Michael Bock

Mortgage Loan Originator

What’s Ahead For Mortgage Rates This Week – August 2, 2021

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What's Ahead For Mortgage Rates This Week - August 2, 2021Last week’s economic reporting included readings on home prices, new and pending home sales, and the post-meeting statement of the Fed’s Federal Open Market Committee. Weekly readings on mortgage rates and jobless claims were also released.

S&P Case-Shiller Home Price Indices: Home Price Growth Breaks Records for Second Consecutive Month

National home prices grew by 16.60 percent year-over-year in May according to S&P Case-Shiller’s National Home Price Index. April’s reading reported year-over-year home price growth of 14.80 percent. Home price growth broke records for the second month in a row in May. S&P Case-Shiller’s 20-City Home Price Index reported top home price growth in Phoenix, Arizona, Seattle, Washington, and San Diego, California again held the top three positions for US home price growth.

Home price growth exceeded expectations in the months since the covid pandemic arose as homeowners and homebuyers sought to relocate to less populated areas. Demand for homes continued to exceed inventories of homes for sale; this trend has driven home prices beyond the reach of many first-time and moderate-income buyers.  While affordability issues won’t be solved overnight, some slowing in home prices growth suggested that the national housing boom was easing as demand for homes slowed. Affordability became an obstacle for homebuyers who could not compete with rapidly escalating home prices, high demand for homes, and buyers prepared to make cash offers.

New and Pending Home Sales Fall

Rapidly rising home prices and few choices among available homes caused new home sales and pending home sales to fall in June. Homebuyers were frustrated with low inventories of homes and high home prices. Pending home sales fell by 1.90 percent in June; analysts expected an increase of 0.50 percent for pending home sales. Pending home sales in May rose by 8.30 percent.

June sales of new homes fell to a year-over-year pace of  676,000 sales as compared to May’s reading of 724,000 sales of new homes. Analysts expected a year-over-year sales pace of 795,000 new homes sold.  This was the lowest pace for sales of new homes since the onset of the pandemic.

Mortgage Rates, Jobless Claims Mixed

Freddie Mac reported mixed changes in average mortgage rates last week. Rates for 30-year fixed-rate mortgages rose by two basis points to 2.80 percent, but the average rate for 15-year fixed-rate mortgages fell by two basis points to 2.10 percent. The average rate for 5/1 adjustable rate mortgages fell by four basis points to 2.45 percent. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages.

New jobless claims fell to 400,000 first-time claims filed as compared to the previous week’s reading of 424,000 claims filed. Continuing jobless claims rose to 3.27 million ongoing claims filed last week as compared to 3.26 million ongoing jobless claims filed in the previous week.

The Federal Open Market Committee of the Federal Reserve announced that it did not raise the Federal Reserve’s key target interest rate range of 0.00 to 0.25 percent.

The University of Michigan’s Consumer Sentiment Index for July was released with an index reading of 81.2; a reading of 80.5 was expected based on June’s index reading of 80.8.

What’s Ahead

This week’s scheduled economic reporting includes readings on construction spending and labor sector readings on jobs growth and national unemployment. Weekly reporting on mortgage rates and jobless claims will also be released.

Will Missing Mortgage Payments Impact My FICO Score? Yes – and Here’s How

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Will Missing Mortgage Payments Impact My FICO Score Yes and Heres HowIf you’re like most homeowners, you probably believe that one missed mortgage payment won’t have a noticeable impact on your FICO score. People get behind now and then, and besides, you’ve been faithfully making payments on time for years. How bad could it be?

In truth, even one missed mortgage payment could seriously damage your FICO score. Lenders can report missed monthly payments whenever they choose – they don’t need to wait until a certain date to do it. That means even if your mortgage payment is a few days late, your lender may report it as unpaid.

So what exactly happens to a FICO score when you miss a mortgage payment? Here’s what you need to know.

