Procrastinating Refinance Prospects Soon to Miss the Boat

Future home buyers of America, and Americans concerned about the future of their investment, it may be time to turn your frown upside down. Top economists across America representing American Bankers Association's Economic Advisory Committee have a positive forecast for our economy, reported by USNEWS.COM. Although we have heard many other economist, top economist as well I might add, say that the recession, in definitions terms, has already ended. Many of those economist believe that we are on a slow ride in recovery at this point, but the fact is, if the remaining "top economist" in the nation are all on the same boat in regards to where the economy stands by end of the third quarter of 2010, which is what the message from the economist in the American Bankers Association's Economic Advisory Committee have forecasted, we MUST be headed toward "greener pastures" sooner rather than later, right?

Despite the Fed's attempts to keep rates as low as possible to keep the rise of the Real Estate market churning, as the economy makes it's turn to the final back stretch to the finish line of recession, the natural progression of higher rates, which is many times the byproduct of a stronger market, will likely begin it's succession. No worries though, it seems like we have been able to study the history of our economy to the extent that unless a major event occurs, we will be able to manage mortgage rates to avoid any major hikes like we saw in the 80's where rates were well over 10%.

If you have chose to "stop procrastinating tomorrow" on your home refinance and you are one of the ones that has made it through the variety of rate hike scares where rates inched up, but somehow have fallen back down to 5% or just under, your luck is surely running out.

CALL TO ACTION: If your interest rate is at or above 6% and you plan on being in your house more than 3 years, and/or you are currently in a 30yr fixed loan but could afford making about $100-$250 more on your mortgage in which would make a rate and term change to a 15 yr note possible, call your trusted mortgage advisor today! At the beginning of these low rates, I refinanced my own home from a 30 yr fixed with 5.125% rate to a 15 yr fixed around 4.25%, and it only changed my payment by $200 and I'll make up $40,000 more principle in my new plan over the next 7 years than I would have in my old if I stayed where I was at.

Future for Texas Housing Market...2010

After reading an article in CNN this week, it sounds like the guru's of the housing market think that research on the cost of home owning versus the cost of renting, can determine what Americans can expect in the outlook for housing in America for 2010. Thats a sensible statement, right?

Lets start with the common sense reason why we can track the rent vs home price to do our homework on the future of the housing market. Plainly, people generally need a good reason why they might benefit from leaving their lease when they compare and contrast owning and renting for what they give up in monthly out of pocket costs each month. Shawn Tully wrote in the CNN article, "And the surest sign that prices have fully adjusted arrives when the ratio of what people pay in rent versus what owners spend on the same property returns to its historic average." So, that is where it starts.

Through research of rents vs homeownership, they found that in 1999 renters were paying 87% of what homeowners were paying monthly. All in all, Americans are ok with paying a little higher monthly when it came to the benefit of owning...13% higher to be specific in 1999 (the case study was called the REIT research team done by Deutsche Bank...REIT=Ratio of Rents to Ownership Costs). Later studies showed drastic changes in that ratio as the housing bubble was growing in areas like California. Home owners prices drop compared to what renters paid in the bubble times.

When the cost to own is "overpriced" by the rent to own ratio, when comparing out of pocket monthly costs, you typically will see that the housing market will tend to fall more until the ratio of rental to owning is more equal...like in the 1990's. In more recent studies, like the one in 1999, we see that the majority of Americans still pay an "over priced" amount for owning than renting today. This research leads the experts to believe we will see a hopeful and final fall in overall national housing market of 5% more in 2010. (My hypothesis is that Texas will not follow that statistic as close and we'll see much less or even small gain in 2010).

