On Having Eight Children

"Children are an heritage of the Lord...happy is the man who has a quiver full of them." - Psalm 127

The recently-delivered edition of the Pontificating Potty Post has a list of April Fools "Facts", and one of the possibilities is that Jeanette is pregnant with our 8th child. That is not one of the April Fools. It's true.

We've been asked in several different ways the same question - "why?" We have never been rich, though we've been comfortable a couple of times during the 17+ years we've been married. It isn't as if we've had money overflowing to take care of so many little people. We live in a nice house, but not a spectacular one, and it's getting a little crowded. It's already very hard to find enough time to spend with each of our spectacular children, and adding one more is not going to help that.

On top of that, Jeanette is 41. I'll be 40 in July. When this kid goes to college, we'll be 60. Its oldest brother (I almost said "her" older brother - and we do very much hope that the child is a girl) is 16 now and will be almost 17 when she's born - he'll be nearly my age when this child is a freshman in college. This child means another three years of potty training (or possibly more, depending on the child), another four years of cub scouts, another eight years of teenage-hood to deal with. Altogether, we'll weather 64 years of teenagers in this house. If, as some experts estimate, each child costs $350,000 or so to raise, we'll have spent over $2.8 million raising our eight, and that's if we do not decide to adopt after this, which we've considered. Lots of money, lots of kids. We live in a very devout Mormon community here, and our family is the largest among even these people (though two have had more children that are grown and gone now). Even my sainted mother only had seven. Only!

Behind the why, we hear the echoes of these and other questions - Aren't we worried about pregnancy complications? Am I not concerned about my wife's heath and well-being? I run a mortgage company - what happens if it goes belly-up, as so many of my competitors have done? What about the scarce resources of the earth - don't I care that my family is consuming too much of them? How can we possibly love so many kids, and give them the attention they need?

The short answer is yes, we're worried about all those things. But the true answer is no, we're not. Obviously, because I just listed them, I know what the potential difficulties will be. Jeanette is not invincible (I assume), and as tough as she is - and she's the toughest woman I know - she could have trouble with a pregnancy so late in her life. But she hasn't so far, and she never has before. She's in good physical shape - weighs now, in her second trimester, about what she did when she graduated from high school - and mentally, she's better than ever. Besides, this was HER idea, more even than it was mine. I've said before, many times, this isn't my show here. She runs the house, and she's in charge here, and it's her body. My part of the child-creation process is relatively short and quite pleasurable, to be frank. It's she that has to carry the kid around for the next three years. All I have to do is pay for it.

And that part is always taken care of. No, as I mentioned, we're not rich by Robin Leach standards. Frequently, and now is one of those frequent times, we go long stretches without any money at all. But we've done pretty well, through apparently no fault of my own. We've always had a house to live in, though we've been through the threat of foreclosure once, we've always had food (remind me to tell you about the miracles we've seen there, one of these days), and since Alexander was 2, Jeanette hasn't worked outside the home. I've been through four business failures and countless job and career changes, yet here we are, fed and clothed and living in one of the larger houses in Lehi. Two cars in the garage. A Wii. Two trampolines.

Short of it is, we don't worry because we are, and always have been, in the hands of a loving God. He has cared for us every day of our lives, and usually in ways so tangible and obvious they bring tears to our eyes. One of our favorite family traditions is the "tell us what God did for you today" reports at the dinner table. Even our youngest children see His mighty arm in all the things that we do.

We really decided to have child number 8 because of Him. See, we really believe in Him, that He has a plan for us and that He loves us. So many of our friends would love to have more children, but they can't. Or their children are physically challenged. Or they cannot support more than they have. Or they cannot physically handle the pregnancy. Or on and on. Our children are healthy, bright, and engaging, we have enough and a little left over, Jeanette can physically and mentally handle the load. Maybe others can't have more children, but we can. How could we then say no? And the children are OURS, in a way that nothing much in this temporary existence is. It's said that you can't take it with you. Oh, you can take it with you, all right, you just have to convert it into the currency they use in the place where you're going.

Family is the coin of that Realm. I'd like as much of it as possible. After all, if you really, truly believed that there was another life after this one, and that it was being prepared for you by a being who loves you more than you can possibly imagine - and I assure you, there is and He does - why wouldn't you act like it? If you could trade a thing in this life, money or time or health or what have you - for a thing in the next, that would never die, but always be a joy to you, why on earth wouldn't you do it?

Hope it's a girl.

How Much Does My Interest Rate Really Matter?

