Help Buyers Upgrade Their New Home

Buying an older home and need help with energy-efficient windows, HVAC upgrade, etc? When team up with Rojo Mortgage Team at UWL we can help you accomplish this.

When utilizing the Energy Efficient Mortgage (EEM) program on an FHA loan, the buyer not only gets energy-efficient windows, HVAC systems, solar electric systems, and cool roofs, but they also qualify for tax credits and rebates thru the new climate change legislation signed into law this month.

Help your new buyers or those refinancing, spruce up the house they are purchasing, making it more desirable while putting money back in their pockets.  Money that will help cover the additional cost of MIP.

Take a look and call us today for more information.  All FHA buyers/borrowers need to be made aware of the thousands of dollars they could receive back from the federal government.

 Energy efficiency makes sense. EEMs are home loan programs designed to enable homebuyers to easily and affordably finance home energy upgrades with their mortgages. Effective insulation, modern central AC/Heating systems and fully weatherized doors and windows deliver more than a significantly lower monthly utility bill: they provide the amenities of happier living. Recommended and supported by the US Department of Energy and ENERGY STAR, EEM programs enable you to finance costly and valuable energy-related home improvements directly with your mortgage.  Call us today 916-548-3942.

Rates Rising, Demand Weakens

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.65% from 5.45%.
"Last week's purchase results varied, with conventional applications declining 2% and government applications increasing 4%, which is potentially a sign of more first-time homebuyer activity," said Joel Kan, an MBA economist.
Mortgage demand continues to weaken, still right around a 22-year low, but there was a sign in the weekly numbers that first-time buyers may be slowly returning.
Mortgage applications to purchase a home fell 1% last week compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. Volume was 21% lower than the same week one year ago. There was, however, a jump in demand for loans offering lower down payments.
"Last week's purchase results varied, with conventional applications declining 2% and government applications increasing 4%, which is potentially a sign of more first-time homebuyer activity," said Joel Kan, an MBA economist.
He also noted that the average purchase loan size continued to trend lower, as homebuying at the high end of the market weakens.
Mortgage rates increased for all loan types last week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) rose to 5.65% from 5.45%, with points climbing to 0.68 from 0.57 (including the origination fee) for loans with a 20% down payment.
As a result of the sharp increase in rates, demand for loan refinances dropped 3% for the week and were 83% lower than the same week one year ago.
Borrowers also moved away from adjustable-rate loans, which are no longer offering the bargains they did just a few months ago.
"The spread between conforming fixed-rate loans and ARM loans narrowed to 84 basis points from over 100 basis points the prior week," Kan said. "This movement made fixed rate loans relatively more attractive than ARMs, thereby reducing the ARM share further from highs seen earlier this year."
Mortgage rates moved even higher to start this week, as the stock market sold off on renewed fears of a recession. Investors are waiting for what they expect to be hawkish sentiment from the Federal Reserve at a meeting later this week in Jackson Hole, Wyoming.

An Overview Of How Mortgage Interest Rates Are Determined

Several factors affect how mortgage rates are determined today, but you can only control one aspect: the personal factors. Lenders look at your qualifying factors to determine your risk level. The better your qualifying factors, the better the interest rate they’ll offer.

 But it all starts with the current market rates, so you may wonder how the market affects interest rates.

 Mortgage rates are affected by the overall economy. When the economic outlook is good, rates tend to increase, and rates fall when they’re not so great. It seems somewhat backward, but here’s the reasoning.

 When the economy is doing well, borrowers can afford more. Without increased rates, the demand for mortgages could exceed the bandwidth of most lenders. Slightly rising rates keep everyone on the same level.

Conversely, when the economy declines and unemployment rates increase, interest rates fall to make it more affordable for borrowers to take out loans.

Frequency Of Interest Rate Changes

Every day, banks receive rate sheets. This doesn’t mean rates change daily, but they can. In fact, they can change multiple times a day.

Which Market Factors Affect Mortgage Rates?

Market factors are some of the largest driving forces behind mortgage rates. The Federal Reserve, bond market, Secured Overnight Finance Rates, Constant Maturity Treasury, the health of the economy and inflation all affect mortgage rates.

Federal Reserve

Many people assume the Federal Reserve sets mortgage rates. They don’t, but the Federal Reserve does affect rates. The Fed controls short-term interest rates by increasing them or decreasing them based on the state of the economy. While mortgage rates aren’t directly tied to the Fed rates, when the Fed rate changes, the prime rate for mortgages usually follows suit shortly afterward.

 The Federal Reserve controls short-term interest rates to control the money supply. When the economy is struggling, as has been the case during COVID-19, the Fed lowers rates, which is why you’ve likely heard rates are close to 0%. These are not the rates given to consumers, but the rates at which banks can borrow money to lend to consumers.

