Mortgage News Roundup

This week’s FOMC meeting has adjourned with an announcement that the Fed trimmed their current bond buying program by another $10 billion per month. This met the analysts predictions.

Following the release of the statement at 2:00 PM ET, the bond market initially worsened but has since improved to near its best levels on Wednesday. The stock markets have extended their earlier losses with the Dow down 172 points and the Nasdaq down 47 points. The bond market is currently up 18/32, which should be enough of a move to cause many lenders to improve rates by approximately .125 of a discount point over this morning’s pricing.

Sales Climb as U.S. Housing Market Adjusts to Rates: Economy

December showed an increase in the number of previously owned home sales for the first time in five months, and capped the highest rate since 2006.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 1.0 percent to a seasonally adjusted annual rate of 4.87 million in December from a downwardly revised 4.82 million in November, but are 0.6 percent below the 4.90 million-unit level in December 2012.

For all of 2013, there were 5.09 million sales, which is 9.1 percent higher than 2012. It was the strongest performance since 2006 when sales reached an unusual high of 6.48 million at the close of the housing boom.

Self-Employed? The Mortgage Rule You Need to Know

When applying for a mortgage, lenders will classify you as a wage earner employee or self-employed. Furthermore, if you also own a business, or a percentage of a business, you might be considered self-employed even though you are a W-2 wage earner.

Here is how lenders classify you:

• Employee: Individuals are W-2 wage earners and receive a paycheck. From the paycheck, taxes are withheld.
• Self-employed: Everything else including any business entity where income is derived or lost.

Where it gets tricky is when you have an employee who has a stake in the business. They could be considered self-employed. What most loan officers look at is if you own 24% or less of a business. If so, then you’re generally considered an employee. If you own 25% or more, you’re generally considered self-employed.

Talk with a reputable loan officer about your particular situation before you buy a home to ensure that you’ve met all the requirements. These issues will be discussed if you pre-qualify for a mortgage.

Buyers flocked to foreclosures last year — and many paid all cash

Sales of foreclosed and distressed homes made up 16.2% of all home sales last year, up from 14.5% in 2012, according to RealtyTrac. This was unusual and not what was expected because the number of foreclosures dropped to a seven year low in 2013.

There are about 1.2 million properties that are bank owned or in the foreclosure process right now providing a sizable inventory. The median home price of a foreclosed or bank-owned property was $108,500 in December compared with $174,400 for non-distressed properties.

This makes the homes more attractive to those who have a smaller budget.

However, major investors who purchase homes, fix them up and rent them out are buying the greatest share of these properties.

Have you looked into investing in foreclosed homes?

Market Commentary for the Week of January 27th

This week is packed with economic reports and other events that are relevant to bond trading and mortgage rates. There are seven pieces of monthly or quarterly economic data scheduled with at least one being posted four of five days. In addition to those reports, there is also a two-day FOMC meeting and a couple of Treasury auctions that have the potential to affect bond trading enough to slightly move rates.

The week’s calendar kicks off with December’s New Home Sales report late this morning. It is considered to be the sister release to last week’s Existing Home Sales, giving us a small snapshot of housing sector strength. It tracks a much smaller portion of home sales than last week’s report did and is forecasted to show a decline in sales of newly constructed homes. However, this data is not important enough to heavily influence mortgage pricing unless it varies greatly from forecasts.

Tomorrow has two pieces of fairly important data scheduled. The first is December’s Durable Goods Orders at 8:30 AM ET that helps us measure manufacturing strength by tracking new orders at U.S. factories for products that are expected to last three or more years. These are also known as big-ticket items and include things such appliances, electronics and airplanes. The data is known to be quite volatile from month- to-month, but is currently expected to show an increase in orders of approximately 2.1%. A smaller than expected increase would be considered good news for bonds and mortgage rates, but a slight variance likely will have little impact on Tuesday’s mortgage pricing because of the large swings that are common in the data. Bond traders would prefer to see a large decline that would indicate economic weakness.

