Archives for January 2014

The Simplest Ways To Lower Your Home Heating Bill This Winter

The Simplest Ways To Lower Your Home Heating Bill This WinterWhen the holiday season starts and the winter chill comes around, the heating bill at your property will naturally increase as you keep yourself warm and cosy. However, if your home is not being heated efficiently, you are essentially letting your hard earned dollars escape into the air as wasted energy.

What are some simple and inexpensive ways that you can cut down your heating expenses this winter and save yourself some money?

Only Heat The Rooms You Are Using

If you work from home and are spending eight hours of the day sitting in your home office, there is no need to keep the rest of the house toasty warm. If you have heaters that you can turn on and off for each room, you can direct the heat to the room that you are using.

0If you have a spare bedroom, you don’t even have to heat it at all unless a guest is coming to stay over.

Change The Air Filter On Your Furnace

If the air filter on your furnace is getting old and clogged up, it will block the airflow from the furnace itself which is a huge waste of energy. This will mean that your furnace works less effectively and it will also reduce its lifespan. It will only cost you $20 to change the air filter, but this little fix will make a big difference in the long run.

Turn On Your Ceiling Fan

You might think that turning on your ceiling fans in order to save money on heating makes no sense, but hear me out on this one. When you turn on your fans in reverse, they will actually draw the warm air throughout the house – helping to circulate it and keep it warmer.

Dress Warm At Home

If you live in a cold climate and you can walk around in your house in a t-shirt and shorts comfortably, you’re wasting money! If you wear warm clothing indoors during the winter, you will be able to keep your thermostat several degrees cooler and you will save yourself a lot of money over the winter.

These are just a few simple ways that you can reduce the heating costs for your property this winter. For more helpful tips and advice, feel free to contact your trusted mortgage professional.

Pros And Cons Of Adjustable Rate Mortgages

Pros And Cons Of Adjustable Rate MortgagesWhen you are in the market for a new home, you may be faced with numerous options for financing your home. One of the choices you will have to make is whether to apply for a fixed or adjustable rate mortgage.

In some cases, an adjustable rate mortgage may be your best option, but keep in mind, they are not the answer for everyone. Adjustable rate mortgages can be risky for some borrowers and it’s important to understand both the pros and cons.

When To Consider An Adjustable Rate Mortgage

Perhaps one of the best things about ARMs is they typically have a lower starting interest rate than fixed rate mortgages. For some borrowers, this means it is easier for them to qualify for a loan. 

ARMs Are Beneficial For Borrowers Who:

  • Anticipate an income increase – for borrowers who are anticipating their income to increase over the next year or two, an ARM may be the right option.
  • Will be reducing their debt – those borrowers who have automobile loans or student loans that will be paid off in the next few years may benefit from an ARM which would allow them to qualify for a larger mortgage today anticipating their ability to convert to a fixed-rate mortgage.
  • Are purchasing a starter home – when you anticipate living in a home for five years or less, an adjustable rate mortgage may help you save money for a bigger home.

Adjustable Rate Mortgage May Contain Hazards

There are a number of different types of adjustable rate mortgages and they are each tied to specific interest rate indexes. While an ARM may offer borrowers some flexibility in terms of income and debt ratios, the downsides cannot be ignored. Some of the cons of using an ARM to finance your mortgage include:

  • Increasing rates – borrowers should carefully review their loan documents to see how frequently their interest rates may increase. Some loans adjust annually while other may not increase for three to five years after the mortgage is signed. For borrowers, this means they can anticipate an increase in their monthly payments.
  • Prepayment clauses – oftentimes, lenders include a prepayment penalty with ARM loans which can be devastating for borrowers. Before agreeing to an ARM, make sure you read the documents very carefully to determine how long you need to hold the loan
  • Home Values – one of the biggest challenges borrowers face with an ARM is what happens if the property value decreases: Refinancing a home into a fixed-rate mortgage may be impossible if this occurs.

Borrowers who are searching for the right mortgage should discuss all options with their loan officer. There are specific instances when an ARM may be the best option and there are other times, such as if you plan to stay in your home for more than five years, where a fixed-rate mortgage may be your best option.

Flaws You Cannot Hide By Staging Your Home

Flaws You Cannot Hide By Staging Your HomeWhen you sell your home, you want it look as good as possible. To do this, your real estate agent will help you stage your home or, if needed, help you find a professional to stage your home.

