DC Market is Getting Hotter: Get Pre-Approved Now

Over the last several months, I keep hearing DC realtors saying the same thing, "Buyers are wanting to buy, but there is very little inventory on the market to sell." In desirable areas, multiple offers seem to be common once again and buyers are getting frustrated loosing out in these competitive situations. According to a report released by the national housing research firm, Metro study Report, the volume of DC metro listings on the market has dropped down to 3.6 months of supply from a peak of 11 months existing supply back in 2008. The limited home inventory in our area is likely to continue through 2012 with strong local job growth, decreasing short sales and foreclosures, and a lack of new buildings coming to market. The best advice for someone looking to purchase is to get pre-approved. Don't wait till you find the house of your dreams, as it may be too late. Do it up front - maybe even before finding a realtor . With the implementation this year of the Dodd Frank bill and FHA (Federal Housing Administration) tightening lending guidelines, sellers are sure to scrutinize, more than ever, a buyers' ability to get to closing. Nobody wants to accept a contract from a wishy washer buyer, even if they may be offering a little more. Getting pre-approved lets the seller know that you are credible, with FICO scores and income that meet the strict criteria of today's lending climate. The benefits of getting pre-approved are many, First, it saves you time and heartache by looking in the right price range. Second, as described above, it makes you a stronger candidate when you do make an offer, thereby increasing your negotiating power. Here are some great tips in starting the pre-approval and buying process: 1) Determine how much you can afford up front, Remember that when you hear the total monthly payment make sure you are looking at the approximate after tax payment. If your lender tells you that you can not qualify for what you want to buy think about a family member co-signing., 2)Have a lender run your credit report to check your scores, sometimes the credit scores you get on line can vary from the scores lenders get from mortgage credit reporting companies, good credit scores are important if you want a good rate, Sometimes it can take as much as 6 months to improve your scores so act now before you start looking for a house. 3)Make sure you enough for a down payment and closing costs. Have your lender calculate what you need for cash in the bank. A rising numbers of young people struggling to buy their first home are being forced to ask their family for help with down payment and closing costs, Work out an arrangement where one day you will pay them back with interest, With FHA and conventional financing you can put down as little as 3% these days!!!! 4) Hire a real estate agent: As a buyer of a home, especially being a first time buyer, you will want to have an agent represent you on your purchase. A buyers agent that you hire will have your best interest in mind and help you in evaluating the value of the property and negotiating the best possible price and terms in making an offer. Additionally your agent can help you with the many facets of the transaction process, connect you with a reputable lender and inspector and other service people. The buyer agent is paid from the transaction by the seller. One of the best ways to select a Realtor to help you find a home is through a referral from a friend, work colleague or neighbor. Another is by going to open houses and talking to the different agents holding the various homes open. Finally, since a full mortgage approval is taking somewhat longer these days it is to your advantage when you make an offer to shorten your financing contingency to 21 days or sooner. Being pre-approved can allow the lender to speed up the loan process and get the appraisal ordered immediately once you have a ratified sales contract. If you can accomplish a faster close date your offer will be looked at more seriously by the listing agent and seller if there are multiple offers. Gregg Busch is a licensed mortgage loan officer and Vice President of First Savings Mortgage. Gregg has over 20 years of mortgage banking experience and can be reached at Gregg@Greggbusch.com.

