Your NW Home reSource Real Estate Blog

S & P Cuts US Credit Outlook: Impact on Interest Rates?

Recently the credit ratings firm Standard and Poor's cut their credit outlook on the US to negative from stable and said it's AAA credit rating could be cut within two years if headway isn't made in closing the budget gap.

This credit outlook downgrade is a serious issue. The last thing the US wants to endure is an outright credit downgrade. This would make the interest expense on the US debt even more burdensome - and remember, we are all on the hook for this debt and the carrying costs!

What sparked the change in outlook? The S&P cited the wide political divide in Congress as a major hurdle to meaningfully lower the federal budget deficit. Both parties want to lower the deficit but there is stark disagreement on how to do it.

Hopefully, the S&P's actions will motivate Congress to get serious and get something done. If Congress doesn’t address the national debt ceiling limit by May 16^th, then this will increase volatility in the markets.

What does this mean for interest rates?

Mortgage Bonds are in tough spot longer-term. Here’s why: if the US government is successful in taking action to lower the budget deficit and avoid a outright credit downgrade, then we should expect a longer duration of accommodative Fed monetary policy. The Fed doesn't want an economic slowdown to recreate a "deflationary" environment. And if the economy slows, then we may start hearing debate for a QE3 Policy. We can see the negative effect on Bonds when QE2 was rolled out: it was inflationary. This will push rates higher.

On the other hand, if US debt receives an outright downgrade - that would be really bad for Bonds. One could expect a lot of belt tightening and slower economic growth in the future as government spending would have to slow immensely to help close the budget gap. Look at Greece’s current situation for a peek at this. This will push rates higher.

Rates remain historically low and may continue to do so for the near future. However, there are a lot of challenges for Bonds down the road and the recent credit outlook downgrade was just another example.

This makes for a increasingly vanishing opportunity for clients and prospective home buyers. Right now. Contact your mortgage professional to review your situation.

The US Treasury is "Locking" In at Present Rates – Are You?

BREAKING NEWS: The Treasury Department has recently announced that they are going to begin selling some of their massive holdings of Mortgage Backed Securities, to the tune of $10 Billion per month. They are saying that the reason is due to the stabilizing economy and market conditions being ripe for selling, and is not related to the current US "debt limit" issues. Maybe.

The Treasury acquired $142B in debt during the financial crisis – helping lower mortgage rates at the time. The news of this unloading process has immediately pushed Bond prices significantly lower, as Traders try to get their own positions sold. It's like musical chairs... no one wants to be the last one standing with a portfolio full of Mortgage Backed Securities.

With the news out of Japan improving overall, and no new developments from the Middle East, Bonds have been drifting lower in response, as the "safe-haven" trade continues to unwind. Should Stocks regain their footing after a couple of weeks of losses due to the "safe haven" trade to remove risk, we could see a continued move lower in Bonds.

Both of these developments will pressure Bonds – which means pressure on Home Loan rates to continue higher. Remember that as Bond prices go lower, long term mortgage interest rates go higher.

For these reasons, it may be an ideal time for homebuyers to take advantage of the still low home loan rates, and for homeowners to check and see if their debt is structured in the best way possible. Start by contacting your Mortgage Professional today.

What Do Employment & Global Unrest Have To Do With Rates?

There’s a lot going on in the news that is impacting consumers and mortgage interest rates each day. What do Employment and Global Unrest have to do with home loan rates and real estate?

To understand this, we need to understand the Federal Reserve’s stated goals for their current round of Quantitative Easing (“QE2”). The three goals are to (1) boost Stock prices, (2) create inflation, and (3) lower the unemployment rate. The Fed is doing this by injecting $600 Billion into the economy. In recent weeks, we’ve seen evidence of all three goals:

1. Stocks have been improving.

2. The unemployment rate has declined. Just recently, the Labor Department reported that the Unemployment Rate fell to 9%, and the U6 or "real" rate of unemployment, which includes discouraged workers and those who have accepted part-time employment for economic reasons, fell to its lowest level since April 2009.

3. We've seen an increase in global unrest of late (not just in Egypt), but in other parts of the world as well. This at least partially stems from increasing inflation in commodities and food.

The old saying of “Don't Fight the Fed" still rings true! While these goals are designed to stimulate our economy and keep our recovery moving forward (good) – they are unfriendly to Bonds, which means they are unfriendly to home loan rates too (bad).

So what does all this mean? It means if the Fed is successful in its goals boosting Stocks, lowering unemployment, and creating inflation, the negative trend in Bonds will likely continue and push home loan rates upward in the process.

