Mortgage Blog

Rates are near an all time low.  It's a great time to refinance!!  It's not too hard to get it done today--for the consumer, but it's seems like a lot more work for the lender.  A lot of new regs.  RESPA is coming down with many changes now and many more effective January, 2010.  I just completed a class for underwriting.  I also have Continuing Education classes next week about all the changes.  Then more training on the Good Faith Estimate and more.

Much to keep up on!  More hoops to go thru and more mandatory waiting periods for the borrower.  I guess the loan process is not more difficult for the borrower, just more lengthy.

Are you a "first time home buyer"? If you haven't owned a home in the last 3 years or have never owned a home, you qualify to purchase a home and then get an $8000 GIFT from the Federal Government as part of the "stimulus package"

You will get the "gift" when you file next years tax return.  It's called a "credit".  I call it a gift.  You don't have to pay any taxes.  You don't have to pay it back.  To get the full amount of the gift, you have to pay at least $80,000 for the home.  It has to become occupied by you. 

This is available for homes purchased by December 1, 2009.  Somehow, I think we'll see a huge number of purchases closed on November 30 or the weeks just before that, as so many of us are procrastinators.  (I even filed my tax return this year on April 15).

And so it continues to be a great time to BUY.  Home prices are low, interest rates are low, and the Fed is giving away cash incentives for people buying houses.

 Q. Is it a good time to buy a home?

A. Yes, it IS A Good Time To Buy A Home! When you read the newspapers, and watch the news, you may get the idea that all real estate markets are the same in the USA. However, there is NO national real estate market. The markets are local! When you are looking to buy or sell, look at price trends, volume, and inventory in the local market. Don't judge the Wisconsin market or your local market based on national indicators.

The statewide market in Wisconsin is much different than California, Florida or Nevada. We are in a fairly stable market here and growth in home values may continue soon. While we have probably had some decline in values in some areas and some price ranges in Wisconsin, we are likely near the low point of real estate values.

Estimates show Wisconsin's population will increase by almost 190,000 from 2005 to 2010. See

www.doa.state.wi.us. It is a "buyer's market". Interest rates are LOW. Prices are low. The winter season is approaching and there is a wide selection of homes to buy. Bottom line is, it's a GREAT TIME to buy!

What are your thoughts?

John

We have had many ups and downs in the market over the past 60 years.  Every other time, the market came back. How long will this last?  When will real estate values start improving again?  When will sales start picking up again?

I don't have the answers.  What I do know is that God is in control.  (Some think the US Government is.) God owns it all. My car, my business, my home, and my IRA are not mine but HIS.  I can't take any of it with me when I die.  Knowing this, allows me to relax and not panic and not worry.

What are your thoughts?

John

"Fannie Mae Eases Credit To Aid Mortgage Lending"

 By STEVEN A. HOLMES 

The article points out "Fannie Mae officials say they hope to make it a nationwide program by next spring. Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits." (My underlining etc) 

While this seemed to be a good cause, it eventually put us into this mess--9 years later!  Apparently Fannie Mae (FNMA) reduced down payment requirements and lowered its credit standards allowing people to buy homes they weren't otherwise able to.  I understand that this is not NEWS, but for me, at least, I know when and how it all started. Fannie Mae took on significantly more risk and eventually led to severe problems for our economy,.

It seems that at least one person predicted this, Peter Wallison a resident fellow at the American Enterprise Institute, said ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

As Paul Harvey says, "Now we know the rest of the story."

What are your thoughts?

Blessings to all,

John

With a fixed-rate loan, your monthly payment of principal and interest never change for the life of your loan. Your property taxes may go up and so might your homeowner's insurance premium, but generally with a fixed-rate loan your payment will be very stable.

Fixed-rate loans are available for various terms: 30-year, 20-year, 15-year, even 10-year.

During the early amortization period of a fixed-rate loan, a large percentage of your monthly payment goes toward interest, and a much smaller part toward principal. That gradually reverses itself as the loan ages.

You might choose a fixed-rate loan if you want to lock in a low rate. If you have an Adjustable Rate Mortgage (ARM) now, refinancing with a fixed-rate loan can give you more monthly payment stability.

Adjustable Rate Mortgages -- ARMs, come in even more varieties. Generally, ARMs determine what rate you must pay based on an outside index, perhaps  the one-year Treasury Security rate, the Federal Home Loan Bank's 11th District Cost of Funds Index (COFI), or others. They

 typically adjust annually after a fixed period.  Most programs have a "cap" that protects you from your monthly payment going up too much at once. There may be a cap on how much your interest rate can go up in one period -- say, no more than two percent per year, even if the underlying index goes up by more than two percent. You may have a "payment cap," that instead of capping the interest rate directly caps the amount your monthly payment can go up in one period. In addition, almost all ARM programs have a "lifetime cap" -- your interest rate can never exceed that cap amount, no matter what.

ARMs often have their lowest, most attractive rates at the beginning of the loan, and can guarantee that rate for anywhere from a month to ten years. You may hear people talking about or read about what are called "3/1 ARMs" or "5/1 ARMs" or the like. That means that the introductory rate is set for three or five years, and then adjusts according to an index every year thereafter for the life of the loan. Loans like this are often best for people who anticipate moving -- and therefore selling the house to be mortgaged -- within three or five years, depending on how long the lower rate will be in effect.

You might choose an ARM to take advantage of a lower introductory rate and count on either moving, refinancing again or simply absorbing the higher rate after the introductory rate goes up. With ARMs, you do risk your rate going up, but you also take advantage when rates go down by pocketing more money each month that would otherwise have gone toward your mortgage payment.