Why Do Home Loan Rates Move Up and Down?

Miniature House on A Blue Financial Graph

More now than in recent years, we are hearing the question: Why are home loan rates rising so much? 

The Federal Reserve monitors the U.S. economy and, when necessary, takes steps to address inflationary concerns to avoid economic recession. When the Fed discusses interest rates, it is primarily concerning the Fed Funds Rate, which is the rate banks use when lending money to each other overnight.

Home loan rates, on the other hand, are dictated by the trading of Mortgage Backed Securities (MBS), which are a type of Bond.

At the real heart of home loan rate movement is the dual relationship between Stocks and Bonds, as they compete for the same investment dollars on a daily basis. Inflationary pressures, economic conditions and geopolitical events all influence the direction of both Stocks and Bonds.

When economic reports are weak or disappointing, investors often move their money from riskier investments like Stocks into Bonds, which are considered safer. Since home loan rates are tied to Mortgage Bonds, this helps home loan rates improve.

In contrast, strong economic news often causes investors to move their money into Stocks to take advantage of any gains. This can cause Mortgage Bonds and home loan rates to worsen.

Inflation reduces the value of fixed investments like Bonds. This means that a low inflation environment tends to be good for Mortgage Bonds and home loan rates, while high inflation can cause both to worsen.

Political turmoil or economic crises around the world can also cause investors to move their money into the safety of the Bond markets, helping Mortgage Bonds and home loan rates improve.

If you are second-guessing whether now is a good time to purchase a new home, contact us. We’ll analyze your financial situation together and create a plan that’s right for you. And if you have friends or family members considering a home purchase or refinance, please share our information with them.

You Budgeted to Buy a House – Now Budget as a New Homeowner

Save money for home cost

Most of us budget when we want to buy a house, but budgeting after we are homeowners, that’s another story. After you’ve signed the papers and the movers have unpacked your last box, you still need to have a budget for “what’s next.” Without this, you may find yourself with some unexpected needs and no way to pay for them. Here are a few pointers. 

Account for new regular expenses
Even as a renter, you probably had some bills you’ll continue to cover as a homeowner – electricity, water, gas, internet, etc. But when you buy a home, there are new expenses to add to this list.

  • Real estate taxes and homeowners insurance: These often are included in your monthly mortgage payment. If any of these change, even if you have a fixed-interest mortgage, your payment can fluctuate from year to year because of changes in taxes and homeowners insurance premiums.
  • Homeowners association: We see a lot of HOAs in today’s home market. These fees can be as high as several hundreds dollars a month. HOA dues may be payable monthly or annually. If you pay these annually, be sure to budget for them so you have the money to cover the costs when it’s time.
  • Home maintenance and upkeep: As a homeowner, you’ll want to stay on top of maintenance. One rule of thumb is to set aside 1% – 2% of your income to cover these costs. If your home is older, you may need to plan even a little more.
  • High cost repairs: If you have high cost or high value repairs, you’ll need to have budgeted even more. A new roof, deck replacement, or other big projects like finishing a basement or covering plumbing emergencies may cost more. Plan ahead.
  • Finally, make sure you continue to build your emergency fund. Three to six months of living expenses is what most financial planners recommend you always have in a ready-to-use savings plan. This is only for emergencies, but building it up should be part of your budgeting plan.

Being a homeowner is a great thing, and with all great things comes great responsibility! Be ready for anything, homeowner! 

 

Fed Announces Fed Funds Rate Hike

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After its September 25-26 meeting, the Fed announced an increase to the benchmark Federal Funds Rate by 0.25 percent for the third time this year. The increase, which was expected by investors, brings the new target rate range to between 2 and 2.25 percent.

If you’re wondering what this rate hike means for home loan rates, don’t panic. A rise in home loan rates shouldn’t be expected as a direct result of the Fed’s decision.

This is because the Fed hike is not to all rates but to the Fed Funds Rate, which is the short-term rate at which banks lend money to each other overnight. The Fed Funds Rate is not directly tied to long-term rates on consumer products like purchase or refinance home loans.

In its announcement, the Fed noted that the economy and labor market continue to strengthen and that inflation remains near the Fed’s target of 2 percent. If inflation can stay in check, this could be good news for home loan rates. Inflation reduces the value of fixed investments like Mortgage Bonds, and home loan rates are tied to Mortgage Bonds.

However, continued strong economic news could also benefit Stocks at the expense of Mortgage Bonds and home loan rates if investors move money into Stocks to take advantage of gains. I’ll continue to monitor all these market movements for you.

