Colorado Home Mortgage Loan

As your Colorado Home Mortgage provider it is important to me that you understand the Good Faith Estimate.  I have listed a detail explanation of the Goof Faith Estimate for you to review.

Good Faith Estimate

 

The Good Faith Estimate is a listed of fees associated with the loan being offered to you.  These fees are broken down into three major sections; Closing Costs, Prepaid Items, and Title fees.

 

A common issue associated with disclosing Good Faith Estimate costs verbally is that only the closing costs are referenced.  This will give the appearance that the costs are actually lower then they are. 

 

Prepaid items are a major part of the good faith estimate and need to be disclosed and understood.

 

First we will talk about the closing costs.  Closing costs are broken down by line items on the good faith estimate and are easily recognizable and understood.  The most common good faith estimate closing costs are: origination fee, points, credit report, processing fee, underwriting fee, and appraisal fee.  Some other fees not always understood is Tax service fee, and wire transfer fee. 

 

For those who do not know the difference between any of the fees I will quickly go through each.

 

Before I start it is important that I point out that many of the fees on the good faith estimate is a third party fee and I will highlight the differences between both shortly.  These fees will primarily be the same no matter where you decided to go for your mortgage needs.

 

The first fee is the loan origination fee which is the primary fee the broker charges for services rendered on your loan.  It is what we get paid.  The fee will range from .25% to 2.5% of the loan amount; however it is normally 1%.  Obviously it is the gross amount the broker receives and it is subject to additional splits being shared with the company that employees the broker.  Normally about 60% going to the broker themselves.

 

Loan Discount fee can be paid out in two different ways either to the broker or the lender depending on the rate being charged on the loan.  This fee will range between .25% to 2.5% of the loan amount.  The rate on the loan will have a cost or a premium depending on what rate you finally lock into to.  Please review Yield Spread Premium in order to calculate the premium your broker receives for the rate you are charged.  Loan discount fee should be used to pay the lender directly for the cost of the rate you received.  Typically if the rate is low enough a cost is associated to the rate that cost is paid directly to the lender in the form of Loan discount.  On rare occasions if a cost is not associated with the rate your broker has given you and a Loan Discount fee is charged then the fee becomes additional broker compensation.  The compensation will still be gross compensation but it is still compensation.  You can get this determination on the final Settlement statement know as a HUD which will tell you who is receiving the Loan Discount fee.  This should be negotiated and talked about between you and your broker if the charge is listed.

 

Next is the Appraisal fee which is the first of many third party fee that goes directly to the appraiser who offers a detailed report on the value of your property.  This fee ranges from $350 to $450 depending on the Appraiser used on the loan.

 

After the appraisal fee you will have a credit report fee which should not exceed  $50.  We do not charge that fee to our clients but it typically shows up on other broker’s good faith estimates.

 

The Lender’s Inspection Fee is a fee that lenders will charge in order to review an appraisal already done on the property.  It is a fee not normally seen on the good faith estimate so it rarely shows up if ever.  However if the lender requires an inspection to be done then the fee will typically be in the range of $100 - $250.

 

The mortgage broker fee is another fee paid to brokers for compensation on a mortgage loan.  If the fee is charged it could range from .25% to 2.0% of the loan amount.  Most brokers will use the mortgage broker fee as a secondary fee on loans that put a cap on loan origination such as Veteran home loans.  The fee may also be applied to higher risk loans that require more work, but should always be negotiated by you and the broker.  It is another fee tied to compensation to the broker originating your loan.

 

Tax Related Service Fee is another third party fee charged by the lender for handling tax related matters.  It is a small fee but it is paid directly to the lender who funds your loan proceeds.  This fee will typically range from $60- $90.

 

Processing Fee is charged by the branch processing your file.  This fee can be tricky as it is a source for income to the broker and the broker’s office.  The fee is intended to cover matters like the collection of your application, running credit, automated approvals, documentation preparations, ordering services and other administration activities done at the branch.  The fee helps off set costs for the processor and administration staffs.  This fee can also help in additional compensation to the office depending on the relationship to actual costs and income received from this fee.  The fee should range between $300 - $600 but beware of excess charges being applied in this area.  My administrative staff receives 100% of the proceeds tied to this fee.  Our brokers and managing partners receive absolutely no additional compensation from these charges listed on the good faith estimate.

 

The Underwriting Fee is a third party fee paid to the lender to approve your loan in full.  It also pays for the closing preparation done by the lender and the final issue of funds for your closing.  It is basically the fee the lender charges for your loan.  This fee will range between $450 - $1200 depending on the level of risk associated on the loan, and the lender underwriting your file.

 

The final Good Faith Estimate normally tied to closing costs will be the Wire Transfer Fee.  Simply put it is the fee to wire the loan funds from the lender to the title company.  It is a third party fee but it is small in nature.  Ranging from $50 - $90.

 

All of these fees will typically be included in the good faith estimate as closing costs.  Be cautious of any other fees that may apply these fees do not account for normal closing cost fees and are used as additional compensation to the broker.  These fees may include but are not limited to:

Administration fees,

Application fees,

Warehouse fees,

Amortization fees,

Affiliated consulting fees,

Endorsement fees,

Express mail fees,

And miscellaneous fees.

 

The next section of the good faith estimate will typically be referred to as the prepaid items tied to your loan.  Prepaid items are normally costs tied to items that must be paid in advance for the purpose of your loan.  These are also funds set up in an escrow account which will be fully explained under escrows located on the resource page.  Here on the good faith estimate we will simply go through the items as they appear.

