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Limited Opportunity: Mortgage Rates Setting All Time Record Lows

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It isn’t every day that mortgage rates set record lows like they have this week. In fact, the lows that have been reached this week have NEVER been seen before in the United States, ever!

This means that there is historic opportunity for existing and future homeowners looking lock in all time low mortgage rates.

Why Are Mortgage Rates Setting All Time Record Lows?

The markets of the United States and the world are in turmoil and extremely volatile. Consistently bad economic data has shown that recovery is not occurring at the pace expected or at all. Concerns about inflation, unemployment and other key indicators are driving fears of a double bottom recession, an extended recovery and an all around weak economy despite stimulus attempts.

When markets are driven by fear, investors take money from equities (think stocks) and place them in safer but lower yielding vehicles like bonds. Money flowing into bond markets help push rates down. This means that bad news for the stock market is generally good news for mortgage rates.

What Does This Mean For Me?

You may have heard the phrase “never try to pick a bottom” when speaking to a financial adviser or in conversations regarding the stock market. The saying holds true for mortgage rates as well. The markets move too fast to truly pick a bottom and when rates do rise, they will move quickly, meaning that once they move upward, it will be too late for you to get the rates that are available today.

Now is the time to lock in record low rates, holding off in the hope of squeezing a tiny bit more out of the market is a gamble with very high risk and very low reward. We can help, now is the time.

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Qualifying For a Mortgage When You Are Self-Employed

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When you are self-employed, qualifying for a mortgage can be more challenging since more documentation may be needed. The reason for this is that there are some facets of being self-employed and verifying self-employed income that that banks consider to be higher risk.

Since it is true that individuals with salaried jobs are also at risk of losing them at any time, there is no such thing as a totally secure borrower, but being self employed does have a few documentation requirements.

Self-Employed Documentation Requirements

There are a number of things that you will likely need as a self-employed individual. These items will vary depending on the lender and program:

  • Proof of income / tax returns for the first 2-3 years your business has been operating
  • 3 or more months of bank statements
  • Proof of assets / reserves
  • Letter from CPA / Your business registration details to support the existence of a business for 2 or more years
  • Income statement for your business

Self-Employed Income Calculation

Be aware that your lender may choose to take an average of your first 2-3 years in business and not use your actual income today to calculate your approval amount.

If you have made substantial business deductions against your tax returns, bring additional documentation or mortgage lenders may look at your net income only. You want to do what you can to prove the true extent of your income if it is required to get the kind of mortgage you want.

If you are self-employed and the sole income earner in your family, with an understanding of the process, you can ensure that you get yourself a mortgage and step onto the first rung of the property ladder. Many lenders do offer special mortgages for the self-employed that can allow you to work around the traditional system so your entrepreneurial nature does not hold you back. Looking into these options can also help you with the process.

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Turbulent & Volatile Markets = Record Low Mortgage Rates

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Turbulent. Volatile. New Record Low Mortgage Rates. These all describe the market last week. Last week saw mortgage rates set new lows for 2011 and break the previous all time low set in October of 2010.

Last Week Was Marked By:

  1. Increased concern over the stability of European markets
  2. The S&P downgrade of the United States’ credit rating
  3. A less than positive outlook from the Fed, which decided to keep the existing Fed Funds Rate at its existing rate
  4. Volatile movement in the markets with the Dow losing over 600 points in a single day
  5. Consumer confidence reaching the lowest level since May of 1980

What Will Mortgage Rates Do This Week?

Will rates go up, down or stay the same this week? The truth is that nobody knows where rates will be tomorrow or even later today. This is a VOLATILE market and the opportunity to take advantage of these low rates can and very well may likely disappear in a handful of hours as a fast move up is expected when they do move. Now is the time to lock in record low rates, holding off on a lock now is gambling.

