• Borrower’s financial situation
• How long the borrowers will remain in the home

Ultimately, a borrower’s financial situation is certainly the most crucial element in determining if a no closing cost loan is appropriate or not. If a borrower has the wherewithal to pay for the closing costs upfront, the lower the likelihood of the mortgage rate.

For example, a borrower who can afford to pay the closing costs upfront may be eligible for a current mortgage rate of 4.875%, while a borrower who has to roll the closing costs into the loan amount may qualify for a current mortgage rate of 5.125%. Using this example, let’s apply a scenario of a 30-year fixed-rate mortgage with a desired loan amount of $250,000 with $4,000 in closing costs. The borrower who can pay the $4,000 closing costs upfront will have a monthly principal and interest mortgage payment of approximately $1,323 with a mortgage rate of 4.875%. A borrower who decides to roll the closing costs into the loan amount will have a loan amount of $254,000 with a rate of 5.125%. Their monthly principal and interest payment would be approximately $1,383. As you can see, the monthly savings by paying the closing costs upfront, for this scenario, is $60.

Another important variable to consider when considering a no closing cost mortgage is how long you plan on staying in the home. Utilizing the scenario outlined above, we’ll assume closing costs of $4,000. If a borrower has a mortgage rate of 5.75% on an existing mortgage of $250,000, they are making a monthly principal and interest payment of approximately $1,459. Assuming the principal balance of the original mortgage loan was paid down to $246,000, and the $4,000 in new closing costs will be rolled into the new loan amount, this borrower is looking at a new mortgage loan of $250,000. If the borrower qualifies for a rate of 5.125%, their new monthly principal and interest payment will be approximately $1,361, a savings of $98 per month. In this scenario, if the borrower plans on staying in the home for at least 44 months, they will recoup the entire $4,000 in closing costs that were rolled into the new loan amount, and will then save approximately $31,000 over the remaining term of the new 30-year fixed-rate mortgage loan. An online mortgage calculator can easily help assess this information for you.

Want to save on your monthly mortgage payment? Click here for today’s rates or call us today at 866-896-5826.

It’s tough to pin down an exact reason that mortgages have performed so badly lately.  Part of it may be a reaction to last month’s employment report – but the report wasn’t that great.  Most likely it to has to do with fears that the Fed’s asset purchase program (the Fed has been purchasing $85 billion in Treasuries and MBS each month in order to drive down long-term interest rates and stimulate the economy).  I’ve written about this extensively over the past few weeks, but I see few reasons to believe that Quantitative Easing is going to go away anytime soon.  Inflation is very much under control, and outside of housing and a very small sample of employment data, it looks like the economy may be softening.

Last week’s Fedspeak did little to illuminate the issue of QE tapering.  Unsurprisingly, the hawks were in favor of tapering/ceasing asset purchases sooner rather than later, and the doves appear to want to continue easing.  This week we get some more Fedspeak and the Minutes from the last FOMC meeting are released on Wednesday.  Recall that the last statement included this phrase: “the Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes.”

The idea that purchases could be increased was new to the last statement (an expansion of QE would likely help rates improve), and perhaps the minutes will provide some guidance as to the thinking behind this.  Perhaps not.

There’s not much in the way of marketing-moving economic data this morning.  The Chicago Fed’s National Activity Index showed slowing growth and subdued inflation, which jibes with everything we’ve seen from CPI, PPI, and the regional Fed indices lately.  However, this is a decidedly lower-tier report, and probably won’t have much impact today.

The rest of the week is pretty quiet.  Existing Home Sales on Wednesday, Jobless Claims, New Home Sales, and the PMI flash report on Thursday, and Durable Goods on Friday.  Although I don’t see why we should expect rates to continue upward, I didn’t think that last week and was dead wrong.  If you’re getting a mortgage in the near term, market volatility alone presents risk, and you may be better off locking in a rate sooner rather than later.

Today’s Links: 

ProPublica: How the IRS’s Nonprofit Division Got So Dysfunctional.

