Navy Fellas Realty Group

Real Estate, Residential sales and purchase

What’s Ahead For Mortgage Rates This Week – August 14, 2023

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What's Ahead For Mortgage Rates This Week - August 14, 2023Last week’s economic reporting included readings on inflation, consumer sentiment, and weekly readings on mortgage rates and jobless claims.

Inflation Rate Holds Steady in July

Month-to-month inflation rose at a pace of 0.20 percent in July and met analysts’ expectations. There was no change in the pace of month-to-month inflation from June’s reading of 0.20 percent growth. The Consumer Price Index also reported that year-over-year inflation reached 9.10 percent, which was the highest reading since reaching a 40-year high in mid-2022.

Core inflation, which excludes volatile food and fuel prices, was unchanged from June’s month-to-month pace of 0.20 percent growth. July’s month-to-month reading matched analysts’ expectations. Year-over-year core inflation dipped slightly to 4.70 percent in July as compared to June’s reading of 4.80 percent year-over-year inflation.

Federal Reserve leaders said that they would continue monitoring domestic and global economic developments along with financial and economic data before determining whether or not to raise the Fed’s key interest rate range.

Mortgage Rates, Jobless Claims Rise

Freddie Mac reported higher mortgage rates for the third consecutive week. The average rate for a 30-year fixed-rate mortgage approached seven percent and rose by six basis points to 6.96 percent. Rates for 15-year fixed-rate mortgages rose by nine basis points to 6.34 percent.

248,000 initial jobless claims were filed last week, which surpassed expectations of 231,000 new claims filed and the previous week’s reading of 227,000 first-tine jobless claims filed.

University of Michigan Consumer Sentiment Survey

In other news, the University of Michigan released its monthly preliminary reading on U.S. consumer sentiment.

Consumer sentiment rose to an index reading of 72.0 in August as compared to the July reading of 71.6.  The majority of.consumers surveyed indicated that the economy improved in the three months leading up to the survey., Component readings included consumer sentiment index readings for current economic conditions and economic conditions within the next six months. The survey reading for consumer sentiment about economic conditions over the next six months fell to an index reading of  67.3 from the July reading of 68.3 Readings over 50 indicate that most consumers are confident about current economic conditions.

Joanne Hsu, the University of Michigan’s director of consumer surveys, said: “…In general, consumers perceived few differences in the economic environment from last month, but they saw substantial improvement relative to just three months ago.”

What’s Ahead

This week’s scheduled economic reporting includes reading on housing starts and building permits issued, the minutes of the Federal Reserve’s recent meeting of its Federal Open Market Committee, and weekly readings on mortgage rates and jobless claims. 

Will Pre-Approval for a Mortgage Hurt My Credit Score?

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Will Pre-Approval for a Mortgage Hurt My Credit Score?Obtaining a pre-approval for a mortgage is an important step when you’re planning to buy a home. It gives you an idea of how much you can afford, helps streamline the home-buying process, and strengthens your position as a serious buyer. However, many people worry that the pre-approval process might negatively impact their credit score. In this blog post, we’ll dive into the details to determine whether or not a pre-approval for a mortgage will hurt your credit.

Understanding Credit Inquiries

To understand how pre-approval affects your credit, we need to discuss credit inquiries. When you apply for credit, such as a loan or credit card, the lender typically pulls your credit report to assess your creditworthiness. These inquiries are categorized as either “hard” or “soft.”

Hard Inquiries: A hard inquiry occurs when you apply for credit, and it can impact your credit score. These inquiries are visible to other lenders and may suggest that you’re actively seeking credit.

Soft Inquiries: A soft inquiry, on the other hand, doesn’t affect your credit score. These inquiries occur when you check your own credit report or when a lender pre-approves you without your explicit consent.

Pre-Approval and Credit Inquiries

When it comes to mortgage pre-approvals, most lenders perform a hard inquiry to assess your creditworthiness accurately. While this hard inquiry might have a temporary impact on your credit score, the impact is typically minimal. Generally, a single hard inquiry will only result in a small dip in your score, typically around five points or less. The credit bureaus understand that consumers may shop around for the best mortgage terms and account for this in their scoring models.

The Logic Behind Credit Scoring

Credit scoring models are designed to account for consumer behavior related to loans and credit applications. They recognize that it’s normal for individuals to shop around for the best rates and terms when seeking a mortgage. To encourage this behavior, credit scoring models treat multiple mortgage inquiries made within a certain time frame (usually 30 days) as a single inquiry. This means that even if you get pre-approved by multiple lenders within that timeframe, it will be considered a single inquiry when calculating your credit score.

While a pre-approval for a mortgage may result in a temporary dip in your credit score due to the hard inquiry, it’s generally a small and short-lived effect. The benefits of obtaining a pre-approval, such as understanding your budget and strengthening your position as a buyer, far outweigh any minor impact on your credit score.

