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Mortgage Rates Are Down

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mortgage-ratesAnyone who has ever ventured into the world of home buying has learned something about the interest rates that are an integral part of the deal. They yo-yo up and down almost daily. In early May, they hit the lowest level they have been for awhile, at 4.21 percent for a 30-year fixed rate house loan. That was a decline from 4.29 percent the previous week. For a 15-year loan the rate 3.32 percent, a drop from the 3.38 percent of the previous week. The 15-year option is popular for those refinancing existing mortgages.

These rates were the lowest since last November.

The question for most lay folk not privy to the ups and downs of the housing market, the question is: What causes the swings? Why do they rise and fall so consistently and so fast?

Believe it or not, such things as global unrest and a weak U.S. economic recovery from the recent recession are major factors. What happens in Africa and Russia and China sends shock waves into the American economy and affects transactions at the most basic levels. The old saying that it’s a small world is especially true when it comes to the fluctuations in the American housing market.

Negative economic effects in other places on the globe contribute to the ongoing bid for Treasury debt, which drives yields down, with a subsequent dip in mortgage rates as well, financial gurus say. That’s good news for those in the market for a home. The practical effect is a lower house payment. For instance, on a $200,000 home with a 30-year fixed rate mortgage, the monthly payment would be $979 a month at rate of 4.21 percent. At the norm of 6 percent, the home buyer could expect to shell out about $1,200 per month. Though the fractional increases or decreases in the interest rate seem negligible, they make a big difference when you’re making a long-term loan.

There are, of course, other factors at play. Stricter lending standards have to some extent limited the impact of the lower interest rates, according to data compiled by the National Association of Realtors. A high credit score can even the effect. But for those with lower scores, credit is still very tight, the association reports. Many of those who would like to jump into the housing market can’t find financing, despite the attraction of a lower interest rate.

The best solution for those whose credit is marginal is to work on improving the credit score to make themselves more appealing to those who made loan decisions.

Foreclosed Property A Good Buy? Check Closely Before You Jump

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Foreclosures and short sales have been an unhappy downside to the American housing market in recent years. For those looking for a bargain, the temptation to snatch up something at a greatly reduced price makes the time seem ripe. But there are some precautions people in that mode should note carefully.

On the plus side, many distressed properties are selling at 5 percent to 10 percent below today’s market value. That’s as much as 50 percent or more below the peak prices of five to six years ago. Coupled with the current low interest rates, that’s enough to attract buyers with enough assets to take the plunge. But experienced Realtors advise caution. There are some common pitfalls in these deals. Some bargain-hunters have found that their offers on even listed short-sales go unanswered.

Banks make loans. They don’t sell real estate and even though they’ve had several years of dealing with property on which they have foreclosed, they still aren’t good at it, many prospective buyers complain. Weeks, even months of frustration may be ahead for those bent on such a purchase.

For one thing, lending institutions are bogged down with the sheer numbers of properties they have had to reclaim and the backlog can be a frustrating factor for the would-be new owners. It could take up to a year to consummate a deal. You have to be lucky to hit one of the “waves” that occur when the institution has worked through a number of problem loans and is ready to market a batch of properties. These sellers also differ in their approaches to ridding themselves of foreclosed properties. Some are in a hurry to sell and put on a price gauged to get the property sold. Others may pad the price in anticipation of being asked to make concessions.

Before you write out your check, listen to some tips offered by Realtors to help you maneuver the winding path to foreclosed property ownership:

1. Don’t let the posted price be the only criterion on which to base a decision. Consider all the factors to avoid belated sticker shock.

2. If what you want is a condo, check with the homeowners’ association and be certain it has adequate reserves and is certified by the U.S. Federal Housing Administration. Without that certification, would-be buyers relying on FHA-insured loans, would not accept the purchase. Some other types of loans have the same guidelines. Your resale potential could take a real nosedive. Be aware that some condominium complexes charge very high home-owner fees, which should be factored into the long-term cost.