CBS: North Korea Continues Apparent Short-Range Missile Tests.

NYT: Wells Dry, Fertile Plains Turn to Dust.

CNN Money: Oil-Price Manipulation: the Next Libor? This isn’t at all surprising, is it?

Matt Taibbi: Everything is Rigged, Continued: European Commission Raids Oil Companies in Price-Fixing Probe.

Reuters: Shrinking Deficit Reduces Pressure for Budget Deal.

Bloomberg: Connecticut Rail Service May Be Out a Week, Malloy Says. Well, this is going to be a fun week.

Scientific American: Why Do Top Athletes Suddenly Develop ‘The Yips?’

Reuters: The Fight for North Dakota’s Fracking-Water Market.

Zero Hedge: Judd Gregg Redefines “Revolving Door” – From US Senator, To Goldman Sachs Advisor, to Head of SIFMA. There’s a fair deal of tin-foil hat type stuff over at Zero Hedge.  I feel like it obscures the good stuff they do, like this piece.

Washington Post: Banks Slow to Pay Out Mortgage Relief.

The Atlantic: Is This Virtual Worm the First Sign of the Singularity?

Salon: Revenge, Ego, and the Corruption of Wikipedia.

Total Mortgage offers some of the lowest mortgage rates and fastest closing times of anyone in mortgage industry.  Refinancing your home loan today could slash your monthly payments.  Call us now at 877-868-2503 in order to speak with one of our licensed loan officers.    

Last night’s ribbon cutting ceremony: from left to right: Ridgefield First Selectman Rudy Marconi, Total Mortgage President John Walsh, Total Mortgage executive Bill Schettler, Ridgefield Chamber of Commerce Chairman Nancy O’Donnell, and Lou-Ann Daprato.

As part of its ongoing expansion efforts, Total Mortgage Services officially opened its new branch office in Ridgefield, Connecticut last night.  The office is located at 23 Catoonah Street.

Total Mortgage Services has been expanding exponentially over the past three years, and has been on the Inc 5000 list for the fasting-growing privately held companies in the United States for three consecutive years.

Total Mortgage believes that the satellite office will be able to better serve the Fairfield County area.

Lou-Ann Daprato is heading up the Ridgefield branch.  Lou-Ann has over twenty five years experience in the mortgage industry, and can be reached at 203-244-2227.

Want to save on your monthly mortgage payment? Click here for today’s rates or call us today at 866-896-5826.

As I mentioned above, Consumer Sentiment spiked in May, rising to a reading of 83.7, up from 76.4 in April.  The consensus expectation was for a reading of 78.  This is the highest reading since July 2007.  The reasons behind the spike are somewhat baffling to me, but my best guess is that this is related to the belief that housing is improving (which it is, although whether or not this is sustainable is debatable), and the perception that the job market is improving (which I find to be far more dubious).  Whatever the reasons behind the rise in Consumer Sentiment, it’s having the short-term effect of pushing rates higher this morning.

Beyond this, there’s not much to discuss today.  There was an article in the Wall Street Journal this morning that recaps the latest rounds of Fedspeak with regard to QE tapering, but it doesn’t provide much illumination. (The Fed is now on it’s third round of quantitative easing, and is purchasing $85 billion worth of MBS and Treasuries each month in order to drive down long-term interest rates and increase lending.  When this program ends or is tapered, mortgage rates will rise.)  The hawks want to scale back or stop asset purchases now or in the near future, and the doves are fine with current policy or want even more easing.  From the article:

Officials’ contrasting views in part reflect the mixed data coming in on the economy. Housing and auto data look strong and consumers have remained fairly resilient, but major sectors including manufacturing have been faltering. Unemployment has come down in recent months, but some of the improvement is due to workers leaving the labor force. Inflation has slipped well below the Fed’s 2% target, with the latest data showing prices are barely growing at all.

