In June, Existing Home Sales grew to a 5.57 unit annual rate, a nine-year high, and 3% up from a year ago. This was the fourth month in a row sales went up, showing continued strength. Even better, the share of first-time buyers hit its highest level in four years, an important development for the market. Supply, however, is still tight, with inventories down 5.8% from a year ago, making demand so strong that 48% of homes sold in less than a month. This pushed up the median price, but that ought to bring more sellers to market.

Supply should also be helped by the trend we're seeing in home building activities. Housing Starts headed up 4.8% in June, hitting a 1.189 million annual rate. Adding this to the prior two months, the rate of starts in the second quarter was the fastest in nine years. Going along with this nicely, Building Permits bumped up in June to a 1.153 million annual rate, with permits for single-family units up 5.1% versus a year ago. The NAHB index of home builder confidence slipped a point in July, but at 59 is well above 50, showing expansion. Finally, the FHFA index of prices for homes bought with conforming mortgages rose 0.2% in May, up 5.6% from a year ago.

Review of Last Week

Investors played it coyly all week, waiting on what the Fed and other central banks will be doing in the near future. The Fed meets this Wednesday, followed by the Bank of Japan, reporting Friday. Plus, the probability of a Bank of England rate cut in August shot up to around 90% after their purchasing managers' index went south. All this put a cautious tone to the rise in stock prices on Friday, yet equities ended higher for the fourth week in a row. The S&P 500 even finished at a new all-time high, with all 10 sectors ahead, although industrials only made a fractional gain, no surprise there. The tech-y Nasdaq reached its highest close this year.

Wall Street didn't get a lot of economic data to chew on. There were the encouraging housing reports covered above, and good numbers continue on the jobless claims front. Initial Unemployment Claims dropped by 1,000 last week, to 253,000, registering the 72nd week in a row they've come in under 300,000. Continuing Unemployment Claims slid by 25,000, to 2.128 million.Some economists say these figures are consistent with decent job gains going forward. We'll see. Meanwhile, manufacturing continues to disappoint. The Philadelphia Fed Index, which measures factory sentiment in that key region, fell to -2.9 in July, after posting a +4.7 the month before.

The week ended with the Dow UP 0.3%, to 18571; the S&P 500 UP 0.6%, to 2175; and the Nasdaq UP 1.4%, to 5100.

Over in the bond market, Treasuries experienced a seesaw week, trading at the end a tad lower. Other issues showed modest gains, as the 30YR FNMA 4.0% bond we watch finished the week up .01, at $107.03. Freddie Mac's Primary Mortgage Market Survey for the week ending July 21 reported national average 30-year fixed mortgage rates up slightly but still near historical lows. Their chief economist explained: "Post-Brexit volatility tapered off over the last two weeks, allowing interest rates to bounce back a bit." Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

This Week’s Forecast

Forecasters see both New Home Sales and Pending Home Sales up for June. The latter is an index of contracts signed on existing homes, showing those sales should go up a couple of months out, a nice build on last week's data. Inflation could grow with the upward moving Employment Cost Index, since producers raise prices to cover higher worker costs. The Chicago PMI read on factory activity in the Midwest is expected to slide a tad and the FOMC Rate Decision to be a non-event.

The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Jul 25 – Jul 29

Jul 26    10:00    Consumer Confidence
Jul 26    10:00    New Home Sales
Jul 27    08:30    Durable Goods Orders
Jul 27    10:00    Pending Home Sales
Jul 27    10:30    Crude Inventories
Jul 27    14:00    FOMC Rate Decision
Jul 28    08:30    Initial Unemployment Claims
Jul 28    08:30    Continuing Unemployment Claims
Jul 29    08:30    GDP-Advanced
Jul 29    08:30    Employment Cost Index
Jul 29    09:45    Chicago PMI
Jul 29    10:00    U. of Michigan Consumer Sentiment - Final
                                                                                                           
Federal Reserve Watch    

Forecasting Federal Reserve policy changes in coming months... A pinch more Fed watchers feel the central bankers may go for a rate hike in July, September or November, but the majority still see no hike clear through the end of the year. Note: In the lower chart, a 4% probability of change is a 96% certainty the rate will stay the same.

Current Fed Funds Rate: 0.25%-0.5%

After FOMC meeting on: 

Jul 27    0.25% - 0.50%
Sep 21    0.25% - 0.50%
Nov 2    0.25% - 0.50%

Probability of change from current policy:

After FOMC meeting on:    

Jul 27    4%
Sep 21    15%
Nov 2    17%

Have a great day and please call me direct at 303.668.3350 with any questions you might have!

Apply Now!

