Mike Pfefferman, Author at Mike Pfefferman

08

Apr

Financial Reports

What’s Ahead For Mortgage Rates This Week – April 8th, 2024

With the upcoming CPI and PPI reports this week, last week still had a number of important data points to consider. First, the non-farm payroll data, helping reveal the situation of pay versus inflation data giving an overall description of the state of the economy in the future. Among that, the manufacturing data has shown to be contracting the past year, with the first signs of relief this month. Lastly, trade data has shown that the trade deficit has grown bigger than expected with Q1 coming to completion.

All of these are broader indicators of the state of the economy and the most important data is to come this week, as inflation data will firmly decide when and where rates may be cut in the future. It appears to be becoming increasingly unlikely we will see a rate cut decision by the Federal Reserve in Q2. Many of the Federal Reserve’s Chairman had spoken last week, illuminating a resolve to resist rate cuts until “Inflation was under control.”

Non-farm Payrolls

March jobs report showing incredible strength of the job market in the U.S. with a 50% gap above the numbers expected. A strong job market is a strong economy.

U.S. Trade Balance

The numbers: The U.S. international trade deficit widened 1.9% in February to a seasonally adjusted $68.9 billion, the Commerce Department said Thursday. It is the third straight month with a wider deficit and the largest imbalance since last April.

ISM Manufacturing

A barometer of business conditions at U.S. manufacturers turned positive in March for the first time in 17 months, in another sign that the industrial side of the economy is on the mend.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing a decrease by -0.05% with the current rate at 6.06%
• 30-Yr FRM rates are seeing an increase by 0.03% with the current rate at 6.82%

MND Rate Index

• 30-Yr FHA rates are seeing a 0.06% increase for this week. Current rates at 6.45%
• 30-Yr VA rates are seeing a 0.05% increase for this week. Current rates at 6.46%

Jobless Claims

Initial Claims were reported to be 221,000 compared to the expected claims of 213,000. The prior week landed at 212,000.

What’s Ahead

CPI and PPI data will very much decide whether we will be seeing rate cuts this upcoming quarter, with little in the way of other reports.

05

Apr

By Mike Pfefferman

Mortgage

A Consumer’s Guide To Mortgage Escrow Accounts

Are you in the process of purchasing a home or considering refinancing your mortgage? If so, you’ve likely encountered the term “escrow account” during your discussions. Mortgage escrow accounts are a crucial component of many home loans, yet they can be a bit mysterious to those unfamiliar with the ins and outs of the mortgage process. Let’s embark on a journey to explore what escrow accounts are, how they work, and what you need to know as a homeowner.

Understanding Mortgage Escrow Accounts

What exactly is an escrow account? Essentially, an escrow account is a financial arrangement set up by your mortgage lender to hold funds for property-related expenses such as property taxes, homeowners’ insurance, and, in some cases, mortgage insurance.

How Escrow Accounts Work

Initial Setup: When you obtain a mortgage loan, your lender may require you to establish an escrow account. Typically, this occurs at closing, where you’ll make an initial deposit into the escrow account to cover upcoming expenses.

Monthly Contributions: In addition to your mortgage principal and interest payments, your lender will collect a portion of your property taxes and homeowners insurance premiums each month. These amounts are added to your mortgage payment and deposited into the escrow account.

Payment of Expenses: When your property taxes or insurance premiums become due, your lender uses the funds in the escrow account to make these payments on your behalf. This ensures that these vital expenses are paid on time and in full, helping you avoid penalties or lapses in coverage.

Annual Escrow Analysis: Each year, your lender will conduct an escrow analysis to ensure that the funds in your escrow account are sufficient to cover upcoming expenses. If there’s a shortage, you may be required to make a one-time payment to bring the account up to the required balance. Conversely, if there’s an overage, you may receive a refund or have your monthly payments adjusted downward.

Benefits of Escrow Accounts

Simplified Budgeting: By spreading out your property-related expenses over the year, escrow accounts help you budget more effectively, avoiding large lump-sum payments.

