FHA Mortgage Rate Predictions = Irrelevant

Filed under FHA Interest Rate by on March 17, 2011 at 9:00 am {no comments}

have been on an absolute tear for the past few days.  The loan rate is controlled by trading on Wall Street, not the .   HUD is “the ,” and their job is to maintain the underwriting standards.  For the most part, they only control who can get a loan, not the rate.

Except for one critical detail:  HUD is also mandated by Congress to maintain the liquid reserves at a level so that we don’t have Fannie Mae Part Deux on our hands.  As such, they’re raising the by .25% on April 18th.  is similar to a conventional loan’s PMI.  It’s your money that gets set aside to create a pool of money that insures future defaults.  That insurance is what allows the on an to be so low in spite of the loose guidelines and low down payment requirement.

Wall Street has been selling stocks and buying bonds for the past few days.  At the opening bell, that’s reversing a bit.  Nonetheless, global investors have been pouring money into U.S. denominated bonds for the past few days, including mortgage bonds.  That’s what has pushed the FHA interest rate down anywhere from .25-.50%.  That’s the great news.

We’ve gone from a wide band of 5.00-5.25% to somewhere between 4.50% and 4.75% in just a few weeks.

All FHA have a problem right now.  You shouldn’t care about the mortgage rate, you should care about the total costs.

FHA interest rates on April 18th are going to effectively be .25% higher with the new FHA MIP guidelines.

For argument’s sake, say that you were looking at a 5.00% mortgage last week on the current guidelines for a 3.5% down, 30 Year Fixed loan.  That MIP was 0.90%.  It’s a crude way to get to the number, but say that the effective cost was 5% in rate and .9% in MIP, voila, we’re at 5.90%.

Starting April 18th, that MIP will be 1.15%.  Basically, any mortgage rate higher than 4.75% would be “higher” than today’s 5%.

Add to it one more thing:  today’s are based on the past few days of trading.  Wall Street is trading on the assumption that there will be a total meltdown in Japan.  Anything less than a full meltdown and we already have plenty of room for mortgage rates to go up.  No matter what, they’re going up .25% in just a month if you treat the MIP like a rate change.

What does this mean?  If you can find your home, reach an agreement on price, and enter into an FHA mortgage application soon, you stand to gain both in terms of the mortgage rates but also utilize the lower MIP factor.

It makes now a great time to apply for a mortgage.  Unless FHA interest rates go down another .25% or more, the real cost of your FHA loan will be more expensive after April 18th than it is today.

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FHA Interest Rates Rallying

Filed under FHA Interest Rate by on March 11, 2011 at 7:59 am {no comments}

had been in an ugly trend from October until just a few weeks ago. We’d seen rates rise by nearly a full 1.00%.

With the spring buying market already heating up, had definitely taken a hit over the past 4-5 months. However, it probably still made sense to buy with the long-term just making today’s more attractive than those of the future.

That was until today’s mortgage rates decided to improve. I’m not a huge fan of the PMMS report. It is woefully delayed, publishing Thursday rates that are tallied from Monday to Wednesday. This week’s conforming rates held at 4.88%. There isn’t a direct equivalent tool for tracking interest rates, but they’ve been slightly lower. (more…)

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Home Affordability Peaked Last Quarter; Purchasing Power Sinks 10%

Filed under home values by on March 8, 2011 at 7:47 am {no comments}

Home Opportunity Index 2004-2010

reached an all-time high in 2010′s last quarter. Unfortunately for home buyers , it’s been a different story since, however.

As cratered, and with home values soft, the reached its highest level in 20 years. The index is published by the National Association of Home Builders. 

Close to 74 percent of the new and existing homes sold between October-December 2010 were affordable to families earning the national median income of $64,400. It’s the 8th straight quarter in which the Home Affordability Index surpassed 70 percent.

Prior to 2009, the HOI rarely topped 65 percent.

That said, though, as with everything in real estate, home affordability is a local event. For example, take the Elkhart/Goshen area of northern Indiana. 97 percent of homes sold there last quarter were affordable to families making the area’s median income. 

This level of affordability is likely related to state capital Indianapolis, a perennial top-scorer itself.

For the second straight quarter — and the 22nd time dating back to 2006 — Indianapolis led all major metropolitan areas with a 93.5 affordability rating.

Meanwhile, on the opposite end of the home affordability spectrum, the “Least Affordable Major City” title went to the New York-White Plains, NY-Wayne, NJ area for the 11th consecutive quarter. Just 25.5 percent of homes were affordable to households earning the area median income.

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Military Personnel Can Still Claim The $8,000 Homebuyer Tax Credit

Filed under Homebuyer Tax Credit by on March 7, 2011 at 7:47 am {no comments}

Tax credit extended for military householdsFor certain members of the military, and for certain federal employees, there’s just 2 months remaining to get use the federal home buyer .

Eligible persons include members of the uniformed services, members of the Foreign Service, and intelligence community employees who served at least 90 days of qualified, extended duty service outside of the United States between January 1, 2009 and April 30, 2010.

Spouses of persons meeting the above criteria are eligible as well.

The federal home buyer tax credit ranges up to $8,000 for first-time home buyers, and up to $6,500 for existing homeowners. Existing homeowners must have lived in their “main home” through 5 of the last 8 years to be eligible.

Claiming the federal tax credit is a two-step process. First, eligible persons must be under contract for a new home on or before April 30, 2011.  The home’s closing must then occur on or before June 30, 2011. 

