Your Certified Mortgage Planner — Michael Eiden, Mortgage Blogger

The National Association of REALTORS released its Existing Home Sales report for March 2008. An “existing home” is one that is not considered new construction.

A sub-headline in the report showed that the median sales price of all homes sold in March increased by 2.5 percent to $200,700.

But don’t assume that the housing market is improving because of a statistic like that because in the field of Statistics, median is just the “middle” in a group of numbers.

With respect to the Existing Home Sales, the median sales price is the price point at which half of all homes sold went for more, and half went for less.

If more homes sell in high-priced San Jose, CA than in low-priced Youngstown, OH, for example, the median will be skewed to the high-side. The reverse is true, too.

Median sales price make for good headlines, but it does nothing to talk about the local market and that’s where real estate is bought and sold.

I am a research hound as many of my faithful readers know. Well, I came across another interesting and downright SCARY show the other day. It’s called Real Hustle. It’s s factual entertainment series about scams and cons focusing on how easy it is to be scammed and conned in everyday life.

So this last episode (you can see it on youtube) was a bit on the horrifying side. These 3 real live con artists place a card reader on an ATM, ‘skim’ the magnetic strip, and then videotape you entering in your pin code and you, the victim, are none the wiser.

In a matter of minutes, they create their own card, pull out cash and to add insult to injury… chase you down and show you all the cash they just extracted from your account.

See for yourself: http://www.youtube.com/watch?v=OOiCufYGH9I

I’ll make a wager that you’ll look a lot closer at your next ATM.

All the Best,

Michael

P.S. By the way, the other thieves doing this are wait staff. Most wait staff are great. However, just be wary of them. There a little hand held devices now that can ‘skim’ the info off your card and then these often underpaid, under appreciated folks go on a shopping spree!

P.P.S. Make sure you pass this on to folks you know. Pretty eye opening to see how EASY and how REAL this scam is. Take care!

As mortgage lenders limit how much money they will lend and to whom, co-signing home loans is growing in popularity.

“Co-signing” a home loan is when a third-party — usually a parent or relative — promises to make repayments to the bank in the event that the borrower falls behind on his obligations.

Money experts usually advise against co-signing notes because of the long-term financial risks, but people still do it for a number of reasons including “wanting to help”.

If you’re thinking about co-signing a home loan for a friend or loved one, it’s important to consider the implications of sharing credit with another person.

The four questions below may help you with your decision:

1. Why can’t the borrower get approved on his own? It is because of poor credit ratings? Lack of income? History of foreclosure?
2. If the borrower stops paying the mortgage, can you afford to make the full payment due each month?
3. If the borrowers defaults on the mortgage and doesn’t notify you, how will a foreclosure on your credit rating impact your family finances?
4. When the co-signed loan appears on your credit, will the debt load prevent you from getting approved for your own loans in the future?

Not only can a co-signed home loan create serious financial burdens, but it’s a long-term commitment, too.

Once the note is co-signed, the only way to separate the signers is terminate the note entirely. The two ways to accomplish that are to remortgage the home out of the co-signer’s name, or to sell the home and retire the debt.

Co-signing on a mortgage is not “bad” but bad things can happen should the primary signer face personal and/or financial difficulties. Before agreeing to share credit, consider the implications should something go wrong.

The S&P 500 added 4.3 percent last week — more than during all of 2007 — in what was a good week for the economy and a bad week for mortgage rate shoppers.

After Friday’s close, mortgage rates were higher by as much as 0.375% versus the Friday prior. This reversed a trend of falling rates for Americans.

In recent weeks, mortgage rates had been falling as investors fled risky stocks and parked their money in the bond markets.

A trading pattern such as this one is sometimes called “Flight to Quality” and it creates a high demand for all types of bonds. When bond demand is high, bond prices increase and that drives bonds’ relative rates of return down.

Over this past week, however, the Flight to Quality unwound.

Investors saw opportunities for stock market gains and funded stock purchases by selling bonds that they had amassed over the weeks prior. This created an imbalance of bond supply versus bond demand and that caused bond prices to fall.

Naturally, the corresponding rates of return on the bonds rose.

And so, because mortgage rates are really just “rates of return” on mortgage-backed bonds, we can understand why mortgage rates suffered last week as the stock markets were gaining.

It wasn’t anything fundamentally bad in the bond market as much as it was the attraction of stock market gains.

This week, there won’t be much economic data to cross the wires but 160 companies in the S&P 500 will report their earnings. This could have a broad impact on mortgage rates, similar to last week.

If corporate earnings are stronger-than-expected, expect mortgage rates to continue higher as additional monies flow into stocks at the expense of bond markets.

In the world of real estate, Days On Market is the number of days between when a home lists for sale and when it goes under contract.

It is often abbreviated as DOM.

Average Days on Market is a similar statistic but instead of applying to one home in particular, it applies to all homes in a given neighborhood, ZIP code, or city.

Average DOM is calculated by adding the number of days for which every listed home in an area was available for sale, and then dividing that number by the total number of listings.

In a buyer’s market, Average Days On Market is often elevated. This is because homes don’t sell as fast as during a seller’s market when the Average DOM can be quite low.

For buyers and sellers of real estate, Average Days On Market can be a strong indicator of home prices. When Average DOM falls, home prices tend to increase.

Credit scoring is becoming more important to mortgage pricing so now would be a terrific time to brush up on your credit education.

If you understand how the system works, after all, you can make it work to your advantage. One terrific place to start your research is at myFICO.com.

Published by credit scoring powerhouse Equifax, myFICO.com give you information right from the source. There are tens of pages of tips and tricks from which everybody can learn.

