Category: General Mortgage Info.

Mortgage rates cycle to 7-year highs

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Happy Birthday to Lance Armstrong who is celebrating the start of his 48th trip around the sun.  Many people believe Lance is the greatest abuser of performance enhancing drugs in cycling history but I’m not sure.  I think Elliott from the movie ET has some answering to do.

Mortgage Rates

Home loan rates have been cycling higher since the end of August.  Mortgage rates have now increased by +.25% and are at 7-year highs.  

Trade Wars

Earlier today President Trump announced the US would be imposing tariffs on approximately $200 billion worth of Chinese imports.  The Chinese government wasted no time in announcing counter tariffs on roughly $60 billion of US exports.  

Normally I would expect these announcements to potentially help US interest rates because it would be a bad sign for the stock market.  However, the US stock market is trading higher today and US interest rates are suffering.

More Contradictions

Last week it was reported that average hourly earnings increased by 2.9% for American workers.  This was hotter than expected and stoked fears of wage-based inflation which is not friendly to home loan rates.  However, in a separate report the Consumer Price Index was reported to have only increased by 2.2% which is very close to the Fed’s target.

The Fed

Speaking of the Fed they will be meeting next week and announcing a +.25% hike to short-term interest rates on Wednesday.  The Fed does not directly influence home loan rates (don’t believe me? See HERE).  Furthermore, we already know the Fed will be hiking rates and that news is built into the mortgage rates available today.

The Week Ahead

This week’s economic calendar is heavy on housing date with housing starts, building permits, and existing home sales due out.  

I am hopeful that mortgage rates reverse lower but for now momentum is not on our side.  I will remain in a locking stance.

Current Outlook: locking

Mortgage rates continue to trend higher

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Today marks the 17th anniversary of the horrible 9/11 attacks.  Virtually every US citizen’s life were altered that day. If you’ve never heard the incredible and inspiring story of Welles Crowther (AKA “the man in the red bandana”) I encourage you to take a moment to watch THIS today.

 Mortgage Rates

Last week I recommended locking and that proved to be the right call.  

Since the end of April conventional 30-year fixed rates have traded within a range of 4.625%-4.875%.  As recently as August 24th mortgage rates were available at the lower end of that range but as of today we are at the top end.  

The last few times mortgage rates have hit these levels they have reversed lower.  I am not confident that pattern will repeat itself this time.

The Fed

The Fed is scheduled to meet in two weeks and according to CME Group there is currently a 98% chance they hike rates by +.25%.  It is basically a certainty.

Yield Curve

As of today there is a .22% difference between the yield on the US 10-year treasury note and the 2-year treasury note.  After the Fed hikes rates in two weeks we could see the yields on par which means we’d have a flat yield curve.

If this happens I would either expect an economic recession in the next 12-24 months or  longer-term interest rates to increase (including for mortgages).

On a side note the flattening of the yield curve is also reducing the difference between 30-year and 15-year fixed rate mortgages.  There is currently only a .25% advantage for 15-year amortizing loans.

The Week Ahead

There are a number of Fed officials speaking this week and their comments can always influence the markets.  On Thursday we’ll get the latest Consumer Price Index report and on Friday we get the latest reading for Retail Sales.

Momentum is not on our side.  I think mortgage rates will worsen by another .125% before stabilizing.  I will maintain a locking bias.

Current Outlook: locking

Rates modestly worse, home prices projected to increase at a decreasing rate

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

On this day in 1998 two graduate students from Stanford University incorporated their business which was named after the mathematical term for 10 to the 100th power (“1” followed by 100 zeros).

Had you invested $100 in their internet search engine business on that day your initial investment would be worth over $41 million today (91% annualized return).  Don’t believe me? Google it.

Housing

Although investing in a home is not as profitable as being an early investor in a business like Google it can still be fruitful.  

Corelogic released it’s monthly Home Price Insights report earlier today.  The report showed that nationwide home prices increased by 6.2% on average in the past year.  It went on to forecast that home prices will increase by 5.1% in the next year.

It’s important that consumers understand that although the pace of price appreciation is projected to decline home prices are still increasing.  If a consumer put 5% down and purchased a home today and the home appreciated by 5% in the next year their cash on cash return (on paper) would be 100%.  

