The American economy is sputtering, and with oil prices unstable and foreign powers like China and India gaining momentum, our country faces an uphill climb. Debt elimination should be on everyone's mind. With a little debt consolidation and a whole lot of discipline, you can make it happen.
Our government has proven itself incapable of effective debt management. Over the years, it has steadily borrowed more money to pay for our public programs. Unfortunately, this is money it simply doesn't have.
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Regardless of your political stance, using the same approach with your personal finances would never work. If you're currently in debt, you already know the adverse effects of borrowing more money than you make. It may be time to apply debt elimination tactics to your own situation.
Beginning a personal debt management program should start with getting a grip on your finances. If you spend carelessly, and don't keep close tabs on your bills, it's time for a spending freeze. Put a moratorium on all expenditures besides the basics, such as groceries, fuel, utilities, etc. Next, track your spending for the last six months to a year. You'll probably discover that you're spending far more than you make.
If you've been spending with reckless abandon, chances are that you're putting most of the expenditures on your credit card. Have you taken a close look at your plastic, and the interest rate that each of them charges? Most people who have poor debt management are too busy spending to carefully consider how high the interest rate is on their balance, and how much money they'll need to spend just to break even. If you're carrying credit cards with high interest rates, you may want to consider paying off one or all of them. Any card that charges more than 10 percent spells trouble for you in the long run.
Finding the discipline to pay off those high-interest credit cards may be difficult. If you have some extremely high balances, it may also take too much time, and cost too much money, to make serious inroads on your balance. A faster, more effective way to pursue debt elimination is to seek out a debt consolidation mortgage. Assuming that you have good credit, the interest rates on most mortgages are in the single digit range. The interest is also tax deductible, effectively lowering the overall net rate.
While the big shots in Washington figure out how to cope with our sputtering economy, take smart steps to cope with your own sputtering economy. Budget wisely, eliminate credit cards with double-digit interest rates, and pursue a debt consolidation loan. These steps can help you eliminate overspending. We can only hope that our elected leaders can figure out how to do the same for our country.
Call Envoy Mortgage for all your consolidation loan information and help. (314) 993-6690 Call us now!!
Set Your Mortgage Rate Alarm Clock For 3 Hours and 35 Minutes
November 2008 was another record-breaking month for Mortgage Rate Volatility.
While market players drove themselves crazy, rapidly alternating between economic optimism, pessimism and cynicism, Americans looking for new home loans were forced to ride shotgun.
Related to Wall Street's uncertainty, mortgage rates changed 2.40 times per day, on average, over the last 2 months. That's 12 rate changes changes per week.
Now, as a loan officer, I know that of the Top 5 Things You Never Say To A Client, "YOU HAVE TO ACT NOW" is the #1 answer on the board. Advice like that reeks of desperation -- the world's worst cologne. Unfortunately, it happens to be the truth sometimes.
In November, mortgage rates expired after an average of 3 hours, 35 minutes.
This pace of change is why you can't "sleep" on mortgage rates anymore. It's act now, or perhaps maybe never. Looking back at the last two months, on more than half the days, lenders issued 3 rate sheets or more. That's an alarming statistic.
Mortgage shopping wasn't always complicated, but it is now.
In addition to a volatile rate environment, external factors are muddying up the mortgage waters, too:
There's a lot of moving pieces, in other words, and they're all moving in the wrong direction.
In markets like this, the best mortgage advice you can get is to befriend a "good lender". Good mortgage lenders are "good mortgage lenders" for a reason. They're fair with clients and they provide extra service and support that you won't get from a call center. And, most times, they're cheaper, too.
You can rate shop every 3 hours, 35 minutes, or you can save yourself the trouble and work with a reputable lender who's fair and knowledgeable. And, yes -- I'm in that group. If you ever want a speedy rate quote, call or email me.
9 Ways That "Waiting For Mortgage Rates To Fall" Can Come Back To Haunt You
In late-November, as mortgage rates fell into the fives, homeowners helped to start a mini-Refi Boom. This week, however, self-doubt crept in.