January’s Consumer Confidence Index (CCI) will also be posted at 10:00 AM ET tomorrow. This report is considered to be of moderate to high importance to the bond market and therefore can move mortgage rates if it shows any surprises. It is an indicator of consumer sentiment, which is important because waning confidence in their own financial situations usually means that consumers are less willing to make large purchases in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, market participants are very attentive to related data. Analysts are expecting to see a drop from December’s reading, indicating consumer confidence was weaker than last month. A reading much smaller than the expected 77.5 would be ideal for the bond market and mortgage rates. A higher reading than forecasts would hint that consumers are more likely to spend in the immediate future, fueling economic growth and possibly pushing mortgage pricing higher Tuesday.

This year’s first FOMC meeting that begins tomorrow will adjourn Wednesday at 2:00 PM ET. It is expected to yield no change to short-term interest rates, but as is often the case, traders will be looking for any indication of the Fed’s change in sentiment about the economy and when a potential change to short-term rates will be made or another adjustment to their current stimulus programs. This will also be current Fed Chairman Bernanke’s last FOMC meeting as chairman with current Vice Chair Janet Yellen taking over as Chairman Feb. 1st, although that shouldn’t affect this meeting’s results. There is a decent possibility of seeing afternoon volatility in the markets Wednesday due to the 2:00 PM ET post-meeting statement.

Thursday has what is arguably the single most important economic report that we see regularly. This would be the initial quarterly Gross Domestic Product (GDP) reading. Thursday’s release is the first of three we will get for the 4th quarter. This data is so important because it is considered to be the best measurement of economic activity. The GDP itself is the total sum of all goods and services produced in the United States. Its results usually have a major impact on the financial markets and can cause significant changes in mortgage rates. This initial reading will be followed by two revisions, each released approximately one month apart. Last quarter’s first reading, which usually carries the most significance, is expected to show the economy grew at an annual rate of 3.0%. A noticeably weaker reading would be great news for the bond market, questioning the pace of economic growth. That would likely fuel stock selling and a rally in bonds that should push mortgage rates lower Thursday morning. However, a larger than expected increase, indicating the economy was stronger than thought, will likely fuel bond selling and lead to higher mortgage rates.

Also Thursday, there are two relatively important Treasury auctions for the markets to digest. The Fed will auction 5-year and 7-year Treasury Notes Thursday instead of over two days as they traditionally do. If the sales are met with a strong demand from investors, the broader bond market may improve during afternoon hours. If they draw a lackluster interest, they could lead to bond selling and higher mortgage rates mid-afternoon Thursday.

Friday has the remaining three reports, starting with December’s Personal Income and Outlays data at 8:30 AM ET Friday morning. It gives us an indication of consumer ability to spend and current spending habits, making it relevant to the bond market and mortgage rates. Current forecasts call for an increase in income of 0.2% meaning consumers had a little more money to spend in December than they did in November. The spending reading is also expected to rise 0.2%, indicating consumers spent a slightly more last month than the previous month. Larger increases would be good news for the stock markets and could hurt bond prices, driving mortgage rates higher. Smaller than expected increases or declines would be considered good news for the bond market and mortgage rates as it would hint that consumer spending is weaker than thought, limiting economic growth.

The second release of the day will be the 4th Quarter Employment Cost Index (ECI). This index measures employer costs for employee wages and benefits, giving us an indication of the threat of wage inflation. If wages are rising, consumers have more money to spend and businesses usually need to charge more for their products and services. The report is considered moderately important and usually has more of an effect on the bond market than the stock markets. Current forecasts are showing an increase of 0.4%. A lower than expected reading would be favorable to bonds and mortgage rates Friday, but unless we see a large variance from forecasts I am not expecting this report to cause much movement in rates.

The final report of the week is the revised reading to the University of Michigan’s Index of Consumer Sentiment just before 10:00 AM ET Friday. This index is another measurement of consumer confidence that is thought to indicate consumer willingness to spend. I don’t see this data having much of an impact on the markets or mortgage rates unless we see a large revision from the preliminary reading of 80.4.

