Dennis' Mortgage Blog

April 29th, 2016 12:09 PM


Question of the week: If you run a credit report will it mess up my score?

Answer: This is a very common question for us to hear from clients during conversations for preapproving and determining options for refinances. Because there is so much misinformation regarding credit scores some people are over cautious for any credit report being pulled. As a result they are resistant to our obtaining all the necessary information we need to provide accurate and complete information.

My standard response is that I don’t have to pull a credit report if you do not want me to but I cannot provide a pre-approval letter for your offer until I do.

This can often lead to, “well I just got a free credit report on line, can you use that?”

No.

When we pull a credit report it is through a company that is approved with Fannie Mae, Freddie Mac and HUD. As a result the reports are accepted as accurate for showing the applicant’s credit history and outstanding obligations. The report we receive is a “tri-merge” report, meaning it combines reports from TransUnion, Equifax and Experian and provides the credit scores from all three bureaus.

When preapproving a loan, either for a purchase or refinance, we upload this credit report along with the other information from the application package to the Automated Underwriting System (AUS) for either Fannie Mae (Desktop Underwriter) or Freddie Mac (Loan Prospector). The report that is part of our file is then read by the AUS and used for determining if the loan can be approved as long as all the evidence for income, assets and property match the information we uploaded.

Without having our credit report in our system to upload into the AUS for Fannie or Freddie a loan cannot be preapproved, therefore I need to pull my own credit report for your file.

Regarding the impact on your credit scores, our inquiry has zero to minimal impact depending on your history. The models used to determine credit scores have built in a tolerance for multiple inquiries for different lenders in the mortgage and auto loan industries. This is because it is not unusual for someone looking to buy a car or home to speak with more than one lender and each will want to obtain their own credit report. As a result if you have spoken to two other lenders within the past week or two and then call me and rightly decide you want me to work with you on your new mortgage application, when I pull my credit report your credit score should be the same as the score with the first lender you spoke with a week or so before.

Inquiries that will have a negative impact on your credit scores are for consumer, or revolving debt for credit cards and department store cards. If you have multiple inquiries from different credit card companies and/or department stores it appears you are seeking credit from anywhere. This type of behavior is seen as a negative and will impact your score.

When you call or come in to get prequalified or preapproved to purchase your new home or to refinance your existing mortgage be prepared to have me ask you for social security numbers and dates of birth, I will need a credit report and this is the information I will need.


Have a question? Ask me!

Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.

Last week while I was away was a fairly light week for economic data. This week, however, had a fair amount of big news. The overall news shows a dormant economy with consumers leading the dormancy as indicated by consumer oriented data. Consumer confidence slipped in April from March with lower expectations for the future component dragging the report down. This is good news for lower rates.

The first assessment of first quarter Gross Domestic Product shows a slowdown from the last quarter of 2015 with economic growth at only 0.5%. What growth there was occurred due to consumer spending, however that spending dropped from the end of 2015, with the decline due to reduced purchase of durable goods. Prices also slowed from 4th quarter 2015. The GDP report is also good news for lower rates.

Tripling down on consumer driven data was the personal income and outlays report for March. On the income side the news was positive with wages increasing 0.4% for the month following increases in January and February. The other shoe in the report though is the slowdown in consumer spending, up only 0.1% from February. With consumers earning more but not spending as much indicates they are saving their increased earnings, or using it to pay down debt, but not buying goods and services. This is positive for lower rates as well.

With the data presented this week indicating a reluctant consumer it is not surprising that the minutes released on the recent Federal Reserve meeting in which no increase in the Fed Funds interest rate was made. In the minutes the Fed states that our economy “appears to have slowed.” With consumer spending making up 65-70% of our economy slower increases in personal consumption of goods and services results in slower economic growth. The data points to a reduced chance of a Fed increase at its next meeting in June.

Rates for Friday April 29, 2016: While I did not put out the Weekly Rate & Market update last Friday I did record rates for the chart and they were up 0.125% from the prior week---mostly due to profit taking. This week’s news has softened rates, with high-balance rate dropping to prior week’s rate but conforming hanging onto to last week’s pop up though weakening. Looking forward rates will continue to move in tight range based mostly on technical trading. While we may see some drift down any such move will not be significant nor worth the risk of trying to catch such a drift. Lock while you can at these low rates.


FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.375% Flat
30 year high-balance conforming 3.625% Flat
30 year FHA 3.25% *** Flat
30 year FHA high-balance 3.25% *** Flat

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. ***FHA rates have no points and credit towards closing costs, recent rate change reduces credits




The Weekly Rate & Market Update was on hiatus last week as I was in Tulsa for services for a family member I considered to be an uncle, Glenn Wright. The best story teller I will ever know, going places in Tulsa was like travelling with Santa Claus—he knew everyone and their story. When you met Glenn he was truly interested in you, where you are from, your family, what your family is doing. You can know someone for many years, then introduce them to Glenn and learn more about this person in ten minutes of him getting to know this person than you had known.

The saying goes that the value of our lives is measured by the friends we have in our lives—Glenn was a very high value man and will be missed.

This week meet someone new, or meet someone you already know in more depth, this will enrich your life and their’s.

Have a great week,


Dennis

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Posted by Dennis C. Smith on April 29th, 2016 12:09 PMLeave a Comment

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April 15th, 2016 11:39 AM


Question of the week: We had a short sale several years ago, can we get a loan to buy a home?

Answer: Regular readers of the Weekly Rate & Market Update know the immediate answer this question: Yes. No. Maybe.

Fannie Mae and Freddie Mac have had a revision on their guidelines for how long after a short sale someone is eligible for a new mortgage. Prior to the revision there was a sliding scale, the more money you put down on your purchase, or equity you had in a refinance, the shorter period of time you needed to wait. Those guidelines have changed and the waiting period is the same for everyone regardless of the loan-to-value (LTV) of the applied for mortgage.

Here are the waiting time periods for different loan programs (see important notes below):

Fannie Mae & Freddie Mac (aka ‘conventional’): 4 years plus one day from date of sale of short sale.

FHA: 3 years plus one day from date of sale of short sale.

VA: 12 months plus one day from date of sale of short sale.

Jumbo*: Treated same as foreclosure, if it shows on your credit report then ineligible for new loan, typically short sales and foreclosures remain on report for 7 years from final reporting date to credit bureaus by lender impacted by short sale.
*We have one lender with one program that will all 3 day waiting period if, IF, there is a very compelling reason that can be provided as to why the short sale occurred—we will not start file until lender has signed off on the explanation.

It is very important to note that the waiting period impacts you on not only when you can be approved for a new mortgage but also when you can purchase a home. The purchase contract for your purchase must be dated either 3 or 4 years plus one day from the short sale close date, our loan application cannot be dated prior to the waiting period plus one day as well.

For example, you had a short sale on your previous home and we have a recorded deed that shows it closed on June 1, 2012. You wish to purchase a new home for $500,000 with 10% payment located at 1234 Main Street, Somewhere, CA.

You write an offer on June 1, 2016 and it is accepted---lender will reject.

You write an offer on June 2, 2016 and it is accepted—lender will accept.

Keep in mind that all other qualifying guidelines for credit, income, assets, etc for the loan program for which you are applying must also be met.

If you have had a short sale in your past before going out and writing an offer on a new home call me so we can make sure you are eligible for a new loan as well that you are qualified to purchase the property.

Have a question? Ask me!

Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.

Data crunchers were busy this week as there were plenty of significant economic reports released that impact mortgage rates. Wednesday brought us retail sales for March, which dropped 0.3%, pulled down some by slow auto sales, but pushed up by higher gas prices. The number was disappointing and is mortgage rate friendly.

Of more importance to overall economy was the Producer Price Index for March. PPI fell 0.1% for the month. Expectations were for an increase of 0.3% following a 0.2% drop in February. The dropping PPI is reflecting global deflation/economic slowdown which is slowly bleeding into our economy. This is not great news for economic growth, as a result is good news for lower mortgage rates.

Consumer Prices are also showing weakness appearing in the economy. Following two months of 0.3% gains the CPI increased only 0.1% in March. Year over year prices grew 0.9%, which is down from 1.0% growth from February 2015 to 2016, this decrease in growth is worrisome. The news supports Fed Chair Yellen’s uncertainty on whether inflation will continue to increase through the year; and this puts into question future rate hikes by the Fed. The news is mortgage rate friendly.

Capping off our week of market moving data today’s industrial production report showed contraction for the second month in a row and a drop in capacity utilization. Declining industrial production has long term impacts on prices and employment. This number is mortgage market friendly.

Rates for Friday April 15, 2016: Despite all the rate friendly data we barely held onto last Friday’s rates as investors were moving out of Mortgage Backed Securities through the week to take profits. Rates did not fall mostly due to technical trading. If we can hold onto to current levels through early next week we may (may) see a dip by next Friday.


FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.375% Flat
30 year high-balance conforming 3.625% Flat
30 year FHA 3.25% *** Flat
30 year FHA high-balance 3.25% *** Flat

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. ***FHA rates have no points and credit towards closing costs, recent rate change reduces credits



Vrroooom! Long Beach will be filled with sounds of race cars this weekend for all the races and events as part of the Toyota Grand Prix. In 1999 Leslie and I were in Amsterdam and got back to our hotel room pretty late and I turned on the television to see what was on and there was shot from the blimp of Long Beach in brilliant sunlight with the race in progress. We can forget how beautiful our city, region, state can be and how it is seen by outsiders.

If you are going bring your earplugs!

Have a great week,


Dennis

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Posted by Dennis C. Smith on April 15th, 2016 11:39 AMLeave a Comment

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April 8th, 2016 12:35 PM



Reminder property taxes must be received by Monday! If you need more info see email I sent this morning or contact me!

Question of the week: How does a bond measure impact me as a homeowner?

Answer: It is that time of year in California, property taxes are due this week and in coming weeks/month many voters may see on their ballots propositions to assess property owners for municipal bonds to be issued for capital improvement projects.

At this time almost all California property tax bills have a section “VOTED INDEBTEDNESS” which lists the voter approved bond measures that are paid by you and other property owners. Each of the bonds passed by voters is listed with the assessment rate, then the dollar amount of the assessment for your parcel.

For instance currently in my area of Long Beach the tax bill has three Voted Indebtedness listings:

Metro Water District 0.003500
Community College 0.045945
Unified Schools 0.087635

For total assessments of 0.13708 percent of my assessed value, in dollar terms my neighbors and I are being assessed $137.08 per thousand dollars of assessed value. These assessments continue until the bonds pay off, which is usually provided as part of the measure on the ballot; i.e. this bond will be used to build new buildings and repair existing buildings for the school district, each parcel will be assessed at 0.025% of value for a period of 20 years.

When there is a bond measure on your ballot the description will tell you not only what the purpose of the bond and what it will fund, but also the cost to property owners.

As an addendum beyond the bond measures approved by voters, most property bills also have another section of charges that are “DIRECT ASSESSMENTS” that are imposed without direct voter consent but through public agencies or by elected officials. This taxes are not a percentage of assessed value but are flat dollar amounts due annually.

Most people when they receive their tax bill put it aside until they are ready to pay it and then just look at the coupon and send in the amount due. Take some time to review your bill to see just what you are paying for, what special assessments are being charged to you.

If you need help deciphering your tax bill or have any questions please do not hesitate to contact me.

If you are not receiving a tax bill because you are not yet a homeowner and would like to receive a tax bill next year for your own home call me!

Have a question? Ask me!

Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.

Rates for Friday April 8, 2016: Not a lot of economic news this week. Last week while I was on vacation the Labor Department released employment data for March, and it was nice but not shattering. Rates were softening all last week and continue to move in that direction. We are back to our lowest point seen a few weeks ago. If your rate is near 4% or greater give me a call as we might be able to save you some money on your monthly payment.


FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.375% Down 0.125%
30 year high-balance conforming 3.625% Down 0.125%
30 year FHA 3.25% *** Flat
30 year FHA high-balance 3.25% *** Flat
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. ***FHA rates have no points and credit towards closing costs, recent rate change reduces credits





Back from our trip to Orlando and visiting the Universal Studios and Disney theme parks. Quite a bit of fun but can now say, “been there, done that…” What we found most interesting is the disparity between the Disney parks in Anaheim and Orlando, not for the attractions but for the friendliness and cleanliness. It is interesting how such a well-known brand built on customer service can such noticeable differences for their two main sites.

Glad to be home and looking forward to hearing from you for how I might be of service.

Have a great week,


Dennis

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Posted by Dennis C. Smith on April 8th, 2016 12:35 PMLeave a Comment

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March 18th, 2016 9:38 AM


Question of the week: Should I co-sign for my son/daughter’s mortgage?

Answer: Yes. No. Maybe.

Like most questions involving mortgages, real estate and finances in general, the answer is very situational.

It is not unusual for parents to want to help their children purchase their first home, especially in areas such as Southern California where the prices are high. However there are some factors to consider before offering the assistance.

First, you cannot co-sign bad credit. If your child has credit that precludes them from qualifying for a mortgage then adding you with your credit to their application does not change their credit, nor the lender’s recommendation. Often in these instances we look at the opportunity for the parents to purchase the home as investment property, renting the home to the kids at the rate of the mortgage, putting them on title and after they rehabilitate their credit seeing if it is possible to refinance mom and dad off the loan and title.

