Did you know You Don’t Need 20% Down payment ?
To buy a home, you don’t need to make a 20 percent down payment. Unfortunately, though, the “20% Down payment Myth” is widely circulated; passed down from parents to children; and college professors to students.
And there’s actually a good reason why people say you need 20% down to buy a home — without such a downpayment, buyers are typically subject to mortgage insurance payments which can add to monthly housing costs.
To avoid mortgage insurance payments, then, buyers have been conditioned to put 20% down, even though it’s not required or necessary.
Remember: The “20% down” myth is unique to conventional loans. FHA loans, VA loans, USDA loans and jumbo loans charge mortgage insurance differently from Fannie Mae and Freddie Mac.
On a conventional mortgage, in some circumstances, mortgage insurance can be removed in as few as 12 months from closing. This is not a long time. However, for other loan types, mortgage insurance can last as long as 30 years.
More important than making a 20% downpayment, then, is choosing the most appropriate loan for your downpayment needs.
It’s a terrific time to be a home buyer. Home values are rising in many U.S. markets; mortgage rates are near two-year-ago levels; and, there is an abundance of low- and no downpayment mortgages available for today’s buyers.
Contact me for today’s mortgage rates and see for what you’ll qualify. Complimentary consultations are available at no cost, with no obligation to proceed. You can also learn more about the home buying process here: https://yourlenderchris.com/category/education/
Your Weekly Update Begins Here:
The stock market ended the week “mixed” with the Dow Jones Industrial Average stumbling a bit in comparison to the NASDAQ Composite and S&P 500 Indexes after either disappointing earnings results or guidance from Exxon Mobil, 3M, and Intel. Bonds posted modest gains with yields moving lower.
Economic news was generally favorable during the week showing strong data for March in new home sales and durable goods orders. Friday, the Commerce Department reported the advance estimate for first quarter GDP growth also exceeding analysts’ forecasts by increasing 3.2% versus consensus expectations of 1.9%. Inflation was tame with the GDP Price Deflator showing a modest gain of 0.9% versus a consensus forecast of 1.4% and a prior reading of 1.7%. However, the GDP report also showed a slowing in the pace of consumer spending with an increase of 1.2% which was down considerably from the 2.5% rate seen during the fourth quarter of 2018.
In housing, the Census Bureau reported Existing Home Sales for March declined 4.9% month-over-month to a seasonally-adjusted annual rate of 5.21 million. This was below the consensus forecast of 5.37 million and lower than a downwardly revised 5.48 million for February. Total sales were 5.4% lower than the same period a year ago.
Housing prices continued to rise with the median existing home price for all housing types increasing 3.8% year-over-year to $259,400. The median existing single-family home price rose 3.8% higher year-over-year to $261,100.
Regionally, existing home sales were down 2.9% in the Northeast; 7.9% lower in the Midwest; down 3.4% in the South; and 6.0% lower in the West. Median home prices rose 2.5% in the Northeast to $277,500; prices increased 4.6% in the Midwest $200,500); prices rose 2.4% in the South to $277,400; and they increased 3.1% in the West to $389,300.
The March inventory of homes for sale increased to 1.68 million units from 1.63 million units in February and inventory was 2.4% higher on an annual basis. At the current sales rate, unsold home inventory is at a 3.9-month supply, up from a 3.6 month supply in February. The data continues to suggest overall home sales activity will be hindered by rising prices and lower home inventory with affordable price points.
The Census Bureau also released their latest New Home Sales report showing sales increased in March by 4.5% month-over-month to a seasonally adjusted annual rate of 692,000. This easily exceeded the consensus forecast of 646,000 and was the strongest sales rate since November 2017. Year-over-year sales were 3.0% higher.
The average sales price increased 1.8% in March to $376,000 although the median sales price fell 9.8% year-over-year to $302,700.
Regionally, new home sales were 22.2% lower in the Northeast; 3.6% higher in the South; 17.6% higher in the Midwest; and 6.7% higher in the West.
Homes priced below $400,000 accounted for 71% of total homes sold in March versus 70% in February. New home inventory for sale declined to a 6.0-month supply in March from a 6.3-month supply in February. This data reveals new home sales activity was boosted by the 9.8% decline in the median home sales price and lower mortgage rates – a potent combination releasing pent-up demand for affordable housing.
Furthermore, the Federal Housing Finance Agency (FHFA) reported that its latest seasonally adjusted monthly House Price Index (HPI) was 0.3% higher in February while the previously reported 0.6% gain in January 2019 remained unchanged. On an annual basis, house prices were 4.9% higher. For the nine census divisions, seasonally adjusted monthly house price changes from January 2019 to February 2019 ranged from -1.2% in the Middle Atlantic division to +1.4% in the East South Central division.
The 12-month changes were all positive, ranging from +3.5% in the West South Central division to +6.5% in the Mountain division.
Elsewhere, mortgage data from the Mortgage Bankers Association (MBA) showed the number of mortgage applications declined from the prior week.
The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 7.3% for the week ended April 19, 2019. The seasonally adjusted Purchase Index decreased 4% from a week prior while the Refinance Index decreased 11%. Overall, the refinance portion of mortgage activity decreased to 39.4% from 41.5% of total applications from the prior week.
