1% = 10%

For those trying to predict the "bottom" of the real estate market for maximum savings, please keep this in mind.

Every 1% increase in home loan rates decreases the buying power of an indiviual by 10% in home price. Ths means that if you qualify for a home priced at $200,000 today and interest rates increase 1%, the amount you qualify for would be reduced to approximately $180,000 to maintain the same payment.

This is a good example of how important it is to take advantage of today's opportunities before there's even a slight change higher in rates.

There has been a lot of "Fed talk" recently that exposes the wide range of opinions on which direction the Fed will take and how volatile our mortgage rate environment is. We've been spoiled with Fed intervention and a series of international events that have kept us at record lows. While I can't predict the "when", I can tell you that it is only a matter of time before rates return to more traditional levels.

Prospective buyers: get pre-approved and go see what is out there for you.

Realtors: please share this tid-bit of info with your clients. This may get them off that proverbial fence.

Homeowners: I'm amazed to find so many who have yet to refinance into better terms. Let's talk. If we can't get you qualified, we'll formulate a plan to get you there.

Making Sense of the Housing Numbers

Mortgage Market Guide Chairman and CEO, Barry Habib, recently spoke on Fox Business News about the state of the housing market. Barry offered some valuable insight that I believe is worth sharing.

Click here to view:
http://video.foxbusiness.com/v/4210331/making-sense-of-the-housing-numbers

Barry tells us that this is a "market of opportunity". Due to a variety of economic factors across the globe, our mortgage rates continue to bounce off of all-time lows. Couple that with aggressive home prices and the incentives to buy are hard to resist.

Of course, you have to qualify for the loan and lenders have tightened up their guidelines so some will be left out. Some would say this is an "over-correction" but others would argue that reasonable lending standards are being employed. Personally, I'd like to see programs offered again for the borrower with excellent credit and equity in the home without having to fully document their income. The self-employed are a segment of our borrowing population that have been left out in the cold since the Mortgage Meltdown and I believe there are ways to include them.

Barry reminds us that real estate markets are highly localized and that factors such as the local economy and housing inventory will play a part in the "deal" you can get on a new home and how quickly you can expect it to appreciate. This may not be the time to expect big returns on a six month flip but if you are looking to stay in a home for several years the returns could be quite healthy.

Eventually the Fed will have to take their foot of the gas and when they do we can expect these rates to climb back up. So, if you are in position to buy or if you think you'll be in your current home for a few more years and wish to improve your terms, now is the time to seek advice.

Opportunity is knocking. Make sure you answer the door.

Please share this with anyone you know and care about who may be considering a purchase or refinance of their own. They will thank you.

I Keep Holdin' On

We are pleasantly surprised by the fact that our mortgage rates are still so low. As you'll note in my previous posts, we've been expecting rates to rise since the Fed's purchasing of Mortgage Backed Securities ended in March, however we're now seeing rates as low as they've ever been, thanks in large part to the economic turmoil in Greece, Portugal and other countries, which are having a negative impact on the Euro. Once again this has driven investors toward our safe haven U. S. bond market, driving up the bond price and lowering our mortgage rates.

The homebuyer tax credit is gone, but there are still lots of homes for sale and those sellers don't have the tax credit to use as an incentive any longer. Those who are able to are more likely to incent buyers with lower prices.

Super-low interest rates and lower prices = great opportunity. No strings attached. No government intervention. Just the market working to let you know that now could be a great time to buy (or to refinance if you've still not done so).

While these rates have been holding on, they won't forever. Inflationary pressures and a rebounding economy are both around the corner and will both be bringing these rates up to more traditional levels soon.

Please share this message with anyone you know and care about who is considering that home purchase or who has not yet refinanced and I'll answer any and all of their questions.

I can be reached at 615-627-4869 or at twiggins@affsmortgage.com. Thank you.

Thank You, Fed. Now what?

On behalf of the American homeowner, I'd like to say, "Thank You" to our Federal Reserve for buying $1.25 Trillion in Mortgage Backed Securities over the last year and a half. Their intervention has helped keep mortgage interest rates at all-time lows, allowing homeowners to refinance into more affordable mortgages and allowing homebuyers to achieve the dream of homeownership with less strain on their budget in an economy that requires a more discriminating look at how we spend.