Overall, it is difficult to label any particular day this week as the most important for mortgage rates with so much going on. Wednesday is the only day with no economic data being posted, but it does have the FOMC meeting adjournment that is always big news. Thursday’s GDP report is highly important but Tuesday and Friday have multiple reports set for release that can influence mortgage rates. And stocks can affect bond trading and mortgage pricing any day, especially if they extend their significant slide from late last week. What I am fairly certain of is that we will see a very active week in mortgage rates this week. Therefore, please maintain constant contact with your mortgage professional if still floating an interest rate and closing in the near future.

Mortgage News Roundup - New Year's Money Resolutions to Think About

Mortgage News Roundup

Did you have Monday off? Whether you did or not, the good news is that this short week is almost over. We hope you have fun plans for this weekend.

Mortgage interest rates will probably increase a bit next week.

The housing market seems to be flat. The home sale report released this morning showed that existing home sales rose only 1%. November’s rate was revised down. And for all of 2013, sales were up 8% from 2012. The reason why it’s slowing is that fewer investors are buying.

5 Tools that Will Keep You Safe Online

In light of the news that personal and financial information were stolen from Target and Neiman Marcus, we found an article detailing five tools that will help protect your information while you’re online.

1. McAfee Site Advisor – free software that adds safety ratings to your browser and search results whether you use Chrome, Safari, Internet Explorer, or Firefox.
2. AVG Secure Search – Identifies which websites are collecting information about your online activities nd gives you the option to block it. It even has a Do Not Track feature.
3. SurfEasy – Software sets up a virtual private network (VPN) that encrypts all of the Internet traffic on your smartphone, tablet and computer to protect your online privacy.
4. Web of Trust – Considers themselves the Yelp of secure websites because it relies upon users rating sites and then provides you with that information as to whether it’s secure or not.

Which mortgage lender will save you the most money?

Do you know whether to use a national bank, online lender, or mortgage broker for your new mortgage or refinance? Here are some pros and cons to all of these options.

• National banks make their own guidelines for underwriting, and tend to be competitive on interest rates and fees. But because they’re so big, they are disconnected from regional differences. And the person who works with you on your loan application may be just a voice on the phone many states away. You lose that personal connection with this important choice.
• Direct Lenders – Act like big banks, and are often affiliated with national banks. While they have the freedom to make their own mortgage-qualifying guidelines, you will probably be treated as though you were going through a national bank. You may not get a personal connection, and you will probably be compared to big data rather than your particular circumstance.
• Credit Unions – Credit unions are structured to be not-for-profit, and so may have lower fees. But, you need to know that most credit unions are what is called correspondent lenders. They’ll help you get a mortgage but they are not the lenders and have to follow another lender’s guidelines.
• Mortgage Brokers – Like credit unions, mortgage brokers are not direct lenders. However, they work with many lenders and can help you find a niche loan if you need it. And they help you complete the paperwork. There may be more in upfront fees, however you’re gaining expert knowledge in the mortgage interest market as well as receiving personal assistance.

New Year’s Money Resolutions to Think About

The Wall Street Journal posted an interesting article to get you thinking about ways you can improve your financial health in 2014.

1. Make a budget and stick to it
2. Pay down debts
3. Make an estate plan
4. Get serious about retirement
5. Get an insurance checkup
6. Review your portfolio
7. Create an emergency fund

Which will you start with?

Market Commentary for the Week of Martin Luther King Jr.

This week brings us the release of only two pieces of monthly economic data for the markets to digest, but neither of them is considered to be highly important for mortgage rates. It is a shortened trading week with the stock and bond markets closed Monday in observance of the Martin Luther King Jr. holiday. The financial and mortgage markets will reopen Tuesday morning for regular trading hours. Accordingly, there will be no update to this report Monday morning.

