Fed’s Halt on Rising Rates

The week of January 27, 2019, the Federal Reserve had their 2-day rate-setting meeting and decided not to raise interest rates. Although the Fed does not directly affect long-term mortgage rates, this is a positive outcome for borrowers looking to purchase a new home or refinance to a lower fixed-rate.

Mortgage interest rates have been slowly declining over the last few months which is a good sign for buyers. The 30-year fixed rate mortgage average was 4.45%, having stayed at that level for three straight weeks, and the Fed’s choice to leave interest rates unchanged could keep mortgage rates steady.* Lower interest rates could mean lower monthly down payments for homebuyers, and less total interest spent over the life of the loan.

The Federal Open Market Committee (FOMC), which decides the Fed’s rate policy, said in its statement, “In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.” **

It is hard to predict what will happen in the upcoming months, but for now, things are looking bright for homebuyers. Please reach out to any of our Loan Officers if you have any questions, we are always here to help.

 

*Passy, J. (January 31, 2019) So the Fed left interest rates unchanged, but what does that mean for you? https://www.marketwatch.com/story/5-things-consumers-should-watch-for-now-that-the-fed-has-not-raised-rates-2019-01-30

**Foster, S (January 30,2019) A ‘patient’ Federal Reserve signals it’s done raising interest rates — for now. https://www.bankrate.com/banking/federal-reserve/fomc-recap/

Maximum Conforming Loan Limits Announced for 2019

The Federal Housing Finance Agency (FHFA) announced the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2019. Starting January 1, 2019, in most of the U.S., the maximum conforming loan limit for one-unit properties will be $484,350, an increase from $453,100 in 2018.

FHFA’s house price index data indicate that house prices increased 6.9 percent, on average, between the third quarters of 2017 and 2018. Therefore, the baseline maximum conforming loan limit in 2019 will increase by the same percentage.

For areas in which 115% of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit will be higher than the baseline loan limit. The new ceiling loan (Conforming Jumbo) limit for 1-unit properties in most high-cost areas will be $726,525 — or 150% of $484,350.

If you have any questions, please reach out to one of our loan officers.

 

What Causes Rates to Fluctuate?

An interest rate is a percentage of the amount of a loan paid for the use of money for a specified time. More simply put, it is the rate of interest charged on your mortgage loan. Interest rates are volatile, meaning they can fluctuate sharply and regularly. There are many elements that affect your mortgage interest rate, some are caused from your personal and financial information, and other reasons are more universal, deriving from economic and governmental factors. Interest rates are always changing, and it is possible to see different rates while you are looking for your home.

It is common to see mortgage rates fall when the stock market declines, and vice versa; it depends on the reason for the movement. Most of the time, the cause is shifting expectations for economic growth based on newly released data. Stronger growth is good for stocks, but it raises the outlook for future inflation, so it is negative for mortgage rates, and the reverse is true as well.

Inflation may be a cause for fluctuating interest rates. The Consumer Price Index (CPI), a widely followed monthly report that looks at the price change for goods and services, measures inflation rates. It is calculated by taking price changes for each item of goods and services and averaging them. Changes in the index are used to assess price changes associated with the cost of living. Inflation causes higher prices for everything, including home loans. Lower inflation is positive for mortgage rates.

Mortgage interest rates are very susceptible to economic activity. For this reason, jobs reports, Consumer Price Index, Gross Domestic Product, Home Sales, Consumer Confidence, and other data on the economic calendar can move mortgage rates significantly.

Your credit score will be a factor in determining your mortgage interest rate as well. Your lender will determine your likeliness to pay back the loan by reviewing your credit score. The higher your credit score, the more likely you are to repay the loan, making you a candidate for a lower interest rate. On the other hand, if you have poor credit history and your score is below average, your interest rate will likely be a bit higher. The good news is there are ways to improve your credit. A simple start is to pay your bills on time, all the time.

Since rates can fluctuate, it is a good idea to lock in your rate when rates are low, and you are ready to purchase. A rate lock can protect you from rising interest rates while you are searching for a home. Once your rate is locked, it cannot change for a specified amount of time, even if interest rates increase. Interest rates are a hot topic and tough to track; get in touch with one of our loan officers to learn more about interests rates and the current market.

