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Jennifer Carstensen's Blog

By Jennifer Carstensen | Agent in Memphis, TN
  • Mortgage Rates Make Biggest Jump in 26 Years

    Posted Under: Financing  |  June 27, 2013 6:52 PM  |  168 views  |  No comments

    The average rate for a 30-year mortgage soared half a percentage point in the last week, the biggest one-week leap since 1987.

    The rate went from 3.93% to 4.46%, the highest rate since July 2011. This is the first time the rate has gone above 4% since March 2012.

    Most analysts don’t expect higher interest rates to hurt the housing recovery, though they do believe rising rates will help tamp down home-price increases.

    Higher mortgage rates are "not going to snuff out the housing recovery," Paul Diggle, property economist for Capital Economics, told Bloomberg. "But it’s another reason to expect a slowdown from the very rapid rate of price rises of late." 

    His firm, which had been predicting that mortgage rates would be 3.75% next year, upped its prediction to 5% -- still lower than rates were during the real estate boom, Bloomberg reported.

    The rate for a 15-year mortgage rose from 3.04% to 3.5%, according to Freddie Mac’s Weekly Primary Mortgage Market Survey.

    The impetus for the rise in rates appears to the Fed’s indication that it will cut back on bond purchases.

    While higher interest rates means higher house payments, rates still remain at historic lows. The rate would have to rise to nearly 7% before a home priced at the U.S. median would be unaffordable to a family making the median income, according to Freddie Mac’s June 2013 U.S. Economic & Housing Market Outlook. However, rising rates will affect affordability in some areas long before they hit 7%.

    "Higher mortgage rates may dampen some housing market activity but the effect will be muted by the high level of buyer affordability, and home sales should remain strong,” Frank Nothaft, vice president and chief economist at Freddie Mac, said in a statement.

    The 30-year mortgage rate was 7.33% when Freddie Mac began its weekly survey in April 1971. Rates reached 18.63% in 1981. During the mid-2000s real estate boom, mortgages rates were in the 5% to 6%-plus range. The rate first dipped below 5% in January 2009.

    Source: MSN

  • How to Get a Mortgage Rate Under 4%

    Posted Under: Home Buying, Financing  |  January 20, 2013 6:19 AM  |  207 views  |  No comments

    Low mortgage rates: everyone wants them, but not everyone can have them. And with rates dropping to record-setting lows, it's no wonder why they're such a hot commodity.

    Mortgage rates hit record-setting lows at well under the 4-percent mark in the first week of October 2012. That's when Freddie Mac, the government-sponsored home financing corporation, reported the average 30-year fixed-rate mortgage (FRM) average dipped to 3.36 percent.

    Unfortunately, not everyone will be able to take advantage of these low interest rates.

    Why not? According to Brownie Stanisch, a senior loan consultant from Sherman Oaks, Calif., the qualifying guidelines for loan approval are tougher than ever due, in part, to the rising amounts of home foreclosures.

    "Every time a property is foreclosed, lenders look at what caused the foreclosure," Stanisch says. "If they look at 10 property foreclosures and eight of them were homes (purchased by borrowers) with low credit scores or a low down payment, lenders feel they have got to be more stringent."

    Want to find out if you could score a 4 percent mortgage rate or less? Consider these six key factors that mortgage experts say could help you get a low rate.

    Factor #1 - Good Credit

    Nothing moves the needle in terms of an interest rate more than a borrower's credit rating, mortgage experts say.

    "Good credit is mandatory," says Laura Hertz, a loan officer based in Sherman Oaks, Calif. "People think no credit is good credit, but no credit is no credit."

    A primary form of determining one's credit "rating" in the eyes of lenders is a borrower's FICO score, a numerical calibration of one's credit risk (invented in the 1960s by a company called Fair Isaac).

    According to myFICO, the consumer division of Fair Isaac, lenders use your credit score to determine how much money you can borrow and at what interest rate. FICO scores range from 300 (on the bad end) to 850 (on the great end).

    "It's important to maintain good credit," Hertz says. "A score of 640 is an OK credit score, but 740 and above will get you the best rates."