Both of this week’s relevant reports are scheduled for release at 10:00 AM ET Thursday. The first is December’s Existing Home Sales from the National Association of Realtors. This data will give us a measurement of housing sector strength and mortgage demand by tracking home resales in the U.S. It is expected to show little change in sales from November’s level, meaning the housing sector was flat last month. Ideally, bond traders would like to see a decline in sales that would point toward housing sector weakness because a weakening housing sector makes broader economic growth more difficult. However, as long we don’t see a significant surprise in its results, it shouldn’t have a noticeable impact on Thursday’s mortgage rates.

December’s Leading Economic Indicators (LEI) is the other report of the week. It will be posted at 10:00 AM ET Thursday morning also. The Conference Board, who is a New York-based business research group compiles the data and releases this report. It attempts to predict economic activity over the next several months, but posted by a non-governmental agency, it is not considered to be of high importance to the financial and mortgage markets. Thursday’s release is expected to show a 0.2% increase, meaning the indicators are predicting a modest increase in economic activity this spring. Theoretically, that would be fairly good news for mortgage rates because long-term securities such as mortgage-related bonds tend to do better in weaker economic conditions. But as long as we don’t see a much stronger than predicted increase, I don’t think this data will have much of an influence on mortgage pricing either.

Overall, it appears that we may have a fairly quiet week ahead of us in the mortgage market. That is unless we see something drastic happen in stocks. The benchmark 10-year Treasury Note yield closed last week at 2.82% after moving back above 2.90% mid-week. That means we saw rates bounce around because mortgage rates trend with bond yields. I see a relatively minor level of resistance at 2.80% that could prevent bonds from improving too much more without something of significance to drive trading. With an extremely light week in terms of economic data and other events that traditionally affect bonds and mortgage rates, I believe it could be difficult for the 10-year yield to break below that level and remain there this week. Therefore, if closing in the very near future and you still have not locked a rate, it may be an opportune time to do so. I am holding the short and mid-term lock recommendations on that theory, but am prepared to shift to a less conservative position if the major stocks indexes start to move lower as that could be the catalyst needed to push bond yields below that level.

Mortgage News Roundup - What's it Take to Be a Qualified Mortgage?

In today’s blog we’ll look at the drop in foreclosures as well as look at how the new rules make it easier or more difficult to get a loan.

Foreclosures Drop to Lowest Level in 7 Years

The good news is that the foreclosure crisis is finally fading away. The number of new foreclosure filings, including default notices, auctions and bank repossessions, dropped 15% to a total of 113, 454 properties in November. RealtyTrac, an online marketer of foreclosed properties, also reported that this was the biggest monthly decline since November, 2010, and foreclosure filings are now at the lowest level since December 2006.

“While foreclosures will likely continue to stage a weak rally in certain markets next year as the last of the distress left over from the Great Recession is dealt with, it is highly unlikely that there will be a foreclosure comeback that poses any major threat to the solid housing recovery that has now taken hold,” said Daren Blomquist, vice president at RealtyTrac.

Home loans are becoming easier to get – for some

Ellie Mae, a national mortgage tracking firm, is reporting that for closed loans, average credit scores and down payments are lower than before and allowable debt limits are rising. The average FICO score dropped from 750 to 732 in 2013. Also the people with FICO scores under 700 who qualified for loans went from 17% in 2012 to 32% in September of 2103.

Some companies are also allowing higher debt-to-income ratios where it makes sense. Also, it’s just one thing that a mortgage company will look at.

Additionally, there are now more competitive private mortgage insurance (PMI) options for people who can’t have 20% down payment.

What You Need to Know About the New Mortgage Rules

As we’ve been telling you, the rules changed in 2014 to comply with the Dodd-Frank Act passed in 2010 to ensure that borrowers could repay their mortgage loans.

Here are 3 main things you need to know about how the mortgage rules changed in 2014.

