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Archive for the 'Mortgage information' Category
Fannie Mae and Freddie Mac: What Effect Will Phasing Them Out Have On Mortgage Market?
Current consideration of phasing out Fannie Mae and Freddie Mac over the next 5-7 years has everyone in the real estate and mortgage markets speculating as to the effect it will have. Created after the depression to help people buy homes, these two entities and FHA, now buy or insure 97% of home loans.
Some of the effects include:
- Higher borrowing costs – fees as well as interest rates would go up
- Limited financing choices – more ARMs than 30-year mortgages would be offered
Two articles in last week’s New York Time online, Without Loan Giants, 30-Year Mortgage May Fade Away and A Plan to Phase Out Fannie Mae and Freddie Mac do a great job of providing looking at the pros and cons of these programs and examining possible outcomes of phasing them out.
Whatever happens, it is another sign that housing will likely never be as cheap as it is now.
Mortgage Interest Deductions: Should They Be Eliminated?
Since before I owned or started selling real estate, the mortgage interest deduction has existed and been one of the main benefits espoused for buying a home. In addition to building up equity, it has been argued that this is one of the deductions that is helpful for lowering taxes due, especially for individuals and couples with few other tax deductions.
The mortgage interest deduction was one of the items recommended be trimmed, to help control the national debt, by President Obama’s deficit-reduction commission last December. The panel addressed the interest deduction for first and second mortgages and equity lines of credit. Other real estate targets included in the were tax write-offs for property taxes paid and the capital gains exclusions ($250,000 and $500,000) for individual and married taxpayers who make a profit when they sell their residence.
As a homeowner, Realtor, and real estate investor, I want to keep all of these deductions. However, there are some I would be willing to live without in exchange for decreasing the national debt. I would be willing to forgo the mortgage interest on second homes and on equity lines of credit to keep the deduction on primary home interest, capital gains exclusion and property tax write off? What do you think? Are there any you would be willing to give up? If so, which ones?
How Rising Mortgage Rates Affect Your Buying Power
This table from the KCM post “The Cost of Waiting for Prices to Fall” is a great visual to update my post from yesterday regarding mortgage rates hitting the 5% mark
Mortgage Rates Hit 5%
Mortgage rates are inching up, currently hovering around 5%. According to a CNNmoney.com report, interest rates at 5% don’t affect home buyers. While 5% is still low, and would only add slightly to a monthly mortgage, a continued increase in rates will affect the amount of home a buyer can purchase.
Other posts that discuss mortgage rates include:
Mortgage Rates – How An Increase In Rates Affects Your Purchasing Power
Fannie Mae and Freddie Mac Increasing Interest Rates and Fees
The Difference between Cost vs. Price
Fannie Mae and Freddie Mac Increasing Interest Rates and Fees
Starting in March 1 for Freddie Mac and April 1 for Fannie Mae interest rates for loans over 15 years could almost double, even if you have perfect credit.
Remember, if you are a buyer the cost of owning a home is more important than the price of the home. Obviously you don’t want to overpay for a home, but by waiting for prices to “bottom out” you may be overlooking the most important part of purchasing a property or home – interest rates. Trying to time the real estate market perfectly is like trying to time the stock market.
You Have Heard It But Do You Believe It
Miami Real Estate On Sale
With prices still on a downward slide in South Florida, the number of sales are up as buyers realize the buying opportunity these price decreases represent. And although 30-year mortgage rates inched up slightly this week, they are still under 5% and near historic lows.
These interest rates will help first time buyers, but may not play much of a difference in Miami’s high end market: 2 out of 3 sales in the $1,000,000 and over market are cash sales.
FHA Loans – Minimum Credit Scores Reduced
Effective January 15th 2011, it will be easier to qualify for an FHA loan with Homes Services Lending. The new FHA minimum credit scores will be reduced from 600 to lower thresholds as follows:
- Credit score 500 – 579 allowed with maximum 90% LTV
- Credit score 580 – 599 allowed with maximum 95% LTV
- Credit score 600 – and higher allowed with maximum 96.5% LTV
Additional requirements may have to be satisfied.
New Low Mortgage Rates Results in Flurry of Refinancing Activity
According to the Mortgage Bankers Association, new record low mortgage rates caused refinancing activity to increase by 21% last week. Applications for new mortgages were down 8.5%, mainly due to the more stringent requirements for FHA mortgages that took effect on October 4.
Credit Do’s and Don’ts if You Are Thinking of Buying a Home?
Fannie Mae is requiring more stringent reviews of loans from lenders so if you are going to be in the market for a home in the near future keep the following in mind:
- don’t incur any new debt, especially between the time you apply for the loan and the closing on your property;
- don’t apply for credit cards or anything that would require a credit check, as they are going to be looking at all credit inquiries, especially those prior to closing;
- do have plenty of documentation on the source of any large deposits as these are going to scrutinized a lot more closely. If you are getting a gift from a relative for the down payment, make sure you have a gift letter. If you are selling stocks or bonds have a copy of the transaction from your financial institution.
Mortgage Applications Decline to Lowest Level Since April, 1997
Despite the decrease in interest rates since April 30 of this year, mortgage applications for home purchase are down to the lowest rates since April 11, 1997. The decrease is largely due to the expiration of the First Time Home Buyers Tax Credit.
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