Consumer confidence levels beat expectations

Highest level since April

According to the Conference Board, the Consumer Confidence Index for December hit 64.5, up from 55.2 in November. December confidence levels beat analyst’s expectations that the index would rise to 58.9 and consumer confidence is now at its highest level since April.

The proportion of consumers expecting the business climate to improve over the next six months rose to 16.7 percent from 13.7 percent, while those expecting business conditions will worsen declined to 13.4 percent from 16.1 percent.

Respondents that believe jobs are “plentiful” increased to 6.7 percent from 5.6 percent, while those claiming jobs are “hard to get” decreased to 41.8 percent from 43.0 percent.

Those that plan to buy a home within six months improved slightly, those that plan to buy a vehicle fell to the lowest level of the year, and people planning on taking a vacation hit hits highest level for the year.

Says Lynn Franco, Director of The Conference Board Consumer Research Center: “After two months of considerable gains, the Consumer Confidence Index is now back to levels seen last spring (April 2011, 66.0). 

Consumers’ assessment of current business and labor market conditions improved again. 

Looking ahead, consumers are more optimistic that business conditions, employment prospects, and their financial situations will continue to get better. While consumers are ending the year in a somewhat more upbeat mood, it is too soon to tell if this is a rebound from earlier declines or a sustainable shift in attitudes.”

Economist Barry Ritholtz said, “Bottom line, while the move higher in confidence is good to see, especially around the holidays, at 64.5 it is still almost half the 10 yr high of 111.9 in July ’07 (of course just as everything was about to change). But, importantly there seems to have been an improvement in the labor market as seen in today’s answers and also in the level of initial jobless claims over the past 3 weeks.”

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

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Tips to Help You Plan Your Business Taxes in 2012

It's smart to bear in mind how the tax landscape may change next year. When you know what's coming may help you make a few smart moves before the end of this year. Here are a five tips from tax expert Barbara Weltman on what to expect:

1. Some business tax breaks live on. While some helpful credits expire at the end of this year, good things that continue for 2012 include the 100 percent bonus depreciation write off and the chance to deduct up to $500,000 of first-year expenses immediately through the Section 179 deduction. Also still alive is the research credit and some of the work opportunity credits -- particularly if you hire veterans.
   
   Related: Six Small-Business Tax Breaks for 2010 
    
2. You could get audited. A recent KMPG survey found small-business tax audits are on the rise. So be sure you understand tax laws, are in compliance and have the documentation you need to answer any questions.
   
   Related: How to Survive a Tax Audit 
    

3. The healthcare tax credit may change. The U.S. Supreme Court will hear the National Federation of Independent Business's case on the constitutionality of healthcare reform, with a decision expected in June. In the meantime, there's a key provision that may change -- the tax credit to help small business owners pay for healthcare coverage for workers. The hope was that 4.4 million businesses would use it, but only about 300,000 have done so. The NFIB has suggested the credit be simplified and improved.
    

4. Estate planning -- just do it. The crystal ball is completely cloudy on this one, as the estate-tax rules are only known through next year. After that, the rules revert to only a $1 million tax exemption instead of the current $5 million. This is likely to change next year and beyond, depending on who is elected. Expect renewed interest in abolishing the estate tax, which can hit small, family-owned businesses hard. But the one thing that's for sure is -- reducing your estate by gifting heirs now will always be a good idea.
   
   Related: What Entrepreneurs Should Know About Estate Planning
    

5. Low interest rates. If you end up owing penalties on outstanding money the Internal Revenue Service thinks you should have paid sooner, the good news is interest rates are currently only about 3 percent. That's so low, it may not provide much incentive for some taxpayers to pay up on time. Let's hope that doesn't lead to unexpected budget shortfalls.

What do you think will happen with taxes in 2012? Leave a comment and give us your predictions.

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

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FHA Revises Lender Approval Requirements

Mortgage Letter 2011-34 was issued in late September, but didn’t get a lot of attention.

