Mortgage bond prices finished the week lower which pushed rates higher. The Core PCE, the Fed’s favored inflation gauge, fell 0.1% as expected. Personal income rose 0.2% and spending was unchanged. The ISM Index was weaker than expected. ADP employment showed the economy added 177,000 jobs in April which was near the expected 170,000. Productivity showed a sharp decrease of 0.6% in the first quarter. Analysts looked for a 0.1% increase. There were no surprises from the Fed as they left rates unchanged and indicated they will continue to reinvest in mortgage-backed securities which is good for rates in the short term. Unemployment came in at 4.4% versus the expected 4.6%. Payrolls rose 211,000 versus the expected 180,000 increase. Mortgage interest rates finished the week worse by approximately 1/8 of discount point. LOOKING AHEAD
ReleaseDate & Time
Tuesday, May 9, 1:15 pm, et
Wednesday, May 10, 1:15 pm, et
Thursday, May 11, 8:30 am, et
Up 0.1%, Core up 0.2%
Thursday, May 11, 1:15 pm, et
Friday, May 12, 8:30 am, et
Down 0.1%, Core down 0.1%
Friday, May 12, 10:00 am, et
Fed Chair Yellen has a difficult road ahead. She wants to raise rates but the recent disappointing growth figures make a hike in the short term difficult. The last thing the Fed wants to do is tip the economy the other way. The Fed indicated last week that, “The Committee views the slowing in growth during the first quarter as likely to be transitory and continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term.”
The good news is that rates remain historically favorable. Now is a great time to get a low interest rate mortgage ahead of any potential rate volatility.
Dana Bain & Robin Dunbar Bain
elections can cause great turmoil in the interest rates. The uncertainty of an
election like this one, where a new president will definitely be elected
heightens the tension, and thus creates pressure on markets. Not knowing what
the fiscal course may be under a new administration can cause banks to tighten
up their loan policies, and the fed-foreseeing this-tends to hold the line on
the base rate, in an attempt to keep the economy running smoothly, even though
markets and bankers may find it hard to exhale. After the election, rates could
go up slightly or more, depending on which party gets elected, and what
direction the new president wants to take. If you are considering buying a home or refinancing , lock in a mortgage now at historic low
rates. If you wait, you may regret it, money-wise.
Debt-to-Income Ratio“DTI” …a seemingly simple three-letter acronym, but it downright mystifies some homebuyers. Many are not sure what DTI is, how it’s calculated and what role it plays in their home financing but make no mistake, DTI, the debt-to-income ratio, plays a central role in mortgage lending.In the most basic of terms, DTI compares the amount of debt a borrower has against that borrower’s total income, and it describes how capable a borrower is to pay their monthly mortgage payment.Many of your clients will understand that basic concept, but you can assist them considerably by helping them grasp the more nuanced aspects of DTI.Let’s start with how lenders calculate DTI. When lenders compare income to debt, they are comparing all of a borrower’s income to all of that borrower’s debt.Income – the lender totals up not just pre-tax income from a borrower’s job, but income sources such as bonuses, income for contracting, pensions, social security, alimony, dividends, or child support. The lender accounts for everything a borrower earns on a regular or semi-regular basis, but it also places requirements on certain types of income to ensure that income is truly regular and dependable. This gives the lender the gross income.Debt – the lender adds together all of a borrower’s obligations. This includes what would be the total monthly mortgage payment, as well as existing payments on credit cards, student or car loans, other debts requiring regular payments, alimony or child support payments and housing costs, such as rent or mortgage payments, associated with another property.So, the basic DTI calculation divides the gross income by the total debts. But it’s not exactly that simple. Lenders express the DTI ratio in two figures: the front-end ratio and the back-end ratio.The front-end ratio – compares only housing related costs, such as the mortgage’s principle and interest payments, mortgage insurance, home insurance, property taxes, and association due or Mello-Roos, to the borrower’s income.The back-end debt – ratio compares all of the borrower’s recurring debts plus housing costs (a larger figure) against their income.Now, how does this factor into qualification? Every lender caps DTI for its loans at different maximum percentiles. Generally, a lender won’t go higher than 43% for back-end DTI for a conventional, conforming loan. (There are exceptions in special circumstances).
