Common First Time Homebuyer Mistakes

Many first-time homebuyers make simple and common mistakes that are easily avoidable.
They face multiple challenges anyway, such as finding the right home, the right agent, getting approved for a mortgage, and staying within their budget. By avoiding these common mistakes, the process of buying a home can be much less stressful.

1. Overlooking extra costs of homeownership
While some see themselves as ready for homeownership once they can afford a mortgage payment, it is important to remember the other fees that come along with owning a home. Property taxes, home owners association fees, maintenance, higher water and electrical bills, and property insurance are among the extra costs of owning a home, and should be calculated into your budget.

2. Not getting preapproved
It is very important to get preapproved for a loan before you go out searching for the perfect place. That way, you will be making financially sound decisions versus unrealistic emotional ones as to what you can afford.

3. Spending your entire savings on your down payment
This is one of the most common mistakes first time homebuyers make. Homebuyers who put 20 percent or more down don’t have to pay for mortgage insurance when getting a conventional mortgage, which often translates into substantial savings on the monthly payment. However, it is smarter to keep your rainy day savings intact instead.
photo credit: opensourceway

Financial Fitness

This article about being financially fit has great advice for small, inexpensive ways to save more money over time with your home.
Several tips that stand out are:

1. Be fire ready – Check that your fire extinguishers are functioning and easily available, and check your smoke detectors as well.

2. Prevent shocks – Outlets near water, such as in the bathroom or kitchen, should have a ground fault circuit to prevent shocks and electrocution. An inexpensive tool can alleviate this worry.
The major takeaway from this is that by making small investments in your home, you save yourself more in the long-run and protect the value of your property.

Full article here.

This Week’s Market Commentary

Happy New Year Everyone!
This week bring us the release of only three monthly reports that are relevant to the bond market and mortgage rates, but two of them are considered to be highly important.

In addition to those three reports, we also will get the minutes from the last FOMC meeting that may influence the markets and possibly mortgage rates. The financial markets are closed today due to the New Year’s Day holiday.

The first report is the Institute for Supply Management’s (ISM) manufacturing index for December late tomorrow morning. This highly important index measures manufacturer sentiment. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened.

That indicates manufacturing sector strength rather than contraction. Analysts are currently expecting to see a 53.4 reading in this month’s release, meaning that sentiment strengthened from November’s 52.7. A smaller reading will be good news for the bond market and mortgage shoppers, while a higher than expected reading could lead to higher mortgage rates tomorrow morning as it would point towards economic strength.

Also tomorrow is the release of the minutes from the last FOMC meeting. This will give market participants insight to the Fed’s thinking and concerns regarding the economy, inflation and monetary policy. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so they won’t affect the markets or mortgage rates until afternoon hours.

The Commerce Department will post November’s Factory Orders data late Wednesday morning. This data gives us a fairly important measurement of manufacturing sector strength. It is similar to the Durable Goods Orders release that was posted late last week, except this report includes orders for both durable and non-durable goods. Durable goods are items that are expected to last three or more years such as electronics and autos. Examples of non-durable goods are food and clothing. Analysts are expecting to see an increase of 2.1% in new orders. This report generally does not have a huge impact on the bond market or mortgage rates, but it can influence bond trading enough to create a minor change in rates. The smaller the increase, the better the news for mortgage rates.

The final report of the week comes Friday morning when the Labor Department will post December’s employment figures. The Employment report is arguably the most important monthly release we see. It gives us the national unemployment rate, the number of jobs added or lost during the month and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, a decline in payrolls and earnings would be ideal news for the bond market.

Current forecasts call for a 0.1% rise from November’s unemployment rate of 8.6%, 150,000 new jobs added to the economy and an increase in earnings of 0.2%. If we see weaker than expected results, mortgage rates should improve Friday. However, stronger than expected readings will likely raise optimism about the economy, pushing mortgage rates sharply higher.

Overall, the key data of the week will be Friday’s Employment report, but look for tomorrow and Wednesday to be active due to the economic data and FOMC minutes scheduled. If they give us favorable results, mortgage rates will likely move lower for the week. But if not, we can expect to see mortgage rates move higher on the week.

Higher Rates coming?

Check out this video blog from "Think Big Work Small" regarding HR 3630 that is expected to pass...
"Think Big Work Small"

Shadow Inventory Down By 16% From Last Year

The shadow inventory of distressed properties owned by lenders and not on the market decreased 16% from this time last year, according to a report released by CoreLogic today. The 1.6 million homes not on the market represent a five month supply.

A one month supply in a shadow inventory is more ideal for the housing market, but this is still an improvement over October 2010. This month last year there was a seven month supply.

California is among the six states that make up half of the current shadow inventory, along with Florida, Illinois, Texas, New Jersey and New York.

How to Hire A Contractor: Five Important Steps

Whether remodeling or making more simple home improvements, it is vital to find the right contractor. Times are tight, and horror stories about lingering projects abound. These five steps, outlined by the San Jose Mercury News, will help you hire the perfect contractor that you can trust to improve your home.

Step One: Get referrals
While there are many ways to find contractors, an easy way to start is simply asking friends and family--or your Mortgage Consultant about it. Put the question out to your contacts on Facebook, and a friend may refer you to a fantastic and trustworthy contractor.
Online sites such as Angie’s List, which requires a subscription fee, provide reviews of local contractors among other small businesses.