August Mortgage Rates Starting to Hike...Mortgage Trend Last Couple Months

In July, the national average for the 30 year fixed mortgage at one point got as low as 5.25%. Please note, from my long experience in this industry, I'm not sure where the national average is derived because it's always .125% or .25% higher than what most people in my market are seeing. None the less, I'm just using this as an illustration of how rates have moved upward in the recent months. Today, the national average is 5.47%. That is a full .25% higher than July's best rates. Going back to May, rates were at 4.75%. So, from May to August 7th, rates have increased over a half a point, or more than .5%.
If this becomes the trend, like economic forecasters have said it would eventually this year leading into 2010, by January we could see rates hit the 7% mark. If you are waiting on buying a home, or have not checked out of your refinance "procrastinator's anonymous class" yet, this would be the time. Take a look at this first chart on BankRate.com to see what it looks like in an image...for you brain type people that need pictures to subscribe to your long term memory.
On the positive side of this mortgage interest rate hike, I received my investment portfolio statement today and I made some money. Come on economy!

Frisco Mortgage Tweets on Twitter

Just in case you were wanting to have a Mortgage person on Twitter, here is a my link.
http://twitter.com/Frisco_Mortgage

No Payment for 2 Months After Purchasing a Home or Refinancing

There are a number of ways that you can structure or plan a closing so that you can maximize your specific needs when financing a home today. Assuming you have a choice on your closing day, here are three typical options.
Option number 1: The typical and assumed closing at the end of the month...
If you have bought a home lately, or refinanced, you might have heard someone in the transaction sphere of influence mention the large volume of closings that come together at the end of ever month. The idea is that if you close at the end of the month, you pay less prepaid interest. What that means is this; If you close on your home on say April the 30Th, the last day of the month, then you only borrowed money for your new loan for one day in April. They do not tack that one day on to the first payment of your loan, so you pay that up front at closing. You can see how if you closed at the first of the month how you would be required to come out pocket up front/at closing by much more money. In this scenario, you close on April 30Th and pay one day of interest up front at closing, you have no payment at all in May, and your first payment is due June 1st but isn't counted negatively in any way until June 15Th. That is a 45 day no payment closing, and it works for refinancing and purchases

Option number 2: Close on your home loan the 1st day of the month...May 1st.
There is 31 days in May, and since you'll have funds loaned to you all 31 days of that month with no mortgage payment, you'll pay 31 days worth of interest at closing. AH, but you don't have a payment in June at all. Your first payment is due July 1st and it is not late until July 15Th. That is two and a half months, or 75 days with no mortgage payment.

Option number 3: Close your home on the 1st day of the month with a "short pay"...May 1st
In a short pay, you do it all opposite of what the above options provide. You pay interest in days backward, and you make your first payment the very first month coming up. If you close on May 1st, you pay 1 day of interest up front, and your first payment is due June 1st and not late until June the 15Th. In this scenario, you don't have a "mortgage payment" in May, so you still ultimately get a month with no mortgage.

Here are the calculations for closing scenarios for options 1-3 Using a new loan amount of $270,000 and a new interest rate of 4.875%. Please take not that two of the closings are on the same day, and the other one is 1 day before the other:
Option #1...Close April 30Th;1 day of interest = $36.56 paid at time of closing
No payment due until June 1st of $1,429 a month (Principle and interest on $270k at 4.875%)
31 days of May you have no payment...
Pay all other closing costs PLUS $36.56 AND then come up with 1st payment of $1,429 in June. From day of closing until June first you spend a total of = $1,465 and then another mortgage payment of $1,429 July 1st
Money spent total from closing to July first = $2,894

Option #2...Close May 1st 31 days of interest = $1,096 paid at time of closing
No payment until July 1st of $1,429 a month (Principle and interest on $270k at 4.875%)
31 days of May you have no payment, 30 days of June you have no payment...
Pay all other closing costs PLUS $1,096 AND then come up with 1st payment of $1,429 in July. From day of closing until June first you spend a total of = $1,465
Money spent total from closing to July first = $2,525


Option #3...Close May 1st using a "short pay"
1 day of interest = $36.56 paid at time of closing
Payment due June 1st of $1,429 a month (Principle and interest on $270k at 4.875%)
30 days of May no payment...
Pay all other closing costs PLUS $36.56 AND then come up with 1st payment of $1,429 in June. From day of closing until June first you spend a total of = $1,465
Money spent total from closing to July first = $2,894

The number 2 option here appears to save you $369 out of pocket in your closing scenarios. I know some of you are thinking, "that's it! I'm going that route, and there is no discussion". Others are taking a little longer look at it and seeing how the options for cash in the pocket for a little longer in the front might help here, but "yada yada yada". Good! How ever you feel the options help you, that is what matters. Remember though, the majority of loans close at the end of the month and lender offices are busy busy busy towards the end of the month with such a work load, so consider closing at a different point in the month to avoid getting stuck in the traffic...you might have a hiccup in the process and when there is traffic, the slower you will be able to "get rid of you hiccup".

