The housing market is extremely competitive right now because mortgage rates are still near record lows. While mortgage rates are rising this year, the rates are still attractive to many individuals and families who are looking to buy a home. At the same time, when mortgage rates change, families need to re-evaluate their budgets. A change in mortgage rates will impact the monthly mortgage payment, so families need to know what they can afford.
Furthermore, because the market is so competitive, sale prices are going up as well. As mortgage rates and home prices rise, families need to determine what their monthly budget is. Even a small increase in the mortgage rate can make a big difference.
Families Must Do The Math To Figure Out Their Monthly Mortgage Payments
Families need to figure out what monthly mortgage payment they can afford before they make an offer on a home. The factors impacting the monthly mortgage payment are the loan amount, the interest rate, and the repayment period. Many homeowners take out a 30-year mortgage; however, borrowers might be able to adjust the term to meet their specific needs. A few important points to remember include:
Families can adjust all of these factors to find the right monthly payment for their budgets.
There Are Ways To Reduce The Interest Rate On A Loan
Finally, there are steps that families can take to reduce the interest rate on their loans. For example, families might be able to put more money down to qualify for a better interest rate. This could reduce the monthly payment, keeping the loan amount within the family's budget. Or, families might be able to pay down other types of debt such as credit card debt or car loans. If families have a lower debt to income ratio, they might qualify for a better interest rate. This could help families afford a larger house without having to spend more money.
Reevaluate
Most of the focus on stimulus checks has been on "when" they will arrive, but if you are in the market for a new home (and mortgage) you should know how that payment will impact your financing. Part of the latest Covid 19 relief package includes payments and protections for existing borrowers and renters, but what about those who are looking to buy? According to the IRS, here are a few things to know about how your stimulus impacts your upcoming mortgage.
Stimulus Money Is Not Taxable
Any funds you are qualified to receive are not taxable; this is important to know as you move forward with your purchase because it allows you to properly anticipate your tax burden for the coming year.
Stimulus Money Is Not Income
While funds from the stimulus can be used however you'd like, including as part of your downpayment, they are not considered income. If you currently qualify for an income-based mortgage incentive or program, having a one-time boost in income could work against your housing plans. If those extra funds counted as income, some families could find themselves no longer qualifying for programs and loans that have income guidelines.
Stimulus Money Can Be Used For Your Mortgage
Whether you use it for your down payment, pay points to reduce interest, or even pay off remaining debts to improve your ratios, this money can benefit your home buying plans.
Every debt you pay regularly impacts the amount of money you can afford to borrow for your mortgage -- using a stimulus payment to eliminate one or more credit cards or even car payments can increase the amount of monthly payment you can afford. Making these payments can also improve your credit score, which could qualify you for a better rate.
Since the current stimulus program can benefit home buyers in several key ways, there is no better time to buy than now. Use your stimulus to maximize your buying power and get the best possible mortgage terms and you'll be able to access a wider variety of homes.
Last week’s scheduled economic news included readings on sales of new and previously-owned homes and weekly reports on jobless claims and mortgage rates.
March Sales of Previously-owned Homes Dip; New Home Sales Rise
Sales of single-family homes fell in March as demand for homes exceeded availability. 6.01 million previously-owned homes were sold in March on a seasonally-adjusted annual basis; analysts expected a pace of 6.11 million sales based on February’s reading of 6.24 million sales of existing homes. The March reading for sales of pre-owned homes was 3.70 percent lower year-over-year and was the lowest sales pace reported since August 2020.
High demand for homes coupled with low inventories of available homes constricted sales. Lawrence Yun, chief economist of the National Association of Realtors® said, “Sales for March would have been measurably higher had there been more inventory.” Mr. Yun also addressed affordability concerns arising from lean inventories of homes and high demand. “Without an increase in supply, the society’s wealth division will widen with homeowners enjoying sizable equity gains while renters will struggle to become homeowners.”
