The interest rate on a standard 30 year mortgage has stayed below the 5% mark. Are mortgage rates falling? Last week the rate fell again. It dropped to 4.8% down from the previous week of 4.91%. The lowest rate was at 4.17% (November 2010), and this was the lowest recorded rate in 40 year.
The 15 year rate followed the same pattern dropping to 4.02% from the previous 4.13%. The lowest
in had previously been was 3.57% back in November 2010; and that was the lowest since 1991.
It is a fantastic time to lock in rates or to purchase a new home if you need financing. Not only is
inventory high enough to keep prices down and give the buyer ample options but rates are still at
historically low levels.
To give you an idea you can calculate your mortgage payment for a $250,000.00 loan to be $1311.66 for principle and interest at 4.8%.
Keep in mind that financing is a complicated issue so it is always best to deal with a competent mortgage broker. Many factors play into the banks calculation of your qualifications; your credit, your income, your other financial obligations and your cash reserves and down payment are some of the items taken into consideration.
The Federal Housing Administration or FHA has announced some changes which are geared at strengthening the capital reserves as well as manage risk. These changes will affect borrowers abilities to secure a loan, they are changes that should be reviewed prior to making a loan application. The following is a list of changes:
1. The mortgage insurance premium (MIP) will be increased to 2.25% of the loan amount. In addition, the FHA will seek approval to increase to the maximum annual MIP that the FHA can charge. However, if the maximum is charged then the premium or at lease a portion of the premium will be spread out through the term of the loan versus being paid upfront; this will enable the borrower to feel less upfront impact of the premium while still building the proper capital reserves. The initial MIP increase should go into affect this coming Spring.
2. The credit and down payment requirements for borrowers will also be updated. In order to qualify for a 3.5% down payment they must have a 580 or greater FICO score. Those borrowers with a lower than 580 Fico score will be required to place 10% down payment. This change is being made in an effort to balance the risk factor involved with these loans.
3. Seller concession or contributions will be reduced to an allowable 3% this is down from 6%. This change was made in order to eliminate the tendency to over inflate appraised values.
There are some additional operational changes that will be taking place; however, we feel that these three changes are the ones that will affect borrowers in the immediate process.
Most of the professionals in the business would probably agree that although 2009 did show some signs of recovery in the housing market they certainly look forward to new year with new hopes. Well, there is some good news on the horizon along with some positive indicators.
I recently read a message written by NAR Chief Economist Lawrence Yun (Personally I have always found his analysis very reliable and I would even say that he tends to be conservative with his predicted numbers):
The end of 2009 did show higher sales compared to the rest of the year; however, Mr. Yun and other economist will say that most of this movement was due to folks running out to beat the tax credit expiration. Now with the new deadline not threatening until mid 2010; Mr. Yun is predicting heavier activity for spring and early summer due to the tax credit expiration.
So, we have seen lowered near bottomed prices and we are still seeing historically low-interest rates and in addition we are (as buyers) enjoying high levels of inventory and motivated sellers and not to mention a great government incentive program. It really is the best time to BUY. So what is holding this housing market back??? According to Mr. Yun the answer lies in the job market.
Unemployment is still looming at a very high rate of 10% and although there are sectors which are having job gains the reality is that the unemployment rate is still expected to climb a bit more.
Mr. Yun’s opinion and stats show that the private sector is still very hesitant to move forward with hiring new employees. Instead, company’s are placing additional pressure on their current employees to increase production and they are resorting to the temp job market. With that said the temp job market has seen increases; hopefully signaling new permanent jobs in the future.
With all this taken into account we should certainly see a boost in the housing market provided that the job market picks up. We have a formula for success and a recovery!
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As of the first of the year HUD issued new rules regarding Good Faith Estimates (also know as GFE’s). These newly adopted rules called for stricter guidelines for the preparation of GFE’s by lenders, mortgage bankers and mortgage brokers. Obviously the look of the GFE and layout has changed; however, the real change in the rules is how accurate the preparer must be in estimating closing costs and loan origination fees. In the past there were not many guidelines regarding the accuracy of these items. Although, I feel that there are many great mortgage brokers and lenders working in our market; I must also admit that I had many instances where the final HUD at he closing table had significant differences from the original GFE, and trust me, it was never in the favor of the buyer. Although, there is no way to prove it; it would appear that preparers of GFE would under estimate closing costs, prepaid items and origination fees in order to get the buyer / borrower to commit to them, only to later at the closing table, at the 11th hour change-up the numbers. “Well, now what here we are a the closing table, with a ton of deposit money in escrow at risk if we don’t close.” Naturally, this would anger any buyer and anger any agent or broker representing the buyer.
I for one am glad that the new rules are in place. The rules basically state that there is only a small margin of acceptable variance from the GFE to the final HUD for the previously mentioned fees. Also, if these fees do vary by more than the acceptable margin then the lender must absorb the difference. I feel that this will help in more honest and responsible lending.
Lenders are naturally concerned about this rule as they see it as potential losses. Therefore, many lenders have responded by creating “initial fees worksheet”. This worksheet will give an estimate of fees and prepaid items, etc. However, this particular worksheet will be provided prior to application, that is prior to the borrower having their credit pulled, or even providing the property address. The main thing for a buyer / borrower to remember is that this is not a GFE and should not be taken as such. The “initial fees worksheet” offers no guarantees whatsoever.
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South Florida Brokers & Associates, Inc.
It is no big secret that in the recent post real estate boom market there have been great deals for investors and end-use buyers in the foreclosure and short sale arena. Many buyers know exactly what a foreclosure is but many are not familiar with short sales. Well, a “short sale” is a sale in which a lender agrees to allow a property to be sold in a sale which will produce proceeds insufficient to clear the actual loan amount / balance, in laymen terms the lender will take a loss on the loan. This type of sale although considered cumbersome by most real estate practitioners are an essential part of a recovering market. Therefore, as real estate brokers and agents we should do our best to help buyers find the best deal on the market; and if the best deal is a short sale we should certainly educate the buyer on short sales and work the deal and on the other side if we have the short sale listing we should educate the seller and work closely with the lender involved on the short sale to ensure a successful transaction. However; buyer, seller and real estate practitioners BEWARE!!!!
I read a recent CNBC report which was a bit disturbing. This report depicted fraud when it came to these short sales. Although, as a brokerage we have not experienced or witnessed this type of activity, the report did place me on guard and as a broker I have passed on the information to the associates working with us.
The allegations go something like this: There is a short sale listing which goes under contract. There are two mortgages on the property. The primary lender or first lien position accepts the contract and negotiates with the secondary or second lien holder a reduced amount, usually a small fraction of what they are actaully owed. The buyer and seller all sign. This is all perfectly legal and good until the secondary lender does one extra step. That extra step is that the secondary lender contacts either one of the real estate agents (seller or buyer agent) or the seller or buyer directly and states that they want additional funds paid outside of closing (POC) or wants fund paid which will not be depicted on the closing statement (HUD). This is a violation of RESPA (Real Estate Settlement Procedures Act), which clearly states that all monetary transactions must be depicted on the HUD. However, secondary lenders are allegedly ignoring this fact and asking for funds outside of closing disregarding the law; and going to the extent as to threaten to block or kill the short sale and allow the property to go into foreclosure. The irony of all of this is that although it may harm the seller and buyer and the real estate licensee it still doesn’t help the secondary lender as the fact is that if the property goes to foreclosure the second loan will subordinate to the first lien position anyway.
In conclusion, our advice to sellers buyers and all of our counterparts is to not participate in this type of activity. No commission or deal is worth a license being revoked or to be accused of aiding in fraudulent activity.
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