 

Daily interest charged for per day interest on the loan.  This item will appear as a per day charge and will vary depending on what day of the month you close your loan.  The per day charge can seem a bit complicated but it does not have to be that way.  Simply put it is the number of days between the day you close until the last day of the month.  For example if you close on the 15^th and there are 30 days in that month you will be charged 15 days interest.  The reason for this is simple.  Your first mortgage statement does not come out until the first full month is completed.  On the 1^st day of the following month you pay the mortgage for the month you had the loan.  Mortgage payments will pay interest in the rear and that is what your mortgage payment will be the following month.  Best way to look at this is by example:  Lets say you close on the 10^th of April since there is not a full month behind you since acquiring the loan a payment will not be due on May 1^st.  The first full month under the new loan will actually be June 1^st which will cover May 1^st through May 31^st.  So if you move in on April 10^th and don’t make a payment until June 1^st you actually have the loan for about 51 days.  June 1^st covers 31 from May 1^st to May 31^st so what happens to the other 20 days.  That is what will show up on your line item.  These days will always be paid in advanced as part of your prepaid items. 

 

Mortgage Insurance Premium will be a premium charged by lenders which will be issued to a Mortgage Insurance company to help protect the mortgage in the event of default.  These premiums are normally tied to loans that carry a loan to value ratio above 80%, or FHA loans.  FHA loans will charge Mortgage insurance premiums ranging from 1.5%-1.75% of the loan amount.

 

Hazard Insurance Premium is only charged on purchases and will be an annual charge made by your Home Owners insurance provider and will be paid directly to them for your home owners insurance for one year.

 

VA Funding Fee just like Mortgage Insurance Premium will be used to off set the risk tied to these loan programs.  VA provides lenders with a guarantee on the loan proceeds and in order to do this VA will charge a fee to all borrowers depending on how often they have used their VA eligibility.  The VA funding fee will range from .5% found in refinances and 2.15% - 3.3% on Purchases depending on whether it is a 1^st time use of multiple use VA benefit.

 

The 2^nd component of prepaid Items will be your escrow balance which is an account set up by the lender to pay taxes and insurance in the future.  A New Escrow balance must be established on all transactions and will be collected here.

 

Hazard Insurance Premium reserves will be collected depending on when your insurance is due next.  Normally it will be about 4-6 months insurance premium set aside to pay next year’s insurance obligations.

 

Mortgage Ins. Premiums reserves very rare and will typically not show up on a good faith estimate is collected to off set yearly Mortgage Insurance Premiums.  I can’t remember the last time that was used, but if the program warrants it, it will be collected.

 

School Tax Reserves.  Like the Mortgage Insurance premium is rare and will only be collected if the school district requires it as a function of the yearly mortgage premiums to be collected.  It is set up for future tax requirement for schools.

 

Taxes and Assessment Reserves are required on most loans and pretty much compiles the 2^nd major component to a typical escrow account.  Like Hazard premiums depending on what part of the year you close will dictate the amount paid in your reserve account.  Taxes are paid on twice a year once at the in of April and again in July.  Lenders will project how much is needed to ensure payment is available on these due dates and will set aside the amount in your reserve account to pay the premiums as they come due.

 

Flood Insurance Reserve will also be rare in the state of Colorado, but other states do require it.  Flood insurance is used to cover premiums associated with Flood insurance and work in a similar manner that taxes and home owners insurance is collected for reserve requirements.  The flood insurance reserve will cover the flood insurance requirement for the home.

 

Finally the last section of the Good Faith Estimate is title fees.  Title fees are fees charged by the title company to close and services the needs to allocate funds for your loan.  These fees are broken down and disclosed to you on the good faith estimate.  What people don’t realize in this section is that the borrower has the right to negotiate who the title company will be.  Title fees are listed as follows:

 

Closing/Escrow Fee is the charge that title companies charge to sit down with you and deliver the closing documents to you.  Basically it is the compensation received for closing your loan documents.  In a sales contract an additional charge is charged for the real estate closing documents and will be explained later. This fee will rage from $175 to $350.

 

Doc Prep Fee is another compensation fee charged to the borrower and is typically tied to administrative tasks done by the title company the fee will range from $100 - $300.

 

Notary Fees will be an administration fee given to a notary typically working for the title company in the even documents require notary services.  This is rare and is often associated as a junk fee.  The fee should be no greater then $100

 

Attorney Fees normally not needed in the state of Colorado are fees associated for the services of an attorney for closing a real estate transaction.  Some states like New York require attorney’s to negotiate and handle any contract administration which is involved in every Real Estate Transaction there for are required to close these deals.  This is where an Attorney Fee will be charged.  These fees can be as high as $2000, but should not be seen on a Good Faith Estimate in the State of Colorado.

 

Title Insurance fee is mandatory by law and will be charged on every real estate loan.  The Title Insurance fee insures protection to the lender that they no other outstanding liens appear on the deed and that they will have 1^st or 2^nd position depending on what loan you have.  The fee on this is paid directly to the title company and a portion of this fee will be compensation to the title company for services rendered.  Because the fees for title are registered with the state it is set in stone, but make no mistake title companies do make money on title insurance.

 

Recording Fees are charges made by the county clerk’s office for recording the deed of trust and note.  It is a per page charge and will typically range from $125 - $195.

