Average 30-Year Mortgage Rate Drops Back Below 4 Percent
July 30, 2015

Having ticked up to 4.09 percent two weeks ago, the highest rate so far this year, the average rate for a 30-year mortgage has dropped to 3.98 percent, versus 4.12 percent at the same time last year, according to Freddie Mac’s latest Primary Mortgage Market Survey.

The 30-year rate, which hit an all-time low of 3.31 percent in November 2012, and a three-year high of 4.58 percent in August 2013, has averaged roughly 6.7 percent over the past twenty years.

The recent dip comes on the heels of a second big drop in Chinese stock prices and weaker than expected pending and new home sale reports, and an associated flight to quality which dropped Treasury yields around 5 basis points.

Articles and photos sourced from www.socketsite.com

Most Renters Unable to Afford a Home Purchase

Financial hardships are preventing most renters from entering the real estate market, a recent Freddie Mac survey found, but new low-down-payment programs could help some of them unlock purchasing power and become first-time homebuyers.



According to poll results, 45 percent of U.S. renters said they live from paycheck to paycheck, while another 17 percent reported an inability to pay for basic necessities. And although 91 percent of renters believe that homeownership is a source of pride, just 39 percent said that they expect to purchase a home over the next three years.

Renters who plan to get in the game tend to be younger, with 47 percent of those in the 25-to-34 age bracket foreseeing a purchase by 2017. Generation Xers seemed even more certain that homeownership is in their future, with 58 percent of those aged 35 to 44 responding that they expect to buy a property within the next three years. Renters who haven’t bought a home by the age of 45 were unlikely to do so, Freddie Mac noted.

In a statement accompanying the survey results, Freddie Mac Multifamily Executive Vice President David Brickman said that an inability to afford a down payment is preventing some renters from buying, but the California Association of Realtors believes that new lending programs could help turn the tide.

Last week, both Freddie Mac and Fannie Mae unveiled programs that would allow qualified first-time buyers to obtain a loan with as little as a 3 percent down payment.

“Our goal is to help additional qualified borrowers gain access to mortgages,” Andrew Bon Salle, Fannie Mae Executive Vice President for Single Family Underwriting, Pricing and Capital Markets, said in a statement.

CAR commended the programs, saying that increased access to credit would greatly benefit the state’s first-time buyers.

“Saving enough money for a down payment is the biggest hurdle for most first-time home buyers, but this program will help remove that barrier, and at the same time, lenders can be assured they are providing a safe, affordable loan to creditworthy borrowers,”CAR President Chris Kutzkey said in a press release.

Still, not all renters want the responsibilities and commitments that come with homeownership, according to Freddie Mac. Freedom from home-maintenance chores and expenses is the main advantage of renting, 78 percent of respondents answered, while 68 percent said that renting allows for greater flexibility in terms of location.

And the country’s recent recession and housing collapse is still very much top of mind, with 66 percent of those polled responding that continuing to rent would protect them against future home price declines.

(Photo: Flickr/NoHo Damon)

Failing to Refinance at Low Rates Could Cost You Thousands of Dollars

File this story under “Woulda, coulda, shoulda.”

In December 2010, 20 percent of U.S. homeowners could have refinanced their mortgages and saved an average of $45,000 each over the life of their loans, but they failed to do so.

The National Bureau of Economic Research analyzed 1 million fixed-rate mortgages from that month and estimated that, in all, millions of Americans with fixed-rate mortgages failed to take advantage of money-saving refinancing opportunities that month, when interest rates hovered near record lows.

Some homeowners later said they were unaware of the potential savings from refinancing or were unwilling to follow through on the necessary paperwork, according to an article in The Washington Post. Some said they simply failed to open mail that offered once-in-a-lifetime refinacing deals.

Even more amazing than the behavior of homeowners in December 2010 is that fact that interest rates today are lower than they were back then: Freddie Mac reported Thursday that current 30-year fixed-rate mortgages averaged 4.19 percent — lower than the average 4.3 percent in December 2010 and close to the record low of 3.31 percent set in November 2012.

Still some homeowners today are still nervous about refinancing, even when it can save them thousands of dollars.

Andrew Celis, who teaches financial literacy classes at Neighborhood Housing Services of Chicago, told the Post that some homeowners don’t refinance because they’re afraid that making changes will jeopardize their mortgage.

“A lot of homeowners that we communicate with on this issue sort of have just held their eyes to the ground, and have said, ‘I’m going to do whatever I need to do to make my payments monthly,’ ” Celis said.

Today’s low interest rates won’t last forever, however. It’s worth remembering that the average interest rate on a 30-year, fixed-rate mortgage in the 1990s averaged 8.12 percent, and in October 1981, mortgage rates peaked at more than 18 percent.