Scott Synovic
Nations Reliable Lending, LLC
Colorado's Mortgage Expert

303.668.3350 Direct
www.scottsynovic.com

Mortgages & Minimum Credit Scores

Mortgage lenders are approving more mortgage loans than during any period this decade. In part, this is because new loan programs have emerged such as the FHA Back to Work loan for buyers with a recent bankruptcy, foreclosure, or short sale; and, the Conventional 97 which allows for three percent down payment on a home.

So, what's the minimum credit score required to get a mortgage approved?

Ask a group of lenders and you’ll get answers across a wide range of the credit scoring spectrum -- which is unhelpful, of course. Without "one minimum score", you can't know whether you'll be approved until you go to underwriting.

Even more challenging is that, although loan programs come with prescribed minimum FICOs, lenders have the right to ignore those minimum scores, and many often do.

With FICO scores ranging from 350-850, what score do you exactly need?

It depends.

Credit Scores & Automated Underwriting

As a mortgage borrower in the United States, there is no shortage of mortgage loans available to you.

Loans backed by the Federal Housing Administration (FHA) and Fannie Mae and Freddie Mac allow down payments as low as 3.5% and 3.0%, respectively.

And, VA loans from the Department of Veterans Affairs and USDA-backed Rural Housing Loans both allow no money down.

In order to qualify for these loans, which are all government-backed, a minimum credit score is required.

In today's housing market, the minimum FICOs required are lenient.

    Fannie Mae and Freddie Mac: 620 minimum FICO score
    FHA loan: 580 minimum FICO score
    VA loan: No minimum FICO score
    USDA Rural Housing: No minimum FICO score

There's more to know than just the minimums, of course (which is why underwriting guidelines are comprised of hundreds of pages). In addition to credit scores, lenders evaluate borrowers based on down payment, income, savings, and debt loads, too.

And, if that seems like a lot of information, that's because it is.

It's so much information that mortgage lenders use automated underwriting software (AUS) to make an approval recommendation.

In general, AUS findings work like this:

    High credit scores with strong income, assets, and debt get approved
    Low credit scores with weak income, assets, and debt get turned down

If your credit scores are weak but you have high, stable income; a large amount of savings; and a manageable load of debt, you're likely to get approved via AUS.

Similarly, you're likely to be approved if your credit scores are strong but you're average in the supporting zones.

You don't have to be strong in all areas to be approved. The key is to understand that lenders don't treat "low credit scores" in the same way that they treat "bad credit".

Your FICO Score Doesn't Tell The Whole Story

620 is the minimum FICO score for a conventional home loan and that's widely considered to be a below average score.

However, low credit scores can happen for a lot of reasons. Maybe you prefer paying cash over using credit; or, maybe you're too young to have a credit history; or, maybe you carry high balances.

A "respectable" credit history can get you approved.

Bad credit, though, is different.

Characterized by collections, write-offs, and late and missed payments, "bad credit" will get your loan denied -- especially when lenders begin to apply their overlays.

A mortgage overlay is an additional mortgage guideline imposed by a lender, which goes beyond the loan's official minimum standard.

For example, Fannie Mae allows the financing of more than four properties via a program called the 5-10 Properties Program.

However, because this loan is a challenge to underwrite, many mortgage lender put an overlay in place which disallows financing a fifth property in a portfolio.

Another example of a mortgage overlay is with the FHA Streamline Refinance program.

According to FHA guidelines, the FHA Streamline Refinance program does not require the verification of income, assets, or credit; nor does it require employment.

Yet, many lenders opt to make those verification's in order to hold loan quality high.

A recent study from Fannie Mae found that nearly two-thirds of mortgage lenders apply mortgage overlays. The most common overlay related to credit scores.

47% of lenders applied overlays to the minimum credit score requirements of a mortgage loan. Your credit score, therefore, may not get you FHA-approved, even if the FHA allows it.

This is why it's smart to re-apply for a mortgage if you've recently been denied. Your loan may have been turned down, but that could be because of an overlay. Click here for a link to my secure online loan application.

So, what's a good credit score? Call me today and we can find out!

Scott Synovic
Nations Reliable Lending, LLC
Colorado's Mortgage Expert

303.668.3350 Direct
www.scottsynovic.com

There Are More Cash Buyers Than You Think.

In May 2016, pending home sales hit their highest level in ten years.

A pending sale is one that a buyer has agreed to, but is not yet closed. In short, a lot of people are buying homes.

It’s officially no longer a buyer’s market in much of the U.S., and home shoppers face competition from both traditional buyers and cash-wielding investors.

About 1 in 3 homes purchased in the U.S. are all-cash, according to real estate data company Realtytrac. In some markets, that number shoots well past 2 in 3.

First-time home buyers, those buying again after foreclosure, and even buyers using FHA financing may not look as good to a seller as a buyer who is paying cash.

Fortunately, a buyer who needs financing can beat out a cash buyer, if they prepare the right way. Here are five ways to do just that.

