10 Apr 2023
By Kevin Gahagan

What’s Ahead For Mortgage Rates This Week – April 10, 2023

Financial Reports

What's Ahead For Mortgage Rates This Week - April 10, 2023

Last week’s economic reporting included readings on construction spending and labor sector readings on employment and the national unemployment rate for March. Weekly readings on mortgage rates and jobless claims were also released.

Commerce Department: February Construction Spending Falls

The U.S. Commerce Department reported less construction spending in February than in January as construction spending fell by 0.10 percent to a year-over-year reading of $1.844 trillion for all types of construction. Year-over-year construction spending increased by 5.20 percent.  While total construction spending fell in February, residential construction spending increased.

Spending on single-family home construction slowed due to builders’ concerns over materials costs, supply chains, and a possible economic recession.  Seasonal weather conditions can also contribute to less construction spending during winter. Homebuilders continue to focus on high-end homes, which leaves limited options for first-time and moderate-income homebuyers. High demand for homes and increasing numbers of cash buyers are competing with owner-occupant home buyers who require mortgages to finance their homes.

High home prices and strict mortgage lending standards caused some would-be buyers to rent homes. Multi-family residential construction increased as demand for rental housing expends.

Mortgage Rates Mixed as Jobless Claims Fall

Freddie Mac reported a lower average rate for 30-year fixed-rate mortgages last week. Rates fell by four basis points to 6.28 percent. The average rate for 15-year fixed-rate mortgages rose by eight basis points to 5.64 percent. Initial jobless claims fell to 228,000 new claims filed as compared to the expected reading of 200,000 new claims filed and the previous week’s reading of 246,000 initial jobless claims filed. Continuing jobless claims were unchanged at 228,000 claims filed.

During March the U.S. unemployment rate was 3.50 percent as compared to the expected rate of 3.60 percent and February’s jobless rate of 3.60 percent.

What’s Ahead

This week’s scheduled economic reporting includes readings on inflation, minutes of the Federal Reserve’s recent Federal Open Market Committee meeting, and weekly readings on mortgage rates and jobless claims.

07 Apr 2023
By Kevin Gahagan

A Home Equity Loan Versus A HELOC

Mortgage

A Home Equity Loan VS HELOCIf you are looking for a quick source of cash, you may have been told that you can tap into the equity in your home. If you have at least 20 percent equity in your home, you can borrow against that equity at a relatively low interest rate for a quick source of funding. You might be deciding whether to apply for a home equity loan or a home equity line of credit, which is usually shortened to HELOC. 

Home Equity Loan

A home equity loan is a loan that you will receive based on the equity you have in your home. It is often termed a second mortgage, and it comes with a fixed interest rate. This could make it more predictable when compared to a HELOC, which has a variable interest rate. A home equity loan will also provide you with a lump sum, so it could be a great option if you know exactly how much money you need to borrow when you apply for the loan. In general, you should be able to borrow up to 80 or 90 percent of the equity in your home. 

HELOC

A home equity line of credit is a type of credit that allows you to borrow against the equity in your house up to a certain limit. In general, a lender should allow you to borrow up to 80 percent of the equity you have in your home, but it may vary depending on your financial situation. The lender should give you a certain amount of time within which you are allowed to withdraw money against the equity in your home. This is usually several years. Then, there will be a repayment period, within which you need to pay back the interest and the principal. This period could last 20 years. With this option, you can withdraw money, make monthly payments on it, and then withdraw more money if you need it. 

Decide Which Is Right For You

These are just two of the many options available, so consider reaching out to a professional who can help you decide which one is right for your needs. 

 

06 Apr 2023
By Kevin Gahagan

Why Your ‘Debt-to-Income Ratio’ Number Matters When Obtaining a Mortgage

Mortgage Tips

If you are looking to buy a home, you may want to consider shopping for a loan first. Having your financing squared away ahead of time can make it easier to be taken seriously by buyers and help move along the closing process. For those who are looking to get a mortgage soon, keep in mind that the Debt-to-Income ratio of the borrower plays a huge role in the approval of your mortgage application.

What is a Debt-to-Income Ratio?

A debt-to-income ratio is the percentage of monthly debt payments compared to the amount of gross income that a person earns each month. Your gross monthly income is typically the amount of money you earn before taxes and other deductions are taken out. If a person’s monthly gross income is $2,000 a month and they have monthly debt payments of $1000 each month, that person would have a DTI of 50 percent. The lower the DTI the better. 43 percent is in most cases the highest DTI that potential borrowers can have and still get approved for a mortgage.

What Debt Do Lenders Review?

The good news for borrowers is that lenders will disregard some debt when calculating a borrower’s DTI. For example, utilities, cable, phone and health insurance premium would not be considered as part of your DTI. What lenders will look at are any installment loan obligations such as auto loans or student loans as well as any revolving debt payments such as credit cards or a home equity line of credit. In some cases, a lender will disregard an installment loan debt if the loan is projected to be paid off in the next 10-12 months.

What Is Considered Income?