The next Fed meeting occurs on June 18-19, and we’ll see one more employment report in the interim period.  The minutes from the last FOMC meeting come out next Wednesday, but I doubt we’ll get any more clarity from them.  The long and short is that there is some disagreement between the Fed members about the easing programs – and there has been for as long as the programs have been in effect – this is nothing new.  I still think the asset purchases will remain in place for the forseeable future, but even the Fed said in their last statement that purchases could decrease or increase depending upon conditions, which leads me to believe that they don’t have a much better idea than I do as to when to taper QE, and whatever strategy they adopt is necessarily reactive to upcoming data.

Anyway, have a great weekend, there will be more on this next week.

Today’s Links: 

Matt Taibbi: Everything is Rigged, Continued: European Commission Raids Oil Companies in Price-Fixing Probe.

McClatchy: In Mexico, Fears for Democracy as Threatened Journalists Curtail Coverage.  And of course, the biggest reason things in Mexico are as bad as they are:

David Simon: A Fight to the Last Mexican.

The Economist: Libor in a Barrel.

Slate: Climate Scientists Overwhelmingly Agree Global Warming Is Real and Our Fault.

Toronto Star: Rob Ford in ‘Crack Cocaine’ Video Scandal.

The Onion: Obama Supporter Has Perfectly Improbably Explanation Absolving President From Blame For Scandals.

Scientific American: Fracking Can Be Done Safely, But Will It? If it costs more than the alternatives, we all know the answer is “no.”

Hardballtalk: Nice Slide, Ian Kinsler.

Ken Rosenthal: More Extensions, Less Free Agency.

Yahoo: Deployed Dad Makes Surprise Return – Disguised as Catcher While Daughter Throws First Pitch.

Total Mortgage offers some of the lowest mortgage rates and fastest closing times of anyone in mortgage industry.  Refinancing your home loan today could slash your monthly payments.  Call us now at 877-868-2503 in order to speak with one of our licensed loan officers.    

In a recent column by real estate journalist Ken Harney, one comment was clear: “That stinks,” said Steve Stamets, a mortgage officer with Apex Home Loans in Rockville, Md. “It’s just a money grab” that will cause creditworthy borrowers to avoid FHA loans and seek out low-down-payment alternatives through Fannie Mae and Freddie Mac, using private mortgage insurance.

However, in a statement to Total Mortgage by the National Association of Realtors, a softer tone was taken: “NAR dislikes higher fees that make it more difficult for buyers and owners to afford a home; however, we realize that these fees are necessary in the short-term to help stabilize the FHA fund.”

Below are the basic changes regarding FHA:

Consistent with FHA’s ongoing efforts to strengthen the Mutual Mortgage Insurance Fund, FHA is: revising the period for assessing the annual MIP; removing the exemption from the annual MIP for loans with terms of 15 years or less and Loan to Value (LTV) ratios of less than or equal to 78 percent at origination; and increasing the annual MIP on all forward mortgages except single family forward streamline refinance transactions that refinance existing FHA loans that were endorsed on or before May 31, 2009. For loans with FHA case numbers assigned on or after June 3, 2013, FHA will collect the annual MIP for the maximum duration permitted under statute.

For all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation (excluding financed Up-Front MIP (UFMIP)) less than or equal to 90 percent LTV, the annual MIP will be assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first.

For any mortgage involving an original principal obligation (excluding financed UFMIP) with an LTV greater than 90 percent, FHA will assess the annual MIP until the end of the mortgage term or for the first 30 years of the term, whichever occurs first. (source-HUD)

NAR senior economist Ken Fears wrote a report made available to Total Mortgage; in which he explains the motives by the FHA.

Said Fears, “The FHA faces many challenges going forward. Rising mortgage rates and a changing regulatory landscape may alter the typical borrower’s profile as well as the agency’s market share. Mortgage assumability will also impact the type of borrower the FHA receives, so it is with keen foresight that the agency changed its policy to shore up its books against future risks. Furthermore, the consumer gains an asset, which will help keep the market fluid in an environment of rising mortgage rates. However, many households will over pay with permanent mortgage insurance. More should be done to protect consumers who are likely to hold these loans to term.”

What Does this Mean to the Buyer?