1. Be Prepared. Get A Prequalification

Preparation or lack thereof can make or break your offer.

If you want home sellers to take you seriously, you need a mortgage prequalification.

2. Big Earnest Money Means You’re Serious

Want to compete with a motivated cash buyer?

Put up as much earnest money as you can -- even the entire down payment.

If the purchase doesn’t go through, you get it back, but impressive earnest money makes it clear that you’re serious about your purchase and can afford it.

Some experts recommend beating investors at their own game. One of their favorite tricks is attaching a check for the earnest money to the offer.

That sends the message that you’re ready to close, and it can give you a leg up on your competition.

3. It's Okay To Offer A Higher Price

You may have to go a little higher than an investor if you really want the property.

Washington, DC REALTOR® Candy Miles-Crocker says, “It is extremely difficult to compete with all-cash offers, but there are times when an owner-occupied buyer can make a higher offer because they will renovate over time and don't have to worry about margins.”

Miles-Crocker continues, “An investor will only offer so much for a property because they want to make a specific profit when it's flipped.”

Seasoned real estate investor Jean Norton says a higher offer can be the most effective strategy. “Offer a higher price for the property,” she says, “Interest rates are so low that the monthly impact to their budget is negligible.”

4. Shop Government Foreclosure Properties

Investors don’t always have the advantage, because government-backed programs give preference to individuals and families who plan to live in the home they buy.

A number of government-run websites feature foreclosure houses that are owned by the agencies and entities that backed the loans: the VA, USDA, FHA, Fannie Mae and Freddie Mac.

When these houses are put up for sale, owner-occupant buyers have several days to get their offers in and buy without competition from investors.

You can also shut out investors by seeking condominium communities that have reached their maximum allowable rental units.  Many HOAs limit the number of units that can be rented out or held by investors.

Once the community reaches that limit, sellers can only accept offers from owner-occupants.

5. Don’t Be Afraid To Get Personal

It can help to make a personal connection with sellers.

Look them up on a social media platform or search engine.

See if you have interests in common or mutual friends. If you do, ask a friend to put a good word in for you.

Some agents recommend writing a short note with your offer, complimenting the home and mentioning how you will use it.

For instance, a seller might accept a non-cash offer from a family that plans to live there, instead of an investor who plans to gut it and flip it.

Sentimentality can go a long way.

Something as small as a common interest can work too.

"My nine-year-old daughter’s favorite color is pink, and she loved the pink bedroom"
"Love your garage. I also drive a Jaguar and want to keep it out of the snow"
"We noticed you are Broncos fans too. Hoping for a great 2017"

Don’t underestimate the power of human connection when buying a home.

Think Long-Term

Winning isn’t everything. It’s easy to get caught up in a bidding war, wanting to beat everyone out no matter what.

However, investors buying and selling 50 properties a month can afford to pick up an occasional clunker.

You, on the other hand, don’t want to buy a mistake you’ll have to live with for the next ten years.

Set an upper limit on home price, and be sure to add in estimated costs of repairs if the home needs them. You need this purchase to make financial sense for the long run.

Call me to get a rate quote now, 303.668.3350. No social security number is required to start the process and I can deliver you information in a matter of minutes!

Apply Now!

Cheers!

Scott Synovic
Colorado's Mortgage Expert
www.scottsynovic.com

While we wait for the riches to roll in, we can meanwhile find a measure of happiness in things like Freddie Mac's monthly Outlook for July. This report tells us that  the U.K.'s 'Brexit' vote to leave the European Union, plus slowing economic growth in China, played big roles in in moving mortgage rates down in the U.S. "The turbulence abroad should continue to create demand for U.S. Treasuries and keep mortgage rates near historic lows," according to Freddie Mac's chief economist.

The Mortgage Bankers Association corroborated the heightened refi action. Their Mortgage Application Survey for the week ending July 8 was up 7.2% overall, with the Refinance Index up 11% and refis making up 64% of total activity. The National Association of Realtors HOME (Housing Opportunities and Market Experience) Survey for Q2 tells us 80% of respondents feel it's a good time to buy and 61% of homeowners think it would now be advantageous to sell. Home prices are appreciating, good for sellers, but at a slower rate, good for buyers. A predictive analytics firm puts annual price gains at 3.5%, with increases forecast in 92% of markets.

Review of Last Week

Record Breaking! The blue chip Dow and the broadly based S&P 500 ended Friday hitting new record highs, as the stock market notched its third weekly gain in a row. So much for fears about the economic fallout from Brexit, the U.K.'s vote to leave the European Union. Traders' spirits were no doubt buoyed by the data that came in at the start of the second quarter corporate earnings season. The first of the big companies reporting beat expectations, which many analysts worried they would miss. And even though rate hike probabilities edged up a tad, virtually no one is worried the Fed will raise rates any time before the end of 2016.

