Current & Future Interest Rates Trends October 18′

Now that the traditional spring/summer buying and selling season is over, let’s take a look at how interest rates have been trending—and what may be in store in the coming months.

Generally, the interest rates on a 30-year fixed-rate mortgage and on a 15-year fixed-rate mortgage have been stable throughout the spring and summer real estate season. In the chart below from Freddie Mac’s Primary Mortgage Market Survey, the interest rates have fluctuated only 0.12 percentage points on the 30-year fixed-rate and only 0.14 percentage points on the 15-year fixed-rate from April through August.

This stability in the rates is something we’ve seen the last two years during the same April-August timeframe, with a variance of 0.17 percentage points in the 30-year fixed and 0.14 percentage points in the 15-year fixed in 2017 and 0.17 in the 30-year fixed and 0.12 in the 15-year fixed in 2016.

 

Month 30-Year Fixed 15-Year Fixed
April 4.47% 3.93%
May 4.59% 4.07%
June 4.57% 4.04%
July 4.53% 4.01%
August 4.55% 4.02%

 

The weekly figures for the last six weeks also show fairly steady rates. Since August 16, the 30-year fixed has varied only 0.14 percentage points and the 15-year fixed has varied only 0.14 percentage points.

 

Weekly 30-Year Fixed 15-Year Fixed
August 16 4.53% 4.01%
August 23 4.51% 3.98%
August 30 4.52% 3.97%
September 6 4.54% 3.99%
September 13 4.60% 4.06%
September 20 4.65% 4.11%

 

 

The steady interest rates are a result of a variety of factors that have been applying pressure—both upwards and downwards—on the rates. The balanced economy, strong corporate earnings and worries over rising inflation have applied upward pressure while slowing home sales, concerns about the global economy, and other international “drama”—such as the recent currency problem in Turkey—have applied downward pressure on the rates.

Going forward, two opposing factors that may influence interest rates in the near future are the Federal Reserve’s pronouncement that we’ll see one or two more hikes to the key short-term interest rate this year and the possible economic ramifications of the current tension surrounding tariffs and trade.

As always, to get the best information on interest rate trends, talk to your mortgage professional. ∆

 

© Left Field Media


Are Mortgage Rates Influenced by the Presidential Election?

Thinking of buying a home?

If you’re thinking of buying a home, it’s prudent to know if current events have any impact on the direction of mortgage rates. After all, the direction of mortgage rates means you can buy more house for the same money if they go down, or less if they go up.

Does the outcome of the presidential election have any influence on mortgage rates? Up? Down? Remaining the same?

Mortgage Rates Are Determined by the Federal Reserve

Mortgage rates are determined by the Federal Reserve, which meets about eight times a year and looks at economic data. If the economy looks strong, they may decide to raise rates. If it looks weak, rates are sometimes lowered to stimulate the economy.

The governance of the Federal Reserve, which determines the direction of interest rates, was designed in part to remove it from partisan politics. Although the president of the United States nominates the chair of the Federal Open Market Committee (FOMC), they serve for four-year terms and cannot be replaced. In other words, the inauguration of a new president does not coincide with the ability to name a new Fed chair, although that will happen down the road, when the term is up.

The governors of the Fed serve 14-year terms, and also cannot be removed. That means, for example, that the overall governance of the Fed cannot be removed because an incoming president doesn’t like their monetary policies.

Federal Reserve

It’s the Economy, Not the President

The ultimate determinant of interest rate direction and thus mortgage rate direction is the economy, not who sits as president.

Rates currently are at historically low levels, making this a good time to buy a house.

A recent survey of economists showed a consensus that the economic picture would be strong in November 2016, with low unemployment and good consumer confidence.

However, the consensus on the direction of interest rates has changed several times this year, with an unexpectedly weak job report and the British vote to leave the European Union affecting plans to hike.

The best bet is to stay tuned to the economic news.

 


What is happening to the Home Loans Market?

A 2013 survey (Belden and Russonello, America-in-2013-Final Report.PDF) showed that the demand for home ownership is very high, in spite of various difficulties experienced by the housing market. Most believe that home ownership is a good investment for them. Seventy percent of renters hope to buy homes within five years. Many people who own homes are looking for larger homes.

Demand for homes:

Qualifying for a home loan is part of the life cycle of Americans. The youngest generation (age 28 to 34) show the strongest preference for mixed use urban communities in the city. They want walkable communities and public transit. When people move into the 35 to 47 age group (the married and child-rearing phase), they begin to prefer to buy single-family homes. The older baby-boomer generation have diversified into a wide range of housing sizes and communities. They generally feel settled, except that some want to move into smaller homes with shorter transportation demand, close to parks and far from neighbors.

The need for home loans is a constant through all the varieties of location and need. According to the survey,

Living in a single-family house is…related…to their stage of in life. It is a goal that Americans move closer to as the age, marry, and earn more.”

