Consumer sentiment drops at end of year

1/31/2014 3:53:50 PM

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According to Reuters, American sentiment about the economy declined in January, while spending rose in December. Economists at Reuters found that consumer spending rose 0.4 percent in December, after an increase of 0.6 percent in November. Americans have since changed their attitude about where the economy is headed, as consumer confidence has dropped, signaling that spending could weaken in the first quarter of 2014.

At the same time, The Wall Street Journal reported that mortgage volume hit its five-year low during the fourth quarter of 2013. From a year ago, mortgage rates have risen nearly 1 percent, and fewer Americans have applied for a mortgage refinance as a result. Refinance applications have taken over the majority of the mortgage market over the past few years due to record-low interest rates.

Mortgage rates recently declined following the Federal Reserve's January announcement that it would reduce stimulus spending by an additional $10 billion in February. The decline is good news for borrowers looking for a low cost mortgage in 2014.

Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable mortgage options

2014 homebuying barriers

1/31/2014 9:15:00 AM

Amid rising home prices and interest rates, first-time homebuyers and move-up buyers are faced with a few upcoming housing barriers in 2014.

New homes
While 2013 was generally a positive year for the housing market, new home sales were outweighed by the transactions of existing homes. According to a recent report by the National Association of Homebuilders, new home sales were down 7 percent in December, falling from initial projections of 458,000 units to 414,000. Compared to 2012 however, new home sales were up 16.4 percent. The decline at the end of the year could indicate that more new homes will be sold in 2014.

"December's decline in new-home sales follows elevated levels in the previous two months and means the fourth quarter was still much stronger than the third," said NAHB Chairman Rick Judson. "While we expect sales to gain strength in 2014, builders still face considerable constraints, including tight credit conditions for home buyers, and a limited supply of labor and buildable lots."

For first-time homebuyers, new homes represent a particularly difficult purchase. CNBC reported that new homes are typically more expensive than existing homes, requiring mortgages with higher loan amounts - often jumbo loans exceeding $417,000 - with higher down payments. Nationally, home sales were up for 2013, but the same trend did not carry over to new homes. A large portion of home sales were from investors making purchases with all cash.

"New homes are very unlikely to be sold to an investor, the leading cause of high cash sales of existing homes," David Crowe, chief economist with the National Association of Home Builders, told CNBC. "And, new homes typically cost more than existing homes, making cash an even harder hurdle."

Mortgage market
From a year ago, mortgage rates have risen about 1 percent. Since the Federal Reserve's announcement that it would begin tapering stimulus spending, mortgage rates are expected to rise above 5 percent. While rates are significantly higher, they are still low by historical standards and most housing markets are still affordable for buyers. Borrowers will be able to get approved for a low cost mortgage in 2014.

"Consumers are getting used to more realistic mortgage rates, which still remain favorable on a historical basis," said Crowe. "As household formations and pent-up demand continue to emerge, we anticipate that 2014 will be a strong year for housing."

Other barriers to homebuyers include the recent tightening of credit standards. Since the recession, new lending practices have made credit requirements stricter in order to reduce the chances of a borrower falling into default and losing their home to foreclosure. Some of these changes include a lower debt-to-loan ratio, meaning that households cannot have too much debt owed compared to the amount of the loan. In addition, income standards have increased. Fortunately, most of these changes will protect borrowers in the long run and strengthen the mortgage market.

Contact the Federal Savings Bank, a veteran owned bank, to find out more about first-time homebuyer programs.

Mortgage activity remains flat

1/30/2014 12:11:38 PM

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In the latest Mortgage Bankers Association weekly mortgage application survey, activity appeared to be stable during the week ending Jan. 24. When compared to the previous week, mortgage applications were virtually unchanged, dropping just 0.2 percent.

Mortgage refinance activity declined 2 percent during the week, while the purchase index rose 2 percent. The decline in refinance applications brought the total market share to 62 percent of all mortgage applications, down from the previous week's share of 64 percent.

Mortgage rates have risen more than 1 percent from a year ago, causing many to think harder about refinancing. Last week, rates hit an average of 4.52 percent for a 30-year fixed-rate home loan, the lowest rate since the end of November. Fortunately, mortgages have remained relatively affordable for most Americans, but have also given rise to popularity with adjustable-rate mortgages. According to the MBA weekly survey, ARMs account for 7 percent of the share of mortgage applications.

