(MCT)—Good credit is important, especially when you’re looking to buy a house. Mortgage lenders have to know whether you’re able to repay the debt, and have to determine through your credit history if you’re willing to pay, as well.
They use credit scores to determine, statistically, how much of a loan you can afford, whether to approve it, and the interest rate. The scores are obtained from the three major credit bureaus: Equifax, Experian, and Trans Union.
The most common credit score issued is the FICO, named for Fair Isaac Co., which developed the mathematical formula. Rankings are from 300 to 950: The higher the number, the lower the loan-default risk.
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Federal Housing Finance Agency (FHFA) recently reported that the National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders, used as an index in some ARM contracts, was 4.08 percent based on loans closed in February.
Beginning this month, FHFA is calculating interest rates using un-weighted survey data. For January, a comparable rate based on unweighted data would have been 4.18 percent. Thus, there was a decrease of 0.10 percent from the previous month’s corresponding un-weighted rate. The average interest rate on conventional, 30-year, fixed-rate mortgage loans of $417,000 or less decreased 5 basis points to 4.36 percent from January’s figure based on unweighted data.
These rates are calculated from the FHFA’s Monthly Interest Rate Survey of purchase-money mortgages. These results reflect loans closed during the February 23-29 period. Typically, the interest rate is determined 30 to 45 days before the loan is closed. Thus, the reported rates depict market conditions prevailing in mid- to late-January.
The contract rate on the composite of all mortgage loans (fixed- and adjustable-rate) was 4.05 percent in February, down 9 basis points from 4.14 percent, based on un-weighted data, in January. The effective interest rate, which reflects the amortization of initial fees and charges, was 4.17 percent in February, down 10 basis points from 4.27 percent, based on un-weighted data, in January. This report contains no data on adjustable-rate mortgages due to insufficient sample size.
Initial fees and charges were 0.93 percent of the loan balance in February, up 0.04 percent from 0.89, based on un-weighted data, in January. Thirty-one percent of the purchase money mortgage loans originated in February were “no-point” mortgages, down three percent from the un-weighted share in January. The average term was 28.8 years in February, up 0.1 years from an un-weighted 28.7 years in January. The average loan-to-price ratio in February was 75.3 percent, down 0.4 percent from 75.7 percent, un-weighted, in January. The average loan amount was $244,300 in February, up $7,300 from an unweighted $237,000 in January.
For more information, visit http://www.fhfa.gov Print This Post
by Dean Hartman on February 16, 2012
1.) The hike in the Guarantee Fees charged by the GSEs Fannie Mae and Freddie Mac.
The 10 basis point increase in the fees has translated to a .375% to .5% increase in mortgage rates for conventional loans. Many customers who started their loans a couple of months ago are being “surprised” with higher than expected rates. Heck, everything you read in the papers says rates are at historic lows and will likely stay there through 2014. Many consumers feel as if their lender is being unscrupulous. However, your lender has fallen victim to the increase in Guarantee Fees and how the secondary market is passing on the cost. What looks like possible lender greed is just a passing on of the increased expense imposed by the government. Sadly, the increased revenue isn’t even being used to help aid an ailing Fannie Mae or Freddie Mac. It is being turned over to the US Treasury to cover the temporary extension of the payroll tax cut.
2.) Permission for HUD to increase the insurance premiums they charge on FHA loans.
If you remember, HUD charges two insurance premiums – a monthly one and an up-front one that is usually added into the loan. Most recently, they reduced the up-front mortgage insurance premium (UFMIP) and dramatically raised the monthly fee (MMIP). It is widely anticipated that, maybe as soon as April, we will see a hike in the UFMIP with no adjustment to the MMIP. While this will help shore up the reserves in the insurance fund, it will simultaneously make buying a home more expensive. No one knows the effective date or amount of the increase. Buyers should look to buy before the increase in fees.
We always hear how our government officials tuck away things in their bills. In this case, while the headlines during the holidays praised Washington for preserving the payroll tax cut, they may have hurt us more in the long run. Print This Post
RISMEDIA, August 11, 2011—Mortgage rates continued to move lower as investor concerns over the health of the U.S. economy increased, reports mortgage rate research website, ForTheBestRate.com. Interest rates advertised on the site have dropped to near their lowest point of 2011 for most products, with the 15 year fixed reaching historical record lows. On August 4, 15 year mortgage rates as low as 3.250% were posted (APR: 3.387%, Lender: Gateway Bank Mortgage).
Mortgage pricing has edged lower while US and global stock markets are seeing losses, including a drop in the Dow of more than 500 points on Thursday, August 4, the largest single day loss since December of 2008.
The downward trend of mortgage rates was confirmed in the weekly survey from Freddie Mac, a government sponsored enterprise that purchases residential mortgage loans in the secondary market. The data released August 4 showed a decrease in the average 30 year fixed rate pricing to 4.39% (0.8% points) from 4.55% (0.8% points) from the previous week. 15 year fixed rates fell to a new historical low, an average of 3.54% (0.7% points), after averaging 3.66% (0.7% points) the week before.
5 year adjustable rate loans also moved lower to an average of 3.18% (0.6 points), down from 3.25% (0.6% points) the week of July 28.
“While we’d love to see more positive economic news coming from other sectors, right now there is a huge opportunity for homeowners,” comments Shaun Hamman of American Financial Resources, a National mortgage lender offering a range of products including home improvement loans and debt consolidation mortgages. “Buying a home or refinancing a higher rate mortgage at these incredibly low rates can allow one to make a significant positive impact on their long term net worth,” he adds.
