Planning For A Memorial Day Closing

Planning to close on your home at the end of May? Plan ahead. Memorial Day is coming and the holiday may delay your closing.

Memorial Day marks the unofficial start of summer and the 3-day Memorial Day weekend is a popular vacation time in real estate-related industries.

Real estate agents tend to take time off because fewer of their clients are actively home shopping on a holiday weekend; mortgage lenders are closed because banks don't operate on a federal holiday; and, title agents are often away from the office because the former two groups aren't working.

But what's supposed to be a 3-day weekend is actually a 4.5-day one. This is because many people leaving for a Memorial Day vacation will not go to work on the Friday before the holiday, and then getting back into the "work groove" on Tuesday can be a half-day affair.

Therefore, if you're under contract to buy a home in Maple Grove , or to sell one; or if you have a refinance in progress that's expected to close at month-end, there are some steps you should take to get pro-active with your closing. If you're going to lose 4-and-a-half days at the end of the month, you'll want to try to make those days up while the month is still young.

Here are 3 quick tips to speed up your closing and approval.

First, get your homeowners insurance policy picked out. Do your comparison shopping, select an insurer, and then prepay your first year of insurance, effective your closing date. Pay by check and not credit card, if possible, to avoid harming your credit score.

Provide your proof of payment to your lender immediately.

Next, if you're using a Power of Attorney, have your documents signed by all interested parties and submit them to your lender for review. Don't assume that your attorney's Power of Attorney documents will be acceptable to a bank -- banks require specific verbiage. If the documents are rejected, make the requested fixes and resubmit.

Banks do not compromise on Power of Attorney letters.

And, lastly, if you're accepting gifts or using retirement funds for your downpayment, be sure to have your paperwork reviewed and on file with your lender as soon as possible. Do not wait to withdraw funds until just before closing, either. Have everything in the proper checking account at least one week in advance, and ready for your closing.

There are other steps you can take, too, to make sure your end-of-May closing goes smoothly and they all amount to "preparedness".

When you're asked for paperwork, provide it quickly. When you're asked to sign a document, sign it on the same day. When you're needed to attend a home inspection or an appraisal, do it during your first available opening.

Just leave as little as possible to the "last minute", and everything should go well.

Make A Mortgage Rate Plan Ahead Of The Jobs Report

Been shopping for a mortgage rate? You may want to lock something down. Tomorrow morning, mortgage rates are expected to change. Unfortunately, we don't know in which direction they'll move. 

It's a risky time for Minnesota home buyers to be without a locked mortgage rate.

The action begins at 8:30 A.M. ET Friday. This is when the government's Bureau of Labor Statistics releases its April Non-Farm Payrolls report.

The monthly Non-Farm Payrolls report is more commonly known as "the jobs report" and provides a sector-by-sector breakdown of the U.S. employment situation, including changes in the Unemployment Rate.

In March 2012, the government reported 120,000 net new jobs created -- half the number created during the month prior, and the third straight month of declining job creation. The Unemployment Rate fell one-tenth of one percent to 8.2%.

For April, economists expect to see 160,000 net new jobs created, and no change in the national Unemployment Rate.

Based on the accuracy of those predictions, mortgage rates in Plymouth are subject to change. If the actual number of jobs created in April exceeds economist expectations, mortgage rates should rise. Conversely, if the actual number of jobs created falls short, mortgage rates should drop.

Job growth's link to mortgage rates is straight-forward. Jobs are an economic growth engine and mortgage rates are based economic expectation. Therefore, as the number of people entering the U.S. workforce increases, so do Wall Street's growth projections for the economy. When that happens -- especially in a recovering economy such as this one -- mortgage rates tend to rise.

So, for today's rate shoppers, Friday's job report represents a risk. The economy has created jobs for 18 straight months, a winning streak that has added 2.9 million people to the U.S. workforce. If that winning streak continues and expectations are beat, mortgage rates are likely to rise off their all-time lows, harming home affordability.

Home Values Start The Year Strong

Home prices started the year on an upswing. 

According to the Federal Home Finance Agency's Home Price Index, home prices rose by a seasonally-adjusted 0.3 percent between January and February 2012. The index is up 0.4% over the past year, offering a counter-story to the Case-Shiller Index's assertion that home values are sinking.

Last week, Standard & Poor's Case-Shiller Index said home values had dropped more than 3 percent in the prior 12 months. 

As a home buyer or seller in Plymouth , data showing "rising home values" or "falling home values" may be of interest to you, but we can't forget that most home valuation trackers -- including both the government's Home Price Index and the private sector Case-Shiller Index -- have a severe, built-in flaw.

Both used "aged" data. Today, the calendar reads May. Yet, we're still discussing February's housing data.

Data that is two-plus months old is of little value to everyday buyers and sellers wanting to know the "right now" of housing. And, even then, characterizing the data as "two-plus months old" may be a stretch. This is because the home values used in the Home Price index and the Case-Shiller Index are collected from actual transactions, but at the time of closing.