 When the Fed decides they need to tighten up the money supply, they raise the Fed rate. While this doesn’t directly increase mortgage rates, eventually, banks and lenders must follow suit to keep up with their costs to borrow money from the Fed.

Bond Market

Mortgage rates have a reputation of being tied to the 10-year Treasury note when they’re tied to the bond market.

 Mortgage-backed securities, or mortgage bonds, are bundles of mortgages sold in the bond market. Bonds affect mortgage rates depending on their demand. When the demand for mortgage bonds is high (usually when the stock market performs poorly), mortgage rates increase, and when the demand is low, mortgage rates decrease.

Secured Overnight Finance Rate

A secured Overnight Finance Rate (SOFR) is an interest rate set based on the cost of overnight borrowing for banks. It’s often used by lenders to determine a mortgage’s base interest rate, depending on the type of home loan. It’s grown in popularity to serve as the replacement for the London Interbank Offer Rate (LIBOR), which is being phased out at the end of 2021.

Inflation Worse Before it Gets Better?

After underestimating the worst inflation outbreak in decades, central banks are now driving their economies headlong toward recession in order to tame prices. For now, central banks across many advanced and emerging economies have little option but to keep on hiking in the face of inflation that has yet to peak. Bloomberg Economics sees global inflation edging up from 9% year-on-year in the second quarter to 9.3% in the third quarter before slipping back to a still uncomfortable 8.5% by year end.
The speed of tightening is making a soft landing harder to achieve. Citigroup Inc. economists put the chances of a global recession at 50% while Bank of America Corp. economists forecast a “mild recession this year” in the US as conditions have deteriorated much more rapidly than they expected.
The stark outlook is stoking fears that policymakers will end up overreaching as they push ahead with aggressive interest-rate hikes, just as some now concede they overstimulated through the pandemic recovery.

Investor confidence that policymakers can avoid recession has collapsed. Global growth and profit expectations are at an all-time low while recession expectations are at their highest since the pandemic-fueled slowdown in May 2020, according to Bank of America’s monthly fund manager survey.
While labor markets remain strong, central bankers will still need to tread carefully, said Dario Perkins, global macro strategist at TS Lombard.
“We’re on this rapid path to over-tightening,” he said. “The worry is that having been embarrassed by inflation, policymakers now want to make amends and the risk is they go too far and cause unnecessary damage to the world economy.”

Some officials are already voicing concerns about the pace of rate hikes. They include Federal Reserve Bank of Kansas City President Esther George, who cautioned this month that rushing to tighten policy could backfire.
The European Central Bank raised its key interest rate by 50 basis points, the first increase in 11 years and the biggest since 2000. That came as the likelihood of a contraction has increased to 45% from 30% in June, according to a Bloomberg survey of economists.
The Bank of England is considering a 50 basis points move and the Federal Reserve on July 27 is expected to raise rates by another 75 basis points. The Bank of Canada has already shocked with a 100 basis points move.
Among emerging economies, the South African Reserve Bank lifted its rate by 75 basis points, its biggest increase in borrowing costs in almost two decades, while the Philippines this month surprised with a 75 basis points hike in an unscheduled decision.
Having missed the inflation build-up, monetary officials now face an uphill battle to restore confidence.
In the UK, BOE Governor Andrew Bailey has had to defend against attacks from politicians in the ruling Conservative Party who blame the bank for moving too slowly on inflation. Sweden’s Riksbank Governor Stefan Ingves this month admitted that the bank has had a “bad year” as a forecaster after a ninth consecutive month of inflation exceeding its forecast.
Australia’s government has announced a review of the Reserve Bank amid criticism of the institution’s recent performance. In a rare mea culpa, RBA Governor Philip Lowe on Wednesday conceded that its over stimulus in the pandemic’s wake had added to price pressures.
“While this approach meant we avoided some damaging long-term scarring, it has contributed to the inflationary pressures we are now experiencing,” he said in a speech.
That leaves him, like so many peers, having to trade off economic growth to rein in prices.
“Inflation is expected to get worse before it gets better,” Ravi Menon, managing director of the Monetary Authority of Singapore, said at a briefing on July 19. “A slowdown in economic growth is necessary” to restore global stability. In a warning for central banks about what lies ahead, analysis by Citigroup of the Fed’s hiking cycle between 2015 and 2018 found the economy slowed more rapidly than the Fed expected -- “a powerful reminder that the Fed will need to stay light on its feet and prepare for surprises.”

Inflation and Interest Rates

Inflation continued to heat up in June, hitting a fresh pandemic peak that keeps the Federal Reserve geared for another big interest-rate hike later this month, economists project.