The Fed's program of purchasing has ended. Now the big question is about to be answered. What will rates do now that the Fed isn't buying these bonds? My research tells me that most experts agree that rates will go up. With less demand for these bonds, prices will be forced down and mortgage rates will be forced up. We expect to see an initial spike in rates, which may be tempered as less mortgages get written. At the very least we expect an increase in volatility.

So, what does this mean to you? That depends on your situation:

- the homeowner: if you haven't refinanced out of your Adustable or High-Rate loan, this could be your last chance. Qualifying is still a challenge for many, but if you qualify, it is worth one last look.

- the prospective home buyer: with rates still hovering near all-time lows, homebuyer tax incentives and low home prices this is the perfect opportunity to buy whether you are a first timer or even if you are looking to trade up (or down).

- the real estate professional: while we know that people will continue to buy homes at higher rates and without tax incentives, it is our responsibility to let the people know that TIME IS OF THE ESSENCE if they want to take advantage of these opportunities. All good things must come to an end and unfortunately we may very well see the end staring us in the face. Think of how grateful your buyers will be when they see how you encouraged them to act and others are accepting higher rates, paying higher prices and NOT receiving tax credits.

Now that rates are subject to increased volatility, I'll be posting more regularly, commenting on how the market will react without the Fed's support. Stay tuned and hold on to your hat!

What Affects Interest Rates?

Our friends at Mortgage Market Guide have shared with us a wonderfully informative video about mortgage interest rates:

• what causes them to go up or down?
• why they are so volatile?
• why they've been so low this past year?
• why they likely won't be so low after the first quarter?

It's about seven minutes long, but if you asked me to explain all this to you, I'd likely take a half hour.

click her to watch video

The tools that they reference in their video are what I watch all day long. I'm streaming live bond market updates and am alerted via email, text and on the cell phone of movement in the market that will cause lenders to reprice for the worse (or better).

Is your lender doing this?

Rates are still great but won't be for long, so if you or someone you know is considering a refinance or purchase, please call now to research your specific options.

Yet Another Reason to Buy or Refinance Now - FHA Changes

As if there wern't enough reasons to be considering a home purchase or refinance, FHA has added further incentive with their announcement today.

click here to read full announcement:
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-016

Due to the increased popularity of FHA in the absence of alternative loan products, they must address their capital ratio. They have chosen to increase the Up Front Mortgage Insurance Premium, reduce seller contributions and are making other changes that will increase their capital and reduce default risks. Here are the changes that matter most to consumers and real estate professionals:

• A .50% increase in the Up Front Mortgage Insurance Premium (UFMIP) from 1.75% to 2.25% that will go into effect in the Spring of 2010. This increases the total amount financed and makes for a higher payment.
• Proposed shift in some of the premium increase from the UFMIP to the Annual MIP, which will have less impact on the consumer as it is spread over the life of the loan. We are unsure when this change will take place. While it is meant to soften the blow, payments will be more nonetheless.
• Reduce allowable seller contributions from 6% to 3%, which is more in line with industry standards. This will go into effect in the early summer. I've never had an instance where 6% contriubitions were needed, but on smaller transactions, we've had use for 4% from the seller. This new limit could impact the borrower's ability to get the lowest rate or require additional funds from the buyer at closing.
• New requirement of a minimum 580 credit score to qualify for FHA's 3.5% down payment program. Borrowers with scores below 580 must put down at least 10%. This is not much of a factor as just about every reputable lender requires a 620 (some require 640) score for their FHA loans.

The bottom line is that rates are great and tax incentives are in place for first timers as well as repeat buyers. Rates are predicted to go up once the Fed's buying of Mortgage Backed Securities ceases. We are looking at rates of 6% and higher this year! To receive the tax credit for your purchase you must be under contract by the end of April and close no later than June.

Of course the Fed may choose to continue buying Mortgage Backed Securities and the tax credit could be extended further but those are pretty big "ifs".

If you, or someone you know, is considering a purchase or simply wants to review their refinance opportunities, this would be a very good time to look into it.