| Overnight Avg Rate | Latest | Change | Last Week |
|---|---|---|---|
| 30 yr fixed | 4.81% | 4.82% | |
| 15 yr fixed | 4.09% | 4.09% | |
| 5/1 ARM | 3.43% | 3.44% | |
| 30 yr refi | 4.83% | 4.84% | |
| 15 yr refi | 4.10% | 4.10% |
Monday, January 31, 2011
Mortgage & Savings Center
10 tips to snag a mortgage in 2011
10 tips to snag a mortgage in 2011
\
Mortgage lenders tightened their standards after the subprime-mortgage mess, and that won't change this year. But mortgage loans can be had.
Follow these 10 tips this year to secure a mortgage at an interest rate and under the terms that are right for you.
1. Have the right credit score
The best combination of interest rate and points requires a higher credit score than in the past. Before the crisis, the best mortgages came with credit score of 720 or higher. Then the industry went back to basics. Now the best deals often require a 740 credit score.
2. Protect and preserve your credit
Multiple hard credit inquiries will cause your credit score to fall. For that reason, some would-be borrowers are wary of shopping around for a mortgage loan. They worry that if two or more lenders pull credit reports, their scores will go down. But the effect of rate-shopping is more complicated than that.
When mortgage lenders make multiple credit inquiries within a few weeks of one another, those multiple inquiries are treated as one. Yes, it will cause the score to drop. But the hit likely will be minor.
One credit-scoring method treats all mortgage credit inquiries made within 45 days as one inquiry; an older, less-generous method lumps together all mortgage credit inquiries made within just 14 days.
3. Shop around
The interest rate is important, but there are other costs to consider, such as discount points and even the type of mortgage loan. When shopping for best rates, compare combinations of discount points and loan types.
For example, if you estimate that you'll live in the house for eight years before moving, compare the total fees and monthly payments that you would make under three or four different loan deals. Ask yourself how much it would cost to pay zero discount points and get a higher interest rate, compared with paying discount points in exchange for lower rates? What about a 5/1 or 7/1 adjustable-rate mortgage?
You might quickly rule out some options, but at least you considered them.
4. Know your borrowing limit
Whether or not you get an Federal Housing Administration-insured mortgage, let the FHA be your guide to how much debt to take on.
For most borrowers, the FHA caps mortgage payments at 31% of gross monthly income, before taxes. If you earn the median household income of about $4,200 per month before taxes, then your monthly house payment — principal, interest, taxes, insurance and association dues — should be no more than 31% of that, or $1,302.
Some housing counselors say 28% to 30% is a safer number. The FHA limits total debt payments to 43% of monthly income. Total debt payments include first and second mortgages, auto loans, credit cards and child support. Some non-FHA loans let you borrow more, but you don't have to do it.
5. Don't reset your refi calendar to 30 years
When refinancing a 30-year mortgage loan, many borrowers restart from the beginning and schedule payments so they pay off the loan in 30 years. You don't have to do it that way.
When you refinance a 30-year loan that you've had for five years, pay off the new loan in 25 years. Just ask the lender to amortize the loan for the remaining period of the old loan.
6. Consider a no-closing-cost refi
You're fortunate enough to have positive equity, but you don't have a lot of cash lying around. If you think that means you can't refinance, think again. You could refinance the loan yet pay little out of pocket in a no-closing-costs refi.
The lender doesn't eat the closing costs out of a sense of generosity. After all, we are talking about a bank. With a no-closing-cost loan, the bank charges a slightly higher rate. You end up paying closing costs over time, instead of all at once.
7. Small down payment? See the feds
Most lenders require borrowers to have down payments of at least 10% of the home's price. In the case of refinances, lenders want borrowers to have at least 10% equity.
That leaves out a lot of borrowers and refinancers. But there are options for people without much savings or equity.
For borrowers with good credit, the FHA requires a down payment (or equity) of 3.5%.
The Agriculture Department's rural-development program guarantees mortgage loans with zero down payment. Those loans are limited to designated rural areas. The Department of Veterans Affairs offers zero-down mortgages for qualified veterans.
8. Small loan? Act early
This tip is based on the Dodd-Frank Wall Street Reform and Consumer Protection Act and concerns loans of less than $100,000.
New restrictions on how loan officers are paid take effect April 1. The law forbids lenders from basing loan-officer compensation on interest rates or other loan terms. Essentially, a mortgage broker or loan officer can earn more money only by lending more money.
As an unintended consequence, loan officers are likely to chase bigger loans, and they may not want to spend as much time working on smaller loans. For borrowers getting small mortgages, customer service could suffer.