January Retail Sales Data may not help rates today...

After a couple days of low rates, we in the mortgage "circle" were hoping for the January Retail Sales Data report to come back negative...again, it's not good for the economy for negative reports, but for interest rates it might have helped. The expectations were a fall of .3% and it increased by 1%. Right off, that might lead us to believe that we would definitely see an increase in rates today. On the other hand, there was quite a bit of momentum in a bettering market towards the end of the day yesterday, and we have hope at the most, that rates at least stalemate today and don't go up.

Should I pay points/origination on my refinance?

Should I pay points/origination on my refinance?
YES! If you are going to be there for a while.

I'll update this shortly...going to a meeting and can't wait to share. In the meanwhile, read this that I copied and pasted from CNNMoney and their trusty writer Les Christie. He does a great job expressing this.
"CNNMoney.com

Mortgage borrowing today: What you need to know
Wednesday February 4, 1:35 pm ET

By Les Christie, CNNMoney.com staff writer

If you're shopping for a mortgage these days, it's a whole new world out there.
"There have been a huge number of changes over the past few years in mortgage borrowing," said Gibran Nicholas, founder of the CMPS Institute, which trains and certifies mortgage advisors.
Of course, many of the subprime loans that helped fuel the housing boom - those that didn't require borrowers to show any proof of income, or that let homeowners make minimum payments - are are simply no longer available.
But even buyers looking for a traditional mortgage are now faced with different factors to consider.
Here is what you need to know:
Paying up-front points. Borrowers can pay points - one-time, up-front fees - in order to reduce their mortgage's interest rate over the life of the loan. One point represents 1% of the mortgage value.
But they often assume that they should never pay points, according to Alan Rosenbaum, founder of mortgage broker Guardhill Financial. That's a mistake, in his opinion.
When interest rates were high, paying points didn't make sense because borrowers were very likely to refinance after rates dropped. They wouldn't hold their original loans long enough to recoup their up-front costs.
But now borrowers can get a lot more bang for their buck. The old rule of thumb was that paying one point at closing could lower their mortgage's interest rate by a quarter percentage point or so.
"Today the spread is worth a half point to a full point on the rate," said Rosenbaum.
It means paying $2,000 on a $200,000 mortgage at closing can shave as much as a whole percentage point off the loan's interest rate, changing a 6% loan to 5%.
That would save $126 a month, and pay for itself in 16 months. Even if the rate were only lowered to 5.5%, that would still save $64 a month, paying for itself in 32 months.
Still, not everyone is convinced. Rosenbaum recently had a client who chose a 15-year fixed rate loan at 5.875% with zero up-front points on a $800,000 loan, instead of paying a point to get a 5.375% loan.
Had the borrower chosen to pay that point, he would have recouped that cost in about three years, and then gone on to save more than $200 a month for the remaining 12 years of the loan.
Of course, there are caveats. Buyers who are planning to refinance or sell within a few years shouldn't pay points, since the strategy simply doesn't pay in the short term.
Making more than the minimum down payment. If you can afford to put 25%, 30% or more down, should you do it?
Most lenders require a minimum down payment of 20%; anything less and borrowers will need to obtain private mortgage insurance.
And if a buyer could afford to put more than 20% down, it was generally assumed that they should.
The traditional thinking was, "If you have the capital to commit, why not?" said Keith Gumbinger of mortgage research firm HSH Associates. "It will give you a smaller balance to pay off. But now, in light of declining home markets, not everyone would agree with that."
High down payments can be wiped out in severely declining markets.
Nicholas said he knows of a couple in Arizona who put a whopping $400,000 down on a million dollar house a couple of years ago. That gave them, they thought, a nice home equity cushion should they run into financial trouble.
"But prices are down so much, the couple still fell underwater," he said. "It would have been better to conserve that cash in case home prices continue to decline."
Locking in the mortgage rate. Many borrowers choose not to lock in when rates are falling, as they have been, since they assume that the deals will only get better.
But that's often a mistake.
"We almost always recommend that if you have the numbers that make your deal work, then lock it in," said Gumbinger.
His reason: Interest rates tend to jump up much faster than they inch down, meaning that buyers are much more likely to get stuck with a higher mortgage rate than they are to get lower one because they waited.
Besides, locking in at the currently very affordable rates can give borrowers peace of mind, which is no small matter when you're trying to buy a house.
"You'll sleep better at night," said Gumbinger."