Economic Calendar for Week of August 15, 2011

  • Monday: Housing Market Index, Dennis Lockhart from the Fed speaks
  • Tuesday: Housing Starts, Building Permits
  • Wednesday: Producer Price Index, Richard Fisher from the Fed speaks
  • Thursday: Jobless Claims, Existing Home Sales, William Dudley from the Fed speaks
  • Friday: William Dudley and Sandar Pianalto from the Fed speak

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Mortgage Rate Volatility and New Record Lows

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Global unrest became the latest player to affect mortgage rates this week in what was already expected to be an especially volatile week given the S&P credit down grade of the United States a week ago.

Riots in London and increased concern about the health of European markets brought yet another layer of doubt into the fold that helped propel mortgage rates to yet new lows for the year.

Demonstrating the concern about stability In Europe, France and Italy have actually passed a ban on short-selling for the next 15 days. Short selling is trading that is essentially betting against the markets, an activity that may contribute to creating even more downward pressure on already weak markets.

Record Lows For Consumer Confidence

Negative economic data, global unrest and a weak economy are not lost on the public at large as the Thomson Reuters/University of Michigan preliminary index of consumer sentiment released data this morning.

Consumer confidence dove to 54.9 from 63.7 the prior month among U.S. consumers, reaching the lowest level since May of 1980.

The Upside to All of The Negative Market News and Data

The silver lining in negative economic data and unhealthy and unstable markets in the United States and Worldwide is low rates. In times of uncertainty, investors take money from stocks and equities and put it to work in safer vehicles like bonds. The end result is that this will usually result in lower mortgage rates, as is the case now.

The record low rates of today are not guaranteed to be available tomorrow or even later today, these markets are VOLATILE. Do not gamble with locking in a low rate, we can help you find the right loan for your needs and lock in a low rate to insure you are able to take advantage of the current window of low mortgage rates.

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Adjustable Rate Mortgage Terms

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Many new home buyers are focused more on the affordability of their monthly payments today without enough focus on the future payments they may have to pay if their loan adjusts to a possibly higher rate sooner than expected. Sometimes borrowers will take a shorter term, adjustable rate term when a longer term adjustable rate loan might be more appropriate and vice versa. There is a risk that if a homeowner gets into a shorter term adjustable mortgage that is not appropriate for them, they may not be able to afford their home if their mortgage rate adjusts upward too quickly.

As a result, it is important that new home buyers run some numbers before they choose their mortgage term. We can help you calculate payments at different interest rates and help estimate worst case scenarios upon adjustment (in the case of an adjustable rate mortgage), to help prevent a scenario where a loan that is affordable in the beginning, will not be unaffordable when the loan enters into its adjustment period. If we find that an adjustable rate mortgage term is not suitable for your finances or comfort level, then we can explore options for a longer term adjustable mortgage that will better fit your needs.

The Benefits of a Longer Term Adjustable Rate Mortgage

  • A longer term adjustable rate mortgage guarantees that home buyers will be able to afford their home over a longer period of time without their rate adjusting.
  • A 10 year adjustable mortgage, for example, allows home buyers to pay down more of the principal since the first few years of a mortgage primarily pays the interest.
  • By the time the longer term adjustable mortgage comes up for renewal, the total amount will be lower. This means it will be more affordable even if interest rates are higher as there will be a lower balance owed.

Home buyers that believe they will be able to afford their mortgage regardless of an increased interest rate can simply pick the mortgage term that most appeals to them. A little bit of preparation before choosing a loan term is critical in maintaining financial stability in the future and preventing challenges in the future.

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Mortgage Outlook: Week of August 8, 2011

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Last week marked new yearly 2011 lows for mortgage rates as a debt ceiling agreement was reached early in the week. These low rates were sustained through out the week with a small uptick on Friday when the Non-Farm payrolls came in stronger than expected.

Fast forward to today and the markets are being rocked by the S&P downgrade of U.S. credit worthiness. As a result, the Dow closed down 634.76 points or -5.55%‎, wow. This should bad for mortgage rates, causing them to rise, but there is significant concern and uncertainty in the markets about the US and World Economic outlook, which have helped rates maintain their current low levels.

