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What’s Ahead For Mortgage Rates This Week – June 3rd, 2024

June 3, 2024 by Scott Hill

The Federal Reserve’s preferred inflation data, the PCE Index, was the highlight of this week. These were followed up loosely by trade balance, retail inventories, and GDP — all of which are strong secondary indicators for current inflation.

For lending partners and those affiliated with broader markets, inflation is the key determining factor for rate adjustments, and other data at this point has a nominal impact in comparison. It does appear the Federal Reserve wants to have a strong hand towards inflation and will be careful about cutting rates even this year. 

The broader market is holding such expectations as well. As a side note, the Federal Reserve’s Beige Book still shows signs that the economy is going strong, but businesses are showing reservations about the current interest rates.

PCE Index

April PCE shows the smallest increase in ‘core’ inflation this year. Prices in the U.S. rose again in April, the Federal Reserve’s preferred PCE index found, but a recent surge in inflation in early 2024 may have also shown signs of fading. The PCE index rose 0.3% last month, the government said Friday. Economists polled by The Wall Street Journal had forecast a 0.3% gain.

Federal Reserve’s Beige Book

A Federal Reserve survey found that the U.S. economy expanded in the late spring, but persistent inflation, high interest rates, and political uncertainty caused businesses to turn “somewhat more pessimistic.” The latest findings in the Beige Book suggest the economy is unlikely to speed up until inflation slows further and the Fed can cut high U.S. interest rates.

GDP

The U.S. economy grew at a lackluster 1.3% annual pace in the first three months of the year, revised figures show, largely because of softer consumer spending that could herald a broader slowdown in the economy. The increase in gross domestic product, the official scorecard for the economy, was the smallest in almost two years. Previously the government reported that GDP had expanded at a 1.6% rate in the first quarter.

Consumer Confidence

The U.S. index of consumer confidence rebounded to 102 in May from a revised 97.5 in the prior month, the Conference Board said Tuesday. This is the first increase in the index after three straight monthly declines.

Primary Mortgage Market Survey Index

  • 15-Yr FRM rates are seeing an increase by 0.12% with the current rate at 6.36%
  • 30-Yr FRM rates are seeing an increase by 0.09% with the current rate at 7.03%

MND Rate Index

  • 30-Yr FHA rates are seeing an increase by 0.05% for this week. Current rates at 6.75%
  • 30-Yr VA rates are seeing an increase by 0.05% for this week. Current rates at 6.77%

Jobless Claims

Initial Claims were reported to be 219,000 compared to the expected claims of 218,000. The prior week landed at 216,000.

What’s Ahead

We should expect several interim reports; and while they do not impact inflation data the most, they are still relevant. The top reports will come from Non-farm payrolls and unemployment numbers. The more minor reports will be shown in the manufacturing data with PMI and ISM numbers. The next CPI and PPI release is the week after that, which also has the largest impact on rate decisions, even if the Federal Reserve would like to use the PCE Index as their preferred data.

Filed Under: Financial Reports Tagged With: Financial Report, Jobless Claims, Mortgage Rates

The Difference Between Prime and Subprime Mortgages

May 31, 2024 by Scott Hill

Understanding the difference between prime and subprime mortgages is essential for anyone entering the world of home financing. Prime mortgages are tailored for individuals with exemplary credit scores and stable financial profiles, offering them lower interest rates and more favorable loan conditions. Conversely, subprime mortgages are intended for those with lower credit scores or a history of financial setbacks, resulting in higher interest rates and less beneficial terms. Let’s take a look at both.

Prime Mortgages

You have a stellar credit score, a stable income, and a solid history of paying your bills on time. You’re what lenders call a prime borrower. Prime mortgages are tailored for individuals with excellent credit ratings and financial stability. Here’s what sets them apart:

Low Interest Rates: Prime borrowers often enjoy the lowest interest rates available in the market. Lenders view them as low-risk investments, so they’re willing to offer favorable terms.

Favorable Terms: Alongside low interest rates, prime mortgages typically come with other perks such as lower fees, flexible payment options, and longer loan terms. These favorable terms make homeownership more accessible and affordable for those who qualify.

Stringent Requirements: To qualify for a prime mortgage, you’ll need to meet stringent criteria. Lenders scrutinize your credit history, income stability, employment status, and debt-to-income ratio. The better your financial standing, the more likely you are to secure a prime mortgage.

Higher Loan Limits: Prime borrowers may qualify for higher loan amounts compared to subprime borrowers. This allows them to purchase more expensive properties or borrow larger sums for home improvement projects.

Subprime Mortgages

Imagine you have a less-than-stellar credit score or a history of financial setbacks. You might still dream of owning a home, but traditional lenders might be hesitant to extend a loan to you. This is where subprime mortgages come into play:

Higher Interest Rates: Subprime mortgages typically carry higher interest rates compared to prime mortgages. Lenders perceive subprime borrowers as higher risk, so they offset this risk by charging higher interest to compensate for potential defaults.