For these reasons, it may be an ideal time for homebuyers to take advantage of the still low home loan rates, and for homeowners to check and see if their debt is structured in the best way possible. Start by contacting your Mortgage Professional today.

 

Purchase and rehab your home with FHA 203k Streamline home loan

FHA Streamlined 203(k) Overview

The Streamlined FHA 203(k) program is intended to facilitate uncomplicated rehabilitation

and/or improvements to a home for which plans, consultants, engineers, and/or architects are not required. Due to the rehabilitation amount limitation of $35,000, eligible improvements are limited and can not include any major rehabilitation or remodeling, new construction such as room addition, repairs to structural damage, or site amenity improvements. (Repairs of this nature would be considered under the Standard FHA 203(k) Program which is not offered at this time.)

Eligible Improvements: Examples of eligible improvements are listed below (this is not an
all-inclusive list):

• Repair/replacement of roofs, gutters and downspouts.
• Repair/replacement/upgrade of existing heating, ventilation & air conditioning
• systems.
• Repair/replacement of plumbing and electrical systems.
• Repair/replacement of flooring.
• Minor remodeling that does not involve structural repairs, such as kitchens
• Exterior and interior painting.
• Weatherization, including storm windows and doors, insulation, weather stripping,
• etc.
• Purchase and installation of appliances, including free-standing ranges,
• refrigerators, washers and dryers, dishwashers and microwaves.
• Improvements for accessibility for persons with disabilities.
• Lead-based paint stabilization or abatement of lead-based paint hazards.
• Repair/replacement/addition of exterior decks, patios, porches.
• Basement waterproofing.
• Replacement of window and doors.

Most improvements are eligible provided they add value and are permanently affixed to the foundation. Improvements to detached structures and luxury items are not allowed:

• Luxury items include: Swimming pools, hot tubs, tennis courts, gazebos, barbecue pits, etc. Repair work to these items is also not allowed.
• Properties that require the following work items are not eligible for financing:
• Major rehabilitation or major remodeling, such as the relocation of a load-bearing wall;
• New construction (including room additions);
• Repair of structural damage;
• Repairs requiring detailed drawings or architectural exhibits;
• Landscaping or similar site amenity improvements;
• Any repair or improvement requiring a work schedule longer than six (6) months;

or

• Rehabilitation activities that require more than two (2) payments per specialized contractor.

The Streamlined 203(k) program may not be used to finance any required repairs arising from the appraisal that do not appear on the list of Streamlined 203(k) Eligible Work Items or that would:

• Necessitate a "consultant" to develop a "Specification of Repairs/Work Write-Up"
• Require plans or architectural exhibits;
• Require a plan reviewer;
• Require more than six months to complete;
• Result in work not starting within 30 days after loan closing; or
• Cause the borrower to be displaced from the property for more than 30 days during the time the rehabilitation work is being conducted. (FHA anticipates that in a typical case, the borrower would be able to occupy the property after mortgage loan closing).

Reinspection: If the cost of the renovation is over $15,000 then a second inspection by the original appraiser is required. 

More Info:

• FHA Streamlined 203K Overview
• FHA Streamlined 203K Frequently Asked Questions

Mortgage Rate Lock Advisory for March 29th, 2010

Dan Edwards - Northstone Mortgage, 510-LO-37734

Rates Based on 20% down on a $475,000 purchase with a 720+ credit score and 1 point fee.

Adding insult to injury - Identity Theft can follow you around!

This months item of value is a comprehensive review of Identity Theft.  Most would be home owners are never aware of impact that Identity theft has on their ability to get a great rate and it may not allow them to even get a loan.  As you begin the home buying process it's important to ensure you aren't a victim of Identity Theft.  Here is how to prevent it from happening to you!

 

ATTEMPTS TO SCAM PEOPLE OUT OF THEIR HARD-EARNED MONEY ARE NOTHING NEW,BUT WITH TECHNOLOGICAL ADVANCEMENTS, SCAMMERS ARE BECOMING MORE SOPHISTICATED.

LEARNING HOW TO QUICKLY SPOT THESE SCAMS WILL PREVENT YOU FROM BECOMING THEIR NEXT UNSUSPECTING VICTIM.

TOP SIX SCAMS

Mortgage Fraud

There are many types of schemes, including foreclosure rescue, loan

modification or reverse mortgage scams, and all contain some type of material misstatement, misrepresentation or omission of information relating to the

property or potential mortgage.

Unauthorized Credit Card Charges

Scamming occurs when a company that has your credit card information on file makes unauthorized charges and hopes the victim either doesn’t notice or thinks reversing the charges will be too much trouble. To get your credit card information, some companies will offer a “free trial” and then sell the credit card information to another disreputable group.