Here are some basic pointers to get you started:

Use It Or Lose It: If you don’t use credit, the credit agencies can’t assign you a credit score. Spend $10 monthly on your credit cards and then pay it in full to “get on the grid” and get yourself a score.

30 Is The Magic Number: Holding your credit card balances below 30 percent of their respective limits shows an ability to manage credit responsibly. Before consolidating multiple credit cards onto one credit line, consider that card’s credit limit. Overload it and the consolidation could hurt your credit score.

The Trend Is Your Friend: A track record of paying accounts on-time means that you’re likely to continue paying on-time. Credit bureaus like on-time payments. If you’ve been late, catch up immediately. At 35 percent, this is the largest component of your credit score.

History Is The Best Teacher: Don’t close unused credit cards. Having a credit “history” accounts for 10 percent of your score.

There are more helpful hints available at the Web site so with additional credit score adjustments to mortgage rates expected later this year, the best way to protect yourself is to be proactive.

Identify potential issues in your credit profile and work to improve them.

Credit scoring is not always intuitive so if you’re not getting the personal information you need from general Web sites, ask your loan officer for an in-depth analysis. The mortgage rate you save may be your own.

Average gas prices reached an all-time U.S. high Tuesday, touching $3.40 per gallon. San Francisco and Tulsa are the nation’s bookends at $3.94 per gallon and $3.11 per gallon, respectively.

But before you wonder if relief is coming to your family budget, remember that “rising gas prices” is a conversation we have every April.

Using data from gasbuddy.com and looking back to 2004, we can see that gas prices tend to rise during the Spring season.

If the pattern holds, we’ll should see another 10 percent increase at the pump before gas prices settle back down over the summer and fall months.

Today is Tax Day so here’s some IRS-related trivia to share at the water cooler:

Did you know… President Lincoln and Congress enacted the first income tax in 1862 to pay Civil War expenses.

Did you know… The Civil War income tax was repealed in 1872, revived by Congress in 1894, and ruled unconstitutional by the Supreme Court in 1895.

Did you know… In 1913, Wyoming was the deciding vote in the 16th Amendment which gave Congress the authority collect income tax.

Did you know… The first income tax was 1 percent on net personal incomes above $3,000. There was a 6 percent surtax on incomes over $500,000.

Did you know… The first 1040 form was 4 pages long — including instructions. Today, the instructions ALONE are 92 pages.

Did you know… During World War I, the highest rate of income tax was 77 percent. Taxes were used to help finance the war.

Did you know… In 1954, the tax filing date changed from March 15 to April 15.

Did you know… Electronic filings started in 1986. Today, e-filings have an error rate of 0.5 percent versus an error rate of 21 percent for paper filings.

And remember: If you don’t file tax returns, the Treasury Department won’t send your economic stimulus check. Happy April 15, everyone.

Source
A Brief History of the IRS
IRS.gov
http://www.irs.gov/irs/article/0,,id=149200,00.html

Through 5 days of see-saw trading, mortgage rates ended last week relatively flat; the downward tick into Friday’s close was a boon for home buyers this past weekend.

It may be short-lived, however.

Oil continues to sit near all-time highs and a slew of inflation-related data is crossing the wires this week.

When inflation pressures are high, mortgage rates rise.

The first piece of data is Retail Sales for March and it hits Monday at 8:30 A.M. ET.

Traders pay close attention to Retail Sales because consumer spending accounts for two-thirds of the economy. If sales growth is negative, it’s unlikely that Americans will spend the economy out of its weakness.

That should bode well for mortgage rates because a sluggish economy can combat some forms of inflation.

Next, on Tuesday, markets will see the Producer Price Index from March and, on Wednesday, it will see the Consumer Price Index from March. These are “Cost of Living” measurement for businesses and consumers, respectively.

Over the past few months, rising energy costs have pushed both indices to record levels, taxing Americans on all fronts. Rising costs are the heart of inflation and this tends to push mortgage rates higher.

Another “hot” number this month will be bad for mortgage rate shoppers.

Also impacting mortgage markets this week will be the earnings reports of key financial companies including Washington Mutual, JPMorgan Chase, Wells Fargo, Citigroup, and Wachovia. This list is a Who’s Who of mortgage-exposed banks and dramatic weakness will force investors to sell stocks in favor of bonds.

Because mortgage rates are based on the price of mortgage bonds, this sort of “safe haven” buying would lower rates.

Mortgage markets have been manic since the start of the year and there’s no reason to expect a reprieve this week. It’s data-heavy so if you see a rate you like, lock it before it’s gone.

Getting approved for a conforming home loan is now tougher than before.

Again.

As home loan defaults mount, government-sponsored financier Fannie Mae has imposed new guidelines on what it will lend and to whom, highlighting the need for a strong credit profile and a downpayment.

In other words, Fannie Mae is outright declining mortgage applicants whose credit is weak and whose payment history shows signs of trouble. But, it’s not just the “fringe” borrowers that are finding it harder to get a mortgage.

Buyers with strong credit profiles are being hit by new changes, too.

One such change says that owners of second homes must now have a 10 percent equity position in their homes; 15 percent if the property is in a “declining market”.

This is up from 5 and 10 percent, respectively, and represents a growing trend to make homeowners have a “stake” in their own homes. Downpayment requirements are higher for all mortgage products, in general.

Fannie Mae’s changes are the third set of restrictions imposed since December 2007 and more tightening is expected over the next few months. That makes now a compelling time to buy a home — borrowing money will be more restrictive (and more costly) later.

If you are actively shopping for homes and have not been pre-qualified in the last few weeks, reach out to your loan officer and get checked against the latest set of mortgage guidelines.

It’s better to know today than after you make an offer.