3. Don’t rush into anything. Sometimes that great asking price can be a cover for significant problems with the property. If you lose what you saved on the bottom line through costly repairs, you haven’t benefited at all. Property that has been left to languish without any upkeep might be targeted by its political jurisdiction for fines for weeks, trash , unpaid utility bills, etc.. As the proud new owner, those are part of your deal. Some homeowners facing foreclosure feel free to walk off with anything that isn’t firmly attached.

The lower prices of housing in today’s market compared to what they were at the height may trip you up if you buy a short-sell home and then want to refinance. The lender may refuse because the property at today’s values is less than it was before. There also is the problem of multiple loans on a property. Second and third mortgages can muddy the waters pretty fast.

Banks that went along with the extra mortgages a few years ago are not nearly so eager now. All of the lenders who have a money interest in the property have to agree to a short sale. Best to become involved after all those items are settled.

Unless you are auction-savvy, don’t risk that route. Also be aware that you aren’t the only bargain-hunter in the market. Expect multi-offers situations and be prepared to dicker aggressively.

Some experts in the field are aware that there are bargains to be had, but unless you go into the short-sale/foreclosoure market with your eyes wide open, you may find that your “good buy” really meant good-bye to precious assets.

Basic Tips For Buying A New Home

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Before You Sign Mortgage Papers, Know the Facts

First-time home buyers can find themselves bogged down hopelessly in a sea for facts, figures, statistics, competitive advertising jargon and who knows what all else. That argues for a thoughtful preliminary process that will ensure that you go into what likely will be one of the most important purchases of your life. A clear vision of what you really want in a home, what you can realistically afford and what portion of your earning power and your time you want to dedicate to home ownership should guide your ultimate decision.

Obviously, if more than one person is to be affected in the process, a thorough discussion of every detail is essential. Don’t give anyone else the opportunity for “I told you so’s.”

Start with the question: Do we really want to do this? If there is some doubt that you will remain in the location where you want to buy, home ownership may not be for you. Up-front costs tend to skew the figures mostly in the first few years. If you are not likely to pass that point, you could end up losing money if you relocate. Since no crystal ball has yet been invented to forecast every twist and turn in a society that is prone to make life changes, there is no way to assure the future. But don’t overlook the obvious.

Maintain A Good Credit Rating

Be sure before you make any moves that your credit rating is as healthy as possible. A few months before you want to start looking, get a copy of your credit data and be certain it is correct. Resolve problems before you start any discussion of money so that they don’t become part of what is already an onerous process.

Know What You Can Afford

Be realistic about what you can afford. The usual advice is that you can afford a home two and a half times your annual income. But there are plenty of variables, such as how much debt you are carrying going into the home purchasing routine and whether your income is likely to stay on track. If Mom decides post-purchase to stay home to raise children, how will that affect your bottom line? Online “calculators” are available to help you picture your personal finances relative to what your home will cost you.

Determine Your Down Payment

Find out up front how much you will have to produce for a down payment. You may well qualify for a loan requiring 20 percent down or less. Many private and public lenders offer homes with a down payment as small as 3 percent. Study your options carefully before making a decision, and remember all of the up-front money issues before you are into the actual purchase mode.

Choose A Good Neighborhood

Many factors will affect your decision on where to locate. But as a rule of thumb, areas that have good schools have several advantages. Even if you don’t have children in school who would benefit from such a location, it is a fact known to Realtors all across the country that re-selling in such a neighborhood is enhanced, since that is one of the factors many people include on their “where to live” wish lists, a feature that boosts property values.

Use A Real Estate Professional

When you get serious, involve a professional. Despite all the readily available resources online, there are details that might slip past you that a professional would recognize. Don’t look for the busiest, look for the one who will keep your interests foremost as serious negotiations begin.

Understand the difference between points and rates. When you are selecting a mortgage, you may be offered the option of paying points. That means you pay at the beginning some of the interest that you will be required to pay at closing, in exchange for a lower interest rate. If you expect to be in the home for three to five years, the points may be the better deal. A lower interest rate will save you more over the term of the mortgage.