The economic data kept Wall Street enthusiasm from getting out of hand. Yes, there was the upside surprise of June Retail Sales growing 0.6% over the prior month. Excitement over this was dampened by downward revisions to prior months but, hey, consumers are pouring money back into the economy. They're probably happy that inflation remains mild, the Consumer Price Index (CPI) coming in slightly lower than expected. This should also restrain the Fed from touching rates, as it first needs to see prices going up a bit faster. Industrial Production and Business Inventories grew, though Michigan Consumer Sentiment disappointed. Typical.

The week ended with the Dow UP 2.0%, to 18517; the S&P 500 UP 1.5%, to 2162; and the Nasdaq also UP 1.5%, to 5030.

Positive economic data and rising stocks enticed investors away from the safety of bonds, sending prices south. The 30YR FNMA 4.0% bond we watch finished the week down .29, at $107.02. National average 30-year fixed mortgage rates remained near historical lows in Freddie Mac's Primary Mortgage Market Survey for the week ending July 14. Their chief economist suggested, "mortgage rates are likely to remain low throughout the summer." Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

This Week’s Forecast

Look, nothing about this economy is booming, but at least Housing Starts and Building Permits are forecast up a bit in June. The Philadelphia Fed Index is likewise expected to report manufacturing in that key region inching ahead. But Existing Home Sales are predicted slightly down, though still at a decent 5.5 million unit annual rate. We'll take that.

The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Jul 18 – Jul 22

Jul 19    08:30    Housing Starts
Jul 19    08:30    Building Permits
Jul 20    10:30    Crude Inventories
Jul 21    08:30    Initial Unemployment Claims
Jul 21    08:30    Continuing Unemployment Claims
Jul 21    08:30    Philadelphia Fed Index
Jul 21    10:00    Existing Home Sales
                                                                                                           
Federal Reserve Watch    

Forecasting Federal Reserve policy changes in coming months... Fed handicappers have finally regained their composure post-Brexit and are no longer forecasting a rate drop. But no rate hike either, as they see Janet Yellen & Co. still paralyzed by "uncertainty." Note: In the lower chart, a 2% probability of change is a 98% certainty the rate will stay the same.

Current Fed Funds Rate: 0.25%-0.5%

After FOMC meeting on:

Jul 27    0.25%-0.5%
Sep 21    0.25%-0.5%
Nov 2    0.25%-0.5%

Probability of change from current policy:

After FOMC meeting on:

Jul 27    2%
Sep 21    14%
Nov 2    16%

Please call me direct with any questions at 303.668.3350 or Apply Now!

Have a great day!

A couple of weeks ago, the majority of British voters echoed the movie mogul's famous malapropism in their message to the European Union. After this Brexit (British exit) vote, we've seen dramatic ups and downs in the financial markets, but the economic sky has not fallen as was predicted by Chicken Littles here and in the U.K. For us more sanguine types toiling in the housing field, there's even been a wonderful fallout.


National average mortgage rates have dropped post-Brexit, and analysts expect them to head even lower. This is due to investors sprinting to the safety of Treasuries and mortgage bonds, driving prices up and rates down.

Additionally, mortgage rates are expected to stay low as the Fed waits to see whether Brexit was indeed just an acorn, or Chicken Little's piece of sky. Minutes just released from the Fed's June 15 meeting reveal the central bankers felt it prudent to wait on a rate hike decision until after Britain's June 23 referendum. So far, the main results of Brexit are the above-mentioned boost in bond prices and dip in mortgage rates and a drop in the value of the pound, though this last consequence also makes British exports more competitive! But we must stay alert. Those Fed minutes still project two rate hikes this year, albeit before Brexit became a reality.

Review of Last Week

The nonfarm payrolls number surprised big time on Friday, as the Bureau of Labor Statistics reported the U.S. economy added 287,000 jobs in June, more than 100,000 above analyst forecasts. This was the largest jobs gain since last fall, coming on the heels of a recent spate of weak labor market reports. And it signals economic growth, but hold on. Earnings growth was virtually nonexistent, up just 0.1%. Combine this with modest inflation and Brexit uncertainties, and most economists say the Fed won't raise rates just yet. That's good news to Wall Street (and the rest of us!), so the S&P 500 and the Dow ended the week at their highest levels in a year.

As one trader put it, "After today's rally, the Brexit-related selloff looks like a temporary blip." Meanwhile, the economy may not be booming, but at least it's not tanking. We saw evidence of this last week, when the ISM Services index moved up to 56.5 in June, showing decent growth for the sector that represents at least 70% of our economy and an even greater share of our jobs. Amazingly, ISM Services has reported growth (readings above 50) for 77 months in a row. But the trade deficit grew to $41.1 billion in May, $1.0 billion larger than it was a year ago. Finally, new unemployment claims fell by 16,000 for the week and continuing claims dropped to 2.12 million.

