising home values have proved to be a double-edged sword: While improving home equity and loan-to-value rates for existing homeowners, the higher price tags have also kept would-be new homeowners from breaking into the market.
A key weak link in the equation is a lack of participation among first-time homebuyers. A variety of factors, including shifting housing priorities and high debt burden due to student loans, have prevented 20- and 30-somethings from becoming homeowners. The added hurdles of higher credit requirements and income documentation to qualify have made the process that much more difficult to navigate.
That being said, there are still many ways to achieve your homeownership goals. If you can improve your credit and lower your debt-to-income ratio, investing in a house is a great way to build your wealth and increase your long-term financial security. Added government programs such as FHA also help new homeowners get started with lower down payments necessary. Don't hesitate to ask a loan advisor about qualifications so you can buy your dream house!
Friday, May 16, 2014
Photo courtesy of The Associated Press/Carolyn Kaster
Reports surfaced this week that Vice President Joe Biden refinanced his personal home mortgage last year, taking advantage of record low interest rates to secure a 3.375 percent rate. Since the home's value is assessed at more than $500,000, this will save him at least $6,000 a year. While we could speculate for days on what Joe Biden might do with an extra six grand, can you imagine what you could do with $6,000 savings a year?
Regardless, it's hard to argue with refinancing to lock in a lower rate and save thousands of dollars over the lifespan of a loan term. As certain Vertex loan advisors would say, it's a "no-brainer." If you can reduce your interest and payments - while covering your closing costs with a lender-paid credit - it makes sense every time.
In other news, Congress members are debating whether to dissolve mortgage giants Fannie Mae and Freddie Mac in an effort to reduce government involvement in the home financing business. Naturally, congressional support is mixed.
As it stands, it appears unlikely the proposed bill will garner enough votes to pass the Senate, but that doesn't mean the idea won't be revived in an altered form. Some fear that eliminating Fannie and Freddie could translate to higher premiums for borrowers under modified lending structures. Others argue it could make the mortgage lending industry more resilient in the face of volatility. Either way, you can probably bank on hearing this issue debated further.
Friday, May 9, 2014
But that doesn't mean it's picture perfect
Showing more signs of market improvement, the number of U.S. initial jobless claims filed last week dropped to 319,000 and the unemployment rate is down to 6.3 percent. This is in line with a longer-term trend toward gradual market improvement and slowly dropping unemployment rates. The number of initial jobless claims - the first time someone files for unemployment - is at its lowest point since October 2007.
Meanwhile, the Dow closed Friday at a new all-time high for the second week in a row, despite numerous ups and downs throughout the week, partially due to unease from conflict in Ukraine.
These mostly positive signs of growth are not to say there's no reason for concern, however. Federal Reserve chief Janet Yellen has stated she's worried about the 3.5 million Americans who have been unemployed for more than six months, accounting for more than a third of all unemployed.
Still reeling from an unusually harsh winter, new housing permits are lagging and dropped 2.4 percent in March. The housing market is a key sign of overall economic health, and the demand for new housing remains not as high as hoped. Rising home values and slightly higher mortgage rates may be keeping some potential borrowers from breaking ground on new homes.
As long as the economic picture remains uneven or murky, it's safe to assume that Fed officials will keep interest rates as low as possible for as long as they can. With this in mind, it's a good idea to re-evaluate your own financial housing picture and make the most of your home assets.
Wednesday, April 30, 2014
The Dow Jones industrial average closed at an all-time high Wednesday.
Once again, the Fed announced today what most expected: They will stay the course by shaving off another $10 billion a month in bonds and treasuries purchases, down to $45 billion in total each month. Fed officials have indicated they will continue doing so until something drastic occurs.
The move comes after reports of an overall weak first economic quarter, but in spite of it all, the Dow closed at an all-time high on Wednesday afternoon. Perhaps investors viewed the Fed's decision to continue reducing stimulus efforts as a positive forecast for further market recovery.
Fed officials also reaffirmed their desire to keep interest rates low for the foreseeable future. At the current rate of tapering, however, the bonds and treasuries purchases will be no more by September...unless something happens to stall the slowdown. When the stimulus is over, it's anyone's guess what will happen.
As it stands, mortgage interest rates remain quite low while home values are comparatively high. Due to this combination of factors, many homeowners could obtain a lower mortgage interest rate with a higher loan-to-value ratio. This means a lower monthly payment while continuing to build home equity. If this sounds beneficial to you, feel free to call one our Vertex loan officers to see what you can do at 877-939-0339.
