The number of homes 'under contract' to sell increased significantly in April, climbing nearly 7 percent nationwide versus just a month ago.

It’s the third straight month that the Pending Home Sales Index gained and the biggest monthly jump since October 2001, the month prior to the end of the Early 2000's Recession.  Crazy, right?

What’s a Pending Home Sale?

A “pending” home sale is one that’s under contract to close, but hasn't yet.

The Pending Home Sales Index is an sort of an imperfect statistic because not every home under contract makes it to closing, but the data can a reliable indicator of home buyer activity.

Honestly, it's the best thing we've got, so let's just do with it what we can.

Why Are Sales Up?

It’s not tough to understand why homes-under-contract are spiking:

1. There’s a $8,000 tax credit for first-time home buyers
2. Conforming and FHA mortgage rates are hovering near 5 percent
3. Home prices are still relatively soft nationwide
4. Financing is still readily available

These elements are combining to make homes more affordable than they’ve been in the recent past.  In April, the Home Affordability Index posted its second highest reading since 1970. This is a very big deal because it gets renters out of lighting $800/month and helps them own a home for the same money.  It's not always this good.

Looking Forward

We can’t know if home prices will rise or fall moving forward, but if Pending Home Sales translate into closed home sales, it’s obvious that home values will be pressured to rise.  Remember, each closed transaction takes a home “off the real estate market”, reducing the supply of available properties.

If demand rises while supplies fall, sellers might regain the upper-hand in negotiations and then higher prices are the inevitable result.  Seller’s market, anyone?

It's estimated that 80 percent of all Pending Home Sales close within 2 months.  Just give it a little time, these statistics support that a good housing recovery on it’s way.

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Groundhog Day

Last week, like the last three weeks, mortgage markets were bouncing off the walls all day, every day.

But, also like the 3 weeks prior, when the week ended, rates were right back where they started on Monday.  I swear, It's just like that movie Groundhog Day.  For the 4th straight week, mortgage rates started and ended the week essentially unchanged.

Is It Good For You?

Whether or not this is good news depends on your perspective. 

For active home buyers who have yet to find the "right home", long-term flat rates like this is terrific news.  While interest rates stay even, buyer purchasing power holds flat and pre-approval letters stay valid.  Yep, rates change pre-approval letters. 

For buyers already under contract or homeowners looking to refinance, the market's pattern is a little more rough.  Although rates are holding steady week-to-week, the day-to-day action is much different.  Bond markets are volatile and rate swings of a quarter-percent in a day have been very common.  It's enough to drive a person insane if they watch closely enough. 

How good of a rate you get depends on day on which you're shopping. This complicates the process of "locking a rate" and makes it very hard for people trying to time a market bottom.  It's more important now than ever to work with a mortgage professional that gets it.

Specifically, What Did Those Reports Say?

Each week, I put up an economic calendar of news coming out that following week.   Here’s the what actually happened with those reports last week:

What Impacts Mortgage Rates?

If you’re looking to purchase or refinance a home, it’s important to know what moves mortgage rates.  There are normally two major things that impact the direction:

1. Economic News.  (Like the calendar above).
2. International News. (major events, pending legislation, war related news, etc).
3. Stock Market. (Money flows from equities (stocks) to bonds when it seeks shelter).

What Are Rates Based On?

It’s been mentioned before, but as a common reminder - mortgage rates are only based on one thing.Mortgage Backed Securities (MBS).  The only way you have access to these is through live bond quotes.

Looking For Mortgage Rates?

If you’re looking for specifically what mortgage rates are doing, I’d be happy to help with a custom rate quote.  Each scenario is different (there are 27 different factors a mortgage rate is determined by).  If you or someone you currently know are looking for a mortgage, I’m here to help!

Information without obligation.  That’s my policy.  If you like what you hear, my team and I would love to help you out with your mortgage!

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If you have any questions regarding personal or home finance, you can contact Tyler and he'll get you answers.
If you'd like to be updated each time Tyler puts up a new blog post, click here and have it delivered via e-mail.
Tyler also authors his popular blog Wealth With Mortgage, check it out here!

Last Thursday morning, homeowners in different parts of the country woke up to find the following headlines in their newspapers:

• Rates on 30 year mortgages sink to 4.78%, a new low (LA Times)
• Mortgage rates at record low for a 2nd week (Miami Herald)
• Mortgages hit another record low (San Francisco)

The driver of this story was that Freddie Mac's weekly Primary Mortgage Market Survey showed the lowest, average 30-year fixed rate mortgage in its 38-year, rate-tracking history.  Yes, this is good news.

