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Monthly Archives: July 2016

Steps to getting on track financially after student loan debt

With many Americans saddled with seemingly insurmountable amounts of debt - stemming particularly from student loans - homeownership can seem like an unattainable goal. But the truth is that owning a home is within reach for most, assuming they get their overall financial health into shape. 

"Before you lose hope over high student loan debt, consider these tips."

While tackling student loan debt may seem the most important thing to do to get yourself on track financially, there are other measures of security that may be more important in the short term. Before you lose hope over high student loan debt, consider these tips:

Build up an emergency fund
Holding cash reserves is one of the most important things you can do to support your overall financial health. In the event of a medical or family emergency, having savings will keep you from going further into debt. If nothing happens, you can use the funds toward a down payment on a home or to pay off a larger portion of your student loans. 

Market Preview: Housing Holds Court


The monthly housing data for June and July is cycling in, and it looks pretty good.

The Wells Fargo/NAHB Home Builder Sentiment Index posted at 59 for July. (Anything above 50 is good.) The sub-components within the index were particularly encouraging. Home builders reported strong current sales. Better yet, they expect strong sales to persist into the future. The future sales component of the index posted at a strong 63.

Traffic was the only weakness to be found, and that posted at 45. The weakness was tied to low interest from first-time buyers. As we know, lower-priced homes remain the hot niche in many markets. Potential first-time buyers still find it difficult to get their foot in the door of a new starter home.

With that said, sales are at the highest level since 2007. First-time home buyers accounted for 33% of existing home sales, the highest percentage since July 2012.

Back in January, we predicted that 2016 would be a strong year for housing. In fact, we thought it could be one of the strongest years in over a decade. We’re half way through 2016 and we’ve been proven right so far. The good news is that the second half of the year appears well positioned to build on the gains experienced in the first half of the year.

Housing has been the lead driver of economic growth for most of the past five years. It could easily remain in the driver’s seat for the next five years.

How to Get the Most Out of a Home Appraisal

An essential part of the mortgage refinance process, a home appraisal is a way to judge what your property is currently worth - and how lenders can ensure that you are able to leverage the full value of your equity. When it comes to an appraisal, it is in the homeowner's best interest that it be evaluated as high as possible. With that in mind, here are a few simple steps to make sure that your appraiser sees a home at the peak of its value:

Focus on the small stuff
Does your bathroom faucet have a persistent drip? Is there a tiny water stain on your ceiling? These are the kind of details that, when tallied all together, can have a significant impact on the overall value of a home. Use the time before your home evaluation is scheduled to get everything in order from top to bottom, fixing little issues and making your home clean, well-maintained and inviting. 


Make sure your safety equipment is fully-functional and properly installed
Often in the rush to gussy up the decor of a home, people forget about the non-aesthetic elements that add value. Smoke alarms, carbon monoxide detectors and fire extinguishers properly installed in strategic safety areas will show an appraiser that you are making efforts to protect your home, making it more valuable. 

Make sure your appliances work
While not part of the home per se, appliances like a refrigerator and dishwasher can add value to a property - assuming they are clean and fully functional. Don't neglect these essential components of everyday life when you do a walkthrough and check for issues.

Market Preview: The Unemployment Rate Rises, but that's a Good Thing

The employment numbers for June came in much stronger than anyone expected. Payrolls were up a whopping 287,000 for the month.

This was a welcomed turnaround compared to the dismal 38,000 payroll increase in May. Somewhat paradoxically, the unemployment rate also rose, by two-tenths of a percent to 4.9%. This is actually good news. It reflects an increase in labor participation and a decrease in the number of discouraged workers.

Good news generally manifests in higher interest rates. Good news motivates investors to sell haven investments, like U.S. Treasury securities and precious metals, and buy riskier investments, like stocks. Over the past week, the yield on the 10-year U.S. Treasury note has risen 15 basis points. Stocks are again trading near an all-time high.

Mortgage rates, most notably those on the 30-year fixed-rate loan, also moved decisively higher. This is no surprise. As the yield on the 10-year Treasury note goes, so goes the yield on mortgage-backed securities, and so goes mortgage lending rates.

For the immediate future, it seems that mortgage rates will start slowly rising. We’d say either flat to slightly higher. Everything looks calm and steady (relatively speaking). Rates rarely move lower when things are calm and steady.

Things worth ignoring when buying a home

There's plenty of things that you shouldn't ignore when you're looking for a new home: crumbling foundation, outdated plumbing or utilities or a lack of a clear title, just to name a few. However, some potential "issues" with a home may have less of an impact than you think. Even better, while some factors may lower the value of a home in the short term, fixing them often offers excellent return on investment - meaning you only have to spend a little to raise the value of your future home significantly. 