Some loan officers and brokers will be conscientious and will treat customers equally, regardless of loan size. But keep the regulation in mind.
9. Make an extra payment any time of year
Perhaps you've heard that making an extra mortgage payment at the end of each year will shorten the repayment time. That's true. But the extra payment doesn't have to come at year's end. An extra payment is effective any time of the year. The important thing is to pay it consistently.
If money is tight during holiday season, maybe it would feel less painful to make the extra payment after receiving a tax refund, after an annual bonus or at another time of year.
10. Behind on your payments? See a counselor
Delinquent homeowners who receive Department of Housing and Urban Development-certified foreclosure counseling are more likely to keep their houses and not lose them to foreclosure, according to a study commissioned by NeighborWorks America, a national network of community-development and affordable-housing organizations, based in Washington, D.C.
When late-paying borrowers get counseling, they are more likely to get a mortgage modification, which can reduce their payments.
Friday, December 17, 2010
Mortgage rates hit 5 percent
Mortgage rates hit 5 percent:
Mortgage interest rates rose sharply again this week, touching the 5 percent threshold and presenting more bad news for borrowers.
The benchmark 30-year fixed-rate mortgage rose 11 basis points this week, to 5 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.4 discount and origination points. One year ago, the mortgage index was 5.13 percent; four weeks ago, it was 4.62 percent.
The benchmark 15-year fixed-rate mortgage rose 11 basis points, to 4.37 percent. The benchmark 5/1 adjustable-rate mortgage rose 10 basis points, to 3.95 percent.
Weekly national mortgage survey
*Results of Bankrate.com's Dec. 15, 2010 weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
---------------------------------------------------
30-year fixed 15-year fixed 5-year ARM
This week's rate: 5.00% 4.37% 3.95%
Change from last week: +0.11 +0.11 +0.1
Monthly payment: $885.76 $1,251.30 $782.99
Change from last week: +$11.06 +$9.21 +$9.46
-----------------------------------------------------
This is the highest rate for the 30-year fixed in seven months. On May 12, the 30-year fixed stood at 5.07 percent in Bankrate.com's weekly survey. After that, it fell below 5 percent and stayed there -- until this week. Just six weeks ago, the benchmark 30-year rate was 4.42 percent -- a record low in the 25-year history of the weekly rate survey.
The steep and sudden jump was triggered by signs of an improving U.S. economy, says Peter Ogilvie, president of First Residential Mortgage Corp. in Santa Cruz, Calif.
"We've been getting positive or slightly positive reports that suggest positive movements in the economy, and that will send rates up," he says.
That relationship may seem counterintuitive, but a stronger economy draws investment funds into equities and away from the bond market. Lower demand for bonds means lower prices and, inversely, higher yields -- and interest rates follow the movement of bond yields.
When the dust settled, borrowers faced mortgage rates at least three-eighths to one-half of a percentage point higher than those they may have been quoted last month, Ogilvie says. A rate that's half a point higher on a $200,000 loan adds about $60 to the monthly payment. Bankrate.com's mortgage calculator lets you see what happens to monthly payments when rates change.
Here's a summary of what happened:
•The Federal Reserve held its target federal funds rate unchanged at zero to 0.25 percent Tuesday, but noted in its statement that the "economic recovery is continuing," "consumer spending is increasing at a moderate pace," and "business spending on equipment and software is rising."
•The Fed said it plans to continue buying U.S. Treasuries, a move that has triggered fears of future inflation.
The Fed's words, as well as its actions, have a "significant impact on the market and mortgage rates as bond investors look for any indication of what the Fed's going to do next," says Joe Metzler, a mortgage specialist at Mortgages Unlimited in West St. Paul, Minn.
•President Barack Obama and Congress struck a deal to extend federal income tax breaks for virtually all taxpayers, reduce the payroll tax through 2011, reinstate a smaller estate tax and ease some federal business tax rules. These changes -- and an end to the long uncertainty -- are expected to spur additional spending.
•Retail sales rose 0.8 percent in November, the fifth consecutive monthly increase and better than private-sector expectations of 0.5 percent growth, according to the U.S. Department of Commerce.
•European nations have made strides in the eurozone's debt crisis, a development that prompted investors to leave the security of U.S. Treasuries, causing bond yields and mortgage rates to rise, according to a statement from Freddie Mac.
Metzler says borrowers should focus on current rates and actually take the advice they're offered by experienced mortgage professionals. Both Ogilvie and Metzler report that the rate jump prompted some borrowers to break their holding pattern and finally lock in a higher rate.