Considering that most purchases require 45-60 days to close, we can know that when we look at the Home Price Index and Case-Shiller Index reports for February, what we're really seeing is a snapshot of the housing market as it existed two-plus month plus 60 days ago.

Data that's 5 months old is of little relevance to today's buyers and sellers. Today's market is driven by today's economics.

The Home Price Index is a useful gauge for economists and law-makers. It highlights long-term trends in housing which can be helpful in allocating resources to a particular project or policy. For home buyers and seller throughout Minnesota , though, it's much less useful. Real-time data is what matters to you.

For that, talk to a real estate professional.

Mortgage Guidelines Resume Tightening Nationwide

Despite an improving U.S. economy, the nation's banks remain cautious about what they will lend, and to whom.

Last quarter, by a margin of 3-to-2, more banks tightened residential mortgage lending standards for "prime borrowers" than did loosen them.

A "prime borrower" is defined as one with a well-documented credit history, high credit scores, and a low debt-to-income ratio. The insight comes from the Federal Reserve's quarterly survey of its member banks.

Last quarter, of the 54 responding banks :

• 0 banks tightened mortgage guidelines considerably
• 3 banks tightened mortgage guidelines somewhat
• 49 banks left guidelines basically unchanged
• 2 banks eased mortgage guidelines somewhat
• 0 banks eased mortgage guidelines considerably

By contrast, in the quarter prior, not a single surveyed bank reported tighter residential mortgage guidelines. The period from January-March was a step backwards, therefore, for the fledgling U.S. housing market.

Overall, getting approved for a mortgage is tougher than it used to be. Banks enforce higher minimum credit score standards; ask for larger downpayment/equity positions; and require higher monthly income relative to monthly debt obligations.

It's one reason why the homeownership rate is at its lowest point since 1997.

Another reason why homeownership rates may be down is that prospective home buyers believe the hurdles of today's mortgage approval process may be impassably high. That's untrue.

There are many U.S. homeowners and renters -- even here in Plymouth -- that were approved for a home loan last quarter -- prime borrowers or otherwise. Some had excellent credit, some had modest credit. Some had high income, some had moderate income. Many, however, took advantage of low-downpayment mortgage options such as the FHA's 3.5% downpayment program, and the VA's 100% mortgage program for military veterans.

Despite a general tightening in mortgage standards, loans are still available and banks remain eager to lend.

It is harder to get approved today as compared to 5 years ago, but for those that try and succeed, the reward is access to the lowest mortgage rates in a lifetime. Mortgage rates throughout Minnesota continue to push home affordability to all-time highs.

If you're in the market to buy a new a home or refinance one, your timing is excellent.

What's Ahead For Mortgage Rates This Week : April 30, 2012

Mortgage markets were mostly unchanged last week for the second straight week. Spain made few moves to allay concerns from its investors, the Federal Reserve did little to change its message on the U.S. economy, and newly-released economic data was in-line with expectations.

Conforming mortgage rates in Minnesota idled last week, remaining near all-time lows for the 30-year fixed rate mortgage, the 15-year fixed rate mortgage; and the 5-year ARM.

According to Freddie Mac's weekly mortgage rate survey, last week's mortgage rates, as averaged from more than 125 banks nationwide, were as follows :

• 30-year fixed rate mortgage : 3.88% with 0.7 discount points
• 15-year fixed rate mortgage : 3.12% with 0.6 discount points
• 5-year adjustable rate mortgage : 2.85% with 0.6 discount points

A discount point is a one-time closing cost and is equal to one percent of your overall loan size. This means that a mortgage applicant with a $100,000 mortgage and an accompanying 0.7 discount points would be responsible for paying an upfront charge of $700 at the time of closing.

Freddie Mac's mortgage rates assume full closing costs, too.

This week, it's unclear whether Plymouth mortgage rates will rise or fall.

There are few economic data points due for release so mortgage markets are expected to take their cues from Europe where there's no shortage of story lines.

In Spain, there are protests over new austerity measures. In France, a new President may be elected -- one whom opposes austerity. In the Netherlands, a new budget passed that includes austerity measures, but barely.

Each storyline generates uncertainty about the future of Europe and its unified economy. As the uncertainty grows, global investors seek safety in the U.S. mrotgage bond market, a move that helps mortgage rate shoppers. When demand for mortgage bonds is high, mortgage rates tend to improve.

Also affecting mortgage rates this week will be Friday's Non-Farm Payrolls report.

The economy is expected to have added 165,000 net new jobs in April and the Unemployment Rate is believed to have remained unchanged at 8.2%. If there is a deviation from either of these expectations, mortgage rates will change. If the actual jobs data is stronger than Wall Street expectations, mortgage rates are likely to rise.

If the jobs report is weak, mortgage rates should fall.