Rest easy, friends. You're not missing out.
See, it's well-known that 0-point mortgage rates touched 4.500 percent Wednesday. But it's a little less well-known that those 4-and-a-half percent rates lasted less than 60 minutes. And when the rates were gone, they were gone.
The press isn't doing a follow-up on it, but that same 0-point loan is now priced at six percent, instead. Owie.
Nevertheless, the Plunge-and-Surge has Refi Boom Homeowners wondering whether it would be good idea to cancel their refinance-in-process and wait for rates to fall back into the 4s.
Speaking frankly, this is a terrible idea. And I have 9 really good reasons why.
1. You could unexpectedly lose your job. Nearly 2,000,000 people have been fired in the last 12 months and each week, more layoffs are announced. No job, no mortgage approval.
2. Mortgage lenders could reduce loan-to-value limitations. Suddenly, having a 20 equity stake may not be enough. You may need 25 percent or more. Homeowners with jumbo and investment mortgages are especially susceptible here.
3. Your home could be damaged in a winter storm. In Chicago, large snowfalls can ruin a roof. The same can happen in Seattle. Or Nevada. Then, as soon as a state Governor requests federal aid, mortgage lenders put start to put closings on hold pending home re-inspection. Damaged homes don't get their new mortgages.
4. Mortgage insurance rates could rise. Private mortgage insurers have lost billions this year and have twice raised premiums to even up the balance sheets. Default rates show few signs of abatement so it's likely that PMI rates will rise again in 2009.
5. You could fall ill or get injured. Even for insured Americans, medical issues are the second-most common trigger-event for home foreclosures next to income curtailment. If illness should keep you from working, or leads to long-term disability, your likelihood of getting a home loan is dramatically reduced. Nobody ever expects to get sick.
6. Banks could tighten lending guidelines. Well, we already know this is happening. With each passing week, it gets tougher to borrow mortgage money for one reason or another.
7. A nearby foreclosure could lower your home's value. Mortgage rates are highly sensitive to a home's value versus the amount of money borrowed against it. Foreclosures (and other "fire sales") bring down the Fair Market Value of every home nearby. This leads to higher loan-to-value ratios and, therefore, higher mortgage rates.
8. Your credit score could fall unexpectedly. Credit scores are meant predict the likelihood of mortgage default and the model appears to have failed these past few years. Anecdotally, there's evidence that the credit bureaus are correcting that. Carrying high balances or opening new tradelines appears to be more damaging to credit scores than it used to be. Lower credit scores means higher mortgage rates.
9. Mortgage rates could rise, not fall. Look, nobody knows what rates will do tomorrow. Anyone who says they do is lying. The only thing predictable about mortgage rates is that they're unpredictable. Take what you can, when you can. You can always refinance again later.
And, if you want to throw a 10th reason in there for good measure, use this: It's bad karma to cancel a loan. The Mortgage Gods never forget and -- someday -- it'll come back to bite you in the arse.
Lacker has a rather positive outlook for 2009, which is actually shared by other economists. If Lacker is right about his forecast for the economy in 2009, it will be cause to celebrate.Fed banker Jeffrey Lacker gave a speech to the Tech Council in November, in which he expressed guarded optimism for the domestic economy. He thinks that it's reasonable to expect the economy to regain traction in 2009."It's essential that we not let inflation drift from view," Lacker said, according to published media reports. "It may seem premature to be worrying about how inflation behaves after the recession is over, but we need to be sure our policy remains consistent with a strategy that does not allow inflation to ratchet up over the business cycle."
Lacker happens to be one of the Federal Reserve's most outspoken members when it comes to fighting inflation, and he'll be one of the influential members of the Fed board that votes on interest rate policy in 2009. While some expect to see the Fed cut rates even more, they acknowledge that the central bank has very little room left to lower interest rates, because they're already closing in on rock bottom. The Fed often slashes rates to fight recession. But lowering rates can undercut the value of the dollar and make money so plentiful that it triggers inflation. Right now, most economists are more worried about deflation, and officials, including Lacker, have an immense burden of responsibility. If they make the right moves, they could save us from further economic deterioration in 2009, and possibly help the economy get back to a healthy condition. But if they make even one mistake, it could have immediate and profound negative implications for the future economic forecast.
