Weekly Rate & Market Update 2-12-16

Question of the week: Why is my loan approval delayed because I filed my taxes?

Answer: We are at this time of year when filing your tax returns if you are getting a mortgage can create a problem. For most people, those who are salaried and on W2s it is not much of an issue.

For those who are self-employed, have large commissions, bonuses, own rental property, receive significant investment income from dividends, interest or capital gains, or are partner in any businesses, this time of year may create an issue for final loan approval depending on when and how you have filed your income taxes for 2015.

As a standard rule we need tax returns to verify income from those sources mentioned above. For any year’s tax returns we are using for income verification we also need transcripts sent to us directly from the IRS to confirm the returns we have are the same ones the IRS has.

For most tax years we receive the transcript in a week or less from when we send in our request. That time frames gets extended by a week or more at this time of year when requesting the immediate past year’s returns—if the return was filed electronically. For example, you filed your 2015 tax return electronically on February 1st. We need the income on the 2015 returns so you qualify for the new home you are purchasing. Your loan application is completed with this week and today we are able to send out IRS Form 4506-T requesting a transcript of your 2015 taxes. The current time frame in which we are getting these returns back would put us at February 26th at the earliest.

A couple of work arounds for this possible delay. If your income is stable and we do not need 2015 tax returns to qualify we can get buy on 2014, and 2013 if two year’s returns are required. In some instances if we can show that you have received your refund from the IRS and it matches exactly the amount on your submitted return, or if the IRS has processed your tax payment and it matches exactly the amount on the submitted return, we may be able to proceed without the transcripts from the IRS.

If you mail your return, or do not have automatic deposit or refunds or electronic payment of taxes due, this process can be delayed even longer. We have seen cases with manually filed returns that have taken as much as a month or more to have the IRS process the return and then be in position to issue a transcript.

If you are going to be applying for a mortgage between now and sometime in May and receive any income that is not W2 salary, again such as self-employment income, partnership, rental income, commissions, bonuses as examples, then determine very soon if your income from 2015 will be needed in order to qualify for the mortgage you are considering. If it is then I strongly suggest you file electronically as soon as possible and start your mortgage process to reduce any possible delay in verifying the tax return income.

As mentioned there can be exceptions and work arounds that we have been successful using, however without speaking to me regarding your situation do not assume any such process will be applicable to your circumstance.

If you are considering a home loan and do have non-traditional income please call me to discuss your situation and how we can qualify you for a mortgage. If you are in a more traditional income situation you can call as well!

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

Some big news this week on the economic front. Federal Reserve Chair Janet Yellen was on Capitol Hill for her semi-annual visits with the financial services and banking committees for the House and Senate. In her testimony it appears there is a shift in direction for the Fed from December. As you recall the Fed hiked its Fed Funds rate in December and the intention and consensus was that the Fed would increase the rate four more times in 2016. The first of those increases was thought to be next month at the Fed’s Open Market Committee meeting in March. Yellen’s comments however seemed to push the next rate hike further into the year due to concern with global economy, or in Fed speak, “risk tied to global financial stress.” She expects the U.S. economy to grow more in the first quarter 2016 than in the last quarter 2015 and continued growth in employment. If this happens it should support the Fed’s intention of more rate hikes, however it seems the intention is being tempered by concerns for global recession that could move into the United States’ economy. Mortgage rates pushed up Thursday following Yellen’s testimony to the Senate committee.

Consumers were a bit more active in January. Retail sales improved from December, especially when gasoline sales are stripped from the data, showing a 0.4% gain (with the dropping gas prices sales grew 0.2%). The number moved rates higher as higher retail sales is a key factor for a growing economy.

Rates for Friday February 12, 2016: Rates are up from midweek lows, but still lower than last Friday and the conforming is at its lowest level since the end of last January. It feels like rates want to climb but are finding no reason to at the moment. Take advantage of low rates, let’s get your application completed and rate locked!

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

Last week was the unofficial Super Bowl holiday, this week is the official President’s Day holiday closing state and federal offices, and local mortgage companies.

Some quick Presidential trivia:

Our 39th President was the first born in a hospital, his parents named him James Earl Carter.

Besides being called the writer of the Constitution our 4th President James Madison was our shortest (5’ 4”) and lightest (under 100 pounds) President. He also was the first to wear long pants and not knee britches. (For the record, if Hillary Clinton becomes President, Madison will still be the shortest by three inches and lightest by….let’s just say our suspicion is the former Secretary of State is a bit over 100 pounds.)

The Teddy Bear got its name from a company manufacturing bears and naming them after number our youngest President, number 26 Theodore Roosevelt—the toy bear resulted from a story of Roosevelt refusing to shoot a bear, the press twisted the story so it became a cowering cute little bear cub.

Finally the election of 1800 pitted by then bitter rivals Adams and Jefferson against each other. The election showed a correction that needed to be made in the Constitution regarding electoral votes as the Democratic-Republican Party signals got crossed and Aaron Burr and Jefferson tied in electoral votes. The contest went to the House of Representatives and after 35 tied ballots Jefferson prevailed on the 36th to become our 3rd President. The only other time the House decided our President was in 1824 when neither Secretary of State John Quincy Adams nor Senator Andrew Jackson received enough electoral votes to win the election. Though Jackson won the popular vote, had the most electoral votes and won the most states the House under Speaker Henry Clay elected Adams. Jackson and his supporters were bitter by what they saw as a fixed deal and formed the Democratic Party—and beat Adams in the next election in 1828.

Who knows perhaps this year we will see brokered conventions, and if we get a few independent candidates who did not get their party’s nominations or did not seek a nomination, we could again have a result decided in the House of Representatives. Farfetched? We’ll see if Sanders and Trump do not win nominations what they will do and there is always Michael Bloomberg….2016 could be historic!

Enjoy your President’s Day, looks like it will be great beach and pool weather.

Have a great week,

Dennis