Freddie Mac

The Week Ahead for Mortgage Rates: January 17, 2012

Mortgage markets gained last week, picking up momentum into the weekend. Global demand for mortgage-backed bonds helped push mortgage rates to new lows, and closing costs eased somewhat, too.

According to Freddie Mac’s weekly mortgage rate survey, the average 30-year fixed rate mortgage rate fell to 3.89% nationwide. In order to get access to 3.89% mortgage rates, Freddie Mac said, mortgage applicants should expect to pay a full set of closing costs plus 0.7 discount points.

1 discount point is equal to 1 percent of your loan size.

Loans with “low closing costs” or “no closing costs” will be at higher rates than Freddie Mac’s published, average rate.

The biggest reason why mortgage rates fell last week is because — once more — concerns over European sovereign debt resurfaced on Wall Street. This has been an ongoing story for more than a year, and one that won’t likely end soon.

Several Eurozone nations saw their respective credit ratings downgraded last week, a move that sparked safe haven buying of U.S. mortgage bonds. France was stripped of its top credit rating. Slovakia, Italy and Austria were each downgraded, too.

Markets were also influenced by a conflict between Greece’s creditor banks and the nation-state’s government. The breakdown in talks increases the likelihood of the Eurozone’s first sovereign default.

Meanwhile, domestically, in-line Retail Sales figures and rising consumer confidence helped to prop up the U.S. dollar, a move that’s linked to lower mortgage rates.

This week, the markets were closed for the federal holiday Monday, and re-open Tuesday without much data on which to trade. Several inflationary reports are set for release including the Producer Price Index and the Consumer Price Index; and, in housing-related data, we’ll see the Housing Starts report and Existing Home Sales figures for December.

Expect mortgage rates to follow the Eurozone story this week. Pessimism and weak data will be good for mortgage rates in Indiana and nationwide. Strength will lead mortgage rates higher.

If you’re still floating a mortgage rate or have otherwise yet to lock, mortgage rates are lower than they’ve been in history. It’s an ideal time to make an interest rate commitment.

The economic calendar this week has the following key economic and financial reports.

This is The Week Ahead for Mortgage Rates: January 17, 2012.

Quick general rule of thumb when keeping an eye on mortgage rates.

Strong Economic News: $$$ from Bonds —> Stocks = Home Loan Rates Worsen

Weak Economic News: $$$ from Stocks —> Bonds = Home Loan Rates Improve

If you or someone you know is thinking about buying a home, the combination of low home loan rates and affordable home prices make this an ideal time to buy a home. Want to know if you can afford a new home? Call or text me at 512-522-7284 to discuss your personal situation and your home loan options!

Freddie Mac

Adjustable-Rate Mortgages Are A Relative Bargain Today

For home buyers and refinancing households throughout Indiana, adjustable-rate mortgages are a relative bargain as compared to fixed-ones.

According to Freddie Mac’s weekly survey of more than 125 banks nationwide, Illinois mortgage applicants electing for a conventional ARM over a conventional fixed-rate mortgage will save 105 basis points on their next mortgage rate.

“Conventional” loans are loans backed by Fannie Mae or Freddie Mac.

Today’s average, conventional 30-year fixed rate mortgage rate is 3.91% plus points and closing costs. The average rate for a comparable 5-year ARM is 2.86%, plus points and closing costs.

In other words, for every $100,000 borrowed, a conventional 5-year adjustable-rate mortgage will save you $58.15 per month, or $698 per year.

That’s a 12 percent savings just for choosing an ARM.

12 percent is a big figure that adds up over 5 years — especially for households that plan to sell within those first 60 months anyway. There is little sense in paying the mortgage rate premium for a 30-year fixed-rate mortgage when a 5-year ARM is perfectly suitable.

For the reason why adjustable-rate mortgages continue are so much lower than their fixed-rate counterparts, look no further than the U.S. economy. ARMs reflect Wall Street’s short-term economic expectations; whereas fixed-rate mortgages reflect medium- to long-term expectations.

In the short-term, analysts expect the U.S. economy to grow slowly, with low levels of inflation. This supports the U.S. dollar, the currency in which mortgage bonds are denominated. When the dollar is strong, demand for mortgage bonds tends to increase.

This supports lower interest rates.

Conversely, over the longer-term, inflation is expected to return, which devalues the dollar and everything paid in it (e.g.; mortgage-backed bonds). This is why inflation is linked to higher mortgage rates. When inflation is present in the economy, mortgage bonds lose value, driving mortgage rates up.

Adjustable-rate mortgages aren’t perfect for everyone, but in the right situation, they can be a big money-saver and a helpful tool for stretching a household budget. Given today’s rates, the money-saving potential is larger than usual.

Before you choose an ARM, discuss your options with a qualified loan officer.

