Tri-Valley Mortgage News

Practical Advice for the New Homeowner

There's nothing more exciting than opening the door to your first new home and knowing that it's entirely yours, that you actually own it! No landlord bothering you about every little thing. Finally you can do whatever you want to do in your new home (including painting the walls!).

But step back for a moment. While you've certainly earned the pride you feel of owning your home, don't let your emotions get the better of you and potentially jeopardize your valuable investment.

Before you start making any major renovations, take a minute to cover the practical side of home ownership. These three steps can save you time, stress and money:

1. Make sure you are properly insured:  Before you decide to add on or tear down anything associated with your house, sit down with your insurance provider and make sure you are covered on all fronts before you make any renovations. It makes no sense to spend a single cent on upgrades if they are not protected.
2. Put maintenance first: You may be happy you no longer have to answer to your landlord but conversely, you have no landlord to call when something goes wrong! Before you think about beautifying your home, fortify it first. Invest in necessary repairs and avoid trouble down the line. For more tips see our blog on Easy Home Maintenance.
3. Hire a pro: When you do decide to upgrade or renovate, be sure to hire a qualified professional. This doesn't mean you can't do your own painting or other simple projects but a major undertaking requires a professional to achieve the desired result and avoid injury. On the other hand if you are "DIY- impaired" don't worry. For even the minor fixes and upgrades you can call on a local handyman. Check your community center, yellow pages or local newspaper classifieds for these services. And if you have a parent, relative or friend who's handy, you've hit the jack pot. Just be prepared to put your kitchen to use and feed your helper(s) well!

  By simply taking steps to ensure these bases are covered you will be able to feel both proud and secure in your new home.

End of Week Update

Economic News:  Yesterday's release of the Durable Goods Orders showed positive improvement and raised hopes that the recovery is extending.  The Unemployment Claims number came in surprisingly higher than the expected 460,000 at 496,000 which represented the highest level since November.  This put a bit of worry in the market which was a positive for the debt sector.  Today's revised Gross Domestic Product (GDP) numbers were 5.9% (versus the initial 5.7%) representing the second quarter of economic growth in a row.  Finally, Existing Home Sales fell 7.2% for the period which mirrored the softer new home sales numbers from earlier in the week.

Mortgage Markets:  Yesterday we were greeted with better mortgage pricing in the afternoon.  Even with the better than expected revised GDP numbers both the stock and bond markets are fairly quiet today.  Rates are roughly the same as yesterday afternoon.  Still great and a super time to lock with the uncertainty surrounding the end of the Fed's Mortgage Backed Securities purchase program at the end of next month.

Upcoming Next Week:   Monday:  Personal Income & Outlays, ISM Manufacturing Index & Construction Spending.  Tuesday:  Motor Vehicle Sales.  Wednesday:  ADP Employment Report.  Thursday:  Jobless Claims, Productivity & Costs, Pending Home Sales Index.  Friday:  Employment Situation.

All of us in the real estate industry are acutely aware of the short sale phenomenon which has been prevalent for the past few years and is still going strong. The decline in home values have prompted many home owners to either negotiate a payoff for less than the amount they owe or even worse, to walk away altogether.

                While many home owners have fallen into this dilemma as a result of poor financial management, there is a distinct group who are forced into the short sale arena through nothing but bad luck. For instance, a home owner may be transferred out of the area and has no choice but to sell short. Other trigger events may include job loss or illness. After the dust settles and they have moved on, they may be wondering if they are destined to be renters for the next decade.

                Home financing these days falls into one of two categories: conventional and government (ie: FHA). Prior to 2008, most home loans closed were conventional due to lax underwriting guidelines. With those days behind us, FHA loans are the saving grace of the lending industry and account for a much larger share of loans originated today.

                For a potential buyer with a previous short sale, conventional loans would require the buyer to wait 4 years from the date of the short sale unless it can be proven that the short sale occurred due to circumstances beyond the buyer's control (see examples above) and the buyer had no derogatory credit prior to such circumstances. Then the wait would be 2 years.  

                So let's assume that a buyer had been transferred out of the area and had to short sell. Is he doomed to wait at least 2 years? Not if he applies for an FHA loan. In December, FHA announced its new policy regarding previous short sales. As long as a buyer was current on the mortgage and other debts at the time of the short sale, there is no waiting period to obtain a new FHA purchase loan.

                The point to remember with previous short sales is to document the reason behind it and to show the event occurred not as a result of financial mismanagement. As you can see, not all short sales are equal and through FHA financing, some buyers can reclaim homeownership faster than they may've thought!