In this month’s article, I’ll point out the highlights of the update. The update announced changes to the Federal Housing Administration (FHA) requirements for obtaining, maintaining and utilizing a lender’s FHA approval.

Identifying officers
The lender must list all of its corporate officers who will be managing, overseeing or conducting the FHA business of the lender. Unless the applicant is a supervised lending institution, the applicant must submit a credit report for each corporate officer listed and a resume for the senior officers with FHA origination experience (Handbook 4060.1, 3-2.A.4 and 3-2.A.5). The term “Corporate Officer” is now defined as a “natural person who is an owner, president, vice president, chief operating officer, chief financial officer, director, corporate secretary, chief executive officer, chairman of the board, or member or manager of a limited liability company (LLC).

Identifying owners
The following list defines which of the owners must be listed on the application for FHA approval according to the type of company and the owner’s percentage of ownership:
►Publically traded company or corporation; if 10 percent or more ownership
►Non-publically traded company or corporation; if 25 percent or more ownership
►Limited Liability Company; all members
►Partnerships; general partners

Office facilities
An approved FHA lender may originate and service loans from its home office, branch office and direct lending branch office. All office facilities, regardless of type, must comply with all state licensing requirements within the jurisdiction in which the office is located. In addition, the U.S. Department of Housing & Urban Development (HUD) is no longer regulating branch offices facilities and lenders are no longer required to submit evidence of acceptable home office facilities. However, the FHA will verify compliance with these requirements through on-site visits to the home office to assure that the lender has acceptable office facilities as outlined in 2-11.A of Handbook 4060.1.

Conversion of FHA lender approval type
Lenders that want to convert their FHA approval type must submit a new lender approval application package with all required exhibits, and pay a new $1,000 lender approval application fee. Previously, a lender had to submit certain forms and documents along with a $300 fee.

Prohibited branch arrangement
Approved lenders must directly pay all expenses for the operation of their home, branch and direct lending offices, and may not create “net branching” arrangements in which a party, other than the approved mortgagee, pays some or all of the branch office expenses.

Single-family loan origination lending area
FHA has expanded the single-family origination lending area of each home office and registered branch office to include all HUD jurisdictions throughout the country. Lenders must bear in mind that they must also meet each state’s origination and licensing requirements.

Business changes subsequent to approval
The FHA now requires that mortgagees notify HUD within 10 business days if the lender or any officer, partner, director, principal, manager, supervisor, loan processor, underwriter or loan originator of the lender or mortgagee:
1. Has been suspended, debarred, under a limited denial of participation (LDP) or has been debarred or suspended by HUD or by any other federal agency.
2. Has been indicted for, or convicted of, an offense that reflects adversely upon the integrity, competency, or fitness necessary to meet the responsibilities of the lender to participate in FHA programs.
3. Is subject to unresolved findings as a result of HUD or other governmental audit, investigation, or review (see ML 2010-38 for clarification on meaning of “unresolved findings”).
4. Is engaged in business practices that do not conform to generally accepted practices of prudent mortgagees or that demonstrate irresponsibility.
5. Is convicted of, or pled guilty or no contest to, a felony related to participation in the real estate or mortgage loan industry within seven years prior to the date of the application for licensing and registration, or for any felony at any prior time that involved an act of fraud, dishonesty, or a breach of trust or money laundering.
6. Is in violation of provisions of the Secure and Fair Enforcement (SAFE) Mortgage Licensing Act of 2008 or any applicable provision of state law.

Use of DBA names
FHA now requires lenders to register all of their DBAs though FHA Connection rather than just those used for advertising FHA programs. FHA Connection has been modified to allow the registration of up to seven DBAs for each home office or branch. If a lender has more than seven DBAs, its remaining DBAs must be registered with the FHA by submitting the additional DBA names and documentation authorizing their use to HUD (see ML for address).

Officer changes
FHA-approved lenders are now required to report to any changes in the identity of corporate officers, as defined above, to the FHA.

