How big a Mortgage can you afford?This is a good link at CNN Money to tell a prospective home buyer how much they could afford!
bhendrick@yourloanteam.com
Tuesday, March 31, 2009
How big a Mortgage can you afford?
How big a Mortgage can you afford?This is a good link at CNN Money to tell a prospective home buyer how much they could afford!
bhendrick@yourloanteam.com
Fed's Move to Lower Mortgage Rates May Backfire On Market
CNBC
The Federal Reserve's latest moves to push down mortgage rates quickly raised expectations about helping the housing recovery, but it may be months before the impact is entirely apparent and the effects may not all be positive, say people in the real estate and housing industries.
First and foremost, there is general skepticism about the how much impact government intervention will have in the marketplace, as well as concern about the potential for unintended consequences.
"It's wrong to place too much hope on what the Fed would be able to accomplish in pushing rates lower," says economist Dean Baker, co-director of the Center for Economic and Policy Research. "There's a limit to what they can realistically do."
That's apparent in what some call the inevitable bounce back in rates since the Fed's announcement at the March 19 FOMC meeting that it would increase its planned purchase of GSE and MBS debt as well as finally begin buying longer-term Treasuries.
The yield on the 10-year note went from roughly 3.00 percent down to 2.50 percent, but has slowly climbed back to around 2.75 percent. Thirty-year mortgage rates, which track the 10-year yield, have moved accordingly.
"Rates are historically low, but the expectation is that interest rates should be much lower than they are," says Manhattan Mortgage Company CEO Melissa Cohn.
That sort of criticism highlights the difficulty of the Fed's mission, and though the significant drop in mortgage rates in the past six months has been welcome in almost all quarters, it is hardly a magic bullet for the multi-faceted housing market
For one, Cohn and others have seen a greater increase in refinancing activity that in loans for home sales.
The Mortgage Bankers Association last week increased its forecast for loan originations in 2009 by 40 percent to $2.8 trillion, more than any year since 2005 and the fourth highest on record. Some 71-percent of that, however, will be refinancing. Home purchase origination's will be almost 4-percent lower than last year.
"For the purchase market, it is still an issue of the economy," says Jay Brinkman, chief economist and senior vice president of the mortgage industry trade group. "I don't think rates were an impediment even before the Fed's move."
Refinancing does not a housing rebound make, although it certainly increases the chance of keeping a homeowner out of foreclosure. That and other forces continue to put a drag on housing.
Right now, the single-family market is still in the doldrums, though many measures point to a possible bottom.
Thus far this year, existing single-family homes are off an average of 6 percent from 2008 and prices are down 15 percent from the previous year, according to the National Association of Realtors.
On the bright side, inventory has been below a 10-month supply for three months and the NAR's affordability index now stands at a whopping 175 vs. a meager 107 in 2006, when house prices peaked in most parts of the country.
According to NAR Chief Economist Lawrence Yun, every 1-percent decline in mortgage rates typically generates an additional 500,000 home sales.
The average rate on a 30-year mortgage was more than 6-percent in the fall of 2008, while last week it was as low as 4.85 percent, according to Freddie Mac, so that could mean a lot of sales in the pipeline.
The Federal Reserve's latest moves to push down mortgage rates quickly raised expectations about helping the housing recovery, but it may be months before the impact is entirely apparent and the effects may not all be positive, say people in the real estate and housing industries.
First and foremost, there is general skepticism about the how much impact government intervention will have in the marketplace, as well as concern about the potential for unintended consequences.
"It's wrong to place too much hope on what the Fed would be able to accomplish in pushing rates lower," says economist Dean Baker, co-director of the Center for Economic and Policy Research. "There's a limit to what they can realistically do."
That's apparent in what some call the inevitable bounce back in rates since the Fed's announcement at the March 19 FOMC meeting that it would increase its planned purchase of GSE and MBS debt as well as finally begin buying longer-term Treasuries.
The yield on the 10-year note went from roughly 3.00 percent down to 2.50 percent, but has slowly climbed back to around 2.75 percent. Thirty-year mortgage rates, which track the 10-year yield, have moved accordingly.
"Rates are historically low, but the expectation is that interest rates should be much lower than they are," says Manhattan Mortgage Company CEO Melissa Cohn.
