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The government confirms what the private-sector Case-Shiller Index reported yesterday. Nationwide, average home values slipped in October.
The Federal Home Finance Agency’s Home Price Index shows home values down 0.2% on a monthly, seasonally-adjusted basis. October marks just the second time since April that home values fell month-over-month.
The Case-Shiller Index 20-City Composite showed values down 0.7 percent from September to October.
As a home buyer in Blue Ridge or Ellijay Georgia, it’s easy to look at these numbers and think housing markets are down. Ultimately, that may prove true. However, before we take the FHFA’s October Home Price Index at face value, we have to consider the report’s flaws.
There are three of them — and they’re glaring. As we address them, it becomes clear that the Home Price Index — like the Case-Shiller Index — is of little use to everyday buyers and sellers in the North Georgia Mountains.
First, the FHFA Home Price Index only tracks home values for homes backed by Fannie Mae or Freddie Mac mortgages. This means that homes backed by the FHA, for example, are specifically not computed in the monthly Home Price Index.
In 2007, this was not as big of an issue as it is today. in 2007, the FHA insured just 4 percent of the housing market. Today, the FHA is estimated to have more than one-third of the overall housing market. Read the rest of this entry »
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Mortgage rates have troughed. Or, so it seems.
According to Freddie Mac’s weekly Primary Mortgage Market Survey, the average 30-year fixed rate mortgage is 4.00 percent nationwide — roughly the same rate as it’s been for 5 weeks.
During that times, rates have ranged between 3.97 and 4.02 percent with an accompanying 0.7 discount points, plus “typical” closing costs. Closing costs vary by state and 1 discount point is equal to 1 percent of your loan size.
In other words, to get the weekly, published Freddie Mac rate, borrowers in Georgia should expect to pay a complete set of fees to their respective lenders. The larger the loan, the higher the costs. “Low-fee” and “no-fee” loans are available, too — typically in exchange for a slightly rate.
A breakdown of the Freddie Mac survey shows that interest rates and discount points vary by region. Typically, states in the West Region offer the lowest rates but with the highest costs. East Region states work in reverse; rates are often highest but the accompanying points are fewest.
The most recent mortgage rate breakdown by region shows :
- Northeast Region : 4.00% with 0.7 discount points
- West Region : 3.96% with 0.8 discount points
- Southeast Region : 4.06% with 0.9 discount points
- North Central Region : 3.97% with 0.7 discount points
- Southwest Region : 4.04% with 0.7 discount points
What’s most notable, though, is that in all 4 regions, rates are well below their 2011 highs. Since mid-April, mortgage rates have been in descent, dropping for 5 consecutive months before reaching to their current, “rock-bottom” levels in early-November.
Since then, however, rates have idled and the forces that combined to make rates low throughout Blairsville and Hiawassee Georgia are subsiding. The U.S. economy is showing signs of a rebirth; the Eurozone is edging closer to solvency; and the housing market is recovering.
So, if you’ve been wondering whether now is a good time to refinance, or whether higher rates will harm home affordability, the answer is yes. Get in touch with your loan officer to review your home loan options because, looking ahead to 2012, mortgage rates look poised to rise.
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A conforming mortgage is one that, literally, conforms to the mortgage guidelines as set forth by Fannie Mae and Freddie Mac.
Conforming mortgage guidelines are Fannie’s and Freddie’s eligibility standards; an underwriter’s series of check-boxes to determine whether a given loan should be approved.
Among the many traits of a conforming mortgage is “loan size”.
Each year, the government re-assesses its maximum allowable loan size based on “typical” housing costs nationwide. Loans that fall at, or below, this amount meet conforming mortgage guidelines. Loans in excess of this limit are known as “jumbo” loans.
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Tuesday, Fannie Mae and Freddie Mac unveiled lender instructions for the government’s revamped HARP program, kick-starting a potential refinance frenzy across Georgia and nationwide.
HARP stands for Home Affordable Refinance Program. The updated program is meant to give “underwater homeowners” an opportunity to refinance at today’s low mortgage rates.
In the two-plus years since its launch, HARP’s first iteration helped fewer than 900,000 homeowners. HARP II, by contrast, is expected to reach millions.