Said the Fears report:

Assuming a lower rate loan reduces the cost of borrowing in an environment of rising interest rates. Assuming that home values rise at the historical 3% average, that $207,250 home would be worth roughly $247,500 after six years when the owner decides to sell. The next buyer could assume the remaining balance of roughly $172,000 and a second mortgage for the $83,000 balance at a hypothetical retail rate of 5.0%. The difference in the monthly payment for the new homeowner is nearly $72 dollars with the assumed mortgage versus if the entire sum were financed at the retail rate. If rates were to rise further, the difference is larger reaching more than $900 a month if rates rise to an unlikely 12%.

The one group that loses from permanent mortgage insurance is those borrowers who put down less than 10% and hold the loan for 30 years or those who hold for more than 10 years and sell but don’t allow their loan to be assumed. At the extreme, those borrowers would pay an extra $56,700 in mortgage insurance over the life of the 30-year loan; monies that could be used to pay down principal, student loans or some other more productive use. The permanent mortgage insurance is an onerous change for this group. For this reason, the FHA might re-think the mechanics of its mortgage insurance policy so that it releases after 78%, but kicks in again if the loan is assumed. In this way the program is protected from the risks of assumption without overcharging the consumer.

Click here for the complete HUD/FHA statement.

Click here for the complete NAR report.

Fortunately, the Federal Housing Administration (FHA) offers a program called Section 203(k). Section 203(k) is an FHA program designed for borrowers who would like to rehabilitate or repair a single-family property. The Section 203(k) program is not new, however, it is not as recognizable as other forms of financing homeowners across the county have utilized in the past to renovate their homes. The more conventional method of making repairs to a home came in the form of cash-out refinancing. These loans became far less prevalent given the decline in home equity when the housing bubble burst.

FHA 203(k) loans can be used for either a purchase or refinance of a property in need of work, and provides borrowers with funds needed to purchase or renovate such properties. Section 203(k) is a vital program for the revitalization of neighborhoods, in addition to the expansion of homeownership opportunities. FHA’s commitment to the Section 203(k) program is evident in their continued support of FHA-approved lenders in originating these types of mortgage loans.

Given today’s low mortgage rates and the difficulty of getting a traditional construction loan, those looking to purchase or refinance a home that needs a little work should seriously consider a Section 203(k) mortgage loan.

Want to save on your monthly mortgage payment? Click here for today’s rates or call us today at 866-896-5826.

Today’s economic data was fairly poor (and yesterday’s data wasn’t great either, for that matter):

• Weekly initial jobless claims surged last week, rising from a seasonally-adjusted figure of 328,000 last week (revised up from 323,000) to 360,000 this week.  The consensus expectation was for 330,000.  This is the highest level since March.
• The Philly Fed Manufacturing Report fell into contraction territory in April, falling to a reading of -5.2, down from 1.3 last month, and falling short of the consensus expectation of a reading of 2.2.  The Empire State Survey yesterday also showed manufacturing contraction in that territory.
• Housing starts were way down in April, falling to a seasonally adjusted annual pace of 853,000, down from a pace of 1.036m in March, and missing expectations of 969,000.  Permits were up significantly from March, so perhaps we will see this turn around in the coming months.
• The Consumer Price Index came in at -0.4% in April, falling from -0.2% in March, but pretty much in line with expectations.  Core CPI (excluding gas and energy) was up 0.1%, also basically in line with expectations.  Neither CPI nor PPI are showing signs of inflation right now.

These poor numbers are fueling today’s mortgage bond rally, but it’s going to take a lot more before we erase last week’s losses.  Perhaps signs of a slowing economy and an almost complete lack of inflation will ease concerns over the Fed tapering QE, although I sort of doubt it.

Short of Ben Bernanke hiring a skywriting plane to explicitly spell out his intentions over lower Manhattan, the prospect of tapering asset purchases will continue to hang like the Sword of Damocles.

Either way, today’s rally is a welcome respite from the beating that rates have taken for the past two weeks or so.