What Will Happen With Rates This Week?

Volatility is the theme of the week, which means it’s hard to tell. Factor in the Fed meeting tomorrow and we’ve got yet another wildcard that could negatively or positively affect rates.

The bottom line is that rates are at record low levels and when rates move up, they will do so quickly and without warning. If you are looking to lock in a low rate, now is the time to do so, to hold off for lower rates is simply gambling. If there has ever been a sensible time to lock in a low rate and savings, this is it.

Economic Calendar for Week of August 8, 2011

  • Tuesday – FOMC Meeting
  • Wednesday – Wholesale Inventories
  • Thursday – Initial Claims
  • Friday – Retail Sales, Michigan Sentiment

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Mortgage Rates Set New Lows for 2011

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Mortgage rates set new lows for 2011 yesterday, fresh off a week that saw more negative economic data released and the biggest Dow plunge since 2008, with a total loss of 512.76 points. The loss was fueled by ongoing concerns in the markets about US debt, ongoing weak economic data, the possibility of a second recession and the possibility of a downgrade for US debt and ongoing debt crisis in Europe.

Today rates rose slightly on better than expected employment numbers. The U.S. economy added about 117,000 new jobs in July, coming in higher than the 46,000 jobs added in June. The street had expectations of 75,000 new jobs this month. The unemployment rate also showed a slight sign of improvement moving down to 9.1 percent, from 9.2 percent.

Getting Technical: Frank Nothaft, vice president and chief economist, Freddie Mac Speaks

“Treasury bond yields fell markedly after signs the economy was weaker than what markets had previously thought allowing fixed mortgage rates to follow this week with the 15-year fixed and 5-year ARM setting new historical lows. The economy grew 1.3 percent in the second quarter, which was below the market consensus forecast, and first quarter growth was cut to less than a quarter of what was originally reported. In fact, the first half of this year was the worst six-month period since the economic recovery began in June 2009. Moreover, consumer spending fell 0.2 percent in June, representing the first decline since September 2009.

“On a positive note, there were indications that the housing market is firming. Real residential fixed investments added growth to the economy in the second quarter after subtracting from growth over the first three months of the year. The CoreLogic® National House Price Index rose for the third straight month in June (not seasonally adjusted) and was the first three-month gain since June 2010. Finally, pending existing home sales rose for a second consecutive month in June and was up nearly 20 percent from June 2010 when the housing tax credits expired.”

Time and time again, rates have moved downward on a flood of negative economic data over the past month(s). While this has provided a record breaking window for locking low mortgage rates, the market will see mortgage rates move higher as the pendulum begins to swing the other way. The question is not if, but when, mortgage rates will increase. Not locking in low rates now is taking a gamble, we can help you lock in savings that will not be around for long.

Home Closing Basics

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Everyone’s home search is different. Some buyers fall in love with the first home they see, and others have wish lists that are harder to satisfy. Buyers typically make their decisions based on location, size, finishes and features, and of course price. What most buyers don’t realize is that the process doesn’t end when you choose your dream home and put in an offer.

The Offer Process

In many ways the offer process is straightforward. You determine a price you’d be willing to pay, add any conditions or requests you’d like the seller to consider, and then allow your agent and possibly a lawyer to review it before it’s submitted. If you’re submitting an offer without having secured financing, there are other actions you need to take, including showing proof of income.

Once your offer is accepted by the seller, there are only a couple of reasons why you’ll be allowed to back out of the deal. Some purchases are contingent on financing, while some are contingent on the results of a home inspection. If neither party backs out, however, you go to closing.

What is Closing?

Closing is the name given to the time when your home purchase becomes final. In order to close your mortgage needs to be approved, and you must officially turn in your down payment and checks for closing costs. Sometimes you’ll be able to sign the final contract early, but often that step has to wait until closing day. Your closing day is the day you receive your keys and your house is officially in your name. That’s the day when your home search is truly over.

Need Help With Your Home Purchase?

