Austin Property Talk

30-year fixed-rate still below 5%

Inman News -  For borrowers with good credit and cash for a downpayment, mortgage rates remained at or near record lows this week, according to Freddie Mac's latest weekly rate survey.

The survey found rates on 30-year fixed-rate mortgages averaged 4.75 percent for the week ending June 17, with an average of 0.7 point. That's up slightly from last week, when 30-year fixed-rate loans averaged 4.72 percent, but down from 5.38 percent a year ago.

The all-time record low for 30-year fixed-rate loans in records dating back to 1971 was set during the week of Dec. 3, when the rates averaged 4.71 percent.

Rates surveyed by Freddie Mac are for prime borrowers taking out loans with 20 percent downpayments. Borrowers taking out loans too large or risky for purchase or guarantee by Freddie Mac can expect to pay more.

Recent turmoil in financial markets has made the mortgage-backed securities that are the ultimate source of funding for most home loans popular with investors, helping keep rates charged to borrowers low.

** But the Mortgage Bankers Association is forecasting that rates on 30-year fixed-rate mortgages will gradually rise to 5.4 percent during the fourth quarter of this year, reach 6 percent in the last three months of 2011, and average 6.6 percent in the fourth quarter of 2012.

Loan Credit Standards Tightened Further

Their making a list and checking it twice . . . .

We thought the worst was over but it seems like every month there is some new federal guideline tied to final mortgage approval; an extra hoop to jump through.  First it was full disclosure on the good faith estimate, then it was raising FHA fees and now its extensive credit checks.  Its probably going to get worse before it gets better. 

The most recent change to Fannie Mae's guidelines called the "Loan Quality Initiative" calls for credit checks on the buyer(s) up to the day of closing.  Who can blame them.  Recent history indicates that everyone involved in a real estate transaction needs to go the extra mile to assure that there is no funny business going on. 

This is not necessarily a new practice.  Most lenders have been following this practice for some time now.  That is why it is imperative for a buyer not to do anything between the preliminary loan approval stage and the final "clear to close" stage that would negatively effect debt to income ratios. 

This means waiting to buy a new car, not putting new furniture purchases for the new house on credit and not even using existing credit on credit cards that have high limits.  Anything that alters the balance of the amount of debt that you carry compared to the income you generate can be a red flag for the lender, delay closing.  

Smart Money (Wall Street Journal) published a very good article that explains the entire procedure. 

One thing I found interesting in this article is the part that states that lenders are going to be extra diligent to confirm the occupancy plans for the property.  That is not something that we have seen in the past and I haven't seen it yet at a recent closing but it does have the opportunity to effect a number of closings.  Sometimes plans change during the escrow process and it looks like that could be a recipe for added chaos. 

A word for the wise: just keep everything status quo until the loan funds and the transaction closes. 

Post Tax Credit Hangover?

As an aside to my recent post below about the effects that the recently expired tax credits will have in the months to come, mortgage applications have slipped dramatically in the past month.  I rarely watch the evening news but I did catch a segment on this topic last night.  While it is a little bit troubling from my stand point as a Realtor, I want to just say, DUH!  Of course this is going to happen. 

As I stated below, anyone who was in a position to purchase a home from January-June of this year would have been foolish to wait until now to do so.  There were thousands of reasons to be under contract by April 30th and close by the end of June.  I've posted an article below but I think we have to take this data with a grain of salt.  If we are going to compare this month to the past 3 months when numbers were sky high because of the incentives then of course the difference is going to be significant. True indicators are going to be late Summer-Early Fall.  

MSNBC - The number of customers applying for a mortgage to purchase a property fell to the lowest level in 13 years last week, a sign the housing market is struggling without government incentives.

Purchase volume declined 5.7 percent and is at its lowest point since February 1997, the Mortgage Bankers Association said Wednesday.  Overall mortgage application volume, which includes loans for purchases and refinancings, dropped by 12.2 percent during the week ending June 4, compared with the previous week.  Read the rest of the article.

Austin Texas Picked as No. 1 Best City

Austin Texas and Real Estate news for the week . . .