Lenders begin taking HARP II loan applications December 1, 2011.
To apply for HARP, applicants must first meet 4 basic criteria :
- The existing mortgage must be guaranteed by Fannie Mae or by Freddie Mac
- The existing mortgage must have been securitized by Fannie Mae or Freddie Mac prior to June 1, 2009
- The mortgage payment history must be perfect going back 6 months
- The mortgage payment history may not include more than one 30-day late payment going back 12 months
If the above criteria are met, HARP applicants will like what they see.
For HARP applicants, loan-level pricing adjustments are waived in full for loans with terms of 20 years or fewer; and maxed at 0.75 for loans with terms in excess of 20 years.
This will result in dramatically lower mortgages rates for HARP applicants — especially those with credit scores below 740. Some applicants will find HARP mortgage rates lower than for a “traditional” conventional mortgage.
In addition, HARP applicants are exempted from the standard waiting period following a bankruptcy or foreclosure, which is 4 years and 7 years, respectively.
These two items are inclusionary and should help HARP reach a broader U.S. audience.
HARP contains exclusionary policies, too.
- The “unlimited LTV” feature only applies to fixed rate loans or 30 years or fewer. ARMs are capped at 105% loan-to-value.
- Applicants must be “requalified” if the proposed mortgage payment exceeds the current payment by 20%.
- Applicants must benefit from either a lower payment, or a “more stable” product to qualify
And, of course, HARP can only be used once.
Fannie Mae and Freddie Mac will adopt slight variations of the same HARP guidelines so make sure to check with your loan officer for the complete list of HARP eligibility requirements.
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The Federal Home Finance Agency announced big changes to its Home Affordable Refinance Program last Monday. More commonly called HARP, the Home Affordable Refinance Program is meant to give “underwater homeowners” opportunity to refinance.
With average, 30-year fixed rate mortgages still hovering near 4.000 percent, there are more than a million homeowners in Blue Ridge, Blairsville and nationwide who stand to benefit from the program overhaul.
To qualify for the re-released HARP program, you must meet 4 basic criteria :
- Your existing home loan must be guaranteed by Fannie Mae or Freddie Mac
- Your home must be a 1- to 4-unit property
- You must have a perfect mortgage payment history going back 6 months
- You may not have had more than one 30-day late payment on your mortgage going back 12 months
Most notable about the new HARP refinance program, though, is that the government is waiving loan-to-value requirements on a HARP loans. Homeowners’ participation in the program are no longer restricted by their home’s appraised value. In fact, the new HARP doesn’t even require an appraisal, in most instances.
With the new HARP program, underwater mortgages can be refinanced without LTV limit or penalty.
According to the government’s press release, pricing considerations for the new HARP program will be released on or before November 15, 2011; and lenders are expected to be offering the program as of December 1, 2011.
If you think you may be eligible, first confirm that either Fannie Mae or Freddie Mac is backing your loan. Both groups provide a simple, online lookup.
- Fannie Mae loan lookup : http://www.fanniemae.com/loanlookup/
- Freddie Mac loan lookup : https://ww3.freddiemac.com/corporate/
If your loan cannot be located on either of these two sites, your current mortgage is not backed by Fannie Mae or Freddie Mac, and is not HARP-eligible.
The FHFA’s official press release contains an FAQ section. In it, you’ll find minimum qualification standards, as well as information related to condominiums and to mortgage insurance.
The HARP program is meant to help a wide group of homeowners, but each applicant’s situation is unique. For specific HARP questions, be sure to talk with a loan officer.
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Mortgage rates have dropped past 4 percent.
For the first time in more than 40 years, data from Freddie Mac’s weekly Primary Mortgage Market Survey shows the average 30-year fixed rate mortgage falling below 4 percent, dropping to 3.94 percent nationwide. It’s the lowest average 30-year fixed reading in the survey’s history.
In addition, Freddie Mac shows the 15-year fixed and 5-year ARM making new all-time lows, too, falling to 3.26% and 2.96%, respectively.