The Fed has cut rates by an enormous 4.25 percentage points since September of last year. It's expected to cut them again by as much as half a point when the central bank voters convene in mid-December. If they do cut rates by that much, Fed rates will only be half a point away from zero. At that point, cutting rates will no longer be an option. Without the ability to cut rates, the Fed loses one of the most powerful-perhaps the most powerful-tool in its toolbox for fixing the economy.
Lacker offers hope, though. He argues that so far, monetary policy has done plenty to stimulate the economy, and those measures may reap good results that could help turn the economy around and begin a rebound in 2009. During his November speech, he said that the major fallout from the economic crisis has subsided already or is in the process of doing so. Americans can only hope that his forecast is right on the money.
Explaining What Happened At The Fed (December 16, 2008)
The Federal Open Market Committee voted to lower the Fed Funds Rate by at least three-quarters percent today. The benchmark rate now rests in a range of 0.000-0.250 percent, the lowest Fed Funds Rate recorded levels in history.
And while the rate cut matters to Americans, it was more just a show of force.
The bigger news is that the Federal Reserve plans to "employ all available tools" to prevent the current recession from turning into a depression.
One such tool is to buy billions of dollars of mortgage-backed bonds. In November, when the Fed did this the last time, it started the Refi Boom we're in. No surprise, therefore, that mortgage markets rallied late in the day, leading conforming mortgage rates lower. I chronicled said rally in real-time.
Jumbo, super-jumbo and FHA mortgage rates did not get similar treatment.
Also worth noting: In their statement, the FOMC's voting members fingered inflation as a diminishing economic threat. In the short-term, this is probably true. In the long-term, however, it's unclear.
What we learned today is that the Fed's "available tools" really does include the Kitchen Sink. A breadth of options like that should serve the economy well throughout the early part of 2009. However, we can't forget that today's support for the housing market was 17 months in the making and the Fed may be trying to unwind it in 2.
Reviewing the massive stimulus since October, there's now a strong possibility that once the economy starts to recover, it will recover right into runaway inflation. Call me a hawk, but that's what's ahead for the U.S. and inflation is awful for mortgage rates.
You know the drill, folks. Mortgage rates are good so get to locking. It's going to last a little bit, but not forever.
Ben Bernanke pulled out all the stops and lowered the federal funds rate to the lowest rate in history signifying a target range of zero to .25 percent. The New York stock exchange reacted favorably to the annoucement.
The Federal Funds Rate is the rate banks use when lending to each other. Bernanke kept the analysts off guard by this cut since they were expecting a less bold move setting the fed funds rate at .5 percent.
The language in the Fed statement is as follows,
“The committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time…. “The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability.”
“The committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time….
“The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability.”
All of this verbiage is clearly indicating Bernanke is as clueless as to how to stimulate the economy as Hank Paulson, the Treasury Secretary. The knee-jerk reaction is to flood the system with cash and hope that lending and borrowing will occur.The efficacy of this assumption is yet to be seen. However, if we look back at the Japanese meltdown of the late 1980’s and 1990’s, it didn’t work for them.
This particular rate cut will reflect in the short term interest rates used in credit cards and auto loans, but the mortgage rates will not be affected as other market forces move long-term lending.
Have you ever tried to make sense out of the binomial theorem? Or the equation for cell voltage? You might have that same feeling of confusion when you pull your free annual credit report. Thankfully, a short lesson in the intricacies of the credit report can teach you everything you need to know.
By law, Equifax, Experian and TransUnion must provide you with one free copy of your credit report annually. You can obtain your free reports by calling or writing each agency individually, or you can access all three reports online at www.AnnualCreditReport.com. It's the only website that's officially authorized to provide this information.