(Image: Flickr/Mark Moz)

Bay Area Homebuyers Get a Break: Lower Interest Rates for Jumbo Loans

We all know that the Bay Area has some of the highest home prices in the nation. But did you also know that the so-called “jumbo loans” needed to buy many of these homes come with interest rates that are less than that of smaller “conforming” loans?

It’s true. All summer long, in fact, interest rates on jumbo loans have been lower than what average borrowers pay.

And in some cases, buyers who take out jumbo loans don’t even have to worry about a large down payment or mortgage insurance, according to a recent CNNMoney report.

For example, the average rate on jumbo loans last week was 4.30 percent, compared with 4.39 percent for a 30-year, fixed-rate conventional mortgage, the Mortgage Bankers Association reported.

In some cases, lenders also have reduced their down payment requirements as well, requiring as little as 10 percent, which is about half the normal rate. Some lenders are waiving the private mortgage insurance requirement, too.

Conforming loans — those guaranteed by Fannie Mae and Freddie Mac — are currently capped at $417,000 across much of the country, although in costlier regions such as the Bay Area the maximum loan amount limits are higher.

Fannie Mae and Freddie Mac guarantee mortgages up to $625,000 in San Francisco, Alameda, Contra Costa, Marin, and San Mateo counties and up to $592,250 in Napa County and $520,950 in Sonoma County. Federal Housing Administration loans have higher limits: $729,750 in San Francisco, Alameda, Contra Costa, Marin, San Mateo, and Napa counties and $662,500 in Sonoma County.

In the Tahoe/Truckee region, all conforming loans are capped at $477,250 in Nevada County and $474,950 in Placer County.

Banks are on the hunt for jumbo customers in order to win them over as clients for other banking services, such as retirement planning, Malcolm Hollensteiner, head of retail lending for TD Bank, told CNNMoney. Jumbo borrowers tend to have better track records in repaying their loans and have lower default rates, so more banks are willing to take the gamble on them.

CNNMoney also reported that many banks have lowered their credit standards for jumbo loans in 2014, Many jumbo borrowers used to need at least a 700 credit score to qualify, but some lenders reportedly are considering applicants with credit scores of 650.

If you are in the market for a mortgage, take a look at these helpful mortgage tips, posted on Pacific Union’s blog earlier this year.

And if you plan to buy a home in the Bay Area or the Tahoe/Truckee region, Pacific Union’s mortgage partner, Mortgage Services Professionals, can offer loan advice and consultation to help make your purchase a success.

(Image: Flickr/401(K) 2012)

Low Mortgage Rates Linger Longer Than Expected

Good news for homebuyers: Interest rates for home loans continue to linger at historically low levels, extending a rare opportunity to get a mortgage at rates that can shave hundreds of thousands of dollars off payments over the life of the loan.

Bankers and economists last year had forecast mortgage rates to climb higher in 2014 and top 5 percent by the end of the year. But the reverse happened, and rates today on a 30-year mortgage are nearly one-half of a percentage point lower than where they stood a year earlier.

Today’s low rates give another chance at homeownership to Bay Area residents who were outbid on properties during the frenzied real estate scene of 2013 and early 2014.

Since then, the number of all-cash investors has dropped significantly and the supply of homes on the market has gradually expanded — both signaling new opportunities, especially for first-time buyers.

Freddie Mac reported late last week that 30-year fixed-rate mortgages averaged 4.12 percent, down from 4.57 percent last year at this time, and 15-year fixed-rate mortgages averaged 3.26 percent, down from 3.59 percent one year ago.

Surprisingly, mortgage rates aren’t too much higher than when they fell to a record low of 3.31 percent in November 2012. By comparison, mortgage rates averaged 7 to 9 percent in the 1990s and 10 percent in the ’80s.

Last year, Pacific Union explained how rising mortgage rates can add hundreds of thousands of dollars to total house payments over the life of a loan.

Even with increasing home prices, buyers who take advantage of today’s low mortgage rates can still find a bargain. But it’s a wise move to act fast. How long these low rates will linger is a question that even bankers and economists cannot reliably answer.



(Image: Flickr/401(K) 2012)

Where Are Mortgage Rates Headed?

The interest rate you pay on your home mortgage has a direct impact on your monthly payment. The higher the rate the greater the payment will be. That is why it is important to look at where rates are headed when deciding to buy now or wait until next year.

According to a recent article in Kiplinger, 30 year mortgage rates are about to increase:

“Now around 4.1%, rates will edge slowly toward 4.4% by the end of this year. Then they’ll follow the Treasury bond rate’s upward move in early 2015. Thirty-year home loans should end 2015 at around 5.1%, still low by historical standards.”