For more information, visit http://www.ForTheBestRate.com. Print This Post
by Dean Hartman on June 9, 2011
As people go through the mortgage process today, I believe that they wonder if their lender has gone insane. Lenders ask for documentation repeatedly, constantly updating, asking for further clarification and explanation for everything. Income, credit, assets and appraisals are scrutinized at a level unseen in my 25+ years. It almost seems like they are trying to find reasons NOT to lend.
But, I assure you, that is not the case. The only way lenders can stay in business is to lend money. It is what funds the operation and pays for salaries, rent and paper clips. Lending is what creates the value of the company. No closings, no revenue, no company.
So why the perception of over-documentation and over analysis when we know the lenders have to make loans? This is the reality of a post-subprime world. Lenders got too liberal and under-documented files and forgot the primary role of underwriting (judging a borrower’s ABILITY and WILLINGNESS to repay the loan) as they approved files. And now, the pendulum has swung back to a very conservative stance. Common sense seems to have been replaced by a “Cover Your Butt Mentality”.
No one is immune. Appraisers error on the side of lower valuations and heightened criticism of a home’s condition. Underwriters labor over pay stubs, tax returns, bank statements and credit information. Closing agents meticulously examine title and closing documents. Each of them has learned that their mistakes, miscalculations, or errors in judgment (no matter how minor) can result in a loss of their job, a bad loan, and/or monetary damages to their companies.
So, today I just wanted to counsel home buyers. Your lender WANTS to make your loan. However, understand that they have been burned by borrowers, burned by their bad judgment, burned by moronic industry trends of the past. Lenders are going to be a little gun shy. If you can prove that you are willing and able to repay the loan, lenders have lots of money available at incredible (once-in-a-lifetime) rates. When you think your lender is asking for too much, know it’s because they want to say “yes” AND know that their decision is both a good and defendable one. Print This Post
by The KCM Crew on April 12, 2011
As Dean Hartman said last week, the purchase of a home is a personal decision. However, we want to give everyone four great financial reasons why you should not wait before taking the plunge into homeownership.
Interest Rates Are Increasing
Interest rates have increased almost 3/4 of a point in the last six months. Most experts expect rates to continue to increase through the year. Interest rates along with price determine the overall cost of a home. Even with prices softening, if interest rates rise, it may be less expensive to buy now rather than wait.
The 30-Year Mortgage May Disappear
There has been much debate regarding government’s role in providing support for homeownership. There are several experts who believe If Fannie Mae and Freddie Mac’s roles are eliminated, or even limited, it may be the end to the 30-year mortgage. This concern is addressed in MSN Real Estate’s Is it curtains for the 30-year mortgage? (More …) Print This Post
RISMEDIA, March 31, 2011—The Federal Housing Finance Agency has reported that the National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders, used as an index in some ARM contracts, was 4.79 percent based on loans closed in February. This is an increase of 0.08 percent from the previous month. This Contract Rate series can be found at http://www.fhfa.gov/Default.aspx?Page=251.
The average interest rate on conventional, 30-year fixed-rate mortgage loans of $417,000 or less increased 12 basis points to 4.97 percent in February. These rates are calculated from the FHFA’s Monthly Interest Rate Survey of purchase-money mortgages (see technical note). These results reflect loans closed during the Feb. 22-28 period. Typically, the interest rate is determined 30 to 45 days before the loan is closed. Thus, the reported rates depict market conditions prevailing in mid- to late-January. (More …) Print This Post
by The KCM Crew on March 2, 2011
We often point out that a buyer should be more concerned about the COST of a home rather than the PRICE. Price obviously is a component of cost. However, unless you buy all-cash, you must also be concerned about the financing of the purchase. The price and the financing together determine the cost of a home. Today, we want to look at only the financing piece.
An opportunity exists today because of recent government involvement; an opportunity that may never again be available in our lifetimes. There has been much discussion about what role the federal government should have in supporting homeownership. We will leave our opinions on the debate for another time. However, we want to alert you to two advantages available to a purchaser today that may disappear in the future:
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- Historically low interest rates
- The ability to lock in these rates for thirty years (More …)
by The KCM Crew on February 11, 2011
Many purchasers have been sitting on the sidelines waiting for home prices to hit bottom. They want to guarantee that they are purchasing at the best possible price. Like them, we also believe that prices still have some room to fall in most markets. However, we disagree that waiting is a good financial decision. The buyer should not be concerned about housing prices. They should be concerned about cost.
The National Association of Realtors (NAR) released their 4th quarter housing research report. In the release, they reported that home sales rose 15.4% in the 4th quarter over the 3rd quarter. They also showed that prices remained stable during the year: (More …) Print This Post
by Dean Hartman on January 27, 2011
Predicting what will happen with interest rates is risky for a person’s credibility. Last year at this time, I (and the KCM Crew) believed rates would climb after June and for very logical reasons: the end of the Fed’s purchase of mortgage-backed-securities (MBS) and the end of the Tax Credit. What we didn’t anticipate was the collapse of the Greek economy.
That being said, I firmly believe that my opinion on the topic has some value. So, here’s my opinion (which assumes the governments of Ireland, Spain and Portugal stay solvent and no other major geo-political event occurs- like a war or terrorist activity).
The Fed and the federal government have publically stated their desire to get the American Economy back on track. Their goals:
- Creating Jobs. They want to put Americans to work.
- Improving Production in the corporate and manufacturing sectors (which will create jobs and profits)
- Ratcheting Up Inflation in order to get prices moving upwards (really as a prevention of deflation) (More …)