Today’s Links: 

Wired: Drugstore Cowboy.

Pew Research: The New Sick Man of Europe: The European Union.

Dealbook: HSBC Plans More Job Cuts in Effort to Save Up to $3 Billion. Nobody wants to see layoffs, but let’s not forget what this company did.  It shouldn’t be allowed to do business in the U.S.

Matt Taibbi: Outrageous HSBC Settlement Proves the Drug War is a Joke.

Bloomberg: From Brooklyn to California, Housing Bubble Threat Grows.

CNN/Money: Dirty Medicine.

Scientific American: Summer of the Mosquito. Maybe the cicadas can eat ‘em.

Boston Globe: Greetings From New England’s Gun Valley.  We Make a lot of guns up here in the blue states.

McClatchy: Benghazi Emails Show CIA Deputy Director Did Most of Editing on Talking Points.

ProPublica: On Victory Drive, Soldiers Defeated by Debt.

Total Mortgage offers some of the lowest mortgage rates and fastest closing times of anyone in mortgage industry.  Refinancing your home loan today could slash your monthly payments.  Call us now at 877-868-2503 in order to speak with one of our licensed loan officers.    

Spring has sprung and home buyers are at the starting gate. But this race to buy might be 

A fairly new player on the scene are institutional investors; many ready to pay with cash. The primary strategy is to turn property into rental homes. “There are many markets across the country where it makes sense to do that. The average rent will allow you to cash flow single family homes and that’s what these investors are looking at,” explained said Daren Blomquist, vice president of RealtyTrac. “You have many displaced families who still want to live in a single family home but are not qualified to buy yet. Interest rates are low and they’re getting out of the bond market and are looking for places to invest their money. Some of the best markets are showing a 10% return by renting out the property. And that’s just for the rental. The value of the property is going up as well.”

“We did a study of institutional purchases -10 properties or more in one month- and found they were up in places such as San Bernardino/Riverside but also up in Atlanta and parts of Florida,” said Blomquist. “Many of these investors started out in the west because that’s where the market bottomed out first. Now they are moving east as they run out of inventory in the western markets. Local investors might buy a Sandy-damaged property; rehab it and flip it at a much higher price.”

His advice. Be persistent. “You’re going to run into situations where your offer is one of many. But you’ll learn what types of offers are the successful ones. And, if possible, avoid the need to buy immediately. There will be foreclosed inventory entering the market that isn’t for sale yet but will be later this year and next year. And homebuilders are ramping up and that will balance out the the inventory,” said Blomquist.

And cash is still king. “If you can make an offer that’s not contingency-based, that’s a plus. A first time home buyer has that advantage over someone who has to sell their home first before buying,” he said.

Said Ken Fears, a senior economist at the National Association of Realtors: “Investors buying property are a concern. If you are someone coming in with all cash vs someone who has financing hurdles, that process will take longer. It also depends on the market. For the Wall Street investor, the spread has to be enough to make it worthwhile and there aren’t that many markets where that can be done. They need to keep the cost down and need to do it on a large scale basis.”

“There’s lots of competition out there and multiple offers are the norm,” said Fears. “I’ve heard of buyers waiving inspections. That’s never a good idea. You need too know what you are getting before you buy it. One can look at Sandy-type homes but if you’re a first-time buyer, you may not be able to get financing for that type of property. But if you can get the financing and can afford the insurance for these low lying areas, sure. The sweat equity option is a great one.”

A recent article in Forbes cites stats used by CoreLogic regarding institutional investors:

Institutions are most active in five states: Florida, Georgia, Arizona, Nevada and California. The metro area that had the most institutional activity in 2012 was Miami, Fla., with firms funding 30% of all sales. Single-family home prices for the Miami metro area rose about 11% in 2012. That figure includes distressed homes. Institutional investors accounted for 21% of all sales in Charlotte, N.C., 19% in Las Vegas, and 18% in Orlando.

