Angela Mackinnon

CMI Mortgage #217909

What’s Ahead For Mortgage Rates This Week – January 3, 2022

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What's Ahead For Mortgage Rates This Week - January 3, 2022

Last week’s economic reporting included readings from S&P Case-Shiller Home Price Indices and the National Association of Realtors® released its monthly report on pending home sales. Weekly reports on mortgage rates and jobless claims were also released.

S&P Case-Shiller Reports Show Slower Gains in Home Prices

October home price readings from S&P Case-Shiller Home Price Indices showed slower home price growth in October than for September. Nationally, October home prices rose 19.10 percent year-over-year as compared to 19.70 percent year-over-year home price growth in September. October’s reading was the fourth highest since the inception of the National Home Price Index 34 years ago.

Case-Shiller’s 20-City Home Price Index reported 18.40 percent home price growth year-over-year, as compared to September’s reading of 19.10 percent year-over-year home price growth in September. Home prices for cities included in the 20-City Home Price Index rose by 0.80 percent between September and October. Phoenix, Arizona held on to first place in the 20-City Index with year-over-year home price growth of 32.30 percent; Tampa, Florida followed with year-over-year home price growth of 28.10 percent. Miami, Florida reported year-over-year home prices rose by 25.70 percent in October.

All 20 cities posted double-digit year-over-year gains in home prices. The two cities tied for the lowest year-over-year home price growth rate of 11.50 percent were Chicago, Illinois, and Minneapolis, Minnesota. Analysts said that while home price growth is slowing, prices will continue to rise in 2022.

In related news, pending home sales fell by 2.20 percent in November and were 2.70 percent lower year-over-year. The Midwest posted the largest year-over-year decline in pending home sales with a reading of -6.30 percent.

Mortgage Rates Rise, Jobless Claims Fall

Freddie Mac reported higher mortgage rates last week as rates for 30-year fixed-rate mortgages rose by six basis points to an average of 3.11 percent. Rates for 15-year fixed-rate mortgages rose by three basis points to an average rate of 2.33 percent. Rates for 5/1 adjustable rate mortgages averaged 2.41 percent and were four basis points higher.

Discount points averaged 0.70 percent for fixed-rate mortgages and 0.50 percent for 5/1 adjustable rate mortgages.

Initial jobless claims fell last week to 198,000 first-time claims filed; analysts expected 205,000 new claims filed based on the previous week’s reading of 206,000 initial claims filed. Continuing jobless claims also fell with1.72 million claims filed as compared to the prior week’s reading of 1.86 million ongoing jobless claims filed.

What’s Ahead

This week’s scheduled economic reporting includes readings on construction spending and labor sector readings on jobs growth and the national unemployment rate. Weekly reports on mortgage rates and jobless claims will also be released.

Do You Need Mortgage Insurance Even If It’s Not Required By Your Lender? Let’s Take A Look

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Do You Need Mortgage Insurance Even if It's Not Required by Your Lender? Let's Take a LookFinding a proper mortgage loan and understanding the processing procedures behind the loan is the basis of good research. The down payment on a mortgage loan is typically significant when dealing with mortgage insurance.

Most loan applications with less than 20% down payment are required to include mortgage insurance with the loan. However, mortgage insurance may still be required even if it’s not typically required by your lender.

Underwriting Requirements

Most home mortgage applications undergo a strict set of standards for approval. These standards are known as underwriting and make up the bulk of time spent on a mortgage application. Unique situations in employment or credit history may require an additional down payment percentage to avoid PMI or private mortgage insurance.

Most underwriting requirements require adequate information on the borrower’s credit and employment history for complete application. Self-employed individuals or those with alternative forms of credit may need a few additional hoops to jump through when dealing with mortgage insurance requirements.

Lender-paid Mortgage Insurance

Lender-paid mortgage insurance is a popular option with potential homeowners that seek to avoid the cost of a PMI or FHA-backed insurance on a home loan. Most lenders incorporate payment of private mortgage insurance in exchange for a slightly higher interest rate.

This is one example of the points system on a mortgage application that eliminates the cost of PMI. The increase in interest rate may or may not warrant the need for a lender-paid mortgage insurance arrangement.

What’s Involved With Risk Assessment?

Strict lending requirements and banking policy now limit the number of mortgages with zero down payment options. Conventional mortgages and FHA both require private mortgage insurance if it is less than 20% down payment. However, FHA loans can be more flexible with the initial down payment requirements with adequate credit. FHA mortgage costs are now for the life of the loan. Lenders will look at mortgage insurance as risk protection.

The risk protection process may or may not require mortgage insurance in your home loan. For example, VA and USDA loans do not usually require mortgage insurance if the borrower’s credit and employment history are adequate.

Conventional loans have a reduction in risk once there is at least 20% equity in the home compared to the principal of the mortgage. Don’t hesitate to contact your trusted mortgage professional about potentially dropping mortgage insurance in the future to reduce overall loan costs.

Major Mistakes Which Are Sure to Increase Your Closing Costs

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Three Major Mortgage Mistakes Which Are Sure to Increase Your Closing Costs When shopping for a mortgage, it is important to take closing costs into account. While some closing costs are the same for all lenders, different programs may add or reduce some of the burden borrowers face when closing on a home loan.

Let’s take a look at some major mistakes that could result in borrowers paying more than they need to in closing costs.

1) Failing to Take Property Taxes Into Account

Property taxes are generally put into an escrow account that is established prior to closing on the home loan. In most cases, a homeowner will have to pay 12 to 14 months’ worth of property taxes prior to close.

This can represent several thousands of dollars or more depending on the property taxes associated with a property. While everyone has to pay property taxes, finding a home in a low tax area can significantly reduce the cost of closing on a loan.

2) Failing to Ask Lenders for Credits Toward Closing Costs

A lender may have a program in place that enables them to give a borrower a credit toward applicable closing costs. While this generally may not count toward the down payment, it can still be a significant help for first-time buyers or anyone else who may not have thousands in a bank account ready to pay for lawyers or titling fees.

Depending on where the property is purchased, there may be programs available that provide funding for those who promise to stay in the property for a certain amount of time.

3) Failing to Ask the Seller for Concessions

The seller of a property may offer up to 6 percent of any closing costs associated with the sale of the property. While a seller does not have to offer any concessions, they could potentially provide hundreds or thousands of dollars that may not need to be repaid.

In addition to closing cost support, a seller could also provide appliances or other items that can further save a buyer money during and after the purchase is finalized.

A home buyer can save a lot of money by taking simple and common sense actions. By doing research into cost saving programs and credits toward closing costs, those who may have felt that home ownership was beyond their reach may be able to achieve their dream. To learn more about closing costs, you may wish to talk to a mortgage professional in your area.

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