28
May
By Mike Pfefferman
Financial Reports

What’s Ahead For Mortgage Rates This Week – May 28th, 2024

The Consumer Sentiment Report was the sole important report to take place the prior week, keeping with the trend of the cooling-off period that happens the weeks following the CPI and PPI data releases.

Consumer sentiment this time around has come to be slightly below expectations and falling to a 6-month low, marking a great change in overall sentiment towards the clear trend in rising costs in goods and services. It is largely expected that the Federal Reserve, even with the recent improvement in data, will maintain its stance at holding rates at the current position until a later date this year.

Consumer Price Index

A monthly gauge of U.S. consumer sentiment fell to its lowest level in six months in May on expectations of higher inflation, according to a survey released Friday. The second of two readings of the consumer-sentiment index was 69.1 in May, a sharp decline from 77.2 in April, the University of Michigan said. The final reading was slightly higher than the initial estimate of 67.4.

Primary Mortgage Market Survey Index

  • 15-Yr FRM rates are seeing a decrease by -0.04% with the current rate at 6.24%
  • 30-Yr FRM rates are seeing a decrease by -0.08% with the current rate at 6.94%

MND Rate Index

  • 30-Yr FHA rates are seeing an increase by 0.08% for this week. Current rates at 6.70%
  • 30-Yr VA rates are seeing an increase by 0.08% for this week. Current rates at 6.72%

Jobless Claims

Initial Claims were reported to be 215,000 compared to the expected claims of 220,000. The prior week landed at 223,000.

What’s Ahead

Next week is the Federal Reserve’s preferred inflation metric PCE Index Prices, but the more impactful metric has largely always been the CPI and PPI reports. There will also be the release of the Chicago PMI report which will headline manufacturing data and the current state of the manufacturing industry. Tailing up the two major reports is the Federal Reserve’s beige book.

24
May
By Mike Pfefferman
Home Mortgages

Understanding the Differences Between Construction Loans and Mortgages

Construction loans and mortgages are two important tools in the world of real estate financing. They each have specific purposes and come with their own set of rules and requirements. These differences cater to various needs when it comes to buying or building properties.

Construction Loan: A construction loan is specifically designed to finance the construction of a new property or significant renovations to an existing property. These loans typically have short terms and are used to cover the costs of labor, materials, and other expenses associated with building or renovating a property.

Mortgage: A mortgage, on the other hand, is a loan used to purchase a property that is already built. It is a long-term loan secured by the property itself.

Disbursement

Construction Loan: Construction loans are typically disbursed in phases or “draws” as the construction progresses. The lender may inspect the progress of the construction before releasing funds for each phase.

Mortgage: A mortgage is usually disbursed in a lump sum at the time of purchase or refinance of the property.

Interest Rates and Terms

Construction Loan: Construction loans often have higher interest rates than traditional mortgages because they are considered riskier by lenders. They also have shorter terms, typically ranging from six months to three years.

Mortgage: Mortgages generally have lower interest rates compared to construction loans, and they can have terms of 15, 20, or 30 years, depending on the agreement between the borrower and the lender.

Requirements

Construction Loan: Lenders typically require detailed plans and specifications for the construction project, as well as a budget outlining the costs involved. They may also require a larger down payment compared to a traditional mortgage.

Mortgage: Mortgage requirements vary depending on the lender and the type of mortgage being sought, but they generally include factors such as credit score, income, employment history, and debt-to-income ratio.

Application Process

Construction Loan: The application process for a construction loan may be more involved than that of a traditional mortgage because lenders want to ensure that the project is feasible and that the borrower has the means to complete it. Borrowers may need to provide detailed plans and specifications, as well as a budget for the project.

Mortgage: The application process for a mortgage typically involves providing documentation related to income, assets, debts, and credit history. Borrowers may also need to undergo a home appraisal and provide a down payment.

While both construction loans and mortgages are used to finance property, they have different purposes, terms, requirements, and application processes. Construction loans are for building or renovating properties, have shorter terms and higher interest rates, and require detailed plans and budgets. Mortgages are used to purchase existing properties, have longer terms and lower interest rates, and require documentation related to the borrower’s financial situation.

23
May
By Mike Pfefferman
Mortgage Application

Making Mortgage Decisions: Online Lenders vs. Traditional Banks

The options for securing a mortgage have expanded beyond the brick-and-mortar banks to include online lenders. With this diversity comes a crucial decision for homebuyers: should you opt for the convenience of online lenders or stick with the familiarity of traditional banks? Let’s explore the pros and cons of both options to help you make an informed decision.

Online Mortgage Lenders

Pros:

Convenience: One of the most significant advantages of online mortgage lenders is the convenience they offer. You can apply for a mortgage from the comfort of your home, without the need to visit a physical branch. This is especially beneficial for busy individuals who may not have the time to schedule meetings during traditional banking hours.

Competitive Rates: Online lenders often have lower overhead costs compared to traditional banks, allowing them to offer competitive interest rates and fees. By shopping around and comparing quotes from various online lenders, you may find a better deal than what traditional banks can offer.

Streamlined Application Process: Online mortgage applications typically involve less paperwork and can be completed faster than traditional methods. Many online lenders utilize digital platforms and automated systems, making the application process more efficient and straightforward.

Cons:

Limited Personal Interaction: While online lenders offer convenience, they may lack the personalized touch of traditional banks. Some homebuyers prefer face-to-face interactions with loan officers to address their questions and concerns. If you value personal relationships and guidance throughout the mortgage process, an online lender may not be the best fit for you.

Risk of Fraud: As with any online transaction, there is a risk of fraud when dealing with online mortgage lenders. It’s essential to research and verify the legitimacy of the lender before providing sensitive personal and financial information. Look for reputable lenders with strong security measures in place to protect your data.

Traditional Banks

Pros:

In-Person Support: One of the primary advantages of traditional banks is the availability of in-person support from loan officers and mortgage specialists. This can be reassuring for first-time homebuyers or individuals who prefer face-to-face interactions when navigating the mortgage process. Loan officers can provide personalized guidance and address any concerns you may have along the way.

Established Reputation: Traditional banks have a long history and established reputation in the financial industry. Many homebuyers feel more confident entrusting their mortgage to a well-known bank with a proven track record of stability and reliability.

Bundling Options: Some traditional banks offer incentives for customers who already have existing accounts, such as checking or savings accounts. These banks may offer discounts or preferential rates for mortgage applicants who bundle their services, providing potential cost savings in the long run.

Cons:

Potentially Higher Costs: Traditional banks often have higher overhead costs, which can translate to higher interest rates and fees for mortgage borrowers. While some borrowers may prioritize the familiarity and security of a traditional bank, others may be willing to sacrifice these benefits for a more affordable mortgage option.

Lengthy Application Process: Compared to online lenders, traditional banks may have a more time-consuming and paperwork-intensive application process. This can lead to delays in securing a mortgage, especially if you encounter any complications or need to provide additional documentation.

Limited Accessibility: Traditional banks typically operate within specific business hours and may have limited accessibility, especially for individuals who work during those hours. This can make it challenging to schedule appointments or speak with a loan officer if you have questions or concerns outside of traditional banking hours.

Both online mortgage lenders and traditional banks have their own set of pros and cons. The right choice for you will depend on your individual preferences, priorities, and financial situation. If you prioritize convenience, competitive rates, and a streamlined application process, an online lender may be the best option. On the other hand, if you value in-person support, an established reputation, and bundling options, a traditional bank may better suit your needs. Whichever option you choose, be sure to carefully research and compare multiple lenders to find the best mortgage deal for your homebuying journey.