1. Not a whole lot is changing when it comes to loans available

These new rules were designed to discourage the kind of predatory and risky lending that was rampant in the years leading up to the housing recession. However, many of the lenders made changes on their own years ago, and the bad type of loans haven’t been available for years.

2. New ‘ability to repay’ guidelines will require more documentation

Lenders are now required to verify all of these items before approving a loan:

• Income or assets you will rely on to repay the loan.
• Current employment status.
• Monthly mortgage payment for the loan. (The rule requires that for adjustable-rate loans, lenders must calculate the payment using the higher of the introductory or fully-indexed adjustable rate.)
• Monthly payment on any other loans associated with the same property.
• Monthly payments for property taxes and insurance that you are required to buy, and certain other costs related to the property such as homeowners association fees.
• Debts, alimony and child-support obligations.
• Monthly debt-to-income ratio that compares the borrower’s total debts with total income.
• Credit history.

3. Most lenders will follow new ‘qualified mortgage’ (QM) guidelines

It protects them as well as you.

So what’s it take to be a “qualified mortgage?” A loan must:

• Have a loan term of 30 years or less.
• Not have negative amortization.
• Not be an “interest only” loan, or a “balloon payment” loan where a large lump sum of the principal is due back at one time (exception made for small lenders).
• Upfront points and fees must not exceed 3 percent of the total loan amount.
• Debt-to-income ratio may not exceed 43 percent.

NOTE: some of these are not in concrete. FHA, FHFA, VA, USDA, RHS, etc do allow higher debt loads. Small lenders could offer balloon payments.

Zillow is predicting that there will be a larger number of loan offerings in 2014 to help people find better lending options.

If you have any questions about mortgages, contact your reputable mortgage officer to find out what is the best option for you.

Easy Ways to Pay Down Your Mortgage

It may seem a huge task – paying down your mortgage early. But you’d be surprised how small things can make a big difference and give you a great sense of security and freedom.

The first is one you’ve already heard. Instead of paying one payment a month, split the amount in half and pay twice a month. You may think you’re paying the same amount wouldn’t have any impact, but you’re paying down the principal faster thus making the interest accrue less quickly.

If you get a windfall or bonus, instead of spending the money, make a lump sum payment on your mortgage. If you got a holiday bonus, make an extra payment on your mortgage in January. It will go completely towards the non-interest portion of your loan and reduce the amount you owe for the rest of the year.

For example, a $500,000 mortgage with an interest rate of 4.53 percent (the rate as of January 2, 2014 as reported by Freddie Mac), would have a monthly payment of $2,542. By making an extra payment of the same amount at the beginning of the year, you will shorten the loan payoff from 30 years to 26 years.

While four years may not seem like a huge difference, that time translates into big savings. By paying off this home loan four years early, you would save $67,582 in interest.

If you have an adjustable rate, and the amount you’re supposed to pay every month goes down, keep paying the same amount. You’re used to paying it, and once again, the extra will go towards paying down the principal.

So why do I keep bringing up paying down the principle? Did you know that with a 30 year mortgage at 7%, that about 80% of all your mortgage payments during the first 5 years of the loan are interest? The sooner you start chipping away at the base amount, the less you’ll pay over the term of the loan.

So what are some other ideas?

Talk to a reputable loan officer about refinancing. As we mentioned in a prior post, there are refinancing options out there that will allow you to get a lower interest rate for the same term that you’re at. So if you’ve been paying for four years, you can refinance for 26 years rather then 30 again.

If your credit card offers you money back, use the money towards your mortgage.

And finally, always round up the payment each month. So if you were paying $2349, you could round it up to $2400 or even $2500.

What are some other small ways you could pay down your loan faster?

Market Commentary for the Week of January 13th

This week has seven economic reports that are relevant to the bond market and mortgage pricing. Some of the date is considered to be highly important and we have reports set for release four of the five days. In addition to the data, there are also a relatively high number of public speaking engagements for Federal Reserve members. There is nothing of importance scheduled for release Monday, but if Friday’s strong rally extends into Monday’s trading we should see further improvements to mortgage rates.

