Monday Market Update: Home Sales Slow, Employment News Remains Strong

The pace of nation-wide existing home sales dipped by 1.8% month-over-month and 5.3% year-over-year in August. By region, the West’s -6.0% drop was the largest decline.

Home sales have been slowed by low supply and rising prices. The rate environment remains favorable, but without homes to buy, many first-timers remain on the sidelines. The supply of “distressed” properties (foreclosures and short sales) has dried up, which has eliminated a source of affordable housing and contributed to the current supply crunch.

New home development has stepped into the vacuum. Sales of new homes jumped 18% percent in August. The Western region (which had the largest existing sales dip), saw new sales jump by 50%. Here in San Luis Obispo County, stakeholders have come together to plan for more “workforce housing” developments and alleviate the supply crunch. Click here for the full story.

In other economic news, jobless claims increased slightly, but keep in mind that the rise came after the lowest recorded volume of new claims in 14 years. The increase was small (281,000 two weeks ago to 293,000 last week), which suggests that the nationally jobs situation is making solid improvements.

Second quarter GDP was revised up to a 4.6% growth rate. The first quarter churned out an alarming 2.1% drop in GDP, so the strong Q2 recovery has provided a nice salve for markets.


Mortgage Rate Movement

30-Year Fixed MovementMortgage rates have dipped back to early-September lows. After a mid-month spike, the Central Coast Lending 30-year fixed dropped 3/8 of a point week-over-week. For 3/8 of a point in cost, we are now advertising the 30-year fixed at 4.125% (4.171% APR).

The Freddie Mac national mortgage rate tracker reflects this decline. Last week, the 30-year fixed national average fell back to 4.20%, which is only slightly higher than the 18-month low of 4.10% set in late-August.


Loans Program Updates

Remember: monthly USDA mortgage insurance fees are set to increase from 0.4% of the loan to 0.5% on October 1, 2014. For a loan of $400,000, this would increase the monthly mortgage payment by about $33. Read more here.


Central Coast Lending is a California mortgage broker and direct lender based on the Central Coast of California in San Luis Obispo County. Call us today at 805.543.LOAN or email us here to set up a free pre qualification. We are The Mortgage Experts: ask us anything!

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Monday Market Update: Fed Stays the Course

The Federal Open Market Committee – the policy setting wing of the Federal Reserve – concluded its monthly meeting last Wednesday (September 17).

As expected, the FOMC will stay the course. The FOMC will keep short-term interest rates at their lowest level, with the expectation that an increase will come in 2015. The target inflation rate remains 2.0%.

The FOMC will also continue to “taper” its stimulus program (quantitative easing), with the conclusion to come by Halloween (2014). QE3 helped mortgage rates reach the lowest level on record in 2012, but “tapering” has alleviated some of that downward pressure on rates.

Still, rates remain near the lowest levels because low supply of mortgage-backed securities and high investor demand has helped fill the FOMC’s place.

In other economic news, weekly jobless claims hit a fourteen-year low at 280,000, and the four-week average dipped below 300,000.


Mortgage Rate Movement

Freddie Mac 30-year fixed movement copyMortgage rates inched up, but overall there isn’t all that much to report.

Despite the positive jobless claims report, the impression seems to be that the U.S. jobs market is soft. The Fed cut its 2015 economic growth predictions, and also dropped its September expectations. Unremarkable U.S. economic growth at home and turmoil abroad has helped maintain the low mortgage rate environment.

All eyes will be watching the jobless report this Thursday, and we will also see data on existing home sales, new home sales, durable goods orders, and GDP.


Loans Program Updates

Funding for second mortgages – Home Equity Lines of Credit (HELOC), for example – is making a strong comeback. The savvy buyer / owner can use the second mortgage to solve complicated financial situations. Read more here.


Central Coast Lending is a California mortgage broker and direct lender based on the Central Coast of California in San Luis Obispo County. Call us today at 805.543.LOAN or email us here to set up a free pre qualification. We are The Mortgage Experts: ask us anything!