Interest Rates Are Not Looking Good

Hoping for better rates so you can lock down on a rate soon? Patience may bring fruition, or "the early bird gets the worm" and you missed the worm.
Moving.com reported today on their website about todays bond market and how it will affect today's rates and why. They did a good job of speaking in "English" about it, so I'll just quote them here.

"Tuesday's bond market has opened well into negative territory despite early stock losses. The stock markets have also shown a weak opening with the Dow down 130 points and the Nasdaq down 40 points. The bond market is currently down 29/32, which will likely push this morning's mortgage rates higher by approximately .500 of a discount point over Friday's rates. The financial markets were closed yesterday in observance of the Martin Luther King holiday.
Today's weakness in bonds is a result of renewed concern about the supply of government debt that will need to be sold to cover the economic stimulus that President Obama has hinted at. The significant new debt that will be sold makes the current outstanding bonds less attractive to investors, leading to lower bond prices and higher mortgage rates this morning."

Hopefully next week will bring better hope.

Get Your Dugome Money TODAY, Before It's Too Late (Fiction Writing Ahead)

In recent loan appointments with new clients, I have received comments on the different Blog posts these clients have read of mine. Many times they mentioned that they enjoyed reading them and liked the sparing humor I sprinkle into them. That is my goal after all. I know reading mortgage "jargon" is not always the most interesting read to everyone else like it is to me. So, that is the twist I throw into it. See what I do for my readers? Goooooooosh! ha ha
In a recent email to my friends outside the mortgage world that I have stayed in touch with through Middle School, High School, and College, we joked around about the recent Shuttle event. (Two of them are brothers that work for BAE Systems and Lockheed Martin...Google those companies and see their purpose and you'll know why we got into an email about such Shuttle talk). I made a mortgage joke that I thought my Blog readers might enjoy. I would like to have just jumped in and wrote this Blog AS IF I was really advertising for a real scenario, but I am consistently surprised at the serious stand so many random Blog readers take on everything they read. So, my preface here is to announce that this is ALL A JOKE!

Home Owners in Frisco and the surrounding Collin County area have received hard evidence through undisclosed sources that life as we know it on Earth will soon change, as reports from the undisclosed source reveals from research and findings recently brought to Earth on the yesterday's return trip from the moon by Shuttle Astronauts. Global warming will soon be termed Global Burning as to it's now realized inevitable affect on our planet, and the demand for underground living has only recently become real in Collin County. Residence have begun cashing out the equity in their homes to afford the cost of digging and moving all personal belongings including pets into their new underground homes. Residence who have invested in rental properties are even finding that they have enough money after cashing out the equity in their investment homes to put sky lights in their Dugomes (term used when you put Homes and Dugouts together)that just pierce the Earth's surface to allow natural light in. (See, I tell all my clients to invest in rentals and nobody listens...no natural light for you in your Dugome)
Before the banks realize what is real in the future and decide to "cashout" on this themselves, please call Brad Lynch for your Dugome moneys today. Disclosure in small writing: you must have at least 40% equity in your home to get exclusive dugome cashout rates.

Picture below of recently found Mars Alien from recent shuttle trip...or maybe it's just a picture of My Little Alien that love pancakes and Carebears.