 

Finally the Real Estate closing fee which will be the exact charge for the closing fee and is additional compensation given to the title company for services rendered in closing the actual real estate transaction portion of a purchase. $175 - $350

 

The title company may have some other charges that show up on the settlement statement but the costs of those additional charges are small.  Examples of these but limited to.  A variety of form fees that may be required by the lender, Improvement Land Certificate, Courier Fee, and Stamps fees.

 

These are the actual line items that will accumulate and be calculated as your total costs for the loan.  Closing costs and prepaid items plus your payoffs for your current loans of the purchase price will be your total cost for financing. 

 

 

What is Credit?

 

This is the fist of three major qualifying components for a home loan: Credit, Income/employment/, Previous residency

 

Lender will review your credit report to determine credit worthiness.

 

Three major reporting agencies are: Experian, Transunion, and Equifax.  We use Credit Plus to order credit there are many vendors, but primarily the scores will be similar, but not always exactly the same. 

 

What’s on the credit report: Identifying information, Public information such as judgments or BK’s,  Account history for every account you have ever opened. 

 

Credit History will determine a FICO score: The top 5 things impacting credit scores on a credit report are:   Amounts owed on accounts are too high, Delinquency on Accounts, Too Few bank revolving accounts, too many accounts with balances,

 

Things that can help boost credit scores immediately:  Opt Out Prescreen, Authorized user on good accounts, pay down total balance on accounts to 35% of the high credit limit.  Pay off or eliminate debt on American Express cards they do not report a high limit only the current balance, Pay your accounts on time

 

 

Pre-Qualification Process

 

Shopping for the right loan will be as important as shopping for the right home; you should find out what you qualify for 1^st before actually going out and starting the buying process. 

 

Preapproval commitment from the lender can be achieved if in fact you go through the loan process first.  Sellers are more likely to accept offers with a preapproval letter then without.

 

It is important that you ask yourself a few questions before obtaining a Loan, these questions will help you and your loan officer determine the right program for you: 

 

How long do I plan to stay in this home?

Do I anticipate any income or debt changes in the near future?

How quickly do I want to pay my mortgage off or do you want to pay your mortgage off?

If I do decided to move out of this property do I plan on keeping it as an investment property?

 

Finally do you homework and be prepared to ask as many questions as you need to feel comfortable with the choice you are making.

 

Mortgage Process

 

There are several steps that need to be followed in the mortgage process but it can be easy.  We understand that this is a major step for you and your family and we take it very serious.  We will put you at ease

 

The fist step is to have a mortgage application appointment where the application is completed so that your loan officer can begin working on what programs best fit your situation

 

Typically a loan program is recommended at applications and you will be asked to sign the documentation at that time.  If you need more time we will accomidate your requests, however by signing the documentation you are not in any way tied to the paperwork being submitted to our lenders, nor are you required to use us for the transaction.  Signatures on the disclosures and applications allows us to obtain information from a variety of sources in order to provide you with the best loan options available in the market today.  We work for you and we do not forget that in the process, because you can fire us at will.

 

With the application we will collect a variety of standard qualify documents to prove the information on the application is accurate and true; W-2’s, tax returns, bank statements, current pay stubs, home owners insurance, asset information. Public information reports like bk or proof of judgment pay offs, divorce documentation, and other sources of income information

 

Once the signed documentation takes place and all supporting documentation is in place, we will shop the loan with all 92 investors currently signed up with us to see who is offering the best programs.  We are in a sense a travel agent for banks and these banks work hard to obtain our business by providing large incentives to us which we pass on to you in order to be competitive in this market.

 

The next step is to secure the loan program with a rate.  The rate will be determined by the market and will be explained in more depth in the rate section of the web site.  We will make float and lock recommendations daily, but ultimately you get to decide when to lock your rate.  We will do everything in our power to ensure you lock at the right time that maximizes your rate benefits. 

 

The entire loan packages is faxed or shipped out to the loan processing center located at the selected banking institution.  An underwriter is assigned where they review the file to ensure all supporting documentation is verified and accurate.  Their job is to prepare the file so that it can be portfolio’ed and sold in the secondary market.  Typically they will issue an approval with conditions and send it back to the loan officer or processor at the branch.  We will then contact you to gather the remaining components to complete your loan application in full.

 

The loan application is then again reviewed by the underwriter and hopefully all required documentation is in place, if not a new approval with conditions will be issued.  If the loan has all the appropriate information a Loan Commitment is generated and the loan application is sent to a closing department.

 

The closing department will be responsible for issuing the wire transfer that will ultimately be wired to the title company of your choice. 

 

Finally you will be given a closing date and closing time where you will be signing all of the final disclosures and application for loan approval.  Once the signing takes place the title company will issue all funds to the appropriate entities and your loan transaction will be complete.

 

Appraisal

 

An appraisal is done by a unbiased third party to assess value in the property.  The lender uses the appraisal in determining the maximum loan amounts offered to you.

 

The appraisal fee is typically paid to the appraiser at the time the appraisal is done and will normally require you to make this payment upfront.

 

The appraiser will view the home and take measurements to calculate size and features of the home.  They will also take pictures to show what condition the home is in.

 

Once the measurements are completed and all features analyzed the appraiser will then pull comparable sales normally within the last 90 days to start assessing the value of the home. 

 

These comparable homes are analyzed to determine like models and features that best relate to the subject property.  Once 3 or 4 comparable homes are determined the price for which these home sold for will be the starting point when assessing value to the subject property.

