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Category Archives: Mortgage Rates

Rates on 30-year loans fall below 5 percent

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WASHINGTON – Nov. 6, 2009 – Rates for 30-year home loans dipped below 5 percent this week after rising for three straight weeks.

The average rate fell to 4.98 percent from 5.03 percent a week earlier, mortgage company Freddie Mac said Thursday.

Rates had hovered below 5 percent for nearly a month until inching upward two weeks ago. They hit a record low of 4.78 percent in the spring, but are still attractive for people looking to buy a home or refinance.

The Federal Reserve has pumped $1.25 trillion into mortgage-backed securities in an effort to lower rates on mortgages and loosen credit. Rates on 30-year mortgages traditionally track yields on long-term government debt.

That, plus a federal tax credit of up to $8,000 for first-time homebuyers, has helped boost the ailing housing market.

The number of signed contracts to buy previously occupied homes rose for the eighth month in a row in September, while residential construction spending jumped by 3.9 percent, the largest gain in more than six years, data this week showed.

Still, lenders are cautious and standards remain tight, so the best rates are available only to borrowers with solid credit and a 20 percent downpayment.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, frequently in line with long-term Treasury bonds.

The average rate on a 15-year fixed-rate mortgage declined to 4.40 percent from 4.46 percent recorded last week, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages averaged 4.35 percent, down from last week’s 4.42 percent. Rates on one-year, adjustable-rate mortgages decreased to 4.47 percent from 4.57 percent.

The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 points for 30-year loans. The fee averaged 0.6 points for 15-year, five-year and one-year loans.

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TWO POINTS

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The $8,000 first-time homebuyer tax credit has received a lot of attention lately, but it has also overshadowed another big reason to buy a home now: record-low interest rates. In May, 30-year mortgage rates of 5 percent were widely available. That’s down from January’s already-low 5.8 percent, and two percentage points less than in August 2008. How important is two points? On a $200,000 home, a buyer could save $257 per month ($3,084 per year) by buying now rather than last August. On a $200,000, 30-year fixed rate mortgage, the monthly payment difference is:
• 7 percent: $1,330 monthly (rates in August 2008)
• 6 percent: $1,199 monthly (rates in December 2008)
• 5 percent: $1,073 monthly (rates in May 2009)

Federal program to help first-time buyers use tax credit for downpayment

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WASHINGTON – May 13, 2009 – First-time homebuyers will soon have another option if they want to use their $8,000 tax credit toward a downpayment. On the tails of a Florida-created program that Gov. Charlie Crist is expected to sign into law, the federal government announced its own downpayment assistance program at the National Association of Realtors® Midyear Legislative Meetings & Trade Expo taking place this week in Washington, D.C.

While the tax credit applies to “first-time homebuyers,” the term is misleading. In general, anyone who hasn’t owned a home for the past three years is considered a first-timer under the program. Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development (HUD), hopes to have additional details available within a few days, though it’s still unclear how soon homebuyers can apply for the credit.

Donovan said that the Federal Housing Administration (FHA) would allow its lenders to credit homeowners up to $8,000. He made the announcement to several thousand Realtors yesterday at a special daylong session called, The Real Estate Summit: Advancing the U.S. Economy.

“We all want to enable FHA consumers to access the homebuyer tax credit funds when they close on their home loans, so that the cash can be used as a downpayment,” Donovan said. According to Donovan, FHA approved lenders will be permitted to “monetize” the tax credit by using short-term bridge loans. Donovan also said that more will be done, and the Obama administration plans to further stabilize the housing market.

“I do think we have some early signs that the market overall is stabilizing,” said Donovan. “Since January, we’ve seen both home sales moving up and down around a relatively stable number, and we are seeing the first signs that the rapid decline in home prices is starting to abate.”

Housing aid gaining steam in stimulus bill

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WASHINGTON – Feb. 3, 2009 – Homebuyers could see lower mortgage rates and get tax credits as part of a sweeping economic stimulus package being considered on Capitol Hill.

Lawmakers are heeding the pleas of two powerful and well-heeled interest groups: real estate agents and homebuilders. Those industries have lobbied hard in recent weeks for more expansive assistance for their flailing members.

The Senate took up a $900 billion version of the stimulus legislation on Monday after an $819 billion version passed the House last week without a single Republican vote.

Any government aid for the housing sector should be temporary and apply to all buyers to help boost sales of expensive homes as well as low-priced ones, said Wachovia Corp. economist Mark Vitner.

“Nobody wants to buy a home before prices have bottomed out,” Vitner said. “Unfortunately if everybody has the same idea, prices are going to keep falling.”

With median sales prices back to levels last seen in mid-2003 and rates on 30-year mortgages hovering around 5 percent, homes have become far more affordable in most of the country. But some economists say they still have farther to fall, particularly in former bubble markets like California and the Northeast.