To minimize any potential negative impact on your credit score during the mortgage pre-approval process, consider the following tips:

Do your research: Before applying for a pre-approval, research lenders and their qualification criteria. Focus on a select few lenders who are likely to meet your needs to minimize the number of credit inquiries.

Time your applications: If possible, try to complete all your mortgage pre-approval applications within a short time frame, such as 30 days. This way, the credit bureaus will consider them as a single inquiry.

Monitor your credit: Regularly monitor your credit report to ensure accuracy and identify any potential issues. You can obtain one free credit report per year from each of the three major credit bureaus.

In most cases, the impact of a mortgage pre-approval on your credit score is minimal and short-lived. While the initial hard inquiry may result in a small dip in your score, credit scoring models are designed to account for shopping around for the best mortgage terms. The long-term benefits of obtaining a pre-approval far outweigh any minor impact on

Avoiding Becoming House Poor: A Path to Financial Security and Balance

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Avoiding Becoming House Poor: A Path to Financial Security and BalanceAs the housing market continues to evolve, it becomes increasingly crucial for aspiring homeowners to tread carefully and avoid falling into the trap of being house poor. The dream of owning a home should not come at the expense of financial stability and overall well-being. Here are some essential tips to steer clear of this precarious situation:

Setting a Sensible Budget:

Before even considering purchasing a house, it’s imperative to create a comprehensive budget that includes all your income, expenses, and financial goals. Be honest with yourself about what you can afford, considering not only the mortgage but also property taxes, insurance, utilities, and maintenance.

Prioritizing Emergency Savings:

Building a robust emergency fund should be a top priority. Life is unpredictable, and unexpected expenses can arise at any moment. Having a safety net of three to six months’ worth of living expenses can prevent you from becoming overwhelmed by financial burdens if an unforeseen situation occurs.

Saving for a Substantial Down Payment:

While it may be tempting to put down a smaller down payment to secure a house quickly, it’s wiser to save for a more substantial down payment. A larger down payment means borrowing less money and having lower mortgage payments, which can significantly reduce the risk of being house poor.

Consider All Costs:

Beyond the mortgage, homeownership involves additional expenses such as property taxes, insurance, utilities, and maintenance. Renters must consider renter’s insurance, utilities, and other costs.

Maintaining a Healthy Debt-to-Income Ratio:

Lenders often look at your debt-to-income ratio when considering your eligibility for a mortgage. Aim to keep this ratio as low as possible by paying off existing debts before taking on a mortgage.

Living Below Your Means:

It’s crucial to resist the temptation of purchasing the most expensive house you can qualify for. Instead, opt for a more affordable home that aligns with your budget and long-term financial objectives.

Anticipate Future Expenses:

Plan for the future and anticipate upcoming financial commitments such as career changes, education costs, and family planning. Being prepared for these events will ensure that your housing costs remain manageable even as your life circumstances change.

Shop Around for Mortgages or Rent:

If you’re in the market for a new home, don’t settle for the first mortgage offer you receive. Shop around and compare rates and terms from different lenders to secure the most favorable deal.

Avoid Making Big Financial Decisions:

Focus on stabilizing your housing situation first before taking on additional financial responsibilities.

Seek Professional Guidance:

If you’re uncertain about the process or worried about becoming house poor, consider seeking advice from a financial advisor or a reputable real estate professional..

Achieving the goal of homeownership or finding a suitable rental property should not come at the cost of your financial security and overall happiness. Remember, it’s not just about the house you live in; it’s about building a fulfilling life within your means.

Most Renters Are Paying Far More Than Their Landlord’s Mortgage

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Most Renters Are Paying Far More Than Their Landlord's MortgageIt is not uncommon for renters to pay more in rent than their landlord’s mortgage payment. This is because landlords are typically looking to make a profit on their rental properties, and they will often set their rent prices based on market rates rather than the cost of their mortgage.

There are several reasons why renters often pay more than a mortgage payment:

Renters are not building equity: When you make a mortgage payment, you are building equity in your home. Equity is the value of your home that you actually own. As you pay down your mortgage, you own more and more of your home. Renters, on the other hand, are not building equity in their homes. They are simply paying for the use of the property.

Renters don’t get tax benefits: Homeowners can deduct their mortgage interest and property taxes from their income taxes, which can save them a significant amount of money. Renters, on the other hand, do not get these tax benefits.

Landlords have to cover maintenance costs: When you rent a property, the landlord is responsible for maintenance and repairs. This includes everything from fixing a leaky faucet to replacing a roof. These costs are factored into the rent payment, so renters end up paying for these expenses indirectly.

Supply and demand: Depending on the area and the rental market, there may be more demand for rental properties than there is supply. This can drive up rental prices, making them higher than mortgage payments.

Location: In some areas, it may simply be more expensive to rent than it is to buy a home. This can be due to a variety of factors, such as high demand, limited supply, or a desirable location.