 

These comparable homes are broken down by all the features and amenities offered by each and simple reduction or additions are made to the subject property based on the differences found in each of these homes.  These differences will ultimately be calculated to create an even value for all the homes being compared.

 

A final value is determined and a full appraisal report is generated for the lender. A copy of this report will also be given to you at the time of closing or upon request.

 

It is important to remember an appraiser differs from a home inspector and will not inspect the house the same way.  A home inspection is highly recommended before purchasing a home.   

 

 

 

Title Insurance

 

Required by law and will vary in cost depending on which title company you use.

 

A new policy will be required anytime a new deed is filed which will be done on all loan transaction.

 

This will protect the lender and the home owner from any unresolved title issues that appear after the closing from circumstances that arose before closing.

 

For example:  Lets say you bought a home and the reason for buying that home was the beautiful landscaping throughout the property.  This landscaping could have been done recently on credit with th landscaping company.  If for some reason the previous owners default the likelihood that a lein be placed on your home is high.  The title Insurance would protect you in this situation

My Colorado Home Mortgage Rate is about to adjust.  What does that mean and what should I do?

The full impact of a Colorado Home Mortgage that has an adjustable rate tied to it really depends on the type of Colorado Home Mortgage you have.  The most popular adjustable rate programs used over the last six years were the subprime loans.  These Colorado Home Mortgage Programs were designed to get high risk borrowers into homes at a rate normally just low enough to qualify.  The adjustable rate period for these loans ranged from 2 years to 3 years.  They are known in the mortgage business as two/twenty-sevens or three/Thirty-eights.  They were designed to adjust every 6 months until the rate hit the market cap rate, which is around 11%.  Pretty scary for anyone that currently has these Colorado Home Mortgage Programs.  These loans are designed so that you have to refinance after the 2 or 3 year grace periods.  If you do not refinance your Colorado Home Mortgage, you can expect your rate to jump up 2% every 6 months until it hits that Market Cap rate.  So if you had a 5% rate on this loan it would jump up to 7%, 9%, 11% respectively over time. 

The 2^nd type of Adjustable Rate Mortgages offered in the market has far less risk tied to it, and as a result, the adjustment periods are a bit friendlier.  FHA and Conventional A-Paper Colorado Home Mortgage programs have an Adjustable Rate Mortgage Option.  These Rates typically adjust only once per year and will not exceed 1% per year during that time.  This option will give most Colorado Home Mortgage clients the ability to refinance when it makes sense to them.  For example, we have several clients that got into an ARM Colorado Home Mortgage program at 3.875%.  This is a great rate and they have it locked for 5 years.  In year 6 that Colorado Home Mortgage will be set to adjust.  The adjustment can only go up 1%, therefore making the highest rate available for that year set at 4.875%.  That rate is still better then the 30 year rate currently being offered.  Year number 7 the rate could go to 5.875%, assuming worst case scenario. Again that rate is right in line with what is being offered on 30 year fixed rates.  

Much of the publicity circling around adjustable rate mortgages comes from media outlets.  These media outlets will only report the most negative aspects of the business.  A tornado hits a small town what do you see, 3 trailers hanging from a tree.  You know what I am talking about and the point I am trying to make is that you need to understand what type of Colorado Home Mortgage you are getting yourself into.  There are benefits from an Adjustable Rate Mortgage when it is done right.  Those clients that have been in their house for 5 years at 3.875% will attest to the benefits that they had.  There are so many right reasons to do an Adjustable Rate Mortgage, however the biggest wrong reason is for qualification purposes.  Many of the subprime lenders now out of business qualified these Colorado Home Mortgage programs with the lower teaser rates in order to get people approved.  What they did not do is analyze the impacts created by the adjustment for these buyers.  These borrowers were put in a position where they could no longer afford their payments at the higher interest rate levels.  This has caused many Americans to fall into Foreclosure status.

So now that we have talked about what the Adjustable Rate Mortgage is, we will focus on what you should do.

Option 1:  Refinance Your Home

Utilizing a premier Colorado Home Mortgage broker, you can get access to all programs that are available to you, not just the programs offered by that bank.  The most popular refinance for those borrowers that took out a subprime loan is a FHA Colorado Home Mortgage.  The FHA option allows for a little more risk then the conventional A-Paper loan option.  The Higher risk also allows for a higher loan to value ratio.  This is big as most Colorado Home Mortgage programs face home value issues.  You do not need much appreciation on your home to qualify.  In fact you only need 3% if you have not refinanced before, and 5% if you have.  If the rate creates payment obstacles for you and new 5 year adjustable rate mortgage might be the solution.  FHA Colorado Home Mortgage ARM products are far less volatile then subprime ARM products.  The reason that I recommend the 5 year option as a qualifying option is that it will allow you an additional 5 years to get your current situation back on track.  This is the most feasible option available for people who are not happy with the adjustment that is about to take place on their Colorado Home Mortgage program.

Option 2:  Let your Rate adjust and continue paying.

I stated above that some adjustments are not bad.  Colorado Home Mortgage programs that only adjust once a year at a rate of 1% a year may still offer a lower rate then what the market currently offers.  In these circumstances it is best to wait and refinance only when the market hits a low point.  Colorado Home Mortgage programs should be designed to meet both your current and future needs.  Refinancing should only take place when it makes sense for your long term objectives.  Many people looking to refinance their current Colorado Home Mortgage Program do so because it saves them $200 a month today.  Then they sell their home a year later.  The cost of the refinance will set you back much more then the savings you get over the next year.  Your net proceeds from the sell of that house will be far lower then the savings your received from the refinance.  So refinancing your Colorado Home Mortgage should only take place when it makes sense to do so.  Talking to your Colorado Home Mortgage broker and asking for amortization schedules will help you make that decision.