It is possible to co-sign for income. Some, not all, programs will use “blended ratios” for qualifying, meaning that the income to debt ratios for qualifying includes all the applicants’ income and all the applicants’ debt obligations. This is the most common type of parents co-signing for their children that we see. There are limitations regarding program types and loan amounts.

The upsides to co-signing on your child’s mortgage are obvious: they are able to purchase a home being the primary benefit, a secondary benefit is that you have leverage when it comes to spoiling any grandchildren….

There are downsides as well that need to be considered before obligating yourself to the mortgage debt. When working with a client who co-signed for a family member in the past we often hear, “that’s not mine, I just co-signed,” as if they have no obligation for the debt. Wrong. If you co-sign for any loan your as equally responsible for the repayment as everyone else on the loan. If payment is not made your credit is impacted, if the loan defaults the lender may come after you for satisfaction of the debt.

Before co-signing one of the factors I have you consider are how likely is it that your son or daughter will not be able to make payment in the future? Do they have spotty work history? Have you bailed them out not infrequently in the past, especially the near past? At times after taking an honest, and difficult, look at the situation I have seen parents decide to not co-sign until there is more financial stability in their child’s life.

Are you considering purchasing a home or financing a major purchase in the near future? For most practical purposes the full housing obligation for your child’s home, principal and interest on the loan, taxes, homeowners insurance, HOA dues if applicable, are counted against you for qualifying. There is a guideline for most mortgage programs that if you can show you did not make the payments for the prior twelve months and the mortgage payments are made on time the payment will not be counted against you. For example, you co-signed for your son and daughter in-law in 2012. You are looking to purchase a second home in Fallbrook that you intend to become your retirement home in 2020, but need a mortgage for the purchase. As part of our application package for your Fallbrook mortgage we collect proof that your son has made all the mortgage, and tax, payments on their home for the past twelve months. If you made even one payment, or paid the taxes, during this period then we count the entire housing obligation against you for qualifying; in this instance you would need to qualify using three housing payments: your own home, your son’s home and the home you are looking to buy in Fallbrook.

Should you co-sign for your son or daughter? Perhaps, but before you offer let’s have a discussion about the situation, your involvement and the impact on you for the short and long term.

Have a question? Ask me!

Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.

Plenty of news this week impacting mortgage rates, all of which became irrelevant due to Fed speak on Wednesday. Starting the cavalcade of data was the Producer Price Index for February, which showed flat to declining prices for the month and for the past twelve months. This data is positive for lower rates. Also providing good news for rates was a decline in retail sales in February, and a strong revision downward of January sales.

Contrary to the PPI data, the Consumer Price Index came in a bit hotter when food and energy prices are stripped from the model (“core prices”) showing a 1% increase in prices from January to February and 2.3% growth year over year. This is not friendly news for mortgage rates.

The markets moved little on the price news. Not the same story after the minutes and forecast from the Federal Reserve Open Market Committee were released on Wednesday. The Fed did not increase its discount rate, as anticipated, and announced it would increase the rate two times in 2016. The news sent stocks and bonds higher—lower rates. The Fed’s forecast through 2018 is for a slow growing economy, from 2.0-2.3% in 2016 and 2017 slowing to 2.1% in 2018. The news was pretty rate friendly as it suggests that while the Fed will be raising rates a bit this year but not a whole lot in 2017 or 2018.

Rates for Friday March 18, 2016: Rates retreated following increases for the past two weeks, and the momentum is down for the short term. It appears we tested the high for 2016 thus far and bounced off. My advice is still to lock through your escrow period when you can as to no lose the opportunity with the current rates.


FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.50% Down 0.125%
30 year high-balance conforming 3.75% Down 0.125%
30 year FHA 3.25% *** Flat
30 year FHA high-balance 3.25% *** Flat

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. ***FHA rates have no points and credit towards closing costs, recent rate change reduces credits





The Weekly Rate & Market Update will most likely be a bit short the next two weeks as we head out Orlando for a week of rides and roller coasters. Spring Break will be upon us which means one thing, as soon as we get back the kids will be counting the days until school is out for the year.

Have a great week,


Dennis

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Posted by Dennis C. Smith on March 18th, 2016 9:38 AMLeave a Comment

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March 11th, 2016 10:08 AM


Question of the week: Should I get earthquake insurance?