The average price of a single-family home in the U.S. rose to $329,100 in March, which indicates year-over-year growth of 17.20 percent in home prices. While a six-month supply of homes for sale indicates an average inventory, the March inventory of homes for sale rose to a 2.10-month supply from February’s 2.0- month inventory of homes for sale.
Shortages of existing homes for sale boosted March sales of new homes, which sold at a seasonally-adjusted annual pace of 1.02 million sales. Analysts expected 888,000 new homes to be sold year-over-year in March based on February’s sales pace of 846,000 new homes sold. Rapidly rising materials costs created obstacles for builders and limited their ability to meet the need for affordable homes, but they raced to meet the ongoing demand for homes.
Mortgage Rates Mixed; Jobless Claims Fall
Average mortgage rates fell below three percent last week; the rate for 30-year fixed-rate mortgages dropped by seven basis points to 2.97 percent. Rates for 15-year fixed-rate mortgages averaged 2.29 percent and were six basis points lower. Rates for 5/1 adjustable rate mortgages rose by three basis points to an average rate of 2.83 percent.
Jobless claims were lower last week with 547,000 new claims filed; analysts expected 603,000 initial claims filed. 586,000 first-time claims were filed in the prior week. Claims were also lower for ongoing claims filed. 3.67 million continuing jobless claims were filed as compared to 3.67 million continuing claims filed in the prior week.
What’s Ahead
This week’s scheduled economic reports include readings from Case-Shiller Home Price Indices, data on pending home sales, and the University of Michigan’s consumer sentiment index. Weekly readings on mortgage rates and jobless claims will also be published.
Last week’s economic news included readings from the National Association of Home Builders on housing markets along with Commerce Department readings on housing starts and building permits issued. Fed Chair Jerome Powell appeared on 60 Minutes. Weekly readings on mortgage rates and jobless claims were also released.
NAHB: Homebuilder Confidence Ticks Up
The National Association of Home Builders reported that home builders’ confidence in housing market conditions rose one point to an index reading of 83. Builder confidence readings over 50 indicate that most builders consider housing market conditions as positive.
Component readings used for the NAHB Housing Market Index were varied. Builder confidence in current market conditions rose one point to 88 and home builders’ confidence in housing markets over the next six months fell two points to 83. The index reading for home buyer traffic in new housing developments rose three points to 75. Homebuilders faced ongoing challenges including supply chain problems, rising materials prices, and meeting the need for affordable homes.
In related news, the Commerce Department reported a seasonally adjusted annual pace of 1.74 million housing starts in March. 1.77 million building permits were issued at a seasonally adjusted annual pace in March.
Mortgage Rates, New Jobless Claims Fall
Freddie Mac reported lower average mortgage rates last week as the rate for 30-year fixed-rate mortgages dropped by nine basis points to 3.04 percent; rates for 15-year fixed-rate mortgages dropped by seven basis points to 2.35 percent. Rates for 5/1 adjustable rate mortgages averaged 2.80 percent and were 12 basis points lower. Discount points for fixed-rate mortgages averaged 0.70 percent for fixed-rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.
New jobless claims fell to 576,000 claims filed last week as compared to 769,000 initial claims filed the previous week. Ongoing jobless claims were unchanged from the prior week at 3.73 million claims filed.
The Commerce Department released inflation data for March. The Consumer Price Index rose by 0.60 percent as compared to February’s growth rate of 0.40 percent; analysts expected a March reading of 0.50 percent. Core inflation, which excludes volatile food and fuel sectors rose 0.30 percent in March and exceeded expectations of 0.20 percent growth. Core inflation rose by 0.10 percent in February.
Fed Chair Jerome Powell appeared on 60 Minutes on Sunday; he said that that the global economy would not return to normal until the COVID pandemic is controlled, but he presented a brighter picture for the U.S. economy. He said that the national economy is expected to grow between six to seven percent and that the national unemployment rate could fall to four or five percent from its current rate of six percent.