Ownership changes
FHA now requires approved lenders to report all ownership changes, including new owners and changes in ownership interests, in accordance with the ownership requirements for their business form as detailed above.

Commentary
Note that number four above has broad application in terms of administering the law and gives HUD a great deal of latitude to revoke a lender’s FHA approval status. Let this be a clear warning to companies that walk the line in any of their business practices and want to take advantage of FHA programs. It has been easy for companies in the past to hide their unethical business practices with FHA programs, but things have changed and HUD has worked very hard at leveling the playing field for reputable lenders by removing unethical companies and their leaders.
This update is not only important for owners of companies but also MLOs. Knowing these criteria can help you make better decisions about which companies to work for, and can assist you in judging the integrity of the individuals that run your company. It’s important to know that you are working for a company that has solid leaders. And, if you are considering joining a company, it’s fair to ask questions about its leaders so that you can have peace of mind that you are joining a reputable company—or know that you need to look elsewhere!
Wed, 2011-12-28 18:09 — Jeff Mifsud

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

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Want More Business? Ask for It!

Your best source for new business is satisfied customers and clients.

It seems obvious that people satisfied with your services or products would be great brand ambassadors, yet asking for referrals or recommendations is one of the least utilized and most avoided techniques used by small business owners to gain more customers.

It’s not always easy to ask for referrals. You don’t want to turn off clients or embarrass them by asking and risk losing their business. Or perhaps you’ve already asked and are reluctant to ask again. Or maybe you’re afraid the request will make you appear needy or unsuccessful.

Here is another way to look at it: We’ve been asked for recommendations--whether it’s for a restaurant, movie, physician, school, or product. And as a business owner, you have most likely picked up business through referrals as well.

Asking for referrals proactively can increase your business even more than random and sporadic referrals. Here are steps to take to make asking for a referral easier and more effective. 

Confirm Your Value and Define Your Brand

Confidence in the value your product or service provides is integral to making a recommendation request that yields positive results.

You should understand the unique value you provide to customers and how to articulate it. Be able to communicate how you help make customers’ lives easier, why they use your services and your advantages—this helps you define your brand from the standpoint of your customers.

Once you have the answers to these questions then you can formulate the ask.

Make the Ask

Who to ask: Target repeat customers—people you know by name and have regular interactions with. If you provide services, ask clients who are extremely satisfied with your work and can point directly to how you fulfilled their needs.

 

What to ask: Before you make the ask, reconfirm with them the value you provide.  Let them know you are looking for clients and customers like them that stand to benefit from your services. Be specific with what type of clients you are seeking.

For example, if you own a small real estate sales company you might want to ask a customer for young couples (like them) looking for their first home in a particular geographic region.  

Another way to ask for a recommendation is to create programs to encourage referral business. Programs that incorporate discounts like a 2-for-1 offer, or a bonus card  that becomes more valuable with each referral can also generate a buzz.

No matter how you ask, remember to always reiterate the value that these potential new customers would be receiving.

Show Gratitude
Regardless of who and how you ask for a recommendation, show your customers appreciation for any referrals they make. It could be a gift card, flowers, or a handwritten thank-you note--anything that enables you to “touch” your customers or clients and acknowledge their support. An act of gratitude is remembered for a long time, and serves as an incentive for them to keep on passing the word about your great business.
Mary Rosenbaum is a Master Certified Personal Branding Strategist

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

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30-year mortgage rates climb from record low

BLOOMBERG
Mortgage rates inch back higher
30-year mortgage rates climb from record low

U.S. mortgage rates for 30-year fixed loans increased from the lowest on record as home sales rose amid improved consumer confidence and employment data.

The average rate for a 30-year fixed loan rose to 3.95 percent in the week ending Thursday, from 3.91 percent last week, the lowest in records dating to 1971, Freddie Mac said. The average 15-year rate climbed to 3.24 percent from 3.21 percent, according to the mortgage finance company.