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New Listing! 2598 Emerson Road, Cambria


Forest Perfection is what you will find with this absolutely spotless, light and
lovely Two Bedroom One and One-Half Bath home. No deferred maintenance here –
the owner has invested countless hours to ensure this charming home is picture
perfect. Enter from the protected front deck, soft light filters into the
vaulted living room with its inviting fireplace. Enjoy a cup of coffee on one of
your warm and spacious decks that looks out to the naturally sculpted oaks and
towering pines. Rest peacefully in this dramatic loft style master bedroom with
its cozy nook bathed in natural light. Surrounded by coastal oaks and a Monterey
pine forest, visitors describe this peaceful setting as Ventana South”.
Abundant wildlife and close proximity to the Fern Canyon Preserve. Milgard
windows, nearly new kitchen, well scaled living room with gas fireplace, vaulted
ceilings, dining area, indoor laundry, view decks, attached garage with opener,
and bonus room – workshop, wine cellar or..

New Listing! 1270 Bur Clover, Varian Ranch, AG


The current owners purchased the home from California’s renown Hollister family, who built the original home in 1987. They bought this home because of their vision for an absolute dream home. Prestigious Varian Ranch is a gated community made for fulfilling dreams. It is one-of-a-kind as there’s nothing else like it. Co-owning 3200 acres of the finest land in CA with your own multi-well water company is pretty amazing. Enjoy the scale, setting, silence, and beauty this community offers. The home’s custom renovation exhibits end-to-end obsessiveness for attention to detail and brilliant craftsmanship. Upgrades hover in the 1.65M range. It has relaxed, authentic, timeless, built-to-last, uncompromising quality & ambiance. Multiple indoor and outdoor settings, each with its own mood, feel, and time of day provide options for unique entertaining environments whether to suit intimate moments or if huge gatherings are desired. There are four firepits and three fireplaces for your use.



New Listing! 218 Patricia Court, SLO


Take advantage of this rare opportunity to live just a block from Bishop Peak open space access in this lovely approx. 1975sf home that provides 4 bedrooms, 2 baths plus a 2-car garage on an approx. 9450sf lot. Located within the highly sought after Ferrini Heights neighborhood, just minutes from downtown, shopping and schools, this light and bright home features a centrally located fireplaces shared with the formal living room, and adjacent family room. The well illuminated kitchen has an abundance of cabinetry, and the fully fenced rear yard offers a spectacular view of Bishop Peak.

Great way to enjoy the SLO life

Music in the Vineyards

This is a beautiful time of year here on the Central Coast.  Wineries are spoiling us and booking great local musicians for casual as well as large events.  Sculpterra Winery, for instance, has music every Sunday. Stillwaters Winery has music in their 100 year old olive grove once a month.  Castoro Cellars hosts it’s annual ‘Beaverstock’ this coming sculpterraweekend.  Good music, beautiful scenery and a little vino……..what better way to spend a restorative day off!


Market Update: Employment Disappoints, Mortgage Rates Unchanged

Employers added 142,000 jobs in August, according to the Bureau of Labor’s widely-followed monthly report. The tally fell below the expectation for 200,000+ jobs added.

This is the first month since January 2014 that payrolls failed to add over 200,000 positions.

“One can’t help but wonder if this is just a speed bump, or if it is a new trend,” said Jason Grote, co-owner of Central Coast Lending, noting that this time around, we don’t have a convenient large-scale answer like “poor weather” or “government layoffs” to serve as blame.

One cause for optimism, as noted by Wall Street Journal reporter Kathleen Madigan, is that demand for labor persists. The average workweek held at 34.5, and “if demand for labor was in reality weakening, the first thing businesses would do is cut the hours of their existing employees.” Another positive for labor: the number of “involuntary” part-time workers continues to decrease, which means that businesses are not widely cutting full-time workers to part-time, or adding only part-time jobs to hold down labor costs.

The workforce participation rate ticked down to 62.8% – the lowest reading since 1978 – and the employment-population rate of 59% was unchanged for the third straight month.

Investors didn’t see enough in the report to make any market-changing moves. The lower-than expected returns will “put everybody at heightened awareness,” said Grote, but in the meantime, concerns abroad (geopolitical issues and struggling European economies) hold center stage.