Payment History: The Single Largest Factor In Determining Your Credit Score

FICO scores are calculated based on several different criteria, the largest of them being your payment history. A full 35% of your credit score is determined by how often you pay your bills on time and in full. And although FICO says that one or two late payments aren’t going to decimate your credit score, they will shave off some points that could have made the difference between a low-risk and high-risk interest rate.

Consumers With Higher Scores Have More To Lose

A 2011 FICO study analyzed the impact of late mortgage payments on consumer credit scores. The study grouped consumers into three groups based on their starting FICO score, with Consumer A having a score of 680, Consumer B a score of 720, and Consumer C a score of 780. The findings?

Even if you have a credit score of 780, being just 30 days late on a mortgage payment can result in a 100-point drop. And it can take up to three years to earn that credit back. In contrast, a consumer with a score of 680 who is 30 days late will see only a 70 point drop and can recover their original score within 9 months.

The takeaway? Contrary to popular belief, people with high credit scores stand to lose more from a missed payment than people with low credit scores.

There Are Varying Degrees Of “Late”

One common misconception is that if you miss a mortgage payment, it doesn’t matter if it’s 30, 60, or 90 days overdue. The mainstream thinking is that late is late is late. But that’s not how FICO sees it.

Although borrowers with credit scores under 700 won’t see much of a decline after 30 days late, borrowers with a higher credit score will. If you have a credit score of 720 and you’re 30 days late on your mortgage, your score will fall to about 640. If you’re 90 days late, that score will fall again this time, to about 620.

That means if you miss a mortgage payment, you need to get in touch with your lender as soon as possible in order make repayment arrangements and hope they haven’t yet reported the overdue payment. It’s your best shot at protecting your FICO score.

Credit scores can be vulnerable to all sorts of factors, which is why if you’re looking into mortgages, you’ll want to consult an expert. A qualified mortgage professional can help you find a mortgage you can afford, so your credit will stay intact. Contact your local mortgage expert to learn more.

S&P Case-Schiller Indices Report Record Rise in Home Prices

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S&P Case-Schiller Indices Report Record Rise in Home PricesHome prices continued to rise at record rates in May according to S&P Case-Shiller Home Price Indices. National home prices rose by 16.60 percent year-over-year in May as compared to 14.80 percent year-over-year price growth in April. The 10-City Home Price Index reported home prices rose 16.40 percent year-over-year and 1.90 percent month-to-month.

20-City Home Price Index Reports 17 Percent Home Price Growth Year-Over-Year

S&P Case-Shiller’s 20-City Home Price Index reported month-to-month home price growth of two percent in May as year-over-year home price gains rose from April’s reading of 15 percent to 17 percent year-over-year home price growth.

All cities participating in the 20-City Home Price Index reported home price gains in May. Three cities held their positions with top rates of home price growth. Phoenix Arizona held first place with year-over-year home price growth of 25.90 percent; San Diego, California reported 24.70 percent home price growth. Seattle Washington held third place with 23.40 percent year-over-year home price growth in May.

Home Price Growth Expected to Slow as Buyers Drop Out of Market

Craig Lazarra, managing director and global head of index investment strategy at S&P down Jones Indices said he found himself “running out of superlatives to describe the record increases in home prices.” Analysts credited homebuyer relocation from urban areas to less populated suburban and rural areas for driving up prices. The pandemic initially drove this trend and continues to do so today. Other factors pushing home prices higher included high demand for homes exceeding homes available. As millennials reach their prime-home buying years, demand for homes will increase. Low mortgage rates also encouraged would-be home buyers into the housing market.

High demand for homes drives home prices up, but slower sales suggest that buyers are reaching a tipping point with affordability. Fewer buyers will raise the inventory of available homes and cause home prices to fall. First-time and moderate-income buyers continue to face affordability constraints in many areas, but home prices likely won’t fall significantly in the near term.

In related news, the Federal Housing Finance Agency reported similar readings for single-family homes owned or financed by Fannie Mae and Freddie Mac. Home prices rose 1.70 percent from April to May and 18.00 percent year-over-year in May. Readings from FHFA include seasonally-adjusted purchase-only data;  refinance transactions were not included.