Young adults in the millennial generation are heavily burdened by student loan debt.  A Wells-Fargo survey found that a majority of millennials (54 percent) describe debt as their biggest financial concern. Forty-two percent of millennials say their debt is “overwhelming.” Of the millennial generation 64 percent financed their education with student loans. This contrasts with baby boomers, of whom only 29 percent financed their education with loans, during a period when tuition costs and fees were much lower.

Millennials in the marketplace:

When millennials are ready to finance a home, what is the home finance market like for them? In 2013, 30 year-olds were as likely to be stuck in their childhood bedrooms as they were to own their own home. The job market was especially hard on millennials with unemployment rates at 14 percent for that group between 2007 and 2010. For many, saving and handling student debt were very hard.

With  the gradual recovery of the job market, the “household formation rates” (how many new household units–home buying units–are being formed) has reached close to normal levels. Normally this would signal a normalizing housing market. However, the people forming new households are disproportionally not millennials.

Surprisingly, even with improving conditions, the share of adults in the millennial age range living with their parents has continued to rise. The rate at which millennials get married or live with a partner has been decreasing for many years now, independent of the recession. Millennials, employed or not, are more likely than ever to live with parents and not form independent households. The increases in household formation is coming from older adults. Many feel that fewer households entering the home buying market is due to later marriages and not-good-enough jobs, as well as student debt.

Preparing Better Mortgages to Tempt Millennials:

The worry felt by many borrowers has to do in part with hidden costs of the mortgage. Over the last few years, the household lending industry has been borrowing the practice of Total Cost of Ownership from industrial management practice. Total Cost of Ownership (TCO) was popularized for business in 1987. The Total cost analysis in mortgage lending enables lenders to explore what their resources can afford in a home mortgage. This analysis treats home ownership as a cost-benefit proposition.

Looking at all the factors that go into mortgage cost gives purchasers a sense of closure and allays fears of the unknown. As will any Total Cost of Ownership calculation, the total mortgage cost analysis begins looking at all the factors that go into the cost of the mortgage:

  • Mortgage attributes–for a fixed rate mortgage: loan amount, loan term, and interest rates. For a variable rate mortgage: periodic rate cap, lifetime rate cap, months between rate adjustment, etc..
  • Down payment–the larger the down payment, the smaller the total mortgage costs. Recent government regulations permit down payments of 1 percent. What would such a small down payment mean for total cost?
  • Discount points–upfront fees paid to the lender.
  • Other closing costs–a multitude of upfront expenses for inspections, legal and document fees, surveys, etc..
  • Private mortgage insurance–usually around $55 per month for every $100,000 borrowed, until the remaining principle falls below 80 percent of the home’s fair market value.
  • Income tax ramifications–some mortgage expenses may be tax-deductible.

Pacific Mortgage Group makes it easy and stress-free for you to find a mortgage option that truly fits your needs. Our mission is to match you with the best possible home loan package so you can achieve your financial goals. Please contact us to learn more.


Tips on Owning a Home: It’s More Than Just the Mortgage!

One of the most common misconceptions about home ownership is that you simply buy a house, pay the mortgage every month, and call it a day. However, the reality of owning a home is that it costs a lot more than just the mortgage!

In this blog post, then, we’re going to go over the full list of expenses that come with owning a home so that you can decide if you’re in the market to buy a home, or to continue renting as you’re currently doing.

  • Insurance: many lenders, especially from the so-called “big banks,” will require you to have homeowner’s insurance before giving you a mortgage. This premium varies from state to state, and different environmental factors — such as your area’s propensity for hurricanes, earthquakes, and flooding — can drive the price up significantly.
  • Property Taxes: again, this is an inevitable cost. Now, there are some mortgages that allow this to be built in — and paid — from the monthly mortgage payment, but in the end, this will also drive your monthly payment up to more than you thought before. Like insurance premiums, property taxes vary from state to state, and are dependent on the value of your home.
  • Utilities: you thought you had the “utilities” thing down pat when you were living in your first studio apartment, but the reality is, the utilities go up tremendously when you’re trying to heat, water, and provide electricity to a home with a few thousand square feet. Make sure you budget accordingly!

For more information about us and our services, contact us today.


Discover How to Save Money for a House

Saving money for a house can feel like an insurmountable goal. A down payment and closing costs will be in the thousands. For a traditional mortgage, the target number is 20 percent of the sale price for the down payment and another estimated 5 percent toward closing costs. If your dream home is $200,000, expect to need $50,000 saved.

It seems a bit daunting, doesn’t it? The Consumer Financial Protection Bureau reports, “People often put off saving for [important] goals because they feel like they don’t have enough money to save or they are busy struggling to make ends meet today. They feel like they can’t think or worry about saving for goals, large purchases, or even life events in the future. This can create financial challenges in the future.”

