Mortgage Rates Move Upwards, But Stay Low

DAILY REAL ESTATE NEWS | FRIDAY, JULY 29, 2016

For the second consecutive week, fixed mortgage rates inched up, but still remain near historical lows, Freddie Mac reports in its weekly mortgage market survey.

"The 10-year Treasury yield remained flat this week in anticipation of the Fed's July policy meeting,” says Sean Becketti, Freddie Mac’s chief economist.

“Mortgage rates, on the other hand, rose another 3 basis points to 3.48 percent. Nonetheless, home sales continue to benefit from the persistently low mortgage rates with June's new home sales coming in at an annualized rate of 592,000 homes -- its fastest pace since 2008."

Freddie Mac reports the following national averages for mortgage rates for the week ending July 28:

• 30-year fixed-rate mortgages: averaged 3.48 percent, with an average 0.5 point, rising from last week’s 3.45 percent average. Last year at this time, 30-year rates averaged 3.98 percent. 
• 15-year fixed-rate mortgages: averaged 2.78 percent, with an average 0.5 point, increasing from last week’s 2.75 percent average. Last year at this time, 15-year ARMs averaged 3.17 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 2.78 percent, with an average 0.5 point, holding steady from last week. A year ago, 5-year ARMs averaged 2.95 percent.

Source: Freddie Mac

Mortgage Rates Fall on the New Year

Global Market Concerns Cause Mortgage Rates to Fall

The Risks of Adjustable Rate Mortgages

Confounding most predictions, mortgage rates have remained unusually low this year, begging a question: is an adjustable-rate mortgage worth the risk?

It can be, but it's likely that many borrowers focus on the wrong issue, looking at the way lower interest rates on ARMs (as opposed to fixed-rate loans) reduce monthly payments. Currently, a one-year ARM charges 2.876%, a 30-year fixed-rate loan 4.313%.

A lower payment obviously means more money in your pocket for other things. But if that's what matters to you, consider it a red flag. The ARM rate will start out lower than the fixed-rate loan, but could go higher when the annual adjustments start after one, three, five or seven years. At some point, you could pay more each month than you would if you'd taken out a fixed loan. That means if you think the monthly payment on a fixed loan would be a stretch, be very wary of taking out an ARM for the same amount.

Why, then, would you even consider an ARM? In a nutshell, not to reduce monthly payments but to reduce your overall interest charges — assuming everything works in your favor.

Consider some numbers produced by Jack M. Guttentag, emeritus professor of finance at the Wharton School. On a $300,000 loan, he figured a 30-year fixed mortgage would charge 4%, for a monthly payment of $1,432. A five-year ARM would start at $2.635%, for $1,205 a month.

After five years, the ARM rate would be reset every 12 months, based on a formula using prevailing rates, with a "cap" limiting the annual changes — typically 2 percentage points for each adjustment, up or down. Assuming the rate went up the maximum allowed, the five-year ARM would still be cheaper than the fixed loan for nine years. It would take that long for the rising payments on the ARM to wipe out the savings enjoyed in the first five years. After the nine-year breakeven point, the total cost of the ARM would be higher than for the fixed loan.

Note that in year six, the ARM would charge about 4.6%, while the borrower would have continued paying just 4% on the fixed loan. In year seven, the ARM could charge 6.6%. So although the total costs of the ARM are still lower through these years, the monthly payment would be considerably higher than on the fixed mortgage.

Of course, the borrower could get lucky, with smaller rate hikes. Conceivably, rates could even go down.
But if that happened, the savings would be gravy. Unless you have a crystal ball, the prudent move is to assume the rate will go up the maximum allowed.

All this demonstrates that an ARM is a safe bet only if you can afford the maximum payments it could charge, and that overall savings are certain only if you expect to pay off the mortgage before the breakeven point — by selling the home, for instance. If you expect to have the loan longer than that, savings are a gamble. (Find the breakeven point with the ARM vs. Fixed Rate Mortgage Calculator).

To improve your odds of coming out ahead, the monthly savings from the ARM should be reinvested, not spent. That "extra" cash could be used as extra principal payments to reduce the mortgage balance, thus reducing the payments after subsequent adjustments. Or it could be invested in stocks, bonds or mutual funds — anything that looks promising.

But if you're considering an ARM because the lower initial payments will make it easier to put food on the table or make your car payment, better reassess. In this case, the key issue is not whether to get an ARM instead of a fixed loan, it's whether you'd be wiser to buy a cheaper home.