FHA Cash-Out Refinance – Are You Eligible?

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FHA Cash-Out Refinance – are you Eligible?If you have equity in your home, you may wonder how you can access it. You don’t want to sell your home, but you know you’ve earned a profit from it.

We have many options to secure your home’s equity, one of which is the FHA cash-out refinance. Unlike the FHA streamline refinance, you don’t have to be a current FHA borrower. As long as you meet the requirements below, you can use an FHA loan to cash into your home’s equity.

Qualifying for the FHA Cash-Out Refinance

Like an FHA purchase loan, the FHA cash-out refinance has simple requirements:

  • Minimum 600 credit score
  • Maximum 43% debt-to-income ratio
  • Proof you’ll occupy the property as your primary residence
  • Stable income and employment for 2 years
  • Over 20% home equity
  • Make at least 12 months of timely payments on your current loan

How Much Can You Borrow?

The FHA cash-out refinance allows you to tap into your home’s equity, but you must leave 20% untouched.

Here’s an example: 

Your home is worth $300,000 and your current mortgage is $150,000. With a new FHA cash-out refinance, you can borrow up to $240,000, but first, you must deduct the amount of your outstanding mortgage.

This leaves you with $90,000 in equity.

$300,000 x.8 = $240,000
$240,000 – $150,000 = $90,000

If you can afford the payment without going over the 43% debt-to-income ratio requirement, you could take out $90,000 from your home’s equity, leaving $60,000 untouched.

How to Use an FHA Cash-Out Refinance

The nice thing about the FHA cash-out refinance is you don’t have to justify how you’re using the funds. You earned the equity and it’s your right to withdraw it, but here are a few common uses:

  • Home renovations, repairs, or additions
  • Debt consolidation
  • Pay for college or prepay for a college education
  • Consolidate a first and second mortgage
  • Save as an emergency fund

How to get an FHA Cash-Out Refinance

Securing an FHA cash-out refinance is simple using these steps:

  • Complete an application and get pre-approved by a lender, compare your options and see if you qualify for any other cash-out loan including a conventional cash-out refinance
  • Decide which loan you want, including if you want a fixed-rate or ARM
  • Provide the documentation required including paystubs, W-2s, tax returns, asset statements, and proof of employment
  • Arrange an appraisal time with the appraiser (you’ll need a new appraisal)
  • Work with the loan officer to clear your conditions
  • Close on the loan and receive your cash

Bottom Line

If you’re thinking about tapping into your home’s equity, an FHA cash-out refinance can be a great option, especially if you have less-than-perfect credit. FHA loans have flexible guidelines and allow borrowers to get the money they need to complete their life goals.

You’ve worked hard to earn your home’s equity. If you need it for other purposes, let us help you access it. We’ll discuss your options, go over the costs, and make sure it’s the right option for you!

Homeownership And The American Dream: Is It Changing?

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Homeownership And The American Dream: Is It Changing?There are a few parts of American culture that people believe define this country. One element is the dream of homeownership. There is a strong belief that people need a place to call home. Therefore, since the dawn of this country, the government has tried to incentivize people to purchase a home.

At the same time, there are some people who are looking at the younger generation, wondering if this American Dream is starting to change. Is homeownership still a part of the American Dream?

Americans Still Believe In The Idea Of Homeownership

Hard work and owning a home appear to be inseparable. There is still a belief that as long as people work hard and save money, they can fulfill the American Dream by buying a home. Real estate professionals regularly take surveys that show that people still want to be a homeowner for the sake of owning a home. While it is true that owning a home provides more control and creates investment opportunities, owning a home still has an allure to people that is undeniable.