Freddie Mac

The Week Ahead for Mortgage Rates: January 3, 2012

Mortgage markets improved last week during a holiday-shortened trading week. The mortgage bond markets were closed Monday for Christmas, and closed early Friday afternoon. Trading volume was light all week long, which contributed to a year-end rally.

Mortgage bonds made their largest one-week gain in two months as conforming mortgage rates in Illinois, Indiana and nationwide fell to new lows.

Because most of the improvements transpired Wednesday and Thursday, Freddie Mac’s weekly mortgage rate survey failed to capture the action. The survey’s poll of more than 125 banks across the country “closes” Tuesday.

As a result, Freddie Mac reported mortgage rates rising to 3.95% with an accompanying 0.7 discount points plus closing costs, where 1 discount point equals one percent of your borrowed amount. However, those rates represented the high point for the week.

By Friday, conforming loans “with points” were noticeably lower as compared to Freddie Mac’s weekly survey. Loans without discount points were little changed, however. 

The same was true for FHA mortgages.

This week, though, the calendar reads 2012. Unfortunately, we’re still watching the stories that drove mortgage rates for much of 2011 — the Eurozone and its members’ debt obligations, and the U.S. jobs market.

As the year concluded, there were fresh fears of trouble in Italy, which has large amounts of debt due in the early part of the year. There were also stern warnings from Eurozone leaders that a difficult 2012 may be ahead. 

Events like these are often good for U.S. mortgage rates.

And, this week, the government releases its December Non-Farm Payrolls report. The report moves markets — especially when the actual number of jobs created deviates from consensus estimates.

Economists expect that 150,000 net new jobs were created in December.

Momentum may draw rates lower this, or mortgage rates may begin to rise instead. The direction depends on the outlook for 2012, both domestic and international. The safe play is to lock a mortgage rate now.

Rates have more room to rise than to fall.

The economic calendar this week has the following key economic and financial reports.

This is The Week Ahead for Mortgage Rates: January 3, 2012.

Quick general rule of thumb when keeping an eye on mortgage rates.

Strong Economic News: $$$ from Bonds —> Stocks = Home Loan Rates Worsen

Weak Economic News: $$$ from Stocks —> Bonds = Home Loan Rates Improve

If you or someone you know is thinking about buying a home, the combination of low home loan rates and affordable home prices make this an ideal time to buy a home. Want to know if you can afford a new home? Call or text me at 512-522-7284 to discuss your personal situation and your home loan options!

Freddie Mac

Higher Home Loan Fees from Fannie Mae and Freddie Mac

Do you have less than 25 percent as a down payment for your next home purchase in Northwest Indiana?

Do you need a home loan term longer than fifteen years?

Is your FICO credit score less than exceptional?

If you answered yes to these questions, you will soon be paying even more to get a home loan for purchase or refinance.

Fannie Mae and Freddie Mac are raising credit risk fees that are charged to lenders for the first time since 2009. These increases will affect a vast majority of home loans sold to Fannie Mae (since April1, 2011) and Freddie Mac (beginning March 1, 2011).

Here is an example of the impact of the higher home loan fees from Fannie Mae and Freddie Mac.

Say you are purchasing a nice home in Valparaiso Indiana for $250,000. You have a 20 percent down payment. Your FICO credit score is 720. Your credit risk fee will now be $1,000. If your FICO credit score is 680, the credit risk fee will now be $3,500.

If you want to find out what these fees could mean to your home buying situation, contact us today. Home loan rates are still at historically low levels and if you are looking to purchase a home or refinance your existing home, now is the perfect time to plan accordingly.

Freddie Mac

Top Real Estate and Mortgage Headlines for April 2nd

In case you didn’t hear the news, the unemployment rate has fallen to 2-year lows. Why is this important to real estate?

People who are not employed can not buy homes. As lending guidelines have tightened over the past 2 years, even a temporary layoff could derail a home purchase.

While we collectively wait for more jobs, let’s take a minute to review what the top real estate and mortgage headlines are today according to the National Association of Realtors.

• Bargain-Seeking Home Buyers on the Hunt
  The spring selling season is heating up as investors make more cash buys, foreign buyers increase, and other buyers look to snag a good deal.
• Mortgage Rates Continue to Inch Up
  For the second straight week, mortgage rates were on the rise, reports Freddie Mac.
• GOP Senators Join Efforts to End Fannie, Freddie
  More lawmakers are jumping in to chip away at the housing giants as the government continues to seek ways to shrink it’s role in the mortgage market.
• Watch for Red Flags That May Get You Audited
  The number of tax audits is increasing. Find out what may put your tax return at risk of being audited.
• You Can’t Bribe Your Way to Lower Property Taxes
  An Orlando man was arrested Wednesday on charges that he tried to bribe an appraiser to lower his home’s tax assessment.
• Home Owners See Big Value in Remodeling
  Nearly 40 percent of home owners say that a major home improvement is the best long-term investment you can make, according to new research by Mintel.