Less Favorable Terms: Subprime borrowers often face less favorable terms, including higher fees, stricter repayment conditions, and shorter loan terms. These terms reflect the increased risk that lenders undertake when financing borrowers with less-than-perfect credit.

Easier Qualification: While prime mortgages have strict eligibility criteria, subprime mortgages are more accessible to borrowers with imperfect credit histories. Subprime lenders are willing to work with individuals who may not meet the criteria for prime loans, providing an opportunity for homeownership to a broader demographic.

Lower Loan Limits: Subprime borrowers may face lower loan limits compared to prime borrowers. This means you might be restricted in the amount you can borrow, potentially limiting your housing options.

The primary difference between prime and subprime mortgages lies in your creditworthiness and the associated terms and conditions of the loan. Prime mortgages cater to individuals with excellent credit and financial stability, offering low interest rates and favorable terms. On the other hand, subprime mortgages serve borrowers with less-than-perfect credit, providing an opportunity for homeownership albeit with higher interest rates and less favorable terms. Understanding these distinctions is essential when navigating the complex landscape of mortgage lending, empowering you to make informed decisions that align with your financial circumstances and homeownership goals.

Filed Under: Mortgage Application Tagged With: Mortgage, Mortgage Options, Mortgage Term

Energy Efficient Mortgage (EEM) Programs – The Green Loan

May 30, 2024 by Scott Hill

Are you dreaming of owning a home that not only suits your lifestyle but also helps you save on energy bills? Well, it might sound like a dream, but with Energy Efficient Mortgage (EEM) programs, it’s entirely within reach. We will discuss the world of EEMs, exploring what they are, how they work, and how they can benefit both homeowners and the environment.

What is an Energy Efficient Mortgage (EEM)?

An Energy Efficient Mortgage is a home loan that allows homebuyers to finance energy-saving improvements as part of the mortgage and is at times referred to as “The Green Loan”. These improvements could include installing energy-efficient appliances, upgrading insulation, or integrating renewable energy systems like solar panels. Essentially, an EEM empowers homeowners to make their homes more energy-efficient without the need for significant upfront costs.

How Does an EEM Work?

Unlike traditional mortgages, where you secure financing solely for the purchase of the home, an EEM takes into account the potential energy savings that result from energy-efficient upgrades. Lenders calculate the anticipated energy savings and incorporate them into the loan amount, enabling borrowers to finance both the purchase price of the home and the cost of the improvements.

Benefits of Energy-Efficient Mortgages

1. Cost Savings

One of the most significant advantages of EEMs is the long-term cost savings they offer. By investing in energy-efficient upgrades, homeowners can significantly reduce their utility bills over time, offsetting the initial investment and potentially saving thousands of dollars over the life of the mortgage.

2. Increased Comfort

Energy-efficient improvements not only save money but also enhance the comfort and livability of a home. Better insulation, high-efficiency heating and cooling systems, and improved air quality contribute to a more comfortable indoor environment, ensuring that homeowners enjoy their living spaces to the fullest.

3. Environmental Impact

Reducing energy consumption isn’t just about saving money—it’s also about reducing our environmental footprint. EEMs promote sustainability by incentivizing homeowners to adopt eco-friendly practices and technologies, ultimately helping to mitigate climate change and preserve natural resources.

Who Qualifies for an EEM?

While eligibility criteria may vary depending on the lender and the specific EEM program, most borrowers must meet certain requirements to qualify for an Energy Efficient Mortgage. These typically include:

·       The property must meet minimum energy efficiency standards.

·       Borrowers must demonstrate the ability to repay the loan.

·       Energy-saving improvements must be cost-effective and feasible.

·       Homeowners may need to undergo a home energy assessment to determine the most suitable upgrades.

Exploring Available EEM Programs

Several EEM programs are available to homebuyers, including those offered by government agencies such as the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and the U.S. Department of Agriculture (USDA). Additionally, many conventional lenders offer their own EEM products, each with its own set of terms and conditions.

Tips for Maximizing the Benefits of an EEM

Conduct a Home Energy Audit: Before applying for an EEM, consider scheduling a home energy audit to identify areas where energy efficiency improvements can yield the most significant savings.

Research Available Programs: Take the time to explore the various EEM programs available to determine which option best suits your needs and financial situation.

Work with Experienced Professionals: When undertaking energy-efficient upgrades, enlist the help of qualified contractors and energy experts to ensure that the improvements are implemented correctly and effectively.

Consider Long-Term Savings: While upfront costs may seem daunting, remember that energy-efficient improvements offer long-term savings that can outweigh the initial investment.

Energy Efficient Mortgages offer a unique opportunity for homebuyers to invest in both their financial future and the future of the planet. By incentivizing energy-saving upgrades, EEMs empower homeowners to enjoy greater comfort, lower utility bills, and a reduced environmental impact.

Filed Under: Home Mortgage Tagged With: Energy Efficient Mortgage, Environmentally Friendly, Green Homes

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Scott Hill

Scott Hill


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scott@hillmortgageinc.com

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