New-home sales jumped to a seven-month high in November, figures from the Commerce Department showed last Friday. The unemployment rate declined to 8.6 percent last month, the lowest level in more than two years, and confidence among consumers reached an eight-month high in December.

"Low interest rates are a necessary condition to help the housing market, but they aren't sufficient," Charles Lieberman, chief investment officer at Advisors Capital Management, said before Freddie Mac made the announcement. "We need some other things to happen to help housing. The most important of those is for job growth to continue at a stronger pace."

The number of Americans filing claims for unemployment benefits decreased for the week ended Dec. 17 to the lowest level since April 2008, the Labor Department said last week.

Residential home values, weighed down by foreclosures, fell 3.4 percent in October from a year earlier, according to the S&P/Case-Shiller index of property values in 20 cities.

A measure of contracts to buy previously owned homes increased 7.3 percent in November to the highest level since April 2010 after climbing 10.4 percent the previous month, the National Association of Realtors said Thursday in Washington.

Market data provided by Bloomberg News

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

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Survey: Home prices down in most major US cities

WASHINGTON (AP) — U.S. home prices fell in most major cities for the second straight month, further evidence that the housing recovery will be bumpy and weigh on the broader economy in 2012.

The Standard & Poor's/Case-Shiller index released Tuesday showed prices dropped in October from September in 19 of the 20 cities tracked.

The decline reflects the typical fall slowdown after the peak buying season. Prices had risen modestly in April through August in at least half of the cities tracked.

Still, home prices have fallen roughly 32 percent nationwide since the housing bubble burst five years ago and are back to 2003 levels, according to the index.

Prices are even lower in hard-hit areas, such as Atlanta, Cleveland, Detroit, Phoenix and Las Vegas. Washington, New York, Los Angeles and San Diego have seen the smallest declines.

Home values remain depressed despite some modest progress in the housing market.

Residential construction is likely to add to U.S. economic growth in 2011, the first time that has happened in four years. That's mainly because apartments are being built almost twice as fast as two years ago — reflecting a surge in renting and weaker home sales.

The Case-Shiller index measures prices for roughly half of all U.S. homes. Prices are compared with those in January 2000 and the index is based on a three-month moving average. The monthly data are not seasonally adjusted.

Atlanta, Detroit and Minneapolis posted the biggest monthly declines. Prices in Atlanta and Las Vegas fell to their lowest points since the housing crisis began. Prices rose in Phoenix after three straight monthly declines.

David M. Blitzer, chairman of S&P's index committee, said steep price drops in cities such as Atlanta, Chicago, Cleveland, Detroit and Minneapolis were particularly worrisome because their gains earlier this season were so strong.

"Atlanta and the Midwest are regions that really stand out in terms of recent relative weakness," Blitzer said. "These markets were some of the strongest during the spring/summer buying season."

Americans are reluctant to purchase a home more than two years after the recession officially ended. High unemployment and weak job growth have deterred many would-be buyers. Even the lowest mortgage rates in history haven't been enough to lift sales.

Some people can't qualify for loans or meet higher down payment requirements. Many with good credit and stable jobs are holding off because they fear that prices will keep falling.

Sales of previously occupied homes are barely ahead of 2008's dismal figures — the worst in 13 years. And sales of new homes this year will likely be the worst since the government began keeping records a half century ago.

Prices are likely to fall further once banks resume millions of foreclosures. They have been delayed because of a yearlong government investigation into mortgage lending practices.

Foreclosures and short sales — when a lender accepts less for a home than what is owed on a mortgage — are selling at an average discount of 20 percent. By DEREK KRAVITZ

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

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Low Mortgage Rates Sitting Still While Consumers Become Optimistic

Current low mortgage rates are sitting still today while reports that consumers are more optimistic about the economy were released today. According to the Conference Board, consumer confidence index rose in December to 64.5 which is the highest level since April. This jump was much more than anticipated.