By the Tracy Tidwell Team at ERA Henley Real Estate in Conway, AR
http://www.tracytidwell.com
Tracy: 501-472-4709   ERA: 501-327-6731

What Bankers Suggest When Buying a Home

Buying a home? Bankers say do these 8 things first
Manage your budget, check your credit, and more...
Ben Lane June 2, 2014 4:17 PM

Many first time homebuyers launch into the market, find the perfect home, and then decide to look at getting a mortgage. Imagine the disappoint when they are declined and the perfect nest slips from their grasp.

That's because the buyers have the process backwards.

Yes, for many prospective homebuyers, the process can seem daunting and maybe even overwhelming. For first-time buyers, there are many obstacles that may prevent them from owning their own little piece of the American dream.

One of the biggest potential obstacles is obtaining credit to buy a home. Increasingly tight credit standards may be squeezing out potential buyers, but the Independent Community Bankers of America say they’re willing to help. Of course, big box retailers, such as Wells Fargo (WFC), and non-banks such as Nationstar (NSM), could also help first time homebuyers get mortgage. And this advice is applicable not just to the community bank crowd the ICBA represents, though they'd argue that community banks offer a higher level of service for potential homebuyers.

“Buying a home is likely the biggest purchase anyone will make, and community bankers are an excellent resource to help guide consumers through the process,” said John Buhrmaster, ICBA chairman and president and CEO of 1st National Bank of Scotia, New York.

“With new mortgage rules and regulations in place, community bankers are available to help potential homebuyers by providing accurate and well-informed information,” he continued. “Community bankers across the country can help their neighbors in their local community find mortgages that fit their financial needs, budgets and lifestyles.”

The ICBA says prospective buyers should do the following to make the home buying process a little easier for themselves:

1: Earn and spend

Know your monthly income and budget, including how much you spend on rent, utilities, entertainment, clothing, food and transportation.

2: Talk about it

Discuss your finances with a planner at a bank before you begin looking for a home. It is important to stay within your means when purchasing a house.

3: Have a paper trail

Gather and organize paperwork and documents. Items you should have readily available include paycheck stubs, W2 forms, tax returns and bank and investment statements for the last two years.

4: What's your FICO score?

Check your credit report so you are aware of what your current credit score is before applying for a loan. Credit reporting agencies must give you one free report annually.

5: Bad FICO? Fix it.

Maxing out credit cards or falling behind on other loan payments could create issues when applying for a mortgage. Keep tabs on your spending habits before applying for a mortgage, and don’t go on a spending spree afterwards either.

6: 30-year fixed? Really?

Work with a banker to figure out how much you can borrow and which mortgage product is right for you. Your local community banker can explain available mortgage options- including rate adjustments, fees and other loan features - so you are prepared for the loan closing and not surprised down the road.

7: Rates. Rates. Rates.

Learn what current mortgage rates are. This will greatly impact your monthly payment. A banker can explain this to you well before you set your sights on the perfect place.

8: You may get help

Check with your state, city and county government agencies for special first-time-homebuyer loan or grant programs available to assist with down payment and closing costs.

“Community bankers work with their customers and help give advice on finding mortgages borrowers can afford,” Buhrmaster said. “There are plenty of steps to complete to ensure the home buying process goes smoothly and community bankers are on hand to help with this. They can help customers determine the most affordable mortgage options and are available to provide additional financial guidance if needed.”

By the Tracy Tidwell Team at ERA Henley Real Estate in Conway, AR
http://www.tracytidwell.com
Tracy: 501-472-4709   ERA: 501-327-6731

10 Steps to a Great Mortgage Loan Deal

How to Get a Great Deal on a Mortgage Loan

It is often said that for most people, the purchase of their home will be their single greatest expenditure. In truth, however, the purchase of a mortgage--the points and interest paid over the life of the loan--often equals or exceeds the sale price of the house. Thus, as everyone knows, it's essential to get the best deal on your mortgage as possible. Doing so, however, is not an easy proposition. To get a truly great rate, you'll need not only to shop smartly for a mortgage, you also need to establish yourself as a good credit risk before you apply.

Steps
Get a Get a Great Deal on a Mortgage Loan Step 1
1. Wait for Low Interest Rates

The easiest way to get a lower rate is to wait until the interest rates on loans across the board are at low levels. Interest rates fluctuate a great deal, sometimes even during the same day, but there are times when they are simply far lower than at other times. Keep in mind, however, that (all other things being equal) periods of low interest rates often see increased home prices.






Get a Get a Great Deal on a Mortgage Loan Step 2
2. Improve Your Credit Score

Make loan and other payments on time, especially over the months leading up to the loan application. Every delinquency will result in a lower credit score The better your score, the better your deal. Keep in mind, however, that it typically takes at least a couple years to significantly improve your credit. Don't close accounts when you pay them off - credit capacity is an important part of credit scoring. Unused open accounts do not help credit scores, however - higher scores come from current use of credit. Use it - pay it off - repeat.