These are the top real estate and mortgage headlines for Saturday, April 2, 2011.

Want to know how these national real estate headlines could impact you right here locally in Northwest Indiana? Subscribe to this blog, Today’s Real Estate Reality, and let our collective years of real estate experience in Northwest Indiana guide you to an informed and successful real estate transaction today.

Freddie Mac

Like It Or Not “Cash-In” Refinancing Is All The Rage

If you own a home and/or know someone who owns a home, you have most likely heard of a cash-out refinance. During the economic and housing boom in the early part of the decade, cash-out refinances were all the rage and fueled consumer spending.

Fast forward to the present and check out these recent news headlines.

• “Cash-In Refinancing Rise in Second Quarter: Tied for Third Highest Cash-In Share on Record” – Freddie Mac, July 28, 2010
• “US Borrowers Pay Down Mortgages” – Financial Times, July 28, 2010
• “More Borrowers Are Paying Down Their Mortgages: Freddie Mac” – DSNews.com, July 29, 2010
• “Cash-In Refinancing Nears Record High in Q210: Freddie Mac” – HousingWire.com, July 28, 2010

So what exactly is a ”cash-in” refinance? A “cash-in” refinance is when a borrower brings cash to closing to get the home loan they desire. Yes you heard that correct. A borrower would bring their own money to pay to get the loan they desire.

Frank Nothaft, Freddie Mac’s vice president and chief economist, gives the following statement as to the rationale behind a “cash-in” refinance.

“Interest rates on fixed-rate mortgages are at 50-year lows, making refinancing attractive if borrowers qualify, and similarly rates on savings instruments like CDs are also very low, which makes the choice of paying down mortgage principal very attractive to borrowers with extra cash reserves.”

“If you pay down your mortgage balance you save the interest you would pay on the loan, about 4.6 percent at today’s rates, over the life of the loan versus earning a percentage point or less in CDs and money markets and without the riskiness of stock market investments, which have not performed well in the past couple of years either.”

It seems to make sense unless you read the details of the Freddie Mac 2nd Quarter Cash-Out Refinance Analysis. The report actually states the following as the main causes in the decline of cash-out refinancing:

1. Reduced Home Prices
2. Tighter Underwriting Standards for Loan-To-Value Ratios
3. Negative Appreciation Rates – Declining Home Values

Freddie Mac was quick to declare that “22 percent of homeowners who refinanced their first-lien home mortgage lowered their principal balance by paying-in additional money at the closing table”.

“Cash-In” refinancing is all the rage, not because homeowners want to, but because they have to.

Freddie Mac

Surprise! Freddie Mac Says Cost of Home Loans Are Rising

Mortgage rates may be dropping, but mortgage costs are not.

According to Freddie Mac, the average required discount points on a conforming mortgage rate are higher by 0.1 percent since early-May.

A “discount point” is prepaid mortgage interest; an up-front fee paid by a borrower in exchange for a lower mortgage rate. In most cases, discount points are tax-deductible.

Tax-deductible or not, though, rising costs are rising costs and Freddie Mac glosses over it.  In its weekly press release, the government group offers mortgage rate comparisons to weeks prior, but doesn’t do the same for required points.

The press fails to mention discount points entirely.

An increase of 1/10 percent in discount points costs homebuyers and refinancing households in Schererville Indiana an extra $100 per $100,000 borrowed.

The hike reminds us that there’s more to a mortgage than just its rate — costs matter, too.  And if you’ve only been watching the headlines, you would have missed how costs are rising.

Freddie Mac

Sure, Mortgage Rates Are Lower, But Mandatory Fees Are Not

With respect to mortgage rates, you can’t always believe what you read in the papers. Or what you see.

A terrific example is the chart at right.

Published by Freddie Mac, it shows the 30-year fixed mortgage’s “going rate” as reported by the nation’s mortgage lenders. On December 30, 2008, that rate was 5.1 percent.

But 5.1 percent is only half of the relevant information. There’s a mandated fee schedule that accompanies the Freddie Mac-reported rate survey.

Currently, the published fee required to get a 5.1 percent mortgage rates is 0.7% of the borrowed amount, or $700 per $100,000 borrowed. This fee is more commonly known as “points” and versus last year, it’s nearly doubled from 0.4 points.

So, yes, conforming mortgage rates are low and they have fallen near all-time lows but there’s more to the story than just the interest rate — there are the fees that go with them, too.

Mortgage rates and loan fees often move in opposite directions so to get lower rates, consider paying additional points. Conversely, to face fewer fees, accept a higher rate. It’s a trade-off and your loan officer can help you best understand the choices.

(Image courtesy: The Wall Street Journal)