The Numbers on Buying a House

Provided By Realty Times

It can be a tricky question. How much home can you really afford? From employment status, to savings, downpayment, and even spending habits, there are a myriad of factors that come into play.

Here is a list of items to consider before settling on a budget.

1. Monthly Payment: Conventional wisdom tells us that your mortgage payment should be no more than 28 of your gross monthly income. This means that if you make $50,000 a year, the maximum amount you would safely want to pay each month is $1,166. How do you figure this for you own salary? Take ___ (salary) x .28 = total dollar amount for year. Then divide the total dollar amount by 12 (months in the year) and there you have it!

The National Association of Realtors also gives this simple equation for renters to use to figure out how much they can afford. Multiply your rent by 1.32 and that will equal your affordable mortgage payment.

2. Job Security: Have you just switched jobs? Is your company experiencing layoffs? In times of economic uncertainty, you may find it best to stay put. This is why many economic analysts keep saying that a housing recovery is dependent on a jobs recovery. When jobs return, so will the buyers.

3. Savings: The state of American savings is scary. According to Visual Economics.com, the average family has $117,951 worth of debt and only $3,800 in savings.

And a quarter of Americans have no savings at all! Half have nothing saved for retirement. Talk about crossing your fingers that social security will hold out for a while.

New grads are encountering an even scarier situation. The average college graduate has well over $20,000 in student loans to repay, and according to the New York Times, "Paying back student loans is likely to be especially difficult for recent graduates ... because the unemployment rate for college graduates ages 20 to 24 was 8.7 percent in 2009 — the highest annual rate on record and a substantial rise from 5.8 percent in 2008."

How does your debt-to-income ratio stack up? The Federal Reserve thinks debt adding up to more than 40% of your gross income could indicate financial distress.

The U.S. savings rate has risen steadily since the recession hit. It is now at 5.8 percent (American Express Spending & Saving Tracker). Hopefully, this rate will continue to be a trend.

4. Emergency Fund: Before you even begin to think about buying a house or moving, you must have an 8-month emergency fund in the bank. This means you need to add up your living expenses for a month. Include all the necessities and things that must be paid (rent or mortgage, car payments, insurance, food, gas money, electric, phone, tuition, day care, etc). Then multiply this number by 8. You must have this in case you or your spouse loses your job, gets sicks, or some other disaster hits your family.

5. Downpayment: This is savings in addition to your 8-month emergency fund. And a downpayment should be at least 20 percent of your purchase amount.

Look at it this way. If your monthly expenses are $2,000 a month and you want to buy a $100,000 house, you'll need a bare minimum of $36,000 in the bank to truly afford this move. That doesn't include cash needed for closing costs, repairs, moving expenses, and renovation.

6. Lifestyle and Extraneous Factors: Everyone has different wants and needs. You may be fine spending a little more for the house of your dreams in exchange for taking fewer vacations. Others abhor the statement, "house rich, cash poor," and instead would rather have funds for shopping, dining out, and travel. And don't forget about extraneous factors, such as aging parents, car repairs and maintenance. Things may come out of nowhere!

Buying a house is a fulfilling experience, but it comes with a lot of financial responsibility that shouldn't be taken lightly. Be sure to mull these items over when considering a buy.

Do you feel ready to buy a home, but are unsure where to start? Give us a call at 972.772.7000 or email us at frontdesk552@kw.com.

Fixed Mortgage Rates This Week Better For Borrowers

Provided By Realty Times

After slight movement early last week, mortgage rates ended up looking better for borrowers with a decrease of .125% for conforming 30 year and 15 year mortgage interest rates making them more competitive with FHA mortgage rates.

FreeRateUpdate.com's daily survey of wholesale and direct lenders show that current 30 year fixed mortgage rates are at 4.750% and 15 year fixed mortgage rates are at 4.125%. 5/1 adjustable mortgage rates are at 3.250%. Still remaining below 5%, these are the best mortgage rates available with 0.7 to 1% origination fee to well qualified borrowers who can also meet lender approval.

FHA 5/1 adjustable mortgage rates increased .125% and are at 3.625%. >FHA 30 year fixed mortgage interest rates are at 4.625% and FHA 15 year fixed mortgage interest rates are at 4.000%, both remaining the same.