So, how do you start saving the tens of thousands of dollars needed for a home purchase? Here are our tips for saving money for a house.

Set a Goal: Decide how much money you need for the house you want, and set a date to achieve this goal. Moreover, ensure your goal is reasonable, It may take you five years to save $50,000.

Create a Plan: Convert your goal into yearly, monthly, and weekly financial targets. A $178.58 weekly goal is easier to achieve than the lump sum of $50,000.

Cut Spending: Reduce spending on as many items or services as you can. Cut back your cable television from the premium package to basic. Reduce your phone from unlimited calling to a fixed number of minutes. Limit the number of times you eat out.

Boost Savings: Take the money you have saved and invest it into a savings account, certificates of deposit, mutual funds, and savings bonds. Banks and credit unions offer financial products that are safe and boost the value of money saved.

Increase Income: Consider taking a part-time job. The added income will help you to save faster, and will help with other unexpected expenses like automobile repairs.

Revise Goals: If the amount you are saving for a home doesn’t make sense, or your life’s circumstances have changed, adjust your goals. Your goals are not etched in stone. Adjust them so they make sense for you and your family.

If you already saved money and plan on purchasing your first home, or just need more information, please contact us.


Four Benefits of a FHA Loan

FHA loans are government-issued loans by the Federal Housing Authority. Actually, you will still get loans through private lenders but, you will be protected by the government, if you should default on your loan.

Here are some of the benefits of getting a FHA loan.

  • Lower down payments required to get a mortgage. Most loans require at least five to ten percent of the cost of the house as a down payment. Some require even more. With a FHA loan, you only need 3.5% down! Closing costs can be even more expensive and that can be added to your mortgage.
  • Lower mortgage insurance. Mortgage insurance is expensive and is included in your monthly costs. With a FHA loan, you might be able to pay less, essentially paying less money each month with your mortgage payment.
  • Competitive interest rates. When you get a FHA loan, you will get a competitive interest rate, no matter what your credit score is. This allows people who have less than desirable credit to own homes.
  • Higher debt ratio. When figuring out your debt ratio, you are allowed to have more debt with a FHA loan than you can with a conventional loan. If you have a car payment or two, along with credit card debt, you might be better off looking at a FHA loan!

FHA loans are helpful when you are just starting out and you don’t have a lot of money for a down payment. They are also helpful if you don’t have the best credit. They are also helpful when you have a little bit of debt. However, make sure that you can afford your house or you will end up losing your home!

Contact us to see if you qualify for a FHA loan!


How Much to Put Down on a Home Loan

Whether or not to buy a home is, for many, the single most important financial decision in their life. The second is how much to put down on a home loan. Your down payment plays an important part in the home loan approval process.

The down payment influences:

  • Loan-to-value ratio,
  • Private mortgage insurance,
  • Debt-to-income ratio,
  • Housing expense ratio, and
  • Interest Rate.

Loan-to-Value Ratio: This is the percentage a financial institution lends compared to the value of the property. If a home’s market value is $100,000, and one borrows $80,000 to purchase it, the loan-to-value ratio is 80 percent. While special loan programs exist, in today’s marketplace, one should expect to need a down payment of 20 percent for loan approval.

Private mortgage insurance: This is an insurance policy paid by the borrower. In case the homeowner defaults on their mortgage payments, and the financial institution is unable to recover costs through the foreclosure process, private mortgage insurance offsets the lender’s losses. You can avoid paying this cost with a 20 percent down payment.

Debt-to-income ratio: One’s debt-to-income is the percentage of your monthly income that goes toward paying their debt. This includes credit cards, car payments, child support, legal judgements, and more. One’s potential housing expenses are also included.

Each financial institution, and depending on the type of loan, has their own requirements. However, exceeding this ratio will negatively impact loan approval. The down payment affects the payment and, therefore, one’s debt-to-income.

Housing expense ratio: This is sometimes referred to as the payment-to-income ratio. It is the percentage of your monthly income going towards housing: mortgage payment (principal and interest), private mortgage insurance, homeowner insurance, property taxes, et al. The housing expense ratio becomes difficult to understand for some home buyers.

An example is a bank requiring no more than 33 percent of one’s monthly income going toward housing expenses. However, these expenses are added into one’s debt-to-income calculation. The percentage limit decreases with the more debt one owes. As with the overall debt-to-income, your down payment lowers your loan payment and affects the housing expense ratio.

Interest rate: The interest rate represents your cost to borrow the funds for the home purchase. Your down payment is your initial investment. It creates instant equity in the property and lessens the lender’s risk. For this reason, many financial institutions will give a better interest rate with a higher down payment.

If you would like more information or to talk more about how much to put down on a home, please contact us.