Interest rates for FHA mortgages were lower than conforming and jumbo loans, dipping to an average of 4.18 percent for a 30-year fixed-rate mortgage. Mortgage rates have recently reached their lowest levels since the Federal Reserve announced it would begin to taper stimulus spending. Since quantitative easing was enacted in 2012, mortgage rates have been kept artificially low, encouraging more Americans to become homeowners.

 Mortgage rates immediately inched up after the Federal Reserve announced its plan in December, before falling back to their end-of-year averages. Higher mortgage rates could make it more difficult for borrowers to afford home loans. As a result, adjustable-rate mortgages - which allow a borrower to start off the loan terms with a low rate for a certain number of years - will likely become more popular among homeowners.

Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable mortgage options.

Mortgage rates drop after Fed announcement

1/30/2014 12:08:34 PM

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After its two-day meeting ending on Jan. 29, Federal Reserve officials announced they would continue the tapering of quantitative easing, the stimulus spending that has been in place since 2012.

Mortgage rates have remained near historic lows over the past few years as a result of the Fed's fiscal policy. Many economists expected interest rates to rise above 5 percent once stimulus spending was reduced. However, mortgage rates have fallen to the lowest levels in a few months.

According to Mortgage News Daily, mortgage rates dropped to an average of 4.375 percent for a 30-year fixed-rate mortgage on Jan. 29, immediately following the Fed's announcement. During the previous few days, rates averaged around 4.5 percent. That figure remains the average for some lenders.

The impact of reducing stimulus spending may have already had its effect on the mortgage market. The fact that mortgage rates have not risen above 4.5 percent since Fed officials announced tapering plans indicates that rates might remain where they are. CNBC reported that mortgage rates have already risen substantially and may have already absorbed the impact of the anticipated reduced pace of spending from the central bank.

This could be a positive sign for homebuyers who hope to make a new home purchase in 2014. Another reason mortgage rates may not be moving upward could be the fact that applications are down compared to a year ago, when rates were ultra low. While many housing markets remain affordable for American homebuyers, rates are up nearly 1 percent from where they were a year ago. Additionally, long-term interest rates might not be affected until the Fed completely abolishes quantitative easing.

Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable mortgage options.

Fed expected to continue tapering

1/28/2014 11:59:54 AM

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After two days of meeting in December, Federal Reserve officials decided they would begin to reduce stimulus spending by $10 billion, bringing the monthly total to $75 billion on U.S. Treasuries. Since 2012, the Fed has helped keep interest rates near record lows as a result of its fiscal policy. This has encouraged more Americans to borrow and become homeowners, bringing life back into the housing market.

The November national employment report by the Department of Labor revealed that unemployment appeared to be dwindling, as 204,000 jobs were added to the economy during that month. However, the trend was short-lived. The December report revealed weaker results, with only 74,000 jobs added in the last month of the year. 

Fed officials have previously stated that the economy must appear to be strong enough that it can continue growing without stimulus help - meeting an unemployment rate of 6.5 percent with at least 200,000 jobs added to the economy every month. The disappointing December report has left some economists wondering whether the central bank would adjust its recent decision to limit stimulus spending.

In a CNBC survey, most economists predict that the Fed will make good on its decision to reduce spending by $10 billion in January, regardless of the weak December jobs report. Fed officials are meeting at the end of January to discuss the bank's fiscal policy.

Housing market recovery
Other important indicators may prove that the economy has recovered enough to continue growing without help, including the improvements seen in the housing market. According to a recent report by the S&P/Case-Shiller Index, home prices across a 20-city index were up 13.7 percent in November 2013 compared to the previous year.

While prices were up in a year-over-year comparison, the index slipped 0.1 percent from October 2013. It is typical for the housing market to slow down at the end of the year, as more buyers are house hunting during the spring and summer. The growth in prices may be helpful to homeowners who lost equity during the recession, and could bring out more sellers to meet the large housing demand in 2014.