Here's where things might get tricky. Each report contains four main types of data that you'll want to review: personal information, account information, public records, and inquiries.
If you see any mistakes or omissions, check the report itself for instructions on how to dispute those inaccuracies.
Reading your credit reports can be tedious. But unless you're a math genius, you'll find that it's far easier than calculating the voltage of electrochemical cells.
Obama has an economic plan, but he hasn't yet offered an aggressive action plan to save the housing market. So far, his campaign promises have been piecemeal proposals, such as:
Those promises prior to the election were enough to win the majority vote, but they won't be sufficient to force a housing market recovery. At this point, the crisis has taken on a life of its own; foreclosures are pushing real estate values down, leaving homeowners and lenders over-extended with debt. Since lenders, too, are over-extended, they're reluctant to lend more, which further inhibits recovery by limiting home sales. To stop the cycle, the Obama administration will have to implement comprehensive measures to halt foreclosures and facilitate an increase in home sales. Some options in this vein include:
Obama and his advisors hopefully have something definitive up their sleeves with respect to housing that will be more powerful than sending out a bat signal or dispatching Colonel Wilcox to find the Super Friends.
Homes are getting cheaper, but that doesn't mean they're more affordable. Consider the cost of a single-family home in Southern California's Anaheim-Santa Ana metro area: a year ago, it cost about $714,200. Today, the metro's median home price is $517,300. This 28 percent decline would be great from an affordability standpoint, if only mortgage lenders hadn't changed their loan underwriting policies. The problem relates to changes in down payment requirements. A 2008 National Association of Realtors (NAR) study reports that median down payments by first-time home buyers increased to 4 percent of the purchase price, versus 2 percent in the prior year. While 4 percent doesn't seem bad, NAR chief economist Lawrence Yun has pointed out that this number is already outdated. "The study covers transactions through the middle of 2008," he says, "so we can assume the down payment numbers have shifted recently because credit tightened, and no-down payment loans all but disappeared around the close of the survey." If the no-down payment mortgage has disappeared, that leaves homebuyers scrambling to come up with a 20 percent cash down payment. Continuing with the example above, 20 percent of $517,300 equates to $103,460.
Even if you did have $100,000 sitting in the bank, you might be reluctant to tap every last dime of your savings-particularly at a time when unemployment is on the rise. But it's more likely that you don't have anything close to that kind of money sitting around. Not many first-time buyers do. Here's where your parents can help. Your lender will allow you to use gifted funds from a family member as your down payment. Parents are usually the most suitable donors because they're more likely to have the savings to spare. You'll have to document that it's truly a gift and not a loan. This is generally done with a gift letter that's signed by both you and your parents. Your folks may also have to provide the lender a bank statement to prove that the money is really there. And finally, your parents will have to file a gift tax return if the amount given exceeds the annual gift tax exclusion, which $12,000 in 2008. They won't have to pay gift taxes unless they exceed the lifetime exclusion ($1 million in 2008), but they still have to file the return. Accepting the generosity of your parents is particularly attractive right now, because it enables you to take advantage of today's low home prices and relatively low interest rates. So this holiday season, ask for the ultimate holiday gift: a new home!
Please Call Assist-2-Sell for any Real Estate information or questions you may have at (314) 993-6023!!
A cardinal sin of the first time homebuyer is to fall in love with a home that's too expensive. It's easy to walk into a home that's outside your price range, set your heart on buying it, and then do whatever you can to make it happen.Even in this subprime mortgage crisis, some banks may still be willing to lend you more than you can afford, especially if you have good credit. To avoid this pitfall, get yourself pre-qualified before you go house shopping. Create a budget to determine exactly how much you can comfortably afford. Don't overextend yourself, since there's more to home costs than just a mortgage.
