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What’s Ahead For Mortgage Rates This Week : October 22, 2012

FOMC meets this week -- mortgage rates get volatileMortgage markets worsened last week as hope for a European economic rebound and stronger-than-expected U.S. economic data moved investors out of mortgage-backed bonds.

Mortgage rates all of types — conventional, FHA and VA — lost ground last week, harming home affordability in Thornton and reducing purchasing power nationwide.

Rising rates also thwarted would-be refinancing households hoping to time a market bottom.

The increase runs counter to Freddie Mac’s weekly Primary Mortgage Market Survey which showed the average 30-year fixed rate mortgage rate dropping 2 basis points to 3.37% nationwide.

This contradiction occurred because Freddie Mac’s weekly mortgage rate survey is conducted Monday through Wednesday, and because the majority of the surveyed banks reply to Freddie Mac on Tuesday. As a consequence, Freddie Mac failed to capture this week’s mid-week movement that took mortgage bonds to a one-month worst.

Access to Freddie Mac mortgage rates is for “prime” borrowers and requires payment of discount points plus closing costs.

This week, mortgage rates may rise again. There is a lot of news on which for Wall Street to trade, beginning with the week’s biggest story — the Federal Open Market Committee’s 2-day meeting scheduled for Tuesday and Wednesday.

At the FOMC’s last meeting, the Federal Reserve introduced a third round of qualitative easing (QE3), a program through which the Fed will work to keep mortgage rates low until the economy’s recovery is more complete.

The Fed is expected to announce no new stimulus in this, its seventh of eight scheduled meetings for 2012, however, mortgage rates are typically volatile in the hours after the FOMC adjourns.

New housing data is set for release this week, too.

Wednesday, the U.S. Census Bureau will release September’s tally of New Home Sales. Given the recent strength in Housing Starts and rising confidence among the nation’s home builders, New Home Sales may best analyst calls for 385,000 new home sold last month on a seasonally-adjusted, annualized basis.

Strength in housing has recently correlated with rising mortgage rates.

The housing market’s forward-looking Pending Home Sales Index is released Thursday.

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Thornton Foreclosed Homes Benefit from Loan Program

One of the key factors serious buyers eye when appraising foreclosed homes for sale in the Thornton market is condition – the shape those properties have been left in. The Federal Housing Administration has weighed in with a program that can materially affect how that condition – good or bad – will finally affect the bottom line: it’s known as the FHA 203 (k).

If you are among those currently looking at foreclosed homes, the 203(k) can make a big difference.  Here are some points that might influence your decision:

First in line is whether the program is applicable. HUD tells us that for a local property to be eligible, it must be a one- to four-family dwelling that has been completed for at least one year. The number of units on the site must meet Thornton zoning requirements. Furthermore, any and all newly-constructed units must be attached to the existing dwelling. Importantly, coops are out: cooperative units are not eligible.

The greatest effect is on Thornton foreclosed homes for sale that need a lot of work. HUD guidelines indicate that properties that have been demolished, or will be taken down as part of the renovation, may be eligible — as long as at least some of the existing foundation remains.

As you might expect, none of this helpful news comes without some practical caveats. Although you may get this kind of FHA rehab help for a foreclosure, this is a labor-intensive type of loan requiring multiple appraisals (including “as-is” and “Value After Rehabilitation”), licensed contractor projections, and more. Since time factors are always important when dealing with a foreclosure, it’s important to choose your backup team carefully. You will need to select the right lender and consider enlisting a team consisting of a mortgage broker and real estate professional – both of whom have experience getting approval for FHA 203(k) loans. You want pros who understand the extra steps involved, not those who simply tell you what you want to hear.

Most likely, you will want to get actual pre-approval for the FHA loan (not just a prequalification letter).  There is a lot of additional paperwork involved, and you will want to avoid a last-minute scramble once your desired property is on the line.

Buying Thornton homes for sale taking advantage of the FHA 203(k) requires organization and preparation, but can be a great way to make a questionable rehab project on a Colorado foreclosed home for sale affordable.  If you have questions about buying the right property and the outlook for getting a 203(k) insured mortgage loan, get in touch with an FHA-approved lender in Thornton or call me anytime for an introduction.  Then — let’s get started!

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Simple Techniques That Help Sell Thornton Homes

Success in selling Colorado homes can depend on being able to distinguish what is important to buyers from what is not.  Proactive homeowners know that one room usually gets more attention than does any other: the kitchen.