Economists seem to be taking the news in stride, and attributing the data as a “one-off” dip. Pimco co-CEO Mohammed El-Erian told CNBC’s “Squak Box” that he actually sees some good in the report. Long-term unemployment is down and the dip in the unemployment rate (6.1%) seems genuine (i.e. not propped up by people leaving the workforce).

At the end of the day, Grote doesn’t see much cause for panic. “To me it is just the growth pains of getting back to normal,” he said. “They can’t all be great months.”


Mortgage Rates Unchanged

30-year Fixed 2014 Movement GraphWhen markets move, mortgage rates move. The employment report didn’t cause much distress in markets, and mortgage rates stood mostly still.

Another piece of data that came out recently: second quarter GDP was revised up to +4.2%, suggesting that the economy enjoyed even more growth than expected. Ordinarily, this type of good news would put upward pressure on interest rates (click here to learn about why – and when – interest rates move).

The only problem: concerns abroad trump success at home. Germany turned in a recent quarter of negative GDP, the Russia-Ukraine issues continue, and European economic growth remains flat.

“If anything, you could argue there is downward pressure on rates,” said Grote. “The brighter U.S. economic outlook was supposed to mean higher mortgage rates, but instead they have stayed steady and even declined.”

Click here to read more about why rates have zigged (dropped) when everybody expected them to zag (jump).


First-Time Buyer Guide to the Central Coast

Any questions about home loans in California? We are The Mortgage Experts: ask us anything! Call 805.543.LOAN or email us today.

Mortgage rates have done their part to aid new buyers, but rising prices on the Central Coast have made the home purchase process a challenge. As we wrote in our Q2 SLO County real estate report, the median sales price of single-family Central Coast homes has jumped over 30% in the past 36 months.

As a result, this window of affordability for middle-income and low-income buyers hasn’t resulted in the kind of boom we might have expected for first-time buyers. Nationally, 29% of purchases were attributed to first-timers in May of 2014, where the historical average has been closer to 40%.

We have put together a thorough guide to help first-time buyers succeed. Use these tips to better understand the mortgage process, qualify for a loan, and then submit a competitive bid that will improve your chances of winning. Click here to view.


Central Coast Lending is a California mortgage broker and direct lender based on the Central Coast of California in San Luis Obispo County. Call us today at 805.543.LOAN or email us here to set up a free pre qualification. We are The Mortgage Experts: ask us anything!

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Minimum Credit Standards for Home Loan Qualification

Of all the parts of the mortgage financing process, credit qualification is one of the most misunderstood.

Through the qualification process, lenders dig through all aspects of the borrower’s financial situation and attempt to assess their ability to repay the loan. The underwriting process builds evidence by looking at all income sources, outstanding debt, and credit history, among other factors.

We have built our business around the idea that knowledge is power, but we will also clarify that knowledge, when incomplete, can be misleading and even harmful. Nowhere is this axiom more true than with credit qualification.

Minimum credit standards differ between lenders, borrowers, loan types, and home builds, among other factors. What’s more, the situation is fluid. Lenders are constantly shifting standards, and potential buyers are constantly encountering new life situations (and dealing with old ones) that may change their credit outlook. What is true today may not be the same as yesterday, and it all certainly won’t be the same as tomorrow.

If you take away any one piece of advice from this credit qualification overview, take away this: don’t disqualify yourself from the couch. We can almost stop the article there. But to better understand the situation, we offer the the following three guidelines:


Point #1: Different Lenders, Different Loan Programs, Different Standards

Any questions about home loans in California? We are The Mortgage Experts: ask us anything! We have a loan program to fit every need. Call 805.543.LOAN or email us today.

Different lenders often offer different qualification standards (credit score, debt-to-income, loan-to-value) for the most popular government-backed loan programs (Conforming 30-year fixed and 15-year fixed, FHA, USDA, and VA)

So while one lender advises that the lowest FICO score for the FHA loan is 550, another might not go that low.

What’s more, one 550 FICO score might not be the same as another.