When touring a home that you think might be the one, don't let these so-called issues become dealbreakers:

Bad wallpaper, paint or carpet
While time-consuming, repainting a room or replacing an ugly shag carpet is often relatively inexpensive and simple to do on your own. Even so, poor aesthetic design choices may turn off some buyers, which is why sellers are often encouraged to go with neutral colors and designs when readying a home for showing.

Poor landscaping
As with the design choices in the house, bad or poorly maintained landscaping can easily be spruced up with a little elbow grease and TLC. An overgrown lawn can be tamed over time, so there's no need to rush out in search of a better maintained - and more expensive - home. 

Confusing room use choices
Puzzled by the fact the previous owners turned what is obviously a walk-in closet into an office? Don't be discouraged! Once you own the home, it's yours to rearrange as you see fit. Don't get too hung up on a confusing room use. Instead, focus on what you will find most comfortable.

Market Preview: How Low Can Rates Go?

Each week, we see interest rates as low as they’ve been in our lifetime.

This week, the yield on the 10-year U.S. Treasury note hit another all-time low, dipping below 1.37%.  Mortgage rates aren’t quite at an all-time low, which occurred in December 2012, but they’re darn close. 

Again, we look to the other side of the Atlantic for the cause. Financial markets rallied over the second half of last week, but they pulled back again this week. It seems market participants, after having a holiday weekend to mull things over, returned to work Tuesday thinking there is still considerable market risk associated with the U.K. Brexit vote.  Investors re-embraced haven assets – precious metals and U.S. Treasury securities.  Prices in both asset classes have risen meaningfully over the past week. 

We all know that refinance activity is surging, but more importantly, purchase applications are again moving higher.  The Mortgage Bankers Association Purchase Index was up 4% last week after treading water over the previous three weeks. 

What occurred this past week may have been one last spastic reaction to the Brexit vote. In that case, rates could start trending higher, especially when you consider no other major event hangs over our heads. It’s tough to argue against locking in at today’s rates. 

How Home Equity and Retirement Planning Go Hand in Hand

One of the best things about owning your own home is that, simply by buying it, you are investing in your future. Unlike renting, every time you make a payment on your mortgage, you are building more equity and own more of your home. 

This makes homeownership a potentially important element of retirement planning. With Social Security in some hot water and people living longer, the need to save up for your post-retirement life is paramount. This is on top of a troubling new finding by the Employee Benefit Research Institute that claims that the Baby Boomer generation and their children remain "woefully unprepared for retirement."

"Homeownership is an important element of retirement planning."

A leg up in retirement
Going into their golden years, many Americans struggle to build up a sufficient reserve of funds. By being able to turn the equity in your home into cash you can live on if you need it, homeowners have a serious leg up when it comes to retirement savings

"That is really going to improve a retiree's cash flow, especially for people relying on withdrawals from their savings because they don't have a pension," Jamie Hopkins, co-director of the retirement income program at the American College of Financial Services, told Bankrate.

Market Preview: Brexit Keeps Rate Low for the Time Being

A vote occurred on the other side of the Atlantic last week, and the result was unanticipated by most political wonks. 

As you no doubt know, the citizens of the United Kingdom voted their country out of the European Union.  And given the immediate response from financial markets around the world, you’d have thought that they had voted themselves off the planet.  Market participants responded by marking most everything down: stocks, commodities, global economic growth, and interest rates. (Gold, silver, and U.S. Treasury securities – havens all – bucked the trend to trade up.) 

The yield on the 10-year U.S. Treasury note dropped nearly 25 basis points overnight to a level unseen since, well, never.  Because long-term mortgage rates follow the 10-year note (though not in lockstep), the 30-year fixed-rate loan hit a four-year low. Sub-3.5% on the 30-year loan has become the new norm. 

The UK vote – known by the tedious portmanteau “Brexit” – enables the UK to free itself from EU diktats, which can be stultifying at times. (For example, bottled-water manufacturers are prohibited from saying water PREVENTS dehydration.) By voting “yes” on Brexit, the Brits voted for more local control, which it appears they will get. 

Market participants are worried that the Brits also voted themselves out of the European market.  Worries were exacerbated by the notion that other EU countries – most notably France and the Netherlands – will also vote themselves out of the EU, thus starting a contagion that could end the EU.  Should this occur, a worldwide recession would ensue, so we’ve been warned.

As a result, we’ve got a low-lending rate environment that’s likely to persist through the summer months. With the Brexit vote out of the way, no major global event resides on the horizon. This means mortgage rates are unlikely to trend much lower.