Option 3:  Sell your Home

Not the most popular option, but if you find yourself in a situation where you can no longer afford your payments selling your home will be the best option.  Hopefully you have some equity to make the sell of the home complete.  However if you are upside down on your home like many of us are, you can also go into a short sale situation.  You should contact a professional Real Estate agent to answer your short sale questions.  Colorado Home Mortgage loans have been adjusting for many people in a way that makes it impossible for them to continue making payments.  Circumstance arise that may have contributed to these obstacles, but putting your home up for sale and eliminating the threat of continued Colorado Home Mortgage rate hikes may help you save money over the long term.  

I hope that you found the information helpful, if you are looking for current Colorado Home Mortgage market updates you can check out my market blog at www.coloradomortgagebanking.com/news

I am here to help you and I would be pleased to earn your business.  If you are someone you know needs my assistance please don’t hesitate to call me directly.  My goal is to be your Colorado Home Mortgage provider for life.

Daniel   

Colorado Home Mortgage Loan rates will be impacted by a variety of Economic reports due out this week.  We saw some nice improvements last week and we are hoping that the momentum will continue to drive Colorado Home Mortgage Loan rates down.  We are hitting some resistance in the MBS market and you can learn more about that at www.coloradomortgagebanking.com/news.  We will focus this site on the news that will impact your Colorado Home Mortgage Loan rates today.  We only had one report today, which was the Chicago Purchasing Managers Index.   The Chicago PMI is measured by new orders, production, supplier deliveries, inventories and employment; asking for positive, negative or unchanged readings of each. A reading above 50% generally indicates that the manufacturing sector is expanding, and below 50% signifies contraction.  The Chicago PMI report came in at 49.6 which still indicates contraction in production however it does appear that we may be hitting the turning point soon.  We can only contract so far before expansion becomes inevitable.  Colorado Home Mortgage Loan rates did not move much from the news as it basically came in close to expectations.  With no surprises in the report investors looked to the headlines to make their buying decisions.  The stock market did increase a bit and because of those gains MBS did take a bit of a hit.  Colorado Home Mortgage Loan rates did jump up about .125% by close of business. 

                                                                                       

I do not think that the increase seen today will continue unless something unexpected happens in the next day or so.  Most of the Economic reports being released this week will have minor impacts on Colorado Home Mortgage Loan rates, and will not be enough to break any new barriers.  Most of the decreases felt in Colorado Home Mortgage Loan rates over the last couple of weeks have found its way into the Rate Sheets today, and LOCKING would be a good idea.  Those that think inflationary pressures will not creep into the news might find this week’s economic data favorable to Colorado Home Mortgage Loan rates.  We have a variety of reports due out that will create some movement.  The two reports to watch out for this week are tomorrows ISM index and Thursday Nonfarm Payroll.  These are the only two reports that could break some of the barriers we are seeing in the MBS market.

 

The ISM Manufacturing Index is a national survey of purchasing managers which covers such indicators as orders, production, employment, inventories, delivery times, prices, export orders, and import orders. The ISM provides a composite index of national manufacturing conditions.  Manufacturing is an important sector of the economy and the ISM index is one of the two primary national measures (the Chicago PMI is the other). Like the Chicago PMI anything reported below 50 indicates a contraction in the market.  If the Chicago PMI is a preview of what is to come in the ISM Manufacturing Index, we will see this report indicating some contraction in the market.  Colorado Home Mortgage Loan rates should decrease a bit if the report indicates contraction.  How much Colorado Home Mortgage Loan rates will improve depends greatly on what the report says.  I don’t expect any surprises in this report and because of that, do not expect any real movement to play out in the Colorado Home Mortgage Loan rate market.

 

Non-Farm Payrolls is estimated based on a survey of larger businesses measuring the number of paid employees working part-time or full-time in businesses or for the government.  This report typically has a big impact on Colorado Home Mortgage Loan rates, because on the inflationary implications that come from the report. The Non-Farm Payroll data is the top number of the Employment Report, one of the most highly anticipated pieces of economic data. The headline figure is often a major market mover with the labor market a strong predictor of the strength of the economy. The Unemployment Rate is obtained from a different data sample, and together the two reports provide the most comprehensive picture of the labor market.  This could be the information we need to break through the price Ceiling currently being felt in the market.  This also assumes that we do not see any additional movement in Colorado Home Mortgage Loan rates until then.  Inflation is a hot topic and if the reading comes in worse then expected, much of the inflationary fears revolving around this report will dissipate (for the time being).  Colorado Home Mortgage Loan rates will see some nice improvements and we might at that time get below the 6.0% range.  We need to weigh out the risk/reward in any decision to float or Lock.  We have hit a low point for the last couple of weeks and we will need the economic data to indicate something that is contradictory to what experts are say.  Which is that inflation is under control.  Only if this happens will rates improve to a point where floating makes sense.  Its like betting on the right horse, about a 1 in 10 shot, because of this if you are not risk adverse, then LOCKING would be a good idea.

 

Please call me with your Colorado Home Mortgage Loan rate questions.  I would enjoy earning your business.