We recently helped a client purchase a home with an FHA loan and a 550 credit score. Our buyer had a heap of student debt, and in searching for adequate employment, making rent, and purchasing necessities, had occasionally lapsed on repayment. When our client prevailed and found a high-paying local job, this person had the ability to comfortably make mortgage payments and remain current on pre-existing debt. The credit score did not reflect the current reality of the situation.

This is our #1 piece of advice: different lenders and different loan programs offer different standards. Bank #1 might list a 620 credit minimum and a 31% debt-to-income maximum, while Bank #2 lists 580 and 40%.

As a mortgage banker and broker, we have access to many lenders, and are able to shop for the most flexible credit scores and debt-to-income ratios on the market. Here are the best terms we can find for you:

FICO Credit Score:

  • 550: FHA
  • 560: VA and USDA
  • 580: Conventional

Debt-to-income (DTI) Ratio:

  • 60%: VA
  • 57%: FHA
  • 50%: Conventional (Fannie Mae and Freddie Mac)
  • 43%: USDA
  • 43%: Jumbo

And this brings us to point #2:


Point #2: Go Shopping (The Broker Advantage)

Always ALWAYS shop around. In our last example, Bank #1 has stricter standards. But all too often Bank #1 would not refer the borrower to Bank #2. Because why help a competitor?

We have qualified countless borrowers who had “lost hope” or thought they were “unlendable” based on advice given by brick-and-mortar banks:

#1 “This was a painless process; you succeeded where conventional banks failed me.” – Susan Manbeian, Pismo Beach

#2 “I had been trying to refinance with my current lender for 4 months. Your people were able to take my application, process it, find a lender, and close while the former lender was still trying to get their act together.” – Bonnie McIvor, San Luis Obispo.

Again we return to the point: always ALWAYS shop around. The mortgage broker is able to act as an advocate for THE BORROWER and not the bank. They will find a loan that best fits the borrower, rather than vice versa.

Even better, we offer the entire shopping process, professional advice, pre qualification, pre approval FREE. We are not paid until the loan closes.

Which brings us to our third piece of advice:


Point #3: Credit is NOT static

So far we have focused on the lender’s standards, but what of the borrower? The nature of the FICO score and debt in general, is that it never really stands still. As you make monthly payments, your DTI declines. As you continue to pay your revolving credit lines, your FICO improves.

Even a negative credit event as large as a foreclosure or short sale can be overcome in a year. The FHA Back-to-Work program offers financing just 12 months after a negative credit event, given the right situation. See here for our complete guide to minimum wait times.

Take this example. We recently helped a first-time buyer take out a loan and purchase a home with NO PRIOR CREDIT. This client had never held debt of any kind (credit card, auto loan, student loan, etc) to build a credit history and a FICO score.

To build credit quickly, we had our client join a close family member’s account as a co-borrower. By the end of the process, our client got a 30-year fixed conventional (Fannie Mae) loan with just one trade line.

As a borrower, most issues (collection accounts, trade lines, etc.) can be overcome with a little work. However, there are a few major issues that will require more attention. Past-due state and federal tax bills with no payment plan, and past-due child support are major warning flags.

We have put together a general guide for improving your credit score. Check it out. These are general guidelines; you can receive custom tailored advice (free!) for your situation simply by picking up your phone and calling us at 805.543.LOAN or emailing us here.


Free Service!

In reading about credit issues and mortgage finance, you will often see all kinds of minimum qualification terms thrown around. On top of the usual FICO and debt-to-income, you will hear about minimum trade lines, collection accounts, and more.

The simple fact is this: different banks treat different factors differently. Don’t disqualify yourself from the couch and come to the conclusion that you are “unlendable” without talking to a loan officer. This is a free service from a financial professional, and you may be surprised to learn just how much is possible.


Central Coast Lending is a California mortgage broker and direct lender based on the Central Coast of California in San Luis Obispo County. Call us today at 805.543.LOAN or email us here to set up a free pre qualification. We are The Mortgage Experts: ask us anything!

About   ||   Mortgage FAQ   ||   Market Update Blog   ||   Radio Show   ||   Contact