The first economic report of the week will be posted early Tuesday morning when the Commerce Department will release December’s Retail Sales data at 8:30 AM ET. This Commerce Department report measures consumer spending by tracking sales at U.S. retail level establishments. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched closely. Rising consumer sales fuels expectations for broader economic growth that makes long-term bonds less attractive to investors. Current forecasts are calling for no change from November’s sales. A decline in sales would be good news for bonds and mortgage rates because it would hint at weaker than thought economic growth.

Wednesday has two reports scheduled for release that have the potential to influence mortgage rates. The first and more important is the Labor Department’s Producer Price Index (PPI) at 8:30 AM ET. The PPI is important to the markets and mortgage rates because it measures inflationary pressures at the producer level of the economy. Analysts are expecting to see a 0.3% rise in the overall reading and a 0.1% increase in the more important core reading that excludes volatile food and energy prices. A larger than expected increase in the core reading could mean higher mortgage rates Wednesday since inflation is the number one nemesis of the bond market. It erodes the value of a bond’s future fixed interest payments, making them less attractive to investors. Accordingly, they are sold at a discount to offset the drop in value, which drives their yields higher. And since mortgage rates follow bond yields, rising inflation usually translates into higher interest rates for borrowers.

Also Wednesday, the Federal Reserve’s Beige Book will be posted at 2:00 PM ET. This report is named simply after the color of its cover and details economic conditions throughout the U.S. by Fed region. Since the Fed relies heavily on it during their FOMC meetings, its results can have a fairly big impact on the financial markets and mortgage rates if it reveals any surprises, particularly regarding inflation, unemployment or future hiring. Any reaction to the report though will come during afternoon trading.

Thursday’s sole monthly report is December’s Consumer Price Index (CPI) at 8:30 AM. This is one of the most important monthly reports for the bond market each month since it measures inflationary pressures at the consumer level of the economy. As with the PPI, there are two readings in the release. The overall index is expected to increase 0.3% while the core data rose 0.3%. Weaker than expected readings would be favorable news and should lead to bond strength and lower mortgage rates Thursday morning.

The remaining three reports are all set for Friday morning. The first data of the day is December’s Housing Starts at 8:30 AM. It helps us measure housing sector strength and future mortgage credit demand by tracking construction starts of new homes. It is not considered to be one of the more important releases each month, so I don’t see it causing much movement in mortgage rates Friday but does carry the potential to affect trading and rates if it shows a significant surprise. Analysts are expecting to see a decline in new home starts between November and December.

December’s Industrial Production report has a release time of 9:15 AM ET Friday. This data measures output at U.S. factories, mines and utilities, giving us an indication of manufacturing sector strength or weakness. Current forecasts are calling for an increase in production of 0.3% from November’s level. A weaker reading would be considered good news for bonds and could help lower mortgage rates as it would point towards a manufacturing sector that was softer than many had thought.

The final report of the week is January’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to slightly change mortgage rates. If consumers feel better about their own financial and employment situations, they are more apt to make a large purchase in the near future, fueling economic growth. Good news would be a reading weaker than the 83.0 that is expected and even better would be lower than December’s 82.5.

There also are speaking engagements by current Fed members each day, with some days having multiple appearances scheduled. The topics of some of them appear to be directly related to economic growth, so their words can also influence the markets enough affect mortgage rates. Their speaking times range from early morning to post-closing, so we could see markets react at different times of the day. Fed Chairman Bernanke is due to speak late morning Thursday.

Overall, Tuesday or Thursday will probably be the most active day for mortgage rates with some key economic data being posted both days. The least active day will likely be Monday, although we could see last Friday’s afternoon strength extend into Monday’s early trading. That would be good news for mortgage rates as many lenders already improved rates during afternoon trading Friday. The stock markets, which I believe are due for a pullback, also can be a big influence on bond trading and mortgage pricing any day (stock weakness should equate to bond strength). I still like what I see in bonds right now even after the recent rally and would not be surprised to see further gains that drive the benchmark 10-year Treasury Note yield and mortgage rates lower. However, this week’s data is important enough to reverse last week’s downward move, so while the overall tone in the bond market is positive, you should still maintain contact with your mortgage professional if still floating an interest rate in case that changes.

