By Marcie Geffner – LendingTree.com

Home buyers and homeowners may want to be prepared for the possibility of higher mortgage rates next year. That’s one take-away from a statement the Federal Reserve issued Wednesday, November 4..

Updated on Nov 12 2009 12:16PM EST

Thursday’s bond market has opened fairly flat despite stock weakness. The stock markets are showing losses with the Dow down 52 points and the Nasdaq down 7 points. The bond market is nearly unchanged from Tuesday’s close, so we will likely see little change in this morning’s mortgage rates.

The Labor Department gave us last week’s unemployment figures this morning. They reported that 502,000 new claims for unemployment benefits were filed last week, falling short of expectations. That is theoretically bad news for bonds, but since this data gives us only a week’s worth of new claims its impact on mortgage rates is usually minimal. Accordingly, it has not influenced today’s mortgage pricing.

We also have the 30-year Treasury Bond auction to watch today. It is considered to be less important to mortgage rates than Tuesday’s 10-year sale was, but does have the potential to affect mortgage rates. Bond traders will be looking for a strong demand from investors, particularly international buyers. If there is an overwhelmingly strong interest in the sale, bonds may rally after the results are posted at 1:00 PM ET tomorrow. But a weak sale could lead to bond selling and higher mortgage rates later this afternoon.

The first monthly data of the week is tomorrow’s release of September’s Goods and Services Trade Balance report. It helps us measure the size of the U.S. trade deficit, but usually is not a major influence on bond trading or mortgage pricing. It does affect the value of the U.S. dollar, which makes U.S. securities more attractive to international investors when the dollar is strong. This is because the securities’ proceeds are worth more when sold and converted to the investor’s domestic currency. However, its results will not likely directly lead to changes in mortgage rates. It is expected to show a $31.8 billion trade deficit.

Tomorrow’s second report is November’s preliminary reading of the University of Michigan’s Index of Consumer Sentiment. This index measures consumer confidence, which gives us an indication of consumer willingness to spend. It is expected to show a reading of 71.0, up slightly from October’s final reading of 70.6. That would be considered negative news for bonds because rising sentiment means consumers are more optimistic about their own financial situations and are more likely to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

©Mortgage Commentary 2009

•Existing single family home.

•Townhouse or condo in a VA-approved project.

•New construction residence.

•A manufactured home and/or lot.

•Home refinances. Certain types of home improvements.
What’s the Maximum Amount I Can Borrow?
There is no set maximum for a VA loan, but lenders usually limit it to an amount that can be sold on the secondary market.

What is a Funding Fee?
A fee of two percent of the loan amount (2.75 percent for Reservists) is payable when the VA loan closes your loan, and can be included in the loan. The fee is reduced if the veteran makes a downpayment of at least 5 percent.

Can I Get a Second VA Loan?
Yes. If your previous loan was made under previous entitlement guidelines, you may be eligible for an additional amount based on today’s increased figures, even if the loan has not been paid in full.

Or, your entire entitlement may be restored to purchase another home:

•If the property has been sold and the loan paid in full, or if you have repaid the prior loan and still own the property.

•If a qualified veteran assumes your loan and agrees to substitute his or her entitlement for yours.
What Are the Benefits of a VA Loan?

•100% financing, no down payment loans are common.

•No Private Mortgage Insurance (PMI).

•No penalties if you prepay the loan.

•Competitive interest rates.

•Loan qualification is sometimes easier than if you were applying for a conventional loan.

•Sellers can pay all closing costs.
What Are the Negatives of a VA Loan?

•VA loans made prior to March 1, 1988, can be assumed with no qualifying of the new buyer. If a buyer of such a property defaults, the veteran homeowner may be liable for funds.

•Some sellers may be hesitant to work with someone who is acquiring a VA loan because of their past reputation of taking longer to process than conventional loans. While the time may still be a little longer, getting a VA loan is not the lengthy ordeal it once was.

•Sellers are often asked to pay a portion of closing costs, so they may not be eager to negotiate the sales price of the home.
The Veterans Administration Web site is an excellent resource for detailed information about VA guaranteed home loans. If you cannot find the answers to all of your questions there, be sure to contact your local or regional VA office.

As always, feel free to contact me directly at 813-313-0761 if you have any further questions or concerns regarding 100% VA financing!

