Saturday, July 26, 2014

Got an FHA loan? Switch to conventional and ditch your mortgage insurance cost

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

Not so fast: Housing struggles reveal economic weak spots

Charts via

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. 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

Improved economy, but new housing challenges

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

'Tis the season: July economic reports exploding with growth

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.