What’s Ahead
This week’s scheduled economic news includes readings on readings on sales of new and previously-owned homes and weekly readings on mortgage rates and jobless claims.
Last week’s economic reporting included readings from the Federal Reserve’s Federal Open Market Committee and a speech given by Fed Chair Jerome Powell. Weekly reports on mortgage rates and jobless claims were also released.
FOMC Minutes: Fed’s Monetary Policy Stance to Remain “Accommodative”
The Federal Open Market Committee of the Federal Reserve released minutes of its meeting held March 16 and 17. The meeting minutes indicated split opinions on the U.S. economy’s outlook. Several members expected inflation to rise due to constricted supply chains and high demand for goods and services. This scenario resembles trends in residential real estate where supplies of available homes are far lower than buyer demand. Other FOMC members expected continued downward pressure on inflation. Members expected inflation to rise to 2.40 percent in 2022 but expected the inflation rate to ease to 2.10 percent by 2023.
The Federal Reserve has a dual legal mandate to achieve an inflation rate of 2.00 percent and maximum employment. While inflation is expected to exceed 2.00 percent in 2022 and beyond, unemployment remains above pre-pandemic levels. FOMC members did not raise the Fed’s key interest rate range from 0.00 to 0.25 percent.
In related news, Fed Chair Jerome Powell spoke at a webinar hosted by the International Monetary Fund. He emphasized the potential threat of COVID to the U.S. and global economy and encouraged everyone to get vaccinate and said, “Until the world is vaccinated, we’re all going to be at risk of new mutations and we won’t be able to resume activity all around the world.”
Mortgage Rates, Jobless Claims Show Mixed Readings
Fixed mortgage rates were lower last week according to Freddie Mac. The average rate for 30-year fixed-rate mortgages fell by five basis points to 3.13 percent; the average rate for 15-year fixed-rate mortgages fell by three basis points to 2.42 percent. Rates for 5/1 adjustable rate mortgages averaged 2.92 percent and rose by eight basis points. Discount points averaged 0.70 percent for 30-year fixed-rate mortgages and 0.60 percent for 15-year fixed-rate mortgages. Discount points averaged 0.10 percent for 5/1 adjustable rate mortgages.
Initial jobless claims rose to 744,000 claims filed as compared to the prior week’s reading of 728,000 first-time jobless claims filed. Analysts expected 694,000 new claims for last week. Continuing jobless claims were lower last week with 3.73 million ongoing claims filed. There were 3.75 million continuing jobless claims in the prior week.
What’s Ahead
This week’s economic reporting includes readings from the National Association of Home Builders, Commerce Department readings on housing starts and building permits issued, and inflation. Weekly readings on mortgage rates and jobless claims will also be released.
Last week’s economic reports included readings on home prices, pending home sales, and construction spending. Data on public and private-sector employment and the national unemployment rate were published along with weekly readings on mortgage rates and jobless claims.
Case-Shiller: Record Home Price Growth in Phoenix, but Will it Last?
Case-Shiller Home Price Indices indicated fast growth in home prices as the national home price growth rate for January grew to 11.20 percent from December’s reading of 10.40 percent national home price growth. Case-Shiller’s 20-City Home Price Index reported 19 of 20 cities reported rising home prices in January, but Cleveland, Ohio home prices were lower. Detroit, Michigan resumed reporting to the 20-City Home Price Index after nearly a year’s absence.
Phoenix, Arizona led the January 20-City Home Price Index with a seasonally-adjusted annual pace of 15.80 percent; Seattle, Washington, and San Diego, California followed with home price growth of 14.30 percent and 14.20 percent.
Analysts expressed concerns that rapidly rising home prices are not sustainable in the long term and cited rising mortgage rates and skyrocketing home prices as obstacles to homebuying. As demand for homes eases, home price growth will slow.
