With mortgage rates are hovering near all-time lows, lots of Americans are taking advantage of refinance and home buying opportunities.
The downside of today’s unexpectedly-low rates, though, is that mortgage lenders are ill-equipped for the rush of new business.
As a result, the process of underwriting and approving new mortgage applications is taking some conforming lenders as long as 2 months to complete.
This is double the time needed as recently as six months ago.
Because there may be 60 days between the application date and the closing date, it’s important for applicants to remember that mortgage approvals can be revoked at any time prior to funding.
As mortgage applicants, there are many events that are out of our control — job security and health matters, for example. But there are also events that are within our control.
Knowing that mortgage approvals can be fragile, here are 8 things you should absolutely not do while your home loan is in process. It may be the difference between being approved by the bank, and being turned down.
- Don’t buy a new car or trade-up to a bigger lease.
- Don’t quit your job to change industries
- Don’t switch from a salaried job to a heavily-commissioned job
- Don’t transfer large sums of money between bank accounts
- Don’t forget to pay your bills — even the ones in dispute
- Don’t open new credit cards — even if you’re getting 20% off
- Don’t accept a cash gift without filing the proper “gift” paperwork
- Don’t make random, undocumented deposits into your bank account
Now, avoiding these items may not be practical for everyone. For example, if your car lease is expiring and you need a larger vehicle, it doesn’t mean you can’t buy the car — just check with your loan officer first to be sure the new payments won’t “break” your approval.
The same goes for accepting cash gifts from parents. There’s a right way and a wrong way to accept gifts and doing it the wrong way may prevent you from using the gift as a source of downpayment.
Mortgage lending is full of “gotchas” and with underwriting times stretching to 60 days, it’s a lot more likely that a mortgage applicant will trip into one. Following these 8 rules, though, is a good start.
Lead and other toxic metals are in the products we use everyday and the surfaces with which we come into contact. Lightbulbs, for example, or painted window sills.
Unfortunately, washing your hands with soap and water — even with the use of a disinfectant — doesn’t cleanse you of dangerous lead dust.
Instead, a heavy-duty wipe like Hygenall is required.
Hygenall is a cleansing wipe that removes metal oxides from the skin’s surface, including lead. The wipe creates a specially-formulated lather that traps heavy metals and pulls them away from the skin.
The Hygenall website recommends its lead-remover for a wide group of people including:
- Pregnant mothers
- Children in daycare
- Sportsmen, policemen and others weapon-handlers
- Construction workers
In addition, the site links to numerous lead poisoning studies including one that references “take-home” lead — the scenario in which a working parent in one of 100 industries is exposed to lead at work and introduces lead dust into the home.
Hygenall doesn’t cure lead poisoning, but it may go a long way toward preventing it — including contaminating a person’s home.
Buy Hygenall in a 3-pack for cheap at Amazon.com.
If you’re in want of a cash out refinance, the most liberal cash-out program in town is about to make qualification more difficult.
Effective April 1, 2009, the FHA is reducing the maximum loan-to-value on cash-out refinances by 10 percent, dropping the loan size limit from 95% of the home’s value to 85%.
In its official press release, the FHA days it’s making the change to “limit its exposure to undue risk”.
It also lists the following cash-out requirements:
- With less than 12 months since the purchase date, a home’s value cannot exceed its original purchase price — even if home improvements were made.
- A homeowner must be current on his mortgage payments to qualify
- A second, verifying appraisal may be necessary, depending on loan traits
- Co-signers may not be added to the mortgage note in order to qualify
The last day to register a FHA 95% cash out refinance is Tuesday, March 31, 2009. The loan does not need to be “locked” — only registered.
So, if you know that a 95% cash out FHA refinance is in your future, talk to your loan officer before Wednesday morning about registration.
The national housing market got its third piece of good news in 3 days:
- Monday: Existing Home Sales up
- Tuesday: Home values appear higher nationally
- Wednesday: New Home Sales up
And although national real estate statistics are irrelevant to the local markets in which real estate transactions happen, to a country of would-be and wanna-be home buyers, repeated positive news on housing can be a strong signal that it’s time to get off the sidelines.
At least, that’s what the data is showing us. According to an industry trade group, first-time home buyers accounted for half of all sales of previously-owned homes.
The stimulus package’s $8,000 tax credit likely played a role in this 50 percent figure, as well as sagging home prices in most markets and low mortgage rates nationwide.
But lest we carried away, we can’t forget that February’s New Home Sales is still the second-lowest tally on record and that two months of data doesn’t define “turnaround”.
On the other hand, if the trend continues through the Spring Buying Season, we’ll likely look back at Winter 2009 as the low point in housing.
Don’t look now but oil prices are climbing.
This should worry today’s home buyers and would-be refinancers because some of the same forces that helped to push crude past $50 for the first time in 4 months also cause mortgage rates to rise.
March 18, the Federal Reserve committed an additional $1.15 trillion to support the economy.
Since the announcement, investors have questioned whether the Fed is purposefully spurring inflation. The Fed’s total debt purchases now total $1.75 trillion.