Austin was picked as the No. 1 best city to live in for the next 10 years in Kiplinger's Personal Finance ranking Wednesday. The magazine cited the capital city's innovative thinking, plentiful music venues, lakes, parks, unique business climate and job-creation tendencies. The report said "arguably the country’s best crucible for small business, Austin has spawned many companies with unique twists that have gone nationwide." Kiplinger's chose cities with positive business climates, but also unique livability appeal.  Read more Austin Called Crucible for Small Business.

Austin was ranked among the top 20 Memorial Day vacation spots, according to a survey from Web booking engine Priceline.com.  The Texas capital took the No. 18 spot, ranked according to a survey of more than 30,000 hotel booking requests for May 29-31.  Austin top Memorial Day destination reflected in Americans' travel plans.

Austin home sales continued to rise last month, increasing 31 percent compared with April 2009, according to Austin Board of Realtors statistics released Thursday.  Home sales for the month totaled $486 million with 2,043 single-family homes sold, according to the Multiple Listing Service report. When compared to April 2009, the median price of real estate was unchanged in Austin at $190,700. Most promising, pending sales increased 47 percent to 2,813.  Austin Home Sales up 31% in April.

Continued instability in financial markets overseas drove U.S. fixed-rate mortgage rates lower this week, and Freddie Mac's chief economist on Thursday said the low rates could soften effects of the home-buyer tax credit's expiration. Fixed Rate mortgages continue to fall.  

Post-Tax Credit Buyers May Save Money

From REALTOR Magazine . . .Missing the tax credit deadline might have seemed like a big mistake to some home buyers, but waiting could have been the smartest thing to do.

Interest rates have fallen so dramatically since April 30th that the typical purchaser of a $350,000 home, financed with a $280,000 mortgage, would have saved a bundle by waiting until May.

At April’s average rate of 5.34 percent, a home buyer would have locked in a 30-year fixed rate loan with a monthly payment of $1,561.82.

The same borrower could have snagged a 30-year fixed rate loan at a rate of 4.625 percent in May and paid $1,439.59 per month.

That’s a $1,467 annual savings. Over 30 years, it’s a $44,003 savings, dwarfing the tax credit.

Source: Informa Research Services (05/26/2010)

Link it Up

4 Links to interesting news & insight about homes, home loans and the real estate market for you on this Friday.  

What's that in your mailbox (or directly deposited into your checking account)?  Woo-hoo -- your tax refund from the IRS! But that giddy feeling can lead you to squander most or all of the dough on stuff you don't really need. Here are three ways to make it easier to save at least some of it. (How to Save some of your Tax Refund)

Mortgage rates yesterday ended a rally streak that brought consumer borrowing costs back down toward their best levels of 2010. Almost erasing all the losses experienced before and after the Federal Reserve exited the secondary mortgage market. (Mortgage Rates Give Back Gains after Steady Winning Streak)

Spring in Texas: Bulbs blooming. Hail pounding your roof. There's nothing quite like that helpless, sinking feeling of wondering how many thousands of dollars you'll be out or worrying about what's happening to the new home you're trying to buy. (Know what to do when Hail and your Roof Meet)

Austin ranked 18th on a U.S. Environmental Protection Agency listing of metropolitan areas with energy efficient buildings, falling behind both Houston and Dallas. Read more: (Austin ranks 18th on green building list, behind Dallas and Houston - Austin Business Journal:)

Mortgage Market Watch

They say March comes in like a Lion and out like a Lamb. . . But this year, the exact reverse is true when it comes to home loan rates - for quite a few reasons, including the end of the Federal Reserve acting as a large buyer of Mortgage Backed Securities (MBS). The "demand" created by their fifteen-month program has helped Bond prices stay high and home loan rates stay low.

But the Fed's MBS purchase program will end on March 31st. The Fed has confirmed this several times, including during last week's testimony by Fed Chairman Ben Bernanke. What's more, the Fed will likely change sides entirely, and actually become a seller of MBS, since their balance sheet hangs heavy with MBS holdings. However, once the Fed begins selling MBS and puts more supply into the market - at the same time as entirely removing their past demand as buyers - this will pressure Bond prices lower and push home loan rates higher.

Read the entire article and short term forecast for mortgage interest rates.

Priceless!

