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.

Tax Credit for Homebuyers - Extended and Expanded

11/6/2009 - President Obama just signed a bill to extend the tax credit for first-time homebuyers through June 30, 2010. The bill also opens up opportunities for others who are not buying a home for the first time. To learn what the new tax credit means to you, please take a look at the concise overview below.

TAX CREDIT OVERVIEW: Who Gets What?

First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000.
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Tax Credit Versus Tax Deduction
It’s important to remember that the tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!

Higher Income Caps
The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sale price of $800,000.
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Remember, the new tax credit program includes a number of details and qualifications. For more information or answers to specific questions, please call or email me today.

In addition, you may be able to benefit from additional housing related provisions, including the following:
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Tax Incentives to Spur Energy Savings and Green Jobs
This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.

Landmark Energy Savings
This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.
Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing
This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs. Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.

Expanding Housing Assistance
This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.

As always, if you have any questions about your specific situation or would like to discuss how you may benefit from this program, please call or email me. I’ll be happy to sit down with you.

Third Time's A Charm

With as many refinance transactions that have occurred since December of '08 I sometimes wonder if there is anyone left who didn't do it when they had the chance. I know, though, that there are a lot of people who have not yet taken advantage of the lower rates we've experienced this year because they were holding out for something even better or were just too plain busy.

Well, the writing is on the wall and this could be our "last call". As I mentioned in my last post about the Fed's comments from their most recent meeting, we are expecting rates to start going up as they curb their buying of the mortgage backed securities (MBS). Without their high-level purchases we can expect a lot more volatility in the bond market which will directly impact the mortgage rates we're able to offer. As the program phases out at the end of the first quarter of 2010 we should see 30 year fixed rates back into the 6% range. While historically speaking a 6% rate is great, opportunities to refinance into lower rates are running out.

The chart below shows activity in the bond market over the last year (Remember, the higher the price for the bond, the lower the mortgage interest rate. They work inversely of each other). You can see where it all began back in December 2008 when the Fed announced they would be buying up billions in mortgage backed securities. That got another boost in Spring, when most of these refinances took place and now we've found ourselves again at these same record pricing. So, perhaps the third time will be the charm for those who haven't acted yet.

Of course, these great rates also mean that this is a good time to buy a home. I've been beating that drum for awhile as we've discussed the first time home buyer tax credit and affordable home prices. We are hoping for an extension and expansion of that program to include ALL buyers but still have no official word. You can count on me to provide you with the facts as they become available.

Meanwhile, should you or anyone you know still be thinking about restructuring their mortgage, primarily to take advantage of these super-low rates while they are available, please call and I'll give honest advice as to whether there is a benefit. It would be my honor to be of assistance.

For more information on these great opportunities click on this link for my monthly "Views You Can Use" newsletter.

http://www.mmgweekly.com/m/index.html?SID=f073cd45cff903b9a6e8a810ecda129b

9/23/09 - What the Fed Said

Some important information came out of today's Fed Meeting.

As expected, they left the Fed Funds Rate alone, keeping it at a low .25%. This is good news for those of us with Home Equity Loans tied to Prime. Eventually, this rate will have to come back up though. It is only a matter of time.

The real news today was that the Fed's purchases of Mortgage Backed Securities will continue and they still plan to spend the $1.25 Trillion allocated toward this program. HOWEVER they will decrease the frequency of their purchases and draw it out through the first quarter of 2010.

The good news is that they are going to finish what they started. There were rumors that they would discontinue the program early. The bad news is that we're very likely to see mortgage rates creep back up into the Sixes early next year.

What does that mean to Joe and Jane Homeowner? Well, if you were thinking of buying or refinancing you'd be wise to take a look at your options now while the rates are most attractive.

The next big question yet to be answered is if the First Time Homebuyer Tax Credit will be extended past November 30 and if they will extend this credit to ALL buyers or increase the amount of the credit.

Stay tuned as I'll be keeping a close eye on this.