FHA mortgage loans continue to attract borrowers for the benefits they offer such as the low down payment requirement although FHA closing costs (APR) are higher due to the upfront mortgage insurance premium and other applicable FHA fees. Coming April 18th, FHA is increasing the annual mortgage insurance premium by .25% for FHA 30 year and FHA 15 year fixed rate mortgage loans.

Jumbo 15 year fixed mortgage rates saw the biggest jump increasing .250% and are at 5.250%. Jumbo 30 year fixed mortgage rates are at 5.500% and jumbo 5/1 ARM loan rates are at 4.125%, both remaining the same. Jumbo mortgage loans are available for borrowers in need of financing above the conforming loan limit which is $417,000 to $729,250 depending on location. Available with 0.7 to 1% origination fee, these low jumbo mortgage rates can still be obtained by borrowers who have outstanding credit.

MBS prices (mortgage backed securities) have fluctuated each day this past week depending on the news and investor reaction. Mortgage rates increase and decrease in the opposite direction of MBS prices. After Tuesday's mixed results, mortgage rates stabilized for the rest of the week upon the release of the producer price index,, the consumer price index and housing starts which all came in better than expected.

To determine what your mortgage rate will be give us a call at 972-772-7000 or email us at rockwall@kw.com.

Compare A 'No-Cost' Versus Traditional Mortgage

Provided By Yahoo! Personal Finance

Many lenders will offer a 'no-cost' loan in lieu of a traditional mortgage. 'No-cost' loans are generally priced at a higher interest rate than a traditional mortgage. The higher rate allows the lender to make enough money on the interest rate spread from the underwriter to pay for all your closing costs and provide them with their profit. Go to the calculator to help determine if a no-cost loan with your lender is better than a traditional mortage.

If you have questions about home loans give us a call at 972-772-7000 or email us at rockwall@kw.com.

Types of Lenders

Provided By Yahoo! Real Estate

Today's choices include banks, mortgage brokers, home builders, and Internet lenders. Each has its advantages and disadvantages, and rates vary from lender to lender.

Typically, most lenders do not keep money on hand but instantly sell conforming loans to third parties like the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). The most common source of home lending is a retail financial institution or credit union. They offer specific loan products and handle their own direct financing by taking consumer deposits and lending them to home buyers.

Mortgage brokers, on the other hand, act as the middleman and don't fund the loans themselves, but handle the mortgage financing for the borrower. Most earn their fees directly as a percentage from the lender and some from the borrower, or a combination of both. Since mortgage brokers have access to a wide variety of lenders they are usually on top of the latest rates, fees and lending practices.

Home builder financing is common in new developments where there is a single builder. The builder carries the construction costs until the homes are built. The builder works with a lender to set-up financing for the buyer and finances the construction costs. The buyer doesn't make mortgage payments until the property is finished.

The popularity of finding a mortgage on the Internet mortgage has grown in recent years. Many lenders offer competitive rates and the convenience of tracking your application through the approval process. Some can save you a significant amount in closing costs, since everything is automated and the time to get approved can be shortened.

Do you have questions about a new home loan? Give us a call at 972-772-7000 or email us at rockwall@kw.com.

Mortgage Rates Down for Second Week

Provided By Realty Times

McLean, VA – Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®). The survey results showed lower mortgage rates for both long- and short-term rates, with the 30-year reaching a four-week low.

30-year fixed-rate mortgage (FRM) averaged 4.71 percent with an average 0.8 point for the week ending January 13, 2011, down from last week when it averaged 4.77 percent. Last year at this time, the 30-year FRM averaged 5.06 percent.
15-year FRM this week averaged 4.08 percent with an average 0.7 point, down from last week when it averaged 4.13 percent. A year ago at this time, the 15-year FRM averaged 4.45 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.72 percent this week, with an average 0.7 point, down from last week when it averaged 3.75 percent. A year ago, the 5-year ARM averaged 4.32 percent.

1-year Treasury-indexed ARM averaged 3.23 percent this week with an average 0.6 point, down from last week when it averaged 3.24 percent. At this time last year, the 1-year ARM averaged 4.39 percent.

Frank Nothaft, vice president and chief economist of Freddie Mac, reports, "Bond yields drifted lower following the release of the December employment report , which was weaker than the market consensus forecast and implied that the labor market is still in a sluggish recovery. Fixed mortgage rates followed bond yields lower for a second consecutive week, bringing them to a four-week low."