 

How to Win in a Competitive Market

It’s a seller’s market in the mortgage world these days. That means there are more buyers looking to purchase homes than there are homes for sale, giving way to some strong competition. Properties may be going off of the market more quickly since there is higher interest, and they may be selling for more than the asking price. So how are you supposed to beat out the competition? Take these tips into consideration the next time you find yourself in a seller’s market.

Be proactive.

Homes may go off the market lightning fast in a seller’s market, so be ready to act fast. Research houses in your preferred neighborhood a few months before you are ready to buy to get a feel for the market. This will help you determine what the typical price range is and how quickly homes are sold. When you are ready to purchase and have found a home, if possible, try and schedule a tour before the weekend open house. This will give you an advantage over other buyers to put in an offer before they even see the house.

Get pre-approved.

When buying in a competitive market, you should always be as prepared as possible. First, start by getting pre-approved. Getting pre-approved shows the seller you are serious and ready to buy. Having your finances in order indicates you have the means to purchase the house and won’t need to back out of the contract for financial reasons. Your pre-approval letter will show how much you can afford and what type of mortgage is best for you.

Make a strong offer.

Bringing your strongest offer to the table may save time by eliminating a negotiation period or bidding war. A seller may not want to deal with the hassles of negotiating, so if you present a solid offer, it may have a better chance of being accepted right away. Also, bringing your strongest offer will save you time, and probably money, by taking you out of a bidding war. Presenting an offer that is much lower than the asking price could deter the seller and they will take your offer right off the table. If you have done your due diligence, you will know the best offer to make.

Get personal.

Writing an additional letter to the seller, along with your offer letter, may help you stand out against other buyers. If you plan on making the house your forever home, write a formal letter to the seller explaining how you envision your family in the home. Maybe you see yourself cooking breakfast for your family every morning in the kitchen, or describe how you can see your kids playing in the backyard on sunny days. Adding a personal touch to your offer may give you an advantage over your competition.

It’s a tough market out there right now, but with the right mindset and game plan, you will be enjoying your new house in no time!

If you are ready to get started, contact one of our loan officers.

New Tax Laws of 2018

On Friday, December 22, 2017, President Trump signed the Tax Cuts and Jobs Act, designed to lower taxes and spur economic growth.  Most of these changes have already taken effect, starting on January 1, 2018.  Expecting to reduce taxes for individuals and businesses, this new tax reform bill will increase standard deduction, increase child credit tax among several other adjustments.

Mortgage Interest Deduction

The limit for mortgage interest deduction dropped from $1 million in housing debt to $750,000.  This is effective on homes purchased after 12/15/17.  Also allows the $1 million limit for refinancing an existing loan as long as the new loan is not greater than amount refinanced.

Standard Deduction

Increasing (nearly doubling) to $12,000 for individuals and $24,000 for couples filing jointly.  This increase means fewer people will have to itemize and more taxpayers will be able to take the standard deduction.  The standard deduction for taxpayers with few itemized deductions will exempt twice as much of their income from federal taxation.

State and Local Tax Deductions

New $10,000 deduction limit on state and local taxes, including income and property taxes.  Taxpayers can claim the aggregate of state and local property taxes capped at $10,000.  Interest can be deducted at $750,000 down from $1 million on the amount of mortgage obligation on new home purchases.

Home Equity Deduction

HELOC (Home Equity Line of Credit) was tax deductible when debt was incurred “for reasons other than to buy, build, or substantially improve your home.” This tax deduction has been removed.

Moving Expense Deduction

Certain moving expenses were tax deductible if starting a new job.  This is now limited to only active duty in the armed forces.

Increased Child Tax Credit

The Child Tax Credit is doubled from $1,000 per child to $2,000 with an amount that is refundable to $1400. Also, adding a nonrefundable credit of $500 for dependents other than children.  Income threshold raised from $110,000 for a married couple to $400,000.

*Please consult a tax advisor

 

Want to learn more? Contact a First Home Loan Officer, today!