Mortgage: Dodd-Frank Brings Changes for 2014

As we close out 2013, the mortgage industry is bracing for significant changes. The new year will usher in updated rules, emanating from the Dodd-Frank legislation, as well as the tightening of FHA loan standards. These changes will make obtaining a mortgage more challenging for some folks. The high-cost loan limits on FHA loans are being lowered in 2014. The present high loan limit is $729,000. The new limit will be $625,500. This will put the FHA high limits in line with the high-cost loan limits. Washington, D.C., and most of its close-in jurisdictions are treated as high-cost areas. FHA mortgages enable a borrower to buy a home with a down payment of only 3.5 percent. There are no income limits on FHA borrowers. The allowable debt ratios will be tightened in the new year. The new rule limits the debt limit to 43 percent of income. This number is derived by taking the overall house payment and dividing it by the required payments on installment and credit card debts. The old limits were 45 percent or higher. These rules pertain to any mortgages that will be sold to Fannie Mae or Freddie Mac, which back up the vast majority of mortgages. One option that some lenders will have is to issue mortgages that are not backed by Fannie and Freddie. These are commonly called portfolio mortgages. A portfolio mortgage is a mortgage that is held in a specific bank’s portfolio, instead of being bundled and sold to Fannie or Freddie. The rules on portfolio loans can be more flexible than the rules for non-portfolio mortgages. Portfolio mortgages are usually jumbo mortgages, which start above $417,000, the limit for non-high-cost conventional mortgages. Among the more flexible rules for portfolio mortgages are higher debt-to-income limits and, in some cases, high LTV loans with no mortgage insurance. Expect strict asset requirements with the jumbo portfolio loans. Also, for the super jumbo portfolio loans (higher than $1,000,000), larger down payments are typically required. These requirements get stricter as the loan amounts increase. One result of the new rules will be seen in the once “more nimble” smaller lenders losing some of their flexibility. The larger banks which have large cash reserves will tend to be more eager to lend the jumbo money. This will be seen in aggressive rates and more flexibility. Bill Starrels lives in Georgetown. He specializes in home purchase and refinance mortgages. He can be reached at bill.starrels@gmail.com or 703-625-7355. NMLS #48502


  -The fourth quarter of 2010 is proving to be a most interesting time in mortgages. Rates are fluctuating at near record lows. House prices are trying to stabilize. Underwriting is as stringent as ever. With house prices hovering around their recession-driven lows, this is an excellent time to buy a house in the Washington area. You will need some cash, and you will need to be able to qualify for it with full income and asset disclosure. Underwriters are being very careful when they underwrite mortgages these days. The mortgage application has to be complete, and everything has to be pretty perfect. Credit scores also factor in both the pricing models and underwriting. In non-government mortgages you need very good credit to qualify and excellent credit for the best prices. One of the best gauges of house prices is the Case-Shiller house price index, released by Standard and Poors. Standard and Poors’ August report revealed that 15 of 20 metropolitan areas in the survey showed a decrease in house values. The District of Columbia was one of five metropolitan areas that demonstrated an increase in house prices. The stabilization of home prices in DC has allowed lenders to allow for higher loan to values to be used for conventional loans. A year ago most lenders had to lower loan to value requirements because values were unstable. Appraisals are still problematic, but at least values are stabilizing. Refinancing is picking up its pace again. With mortgage at or near record lows, a lot of people are refinancing again. Even homeowners who refinanced a year ago are now refinancing again. The Washington metropolitan area has another advantage over other areas. DC metro is considered a “high cost” area. What this means is a homeowner can get a conventional or FHA mortgage up to $729,000. In areas not considered high cost, the loan limits are considerably lower, which means those homeowners who have large mortgages will need jumbo money. These typically carry higher rates and are more restrictive. Jumbo money traditionally carries interest rates a half point or higher in rate then a comparable conventional rate. Conventional loans can be sold to Fannie Mae or Freddie Mac. Jumbo loans need to be portfolio by lenders or secured by Wall Street. Beyond fixed rate loans, adjustable rate mortgages are priced very competitively. The two most popular adjustable rate products are 5/1 and 7/1 ARMs. These are fixed for five or seven years before they adjust. If you are going to move in five or seven years, an ARM can be a great loan. If you have a mortgage with a rate with a “5” or higher, consider a refinance. You may be very happy after your initial phone inquiry. Bill Starrels is a mortgage loan officer who lives in Georgetown. He can be reached at 703-625-7355 or emailed at, Bill.Starrels@gmail.com.