The adjustable-rate mortgage share of activity decreased to 6.4% of total applications from 6.6%. According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.46% from 4.44% with points increasing to 0.44 from 0.42 for 80 percent loan-to-value ratio (LTV) loans.
For the week, the FNMA 4.0% coupon bond gained 21.9 basis points to close at $102.688 while the 10-year Treasury yield decreased 5.80 basis points to end at 2.502%. The Dow Jones Industrial Average dropped 16.21 points to close at 26,543.33. The NASDAQ Composite Index gained 148.34 points to close at 8,146.40. The S&P 500 Index added 34.85 points to close at 2,939.88. Year to date (2019) on a total return basis, the Dow Jones Industrial Average has added 13.79%, the NASDAQ Composite Index has gained 22.77%, and the S&P 500 Index has advanced 17.27%.
This past week, the national average 30-year mortgage rate fell to 4.27% from 4.34%; the 15-year mortgage rate decreased to 3.96% from 4.04%; the 5/1 ARM mortgage rate dropped to 4.05% from 4.10%; and the FHA 30-year rate remained unchanged at 4.00%. Jumbo 30-year rates declined to 4.15% from 4.25%.
Economic Calendar – for the Week of April 29, 2019
Economic reports having the greatest potential impact on the financial markets are highlighted in bold.
| Date | Time ET | Event /Report /Statistic | For | Market Expects | Prior |
| Apr 29 | 08:30 | Personal Spending | Feb | NA | 0.1% |
| Apr 29 | 08:30 | PCE Price Index | Feb | NA | -0.1% |
| Apr 29 | 08:30 | Core PCE Price Index | Feb | NA | 0.1% |
| Apr 29 | 08:30 | Personal Income | Mar | 0.4% | 0.2% |
| Apr 29 | 08:30 | Personal Spending | Mar | 0.8% | NA |
| Apr 29 | 08:30 | PCE Price Index | Mar | NA | NA |
| Apr 29 | 08:30 | Core PCE Price Index | Mar | 0.1% | NA |
| Apr 30 | 08:00 | S&P Case-Shiller Home Price Index | Feb | 3.1% | 3.6% |
| Apr 30 | 08:30 | Employment Cost Index | Qtr. 1 | 0.8% | 0.7% |
| Apr 30 | 09:45 | Chicago PMI | Apr | 58.2 | 58.7 |
| Apr 30 | 10:00 | Consumer Confidence | Apr | 127.3 | 124.1 |
| Apr 30 | 10:00 | Pending Home Sales | Mar | 1.1% | -1.0% |
| May 01 | 07:00 | MBA Mortgage Applications Index | 04/27 | NA | -7.3% |
| May 01 | 08:15 | ADP Employment Change | Apr | 170K | 129K |
| May 01 | 10:00 | Construction Spending | Mar | 0.1% | 1.0% |
| May 01 | 10:00 | ISM Manufacturing Index | Apr | 55.0 | 55.3 |
| May 01 | 10:30 | EIA Crude Oil Inventories | 04/27 | NA | 5.5M |
| May 01 | 14:00 | FOMC Rate Decision | May | 2.375% | 2.375% |
| May 02 | 08:30 | Initial Jobless Claims | 04/27 | 212K | 230K |
| May 02 | 08:30 | Continuing Jobless Claims | 04/20 | NA | 1655K |
| May 02 | 08:30 | Preliminary 1st Qtr. Productivity | Qtr. 1 | NA | 1.9% |
| May 02 | 10:00 | Factory Orders | Mar | 1.6% | -0.5% |
| May 03 | 08:30 | Nonfarm Payrolls | Apr | 200K | 196K |
| May 03 | 08:30 | Nonfarm Private Payrolls | Apr | 180K | 182K |
| May 03 | 08:30 | Average Hourly Earnings | Apr | 0.3% | 0.1% |
| May 03 | 08:30 | Unemployment Rate | Apr | 3.8% | 3.8% |
| May 03 | 08:30 | Average Workweek | Apr | 34.5 | 34.5 |
| May 03 | 08:30 | Advance International Trade in Goods | Mar | NA | -$79.5B |
| May 03 | 08:30 | Advance Retail Inventories | Mar | NA | +0.9% |
| May 03 | 08:30 | Advance Wholesale Inventories | Mar | NA | +1.1% |
| May 03 | 10:00 | ISM Non-Manufacturing Index | Apr | 57.4 |
56.1 |
Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond
The FNMA 30-year 4.0% coupon bond ($102.688, +21.9bp) traded within a wider 40.6 basis point range between a weekly intraday low of $102.328 on Tuesday and a weekly intraday high of 102.734 on Friday before closing the week at $102.688 on Friday. Mortgage bonds traded down to the 50-day moving average support level on Monday and Tuesday before bouncing higher off of support and moving just above the 50% Fibonacci retracement resistance level on Friday.
Mortgage bonds received a buy signal from a positive crossover in the slow stochastic oscillator last Tuesday and should continue to move higher toward the next resistance level and toward technically “overbought” status. Therefore, from a technical perspective, we should continue to see some upward movement in bond prices with a corresponding slight improvement in mortgage rates this coming week.