Overpayment Scams

Fraudsters negotiate contracts requiring payment to their victims. Ultimately, the victim receives an illegitimate payment larger than the amount owed, and then scammers instruct their victims to wire the money back to them. Several varieties of this scam exist, such as secret shopper, pet schemes and false roommates.

Identity Theft

This type of scamming occurs through the use of fraudulent, unsolicited e-mails that use spam to steal identity information.  The e-mails solicit personal information, such as a bank account number, by falsely claiming that the FBI needs such information for an investigation and non-compliance will be prosecuted.

Insurance Fraud

In these cases, the scammer files a false insurance claim as an illicit attempt to collect insurance proceeds. For example, arson-related incidents have been reported by homeowners of distressed properties in an attempt to avoid foreclosure. This has grown more prevalent in the wake of Hurricane Katrina and other catastrophes. These frauds, in turn, increase the cost of homeowner’s insurance premiums annually.

Computer Intrusion Scams

In frauds such as the Nigerian e-mail scam, the scammer claims to desperately need short-term financial assistance to see them through a crisis with the false promise of full reimbursement and a generous cash gift for their assistance.  

• Federal Bureau of Investigation http://www.FBI.gov  
• Department of Housing and Urban Development—Office of Inspector General (HUD-OIG reports) http://www.hud.gov/offices/oig  
• Consumer Affairs http://www.consumeraffairs.com  
• National Insurance Crime Bureau http://www.nicb.org  

 

Stay Informed to stay PROTECTED!

 

HERE ARE A FEW PREVENTATIVE MEASURES AND TIPS YOU NEED TO KNOW TO AVOID BECOMING A VICTIM OF A SCAM.

Mortgage Debt Elimination Schemes

Be aware of e-mail or web-based advertisements that promote the elimination of mortgage loans, credit card and other debts, while requesting an upfront fee to prepare documents to satisfy the debt. There is no easy method to relieve your debts, and borrowers may end up paying thousands of dollars in fees without the elimination or reduction of any debt.

Foreclosure Fraud Schemes

Perpetrators mislead homeowners into believing that they can save their homes in exchange for a transfer of the deed and upfront fees. The perpetrator profits from these schemes by remortgaging the property or pocketing fees paid by the  homeowner without preventing the foreclosure. The victim suffers the loss of the property, as well as the upfront fees. Always seek a qualified credit counselor or attorney for assistance.

Predatory Lending Schemes

Beware of lenders who tell you that they are your only chance of getting a loan or owning your own home, and avoid “no money down” loans. This is a gimmick used to entice consumers to purchase property that they likely cannot afford or are not qualified to purchase. Be wary of mortgage professionals who falsely alter information to qualify a consumer for a loan. Do not let anyone persuade you into making a false statement, such as overstating your income, the source of your down-payment or the nature and length of your employment. Never sign a blank document or a document containing blanks.

FREE PROPERTY MONITOR AND ALERT SYSTEM: http://www.epropertywatch.com/myhome

Things you should do: • Insist on learning the full name, address and contact information for any company soliciting your business, personal information or assistance. • Insist that all solicitors send materials to you in writing so that you are able to study the full details of the offer, as well as any guarantees and/or refund policies. • Research all solicitors through the Better Business Bureau, Attorney General’s Office and/or consumer protection service in the state or city where the company is located. • To stop receiving telephone solicitations, instruct solicitors to delete your contact information from all call lists and register with the FTC’s “Do Not Call” registry. • Report suspicious telemarketing calls, mail solicitations or advertisements to the FTC at 1-877-FTC-Help (382-4357) or online at www.ftc.gov

Things you should NOT do: • Do not make any payments to either secure a prize or improve your chances of winning a prize. • Do not be intimidated into making hasty financial decisions by high-pressure sales tactics. • Do not provide anyone with your sensitive personal or financial information unless it is to an entity whose legitimacy is personally known to you or you personally initiated the contact with the entity. • Do not send funds via wire or electronic money transfer services unless it is to an entity whose legitimacy is personally known to you or you personally initiated the contact with the entity. • Do not be lured by offers that are simply too good to be true ...they almost certainly are.

IF YOU SUSPECT FRAUD, CONTACT YOUR LOCAL FBI FIELD OFFICE OR SUBMIT A TIP ONLINE AT HTTPS://TIPS.FBI.GOV 

 

I trust you find this information useful in preventing Identity Theft.  Please pass this blog post along to any one you feel that would value this information.  THE GREATEST COMPLEMENT I CAN RECEIVE IS YOUR RECOMMENDATION TO A FRIEND OR FAMILY MEMBER! 

