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Mortgage Rates

16-Dec-08

 A lot has happened since my last post and currently interest rates are near or at all-time lows.

As it has for the last year, the mortgage market continues to generate a lot of chatter in both the media and in Washington.  First there has been talk about the 4.5% 30 year fixed rate mortgage.  Will it become a reality though?  Right now, no one really knows.  Homeowners who could benefit from a lower interest rate need to know that even if 4.5% becomes a reality from Washington’s actions, it would only be available to home buyers, not homeowners seeking to better their rate.  If you need to refinance, you could be left out.  You also may have heard about Hope for Homeowners, which is a program approved by legislators to help distressed homeowners.  However, regardless of its best intentions, the program has not been embraced by investors, and it is not available to many it could help.

In my opinion we may already be at the lows for mortgage interest rate.  The Fed announcement that they are going to buy up to $600 billion in mortgage-backed securities has help to drive rates to historical lows.  And in January, the SEC is meeting and they may lighten the Mark to Market accounting guidlines put in place by FASB 157.  This could have a significant bearing on rates, potentially for the worse as it could benefit the stock market. 

An announcement like that from the SEC, or anyone in Washington for that matter, could cause a swift move in rates.  Thus allowing only those with loan applications already in process the best rates.  Interest rates are incredibly volatile and fluctuations that used to take months are now occurring in just days or even hours.  If you don’t have an application in process, you could lose out.  Now is the time to get with your mortgage professional.

To learn more about me, go to www.leemclain.com.

Thanks and have a great day.

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Mortgage Rates Plunge

28-Nov-08

On Tuesday morning the Federal Reserve and Federal Home Loan Banks announced that they would purchase up to $600 billion in Mortgage-Backed Securities (MBS).  The exciting part of this announcement, is that it sent mortgage interest rates down to near the lows for the year.  With the bond market now closed for the week, three trading days later, mortgage rates at still at these low levels. 

If you follow me on @dailyrate on Twitter, you have seen that mortgage rates have now in the 5.5% range on a 30 year fixed loan.  Dropping almost half a percent from Monday to Tuesday after the announcement.

The question now though is how long will the rates stay down and will they go lower?  With the economy in the shape it is in, inflation giving way to fears of deflation, and the spread between MBS and the Treasuries; rates have room to drop or at least stay at these levels.  On the other side of coin though is history.  And for the last three trading days we have hit the high closing price (price and yield (rate) have an inverted relationship, as the price of the bond goes up the rate goes down) for the year and have been stopped.  If we can’t break through this level, then this may be as good as it is going to get.  Also if Black Friday turns profitable for retailers and the Holiday shopping season goes better than expected, the retail stocks could improve and pull money out of bonds and into stocks.  This would put upward pressure on mortgage rates. 

My point is if you are in the market to buy a home or refinance, don’t wait.  Get with your mortgage professional and starting getting advice and pre-approved.  That way when you feel the time is right you are ready to go.  Rates have already been very volatile and this opportunity might not last long.  If you don’t have a loan officer, let me offer you some pointers to help you negotiate this process.

To learn more about me, go to www.leemclain.com.  Thanks and have a great day.

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Does the Fed rate cut help mortgage rates?

29-Oct-08

Today the Fed cut both the Fed Funds Rate and the Discount Rate by .50%.  Does this mean that we are going to see mortgage rates drop by a half a percent?

First let me define the Rates that were cut today.  The Federal Funds Rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.  The Discount Rate is the interest rate charged to commercial banks and other depository intitutions on loans they receive from their regional Federal Reserve Bank’s lending facility–the discount window.  Also both of these are generally overnight rates, very short term lending.

When the Fed lowers the Fed Funds rate, it cause the Prime Rate to drop.  The Prime Rate is generally defined as 3 percentage points above Fed Funds.  So for consumers who have a home equity line of credit (HELOC) that floats with prime, their rate should go down by .50% today.   

But for long term fixed mortgage rates it is a different story.  The rates for these products come from the trading of mortgage bonds, also known as mortgage backed securities.  Since these are long term securities, inflation effects their value.  What the Fed did today, historically is seen as inflationary and can weaken the Dollar.  Inflation eats away value of the investment and investors will require a higher rate of return.  That translates to higher mortgage rates for you and me.  And true to history, in the afternoon the bond market sold off and I have started receiving notices of lenders raising mortgage rates.

My long term view for this market is that rates should come back down, once order and trust are re-established in the markets.  And even though I mentioned inflation above, I bought gas today for $1.99 a gallon!!!  I don’t think inflation, even with this rate cut, is currently a problem.

To learn more about me, visit www.leemclain.com.

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First-Time Homebuyer Tax Credit

28-Oct-08

One of the most exciting new provisions of the Housing and Economic Recovery Act of 2008 is the First-Time Homebuyer Tax Credit.  If you have not heard of this or not familiar with details, here you go.  The credit is designed to encourage first-time homebuyers to go ahead and make the leap to purchase their first homes.  Combine this tax credit with the fact that home prices are at historical lows, it is an ideal time for many first-time homebuyers to purchase their new home. 