“DTI” …a seemingly simple three-letter acronym, but it downright mystifies some homebuyers. Many are not sure what DTI is, how it’s calculated and what role it plays in their home financing but make no mistake, DTI, the debt-to-income ratio, plays a central role in mortgage lending.
In the most basic of terms, DTI compares the amount of debt a borrower has against that borrower’s total income, and it describes how capable a borrower is to pay their monthly mortgage payment.
Many of your clients will understand that basic concept, but you can assist them considerably by helping them grasp the more nuanced aspects of DTI.
Let’s start with how lenders calculate DTI. When lenders compare income to debt, they are comparing all of a borrower’s income to all of that borrower’s debt.
So, the basic DTI calculation divides the gross income by the total debts. But it’s not exactly that simple. Lenders express the DTI ratio in two figures: the front-end ratio and the back-end ratio.
Now, how does this factor into qualification? Every lender caps DTI for its loans at different maximum percentiles. Generally, a lender won’t go higher than 43% for back-end DTI for a conventional, conforming loan. (There are exceptions in special circumstances).
Our new home has a fantastic large two person shower which is one of my favorite features in the entire house. However, the great glass shower door has become a real challenge to keep clean. Our problem is with really hard to clean soap scum on the glass shower door.
We’ve tried every product on the market that claims to clean soap scum with little to no luck. So after doing a bit of research I found a suggestion to try Dawn Dish Soap and Mr. Clean Magic Eraser to clean stubborn soap scum.
Simply wet your Mr. Clean Magic Eraser with some Dawn Liquid Dish Soap and scrub the shower door. Trust me it was as simple as that and the results were absolutely amazing! Our soap scum cleaning problem is a thing of the past thanks to this really simple cleaning solution. I decided not to post before and after photos for fear that my wife might not like the public display of soap scum! You’ll have to take my word for it and try it on your shower door.
If you’ve never used this amazing product then do yourself a favor and buy it. From our new soap scum removing recipe to crayons and scuffs on the walls these eraser pads are a must have for any house. This is especially true if you have small children! You can buy them here:Mr. Clean Magic Eraser Cleaning Pads
So have you ever tried this great soap scum removing recipe? Any luck?
Welcome to 2015.
At the beginning of 2014 every talking head on TV and the Internet predicted mortgage rates would rise. That is not exactly what happened, on a bond price basis rates improved by 5 discount points for roughly 1% in rate.
As 2015 gets underway it is important to look at what will drive rates and why. Here is a short list:
Federal Reserve: All eyes will be on Chairperson Yellen and the policy posse. Quantitative easing came to and end with no major market disruption. The next issue the Fed has to tackle is when to begin raising rates. Mrs. Yellen has been very clear since assuming the role as Fed Head that any actions the Fed takes will be “data dependant”. OK, so what will THEY be watching?
Jobs: The unemployment rate has fallen well below the levels where it was previously thought the Fed would act on a rate hike. The unemployment rate stands at 5.6%. As more people found work and the unemployment rate declined the economy did not improve as much as hoped. Despite earlier benchmarks set by the Fed to take action on rates, we learned that the benchmark is a “moving target”. This goes back to Mrs. Yellen’s statement on data dependency.
Dollar: What an interesting story the dollar has been. The US dollar is the world’s reserve currency and its value vs. other currencies is extremely important. A strong US dollar makes imported goods cheaper however it has an opposite effect for exports. Commodities are priced in dollars. All other influences being equal, a rising dollar will bring cheaper food and energy costs to US consumers. That is one reason the price of gas has dropped. Speaking of gas, let’s move to oil.
Oil: Without a doubt, the decline in the price of oil was the biggest financial story of the year. There are several reasons for the drop, not the least of which is the ingenuity of the US oil industry. The ability to extract oil from shale rock (fracking) is only five years old however it has literally reshaped the global landscape and upset the balance of power in several areas. The cost to produce oil in the US continues to decline driven by advances in technology. Some estimates have the US consumer saving $288B (1/4 of a TRILLION) dollars a year in the price of gas alone. While this is a good thing, it also pressures inflation well below the Feds target rate of 2%. This circles us back to the Federal Reserve.
If it sound like a circular reference, from the Fed to jobs to the dollar to oil and back to Fed, you would be correct. The US economy as measured by GDP is an $18 trillion dollar monster with many moving parts, which are all interconnected.