Inflation at the consumer level rose in March, led higher by increasing costs for food and shelter. The Consumer Price Index rose by 0.2%, up from the 0.1% recorded in February. The recent rise in home prices coupled with tightening credit availability has pushed would be home buyers into would be renters. In addition, food costs are higher due in part to the record high beef prices and the rise in the prices of milk, butter, eggs, fruit and vegetables. The National Association of Home Builders (NAHB) reported that its April Housing Market Index rose to 47 from the 46 recorded in March. The NAHB said that for the past three months builder confidence has “been in a holding pattern” with readings below 50, which are viewed as poor conditions. Readings above 50 signal conditions as good. A NAHB spokesperson said that as the spring buying season comes into full bloom and demand increases, builders are expecting sales prospects to improve in the coming months. The world’s largest soda maker, Coca-Cola, reported quarterly earnings meeting estimates, while sales volume in North America halted its slide. In addition, sales in China were strong. Coca-Cola reported earnings per share of 44 cents, which matched analysts’ estimates while cost cutting measures are starting to materialize. Coca-Cola was first introduced in 1886.
The labor markets continue to improve as the sector rebounds from the harsh winter weather. The Labor Department reported this morning that weekly initial jobless claims declined by 32,000 in the latest week to 300,000, near a seven-year low. Claims are now down 14% compared to a year ago and down 21% compared to same week two years ago. Claims could drop even further due to an expected upturn in the U.S. economy in the second quarter.
Freddie Mac reported this morning that the average rate for a 30-year fixed conventional home loan fell to 4.34% in the latest week compared to 4.41% in the previous week. However, to obtain that rate a borrower would have to pay 0.7 in points/fees, which would equal to roughly to 4.52%. Low inflation coupled with the Fed’s massive Bond buying program have kept home loan rates near historically attractive levels.
In the foreclosure arena, RealtyTrac reported this morning that foreclosure filings fell 23% from March 2013 to March 2014. This led first quarter foreclosure filings in the first quarter of this year to the lowest levels not seen since the second quarter of 2007. There were 117,485 U.S. properties with default notices, scheduled auctions and bank repossessions in March. However, from February to March, foreclosure activity rose by 4%.
The Mortgage Bankers Association (MBA) reported today that its Market Composite Index, a measure of total loan application volume, fell by 1.6% in the latest week for its 4th straight weekly decline. The refinance index fell 5% and is at its lowest level since the end of 2013. In addition, the refinance share of mortgage activity fell to 51% of total applications to its lowest level since July 2009. The purchase index rose by 2.7% as the spring buying season gets underway.
Corporate earnings season kicked off yesterday with Alcoa reporting a profit decline due to a drop in aluminum prices though the company did beat earnings expectations. Investors will be looking for the impact of the harsh winter weather for 1st quarter earnings, with signs of optimism for the 2nd quarter. Later this week, banking giants JPMorgan Chase and Wells Fargo will report their numbers.
Mortgage credit availability increased slightly in March from February as reported by the Mortgage Bankers Association’s Mortgage Credit Availability Index. The MBA said that many lenders and investors are providing borrowers seeking higher loan amounts with a broader range of financing options.
If you are thinking of buying your first home, during the process you will come across several terms that you may not be aware of. In this post, we will introduce you to some mortgage lingo that will help you sail through the process.
Before You Make an Offer:
Appraisal Contingency – This is the period by which your lender needs to get the property appraised. If the property doesn’t appraise for the contract price, you have the option to renegotiate or cancel the contract.
Loan Contingency: Loan contingency is the period of time the seller is giving you to obtain full, formal loan approval. It is important to include a financing contingency in your offer, as it makes the transaction dependent on you receiving the mortgage you’ve applied for. It specifies your cancellation rights if you are unable to obtain financing.
Contract Period – The contract period is the timeframe in which all due diligence must be completed, including obtaining loan approval, property appraisal, home inspection reports, termite inspection, etc. Give yourself enough time for all due diligence to be completed for this very important purchase you are about to make. Typically, purchase contracts are drawn up for a period of 30, 45 or 60 days.
During Rate Shopping:
Points – Points are expressed as a percentage of the loan amount. So 1 point equals 1% of the loan amount. It’s a fee that a lender may charge for lending money.
APR – Annual Percentage Rate is designed to represent the “true cost of a loan” to the borrower, expressed in the form of a yearly rate to prevent lenders from “hiding” fees and up-front costs behind low advertised rates.
Closing Costs – When getting a mortgage, there are several closing costs charged by the lender, escrow/title company, etc. Closing costs also include government fees like transfer tax and recording fees.
Prepaids: Prepaid items are amounts that are required by the lender to be paid at closing, in advance of their due date. These may include property taxes, accrued interest, association dues, mortgage insurance premiums and home insurance premiums. Prepaid items are added to the total amount of the loan’s closing costs and will have to be paid at closing.
During Loan Process:
Loan Application – A loan application, also called Form 1003, details all of your personal information, including employment, income, assets and debts. It also lists the loan program, interest rate and proposed payments. Completing a loan application is usually the first step of a loan process.
Conditional Loan Approval: The lender’s underwriter reviews your income, assets, credit, employment history and property conditions to issue a conditional loan approval. This approval lists all the conditions that need to be met before a final approval can be issued.
Final Loan Approval – When all conditions are reviewed and cleared by the underwriter, he/she issues a final loan approval. At this time, the closing department prepares the loan documents that you will sign in presence of a notary/attorney.
Loan Funding – The actual funds are transferred from the lender to the closing agent. The closing agent then disburses the funds to the seller and all of the agents.
There you have it. Mastering this lingo will help you approach the first-time homebuying process with more confidence. But, always be sure to consult an expert loan consultant to understand your financing options better.
From Homes.com, by Shashank Shekhar http://blog.homes.com/2014/04/first-time-homebuyers-learn-the-mortgage-lingo/
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