Archive for category Mortgage News and Information
Most people that I speak with immediately assume that with interest rates at record low levels, of course you should go with a fixed rate mortgage. The truth is that the answer is not so black and white but let’s see what the experts are saying now. Renowned mortgage expert Barry Habib of Residential Finance Corporation was interviewed this morning on CNBC’s squawk box show discussing his views of the housing market and what types of mortgage options are attractive today. He makes a few interesting points such as the value of having an assumable mortgage down the road should interest rates go up in the future and also discusses construction loans. Click here to see the video of his interview.
My take on the ARM vs Fixed discussion has always boiled down to who is going to carry the interest rate risk. If you go with a fixed rate, the risk falls on the bank. However, you have to realize that this comes at a cost and that you are paying them extra to take on the risk for you. Whether this makes sense for you or whether you should take on the risk of rising rates yourself and take a lower rate in return depends on a number of factors such as how long you plan on staying in your home and the ability to cover your expenses in the worst case interest rate scenario. The bottom line is that there is no “right” answer for ARM vs fixed. Both have pros and cons and you must see which fits your particular circumstances better.
This morning we saw two positive signs for the housing market. The first came out of the Mortgage Bankers Association. The MBA publishes a seasonally adjusted index of mortgage application activity that include both new purchases and refinances. For the week ended Jan 13th, the index jumped a whopping 23.1%. Applications for home purchases increased 10.3% while applications for refinancing increased 26.4%. It appears that quite a few people’s New Year’s resolutions involved taking advantage of the record low mortgage rates!
The second piece of good news out this morning was a key sentiment gauge of homebuilder confidence. The National Association of Homebuilders / Wells Fargo Housing Market Index measures builders sentiment regarding newly built single family homes in three areas, current sales conditions, sales expectations for the next six months and traffic of prospective buyers. The index gained 4 points in January to a reading of 25. Keeping in mind that any reading below 50 still indicates a negative outlook, there are four things of significance in this morning’s announcement. First, this marks the fourth consecutive month of increase. Second, all three components of the survey showed improvement. Third, all four regions of the U.S. increased. Lastly, this is the highest level for the index since June of 2007!
This past Thanksgiving Congress gave residents in high cost locales something to be thankful for by raising the loan limits for FHA loans in 660 markets across the country. FHA mortgages are loans by approved lenders that are insured by the Federal Housing Administration. These loans can help home buyers buy a house with as little as a 3.5% downpayment.
The FHA issues limits on the size of mortgage that can qualify for this insurance. These limits vary by county based on the cost of housing in each. In 2008, in an effort to help mitigate the housing and credit crisis, Congress temporarily raised the loan limits. Last summer it was determined to lower the limits back down in approximately 670 counties effective October 1st. After a lot of public concern surrounding the still weak economy and housing markets, Congress decided two months later to raise the limits back up again.
Both Los Angeles and Orange Counties are eligible for the highest limits, $729,750 for a single family residence. Multi-family residences are also eligible with limits of $934,200 for duplexes, $1,129,250 for tri-plexes and $1,403,400 for four-plexes. For more information on requirements for qualification, visit the Department of Housing and Urban Development’s website.