Equifax Breach and How You’re Affected

Equifax is one of the oldest and largest credit-monitoring companies, aggregating information on over 800 million consumers.  The company provides detailed information about personal credit and payment history of individuals, indicating whether they are eligible to receive a loan.  In order to provide a full credit report, Equifax houses an enormous amount of sensitive data, such as full names, Social Security numbers, addresses, birth dates and sometimes driver’s license numbers.

Last week, Equifax revealed their data had been compromised during a cyber-security breach which occurred mid-May through July 2017.   Hackers gained access to personal information on 143 million American consumers.  Equifax also confirmed at least 209,000 consumers’ credit card credentials were taken during this attack.   This means that the opportunity for identity theft has tremendously increased for the majority of American residents.

We at First Home Mortgage understand the seriousness of this attack and need you to realize how important it is to take action immediately and be pro-active so identity theft does not happen to you.

How can I be proactive? Help!

First, monitor your credit report for any suspicious activity.  Check to see if new accounts have been opened that you did not open, late payments on debt you do not recognize or fraudulent charges made on a card.  You can check your credit report free, once a year here.  If you suspect identity theft, contact the credit card company’s fraud department immediately.

For extra protection, freeze your credit with the three major credit bureaus.  This is the best way to prevent identity theft.  Once accounts are frozen, you will not be able to open new lines of credit or have your credit checked without lifting the freeze.  Contact each bureau immediately to freeze your account.  Or, request a freeze online.  Note: You will not be able to freeze your credit if you are currently pending a large purchase or financing activity.

  •                Equifax:  1-800-349-9960 or  Click Here
  •                TransUnion:  1-888-909-8872 or  Click Here
  •                Experian:  1-888-397-3742 or  Click Here

Equifax is offering free credit monitoring and identity theft protection to all who may have been impacted, for one year.  You may also enroll in Equifax’s program to see if you are one of the millions affected by the hack.  To get started, enroll here to begin.  The enrollment process must be completed by November 21, 2017.

For additional information on what to do if you are a victim of identity theft, click here.  This site will guide you on how to report identity theft if, for example, someone else filed a tax return using your information, if your information was exposed in a data breach or anything else.

Still not sure how to get started or need additional information? Contact your local First Home Mortgage Loan Officer today and they will help point you in the right direction. 

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CAUTION- The Dangers of Rate Shopping

Buying a home will probably be the largest purchase you ever make.  With that in mind, you want the lowest interest rate, right?  WRONG!  The lowest advertised interest rate may not be your best option.  Some lenders and mortgage brokers advertise low rates, but don’t inform you of all the additional points and fees that come with the mortgage.  Here are a few tips to take into consideration to avoid misconceptions of an advertised low interest rate.

  1. Look at Points and Fees– Always ask about points, lender fees, broker fees and settlement costs. Points are pre-paid interest that affect the quoted interest rate.  You can ask to have your points quoted as a dollar amount instead of just a percentage.  For example, on a $200,000 loan, one point would equal $2,000.

 

  1. Shop Smart– Interest rates fluctuate daily. Talk to your Loan Officer about when the best time to lock is.  First Home Mortgage values honesty and service, so any questions you may have for your Loan Officer will be answered diligently, fairly and in regards to your best interest. If you contact different lenders, make sure you provide each lender with the same information.  Such information will include: the quality of your credit, location, type and use of your property, the size of down payment and/or the amount of home equity you have.

 

  1. Finding the Best Lender– Customer service may be the most important consideration when shopping for home financing. During the loan process, you should feel comfortable disclosing your financial information and asking questions. A trustworthy lender will be responsive and will assess your situation carefully to best suit your home buying needs. Make sure to choose a lender who can offer personalized options and takes the time to understand your goals.  Just remember, if you don’t close, interest rates don’t matter.

 

If you have any questions or would like to get started on this home-buying journey, contact First Home Mortgage Corporation today!  We provide the mortgage you need to make “home” happen by delivering customer service that not only fulfills goals, but exceeds expectations.

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ALERT- DC Open Doors Closing Cost Grant Special

DC Housing Finance Agency is offering a DC Open Doors Closing Cost Grant Special in the amount of $1,500.  This can only be used towards the borrower’s closing costs and the loan must be closing between June 9, 2017 and September 1, 2017.