 

First time Homebuyer Tax Credit given new life! Extented and Expanded??

I was originally going to post some information on the reported extension of the homebuyer tax credit, but I thought is prudent to wait for more news to materialize about the details of the proposed extension and expansion of the first time home buyer tax credit.

I first heard of the extension from a blogger on Active Rain. In classic fashion senators said it's a done deal. Leaving out that there are many issues still unresolved.  Here is where we stand as of October 29th.  The tax credit would be extended through the end of June.  The home must be in contract by April 30th, 2010 and close no later than 60 days.

  Move up buyers would get a new tax credit: "Tax credit for move-up buyers will be less than for first-time buyers, but still significant. They will qualify for a credit of up to $6,500 and must have owned their current homes at least five years. Under the current program and the new one for 2010, first-time buyers qualify for up to $8,000 and cannot have owned a home for the past three years."

One other provision still being worked out is adjusting the income limitations to raise them to $125,000 for a individual and 225,000 for a couple filing jointly.  This is up from the previous of $75,000 to $150,000 that is currently in place for the current tax credit.

I was never a big fan of the tax credit however, it has been a motivating factor for many buyers and has generated over 400K in new home purchase transactions.    It was a large factor in GDP growth in Quarter 4 of this year (for the first time in 4quarters.)  However I always thought that ending the credit in November was a double negative. In the real estate industry, we all know the months of November & December are seasonally slow.   And I don't believe this is going to spur major activity over the holiday season, it will keep it from completely falling off.  Keep in mind that this still has some final tweaking before the final bill is done, but I think with today's market reaction, to return to strong job growth the economy needs to keep heading in the right direction, up. The extension of the tax credit may be the thing that keeps this economy on the road to recovery.

Time is running out to utilize the FREE $8,000 tax credit

That's right time is running out for First-time home buyers to utilize the tax credit.  As you know it's for first time home buyers(also for folks that haven't owned a primary residence for the last 3 years.) Read more about it on my previous post. 

Here is the deal.  I have already felt the effect of the economy stabilizing business over the last few weeks has been intense.  Once you read through this time-line you will see why the next few weeks/months are crucial.

To qualify for the First-Time Home Buyer Tax Credit you must buyer your home prior to December, 1 2009.

Let's take a typical home purchase and work backwards.

• November 30th, 2009-Transaction must close by the 30th to qualify. This is the Monday following Thanksgiving.  Plan on signing or eating turkey???
• November 19th, 2009- Last realistic day to sign to close by the 30th
• October 5th, 2009 - Critical contract date.  In order to ensure that the contract can close by the 19th I recommend that you go pending inspection no later than Oct 5th.  Given that negotiations can take time this would assume you make your offer no later than Oct 1st.
• September 7th, 2009 - Begin your search in earnest.  Sometimes it take 3-4 weeks to find your home.
• August 28th, 2009 - Ideally, you would begin to speak to a lender and work to get pre-qualified.

***Keep in mind that if the home you decide on is a "Short-Sale" or "Foreclosure"  You may be out of time already.  Some take 3-6 months to close. 

H. Jackson Brown, Jr. said, "Nothing is more expensive than a missed opportunity." and this missed opportunity could cost you $8,000

Good News for Today's Home Buyers

The Truth about today's Market.(that nobody is talking about)

It is easy to understand why you might lack confidence in buying or selling a  home in today's economic climate, especially if you started your day reading the newspaper headlines and end it with the evening news.  Bad news can deepen our fears and concerns about the economy.  That news however is changing a bit.  Take a look at some of the most recent news headlines:

http://www.thebostonchannel.com/news/20063753/detail.html

http://www.reuters.com/article/GCA-Economy/idUSTRE56E4WT20090715

One thing you need to remember is that the media like to be dramatic and it selectively reports negative/sensational news to pull in an audience(and advertisers.)

There has been a plethora of reports about foreclosure records and here are the facts. 

During a recession, those that work hard and focus on taking action will most likely come out ahead when things turn around.  Instead of internalizing the negativity the  headlines can cause, choose to be optimistic and focus on the opportunities around you.

The good news is that you have the choice to see yourself as a victim or as a fighter. 

Are there people buying and selling homes today? Yes, Here are the local homes sold in the last 90 days.

• Sammamish - 144 homes and condos sold.
• Issaquah - 221 homes and condos sold
• Redmond - 276 homes and condos sold
• Kirkland - 262 homes and condos sold
• Bellevue - 333 homes and condos sold

Here is how buyers can win in today's market.