Daniel

Colorado Home Mortgage Refinance Loan rates saw very little movement today.  The only major economic report to be released today was the Consumer Confidence numbers.  It appears that Consumer Confidence is at an all time low and Colorado Home Mortgage Refinance Loan rates did see some action because of this.  Colorado Home Mortgage Refinance Loan rates dropped a bit but not enough to make any type of rate change in the lender rate sheets.  Most of what will impact the market will be released tomorrow and Colorado Home Mortgage Refinance Loan rates will certainly see some action because of this.  Listed below I have a simple break down of the reports released today and what we can expect tomorrow:

Consumer Confidence fell to a record low 50.0, which was a lot worse then the 56.0 expectation set in the market last week.  Colorado Home Mortgage Refinance Loan rates will see some improvements based on this information alone.  Consumer Confidence has a direct correlation to consumer spending, which accounts for two thirds of the economy. Consumer Confidence also has some correlation with joblessness, inflation, and real income. Typically only changes of five points or more are considered significant.  We had an 8.2 point drop from when the report was last issued and a 6 point drop from what was expected.  This should have had some strong impacts in the Colorado Home Mortgage Refinance Loan Markets, but so far it appears the FOMC is taking center stage.  There are other pressures that change consumer spending other than consumer confidence, inflation, joblessness, and regional business issues. Consumer Confidence is used to predict the direction of Consumer Spending but because of other influences, higher Confidence won’t always lead to higher Spending.  Higher Spending numbers could be in direct relation to higher inflation.  This would be bad for Colorado Home Mortgage Refinance Loan rates.  However this months report should have improved Colorado Home Mortgage Refinance Loan rates for now.

Two Other Reports released today Richmond Fed Survey and Case-Shiller Price index numbers play separate roles in the Colorado Home Mortgage Refinance Loan Markets, but not enough to be considered a mover and a shaker.  Richmond Fed Survey works similar to the Empire State report and reports on manufacturing areas.  The report indicated a reduction in manufacturing demand which is a sign that our economy appears to be retracting.  The Price Shiller Price Index which monitors price changes in 10 different cities seemed to indicate that pricing is down which should be good news for Colorado Home Mortgage Refinance Loan rates.  I only briefly talk about these because it does not impact the Colorado Home Mortgage Refinance Loan markets enough to make rates move.  However they were released today and the numbers seem to favor Colorado Home Mortgage Refinance Loan rates so I wanted to mention them.

FOMC Meeting will conclude tomorrow and reports will begin to leak in about what was discussed in the meeting.  The first thing that will be determined is the FOMC action.  Action normally relates to what the FOMC has decided to do to short term interest rates.  If no action is taken on Short-Term Interest rates, the FOMC will signal that Economic Stimulus continues to be its main course of action.  This will be good for Colorado Home Mortgage Refinance Loan rates.  If Short Term interest rates are increased then the FOMC will be combating inflation which is very negative for Colorado Home Mortgage Refinance Loan rates.  I believe that the FOMC will leave rates alone and that Colorado Home Mortgage Refinance Loan rates will react positively.  We just need to stay tuned to see if the board was split or not on this decision and we will need to watch for any major inflationary discussions.

Durable Goods will be a strong mover and shaker for Colorado Home Mortgage Refinance Loan rates.  Durable Goods Orders reports the number of new orders placed with domestic manufacturers for immediate and future delivery. Durable goods are items considered to be useful for at least three years (such as vehicles, large appliances and computers.) This is important to Colorado Home Mortgage Refinance Loan rates because it provides insight into demand as well as business investment. Companies willing to spend more on equipment and other capital are possibly experiencing sustainable growth and could be planning on greater production capacity.  Consensus for this report is that we will have a positive output in growth with manufacturing orders, however our last three reports have all been negative.  A negative number will create uncertainty in the equities market and demand for bonds will increase.  As a result we will have Colorado Home Mortgage Refinance Loan rates improve for the week.  I believe the numbers will show a negative output.   I hope this helps and please contact me with your Colorado Home Mortgage Refinance Loan questions.  If the market heads in the direction I am hoping it will we should see some improvements to Colorado Home Mortgage Refinance Loan rates.  We will have to wait and see what the numbers say tomorrow.  If you have time check out my other site please do so at: www.coloradomortgagebanking.com/news

Colorado Home Mortgage Rates appear to be on their way down today based on what the Mortgage Backed Securities market did today.  We had a variety of economic reports released which finally moved Colorado Home Mortgage Rates down for the 1^st time in about 10 days.  Inflation continues to be the primary concern for investors and was certainly a major concern expressed by the Federal Reserve in the last week or so.  We now have all the inflationary data in for the month of May, and it appears that the Federal Reserve may have over stated the inflation problem, at least for the moment.  Colorado Home Mortgage Rates began to improve a bit after Producer Price Index figures came in line with expectations.  The Federal Reserve has expressed its concern for higher inflationary pressures, but the data so far indicates that inflation is in line with expectation no major surprises.  Colorado Home Mortgage Rates have been climbing based on the expectation that Inflation reports would come in considerably higher then the current consensus put in place.  So far it appears the investors are getting closer to what true inflation is as apposed to the Federal Reserves current expectations. 