    To review your credit report, the Federal Reserve System, which oversees national monetary policy and the banks, suggests ordering a copy from www.annualcreditreport.com.

    Factor #2 - Good Down Payment

    Getting an interest rate under 4 percent truly is a game of percentages. The mortgage rate you receive is likely to be inversely proportional to your down payment - that is, the more you put down, the lower your interest rate tends to be, according to Hertz.

    "To get the very best rate, you have to have a 30 percent down payment," Hertz says. "A 20 percent down payment is good, and that can be worked with for a better rate."

    But is a 20 percent down payment the starting point for interest rates under 4 percent? Not necessarily.

    Hertz says down payments of 10, 5, or even 3.5 percent are good amounts, too, but borrowers might have to pay additional fees or purchase private mortgage insurance (PMI) to offset risk issues such as poor credit.

    The Mortgage Insurance Companies of America defines PMI as a measure lenders use "for protection in case the homeowner fails to make his or her (mortgage) payments."

    Borrowers with a low down payment, according to Hertz, might have to include PMI with their loan package in order to get an interest rate under 4 percent.

    "If you do 20 percent down, you don't end up with high PMI," Hertz says.

    Factor #3 - The Right Lender

    Getting a loan with an interest rate below 4 percent depends heavily on finding a lender or broker who has your best interest at heart. But how can you find the right lender?

    For starters, you need to shop around and consider recommendations from people you trust, Hertz says.

    "Listen to your realtor," Hertz says. "Get different business cards and different references. Almost every one of my clients is a referral from somewhere else."

    You also must be prepared to ask lenders questions about their track record and performance levels, Hertz says. Among the questions you might consider asking include:

    • How quickly do your loans close?
    • Do you have references from people in the area I can call?
    • Does your company have a good rating?
    • How much experience do you have?
    • Are you in communication with the underwriter (the person who approves or rejects loan requests)?

    The answers to these questions will hopefully help you find a lender that can improve your chances of getting an interest rate below 4 percent.

    "You have to find a lender who has the time and patience to deal with any issues you might have," Stanisch says. "They need to be able to advise you on whether you can do anything to improve your pricing conditions, so don't wait until you find a house to start the process."

    Factor #4 - Stable Job History

    How is your employment history? If you have been off and on the job for an extended period of time, that could affect whether your interest rate will find itself near the record-setting low marks, mortgage experts say.

    Even with a good income, you'll still need to prove that your job history bodes well for your future employment, thus enabling you to borrow at a lower interest rate. The key word here: documentation.

    "Lenders will definitely decline loans if you can't provide documentation or back up what you are telling them," Hertz says. "They don't take things at people's word unless they can be backed up."

    Hertz says you can expect lenders to ask you to sign a Form 4506 from the Internal Revenue Service to request a transcript of your tax return. You'll likely also be asked to provide pay stubs and bank statements to verify your income and assets.

    People who are self-employed, receive other types of taxable income, or earn substantial commissions or bonuses have to be diligent in keeping track of their salary history, according to Hertz. Lenders tend to scrutinize job history the way Sherlock Holmes works a case, leaving no stone unturned.

    Hertz recommends having the following documentation in good order to show lenders:

    • Two years of tax documentation
    • Any bonus check stubs from the previous year
    • The most recent month of pay stubs
    • Two forms of legal identification
    • Two months of bank statements

    "If your work hours are not guaranteed, that's a big problem," Hertz says. "If you're somebody who has a big part of their income that's a bonus or a sales rep whose income is decreasing, they might not qualify for the loan. You have to show your income is increasing or staying the same."

    Factor #5 - Few Liabilities

    The amount of debt you owe can play a significant role in whether you get an interest rate near the record-setting lows. If your financial liabilities or debts are too much in comparison to how much income you make, lenders might balk at giving you a rate below 4 percent.

    The Federal Housing Administration (FHA), the government-sponsored mortgage financing entity, describes these debt ratios as loan requirements based on whether potential borrowers are "in a financial position that would allow them to meet the demands that are often included in owning a home."

    A debt ratio is an indicator that measures the proportion of debt an individual has compared to their assets.

