Lower Rates Spur Loan Applications

Lower Rates Spur Refi Applications

 

Applications for mortgages rose significantly during the week ended January 15 as fixed rate mortgage interest rates fell to the lowest levels since mid-autumn.  The Mortgage Bankers Association (MBA) reported that its Market Composite Index, a measure of loan application volume rose 9.0 percent during the week on an adjusted basis and 12 percent unadjusted.

Compared to the week ended January 8 the Refinance Index was up 19 percent and the share of all mortgage applications that were intended for refinancing jumped from 55.8 percent to 59.1 percent.  Purchase mortgage applications increased 2 percent on their adjusted index and 4 percent unadjusted.  The unadjusted index was 17 percent higher than during the same week in 2015.

Applications for FHA backed mortgages decreased from 14.4 percent to 13.7 percent week-over-week and the VA share declined from 12.2 percent to 10.8 percent.  Applications for USDA mortgages eased by 0.1 percent to 0.7 percent.

Effective rates for mortgages fell across the board while adjustable rate mortgages (ARMs) were the only products to see an increase in contract rates.  The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,000 or less) dropped to the lowest level since October 2015, 4.06 percent, while points increased to 0.41.  The previous week the rate was 4.12 percent with 0.38 point.

Jumbo mortgages, those with balances greater the $417,000, had an average contract rate of 3.93 percent, the lowest rate since the previous October, down from 4.02 percent a week earlier.  Points eased to 030 from 0.31.

Thirty-year FRM backed by the FHA had an average rate of 3.86 percent compared to 3.90 percent the previous week.  Points rose to 0.36 from 0.34.  The contract rate was the lowest since October 2015.

The average contract interest rate for 15-year fixed-rate mortgages was also at the lowest rate since October, 3.29 percent, down 3 basis points from the prior week.  Points were unchanged at 0.39.

The average contract interest rate for 5/1 ARMs increased to 3.20 percent from 3.14 percent, with points decreasing to 0.18 from 0.42.  Sox percent of applications were for ARMs compared to 5.1 percent the week before.

MBS’s Weekly Mortgage Applications Survey has been conducted since 1990. The survey covers over 75 percent of all U.S. retail residential mortgage applications with respondents that include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100 and rate data is based on loans with an 80 percent loan to value ratio and points that include the origination fee.

 

Reference: Mortgage News Daily

Jonathan Burdick

Suburban Mortgage Inc

Nmls # 1045837

BK # 10123

Jburdick@submort.com

602-606-6176

Equal Housing Opportunity Lender

 

 

Mortgage Rates Nicely Lower Despite Strong Jobs Data

Mortgage Rates Nicely Lower Despite Strong Jobs Data

Mortgage rates moved respectably lower today, nearly making it to the best levels in a month.  Whereas the average conventional 30yr fixed quote had been creeping up toward 4.25% at the end of December, we’re now easily back to 4.0% for most lenders.  It should be noted that there continues to be more variation between lender quotes during this time of year, but we are seeing signs that things are getting back to normal as business picks up after the holidays.

Today’s improvement is all the more impressive considering the fact that this morning’s employment data from ADP was much stronger than expected.  ADP is one of the leading forward indicators for Friday’s big jobs report.  Typically, a stronger than expected result is bad news for mortgage rates.  Today, however, rates weathered the storm quite well.  In fact, many lenders repriced to even lower rates due to bond market improvements in the afternoon.  It’s possible that lenders and market participants alike were more cautious ahead of today’s Fed meeting minutes.   As it happened, the Minutes weren’t the slightest bit interesting.


