Some borrowers are getting mixed and murky messages from their lenders on whether they qualify for benefits through a $25 billion mortgage settlement that may soon become official in 49 states.
Archive for February, 2012
The NATIONAL ASSOCIATION OF REALTORS® reported that the median home price in January fell 2 percent from December to $154,700. That’s the lowest reading since November 2001.
The Federal Housing Financing Agency released a plan Tuesday for beginning to wind down Fannie Mae and Freddie Mac, largely by increasing fees charged to borrowers.
Many people refinanced their mortgages in 2011 to take advantage of historically low interest rates. Now, it’s important that these borrowers claim all the rightful deductions on their 2011 returns.
With interest rates at historically low levels, many borrowers are finding value with a reliable fixed-rate mortgage. However, borrowers who think they could be relocating in the near future, or need to shore up savings, might want to consider what some regard as the next best thing: An adjustable-rate mortgage that offers several years at a fixed interest rate.
Making sense of the story
- Hybrid adjustable-rate mortgages, or ARMs, originated in the jumbo-loan marketplace at the end of the 1980s. They fell out of favor – along with the riskier ARMs that offered extremely low teaser rates and interest-only components – after the subprime mortgage market collapsed.
- Some adjustable-rate mortgages have an interest rate that changed every year, but a hybrid – also known as a delayed first-adjustment ARM – has a fixed interest rate for a period of time. Most loan officers refer to a hybrid by the period during which the rate is fixed. A 5/1 loan, for example, has a fixed rate for five years, then adjusts annually for the remainder of the term; a 7/1 loan adjusts after seven years.
- ARMs account for only a small segment of the overall mortgage nowadays, financing just slightly more than 10 percent of home purchases. However, market share for hybrid loans is expected to increase to 14 percent this year, according to an annual survey released last month by Freddie Mac. The 5/1 hybrid was the most popular adjustable-rate loan product in the market, according to the survey. The least popular was a 3/3 ARM, which adjusts once every three years.
- A common reason for choosing a hybrid ARM is projected length of homeownership. It’s a nice option for buyers who don’t expect to stay in their home for longer than three to five years.
- Rates on hybrid ARMs are also attractive. As of last week, the average rate on a 5/1 loan was 2.81 percent, compared with 3.88 percent for a 30-year fixed-rate loan, according to Freddie Mac.
- Borrowers should be aware though that with rates starting at rock-bottom levels, there’s generally only one direction for them to go. And even though there are caps on the rate change amount, the jump could be as much as six percentage points.
In a new development, banks are now selectively offering substantial sums of money – up to $35,000 – to some homeowners to encourage short sales.
The number of homes in foreclosures shrunk by 130,000, or 8.4 percent, in 2011, according to a report by CoreLogic.
The consumer outlook for U.S. home prices improved again in January, extending a recent upward trend in housing market sentiment, according to Fannie Mae.
- Home buying doesn’t begin with home searching; it begins with a mortgage pre-approval. Often, first-time home buyers fear getting pre-approved because they’re afraid the lender may tell them they do not qualify for a mortgage or they qualify for a loan smaller than expected. However, by getting preapproved, buyers will make a financial decision rather than an emotion one.
- Another mistake first-time home buyers make is not thinking of a house as a long-term commitment. If a buyer may have to switch jobs in a year or two and may have to move for the job, they should think twice about buying a house. Ideally, buyers should picture themselves living in the house for five to seven years.
- Some first-time buyers make the mistake of spending all of their savings on the down payment, closing costs, and coming up with a 20 percent down payment to avoid paying for mortgage insurance. However, most real estate experts advise against this because the borrower will be left with no savings at all for home repairs and other unexpected expenses.
Renters in areas hit hard by foreclosures have been tartgeted with panic-inducing flyers stating they will be evicted. However, renters living in properties that have been freshly foreclosed upon have rights.