Here is a graph created by using interest rate projections in Freddie Mac’s August 2014 U.S. Economic & Housing Market Outlook:




How will this impact a mortgage payment?Research released this month by Zillow reveals:

“We examined how a 1 percentage point rise in mortgage rates would impact monthly payments for the typical home in 35 metro areas, and found that the difference this year versus next year varies dramatically from market to market. In the San Jose/Silicon Valley area, for example, potential buyers should expect to see a monthly payment increase of more than $700if they waited a year to buy the same home they were considering today. By contrast, in St. Louis, the difference is only $65 per month.” (emphasis added)
Bottom Line

Again, we turn to the Zillow research:

“As rates rise, new home buyers will confront higher financing costs and monthly mortgage payments. For many, this will mean tightening their budgets and sacrificing some luxuries they may take for granted today.”


Agents: Would this chart help you put today’s interest rate environment in perspective when you’re meeting with buyers? How about a few more showing rate projections and the impact this would have on your buyer’s purchasing power?

Start your 14-day trial of KCM to get these and many more visuals to educate your clients.

 

 

Article and Photos Sourced From: http://www.keepingcurrentmatters.com/2014/08/21/where-are-mortgage-rates-headed-3/?utm_source=feedburner&utm_medium=email&utm_campaign=Blog_Promo

 

Are Mortgage Rules Tightening? Relaxing? It Depends on Which Lender You Ask.

A survey of mortgage lenders shows a widening gap in qualifying loan standards over the past six months, with small and midsize lenders tightening their credit rules for homebuyers. Large lenders, meanwhile, moved in the opposite direction and made it easier to obtain home loans.

Lenders most often cited “changing regulatory requirements” for the tightened credit rules, according to the survey by federal loan guarantor Fannie Mae.

“Lenders have been trying to find ways to manage their operational costs and meet new regulatory rules,” Doug Duncan, Fannie Mae’s chief economist, said in a statement accompanying the survey results. “They appear to feel cost-constrained and, thus, may be applying more conservative standards in their lending practices.”

No explanation was given for the opposite approach by large lenders, but Fannie Mae said the gap in mortgage requirements by large and small lenders is expected to further widen during the next three months and possibly longer.

Meanwhile, demand for mortgages rose during the second quarter of 2014, and Fannie Mae said that, too, will continue rising.

“These results are broadly in line with other major indicators released recently,” Duncan said, adding that they “support our expectations of a steady but unspectacular rebound for housing during the second half of this year.”

For homebuyers, the mixed mortgage outlook drives home the importance of planning ahead and securing financing before shopping for a home.


If you plan to buy a home in the Bay Area or the Tahoe/Truckee region, Pacific Union’s mortgage partner, Mortgage Services Professionals, can offer loan advice and consultation to help make your purchase a success. 

(Image: Flickr/401(K) 2012)

Coming in 2015: No-Surprise Mortgage Closings

Mortgage closings should become easier, and more transparent, when new federal regulations take effect next year.

Among the revisions, lenders will no longer be able to make last-minute changes to closing documents such as imposing a higher interest rate, changing the loan product, or adding a prepayment penalty to the loan. The regulations specify that homebuyers must receive any new disclosures at least three business days before the closing.

The mortgage guidelines, set to take effect in August 2015, were written by the Consumer Financial Protection Bureau and are intended to be easier for borrowers to understand by providing them more time to ask questions and compare costs.

In a related move, the CFPB in January launched an inquiry into homebuyers’ mortgage complaints. The agency quickly identified four “pain points” in the process:

1. Too little time to review documents: Buyers complained that they don’t get vital paperwork until they arrive at the closing table, where there is pressure to rush through and repeatedly sign documents – without ample time to make sure that they understand what they are signing.

2. Huge stack of paperwork: Buyers said there are too many pieces of paper to examine, making the closing process overwhelming. As a result, many buyers leave the table with a lingering sense that something hidden in all those documents might adversely affect their financial solidarity.

3. Documents difficult to understand: Buyers said closing documents are full of hard-to-understand terminology, and that they could use additional help from others in the closing room to fully understand them.

4. Document gaffes: Errors in closing documents can often lead to delays. Even seemingly minor glitches, such as a misspelled name or forgetting to include a spouse, require closing agents to overhaul the package.

As a result of that inquiry, the CFPB started work on an “eClosing” pilot program that would move much of the closing process online.

The program, still in the testing stage, would provide buyers with digital tools that explain key terms and important documents, give them more time to review mortgage documents, and make it easier to spot any errors beforehand.

“We strongly believe that electronic closing solutions, known as eClosings, can lead to more knowledgeable consumers and a much better process for everyone involved,” CFPB Director Richard Cordray said in a recent statement.

However, the new guidelines and the eClosing program won’t take the place of homebuyers’ research. From choosing a lender to signing the closing papers, buyers need to take advantage of all the tools available to make the smartest decision.

If you plan to buy a home in the Bay Area or the Tahoe/Truckee region, Pacific Union’s mortgage partner, Mortgage Services Professionals, can offer loan advice and consultation to help make your purchase a success.