Loan Originator Perspective

“ADP’s December employment projection was released today, and despite it surpassing expectations, pricing rallied about 25 bps on continued overseas market angst.  Make no mistake, we aren’t breaking any new ground here yet, just continuing to slide up/down through our recent range.  It’s too early to call the improvement a trend, but I’m all in favor of it continuing.  I’ll still take a conservative approach on locking, rather be wrong and locked than wrong and NOT locked.” –Ted Rood, Senior Originator

“China worries and falling oil prices over come a much better than expected ADP employment report helping rates to stage a small rally today.   I do fear this might be short lived since we have non farm payrolls hitting on Friday.   I think it would be wise to look at locking in today if you are within 30 days of closing.” –Victor Burek, Churchill Mortgage

“Rates seem to be benefiting from a rough start to the year for the Stock Market and further declines in Oil prices.  With the Fed moving in the direction of higher rates I think we’ll need a stronger impetus to push rates even lower in the near term.  We may get that, but I would be cautious and tend to lock in these gains for now.” –Hugh W. Page, Mortgage Banker, Seacoast Bank


Today’s Best-Execution Rates

  • 30YR FIXED – 4.00%
  • FHA/VA – 3.75%
  • 15 YEAR FIXED – 3.25%
  • 5 YEAR ARMS –  2.75 – 3.25% depending on the lender


Ongoing Lock/Float Considerations

  • In 2015 global interest rates rose unevenly from a long-term lows brought about by the onset of quantitative easing in Europe.  European rates moved most (first lower, then higher), but rates in the US, including mortgage rates, are always taking some of their guidance from the global picture.
  • Just as European rates were bouncing at all-time lows, the Fed began talking up its plans to hike its policy rate (Fed Funds Rate).  While the Fed rate doesn’t directly affect mortgages, the two are generally connected in the long run.  They become more disconnected when the economy begins to contract (because Fed policy is slower to respond to changes in the economy).
  • The Fed finally hiked on December 16th.  This implies a constant underlying pressure toward higher interest rates–as long as the economy doesn’t begin to contract.  Opinions vary greatly as to when we’ll see the early signs of the next economic contraction.  Some would argue we’re already seeing them.  This, along with persistently low inflation, has helped rates avoid taking a big hit from the Fed rate hike, though we’re still waiting for the first major trend of 2016 to emerge
  • As always, please keep in mind that the rates discussed generally refer to what we’ve termedbest-execution(that is, the most frequently quoted, conforming, conventional 30yr fixed rate for top tier borrowers, based not only on the outright price, but also ‘bang-for-the-buck.’  Generally speaking, our best-execution rate tends to connote no origination or discount points–though this can vary–and tends to predict Freddie Mac’s weekly survey with high accuracy.  It’s safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie’s once-a-week polling method).

 

 

10 homeowner tax breaks you should be taking advantage of

 

Don’t forget your 2015 mortgage write offs

If death and taxes are the two true givens in life, there probably should be a third: the bucketful of tax breaks Uncle Sam throws out every year to encourage more Americans to buy a home.

From being able to write off virtually all mortgage interest, not only for your primary home, but for a second home as well — up to $1.1 million of debt (when you include home-equity loans) in most cases, to being able to write off your property taxes, homeowners have opportunities for dozens more federal income tax deductions than renters.

In fact, only 21 states and the District of Columbia offer renters any kind of tax breaks or credits — generally credits for property taxes.
Americans took $68.5 billion in mortgage interest deductions (MID) alone in 2012, according to the Congressional Research Service (CRS), saving Americans who owned homes about $1,900 a year, on average. This is particularly beneficial to first-time home buyers whose early monthly payments in a 30-year loan are mostly only interest. About half of American homeowners took advantage of the MID in 2012, the CRS said. What about the other half? Well, according to the CRS, they already paid off their homes or the mortgage interest deduction was less than the standard tax deduction.
“If you have taken out a homeowner’s loan, consider these deductions as Uncle Sam’s gift to you. These tax breaks will surely alleviate the financial burden of many taxpayers, especially those who are paying their mortgage,” says John Gregory, founder of 1040Return.com, a Baltimore-based tax-prep company.