Mortgage Rates

Last week I recommended a locking bias.  Pricing on mortgage rates indeed worsened modestly.  Interest rates are currently in the middle of the range they have established dating back to the beginning of the summer (30yr fixed: 4.625%-4.875%).  

Technical Trading Patterns

Momentum appears to be working against us but mortgage-backed bond prices and the yield on the US 10-year treasury are trading up against technical barriers.  If yields can bounce lower we may see rates improve by .125%.  However, if yields blow through these levels then expect +.125% higher rates by the end of the week.

The Week Ahead

There are a number of significant economic reports due out this week but none more important than the all important jobs report on Friday.  US-Canada trade talks are scheduled to resume on Wednesday.  If talks indicate a free trade agreement on the horizon I expect US stocks to rise which will hurt mortgage rates.

Current Outlook: locking

Things to know about purchasing a condominium

Posted on by Evan in Swanson Home Loans Blog - Mortgage Rate Updates and More

Hey, guys. Evan Swanson, Swanson Home Loans of Cherry Creek Mortgage here to talk to you today about the differences between applying for a loan to buy a condominium and a traditional detached single-family residence.

Why are there differences?

Well, understand, as a lender, we always must evaluate the collateral for the loan. When a person buys a condominium, they are buying into a small democracy.  The homeowner’s association, which is charged with the responsibility of maintaining the common areas, which is often the structure in which the condominium is located.  Not only do we have to take a borrower through the traditional steps to evaluate their finances, but we also have a separate underwriter look at the condominium itself to make sure the condominium is governed well and has the financial resources to maintain the property over time.

Loan programs

With regards to specific loan programs, what is there to look out for? If you’re using FHA or VA financing, there is a separate approval process that the HOA must go through and that project will be listed on those websites to determine if they are eligible or not. If the property is not eligible, chances are you’re not going to be able to use those types of financing to buy a condo there.

For FHA: https://entp.hud.gov/idapp/html/condlook.cfm

For VA: https://vip.vba.va.gov/portal/VBAH/VBAHome/condopudsearch

A couple other things for conventional and jumbo loans that an underwriter will likely want to look at:

Occupancy

The underwriter might want to measure as a percentage of all the units in the homeowner’s association what percentage are owner-occupied and what percentage are non-owner-occupied.  Lenders like to see more owner-occupied because, in general, those owners will vote for assessments and maintenance investments that will help maintain the building over time.

HOA

Is the HOA currently in any form of legal litigation? If so, litigation has to be complete before a loan can fund, typically. Is the HOA under any major, significant construction? If so, oftentimes the construction has to be completed before a loan can fund.

The underwriter may also want to see if there is a concentration of ownership to a single person or entity? There can be limitations on how much a single entity can own of the entire project.

Residential vs. retail space

And then lastly, does the condo have retail space? Is it a mixed use? If so, there’s limitations on how much of the overall square footage can be allocated to retail and residential square footage.

The bottom line is there’s another set of rules that lenders must follow when helping guide a customer through a condominium purchase.

If you’re thinking about buying a condominium, make sure you’re working with a lender that understands those rules. Of course, if you’re looking for a lender, we would love to be a resource, so contact us today. Talk to you soon. Thank you.

Home Loan Rates modestly worse, Portland home prices entering “Goldilocks” range

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

A recent survey by the national maritime association revealed that 3.14% of sailors are pi-rates.  Why do I share this important statistic with you? Just because yesterday was national Just Because Day.   

Mortgage Rates

Although mortgage note rates are unchanged from last week the accompanying closing costs are modestly worse.

US 10-year Treasury

As I highlighted in last week’s ‘rate update’ the US 10-year treasury note had hit a multi-month low at 2.81%.  Although we were hopeful the yield may dip below this level and drag home loan rates lower it didn’t happen.

The US 10-year treasury yield responded the same way it has since the beginning of June which is higher.  As a result mortgage rates are priced modestly worse than last week.

US Stocks

The equity markets are responding warmly to news that the Trump Administration is close to revised trade agreements with Mexico and Canada.  Good news for stocks is often bad news for US interest rates.

Housing

The latest Case-Shiller Home Price Index report was released earlier today.  According to the data in the report home prices in Portland increased by 5.8% year-over-year ending in June.  

It’s important that consumers understand that the pace of home price gains is declining but home prices are still increasing.  I would argue we’re entering “Goldilocks” territory where the market is not too hot or too cold.  