                If you or anyone you know has faced a similar circumstance and would like more information, please contact us any time at (925) 964-1213.

Mid Week Brief

Economic News:  Yesterday started the beginning of a busy reporting week in the form of the Case-Shiller Home Price Index as well as Consumer Confidence.  Case-Shiller revealed mixed data but did point toward continued price stabilization for the seasonally adjusted data.  Consumer Confidence had an unexpected drop and returned to the April 2009 levels.  This morning's New Home Sales numbers were released and were down 11.2% with an expected annual rate of 309,000 units versus the 348,000 forecasted.  New home supply rose from 8 months to 9.1 months.  There was also a FDIC release yesterday that increased the number of troubled banks and reported that their reserve balance fell into negative territory at the end of 2009.

Mortgage Markets:  Yesterday's news brought a rally into the bond markets.  In addition, the 2 year note auction went well.  The mortgage market was greeted by price changes for the better by about .25 in fee.  30 year rates are still holding on to sub 5%.  This morning markets are fairly quiet but keep a keen eye on how the day progresses ahead of the economic reports for the remainder of the week.

Upcoming For Thursday & Friday:   Thursday:  Durable Goods Orders. Friday:  Gross Domestic Product, Consumer Sentiment & Existing Home Sales.

It was reported today that there was a dramatic increase in the number of problem banks in the nation. At the end of the 4th Quarter the FDIC had increased the number of troubled banks to 702 up from 552 during the prior quarter.  Many of us are watching the sector very closely as the commercial loan market is under stress and has not worked it's way through the system yet. It was also noted that the FDIC's reserve fund fell to a NEGATIVE 20.9 Billion Dollars by the end of 2009.  Additionally, the Net Charge Off Rate and loans that were at least three months past due were at the highest level in 26 years which is the same period which that type of data has been collected.

The Wall Street Journal has provided an interesting interactive chart & information tracking the banking sector since the fallout began.

In case you've been in a cave for about a year you've probably heard that rates are at all time historic lows. If you're a homeowner and have sufficient equity in your home (and sometimes even if you haven't!) you've probably refinanced into an attractive fixed rate loan to take advantage of these rock-bottom rates.

However, there are still many of you out there that either have not refinanced or are not yet a homeowner and are ready to take advantage of lower home prices and affordable financing. If that's you, and you're thinking that a fixed rate mortgage is the only way to go, I'd like to try to open up your mind to adjustable rate mortgages (or ARMs).

If you're still with me and haven't closed this webpage muttering expletives under your breath I want to first dispel a huge myth about ARMs: they are not responsible for the recent "mortgage meltdown."
Actually the meltdown was caused by teaser rates, zero-down loans, maximum leveraging and ridiculously lax lending guidelines. In fact, if you took out an ARM in the last 5 years, your rate today is most likely quite a bit lower!

Sometimes an ARM is a smarter way to go than a fixed. For instance, right now (as of 2/22/10) the going rate on a conforming 5 year fixed ARM (meaning the rate is fixed for 5 years and then it begins to adjust) is a shockingly low 3.5%!* A comparable 30 year fixed rate is 4.875%**. So consider this: if there is any chance that in the next 5 years you might be selling your house, this is truly a no-brainer. In just 5 years on a $417,000 loan you could save over $20,000 by choosing a 5 year ARM over a 30 year fixed!

But what if you remain in the home over the initial 5 year fixed period and you then move into the adjustable remainder of the loan? Will your payment skyrocket? What if rates have climbed? Even if rates rise, ARM loans have caps on how high the rate can go above the original start rate. An experienced loan officer will show you all the possibilities associated with an ARM loan so you can make an educated decision. Perhaps a fixed rate IS the best choice for your situation but don't automatically assume an ARM isn't until you've been presented both scenarios.

Give us a call and we will be happy to educate you on ALL your options!

*APR: 3.644%

**APR: 5.031%

Mortgage Update for the beginning of the week

Economic News:  A quiet day is in store for the markets today.  No real economic reports are due but as the week rolls on there will be a bevy of reporting which will give us a glimpse on how well the economic recovery is doing.  Here is what is in the pipeline for the rest of the week.  Tuesday:  Case-Shiller Home Price Index & Consumer Confidence.  Wednesday:  New Home Sales. Thursday:  Durable Goods Orders. Friday:  Gross Domestic Product, Consumer Sentiment & Existing Home Sales.