Overall, there are many factors that can contribute to renters paying more than a mortgage payment. It’s important to note that while renters may feel like they are paying more than their landlord’s mortgage, they are also benefiting from the convenience and flexibility of renting. Renters typically do not have to worry about property maintenance or repair costs, and they have the ability to move more easily than homeowners. Renting can still be a good choice for some people, depending on their financial situation and lifestyle.

What’s Ahead For Mortgage Rates This Week – August 7, 2023

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What's Ahead For Mortgage Rates This Week - August 7, 2023Last week’s scheduled economic reporting included readings on construction spending, public and private sector payroll growth, and the national unemployment rate. Weekly readings on mortgage rates and new jobless claims were also released.

Construction Spending Slips in June

U.S. construction spending slipped by 0.60 percent to 0.50 percent growth in June; analysts expected a month-to-month reading of  0.70 percent growth in construction spending. Year-over-year construction spending increased by 3.50 percent of which single-family residential construction accounted for 2.10 May’s reading for construction spending was revised from  0.90 percent growth to 1.10 percent growth from May to June.

Private residential construction rose by 0.30 percent in June. Spending on public residential construction decreased by -0.20 percent.

July Payroll Growth Shows Mixed Results

ADP reported 324,000 private sector jobs added in July. Analysts predicted only 175,000 private sector jobs added in July while June’s reading showed 455,000 jobs added. The federal government’s Nonfarm Payrolls report showed 187,000 jobs added in July.  Analysts expected 200,000 public and private sector jobs added in July while June’s reading showed 185,000 public and private sector jobs added.

The U.S. national unemployment rate dropped to 3.50 percent in July from June’s reading of 3.60 percent.

Mortgage Rates and Initial Jobless Claims Rise

Freddie Mac reported higher mortgage rates last week as the average rate for 30-year fixed-rate mortgages rose to 6.90 percent. The average rate for 15-year fixed-rate mortgages rose by 14 basis points to 6.25 percent.  The Commerce Department reported that 227,000 jobless claims were filed last week,  which matched expectations and was higher than the 221,000 unemployment claims filed in the previous week.

What’s Ahead

This week’s scheduled economic reporting includes readings on inflation and consumer sentiment. Weekly reports on mortgage rates and jobless claims will also be released.

Financial Considerations When Buying a Home

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Financial Considerations When Buying a HomePurchasing a home is one of the most significant financial decisions many individuals make in their lifetime. It involves a substantial investment of money and requires careful consideration to ensure long-term financial stability. To navigate the complexities of the home-buying process, it’s essential to be well-informed about the various financial considerations involved. In this blog post, we will explore key factors to consider when buying a home to help you make informed decisions and achieve financial success.

Establishing a Realistic Budget:

Before diving into the home-buying process, it’s crucial to establish a realistic budget based on your financial situation. Consider factors such as your income, existing debts, credit score, and other financial obligations.

Saving for a Down Payment:

Saving for a down payment is a significant aspect of buying a home. Lenders typically require a down payment, which is a percentage of the home’s purchase price. Saving for a substantial down payment not only reduces the overall loan amount but also helps secure better mortgage terms, such as lower interest rates. Aim for a down payment of at least 20% to avoid private mortgage insurance (PMI) and decrease your monthly payments.

Understanding Mortgage Options:

Explore different mortgage options to find the one that suits your financial goals and circumstances. Common types of mortgages include fixed-rate mortgages, adjustable-rate mortgages (ARMs), and government-insured loans. It’s essential to carefully evaluate interest rates, terms, and potential risks associated with each type before deciding.

Considering Closing Costs and Additional Fees:

In addition to the down payment, be prepared for closing costs and other fees associated with purchasing a home. Closing costs typically include expenses like appraisal fees, loan origination fees, title insurance, and attorney fees.

Evaluating Long-Term Affordability:

While you may be able to afford the monthly mortgage payment currently, it’s essential to consider long-term affordability. Consider potential changes in your income, lifestyle, and expenses. Ensure that you have a realistic understanding of how your finances may evolve over time, accounting for future goals like starting a family, education expenses, and retirement planning.

Assessing Property Taxes and Insurance:

Property taxes and homeowners’ insurance are ongoing expenses that come with homeownership. Research the property tax rates in the area where you plan to buy a home and include them in your budget.

Maintaining an Emergency Fund:

Owning a home comes with unforeseen expenses, such as repairs, maintenance, and unexpected emergencies. Aim to have three to six months’ worth of living expenses set aside in an easily accessible savings account.

Getting Pre-Approved for a Mortgage:

Before house hunting, consider getting pre-approved for a mortgage. This process involves a lender reviewing your financial situation and creditworthiness to determine the amount they are willing to lend you. Pre-approval provides a clear understanding of your budget, strengthens your bargaining position with sellers, and speeds up the closing process once you find your dream home.

When buying a home, making well-informed financial decisions is crucial for your long-term financial well-being. Remember to evaluate long-term affordability and maintain a financial cushion to handle unexpected costs. By following these financial considerations, you’ll be better prepared to embark on your homeownership journey and achieve financial success in the long run.