Almost 1 in 3 borrowers who applied for a mortgage in 2008 was denied, the government reported last week.
The Federal Reserve said the denial rate for all home loans was 32%, clear evidence lenders are keeping their standards tight.
Current home shoppers and home owners looking to refinance pay close attention. Mortgage pre-approval is a necessity! Don't gamble by skipping this step. Loan turndowns may be the result.
A true pre-approval requires initial verification of assets, credit and income. Automated underwriting findings can then be obtained. The pre-approval is contingent upon final review of assets, credit and income, but if everything is verified and documented correctly the initial pre-approval is gold.
So, take extra time and effort on the front end. Provide your lender with the last 2 years W-2's ( tax returns if self employed ), most recent paystubs and a 60 day bank statement. Also, thoroughly review and accurately complete the loan application.
Errors on the application are a big source of loan turndowns. If some of the loan application details can not be verified a turndown may result.
Properly executed pre-approvals will identify potential problems before they arise in final underwriting. This will give you and your lender plenty of time to overcome them and move forward to closing.
Mortgage rates are crazy low! If you have an existing FHA or VA loan call today and ask about a SUPER EASY Streamline.
You can streamline any previous FHA or VA loan with little documentation, no credit check, no income verification or asset verification! What could be easier than that?
You must be current for previous 6-12 months and new rate must be at least .50% lower.
Need more info on the streamline process, call me today toll free @ 877-627-9211x104 or email SFowler@HorizonFinancial.org .
You would think last month's Existing Home Sales report signals more trouble ahead for the housing market.
Quite the opposite.
Beyond the headlines is the real story; one that shows housing market fundamentals are coming back into balance.
As home values tick lower, it appears, value buyers are stepping in and snapping up supply. It's true the number of homes sold fell to its lowest levels in 12 years, but we can't ignore the number of homes available to buy fell, too.
Banks have put the brakes on foreclosures
Economic uncertainty is reducing job-related relocations
Builders have all but stopped building new homes
The national housing supply is as low as it's been in more than a year.
Based on the current rate of sales activity, the national housing supply would be 100% sold in 9.6 months -- a two-month improvement from the high point set in June 2008.
Also, demand for homes is expected to rise.
The Fed is trying to hold mortgage rates low
Fannie Mae is opening its checkbook to real estate investors
The stimulus package is granting a $8000 tax credit to first-timers
So, the headlines aren't wrong; they're just incomplete.
In looking at all of the data and not just one piece, we find hope. Falling supply plus rising demand leads home values higher and that's the basis for a recovery.
One popular housing theory is -- before a bona fide housing recovery can begin -- the cost of owning a home versus renting one must return to historical levels.
If that belief is true, a national return to rising home prices may be in store for 2009.
Falling home prices and falling mortgage rates have dropped the relative, after-tax cost of owning a home to 125% of the cost of renting a home.
This is the exact 18-year historical average and not since 2001 has the gap been this small.
As reported by the Wall Street Journal, though, the study has some flaws. For example, the data doesn't account for ongoing home maintenance costs, nor does it consider real estate tax bills and insurance policies.
But, combining a relatively low cost of ownership with the government's $8,000 tax credit for first-time home buyers is likely to convert long-time renters into never-before homeowners.
This is thought to be a key element of the housing recovery.
In many markets (but not all), home prices are expected to move even lower through 2009. Provided mortgage rates stay low, the cost gap between owning and renting will shrink even more.
Consumer confidence reached an all-time low and 100,000 Americans were issued layoff notices last week. For the 3rd consecutive week, mortgage rates rose and average loan fees increased.
Amid all of the negative economic news, however, there were two bright spots worth identifying.
First, the supply of "used" homes for sale fell from 11 months to 9 months nationwide. This suggests homebuyers are re-entering the housing market in force and signals home prices are nearing equilibrium.
And, second, the nation's GDP -- a measurement of the country's complete economic footprint -- didn't fall by nearly as much as experts predicted. A positive surprise like this makes us wonder what else the Doomsday Economists may be wrong about.
We won't have to wonder long.
This week we have a large amount of data, legislation and rhetoric to influence mortgage rates. Some of the news mortgage markets will digest this week include:
The Personal Consumption Expenditures Index report. PCE is a preferred inflation measurement and inflation is the enemy of mortgage rates. A high reading may pressure mortgage rates up.
Retail stores report on same-store sales.
The Pending Home Sales report. This notes the number of "homes under contract" and is a good gauge for buyer interest and the general health of housing.
20% of the S&P 500 firms will report earnings.
Congress is expected to vote on the Stimulus package.
The biggest impact on rates, however, could come Friday with the release of January's jobs report. Employment data is always a market-mover and with the press giving so much attention to layoffs lately, expect Wall Street to be extra jittery it.
With rates at record lows, all lenders have recently seen a sharp increase in loan applications. Remember also, lenders have dramatically reduced their staff over the last 18 months to cut cost. This means timeframes needed for underwriting, approvals and closing have become longer than normal.
There are a few things you can do to protect yourself. First, consider longer lock in time frames. 60 days instead of 30. I have several lenders who've recently priced 60 day locks the same as 30 days. They realize 30 days isn't enough and incent customers to select 60 day locks.
Next, responding quickly to requests for information or documentation is important - the faster the file is submitted and approved, the better off we are to keep that great interest rate protected.
Finally, be aware it may be a smart idea to pay points to gain the best interest rate - and sometimes is even necessary in today's market. Fannie Mae and Freddie Mac have recently imposed more "risk-based pricing adjustments", meaning even credit scores and loan to values which in the past would have been considered very low risk, may now be subject to mandated fess by Fannie and Freddie.
Right now is still an excellent time to act, before the great low rates of today get away from us. Don't try to squeeze every last drop out of rates. It's an impossible task. If you are within a quarter percent of the lowest rates offered in the history of our country, you did very well. And rates always shoot up higher at a much faster pace than when they dip lower. But let's be smart - call or email for information on how we can get started right away.
Mortgage Bonds are off to a great start in 2009, as the Fed begins its planned purchase of $500B Mortgage Backed Securities. This process will continue gradually through June and should improve Mortgage Bond prices. What does this mean in plain English. LOWER RATES!!! For today, there are no economic reports due out, so Mortgage Bonds will likely respond to today's Fed announcement.
In other news, President-Elect Obama's new stimulus package will reportedly be worth $775 Billion and will include hundreds of Billions of dollars worth of tax breaks and credits for individuals and businesses. This is good news for the economy and should help with consumer confidence over time.
Currently, I recommend floating, as Mortgage Bonds ride a nice long-term trend higher. Remember, with today's continued volatility and sharp swings in the market, trusted market knowledge is as important as price in your rate decision. If you have any questions or concerns, please contact me. I'll be happy to help.
With home loan rates at historic lows, there has never been a better time to examine your own home loan situation and plans for the future. Sometimes human nature drives people to be a little greedy and attempt to wait for even lower rates before acting...but the opportunity cost of missing the savings that could be benefited from right now - by waiting for something that may never happen - could quickly mount up into thousands of dollars. Take a minute and get in touch with me. Let's take a look at your situation, and ensure you are saving all the money that you can, and positioned correctly for your future home and financial plans.
Looking ahead to the new year, I do see Bond prices revisiting the highs seen last week and for rates to improve, but it will likely continue to be volatile. For now, I recommend floating. Merry Christmas!
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
One popular housing theory is -- before a bona fide housing recovery can begin -- the cost of owning a home versus renting one must return to historical levels.
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