There are many good reasons why this is so (we have discussed them before) — but one kitchen detail in particular can have a disproportionate impact. It’s a detail that is all too easy to overlook: the condition of the appliances.

Realty Times declares, “Sellers should update their appliances.” I don’t think I would go quite that far, but the gist is right. When the appliances look like they deserve their starring role in the main act — the kitchen — it indicates a homeowner who has taken pride in their property. To a prospective buyer choosing whether or not to write an offer, it can be decisive.

If you are selling a Thornton home this fall, it will definitely pay to take a critical look at your kitchen’s appliances, and then taking action!

Of course, begin by deep-cleaning them thoroughly. Potential buyers often look inside appliances…and the last thing you want them to find is a crusty oven or rusty dishwasher. It’s true that after a few years of wear and tear, most kitchens don’t look like they belong on the cover of Better Homes and Gardens. But before you commit to wholesale appliance replacement, first see if some light cosmetic action might make that unnecessary.

Check your appliances for scratches, and if they are prominent enough, do something about them. For surface scratches, get a bottle of matching-color appliance paint (available at local hardware stores), then dot or stipple the smallest amount possible onto the scratch. For deeper scratches, fill first with a filler material you’ll find in one of the do-it-yourself scratch repair kits offered by auto parts stores. After it has had time to dry, step back and inspect. If you have to know where to look to notice anything: Good job! That was certainly a lot more economical than buying a new appliance.

When all else fails, replacements may be necessary. If you go this route, make sure you go color- and tone-neutral. Remember that many homes will undergo remodeling by their new owners, and their taste may be different from yours. Don’t be tempted to blow the budget by buying appliances that outclass the rest of the property, but also be careful to select appliances that don’t look cheap, outdated or out of place where they will be sited in the kitchen.

If you are one of those preparing to sell local homes this fall, I offer complimentary consultation prior to listing. We can go over big and small changes that will help maximize your return!

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How To Improve Your FICO Score

The U.S. housing market recovery is underway. New home sales are at a multi-year high, housing starts are at pre-recession levels, and home builders plan for a strong 2013.

Since late-2011, falling mortgage rates have boosted buyer purchasing power. Now, today, in many U.S. markets, the number of active home buyers outnumbers the number of active home sellers. It’s among the reasons why home supplies remain scarce and why home prices are rising.

Roughly 20 percent of today’s home buyers purchase homes with cash. For everyone else, the ability to gain mortgage approval depends on income, assets, and, most importantly, credit scores. Your credit score is a predictor of your future payment performance and lenders pay close attention.

If you plan to buy a home in Broomfield or anywhere else in the next 12 months, spend some time with this The Today Show interview. It’s five minutes of practical credit scoring advice, including separation of credit score myth from credit score fact.

Among the credit scoring tips shared :

  • How to get your credit checked without harming your credit score
  • The value of using automatic payments with credit cards
  • How to use “old” credit cards to boost your credit score

You’ll also learn about utility companies and why you should never be late with payment.

As compared to August 2011, last month’s average, mortgage-financing home buyer’s FICO score improved 9 points to 750. The average “denied” mortgage applicant’s FICO score was 704. Clearly, standards are high. However, credit scoring is a system and, with time, you can improve your rating.

Watch the interview and find ways to make your credit score better. With better credit comes better mortgage rates.

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Single-Family Housing Starts Rise To 4-Year High

Housing StartsThe housing market continues to improve.

According to the U.S. Census Bureau, on a seasonally-adjusted, annualized basis, Single-Family Housing Starts rose to 603,000 last month, an 11 percent increase from the month prior and the highest reading in more than 4 years.

A “housing start” is a home on which construction has started and home builders are breaking ground at rates not seen even during the 2010 federal home buyer tax credit period.

It’s a signal to home buyers throughout Colorado that the U.S. housing market may be permanently off its bottom.

At least, the nation’s home builders seem to think so.

Earlier this week, the National Association of Homebuilders reported home builder confidence at a 5-year high and nearly triple the levels of last September.

Buoyed by rising sales volume and the heaviest foot traffic since 2006, builders expect the next 6 months of sales to outpace the current rate. It may spell higher home prices for today’s new construction buyer.

Thankfully, mortgage rates remain low.