The week ended with the Dow UP 1.1%, to 18147; the S&P 500 UP 1.3%, to 2130; and the Nasdaq UP 1.9%, to 4957.

Friday's nonfarm payrolls surprise initially sparked heavy selling in the bond market, but buying resumed when traders realized it will take more than renewed job growth for the Fed to hike rates. The 30YR FNMA 4.0% bond we watch finished the week UP .12, at $107.31. Freddie Mac's Primary Mortgage Market Survey for the week ending July 7 saw national average 30-year fixed mortgage rates drop to new lows for the year, thanks to "continuing fallout from the Brexit vote." Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?

In 2015, foreign buyers purchased 214,885 residential properties, up 2.8% from the year before. The fastest growing group of immigrants is Asian, led by Indians who, along with Chinese-Americans, are more likely to own than rent.  

This Week’s Forecast

June Retail Sales are expected to slow to a 0.2% growth rate. This is a bit disappointing, since consumer spending drives about 70% of the U.S. economy. At least the prices we pay for most things aren't rising too much. The Consumer Price Index (CPI) and Core CPI, which excludes volatile food and energy prices, are forecast to remain mild. This low inflation rate should keep the Fed from raising rates, as it wants more robust numbers in that department.

The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Jul 11 – Jul 15

Jul 13    10:30    Crude Inventories
Jul 13    14:00    Fed's Beige Book
Jul 13    14:00    Federal Budget
Jul 14    08:30    Initial Unemployment Claims
Jul 14    08:30    Continuing Unemployment Claims
Jul 14    08:30    Producer Price Index (PPI)
Jul 14    08:30    Core PPI
Jul15    08:30    NY Empire Manufacturing Index
Jul15    08:30    Retail Sales
Jul15    08:30    Consumer Price Index (CPI
Jul15    08:30    Core CPI
Jul15    09:15    Industrial Production
Jul15    09:15    Capacity Utilization
Jul15    10:00    Business Inventories
Jul15    10:00    U. of Michigan Consumer Sentiment Index
                                                                                                           
Federal Reserve Watch
    
Forecasting Federal Reserve policy changes in coming months... The Fed at their last meet talked about a couple of rate hikes this year, but economists aren't buying it. A few even see a rate cut in July, September or November. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate:

After FOMC meeting on: 

Jul 27    0.25%-0.5%
Sep 21    0.25%-0.5%
Nov 2    0.25%-0.5%

Probability of change from current policy:

After FOMC meeting on:    

Jul 27    1%
Sep 21    7%
Nov 2    7%

Call me today with any questions you might have - 303.668.3350!

Colorado housing values are up, and interest rates are down, again. This has created the perfect opportunity to refinance and save.

If you missed your chance to refinance your home last year, now is your time to revisit; the typical refinancing household is primed to save more than 35% on their mortgage via a rate-and-term refinance.

That means for every $1,000 you pay to your lender today, you could reduce your payment by $350 per month.

That's $42,000 saved over the next 10 years -- simply by doing a refinance.

Additionally, there are an estimated 7.5 million homeowners eligible for a refinance who are unaware of their current eligibility. Maybe you are one of them.

You would think homeowners would be rushing to refinance their homes. Low mortgage rates and lower monthly payments help secure a better financial future.

Yet, the majority of refinance-eligible households are currently doing nothing. They're letting low rates pass them by.

The government, for one, is perplexed -- especially because it's Home Affordable Refinance Program (HARP) is entering its last year and volume on the program has dropped to an all-time low.

But, it's not just HARP-eligible homeowners who are staying away from the opportunity to refinance. Homeowners with all types of home loans are doing the same.

And, with no promise that mortgage rates will stay low, isn't it worth a check of today's rates to see for what you're eligible? Call me today for a free, no obligation offer at 303.668.3350. or apply now.

When mortgage rates drop, homeowners typically wonder: Should I refinance my mortgage?

Low mortgage rates are enticing, but homeowners balance the want for a lower rate with the question of "Is this even worth it?"

They worry about things other than low mortgage rates; maybe how they felt the last time they applied for a mortgage, or things they've heard from friends or family about the process.

It's understandable to avoid refinancing because of the stress it may add to your life, but what if that stress is misplaced? The mortgages of 2008-2012 are very different from the mortgages of today.

Getting approved for a mortgage is simpler and faster than it used to be.

And then there's the question of "Does it make financial sense to refinance?" On this point, it's best to avoid "common knowledge" because the common arguments consumers make against refinancing can be quietly misleading.

Perhaps you've heard these two arguments.

The first argument against refinancing goes that it doesn't make sense to refinance unless you're lowering your mortgage rate by one percentage point or more.

