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Try Before You Buy: Learning About Your Home Before You Move In

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In the ideal world, it would be possible to spend a few days or even a few weeks living in the home that you intend to buy before you close the deal. This would allow you to learn all of the pros and cons of the home as it pertains to your lifestyle. In reality, this is not an option in a conventional real estate transaction, but that does not mean you cannot get to know your prospective home before putting in an offer to buy.

Doing Your Homework is A Must

Do your due diligence before you purchase so you know if you and your family are truly well-suited for the home. The following will help you ensure you make the right decision:

  • Scout Out the Neighborhood – To get a feel for the neighborhood, you can tour the area and take advantage of new technology that can give you more information to work with. Google Maps now offers a ‘street view’ feature that allows you to see satellite images up close. By looking at the street view you will be able to see how well the neighbors take care of their homes (which can affect your property value), if there are neighbors with pools, and more. These are things that you may not see when simply taking a quick tour of the area in person.
  • Verify the Sound Levels – If your prospective home is near a busy street, visiting at various times per day will help you determine just how noisy it will be. Remember to open the windows, particularly in the bedrooms. Sometimes in the excitement of looking at a beautiful home, obvious steps like this can be overlooked.
  • Speak to People That Live Nearby – Typically, new neighbors will tell you everything you need to know about the area and more once you move in. They may be equally as open if you just try to initiate a conversation before you purchase. If you don’t feel bold enough to approach the neighbors, visit local stores and speak with the staff.

Scouting out the area and doing some homework before you make an offer is the closest you can get to trying before you buy, and it can ensure that you are satisfied with your decision for the long-term.

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Mortgage Outlook for the Week of August 22, 2011

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Last week set all time record lows for mortgage rates in the United States. Factors in rates moving lower and lower over the past few weeks have been disappointing economic data and uncertainty about the health of European markets and banks.

Since investors move money from equities into bonds in times of uncertainty, the end result is that mortgage rates just don’t get any better than where they are at. This means that the question is not if, but when mortgage rates will move up. The general expectation is that when they do move up, they will do so swiftly.

The Ben Bernanke Watch is On

All eyes are on Ben Bernanke this week, with the widely held expectation that he will announce additional measures to help stimulate the economy. Bernanke will be speaking on Friday at the Kansas City Fed conference in Jackson Hole, Wyoming. In a spooked and volatile market like this, the week ahead may very well be jumpy as rumor and speculation about what Bernanke may or may not say are likely to abound.

Economic Calendar for Week of August 22, 2011

  • Monday – Global Central Bankers Conference
  • Tuesday – Redbook, New Home Sales
  • Wednesday – Durable Goods Orders
  • Thursday – Fed Balance Sheet, Money Supply, Initial Jobless Claims
  • Friday –  Ben Bernanke speaks, GDP, Consumer Sentiment

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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 Rates