Get a Get a Great Deal on a Mortgage Loan Step 3
3. Get the mortgage first if multiple financial obligations are going to pop up in the near future

Numerous credit inquiries, such as new applications for credit cards, can hurt a borrower's score, especially if they're filed in the months prior to the home loan review process. In addition, if you add new debt expenses shortly before applying for a mortgage, the loan underwriter may question whether you'll be able to make all your payments, so avoid making large purchases in the months before you apply.



Get a Get a Great Deal on a Mortgage Loan Step 4
4. Save as much money as possible for your down payment

A major determinant of your interest rate will be the loan-to-value ratio. These days you can sometimes get a mortgage for up to 97% of the value of the home (100% if you are a Veteran)(as of Fall 2008), but if you can reduce the loan amount to 80% of the value, you'll get a better rate. The larger your down payment, the more equity you will have in the home from the start. With more equity, the loan is a lower risk for the lender, and you'll be rewarded with a lower interest rate. A lease option may also help you build equity if you're not in a position to make a large down payment.

Get a Get a Great Deal on a Mortgage Loan Step 5
5. Reduce upfront expenses

Points--1 point equals 1% of the loan amount--and other upfront fees can drive the cost of your loan through the roof. Always take these into account when shopping for a mortgage. "Points" are a way of obtaining a lower interest rate, and may be necessary to make the payment make sense relative to your income.

Get a Get a Great Deal on a Mortgage Loan Step 6
6. Think small

Don't shop for that 6-bedroom house right off the bat. Lenders consider "payment shock" when approving loans. If you go from a relatively low monthly housing payment to a huge one, you'll either end up covering too big a loan with too little money, or you won't qualify at all.





Get a Get a Great Deal on a Mortgage Loan Step 7
7. Shop around

Mortgage rates for the same person can differ widely from lender to lender, so explore your options. If you belong to a credit union or if you've been with a bank for a long time, you'll often find your best rates there, though it's still a good idea to check around. A mortgage broker, who sifts through many lenders, may be able to find you the best rate. On the other hand, a Lender (not a broker)like a credit union does not have to cover the overhead of a broker - you may find lower rates, or lower costs.



Get a Get a Great Deal on a Mortgage Loan Step 8
8. Get pre-qualified, or "pre-approved"

The difference is a pre-qualification is based on information voluntarily submitted by you to a lender, who then provides an 'estimate' of the maximum mortgage amount you can afford. A pre-approval means the borrower, has had the lender perform credit checks, income verification, and various other underwriting tasks and has been approved for a specific mortgage amount. A pre-approval is a much stronger tool, obviously.



Get a Get a Great Deal on a Mortgage Loan Step 9
9. Lock in a low rate

Simply being approved for a loan amount doesn't mean you'll get the interest rate you've been quoted. You'll need to lock in the rate.









Get a Get a Great Deal on a Mortgage Loan Step 10
10. Enlist a real estate agent

Professional assistance can be invaluable when shopping for a new home. Real estate agents are already familiar with the housing market in the areas you are searching. This saves time as an agent can suggest properties that meet your search criteria. Agents also save you money because they know where the deals are among comparable houses in their areas.
Real estate agents also already have relationships with lenders which increases your chances of getting financed and at lower rates with quicker closing times.

By the Tracy Tidwell Team at ERA Henley Real Estate in Conway, AR

http://www.tracytidwell.com

Tracy: 501-472-4709   ERA: 501-327-6731

Mortgage Rates Inch Up After a Five Week Slump

From DAILY REAL ESTATE NEWS | FRIDAY, FEBRUARY 14, 2014

The five-week streak of falling mortgage rates ended this week, with the 30-year fixed-rate mortgage moving up slightly to an average of 4.28 percent, Freddie Mac reports.

Freddie Mac reports the following national averages for mortgage rates for the week ending Feb. 13:

• 30-year fixed-rate mortgages: averaged 4.28 percent, with an average 0.7 point, up from last week’s 4.23 percent average. Last year at this time, 30-year rates averaged 3.53 percent.

• 15-year fixed-rate mortgages: averaged 3.33 percent, with an average 0.7 point, holding the same average as last week. A year ago, 15-year rates averaged 2.77 percent.

• 5-year hybrid adjustable-rate mortgages: averaged 3.05 percent, with an average 0.5 point, dropping from last week’s 3.08 percent average. Last year at this time, 5-year ARMs averaged 2.64 percent.

• 1-year ARMs: averaged 2.55 percent, with an average 0.4 point, rising from last week’s 2.51 percent average. A year ago, 1-year ARMs averaged 2.61 percent.

Source: Freddie Mac

Tracy Tidwell Team  501-472-4709

ERA Henley Real Estate   501-327-6731