Have you benefitted by the lower interest rates or tax credit recently? Do you have questions about the tax credit? Post your comments here or contact me directly at twiggins@affsmortgage.com or 615-627-4869.

Give Yourself Time

We are fast approaching the deadline of the First Time Homebuyer Tax Credit. In order for first time homebuyers to receive this credit of up to $8,000 they must close on their purchase no later than November 30. While you might think, "take it easy Todd, this is mid-September" please keep in mind that what lies ahead is a bottleneck of buyers trying to close by that deadline.

Also please consider that with mortgage interest rates back down yet again and with homes selling at attractive prices, our pipelines are already filling up. Most of our lenders are currently operating on five-day underwriting turn times. From application to closing it typically takes three to four weeks, where a one to two week process was more common. There is the potential that most lenders will need as long as five to seven weeks to close your loan as we near the deadline.

Contributing to these delays are some new guidelines that we are now subjected to, such as the Home Valuation Code of Conduct (HVCC) appraisal process and the new Truth in Lending (TIL) disclosure guidelines. While these were put in place for your protection, I assure you that they offer very little consumer protection and only add to the delays and confusion.

So, should you or someone you know consider purchasing a home this Fall, I recommend that you start that search now.

Follow these steps:

1. gather your income and asset documents (pay stubs, W-2s, tax returns and bank statements for starters)
2. consult with me for an analysis of your best mortgage options and to obtain pre-approval
3. give serious thought to what you are seeking in a new home and break it up into the "must have" and "would be nice" categories (location, # bedrooms and baths, garage, yard, etc.)
4. consult with a professional and qualified realtor to assist you in your home search and negotiations

Please note that there are efforts being made to extend the deadline for the First Time Homebuyer Tax Credit past November 30. It also being requested that the amount of the tax credit be increased and that the credit should be extended all buyers. At this time, however, we have no confirmation that Congress plans to do this.

So don't delay. That awesome feeling of buying your first home won't feel nearly as good on December 1.

For more information on the programs available or on the tax credit, please contact me at twiggins@affsmortgage.com or at 615.627.4869

Is That the Bottom I See?

Hold on to your hats, but we may be finding the bottom of our housing market, or at least a suggestion that a bottom is coming. While prices in most areas continue to decline, the pace of the decline appears to be slowing. Is this just a seasonal adjustment? Is this a reflection of First Time Homebuyers taking advantage of the tax incentives or buyers taking advantage of low interest rates? That has yet to be determined.

I believe that this further emphasizes the importance of getting in on the right side of the curve. If you are in the market to buy, you would be wise to do so before the bottom has been established as you'll have less leverage working with a seller who thinks the market is rebounding.

Of course, you should consult a qualified realtor to see how home prices are performing in the specific area that you desire.

For more details on today's report from Ruth Mantell with MarketWatch, read the excerpt below:

U.S. home prices did fall in April, but overall annual declines are slowing, according to the national Case-Shiller home price index released today.

On a month-to-month basis, prices in 20 selected cities fell 0.6% in April, with declines in 11 cities, compared with a decline of 2.2% in March. The overall annual pace of decline has slowed, said David Blitzer, chairman of the index committee for Standard & Poor's, which compiles the Case-Shiller index.

"Thirteen of the 20 metro areas also saw improvement in their annual return compared to that of March. Furthermore, every metro area, except for Charlotte, recorded an improvement in monthly returns over March," Blitzer said in a statement. "While one month's data cannot determine if a turnaround has begun; it seems that some stabilization may be appearing in some of the regions."

Blitzer added that it will take time to tell whether a recovery has arrived as the market enters a seasonally strong period.

Continuing slower price declines are a "decent bet," wrote Ian Shepherdson, chief U.S. economist with High Frequency Economics.

"The fly in the ointment is foreclosures, which tend to result in much lower prices and are an increasing proportion of transactions," Shepherdson wrote. "For now, though, this is clearly less bad than recently."

For answers to what financing options are available to you, please contact me at 615-627-4869 or at twiggins@affsmortgage.com.