"Home prices continue to rise despite last May's jump in mortgage interest rates," the report cited. "Mortgage applications for purchase were up in recent weeks confirming home builders' optimism shown by the NAHB survey. Combined with low inflation - 1.5% in 2013 - home owners are enjoying real appreciation and rising equity values. While housing will make further contributions to the economy in 2014, the pace of price gains is likely to slow during the year."

While mortgage rates have risen about 1 percent from a year ago, most housing markets are still affordable for American homebuyers. With greater equity and higher prices, the Federal Reserve may decide that the housing market has recovered enough to improve on its own in 2014.

Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable housing options.

What to do before refinancing

1/29/2014 4:29:38 PM

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When mortgage rates drop, it is common for many homeowners to apply for a mortgage refinance. Most hope they can lower their monthly payment, reduce the length of their home loan or switch from a fixed-rate to an adjustable-rate mortgage. Whatever the reason for refinancing, here are a few things homeowners should consider before applying:

Compare rates and fees
Sometimes it can make financial sense to refinance a home loan for a low rate mortgage or to reduce the number of years of a loan, but it won't always save a homeowner money. With a lower interest rate, a person will have to pay less over time, but refinancing usually requires a few steps that can cost thousands. If there isn't much time left on a loan, then refinancing could end up costing more than it would otherwise save.

Credit habits
When applying for a mortgage refinance or new purchase home loan, lenders are going to use a person's credit score to determine what sort of borrower they are. Additionally, other factors like how much debt a person has will play a role in loan terms and whether or not they qualify for a loan. Before applying, it can be a good idea to check credit reports and scores to see if the requirements are met. Applicants should look over their credit reports for any mistakes that might have been made. Credit bureaus are required to give a free credit report once a year.

To improve credit, a person should attempt to pay off all their debts and not make any major purchases on credit cards while loan applications are being processed. A person with a high balance due on their credit cards will end up with more debt that could affect the debt-to-loan ratio. It is also important that no new lines of credit are opened, as this can also affect a credit score.

Appraisal
One of the first things that homeowners need to do when applying for refinancing is to conduct an appraisal. Most lenders will require an independent appraisal that is usually paid for by the borrower. The appraised value of the home is very important, because the new refinanced loan needs to be enough to pay off the old loan. If the property's equity has dropped significantly, then it is possible that the homeowner owes more than the property is worth. In this case, it is unlikely they will receive a mortgage refinance.

The appraisal is usually based partially on comparisons with homes that have recently sold in the area. In general, homeowners will spruce up their property a bit before placing it on the market in order to get the most out of the sale. For this reason, appraisals are typically compared against homes that are in excellent shape. This means that homeowners who want to get the most value from their appraisal should spend a little time making repairs, upgrades and touch-ups. Some of the large upgrades that can increase the appraised value of a home include extra bedrooms, kitchen and bathroom remodels and more garage space. Minor repairs such as landscaping, painting and tidying up may impact the face value of the home more than the true value.

Contact the Federal Savings Bank, a veteran owned bank, to find out more about the best mortgage refinance rates.

Housing market picks up momentum in 2014

1/24/2014 11:19:51 AM

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In 2013, changes in the mortgage market and improvements in many housing markets have led many to believe that 2014 will be a strong year for homebuyers and those wishing to sell. With mortgage rates changing week to week and home prices continuing to rise, the housing market will likely prosper over the coming months, despite slowing down at the end of 2013.

2013 housing market
Realtor.com recently released its National Housing Trend Report for 2013, revealing that the housing market was better off compared to 2012. In December 2013, the national median listing price for a home was 8.1 percent greater than the previous year. Heading into 2014, that is a positive sign for homeowners who lost equity in their properties during the recession. Homes were also selling faster at the end of the year, with the average age of a home on the market dropping by 5.1 percent compared to December 2012.

However, there were some signs that the market slowed down later in the year - a typical change during the winter selling season. According to the report, the number of homes for sale in December was around 1.7 million, down from November's inventory of 1.8 million. The number of days on the market rose month to month, from 101 days to 112 days. Additionally, the median price declined slightly from $197,700 to $194,500. Most real estate transactions occur during the spring and summer, when more homeowners put their houses on the market and more buyers are searching. Overall, prices and sales were still above 2012 figures, which should bode well for owners in 2014.