    For people with a lot of credit card debt, for example, Stanisch says you want to pay off balances or get them as low as possible before you attempt get a home loan with an interest rate under 4 percent.

    Here are some other ways Stanisch and Hertz say you can improve your debt-to-income ratios:

    • Lower your liabilities or debts, such as paying off a car
    • Increase your income, perhaps by getting a second job
    • Some combination of both lowering debt and improving income

    Factor #6 - Loan Type

    Choosing a loan type could spell the difference between getting an interest rate that's well below 4 percent and one that hovers high above it. So which way do you go - a conventional loan or one that's financed by a government-sponsored program?

    Depending on your situation and the loan terms, Hertz says you might get a better rate with a government-backed loan.

    "The FHA's actual rate can be a bit lower than a conventional loan," Hertz says, "but the mortgage insurance is often higher than a conventional loan."

    Hertz says it's important for borrowers to be aware that getting an FHA loan can require an upfront insurance premium and another monthly premium based on the loan amount. But if having an interest rate under 4 percent is important to you, paying the additional premiums might be worth it.

    "The upfront mortgage insurance and monthly (premiums) are aversions, but most Fannie and Freddie loans are under 4 percent," Hertz says.

    Source: HouseLogic.com

  • This Month in Real Estate

    Posted Under: Market Conditions, Home Buying, Financing  |  August 2, 2012 6:23 PM  |  51 views  |  1 comment


  • How Long Will Great Mortgage Interest Rates Stick Around?

    Posted Under: Home Buying, Financing  |  January 16, 2012 2:14 PM  |  182 views  |  1 comment

    Last year, the question on mortgage rates was how low would they go. This year, the question may be how long will they stay this low.


    The most recent unemployment report showed the jobless situation moving in the right direction, with 200,000 jobs added last month and the jobless rate dropping to an almost three-year low of 8.5%.


    Consumer confidence, as measured by The Conference Board, last month rose to an eight-month high.


    Meanwhile, increased fees charged to mortgage lenders on government-backed mortgages take effect April 1 and are likely to be passed along to borrowers.


    Sounds like the first steps toward an increase in mortgage rates, doesn’t it?


    Not yet, say rate-watchers. Conforming mortgage rates generally are predicted to stay well under 5% and near their historical lows until the last part of the year, and even then rates for a 30-year, fixed-rate mortgage will still seem attractive.


    The reason for the continued good news on rates is that although some of the latest economic data is good, the market needs to see more of it to conclude there’s a pattern of economic improvement that will stick.


    “I still think it is not enough,” said Asha Bangalore, an economist at Northern Trust Co. “The (unemployment) report was encouraging on all fronts. We need continued growth in hiring.”

    Mortgage researcher HSH Associates predicts rates this year will range from 3.85 to 4.85%.


    Meanwhile, Bankrate.com anticipates the 30-year fixed rate could drop to as low as 3.5%, but such a decline would be brief, and then rates will end the year in the low- to mid-4% range. The Mortgage Bankers Association thinks rates will end the year in the mid-4s as well.


    “The economy is in much better shape than a couple months ago, but it’s not hitting the cover off the ball,” said Greg McBride, a senior financial analyst at Bankrate.


    There are a number of unknowns that could swing rates in either direction. The quicker the economy finds its footing, the faster the rates will inch upward. An increase in the guarantee fees from Fannie Mae and Freddie Mac, used to fund the payroll tax cut extension, may be followed by additional fees later this year and raise rates more.


    On the flip side, it’s unclear what effect the 2012 presidential election, and possible efforts to shore up the economy beforehand, will have on the mortgage market. The Federal Reserve’s recent white paper offered suggestions on remedying credit markets that have been squeezed too tightly.


    Continued ultralow mortgage rates would benefit home owners seeking to refinance and consumers secure enough in their personal situation to buy a home. But Keith Gumbinger, vice president at HSH, suggests that people should be careful what they wish for and might want to take a macro versus a micro outlook.


    “To wish for continued record lows for rates is to wish for continued economic malaise,” he said. “I can’t imagine anyone would want to wish another year of economic malaise upon themselves or others.”