As compared to last year, today’s buyers have extended purchasing power. Assuming a 20 percent downpayment and a conforming home loan :

  • September 2011 : A $1,000 mortgage payment afforded a purchase price of $202,000
  • September 2012 : A $1,000 mortgage payment afforded a purchase price of $226,000

That’s an 11.9% increase in purchasing power increase over just twelve months. When combined with today’s rising rents throughout many U.S. markets, demand for new construction homes remains high and builders have taken notice.  Buyers should, too.

With mortgage rates low, low downpayment programs available and home prices poised to rise, it’s an opportune time to be a home buyer. Housing has been trending better since late-2011 and will likely carry that momentum forward into 2013.

If you’ve been shopping new construction, remember that as mortgage rates and home prices rise, home affordability drops.

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Home Builder Confidence Moves To 6-Year High

NAHB Housing Market IndexAs home prices rise, so does home builder confidence.

Tuesday, the National Association of Homebuilders reported its monthly Housing Market Index (HMI) at 41, a one-tick improvement from September and the highest HMI value since June 2006 — a span of 77 months.

The Housing Market Index is a homebuilder confidence indicator. When it reads 50 or better, the HMI suggests favorable conditions for home builders nationwide. Readings below 50 suggest unfavorable conditions for builders.

The HMI has not crossed 50 since April 2006 but the index has been making a run since last year, nearly tripling since the 14 reading of last year’s September.

In addition, builder confidence has climbed for six straight months.

For Broomfield buyers of new construction, the Housing Market Index may help to set market expectations for the rest of 2012, and into early-2013. This is because the NAHB Housing Market Index is constructed as a composite survey, measuring builder sentiment in three specific areas — current home sales, future home sales, and buyer foot traffic.

What’s good for builders, though, may not be good for buyers.

When builders expect business to improve, they may be less willing to make concessions on price or product, holding home prices high and removing seasonal sales incentives.

This month, home builders are seeing strength in each of the three surveyed areas :

  • Current Single-Family Sales : 42 (Unchanged from September)
  • Projected Single-Family Sales : 51 (Unchanged from September)
  • Buyer Foot Traffic : 35 (+5 from September)

All three values are at multi-year highs but it’s the level of foot traffic that may concern today’s home buyers. Builders report foot traffic through model units to be at the highest rate since mid-last decade. This, combined with a shrinking supply of homes for sale, has contributed to a rise in new home sale prices and suggests even higher home prices in 2013.

Like most of the U.S. housing market, new construction appears to have bottomed in October 2011. One year later, the market looks stronger.

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Buyers Win 6.6 Percent Increase In Purchasing Power

Purchasing Power 2010-2012

Mortgage rates in Colorado continue to troll near all-time lows, boosting the purchasing power of home buyers statewide.

According to Freddie Mac’s most recent Primary Mortgage Market survey, the average 30-year fixed rate mortgage is now 3.39 percent nationwide, just three ticks off an all-time low. At the start of last quarter, 30-year fixed rate mortgage rates averaged 3.62 percent.

One year ago, they averaged 4.12%.

When mortgage rates are falling, they present Broomfield home buyers with interesting options. Because of lower rates, buyers can choose to tighten their household budgets, buying an ideal home but paying less to own it each month. Or, for buyers who shop for homes by “monthly payment”, falling mortgage rates put more homes with affordability’s reach.

As a real-life example, for a buyer whose monthly principal + interest mortgage payment is limited to $1,000 per month, and whom opts for a 30-year fixed rate mortgage, as compared to January of this year, the maximum property purchase price has climbed 6.6%, or $14,000 in list price.

Consider this comparison:

  • January 2012 : A payment of $1,000 afforded a maximum loan size of $211,756
  • October 2012 : A payment of $1,000 affords a maximum loan size of $225,771

The 6.6 percent increase in affordability outpaces this year’s rise in home prices and is one reason why the U.S. housing market is improving. Slowly and steadily, the U.S. economy is improving and “good deals” in housing are becoming harder to find. In addition, because homeownership is now less expensive than renting in many U.S. cities, home demand among buyers continues to rise.

For today’s home buyer, market conditions appear ripe. Mortgage rates are near all-time lows, low-downpayment mortgage program remain plentiful, and home values have been rising since late-2011. Within 6 months, rates may be up and homes prices, too. Purchasing power would decline, decreasing home affordability nationwide.

The best “deals” in housing, therefore, may be the ones you find today.

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