When you find a home that you like, carefully consider all the potential expenditures-not just the mortgage. Take a look at the utility bills that the previous owner paid for the property. Ask your insurance agent how much it will cost to insure the dwelling. If there's a huge lawn and many gardens, think about all the potential landscaping costs you'll have. If there's a long driveway, consider the cost of snowplowing in the winter.Plan future changes that you might want to make to the home, as well. If you want to add on a screen porch or a downstairs addition, it may be more cost effective to purchase a home that already has those amenities.
Many first time homebuyers purchase a fixer-upper, with grandiose plans of performing an enormous makeover. That's fine, but make sure that you have the money and time to embark on such an undertaking. Most home improvement projects wind up costing twice what you initially budget for. Plus, if you're not experienced at this type of work, it will suck up hours of your time. You may want to consider splitting up the tasks. Perform some of the manual labor yourself, then hire a professional for skilled jobs like plumbing, wiring, or floor refinishing. It'll be well worth the investment.You want to love your new home, not feel trapped in it. Before you sign any mortgage documents, take a step back, and budget your money and your time. Be realistic about what you can afford as a first time homeowner to put into your house. The smarter you are before you close on a new home, the happier you'll be when the deed is done and the deed is yours.
Should you find yourself upside down on your mortgage, here are three possible scenarios to fight back and remedy the situation:
Many homeowners are giving up, mailing the keys back to the bank, and walking away, hoping to start over elsewhere. But help may be on the way for some, just in the nick of time. J.P. Morgan, for example, said that it will modify thousands of mortgages to make them more affordable and manageable. The company inherited $54 billion in troubled loans this year by taking over failed Washington Mutual. Meanwhile, Bank of America, which bought Countrywide Financial a few months ago, has launched a major loan modification program, targeting those who have a home under water. Before being acquired, Countrywide handled about one out of every seven home loans in the U.S., so steps by the bank to help those who are upside-down on mortgages could have a widespread positive impact.Fannie Mae and Freddie Mac have also recently announced a multi-billion dollar plan to do loan modifications. Some of the innovative measures that they're now taking to help homeowners who have loans under water include lowering monthly payments through 40-year amortization, cutting principal balances, and lowering interest rates to 3 percent. With this kind of drastic and aggressive action, many of these homes may now be rescued before it's too late.
Not too long ago, home buying was considered a safe bet. Buy a great house and live in it as a primary residence for two out of five years, and reap tax benefits from the mortgage interest payments while building home equity. When it was time to move on, you could sell the property and not pay taxes on capital gains up to $250,000 in profit. Then, the cycle would start over in the next, presumably larger and more expensive home.That's not how it works anymore. Home prices that had been climbing steadily skyward for years hit a wall and then came crashing down. Many homeowners are sitting on larger loan balances than equity values. Suddenly, renters look very smart.
A house is probably the largest purchase you'll ever make, and almost always financed by the biggest loan of your life. For many years, the vast majority of your mortgage payments will do nothing but pay interest charges. The huge equity balance comes much later, and many owners will move before getting that far. The dream of home buying seems a bit silly from that perspective.Furthermore, a homeowner has to worry about upkeep and maintenance, as well as property taxes and community fees. Those who rent don't have such headaches.
On the flip side, home buying can be incredibly profitable when the market isn't working against you. And in at least a few areas around the country, home prices may already have dipped as far down as they're going to go. Sure, the gravy train of the early 2000s won't magically restart again; but when you're truly at the bottom, the only way to go is up.
It's simple mathematics, really. If you believe that home prices will rise from here, at an annual rate that would beat the returns you'd expect from investing that cash elsewhere, it might make sense for you to buy a home. It's a great way to build a solid credit history, and the profit at the end of the road is extra gravy. And let's be honest-the stock market hasn't impressed anybody lately, either. If you don't want the risk or bother of home ownership, renting a house, condo, or nice apartment would be the better way to go. While it's true that a homeowner can build a sun deck or repaint the walls anytime he chooses, many people aren't really into home improvement, and would rather leave upkeep and improvements to the landlord.
What do you think? Give us your feedback!