The second says that it doesn't make sense to refinance if you're going to move before your loans hit its "breakeven" point.

Let's debunk this "conventional wisdom".

The Fallacy Of "Saving One Percent" On Your Mortgage

The "Saving One Percent" argument is a holdover from the 1950s when closing costs were big, loan sizes were small, and homeowners lived in homes until their death.

Back then, when loan sizes were typically less than $60,000, a homeowner had to lower its mortgage rate at least one percent to save $1,000 annually.

At today's loan sizes, the typical refinancing homeowner can save six times that amount.

Even a modest mortgage rate reduction can result in substantial monthly savings. So long as costs are held low, even a quarter-percentage point reduction can be worthwhile.

You don't need to save 1 percent to have a refinance make sense. You only have to save money.

The Logic Leap In The "Recoup Your Closing Costs" Strategy

Another reason homeowners pass on a refinance is because they think they'll never "recoup their costs".

They rely on a vaguely-mathematical approach known as the "Break-Even Method" which, it turns out, is as flawed as the 1% Fallacy.

The main issue in using the Break-Even Method to evaluate a refinance is that the break-even formula makes three huge assumptions.

    That you'll never want to refinance your home again
    That you'll never need to refinance your home again
    That you'll never sell your home or move from it

These assumptions carry weight.

Of course you may want to refinance your home sometime in the future. There are a lot of reasons why you might.

Maybe mortgage rates have dropped again. Or, maybe you'd like to take cash-out for home improvement project, or to diversify your assets.

Additionally, 15-year mortgage rates are extremely low -- maybe you'll want to reduce your long-term interest payments because 15-year mortgages pay 65% less mortgage interest over time.

Now, before you say "mortgage rates are as low as they can get", remember that people have been saying that since 2009 and, every year, they've been wrong.

Heck, they were even saying it three weeks ago and they were wrong.

People are notoriously terrible at predicting the future of mortgage rates.

Mortgage rates can go lower. Wall Street is unpredictable. And, furthermore, your financial situation could change. That, too, is unpredictable.

It's for these reasons that the Break-Even Method fails to work -- you can't possibly know for how long you'll hold your refinanced loan, which means that you can't really determine your break-even point.

So how can you tell whether it's a good idea to refinance?

A "Safe" Refinance Option: The Zero-Closing Cost Refinance

There's a better way to know whether it's time to refinance -- better than the One Percent Method and better than the Break-Even Method.

Can you save money and pay nothing to do it? Yes, you can.

Use a zero-closing cost mortgage.

Zero-closing cost mortgages are precisely what their name implies -- they're mortgages for which there are, literally, no closing costs. When there are no closing costs, there are no break-even points to consider, and no one-point savings to monitor.

When you can lower your mortgage rate and pay nothing to do it, that's when you refinance.

The good news is that no-closing cost mortgages are readily available across all loan types including FHA loans, VA loans and conforming mortgages.

In general, for loan sizes of $250,000 or more, you can get a zero-closing cost mortgage by increasing your mortgage note rate 25 basis points (0.25%). For loan sizes over $400,000, the typical increase is 12.5 basis points (0.125%).

The extra bump to your mortgage rate creates more value to the lender. The lender then uses this extra value to pay your loan's closing costs on your behalf. It's a win-win situation, and you've paid nothing to get your refinance completed.

Today's mortgage rates are lower than they've been in months. There are refinance opportunities everywhere. Ignore "saving one percent" and your "break-even" -- look at your potential savings instead.

Call me today at 303.668.3350 and get today's mortgage rates and additional information.

Have a great day!

Low Down Payment Option
The FHA Loan

As a program with an 80-year history, the FHA has helped millions of renters become homeowners; and has done it with flexible underwriting standards, low down payment requirements, and widespread availability.

When comparing to a conventional mortgage, mortgage rates for an FHA loan can be as much as 25 basis points (0.25%) lower; and for borrowers whose credit scores aren't "perfect", that gap can grow two- or three-fold.
 
Buying a home and want to make the smallest down payment possible? Take a look at the FHA mortgage today.

FHA Loans: 3.5% Down payment
 
The FHA loan program is a product of the Federal Housing Administration, which is an agency within the U.S. Department of Housing and Urban Development (HUD).
 
Born in 1934, the FHA loan was launched to promote home ownership in a post-depression housing market.
 
Among the program's most widely-used features is its minimum down payment requirement of just 3.5 percent, or $3,500 per $100,000 borrowed.
 
In today's mortgage market, there is no other generally-available mortgage program which allows a down payment of such a small size.
 
There are programs which offer lower down payment such as the no-money down VA loan and the 100% USDA mortgage, but these programs carry a secondary eligibility standard such as minimum military service time; or, maximum household income levels.
 