Some of the most significant tax breaks that only homeowners can claim are fairly well-known, such as the MID, but here are some others:

1. Points on home mortgage and refinancing: If you bought a home in 2014 with a mortgage, then in addition to the mortgage interest (which may not be a lot if you bought late in the calendar year), you can probably write off the points (both origination and discount points) on your tax return, says Jackie Perlman, principal tax research analyst at H&R Block (HRB). One point is equal to 1% of the principal loan amount. That’s because the IRS considers points to be prepaid interest. The challenge is whether you’re eligible to deduct the points all at once, or whether you have to spread the costs out over the life of the loan. Generally, if you bought your first home or got a loan on that first home, you can take the deduction all at once, the IRS says. For a second home, and often for a refinance on a first home, the IRS says you most likely have to spread it out. “You have to meet all the criteria in order to deduct them up front, otherwise you have to amortize them over the life of the loan,” she said. A good place to start, she says, is the IRS Tax Information for Homeowners guide.

2. Interest on home-improvement loan: The IRS considers the interest on a home-improvement loan fully deductible, up to $100,000 in debt. In addition, interest paid on a home equity line of credit (HELOC) is also tax-deductible. However, as Greg McBride, chief financial analyst with Bankrate.com, notes, any portion of a home loan that is over 100% loan-to-value (meaning the loan is worth more than the value of the property) isn’t deductible.

3. Property tax: Property taxes are almost always tax-deductible, but some things on your settlement document that might look like taxes really aren’t, says McBride. You can’t write off your attorney and appraisal fees, title insurance and credit report costs either, McBride notes. Transfer taxes however can be written off, says Gregory.

4. Energy-efficiency tax credit: If you made efforts in 2014 to make your home more energy efficient by installing equipment like storm doors, energy efficient windows, insulation, air-conditioning and heating systems, the IRS wants to give you a tax credit of $500, though only $200 of that can be used for the windows. The credit however is set to expire on Dec. 31, 2016.

5. Renewable-energy tax credit: If you’ve installed equipment that uses renewable sources of energy, such as the sun and wind, to help power your home, you may be eligible for the Renewable Energy Efficiency Property Credit. You are eligible for this tax credit up to a whopping 30% of the cost of the equipment, installation included, so long as the equipment is placed in service by the end of December 2016. About 600,000 American homeowners have added residential solar equipment since 2010, according to the Solar Energy Industries Association.

6. Ground rent: There are rare situations in the U.S. for homeowners where the original owner still owns the land under your house after you’ve bought it, and you own the aboveground property and “rent” the ground from the owner. The “ground rent” option reduces the cost of the home since you’re not buying the land. The IRS lets you get a break for this situation and thus “ground rent” amounts can be deducted if you have been paying the rent monthly or annually, so long as the lease is for more than 15 years. However, if you’re making a payment to capitalize the ground rent, to buy out the lessor’s interest to get out from under it every year, that payment isn’t deductible, the IRS says.

7. Income and interest on reverse mortgages: The IRS considers reverse mortgages as a loan advance not income, so the amount you receive isn’t taxable. But the interest accrued on a reverse mortgage isn’t deductible until the loan is paid off, so you can’t take a deduction each year for the interest as you might with the traditional mortgage interest you pay, says Gregory.

8. Private mortgage insurance: You may be eligible to claim the deduction for private mortgage insurance (PMI) or mortgage insurance premiums on your tax return, though the 2014 tax year is the last year the deduction can be taken. Keep in mind that the deduction for qualified mortgage insurance premiums is reduced if your adjusted gross income (AGI) is over $100,000, and if it’s over $109,000 you can’t take the deduction at all. And you won’t get around that limitation if you’re married and filing separately, as the deduction begins to be reduced at $50,000 in AGI and disappears at $54,500.

9. Home expenses and improvement: If you make improvements to your property, you cannot write off the cost of home improvement, such as the materials and the labor. (Though you can write off the interest of course if you took out a home loan to pay Joe Contractor and purchase the materials.) However, when you sell your home, you can add the cost into the asking price of your property, which should diminish the capital gain when you sell your home, says Gregory of 1040Return.com.

10. Buying a home: The IRS allows first-time home buyers to withdraw up to $10,000 from their traditional IRA (and even Roth IRAs) penalty-free to help with the purchase of the home. Your spouse or even a parent, child, or grandchild can kick in another $10,000 from their IRA accounts, for a total of up to $20,000. You can also borrow half of your 401(k) balance up to $50,000 for the purchase of a home. But, the interest you pay on that 401(k) loan, unlike a mortgage loan, isn’t tax-deductible, notes Perlman.