It’s a great time to be shopping for a mortgage or buying a home in Hiawassee or Blairsville Georgia. Because mortgage rates are dropping, housing payments are dropping, too. As compared to 8 months ago, for every $100,000 borrowed, homeowners now pay $66 less principal + interest each month.
On a $300,000 mortgage, that’s $71,280 saved in 30 years.
Mortgage rates have been lower for several reasons, some of which include :
- U.S. economic growth has been slower-than-expected
- Uncertainty surrounds Greece and the Eurozone
- The Federal Reserve’s “Operation Twist“
In general, demand for mortgage bonds has been high and that’s caused mortgage rates to fall. It should be noted, however, that although the 30-year fixed rate mortgage fell below 4 percent this week, the amount of discount points required to lock that rate rose by 10 basis points, or $100 per $100,000 borrowed.
Homeowners in the North Georgia Mountains are paying bigger fees for these lower rates. If you plan to move within a few years, these fees may wipe out your low-rate savings.
As you shop for a mortgage, pay attention to more than just rates. Low rates are great, but not when they come with high costs. Talk to your loan officer for help with making a plan than works for you.
Related articles
- Choosing A 15-Year Fixed Rate Mortgage Over A 30-Year Fixed Rate Mortgage (thefrontporchview.com)
- Have Mortgage Rates Hit The Bottom? (thefrontporchview.com)
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For homeowners in high-cost areas nationwide, conforming and FHA loan limits have dropped by as much as 14 percent.
Effective October 1, 2011, the temporary mortgage loan limits that allowed for non-jumbo loan sizes of up to $729,750 are no longer.
$729,750 is above the “normal” loan limit of $417,000.
The elevated limits were put in place in 2008 as the economy and financial sector entered its crisis. At the time, there was little private money to serve buyers and would-be refinancers whose loan sizes exceeded Fannie Mae and Freddie Mac’s maximum $417,000 loan limits.
For most people whose loan sizes exceeded that threshold, mortgage financing was unavailable. There were no lenders to back the loan size.
This was of particular importance in places such as New York City, Los Angeles and Washington, D.C. where home prices routinely top $1 million. For people in these areas, unless they had a down payment that could lower their respective loan sizes to $417,000 or lower, mortgages were mostly unavailable.
Congress recognized this and, as a result, gave Fannie Mae and Freddie Mac temporary authorization to purchase and securitize home loans of up to $729,750 in value, depending on where the subject property was located.
The program helped housing, leading Congress to pass more permanent, location-specific loan limits. Later that same year, Congress passed the Housing and Recovery Act of 2009 which, in part, made high-cost loan limit pricing permanent, albeit at $625,500.
The $729,750 temporary limits expired Friday, September 30, 2011. Today, the maximum allowable conforming loan size is $625,500.
If you live in a high-cost area, therefore, take note. Mortgage rates may be low, but the amount of loan for which you qualify may be less than you expect, and you may find yourself ineligible.
The complete list of high-cost areas is available online.
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Low mortgage rates are terrific — if you can get them.
One week after posting its lowest mortgage rate in 50 years, Freddie Mac reports that the 30-year fixed rate mortgage rose by an average of 7 basis points nationwide this week to 4.22%. To get the rate, you’ll pay an average of 0.7 “points”.
This week’s rise in the 30-year fixed rate mortgage pulled rates off their all-time lows so either you locked last week’s rock-bottom rates, or you missed it.
Mortgage rates are rising.
As a refinancing homeowner or home buyer in Blairsville or Blue Ridge Georgia, rising mortgage rates are something to watch. This is because, as mortgage rates rise, so do the long-term interest costs of giving a mortgage, increasing your home ownership costs.
For example, if you failed to lock a rate last week when rates were bottomed, and then decided to lock-in only after rates had climbed 0.25 percent, at the new, higher rate, over the life of your loan, you would have responsibility for an extra $5,300 in interest costs for every $100,000 you borrowed.
Rising mortgage rates can be expensive.
For home buyers, rising mortgage rates pose a second problem — they erode your purchasing power. A home that fits your budget at today’s rates may not fit your budget at next week’s rates. And because mortgage rates change quickly, you can sometimes feel like you’re racing the clock.