This means de-cluttering your home, re-arranging furniture, and de-personalizing each room.

A staged home is more appealing to buyers and helps to highlight your home’s positive features. However, staging is not meant to cover major flaws in your home. Some things just have to be repaired.

Roof Problems

It doesn’t matter how pretty your home is, your buyer is going to expect you to fix roof problems or adjust your price to cover them. Your roof is one of the most important parts of your home.

Cracked Tile

Of course, you can use throw rugs to cover cracks in your tile, but chances are your buyers are going to look under them. Then they may think you are trying to hide a serious problem like a shifting foundation. Save yourself the headache and have your floors fixed.

Broken Windows

You have to expect your buyers to walk around your home checking out the views from the windows. They’re going to notice any cracks. If you have the budget, consider upgrading your windows and making your home more marketable. At the very least, you should have the glass replaced.

Torn Screens

If you have torn screens, your buyers may think you don’t take care of your property. Yet, screens are fairly easy to fix on your own. With the right supplies from your local hardware store, you can have new, sleek screens in less than a day.

Should I Shorten My Mortgage Term, Important Factors To Consider

When you first bought your home a few years ago, perhaps you started off with a 30 year mortgage. Now, you are considering refinancing and changing it to a 20 year or even a 15 year mortgage.

Shortening your mortgage term and refinancing can be a smart financial move, but before you make this decision there are a number of factors that you should consider.

Switching to a shorter mortgage will mean that your monthly payments will be higher, but you will be 100% paid off much sooner and you will save thousands of dollars in interest rates. Here are a few of the factors to consider before making this decision:

Has Your Situation Improved?

Perhaps you have moved to a higher paying position, allowing you to earn a higher income and pay off more of your mortgage every month? Or maybe you have received an inheritance, which will help you to make the payments? Perhaps your expenses have gone down and you will have more money left over from your wage?

Whatever the reason, if your financial situation has improved you might want to consider switching to a shorter mortgage. With your spare money, you will be able to make the larger payments and get your house paid off sooner.

Is The Improvement Long Term?

However, it is important to consider whether this improvement will last for the long term. Will your higher wage stay that way for the next several years? Are there any hidden expenses that you are failing to factor in?

You might be set up to repay larger monthly amounts on your mortgage at the moment, but you don’t want to set yourself up for failure in the future if your finances change.

What Are The Refinancing Costs?

Keep in mind that refinancing often comes with costs and fees, so make sure that you subtract these when you are making your calculations. It can sometimes take at least two or three years to recoup the fees, so make sure that you don’t plan on selling your home in the short term.

Can You Get A Better Rate?

One of the advantages of refinancing to a shorter mortgage is that you can sometimes get the opportunity to find a better rate. Perhaps if you have an adjustable rate you will be able to convert it to a fixed rate. Take a look at what is available and ask your financial advisor for help.

These are just a few important factors to consider when it comes to shortening your mortgage term. For more info about your home, contact your trusted mortgage professional.

What’s Ahead For Mortgage Rates This Week – January 13, 2014

What’s Ahead For Mortgage Rates This Week – January 13, 2014The first post-holiday week of 2014 brought mixed economic and housing-related news. CoreLogic reported via its Housing Market Index that November home prices grew by 11.80 percent year-over-year.

This was just shy of October’s year-over-year reading of 11.90 percent. As with Case-Shiller’s recently reported Home Price Indices, a slower rate of home price growth suggested to analysts that the housing market is cooling down.

The Federal Reserve’s Federal Open Market Committee released the minutes from its December meeting. The minutes reiterated the Committee’s decision to begin tapering its asset purchases this month.

The Fed announced that it would reduce its monthly asset purchases by $10 billion to $75 billion. As always, the Fed indicated that it would continue monitoring economic data for determining future actions concerning monetary policy.

Mortgage Rates Mixed

Freddie Mac’s Primary Market Survey reported mixed results for average mortgage rates last week. The rate for a 30-yer fixed rate mortgage dropped to 4.51 percent from 4.53 percent with discount points lower at 0.70 percent; the rate for a15-year fixed rate mortgage was 3.56; this was one basis point higher than for last week.