Eligibility

  • Borrower must purchase a home in the District of Columbia
  • The borrower’s income must be at 80% or less of the Area Median Income ($88,240)
  • Grant is only available on a loan reserved/locked as a DC Open Doors HFA Preferred loan product (Fannie Mae loan with or without Down Payment Assistance)
  • DCHFA will provide a Grant Disclosure for the borrower to sign

Contact a First Home Mortgage Loan Officer today to see if you qualify.

 

This is not a guarantee to extend consumer credit as defined by Section 1026.2 of Regulation Z.  Programs, interest rates, terms and fees are subject to change without notice.  All loans are subject to credit approval and property appraisal.  First Home Mortgage Corporation NMLS ID #71603 (www.nmlsconsumeraccess.org).

FHA Reduces Mortgage Insurance Premiums UPDATE

*Update 1/22/17: The Trump administration suspended the pending rate cut to FHA mortgage insurance indefinitely. The National Association of Realtors have requested that the premium cut be reinstated in order to help up to 40,000 new homebuyers in 2017. Presently, it is unclear whether this suspension will be repealed.*

Original post:

On Monday, the Federal Housing Administration announced it would be reducing monthly mortgage insurance premiums on loans closing or disbursing January 27th or later. This change means more borrowers may be eligible to purchase a home through the FHA in 2017.

The FHA provides government backed mortgages for as little as 3.5% down, which is why FHA loans are very attractive to first time and low-to-moderate income borrowers. In exchange for a lower down payment, homebuyers must pay mortgage insurance. When there is a reduction in this required cost it opens the door for more aspiring homebuyers.

Every time mortgage insurance premiums decrease, more borrowers can meet the debt-to-income ratio required to purchase a home. New borrowers who close on an FHA mortgage on or after January 27th could save an average of $500 this year, according to the U.S. Department of Housing and Urban Development. This comes at the right time for consumers who might be facing higher credit costs due to rising mortgage interest rates.

FHA mortgage products have always provided opportunities to creditworthy borrowers who may not be able to obtain conventional loans. This cut in mortgage premiums breathes new life into the housing industry and may enable more borrowers to utilize the FHA program to achieve the dream of homeownership.

To read the full HUD press release about FHA, please visit their site here.

First Home Mortgage is an approved FHA lender. To learn more about FHA loans, contact your local Loan Officer.

FHFA Increases Loan Limits for 2017

Last week, the Federal Housing Finance Agency (FHFA) announced loan limits would increase for the first time since 2006. For over 10 years, the maximum loan limit for single family homes has been $417,000 in most counties across the country. In 2017, the loan limit will rise to $424,100, an increase of 1.7%. Why did the loan limit increase and what does it mean?

Every year, the FHFA announces the maximum loan limit for the year ahead. Loan limits set a cap on the size of mortgages that can be guaranteed by Fannie Mae or Freddie Mac. As long as your loan amount falls below the maximum limit, you are eligible to finance your home with a conforming loan (if the loan amount is above the limit, it is considered a Jumbo loan). Conforming loans are considered industry standard, with easier terms and generally lower interest rates, appealing to many borrowers.

Loan limits are determined by the Housing and Economic Recovery Act of 2008 (HERA), which was enacted to help the housing market recover after the crisis in 2008. The act dictates that loan limits will only adjust once home value prices are equal or greater than what they were in 2007. This past year, average home prices met and even surpassed the 2007 level. During the third quarter of 2016, the average price was roughly 1.7% above where it was in the third quarter of 2007. This is how FHFA decided to raise the loan limit 1.7%, up to $424,100.

Loan limits will be even higher if you reside in a county FHFA designates as a “high-cost area”; where the local median home value exceeds the baseline loan limit. For example, Maryland’s Montgomery County will have an increased loan limit of $636,150 compared to $517,500 in Baltimore City, and $424,100 in Wicomico. The limit also corresponds to the type of home you purchase. If you are in the market for a two-unit, three-unit or four-unit, the loan limit rises accordingly. See a full list of the maximum loan limits here.

Overall, this increase is a good sign. It means the housing market is starting to recover and our economic outlook for 2017 is relatively positive. As a home buyer, it will allow you to consider homes that are priced slightly higher, expanding your options and purchase power.

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