"As we open the new year, the first-quarter inventory figures are especially crucial as our first barometer into seller confidence for the 2014 home buying season," said Realtor.com President Errol Samuelson. "The market is still showing significant demand, but in order to have a strong home buying season, sellers need to put their homes on the market."

Higher home prices might help convince some homeowners to list their property for sale. Those that may have been waiting to sell are expected to enter the market in 2014 and boost inventory. The report also stated that demand is expected to increase in 2014, making more inventory crucial.

Credit availability
One factor that might influence those looking for a new home and first-time home buyers is the new Qualified Mortgage rule. Credit standards and debt requirements have tightened as a result, leaving some borrowers wondering if they will be able to get a low cost mortgage. While lenders are not required to follow the new rules and can still approve loans that do not meet QM standards, the changes will make lenders less liable in the case of default.

Specifically, jumbo loans may be harder to get, as  fewer options will be available to borrowers. However, the new rules will strengthen the mortgage market and make it less likely that borrowers will be unable to afford their loan and fall into default.

Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable mortgage options.

Single homebuyer tips

1/27/2014 11:59:03 AM

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Over the last couple decades, the shape of American households has changed, giving rise to a new type of homebuyer - the single buyer. Some first-time home buyers choose to take the plunge in homeownership all by themselves. Here are few tips for going through the process:

Budget
Every homebuyer needs to figure out how much they can afford and do their best to stick to the budget. Compared to a couple buying a property, a single homebuyer might not have the benefit of two incomes and will need to find a monthly mortgage payment that is affordable. It is important to remain within budget, and not overstretch too far to get more property or a more luxurious home. There are always a variety of risk factors that can play into making a monthly mortgage payment. If something were to occur, such as sudden job loss, a single homebuyer won't have the luxury of two income to rely n to make payments. It is therefore crucial that a single homebuyer purchase a home and apply for a mortgage they can afford. Consider other necessary monthly payments and other debt when deciding on a home to purchase. 

Safety
As a single household, safety is important to consider when looking for a new home. Living in a well-lit area and having proper locks and bolts on doors and windows will make a difference, as will having a home security system. A single homeowner won't have the benefit of having another person at home to deter thieves.

Be ready for responsibility
Being a homeowner is much different than renting and comes with a lot of new responsibilities. In a rental, landlords are typically responsible for any repairs as well as maintaining the yard and any landscaping. However, homeowners need to cover these expenses themselves. First-time home buyers and single buyers need to be confident they are ready for all the added responsibilities and are in a financial situation to successfully maintain a home.

Shop around
Once a budget is established, shopping around for the best mortgage rates will ensure that a borrower gets a low cost mortgage. Solo homebuyers need to be their own advocate when searching and comparing rates and loan terms. Borrowers should be sure to get the loan terms laid out by a lender and don't be afraid to ask lenders questions about requirements and any other fees and costs.

Consider resale value
Shopping for a dream home can be a fun and exciting endeavor, but buyers need to remember that property is considered an investment - one that they might want to capitalize on later. It is important to consider the resale value of a home for when it comes time to sell. Even if the plan is to stay in a home for a long time, resale value should be factored in when making a decision.

Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable mortgage options.

Mortgage rates drop as sales pick up

1/23/2014 4:13:55 PM

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Recent reports have quelled the fears of American homebuyers looking to get a low rate mortgage in 2014, as rates dropped again in January and fewer homeowners were underwater.

Mortgage rates drop
According to Freddie Mac, mortgage rates declined for the third week in a row following a disappointing December employment report.

Interest rates for a 30-year fixed-rate mortgage reached an average of 4.39 percent for the week ending Jan. 23. The previous week's average was 4.41 percent. For borrowers, falling rates are a good sign they will be able to receive a low cost mortgage in 2014, despite economists' projections that rates will rise above 5 percent during the year. During the same time last year, mortgage rates averaged 3.42 percent.

Mortgage rates for a 15-year fixed-rate home loan also fell during the week, dropping to an average of 3.44 percent. Rates the week before were only slightly up, reaching an average of 3.45 percent. A year ago, the average was only 2.71 percent, a near record low for homeowners.