Discount fell from 0.70 to 0.60 percent. The rate for a 5/1 adjustable rate mortgage jumped by 10 basis points to 3.15 percent with discount points unchanged at 0.50 percent.

Employment, Unemployment Data Mixed

The week’s jobs-related readings provided mixed readings for the labor sector. The ADP Employment report for December showed 238,000 private sector jobs added and matched expectations of 215,000 new private sector jobs. December’s reading also exceeded November’s reading of 229,000 jobs added.

The Bureau of Labor Statistics released the Non-Farm Payrolls report for December; it reported 74,000 jobs added in December against expectations of 193,000 new jobs and November’s reading of 241,000 jobs added.

The sharp drop in new jobs during December was partially blamed on poor weather, but analysts also said that it could be a sign of further ups and downs in the U.S. economy.

In a statement given in connection with the December Non-Farm Payrolls report, St. Louis Federal Reserve Bank President James Bullard, a member of the FOMC, said that he did not expect the Fed to stop tapering its asset purchases due to December’s sharp drop in new jobs.

The national unemployment rate improved to a reading of 6.70 percent. This was the lowest reading in five years and only two-tenths of a percent above the FOMC’s targeted unemployment rate of 6.50 percent. 347,000 workers left the workforce, which helps to explain the discrepancy between the lower number of new jobs and the lower unemployment rate.

This Week

This week’s scheduled economic news includes retail sales and retail sales except autos, the Federal Reserve’s Beige Book report, Weekly Jobless Claims, Freddie Mac’s PMMS. The NAHB Home Builders HMI and the Housing Starts report will also be released. Friday’s release of the University of Michigan’s consumer sentiment index rounds out the week.

Build A Home Gym For Your New Year’s Resolution

Build A Home Gym For Your New Year's ResolutionWhile many people claim every January that they are going to exercise more, a lot of them give up after the first couple of months. It takes a great deal of effort to make it to the gym before work or have the energy to go afterward.

So don’t make a New Year’s resolution you know you won’t keep. Set yourself up for success by bringing the workout to you. Build your own home gym.

Designate A Space

The ideal situation would be to dedicate an entire room to your new home gym. That way you can close the door, crank up the music, block out the children arguing and focus on you.

However, a section of your garage or the back of your basement will also work. You just need enough room for a set of weights, a mat, a bench and a cardio machine, if you have one.

Prepare The Area

Put down a rubberized floor, especially if you’re in a basement or garage with concrete surfaces. You can purchase them pretty cheaply in foot-by-foot interlocking squares. Then hang mirrors.

This is important so you can watch your form when lifting weights. Also, you might want to put in a stereo system and TV for when you want to listen to music or watch instructional videos.

Decide How Much To Spend On Cardio Equipment

Cardio machines can get expensive and there are many types to choose amongst. If you’re a marathon runner, then you’ll probably want a treadmill. However, you can choose as many or as few as you want, such as an elliptical, stair stepper or stationary bike.

If you don’t want to break the bank for a fancy machine, then a good old jump rope will do the trick.

Choose Your Weights

You can go with a barbell weight system with resistance pulleys or just a set of dumbbells. Make sure you get a bench, so you can vary your lifting routine and properly stabilize yourself for certain exercises.

Make Space For Your Yoga Mat

Yoga mats are great for padding your knees, hands and back when doing abs and stretching — or for actually practicing yoga.

Many people don’t take the time to stretch after a workout, but it’s extremely important in order to improve flexibility, correct posture and prevent injuries. If you create a defined are to limber up, then it’s more likely to become a regular part of your routine.

Dodd-Frank’s Latest Gift: The Qualified Mortgage Rule

Dodd-Frank's Latest Gift: The Qualified Mortgage RuleThe Dodd-Frank Wall Street Reform and Consumer Protection Act’s latest provision – the Qualified Mortgage rule – is going to effect on January 10, 2014.

While, like many of Dodd-Frank’s other features, its ability to protect customers remains to be seen, one of its impacts is already clear. Taking out a home loan just got harder.

The QM rule contains a set of provisions that, if followed, may protect lenders from lawsuits. They will also make it harder for customers to qualify to borrow money to buy a house.