Mortgage:November 20, 2013

Economic events drive mortgage rates. The month of November showcased how events drive markets and cause mortgage interest rates to fluctuate. The employment report released on Nov. 8 showed job growth of 204,000 non-farm payroll jobs created in October. This number was considerably higher than the consensus estimates of 120,000. This good news on jobs was very bearish for the bond market and mortgage rates. On the heels of the employment report were the confirmation hearings for Vice Chairman Janet Yellen who has been nominated to replace the current Federal Reserve Chairman Ben Bernanke. Yellen?s remarks had the potential of moving the markets. If confirmed, Yellen will be the first female Chairperson of the Federal Reserve Bank in its 100-year old history. In her testimony Yellen stated that the quantitative easing made a meaningful contribution to economic growth. She went on to say that the resulting ?lower interest rates have been instrumental? for the growth in the housing sector. Yellen addressed the labor participation rate and the long-term unemployed. She said that there should be special focus on employment and didn?t argue when the point was raised that the employment numbers may be potentially higher due to the slack labor participation numbers. Inflation goals are the same as outgoing Fed Chairman Bernanke. It was reiterated that the rate of inflation is well below the goal of a twopercent inflation rate. Yellen stated that the quantitate easing program by the Fed cannot go on forever, but she did not signal that the program was ending anytime soon. The markets liked Yellen?s testimony. After Yellen?s testimony mortgage rates, there was a collective sigh of relieve reflected in the markets after her testimony. Yellen reaffirmed her reputation as someone who has been supportive of Bernanke?s rate and monitory policy. Rates moderated from the higher levels reached after the strong employment report. Rates were basically back to October levels. Jumbo money ? which can be used for loan amounts north of $418,000 with 20-percent down payments ? has been priced better than comparable super conventional money. Expect rates to keep in a relative narrow range for the near term. Historically, mortgage rates are in excellent shape. Bill Starrels lives in Georgetown, where he works as a mortgage loan officer. He can be reached at bill.starrels@ gmail.com or 703-625-7355. NMLS#485021

The Government Shutdown and the Effect on Mortgages

The short-term agreement that ended the partial government shutdown and raised the debt limit ceiling, reached by Congress and signed by President Barack Obama, was greeted by a collective sigh of relieve by the mortgage industry. The immediate reaction by mortgage markets saw an immediate moderation in mortgage rates. Conventional mortgage rates for 30-year fixed rate mortgages were up to 4.625 percent before the agreement was reached. After the agreement was inked, the rates on 30-year fixed rate mortgages came down to 4.25 percent with no points. FHA mortgages were pricing around 4.25 percent to 4.375 percent before the agreement. Post debt-ceiling gridlock, FHA rates on 30-year fixed money was around 3.75 percent. This represented an improvement of more than 50 basis points. If the debt ceiling was not raised, and the government defaulted on its debt, the markets would have been turned on their heads. Interest rates would have skyrocket that quickly. The only folks who disagreed with this dire assessment were the self-proclaimed economists of the Tea Party, which engineered the shut down and the threat of default. The serious consequences of what default would have meant to the economy of the United States and to the world was one of the few conclusions that virtually all economists could agree on. During the shutdown of the government, there were issues for folks trying to close on their loans and move into their new homes. Verification of employment was problematic for many banks which were doing what was once routine. Verifications of government workers buying new homes with a mortgage was a problem. Tax transcripts were unavailable during the shutdown. Some banks put a temporary waiver on this requirement. Rural loan products were stopped during the shutdown. There were many home buyers who could not perform on their contractual dates due to the above circumstances. There are no provisions in contracts that deal with unexpected government shutdowns. How some of these played out will be interesting. Perhaps Sen. Ted Cruz, R-Texas, who engineered the shutdown could explain to these innocent homebuyers what they were supposed to do. Everyone hopes that there will not be a repeat performance by Congress in January. The ramifications on when someone can or cannot close on a home is far reaching for our economy, and this shows how “local” politics can be.

The Federal Reserve Surprises

The Federal Reserve Board of Governors surprised almost all Fed watchers when it decided at its Sept. 18 meeting not to start tapering with its $85 billion bond-buying program. The program consists of the Fed buying $45 million in 10-Year Treasuries and $40 in mortgage-backed securities. In explaining why it chose not to start tapering, the Fed cited continued weakness of the overall economy. They pointed to a few concerns in the current economy; employment, inflation, a recent spike in rates as well as the government sequester. The unemployment rate remains elevated. The labor participation rate is low. This means that there are many workers who are not looking for work, which means the actual unemployment rate is higher, perhaps significantly higher than what is being gauged and reported these days by the Department of Labor. Other worrisome factors that made influenced the Fed’s decision included pullback of government investments because of the ongoing sequester and other cutbacks. The uncertainty of the raising of the debt ceiling and the possible government shut down also part of the concerns. These items are ultimately a drag on the economy. The inflation rate, or lack thereof, was also cited. The Fed has called for a steady 2-percent rate of inflation to one of the foundations for a healthy economy. Currently, the inflation rate is 1.3 percent. This is well below the target. The Fed is concerned about possible disinflation. In chairman Ben Bernanke’s press conference, he showed charts by the Fed that predicted that the 2-percent inflation target would not be reached until 2016. The Chair reiterated that the Fed would not raise the Fed Funds Rate until the goals are archived. Taken at his word, the Fed is not likely to raise the key Fed Funds rate, which is currently at 0 to ¼ percent, until late 2015 or early 2016. In explaining its accommodative monetary policy, the Fed states: “It will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.” The Fed also expressed concern about the recent increases in mortgage interest rates. The Fed is worried the recent spike in rates is hurting the economic recovery. For the time being, the Fed will be very accommodative in an effort to keep the overall economy moving forward. Expect the bond markets and mortgages to readjust yields lower in order to reflect the Fed’s current outlook. Bill Starrels lives in Georgetown where he works as a mortgage loan officer. He can be reached at 703-625-7355 or bill.starrels@gmail.com