While home loan rates have ticked higher this year, they remain attractive historically. If you have any questions about whether you can benefit from current home loan rates, please reach out to Universal Lending at anytime.

Protect Yourself from Identity Thieves with Free Credit Freezes

CreditFreeze

In the past, credit freezes have cost $5 to $10 in most states. Starting Friday, September 21, credit freezes are free. Take advantage of protecting your credit and your identity.

After the Equifax credit breach, we heard a lot about freezing credit as a way to protect ourselves from identity theft. By freezing your credit, you stop credit card companies, banks, and other lenders from accessing your credit records. When creditors cannot see a person’s credit report or credit score, they generally will not issue a new credit card.

By preventing creditors from accessing your credit report, you are taking a proactive step to stop identity thieves who apply for new accounts in your name.

However, when you freeze your credit, you also stop yourself out from getting a new credit card or loan, or opening a credit account in your name. In the past, freezing and unfreezing your credit could cost you a fee every time.

Starting September 21, if your credit is frozen, you will be able to unfreeze your credit reports at no charge, and then freeze your accounts again for your own protection.

To freeze your credit for free, contact each of the three major credit bureaus after Friday’s fee change.

Equifax
Experian
TransUnion

Want to take one more step to protect yourself? The Colorado Public Interest Group recommends requesting a freeze with the National Consumer Telecommunications and Utilities Exchange. The NCTUE issues credit reports for people applying for cell phones. This helps prevent a thief from opening a cell phone in your name as well.

Your credit counts whether you’re looking for a home mortgage or making any financial decisions. If you’d like to learn more about this email or mortgage loans, please contact me.

What to Expect from a Home Inspection

Hands with house and magnifying glass, search home concept
Hands with house and magnifying glass, search home concept

Even in today’s hot housing market, you don’t want to skip the home inspection. The home inspection is a standard practice when buying a home. No one wants to make the biggest purchase of their lives, only to discover a weak foundation, shoddy electricity and plumbing that will cost $10,000 to repair. A good home inspection can protect buyers from major expenses when buying their homes.

What does a typical home inspection include?

Generally, a home inspector will look at:

The Foundation: Is there evidence of settlement and/or seepage in the basement or lowest level of the home? Is the settlement uneven or are there cracks? What is the structural integrity of the home? What is supporting the home?

Heating and Air Conditioning: What is the insulation like in the home? Is there enough heating and air for the home? How do the systems operate and are they operating properly? What can the inspector see in the way of potential problems in these systems?

Electrical: What does your electric system look like? Is it safe? Are there potential hazards? Is everything properly grounded and bonded? Are all the outlets working?

Roof: What’s happening on top of the house? Are there any general maintenance issues you should know about? What type of roof is it? Are there skylights that need repair? Are there places that are leaking?

Your home inspector should also check out your:
Lot and landscaping
Plumbing
Hot water supply
Chimney and fireplace(s)
Termite damage/wood damage
Attic
Exterior
Garage

There is a lot of ground for your home inspector to cover, so you want to hire one who will take his time and do a thorough job on your behalf. How do you pick a home inspector? Here are some tips:

1. Don’t trust an inspector simply because the inspector has a state license.

2. Look for an inspector who is associated with a professional inspection organization such as the National Institute of Building Inspectors, the National Association of Home Inspectors or the American Association of Home Inspectors.

3. Don’t only take your agent’s recommendation; ask for three recommendations and then really grill the inspectors.

Remember, no matter how anxious you are to get into your home, a home inspection is not something you want to skimp on. 

Why Fall and Winter May be the Best Time to Sell Your Home

New Home

Summer is saying its farewell. And with cooler temperatures, we usually see a cooling in the housing market. But before you put your intentions to sell your current home on the back burner, take a minute to consider all the reasons now is the RIGHT time to sell a home.

There’s less competition.

No matter where you are, it’s a sellers’ market right now. But in the fall and winter, you’ll have an even bigger leg up on the competition with fewer homes on the market. This may pay off big time, making it easier for you to sell your home at the right price.

Fall and winter homebuyers are ready to make move.

Spring and summer buyers may be easing into the market. They know it’s home buying season, so they stick their toe into the water. But fall and winter homebuyers are serious purchasers. They really are planning to make a move, and in this tight market, that will work out well for the home seller.

Your agent can make different and potentially more accurate plans to market your home.