Home prices fell in October according to the latest report from Standard & Poor’s/Case-Shiller index. For potential home buyers, there is still a lot opportunity to purchase an affordable home.

Today’s 30 year fixed mortgage interest rates are at 3.500%, 15 year fixed mortgage rates are at 2.875% and 5/1 ARM loan rates are at 2.250%. These low mortgage rates are available with 0.7 to 1% origination point to borrowers who have a history of good credit. Steady, long term employment is also necessary and will need to be verified.

Home buyers must be have enough documented assets to cover both the down payment for a home purchase and several months of reserves. There are many borrowers who have not yet refinanced and are able to receive these low mortgage rates. These borrowers should also look into refinancing with Harp 2.0 which will eliminate the need for an appraisal.

Current FHA 30 year fixed mortgage interest rates are at 3.250% and FHA 15 year fixed mortgage rates are at 2.750%. FHA 5/1 ARM loan rates are at 2.750%. FHA mortgages are often used by first time home buyers because of the low down payment requirements. With a credit score as low as 580, FHA requires a down payment of 3.5% and 10% with a score down to 500.

FHA also provides several options that borrowers can utilize in order to receive help with the necessary down payment. Gifts from family, friends and employers are accepted provided they can be documented according to FHA guidelines. Local and state housing initiative programs that offer housing grants and loans can also be used. FHA closing costs (APR) tend to be higher because FHA charges an upfront mortgage insurance premium and various other fees, but seller concessions can be used to help offset these costs.

Today’s jumbo 30 year fixed mortgage rates are at 4.250% and jumbo 15 year fixed mortgage interest rates are at 3.375%. Jumbo 5/1 ARM loan rates are at 2.500%. For well qualified borrowers, these are the lowest jumbo mortgage rates available with 0.7 to 1% origination fee. Since jumbo mortgages are not government insured, it is necessary for borrowers to have strong credit and stable employment in order to receive lender approval. Guidelines for jumbo mortgage is often stricter because lenders, who often retain jumbo mortgages within their portfolio, look to reduce as much risk as possible. Jumbo mortgages are usually full documentation loans.
Today’s Wells Fargo California 30 year fixed mortgage interest rates are at 4.000% (4.180% APR).

MBS prices (mortgage backed securities) are up +4/32 which is higher than earlier pricing of +1/32. Mortgage rates move in the opposite direction of MBS prices. There are no major movements going on today with markets which are generally slow during the week between holidays. Neither reports, housing prices and consumer confidence, had enough influence to produce a rally. Although housing prices were reported down again, this is not unusual for October when the real estate market slows down from the activity of the summer months.
FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee. By: Rosemary Rugnetta

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

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Want bigger tax deductions for 2011?

Consider making your upcoming January 2012 mortgage payment a few days early.

Work U.S. Tax Code To Your Benefit

It's late-December and you've likely received your lender's January mortgage statement. Study it, and you'll notice that the payment is broken into as many as 4 parts :

1. Principal : A partial repayment on the original monies borrowed
2. Interest : Based on your mortgage rate, a payment for the right to borrow said monies
3. Escrow : Partial payments of your annual tax and/or hazard insurance bill
4. Mortgage Insurance : For some FHA and conventional loans, a payment to insure the loan against loss 

The key part here for tax purposes is the "Interest" section. For many homeowners,  mortgage interest is tax-deductible in the year in which it was paid.
You can boost your 2011 mortgage interest tax deduction, therefore, by making your January 2012 mortgage payment before the New Year hits. That way, your interest paid will be booked to 2011, and included on your IRS Form 1098.  
Click here to get a mortgage rate quote.

Paying Your Mortgage Early? Know The Pitfalls.

Rushing to make that January mortgage payment in December? Not so fast. Remember, this is federal tax code we're dealing with. There will always be caveats, exceptions and special cases to thwart your eligibility for mortgage interest tax deductions.