Technical Trading Patterns

Given that rates are trending modestly higher I think it makes sense to lock now instead of waiting.  

Current Outlook: locking

Yield on US 10-year treasury note holds key to direction of mortgage rates

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Housekeeping: This weekly ‘rate update’ email will now be delivered each Tuesday instead of Monday.  

You may be here today but will you be gone to Maui?  On this day in 1959 Hawaii became the 50th state of the union.  I plan to celebrate when I am on Kauai in January.   

Mortgage Rates

Home loan rates improved modestly last week.  That said, during the month of August mortgage rates have barely budged.  

Housing

Those of in the real estate industry are acknowledging a modest slowdown in activity.  My personal view is that 2018 is the first year since 2014 for where we experience seasonality with demand.

Last week the Commerce Department reported that permits for single family homes decreased by 10% in the western region.  It appears that builders are having a harder time finding affordable and sufficient skilled labor.

This week the National Association of Realtors will release date on existing home sales on Wednesday and new home sales on Thursday.

Aside from that the only significant economic event on the calendar is durable goods which is also due out on Thursday.

Technical Trading Patterns

In the absence of a lot of economic data I expect mortgage rates to react to the stock market (when stocks do well mortgage rates tend to suffer and vice versa) and technical trading patterns.

The yield on the US 10-year treasury note, which home loan rates tend to track, is currently trading at 2.85%.  This is as good as interest rates have been all summer.  

If yields can find a way to break below 2.82% then we could see home loan rates improve by another .125%-.25%.  However, the past couple times that yields have hit this point they have reversed higher and home loan rates have worsened by .125%.

Current Outlook: cautiously floating

How long does a pre-approval last for?

Posted on by Evan in General Mortgage Info.

 

Video Transcript:

Hey guys, Evan Swanson here, Swanson Home Loans, a division of Cherry Creek Mortgage. I’m trying to pack it all into a day, so I’m on my commute home recording the weekly video. This week I wanted to answer the question that we get a lot, which is how long is a pre-approval good for?

WHEN:

Oftentimes, prospective home buyers are trying to figure out the best time to get pre-approved. First off let me say, I think it makes sense to get pre-approved early and often. This way, if we discover issues that are unknown to an applicant, we can try and fix them before they’ve actually found the house they love and want to make an offer on.

FREQUENCY:

Now, to answer the question, typically pre-approvals are good for either 90 or 120 days. And the reason for this is that’s how long the credit report is good for. Credit reports, depending on the type of loan program, will expire after 90 or 120 days, in which case we have to update that.

NOTE:

That said, keep in mind all the information on a loan application is subject to re-verification by the underwriter. It’s not like if an applicant applied today with a job and got laid off a month from now, we wouldn’t be able to simply rely on the job they applied for, we do have to re-verify that they currently work in the job before closing.

CONCLUSION:

Bottom line, pre-approvals are good for 90 or 120 days. I think it makes sense to get pre-approved as early on in the process as possible.

If you’re curious about your circumstances, or what makes sense to you, please contact me today, I’d love to be your resource. Thank you!

Turkey helps US mortgage rates

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Born this week in 1945 iss one of the greatest financial planning minds in US history.  This brilliant financial mind first appeared on late night TV spreading messages such as, “Don’t buy stuff you can’t afford”.  OK, maybe Steve Martin is known more for his comedy but his memorable SNL skit still resonates for me.  

Mortgage Rates

Home loan rates improved modestly late last week thanks to economic turmoil in Turkey.  After Turkish officials jailed a US pastor President Trump doubled trade tariffs against Turkey which caused panic in their financial system.  

Turkey

The Turkish Lira has depreciated rapidly and the financial markets grew concerned that the contagion would spread to other emerging economies.  Uncertainty tends to help US interest rates.

It appears that conditions have stabilized and that panic will not spread but if that changes later this week we may see mortgage rates hit near-term lows.

The Week Ahead

The economic calendar features a couple notable events.  On Wednesday we’ll get the latest reading on retails sales.  Also on Wednesday we’ll see the Home builders confidence index.  More telling may be Thursday’s release of new housing starts and building permits.  

As long as Turkey’s woes remain contained I would expect home loan rates to give back the .125% improvement they experienced at the tale end of last week.

