Rates
Well once again, a roller coaster ride for rates this week, and yesterday, we even ticked to a brand new high for interest rates. Overall for the week, rates were up, again.
So let’s review some of the number for the week:
-ISM manufacturing: 55.7 vs est of 54.0 (bad news for rates, more positive manufacturing.
-ISM Service: 58.6 vs. est 55 (more bad news for rates)
-ADP payroll, 176,000 vs. est 180,000 (more jobs, bad news for rates)
-initial jobless claims: 323,000 vs. est 330,000 (another week below 350,000)
So all of these reports, and a few more point to the economy growing, thus rates continued their upward climb, anticipating the September 18th looming R-Day.
Today, we have a little pull back, unemployment came in at 169,000 vs. est 180,000 AND the bigger number is July was revised down from 167,000 to 104,000 jobs.
This caused all those traders yesterday who sold off, buying today, thus erasing most of our negative gains from yesterday, so what does all this mean.
Well first of all, yesterday we tested the 5.0% mark for the first time in 3 years, pulling back today in to the High 4’s for conventional financing. And government rates pulled back from the high 4’s to the low 4’s.
This unemployment number has a few more people scratching their heads on what the Federal Reserve is going to do on September 18th, but most feel that the Federal Reserve is going to reduce their process of forcing Interest Rates down and start tapering off.
So what does that mean, well in the last 3 months, the Federal Reserve has not done anything but speak about the potential, potential of tapering off. This has caused interest rates to go from 3.25% to almost 5.00% yesterday.
When the Federal Reserve does start tapering off, we could see rates jump from the 4.75% today, to the high 5’s in a matter of 30 days.
Time to Buy/Sell: My opinion YES!
That will mean people who were qualified for a home, might not be qualified for a home now. Great example is one of our clients who was sitting on the fence post, after today, we pretty made the decision for them.
They were originally qualified for a home, when rates were at the 3.25%, and now that FHA is today at 4.25%, and sneaking up to the 4.50% mark, we told them that their either need to find a lower price home or we can’t get them a loan.
Oh by the way, home prices have jumped, so now they only qualify for a lower price home, those homes do not exist anymore.
This is not the market to wait to purchase or sell a home.
The longer a person waits to purchase a home, the less and less they are going to get a home. If you look way back in my blog, I indicated that a person making $8.25 per hour could afford a $90,000 home. That was so 2 years ago.
And for all of those of you who are waiting to sell your home, this is a tough decision. Do you wait and see how much equity you can get, all the time, less and less people are going to be able to afford the home?
Plus the fact that the longer a person waits to sell, the higher interest they will pay on their new home and that new home price is going up also.
Time to seize the moment!
Loan QM update
If you don’t know already, come January all new lending rules will be going into affect, these are called QM (qualified mortgage) and QRM (qualified residential mortgage).
Over the next few months I will be updating on my blog this mess that is going to really cause less and less people to qualify for mortgage.
Today we talk about 2 types of loans now going to be no longer available.
1-Interest Only loans, for good reason these will not be available past 1/14/2014. Interest only were bad, bad for primary residences, and may or may not have been bad for investment properties, never the less, they are history!
2-97% financing, yep we have 97% financing conventional, but come 1/14/2014 they will no longer be available, and they will have to bring in 5%+ for conventional financing. Which means FHA loans at 3.5% will be the only loan available with a lower down payment, and FHA really bites now because of the high Mortgage Insurance, and the fact that MI is permanent.
FHA Back to Work program
Lenders this coming week are going to release FHA back to work program, there is a flyer attached to the right of the blog, and also to my weekly email. But here are some of the highlights:
-Person who is +12 months out of Bankruptcy (BK), Short Sale (SS) or Foreclosures (FC) eligible to purchase a new home.
-Cause of the BK, FC or SS was beyond their control.
-3.5% down payment required.
-Seller can pay closing costs.
Requirements:
-Reduction of income by 20% or more caused the BK, SS or FC.
-Loss of job caused the BK, SS, or FC
-Was beyond your control, i.e. you didn’t get canned because you took a swipe at your boss.
-Have established good credit or recovered from the BK, SS or FC.
-Taken approved HUD counseling class
This is going to be a pretty good program for those clients where really took it on the chin during the recession.