For example, not every mortgage is mortgage interest tax deduction-eligible.  The IRS outlines mortgage interest tax deduction eligibility via this flowchart. Follow along at-home to make sure your loan qualifies.

In addition, because of the Alternative Minimum Tax (AMT), some tax filers find that their "normal" tax deductions get pared -- including those related to the mortgage.  This may reduce the benefits of making January's mortgage payment in December.
And, lastly, don't get ambitious.
The IRS allows you to make (and claim) January's mortgage payment in December because that's when the mortgage payment is actually due. If you attempted to pay February in advance, too, it will be in vain. This is because making your February mortgage in December (i.e. before the mortgage interest has actually accrued) is considered to be a "prepayment" of a mortgage.
Prepaid mortgage interest is rarely tax-deductible in cases like this.
Click here to get a mortgage rate quote.

Fewer Days Remaining To Claim Your Bigger Tax Refund

If you want to pay your January 2012 mortgage statement early, make sure you "do it early". The end of the year is approaching and mortgage lenders are short-staffed. You want to give your lender ample time to receive and process your paperwork.
If you pay your mortgage electronically, or via auto-pay, try to have your check clear no later than December 30.
And, lastly, please do not accept the above as tax advice; it's just one method of maximizing tax credits and it can't be used by everyone. If you're planning to prepay your home loan, talk to your accountant first.
The "pay early" plan could be a waste depending on your particular taxpayer profile.

Bonus : Lower Your Annual Mortgage Bill

Mortgage rates have dropped through most of 2011. Since peaking in February, conventional and FHA rates have shed more than a full percentage point.
The plus-side is that mortgage payments are lower everywhere; homeowners are saving $202 per month on a basic, 30-year fixed $300,000 mortgage. The down-side, however, is that, with lower mortgage rates, there's less mortgage interest due each month.
This is a good thing. Better than increasing your mortgage interest tax deductions is to actually pay less mortgage interest.  Get started with a rate quote and see how you can lower your mortgage payments to the bank. Original Article Content Written by: Dan Green
Click here to get a mortgage rate quote.

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

Visit First Capital Online or call: 310-458-0010

Your Mortgage and the Holidays

Have yourself a wonderful holiday season - but don't do it at the expense of your mortgage.

Mortgage delinquencies and missed payments often spike after Christmas because people have spent so much on gifts and holiday indulgences that they don't have enough left over to pay all their bills. It's nearly always inadvertent - the little expenditures keep adding up until they suddenly realize they don't have enough left over to make that big mortgage payment that's due every month.

The trap that some people fall into is that they decide to skip or be late on just one mortgage payment. Yes, they'll take a hit on their credit, they may figure, but maybe their credit is already dinged a bit, or perhaps with the mortgage in hand and a decent car in the garage, they figure they can afford to get marked down a bit. And a $35 late fee may seem like an ok price to pay for a little financial flexibility. 

Viscious circle of late payments 

What these people don't take into account is how difficult it can be to get your mortgage payments back on track once you start falling behind. Even worse, some assume that, as long as they make their next month's payment on time, they'll only have one late payment on their account. That's not how it works.

What happens is, if you miss your January mortgage payment, that payment is still due until you make your next payment. So if you make your next payment in February, as scheduled, that is credited as your late January payment. If you don't make another payment to cover your February obligation, your February payment is considered late and you get hit with another late fee, and ding to your credit.

This keeps happening every month until you bring your account current - so your "one-time exception" can end up costing you a ton of money, as well as doing some significant damage to your credit rating. You're probably better off paying late fees and hefty interest rates on your credit card bills, if it comes down to needing to choose between the two, since you can at least cut off any additional spending on them and gradually eliminate the debt.

Better yet, don't get into that position in the first place. There's still time to take stuff back if you've overspent this year. 

The Santa HELOC 

Another mistake that some people make, though it's less common than it used to be, is tapping into their mortgage equity to get money for Christmas spending. This is particularly tempting when you have a Home Equity Line of Credit (HELOC) that makes borrowing modest amounts relatively easy. Others may look to a regular home equity loan to pay for a really big gift, like one of those luxury cars with the big bow on top like you see in the advertisements.