That's Old News

However, once again, the headlines came too late for homeowners.

Prior to Thursday's market open, mortgage markets had already worsened from their record-setting levels.  The worsening started slowly at first, and then sped up.  The shift pressured rates higher so that when lenders issued their Thursday morning rate sheets, most showed an 1/8 increase from Wednesday's close.

Even worse, the negative momentum carried into the afternoon, forcing a second increase of an 1/8 percent.  A 3 rate sheet day, but that shouldn't surprise you.

The Freddie Mac survey may have been accurate when the sun came up on Thursday. However, by the time the sun went down, it wasn't even close.  It is another example of why you can't do your rate shopping by watching newspaper headlines.  Mortgage markets are volatile and rates often change without notice.

Thursday, they did it twice.

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If you have any questions regarding personal or home finance, you can contact Tyler and he'll get you answers.
If you'd like to be updated each time Tyler puts up a new blog post, click here and have it delivered via e-mail.
Tyler also authors his popular blog Wealth With Mortgage, check it out here!

April 4, 2009, marked the official start of the Making Home Affordable mortgage refinance program.

It's expected to help 5 million homeowners, and the Making Home Affordable program "looks the other way" with respect to falling home values, approving mortgage applications based on borrower payment history and benefit to the homeowner.

What's It Take?

Contrary to popular belief though, not every homeowner is eligible for a Making Home Affordable refinance. There are 3 basic criteria that must be met.

First, your existing home loan must be backed by either Fannie Mae or Freddie Mac.  No exceptions.  Thankfully, both large companies provide online lookup services.  Start with the Fannie Mae site because Fannie has many more loans being serviced and also because Freddie Mac's site requires your social security number.

Second, you must have a perfect mortgage payment history over the last 12 months.  Even one payment made 30 days late disqualifies you from participating in the Making Home Affordable program.  It is okay, however, if you were 20 days late on your payment and incurred late fees.  This isn't reflected on your credit report.

Third, the balance on your mortgage cannot exceed your home's value by more than 5%.  The math formula is (Mortgage Balance) / (Home Value).  If the result is greater than 1.05 then your loan-to-value exceeds 105% and you are not eligible for the Making Home Affordable refinance program.

Details If You Qualify

Now, assuming you meet the criteria above, there are some noteworthy details of the Making Home Affordable program you should know:

1. If you didn't pay mortgage insurance before refinancing, you won't have to pay it after refinancing -- even if your loan-to-value exceeds 80%.
2. All refinances do require income verification.  This is even true if the original mortgage was a stated income loan.
3. Second mortgages cannot be paid off using a new loan.  They have to be subordinated.

There are other guidelines, too, and both Fannie Mae and Freddie Mac have dedicated portions of their website to the Making Home Affordable program.  Unfortunately, the information may be a bit technical.

Even the government's fact sheet can be heavy reading at times.

Therefore, if you have specific questions about the Making Home Affordable program and seeing if you qualify, first check to see if Fannie or Freddie is backing your loan.  If they are, give me a call to plan next steps.

Remember, the program ends June 10, 2010.

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If you have any questions regarding personal or home finance, you can contact Tyler and he'll get you answers.
If you'd like to be updated each time Tyler puts up a new blog post, click here and have it delivered via e-mail.
Tyler also authors his popular blog Wealth With Mortgage, check it out here!

Your Best Option Is About To Leave The Building

If you’re in want of a cash out refinance, the most liberal cash-out program in town is about to make qualification more difficult. 

Effective April 1, 2009, the FHA is reducing the maximum loan-to-value on cash-out refinances by 10 percent, dropping the loan size limit from 95% of the home’s value to 85%.

The Reasoning Behind The Decision

In its official press release, the FHA days it’s making the change to “limit its exposure to undue risk”.

It also lists the following cash-out requirements:

• With less than 12 months since the purchase date, a home’s value cannot exceed its original purchase price — even if home improvements were made.
• A homeowner must be current on his mortgage payments to qualify
• A second, verifying appraisal may be necessary, depending on loan traits
• Co-signers may not be added to the mortgage note in order to qualify

How You Can Avoid The Changes

The last day to register a FHA 95% cash out refinance is Tuesday, March 31, 2009.  The loan does not need to be “locked” — only registered.

So, if you know that a 95% cash out FHA refinance is in your future, talk to your loan officer before Wednesday morning about registration. 

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If you have any questions regarding personal or home finance, you can contact Tyler and he'll get you answers.
If you'd like to be updated each time Tyler puts up a new blog post, click here and have it delivered via e-mail.
Tyler also authors his popular blog Wealth With Mortgage, check it out here!