We can help you pre-qualify for a mortgage and help you understand what mortgage rate you would qualify for. More importantly, we can help you establish how much home you can afford. Since rates are near or below 2011 lows, now is the time to lock in extremely low rates before they are gone, which is not a question of if, but when.

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Mortgage Outlook for Week of August 1, 2011

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Mortgage rates were suppressed last week by jittery markets focused on the ongoing debt ceiling debate. While there is a talk of a debt ceiling resolution this morning, there are still concerns about the details of implementing such a solution and whether or not the damage has already been done to world confidence in the United States’ credit worthiness.

Even if a debt ceiling resolution is in place, there is rampant speculation that the United States AAA credit rating is in jeopardy. There is even greater speculation about the aftermath that would occur, should the United States have its credit rating downgraded.

Manufacturing Sector Report Disappoints

The ISM Manufacturing index fell to 50.9 in July, down 4.4 points from June in data released by the Institute for Supply Management. The index fell to 50.9 in July, down 4.4 points from June, marking the sector’s slowest growth since July 2009. Analysts want to see a reading above 50 as that is the level where the manufacturing sector is considered to be growing. While the index has been above that level for two years straight, a reading of only 50.9 shows that growth is very flow, which disappointed analysts.

“The U.S. ISM manufacturing report for July is a shocker and strongly suggests that the disappointing performance of the economy in the first half of the year was not just temporary,” Paul Dales, senior U.S. economist with Capital Economics, said in a research note.

How Are Mortgage Rates Affected?

Continuing negative economic data as we have seen over the past months paints a picture of an economy that is struggling. This means that investors are more likely to flee stocks and push their money towards safer vehicles like bonds, which which can translate into lower mortgage rates. The data is bad, but for current or prospective home owners, it has extended a window of extremely low mortgage rates. Since rates are not expected to stay at these low rates, now may be the opportunity you have been looking for to lock in a new low rate for your existing or future mortgage.

Economic Calendar for Week of August 1, 2011

  • Monday – Construction Spending
  • Tuesday – Personal Income & Outlays Report
  • Wednesday – Factory Orders, ADP Employment Report
  • Thursday – Initial Jobless Claims, ISM Non-Manufacturing Index
  • Friday – Unemployment Rate, Consumer Credit

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Poor GDP and Consumer Sentiment Data Translates Into Low Mortgage Rates

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U.S. Treasuries prices rose this morning (good for lower mortgage rates) as news the U.S. economy grew at an even slower pace in the first half of the year than was previously estimated, raised yet more fears the economy was at a real risk for recession. Gross domestic product, a measure of all goods and services produced within the United States, shows that output increased at a 1.3 percent annual pace in the second quarter. According to Commerce Department data, the economy advanced just 0.4 percent in the first three months of the year, which is significantly lower than the previously reported 1.9 percent gain.

Mortgage rates eased slightly lower this morning on the GDP data. Negative data is bad for the economy as a whole, but good for mortgage rates, which move lower when investors move into the safety of bonds.

‘Economic growth … was much weaker than the government had previously estimated and this opens the door for potentially another round of quantitative easing from the Federal Reserve,” said Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis. “Therefore, the bond market responded positively to the weak GDP number while the dollar weakened.”

 

 

Debt Ceiling Fears Linger

Also continuing to weigh on the markets is the uncertainty around a resolution to the debt ceiling debate in Congress. The continued uncertainty has helped suppress mortgage rates, keeping them at extremely low levels.

Consumer Sentiment Index Reaches Lowest Level Since 2009

All of the negative economic data is not only being felt by consumers but showing in consume sentiment numbers released today. The Thomson Reuters / University of Michigan’s index of consumer sentiment came in at 63.7, down from 71.5 in June, the lowest reading since March 2009.

While the economic outlook and data of late is not great, this means that now is an outstanding time to make sure you are saving as much money with your mortgage as possible. Since mortgage rates will not stay are their current low levels for long, now is the time to ask us how we can help you lower your existing rate or get the lowest rate on your new home purchase loan.

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