Current Outlook: locking

Conforming loans vs. Jumbo loans

Posted on by Evan in Swanson Home Loans Blog - Mortgage Rate Updates and More

Transcript:

In this post and video, I will summarize the differences between a conforming loan and a jumbo loan.

Loan Amount

The first difference is the loan amount, which is ultimately what defines a conforming loan versus a jumbo mortgage.  For 2018, here in Portland, Oregon, the threshold that determines a conforming loan and a jumbo loan is $453,100.00.

A loan amount at that level or less can be underwritten to conforming loan standards, whereas a jumbo mortgage is for an amount in excess of that and is underwritten to jumbo underwriting standards.

I expect the threshold to increase annually overtime.

Underwriting

The second difference is that conforming loans are underwritten to more standardized and simpler guidelines. Fannie Mae and Freddie Mac have produced underwriting guidelines that are applied to conforming loan applications.

For jumbo mortgages, the market is much more fragmented. There are a lot more than two institutions that underwrite jumbo loans and each one has a different set of rules and guidelines.  Therefore, the criteria to approve jumbo loans is a lot less standardized than for conforming loans.

As you might have imagined, jumbo loans tend to be underwritten to a much higher standard than conforming loans. Let me give you a few examples.

Credit

With regard to credit, typically we see jumbo loans require higher credit scores, and in addition, the applicant must have more credit depth, more accounts and history on their credit report, than a conforming loan.

Income

Second, in terms of income, we measure a debt to income ratio for each loan application.  This calculation takes into account the amount of obligations as a percentage of the income. We typically see jumbo mortgages limited to a debt to income ratio of 43%, meaning 43% of the household’s income can be allocated to obligations and the new mortgage payment. Whereas with conforming loans, we can typically get applications approved to 45% and in some instances, 49.9% percent.  Conforming loans allow for higher levels of monthly obligations relative to an applicant’s income.

Assets

With regard to assets, under a jumbo underwrite, typically the jumbo guidelines will require that the applicant have a multiple of six times the mortgage payment left over in financial accounts after the down payment and closing takes place. Whereas with conforming loans, when buying a primary residence, the underwriter doesn’t necessarily require us to document any financial reserves.

Appraisal

Lastly the appraisal, or the collateral underwrite are different between these types of loans. With a jumbo mortgage we typically always need an appraisal, and in some instances, we might need two appraisals and/ or a review appraisal on top of the initial appraisal. With regard to a conforming loan, we can typically get the loan approved with an appraisal and in some instances even that is waived.

In terms of rates and fees, currently the jumbo and conforming loans are pretty similar, but at times you do see small differences between the two.  The bottom line is the conforming loans will be a little less cumbersome to be underwritten compared to a jumbo mortgage. If you have questions about qualifying for either, I would love to be a resource, contact me today. Thank you.

 

Fed stays put as do mortgage interest rates

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Seventy one years ago a wood raft carrying five people arrived at an island near Tahiti after a 101 day journey from Peru.  The raft was captained by Norwegian Thor Heyerdahl and supported his thesis that Polynesia’s earliest inhabitants may have migrated from South America.  

The story was later made popular in the best-selling book Kon-Tiki.  

The Fed

It looks like it will be about 101 days from the Fed’s last rate hike to the next one.  

As expected the Fed did not hike short-term interest rates last week.  According to CME Group there is a 93% probability that the Fed will hike by .25% when they meet in mid-September.  The Fed last hiked short-term interest rates back in mid-June.

As a reminder the Fed does not directly control mortgage rates but their comments and actions can influence them.  

Jobs Report

This past Friday the Labor Department released its monthly employment report.  It showed that the US economy created 157,000 jobs during July and wages grew modestly.

With the unemployment rate at 3.9% the labor market is deemed to be tight which we would expect to pressure wages higher.  If wages grow too quickly then it could lead to inflation which is not friendly for mortgage rates.

The Week Ahead

Speaking of inflation it is about the only significant event scheduled for release this week.  On Thursday we’ll get a look at the Producer Price Index and on Friday we’ll get the latest reading of the Consumer Price Index.

In the absence of a heavier economic calendar I would expect interest rates to react to technical trading patterns.  The technical signals suggest it will be much harder for rates to improve this week than for them to worsen.  I would recommend carrying a locking bias into the latter half of this week.

Current Outlook: locking