The Commerce Department reported fewer pending home sales in February as pending home sales fell by 10.60 percent. Analysts expected pending home sales to fall to -3.10 percent; pending home sales dropped by -2.40 percent in January. Construction spending fell by -0.80 percent in February; it was expected to fall by one percent as compared to January’s positive reading of 1.25 percent growth in construction spending. Rising lumber prices and severe winter weather influenced construction spending in February.
Mortgage Rates Hold Steady, Jobless Claims Mixed
Freddie Mac reported little change in mortgage rates last week. The average rate for 30-year fixed-rate mortgages rose one basis point to 3.18 percent; Rates for 15-year fixed-rate mortgages averaged 2.45 percent and were unchanged. The average rate for 5/1 adjustable rate mortgages was also unchanged at 2.84 percent. Discount points averaged 0.70 percent for 30-year fixed-rate mortgages, 0.60 percent for 15-year fixed-rate mortgages, and 0.30 percent for 5/1 adjustable rate mortgages.
The Census Bureau reported 719,000 new jobless claims last week; this surpassed the prior week’s reading of 658,000 initial claims. Ongoing jobless claims fell to 3.79 claims filed as compared to the prior week’s reading of 3.80 million continuing jobless claims filed.
Private-sector jobs grew by 525,000 jobs in March but fell short of the expected 525,000 private-sector jobs added. Public and private-sector jobs also ramped up with 916,000 jobs added in March. Analysts expected 675,000 jobs added to the Non-Farm Payrolls report; 468,000 public and private-sector jobs were added in February. The national unemployment rate decreased to 6.00 percent from February’s reading of 6.20 percent.
What’s Ahead
This week’s scheduled economic releases include job openings and minutes of the recent Federal Open Market Committee meeting. Weekly readings on mortgage rates and jobless claims will also be reported.
Last week’s economic reports included readings from Case-Shiller on home prices, the Federal Housing Finance Agency also reported on home prices and the Commerce Department released data on sales of new homes and pending home sales. The University of Michigan released its Consumer Sentiment Index, and weekly readings on mortgage rates and jobless claims were released.
Case-Shiller Home Price Indices Report Fastest Price Growth in 7 Years
The S&P Case Shiller National Home Price Index reported December home prices rose at the fastest pace since 2014. The National Home Price Index posted a year-over-year home price growth rate of 10.40 percent in December as compared to November’s home price growth rate of 9.50 percent.
Case-Shiller’s 20-City Home Price Index posted December home price growth at a year-over-year pace of 10.10 percent as compared to November’s home price growth rate of 9.20 percent according to Case-Shiller’s 20-City Home Price Index. Phoenix, Arizona home prices rose at a seasonally-adjusted annual pace of 14.40 percent; Seattle, Washington home prices held second place with 13.60 percent growth, and San Diego, California held third place in the 20-City Home Price Index with 13.00 percent home price growth. 18 of 19 cities reported higher home prices; Detroit Michigan did not report data for December.
The Federal Housing Finance Agency reported year-over-year home price growth of 11.40 percent in December for homes owned or financed by Fannie Mae and Freddie Mac. High demand for homes and short inventories of available and affordable homes created challenges for first-time and moderate-income home buyers. Builders said that rising materials costs and labor shortages continued to impact new home construction.
New Home Sales Increase as Shortages of Pre-Owned Homes Persist
The Census Bureau reported 823,000 sales of new homes in January on a seasonally-adjusted annual basis. Analysts expected 850,000 sales based on December’s reading of 885,000 new homes sold. Homebuyers are turning to new homes as supplies of previously-owned homes are in short supply. Shortages of previously-owned homes continued as homeowners stayed in their homes due to economic uncertainty, unemployment, and ongoing concerns over the pandemic.
Pending home sales fell by - 2.80 percent in January as compared to December’s reading of - 0.50 percent.