The hard part about mortgage rates, though, is that we can never know what they’ll do next. On some days they rise, on some days they fall, and on some days they stay the same. Instead of trying to “time the bottom”, therefore, a good strategy can be to lock the first, low rate that fits your budget. Then, if rates are lower in the future, you can look to refinance at that time.
Mortgage rates remain at historical lows. It’s a good time to lock a rate.
Related articles
- Mortgage Rates Make New 2011 Lows (thefrontporchview.com)
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Mortgage rates in Georgia plunged to new 2011 lows this week.
According to Freddie Mac’s weekly Primary Mortgage Market Survey, the national, average 30-year fixed rate mortgage fell to 4.39% this week — the lowest 30-year fixed reading since November 18, 2010.
The 0.16 drop from last week is the largest one-week rate drop in more than 2 years, and, although the 30-year fixed remains above its all-time lows from November 2010, two other benchmark products made new records this week.
Both the 15-year fixed rate mortgage and the 5-year ARM are reporting lower than at any time in recorded history.
Freddie Mac puts those average rates at 3.54% and 3.18%, respectively.
Mortgage rates are dropping for several reasons, including :
- U.S. economic growth is slower-than-expected
- The U.S. government plans to curb its spending
- Global investors seek the safety of U.S.-backed bonds
The first two items are unfavorable for business and, as a result, stock markets have sold off all week. The Dow Jones Industrial Average posted an 8-day losing streak and Thursday it made its biggest one-day loss since 2008.
When equities lose, bonds tend to gain. This leads mortgage rates lower.
Mortgage rates also fell on “safe haven” buying; bond buys made because of their relative safety to risky assets. Mortgage bonds are considered “safe” so when economies and geopolitics are uncertain, mortgage rates improve.
Going forward, there are reasons for mortgage rates to fall again. The economy won’t rebound overnight and neither will investor confidence. However, markets can be fickle and rates have been known to reverse quickly.
With rates as low as they’ve been history, it’s an advantageous time to refinance your home loan, or purchase a new property.
Related articles
- A Mortgage Rate Strategy For July’s Jobs Report (thefrontporchview.com)
- 5-Year ARM Falls To Historic Lows (thefrontporchview.com)
- What Will The Debt Ceiling Agreement Do To Mortgage Rates? (thefrontporchview.com)
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The interest rate differential between fixed-rate and adjustable-rate mortgages continues to widen and has now reached historic levels.
There’s never been a better time to lock an ARM.
According to Freddie Mac’s weekly Primary Mortgage Market Survey, homeowners in Hiawassee and Blairsville Georgia who lock their mortgage rate today will save 129 basis points on rate, on average, by choosing a 5-year ARM as their mortgage product as compared to a 30-year fixed rate loan.
The average 30-year fixed rate is 4.51%. The average 5-year ARM rate is 3.22%.
It’s the biggest interest rate spread between fixed-rate and adjustable-rate mortgage rates in Freddie Mac’s recorded history; a gap which is the result, in part, of the 5-year ARM dropping to all-time lows this week.
Rates for the 5-year ARM are even lower than during last year’s historic Refi Boom.
Putting today’s “spread” in action against a hypothetical $250,000 loan size, a homeowner that chooses an ARM over a fixed-rate loan would save $184.30 monthly, and would have $500 fewer closing costs.
That’s a 5-year savings of $11,558 — nearly triple what you would have saved just 2 years ago.
The main reason why today’s adjustable-rate mortgages are priced so aggressively relative to comparable fixed-rate loans is that Wall Street expects the economy to drag for the next several quarters, after which it expects an acceleration.
ARMs tend to reflect short-term expectations for the U.S. economy which is why short-term mortgage rates are dropping. Fixed products, by contrast, take a longer view and expectations for an economic rebound are pulling fixed-rate mortgage rates up.
For now, mortgage applicants can exploit the difference — especially those who plan to move within the next 5 years — but adjustable-rate mortgages aren’t right for everyone. ARMs carry particular risks about which you should be aware before locking.
Before you choose an ARM, Contact Me and I will put you in touch with a loan officer who can talk you through it.
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