Almost any source of income that can be verified will be counted as income on a mortgage application. Wage income is considered as part of a borrower’s monthly qualifying income. Self-employed individuals can use their net profit as income when applying for a mortgage, however, many lenders will average income in the current year with income from previous years. In addition, those who receive alimony, investment income or money from a pension or social security should make sure and include those figures in their monthly income as well when applying for a loan.

How Much Debt Is Too Much Debt?

Many lenders prefer to only offer loans to those who have a debt-to-income ratio of 43 percent or lower. Talking to a lender prior to starting the mortgage application process may help a borrower determine if his or her chosen lender offers such leeway.

A borrower’s DTI ratio can be the biggest factor when a lender decides whether to approve a mortgage application. Those who wish to increase their odds of loan approval may decide to lower their DTI by either increasing their income or lowering their debt. This may make it easier for the lender and the underwriter to justify making a loan to the borrower. For more information, contact your local mortgage professional today.

05 Apr 2023
By Kevin Gahagan

How To Successfully Use Your Down Payment to Achieve Your Home Buying Goals

Mortgage

How To Successfully Use Your Down Payment to Achieve Your Home Buying GoalsWhen you are considering purchasing a home, understanding the lending guidelines regarding a down payment is important. 

Here are a few key tips to consider:

Gifting of a Down Payment

There are some programs that will allow you to use a gift for your home down payment. However, before you assume this, make sure you talk to your loan officer. Generally speaking, the lender will require the person making the gift to provide a letter stating the money was a gift and does not require repayment.

Windfalls as a Down Payment

When people hit the lottery or come into money through an inheritance, one of the first things they may consider is buying a new home. However, it is important ot keep in mind that lenders will typically want to know exactly how you came up with your down payment.

Borrowers still need to show a “paper trail” of how they came into money. If your down payment amount has not been “seasoned” the lender may not accept your loan.

What is a Seasoned Down Payment?

Generally speaking, your loan officer will want a “paper trail” to document your down payment. Most lenders require down payment funds to be at a minimum 60 days old. For example, let’s assume a borrower did win the lottery: If they deposit the funds into their checking account and leave it there for 2 months or more, the funds would be considered seasoned.

However not all lending guidelines are the same. Some lenders require even more seasoning to consider the money in your account truly yours. So it’s a good idea to plan well ahead of your purchase date to get your down payment funds in your account if you plan on getting money from another source.

Lender restrictions on down payment funds are fairly common. If you are uncertain if your funds meet the lender’s criteria, talk to your loan officer. In most cases, a lender will require at least one-half your down payment fall into the category of seasoned funds.

The One Place You Can Borrow For Your Down Payment

Some borrowers may use their retirement account or other savings to make their home down payment.  And most lenders are perfectly fine with you borrowing against your own savings in a 401(k) or IRA account. Of course you will likely want to discuss the tax implications with your accountant or financial advisor before making these withdrawals.

Don’t wait until the last minute to discuss your down payment with your real estate agent because you may wind up disappointed. Keep in mind, your real estate professional is available to help guide you through the whole process of buying your new home.

04 Apr 2023
By Kevin Gahagan

Tired of Waiting for Summer? 3 DIY Projects That Will Keep You Busy Until the Weather Warms Up

Around The Home

Tired of Waiting for Summer? 3 DIY Projects That Will Keep You Busy Until the Weather Warms UpDo you find yourself staring out the window, longing for an early sunrise, hot days and late evenings? With spring just around the corner, it might feel like summer is a lifetime away.

However, the good news is that you can be productive around the home while you wait for summer to arrive. Let’s take a quick look at three easy do-it-yourself projects that will keep you busy until the summer sun is shining.

Add A Splash Of Spring-y Color

As long as you are willing to do the prep work, painting is one of the most straightforward home improvement projects you can undertake. It is also the best way to put your own personal touch in each room in your home.

If you haven’t painted before, it is best to start with a single room. Spend an hour or two watching instructional videos on YouTube before you head out and begin buying supplies.

The colors that you choose are up to you, but if you are going for a ‘spring’ look, consider pastel colors including soft greens, powder blues and creamy whites.

New Planters For The Garden

If you have a flower or vegetable garden, building new planters is a fun weekend DIY project. You can make planters out of wood, but a more durable option is to use granite, marble or another hard stone.

Simply buy four slabs of stone and a tube or two of stone adhesive. Line up the slabs together and, using a ruler, ensure they are at 90-degree angles. Caulk or glue the slabs on the inside of where they meet and then tape them together on the outside to hold them until the glue cures.

Bird Seed Rings For Your Feathered Friends

Do you enjoy the sound of birds around your home? If so, bird seed rings are the perfect treat to attract them. Creating these delicious treats is easy. Combine gelatin, corn syrup and flour into a thick paste. Mix this paste with a bag of bird seed, ensuring that it is fully combined. Then mold the rings together using a donut pan. Hang these tasty treats outside for your feathered friends to enjoy.

Investing your time in home improvement projects is an excellent way to wait out the sunny days of summer. If you decide that it’s too much work to renovate and that you would rather explore a new home, give us a call. Our friendly mortgage team is happy to help you get ready for your next purchase.