Plus, some question the amount of money going toward relatively wealthy homebuyers, instead of renters or those who can’t qualify for a mortgage.

“I’m amazed,” said Dean Baker, an economist and co-director of the liberal Center for Economic Policy Research in Washington. “We’re giving people way more money – just because they bought a home – than if they’re unemployed.”

Meanwhile, Senate Minority Leader Mitch McConnell, R-Ky., told reporters Monday that Republicans would offer a plan to have the government step in to reduce mortgage rates to around 4 percent, which could shore up home prices and lower housing payments for millions of Americans.

“A stimulus bill must fix the main problem first, and that’s housing,” McConnell said. “That’s how all of this began. We think you ought to go right at housing first.”

Sen. Charles Schumer, D-N.Y on Sunday told “Face the Nation” on CBS that Democrats would support a GOP-backed idea to double a home buyers’ tax credit from $7,500 to $15,000 and make it available to all buyers instead of those purchasing their first home. He also said the Obama administration is considering ways for the government to lower mortgage rates.

“There seems to be real bipartisan support for a stronger housing focus,” said Mary Trupo, a spokeswoman for the National Association of Realtors, which has rallied its members to push for more aid to the hobbled market.

The Realtors group spent more than $17 million on lobbying last year, with more than $6.5 million coming in the final three months, according to disclosure forms.

The building industry, which has been devastated by the housing bust, has been pushing a package of subsidies that would bring mortgage rates to just under 3 percent for the first half of this year. The National Association of Home Builders – which spent more than $4.5 million lobbying last year – favors a tax credit of up to $22,000 for home purchases.

Media shouldn’t say buyers need 20 percent downpayments

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WASHINGTON – Jan. 6, 2009 – Don’t believe everything you read, says NAR.

There is some misinformation in the media lately about the required size of a downpayment for a mortgage in today’s market, and the blog world is abuzz with misperceptions. Not all so-called experts are knowledgeable in this area, and some experts are being misunderstood.

The facts:

1. An individual may be required to put down 20 percent based on that person’s financial situation – but that is not an across-the-board requirement for all borrowers.
 
2. A borrower who puts down less than 20 percent is required to obtain mortgage insurance.
 
3. Even in a declining market, a borrower is required to make at least a 5 or 10 percent downpayment.
 
4. FHA requires a 3.5 percent downpayment by borrowers, so long as they meet a 31 percent housing cost-to-income ratio. In other words, anyone who stays within their budget and who can afford a 3.5 percent downpayment (even with family help) can become a homeowner.

FHA market share has grown roughly tenfold in the past year to an estimated 30 percent of new mortgage originations.

Real Estate Outlook: Housing in Recovery

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With all the turbulence and losses in stocks and bad economic news in the headlines lately, you can easily lose perspective on what’s really going on in the real estate sector.

For example, new mortgage applications increased last week by 12 percent, according to the Mortgage Bankers Association. Applications from people looking to buy houses with FHA loans were up by 15.3 percent, while applications from purchasers seeking conventional mortgages rose by six and a half percent.

How could that be, with all the grim economic news? Well, remember that there is a huge pent-up demand simmering away out there for housing — especially from first-time buyers who want to scoop up low-priced deals.

When fixed interest rates drop — and last week they were down by a quarter of a percentage point — those buyers start doing the math and getting into the market with offers.

Fixed thirty year rates fell from six and a half percent to 6.24 percent during the week. Fifteen year rates broke below six percent to 5.9 percent, down from 6.14 percent.

Another piece of positive news you may not have noticed: Pending home sales were higher than year-earlier levels for the second straight month — 1.6 percent higher than September 2007 .

Although pending sales contracts were down slightly for the month, in the western states they wee up by 3.7 percent, and now stand at an extraordinary 39.7 percent higher than they were at the same time in 2007.

At the National Association of Realtors’ convention in Orlando, chief economist Lawrence Yun, warned the delegates not to expect a housing recovery overnight, certainly not with unemployment on the rise. But he projected a slow, steady, multi-year upward trend, with 5.02 million total sales this year, 5.3 million for 2009, and 5.6 million for 2010.

Already sales are up significantly in major markets in many parts of the U.S. Yun specifically mentioned the west coast of Florida, the Phoenix area, Virginia, Long Island New York, Kansas City, Minnesota and Idaho.

So here’s the key point to keep in mind as you try to make sense of the headlines: The stock market is NOT the housing market. It’s on a whole different set of tracks. And it’s been in a highly volatile state for more than a month.

Housing, on the other hand, has already endured its painful correction for two and a half years … is now pretty much stabilized … and is slowing moving toward its cyclical recovery.