Because most parents don’t want to move their kids in the middle of the school year, it may be easier for your real estate agent to market more accurately to the true potential buyers – perhaps young professionals with no kids, older adults looking to downsize, people hoping to start a family “some day.” Often, these are the people more likely to make a move in the fall.

Note: This is a great reason to work with a listing agent and not try to sell your home on your own. An agent will know who the most likely buyers of your property are and will know how to reach them.

You could save money.

You won’t be hiring movers during the busiest time of the year, so they may offer you a less expensive rate than “peak moving season.” Everyone likes a bargain, so consider how much money you might save by selling in the fall.

Fall colors are great for curb appeal.

Run a rake over your yard, put out a few fall flowers and a fresh welcome mat, and your house can be read for fall in no time at all. Don’t discount the beauty of the season when it comes to curb appeal. If you’re selling in the winter, make sure you keep your home freshly shoveled and well lit.

Home owners will be home for the holidays.

If you sell in the fall, you’ll be in your new home by the time the holidays roll around, and the new owners of your house will also be home. That’s a big bonus. A lot of homebuyers picture themselves at home and settled in time for the holidays to roll around.

You may find your dream home easier.

You may be able to sell your home easier in the fall or winter, and surprisingly, you may be able to find your dream home in the fall or winter, too. In the summer homes move faster because there are more buyers out looking. In the fall or winter, even in a tight sellers’ market, you may find you have a little more time to make your move.

No matter when you decide to make your move out of your home and into your new home, we encourage you to solicit the help of a trusted real estate partner. A real estate agent can make selling your home easier and more profitable for you. Happy fall and happy house selling!

Consider it Sold – To You! Get Your Offer Accepted on Your Dream Home.

Family with Sold Home

It’s been a long, hard journey. But you’ve made it. You have found your dream home. However, your dream home is the dream home of a lot of other people, too. Offering asking price isn’t  enough – Your offer needs to stand out from the crowd. Let us help you with a few ways to get your offer accepted so you can move into your new home.

1. Get a Performance Guarantee with Universal Lending. Our Performance Guarantee is a conditional loan commitment that guarantees your earnest money up to $10,000. Essentially, you’re putting in an offer that has already gone through underwriting. Other homebuyers may offer a pre-approval letter, but a Performance Guarantee is the next best thing to a cash offer.

2. If you don’t have a Performance Guarantee, submit your pre-approval letter with your offer. Other buyers will have this. so going in without a pre-approval letter will put you at a disadvantage.

3. Work with a real estate agent. You may think “you’ve got this,” but an agent who is familiar with the neighborhood you are buying in, knows how to help buyers stand out in a seller’s market, and who is a genuine champion of buyers will be ready to get you into your home.

4. Have your lender go the extra mile. Can your lender vouch for your ability to close this loan? Your agent can reach out to your lender and ask for a video or testimonial about your offer and ability to pay. A Universal Lending loan officer sent a video testimonial to her borrower’s agent, who sent it to the sellers, and it was the ticket to an accepted offer. Encourage your team be creative!

5. Offer a fast close. Make your offer stand out by offering a shorter closing date. Universal Lending prides itself on the ability to do quick, clean closings – another reason we stand out.

6. Offer above the asking price. Now is not the time to low ball. Check comps in the neighborhood to see what a strong offer was on the homes that have sold most recently.

7. Make a good, clean offer. If you’re trying to sell a property, making the purchase of this home contingent on selling another home may not work in a seller’s market. It’s also going to be difficult to ask for additional concessions such as help with closing costs.

8. In fact, you may want to offer to pay the seller’s portion of closing costs.

9. Don’t ask for extras to be thrown in. Lawn furniture? A grill that’s not staying with the house? A painting that you “must have.” Asking for extras may be just the thing that moves you down the list of accepted offers.

10. Put down a larger down payment than is expected. Putting more down on the house shows that you are serious about making this purchase.

11. Include an escalation clause in your offer. An escalation clause means that your offer will outbid other offers up to a maximum price. This means that you make an offer saying you will pay X price for a home, but if a higher offer is received, you will increase your offer to Y price.

12. Offer one month of free occupancy. When purchasing a home with a mortgage, your payment doesn’t come due until a month after you close. A seller could very well need that time to figure out where they are going and offering to pay their “rent” for a month could strengthen your offer.

13. Submit a personal letter with your offer. When you make an offer on a home, you’re often moving into what was once someone else’s dream home. Include a letter with your offer and share something that makes the home special to you. Tell them what you are planning to do with the house. Promise to love the home!

Don’t lose your dream home. Be prepared when the time comes to make an offer and make your offer stand out.