Mortgage Rates Rise as Jobless Claims Fall
Freddie Mac reported higher average mortgage rates last week. Rates for 30-year fixed-rate mortgages rose 16 basis points to 2.97 percent; the average rate for 15-year fixed-rate mortgages rose 15 basis points to 2.34 percent. Rates for 5/1 adjustable rate mortgages averaged 22 basis points higher at 2.99 percent. Discount points averaged 0.60 percent for fixed-rate home loans and 0.10 percent for 5/1 adjustable rate mortgages.
First-time jobless claims fell to 730,000 new claims filed from the prior week’s reading of 841,000 initial jobless claims filed. Ongoing jobless claims were also lower; 4.42 million continuing claims were filed last week as compared to 4.52 million ongoing claims filed in the prior week.
The University of Michigan reported an index reading of 76.80 for its Consumer Sentiment Index in February, as compared to January’s index reading of 76.20.
What’s Ahead
This week’s scheduled economic reports include readings on construction spending, job growth, and the national unemployment rate. Weekly readings on mortgage rates and jobless claims will also be released.
Last week’s scheduled economic reporting included readings on inflation, Federal Reserve Chair Jerome Powell’s speech on U.S. labor markets, and weekly readings on mortgage rates and jobless claims.
Oil Prices Push Inflation Higher in January
Rising oil and gasoline prices drove a jump in January’s consumer price index. Inflation rose 0.30 percent month-to-month, which matched analysts’ expectations. The year-over-year inflation rate rose to 1.40 percent but remained lower than the pre-pandemic annual pace of 2.30 percent. The core inflation rate, which excludes volatile food and energy sectors, was unchanged in January.
Some analysts expect stronger inflation throughout 2021 due to the impact of stimulus payments and the potential for covid-19 vaccines. Widespread vaccinations are expected to reduce quarantine requirements and local restrictions on businesses and workplaces.
Fed Chair Doesn’t Expect Lasting Jump in Inflation in Near Term
In remarks made during a speech to the Economic Club of New York, Federal Reserve Chair Jerome Powell said he anticipated neither “a large nor sustained” increase in inflation for the near future. Mr. Powell also said that rising prices caused by bursts of spending were not sustainable. “Inflation has been much lower and more stable over the past three decades than in earlier times.” The Fed Chair also observed that “In the 1970s when inflation would go up, it would stay up.”
Mortgage Rates Hold Steady as Jobless Claims Decrease
Freddie Mac reported no change in the average rate of 2.73 percent for 30-year fixed-rate mortgages; the average rate for 15-year fixed-rate mortgages dropped by two basis points to 2.19 percent. The average rate for 5/1 adjustable-rate mortgages rose one basis point to 2.79 percent. Discount points averaged 0.70 percent for 30-year fixed-rate mortgages, 0.60 percent for 15-year fixed-rate mortgages, and fell to 0.20 percent for 5/1 adjustable rate mortgages.
Jobless claims fell last week with 793,000 initial claims filed as compared to the prior week’s reading of 812,000 first-time claims filed. 4.55 million continuing jobless claims were filed last week as compared to 4.69 million ongoing claims filed in the prior week.
What’s Ahead
This week’s scheduled economic reports include readings from the National Association of Home Builders Housing Market Index and Commerce Department readings on housing starts and building permits issued. The National Association of Realtors will report on sales of previously-owned homes. Weekly readings on mortgage rates and jobless claims will also be published.
Last week’s economic news included Commerce Department readings on construction spending, labor sector reporting on public and private-sector job growth, and the national unemployment rate. Weekly reports on mortgage rates and jobless claims were also released.
Construction Spending Driven by Housing Sector in December
The Commerce Department reported a one percent gain in construction spending in December to a seasonally-adjusted annual pace of $1.49 trillion. Residential construction drove spending for the seventh consecutive month with a 3.10 percent gain in spending. Construction for public projects rose by 0.50 percent; private-sector spending on non-residential construction fell by -1.70 percent.
Demand for housing remained high as supplies of previously-owned homes ran below average and homebuyers turned to new housing developments. Flight to less congested metro areas continued to drive demand for single-family homes. Builders cited rising materials costs and land and labor shortages as ongoing challenges to building affordable homes.
