steven.bray

Rate update: Rates simply ran out of crises

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Rates simply ran out of crises
Sep 182018
 

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

By G. Steven Bray

We were hoping last week’s inflation report would keep a lid on interest rates. Unfortunately, that lid didn’t hold, and we’re looking at the highest mortgage rates in about 5 years. Granted, rates still are historically low, but for some folks “rates in the 4’s” are now in the rear-view mirror.

So, what’s going on? We’re looking at a variety of factors.

– Even though last week’s inflation report was tame, inflation still is elevated compared to last year and supports the idea of additional Fed rate hikes.

– The Fed will again reduce its bond buying on Oct 1st as part of its efforts to shrink its balance sheet.

– Economic activity and consumer confidence have reached short-term highs, and a healthy economy tends to put pressure on rates.

– Wages finally seem to be rising, and rising wages typically filter through to higher consumer inflation and higher economic growth.

– Government borrowing to fund deficit spending means a greater supply of bonds as the Fed is tapering its demand.

Against this backdrop, we’ve had a series of mini-crises this year that kept investors on edge. Trade fears probably have been the most pervasive, but even the fear of with a trade war seems to be dissipating. The apocalyptic predictions didn’t pan out, and investors seem to be viewing the posturing as negotiating tactics rather than a real threat to the global economy.

Other threats still exist, and I think those will keeps rates from rising too much too fast. However, for now, if rates take a temporary dip, it probably makes sense to lock.

Rate update: Inflation rears its ugly head

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Inflation rears its ugly head
Sep 122018
 

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

By G. Steven Bray

With summer behind us, things could get more interesting for interest rates. That may result in more volatility than we saw during the summer, but the same forces that were at work then remain relevant now.

Inflation remains enemy number one of those who want low interest rates. We’ve talked the last few months about how consumer inflation seems to be inching higher, but wage inflation has remained mostly contained. Well, that changed with last week’s jobs report. Average hourly earnings broke through an important ceiling, and rates quickly responded by moving higher. More importantly, total wages, which factors in hours worked, are up 5.1% in the past year. That provides a lot of extra juice for the economy.

Interestingly, earnings for workers in the bottom 10% based on income saw earnings grow 3.9% whereas the top 10% saw only 1.2% growth. That’s positive for the economy because lower income workers are more likely to spend their extra earnings.

Now, the question is will these extra earnings translate into extra consumer demand leading to higher consumer prices. We may get an answer this Thurs through the release of the Consumer Price Index. As we’ve discussed before, the CPI is the granddaddy of inflation measures. The core rate has been rising slowly all year and currently exceeds 2%, the Fed’s supposed target rate. It’s a good bet if Thursday’s reading shows another rise, it will give markets a jolt.

Markets also may be watching the European Central Bank meeting this week. European economic growth has been positive, but not all that and a bag of chips. Rumors are the ECB may downgrade its future growth estimates. That may result in some flight-to-safety bond buying, which could help keep US rates contained.

Rate update: Tariffs, Turkey, and Trump move rates

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Tariffs, Turkey, and Trump move rates
Aug 282018
 

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

By G. Steven Bray

Watching paint dry has been more exciting this summer that watching interest rates. Even the latest impeachment bait couldn’t get rates to move out of their current range. When will the boredom end?

If history holds any clues, probably sometime in Sep. Why Sep? Well, first of all, traders will be back at their desks trying to make money. Tradeflow movement in bond markets is more likely when there are, well, traders.

One of the events that might influence tradeflows is the Federal Reserve meeting at the end of Sep. The Fed is widely expected to raise short term interest rates once again, and market watchers will carefully parse the post-meeting pronouncements to glean whether another hike is likely in Dec. A couple of Fed members recently have cautioned against a Dec hike.

Before we get to the Fed meeting, we’ll see new inflation data in addition to more headlines concerning tariffs, Turkey, and Trump – and, of course, the mid-term elections. Trade deals with China and our NAFTA partners could remove some of the risk premium currently built into rates – edging rates higher again as we’ve seen the last couple days. If the Turkish crisis proves to be contagious, a new risk-off trade could lead to lower rates. And any political developments that investors believe could imperil the current economic boom would do the same.

I realize I’m being somewhat equivocal concerning the direction of rates, and that’s because I don’t see a lot of reasons for rates to move – except in response to headlines. If you’re floating your rate right now, consider that rates still are close to their recent lows, and I think it will take more significant headlines to move rates lower than higher.

More low down payment options

 Loan Programs, Residential Mortgage  Comments Off on More low down payment options
Aug 222018
 

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

By G. Steven Bray

Fannie Mae and Freddie Mac have 3% down conventional loan programs that target low-to-moderate income folks. We used to call these community lending programs because they’re designed to fulfill Fannie and Freddie’s mandate to provide assistance for mortgages to low and moderate income families and underserved areas. The programs go by the monikers HomeReady and HomePossible.

