You don't know what you've got until its gone.......
"YOU DON'T KNOW WHAT YOU GOT UNTIL IT'S GONE - AND I FOUND OUT A LITTLE TOO LATE..." The words from Chicago's hit song from the 80's sums up the market's sentiment on the ending of the Federal Reserve's Mortgage Backed Security buying program, and the resulting volatility for home loan rates that has already begun.
The Fed did what they set out to do - purchasing $1.25 Trillion in Mortgage Backed Securities, and succeeding in their plan to lower home loan rates and help stabilize the housing sector. And even though they stretched out the length of the program slightly - in order to soften the impact of the end of the program - the training wheels are now off, the safety net is gone, and home loan rates have already moved higher. In fact - as the Fed will now gradually become a seller of their massive holdings of Mortgage Backed Securities - rates are very likely to continue to move higher still.
Even after home loan rates took a jump higher last week, they still remain at reasonably low levels - which makes right now a crucial time to take advantage of the opportunities that exist, including the Homebuyers Tax Credit which is down to its last month. To take advantage of the generous credit, purchase contracts must be signed by the end of April. If you or someone you know has questions about this credit - please don't wait to get in touch with me.
Adding to last week's volatility, the official Jobs Report was released last Friday - and according to the report, 162,000 jobs were created in March, making it the biggest one-month increase in three years. Additionally, there were upward revisions to January and February, which brought the last two months' net job losses to near zero.
While it was good to see some positive numbers, we're not exactly out of the woods just yet, as there were some concerning aspects of this Jobs Report. For example, Average Hourly Earnings actually fell 0.1% in March. This could be viewed as a negative sign, indicating that there's no pressure on companies to pay workers more to retain them. It also shows continued temporary hiring at a lower pay scale.
The official Unemployment Rate remained steady at 9.7%, but when factoring in the "underemployed", including people who accepted part-time work because full-time work is simply not available, the rate of unemployment overall rose from 16.8% to 16.9%. This is a big number that continues to weigh on the labor market.
Josh Jelsing
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Is Equity Required to Qualify For A Reverse Mortgage?
It is a common belief that one must have a lot of equity in their home to qualify for a reverse mortgage. In reality, a reverse mortgage can still be done as long as there are enough proceeds from the reverse mortgage to pay off any current liens. Even if there aren’t enough reverse mortgage proceeds, a reverse mortgage can still be done as long as the borrower is able to come up with the difference.
If a senior is finding it difficult to stay current on their monthly mortgage payment and is now facing foreclosure, a reverse mortgage may be the best solution to save their home. Even if the reverse mortgage proceeds are used to pay off current liens, the senior’s disposable income improves because they will have eliminated their monthly obligation.
For example, Wayne was struggling to make his mortgage payment of $1,200 a month, but he was able to get enough reverse mortgage proceeds to pay off his current lien. While he didn’t any have funds available after the reverse mortgage, he paid off his current lien which improved his monthly cash flow by $1,200 because he no longer had to make a mortgage payment.
When we ran the calculations for home owners, Jerry and Dorothy the reverse mortgage proceeds were short $3,000 to pay off their current mortgage. They chose to pull some funds from their savings so they could do the reverse mortgage and eliminate their mortgage payments – a benefit and savings in the long run.
Note: HUD, who insures the most common reverse mortgage, the Home Equity Conversion Mortgage (HECM), does not allow the difference to be from another loan or credit cards. If the funds are coming from an outside source, not from your own resources, then it must be a gift, not a loan to be repaid.
If you are over the age of 62 and having a tough time handling your monthly housing or credit card payments, a reverse mortgage may be the solution. Once the reverse mortgage pays off one’s current lien(s) or mortgage(s), there are no more monthly payments.
Josh Jelsing