    Expectations and reality. Consumers are feeling just a wee bit better about the state of the broader economy and the housing market. For its December survey on consumer attitudes, respondents told Fannie Mae they expected their personal financial situations to improve over the next 12 months, and they predicted home prices would increase over the next year, but by only 0.8%.


    Flipping still OK. The Federal Housing Administration recently temporarily waived for a second time its rule prohibiting the use of FHA-backed mortgages to purchase single-family homes if they were resold within 90 days of the previous sale. The rule was designed to prevent property flipping, but in January 2010 the FHA waived it to help investors buy foreclosures, renovate them, and then resell them. The waiver, which was to expire last month, now expires Dec. 31.


    Source: The Chicago Tribune

  • NAR Releases an Official Statement Regarding the Reinstatement of FHA Loan Limits

    Posted Under: Financing  |  November 26, 2011 6:05 PM  |  252 views  |  No comments

    The National Association of Realtors® commends Congress for reinstating the loan limit formula and maximum cap for Federal Housing Administration-insured loans for two years.

    “As the nation’s leading advocate for homeownership, we applaud members of Congress for restoring FHA’s previous loan limits, which will help reduce consumer cost burdens, stabilize local housing markets and allow qualified, creditworthy borrowers to access affordable mortgage financing,” said NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami. “The reinstated loan limits will help provide much needed liquidity and stability to communities nationwide as tight credit restrictions continue to prevent some qualified buyers from becoming home owners and the housing market recovery remains fragile.”

    The provision reinstates the FHA loan limits through 2013 at 125 percent of local area median home prices, up to a maximum of $729,750 in the highest cost markets. The floor will remain at $271,050.The loan limits for Fannie Mae- and Freddie Mac-backed mortgages will remain at 115 percent of local area median home prices, up to $625,500.

    NAR believes the reinstated loan limit formula and cap change will help make mortgages more affordable and accessible for hard-working, middle-class families throughout the country, not just wealthy individuals or those in costly markets. Nearly two-thirds of buyers who will be helped by the loan limits provision have incomes below $100,000.

    “It’s a misconception that only wealthy borrowers benefit from the maximum cost loan limits; middle-class homebuyers living in all areas of the country deserve the same access to affordable mortgage financing and the same opportunity to achieve homeownership that homebuyers enjoy in the most affordable regions of the country,” said Veissi.The legislative action will have an impact even in communities with loan limits well below the maximum cap;the reset last month impacted 669 counties in 42 states and territories, with an average loan limit reduction of more than $68,000.

    The bill also provides for a short-term extension of the National Flood Insurance Program through December 16, 2011. NAR strongly urges Congress to use the additional time to complete work on a five-year reauthorization of the program, which ensures access to affordable flood insurance for millions of home and business owners across the country.

    Source: The National Association of Realtors

  • Drawbacks of Home Equity Loans

    Posted Under: Financing  |  September 4, 2011 9:59 AM  |  213 views  |  No comments

    When you need a quick source of funds, a home equity loan can be tempting. Done wisely, you can use the lower-interest debt secured by your house to pay off debts with high interest rates, like credit cards. It’s also a good choice if you know exactly how much you need to borrow for a big expenditure like a new kitchen.

    Home equity loans aren’t always the best choice for accessing cash. The best use for home equity is to buy things that will contribute to your home’s value, like a needed remodel, or your family’s future income, like a college education. Consider carefully before you cash in home equity to spend on consumer goods like clothing, furniture, or vacations.

    The fact that you’re staking your home against your ability to pay off the debt is just the beginning of the potential drawbacks.

    Drawback #1: Money doesn’t come cheap

    A home equity loan is a second mortgage on your house. Interest rates are usually much lower for a home equity loan than for unsecured debt like personal loans and credit cards. But transaction and closing costs, similar to those for primary mortgages, make home equity loans a pricey — and imprudent — way to finance something you may want but don’t absolutely need, like a fur coat, exotic vacation, or Ferrari.

    The average closing costs on a $200,000 mortgage are $4,070.

 To compare offers on competing home equity loans, use a calculator that compares fees, interest rates, and how long you’ll take to pay back the loan. Ask your current mortgage lender if it offers any discounts if you get a second mortgage from the same company.