There's also the HomeReady™ mortgage, which allows for 3% down. However, eligibility is limited by income or geography.
 
The Federal Housing Administration has insured more than 34 million mortgages for U.S. lenders since the program's inception. The agency's insurance is among the reasons why FHA mortgage rates are often so low.
 
Because the FHA insures mortgage lenders against loss on a loan, lenders carry less risk with an FHA loan as compared to a conventional one. With less risk comes lower rates.
 
FHA mortgage rates don't come "from thin air". There is a formula by which they're made, and that formula begins with something called a mortgage-backed security (MBS).
 
Mortgage-backed securities are bonds, bought and sold on Wall Street. They are, literally, bonds secured by mortgages -- in this case, mortgages from the FHA.
 
FHA mortgages are brought to Wall Street via a group within HUD known as the Government National Mortgage Association (GNMA). This agency is more commonly called "Ginnie Mae".
 
Like stock prices, bond prices change constantly. The price of a Ginnie Mae bond today won't likely be the price of a Ginnie Mae bond tomorrow. Prices are based on supply and demand.
 
When demand for Ginnie Mae MBS is high, bond prices rise. When demand falls, bond prices fall.
 
FHA mortgage rates move inversely to the price of a Ginnie Mae bond. When bond prices rise, mortgage rates drop. Conversely, when bond prices drop, FHA loan rates rise.
 
Predicting where FHA mortgage rates will be tomorrow, next week, or next year is a challenge. However, because Ginnie Mae bonds are backed and guaranteed by the U.S. government; and because U.S. government bonds are virtually risk-free to investors, there are general rules which can help you forecast where FHA rates might go next.
 
These rules are based on mortgage-backed securities being among the safest asset classes in the world.
 
In general, when the U.S. economy shows signs of weakness; or, when there's uncertainty in the global economy, FHA mortgage rates often improve.
 
This is because weakness and uncertainty tend to drive Wall Street toward "safe" assets and away from more risky ones, and the additional demand for Ginnie Mae bonds drives down FHA loan rates.
 
When the economy is improving, the opposite occurs. Wall Street moves away from safe assets and toward more risky ones. Mortgage bonds sell off and FHA loan rates rise.
 
The Benefits Of An FHA Mortgage
 
FHA mortgage rates are typically low, and the FHA loan program allows for a 3.5% down payment. However, there are other reasons why a home buyer may want to finance a home via the FHA.
 
Along with its flexible underwriting, FHA loans offer a number of benefits not available via other loan popular loan program.
 
First, FHA loans are assumable.
 
Assumable loans are loans which, literally, can be assumed by another homeowner. This means that a homeowner with an FHA loan rate at, say, 3.50% could sell its home and its mortgage to a future home buyer. This is a huge deal in a rising mortgage rate environment.
 
The FHA loan's assumable feature can you sell your home more quickly.
 
A second benefit of the FHA loan program is that FHA interest rates are the same no matter how high or low your credit score; or, how big or small your down payment.
 
Unlike conventional mortgage rates which vary on low credit scores and low downpayments, FHA mortgage rates are the same no matter what.
 
Third, the FHA doesn't care if you're buying a one-unit home or a 2-4 unit property -- your mortgage rate won't be subject to adjustments the way that a conventional rate would.
 
It's often more affordable to buy 2-unit, 3-unit, or 4-unit homes via the FHA loan program as compared to a program via Fannie Mae or Freddie Mac.
 
"Special" FHA Loan Programs
 
Beyond just low FHA mortgage rates and the flexible guidelines, the FHA offers more to its borrowers. The agency provides access to a series of loan programs which promote homeownership and low monthly payments.
 
One such program is the FHA 203(k), which the Federal Housing Administration's "construction loan". Via the 203(k), consumers can borrow the costs of a home improvement project instead of paying for it with cash.
 
The 203(k) can be used for structural improvements to a home including moving walls and replacing plumbing; or, for smaller projects such as replacing windows or flooring.
 
Another FHA program is the FHA Back to Work mortgage, which waives the typical three-year waiting period after a short sale, bankruptcy, or foreclosure. Via FHA Back to Work, mortgage applicants who experienced an "economic event" can apply for a loan with the FHA after just 12 months.
 
FHA interest rates on the Back to Work program are the same as with any FHA-backed home loan; there are no additional fees charged at closing.
 
But, perhaps the more valuable loan program from the Federal Housing Administration is its FHA Streamline Refinance loan.
 
The FHA Streamline Refinance program is a service provided to all FHA-backed homeowners. Via the program, so long as a homeowner's been making monthly payments on time; and, so long as those payments are dropping by five percent or more, the FHA will allow a no-verification refinance to today's current FHA mortgage rates.
 
The FHA Streamline Refinance is among the fastest, easiest ways to lower your monthly mortgage payment and all FHA-backed homeowners get access to it.
 
