Rate Lock Advisory - Thursday May. 6th

Thursday's bond market has opened in positive territory yet again after this morning's economic data gave us favorable results and the stock markets continued their downward move. The Dow is currently down 72 points while the Nasdaq has fallen 25 points. The bond market is currently up 6/32, which should improve this morning's mortgage rates slightly.

The Labor Department said this morning that the 1st quarter employee productivity rose at a 3.6% annual rate. This was higher than expected, meaning workers were more productive than thought. The employee costs portion of the data showed a larger than forecasted decline, indicating that wages were not rising rapidly. Both of these readings were good news for bonds and mortgage rates, but the biggest factor in this morning's trading was another round of stock losses.





The Labor Department also gave us last week's unemployment figures. They announced that 444,000 new claims for unemployment benefits were filed last week, slightly exceeding forecasts. However, this data does not carry the significance to affect mortgage rates with just a slight variance from expectations.

Tomorrow brings us the release of the almighty monthly Employment report, giving us April's employment statistics. This data has the importance to cause a huge rally or major sell-off in the bond market and large changes in mortgage rates.

The ideal situation for the bond and mortgage markets would be an increase in the unemployment rate and a much smaller number of payrolls added to the economy during the month than was expected. Current forecasts are calling for the unemployment rate to remain at 9.7% and that approximately 187,000 jobs were added to the economy during the month. Just how much of an improvement or worsening in rates depends on how much variance there is between forecasts and actual readings. This could turn out to be a wonderful day in the mortgage market, but it also carries risks of seeing mortgage rates move higher if the Labor Department posts stronger than expected readings.

The recent bond rally has been wonderful for mortgage shoppers, but I have concerns as to whether it can continue much longer. My issue is that the rally has been fueled much more by stock weakness than weak economic data. I believe there is still room for the stock markets to fall, but we have seen a significant improvement in bonds from their recent lows. The yield on the benchmark 10-year Treasury Note actually crossed over 4.00% just last month but currently stands at 3.48%. And we must keep in mind that rates usually spike higher much quicker than they fall. In other words, it will not take much bad news for the bond market to start reversing course and give back some of its recent gains.

Tomorrow's data certainly has the importance to do this and to do it quickly. It is my opinion that if tomorrow's data shows stronger than expected results that we will see the bond market go into selling mode, driving mortgage rates higher. I also believe that it will take much weaker than forecasted results for the bond market and mortgage rates to greatly improve. I also think it is going to take a lot for the bond market to react favorably to the data but just a little surprise to create a negative reaction. Accordingly, I strongly recommend proceeding with caution into tomorrow if still floating an interest rate.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Lock if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Mortgage Rates Inch Lower as Nervous Investors Seek Safety

Mortgage rates fell a few more basis points yesterday as global economic concerns continue to lead nervous investors to re-allocate their funds into risk free benchmark Treasury debt. This "flight to safety" helped mortgage-backed securities prices tick higher which has allowed lenders to offer progressively lower consumer borrowing costs over the last four days.

A flight to safety happens when investors are nervous about owning risky assets like stocks, but do not want to miss out on earning a return on their funds, so they allocate money into risk-free U.S Treasury debt to provide a safe-haven AND an investment return. To remind readers, as benchmark Treasury yields fall, prices of mortgage-backed securities move higher, which allows lenders to offer lower mortgage rates. As Treasury yields rise, mortgage-backed security prices are led lower, which forces lenders to push mortgage rates higher.

The flight to quality continues to move interest rates. Although lenders have been unable to move mortgage rates lower in step with benchmark Treasury yields, lender rate sheets did improve again today. The par 30 year conventional rate mortgage remains in the 4.875% to 5.125% range with a few more lenders offering 4.75% to well-qualified consumers. To secure a par interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you have lower FICO scores or higher loan to values, you should consider a government loan which offers the same rates as conventional with higher costs.