This video is absolute genius.  This is Rich Iacovetta who is a mortgage broker in California.  He began "Facebook Friday" (about a year ago as a platform to relay mortgage news to his network.  His videos usually involve a little or a lot of humor, but this one takes the cake.  Enjoy!

10 Ways to Get a Down Payment

Nicole Lahti with United Lending here in Austin Texas recently published a blog post detailing 10 Ways to Get a Down Payment.  

With the new expanded tax credits available to home buyers between now and April 2010, mortgage rates hovering around or below 5%, the market is ripe with opportunity. 

However, with first time buyers especially, the question can often be, "Id like to buy but where would I come up with the down payment?" 

Currently, the least amount that you can put down would be with a FHA loan which requires 3.5% down on a qualified purchase.   

But you might be surprised about some of these creative sources for a down payment that may not have crossed your mind.  Take a look at this list.  

Mortgage Market Watch

Here is your mortgage market watch for the week of October 26th. 

One of my goals as a real estate consultant is to provide my clients with as much valuable information as possible.  Naturally, one of the biggest questions on the minds of home buyers and sellers is; how do interest rates look?  Its important to pay attention to the details because the headlines can sometimes be deceiving.  I receive weekly briefs from my mortgage partners and I will summarize and pass along the important facts.  This information is provided by the Mortgage Market Guide.  

Its important to remember that weak economic news normally causes money to flow out of stocks and into bonds, helping bonds and home loan rates improve.  While strong economic news typically has the opposite result. 

Two weeks ago, the Core Consumer Price Index (CPI) was reported higher than expected, indicating inflationary forces may already be underway.  Inflation erodes the value of the fixed return that a Bond provides - therefore inflation has harmful effects on bonds and home loan rates.  Just a hint of inflation can cause home loan rates to worsen which is what we have seen over the past couple of weeks and what economists predict will continue to happen over the next year. The truth is that we may never see interest rates at these levels again in our lifetime. 

In national housing news, Housing starts and Building permits both came in slightly lower than expectations which may indicate that builders are exercising some caution in the face of the First Time Home Buyer Tax Credit which is currently scheduled to expire on November 30th. 

On the flip side, existing home sales came in better than expected.  A vast majority of those sales (45%) were sold to first time home buyers - rushing to move in on the tax credit. 

If you have specific questions about interest rates or the mortgage market as a whole, email me and Ill introduce you to one of my trusted mortgage partners who would be happy to enlighten you on any questions or concerns you might have. 

Mortgage Market Watch

Here is a brief overview of how changes in the financial markets have affected mortgage rates over the past couple of weeks. 

Two weeks ago at thier regularly scheduled Open Market Committee meeting, the Fed decided to ration out their remaining purchase commitment of Mortgage Backed Securities through the first quarter of 2010. In other words, instead of committing to purchase more, as speculated, they will space the remaining purchases out over the next six months.  This will be  done in an attempt to provide a smoother transition back to "normal market conditions.

What effect does this decision have on mortgage rates?  In the interim, rates should remain fairly steady.  However, once the Fed ceases its purchases or MBS, interest rates are anticipated to climb steadily - most likely back above 6%.

Last week, the Labor Department's Jobs Report did not  provide promising news, with an uptick in unemployment rates to 9.8%. 

On the flip side, the report on Personal Spending indicated that spending rose in August at its fastest monthly pace in almost 8 years.  However that news must be taken with a grain of salt since a large part of that spending can be attributed to the "Cash for Clunkers" rebate program which is no longer in effect. 

Sales of existing homes were down in August, but pending home sales were up significantly at 6.4% (mostly as a result of buyers working to take advantage of the $8000 First time Home Buyer Tax Credit).

Remember:  With home loan rates still at near historic lows and slated to increase incrementally over the next 6 months, as well as the First Time Homebuyer Tax credit set to expire on November 30th, now is the best time for you to get off the fence and take action if you have been thinking about possibly buying a house. 

If you, a family member, neighbor, friend, or co-worker have been thinking about purchasing a house, email me and we can discuss the best way for you to introduce the two of us.  I have time to help a few first time buyers in the next few months and Id love to spend my time helping those people that you care about most.