21. March 2008 by Ana Connell.

The Economic Week in Review, after a 3 month long hiatus, is back.

Today the markets are closed in observance of Good Friday.

• Yesterday the market rose 262 points(2.2%) after a better than expected Philly Fed Manufacturing Index report. The financial stocks led the way, although I want to point out that, as a whole, this has been a very volatile week. The bottom line seems to be that traders are looking for any positive sign to try and bring back the bull. The other factor was quadruple witching and it appears that alot of buying to cover short positions was occurring.

• The Fed cut it’s key lending rate 75 basis points to 2.25% and this spurred a rally in the dollar, much needed as it had reached it’s lowest level since 1973. The rate cut also set off one of the biggest commodity collapses in 40-50 years. Commodity prices had been spiraling upwards on inflation fears. Gold, for example, had reached $1033.90 per ounce on March 17th, came down, over 3 days, to $920.ounce. Crude Oil closed at $101.84, down from $110 on Monday……I remember the days when $70 per barrel seemed high.
• Both the 10 and 30 year notes(3.33% and 4.17% respectively) closed at their lowest yields since June of 2003. This is troubling because it is not indicative of a rebounding economy. Rates, in theory, tend to be going higher on the long end if things are improving, not always the case but many times that’s the pattern.
• Last Friday, in order to avoid the bankruptcy of the nation’s 5th largest brokerage house, the Fed stepped in and bailed out Bear Stearns by devising a plan for JP Morgan to buy them out at $2 per share(52 week high $170/share), with the Fed providing all of the funding. Additionally, the Fed is allowing securities firms to borrow money at the same interest rate as banks. This is huge and represents the first time, since the Great Depression, that the central bank has helped institutions.

• Single family home starts and permits hit lowest levels since 1991.

The Economic Week Ahead:

• Existing Home Sales (Monday)

• Consumer Confidence, Case Schiller Home Price Index (Tuesday)

• New Home Sales, Durable Goods Orders (Wednesday)

• Jobless Claims (Thursday)

• Personal Income and Outlays,Consumer Sentiment(Friday)

Have a great weekend!

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21. March 2008 by Ana Connell.

Some of the most important elements of buying a home is knowing how much home you can afford to buy. How much money you have to put as a down payment and how much money you can afford to pay on a monthly basis may not only determine the size of your home, but which neighborhood you choose.

Here are some tips to make your life easier:

• Clean up your finances

Pull a copy of your credit report to see exactly what all three credit agencies are reporting about you. Not only do you want to know your credit scores, but you want to know if your balances and payment history is being properly documented. Check with Experian, TransUnion, and Equifax.

Years ago when purchasing a home I found out during escrow that a credit card I had closed years earlier was reporting late payments, impossible since the account was closed before the alleged late payments were made. Regardless I had to obtain a letter from the company reporting the late payments stating that this was erroneous information, it was, unfortunately, not an easy task. Needless to say, my life would have been much easier had I known about this problem before entering escrow!

• Meet with your lender to get pre-approved for a loan

Pre-qualification is different from pre-approval, because it is only an estimate of what you’ll be able to afford. Pre-approval is a more conventional process where a lender examines your finances and agrees in advance to loan you money up to a specified amount.

Get a lock in rate letter along with a loan commitment if you can. That will make your offer that much more enticing to a homeowner.

· What factors are important to lenders?

Lending institutions use several criteria in determining how much money they’ll agree to lend. These include:

· Your monthly income (gross)

· Your credit history

· The amount of your outstanding debts

· Your savings–or the amount of money you have available for a down payment and closing costs

· Your choice of mortgage….adjustable vs. fixed, 15 vs. 30 yr.

· Current interest rates

· Two important ratios
Based on your particular financial situation, lenders will figure out two crucial ratios: the debt-to-income ratio and the housing expense ratio.

· Debt-to-income ratio
Most lenders will look at the amount of debt you are paying on each month (car payment, student loan, credit card, etc,) and that amount shouldn’t exceed more than 36 percent of your gross monthly income. FHA loans are slightly more forgiving.

· Housing expense ratio
It is usually difficult to obtain a loan if the mortgage payment will be more than 28 to 33 percent of your gross monthly income.

· Down payments make a difference

If you can make a large down payment, lenders have more flexibility and can work with you.

· Other ways to improve your purchasing power

· Gifts
If you do not have sufficient funds for a down payment, many lenders will allow you to use gift funds for the down payment and closing costs. However, most lenders require a “gift letter” stating the gift doesn’t have to be repaid, and will also require you to pay at least a portion of the down payment with your own cash.

· Loan Programs
Sometimes federal, state and local governments have special loan programs designed to help first-time homebuyers. Loans may be available at reduced interest rates, or with little or no down payments. Great information is available on HUD’s website!

· Loan Types
Some homebuyers choose Adjustable Rate Mortgages (ARMs) because of low monthly payments and low initial interest rates. Others prefer 30-year loans because they have lower monthly payments than 15-year loans. There can be significant differences between different loans, so make sure to discuss the pros and cons of different loans so you have a good understanding of the products before making a decision.

· Figure out exactly where to live

Different areas of the city offer different perks. If you like being walking distance from restaurants and shopping living close to the boulevard might make more sense. If you have young children, living near a park may be a priority. The point here is to think about these things and have neighborhoods picked out before you start your house hunt. If you are new in town or don’t know the local neighborhoods your realtor should be an excellent source of information.

· Affordability

Next, based on the amount that you have been approved for, you can look at homes that are in your budget range.

· Fixer vs. remodeled or new

Are you handy or would you prefer a move in ready or turnkey home? Keep mind that aside from the inconvenience adequate funds need to be held aside for the scope of work.

· Prioritize features

Is a fireplace or pool important to your and your family? Do you work from home and need an office space? These questions are good to discuss before you start your home search.

Search for Burbank homes here!

Good luck in your home search!

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