We have seen several days in a row of improving lender pricing thanks to the sovereign debt concerns with Greece and other European countries. At some point this is going to come to a conclusion which will probably result in the unwinding of the “flight to safety” trade that has benefited mortgage rates recently. Once that happens, we will see increases in mortgage rates. I continue to favor locking all loans closing within 30 days as I feel rates have very little room to continue to improve and the likelihood of a correction which increases rates is growing. Remember lenders push rates higher much faster than they let them fall. In addition, we have the Employment Situation report coming out on Friday. This is one of the most influential economic releases on the schedule and it can impact the markets in a big way… especially if it is better than expected. There is much risk in floating and very little to gain. It is always better to have locked when you should have floated than to have floated when you should have locked.

Rate Lock Advisory - Wednesday May. 5th - Happy Cinco de Mayo

Wednesday's bond market has opened in positive territory again following more weakness in stocks. The stock markets are extending yesterday's losses, but to a much lesser degree. The Dow is currently down 40 points and the Nasdaq down 18 points. The bond market is currently up 7/32, which should improve this morning's mortgage rates by approximately .250 - .375 of a discount point.

There is no relevant data scheduled for release today, so any afternoon revisions to mortgage rates will likely come from movements in stocks. If the stock markets move into positive territory, we may see bonds fall and mortgage rates move higher. If the major stock indexes move lower, afternoon improvements to rates may follow.

The Labor Department will release its 1st Quarter Productivity and Costs data early tomorrow morning. This information helps us measure employee productivity in the workplace. High levels of productivity help allow low-inflationary economic growth. If employee productivity is rapidly rising, the bond market should react favorably. However, a decrease could cause bond prices to drop and mortgage rates to rise tomorrow morning. It is expected to show a 2.4% increase in productivity.

We also will get weekly unemployment figures from the Labor Department early tomorrow. They are expected to say that 440,000 new claims for unemployment benefits were filed last week. This would be a decline from the previous week, but unless we see a large variance from forecasts this data likely will not have much of an influence on tomorrow's mortgage rates.

The big news of the week comes Friday when we will get April's monthly employment numbers. They are expected to show that the unemployment rate stood at 9.7% last month and that 187,000 new jobs were added to the economy. The higher the unemployment rate and the fewer number of jobs added, the better the news for bonds and mortgage rates.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Mortgage Rates Start Week Sideways. Busy Week Ahead

Mortgage rates last week benefited from nervous investor sentiments regarding the fate of Greece and Goldman Sachs. A lack of conviction to own risky stocks heading into the weekend led to a flight to safety rally in benchmark Treasuries which helped mortgage-backed securities and allowed lenders to offer slightly lower mortgage rates.

After bouncing back and forth in a tight range for the entire week, mortgage rates went into the weekend close to their best levels of the month (which really wasn't too different from what we have been seeing over the past 10 days.)

Over the weekend, the European Union and Greece announced that an aid package was put together to prevent Greece from defaulting on their national debt. This bailout was expected to “safeguard financial stability in the euro area as a whole”. This news ended up forcing traders to sell a portion of their "flight to safety" positions in Treasuries which pushed MBS prices lower at the open. Almost all of Friday's modest gains have been erased.

We have several economic releases to start the week. First report to hit the news wires comes from the Department of Commerce with the release of Personal Income and Outlays. A stronger consumer benefits the stock market while a weaker consumer benefits the bond market. This report gives us three readings on the health of consumers. The first is personal income which shows the monthly change in income that households receive from all sources. Next is consumer spending, which shows the monthly change in the amount of money consumers are spending on durable and non-durable goods and services. The final reading is the Personal Consumption Expenditure, a preferred read on inflation.

Rate Lock Advisory - Tuesday May. 4th

Tuesday's bond market has opened well in positive territory due significant stock selling. The stock markets are posting large losses with the Dow down 220 points and the Nasdaq down 74 points. This has helped boost bond prices, pushing the bond market up 14/32, which will likely improve this morning's mortgage rates by approximately .250 of a discount point.

Today's only relevant economic news actually gave us unfavorable results. It showed that March's Factory Orders rose 1.3%, greatly exceeding analysts' forecasts. That indicates that the manufacturing sector was stronger than expected and can be considered bad news for bonds. However, the data is pretty much being ignored this morning as bonds have become a safe-haven from the volatility in stocks. If this continues into afternoon hours, I would not be surprised to see a downward revision to mortgage pricing later today.