There is a certain logic to borrowing against your home equity for certain debts - mainly because interest payments on mortgage debt is tax-deductable. So if you've got a lot of equity in your home and you're planning to pay off the new debt fairly quickly, it can make sense to use a home equity loan for a major purchase like a car, rather than taking out a conventional loan. But with interest rates as low as they are, that argument loses much of its merit.

The broader problem is that it can get you into the habit of borrowing against your home equity, so that you're always using your home as a piggy bank rather than paying off your mortgage. This can be a particular temptation for people who have their home about half paid off and are feeling flush.

The collapse of the housing bubble, when a lot of people got into trouble because they had borrowed too much against their home equity, was supposed to have cured people of such things, but it's easy to fall back into bad habits once things start looking up again. by Kirk Haverkamp from MortgageLoan.com

The views, opinions, positions or strategies expressed by the authors and those providing comments or external internet links are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of First Capital, we make no representations as to accuracy, completeness, current, suitability, or validity of this information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All registered trademarks, copyright, images, or other items used are property of their respective owner and are used for editorial purposes only.

Visit First Capital Online or call: 310-458-0010

New Construction Stays Hot; Home Buyers Buy Up Supply, And Then Some

Buying new construction? Get moving. Emerging data hints at higher home prices in 2012.
Click here for mortgage prequalification.

Single-Family Housing Starts Keep Climbing

The U.S. Census Bureau publishes a monthly Housing Starts report in which it tallies the number of new homes on which ground has been broken.
The Housing Starts report is split into three parts:

1. Single-Family Housing Starts, a group that comprises 1-unit homes, detached single-family residence, and attached  single-family residences.
2. 2-unit, 3-unit and 4-unit homes

3. "Apartments" -- buildings of 5 or more units which includes true apartments, condo buildings, and co-ops.

All three home types are relevant, but to new home buyers in places such as Bucks County, Pennsylvania or King County, Washington, it's the "single-family" starts data that's most relevant.
Single-family homes are the most common purchase type and account for more than 80% of all home purchases.

In November, nationwide, Single-Family Housing Starts rose to 447,000 units on a seasonally-adjusted, annualized basis in November. This is a 2 percent increase from October and the third straight month that the number of  Single-Family Housing Starts grew.
Single family starts are now 15 percent above the metric's all-time low, which was set in February 2011.

Home Prices Rising Into 2012

November's Housing Starts data likely won't be a surprise to today's active home buyers. Many report competition for new homes and have faced multiple-offer situations. When homes are priced right, they sell; and builders are moving inventory.

Since September, new home sales volume is up and remaining home inventory is down. Basic economics tells us that home prices should soon rise, if they haven't already.

The good news is that low mortgage rates should keep new homes affordable.
As compared to six months ago, average mortgage rates are down one-half percent, normalizing for discount points and closing costs. This rate-drop has made a palpable dent in the cost of homeownership. Looking at homes in the Washington, D.C. metro area at the mortgage loan limit for the area, it's obvious why low rates appeal to buyers.

• In June 2011, the principal + interest on a $625,500 mortgage was $3,166.78 per month

• In December 2011, the principal + interest on a $625,500 mortgage is $2,983.85 per month

With mortgage rates down, home buyers in Loudoun County, Virginia; or Potomac, Maryland, as examples, are saving $2,195 per year. It's no wonder home builders report the highest buyer foot traffic in 3 years. Buyers know a good deal when they see one.
Furthermore, the same report that showed Single-Family Housing Starts rising showed Building Permits rising, too.

Permits for single-family homes rose to their highest levels of the year in November and 89 percent of those homes will start construction within 2 months. Building Permits are a pre-cursor to Housing Starts so we should expect for Single-Family Housing Starts to remain strong through the early part of 2012, and into the spring season.

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