Conforming Loan Costs Are Rising, Says Freddie Mac

Mortgage rates may be dropping, but mortgage costs are not.

According to Freddie Mac, the average required discount points on a conforming mortgage rate are higher by 0.1 percent since early-May.

A "discount point" is prepaid mortgage interest; an up-front fee paid by a borrower in exchange for a lower mortgage rate. In most cases, discount points are tax-deductible.

Tax-deductible or not, though, rising costs are rising costs and Freddie Mac glosses over it.  In its weekly press release, the government group offers mortgage rate comparisons to weeks prior, but doesn't do the same for required points.

The press fails to mention discount points entirely.

An increase of 1/10 percent in discount points costs homebuyers and refinancing households in Phoenix an extra $100 per $100,000 borrowed.

The hike reminds us that there's more to a mortgage than just its rate -- costs matter, too.  And if you've only been watching the headlines, you would have missed how costs are rising.

Fannie Mae's Loan Quality Initiative : Repulling Your Credit Just Before Closing

A new loan quality initiative from Fannie Mae is making it harder for Cave Creek home buyers and refinancing homeowners everywhere to close on a mortgage.

Beginning June 1, 2010, with all new applications, Fannie Mae wants lenders to verify that borrowers have not taken on new debt during the underwriting phase of the mortgage. 

If new debts are found, the mortgage is subject to a re-underwrite and a possible turndown.

For Fannie Mae, the goal is to reduce the number of loans that go bad because of new, non-disclosed debt. Lenders have the freedom to verify in whatever manner they wish, but in most cases, the verification process will amount to a credit re-pull made just prior to closing.

The underwriters will be looking for 3 things in particular -- even after your loan is approved.

First, your updated credit report will show your current credit card bills and minimum monthly payments.  Those numbers will replace your original numbers made at the time of application.  If the debts exceed a certain threshold, your loan will be denied.

Second, underwriters will be looking at your updated credit score. If your FICO has dropped below minimum lending standards, your loan will be denied. Or, you may be subject to a new loan-level pricing adjustment. 

Loan level pricing adjustments are mandatory loan fee based on your credit score.

And, lastly, underwriters will be looking at your credit report's Credit Inquiry section. The goal is to see if you've been applying for credit elsewhere. Underwriters can use this information at their discretion.

Fannie Mae's Loan Quality Initiative is just one more way that the government-backed group is trying to improve its loan pools. Unfortunately, it'll mean more turndowns for mortgage applicants.

Therefore, take extra care of your credit between the time of application and the time of closing. Don't buy new cars, don't buy new appliances, and -- most definitely -- don't open new credit cards.  Be extra safe with your credit because a mortgage application that's supposedly cleared-to-close can be revoked at the eleventh hour.

When in doubt, talk to your loan officer about what may or may not trigger the Loan Quality Initiative.  Your loan approval is at stake.

Fannie Mae's Loan Quality Initiative : Repulling Your Credit Just Before Closing

A new loan quality initiative from Fannie Mae is making it harder for Scottsdale home buyers and refinancing homeowners everywhere to close on a mortgage.

Beginning June 1, 2010, with all new applications, Fannie Mae wants lenders to verify that borrowers have not taken on new debt during the underwriting phase of the mortgage. 

If new debts are found, the mortgage is subject to a re-underwrite and a possible turndown.

For Fannie Mae, the goal is to reduce the number of loans that go bad because of new, non-disclosed debt. Lenders have the freedom to verify in whatever manner they wish, but in most cases, the verification process will amount to a credit re-pull made just prior to closing.

The underwriters will be looking for 3 things in particular -- even after your loan is approved.

First, your updated credit report will show your current credit card bills and minimum monthly payments.  Those numbers will replace your original numbers made at the time of application.  If the debts exceed a certain threshold, your loan will be denied.

Second, underwriters will be looking at your updated credit score. If your FICO has dropped below minimum lending standards, your loan will be denied. Or, you may be subject to a new loan-level pricing adjustment. 

Loan level pricing adjustments are mandatory loan fee based on your credit score.

And, lastly, underwriters will be looking at your credit report's Credit Inquiry section. The goal is to see if you've been applying for credit elsewhere. Underwriters can use this information at their discretion.

Fannie Mae's Loan Quality Initiative is just one more way that the government-backed group is trying to improve its loan pools. Unfortunately, it'll mean more turndowns for mortgage applicants.

Therefore, take extra care of your credit between the time of application and the time of closing. Don't buy new cars, don't buy new appliances, and -- most definitely -- don't open new credit cards.  Be extra safe with your credit because a mortgage application that's supposedly cleared-to-close can be revoked at the eleventh hour.

When in doubt, talk to your loan officer about what may or may not trigger the Loan Quality Initiative.  Your loan approval is at stake.

