Quicken Loans Mortgage News

5 Common Money Mistakes People Make

Jenny Zhang — Fri, 20 Nov 2009 17:42:05 +0000

We all wish we could save more, but only about 20% of us actually achieve that goal. A majority of Americans report that they are not satisfied with how much they save, but few actually take steps to budget well and save for emergencies. Where does the money all go? Well, here are five common money mistakes we all make, so maybe we can watch out for them and hopefully start saving.

Not putting money away for retirement. When your company matches a portion of your 401(k), you should definitely take advantage of this. In fact, this should be more important than paying for your kids’ college or paying off your house. While your children have many ways to finance college, and have their whole lives ahead of them to earn money, your retirement is much more limited. By saving for that early, you’re also ensuring you won’t be a burden to them in the future.

Buying too much house. You hear about foreclosures and short sales all the time. To prevent this, you should never buy a house that exceeds 28-33% of your gross income. This way, with an emergency fund, the mortgage payment will always be affordable.
Paying off your mortgage before other debts. Your mortgage generally has the lowest interest rate out of all your debt. So any extra money should be used towards paying off high interest rate debt first.
Refinancing into a fixed when you don’t need to. Many people worry once their ARMs start adjusting, and the natural impulse is to refinance. However, before you make that decision, first calculate if refinancing is worth it. Next, remember that ARMs can adjust down, and they have been with the current low interest rates. So it may make sense to wait a few more months before refinancing anyways. Lastly, don’t refinance into another 30-year fixed if you only have 10 years or less left on the loan. Refinancing into a longer term lowers your monthly payments but increases the amount of interest you pay overall.
Spending to solve problems. We often get into the habit of just spending money whenever something goes wrong. Vacuum broke? Buy a new one. Not enough groceries around the house? Eat out. Not enough time in the morning? Run by Starbucks. All of these reflex decisions to spend money become costly whenever a problem comes up. Instead, evaluate your everyday spending, and cut out expenses that have become a habit and don’t need to be. Maybe in order to cut eating out so much is making a rigorous routine to grocery shop once a week so that the pantry is always stocked.

Capital Markets Update – Initial and Continuing Claims Higher Than Expected

Jenny Zhang — Fri, 20 Nov 2009 15:30:03 +0000

Quicken Loans Capital Markets Update for November 20, 2009

Yesterday, Treasuries moved higher on a flight to quality as equities plunged. Gains were restricted as the market is expecting $118 billion in Fed auctions next week, and also due to concern that the rally has outpaced growth prospects after Bernanke signaled that interest rates will stay low.

Stay tuned for next week’s Capital Market Updates!

Quicken Loans Capital Markets Update – Initial and Continuing Claims Higher Than Expected

Jenny Zhang — Thu, 19 Nov 2009 15:03:37 +0000

This week’s economic news will conclude today with initial claims, leading indicators, and the Philly Fed survey. Today’s initial claims showed signs of further deterioration in the job market.

Initial claims were forecast to be slightly higher at 504k from the previous week. The actual number was slightly higher than the forecast at 505k.

Continuing claims were expected to lower to 5598k from 5631k. The actual number came in higher than expectation at 5611k. Treasuries are up slightly this morning as the 2-year yield approached the lowest level in nine months and because of the worse than expected employment data.

Can a 10.6% Drop in Housing Starts Be Good News?

Jenny Zhang — Wed, 18 Nov 2009 18:34:53 +0000

According to an article by Reuters, housing starts dropped 10.6% to a seasonally adjusted annual rate of 529,000 units for the month of October. This is the lowest level it has been since April, and the largest percentage drop since January. Housing starts were predicted to be closer to 600,000, as September’s housing starts were at 592,000 units.

Reuters also reported both single-family and multi-family homes had a sharp decline in construction activity. Single family homes by 6.8% last month to the annual rate of 476,000 units in groundbreaking starts. Multi-family was much worse off, as they dropped by 34.6% to 53,000 units annually.

With building permits falling, indicating a lack of demand for new homes in the future, and construction slowing down significantly compared to this time last year – is this showing that the first-time home buyer tax credit isn’t working?

Not necessarily, according to Wall Street Journal’s Blog. A strong decline in housing starts may actually be a good sign. How can this be? Well, people may be less willing to want a new house when there has been a huge surplus of empty homes in the market. With having to buy a home in a rush as the tax credit deadline is April, homebuyers may not want the extra work of building a new one. In many areas, vacant homes fill the street. And with the mass amounts of short sales and foreclosures, it just may be more economical to go with a house that’s already been built.

According to the blog entry, roughly 10.9% of all housing units were vacant year round – that equates to 14.2 million empty houses! So while the news seems depressing for what’s supposed to be a recovering economy, don’t be so quick to judge, as this may just be the best news in awhile if all the vacant homes are being filled.

Mortgage Applications Fall as Refinance Activity Softens

Jenny Zhang — Wed, 18 Nov 2009 15:26:30 +0000

Last week, the number of Americans applying for mortgages decreased 2.5% when compared to the week prior, according to a report released today by the Mortgage Bankers Association (MBA). The study showed refinance applications decreased 1.4 percent, while applications from those seeking to purchase a home tumbled 4.7 percent.

According to Quicken Loans Chief Economist Bob Walters, consumers continue to hold out for even lower interest rates.