Here are some things to keep in mind:

  • The credit is available for homes purchased between April 9, 2008 and July 1, 2009
  • The credit amounts to 10% of the purchase price of the home not to exceed $7,500
  • A first-time homebuyer is defined as someone who has not owned a home in the last three years
  • Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit
  • The tax credit works like an interest free loan and must be repaid over a 15 year period

How does a tax credit work?  A tax credit is a special provision that reduces income tax liability on a dollar for dollar basis.  When filing a tax return, you must include income items, deduction items and the number of exemptions, among other things to figure your total tax liability.  If your total tax liability ends up being $7,500 and you qualify for the full $7,500 tax credit, this credit would be applied and would wipe out all of the tax due.  If your employer had already deducted the $7,500 from your pay checks throughout the year, you would receive a tax refund of $7,500.

Does the credit have to be repaid?  Yes, the credit does have to be repaid, so it is really more like an interest free loan.  Homebuyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the homes, if there is sufficient capital gain from the sale.  For example, a homebuyer claiming a $7,500 credit would repay the credit at $500 per year.  The home owner does not have to begin making repayments on the credit until two years after the credit is claimed.  So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed.  If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale.  If there was insufficient profit, then the remaining credit payback would be forgiven.  As always, check with your tax professional when filing your taxes to verify how the IRS interprets this law.

For more information about the first-time homebuyer tax credit or other changes resulting from the Housing and Economic Recovery Act of 2008, please contact me.  I would be happy to assist you with your mortgage in the purchase of your new home.  I would like to thank the CMPS® Institute for their assistance in preparing this post.

To learn more about me, visit www.leemclain.com.

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Lower payments, afford a larger home, what is the mortgage payment you qualify for? First pay off your other debt.

18-Oct-08

When I am getting my clients approved for a mortgage, the most common question is how much can we afford?  And when I am looking at the debt ratios, I see that credit card payments are eating in to that number.  Along with car payments, student loans, and other debts that financed their toys.

While I am all for living life to the fullest and enjoying every minute of it, trust me it is better for your health, marriage, relationships, and retirement to have your unsecured debted and depreciating assets paid off.  And thanks to www.lifehacker.com, a great site by the way, I found a free excel calculator to help you accomplish this task.

You will want to go to http://www.vertex42.com/Calculators/debt-reduction-calculator.html and download the free Debt Reduction spreadsheet from Vertex42.com.

Let me know what you think and any success stories.

Make it a great day and to learn more about me, visit http://www.leemclain.com.

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Kansas City Home Sales for September 2008

17-Oct-08

The Kansas City Regional Association of Realtors announced today the September home sales numbers.  In going through the numbers I see several bright spots.  The first being the overall number improved 10.5%, 2,416 less homes on the market, as compared to September 2007. 

New home sales were down, but the average sales price of a new home increased by 2.9% over last September to $291,283.  Existing homes did drop by 5.4% to $142,966.

Kansas City did not sell as many new homes in September as it did last year, dropping 15.6% to 287 homes sold.  But existing homes sales increased to 2,141 homes sold, up from 1,857 last September a 15.3% increase.

The overall number of homes for sale in Kansas City dropped in September to 18,880, down from 19,183 in August.   The number of months of supply increased to 7.775%, up for 7.432% in August.  So while the amount of homes for sale decreased, the number of sold homes also decreased 153 units causing the increase.  This is also the 5th month in a row we have remained under 8 months of supply, this is still a buyers market.  But I do believe we are starting to see the light at the end of the tunnel.

For more on this information you can go to www.kcrar.com.

Make it a great day and to learn more about me, visit http://www.leemclain.com.

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Can You Afford It?

06-Oct-08

With the new tax credit provided by HERA for first-time homebuyers. It is a great time for the first-time buyers to get in the market. FHA and VA loans are a great options and have guidelines in place that allow for the limited credit profiles of buyers fresh out of school.Now a great idea that I have heard several times over the last month, is for the inexperienced buyer to experiment with their budget before they actually commit to a mortgage. This is for the person who is currently living at home with their parents with no housing expense or knows that the mortgage payment and monthly expenses will dramatically jump when they get their our place. 

What they should do is calculate what the mortgage payment and utilities are going to run in their new home. Then put that amount in savings each month and see if they can live off the remainder of their income. If they can for at least six months and can still maintain the lifestyle they want to live, then they are ready to go house hunting. If not, they have saved some money and did not bury themselves in debt and can continue renting and saving until they are ready.

The great thing about this plan, is it give the buyer piece of mind and money in the bank for down payment and reserves with no risk. 

 

 

Make it a great day and to learn more about me, visit www.leemclain.com.
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