 

The Federal Reserve will need to watch that it does not express too much hype in relation to the information they release, otherwise they may loose some credibility in the market.  Obviously when the Federal Reserve speaks the market listens, but this over communication policy may create market gaps for the Federal Reserve, versus desired market movement.  Allen Greenspan had a history of keeping information close by and releasing the information at times of relevancy.  Colorado Home Mortgage markets reacted very quickly when the information came out, because the information was relevant to what they intended to do.  The Federal Reserve expressed concern over the last week or so, indicating that they would take steps to combat inflation.  They went as far as insinuating that a short term interest rate hike would be needed to slow down inflationary pressures.  This type of communication in the market would have definitely lead to an interest rate hike in the next Federal Reserve meeting, however Bernanke’s approach appears for the moment, to cry wolf with no actual action.  Will this benefit his creditability in the future?  Probably not.  Colorado Home Mortgage rates have always drawn its movements from market action, and anyone trading in MBS knows that reacting first can make the difference in their portfolios bottom line.  The Federal Reserve is a tool for investors and they count on that to be accurate and predictable.  I know that we have been used to one way for a long time, and who knows, maybe Bernanke’s new approach will pay off.  So far it appears that investors are left confused and frustrated by the lack there of, in the predictability of the Federal Reserves current action plan. 

 

Colorado Home Mortgage rates reacted to four economic reports: PPI, Core PPI, Housing Starts, and Industrial Production.  Listed below are the actual data report figures and their impacts on the Colorado Home Mortgage Rate market.

 

Producer Price Index reports on inflationary pressures between business to business and typically involves overseas transactions.  These inflationary numbers will outline global inflationary pressures and pressures brought into our domestic consumer numbers.  The index showed a 1.4% increase which was a little higher then the 1.0% expert consensus which investors had hoped for.  Normally that would have created some issues for Colorado Home Mortgage Rates, however after all the fears tied around inflation, it was not the surprise everyone was preparing for.  Core Producer Price Index which takes out the highly volatile Food and Energy components actually only increased by .2% which was exactly what investors were hoping for.  This information sent a vary strong sign that inflation is still a bit higher then what investors would like to see, but not the catastrophic issue the headlines played them out to be.  Overall the news was positive for Colorado Home Mortgage Rates.

 

Housing Starts came in just below 1 million its lowest level since 1999.  This may be a result of the Home Builders Associations current sentiment readings released yesterday, which indicated major concern by builders on the state of the housing market.  Fear of inventory drives down inventory supplies and as a result lowers the number of home permits being issued.  Colorado Home Mortgage rates will also react positive to this as investors look for safer investment opportunities during tough economic times.  The consensus was that housing starts would be around 980K and the actual Housing Starts came in at 975K.  Not a big difference, but keep in mind housing permit activity is always higher in the summer months which make the drop even more significant.  This will be monitored by the Colorado Home Mortgage rate market, but should not make a big difference on what Colorado Home Mortgage rates will do.

 

Finally, Industrial Production numbers were released.  The consensus on the Industrial Production numbers was for a 0.1% advancement in production, but the actual data indicated a -0.2% drop.  This was significant and helped move Colorado Home Mortgage Rates back down.  Industrial Production numbers currently measures the change in the production of the nation’s industrial industries as well as a measure of their industrial capacity.  The level of industrial production divided by the level of industrial capacity gives the capacity utilization rate. The manufacturing sector accounts for one quarter of the economy and is weighted heavily in predicting economic growth.  Stronger economic growth typically leads to higher inflation which is bad for Colorado Home Mortgage rates.  What is hard to compare on a report like this is how much of a production increase is good.  With economic numbers coming in at zero or below it seems that anything tied to economic growth leads investors to fear inflation.  This trend seems to be more prevalent today then ever before.  Economic growth is a part of our economic evolution and some growth is needed however it appears that any growth causes Colorado Home Mortgage rates to increase out of fear. 

 

We have a long way to go before investors begin to react in a predictable manner, but in the mean time please call me with your Colorado Home Mortgage questions.

Daniel

We saw another .25% hit on Colorado Home Mortgage Refinance Loan rates sparked by another day of inflation talk by the Federal Reserve.  Inflation seems to be a very hot topic and will create issues for Colorado Home Mortgage Refinance Loan rates until something else makes the headlines.  For two days now members of the Federal Reserve have been commenting on the state of the economy and have expressed very clearly that inflation remains their top priority.  Fisher the southern states representative on the Federal Reserve Board is known for his tough stance on inflation, but yesterday Bernanke continued the trend by reaffirming his position on inflation.  The mortgage backed securities market went on a selling spree and have not stopped in the last 48 hours.  We have seen some of the sharpest increases in Colorado Home Mortgage Refinance loan rates for the year.  Most lenders are offering Colorado Home Mortgage Refinance loan rates in the 6.5% range and if you have not locked in yet you may want to talk to your lender to see if the rates quoted 10 days ago will still be honored.  It is hard to make a FLOAT or LOCK recommendation on your Colorado Home Mortgage Refinance Loan rates today especially when the market is acting so irrational.

Global fears should be a real concern in the market today and should be monitored especially if it’s impacting your Colorado Home Mortgage Refinance Loan rates.  We should remember that much of the impacts are based on speculation about inflation not facts.  Not that I don’t think it is warranted, but none of the hard data being reported on inflation appears to be out of line.  Investors should come back to terms with their fears once we have more economic data to report on.  Colorado Home Mortgage Refinance Loan rates may improve as investors jump back in the market to buy at a bargain.  Obviously if this happens we may see some slight improvements in Colorado Home Mortgage Refinance Loan rates. 