“Despite these extremely low rates, many consumers continue to stand on the sidelines in hopes of lower rates. Next week’s numbers will be extremely interesting as we have seen rates break through the recent lows, which should spur strong activity.”

Quicken Loans Capital Markets Update – U.S. Housing Starts Drops 10.6%

Jenny Zhang — Wed, 18 Nov 2009 15:03:07 +0000

Quicken Loans Capital Markets Update for November 18, 2009

Yesterday, both Treasuries and stocks ended the day little changed, but Treasuries are down slightly this morning following key reports on inflation.

The consumer prices report showed that the cost of living rose 0.3% in October as Americans paid more for gas. In other economic news, U.S. Housing Starts unexpectedly dropped 10.6% in October to 529,000.

Fannie Mae Changes Conventional Loan Guidelines

Jenny Zhang — Tue, 17 Nov 2009 21:08:02 +0000

With the first-time home buyer tax credit extension comes a new crowd of borrowers, looking for a new home and a new loan.

However, home buyers are going to be experiencing tightening guidelines if they’re looking for a conventional loan. Fannie Mae recently announced a change in requirements for the debt-to-income ratio in home buyers who choose a conventional loan. How does this affect you?

Well, with the exception of FHA and VA loans, most loans are considered conventional including 15 and 30-year fixed, as well as the 5-year ARM.

So, if you want a conventional loan, there may be some difficulty starting after December 12th, 2009. To qualify for a loan amount, lenders use various factors to determine your eligibility. Among them, is the debt-to-income ratio.

Here’s how it’s calculated:

Total gross income per month:
$2,000

Total debt per month:
Credit card payment (from amounts owed): $200
Car payment: $300
Mortgage (the one you’re applying for): $400
Student loan payment: $200
Total debt payments per month: $1,100

To calculate your Debt-to-Income ratio, simply divide your debt by the income:
$1,100/$2,000 = 0.55 or 55%

Previously, Fannie Mae approved debt-to-income percentages of up to about 55%, and in rare cases, a higher percentage was accepted. However, after December 12th, the new guideline is going to be 45%. So in the above example, the homeowners would not be able to get a conventional loan. Keep in mind that you would only calculate what debt you have, so costs such as electric bills or car insurance would not count as it is not debt. The monthly payments figured in are also the absolute minimum payment amounts, so if you pay extra every month, that amount would not be figured into this ratio.

Of course homeowners who do not qualify for conventional loans can also apply for FHA loans, which continues to have the same low down-payment requirements, as well as the flexible credit requirements. Homeowners concerned about this more restrictive requirement can also apply for a loan, and go through the underwriting process before this change takes place on December 12th, 2009. For more information on the underwriting process, check out How Much Home Can You Really Afford?

Quicken Loans Capital Markets Update – Inflation Predicted to Start at Low Levels

Jenny Zhang — Tue, 17 Nov 2009 16:02:06 +0000

Quicken Loans Capital Markets Update for November 17, 2009

Treasuries and equities rallied while mortgages lagged yesterday. Treasuries benefited on comments from Fed Chairman Ben Bernanke which suggested interest rates will remain low for an extended period of time.

Today marks another day of important releases. The core PPI was expected to ease to +1.4%. The actual number came in at +0.7%. The market keeps a close eye on the core PPI.

With economic recovery comes concern of inflation, however, today’s decline provides some reassurance that inflation will at least start out from low levels as the new business cycle begins.

Buying a House in a Hurry: the First-Time Home Buyer Tax Extension

Jenny Zhang — Mon, 16 Nov 2009 15:54:32 +0000

Yes, the first-time home buyer tax credit has been extended and expanded. Sellers: be ready for a whole stampede of homebuyers bidding up your home. Buyers: you can take a deep breath of relief, but don’t wait too long, as the extension only brings more homebuyers to the market.

How is this tax credit extension different than last time?

Three things:
1. Existing homeowners can get a tax credit on a new house for up to $6,500.
2. Income limits have risen to $125,000-$145,000 for individuals or $225,000-$245,000 for couples filing joint returns.
3. The tax credit now ends on April 30th, 2010.

However, just because there’s been an extension – don’t procrastinate, as there won’t be another one anytime soon. Interest rates also won’t stay low forever, so lock in before it goes up. Keep in mind that while there are many houses on the market, the tax credit will bring an even larger crowd of people into the market as well. The houses in great condition that are a true steal will definitely not stick around forever – so start looking today.

Lastly, short sales are often fantastic bargains, but because you have to wait for third party approval – it may take months to just find out if your bid was accepted. So while April may seem like a ways away, the truth is finding a house takes quite a bit of time, especially if you’re working with bank owned. For more information on buying a home, check out this article on marketwatch.com.

Quicken Loans Capital Markets Update – Rates Predicted to Remain at Record Lows

Jenny Zhang — Mon, 16 Nov 2009 15:49:26 +0000

Quicken Loans Capital Markets Update for November 16, 2009

This market will focus on several key economic reports due this week, which include today’s retail sales, Tuesday’s PPI (Producer Price Index) report, Wednesday’s CPI (Consumer Price Index) and housing starts, and Thursday’s initial unemployment claims.

Treasuries rose this morning after a report showed retail sales excluding autos rose less than forecast. Traders are also betting that Bernanke will reiterate that rates will remain at record lows when he speaks later today.