Friday, April 25, 2014
Maybe, except for Denver
Graphic courtesy of qz.com
Since home values nationwide took a nosedive about six or seven years ago, housing prices have really made a comeback. So much so, in fact, they've exceeded peak levels from heady pre-recession days in many places.
Take Denver, for example: The metro area's average home value hit $245,200 last month, an all-time high. Despite steadily increasing asking prices and modest interest rate hikes, however, demand seems to be through the roof. According to a local realtor interviewed by the Denver Post (see link above), residential properties in the area average about 25 days on the market before being sold, a far cry below national averages of 102 days, often with multiple offers above asking price.
As is typically the case, Denver's swelling home values match the area's soaring rent prices, which makes investing equity in a home all the more attractive. Buyers can still take advantage of considerably low interest rates below 5 percent and government programs to get their foot in the door, both figuratively and literally. That is, as long as they aren't outbid by someone with a higher percentage down upfront.
In other regions across the U.S., prospective buyers aren't biting at rising home prices, suggesting a weakening housing market - see graphic above. There was much speculation that perhaps just a harsh winter was stalling the market, but even after temperatures warmed, it appears buyers may be getting priced out of home values they can't afford.
Does all this mean that home values may finally start dropping? Only time will tell. If you live in a red-hot market like Denver, though, don't expect the meter to fall too much.
To check out where home prices in Denver metro are hottest or coldest, visit Trulia's "Heat Map" here: http://www.trulia.com/home_prices/Colorado/Denver-heat_map/
Thursday, April 17, 2014
Warm weather has finally returned, encouraging the notion we should be outdoors making the most of spring. Time to fire up the grill, sit on the patio and enjoy longer nights before sunset. You can finally dust off your bike or other favorite summer hobby and get moving again.
It's also a great time to knock off that home project you've been thinking about all winter. Besides enhancing your living space and potentially increasing efficiency, you can also raise your home's value, in turn putting more cash back in your pocket. By boosting value, you can obtain a lower interest rate and get better pricing through a refinance, also lowering monthly payments. And obviously, you could eventually sell the house for a higher price.
There are probably thousands of things you could do to make a positive change, ranging from mixing up your furniture "feng shui" to knocking down walls and adding windows. It is definitely worth thinking about making a change if it can help you save in the long run.
The TV show and magazine "This Old House" offers its top 10 list of home improvements, starting with creating more space. Adding more natural light is almost always a surefire way to make your home more attractive to the next buyer as well.
The DIY Network has its own list of home project ideas, focusing a little more on energy efficiency. These are triple-win projects: Not only can a new air-conditioning unit, furnace, windows or plumbing add to your home's value, you can also save on your utilities bills (and reduce your carbon footprint!).
If you don't have a lot of extra cash to invest in a big project, focus on these cheap, easy ways to get more bang for your buck. You might be surprised how much something as easy as matching appliance panels could make your kitchen appear more updated and pulled together.
Once you've tackled your home to-do list, you can kick back and return to enjoying all of the finer pleasures warmer weather brings. Isn't that what spring and summertime is all about?
Friday, April 11, 2014
When buying a new house, the rule of thumb historically has been put down 20 percent upfront, then borrow and pay off the rest on a set timetable. Borrowing 80 percent or less of a home's value is the magic number most lenders use to determine your ability to borrow free of extra costs. If you cannot put down the full 20 percent, however, there are other alternatives at your disposal...for a premium, of course.
The Federal Housing Association offers the opportunity for borrowers to purchase new homes with as little as 3.5 percent of the total purchase price paid upfront. The "catch" is that an extra mortgage insurance premium is paid each month in addition to your base mortgage payment. Besides the FHA program, if you prefer to go another route with less than 20 percent down, you can obtain private mortgage insurance to make up the difference.
Sometimes utilizing mortgage insurance is the only tool available to qualify for a loan, depending on your circumstances. Want to learn more? Visit the FHA's website to get more information here.
On the other hand, if you qualified for your last mortgage through an FHA program or using private mortgage insurance and you have since paid off more than 20 percent of the home's value, congratulations! You can refinance to get rid of that extra insurance premium and only focus on paying the principal and interest on the mortgage itself.
Whether you are interested in purchasing a new home with less than 20 percent equity or you are ready to get rid of the PMI on your current mortgage, a Vertex loan officer would be more than happy to walk you through the different options available. Feel free to visit our website for more info on the process or call our office toll-free at 877-939-0339 to see what makes the most sense for you.
Friday, April 4, 2014
Job growth continues with almost 200,000 added
Graphic courtesy of ADP National Employment Report
The March jobs report released today could be described in a variety of ways, depending on your perspective: steady, promising, solid, flat, or lackluster. An estimated 192,000 jobs were added to the economy and unemployment remained even at about 6.7 percent. This comes in close to the roughly 200,000 jobs expected to be added but shy of some predictions for a big spring bounce back after a harsh winter.