And to finance its purchases, the Federal Reserve is printing new money, devaluing the U.S. dollar along the way. This then leads to inflation which, all things equal, causes oil prices to rise, gas prices to rise, and mortgage rates to go with them.
As we’ve seen the last few summers, oil prices and mortgages seem to touch their yearly high points while the weather is warmest.
Each month, the National Association of REALTORS
With the official start of Spring last week comes the official start of Spring Cleaning Season nationwide.
In some homes, Spring Cleaning is an annual ritual, tackled within one sweat-filled, rubber-gloved weekend. In other homes, it’s a less serious endeavor.
Either way, it helps to have a game plan.
Courtesy of Martha Stewart’s website, the Spring Cleaning Organizer is a 9-step checklist covering all of the basics.
- Clean shades and windows
- Sort through wardrobes
- Clean and rotate mattresses and cushions
Most of the checklist items can be retired with household cleansers and vacuums. A few, however, require heavy-duty appliances that you may not have at-home. For example, cleaning carpets and rugs is best-handled with a steam cleaner; and, washing windows may be too dangerous, depending on your home.
If you don’t want to rent cleaning equipment from your local hardware store just for Spring Cleaning, consider hiring an Angie’s List contractor to do the job for you. It will cost more money than doing it yourself, but the job will get done right (and your home will be clean).
The Spring Cleaning checklist also reminds homeowners to check the batteries of in-home safety devices like smoke alarms, carbon monoxide detectors, and flashlights.
For the fifth time in a year, rate shoppers learned an important lesson this week: When mortgage rates plummet unexpectedly, they often recover just as fast.
Wednesday, the Federal Reserve’s newest $750 billion mortgage market pledge helped to push conforming mortgage rates near their lowest levels since WWII.
24 hours later, however, those rates were expired.
After considering the long-term implications of the Federal Reserve — literally — printing new money to service the recession, markets grew fearful that the Fed’s interventions will eventually lead to inflation. Inflation, of course, is the enemy of mortgage rates.
So, if you’re looking for the explanation of why rates rose as suddenly Thursday as they fell the day prior, this is it. And, in hindsight, rate shoppers might have seen it coming, if only because we’ve seen the exact pattern 4 other times:
- After the Fed’s “surprise” rate cut in January 2008
- After the Fannie Mae and Freddie Mac takeovers in September 2008
- After the Fed announced its first $500 in support in November 2008
- After the Fed zeroed out the Fed Funds Rate in December 2008
Sharp drops in mortgage rate, it seems, are followed by immediate bounce-backs.
Unfortunately, not every would-be refinancing homeowner saw the increase coming. People that locked Wednesday captured the lowest rates in 6 decades. Everyone else wishes they had.
From day-to-day, we don’t know if mortgage rates will rise or fall. Nobody knows that. But, we do know that mortgage rates tend to follow patterns and we’ve seen the above pattern 5 times now.
When mortgage rates plunge like they did Wednesday, they rarely low for long. When you find a rate you like, get in and get locked as soon as possible. By tomorrow, it’s likely to be gone.
The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today, within the target range of 0.000-0.250 percent. This doesn’t mean the Fed stood pat, however.
On plan to resurrect the economy using “all available tools”, today, the Fed announced a new, $1.5 trillion round of fiscal support for the treasury and mortgage markets.
The stimulus will likely be Thursday morning’s headline story.
In its press release, the FOMC touched upon a few of the prevailing economic issues, using these points as a legitimizing backdrop for its newest debt load:
- Job losses and wealth loss are dragging down consumer spending
- Some U.S. trading partners are falling into recession
- Businesses are cutting back on investment and inventory
Of interest is that the FOMC said today’s inflation levels may be too low to support economic growth at all. This condition is more commonly called deflation. The Fed’s latest actions, therefore, may be a deliberate attempt to induce inflation through unprecedented borrowing.
For home buyers and potential refinancers, this is terrific news — at least in the short-term. By introducing new demand for mortgage bonds, the Fed will help pressure mortgage rates lower. Already this afternoon, mortgage rates fell and they will continue to fall until the market reaches a new equlibrium.
After the Fed’s last intervention, markets reached their balance point in about a day-and-a-half.
Parsing the Fed Statement
The Wall Street Journal Online
March 18, 2009
There’s a mixed message in February’s Housing Starts data and it may be a good sign for home sellers in the near-term.
A more thorough inspection, however, reveals a different story.
The 22 percent figure applies to all homes built — including apartment building units. Isolating residential units, February’s housing starts rose by just 1 percent. Furthermore, the data’s margin of error is 11 percent.
Statistically, we can’t know if residential housing starts really rose last month, or if it fell instead. What we do know, though, is that the number of building permit requests rose.
Permits to build single-family homes were up 11 percent in February nationwide.
To home sellers, the rise in building permits may confirm that a housing market turnaround is already underway. Builders wouldn’t be putting new inventory on the market, after all, without being sure of their ability to sell it 9 months hence.
The headline figure of 22 percent is attractive, but it’s not completely honest. It’s not the number of housing starts that matter so much right now as the number of housing permits. A rise in permits signals that homebuilders — a group that’s lost a lot of money in the last 2 years — think the worst of housing is already over.