Inflation is the big problem this week, and it's pushed mortgage interest rates to their highest level in 2 months. Today's market news - bad earnings from nearly everyone and higher-that-expected jobless claims - should push bonds higher, but right now the market traders have decided that stocks are good and bonds are bad, and nothing is going to change their minds, apparently. So let's spend a moment talking about interest rates, and why they are NOT the end-all and be-all of mortgages.

First, interest rates aren't very high, on a historical basis. 6.25% sounds like a lot, but most people can remember 7.5% fairly recently, and some can remember 12%. Business still got done.

Second, let's look at the real difference between 6.25% and 6% mortgage interest rates. On a 30-year mortgage, beginning balance of $250,000, the payment difference is $41/mo ($1498 vs $1539). That's less than $500/yr, or .1% of the gross annual income of a typical homeowner for a home with that kind of loan. Suppose your company comes to you and says "in order to cut costs and keep the company alive, we're going to have to cut everyone's salaries. The cut will be .1%. Please don't kill us." Anyone going ape over that? Over what amounts to one family trip to Wendy's every month? Yet there are borrowers that have attempted suicide when their rate rose by an unexpected .25%.

Third, keep in mind that on fixed-rate loans, you pay with the house's money, to use a gambling term. Every year inflation rises, and that means that every year the effective payment on your mortgage DROPS. Know how we talk about "real dollars" as a way to price things? That, say, gasoline, despite its huge runup recently, is still cheap in 1975 dollars (costs less now than it did then, actually)? Well, in 2015, you're going to be paying your mortgage with 2015 dollars, and if things go the next 7 years the way they have the last 7, that will be the equivalent of paying only $1249, a $250/mo cut in real dollars, more than 6x as much as the difference between 6% and 6.25%.

Bottom line? Don't panic when rates rise. If you're refinancing, just hold your cards, tell us what rate you want, and we'll tell you when it gets there (hey, a stockbroker for mortgages - for FREE!). If you're buying, just buy. The cost of a new heater will be 25x as much as any difference in your interest rate, so don't waste energy on irrelevant things.

30-year rates at 6.25% this morning, although there are bonuses for credit over 720 and for larger loan sizes and for lower loan-to-value ratios, so you need to check with a pro to know where you are for sure. Bryan - still 6.125%. Hang in there.

Cj

P.S. Although we do this for free, we get up at 5:30am to do it and we'd be grateful if you'd do us the favor of passing along some names of other people that would like this service. We think Rate Watch is valuable, and if you do, let us know.

Hey - Is Inflation Bad for Me?

Nothing impacts bonds more than inflation - not even the Fed - and today's Producer Price Index number, up 1.1% when .6% was expected, has been very bad for bonds. The core PPI, which is the prices paid to US producers exclusive of food and energy costs, was up .2%, exactly what was forecast. Because bonds are fixed-rate investments, inflation is the greatest threat to their value. When inflation rises, it erodes the return on bonds. Right now, inflation is seen as rising - and it probably is rising - so that's putting pressure on bonds. Bond rates and mortgage rates move together, loosely, so when bond rates rise, mortgage rates go with them.

One note here - if you already own a house, inflation is not necessarily your enemy. Your house value rises at least with inflation, and usually a bit better than that, and while a 5% move in gas prices takes a gallon from $3.00 to $3.15, it takes the value of your $250,000 house to $262,500. Maybe you'll end up spending an additional 12 grand on mayo and hot dog buns this summer, but I doubt it. There's no news so bad that there isn't something good to be made out of it. Just keep that in mind.

30-year mortgage rates are hovering at 5.875%, still well below historical norms, but up from last week. Rates have risen the last couple of days. However, just to point out the use of this service, one of our clients yesterday hit his rate target of 5.5%. We had that rate (in his specific situation) for about an hour, and because we were watching (and had been since roughly the first week in February), we got the lock down. We can do this for you, too, and for anyone else you know and care about. Just hit us back and let's talk.

What's an FHA Loan, Anyway?

Welcome to those of you that are new, and it's a great pleasure for the Chris Jones Group to be able to provide this Rate Watch to you every day. No, really. We mean it.

Since the news is all over the map this morning - trade gap is widening, WalMart missed its earning target but raised its earnings guidance going forward, jobless claims dipped unexpectedly, the Bank of England (Fidelity Fiduciary BANK!) cut its rate to 5%, American Airlines isn't apparently an airline any more - and traders have no idea what to do, I thought I'd give everyone a paragraph on FHA loans.

