Mortgage Rates Are On the Rise - Lock In Good Rates
August 9, 2008
Time to lock in your Atlanta mortgage rate
Since mortgage interest rates are on the rise, home buyers can save considerable cash by locking in a reasonable rate when they find one.
During the housing boom, interest rates were extremely low - generally between 5.5% and 6.5% - and very stable. So borrowers often didn’t bother to ask lenders to lock in their rates regardless of market fluctuations. If one good interest rate deal disappeared, another one was generally right around the corner.
But today the mortgage market is very volatile, and rates are trending upwards. So losing out on a good deal may mean it’s gone forever. If buyers see a bargain, say experts, they should pounce.
“If you hear of a rate that seems to be much better than the rest of market, get it in writing and lock it in,” said Steve Habetz, a veteran mortgage broker in Connecticut.
Mortgage giant Freddie Mac reported Thursday that the average rate for a 30-year fixed stood at 6.52%, up from less than 6% in May.
Rates on the rise
A panel of analysts surveyed by Bankrate.com - including Cameron Findlay, the chief economist for LendingTree.com; Mick Larson, real estate analyst at Weiss Research; and Dan Dowling, president of United Mortgage Capital Corp. - expects rates to go up in the next six weeks.
With the threat of inflation growing and investors wary of buying mortgage securities, other forecasters have predicted rates will hit at least 7% by the end of the year.
For every half point interest rate increase, the monthly payment on a typical mortgage of $200,000 jumps nearly $70. That adds up to more than $800 a year, and $8,000 in the first 10 years of a 30-year mortgage alone.
Locking in a rate is easy, as long as you have a contract or at least a binder on a home. Just tell your mortgage planner to give you a commitment in writing. Locks are available for as long as 60 days at very low cost.
Locking in for 60 days may cost only an eighth of a point extra, turning a 6.5% loan into a 6.625% one. Paying that extra eighth of a percent makes sense if the locked rate is below market, or if you expect rates to rise.
“More than 60 days and the lender is usually looking for cash up front,” said Habetz.
Habetz had an offer from Wells Fargo several weeks ago that beat anything else available. It was for a 5-year adjustable rate mortgage with an introductory rate of 4.875% - at least a full percentage point lower than competing offers.
“It lasted only two or three days,” he said, “and all we had time to do was to get the customers we were already working with into the loan.”
Those customers probably saved themselves $5,000 or so for every $100,000 they borrowed over the first five years. The amazing part of this story, to Habetz, was that not all his clients took advantage of the offer.
“Some of my customers said, ‘That’s an attractive offer. If it’s that good, it will probably get better,’ ” he said.
Wrong. It only got worse, and those people locked themselves out of a great deal.
But locking in your rate isn’t entirely risk-free. After all, rates might actually go down.
“When rates go down,” said Habetz, “most lenders won’t take your rate down with them unless rates drop substantially. Then they may give you the new rate plus an eighth of a point.”
Certainty in an uncertain market
But that scenario appears unlikely.
Concerns about inflation are helping to push rates higher. “Inflation has gone from the back burner to the front,” said Greg McBride, a senior financial analyst for Bankrate.com.
At the same time, nervous investors in mortgage backed securities, are demanding higher rates for buying these bonds in what they deem a very risky market. That translates into higher rates for borrowers.
So locking in a good deal now should mean a lower rate for most borrowers. And besides saving them money, a lock should take some of the uncertainty out of financing a home purchase, since buyers can determine exactly what their monthly home ownership expenses will be several weeks before closing.
“There are times in your financial life when you should be aggressive and there are times when you should be conservative,” said McBride. “When you’re buying a house and looking at mortgage rates, that’s a time to be conservative.”
Atlanta First Time Home Buyers - $7500 Tax Credit
August 4, 2008
The Housing and Economic Recovery Act of 2008 was just signed by President Bush with some amazing benefits for first time home buyers.
When is the last time someone gave you a $7,500 loan, that has no interest, no payments for two years, and if you do not make enough profit when you sell, you do not have to pay back the loan?
That is what first time homebuyers get.
Call everyone you know who wants to buy their first home, this is too good to miss.
The risk of loss in buying now is on the government. In other parts of the country where real estate is going down in value, you can lose 10% of the value of the home (up to $7,500) and the loss is covered by the fact that you do not pay back the tax credit. The North Atlanta real estate that first time buyers can afford is going up in value, so we are not as worried about the risk of loss. Even a bad buy that does not go up in value is covered by the tax benefit because you get $7,500 no matter what happens.
What is the catch?
You have to buy your first house in three years before July 1,2009, not have super high income, not use bond financing and buy anywhere in the US, Not too difficult, right?
My thanks to Tim Burrell, Raleigh real estate broker, for his informative article on tax benefits to first time homebuyers.
How Much Down Payment Do You Charge?
June 30, 2008
How much do you charge for a down payment? A question often raised by first time Atlanta home buyers.
Photo Credit: AMagill
The hopeful buyers have been looking at houses online, and identified a property that seems to meet their needs. It is only natural to ask how much money is needed to buy the house.
Just a few short months ago my answer would have been different. Some lenders will finance the down payment into your mortgage.
Today, mortgage guidelines and qualifications for obtaining a loan to purchase have changed. Lenders and mortgage brokers have gone out of business. Others are hanging on by a shoestring. One unwavering constant - since 1934 - is the Federal Housing Authority (FHA).
An FHA loan is a home mortgage that allows for a purchase or refinance with a low down payment. They’re great for the first time home buyer.
My real estate colleague in Pasadena, California area has written several articles on FHA advantages and disadvantages. Advantages include low cash outlay and no penalty for paying off the loan early. A small disadvantage is loans take approximately 45 days to process and close - about 2 weeks longer than a conventional loan.
Want more information on buying a house in north Atlanta with a small down payment? Contact us.
Use this topic list to tell how to best respond to your FHA loan questions.
- About the FHA
- Applying for an FHA Loan
- How To Pre-qualify for an FHA Home Loan
- The Increased FHA Loan Amount
- FHA Mortgage Fees
- Fees Prohibited by HUD
- FHA Loan Mistakes to Avoid
- FHA Adjustable Rate Mortgage
- FHA Loan Limit
- FHA Loan Options
Strategic Equity Management
June 18, 2008
There are several reasons why purchasing a home is preferable to renting one. Rent payments go directly into the pocket of a landlord, while mortgage payments result in the accumulation of equity and the eventual ownership of the property. The tax advantages of home ownership are also significant since mortgage interest is tax deductible.
Ironically, these two benefits do not always work well together! Financial planning expert and best-selling author, Douglas Andrew, has revealed some surprising misconceptions as well as some innovative strategies in his book, Missed Fortune 101. Andrew explains that most homeowners believe that paying down their mortgages quickly and increasing their equity is the best investment they can make. However, doing so results in a decrease in the tax benefits available since the loan is paid off sooner, causing the interest deductions to disappear.
As an alternative, Andrew suggests that homeowners obtain a fixed-rate, long-term mortgage. Rather than putting down a large down payment or paying extra principal, he recommends placing these funds in a carefully chosen investment vehicle that will earn a higher rate of return. By using the tax benefits of the interest deductions and the compounding of interest on the investment account, homeowners have the potential to earn a higher rate of return. In addition, should an emergency need for cash arise, the investment account will be much more liquid than the equity of the home.
Stay up to date with what’s going on in the market by registering for updates.
Subscribe To Our RSS Feed! 
