Save More Money With Your Home

This article about being financially fit has great advice for small, inexpensive ways to save more money over time with your home.

Several tips that stand out are:

1. Be fire ready – Check that your fire extinguishers are functioning and easily available, and check your smoke detectors as well.

2. Prevent shocks – Outlets near water, such as in the bathroom or kitchen, should have a ground fault circuit to prevent shocks and electrocution. An inexpensive tool can alleviate this worry.

The major takeaway from this is that by making small investments in your home, you save yourself more in the long-run and protect the value of your property.

Full article here.

This Week's Market Insights

There are six economic reports worth watching this week that are likely to affect mortgage rates in addition to the minutes from the last FOMC meeting and two speaking appearances from Fed Chairman Bernanke.

This is a far cry from last week’s schedule, making it very likely that we will see plenty of movement in mortgage pricing this week.

There is no relevant economic data scheduled for today, so look for the stock markets to be the biggest influence on bond trading and mortgage rates. The week’s first release is one of the highly important ones when the Commerce Department posts January’s Retail Sales data. This report is very important to the financial markets because it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched quite closely.

If Tuesday’s report reveals weaker than expected sales, the bond market should thrive and mortgage rates will fall since it would be a sign that the economy is not as strong as many had thought. However, a stronger reading than the 0.5% increase that is expected could lead to higher mortgage rates.
Wednesday brings us three economic releases in addition to the FOMC minutes. January’s Housing Starts will be posted early Wednesday morning, giving us an indication of housing sector strength and mortgage credit demand. It usually does not affect rates unless the results vary greatly from forecasts. Current forecasts are calling for an increase in starts of new housing.
The Labor Department will post their Producer Price Index (PPI) for January early Wednesday morning also. It measures inflationary pressures at the producer level of the economy and is considered to be one the two key measures of inflation we see each month. The core data is more important to market participants because it excludes more volatile food and energy prices. It is expected to show an increase of 0.7% in the overall reading and a 0.2% rise in the core data. Good news for bonds would be a decline in both readings, particularly the core data as it would ease concerns about inflation that make long-term securities less attractive to investors.
January’s Industrial Production data will be released mid-morning Wednesday. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities and can have a moderate impact on the financial markets. Analysts are expecting to see a 0.6% increase in production from December to January. A smaller than expected rise in output would be good news and should push bond prices higher, lowering mortgage rates Wednesday. That is assuming that the PPI doesn’t give us any negative surprises.
The minutes from last FOMC meeting will be released Wednesday afternoon. Traders will be looking for any indication of the Fed’s next move regarding monetary policy. They will be released at 2:00 PM ET, therefore, any reaction will come during afternoon trading.
These minutes may indicate if there is a consensus amongst Fed members or if there is disagreement about their actions or inactions. This release may lead to afternoon volatility Wednesday, or it may be a non-factor. However, the minutes do carry the potential to influence mortgage rates so they should be watched.
The sister report to Wednesday’s PPI will be posted early Thursday morning when the Labor Department releases January’s Consumer Price Index (CPI). The difference between the two is that the CPI measures inflationary pressures at the more important consumer level of the economy. With exception to maybe the Employment report, the CPI is the single most important report that we see each month. Its results can have a huge impact on the financial markets, especially on long-term securities such as mortgage-related bonds. It is expected to show a 0.3% increase in the overall index and a 0.1% rise in the more important core data. If we see weaker than expected readings, bond prices should rise and mortgage rates would likely fall.
Also Thursday morning will be the release of the Leading Economic Indicators (LEI) for January. This Conference Board report attempts to predict economic activity over the next three to six months. It is expected to show a 0.5% increase, meaning that economic activity may rise in the near future.
A smaller than expected rise would be good news for the bond market and mortgage rates, but the CPI draws much more attention than the LEI. Therefore, for this report to influence mortgage pricing, it will have to show a sizable variance from forecasts and the CPI will have to match estimates.
Fed Chairman Bernanke will speak before the Senate Banking Committee Thursday morning and overseas Friday morning. Neither engagement is expected to bring any new theories or give an indication of the Fed’s next move to boost or limit economic activity. The markets always watch his words, but I would be surprised if either of these lead to changes in mortgage rates.
Overall, the most important day of the week will likely be Thursday with the CPI being released, but Tuesday and Wednesday will also be active days for mortgage rates due to the importance of the Retail Sales data and the number of events scheduled Wednesday. There is nothing of concern scheduled for today or Friday, so we can label them the best candidates for the calmest day.
In other words, be prepared for an active week in the markets and mortgage rates, particularly the middle part of the week.