Homeowners jumped off the fence nationwide, according to the Mortgage Bankers Association, which reported that refinance applications fell just 0.7 percent last week, despite the rise in mortgage rates.
"If you have a chance to lock now, lock," Ogilvie says. "The chances are, at this point, much better that rates will rise slightly in the near future."
Mortgage interest rates rose sharply again this week, touching the 5 percent threshold and presenting more bad news for borrowers.
The benchmark 30-year fixed-rate mortgage rose 11 basis points this week, to 5 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.4 discount and origination points. One year ago, the mortgage index was 5.13 percent; four weeks ago, it was 4.62 percent.
The benchmark 15-year fixed-rate mortgage rose 11 basis points, to 4.37 percent. The benchmark 5/1 adjustable-rate mortgage rose 10 basis points, to 3.95 percent.
Weekly national mortgage survey
*Results of Bankrate.com's Dec. 15, 2010 weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
---------------------------------------------------
30-year fixed 15-year fixed 5-year ARM
This week's rate: 5.00% 4.37% 3.95%
Change from last week: +0.11 +0.11 +0.1
Monthly payment: $885.76 $1,251.30 $782.99
Change from last week: +$11.06 +$9.21 +$9.46
-----------------------------------------------------
This is the highest rate for the 30-year fixed in seven months. On May 12, the 30-year fixed stood at 5.07 percent in Bankrate.com's weekly survey. After that, it fell below 5 percent and stayed there -- until this week. Just six weeks ago, the benchmark 30-year rate was 4.42 percent -- a record low in the 25-year history of the weekly rate survey.
The steep and sudden jump was triggered by signs of an improving U.S. economy, says Peter Ogilvie, president of First Residential Mortgage Corp. in Santa Cruz, Calif.
"We've been getting positive or slightly positive reports that suggest positive movements in the economy, and that will send rates up," he says.
That relationship may seem counterintuitive, but a stronger economy draws investment funds into equities and away from the bond market. Lower demand for bonds means lower prices and, inversely, higher yields -- and interest rates follow the movement of bond yields.
When the dust settled, borrowers faced mortgage rates at least three-eighths to one-half of a percentage point higher than those they may have been quoted last month, Ogilvie says. A rate that's half a point higher on a $200,000 loan adds about $60 to the monthly payment. Bankrate.com's mortgage calculator lets you see what happens to monthly payments when rates change.
Here's a summary of what happened:
•The Federal Reserve held its target federal funds rate unchanged at zero to 0.25 percent Tuesday, but noted in its statement that the "economic recovery is continuing," "consumer spending is increasing at a moderate pace," and "business spending on equipment and software is rising."
•The Fed said it plans to continue buying U.S. Treasuries, a move that has triggered fears of future inflation.
The Fed's words, as well as its actions, have a "significant impact on the market and mortgage rates as bond investors look for any indication of what the Fed's going to do next," says Joe Metzler, a mortgage specialist at Mortgages Unlimited in West St. Paul, Minn.
•President Barack Obama and Congress struck a deal to extend federal income tax breaks for virtually all taxpayers, reduce the payroll tax through 2011, reinstate a smaller estate tax and ease some federal business tax rules. These changes -- and an end to the long uncertainty -- are expected to spur additional spending.
•Retail sales rose 0.8 percent in November, the fifth consecutive monthly increase and better than private-sector expectations of 0.5 percent growth, according to the U.S. Department of Commerce.
•European nations have made strides in the eurozone's debt crisis, a development that prompted investors to leave the security of U.S. Treasuries, causing bond yields and mortgage rates to rise, according to a statement from Freddie Mac.
Metzler says borrowers should focus on current rates and actually take the advice they're offered by experienced mortgage professionals. Both Ogilvie and Metzler report that the rate jump prompted some borrowers to break their holding pattern and finally lock in a higher rate.
Homeowners jumped off the fence nationwide, according to the Mortgage Bankers Association, which reported that refinance applications fell just 0.7 percent last week, despite the rise in mortgage rates.
"If you have a chance to lock now, lock," Ogilvie says. "The chances are, at this point, much better that rates will rise slightly in the near future."
Housing bust? So what? We still want to own
Housing bust? So what? We still want to own
The American Dream is still alive and kicking, including within immigrant and minority communities, according to a survey from mortgage giant Fannie Mae.
The housing crisis hasn't quenched the homeownership thirst, the company found. More than 51% of people said the bust did not change their willingness to buy a home and an additional 27% said it actually made them more likely to do so.