Reference Bankrate.com

Jonathan Burdick-1045837

Suburban Mortgage Inc

602-606-6716

Equal Housing Lender

 

 

Mortgage Rates Lowest in 2 Weeks

Mortgage Rates Lowest in 2 Weeks

Mortgage ratesmoved lower today as financial markets roared back to life after the winter break.  In this age of ever-increasing automation and digital connectivity, it would be easy to assume that financial markets continue to hum along in the background even as the rest of the world takes some time off during the holidays.  The truth is that financial markets are greatly affected by the Christmas/New Years holiday season and that’s readily apparent in today’s mortgage rates.

Mortgage rates are primarily a function of mortgage-backed-securities (MBS) prices.  Most days, there is a stable connection between the two (in that a certain amount of movement in MBS tends to correspond with a certain amount of movement in mortgage rates).  If we were to solely base our assumptions on that relationship, rates would be only marginally better today–somewhere near those seen on December 28th.  Instead, rates moved noticeably lower–closer to those seen on December 21st.

The x-factor here is the human element.  Strategies vary, but in general, folks in charge of setting rates for lenders tend to be more conservative heading into the holidays.  If MBS prices are in decent shape after the holiday season, lenders are able to get back to where they would have otherwise been fairly quickly.  As such, it’s no major surprise to see rates right back where they were a few days before the holidays kicked into high gear.


Loan Originator Perspective

“As I suspected last week, bonds did rally today, albeit not as much as they should have, given equities’ losses.  Once again, we’re basically cemented in our current pricing range.  At this point, we’re still closer to the high side of rates than the low, so we may see better pricing the next couple of days.  Friday, however, is the December NFP report, which is a huge wild card.  Float until Thursday if you like to gamble a little.  Only those who love “action” should float into Friday.” –Ted Rood, Senior Originator

“Nice little rally today thanks to a global sell off of stocks that started with very weak manufacturing data out of China.   If you floated over the long weekend, your rate sheets should reward you today.   With today’s gains, it would be wise to consider locking especially if you are within 30 days of funding.   The trend still isn’t our friend, so this could turn around very quickly.” –Victor Burek, Churchill Mortgage

“Mortgage bonds started the new year off right rallying at the open of trading.  This was largely due to the global sell off sparked by the manufacturing date released in China.  Bonds however did not hold their gains which worries me a bit and puts me in lock mode.  While it may be possible for rates to continue to improve the risk at this level may not be worth taking.” –Manny Gomes, Norcom Mortgage


Today’s Best-Execution Rates

  • 30YR FIXED – 4.00-4.25%
  • FHA/VA – 3.75%
  • 15 YEAR FIXED – 3.25-3.375%
  • 5 YEAR ARMS –  2.75 – 3.25% depending on the lender


Ongoing Lock/Float Considerations

  • In 2015 global interest rates rose unevenly from a long-term lows brought about by the onset of quantitative easing in Europe.  European rates moved most (first lower, then higher), but rates in the US, including mortgage rates, are always taking some of their guidance from the global picture.
  • Just as European rates were bouncing at all-time lows, the Fed began talking up its plans to hike its policy rate (Fed Funds Rate).  While the Fed rate doesn’t directly affect mortgages, the two are generally connected in the long run.  They become more disconnected when the economy begins to contract (because Fed policy is slower to respond to changes in the economy).
  • The Fed finally hiked on December 16th.  This implies a constant underlying pressure toward higher interest rates–as long as the economy doesn’t begin to contract.  Opinions vary greatly as to when we’ll see the early signs of the next economic contraction.  Some would argue we’re already seeing them.  This, along with persistently low inflation, has helped rates avoid taking a big hit from the Fed rate hike, though we’re still waiting for the first major trend of 2016 to emerge

Jonathan Burdick

NMLS 1045837

602-606-6716

Reference Mortgage News Daily