Mortgage Rates Hold Steady as Job Growth Improves
Freddie Mac reported little change in average mortgage rates last week. The average rate for 30-year fixed-rate mortgages was unchanged at 2.73 percent. Rates for 15-year fixed-rate mortgages averaged 2.21 percent and one basis point higher. The average rate for 5/1 adjustable rate mortgages was two basis points lower at 2.78 percent. Discount points averaged 0.70 percent for 30-year fixed-rate mortgages and 0.60 percent for 15-year fixed-rate mortgages. Points for 5/1 adjustable rate mortgages averaged 0.30 percent.
Public and private-sector job growth improved in January. ADP reported 174,000 private-sector jobs as compared to a negative reading of -78,000 jobs in December. Analysts forecasted 48,000 private-sector jobs added in January.
The federal government’s Non-Farm Payrolls report showed 49,000 public and private-sector jobs added, which fell short of the expected 50,000 jobs added, but the job growth reading was good news when compared to December’s reading of -227,000 jobs lost. In related news, the national unemployment rate fell to 6.30 percent as compared to December’s reading of 6.70 percent
Fewer Jobless Claims Filed
779,000 initial jobless claims were filed last week as compared to the prior week’s reading of 812,000 first-time claims filed. Continuing jobless claims also fell with 4.59 million ongoing claims reported; 4.79 million continuing claims were filed during the prior week.
What’s Ahead
This week’s scheduled economic reporting includes readings on inflation and consumer sentiment. Weekly readings on mortgage rates and jobless claims will also be released
Last week’s economic reports included readings from S&P Case-Shiller Home Price Indices, readings on new and pending home sales, and the University of Michigan’s Consumer Sentiment Index. Weekly reports on mortgage rates and jobless claims were also published.
S&P Case-Shiller Home Price Indices: Home Prices Rose Faster in November
The Case-Shiller National Home Price Index showed that November home prices grew by 9.50 percent on a seasonally-adjusted annual basis. October’s reading showed 8.40 percent home price growth; analysts expected a year-over-year pace of 8.80 percent for national home price growth.
Severe shortages of available homes coupled with high demand for homes continued to fuel rising home prices as builders faced rising materials costs. The covid pandemic added to home price growth, which is expected to slow as businesses and employers reopen and flight from congested urban areas slows.
The 20-City Home Price Index reported home price growth in 19 of 20 cities; Detroit, Michigan has not reported its data in recent months. Phoenix, Arizona, Seattle, Washington, and San Diego, California again held the top three places in the 20-City Index.
New Home Sales Rise in December
New homes sold at a seasonally-adjusted annual pace of 842,000 sales as compared to a sales pace of 829,000 homes sold in November. Pending home sales were lower in December with a -0.30 percent decline. Analysts forecasted a reading of -0.20 percent in pending sales based on November’s reading of -2.60 percent fewer pending home sales. Seasonal influences including winter weather and the holiday season typically cause home sales to fall during the winter months.
Mortgage Rates, Jobless Claims Lower
Freddie Mac reported lower fixed mortgage rates last week; the average rate for 30-year fixed-rate mortgages fell by four basis points to 2.73 percent. The average rate for 15-year fixed-rate mortgages fell one basis point to 2.20 percent. The average rate for 5/1 adjustable rate mortgages was unchanged at 2.80 percent. Discount points averaged 0.70 percent, 0.60 percent, and 0.30 percent respectively.
First-time jobless claims fell to 847,000 claims filed as compared to the prior week’s reading of 914,000 initial claims filed. Continuing jobless claims were also lower with 4.77 million claims filed. as compared to the previous week’s reading of 4.97 million claims filed.
The University of Michigan reported an index reading of 79.0 in January for its Consumer Sentiment Index. Analysts expected no change to December’s reading of 79.2. The continued spread of covid-19 and related economic concerns contributed to lower consumer sentiment.