(Image: Flickr/401(K) 2012)

Mortgage Payments Across Time

Posted By:  http://www.keepingcurrentmatters.com/2014/05/30/cost-across-time-infographic/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+KeepingCurrentMatters+%28Keeping+Current+Matters%29

Bay Area Tops Homeowner Equity List in First Quarter

Rising home prices have helped homeowners get back above water on their mortgages over the past year — especially in the Bay Area.

The San Jose metropolitan area placed No. 1 in the nation for the highest percentage of homeowners with at least 50 percent equity in their homes during the first quarter of 2014, according to the research firm RealtyTrac.

In all, 39 percent of San Jose homeowners with a mortgage were above the 50 percent equity threshold. The San Francisco metro area tied Honolulu for second place in the nation, with 35 percent of owners above the halfway mark.

These “equity-rich” homeowners will help boost the Bay Area’s housing markets in the year ahead. By trading up for bigger and more-expensive homes and putting their old homes up for sale, they will make available much-needed housing for first-time buyers and those on tighter budgets.

Nationwide, 19 percent of homeowners with a mortgage were equity-rich by the the end of the first quarter, up 1 percentage point from the previous quarter.

“U.S. homeowners are continuing to recover equity lost during the Great Recession,” RealtyTrac Vice President Daren Blomquist said in a statement.

Over the past year, nearly 2 million homeowners — 17 percent of those with a mortgage — emerged from being “seriously underwater,” meaning their debt exceeded the home’s value by 25 percent or more, according to RealtyTrac. That’s down from 26 percent seriously underwater a year earlier.

Another 8.5 million properties — 16 percent — were on the brink of resurfacing in the first quarter, meaning that the owners hold between 10 percent negative equity and 10 percent positive equity.

The San Jose metro area includes Santa Clara and San Benito counties. The San Francisco metro area includes San Francisco, Marin, San Mateo, Alameda, and Contra Costa counties.

(Image: Flickr/401(K) 2013)

Energy-Efficient Mortgages Can Add Value, Reduce Utility Bills

So you’re buying a home and are totally in love with the place, except that the doors and windows all but invite cold air inside, the exterior walls have no insulation, and the heating and air-conditioning systems were installed during the Harding administration.
You need an energy-efficient mortgage.
Several federal agencies and many lenders now allow you to finance a wide range of energy-saving home improvements — from tankless water heaters and newer heating and air-conditioning systems to solar panels and geothermal heating – with your home loan.
Fannie Mae, the Federal Housing Administration, and the Veterans Administration, for example, offer loan programs with special benefits for energy-efficient improvements. The cost of the improvements is added to the mortgage, but typically lower energy bills more than offset the higher monthly loan payments.
A report by the U.S. Department of Housing and Urban Development cites, as an example, a California couple that added $2,300 in energy improvements to their home loan. The monthly mortgage payment increased by $17, but the couple saves $45 each month through lower utility bills.
Getting an energy-efficient mortgage begins with an energy-rating survey. A trained examiner will assess the home’s energy efficiency and generate a score using a Home Energy Rating System index. On the HERS scale from 0 to 150, the lower the score, the more energy efficient the home. Factors such as insulation, appliance efficiencies, window types, local climate, and utility rates are used to rate the home and calculate energy costs.
The survey helps determine which improvements are included in the loan. Once the loan is approved and the home is sold, work starts immediately to make the dwelling more energy efficient.
With conventional loans, funding for energy improvements is usually capped at 10 percent of the final appraised value of the property. FHA and VA loans typically have more stringent limits.
By the way, energy-efficient mortgages are also available to current owners — remodelers, as well as those making improvements before they put their home on the market.
Energy-efficient homes are especially attractive to buyers, according to a recent article in U.S. News & World Report. And more than two-thirds of builders and home remodelers report that their customers will pay more money for “green” homes, according to a study by McGraw Hill Construction. In addition, 81 percent of consumers say energy efficiency somewhat-to-very-much affects their homebuying decision, according to the Shelton Group. 



(Image: Flickr/Michael Coghlan)

Top Tips for Mortgage Borrowers in 2014

In the market for a mortgage? Take a look at these helpful mortgage tips for 2014, compiled by 
Bankrate, an online aggregator of financial rate information:

1. Be Prepared to Document Your Finances

Mortgage regulations went into effect in January that put new pressure on lenders to verify that borrowers are able to repay their loans. Keep track of financial documents, including bank statements, tax returns, and investment accounts, and be ready to show them to a loan officer.

2. Rates Are Rising, So Don’t Delay

Mortgage rates will almost certainly climb in 2014 as the Federal Reserve scales back the economic stimulus program that helped keep rates low in recent years. If you are planning to get a mortgage, don’t put it off much longer.