Mortgage News Roundup

Interest rates are on the rise for a variety of reasons including the Feds no longer purchasing bonds to keep rates low.

Home prices are increasing in many areas. If you read our blog post yesterday, home prices are almost back to normal in areas where job numbers are on the rise.

Why 2014 Is The Year to Get Out of Debt

When it comes to your personal finances, 2014 may be your best chance to take advantage of low interest rates and get out of debt — before it really starts costing you. The prime rate has stayed at 3.25% since 2008 and isn’t expected to move higher in 2014. Prime impacts credit cards, auto loans, student loans, and many other common interest rates.

Keith Gumbinger, vice president at HSH.com believes mortgage interest rates could go over 5% this year. But the other interest rates will be more stable, so now is the time to tackle paying off those old balances.

7 Reasons Not To Pay Off Your Mortgage Before You Retire

Forbes published an interesting, almost contrarian, article on why you may want to consider not paying off your mortgage before you retire.

• You have high interest rate debt
• You aren’t maxing out your retirement savings
• You are getting a tax break on the mortgage interest
• Your assets are in retirement plans
• You might need funds to tap into
• There is a chance you may move
• You are earning a decent rate on your funds

Read the article for more in depth information. The bottom line is ensure that you’re paying off high interest rate debt, saving enough, and consider your future. If you need the extra cash, hang onto it rather then putting it into the home.

What It Means to Be ‘Pre-Approved’ for a Mortgage

To be pre-approved for a mortgage means that a bank or lender has investigated your credit history and determined that you would be a suitable candidate for a mortgage. Often there’s a time limit involved as to how long you would be pre-approved.

Getting pre-approved is a lengthier process than getting pre-qualified. However, at the end of the pre-approval process, you should have an exact amount that you could get as well as an interest rate. Getting pre-qualified doesn’t guarantee anything, and only provides a rough range.

Talk with your reputable loan officer about what you would need to do to pre-qualify and get pre-approved. They have a great number of resources and types of loans to choose from, and can help you find the one best suited to your needs and goals.

Should You Rent or Buy in 2014?

Housing prices are increasing and so are mortgage interest rates. New regulations in 2014 also increased closing costs and put limits on the amount of points you could use to pay down your interest rate. They also created stricter guidelines for application approvals.

So if you’re a first time home buyer, you may be asking yourself: should I continue to rent or should I buy in 2014?

TIG adviser Jeff Lewis was interviewed on Fox Business to answer this very question. You can see the full 6:32 minute video here. His prediction is that the housing market will get back to normal by the end of the calendar year.

In his opinion, housing prices are still affordable now compared to housing prices before the real estate bubble that inflated costs tremendously. They are not as easily affordable as they were the last two years, and as interest rates continue to increase and housing prices level up, we will achieve a normal balance by the end of the year.

We’re seeing a greater recovery in the states with the better abilities to create jobs. Housing is still in a very bad state in the Midwest and big cities like Detroit. Mr. Lewis speculated that increased home ownership may be part of the problem because it reduced mobility of people to leave the area and find a better job. The homeowners are stuck in underwater housing and no jobs.

Also, in large cities, home ownership is near impossible, and there isn’t the same stigma attached to being a life-long renter. In fact, renting is considered a bonus because when there are problems like water leaks, the owner of the building has to fix it.

Still, for many people buying a home is achieving an American Dream. The bottom line for future homeowners is to evaluate their expectation of prices and goals. If it is your goal to own a home on a nice tree-lined street and have block parties, then you should start talking with a reputable mortgage officer to find out how much you could pre-qualify for. A knowledgeable real estate agent will also be able to help you find the right home. You may want to save up longer and buy the one home you will stay in, or you may want to invest in a starter home that you can sell to get back your equity, or rent out.