"In its January 12th regional economic review, the Federal Reserve noted that activity in residential real estate and new home construction remained slow across all Districts over the last two months of 2010 due to concerns about the pace of economic recovery, especially in employment. In addition, the outlooks for residential real estate were mixed, with contacts in most Districts described as expecting continued weak conditions."

Do you have questions about mortgage rates? Give us a call at 972-772-7000 or email us at rockwall@kw.com.

Mortgage Rates Settling Above All Time Lows

Provided By Ed Ferrara of Realty Times

30 year fixed mortgage rates are settling at levels significantly higher than all time lows set just weeks ago. Conforming 30 year fixed mortgage rates today are at 4.25% for well-qualified borrowers who pay a standard origination fee (points) of .07 to 1%. Current 15 year fixed mortgage rates today are at 3.75%.

FHA mortgage rates, which are driven by the same mortgage-backed securities prices as conforming fixed mortgage rates, are also up about a quarter percent higher than they were two weeks ago and are nearly identical to conforming mortgage rates today. Today's California 30 year fixed FHA loan rate is 4.125%. MI and other FHA fees make FHA loans more expensive than conforming mortgages.

Jumbo mortgage rates have avoided the spike that has hit conforming and FHA interest rates. Current 30 year fixed jumbo mortgage rates remain at a record low 4.875%.

MBS prices, which move mortgage rates in the opposite direction, have been gaining on low inflation, falling stocks, Euro debt concerns, and tension in Korea, helping to stabilize mortgage rates which had been rising quickly.

Do you have questions about the low mortgage rates? Give us a call at 972-772-7000 or email us at rockwall@kw.com.

4 Mortgages That Require Little Money Down

Written By Holden Lewis
Source: http://www.bankrate.com/
Provided By Shelley Dudley

Homebuyers with little money for a down payment are finding more home loans available for a low down payment or even no down payment.

These mortgages are becoming more commonplace even as the country recovers from a housing bust made worse by the popularity of low down-payment mortgages during the housing boom.

The Federal Housing Administration insures loans with small down payments. And private mortgage insurers have lowered their down payment requirements.

It's even possible to get a mortgage today with no money down. The nation's biggest credit union offers "zero-down" mortgages. The Veterans Administration and the Department of Agriculture guarantee home loans with no down payments.

Following are a few options for borrowers seeking low down-payment and zero down-payment home mortgages:

No down payment: VA loan

Veterans Affairs (formerly the Veterans Administration) guarantees no-down purchase mortgages for qualified veterans. Private lenders originate VA loans, which the VA guarantees. There is no mortgage insurance. The borrower pays a funding fee, which can be rolled into the loan amount.

The VA funding fee varies, depending on whether the veteran served in the regular military or in the Reserves or National Guard, and whether it's the veteran's first VA loan or a subsequent one. The funding fee can be as low as 2.15 percent or as high as 3.3 percent.

No down payment: Navy Federal

Navy Federal Credit Union, the nation's largest in assets and membership, offers 100 percent financing (up to $650,000) to qualified members for buying primary homes. Credit union eligibility is restricted to members of the military, some civilian employees of the military and U.S. Department of Defense, and family members.

Navy Federal resumed zero-down financing this year after a hiatus of a couple of years. Barbara Sheehan, Navy Federal's assistant vice president for mortgage products, says when members of the military are transferred, they sometimes own houses whose values have fallen, wiping out equity.

"Some people had to take losses to sell their houses, so to have to start over and save the money again for a down payment is really difficult," she says.

The credit union's zero-down program is similar to the VA's. One difference is cost: Navy Federal's funding fee of 1.75 percent is less than the VA's funding fees.

No down payment: Department of Agriculture

The Department of Agriculture's Rural Development mortgage guarantee program is so popular that it ran out of money this spring. Congress is expected to cough up more in time for summer homebuying season.

"That's the cat's meow, my favorite loan program," says Jeff Tufford, mortgage consultant for Monarch Mortgage Consulting, in Grand Blanc, Mich.

Some borrowers are surprised to find that Rural Development loans aren't confined to farmland.

"It's not all rural," Tufford says.

Grand Blanc is a suburb of Flint. There are nearby towns, such as Fenton and Davison, where "no one would walk there and say this is a rural area, but the USDA can do loans there."