"The crisis has not put a dent in the desire to own," said Doug Duncan, Fannie's chief economist, "although it may have changed the reasons that people want to own."
The report, the first close analysis Fannie has taken of consumer attitudes about the rent-or-own decision, found that qualitative reasons -- like having the ability to remodel or to send the kids to a better school -- have overtaken financial considerations as the primary motivators for homeownership.
Some misperceptions about financial benefits may help to keep it high.
"People's attitudes don't always line up with empirical facts," said Duncan.
For example, although trillions of dollars of equity were wiped out by the housing bust and millions of people will lose homes to foreclosure, nearly two-thirds of people surveyed still believe purchasing a house is a safe investment. That could be viewed as a major disconnect.
Buying a home now is a no-brainer:
Also, more than half the public thought buying a home was a good idea financially even if they plan to move out in less than three years. That's actually rarely true because transactional costs like real estate commissions, title insurance costs and mortgage fees take a big cut off the top of selling and purchase prices.
Furthermore, a huge majority, 86% of those surveyed, cite income-tax benefits -- mostly the mortgage interest deduction -- as a big reason to buy. That benefit, however, is very small for most homeowners or even nonexistent.
"Lower-income homeowners, for example, don't itemize," said Duncan, "so there is no tax benefit for them at all."
Broad homeownership hopes:
Fannie found that no matter what their ethnicity or immigration status, Americans generally share similar positive attitudes toward homeownership, even though there are substantial differences among these groups in homeownership rates.
It seems that economic opportunities, not attitudes, account for much of the variation.
Only 44% of African Americans own homes, for instance, compared with 71% of whites, but that disparity starts to vanish among families in stronger financial circumstances. African Americans' homeownership rises to 60% for those earning between $50,000 and $99,000, for example.
The survey findings have implications for Fannie's business model. Non-Hispanic whites are projected to account for just 46% of the population by 2050. Immigration will account for most of the population growth between now and then.
And since, as the report stated, "strong homeownership aspirations exist across races, ethnicities and immigrant groups," Fannie can count on future demand for owner-occupied homes remaining strong, as long as the economy cooperates.
The American Dream is still alive and kicking, including within immigrant and minority communities, according to a survey from mortgage giant Fannie Mae.
The housing crisis hasn't quenched the homeownership thirst, the company found. More than 51% of people said the bust did not change their willingness to buy a home and an additional 27% said it actually made them more likely to do so.
"The crisis has not put a dent in the desire to own," said Doug Duncan, Fannie's chief economist, "although it may have changed the reasons that people want to own."
The report, the first close analysis Fannie has taken of consumer attitudes about the rent-or-own decision, found that qualitative reasons -- like having the ability to remodel or to send the kids to a better school -- have overtaken financial considerations as the primary motivators for homeownership.
Some misperceptions about financial benefits may help to keep it high.
"People's attitudes don't always line up with empirical facts," said Duncan.
For example, although trillions of dollars of equity were wiped out by the housing bust and millions of people will lose homes to foreclosure, nearly two-thirds of people surveyed still believe purchasing a house is a safe investment. That could be viewed as a major disconnect.
Buying a home now is a no-brainer:
Also, more than half the public thought buying a home was a good idea financially even if they plan to move out in less than three years. That's actually rarely true because transactional costs like real estate commissions, title insurance costs and mortgage fees take a big cut off the top of selling and purchase prices.
Furthermore, a huge majority, 86% of those surveyed, cite income-tax benefits -- mostly the mortgage interest deduction -- as a big reason to buy. That benefit, however, is very small for most homeowners or even nonexistent.
"Lower-income homeowners, for example, don't itemize," said Duncan, "so there is no tax benefit for them at all."
Broad homeownership hopes:
Fannie found that no matter what their ethnicity or immigration status, Americans generally share similar positive attitudes toward homeownership, even though there are substantial differences among these groups in homeownership rates.
It seems that economic opportunities, not attitudes, account for much of the variation.
Only 44% of African Americans own homes, for instance, compared with 71% of whites, but that disparity starts to vanish among families in stronger financial circumstances. African Americans' homeownership rises to 60% for those earning between $50,000 and $99,000, for example.
The survey findings have implications for Fannie's business model. Non-Hispanic whites are projected to account for just 46% of the population by 2050. Immigration will account for most of the population growth between now and then.
And since, as the report stated, "strong homeownership aspirations exist across races, ethnicities and immigrant groups," Fannie can count on future demand for owner-occupied homes remaining strong, as long as the economy cooperates.
Subscribe to:
Posts (Atom)