Unlike the programs we discussed yesterday, you don’t have to be a first-time homebuyer to qualify. However, if the buyers are first-timers, one of them must complete a homebuyer education course for the HomePossible program. For HomeReady, one must complete homebuyer education regardless of first-timer status.

The programs are income-limited. By that I mean your total income cannot exceed a limit, which can differ even within a given county. For both programs, the limit typically is set to an area’s median income. However, the programs waive the limit in disaster areas and in certain areas Fannie and Freddie consider to be underserved. Call me if you want some help determining the income limit for your area.

So, given the programs we discussed yesterday, who cares that we have another 3% down program? Three reasons:

– Conventional low down-payment programs require mortgage insurance, which can bump up your housing payment quite a bit. HomeReady and HomePossible have lower mortgage insurance rates than the other low down payment programs.

– Second, the programs’ easier guidelines may make it easier for you to qualify.

– Finally, you don’t have to be a first-time homebuyer. For HomePossible, you can’t currently own other real estate, but Freddie carves out some exceptions to that in cases of divorce or inheritance.

The programs have other features and restrictions that may make one more appropriate for you than the other. Give me a call to see what’s the best fit for your situation.

Freddie adds another low down payment option

 Loan Programs, Residential Mortgage  Comments Off on Freddie adds another low down payment option
Aug 202018
 

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

By G. Steven Bray

Freddie Mac recently joined Fannie Mae in offering a 3% down conventional loan program with no income limitations. Freddie calls its program HomeOne, and like Fannie’s program, it targets first-time homebuyers.

A lot of folks hear that, first-time homebuyers, and tune out, but you may be a first-time homebuyer and not realize it. Fannie and Freddie define a first-time homebuyer as someone who hasn’t owned real estate in the last 3 years. Freddie expands that definition to allow folks who owned a home with their ex-spouse to qualify.

If you’re buying a home with another person, only one of you has to be a first-time homebuyer. And if all of you are first-time homebuyers, one must complete a homebuyer education course prior to closing. The cost is minimal, and most folks complete the course online.

The programs are limited to single-family homes and condos and have a min credit score of 620. The 3% down payment may come from your own funds or from an acceptable gift source, such as a family member. It can’t come from the seller, but the seller can contribute up to 3% of the price towards your closing costs.

With this offering, Freddie and Fannie finally have comparable low down payment programs. The two have nuanced differences, so give me a call to see if one program is more appropriate for you than the other.

Next time, we’ll look at conventional low down payment options that specifically target low-to-moderate income folks.

Rate update: Tame inflation keeps rates in summer slumber

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Tame inflation keeps rates in summer slumber
Aug 092018
 

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

By G. Steven Bray

Other than the short tantrum mortgage rates performed a couple weeks ago, the market has been in a summer slumber. And even that tantrum didn’t take rates out of the range they’ve inhabited the last few months. This week’s economic headliner could change that, but I doubt it.

Friday brings the release of the all-important Consumer Price Index (CPI), the granddaddy of inflation measures. Wholesale inflation, wage inflation, and oil prices all ticked higher earlier this year, and many analysts expected consumer inflation would follow in short order. We got a hint in that direction a couple months ago, which brought markets to attention.

However, since then, these other inflation measures have relaxed again. Wholesale inflation, released yesterday, and wage inflation, as indicated by the big jobs report last week, were flat. Oil prices, too, have flattened, and the Personal Consumption Expenditures Index, the broader inflation measure favored by the Fed, slipped back below 2%.

So, all eyes are on the CPI tomorrow. Given the weakening of the other measures, a reading that moves the index higher could make rates jump again. Unfortunately, a moderate reading probably won’t lead to much lower rates but will instead just let rates continue to slumber in their current range.

Getting a mortgage without leaving your bedroom

 Mortgage Process  Comments Off on Getting a mortgage without leaving your bedroom
Jul 232018
 

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

By G. Steven Bray

The real estate and mortgage industries historically have been paper intensive. Getting a mortgage typically involved signing lots of paper documents. That is changing, and many companies now allow you to apply for a mortgage online, but a truly paperless mortgage process has been elusive. Documents signed at closing require a notary seal, and Texas law required a notary to be physically present when a borrower signed the closing documents.

That changed this summer with the implementation of HB 1217, which introduced online notarization to Texas. To understand why it took so long for this to become a reality, you have to consider a notary’s functions.

The concept of a notary public dates backs to at least ancient Rome, and today’s notary public still operates as an officer of the State. A notary’s primary duty is to show that a disinterested party has notified the signer of a document as to the significance of that document and has ascertained that the signer’s identity, signature, and reasons for signing the document are genuine. That was difficult to do in the past without the signer physically appearing before the notary.