Verifying Incomes

Lenders now have to follow stringent procedures to verify that borrowers can repay their loans. While many home loan lenders are already verifying and documenting borrower incomes, assets and debts, they will have to create additional paperwork to prove that they did their jobs.

DTI Caps

For a loan to be considered a qualifying mortgage, the borrower’s debt-to-income ratio can be no more than 43 percent. This means that if a borrower has $4,500 in gross monthly income, his total debt payments including his new mortgage cannot exceed $1,935 per month.

Previously, some lenders had been willing to go up to 45 percent.

Fee And Term Caps

Lenders will be less able to make creative loans, as well. Loans that meet the QM rule can be no longer than 30 years in length. They also cannot have closing costs and fees that exceed a cap of 3 percent of the loan’s balance.

Who Gets Impacted?

The good news is that the normal borrower taking out the normal loan might not notice the new QM rule. Borrowers that get squeezed are those that need to take out a loan that doesn’t fit the box laid out by the provisions. These include:

  • People in high-cost cities that need 40-year or interest-only mortgages to lower their payments.
  • Self-employed people and contractors that need to be able to borrow money on “stated” income without detailed verification.
  • Borrowers that can afford a loan but have other debts, like student loans.
  • Those that need non-traditional loans with high fees.

While the law still allow a lender to make a loan that isn’t a qualifying mortgage, given that the loan won’t have the same legal protections, its costs remain to be seen. This could end up pricing people with special needs out of the home loan market.

3 Considerations When Making A Down Payment

3 Considerations When Making A Down Payment One of the challenges you will face when deciding how much money to put down on your new home is whether to put down a larger down payment or to take a bit of money from your down payment and use it to pay “discount points” to lower your interest rate.

There are pros and cons to doing both and each borrower’s situation will be different so it’s important to understand which option is best for your individual need.

Some Factors You Should Consider Include:

  • Cost Of Borrowing – generally speaking, to lower your interest rate will mean you pay a premium. Most lenders will charge as much as one percent (one point) on the face amount of your loan to decrease your mortgage interest rate. Before you agree to pay discount points, you need to calculate the amount of money you are going to save monthly and then determine how many months it will take to recover your investment. Remember, discount points are normally tax deductible so it may be important to talk to your tax planner for guidance.
  • Larger Down Payment Means More Equity – keep in mind, the larger your down payment, the less money you have to borrow and the more equity you have in your new home. This is important for borrowers in a number of ways including lower monthly payments, potentially better loan terms and possibly not having to purchase mortgage insurance depending on how much equity you will have at the time of closing.
  • Qualifying For A Loan – borrowers who are facing challenges qualifying for a loan should weigh which option (discount points or larger down payment) is likely to help them qualify. In some instances, using a combination of down payment and lower rates will make the difference. Your mortgage professional can help you determine which is most beneficial to you.

There is no answer that is right for every borrower. All of the factors that impact your mortgage loan and your overall financial situation must be considered when you are preparing for your home mortgage loan.

Talking with your mortgage professional and where appropriate your tax professional will help you make the decision that is right for your specific situation.

Case Shiller Price Index Shows Highest Year-Over-Year Gains Since 2006

Case Shiller Price Index Shows Highest Year-Over-Year Gains Since 2006The Case-Shiller 10 and 20-City Home Price Indices for October were released on December 31. Although home prices in most cities continued to show year-over-year gains, the pace of home price appreciation is expected to slow in 2014.

Year-over-year increases have been in double digit territory since March 2013, but month-to-month readings suggest that the rate of increasing home prices is slowing.

According to David Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices, “…the monthly numbers show that we are living on borrowed time and the boom is fading.”

The 10 and 20 city indices are showing that home prices some cities that were showing little or no growth in 2013 are posting higher rates of appreciation, while growth in cities that have shown very high increases in home prices are beginning to lose momentum.

Year-over-Year Growth In Double Digits

The 10-and 20-city indices each posted year-over year gains of 13.60 percent between October 2012and October 2013. These were the highest year-over-year gains since February of 2006.

Home prices recovered to mid-2004 levels in October, but remained 20 percent lower than peak home prices seen in June and July of 2006.