If you look at the numbers more closely, however, job growth is barely keeping up with population growth, so are there really more job opportunities? This CNN breakdown takes a closer look at where new jobs are coming from and how it compares to years past. According to this data, a large portion of the net job growth stems from fewer company layoffs than in the past five years rather than outright new job creation.
In light of the newest jobs data, Fed chief Janet Yellen maintains that growth in permanent, full-time jobs and wages both need to be much healthier before Fed policies will be drastically altered. She has stated that interest rates will remain low for quite some time until more evidence of economic recovery is more "solidly" documented.
Friday, March 28, 2014
Graphic courtesy of Bloomberg Businessweek
Reports have emerged recently with a daunting figure. Collectively, Americans now reportedly owe more than $1 trillion just in student-loan debt. Although part of the idea of getting degrees is to put yourself ahead by netting higher-paying jobs, debt payments are surpassing income levels for too many these days.
In turn, sky-high student-loan debt is preventing some from fulfilling the "American dream" by getting a mortgage for a house. New regulations mandated in January of this year allow no more than 43 percent of a borrower's monthly income be used to pay debt obligations. With an economy still in recovery mode, crippling debt ratios have caused many to put other plans on hold, such as purchasing a new home.
What's the answer to this student-loan debt conundrum? Analysts will debate the alternatives on end, but for graduates already in the hole, you would probably benefit from consulting a financial adviser for counseling specific to your situation. If you are in the planning stages for your children's education, you can take advantage of a 529 plan to receive tax benefits and other incentives so you and your offspring aren't overburdened by debt.
There are still plenty of statistics out there supporting the case for a college education, but there's no denying it isn't as affordable as it used to be. It is well worth the time to research all of your degree options and comparative costs, as well as factoring in existing debt, before getting yourself into a debt hole that prevents you from fulfilling other goals.
Wednesday, March 19, 2014
Chart courtesy of qz.com
Fed officials have stated they are looking for key factors such as wage growth, inflation and more house-building permits as signs of a more robust economy before thinking about raising interest rates.
With that being said, however, the Fed is moving ahead with plans to continue tapering its monthly purchases of bonds and treasuries, down to $55 billion a month in April. These monthly bond purchases, initially set at $85 billion a month, were intended to help jumpstart a sluggish economy. Last month's jobs report was better than anticipated, but still suggest an economy in recovery period.
As far as mortgage rates, they will continue to mirror changes in the stock market. After Fed chief Janet Yellen made her remarks today, stocks fell and, along with them, mortgage rates. It appears the markets will continue waiting for more concrete signs of economic improvement before rates rise again.
Confusing data? If you have any questions about getting a mortgage for a new purchase or refinance, contact a Vertex loan officer to help you navigate the process and lock in the best rate for you.
Friday, March 14, 2014
Colorado officials expect hazardous spring runoff
Photo of 2013 flood damage courtesy of Wunderground.com
This spring, the Rocky Mountain state again is bracing itself for massive flooding potential. In a fairly unprecedented pre-emptive move, the U.S. Department of Housing and Urban Development granted nearly $200 million in recovery funds to flood-damaged Colorado communities, anticipating the possibility of more devastation after a heavy snow year. Many areas in Boulder, Weld and Larimer counties are still recovering from September's flooding deluge.
So, how protected are you from flooding? Many people do not realize that their standard homeowner's insurance policy does not cover flood damage. Separate flood insurance is needed to cover these losses, and just about anyone is eligible to buy it. While purchase of a flood insurance policy is only mandated in designated flood plains, in light of previously unaffected areas (i.e. Colorado's Front Range and most of the East Coast after Hurricane Sandy) getting insured before catastrophe hits could save you thousands.
Areas previously wiped out by fires also are particularly susceptible to flash flooding because there is little foliage left to absorb the precipitation - as was the case in Waldo Canyon last year near Colorado Springs. With Colorado wildfires increasing in intensity, one can only expect increased flood risk to follow.
Fortunately, whether you rent or own a single-family house or condo, you can protect your home and belongings with flood insurance. The National Flood Insurance Program offers a wealth of information on how to obtain insurance and file claims after a flood hits. You may not be able to control Mother Nature's volatility, but you can minimize your losses by being prepared.
Friday, March 7, 2014
Graph courtesy of CNN.com
The U.S. government released its monthly jobs report today, and the results seemed mixed. Jobs added to the economy were higher than expected at 175,000, yet the unemployment rate remained at best steady at 6.7 percent, up slightly from January's 6.6 percent. Seems a little conflicting, right?