May 2010 Jobs Report Gives A Temporary Boost To Home Affordability

On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls data from the month prior. 

The release is more commonly called "the jobs report" -- a major factor in mortgage rates and monthly payments.

Especially now.

With the recession officially over and growth returning to the U.S. economy, the recovery's next frontier is jobs. As job growth increases, home affordability should take a hit.  Here's why:

1. As the number of working Americans increases, so should total consumer spending
2. As consumer spending increases, so should a return to risk-taking on Wall Street
3. As risk-taking returns to Wall Street, bond markets should start to lose

Mortgage rates, therefore, should rise.

Furthermore, as the jobs market stabilizes and recovers, renters should be more apt to buy their first home, and homeowners should be apt to up-size.  More home buyers in Phoenix means more competition for homes and higher home prices typically follow.

Job growth can be trickle-up for housing.

Today, however, the jobs data was not so strong. According to the government, 431,000 jobs were created in May, but of those new jobs, 95.4% represented temporary staffing for the 2010 Census.  The number of private-sector jobs created fell well short of expectations and Wall Street is voting with its dollars right now.  Mortgage bonds are gaining so, therefore, rates are falling.

The May 2010 jobs report may not reflect well on the economy, but home affordability in Arizona and around the country is improving because of it.

Pending Home Sales Data Shows Great Deals On Homes Are Getting Harder To Find

The Pending Home Sales Index shot higher in April as low mortgage rates and a soon-to-expire federal tax credit spurred home buying in Cave Creek and across the county.

A "pending home sale" is a home that's under contract to sell but not yet closed.

Region-by-region, April's pending home sales varied versus March's data:

• Northeast Region: +29.5%
• Midwest Region : +4.1%
• South Region : -0.6% (after a +15.9% posting in March)
• West Region : +7.5%

On an annual basis, the Pending Home Sales Index is higher by 22 percent.

April marks the third straight month that pending home sales are up and today's buyers should take note. This is because, according to the National Association of Realtors®, 80% of homes under contract close within 60 days.

In other words, May and June's existing home sales data should be similarly strong, causing the Dove Valley real estate market to gently shift in favor of sellers.  In fact, already, we're seeing home resales touch multi-year highs while new home supplies fall to multi-year lows.

All of it tends to push home prices higher while simultaneously reducing buyer negotiation leverage. That, coupled with the high probability of higher mortgage rates ahead, means that finding "deals" will get tougher for the average home buyer.

In looking at the housing market data, it appears that the best month in which to have bought a home this year was February.  The next best time may be right now. 

Talk to your real estate agent if you're planning to buy a home this year.  It may be sensible to move up your time frame a few months.

Consumer Confidence Hints At Higher Home Prices And Higher Mortgage Rates, Too

The Consumer Confidence Index is rising, a potentially double-edged sword for residents of Scottsdale and for Americans, in general.

According to The Conference Board, economic confidence is as high as it's been since August 2007 -- 4 months before the start of the recession.  Americans are optimistic again.

Confidence matters to the economy because as confidence increases, in theory, consumer spending follows.  Consumer spending accounts for 70 percent of the U.S. economy.

It's why Wall Street is responsive to confidence data.

When consumer confidence is rising, households start to make big-ticket purchases they may have otherwise put off indefinitely.  Maybe it's a replacing old appliances; or, trading in an old automobiles; or, splurging on a vacation.

Rising confidence can also spur real estate sales.

When confidence is rising, a growing family that chose to "make do" in their 3-bedroom, 1.5-bathroom starter home may opt to move-up to a 4-bedroom, 3-bath instead at a slightly higher monthly carrying cost.  And there are families in every city in every state making those same decisions.

As a result, the housing market gets a boost -- especially in the mid-to-upper price ranges. Values rise on higher demand for homes.

The downside is that growing confidence tends to push conforming and FHA mortgage rates up.  This is because an expanding economy draws investment dollars away from bonds and into stocks -- including mortgage bonds. 

The reduced demand for mortgage-backed bonds leads bond prices to fall and mortgage rates to rise.  Sometimes by a little, sometimes by lot.

So, if you're buying a home or thinking of a refinance, rising confidence in the economy may be a signal to act sooner rather than later.  Talk to your real estate agent and/or your loan officer about next steps and get your plan in place.

How To Replace Your New Home's Deadbolt Locks

After moving into a new home in Cave Creek , you should immediately replace its deadbolt locks.  It's not just the home's former residents that have the key, after all, but so might a relative, a friend, a neighbor, a dog-walker, and others.

You may call a locksmith for the job, but you can save some money if you can do-it-yourself. 

In this detailed, 2-minute video, you'll learn how to remove and replace a deadbolt lock using nothing but a Phillips screwdriver and a deadbolt from a hardware store.  It's a simple project that requires little mechanical skill.

And one that can make your new home more safe.