There is no relevant data scheduled fro release tomorrow, so look for the stock markets to again be a heavy influence on bond trading and mortgage rates. If today's selling in stocks extends to tomorrow, we could see further improvements to mortgage rates. But if the major stock indexes rebound tomorrow, today's improvements to rates may be erased.

The Labor Department will release its 1st Quarter Productivity and Costs data early Thursday morning. This information helps us measure employee productivity in the workplace. High levels of productivity help allow low-inflationary economic growth. If employee productivity is rapidly rising, the bond market should react favorably. However, a decrease could cause bond prices to drop and mortgage rates to rise Thursday morning. It is expected to show a 2.4% increase in productivity.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Debating Bank Reform

Debating Bank Reform

6 biggest mistakes homebuyers make

Buying a home is the biggest purchase most people will ever make, yet many go into it blind. Here are the 6 most common -- and costly -- mistakes homebuyers make.

1. Not knowing your credit score

If you're even toying with the idea of buying a home, you must find out exactly what your FICO score is. If you find it is less than ideal, wage a systematic campaign to raise it. Too many borrowers ignore this step and get surprised when they get interest rate quotes.

Once you've pored over your credit history and corrected any errors, your next step is to pay down revolving debt balances to no more than 30% usage. That will help raise your score significantly.

Why does it matter?

The lower your score, the higher your costs of borrowing. Fannie Mae and Freddie Mac, for example, charge higher up-front fees to borrowers with credit scores below 740.

For a buyer with a credit score between 680 and 700, the fee comes to 1.5% of the mortgage principal. On a $200,000 mortgage, that adds up to $3,000. Someone with a 740 score pays nothing.

Lower-score borrowers also get saddled with higher interest rates, about 0.4 percentage point more for the below 700 borrower. That costs an extra $62 a month -- $744 a year -- on a $200,000, 30-year, fixed rate loan.


2. Buying a car before a house

Anytime consumers open new credit accounts -- credit card, auto loan, etc. -- their FICO score could drop, according to Craig Watts, a spokesman for Fair Isaac, the creator of FICO scores.

"Hence the admonition to not open other new accounts while your mortgage application is in process," he said.

A big purchase would use up a considerable proportion of a borrower's total credit limit, which results in a drop in the score. Lenders often continue to check credit scores in the weeks before closing.

"The lender will likely slam on the brakes if the applicant's credit scores have suddenly dropped below the minimum required for the requested loan rate," Watts said.


3. Skimping on home inspection

Buying a pig in a poke can cost buyers big bucks -- just when they can least afford it. So It's vital to find all the costly flaws before you buy.

Many homes on the market today are distressed properties -- foreclosures and short sales -- and that only increases the importance of good inspections, according to David Tamny, president of the American Society of Home Inspectors.

"The owners usually didn't have the money to keep up these homes," he said. "There's a lot of deferred maintenance."

A home inspection can find problems with the foundation, electrical, plumbing, roof, attic insulation, and heating and air conditioning. In some states, separate licensed inspectors offer mold or termite inspections.

Often homebuyers, who may be strapped for cash, stint on inspections and look for the cheapest way to go. That can lead to disaster.

"The cost of repairs far exceeds the cost of inspection," said Tamny.


4. No lawyer

Nearly everyone involved in a real estate transaction -- the seller, the buyer's real estate agent, the seller's agent and the mortgage broker -- has a vested interest in getting the deal done because they only get paid when the house is sold. So they may push a deal even if it's not in the best interest of the buyer.

One of the best defenses against making am expensive purchase you'll regret is to hire a real estate attorney -- even in cities where it's not standard practice. These professionals charge flat fees and their advice is objective.

It's nice to have someone on your side.


5. No contingencies

When signing a sales contract, buyers usually have to put up 1% to 3% in "earnest money," which they don't get back if they pull out of the deal except under certain conditions spelled out in the contract.

Sellers try to limit the grounds for canceling, and inexperienced buyers may sign contracts that don't include common exceptions, such as uncovering major problems during the home inspection, failing to obtain financing and failure of the house to appraise.

Failure to obtain financing is common these days because lenders have become very picky; underwriting is very strict.

Even if your mortgage company is still willing to finance your purchase, the house itself may be worth less than you've contracted to pay for it, and the lender will pull its approval.