• First-time buyers: HOMES ARE AFFORDABLE-If you've been dreaming about owning your own backyard, then now is a great time to purchase your first home. Not only are your choices abundant, but interest rates are at a historic low. In addition , the recently passes Economic Stimulus Bill of 2009 provides for a tax credit for as much as 10% of the primary residence purchase- up to $8000! And because you don't have a home to sell, you are in a prime position to leverage this incredible opportunity.
• Move-up buyer: SELECTION IS GREAT- Now is definitely the time to buy the home you've always wanted. With inventory levels at an all-time high, you will have plenty of choices to ensure you get everything on your checklist!
• Investor: YOUR BUYING POWER IS UP- Prices ave adjusted on average 12% across the country.  That means this is a prime opportunity for you to purchase low or buy more for your money. And financing is still available at historically low rates.  If you are looking to build long-term wealth with real estate, don't miss out on taking advantage of this market!

There is still time to take advantage of lower home prices and historically low interest rates. And despite what the nightly news reports, financing is reeadily available for qualified buyers.

As you know we seek to provide you and your referrals with the highest level of service available.  If someone you know is interested in knowing more about the housing market. Please contact us at 206-818-8816  Feel free to distribute this flyer to interested parties.  Here is the link!

Rate Lock Advisory for June 22, 2009 - Don't lock yet.

This week will likely prove to be very active in terms of mortgage rate movement due to the economic data and other events that are scheduled. There are six economic reports scheduled for release, but in addition to the data another Federal Open Market Committee (FOMC) meeting will be held and another round of Treasury sales are on the calendar. Together, we have the makings of a potentially volatile week in the financial and mortgage markets.

There is no relevant economic news scheduled for release tomorrow. Tuesday brings us the first data with the release of May's Existing Home Sales report. The National Association of Realtors will give us figures on home resales. This data helps us measure housing sector strength and mortgage credit demand, but it is one of the week's less important reports. It is expected to show an increase in sales from April to May.

The only important release scheduled for Wednesday is May's Durable Goods Orders, which gives us an indication of manufacturing sector strength. It is known to be quite volatile from month to month and is expected to show a decline of 0.5% in new orders from April to May. A larger decline would be the ideal scenario for the bond market and could lead to a decline in mortgage pricing Wednesday.

Also Wednesday is the release of May's New Home Sales that is similar to Tuesday's Existing Home Sales report. This report tells us how well sales of newly constructed homes were last month. It is also expected to show a rise in sales, but will likely not have much of an impact on mortgage rates because this data is considered to be of low importance to the markets.

The FOMC meeting that begins Tuesday afternoon will adjourn Wednesday afternoon. It is widely expected that Mr. Bernanke and company will not change key short-term interest rates at this meeting. But, as we have seen so many times in the past, it is the post meeting statement that often creates the most volatility in the markets. They could give an opinion of the overall economy or inflation, hinting at a possible future move or lack of one. Statements like these could cause a knee-jerk reaction in the markets and possibly mortgage pricing Wednesday afternoon.

The only relevant economic data scheduled for release Thursday is the final reading to the1st Quarter GDP and weekly unemployment claims. The GDP data is quite aged now (covers January through March) and will likely have little impact on the bond market or mortgage pricing unless it varies greatly from previous readings. Last month's first revision showed a 5.7% decline in the GDP. This month's second and final revision is expected to the same decline.

May's Personal Income and Outlays data will be posted Friday morning. This report gives us an indication of consumer ability to spend and current spending activity. Analysts are expecting to see an increase of 0.2% in income and a 0.4% rise in the spending portion of the report. Smaller than expected increases should be good news for the bond market and mortgage rates.

The second report of the day and the last important data of the week will come from the University of Michigan who will update their Index of Consumer Sentiment for May. An upward revision would be considered a negative for bonds.

Also worth noting is the fact that the Fed will be selling $104 billion in new debt this week. These sales may influence trading enough to affect mortgage rates. There are sales every day except Friday but the two most likely to affect rates are Wednesday and Thursday's sales. If they are met with a strong demand, we could see bond prices rise some during afternoon trading. This could lead to afternoon improvements to mortgage rates. But, the sales draw a lackluster interest from investors, mortgage rates may move higher during afternoon trading.

Overall, tomorrow will likely be the quietest day of the week. The most active should be Wednesday due to the importance of the data and FOMC meeting. Friday's news may also affect mortgage rates, but likely not as much as earlier days. This would definitely be a good week to maintain constant contact with your mortgage professional.

If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.