3. Don’t Wait to Refinance, Either

Owners who are paying more than 5 percent interest on their home loans still have a chance to refinance at lower rates, but those rates won’t last forever (see above). Speak to a loan officer and take a look at the numbers to see if refinancing still makes sense.

4. You Have Bargaining Power. Use It.

Lenders saw a big drop in refinancing activity in 2013 as interest rates started climbing higher, so they will be more aggressive in courting homebuyers in 2014. Buyers should take advantage of the bargaining power they gain with that increased competition. Shop around for the best deal.

5. You Have New Rights, Too

New mortgage rules created by the Consumer Financial Protection Bureau go into effect in 2014, giving borrowers many new rights. Learn more about these rules, and if you have problems with your mortgage servicer or fall behind on payments, take advantage of your rights.

6. Pay Attention to Your Credit Score

Good credit is a essential when applying for a home loan. Monitor your credit history and score until your loan closes. The best mortgage rates go to borrowers with credit scores of 720 or higher. Though you may still get a mortgage if your score is 680, lower numbers will result in higher rates or higher closing costs.

7. Keep Your Spending Under Control

You are less likely to get a home loan if you won’t have much money left each month after paying the mortgage and other obligations such as credit cards and student loans. Try to keep your monthly debt obligations — including mortgage and property taxes — to less than 43 percent of your income.

8. Which Mortgage Is Right for You?

A homeowner who expects to keep a house for seven to 10 years could get lower mortgage rates by choosing a seven- or 10-year ARM instead of a 30-year fixed-rate mortgage. If you are not sure how long you plan to own the property, a fixed-rate loan is probably the wisest option.

9. Think Twice About an FHA Loan

First-time buyers frequently turn to FHA loans, in part because they allow for low down payments and have more lenient underwriting standards than conventional loans. But consider these points: Mortgage insurance premiums on FHA loans are expected to rise in 2014, and the borrower is now required to pay for mortgage insurance for the life of the loan.

10. Buy Your Home When You’re Ready

Mortgage rates will almost certainly rise in 2014. If you are in the process of house hunting, try to move quickly, but remember that this is likely the largest financial decisions of your life. Take the mortgage and homebuying process at a pace you feel comfortable with.

If you plan to buy a home in the Bay Area or the Tahoe/Truckee region, Pacific Union’s mortgage partner, Mortgage Services Professionals, can offer loan advice and consultation to help make your purchase a success.

Home Loan Rules Are Changing: Introducing the Qualified Mortgage

Homebuyers may face new challenges when applying for a home loan this year, the result of tough new rules from the U.S. Consumer Financial Protection Bureau (CFPB).




The new rules, which took effect Jan. 10, require borrowers to show more proof that they can actually afford the mortgage they are applying for.
Mortgage lenders must ensure that borrowers can  afford their loans over the long term, and applicants’ income, assets, savings, and debt will be more closely scrutinized. Borrowers who meet the ability-to-repay requirements will be eligible for a “qualified mortgage” (QM).
QM loans must meet at least some of the following guidelines: They cannot contain risky features, such as terms that exceed 30 years or interest-only payments; carry more than 3 percent in upfront points and fees for loans above $100,000; or push a borrowers’ total debt above 43 percent of their monthly income unless the loan qualifies to be backed by Fannie Mae, Freddie Mac, the Federal Housing Administration, or a small lender.
One the bright side, the CFPB estimates that 92 percent of mortgages currently meet QM requirements.
Also, lenders can still issue loans outside the QM guidelines, although they have less protection against future lawsuits from non-QM borrowers.
Mortgage rates and rule changes have made plenty of headlines in recent months, as the gradual rise in rates in 2013, together with proposed rule changes by Fannie Mae and Freddie Mac, promises to reshape  our real estate markets in 2014. Meanwhile, the CFPB is pursuing another mortgage-related initiative: asking for help identifying the most confusing elements of mortgage closings.
Homebuyers confused by the changing state of mortgages today can get answers to their questions from qualified real estate and mortgage professionals, including experts at Pacific Union’s mortgage partner, Mortgage Services Professionals.
“We knew these qualified mortgage rules were coming, and we took a proactive stance,” says Jonathan Pass, president of Mortgage Services Professionals. ”We secured both QM and non-QM investors, so we can service all our clients’ needs.”
For a private consultation, or help with securing a mortgage, give Mortgage Services Professionals a call at 925-743-3525.

Mortgage Rates a Hot Topic as New Year Begins

The final days of 2013 saw a flurry of real estate news involving interest rates and mortgages. Some news offered relief for homebuyers, while other announcements made it all but certain that interest rates will climb noticeably higher in the new year.

Home prices risingIn mid-December, federal home-loan guarantors Fannie Mae and Freddie Mac said they would soon boost the fees they charge lenders, with the added cost passed on to homebuyers as higher mortgage rates. The fees would hit homebuyers with small down payments and less-than-perfect credit scores the hardest.