That sort of criticism highlights the difficulty of the Fed's mission, and though the significant drop in mortgage rates in the past six months has been welcome in almost all quarters, it is hardly a magic bullet for the multi-faceted housing market
For one, Cohn and others have seen a greater increase in refinancing activity that in loans for home sales.
The Mortgage Bankers Association last week increased its forecast for loan originations in 2009 by 40 percent to $2.8 trillion, more than any year since 2005 and the fourth highest on record. Some 71-percent of that, however, will be refinancing. Home purchase origination's will be almost 4-percent lower than last year.
"For the purchase market, it is still an issue of the economy," says Jay Brinkman, chief economist and senior vice president of the mortgage industry trade group. "I don't think rates were an impediment even before the Fed's move."
Refinancing does not a housing rebound make, although it certainly increases the chance of keeping a homeowner out of foreclosure. That and other forces continue to put a drag on housing.
Right now, the single-family market is still in the doldrums, though many measures point to a possible bottom.
Thus far this year, existing single-family homes are off an average of 6 percent from 2008 and prices are down 15 percent from the previous year, according to the National Association of Realtors.
On the bright side, inventory has been below a 10-month supply for three months and the NAR's affordability index now stands at a whopping 175 vs. a meager 107 in 2006, when house prices peaked in most parts of the country.
According to NAR Chief Economist Lawrence Yun, every 1-percent decline in mortgage rates typically generates an additional 500,000 home sales.
The average rate on a 30-year mortgage was more than 6-percent in the fall of 2008, while last week it was as low as 4.85 percent, according to Freddie Mac, so that could mean a lot of sales in the pipeline.
Tuesday, March 24, 2009
The Truth About Money
5 great reasons to carry a big, long mortgage
Reason #1: Mortgages don’t lower home values.
Your house will grow in value (or not) whether or not you have a mortgage. In fact, most people discover that, over time, their mortgage balance falls while their home value rises – creating substantial wealth they never expected.
Reason #2: Your mortgage is the cheapest money you’ll ever buy.
Most people need to borrow money during their lives, so why pay 18% on credit cards when you can borrow at much lower rates.
Reason #3: Your mortgage is the best way you can lower your taxes.
Interest you pay on personal loans, auto loans and credit cards is not-tax deductible, but for most of us, interest you pay on mortgage loans is fully tax-deductible, making the cheapest loan you’ll ever get, even cheaper. Imagine borrowing money for a net cost of just 3%! You can do it with a mortgage loan.
Reason #4: Get the cash out of the house – while you still can.
The main reason people turn to borrowing is because they have little or no income. But if you ever suffer a job loss, major medical, or other financial crisis, you could find yourself unable to get a home loan. That’s because lenders don’t like to lend money if you are already in financial difficulty. That’s why you should get a big mortgage now, before you need it – and while you still can.
Reason #5: Your mortgage becomes even cheaper over time.
Depending on the loan you choose, your payment never rises – but your income likely will. That means today’s mortgage payment becomes increasingly easy to pay over time!
Reason #1: Mortgages don’t lower home values.
Your house will grow in value (or not) whether or not you have a mortgage. In fact, most people discover that, over time, their mortgage balance falls while their home value rises – creating substantial wealth they never expected.
Reason #2: Your mortgage is the cheapest money you’ll ever buy.
Most people need to borrow money during their lives, so why pay 18% on credit cards when you can borrow at much lower rates.
Reason #3: Your mortgage is the best way you can lower your taxes.
Interest you pay on personal loans, auto loans and credit cards is not-tax deductible, but for most of us, interest you pay on mortgage loans is fully tax-deductible, making the cheapest loan you’ll ever get, even cheaper. Imagine borrowing money for a net cost of just 3%! You can do it with a mortgage loan.
Reason #4: Get the cash out of the house – while you still can.
The main reason people turn to borrowing is because they have little or no income. But if you ever suffer a job loss, major medical, or other financial crisis, you could find yourself unable to get a home loan. That’s because lenders don’t like to lend money if you are already in financial difficulty. That’s why you should get a big mortgage now, before you need it – and while you still can.
Reason #5: Your mortgage becomes even cheaper over time.
Depending on the loan you choose, your payment never rises – but your income likely will. That means today’s mortgage payment becomes increasingly easy to pay over time!