Ken Harrelson

•The guaranteed amount of a VA loan is called an entitlement.

•The current maximum entitlement for loans up to $144,000 is $36,000, with the exact figure determined by your loan amount.

•The maximum entitlement for VA home loans over $144,000 is $60,000.
An entitlement is not a cash payment to you or to the bank. It is the amount the VA promises will be paid to the lender if you default on your loan. Should that happen, the VA may pursue you to recover those funds.

Who Is Eligible for a VA Loan?

Wartime/Conflict Veterans who were not dishonorably discharged, and served at least 90 days:

World War II

•September 16, 1940 to July 25, 1947

Korean Conflict

•June 27, 1950 to January 31, 1955

Vietnam Era

•August 5, 1964 to May 7, 1975

Persian Gulf War

•Check with VA regional office for specific eligibility.

Afghanistan and Iraq

•Check the VA’s Web site for eligibility guidelines for current service in Afghanistan and Iraq.
Peacetime Service
Peacetime service of at least 181 days of continuous active duty with no dishonorable discharge. If you were discharged earlier due to a service-connected disability, you should speak with the regional VA office to verify eligibility.

•July 26, 1947 to June 26,1950

•February 1, 1955 to August 4, 1964, or

•May 8, 1975 to September 7, 1980 (enlisted) or to October 16, 1981 (officer)

•Enlisted veterans whose service began after September 7, 1980, or officers whose service began after October 16, 1981, must normally have served at least two years.
Reserves and National Guard
Members who have completed six years of service and have been honorably discharged (or are still serving) may be eligible for a VA loan. Contact your regional VA office for more details.

Other Qualifying Service
Other types of service that may make you eligible for a VA loan:

•Certain US citizens who served in the armed forces of a government allied with the United States during World War II.

•Surviving spouses of eligible persons who died as the result of service or service-connected injuries. The surviving spouse must not have remarried.

•The spouse of any member of the Armed Forces serving on active duty who has been listed as a prisoner of war or missing in action for more than 90 days.
Anyone with questions about eligibility should speak with their regional VA office.

What is a Certificate of Eligibility?
It is a document issued by the VA that lets lenders know you are eligible to apply for a VA loan. The certificate does not guarantee the bank will approve your credit application.

Call me directly at 813-313-0761 if you have any further questions or to see if you qualify for a 100% financing VA loan.

Ken Harrelson

Bay to Bay Lending, a highly regarded Mortgage Broker Business, is now seeking licensed Mortgage Brokers for residential and commercial financing.

Company is seeking loan officers to generate residential and/or commercial mortgage applications thru LendingTree leads, face to face contacts, professional relationships amongst other company marketing. Ideal candidate’s posses loan product knowledge and have the ability to connect with potential clients over the phone or in office. Will be required to interview loan applicants to develop information regarding their product needs and determine appropriate product, term, and pricing. Company is strategically positioned as both a full service Mortgage Broker service and a Licensed Real Estate and Property management Company in FL.

The right candidate will have the opportunity to be trained in a unique niche in which your clients will not shop you against other Mortgage Brokers and interest rates & closing costs are not a factor to them. These clients have excellent credit. This niche has virtually no competition so you won’t have other brokers competing against you.

Seeking:
JR Mortgage Brokers
SR Mortgage Brokers
Regional Branch Owners

You must have the following:

• Five years of experience is ideal (will train new inexperienced mortgage brokers)
• Ability to manage clients, pipeline, and multi-task many business functions
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• The willingness to work hard
• Self Motivated and Ambitious
• Enjoy prospecting and developing client relationships
• Customer service driven
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• Exceptional sales ability
• Exceptional phone skills

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Residential and commercial Division
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While most media outlets were giddy about the news and started the hype that the recession is behind us, it’s important to remember that there’s more to the economic data than just the headlines.

The temporary “Cash for Clunkers” program has now expired, but was a big part of last quarter’s GDP gain. If we remove it from the total, the reading would have been a more modest 1.9%. But there is even more to the rise in the latest GDP number that is just temporary…

Also bolstering the economy has been the $8,000 first-time homebuyer tax credit – which is set to expire at the end of this month. Many home buyers have been taking advantage of this program – and wisely so.