    Drawback #2: Early payoff can be costly

    Home equity loans almost always have fixed interest rates, so you know your monthly payment won’t rise. Do check to see if there’s a pre-payment penalty — a fee the lender will charge if you pay back the loan early because you sell your house, or you just want to get rid of the monthly payment.

    Such early-termination fees are typically a percentage of the outstanding balance, such as 2%, or a certain number of months’ worth of interest, such as six months. They’re triggered if you pay off part or all of a loan within a certain time frame, typically three years. Despite the penalty, it may be worthwhile to refinance if you can lower interest rates sufficiently.

    If you want to be able to borrow money periodically, it may make sense to go for a home equity line of credit instead of a lump-sum second mortgage. Although more lenders are charging stiff prepayment penalties for HELOCs too, these are triggered when the line is closed within a certain period, such as three years, not when the balance is paid off. Bear in mind that interest rates on most HELOCs are variable.

    The big advantage to a credit line is that you can borrow whatever amount you need as you need money. The big drawback is that the lender can shut off the line of credit if the value of your home falls, your credit goes south, or just because it no longer wants to offer you credit.

    Drawback #3: Beware predatory lenders

    Some lenders don’t act in your best interest. Theoretically, lenders are supposed to follow underwriting guidelines on appropriate debt and income levels to keep you from spending more than you can afford on a loan. But in practice, some unscrupulous lenders bend or ignore these rules.

    Always shop for the best deal, rather than accepting the recommendation of a home-improvement contractor. Some will try to pressure you into taking their loans at above-market rates — and jack up the price if you don’t. According to the U.S. Department of Housing and Urban Development, you should avoid anyone who insists on only working with one lender or who encourages you to do things like overstate your income.

    Drawback #4: Your house is at stake

    A home equity loan is a lien on your house that usually takes second place to the primary mortgage. As such, home equity lenders can be left with nothing if a house sells for less than what’s owed on the first mortgage. To recoup losses, second-mortgage lenders will sometimes refuse to sign off on short sales unless they’re paid all or part of what they’re owed.

    Moreover, even though the lender loses its secured interest in the house should it go to foreclosure, in some states, it can send debt collectors after you for the balance, and report the loss to credit agencies. This black mark on your credit score can hurt your ability to borrow for years to come.

    There are benefits to home equity loans. Often you can write off the interest you pay on the loan. Consult a tax adviser to see if that’s the case for you. And the rates can be lower than what you’d pay for an unsecured, personal loan or if you used a credit card to make your purchase.

  • Fixed Mortgage Rates Inch Higher

    Posted Under: Financing  |  August 1, 2011 8:42 PM  |  199 views  |  No comments

    Mortgage rates turned course this week, with the benchmark conforming 30-year fixed mortgage rate rising to 4.74%, according to Bankrate.com. The average 30-year fixed mortgage has an average of 0.35 discount and origination points.

    The average 15-year fixed mortgage moved up to 3.83%, as did the larger jumbo 30-year fixed rate, which is now 5.19%.

    Adjustable rate mortgages moved lower, with the average 5-year ARM sliding to 3.34% and the 7-year ARM falling to 3.57%.  

    Mortgage rates inched up this week as investors were worried by political gridlock over how to raise the national debt ceiling and cut the deficit. Industry analysts have made it clear that if the United States defaults and the national debt is downgraded, mortgage rates could spike immediately. But the uncertainty over what Congress will decide over the next few days has already started to shake the mortgage world, as investors question if it’s still safe to invest in U.S. bonds.

    The last time mortgage rates were above 6% was Nov. 2008. At the time, the average 30-year fixed rate was 6.33%, meaning a $200,000 loan would have carried a monthly payment of $1,241.86. With the average rate now 4.74%, the monthly payment for the same size loan would be $1,042.86, a difference of $199 per month for anyone refinancing now.

    Survey results

    • 30-year fixed: 4.74% — up from 4.68% last week (avg. points: 0.35)
    • 15-year fixed: 3.83% — up from 3.82% last week (avg. points: 0.37)
    • 5/1 ARM: 3.34% — down from 3.36% last week (avg. points: 033)

    Source: Bankrate, Inc.

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