Forbes also pointed to JPMorgan Chase, Colony Capital, a real estate equity company privately owned by billionaire Thomas Barrack, Waypoint Homes, Apollo Global Management, KKR & Co, and Oaktree Capital Group. The biggest player is Blackstone Group; claiming to have purchased $3 billion of houses that had been foreclosed.

For more info:

http://www.realtytrac.com/statsandtrends

http://www.realtor.org/news-releases/2013/03/pending-home-sales-slip-on-constrained-inventory

Many homes declined in value greatly after the housing bubble burst, leaving many home owners owing more on their mortgage than their home is worth (this is known as being underwater, upside down, or having negative equity).  In the past, most lenders would not underwrite a new mortgage if a borrower was underwater, which kept people from refinancing.

Thankfully for millions of underwater homeowners, this is no longer the case.  At Total Mortgage we are now able to refinance eligible borrowers with underwater homes through HARP with loan-to-value (LTV) ratios up to 150%*.

Are you underwater and worried that your second mortgage or HELOC will prevent you from refinancing?  If your LTV is 150% or less, we have no combined loan-to-value restrictions.  There is  an unlimited cap on CLTV with HARP through Total Mortgage*.

Credit guidelines are less restrictive on HARP than with traditional mortgage programs.  Even if you’ve been turned down by other lenders, you owe it to yourself to speak with one of the HARP experts at Total Mortgage.  We’ve helped thousands of people refinance their homes, and have extensive experience with HARP.

Since 1997, Total Mortgage has been helping responsible homeowners refinance, and we would like to help you as well.  We have an A+ rating with the Better Business Bureau and more than 90% of our past customers would recommend us to their family and friends.  We want to be your lender for life.

Call today at 877-868-2503 to speak with a HARP expert.  You could slash your mortgage payments with one easy phone call.

*Some restrictions apply and conditions may vary depending upon your individual financial situation.  Call for more details.

Want to save on your monthly mortgage payment? Click here for today’s rates or call us today at 866-896-5826.

Moving on to today’s economic data:

• The Empire State Manufacturing Survey declined from a reading of 3.05 in April to -1.43 in May, falling significantly short of a consensus expectation of 3.75.  New orders also fell into contraction territory, not a good sign for the future.
• Industrial Production contracted in April, falling from 0.4% growth in March to -0.5% growth in April.  Expectations were for -0.2% growth.  
• The Producer Price Index dipped significantly in April, falling 0.7% from March.  This was more or less in line with expectations, and reflects a decrease in gas prices Core PPI (minus good and energy) was up 0.1%, also pretty much in line with expectations.  If the Fed’s going to taper, it’s not going to be because of inflation.

On the whole, this data was pretty weak, and is helping to put downward pressure on rates.  Given recent volatility, whether or not this is will be sustained is anyone’s guess.  There’s a lot of economic data tomorrow and a bunch of Fedspeak, so there is certainly risk that we could see rates deteriorate further on Thursday.  If you’re in the process of getting a new mortgage and have yet to lock your rate, you need to be aware of the short term risk.

Today’s Links: 

McClatchy: Multiple Controversies Suddenly Plague Obama.

Pat OIiphant: “You’re doing beautifully, son…”

Reuters: Once a Beacon, Obama Under Fire Over Civil Liberties. Wait, when we he a beacon?

BBC: Eurozone Recession Continues Into Sixth Quarter.

Guardian: Eurozone Now in its Longest Recession. Austerity, Hurrah!

Paul Krugman: How the Case for Austerity Has Crumbled.

Slate: Obama’s War on Journalists.

NYT: Spying on the Associated Press.

Reuters: The Global Epidemic of Underemployed Youth.

The Onion: Dude With Knit at Party Calls Beer “Libations.”

Esquire: 14 Ways to Make Yourself Better Right Now.

The Economist: Shaken, Not Stirred – the Breadth of the Latest Slowdown is Disconcerting.

Total Mortgage offers some of the lowest mortgage rates and fastest closing times of anyone in mortgage industry.  Refinancing your home loan today could slash your monthly payments.  Call us now at 877-868-2503 in order to speak with one of our licensed loan officers.