How FHA Streamline Loan Refinancing Works

If you have purchased your current residence via an FHA loan and have thought about refinancing to a lower rate to free up money for other purposes, FHA Streamline Loan Refinancing could be just the thing you need.

Features

Streamline loan refinancing through the FHA has several features that make it attractive to homeowners. These include:

  • Appraisal waiver, allowing you to use the original purchase price of your home, regardless of its value today
  • No income or credit score verification
  • No employment verification

The appraisal waiver is a particularly popular feature as it allows unlimited loan-to-value (LTV), an important feature for homeowners whose houses lost value during the economic downtown.  When applying for a Streamline Loan Refinance, homeowners can be jobless or have fair to poor credit and still receive approval, factors that prevent refinancing under other programs. If homeowners want to roll their closing costs into the loan, however, they must obtain an appraisal, otherwise, those fees must be paid out of pocket.

Eligibility

The only homeowners who are eligible for the Streamline loan are those who currently have FHA mortgages. Homeowners who want to refinance to an FHA mortgage from another type of loan must go through the normal FHA refinance process.

To obtain an FHA Streamline Loan Refinance, other factors are required. You must not have more than two, 30-day late payments on your mortgage in the last 12 months  and payment history must be perfect for the last three months. You must not have completed an FHA Streamline Refinance in the last six months. Finally, the refinance must show a net tangible benefit, meaning the new loan must reduce the total monthly mortgage payment by 5% or more. Refinancing to free money to pay bills is not acceptable.

For more information on how we can help you obtain an FHA streamline,  contact us or come visit us at Pacific Mortgage Group.


Making Room for Fitness

With your busy, constantly on the go schedule, you need fitness to be as easy as possible. If you can take care of your daily workout in the comfort of your own home, that’s greatly preferable to having to go to the gym every day. Unfortunately, making room for fitness equipment in your home can be a challenge. It’s clunky, takes up a great deal of space, and doesn’t fit with the existing decor of your room. Fitness equipment, however, doesn’t have to take over your home in order to be effective.

Find space in a closet. There’s plenty of fitness equipment that will help you stay active or get back in shape without taking up valuable floor space. Hand weights, bands, and pull-up bars will all fit in a box or crate in the closet when not in use, then come out for you to use them when you need them.

Choose fold-up pieces of equipment. There are plenty of treadmills, elliptical machines, and other workout equipment that are designed to fold up and slide out of the way when they’re not in use. They’ll fit behind the couch, beside a bookshelf, or anywhere else that you’d like to slide them when you aren’t actively using them.

Clear some floor space. The one thing that exercise does require is enough space to move around in. Shift your furniture around to provide plenty of open space in the center of the floor. While you can move the furniture in order to exercise, you’ll discover that you’re much more likely to actually make time for that workout when space is already there and all you have to do is take advantage of it.

Think about what you’ll need. Do you prefer exercise videos to a regular cardio workout? Do you like to have music playing while you exercise? If you need a television, stereo, or other devices handy throughout your workout, make sure the room you intend to use contains all those critical items.

Fitness equipment doesn’t have to take over your home when you start making exercise a priority. In fact, it can blend in so well that most people won’t even know it’s there unless you tell them! Looking for more ways to help make your home perfect for you and your family? Contact us today for more information.


Three Ways to Make Your Home More Energy Efficient

Efficient energy is very much in the news as people become increasingly concerned about climate change and global warming. Energy draws from oil and gas in ways that contribute to carbon emissions. Carbon emissions are one of the leading factors causing greenhouse gasses and, many believe, global warming.

In addition, energy efficiency will cut down on your monthly bills and make your home more attractive to buyers if you ever decide to sell it.

Here are three ways to make your home more energy efficient.

Look for the Energy Star label

Energy Star is a voluntary program through the U.S. Environmental Protection Agency. A third-party certifies that an appliance or a new home incorporates the maximum amount of energy efficiency possible. It receives a label saying Energy Star to help consumers identify it.

The EPA estimates that Energy Star homes save 20% in energy costs over conventional homes. Over the 20 to 30 years or more you may own a home, that’s a considerable amount.

Install an Energy Monitor

Energy monitors are relatively inexpensive and easy to install. (Many just plug in.) They can show you how much energy you’re using and what sources are causing it. They can raise your knowledge of just what items are costing you money each month. For example, a laptop or television left chronically plugged in keeps consuming energy even when it’s not being used.

Place Solar Panels on the Roof

This is a long-term solution. Solar panels use energy for the sun to heat and light your home. As a result, your energy is drawn from there, not from your power company. This lessens bills.

Solar panels and installation are on the expensive side – from $20,000 to $30,000. However, there is a tax rebate program available.

In addition, your savings could mean that the system pays for itself in a relatively short time period. Especially if you’ve just bought a home and are looking to stay for 20 years or so, this is a great energy-saver.

Contact us for more information.

 

 

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