Getting pre-approved may save you the hassle of looking at properties you can’t afford, only to be disappointed. You will be in a better position to make a valid offer if you do find the property that is just right. Pre-approval is different from pre-qualification, which is based on just a cursory review of your financial data. Pre-approval goes deeper into your income, debt and credit history.

Make a study of recent sales in your desired neighborhood before making a bid. Look at the past three months and if homes have been selling at 5 percent or so under the asking price, make a bid that is 8-to-10 percent below the listed price.

Hire a home inspector aside from the home appraiser the lender will require anyway. An engineer with experience in doing home inspections would be best, especially if he has experience in the area where you plan to buy. He likely will be aware of existing problems in the neighborhood, if any, and be able to alert you to potential problems that could rack up expensive repairs in the future.

There. Ready? Get set and go find the house of your dreams!

Buying a Home? Prepare, Compare, Negotiate

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The U.S. Housing market has taken some heavy blows in the slowly mending recession, but it is not dead. People are buying and selling houses. But if you are in the buying mode, it is more important than ever that you be informed. A recent release by the Federal Reserve Board, titled “Looking for the Best Mortgage” has several key words: Prepare, Compare and Negotiate.

Determine Your Best Mortgage Payments

Start the process by an honest and realistic assessment of your ability to purchase a home. Be certain up front how much you can afford for a down payment and closing costs. Use a free mortgage calculator to determine your monthly payments. Start with your credit report. If it is less than perfect, due to illness or temporary loss of income, don’t just give up, assuming that you would be limited to high-cost lenders. If the information in the report is accurate but you have good reasons for the negatives, explain them to a potential lender or broker. If the less-than-perfect report can’t be explained, you probably will end up paying more. But don’t assume. Ask how a past credit history affects the price of a loan and what you would need to do to offset the current bad rating. You can obtain a current credit report by visiting www.annualcreditreport.com or calling 877-322-8228. Or go directly to the reporting agency. Equifax: (800) 685-1111; TransUnion: (800) 99196-8800; Experian: (888) 397-3742.

Mortgage Lending

Be ware of the types of lenders, including commercial banks, mortgage companies, thrift institutions and credit unions. Different lenders may quote you different prices. Contact several and compare. You may work through a mortgage broker, who would arrange a transaction rather than lending money directly. Remember that a broker is not obligated to find the best deal for you unless you have signed a contract. Consider contacting more than one broker, just as you do with the lending institutions. It may not be clear if you are dealing with a lender or a broker. Some institutions operate in both capacities and their advertisements likely do not use the word “broker.” Ask if a broker is involved in your potential purchase. A broker is usually paid a fee separate from and in addition to the lender’s origination and other fees. His compensation may be in the form of “points” paid at closing or as an add-on to your interest rate or both. Ask how your broker will be compensated so you can compared the various fees. Negotiate if it is appropriate.

Shop and Compare Mortgage Lenders

Be sure to get mortgage information from several lenders or brokers. Just the monthly payment or the interest rate is not enough. Seek information about the same loan amount, loan term and type of loan so you can compare the details. Interest rates fluctuate, sometimes several times in the same day. Even very small differences may make an impact on your payment. Ask if the rate is fixed or adjustable. If you choose an adjustable rate, keep in mind that when the rate goes up, so will your monthly payment. Get the details. Ask about the loan’s annual percentage rate, which takes into account not only the interest rate but points, broker fees and certain other credit charges, expressed as a yearly rate. Points are fees paid to the lender or broker and often are linked to the interest rate. Usually, the more points you pay, the lower the rate, to compensate for the larger amount. Your local newspaper has information about current rates and points. Ask that points be quoted as a dollar amount rather than as a number of points. A home loan is likely to involve several fees such as loan origination or underwriting, broker, transaction, settlement and closing costs. Some are negotiable. Ask. Application and appraisal fees often are required when you apply, others are paid at closing. You may be able to borrow the money to meet fees, but that will increase the loan amount and total costs. “No cost” loans may be available, bu they usually involve higher rates. Several items may be lumped into one fee. Ask questions until you understand what each fee is for.