What’s Ahead
This week’s scheduled economic readings include labor-sector reports on public and private obs growth and the national unemployment rate. Weekly reports on mortgage rates and jobless claims will also be released.
Last week’s economic reporting included readings from the National Association of Home Builders Housing Market Index, along with Commerce Department readings on housing starts and building permits issued. The National Association of Realtors® reported on sales of previously-owned homes; weekly readings on mortgage rates and jobless claims were also released.
NAHB: Home Builders’ Housing Market Index Falls in January
Homebuilder confidence in housing market conditions fell three points to an index reading of 83 in January. The National Association of Home Builders Housing Market Index expected a reading of 85 for January as compared to December’s index reading of 86. Increasing covid-19 cases and rising materials costs caused builder confidence to fall as builder concerns rose.
The NAHB Housing Market Index remained strong as any reading over 50 indicates positive builder sentiment toward housing markets. Component readings for January’s Housing Market Index also fell; builder confidence in current market conditions fell two points to an index reading of 90. Homebuilder confidence in market conditions for the next six months also fell two points to 83. Builder confidence in buyer traffic in new housing developments dropped five points to an index reading of 68. Readings of more than 50 for buyer traffic were rare until the covid-19 pandemic started.
Conflicting factors impacted home builder confidence readings. Home sales rose as urban homeowners sought new and larger homes in the suburbs and rural areas, labor shortages, and rising materials expenses worried home builders.
Housing Starts and Building Permits Rose in December
The Commerce Department reported a seasonally-adjusted annual pace of 1.67 million housing starts as compared to November’s reading of 1.547 million starts. Building permits issued rose in December with 1.709 million permits issued annually as compared to November’s reading of 1.635 million housing starts.
The National Association of Realtors® reported 6.76 million sales of previously-owned homes sold as of December on a seasonally-adjusted annual basis. Home sales are increasing although demand exceeds available inventory and home prices continue to rise.
Mortgage Rates, Jobless Claims Lower
Mortgage rates fell last week with the average rate for 30-year fixed-rate mortgages two basis points lower on average at 2.77 percent. Rates for 15-year fixed-rate mortgages averaged 2.21 percent and were two basis points lower. Rates for 5/1 adjustable rate mortgages averaged 2.80 percent and 32 basis points lower.
First-time jobless claims fell to 900,000 claims filed as compared to the prior week’s reading of 926,000 new claims filed. Ongoing jobless claims were also lower last week with 5.05 million continued claims filed as compared to 5.18 million claims filed the previous week.
What’s Ahead
This week’s scheduled economic reporting includes readings from Case-Shiller Home Price Indices, the FHFA House Price Index, and the Federal Reserve’s Statement from its Federal Open Market Committee. Monthly readings on new home sales and consumer sentiment will also be published. Weekly readings on mortgage rates and jobless claims will also be released.
Right now is the best time to look at refinancing your home. Even if your current mortgage is as young as a year old, you might find that a refinance is in your best interest.
Be Sure That A Refinance Makes Sense
With today’s rates, refinancing makes sense for many homeowners, but it might not be the right move for you. Depending upon your mortgage, you may pay a penalty if you prepay early. Also, if you’ve paid heavily into your mortgage, refinancing into a new 20 or 30 year mortgage could cost you money over the long-term. The bottom line is to carefully read through your loan documents or even call your loan company to find out the details of the impact of a refinance.
Consult With A Professional
Once you’ve determined that a refinance makes sense in theory, it’s time to talk with an objective professional, i.e., not your loan rep. Seek out a fiduciary, who has receives no gain whether or not you refinance. Have the professional run the numbers so you can see in black and white where you will stand financially after a refinance.
Compare Rates
If you and your financial professional decide that a refinance is the way to go, now it’s time to compare rates. Even with rates at rock bottom prices right now, you’ll find that you might save even more money just by shopping around. Also, remember that if your credit is excellent, you have more negotiating power. If you have a preference with working with a certain company, ask them to match the interest rate you’ve been offered by a competitor.
