Rate update: Can markets ignore strong jobs report?

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Can markets ignore strong jobs report?
Mar 312015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

This is jobs report week, and rate markets are once again seeking direction.

It’s likely this week’s report will show the economy continues to create jobs at a moderate pace. The question has been and still is what is the quality of those jobs? Far too many have been low-paying, service sector jobs. As a result, wage growth has been almost non-existent. Rising wages would signal that the economy is heating up and lead to higher interest rates. A couple months ago, it appeared that might happen, but last month’s report returned wages to their previous, anemic trend.

Other than the jobs data, most recent economic reports have shown a slowing economy. A weaker jobs report could tip market sentiment again in favor of lower rates. Another good report for jobs but lacking in wage growth is likely to make markets yawn.

While most of our attention is on the pending jobs report, we shouldn’t forget about events overseas. Greece still hasn’t resolved its debt issues, China’s economy is slowing further, and fighting continues with renewed vigor in the Middle East. This uncertainty also favors lower rates.

Get a lower mortgage payment by recasting

 Residential Mortgage  Comments Off on Get a lower mortgage payment by recasting
Mar 122015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Let’s say you refinanced your mortgage in the last couple of years, and you’ve got a terrific interest rate. However, you’d like a lower mortgage payment. Maybe you have fixed income, and you want the payment to fit that budget. One option might be to refinance the mortgage into a longer term. However, if you’re approaching retirement, that may not make financial sense, and you could lose your interest rate. Another option is recasting.

Recasting resets your mortgage payment based on a lowered mortgage balance. You get that lower balance by making a principal payment. Let’s say you started with a $200k 30y mortgage and a 4% rate. Normally, if you pay $50k against the balance, it simply means you’ll pay off the mortgage sooner, in this case about 10 years sooner, but the monthly payment will remain the same. If instead you recast, your mortgage term wouldn’t change, but your payment would drop by about $250/m.

Not all loans are eligible for recasting. If you’re interested, contact your mortgage servicer.

How does Freddie Mac handle student loans?

 Loan Guidelines, Residential Mortgage  Comments Off on How does Freddie Mac handle student loans?
Mar 112015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

A few weeks ago, we examined the positive changes Fannie Mae and USDA made to their loan guidelines concerning the treatment of student loans. For deferred loans, both dropped the payment we must count when qualifying you for a mortgage from 2% to 1% of the loan balance.

But what about Freddie Mac? If the credit report doesn’t show the loan payment, Freddie says we can use 1.5% of the loan balance or ask the loan servicer to provide the payment. The guidelines don’t address the issue of graduated or income-based repayment plans, which don’t fully amortize the student loan based on the current payment. These plans may have payments less than 1.5% of the balance (or even 1% of the balance). I suspect Freddie will address this inconsistency soon.

Rate update: Reversing the current towards higher rates

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Reversing the current towards higher rates
Mar 092015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Market reaction to last Fri’s jobs report was fast and furious. Mortgage rates rose to their highest levels of the year. The report’s headline numbers were strong, but some of the internal data weren’t so thrilling. In particular, wage growth returned to its previous anemic pace.

But markets weren’t interested. With a quieting of overseas drama, market currents have shifted to favor higher rates. The question now is what might reverse this current? Our attention shifts back to Europe. The European Central Bank began its quantitative easing program today, which pushed European rates back towards record lows. In addition, the commission responsible for reviewing Greece’s restructuring plan failed it. Greece reacted by floating the possibility of a new election. New drama?

The most significant economic data this week is retail sales on Thurs. Except the jobs report, much of recent economic data has been weaker than expected. A weak retail report could help create an eddy in the new market current.

Buyer beware when buying new home

 Homebuyer Tips  Comments Off on Buyer beware when buying new home
Mar 052015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

If you’re in the market for a newly built home, I read an article about an ugly case of buyer beware the other day. When you buy a new home from one of the big homebuilders, you typically have to plunk down a sizable deposit as your commitment to the process. A normal person would think that if the sale doesn’t close, you would get your deposit back.

That wasn’t the case for a number of folks who tried to buy a Toll Brothers home. Instead, Toll Brothers kept the money. The article cited one case of $20,000 and another of $52,000.

Toll Brothers has an affiliated mortgage company, and they incent you to use that company by promising free upgrades only if you use their mortgage company. The problem is the mortgage company never pre-approved the buyers, and the company promised attractive loan terms for which the buyers would not qualify. Once the buyers signed the contract, the company informed them they didn’t qualify for the good loan terms and offered them less favorable ones they couldn’t afford (or no loan at all). Because the buyers already had signed the contract, their deposit money was gone.

It all sounds pretty slimey, but homebuilders have been using the affiliated mortgage company gimmick for years. It’s unfortunate they haven’t faced the same scrutiny for their deceptive practices as the rest of the housing industry.

I’ve included a link to the article at the end of my blog, and I invite you to read it yourself.

What’s the best day to close your mortgage?

 Homebuyer Tips  Comments Off on What’s the best day to close your mortgage?
Mar 042015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The National Association of Realtors recently released data showing the most popular days to close a home purchase. The top 7 were the last days of a month, and in the top 25 most of the remaining ones were Fridays.

From a mortgage perspective, your choice of closing date effects the amount of pre-paid mortgage interest. At closing, you prepay interest from the closing date to the end of that month. If you close at the end of the month, you prepay less interest than if you close on the 10th, but you also would enjoy the home for 20 fewer days, and you paid an extra 20 days to live wherever you were previously.

Some cite the desire to have a weekend for moving to explain the concentration of closings on Fridays. Month-end closings may coincide with the end of leases for renters. Sellers with FHA loans may prefer month-end closings because FHA charges a full month’s interest regardless of when closing occurs (but that policy recently changed). And it just feels better to close before you turn the page on the calendar.

The takeaway is if you can close in the middle of the week or month, you’re likely to encounter less stress, and you might even save some money from service providers like movers.