The USDA has maps on its website that highlight eligible areas. In addition to geographical limits, the USDA program has restrictions on household income, and it's intended for first-time buyers, although there are exceptions.

The USDA mortgage comes from a bank, and there is no mortgage insurance. Instead, the USDA levies a 2 percent guarantee fee, which can be rolled into the loan amount.

Low down payment: Federal Housing Administration

The zero-down options listed above are restricted to limited groups of buyers. With a minimum down payment of 3.5 percent, the Federal Housing Administration is the low-down option that's available to the most people.

Today, about 30 percent of all home loan borrowers get FHA-insured loans, up from 3 percent during the housing boom. The FHA gained market share after many other low-down-payment options (such as piggyback loans) evaporated in the housing bust.

Losses to the insurance fund compelled the FHA to hike rates. The FHA charges an upfront premium of 2.25 percent of the mortgage amount. On a loan with the minimum down payment, there's an annual premium of 0.55 percent of the mortgage amount, or $550 a year for each $100,000 borrowed.

Another low-down-payment option

There is one more option for borrowers in the "low-down-payment" camp: A standard home loan with private mortgage insurance.

A number of companies offer private mortgage insurance for home loans with down payments of less than 20 percent. PMI is not the same thing as FHA insurance, a form of public mortgage insurance.

Typically, monthly private mortgage insurance costs more than FHA insurance for borrowers who put down 5 percent. However, PMI costs less than FHA for loans with down payments of 10 percent or more.

Private mortgage insurance has another edge over FHA: Under certain conditions, you can cancel PMI earlier -- as soon as two years after you get the loan, compared to a wait of at least five years to cancel FHA insurance.

PMI has become easier to get. From the start of the housing bust until just recently, mortgage insurers slapped a "declining market" label on the worst-hit housing markets and required minimum down payments of 10 percent or more, instead of the traditional minimum of 5 percent.

Now, at least some of the insurers have relaxed the requirements, even in hard-hit states such as Arizona, California, Florida, Nevada and Michigan.

"We'll do 5 percent down across the country," says Chris Antonello, senior vice president of marketing for Genworth, a mortgage insurer based in Raleigh, N.C.

Do you have real estate questions? Give the professionals a call at 972-772-7000 or email us at rockwall@kw.com.

How Mortgage Rates Compare

Published By Carla Hill
Provided By Realty Times

You've heard it all across the media. Interest rates are at historic lows. If you are new to the mortgage process, these figures and statements give you little frame of reference.

Let's take a moment to look at where interest rates have been over the last few decades, and what today's rates really mean for homebuyers.

Interest rates are affected by a gamut of factors.

According to the Federal Reserve Bank of New York, "Lower interest rates make it easier for people to borrow in order to buy cars and homes. Purchases of homes, in turn, increase the demand for other items, such as furniture and appliances, thus providing an additional boost to the economy. Lower interest rates mean that consumers spend less on interest costs, leaving them with more of their income to spend on goods and services."

And this is, after all, what you want people to do in a down economy. You want them to reinvigorate the economy with spending.

The Fed continues, "If the rates that consumers and businesses have to pay to borrow rise too rapidly, however, spending may decline, leading to an economic slowdown."

So, it is a intricate dance the powers that be must perform in order to steer the economy the best they can. They, namely the Federal Reserve and Banks, are seeking stable prices, high employment rates, and sustainable growth in the economy.

30 years ago, in 1980, when many first-time home buyers parents were making home purchases, Freddie Mac reports that the 30-year fixed rate mortgage hit a staggering 16.32 percent.

Let's compare that in relation to today's interest rate, averaging around 4.5 percent.

•In the most basic terms, a 30-year fixed-rate mortgage for $100,000 at 16.32 percent, will cost you around $1,450 a month.

•For the same mortgage at a 4.5 percent rate, you'll be paying $580 a month.

The difference is astounding, and this is the main reason the media is shouting news about interest rates. If you are in the position to buy, now could very well be the time.

If you have questions about the 30 year fixed mortgage rate, give us a call at 972-772-7000 or email us at rockwall@kw.com.

Choosing The Best Lender

Published By Yahoo! Real Estate

You're shopping for a mortgage and you've received four offers from four lenders. How do you choose? The first factor most people consider is the interest rate and other costs, but that's only the beginning. You'll also want to think about the lenders themselves, not simply the numbers they're tossing your way.