Protect Your Investment
Now that you’ve improved your mortgage situation with a refinance, it’s time to consider what your heirs will be left with when you’re no longer here to provide for them. Make sure that your loved ones can reap the benefit of your savvy financial planning by taking out a life insurance policy. There are many variations on life insurance policies, so by sure to compare and contrast benefits, terms and rates.
As a homeowner, you should always be on the lookout for ways to maximize your investment. Use these refinancing tips to get the most out of your home’s value.
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.
Last week’s economic news included readings on sales of new and previously-owned homes and consumer sentiment. Weekly average mortgage rates were also released, but readings for jobless claims were not released due to the Christmas holiday.
Single-Family Home Sales Fall in November
Sales of new and previously owned homes were lower in November. Fear of rising covid-19 cases and the usual slump in home sales during the winter holidays contributed to fewer home sales. Rapidly rising home prices cooled buyer interest; short supplies of pre-owned homes for sale drove prices of new homes higher as demand increased.
Inventory of new homes increased by 14 percent as the median price of a new single-family home rose to $335,000, which was five percent higher year-over-year. George Ratiu, a senior economist with Realtor.com, said that would-be homebuyers were dealing with an increased divide between their home-buying preferences and affordability.
Rising materials costs continued to drive new home prices up; builders faced challenges in constructing affordable homes due to higher materials costs and lower profit margins.
November sales of previously-owned homes were lower with 6.69 million sales reported on a seasonally-adjusted annual basis as compared to October’s reading of 6.86 million sales. Short inventories of available pre-owned homes caused a dip in sales as buyers competed for fewer available homes. Shortages of available homes are expected to persist into 2021 and to drive home prices higher. Affordability will challenge many buyers even as mortgage rates remain at or near record lows.
Mortgage Rates Lower
Rates for fixed-rate mortgages dipped last week according to Freddie Mac. The average rate for a 30-year fixed-rate mortgage was one basis point lower at 2.66 percent; rates for 15-year fixed-rate mortgages averaged 2.19 percent and were two basis points lower. The average rate for 5/1 adjustable rate mortgages was unchanged at 2.79 percent. Discount points averaged 0.70 percent for 30-year fixed-rate mortgages, 0.50 percent for 15-year fixed-rate mortgages, and 0.20 percent for 5/1 adjustable rate mortgages.
The University of Michigan reported a lower index reading of 80.7 for December as compared to an expected reading of 81.0 and November’s reading of 76.9. A post-Thanksgiving surge in Covid-19 cases caused consumer sentiment to fall.
What’s Next
This week’s scheduled economic readings include Case-Shiller’s Housing Market Indices, pending home sales, and weekly readings on mortgage rates and jobless claims.
Before taking out a mortgage to buy a home, it's time to take a realistic survey of your finances so that you can determine your price range and what size of home you can comfortably afford.
Buying a home that suits your finances will mean that your mortgage payments will be easily within your budget and won't cause you financial stress.
Stay In Your Price Range
Many people, when offered a large mortgage by the bank, are tempted to buy homes that are outside of their price range.
It's easy to see why a larger property or a more luxurious home might be appealing, but by stretching too far beyond your means you are courting with disaster.
If your monthly mortgage rate just barely fits within your budget, without room for savings, retirement contributions, or to build up an emergency fund – it will only be a matter of time before things start to get tight.
What happens if you lose your job, or if your income decreases? If you are unable to meet your mortgage payments, it is easy to slip very quickly into debt or even bankruptcy. This is why it is so crucial to buy a home that fits your budget.
Here Are Some Questions To Ask Yourself For Figuring Out How Much Mortgage You Can Comfortably Afford:
Once you have asked yourself these questions and taken a close look at your budget, you will be able to determine realistically what you can afford when buying a home – so that you can find that dream home that meets your budget. For more helpful advice, contact your trusted mortgage professional.