Ways to Accumulate Your Down Payment

Do you want to take advantage of the market and buy a home?  Here are a few tips  that may help you come up with your down payment or reduce closing costs

n   Have your parents give you the money as a gift.

Documentation will be required to prove that the money is actually a gift and not a loan. Any taxpayer is permitted to give up to $10,000 per year to another person without having to pay a gift tax. Technically, your mother could give you $10,000 and give $10,000 to your spouse. Your father could do the same. With 20% down the whole downpayment may be in the form of a gift. Less than 20% down, the buyer should be prepared to put down 5% of their own funds.

n   Borrow against your 401K or insurance policy.

You can also cash out your 401K but you will be subjected to withdrawal penalties and payment of taxes. If you borrow against it, the loan payment will be counted as a debt.

n   Sell or borrow against an asset.

Selling an asset such as a car can help increase the amount of money you have available. Borrowing against an asset is also acceptable as long as you qualify with the additional debt. (Payment may not be counted as a debt when down payment is 20% or more.)

n   Obtain a low point or zero point loan.

This will reduce the amount of your closing costs substantially. In some instances, the lender can also pay all or a part of your non-recurring closing costs.

n  Ask the seller to pay for all or a part of you non-recurring closing costs.

(On loans to $240,000 seller may also pay recurring costs.)

Your real estate agent can assist you with this when you make an offer on a home.

n   Ask the seller to carry back financing.

If the seller does not need all of the equity in their property, they may be willing to carry some of the financing which will reduce the amount of your down payment.

n    Check into city and/or county down-payment assistance programs.

n  Close escrow late in the month to reduce the amount of prepaid interest on the loan.

Mortgage Process Too Confusing for Some in Recent Survey

An article in yesterday’s Wall Street Journal revealed the results of a survey that determined the mortgage process was considered to be the one of the most confusing parts of buying a home.

While 54% of respondents said finding the right home was the most difficult part of the process, one-third of those surveyed by MortgageMatch.com felt that understanding the mortgage process was the most confusing.

According to the article, “nearly 23% of those surveyed said that the mortgage process was challenging because documentation requirements from lenders kept changing, compared with 7% of borrowers who said it was hard to qualify because their credit score wasn’t strong enough.”
While the requirements have changed, it is important that our customers are educated fully along every step of the sometimes-confusing mortgage process labyrinth. Your comfort and understanding is a priority, and if you have any questions, speak with a loan officer today.
Take a look at the full WSJ article here. Do your concerns match up with the survey results?

This Week’s Market Commentary - 2/2/2011

Yesterday’s bond market is in negative territory following early stock gains and stronger than expected results from an important economic report.
The Dow is currently up 89 points while the Nasdaq has 37 points. The bond market is currently down 19/32, which will likely push the morning’s mortgage rates higher by approximately .250 of a discount point.
The Institute of Supply Management (ISM) released their manufacturing index for January late this morning. They announced a reading of 60.8 that exceeded forecasts of 57.5 and that December’s reading was revised higher by 1.5 points.
This indicates that more surveyed manufacturers felt business improved during the month than did last month- a sign of a strengthening manufacturing sector and economic growth. That means this data is negative for bonds and mortgage rates because economic growth makes long-term securities such as mortgage related bonds less attractive to investors.
Today has no government reports scheduled for release or data that is considered likely to impact mortgage rates. However, there are a couple of private sector employment-related reports due to be posted. They normally would not be of much concern, but one of them showed an unexpected spike in new hires recently that caused selling in bonds and an increase in mortgage rates.
I still am not too concerned about their results, but the potential does exist that a significant variance in the numbers could lead to changes in mortgage pricing.
Thursday has a weekly (unemployment figures), monthly (December’s Factory Orders) and a quarterly report (4th quarter Employee Productivity and Costs) all scheduled for release. None of them individually is considered to be highly important, but combined they can move mortgage rates enough to notice if they all show similar results.