The consumer price index probably increased 8.8% from a year earlier, marking the largest jump since 1981, according to the median forecast in a Bloomberg survey. Compared to May, the widely followed gauge is seen climbing 1.1%, marking the third month in the last four that inflation has advanced at least The acceleration is likely to reflect higher gasoline and elevated food costs. Prices at the nation’s gas pumps reached a high of more than $5 a gallon in mid-June and will add at least 0.5 percentage point to the headline CPI monthly advance, according to Bloomberg Economics ahead of Wednesday’s report. 

High gas prices, which were increasing well before Russia invaded Ukraine, help explain both President Joe Biden’s dismal approval ratings and his upcoming trip to the Middle East, where he hopes to convince Arab leaders to produce more oil.

But fuel prices have started to ease this month, suggesting the CPI will simmer down beginning with the July data. Though still well-elevated, some cooling in inflation may already be in the works as bloated retail inventories lead to discounts and used-car prices soften. The core measure, which excludes energy and food, probably rose 0.5% in June on a monthly basis, the smallest advance in three months.

While Fed officials have already signaled a 75 basis-point interest-rate hike at their next meeting, smaller inflation prints in the coming months could lead to less-aggressive policy action later this year.

“If I’m right about June being the start of a string of lower core CPI prints, which is what the Fed wants to see, then I think comments from officials will quickly switch to a 50 basis-point hike for September and there were more calls for slowing to 25 basis points late in the year,” said Omair Sharif, founder of Inflation Insights LLC. 

Even though measures of goods inflation are seen decelerating, service components like housing may keep consumer price growth elevated for some months.

“Inflation of course has migrated away from the goods sector and is now firmly entrenched in housing -- thanks to a very tight housing market -- as well as in non-shelter services,” Citigroup Inc. economists Andrew Hollenhorst, Veronica Clark and Isfar Munir said in a note. 

“We continue to expect a slowing in activity and some slowing in prices but it could take time both to cool-down the overheating housing market and that may only flow through to rents with a lag,” they said.

If measures of inflation don’t decline as expected in the coming months, that could lead the Fed to take an “even more painful adjustment to the monetary policy stance,” Deutsche Bank AG economists said in a note. That would add to recession risks, because larger and faster interest-rate hikes take a greater toll on demand.

Need a Refinance with Excess Debt?

With the stimulus checks that have circulated in the last few years and people staying home more because of the pandemic, credit card debt shrunk drastically. People were able to pay balances down and even save some money. Unfortunately, it seems that with inflation at the level it is, credit card debt is now at an all-time high. According to the Federal Reserve, credit card debt rose by 20% in April 2022.

Because prices have risen on everything over the last few months, and most incomes have stayed the same, many consumers are being forced to rely more on credit cards to pay for every day living expenses like gas and food and sometimes even to pay their bills.

The big problem with this is that revolving balances are a large part of a consumer’s credit score. While payment history makes up the largest part of a credit score at 35%, the amount owed is the second largest factor at 30%. So, keeping balances low is just as important as paying bills on time. Revolving balances weigh more heavily than installment balances. While it is important for a good credit score to have both, close attention needs to be paid to revolving balances.

As consumers use their credit cards more this also means their credit scores are most likely taking a big hit. Optimally you do not want more than three credit cards with balances and those balances below 10% of the high credit. That’s not cumulative, that’s for each card.

While paying down credit cards might not seem feasible for some right now, there are things that people can do that could ease some of the pain without having to put out a lot of money. Even though interest rates are rising, which includes credit cards, it is still possible to get yours lowered. If a consumer has a long-standing relationship with a certain credit card, and they have no delinquent payments on it, there is a good possibility that once a year they will agree to lower the interest rate. It is always worth a phone call. Most credit cards have a variable interest rate. Right now, that interest rate averages 16.62% but by the end of the year that could rise to close to 19% which would be an all-time high. If a borrower has cards that have a long history and no delinquent payments, now would be a good time to ask for a lower interest rate.

Another possibility is to ask for the credit limit to be increased. For some, this can be a temptation to use the card more. However, if the limit is increased but your balance stays the same and decreases over time this shows responsible credit utilization and can help to raise your credit score. When Banks and lenders see several maxed-out credit cards or lines of credit it is a red flag to them of financial distress.

An option for those with several credit cards would be to transfer some or all the balances to the card with the lowest interest rate. Some creditors even offer 0% interest for up to a year or more when you open a card with them. While this can be a double-edged sword, in some cases this might be a good option to get through this time. Yes, it will be a new inquiry and a new account with no history but in the long run, it could make it much easier to get the balances paid down. HELOC’s and personal lines of credit normally also have extremely low-interest rates. Opening one to pay off credit cards could also be a viable option and would drastically reduce the time it took to pay off the balance.

While this is a frustrating time financially for a lot of consumers, we need to keep in mind it is only temporary and there are things that can be done proactively to ease the pain as we move through these times of uncertainty.

If I can be of any assistance, please reach out! You can reach me, Scott Rojo, at 916-548-3942 or through my website, rojomortgage.com/contact.