The does not make date exceptions.

Furthermore, both the buyer(s) and the subject property must meet certain minimum eligibility requirements:

(more…)

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FHA : Monthly Mortgage Insurance Premiums To Rise April 18, 2011

Filed under FHA Mortgages by on March 4, 2011 at 7:47 am {no comments}

FHA Mortgage Insurance Increase April 18 2011For the third time in 12 months, the is changing its costs. 

Effective for all FHA case numbers assigned on, or after, April 18, 2011, annual mortgage insurance premiums () will increase 25 basis points.

The change will add $250 to an FHA-insured homeowner’s annual loan costs per $100,000 borrowed, and applies to all borrower’s equally. Current FHA borrowers are unaffected.

To understand the FHA is to understand why premiums are rising.

As an institution, the Federal Administration plays a much larger role in the U.S. market today than it did just 5 years ago. According to its own records, the FHA’s percentage of purchase money business nationwide expanded from 4 percent in FY 2006 to 19 percent in FY 2010.

Rapid growth like this has strained the FHA’s capital and, indeed, in its official statement, the FHA alludes to this, stating that the MIP increase will “significantly strengthen” its reserves. By law, the FHA must maintain a certain minimum level of reserves.

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Make A Mortgage Rate Plan BEFORE Friday’s Jobs Report

Filed under Jobs by on March 3, 2011 at 7:47 am {no comments}

Unemployment Rate 2008-2011 could move higher beginning tomorrow morning. The Bureau of Labor Statistics releases its February jobs report at 8:30 AM ET.

Home buyers and rate shoppers would be wise to take note. The report is almost always a market-mover.

Consider last month.

Although net job creation fell well-short of expectations in January — just 36,000 jobs were added — the national Rate dropped to 9.0%, its lowest level in 2 years. The marked improvement surprised economists and sparked inflationary concerns within the investor community.

This, in turn, caused mortgage rates to rise.

In the days immediately following the jobs report’s release, conforming rates jumped 0.375 percent. That’s equivalent to a mortgage payment increase of $22 per month per $100,000 borrowed.

A similar spike could occur tomorrow.

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Ignore The Case-Shiller Index; Focus On The Future Instead

Filed under Case-Shiller Index by on March 2, 2011 at 7:47 am {no comments}

Case-Shiller December 2010

Last week, Standard & Poor’s released its Case-Shiller Index for December 2010. The index is a home valuation tracker, meant to meausure the change in from one period to the next.

December’s Case-Shiller Index showed major devaluations nationwide. As compared to December 2009, on a year-over-year basis, home values fell in 18 of the Case Shiller Index’s 20 tracked markets, and the U.S. National Index dropped 4 percent overall. 

The retreat puts December’s home values at similar levels as compared to early-2003.

That said, buyers and sellers would be wise to take the findings lightly. The Case-Shiller Index is inherently flawed. As such, its results are neither practical — nor relevant — to everyday Americans.

There are 3 Case-Shiller flaws, in fact.

The first flaw is the index’s limited sample set. Wikipedia lists 3,100+ municipalities nationwide and we can be certain that real estate is bought and sold in all of them. The Case-Shiller Index, however, measures just 20 of them. That’s less than 1% of all U.S. cities. And then, within those tracked cities, Case-Shiller reports an average, lumping disparate neighborhoods and streets into one big number.

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Pending Home Sales Drop For Second Straight Month

Filed under Pending Home Sales by on March 1, 2011 at 7:47 am {no comments}

Pending Home Sales July 2009 - January 2011After a strong run to close out 2010, the market for home resales softened a bit in January.

On a seasonally-adjusted basis, the Pending Index dropped 3 percent last month, and December’s figures were revised downward for a loss, too, according to the National Association of REALTORS®.

A “pending home sale” is defined as a home under contract to sell, but not yet closed. 

The forward-looking index is now at a 3-month low on a national level, but still well ahead of its rolling 6-month average.

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What’s Ahead For Mortgage Rates This Week : February 28, 2011

Filed under Weekly Review by on February 28, 2011 at 7:48 am {no comments}

Employment data is released FridayMortgage markets improved last week as Wall Street’s concerns about the trumped its fears of inflation. Conforming and fell to a 3-week low.

Last week marked the second straight week in which mortgage rates fell, a streak that follows four straight weeks of climbing mortgage rates.

It’s been a bout of good fortune for rate shoppers and home buyers.

In addition, according to ’s weekly mortgage rate survey, the average spread between conforming 30-year fixed rate mortgages and 5-year ARMs has widened further.

The two benchmark products are now separated by 1.15%. It’s the largest interest rate gap in recent history; one that yields a monthly payment difference of $68 per $100,000 borrowed.

This week, it’s unclear in what direction mortgage rates will go.

(more…)

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New Home Sales Crater In January, Opening The Door For Deals With Builders

Filed under New Home Sales by on February 25, 2011 at 7:47 am {no comments}

New Home Sales (Jan 2010 - Jan 2011)

Not all reports are sunny, it seems.

In its monthly New release, the U.S. showed a 13 percent drop-off in annualized new construction sales between the months of December and January.

It’s the biggest one-month drop in New Home Sales since May 2010.

In addition, the supply of new homes for sale spiked higher to 7.9 months last month.  ”Home supply” is defined as the amount of time it would take to sell the complete “for sale” inventory at the current pace of sales.

(more…)

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