Inflation, all we've never wanted.

The Go-Go's may have sang about vacation being all we've ever wanted in the 1980's, but if we were to re-write the lyrics about last week, we could sing about inflation. Read on to learn why this matters.
We saw a double dose of inflation news last week and while the Producer Price Index (which measures inflation at the wholesale level) remained unchanged in August, the year-over-year Core Consumer Price Index (CPI) jumped up to hit the upper-end of the Fed's threshold of 2%.

So why is this significant? The concept is very simple: If inflation rises, investors in Bonds demand a higher yield to offset the lost buying power inflation imposes on a fixed payment. And as home loan rates are tied to Mortgage Bonds, this would mean home loan rates move higher.

What’s more, in light of last week’s higher consumer inflation reading, the Misery Index—which is the Unemployment Rate (9.1%) plus the level of year-over-year headline Consumer Price Index (3.8%)—is at a disconcerting 12.9, which is the highest in nearly 30 years. Our great country needs a whopping dose of certainty, clarity and confidence...and in the absence of it, this index will continue to rise.

Remember: Once inflation starts to emerge it can manifest rather quickly. Future inflation readings will be closely watched to see if a trend higher is emerging, and last week’s elevated number will certainly heat up the debate surrounding more stimulus, as more money into the system fuels inflation further. If inflation heats up even more, the Fed will likely back off their "low rates until mid-2013" mandate. Inflation really does change everything, and I will continue to follow this story closely and keep you informed.

The bottom line is that home loan rates remain near historic lows, and now is still a great time to purchase or refinance a home. If I can answer any  questions at all for you or your clients, call or email me anytime.

How to understand where you are ... Financially

The first step toward leaving credit challenges behind is understanding where you are right now. Because your credit report is used by lenders to assess your finances, it's a good idea to review it yourself beforehand. This gives you the chance to correct any errors and identify any continuing problems.

You can order a free credit report each year from each of the three national credit companies. Examine it closely to ensure it's correct. Your explanations of any negative entries can play an important role in determining your mortgage options.

Credit Reporting and Scoring

While many lenders use credit scores to help make lending decisions, other criteria play a significant role in determining the level of risk involved in making a loan. Those other criteria include income and debt, employment stability, and how the borrower's payment history has changed over time.

Factors that affect your score

There are five basic factors that determine your credit score. The levels of importance shown here are for the general population, and will be different for each individual:

1. Your payment history: What is your track record.

2. Amounts that you owe: How much is too much?

3. Length of your credit history: How established is it?

4. New credit: Are you taking on more debt?

5.Types of credit in use: Is it a "healthy" mix?

When lenders review your credit history, they are trying to determine how likely you are to repay the loan. How well you've done that in the past is one indicator of how likely you are to do it in the future.

The credit score identifies to the lender the level of the future risk associated with your credit history, as compared to hundreds of thousands of other credit reports. The higher the score, the lower the risk.

Moving Up

My goal is to do what it takes to meet your immediate financing needs and work with you to help you understand how to establish a positive payment history that can help you improve your standing in the future. As you move up the credit ladder, you'll have an increasing number of programs and rate options available, giving you even more ways to improve your financial security.

For more information, contact me today!

Remodeling? Don’t Forget the Permit

Home owners who fail to get a building permit for a remodeling project can jeopardize a sale.

When home owners take on a remodeling project, they’re often far more focused on choosing glistening fixtures for a new bathroom or debating the type of granite to use on a kitchen countertop than, say, navigating the intricacies of the building permit process. That could be a huge mistake, however, and it may not even come to light until the house is put up for sale. Ignoring local approval requirements not only poses safety and legal problems but also can potentially derail an otherwise smooth sale.
Home owners using licensed contractors for remodeling work typically don’t have to get involved with permitting. Most licensed contractors will handle the cumbersome process for them—filling out the paperwork with the municipality, collecting fees, and being present for the required inspections, says Michael Hydeck, president of the National Association of the Remodeling Industry. But when home owners tackle do-it-yourself projects or use unlicensed contractors, they risk problems later.
The permit process varies widely from city to city and state to state). But the purpose of the document is the same everywhere: It offers ­assurance by a municipal building department that the work being done meets all safety codes.

Ask Sellers Before You List

Home owners may be asked about permits in the process of selling a home. At closing, they may have to disclose any remodeling work they did and verify permits. A home inspector evaluating a property for a buyer may want to know whether a permit was obtained. Furthermore, the buyer’s appraiser may want to see permit records to check the legality of any home renovations.
“If no permits are found and it’s obvious the home has been renovated, the bank will likely refuse to make the loan,” according to the American Bar Association’s book Legal Guide to Home Renovation (Random House Reference, 2006). If the permitless work isn’t discovered until after closing, the home’s value could even be subject to a lawsuit, such as in cases when an addition added extra square footage to the home’s value but the construction wasn’t done legally with a permit.
That’s why contractors and legal experts say real estate practitioners are well advised to ask sellers before they take on a listing for a renovated home: “Did you get a permit for that?”
Remodeling contractor John Price in Merced, Calif., has been called in to help home owners after permit problems have been uncovered. He once worked with a home owner who installed siding by himself, but added it too far down along the wall of the house, so it rubbed up against dirt and picked up moisture. Eventually the poor installation led to mold growing in the drywall throughout the inside of the house.
Some home owners, however, are tempted to sidestep the permit process not wanting to pay the fees (municipalities generally charge a minimum issuing fee—such as $25—as well as an additional fee—sometimes 1 percent—of total construction costs), or they might not want to risk delaying a project or a sale by waiting for city inspections (obtaining permits can take anywhere from a day to six weeks or more).
“People have strong incentives to cheat, and some of that lays squarely on the feet of policymakers who have sometimes created a system that is time-consuming and frustrating,” Price says.
But caught without a permit during resale, home owners may face big consequences. They may have to pay fines (possibly up to quadruple the original permit cost) or may have to tear the project down and redo it.

Virtually No Job Is Too Small

Home owners making any changes to the structures of a home will likely need a permit—and you may need more than one, Price says.
While kitchen and bathroom remodels and housing additions are obvious permit candidates, people may not realize they might also need one for such projects as installing a window, adding a new light switch, or replacing a shower. “There are not too many jobs you don’t need a permit for,” Hydeck adds. “It’s better to be safe than sorry.”