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100% Financing with USDA 
USDA, the United States Department of Agriculture, has a wonderful loan product which allows 100% financing on primary home purchase transactions. There are some pros and cons, as you might have guessed.

The Pros are many, so here are a few. 100% financing is permitted. Closing costs can be included in the loan amount if the property appraises above the sales price. Gift funds are allowed to pay for closing costs. Seller contributions are allowed to pay closing costs. The Guarantee Fee can be financed in the loan amount. The monthly Mortgage Insurance is much less than FHA, only 0.40% annually. Typically you only need a 620 credit score.

There are fewer Cons, but here are the 3 biggest. There is an income limitation/ceiling, based on the property's county. The property must be in an eligible area. A borrower is ineligible if they have enough cash to qualify for a 20% down payment conventional loan.

Most of our Lenders are quoting a 30 year fixed rate of 4.0%, or better, with no points, so the rate is great. If you or someone you know is thinking of purchasing a primary home, please call me to discuss the possibilty of putting this amazing loan program to work for you.

Brett Wolf
President

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Mortgage Rates are Dropping Again. 
One of our Lenders is quoting some awesome rates today! They are offering an FHA 30 year fixed rate at 3.875% and no points! I know the cost of the upfront MIP (Mortgage Insurance Premium) went up to 1.75% and the monthly MI increased to 1.35%, but if you need a low down payment loan, this is the way to go.

The same Lender is quoting a Conventional (Fannie Mae or Freddie Mac) loan rate of 4.375% and no points for a 30 year fixed rate mortgage. This is available for loans with a downpayment of as little as 5% (sometimes 3%) and can be used for any property type.

SHOULD I LOCK OR FLOAT?
Unless you are going to closing and must lock, I feel that is safe to float your rate. There will be some volatility so don't put your blinders on, but overall the risk should be outwieghed by the reward. Let it ride!

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The Federal Debt Ceiling. Does it Matter? 
The Federal Debt Ceiling is the amount that the Federal Government is allowed to borrow and that amount is determined by Congress. The Treasury Department has said it will hit the existing ceiling on October 15th, but the fiscal year ends September 30th, so a preliminary budget must be agreed to by then. There is a lot of posturing on both sides of the political aisle, but ultimately the Republicans will negotiate in an effort to get something from the Democrats in exchange for agreeing to increase the ceiling. If no agreement is reached, the Federal Government will shutdown.

I don't think this will happen. It shouldn't, because they should remember what happened in 2011. The Federal Governement's debt rating was donwgraded in an historical event. Hank Smith, chief investment officer at Haverford, agrees, saying "There's no question they're going to raise the cebt ceiling."

The downgrade caused mortgage rates to bump up slightly, but then mortgage market participants quickly realized that the rating placed on US debt didn't really matter, since the US was still the safest place to invest because the US has never defaulted on any obligation in it's history. I really don't expect it to start happening now.

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Mortgage Rates Down for the Week 
After Wednesday's blockbuster news, mortgage rates dropped across the board. Yesterday and today were relatively quiet in the mortgage market as investors tried to determine what to do next. Most were waiting and watching, trying to get a leg up on their counterparts by finding a nugget of information that would enable them to predict what the FOMC will do next.

30 Year fixed rates for most lenders ended the week at 4.5%, typically with no points, while 15 year fixed rates were at 3.5%, also typically with no points.

SHOULD I LOCK OR FLOAT?
Unless you are going to closing and must lock, I feel that is relatively safe to float your rate. There will be some volatility with mortgage rates, but overall the risk should be outwieghed by the reward. Let it ride!


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Why the FOMC chose not to Taper 
On Tuesday, Bob Doll, chief equity strategist at Nuveen Asset management said "I think the Fed is desperate to get going on it," referring to Tapering. In my blog post on Tuesday, I agreed with him. I felt it was the perfect time since rates had run up solely on the talk, thinking that the start of Tapering was already "baked in the cake", because rates had already risen.

After some additional research, I found some interesting data that explains why i was wrong. The FOMC is looking at Unemployment and Inflation. Bernanke feels that the current rate, which is 7.3%, understate the real rate, and I agree. Why? Because the calculation does not include the people who have run out of benefits and are not longer bing counted. It also doesn't include workers who were full-time employees but are now part-time.

Core PCE Inflation is what the Fed uses as a benchmark for inflation. PCE is a measure of price changes in consumer goods and services. Personal consumption expenditures consist of the actual and imputed expenditures of households. The PCE is currently 1.2% and is dangerously low. Since Deflation is the only thing the Fed dislikes more the Inflation, it is easy to see why they chose to leave QE3 unchanged.

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