Mortgage Rates Climb in an Unsettled Market

Mortgage rates continue to climb to higher levels as the market prepares for an eventual Federal Reserve Bank decision to pull back from its bond-buying program. The Fed has been buying $85 billion dollars worth of bonds and mortgage backed securities in an effort to keep mortgage rates at lower levels. If the Fed pulls back from its bond buying program, the expectation is for bond prices to go down in value and rates to go up. Over the last several weeks, the markets have driven rates on the 10-year Treasury notes up over 100 basis points. Mortgage interest rates have gone up around 150 basis points. The markets have likely priced in a good portion of the anticipated change, when the Fed does pull back on its stimulus program. Economic reports have been fair to good. Housing starts were good for multi-family and less then stellar for single-family homes. House sales have been strong but appear to be showing the effects of rising rates, which have hurt affordability. The latest employment report missed the consensus numbers and was generally a soft report. Additionally, there were downward revisions for the previous two months of employment numbers. The Fed has stated repeatedly that it will not raise the Fed Funds rate until employment goes to around 6.5 percent. Goldman Sachs, among others, does not think the Fed will raise rates until late 2015 or early 2016. Corporate earnings for the latest quarter have been coming in with less then robust numbers. The earnings reports suggest that the economy may be slowing some in the second half of the year. Housing inventory remains tight, and pricing remain at high levels. It does appear in the most recent reports and statistics that the rise in interest rates is dampening the rise in house prices. The housing affordability index is showing the highest readings in years. House prices are clearly rising faster then wages. This coupled with the spike in interest rates have made affordability more difficult for a lot of perspective home buyers. Congress, which reconvenes in September, will launch into its divisive do-nothing mode of governing as the next round of budget talks take center stage. It will be another glaring mess of a lack of governing. This will likely be unsettling for the markets and ultimately the economy. For the near term, expect volatile markets that do not always make sense. Interest rates will remain choppy and on the higher side. Keep focused on the prize of getting that house you want to live in. For your mortgage, simply get the best interest rate of the day and be happy. Bill Starrels lives in Georgetown. He works as a mortgage loan officer. Bill can be reached at 703-625-7355 or bill.starrels@gmail.com

Looking Beyond the Squall

Sometimes, it is a good idea to look beyond the debris left behind by the squall and do an assessment of where things are. Yes, interest rates have spiked from recent historical lows of several weeks ago when mortgage rates were in the middle three-percent range. However, mortgage rates are now moving in a relatively narrow range with the best execution for thirty-year fixed rate mortgages hovering in the mid four percent range. Jumbo rates, for loans above $625,000 in the D.C. metropolitan market are priced very competitively to conventional rates. Rates on 15-year fixed rate money are below 4 percent for purchase rates. Adjustable rate mortgages, including seven-year ARMs are below 4 percent. Today’s rates are similar to rates in late 2011. By historical standards, interest rates are in a very good range. The problem is that most people remember only the lowest of the low rates. After the release of the mid-September FOMC minutes, Federal Reserve Chairman Ben Bernanke made a statement in order to calm the wild market reactions to his early speech from a week earlier which had caused a wild spike in interest rates and unease on Wall Street. In his statement, Bernanke most notably referred to the unemployment rate. He said that the 7.6-percent unemployment rate overstated the strength of the labor market. This is very significant because the announced policy of the Fed has been that they would not think about raising interest rates until the unemployment rate was driven to 6.5 percent. Clearly, there is a long way to go for employment to get close to the Fed’s target. By making these comments, the stock market regained its footing and the bond markets moderated. This helped mortgage rates go to the lower range of their recent range. There will be increased volatility this summer. Economic news, good or bad, is likely to cause an occasional spike in the markets which will drive rates a little higher or a little lower depending on the news of the day. Other economies are slowing, most notably China. The European Union is in the midst of stimulus for its economies. There are clearly a lot of pressures that should help the Fed keep rates in a relative narrow range this summer. ? Bill Starrels lives in Georgetown and is a mortgage loan officer, who specializes in refinance and purchase mortgages. He can be reached at bill.starrels@gmail.com, or 703-625-7355.