LISC reviewed delinquency and foreclosure rates by examining information from March 2007 through March 2008, and found that, while subprime defaults outpaced other types of loans, the phenomenon didn't correlate with income. Instead, the data revealed that borrowers across a variety of income brackets fell into foreclosure at similar rates. What the study did conclude, however, was that the major contributing factors were the types of risky loans being sold to homeowners, and a conspicuous lack of underwriting standards.Only about 30 percent of the subprime loans made during the period studied were to communities with higher poverty rates, while the majority of loans that wound up in foreclosure were made to borrowers in affluent neighborhoods. This is significant because some people have said that the cause of the foreclosure crisis can be traced to the passage decades ago of the Community Reinvestment Act (CRA), which increased investment in low- and moderate-income communities. The report from LISC debunks that notion, and points to the fact that foreclosure prevention policies and efforts need to be directed at risky loans and sloppy lending practices, not at initiatives to provide affordable or low-income housing.
"This crisis has not been driven by efforts to help qualified families of more limited means become homeowners," Rubinger said. "It instead reflects the decisions some financial institutions made to maximize gains at the expense of sensible risk management. The numbers bear this out. This is about lending practices, not about poor people and communities." The housing bubble was caused by demand for mortgage-backed securities that provided lenders and investors fast profits, but also consumed gigantic quantities of mortgages that lenders had trouble generating to keep up with investor appetite. As a result, mortgage companies pushed the most profitable investment product mortgages on borrowers without regard to underwriting. They weren't primarily interested in making money from the loans, but instead, from the Wall Street securities that those loans created. But the get-rich quick scheme collapsed, leading to this foreclosure catastrophe. Now, foreclosure prevention efforts need to target lender regulation and Wall Street oversight if they're to succeed.
If you feel you are in the wrong type of mortgage program, please give us a call and we can discuss other options for you!!
Zillow.com's quarterly Homeowner Confidence Survey indicates that many homeowners aren't facing the facts with respect to home values. The survey, conducted by Harris Interactive on October 7 and 9, shows that only 51 percent of homeowners nationwide believe their home's value has declined over the past year. In actuality, 74 percent of U.S. homes have dropped in worth. The survey also reveals that the severity of homeowner denial varies by geographic region. Residents in the South and West were slightly more realistic than their counterparts in the Northeast and Midwest. Specifically, 47 percent of respondents in the South believed that their home had declined in value, relative to an actual decline in the value of 67 percent of homes. In the West, these figures were 65 percent and 85 percent, respectively. In the Midwest, 51 percent of homeowners acknowledged a home value decline versus the actual number of 72 percent. The Northeast homeowners were the most delusional; only 45 percent admitted to a decline, while 72 percent of homes were worth less.
Homeowner denial about property values can create problems when those homeowners want to sell, refinance, or cash-out their equity. A property that's priced too high won't attract the right buyers and, thus, won't sell. The homeowner may come to his senses eventually, with the help of some pleading from his agent, but only after valuable time has been lost. An overestimation of a property's value will also derail equity financing. Homeowners often fund life's largest expenses with some type of mortgage, but this is only possible when the equity value will allow it. Parents intending to fund college tuition with a second mortgage, for example, may find themselves scrambling when the appraisal doesn't support the amount of financing they need.
The largest factor with respect to home values right now is the sheer number of foreclosures on the market. In September, the Center for Responsible Lending (CRL) predicted that 40.6 million homes will suffer value declines that are specifically related to the presence of subprime foreclosures selling in the same neighborhood. CRL also estimated that the average value decline would be more than $8,600 per home, for cumulative value losses of $352 billion. Those practicing selective reality will filter out these predictions, while ignoring the foreclosure sale signs in their own neighborhoods. It's just one way to cope with a crisis that's already lingered on for too long.
"Friends of Kids with Cancer" Charity Event Sponsored in part by Envoy Mortgage
Greg Iverson-Envoy Mortgage
Gary Bussard-Branch Manager STL Envoy Mortgage
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