Here are figures for 10 cities showing the highest increases in home prices year-over-year in October 2013:

City                                                                        Y-O-Y Growth Rate

Las Vegas, NV                                              27.10 %

San Francisco, CA                                         24.60%

Los Angeles, CA                                           22.10%

San Diego, CA                                             19.70%

Atlanta, GA                                                  19.00%

Phoenix, AZ                                                 18.10%

Detroit, MI                                                   17.30%

Miami, FL                                                    15.80%

Tampa, FL                                                   15.20%

Seattle, WA                                                 13.10 %

Home prices in the 10 and 20-city indices have gained 23.10 percent and 23.70 percent since home prices reached their lowest points in March 2012.

Month-To-Month Readings Indicate Slower Growth

Month-to-month readings show a slowing trend in home price growth. 18 of 20 cities included in the S&P Case-Shiller Home Price Indices showed slower growth in October as compared to September’s readings.

The Federal Reserve will begin tapering its asset purchases this month and will continue doing so unless economic conditions slow to a point where the Fed considers tapering counter-productive to economic growth.

Concerns over the tapering of “quantitative easing” and higher mortgage rates are seen as contributing to slower gains in home prices.

Although some analysts have identified indicators of economic growth, most seem to agree that home prices are likely to increase by single-digit percentages in 2014.

What’s Ahead For Mortgage Rates This Week – January 6, 2014

What's Ahead For Mortgage Rates This Week – January 6, 2014The last week of 2013 brought relatively good news in view of the economic roller coaster rides caused by legislative impasse. A brief shutdown of federal government agencies, and nail-biting suspense over if and when the FOMC of the Federal Reserve would taper its quantitative easing program.

Last week’s news was not high in volume due to the New Year holiday, but it does suggest that a general economic recovery is progressing and that housing markets are leading the “charge!”. Here are the details:

The NAR’s data of month-to-month reading of 0.20 percent showed an increase of 0.20 percent over October’s reading of -1.20 percent, which was the lowest reading for pending home sales in five months.

Lawrence Yun, chief economist for NAR, said that “…the positive fundamentals of job creation and household formation are likely to foster a fairly stable level of contract activity in 2014.”

November’s year-over-year reading for pending home sales was 101.7 against a reading of 103.3 for November 2013. The good news is that November’s reading exceeded a 10-month low of 101.50 for October 2013.

Rapid Rises In Home Prices May Have Peaked

The S&P Case-Shiller 10 and 20- city home price indices for October was released Tuesday with positive results for both indices showing year-over-year gains in average home prices at 13.60 percent.

On an un-adjusted basis, the 10 and 20 city indices each gained 0.20 percent between September and October. The indices each showed a 1.00 percent gain in home prices on a seasonally adjusted annual basis. Case-Shiller cautioned that home prices are expected to rise at single-digit rates during 2014.

Consumer Confidence Rises, Housing And Manufacturing Sectors Improve

December’s consumer confidence reading gained 6.1 points for a reading of 78.1. This also exceeded the expected reading of 76.2. 

The prior two months had shown decreased in readings thought to have been caused by the government shutdown in October. Consumers indicated that they are more confident about the economy than they have been in five and a half years.

Housing and manufacturing are leading the recovery, which reflects stronger housing, production and possibly manufacturing jobs, which have lagged behind increased production. 

The national unemployment rate stood at 7.00 percent last week, which remains 0.50 percent above the Federal Reserve’s targeted rate of 6.50 percent.

Weekly jobless claims came in lower than expectations of 342,000 jobless claims at 339,000 new jobless claims. The prior week’s reading showed 341,000 new jobless claims.

Although a small decrease in new claims, last week’s reading further suggested that the economic recovery is on track.

Mortgage Rates

Thursday’s mortgage interest rate survey showed incremental increases in mortgage rates; concerns over continued tapering of the Fed’s QE program may have been a factor in the slight uptick in last week’s rates.

Average rates for mortgage loans rose as follows. The rate for a 30-year fixed rate mortgage increased from 4.48 to 4.53 percent with discount points rising from 0.70 percent to 0.80 percent.

The rate for a 15-year fixed rate mortgage was 3.55 percent with discount points unchanged at 0.70 percent. The rate for a 5/1 adjustable rate mortgage rose by five basis points to 3.05 percent with discount points unchanged at 0.40 percent.

Economists seem to agree on continued improvement in the economy for 2014, however rising mortgage rates and high unemployment remain as obstacles for faster economic recovery.