Down Payment Requirements For Mortgages

Down payment requirements vary. They range from as little as 5 percent to 20 percent, depending on the lender’s policy. If a smaller down payment is involved, the lender may require the purchase of private mortgage insurance. Government-assisted programs such as FHA, VA or Rural Development Services generally require substantially smaller down payments. Don’t look just at the amount, be informed on all the variables.

Negotiating Your Mortgage Terms

Once you have the background information on what lenders offer, prepare to negotiate. Be aware that on any given day, lenders and brokers may offer different prices for the same loans to different customers, even if they have the same loan qualifications. Loan officers and brokers often are allowed to keep some or all of this difference as extra compensation. Such higher prices are termed ” overages.” When they occur, they are built into the prices quoted to consumers. Have the lender or broker write down all the loan’s associated costs and see if any of the elements can be waived or reduced. Be sure that one fee is not lowered while another is being raised through points. You may simply ask for better terms, quoting those more favorable that you have found elsewhere if that would be helpful. Once you feel you have done the best possible, you may want to lock in the loan. Be clear on the rate you have agreed on and how long the lock-in lasts. A fee, sometimes refundable at closing, may be charged for the lock-in. The arrangement also could backfire on you if interest rates go down while you’re waiting to close. Again, time to negotiate a compromise if possible.

Legal Protection For Home Buyers

Remember that there are laws that protect you as a potential home buyer. The Equal Credit Opportunity Act prevents discrimination based on race, color, religion, national origin, sex, marital status or age or whether any part of your income comes from a public assistance program The Fair Housing Act provides the same protections, adding handicapping conditions and familial status to the conditions that cannot be used as determinants for loans. A consumer cannot be refused a loan or charged more or offered less favorable terms because of any of the listed conditions.

For most Americans, a home is the most significant purchase they make. It is a process that should involve your best effort. Take your time. Prepare. Compare. Negotiate.

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How to Qualify for a Home Loan

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Owning a home has been considered a logical investment, as it gives a sense of security. It is asset than can be passed on to the next generation. With the recent turn in the economy, buying a home is becoming more enticing as property prices are going down. Although this is true, purchasing a home can still be expensive. Obtaining a home loan can help in being able to purchase property.

To apply for a home loan, banks normally check the applicant’s background, whether they have a good, steady job or some other stable source of income. Credit line is also checked, whether the applicant has been responsibly paying his/her debts well. An applicant must also have collateral as financial back up, as an assurance that the applicant will be paying back the loan in full.

Do some research on how much you can ask from lenders.  This will give a general idea in figures of how much you can borrow, how much of your income is needed for the down payment as well as for the succeeding payments. Evaluate how much you can afford to spend for the house loan, in consideration with other existing monthly payments. It is recommended that less than a third of the applicant’s monthly income be spent on the payments for the loan and property.

Start saving money for the purchasing of the house before attempting to apply for a home loan. Possible ways of saving for the home loan and property purchase include taking a second job or reducing unnecessary expenses. This initial investment is a good demonstration to the lender of the applicant’s good intent in purchasing a house. There are also other options to be considered in obtaining financial support when purchasing a house such as the Veteran’s Administration loan for veterans. Consult with your real estate agent regarding other financial support options.

As a result of the recent development in the economy, banks are becoming more stringent in assessing applications. However, there are ways of improving chances when applying for a home loan. In order to prepare for qualifying for a home loan, it is recommended that the applicant obtain a copy of their credit report from a qualified agency. There are services which can send a report annually or directly contact the agencies for an immediate copy. Take note of outstanding or unpaid credit, as this is an important aspect that banks check for. Pay back all debts. If this is not completely possible, then make it as low as possible. This is important as it sends a note to the lender of the applicant’s reliability in paying back the loan.

Banks normally ask for collateral as an assurance that the applicant will pay back his/her loan. Other properties in real estate or investments in the stock market are possible sources of collateral.

There are no definite rules that can assure the applicant will obtain the home loan. Loans are approved on a case to case basis. However, following these tips increases the chances of getting the home loan. Do not despair if you are denied a home loan but see it as a sign that there may be areas in your application that need improving.