For real estate investors, it’s still a great time to be buying homes that are lower than their normal value. Rental vacancy rates are still at an all time low.

Will you be buying in 2014?

Market Commentary for the Week of January 6th

This week brings us the release of only two monthly reports that are relevant to the bond market and mortgage rates, but one of them is considered to be extremely important. In addition to those reports, we also will get the minutes from the last FOMC meeting and two Treasury auctions that have the potential to influence the bond market and quite possibly mortgage rates.

The Commerce Department will post November’s Factory Orders data late Monday morning. This data gives us a fairly important measurement of manufacturing sector strength. It is similar to the Durable Goods Orders release that was posted just before Christmas, except this report includes orders for both durable and non-durable goods. Durable goods are items that are expected to last three or more years such as appliances, electronics and autos. Examples of non-durable goods are food and clothing. Analysts are expecting to see an increase of 1.7% in new orders. This report generally does not have a huge impact on the bond market or mortgage rates, but it can influence bond trading enough to create a minor change in rates if it shows a sizable variance from forecasts. The smaller the increase, the better the news it is for mortgage pricing.

November’s Goods and Services Trade Balance will be posted early Tuesday morning. It measures the size of the U.S. trade deficit and is expected to show a $40.4 billion deficit. This data usually does not directly affect mortgage rates, but it does influence the value of the U.S. dollar versus other currencies. A stronger dollar makes U.S. securities more attractive to international investors because they are worth more when sold and converted to the investor’s domestic currency. But unless we see a significant variance from forecasts, I don’t believe this data will lead to a change in mortgage rates Tuesday.

There are Treasury auctions scheduled several days this week, but the two that are the most likely to affect mortgage rates will be held Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important of the two as it will give us a better indication for demand of mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would result in upward revisions to mortgage rates. Results will be posted at 1:00 PM ET each day, so any reaction will come during early afternoon trading.

Also Wednesday is the release of the minutes from the last FOMC meeting. They will give market participants insight to the Fed’s thinking and concerns regarding the economy, inflation and monetary policy. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so they won’t affect the markets or mortgage rates until afternoon hours. I don’t suspect this particular set of minutes will cause too much concern or excitement because the last FOMC meeting was followed by revised Fed forecasts and a press conference by Chairman Bernanke. Although, the meeting did yield the first reduction in the Fed’s current bond buying program (QE3). Therefore, analysts will be looking for any tidbits that could help predict when the next reduction will be made.

The big news of the week will come at 8:30 AM Friday when the Labor Department will post December’s employment figures. The Employment report is arguably the single most important monthly release we see. It gives us the national unemployment rate, the number of jobs added or lost during the month and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, a decline in payrolls and flat earnings would be ideal news for the bond market.

Current forecasts call for no change from November’s unemployment rate of 7.0%, 197,000 new jobs added to the economy and an increase in earnings of 0.2%. If we see weaker than expected results, the bond market should rally and stocks should fall, improving mortgage rates noticeably Friday. However, stronger than expected readings will likely raise optimism about the economy, pushing stocks and mortgage rates sharply higher.

Overall, Friday is the key day of the week with the almighty Employment report being posted, but Wednesday afternoon also has a chance to be pretty active. The least active day will likely end up being Tuesday and Thursday doesn’t have too much to be concerned about either. The benchmark 10-year Treasury Note yield closed just below 3.00% last week. I will be watching it very closely for mortgage rate direction over the next several weeks. It has been in a tight range between 2.95% and 3.00%. If we could get enough favorable news to push it below 2.95%, we should see a noticeable downward move. Since mortgage rates follow bond yields, that would be good news for mortgage shoppers. On the other hand, breaking above 3.00% and staying above could indicate a sharp upward move in rates over the next couple weeks. Therefore, please keep an eye on the markets and maintain contact with your mortgage professional if still floating an interest rate.