The Federal Housing Authority (FHA) has a class of loans that it guarantees. The FHA doesn't make loans itself; instead, it guarantees them to the banks that do make them. Since the loans are guaranteed, the rate is usually lower than what you'd get in the open market (not always true), and that's a good thing. Additionally, FHA loans do not have rate penalties for cash-out refinance, and that's a VERY good thing for consolidators. FHA loans will go up to 97% loan-to-value (LTV) without penalties to the rate, and that is now the best deal in the market, and has no prepay penalties, and will accept loans from people with iffy credit. Sounds great, right? Well, there are a couple of drawbacks. One is that FHA loans carry monthly mortgage insurance, and you're going to pay it for 5 years unless you refinance out of it, no matter what your LTV is. After 5 years you can get rid of it if your balance is below 78% of the value of the house established when you did the loan. Another is that there are no provisions for any sort of stated income - it's full doc or nothing, and the debt ratios are very strict, which means self-employed people usually have a hard time getting these loans (because we have such great accountants). That's bad, but what's worse - much worse - is the Up Front Mortgage Insurance Premium (UFMIP - you think I could make up acronyms like this? Of course that's for real), which tacks on 1.5% of your loan amount to your closing costs. Remember that low interest rate? UFMIP adds about .5% to it because of the additional amount you have to borrow. So, bottom line, it's a good tool for some, but not the magic bullet for mortgage woes.

Probably more than you wanted to know. The market's flat. We did get a dip yesterday as the market priced in the news that Washington Mutual will no longer be wholesaling loans through mortgage brokers, but we're a lender AND a broker, so we don't care. We'll just use our own money. The 30-year fixed is pricing in at 5.75% at the moment for good credit borrowers. Don't expect a great deal of movement today. Kind of refreshing, actually. It's been like the floor of the Chicago Board of Trade here the last few weeks.

Cj

P.S. If you find this information useful, pass it on and let me know
(chris@thechrisjonesgroup.com) who else you know that would like to
receive it. We'll put them on our list.

Rate Watch

Another ten Rate Watchers today. Welcome to all of you.

New day, new attitude. Chairman Bernanke's testimony was a mixed bag yesterday, and the markets were slightly disappointed that he didn't have anything to say about waving a magic wand and fixing things, so the Dow declined, but so did the bond market, neither of them very much. This morning the market is pulling back in stocks and rolling over into bonds, and we're getting some of our losses back there. This is a pattern, actually - early in the week we lose ground, then get it back later on. So expect things to move a little to the better today.

Still wavering between 5.875% and 6% this morning on the 30-year fixed rate. Please note, PLEASE note, that more than ever before your credit score is the driver on your rate, even on A-paper conforming loans. The negative hits for credit score start at 740. What I'm quoting is somewhere in the "high-normal credit" range, and there are about 40 different factors determining whether you can get this rate - or a better one. DO NOT go to BankRate.com or see a Ditech commercial and figure that you can get whatever you see there. Especially since you can get a professional to help you without it costing you a dime. There's a reason guys like me are still kicking a year into the worst mortgage market since the invention of money. Use us. That's what we're here for.

Cj

P.S. If you find this information useful, pass it on and let me know (chris@thechrisjonesgroup.com) who else you know that would like to receive it. We'll put them on our list.

Rate Watch and FHA

Yesterday was the worst day for bonds in two months, as money poured out of the bond market and into stocks, leading to an almost 400-point gain on the Dow. Mortgage rates loosely follow bond rates, which rose from a low of 4.39 on Monday to 4.59 this morning on the 10-year treasury. That's a gigantic move, and it's pushed mortgage rates from 5.625% Monday to 6% this morning. I'd love to tell you that that means the worst is over, but I don't think it is. Until credit markets unfreeze, we're not going to be able to get substantially lower.

A word on FHA loans: the market currently seems perfectly happy to structure itself so that the government takes all the risk. Until a month ago, I was still of the opinion that FHA loans were a bad deal for the consumer much of the time. They carry mandatory mortgage insurance, and they also have an up-front fee of 1.5% of the loan amount tacked on to the closing costs. The tradeoff is that the rate is usually about .25% lower. Most of the time, that wasn't a very good trade. Recently, however, credit restrictions have tightened to such an alarming degree that for a large number of borrowers there simply is no alternative. We offer FHA loans, and we've been funneling more and more of our borrowers into them, especially those needing to consolidate debt. That's a trend I see continuing all this year.

Cj

P.S. If you find this information useful, pass it on and let me know who
else you know that would like to receive it. We'll put them on our list. chris@thechrisjonesgroup.com