HB 1217 has allowed us to ease our way into the 21st century by redefining “personal appearance” to include the use of two-way audio-video communications. With this, Texas becomes the third state to allow notarization of documents this way.

Being an online notary requires a special commission, and online notaries have extra record-keeping responsibilities, so it may take a while before online notarization becomes common. The state also allow online notaries to charge a small fee for the service.

I understand the first online mortgage closing in TX occurred a couple weeks ago, and it may not be too long until you can buy a home start to finish without getting out of your pajamas.

Jul 162018
 

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

By G. Steven Bray

It feels like deja vu all over again. The National Flood Insurance Program (NFIP) will expire on Jul 31 unless Congress acts to extend it. The program currently is operating on a short-term extension passed in March.

In Nov, the House passed a package of bills that extended the program until 2022. However, they included reforms, including the expansion of private flood insurance to compete with the federal program. While most recognize the program needs to be reformed, the Senate wasn’t comfortable with the scope of the House vision.

Without its own NFIP reform bill, the Senate has opted to kick the can down the road one more time. It slipped another short-term extension into the Farm Bill passed at the end of Jun.

Unfortunately, the Senate version of the Farm Bill differs significantly from the House version. The two bills now go to conference committee to find a compromise that can pass both chambers. The problem is compromise could take a long time, and the clock is ticking on NFIP.

If Congress fails to extend the program, it would have to stop issuing and renewing policies. Realtors estimate this could impact as many as 40,000 loan closings each month.

Congressmen and Senators, especially those from coastal areas, are well aware of what a disaster that would be, especially with the onset of the hurricane season. I wouldn’t be at all surprised to see Congress strip the extension from the Farm Bill and pass a standalone bill just in the nick of time.

Rate update: Trade war vs inflation

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Trade war vs inflation
Jul 102018
 

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

By G. Steven Bray

If you’ve been waiting to lock your mortgage rate, I have good news and bad news. The good news is that you haven’t lost any ground. Rates have been remarkably flat for the last few weeks. The bad news is that if you were hoping for lower rates, your hopes went unfulfilled.

Rates seem to be caught in a tug of war. On one side, we have trade war fears. Traders have been yo-yo-ing in response to constant headlines. Now, it’s quite possible that trading partners are using the headlines to manage their bargaining positions, but this leads to uncertainty, which exerts downward pressure on rates.

On the other side, we have inflation. The Federal Reserve’s favored inflation metric, the personal consumption expenditures index, finally rose to the Fed’s target of 2% in May. Analysts attribute the rise to the robust economy. Even though last Friday’s jobs report didn’t show elevated wage inflation, it did show that job growth remains strong. A strong labor market does exert pressure on wages in some parts of the economy even if the overall inflation rate remains tame.

So, which side will win? We could find out this week. This Thurs, we get the granddaddy of inflation reports, the Consumer Price Index (CPI). Analysts predict 2.3%, which is as high as the CPI has been since the Great Recession. A higher number could pull the rope in favor of inflation, leading to a quick jump in mortgage rates. However, a number that matches expectations probably will leave rates stuck in their current range for another couple weeks – waiting for the next headline.

USDA shrinks areas eligible for RD mortgage

 Loan Programs, Residential Mortgage  Comments Off on USDA shrinks areas eligible for RD mortgage
Jul 012018
 

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

By G. Steven Bray

The USDA Rural Development loan is a great option for homebuyers in rural locations. It requires no down payment and has lower monthly mortgage insurance than an FHA loan.

The loan is only available in areas that USDA considers “rural,” but USDA’s rural includes some areas you might not expect. USDA provides an eligibility map you can use to determine if a particular property is eligible, and a new map went into effect on Jun 4th, which narrowed the eligible area just a bit.

The biggest changes I noticed in the map are around Austin. Most of the fast-growing suburbs of Hutto, Buda, Kyle, and Leander were eligible under the previous map. Now, they’re ineligible. However, more distant suburbs, like Dripping Springs, Liberty Hill, Bastrop, and Taylor remain eligible.

In the Houston area, the expansion of the ineligible areas occurred mainly to the south and southwest and around Conroe. The I-10 corridor to the west and east, and the I-69 corridor to the northeast appear unaffected.

Around the Dallas-Ft. Worth area, more of the fast-growing 380 corridor is now ineligible, but otherwise the metro escaped mostly unaffected.

In the San Antonio area, more of the 281 and I-35 corridors are ineligible as is the suburb of Boerne. However, the boundary to the west appears unchanged.

We’ve got a link to the eligibility map on our Web site or in the text version of our blog.

USDA Rural Development eligibility map