Chart: US Gross Domestic Product (By Quarter)

New Home Sales were reported last week, showing a 7.5-month supply of inventory. While that number is slightly worse than last month’s 7.3 reading, it’s still a big improvement from where we were in January. Back in January, inventory levels reached a high of 12.4-month supply! The improvement in housing inventories has been due in large part to the $8,000 First Time Homebuyer Tax Credit, which is set to expire on November 30.

There is a real possibility of an extension of this program through a proposed Bill, but it is not yet a certainty. The extension Bill still must be reconciled between the House and Senate, and then voted on for final approval. Under the current extension proposal, sales with signed purchase agreements by April 30th that close before June 30th, 2010 would qualify for the credit.

Another positive element would be the possible addition of $6,500 tax credit for other primary home purchasers, meaning the tax credit would no longer be limited only to first-time homebuyers. There is also a possibility that qualifying income limits could increase from $75,000 to $125,000 for singles, and from $150,000 to $250,000 for joint tax filers.

I will be keeping an eye on this for you, so stay tuned.

After all last week’s news and movement in the markets, Bonds and rates ended the week slightly better than where they began.

Forecast for the Week

This week brings us new employment numbers…and a chance to see if the labor market is showing signs of recovery. The employment news begins Wednesday with the ADP National Employment Report. Sandwiched between that report and Friday’s Jobs Report, is the Initial Jobless Claims report on Thursday.

The big news comes on Friday, when the all-important Jobs Report will be released. Last month’s report underscored the struggling labor market, as the Labor Department reported 263,000 jobs lost in September and an increase in the unemployment rate to 9.8%. The report due out this week is expected to show 166,000 jobs lost in October, which would be significantly better than the previous month if it happens. However, the Unemployment Rate is expected to continue its climb to 9.9%.

In addition to employment news, we’ll also see the ISM Index on Monday. This is the king of all manufacturing indices and is considered the single best snapshot of the factory sector.

Finally, the Federal Open Market Committee (FOMC) holds its two-day meeting this week, with an announcement of the Fed Rate Decision and Policy Statement due on Wednesday at 2:15 p.m. (ET).

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Mortgage Bonds were able to bounce back last week with help from weakness in the Stock markets.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Oct 30, 2009)

The Mortgage Market View…

Turning Back the Hands of Time

This weekend, the sun set on another season of Daylight Saving Time. The extra daylight we now enjoy was actually the result of the Energy Policy Act, which was enacted by Congress back in 2005. But did you know that throughout its long history, Daylight Saving Time has had a remarkable and sometimes unexpected impact?

A man was actually able to avoid the draft for the Vietnam War using a Daylight Saving Time loophole. When he was born, it was just after midnight, DST. When he was drafted, he successfully argued that in his home state of Delaware, standard time – not DST – was the official time for recording births. So he was technically born on the previous date–which had a much higher draft lottery number – and he was able to avoid being drafted.

In September 1999, the West Bank was on Daylight Saving Time, while Israel had switched back to standard time. A group of West Bank terrorists prepared some timed bombs – but misunderstood the time change – and the bombs exploded early, killing the terrorists themselves, rather than the intended victims – two busloads of innocent citizens.

In the 1950s and 60s, each state and locality was permitted to choose start and end DST dates as they desired. During 1965, Minneapolis and St. Paul – which are considered one metropolitan area – didn’t agree on start dates, and for a period of time, these Twin Cities had a one hour time change between them. And on one Ohio to Virginia bus route, passengers technically had to change their watches seven times in 35 miles!

To keep to their published timetables, Amtrak trains cannot leave a station before the scheduled time. So when the clocks “fall back” in the fall, all trains that are running on time actually stop at 2 am – the official time of DST change – and wait one hour before resuming their routes. In the spring, the routes instantaneously become one hour behind schedule, but they just keep going and do their best to make up the time.

So Daylight Saving Time sure can have some unexpected impact.

As we enter the first week of Daylight Saving Time, be sure to double-check all of your electronic devices and confirm that the time is correct. Although you may be accustomed to your computer and maybe even your digital clock in your car automatically updating, the recent change of dates for Daylight Saving Time may require that these devices be manually changed, as they now may NOT be ready to update to the correct time on the correct date!

The Week’s Economic Indicator Calendar

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of November 02 – November 06