From The Fed To Jobs

Volume 13 Issue 10 October 2018

T

he end of the quarter

is especially busy when

the Federal

Reserve Board

schedules its meeting at

the same time. We are

just days past the Fed

announcement to raise

short-term rates by 1/4

of one percent and a

confirmation of strong

economic growth for the second

quarter. In addition, at the end of the

first week in October we get a reading

of the employment numbers for

September. All that news should keep

the market analysts very busy.

Not that the Fed announcement was a

surprise to anyone. What the analysts

were looking for is a hint

as to whether we might

get another increase by the

Fed this year. The Fed's

announcement accompany-

ing their rate increase was

anything but clear with

regard to the pace of future

rate increases.

They continue to use the word

"gradual," but as members of the Fed

have said several times, things could

accelerate if there are signs of rising

inflation or imbalances in the financial

In This Issue P2 Your Score May Have Gone Up || P2 Mistakes To Avoid When Financing Your Home

P3 From The Fed To Jobs || P4 How Is Your Coverage?

Did You Know…

Home buyers will have a harder time finding a big yard, as lot sizes remain near record lows, according to the U.S. Census Bureau. Among sold properties in 2017, the median lot size for a new, detached single-family home was one-fifth of an acre, or 8,560 square feet. Median lot sizes fell below 8,600 square feet in 2015 for the first time since the bureau started recording such data. Lot sizes vary regionally, and the nation's largest tend to be in New England.

Source: The Census Bureau

Selected Interest Rates September 20, 2018 30 Year Mortgages——–4.65%

2018 High (May 24 %

2018 Low (Jan 4)———–—3.95%

15 Year Mortgages——-4.11%

5/1 Hybrid ARMs——–—–3.92%

10 Year Treasuries—–—–3.08%

Sources—Fed Reserve, Freddie Mac

Note: Average rates do not include fees

and points. Information is provided for

indicating trends only and should not be

used for comparison purposes.

Continued on Page 3

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Mistakes To Avoid…

B

uying and financing a home is the most important person-al financial de-cision we will

make in our lifetime. Over a lifetime, the average homeowner may pay one-

half of a million dollars or more in mortgage interest, many times more than any other single expense.

Yet, the process and substance of home finance remains a mystery to the average American. We tend to know much more about our automo-biles than we do about mortgages that make our home purchase possible. Because of our unfamiliarity, many Americans have no idea if they are making the right decision in relation to their personal financial situation. This is because we tend to make up to ten essential mistakes when involved in the home buying process.

We do not have a relationship with a loan officer. An individual formulates a multitude of professional relation-ships in his or her lifetime. These include a doctor, attorney, accountant, financial planner and even a car dealer-ship. We tend not to have a relationship with a mortgage lender because the need for the home finance transaction arises much less frequently than our trips to other professionals such as a tax preparer. With the advent of adjust-able rate mortgages and refinances, chances are you will need the help of a professional more frequently. If you

have no relationship with someone qualified, you are much less likely to

find qualified advice when the need arises.

We have no idea whether the lender we pick is qualified. Since we do not tend to have long-term relationships, we do not tend to shop for the right reasons.

We know how to ask about a company's rates, but not the back-ground of the entity with whom we are dealing. For example, what is their experience level? You are about to make your most important financial decision. Would it not make sense to check references?

We do not know how to shop. Most homebuyers know how to ask: what is your rate on a mortgage? We do not know how to ask about lock options, miscellaneous fees, annual percentage rates, or even the variety of programs available.

We do not know enough about mortgages in general--especially how the choices might affect our econom-ic gains or losses. Since we do not know about mortgages, it is not likely we will know how to shop or what to look for in a mortgage. We tend to know that there are fixed rates and adjustables. We may not know that there are options that may require less of a down payment or closing costs.

Page Two

“…we tend to know

much more about our automobiles than we

do about our mortgages…”

A

n overhaul in how

several major credit

reporting agencies fac-

tor in negative credit

information is prompting millions

of consumers’ credit scores to rise.

Collection events were struck from

8 million consumers’ credit reports

in the 12 months ending in June.

The New York Federal Reserve

reported that consumers who had at

least one collections account

removed from their credit reports

are seeing an 11-point increase to

their scores.