Step Two: Interview potential contractors
Prepare to ask the candidates questions about their professional background, recent experience with similar projects, their workers, professional associations, and obtain a list of references. Be sure to follow through and call all of the given references!

Step Three: Look for red flags
Contractors offering extremely low bids could be cutting corners with cheap labor and substandard materials. While times are difficult for many, the cheapest bid is not always the best.
Other red flags include asking for too much cash up front – more than a third – or demanding to be paid only in cash.

Step Four: Narrow it down
From those you have interviewed, narrow it down to three candidates and call all of their references. Ensure that those projects were completed on time and at the expected price. You can also check on your candidates with the Better Business Bureau for former complaints.
Meet with the three candidates face to face, and ask for a broken down price estimate that shows materials and labor expected.

 Step Five: Finalize the deal
Once you have chosen your contractor, get the agreement down in writing! This is crucial if any problems should arise later on. The Mercury recommends including the “beginning date, a completion date, and how payments will be made. It’s typical to pay a third up front, a third when the project is half done and the final third once the job is done and meets your expectations.”
Also ensure that the contractor has a certificate of insurance showing liability and workman’s compensation insurance in case of an accident.

This Week’s Market Commentary

There are six pieces of economic news that may affect mortgage rates this week.

Some of the data is considered highly important to the financial and mortgage markets, so it will likely be an active week for mortgage rates. As the week progresses, the data gets more important.

Unlike most Mondays, there is data being posted this morning with the release of October’s New Home Sales report. It will give us an indication of housing sector strength, but is the week’s least important release. Analysts are expecting to see little change between September’s and October’s sales of newly constructed homes. It will take a large change in sales for this data to influence mortgage rates.

November’s Consumer Confidence Index (CCI) will be released late Tuesday morning by the Conference Board. It gives us a measurement of consumer willingness to spend. If consumer confidence is rising, analysts believe that consumers are more apt to make larger purchases, essentially fueling economic growth. This makes long-term securities such as mortgage-related bonds less attractive to investors and usually leads to higher mortgage rates. Analysts are expecting to see a sizable increase in confidence from last month’s level, meaning consumers were more optimistic about their own financial situations this month than they were last month. A weaker reading than the 44.0 that is expected would be good news for mortgage rates, while a stronger reading could push mortgage rates higher Tuesday.

The next piece of data that we need to be concerned with comes early Wednesday morning when revised 3rd Quarter Productivity numbers are posted. This index is expected to show an upward revision from the preliminary reading of worker productivity. Higher levels of productivity are thought to allow the economy to expand without inflationary pressures rising. This is good news for the bond market because economic growth itself isn’t necessarily bad for the bond market. It’s the conditions around an expanding economy, such as inflation, that hurt bond prices and mortgage rates. Current forecasts are calling for an annual rate of 2.6%, down from the previous estimate of 3.1%.

Also Wednesday, the Federal Reserve will release their Beige Book at 2:00 PM ET. This report, which is named simply after the color of its cover, details economic conditions by region. That information is relied on heavily during the FOMC meetings when determining monetary policy, so its results can influence bond trading and mortgage rates if it shows any significant surprises. More times than not, this report will not influence the markets enough to cause intra-day changes to mortgage rates, but the potential to do so does exist.

November’s manufacturing index from the Institute for Supply Management (ISM) will be posted at 10:00 AM ET Thursday. This index measures manufacturer sentiment and can have a considerable impact on the financial markets and mortgage rates. Current forecasts call for a small decline in sentiment from October to November. October’s reading was previously announced as 50.8. A weaker reading than the expected 51.0 would be good news for the bond market and mortgage rates. A reading above 50 means that more surveyed trade executives felt business improved during the month than those who felt it had worsened. The lower the reading the better the news for bonds because waning sentiment indicates a slowing manufacturing sector and makes a broader economic recovery less likely.

The biggest news of the week comes Friday morning when the Labor Department posts November’s Employment figures. This is arguably the most important monthly report we see. It is comprised of many statistics and readings, but the most watched ones are the unemployment rate, the number of news jobs added or lost during the month and average hourly earnings. Current forecasts call for no change in the unemployment rate of 9.0% while 117,000 new jobs were added to the economy. The income reading is forecasted to show an increase of 0.2%. An ideal scenario for mortgage shoppers would be a higher unemployment rate than 9.0%, a smaller increase in payrolls and no change in the earnings reading. If we are fortunate enough to hit the trifecta with all three, we should see the stock markets fall, bond prices rise and mortgage rates move lower Friday. However, stronger than expected readings would likely fuel a stock rally and bond sell-off that would lead to higher mortgage rates.

Overall, the most important day of the week is Friday with the employment figures being released, but we may also see sizable movement in rates Thursday. Friday’s employment data could cause a significant change in rates, but Thursday’s ISM index is also one of the more important reports we see each month. If Friday’s data reveals stronger than expected results we may see rates spike higher after its release, possibly erasing any gains from the week. It will probably be the key to rates moving lower or higher for the week. I suspect it will be a fairly active week for the markets and mortgage pricing, especially the latter part, so it would be prudent to maintain contact with your mortgage professional if still floating an interest rate.