Demand is Strong for Treasury Debt

With major economic data, large Treasury auctions, and a Fed meeting on the schedule, it was a busy week for mortgage markets. In the end, it was the Treasury auctions which had the greatest impact on mortgage rates. Demand was very strong at the auctions, which pushed mortgage rates lower. Wednesday's Fed announcement and mixed economic data were roughly neutral for mortgage rates.

Much of the rise in interest rates we saw in late May and early June was due to concern about the enormous supply of debt the government needs to issue to pay for all the stimulus programs. The question was whether investors would require significantly higher yields to continue purchasing bonds. Strong demand from both domestic and foreign investors at this week's Treasury auctions eased those concerns for now and helped mortgage rates to reverse some of their recent increases.

As expected, the Fed made no change in the fed funds rate. However, investor expectations varied widely for the Fed's statement, but the statement revealed no significant shifts in policy. In particular, there was no change in the timing or the quantity of future MBS and Treasury purchases. In addition, the statement contained no discussion about exit strategies to eventually unwind Fed stimulus programs. Overall, the Fed simply held the course, and mortgage rates were nearly unchanged after the news.

In the housing sector, May Existing Home Sales rose 2.4%. It was the first time since September 2005 that Existing Home Sales increased for two months in a row. The inventory of unsold homes declined to a 9.6-month supply from a 10.1-month supply in April. A NAR survey revealed that 29% of sales were to first-time homebuyers, helped by the $8,000 tax credit, low mortgage rates, and favorable affordability levels.

Always feel free to contact me with any questions. David Krull 651-246-4250 RealtorMN@gmail.com

Are you the Ideal Mortgage Applicant?

Are You an Ideal Mortgage Applicant?
By Susan Keenan
Photo © Lisa F. Young - iStockphoto
Most lenders check on three main criteria when evaluating a mortgage application. The amount of loan you qualify for and the interest rate quoted will be based on an assessment of your credit score, available cash for a down payment and your ability to make monthly payments. These factors help a lender to decide on their perceived risk in giving you a loan.

What is your credit score?
To qualify for a mortgage, your credit score should be more than 620. Paying bills on time, keeping credit accounts open—don't cancel existing accounts just before applying for a mortgage—and keeping your credit card debt to a minimum should improve your credit rating.

How much can you afford as a down payment?
Lenders want to know how much you can contribute as a down payment towards the purchase. Most lenders limit their funding to 80% of the purchase price. When deciding on your contribution, get an estimate from the lender of the closing costs involved. These costs, which consist of attorney fees, taxes, points, title insurance and such, are due at the time of closing and should be considered when deciding on your total cash outlay for your home.

Will you be able to afford a mortgage payment?
A lender will look into your ability to consistently make monthly mortgage payments. The current mortgage crisis has prompted lenders to scrutinize documents relating to employment, income and assets. Documents such as pay-stubs, letters from employers or bank statements may be submitted for this purpose.

What is your debt to income ratio?
Lenders usually look at two ratios when evaluating mortgage applications. The front-end ratio or debt to income ratio is your monthly principal, interest, property tax and mortgage insurance payment taken as a percentage of your gross monthly income. A value of 28% or less is acceptable.

The back-end ratio is the total of all your debt obligations and commitments, such as alimony or child support, expressed as a percentage of gross monthly income. Lenders check for a value of 36% or less for this ratio. If you are encouraged to take on a higher loan, it is best to exercise prudence and accept an amount that you can deal with.

Despite the best of preparation, crises such as job loss or illness can leave you financially depleted. To ensure that you have sufficient funds to meet your mortgage and other day-to-day expenses, maintain a contingency fund that can cover your financial commitments for a minimum of three months.

Use Less Stuff to be "Green"

Use Less Stuff to be "Green"
Courtesy of ARAcontent
Photo © Saniphoto - Dreamstime
If the desire to "go green" leaves you feeling a bit overwhelmed, keep it simple with a "less is more" attitude, advises Bob Lilienfeld, sustainability expert and author of "Use Less Stuff." You'll be amazed at how simple lifestyle changes can affect your impact on the environment and your budget.

Recycling has long been touted as the centerpiece of environmentally conscious behavior, Lilienfeld notes. But the truth is that recycling by itself can't solve the environmental issues we're now facing. "The real key to saving the planet is to shop smarter so that we manage our consumption and stop creating waste," he says "Beyond recycling, we need to reduce and reuse in all areas of our life."

Here are Lilienfeld's tips on how to shop with a "use less stuff" mindset:

Make a List, Check it Twice
The best way to get what you need—and not what you don't—is to start from a list. Doing so keeps you from purchasing impulse items that you really don't need and have to pay for. And, if you include items that you're almost out of, you'll prevent yourself from having to run out for that one thing you either ran out of or forgot to buy. So, you'll save time, money, and gasoline. Less is More
Concentrated products are better for the environment because they use fewer natural resources. Concentrated products not only mean less waste, but also less weight you have to carry around. Concentrated products use 22 percent to 43 percent less packaging and up to 44 percent less water in the formulation than before, so you get a product that is a better choice for the planet, without any performance sacrifice.

A great place to find concentrated products is the detergent aisle. There are a number of top brand detergents, like Tide, Gain, Cheer, Era and Dreft that have been recently reformulated to provide the same number of loads in detergent bottles that are about half the size, resulting in a more convenient product that is easier to carry, pour and store.

Reduce, Reuse, Refill
Buy refills for your favorite products. Take a spray bottle for example. You really don't need a new sprayer, just more cleaner. Buying the larger refill bottles means you throw away less, get more product, and save money, too, since you're not paying for a spray top that you really don't need.

A Bright Idea
Invest in the just-introduced, second generation compact fluorescent light bulbs, or CFLs. They last 16 times as long, use 75 percent less energy, and now provide light that's as natural looking as standard incandescent bulbs.

For more information on how using less stuff can help the environment, visit www.use-less-stuff.com.

The Benefits of a Great Real Estate Agent

The Benefits of a Great
Real Estate Agent
By Angela Baca
Photo © Jozsef Szasz - Dreamstime
Real estate agents do more than just help you search for a home; they provide indispensable advice during the entire home-buying process. Here are three ways that your agent will protect your interests in the steps toward buying a home.

1. Finding Your Ideal Home - If you've already searched for a home for several months, you probably have a few prime properties in mind. Your agent will help you sift through your choices to ensure that the property you think you want is really going to serve you well long-term.

As an added bonus, an experienced agent has a knack for sniffing out things like dishonest sellers, lemon houses, and bad deals. Buying a home can present many pitfalls for the inexperienced; having the expertise of a professional will provide peace of mind and ensure that the process goes smoothly.

2. Preparing the Real Estate Offer - You may already be aware of the basic steps toward owning a home, but there are some finer details to drafting and presenting a real estate offer to the seller. A real estate agent guides you in how to prepare your offer and helps you to draft a competitive set of terms that will increase your chance of being accepted by the seller. Some considerations include how much to offer for the home, when to close on the deal, what costs will be paid by each party, and if the seller will add improvements to the home before closing.

3. Closing the Deal - Once a seller has accepted your written offer, there are many steps that must take place before the house will be transferred to you. Since a professional real estate agent has been down this road many times, they will be able to guide you during the major phases of the closing process.

Although an objective third party may draw up all the paperwork and hold the escrow funds until closing, your agent acts solely on your behalf. Don't hesitate to voice your concerns or ask your agent lots of questions to ensure that you get the optimal benefit from the home-buying experience.