FHA loans offer relaxed credit standards, simpler underwriting, and very low mortgage rates as compared to conventional loans via Fannie Mae and Freddie Mac. Plus, you can get them just about anywhere.
 
Please contact me direct with any questions at 303.668.3350 or Apply Now!

Last week we found May Pending Home Sales falling 3.7% below April's reading for this index of contracts signed on existing homes.

Nonetheless, the National Association of Realtors (NAR) said May still logged the third highest level for the index in the past year. Their chief economist explained, "With demand holding firm this spring and homes selling even faster than a year ago, the notable increase in closings in recent months took a dent out of what was available for sales in May and ultimately dragged down contract activity."
 
Meanwhile, with strains on supply in many markets, home prices continue to gain overall, according to the S&P/Case-Shiller Home Price Index. The national reading was up 0.1% in April, and is up 5.0% the past year. But balancing higher prices, mortgage rates are expected to remain down, as global investors seek the relative safety of U.S. mortgage bonds in the wake of financial market volatility after Brexit (the UK vote to leave the European Union). Analysts at Fitch Ratings say that in the short term, rates could fall to new lows, though "longer-term economic implications remain difficult to predict." One thing is certain: no one knows what will actually happen.
 
Review of Last Week

After the Brexit vote roughed up equity markets a week ago Friday and last Monday, a curious thing occurred. Stocks bolted higher four days in a row, with the Dow and the S&P 500 logging their best weekly gains since last November and the Nasdaq up a healthy 3.3%. Markets began to realize that Brexit isn't the catastrophic event feared by incumbent politicians and the mainstream media. Instead, the Brexit will probably speed up a nice US trade agreement with the UK that the EU had been delaying. And since the UK buys more from EU countries than it sells to them, it's doubtful that tariff walls will suddenly go up.
 
Of course, uncertainties remain, but last week they simply led to hopes for more stimulus from the Bank of England and European Central Bank. Investors love to see monetary authorities get us through a rough patch by throwing money at it. There were also sound economic reasons for folks to feel better. The ISM Index showed manufacturing activity in June grew at its fastest pace in 15 months following an extended period of weakness. It was equally encouraging to see Personal Income and Spending up in May and Core PCE Price inflation mild. What's so bad about uncertainty anyway? Steve Jobs thought the iPhone would be a big success--but do you think he was certain of it?
 
The week ended with the Dow UP 3.2%, to 17949; the S&P 500 UP 3.2%, to 2103; and the Nasdaq UP 3.3%, to 4863.
 
Bonds remain the hot item for investors seeking shelter from equity market volatility. The 30YR FNMA 4.0% bond we watch finished the week UP .08, at $107.19. In Freddie Mac's Primary Mortgage Market Survey for the week ending June 30, national average 30-year fixed mortgage rates dropped to new 2016 lows "in the wake of the Brexit vote," according to the chief economist. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
 
Did you know? 

In May, first-time buyers accounted for 59.1% of primary owner-occupied home purchase mortgages with a government guarantee, according to the International Center on Housing Risk. This share was up measurably from a year ago.

This Week’s Forecast

 Not a lot of economic reports this week, but two will get major attention. FOMC Minutes from the Fed's last meet will be scrutinized to see what led to Chair Yellen's comments at the presser that followed. That's where she was timid about rate hikes and worried about 'uncertainties,' including what would occur if Brexit happened, which it did. Nonfarm Payrolls in Friday's June jobs report should show May's dismal read was just an aberration.
 
U.S. financial markets are closed today in observance of Independence Day

The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
 
Economic Calendar for the Week of Jul 4 – Jul 8
 
Jul 6       09:45     Trade Deficit
Jul 6       10:00     ISM Services
Jul 6       10:00     FOMC Minutes
Jul 7       08:30     Initial Unemployment Claims
Jul 7       08:30     Continuing Unemployment Claims
Jul 7       08:30     Crude Inventories
Jul 8       08:30     Average Workweek
Jul 8       08:30     Hourly Earnings
Jul 8       08:30     Nonfarm Payrolls
Jul 8       08:30     Unemployment Rate
                                                                                                         
Federal Reserve Watch   

Following the Brexit vote, economists see little chance the Fed will hike rates at the next three meetings, with a 2% probability they'll take them back down. Note: In the lower chart, a 2% probability of change is a 98% certainty the rate will stay the same.
 
Current Fed Funds Rate: 0.25%-0.5%

After FOMC meeting on:     

Jul 27    0.25%-0.5%
Sep 21   0.25%-0.5%
Nov 2    0.25%-0.5%
 
Probability of change from current policy:
 
After FOMC meeting on:

Jul 27            2%
Sep 21           8%
Nov 2            8%

Please contact me direct with any questions at 303.668.3350 or Apply Now!