Home sales up
Despite rising rates, it is likely that the housing market is still affordable for most Americans, and many are seeing equity returning to their properties. In addition, more homes sold in 2013 compared to the previous year. According to RealtyTrac's December and Year-End 2013 U.S. and Residential Sales Report, home sales increased 10 percent in December 2013 from 2012. From November 2013, sales were up about 1 percent at the end of the year, despite the typical slowdown seen in the winter.

Although the national trend showed that home sales increased throughout 2013, sales declined in 18 of the 50 most populated metropolitan areas. Sales in California, Arizona, Nevada, Oregon and Rhode Island were also down overall in 2013. Nationwide, home prices for both distressed and non-distressed properties reached a median figure of $168,391, only a 2 percent increase from December 2012.

Short sales and bank owned home sales increased to represent 16.2 percent of all real estate transactions in 2013, up from 14.5 percent in 2012. However, the increase is not a result of more foreclosed properties. Instead, many of the sales were completed as a result of foreclosures that started several years ago. With an improved housing market, it is likely that more homeowners who have been waiting to sell will put their homes on the market in 2014.

"It may surprise some to see distressed sales rising in 2013 given that foreclosure starts dropped to a seven-year low for the year," said RealtyTrac Vice President Daren Blomquist. "And while short sales did trend lower in the second half of the year, there are still more than 1.2 million properties in the foreclosure process or bank-owned, providing a sizable pool of inventory that the housing market is in the process of absorbing. Meanwhile, non-distressed sellers have not listed their homes for sale in droves, helping to keep the distressed share of sales at a stubbornly high level."

Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable mortgage options.

Refinance activity picks up

1/22/2014 3:06:29 PM

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Heading into the end of January, refinance activity grew, according to the Mortgage Bankers Association. Following a slight drop in interest rates, more homeowners were hoping to cash in on the best mortgage refinance rates seen in the last few weeks.

For the week ending Jan. 17, mortgage applications rose 4.7 percent from the previous week. In the mortgage refinance sector, applications rose 10 percent from the previous week, accounting for a 64 percent share of the mortgage market. That marked the largest share in a month. In the previous week, mortgage refinance applications represented only 62 percent of the market.

After the Federal Reserve announced it would begin to taper its stimulus spending program known as quantitative easing, applications hit their lowest level since December 2000. The recent uptick could be an indicator that Americans are able to find low rate mortgage options. The interest rate for a 30-year fixed-rate mortgage with a conforming loan limit reached 4.57 percent during the week ending Jan. 17 - the lowest rate in several weeks. Interest rates for FHA mortgages were even lower, dropping to 4.23 percent for a 30-year FRM.

Contact the Federal Savings Bank, a veteran owned bank, for the best mortgage refinance rates.

Credit habits and the effect on mortgages

1/21/2014 4:10:56 PM

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There are several known ways to improve your credit score, from making payments on time and keeping balances low to not having too many credit cards. When it comes to mortgages, however, not all credit habits are created equal. In fact, there are a few habits you might think are good that can actually get in the way of getting approved for a home loan.

Paying it off
Some consumers who use credit cards prefer to pay off the amount in full right away at the end of the month. The next month might be the same, and they end up with little or no debt. A lot of people would consider this a responsible spending habit, but lenders might not feel the same way. This might be because credit companies report credit balances at the same time every month, and it could be before you have paid your bill. This means the remaining balance will still be reported to your mortgage lender.

Lenders will use a credit report to determine what type of borrower you are. If your report shows liabilities like a remaining balance, it could affect the approval process even if the debt was paid off later. To fix this issue, a consumer can call their credit company to find out when they report ratings to lenders.

There are a few habits that can bring down your credit rating and have an impact on your ability to get a mortgage, as well.

Late payments
With credit cards, consumers are required to make a payment on their debt every month. While a lot of credit card companies have simplified the process by setting up automatic bill pay and allowing holders to access their accounts online, there are many consumers who miss their due dates. Not only can this lead to late fees and penalties, the habit can bring down a credit score. As lenders continue to increase the standards for home loan approvals, missing credit card payments could be the difference between getting approved for a mortgage or not.

New credit
Every time you open up a credit card, it can impact your overall credit rating. When a person has several different cards, it can increase the chances that they will rack up more debt. Keeping a limited number of credit cards may be the best practice for a good score. If a person has several credit cards, closing them without paying off the balance first can also bring down a score.