With residential real estate markets still slow, sellers usually accept contingency clauses, but if they resist, it may be better to rethink the deal. Losing a deposit of $2,000 to $6,000 on a $200,000 home hurts.


6. Not budgeting for insurance

Don't underestimate insurance costs and fail to budget for them.

Many homebuyers don't understand just what is -- and what is not -- covered. Standard policies pay for theft and wind, fire, lightning, hail and explosion damage. Not covered is flooding, earthquake damage or problems caused by neglect of routine maintenance, according to Jeanne Salvatore, spokeswoman for the Insurance Information Institute, an industry-sponsored educational group.

"The most important thing is before you buy a home, find out what it will cost to insure it," she said. "Insurance needs to be calculated into the cost of owning a home. Unlike a mortgage, which you can pay off, you'll be responsible for the insurance costs forever."

For flood insurance, most buyers use the National Flood Insurance Program. Earthquake coverage may be available through a state authority or some private companies.

Depending on location, flood insurance can run into a lot of money. The cost of $250,000 worth of government flood coverage on the building and $100,000 of its contents can go as high as $5,714 in high-risk, coastal areas.

WHAT IS A BULL AND A BEAR MARKET?

In stock trading and investing there are bulls and bears. It sounds dangerous but it isn’t.

You often hear of the market being bullish or bearish. So what is a bull market and what is a bear market?

BULLS AND BEARS IN THE MARKET

A Bull Market

This is when the market showing is confidence. Indicators of confidence are prices going up, market indices like the Nasdaq go up too. Number of shares traded is also high and even the number of companies entering the stock market show that the market is confident.

These are bullish characteristics. If there is a run of bullish days then you may hear the market is a bull market. Technically though a bull market is a rise in value of the market of at least 20%. The huge rise of the Dow and Nasdaq during the tech boom is a good example of a bull market.


A Bear Market

A bear market is the opposite to a bull. If the markets fall by more than 20% then we have entered a bear market. A bear market is a market showing a lack of confidence. Prices hover at the same price then go down, indices fall too and volumes are stagnant. In a bear market people are waiting for the bulls to start driving the prices up again. However, a bear is a very tentative bull or a bull that is asleep.

Rate Lock Advisory - Monday May. 3rd

Monday's bond market has opened in negative territory following early stock strength. The stock markets are starting the week in positive ground after Greece accepted a bailout package that should help stabilize the country's financial system. The Dow is currently up 86 points while the Nasdaq has gained 14 points. The bond market is currently down 11/32, which will likely push this morning's mortgage rates higher by approximately .125 - .250 of a discount point over Friday's morning pricing.

There were two reports released this morning that were relevant to mortgage rates. The first was March's Personal Income & Outlays that showed a 0.3% rise in income and a 0.6% increase in spending. Both of these readings matched forecasts, minimizing its impact on this morning's bond trading and mortgage rates. February's readings were revised higher than previously estimated, but due to the age of that data it also has not influenced today's rates.

The second report of the day was one of the more important releases of the week. The Institute for Supply Management (ISM) posted their manufacturing index for April late this morning, announcing a reading of 60.4. This was slightly lower than forecasts but an increase from the previous month. This indicates that more surveyed manufacturers felt business improved during the month than last month. That can be considered negative for bonds, but since the reading did not exceed forecasts, its impact on the markets has been minimal.

March's Factory Orders data will be released at 10:00AM tomorrow, giving us a measure of manufacturing sector strength. It is similar to last week's Durable Goods Orders, except this report includes non-durable goods such as food and clothing. Generally, the market is more concerned with the durable goods orders like refrigerators and electronics than items such as cigarettes and toothpaste. This is why the Durable Goods report usually has more of an impact on the financial markets than the Factory Orders report does. Still, a larger decline than the 0.1% that is expected could push mortgage rates slightly lower. But, a sizable increase in new orders could lead to slightly higher mortgage pricing tomorrow.

Overall, I believe Friday will be the most important day of the week with the employment data being posted. It can easily erase the week's accumulated gains or losses in mortgage rates if it shows any surprises. The middle part of the week will likely be the calmest, but I still suggest proceeding cautiously if still floating an interest rate. This would be a good week to maintain contact with your mortgage professional if you have not locked a rate yet.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.