The fee hikes could still be rolled back, however, after they were questioned by the incoming director of the Federal Housing Finance Agency (FHFA).

U.S. Rep. Mel Watt, scheduled to take over the FHFA on Jan. 6, said recently that he would put the fees on hold until he has time “to evaluate fully the rationale for the plan” and how it would affect the availability of credit. Critics in the mortgage and housing industry had argued that the fees are too high and would ultimately hurt homebuyers and the housing recovery.

Meanwhile, the Federal Reserve  announced Dec. 18 that it would begin winding down its bond-buying stimulus program in January and end the program entirely by the end of 2014.
The stimulus program has been widely credited with keeping mortgage rates down. The Fed said it would reverse course if the economy weakens, but housing market analysts said mortgage rates will almost certainly rise.

Within a week of the Fed’s announcement, the Mortgage Bankers Association (MBA) said mortgage rates increased and refinancing applications decreased.

Thankfully, mortgage rates showed little change by the end of the year, according to the weekly mortgage market survey by Freddie Mac.

In its last survey of 2013, Freddie Mac reported that 30-year fixed-rate mortgages averaged 4.48 percent, up from 4.47 percent a week earlier. Last year at this time, 30-year mortgages averaged 3.35 percent.
Also, 15-year fixed-rate mortgages averaged 3.52 percent, up from last week’s 3.51 percent and from 2.65 percent a year ago. One-year adjustable-rate mortgages, meanwhile, averaged 2.56 percent, down from last week’s 2.57 percent but exactly the same as the rate one year ago.

Earlier this year, the MBA predicted that mortgage rates would rise above 5 percent in 2014 and average 5.5 percent by the end of 2015.

The likelihood of rising interest rates offers clear guidance to move-up buyers and first-time homebuyers: Delays in financing could add thousands of dollars to a home purchase. Potential extra costs in the first year alone could top $35,000, according to an analysis we published two months ago.

Why Do We Buy Real Estate?

Why do you own your home? Why do you want to buy a home? According to Fannie Mae the top five reasons people buy a home or aspire to buy a home are: To have a better place to raise their children; A place where their family can feel safe; To have more space; Freedom to renovate to their own taste; and Owning is a better investment. Does this hold true for you? How about for a friend or family member you are close to? I know that all five reasons were a factor in my personal decision to own a home rather than rent. While I do think that sometimes for some people it is better to rent than own (or possibly it is the only option), the vast majority of the time there is no question it is better to own than rent.
The reasons we buy a home have stayed constant throughout the recovery of our real estate market and are strengthening all the while.

Freedom

People have to live somewhere and at least in the United States, people want to own where they live. It has a lot to do with freedom. We are a free nation with citizens who strive for financial freedom, enjoy their religious freedom, freedom to say what we want, etc. Something about owning your home gives you freedom.
Every day I work with people who are buying a home and they all have their own unique set of circumstances. Some are newly married and are ready to start their life together. Some need more space. Some have the means to buy a home in a special location to enjoy the beauty of the oceans or mountains. Either way the drive to own is strong.

Recovery

Let’s face it; we have been through tough economic times in the past several years. Many of us have been caught in the midst of short sales, foreclosures and even bankruptcies. The first question I’m asked by someone who has been through a tough time is “how long do I have to wait before I can buy another house?”

The American Dream

In 1931 the phrase “The American Dream” was defined by James Truslow Adams, historian and author, in his book Epic of America- “…life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement”. Homeownership is a very strong part of the American Dream.
We have all read books, seen movies and heard stories about immigrants who have come to America in pursuit of a better life in a society that allowed them to better themselves based on their own ability and achievement. Most of these people were coming to America from a society that was without opportunity because the class structure did not allow for significant achievement…you pretty much stayed in the class in which you were born.
In America that is not the case, every day we have the freedom to make better choices, work smarter, work harder, take risks, etc. all in pursuit getting to a better place than we came from.

Financial Strength

Owning a home is one of the best ways to better yourself as judged in financial AND non- financial terms. For example, according to the Federal Reserve (2012), on average, Homeowners have a total net worth over thirty times greater than those who rent their home. For most of us the equity in our home is the biggest asset on our balance sheet.

Other Factors

Some of the non-financial related ways we are better off owning a home versus renting include having more room for our growing family by way of buying a bigger house or adding on to our current house… if you rent, your landlord is not likely to allow you to knock down walls and add on to your apartment.
Another way we are better is by having the ability to choose where we want to live. Location is the single most important variable that affects the value of real estate, there is good reason for this…if the location is unsafe, polluted, noisy, high-traffic, prone to flooding, etc. then it less valuable than a location which is safe, quiet, convenient, dry, etc.
Achieving the American Dream is a noble pursuit. I would argue that owning your own home is one of the very best ways to live that Dream. It isn’t the only way but it is so important psychologically and financially that it helped make the USA the wonderfully free and prosperous nation it is and will be.