Rates Take Spike After Fed Comments

June was a horrible month for mortgage interest rates. Interest rates hit their recent lows in May when the average 30-year fixed rate loan was 3.4%. Rates for the last week of June hit 4.45% a jump of just over one hundred basis points. In the second quarter, the quarterly rise in rates was the highest since the fourth quarter of 2010. The catalyst for the rate jump was Wall Street’s reaction to the Federal Reserve Chairman Ben Bernanke’s June 19 news conference. The following are the comments that moved the markets: “If the incoming data are broadly consistent with this forecast, the committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year; and if the subsequent data remain broadly aligned with our current expectations for the economy, we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around midyear.” After the extreme move in the markets, there has been a lot written about the likely overreaction of the markets to Bernanke’s words. Wall Street Journal economics editor David Wessel wrote a column, “A Hawkish Signal Bernanke Didn’t Send,” He wrote the markets overreacted to the Fed’s statements. “Futures markets are betting the Fed might lift short-term rates from zero as soon as mid-2014. “That is neither what Mr. Bernanke expected nor what he meant.” Wessel explained that Bernanke said, “There is no change in policy here” at the Fed’s news conference. After reactions to Bernanke’s statement, the Fed started to clarify the Fed’s positions to temper the market reactions. Fed Governor Jeremy Stein was quoted as saying that the Fed did not want to raise rates until 2015 or later. Even St. Louis Fed President James Bullard, who is known as an interest rate and inflation hawk, shifted his position on raising rates. He has acknowledged that inflation is running substantially below the Fed’s 2% target. The Fed has set a long-term inflation target of 2% when the bank would begin to tighten monetary policy. Inflation remains very low. Jeremy Siegel of the Wharton School of Economics wrote that partially due to the change in demographics – the population is getting older and will spend less and invest more conservatively. This will help to keep interest “rates low for years to come.” Historically speaking, rates are still attractive.

Mortgage: Rates Jump Higher

Late May was the worst period for mortgage interest rates in recent years. Before the turnaround in the markets interest rates on 30-year fixed conventional mortgages was in the mid 3-percent range. FHA government backed mortgages were 3.25 percent with lender credits towards closing costs. Fast forward and we find rates for conventional mortgages on single family houses now at 4 percent or slightly higher and rates for FHA mortgages now in the high 3 percent to almost 4 percent. The catalyst for the jump in rate was the ramification from last month’s employment report. The report was simply much stronger than Wall Street was expecting. Before the report, the markets were pricing in anticipation of much weaker numbers. When the reports came in opposite where the markets were positioned, the severe correction took hold. The labor participation numbers are another important factor in the economy. Fewer people are looking for work then are historically normal. This may be contributing to the lower unemployment numbers. The next event that could upset the markets again is the next employment report. Another strong report will help solidify the current higher trends. If the report is not as strong as expected, then the markets could reverse the current trend. Another catalyst is the Federal Reserve Bank’s asset buying program. There is great debate as to when the Fed will start tapering its buying program. The program includes the massive buy back of treasury notes, which has been helping to keep rates down. An industry newsletter, “Mortgage News Daily,” reported in late May, “The pendulum is swinging back from April’s extremes and is being accelerated by changes in the Fed’s asset buying outlook--even though no changes in the asset buying have yet occurred.” No one has a crystal ball. Clearly, the economy is showing some traction. A couple of weak notes including a slight downward revision to the first quarter GNP and a slight decrease in consumer spending. Lastly, the labor participation rates are low. Inflation is low and is not showing signs of increasing anytime soon. Expect further volatility in coming days and weeks. Calmer waters are somewhere in the future. Until then, the ride will be turbulent. ? +Bill Starrels lives in Georgetown and is a mortgage loan officer who specializes in refinance and purchase mortgages. He can be reached at bill.starrels@gmail.com or 703-625-7355.