Total Debt
While paying off your credit balance every month might have an adverse effect on your credit score, owing too much can have the same impact. Credit card scores are compiled using different pieces of information about your credit habits. Part of the score has to do with the total amount of debt that is owed. Having large balances can bring down a credit score dramatically. If you use your credit cards for frequent shopping, the habit of keeping large balances might make you unqualified for certain loan terms.

Contact the Federal Savings Bank, a veteran owned bank, to explore mortgage options.

Construction declines from November to December but still improved annually

1/17/2014 5:52:30 PM

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New housing starts declined by nearly 10 percent on a month-over-month basis in December, but did rise slightly on an annual basis, according to a recent report from the U.S. Census Bureau.

Data revealed that new construction dropped by 9.8 percent from November to December 2013, though the 999,000 privately owned housing starts from December represented a 1.6 percent jump from a year earlier. The comparisons are indicative of a year-end slowdown while providing some context in terms of the broad state of the housing market. The revised figurefor housing starts in November totaled 1.11 million in November and 983,000 in December 2012, HousingWire reported.

A single-family start rate of 667,000 units was exhibited in December - a 7 percent dip from November's rate of 717,000 units. Building permits for privately owned housing units also declined in December, down 3 percent from November's revised rate of 1.1 million units but up 4.6 percent from the December 2012 estimate of 943,000.

A catalyst for recovery 
An influx of new supply remains vital to the housing market's ability to sustain itself over the long term - especially in coastal markets like Boston, Los Angeles, New York, San Francisco and San Diego where inventory shortages led to sometimes-volatile rates of price appreciation in 2013 - but Trulia chief economist Jed Kolko cautioned that month-to-month comparisons of housing starts can be misleading. In particular, December data may have been skewed by extreme cold that crushed the Midwest and Northeast, causing many projects to stall or cease operation.

"Construction is much farther below long-term normal than home prices and sales volumes, which have largely recovered," Kolko told HousingWire. "Slow household formation and elevated vacancy rates explain why construction remains far below normal."

Year-over-year comparisons, Kolko explained, often serve as better barometers for the true state of the market. Based on those gauges, start rates in December exhibited improvement in almost every regard, but the rate at which new units are being constructed still lags behind the demand that persists in many areas.

For homeowners looking to get a low cost mortgage in 2014, an inventory jolt would be welcome for the sake of affordability. As the Federal Reserve continues to reduce its rate of stimulus, mortgage interest rates figure to rise as the private market compensates for the reduced rate of infusion. As a result, a revitalized supply would ease the burden on prospective homebuyers and facilitate sustainable growth for the market going forward.

Mortgage rates drop again

1/20/2014 5:06:44 PM

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According to Mortgage News Daily, mortgage rates reached six-week lowson Jan. 20, averaging 4.5 percent for a 30-year fixed-rate home loan. Though rates were in a similar range during the previous week, the difference is about 0.03 percent in closing costs.

Mortgage News Daily reported that interest rates over the past eight months have been on an upward trajectory until recent weeks. Declines in mortgage rates during that time have been relatively short-lived. In October, mortgage rates dipped slightly as a result of the federal government shutdown, but have since risen. Following the Federal Reserve's decision to taper quantitative easing by $10 billion per month, mortgage rates rose to about 4.8 percent before subsiding this week.

The Fed's fiscal policy has allowed millions of Americans to find low cost mortgage options and stimulated the housing market. It is unclear what the central bank's next move will be, but it is likely it will continue to reduce stimulus spending over 2014.

While there is no movement in the mortgage market on Martin Luther King Day, there is a possibility that mortgage rates will continue to improve for Americans next week, according to Mortgage News Daily.

"We caught our second consecutive day of improvement in rate markets today," Ted Rood of Wintrust Mortgage told Mortgage News Daily. "While the gains weren't huge, they did improve pricing for most loans. Next week is light on data, with no movement Monday for MLK holiday. My Magic 8 Ball said "probably so" when I asked if it was safe to float for the moment. Probably as reliable an indicator as any! As always, if you're happy with your current pricing, could certainly do worse than locking it up."

Contact the Federal Savings Bank, a veteran owned bank, to explore low rate mortgage options.