Here are five steps to follow when determining which lender is right for you:

1. Compare fees as well as interest rates

Comparing loans based on their annual percentage rate (APR) is a good place to start, but it's not enough. In the case of a mortgage, to get a more accurate breakdown of costs, ask the various lenders for a formal "good faith estimate" of all the fees you'll incur with your loan -- this is a standard form lenders must provide you that is more detailed than the overview you'll get with an offer. Also, ask about potential charges that may not appear on that list, such as prepayment penalties. You're not just comparing numbers here: determine how honest and upfront you feel the lender is being, and don't use a lender that you feel is evading your questions.

2. Consider your individual circumstances

Bigger lenders aren't necessarily better than smaller ones, especially if you have unusual circumstances. For example, some lenders specialize in loans for people with poor credit, while others may have more options for those with small down payments. If you have special borrowing needs, look for a lender with experience working with people in similar situations.

3. Look at the range of loan types available

There are more loan options available than ever before, so take advantage of all that choice. Look for a lender who offers a wide variety of loan types, from conventional fixed-rate and adjustable-rate to newer ones such as hybrid ARMs and option ARMs. Your lender should be able to match you with a mortgage that's right for your financial situation and risk tolerance.

4. Evaluate the level of customer service

When you're comparing offers, ask each lender about their policy regarding locking in their quoted rates and see whether there is a fee. Also, ask them to amend one of the terms (such as a payment cap) and see how willingly they agree. You're looking for flexibility and responsiveness. And also note how well they listen to you. If you ask for a 30-year fixed-rate mortgage, they ought to present that as an option, not push you toward something different, such as an interest-only loan. If you're not getting good service from a lender who is competing for your business, you're not likely to get it after you've agreed to work with them.

5. Check out the lender's reputation

Word of mouth is important in every business, including the loan market. If you've never worked with a particular lender, you'll want to find out the opinion of people who have.

Do you need help with your home mortgage? Give us a call at 972-772-7000 or email us at rockwall@kw.com.

MAY BRINGS 2010'S LOWEST MORTGAGE RATES

Written By Nathan Becker
Published By The Wall Street Journal

Home-mortgage rates fell to the lowest level of the year in recent days as Treasury yields slumped due to investors seeking a haven following last week's stock-market turmoil, according to Freddie Mac's weekly survey of mortgage rates.

Mortgage rates tend to follow Treasury yields. The benchmark 10-year note dropped to a five-month intraday low last Thursday as the Dow Jones Industrial Average suffered an intraday drop of nearly 1,000 points.

The latest week was the fifth in a row that interest rates on fixed-rate mortgages fell, noted Freddie Chief Economist Frank Nothaft.

The 30-year fixed-rate mortgage averaged 4.93% for the week ended Thursday, down from last week's 5% average but up from 4.86% a year ago. Rates on 15-year fixed-rate mortgages were 4.3%, compared with 4.36% and 4.27%, respectively.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.95%, a low since Freddie began tracking such mortgages in early 2005, down from last week's 3.97% and 4.82% a year earlier. One-year Treasury-indexed ARMs were 4.02%, down from 4.07% and 4.71%, respectively.

To obtain the rates, the 30-year fixed required payment of an average 0.7 point and the other mortgages required an average 0.6 point. A point is 1% of the loan amount, charged as prepaid interest.

Are you interested in hearing more about how mortgage rates lowered this year? Give us a call at 972-772-7000 or email us at rockwall@kw.com.

APPLICATIONS INCREASE FROM FALLING MORTGAGE RATES

DALLAS (Dallas Morning News) – Last Wednesday, the Federal Reserve said it would buy up to $300 billion in long-term U.S. Treasuries and increase purchases of Fannie Mae- and Freddie Mac-backed securities to $1.25 trillion, up from $500 billion.

Less than a day after the Fed’s action, fixed rates on conforming 30-year mortgages dropped as much as half a percentage point to well under 5 percent, and many analysts doubt that rates will be headed back up anytime soon.

Except for a day or so in December, rates are at the lowest levels since at least 1965, according to mortgage giant Freddie Mac.

"What you've done is you've created affordability," said Scott Simon, head of mortgage-backed securities at Pacific Investment Management Co. "This will make housing bottom sooner than it would have bottomed, and at a higher price than it would have otherwise bottomed."

The rate drop is likely to encourage more borrowers to see whether they can qualify for the lowest rates.