Mortgage Markets:  Mortgage rates are unchanged over Friday's close with the 10 Year Bond steady at 3.79%.  The mortgage backed securities market is also flat.  As the data for the week progresses keep an eye out for the near term rate direction.  If you are purchasing or refinancing this will be a week to pay attention to.

If you've read any of my previous posts, it's obvious my passion lies in organizing and streamlining pretty much everything to make life more manageable.  One thing I see again and again is an overflowing inbox.  It's fairly simple to devise a process for taming your inbox. Here are some suggestions: 

One word: Unsubscribe.  Today I dove in and unsubscribed to every unsolicited email that hit my inbox. I have the feeling that within the next few weeks, I'll have a lot fewer emails to wade through. 

For all other emails I use folders to categorize them. Since I work in mortgages, when I have a file I'm working on I will devise a folder (in Outlook) that has "@SmithLoan" as its title. The reason I use the "@" sign is because it moves the folder up to the very top of my folder list.  Any email that comes across pertaining to the Smith loan goes in it. When the loan closes I archive the folder just in case I ever need it again. 

I also have folders labeled "@Action" and "@WaitingFor." If you've ever read the book Getting Things Done by David Allen you'll recognize these categories. The "Action" folder contains anything I need to do such as sign up for a webinar or respond to someone's question. The "Waiting For" folder holds any email messages that pertain to a situation where another's response or action is required to move forward. For me this folder often holds responses I'm waiting for from a Realtor or escrow officer. I review these folders at the beginning and the end of every day. 

Finally, I have my reference folders. I get NUMEROUS emails every day from our investors with guideline updates and also tips from my colleagues about certain programs and investors. I have a folder for each of these investors. I also have a marketing folder and a folder for the title/escrow company I use. 

When an email comes in I can usually file it in any one of these folders. Try these tips and you'll find your inbox lighter in no time. ~ Cari

End of Week Briefing

Economic News:  On top of the FED announcement to raise the Discount Rate (discussed here & here) we were greeted yesterday with the Producer Price Index (PPI) & Jobless Numbers.  The PPI came in much higher than anticipated signaling inflationary areas in certain segments of the economy.  Jobless Claims came in well above sentiment at 473,000 new claims versus the expected 440,000.  This somewhat offset the effects of the PPI.  Today the release of the Consumer Price Index (CPI) came in within tolerance and also dampened the stronger PPI data from yesterday.

Mortgage Markets:  Yesterdays markets were met with mid-day price changes for the worse to the tune of about .375 in fee.  The FED's announcement of the increase in the Discount Rate rattled debt markets overnight but as today progresses we are beginning to see mid-day changes for the better.

Upcoming Next Week:  Tuesday:  Case-Shiller Home Price Index & Consumer Confidence.  Wednesday:  New Home Sales. Thursday:  Durable Goods Orders. Friday:  Gross Domestic Product, Consumer Sentiment & Existing Home Sales...It will be a BIG WEEK.  Have a great weekend!

As I briefly discussed earlier today the Federal Reserve increased the Discount Rate by .25% after the market close yesterday.  The full press release is available here.  As mentioned in the statement, the FED "anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period".  This should keep a lid on an aggressive upward movement of interest rates in the near term. It is good news that that they are trying to remain "ahead of the curve" on the inflation front while keeping in mind that the economic recovery is fragile.

Those of us in the Real Estate industry, as well as the general public, should be aware and engaged (no matter what side you fall on) that there is much debate on the current spending levels of the government and what they portend for the future.  On the 16^th of this month the President of the Federal Reserve Bank of Kansas City, Thomas M. Hoenig, gave a speech outlining his views on our current fiscal situation.  One brief excerpt: 

"First, the worst choice for our long-term stability, but perhaps the easiest option in the

face of short-term political pressures: We can knock on the central bank's door and request or

demand that it "print" money to buy the swelling amounts of government debt. Second, perhaps

more tolerable politically, although damaging to our economy: We can do nothing so long as

domestic and foreign markets are willing to fund our borrowing needs at inevitably higher

interest rates. Or third, the most difficult and probably the least palatable politically: We can act

now to implement programs that reduce spending and increase revenues to a more sustainable

level."

The full speech(11 pages double spaced) is worth the read.  As this year moves on we are all expecting higher rates and hope that the powers that be are able to successfully walk a very fine line in the aftermath of one of the most trying times for the financial markets in the history of our country.  As the FED begins to unwind the quantitative easing, remove stimulus programs and put us back on a more traditional path it is my hope to see the return of normally functioning markets sooner rather than later.