The only Economic report coming out today was the trade balance which came in right in line with expectations.  The report had very little impact on what the market did.  Increases seen today with Colorado Home Mortgage Refinance Loan rates came from the continued upward spiral created by comments made earlier this week by the Federal Reserve.  We are probably not going to see much relief in Colorado Home Mortgage Refinance Loan rates until Friday the 13^th, which will be when or next Core inflationary report comes out.  Consumer Price index is expected to be released on that day which will give investor a much needed piece of the puzzle to determine whether Colorado Home Mortgage Refinance Loan rates will go up or start coming back down.

Right now we believe Colorado Home Mortgage Refinance Loan rates are set too high, but heck if you told me gas would be $4 a gallon 6 months ago I would have thought it to be highly unlikely as well.  Investors are driven on emotion and every investor appears to be fearful that the next person knows more then they do.  Investors being the lemmings they are will reaction to what everyone else is doing. The tendency in the market is to sell when everyone else is selling, and buy when everyone else is buying.  Colorado Home Mortgage Refinance Loan rates will react up or down Depending on what action investors are taking in the market.  Right now everyone is in a sell mode which has created an upward movement for Colorado Home Mortgage Refinance Loan rates.  How far it will go and when it will slow down is hard to say.  What can be said is that if the next couple economic reports come in as expected, then Colorado Home Mortgage Refinance Loan rates will settle down.  If the CPI report comes in like last month which was better then expected, we will see some rapid improvements in Colorado Home Mortgage Refinance Loan rates.  LOCKING now will have you locking at this year’s highest interest rate lock.  I believe that the trend will continue over the next week or so but not to the extent felt over the last two days.  We may see some of the conservative price approaches used by investors today lighten up.  This would relieve some of the upward trends being realized in the Colorado Home Mortgage Refinance Loan markets today.  Friday the 13^th can be a day of horrors or a day of reckoning.  My only fear is the superstitious tendency for that day, which is normally bad news, but everything else tells me things will improve and I will remain with my FLOAT recommendation.  If 6.0% is on the table taking it would be your best bet, but right now I don’t believe it is an option on your Colorado Home Mortgage Refinance Loan rate.  We do have other options to look at.  Does 5.375% appeal to anyone?  You should ask me about that one it may be the Colorado Home Mortgage Refinance Loan program you are looking for.

Daniel

 

Colorado Foreclosures are at an all time high.  These Colorado Foreclosures have followed the same statistics found in many other markets throughout the U.S.  So in short we are not experiencing anything that is not in line with national averages.  However, we are experiencing some of the worst Colorado Foreclosures ever recorded in Colorado History.  There are many reasons for the Colorado Foreclosures.  I will try to break some of these reasons down for you today.  The first and most obvious reason for Colorado Foreclosures is that Home owners are not making their payments due to economic hardships.  Loss of employment for one or both members of a house hold will play havoc on their ability to make payments.  This is really self explanatory and based on the state of the economy we are seeing many households faced with this issue.  Colorado Foreclosures have always had these factors contributing to its statistics, but there are even bigger issues going on.  Colorado Foreclosures are experiencing new phenomenon’s in the industry with the adjustments of the once popular Adjustable Rate Mortgages or ARM’s. 

 

There are many types of ARM products available and not all ARM products are bad.  The issues that Colorado Foreclosures are facing are the Subprime ARMS commonly know in the business as 2/28 or 3/37.  These programs were designed to force homeowners to refinance after 2 or 3 years.  We called these band aid loans because when the adjustment period starts it will actually adjust 2% every 6 months until it hits the market cap rate around 12.5%.  You can see why Colorado Foreclosures were impacted so quickly.  Home owners that got into a 5.5% 2/28 program actually jumped up to 7.5% and 9.5% before the 3rd year ended.  Colorado Foreclosures spiked because homeowners had to make payments that got out of control.  As I stated before these programs were designed to get out of after the 2 or 3 year period but something held them back.  What held them back was the fact that homes were not appreciating to a point where refinancing was possible.  FHA home loans require a minimum of 5% equity in the home and were designed to be the loan these clients got into after the adjustment period began.  Colorado Foreclosures and bad economic conditions forced many homes on the market and with the supply so high Home prices tanked.

 

Colorado Foreclosures began to see more and more homes entering into Colorado Foreclosures status.  Homes were not maintaining the value needed to qualify for a new loan and interest rates were adjusting out of control.  Home owners were faced with a decision; continue making a payment they can’t afford or stop making payments all together.  If they choose to stop making payments the home owner was able to save the money needed to get into a rental property shortly before the official Colorado Foreclosures took place.  It is clear why so many people are electing to go into Colorado Foreclosures when the only repercussion was that they had to move.  I can’t blame just the homeowner in this situation.  Mortgage Brokers failed and Lenders failed by allowing such loose standards in underwriting the homes.  Ultimately these brokers and lenders were the primary contributors to the number of Colorado Foreclosures being put on the market today.  A lot of money was made by everyone involved.  These individuals choose income over doing what was right for the industry and the consumer. 

 

Realtors were simply pricing homes for what the market would allow so they probably could have seen what was happening, but ultimately are the least likely to blame for Colorado Foreclosures running as high as they are.  Brokers and Lenders top my list of who to blame for Colorado Foreclosures being where they are.  Lenders for allowing bad credit individuals to qualify with debt ratios so high that any increase of payment would send the consumer out of con