Millennials Want To Own A Home As Well

Millennials appear to believe most strongly in owning a home, indicating that this is still a part of the American Dream. Even though some people thought that millennials were simply going to rent forever, this is not the case. The reality is that many young adults have not purchased a home because they could not afford one. Student loans and a lack of wage growth compared to housing increases simply made it harder. With interest rates lower than they ever have been in the past, many young adults are ready to make the jump to purchase a home.

Homeownership Is Still A Part Of The American Dream

Ultimately, many millennials simply put off the idea of getting married and having children, so they put off the idea of homeownership as well. Now that this milestone has arrived, there are many young adults who are looking to purchase a home for the first time. This indicates that owning a home is still a key part of the American Dream.

What’s Ahead For Mortgage Rates This Week – July 26, 2021

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What's Ahead For Mortgage Rates This Week - July 26, 2021Last week’s economic reporting included readings from the National Association of Home Builders Housing Market Index, data on sales of new and previously-owned homes, and weekly reports on mortgage rates and jobless claims.

NAHB: Affordability, Shortages of Labor and Materials Impacting U.S. Housing Markets

Housing market conditions are changing according to July’s Housing Market Index produced by the National Association of Home Builders. Although the HMI reading declined by one point in July, ongoing trends including labor shortages, higher prices for building materials, and affordability impacted builder confidence in overall market conditions. July’s index reading was 80 as compared to June’s reading of 81 and the expected reading of 82. Housing Market Index readings over 50 indicate that most builders surveyed were confident about housing market conditions.

Component readings of July’s Housing Market Index included builder confidence in current market conditions, which fell one point to 86;  builder confidence in housing market conditions for the next six months rose two points to 81. Builder confidence in prospective buyer traffic in single-family housing developments fell six points to an index reading of 65. Buyer traffic readings often fell below 50 before the pandemic.

Regional builder confidence readings for housing market conditions were mixed in July. The Northeastern region’s reading was four points lower at an index reading of 75. The Midwest index reading was one point lower at 71. The builder confidence reading in the South was unchanged at 85 and the West’s builder confidence reading dropped two points to 87.

Previously-Owned Home Sales Rise in June

The National Association of Realtors® reported a seasonally adjusted annual pace of 5.86 million sales of previously-owned homes in June. Analysts expected a reading of 5.93 million sales; May’s reading for existing home sales showed an annual pace of  5.78 million homes sold.

Demand for homes since the pandemic started is driven by home buyer demand for homes in less congested suburban and rural areas. Although demand for homes encourages home builders, it also increases home prices when multiple buyers submit purchase offers on each available home. This drives home prices higher and sidelines first-time and moderate-income buyers. High-demand areas are also experiencing more cash offers, which creates difficulties for buyers needing to finance a home purchase.

Housing Starts Rise in July as Building Permits Issued Fall

U.S. housing starts rose in June according to the Census Bureau. 1.64 million starts were reported on a seasonally adjusted annual basis. 1.59 million starts were expected based on 1.55 million starts reported in May. Building permits fell to 1.60 permits issued in June; analysts expected building permits issued in June to match May’s reading of 1.68 million building permits issued.

Mortgage Rates and Jobless Claims

Freddie Mac reported lower rates for fixed-rate mortgages with 30-year fixed rates averaging 10 basis points lower at 2.78 percent. Rates for 15-year fixed-rate mortgages were also 10 basis points lower and averaged 2.12 percent. Rates for 5/1 adjustable mortgages rose two basis points on average to 2.49 percent. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

419,000 new jobless claims were filed last week as compared to 368, 000 initial jobless claims filed in the previous week. 3.24 million continuing jobless claims were filed as compared to 3.27 million ongoing jobless claims filed in the previous week.

What’s Ahead

This week’s scheduled economic reporting includes readings on home prices from S&P Case-Shiller Home Price Indices, data on pending home sales and new home sales will be released along with the post-meeting statement of the Fed’s Federal Open Market Committee. Fed Chair Jerome Powell is scheduled to give a press conference after the FOMC statement is released. Weekly readings on mortgage rates and jobless claims will be published along with the University of Michigan’s Consumer Sentiment Index.

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