Critics have long claimed such

dings to scores are prone to errors.

Equifax, Experian PLC, and

TransUnion have all agreed

to revamp reports, which stems

from a 2015 settlement with

state attorneys general on the

matter. The firms agreed to remove

some non-loan related items that

were sent to collection firms, such

as gym memberships and traffic

tickets. They also agreed to

strike medical-debt collections that

have been paid by a patient’s insur-

ance company. The majority of

consumers who benefited from the

changes are those who had scores

below 660 before the events were

removed...

Source: The New York Times —

Want to see if your score has

changed? Contact us and we will

help you find out.

Your Score May Have Gone Up

Page Three

We tend to be clueless when asked how the down payment might affect our overall rate of return on our investment in the long run.

We think we know what type of loan we would like--without knowing all the options. Many of us begin by shop-ping for a 30-year fixed or a one-year adjustable because we are familiar with only one or two options and we have made our decision. There are several additional major loan types that should be considered. Are you familiar with buydowns, long-term ARMs and 20-

year loans?

When we refinance our mortgage, we forget about the long-term. With lower rates, we think that we come out ahead when we refinance. Many times, we use the equity in our homes to finance additional debts. It seems very attractive to lower a payment from $500 monthly to $200 by stretching out the term. Did you know there are options that can accelerate your mortgage pay-off?

We have no idea how the approval process works. Many of us sign a contract to purchase a home and then address the idea of obtaining a mortgage. Most do not know that it makes more sense to obtain an approval first. This helps our own piece of mind while we shop and also increases our bargaining power with the seller.

We do not know that the lock options may be as important as the rate. Most shoppers have no idea that many lock options exist. There are options which allow us to lock in the rate and points from 15 to 90 or more days. Some of the lock options may cost money up-front and the fees may or may not be applicable to closing costs. Many people shop different companies in

order to save $250 in points and then make the wrong decision with regard to lock options.

We do not know what to ask the lender with regard to their services. The quality and service options can vary. For example, many lenders offer quick approval programs that will allow these lenders to render a decision in a few days. A smaller broker that sends your loan to a larger lender might offer you a wider range of programs than a bank. The important thing is that you are aware of what services are available and that tradeoffs must be made in order to make a final decision.

We are intimidated by the process. Buying and financing a home seems to be a very large task. The reason we become intimidated is that we are not knowledgeable. The decision is important enough to spend time learning. With knowledge comes confidence. With confidence comes the right decisions...

...When Financing Your Home

Continue from Page 2

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From The Fed To Jobs

Continued from Page 1

markets. Of course, things could

slow down if other factors come

into play.

The next three jobs reports, starting

with the end of this week, will go a

long way to provide evidence to

the Fed. They will be looking at

more than the unemployment rate

and jobs created. They also will be

looking at the labor participation

rate and any signs of wage infla-

tion.

But the employment numbers are

only part of the picture. The

strength of the markets will also be

a factor. If we have a strong stock

market in the fourth quarter, this

could help tip the scales toward

another increase...

“…the strength

of the markets…”

How Is Your Coverage?

Address Correction Requested

In This Issue:

From The Fed To Jobs

M

any homeowners have limits on their home insurance policies

that are too low to cover the full cost of repairing or rebuilding in

case of a natural disaster—and the problem is particularly

alarming in areas at risk of hurricanes and flooding. The problem

is that, while many homeowners may have home insurance, their policies are too

low or they don’t have flood coverage, which generally must be purchased under

a separate policy.

In Houston, which was ravaged by Hurricane Harvey last September, about 70

percent of flood-related damage was not covered by insurance, according to real

estate data firm CoreLogic. Of the 717,000 claims insurers received from Harvey

victims by Oct. 31, 2017, about a third were closed with no payment made.

Similarly, in Florida, where Hurricane Irma hit, insurers received nearly one

million claims and did not pay out a third of them.

Too often, homeowners don’t realize they need to increase their policy limits if

they expand or upgrade their homes, according to insurance regulators. Also,

homeowners may learn that their policy limits are insufficient for rebuilding, as

the cost of construction materials and labor continues to rise...

Source: The Wall Street Journal