Peace of Mind: With your property taxes and insurance premiums taken care of automatically, you can rest easy knowing that these essential expenses are being handled.

Compliance with Lender Requirements: Many lenders require escrow accounts as a condition of the loan, so having one in place helps you meet your contractual obligations.

Things to Keep in Mind

While escrow accounts offer numerous benefits, there are a few important considerations to keep in mind:

Changes in Expenses: Property taxes and insurance premiums can fluctuate over time, which may result in adjustments to your monthly escrow payments.

Understanding Escrow Statements: Your lender will provide you with an annual escrow statement detailing the activity in your escrow account. It’s essential to review these statements carefully to ensure accuracy.

Escrow Cushion: Lenders often require a cushion or buffer in their escrow account to cover any unexpected increases in expenses. This cushion is typically equivalent to two months’ worth of escrow payments.

While mortgage escrow accounts may seem complex at first glance, they serve a valuable purpose in helping homeowners manage their property-related expenses efficiently. By understanding how escrow accounts work and staying informed about your financial obligations, you can navigate the homeownership journey with confidence.

Remember, if you ever have questions or concerns about your escrow account, don’t hesitate to reach out for clarification. With a solid understanding of escrow accounts, you’ll be well-equipped to make informed decisions about your mortgage and homeownership finances.

04

Apr

By Mike Pfefferman

Home Mortgages

Choosing the Right Mortgage Term

You’re about to start on an exciting journey toward homeownership. But before you dive headfirst into the world of real estate financing, there’s an important decision you’ll need to make which is choosing the right mortgage term.

The mortgage term refers to the length of time you commit to a specific mortgage rate, lender, and conditions. It’s a critical aspect of your mortgage because it determines how long you’ll be making regular payments and the total amount of interest you’ll pay over the life of the loan.

Here’s a comprehensive guide to help you navigate the process of choosing the right mortgage term:

1. Understand the Basics

Short-term vs. Long-term: Mortgage terms typically range from as short as one year to as long as 30 years. Short-term mortgages offer lower interest rates but higher monthly payments, while long-term mortgages have higher interest rates but lower monthly payments.

Fixed vs. Adjustable: With a fixed-rate mortgage, your interest rate remains constant throughout the term of the loan. In contrast, an adjustable-rate mortgage (ARM) offers a fixed rate for an initial period, after which it adjusts periodically based on market conditions.

2. Assess Your Financial Situation

Your financial circumstances play a critical role in determining the right mortgage term for you. Consider the following factors:

Income Stability: If you have a stable income and can comfortably afford higher monthly payments, you may opt for a shorter mortgage term to save on interest costs in the long run.

Budget Constraints: If you have budget constraints or prefer more predictable monthly payments, a longer mortgage term with lower monthly payments might be more suitable.

Future Plans: Consider your long-term financial goals and lifestyle preferences. Are you planning to stay in your current home for the foreseeable future, or do you anticipate relocating within a few years?

3. Evaluate Interest Rates

Interest rates play a significant role in determining the overall cost of your mortgage. Generally, shorter-term mortgages tend to have lower interest rates compared to longer-term ones. Take the time to compare current interest rates and projections to make an informed decision.

4. Calculate Total Interest Costs

Use online mortgage calculators or consult with a financial advisor to estimate the total interest costs over the life of the loan for different mortgage terms. This will help you understand the long-term financial implications and make a more informed decision.

5. Consider Your Risk Tolerance

Your risk tolerance and comfort level with fluctuations in interest rates should also influence your decision. If you prefer stability and predictability, a fixed-rate mortgage may be the better option, regardless of the term length.

6. Seek Professional Guidance

Don’t hesitate to seek advice from mortgage brokers, financial advisors, or real estate professionals. They can offer valuable insights and help you navigate the complexities of mortgage terms and options.

Choosing the right mortgage term requires careful consideration of your financial situation, goals, and risk tolerance. Remember, your mortgage term is a significant financial commitment, so take the time to explore your options and choose wisely. By understanding the basics, assessing your needs, evaluating interest rates, and seeking professional guidance, you can make an informed decision that aligns with your long-term objectives.