Why do you own your home? Why do you want to buy a home? Go out and achieve the American Dream!



This article and post was sourced from the KCM Blog:
http://www.keepingcurrentmatters.com/2013/10/21/why-do-we-buy-real-estate/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+KeepingCurrentMatters+%28Keeping+Current+Matters%29 

The Curious Case of the Jumbo Mortgage

Though it may feel like yesterday, it's been about half a decade since the housing bubble burst and the subprime mortgage crisis hit. In September 2008, the United States government took over Fannie Mae and Freddie Mac. Since then, the mortgage industry has undergone fundamental changes, experiencing both increased regulation and a large shift toward nationalization. To give you an idea of the size of these changes, in 2006 around 30% of mortgage loans in the US were backed by a government guarantee. This number rose to around 90% in 2012.

Private vs. Government Funding

As we move further from the financial crisis, it makes sense to start asking if and when the mortgage industry will return to a world where private money plays a greater role and government institutions such as Fannie, Freddie, and the Federal Housing Administration (FHA) play a smaller one. Recently, our representatives in Washington have begun to discuss plans to dissolve Fannie and Freddie and bring private money back into the game, and that's a good start. In the past few months, we've also seen a few encouraging trends in the jumbo mortgage market that could point toward a mortgage industry less reliant on government guarantees.

Jumbo Mortgages

If you're not familiar with a jumbo mortgage, the entire concept revolves around the type of loans that Fannie and Freddie are willing to guarantee. Fannie and Freddie will guarantee loans only up to $417,000 in value (sometimes more, but not important for this discussion), and these are referred to as conventional mortgages. A jumbo mortgage refers to one with a higher loan amount, typically $417,000 to $750,000, and these are not backed by a government guarantee. Prior to the financial crisis, jumbo loans were priced around .25% higher than conforming. After the financial crisis, the gap has widened to as much as 1.8%, just one more indicator of the flight of private capital.

Latest Trend

In September, something changed – by some measures, the rates on jumbo mortgages actually fell below the rates on equivalent conventional loans. This phenomena was covered in many media outlets, and you can read more detail here and here. As of this writing, the rates on a few popular websites are almost too close to tell the difference, with 30 year fixed rate conventional mortgages at 4.28% and jumbo 30 year fixed rate mortgages at 4.32%. Though it's only been one month, the fact that jumbo mortgage rates did not immediately diverge from conventional rates is a sign that we may be witnessing a trend.
There are countless ways to interpret the closing spread between jumbo and conventional mortgage rates. For example, banks with excess capital to lend may feel pressure to put this money to work, which one could argue is leading to higher demand for jumbo loans and thus lower rates. Another interesting interpretation, however, ties back to Fannie and Freddie. In recent years, both institutions have raised guarantee fees, the fees that are meant to compensate them for providing a guarantee on a mortgage. This makes conventional loans more expensive, which would help close the gap with jumbo loans in the other direction.

If you're in favor of more private market involvement within the mortgage industry, you may be wondering if falling jumbo mortgage rates are the first step in a path toward private options for conventional loan amounts. After all, at some point working with Fannie and Freddie may become prohibitively expensive, and the WSJ article linked earlier mentioned a mortgage lender encouraging borrowers to borrow more money to jump over conventional limits. It's far too early to tell, but this trend certainly deserves attention over the coming months. 


Article and Photo Sourced from the KCM Blog:
http://www.keepingcurrentmatters.com/2013/10/16/the-curious-case-of-the-jumbo-mortgage/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+KeepingCurrentMatters+%28Keeping+Current+Matters%29 

Mortgage Rates after the Bernanke Announcement

Last week, Bernard Bernanke startled many by announcing that the Fed will not wind down their bond buying program right now. The program is part of an overall stimulus package geared at bringing back the national economy. The Fed’s purchase of these bonds over the last few years has driven mortgage rates to historic lows. The assumption that there would be a reduction in bond purchases has caused 30 year mortgage rates to spike upward over the last few months.
Surprisingly, Bernanke revealed the Fed will continue bond purchasers at the current pace. What happened and what does it mean to mortgage interest rates? 

What would have happened if they reduced bond purchases?

According to Bankrate.com:

“The Fed could have caused rates to shoot up this week if it had announced the tapering of its bond-purchasing program.”

Why did the Fed decide not to start winding down bond purchases?

Moody’s Analytics reported that there were three reasons:

1. Subpar economic data
2. Tighter financial conditions
3. Uncertainty surrounding fiscal policy

What does this mean to a buyer applying for a mortgage?