There are many factors at play to explain the jobs report data - even including rough winter weather keeping people home from work - but the overall question is how the Fed chiefs will act on the data. February's added number of jobs showed a steady, growing economy, and this is more than likely enough evidence to keep the Fed on its stimulus tapering track.
The Fed will meet later this month and is expected to drop another $10 billion a month in its bond-buying program to a total of $55 billion per month. Despite a weak/mixed jobs report in January, Fed leaders forged ahead with the plan to continue tapering its monthly bond buying. It's likely only a drastic economic change will stop this progression until no more bonds are purchased.
How does all this affect the mortgage industry? Interest rates have been dropping slightly on weak jobs data in 2014, hovering around 4.25 to 4.5 percent, currently at the lower end of that range. Of course the future is uncertain, but assuming the economy continues improving and interest rates rise, now could be a prime time to take advantage of historic low rates, saving you thousands of dollars in interest over the long term.
Friday, February 28, 2014
It's getting to be that time of year that winter is dragging on and everyone is anxious for springtime to fully settle in. Flirtation with warm weather still turns to snow showers in a matter of hours, and we're reminded that it's not quite time to retire the snow shovels yet.
Before we can completely turn the page into spring, one other task remains that may be nagging your subconscious: tax time. There's about six weeks left before you'll need to ask the IRS for an extension or risk additional penalties.
There are a few changes this year to be aware of if you haven't filed yet, including new requirements for health insurance policies and same-sex couples. As this list of tax tips details, the Affordable Care Act mandates that all adults obtain some form of health insurance by March 31, 2014, or pay a fine by next year. In other 2013 news, the federal government now recognizes all same-sex marriages in states allowing couples to do so, including five states where Vertex is licensed to do business: California, Connecticut, Illinois, Utah and Washington. All married couples in these states can file taxes jointly and benefit from multiple tax savings.
There are several places to file your taxes online for free, including "Free File" on the IRS website if you earned $58,000 last year or less: http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Free. The Boston Globe provided additional steps to consider before approaching tax season.
Still facing tax dilemmas? Especially if you are self-employed, making mistakes on your taxes could cost you dearly. Three Vertex loan officers also hold distinction as Certified Financial Planners and can offer advice to your particular financial situation.
If you are seeking consultation from a CFP, contact:
Friday, February 21, 2014
Foreclosure rates finally drop to 2008 levels
Graphic courtesy of The Wall Street Journal
Good news: Home foreclosure rates are way down compared to the last couple of years, a sign that stricter lending standards have done their job to only allow mortgage loans to properly qualified candidates.
Decreased foreclosure rates also reflect a sharp increase in home values in 2012 and 2013 and dropping unemployment rates. Fewer homeowners are now "underwater" on their mortgage thanks to higher home values, and more people have jobs today than a few years ago.
It may be tempting to complain that the refinance process takes longer than it did in 2008 and that lenders' new requirements are too stringent. However, these restrictions appear to at least be effective in minimizing the numbers of people getting loans who can't afford to pay them back. Lenders have less risk of borrowers falling delinquent on loans when lending standards are higher.
Bad news: Home sales in January were down, partially due to unusually cold weather, slightly higher interest rates and a smaller supply. This is likely only a seasonal loss, though: Most analysts predict a sales bounce back by springtime as the weather warms up and buyers are eager to see what's on the block.
Thursday, February 13, 2014
It might seem counterintuitive in our debt-fearing culture, but spending money you don't have (yet) can be a very good thing. Your history of taking on debt, buying things on credit, can be the difference between getting approved or denied for your new home. Beyond that, it can determine how low of an interest rate you can get and, ultimately, how much money you will pay for it.
For better or worse, a person's credit history is used as a barometer of trust and reliability. A person with several credit cards and a mid-level to high credit score and no late payments is viewed as a stronger loan candidate than someone with no debt and a vague credit history. As unfair as that may seem, a lender wants to see borrowers with a proven track record of making regular, full payments and thus less likely to miss any mortgage payments.
To increase your chances of getting loan approval, make sure you already have some form of credit and that you use it. Keeping a low balance on your credit card - and making at least the minimum payment each month - can build your credit score, positioning you as a more attractive candidate for a $200,000 mortgage loan. This article does a great job of explaining why this borrowing principle empowers you in our lending economy.
Raising your credit score can help you get jobs, new phones, new cars, new homes - the list goes on. It is worth digging into if it can save you thousands of dollars in the long run. Generally, you want to aim for a credit score of 700 or above to guarantee loan qualification. If building credit is a goal for you, check out this list of ways to improve your financial security.