Answer: In the fall our question of the week was if you should consider flood insurance with El Nino in effect (so far the insurance companies are winning on Southern California policies). Since California is on Eastern edge of the “Ring of Fire” there of course exists the possibility (probability?) that we will experience a massive trembler in the future. California’s vulnerability and possibilities to major earthquake(s) have many homeowners are wondering about protecting their primary asset, their home, should a large earthquake hit the region and cause damage to their home.

Whether you should or should not have earthquake insurance is a conversation you should have with your insurance agent who provides your homeowners’ coverage. In California individual companies no long write earthquake policies, rather they provide policies under the California Earthquake Authority (www.earthquakeauthority.com). The CEA provides the coverage, determines the premiums for coverage and deductible options available to you.

When considering earthquake coverage three questions to consider are:

1. What are you protecting
2. What is your deductible
3. What is your cost

1) What are you protecting? How much equity do you have in your home? Are you upside down? Do you have ten or fifteen percent equity in your home?

2) What is your deductible? CEA has two deductible options, 10% or 20% of the coverage. If your dwelling is insured to rebuild for $200,000 then your deductible is either $20,000 or $30,000. Does this exceed your equity in your home? If so do you feel it worth the cost to pay not only premiums but also a deductible to rebuild your home given the current value? If you home is valued at $450,000, you owe $415,000 and your deductible is $20,000 do you feel it makes for your to get earthquake insurance? A difficult question to answer. Finally, if there is partial destruction of your property, but not complete, the cost to repair may be just beyond your deductible, say $30,000 to repair some damage as the house was not a complete loss to the earthquake.

3) What is your cost? Premiums, as you can see by going to the CEA site, depend on a myriad of factors, as most insurance premiums do. Type of home, zip code, deductible, etc all factor into your premium. The analysis of premium comes down to how much it is worth to you per year to insure how much equity against how much of a deductible? It is a risk-benefit analysis that only you can answer, with the assistance of your insurance professional providing the costs and deductibles. If your premium is around $500 per year and you have significant equity you may decide there is a good value in obtaining a policy. If you premium is over $1000 per year, you have little equity and a large deductible you may feel the value of the policy is not worth the premium and should your home undergo significant destruction in an earthquake you are comfortable walking away from the home and the mortgage(s).

In California it is important to note that with a few exceptions earthquake insurance is not required by lenders. (The primary exception is that Freddie Mac requires earthquake insurance on condominiums, Fannie Mae and FHA do not.) Because the insurance is not a requirement of obtaining your mortgage the lender does not need to be listed as a loss-payee for any earthquake insurance policy you may purchase. This means that if you do have cause to submit a claim on your earthquake policy your lender need not be named and therefore a co-payee on any checks or claims paid. In short if you chose not to add your lender as an additional insured they do not have a claim to any funds to pay down/off the mortgage or control who gets the funds for rebuilding etc.

There is no set “yes” or “no” answer to “should I get earthquake insurance?” Every situation is different and every family’s comfort level of risk and benefit is different. Answering the question however is a valuable exercise and one every homeowner should engage in annually when reviewing their insurance coverages.

Have a question? Ask me!

Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.

Not a lot of news this week moving mortgage rates. Europe has initiated a new round of stimulus through the European Central Bank, however trading in American mortgages was mostly based on technical triggers.

Rates for Friday March 11, 2016: Mortgage Backed Securities (MBS) traded mostly down this week (higher rates) as investors moved to a climbing stock market and took some profits from gains made in the past few months. As you can see from the chart rates for conventional mortgages have climbed two weeks in a row for the first time since late October/early November. Looking ahead we are in an up market and the advice is to lock through your escrow period as soon as you can. (FHA says “flat” as the rate is on the floor and adjustments are to price and credits you get for closing costs).


FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.625% Up 0.125%
30 year high-balance conforming 3.875% Up 0.125%
30 year FHA 3.25% *** Flat
30 year FHA high-balance 3.25% *** Flat

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. ***FHA rates have no points and credit towards closing costs, recent rate change reduces credits





I get a bit curmudgeonly about this time every year due to our switching the clocks ahead for daylight savings time—which means I am back to spending the morning in the dark when I am up and walking the dog. Being a morning person the morning light is more meaningful to me than a longer afternoon. How about you, morning person who will miss the early morning light for the next several weeks or month, or glad to have the daylight later in the day?

Don’t forget to set your clocks before bed on Saturday---and that is ahead not behind (made that mistake once!).


Dennis

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Posted by Dennis C. Smith on March 11th, 2016 10:08 AMLeave a Comment

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