Those at Bankrate.com explain:

“For now, borrowers have dodged another spike in rates. The Fed’s announcement might even cause rates to drop in coming days, says Paul Edelstein, director of financial economics at IHS Global Insight.
‘Mortgage rates should fall back — not massively, but to some extent,’ he says.
That doesn’t mean homebuyers and homeowners should wait for lower rates, mortgage professionals say.
Eventually, once the Fed lets the mortgage market and the economy start walking on their own, rates will probably head back to the 5 percent or 6 percent range, says Scott Schang, manager for Broadview Mortgage Katella in Orange, Calif.”

When will the Fed begin winding down bond purchases?  

According to an article in the Wall Street Journal:

“Federal Reserve policy makers decided this week that the economy isn’t in the right place for them to start winding down their bond-buying program. By the time they meet in December, it might be.
The decision to not start winding down the bond-buying program now was close… The economy only needs to get a little bit better over the next few months for the central bank to get its nerve back. That should be an easy bar for the economy to clear.”

Bernanke himself has not ruled out that the Fed could still scale back the stimulus this year. He stated:

“If the data confirms our basic outlook, then we could move later this year.”

Bottom Line

Ed Conarchy, a mortgage planner at Cherry Creek Mortgage in Gurnee, IL had a great quote in the Bankrate article:

“Remember that rates go up like a rocket and fall like a feather.”

Still, Bankrate.com itself probably put it best: Grab the gift before it’s gone!


Article &Photo Sourced From the KCM Blog:
http://www.kcmblog.com/2013/09/23/mortgage-rates-after-the-bernanke-announcement/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+KeepingCurrentMatters+%28The+KCM+Blog%29

Should I Wait for Interest Rates to Come Back Down?

Above is a graph of the movement of the 30 year fixed mortgage rate since the beginning of 2012.

Some buyers are waiting to see if interest rates will come back down before making a decision about buying a home. Though no one can guarantee where rates will be in a few months, we don’t believe waiting is a good strategy.

Most experts believe rates may actually move higher. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison projecting that rates will continue to climb.  With home prices increasing and interest rates projected to also increase, the cost of buying a house could quickly increase rather dramatically.

The COST of a Home: Last Year, This Year & Next Year

The cost of a home is determined mainly by two components: price and mortgage rate. Today, we want to show how the monthly cost of purchasing a median priced home has changed over the last twelve months and how it might change over the next twelve months. For the first two examples, we will be using the National Association of Realtors’ (NAR) Existing Home Sales Report to establish median price and Freddie Mac’s Primary Mortgage Market Survey to establish mortgage rate. We also assumed a 20% down payment in all examples.

LAST YEAR

The median priced home in the country was selling for $187,800. The 30-year fixed mortgage rate was at 3.5%. Here is what it would cost to buy a home last year:

TODAY

The median priced home in the country is selling for $213,500. The 30-year fixed mortgage rate is at 4.5%. Here is what it would cost a purchaser to buy a home today:

The monthly cost increased by: $190.78!

NEXT YEAR

Projecting into the future in real estate can be rather tricky. To establish future pricing, we depended on the over 100 housing experts surveyed for the Home Price Expectation Survey who called for an approximate appreciation rate of 5% over the next twelve months. For the interest rate, we took the average of the projections from the Mortgage Bankers’ Association, Freddie Mac and Fannie Mae. Here is what these experts project will be the approximate cost of a home a year from now:

The monthly cost will increase by about: $97.32!

Bottom Line

From a financial perspective, why wait if you are thinking about buying?



Article & photos Sourced From THE KCMBLOG.com
http://www.kcmblog.com/2013/08/26/the-cost-of-a-home-last-year-this-year-next-year/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+KeepingCurrentMatters+%28The+KCM+Blog%29

Mortgage Interest Rates: Where Are They Headed?

Today’s $20,000 question is…Where are mortgage rates headed in the near future? Most believe the rapid rise in rates experienced over the last month will not be sustained and that they will level off into a range between 4% and 5%.
When recently asked, Zillow’s director of Mortgage Marketplace, Erin Lantz suggested:

“It is impossible to predict. However, we expect there to be a lot of volatility, probably between 4.5% to 5%.”

In Bankrate.com’s Mortgage Rate Trend Index last week, 20% of the experts said rates would go up this week, 30% said rates would go down and 50% said they would remain unchanged.

What about going forward?

Doug Duncan, chief economist for Fannie Mae recently addressed where mortgage rates may eventually end up:

“I don’t think the Fed ultimately would be troubled with a 6.5% mortgage rate.”

Why wouldn’t the Fed be troubled? They have artificially kept rates low in order to stimilate the economy. As economic indicators begin to show signs of a recovery, the stimulus will be pulled back and rates will rise.
Frank Nothaft, Freddie Mac’s VP and chief economist confirms this:

“As the economy continues to improve, we expect to see continued upward movement in long-term interest rates.”

Buckle in!! The rollercoaster ride will probably continue.