Tuesday, March 17, 2009
NY Times says Reverse Mortgages can be a great tool
Over the weekend, the New York Times published an article about how more retirees are exploring reverse mortgages as they face declining income, falling home values, and dwindling savings from Wall Street’s meltdown. In The Reverse Gear, journalist Vivian Marino writes that as mortgage financing gets increasingly tougher to obtain, reverse mortgages continue to look more appealing.
“Many seniors have been able to use reverse mortgages to avoid delinquency or foreclosure, and to help fund their retirement,” said Regina M. Lowrie, a former chairwoman of the Mortgage Bankers Association and the chief executive of Vision Mortgage Capital in Montgomeryville, Pa.
One of the bright spots of the article comes from Martin Shenkman, a New Jersey based attorney who specializes in estate and tax planning.
Shenkman considers reverse mortgages “a great tool, when the right circumstances exist.” He even acknowledges that the reverse mortgage industry has come a long way in attracting business and burnishing its reputation, which was full of stories from years past of lenders preying on the elderly.
“Many seniors have been able to use reverse mortgages to avoid delinquency or foreclosure, and to help fund their retirement,” said Regina M. Lowrie, a former chairwoman of the Mortgage Bankers Association and the chief executive of Vision Mortgage Capital in Montgomeryville, Pa.
One of the bright spots of the article comes from Martin Shenkman, a New Jersey based attorney who specializes in estate and tax planning.
Shenkman considers reverse mortgages “a great tool, when the right circumstances exist.” He even acknowledges that the reverse mortgage industry has come a long way in attracting business and burnishing its reputation, which was full of stories from years past of lenders preying on the elderly.
Friday, March 13, 2009
HECM's (Reverse Mortgages) can now be used to purchase a home!
What is HECM for Purchase?
HECM for Purchase allows seniors, age 62 or older, to purchase a new principal residence using loan proceeds from the reverse mortgage.
What is the purpose of the program?
The program was designed to allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction. The program was also designed to enable senior homeowners to relocate to other geographical areas to be closer to family members or downsize to homes that meet their physical needs, i.e., handrails, one level properties, ramps, wider doorways, etc.
GENERAL OVERVIEW
What is HECM for Purchase?
HECM for Purchase allows seniors, age 62 or older, to purchase a new principal residence using loan proceeds from the reverse mortgage.
What is the purpose of the program?
The program was designed to allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction. The program was also designed to enable senior homeowners to relocate to other geographical areas to be closer to family members or downsize to homes that meet their physical needs, i.e., handrails, one level properties, ramps, wider doorways, etc.
PROCESSING
Is the fixed interest rate eligible in a HECM for purchase loan?
Yes.
PROPERTY
What property types are eligible?
Existing one-to-four unit properties where construction has been completed and the property is habitable as evidenced by local jurisdiction issuance of certificate of occupancy or its equivalent.
Can a lender take application on a property that is under construction and not habitable?
No. The lender may only take application once the Certificate of Occupancy or its equivalent has been issued.
What property types are ineligible?
Cooperative units
Newly constructed residences where a Certificate of Occupancy or its equivalent has not been issued by the appropriate local authority
Boarding houses
Bed and breakfast establishments
Existing manufactured homes built before June 15, 1976; and
Existing manufactured homes built after June 15, 1976 that fail to conform to the Manufactured Home Construction Safety Standards, as evidenced by affixed certification labels (e.g., data plate and HUD certification label) and/or lack a permanent foundation as required in HUD's Permanent Foundations for Manufactured Housing Guide.
FUNDING
Are gifts an acceptable source of funding?
No. Prospective mortgagors may only use their own money or money obtained from the sale of assets. FHA prohibits the use of loan discount points, interest rate buy downs, closing cost assistance, builder incentives, gifts or personal property given by the seller that would benefit financially from the transaction.
What would be an "allowable FHA funding source" for gap financing of the equity portion?
A withdrawal from the mortgagor's savings or retirement account would be an acceptable funding source.
How is the maximum claim amount and principal limit calculated?
For HECM purchase transactions only, The maximum claim amount will be the lesser of the appraised value, sales price or FHA mortgage limit for a one family residence.
Is seller financing permitted?
No.
MISCELLANEOUS
Does FHA have special eligibility requirements for first-time homebuyers?
No. FHA encourages all first-time homebuyers to meet with a reverse mortgage counselor that offers pre-purchase counseling to educate themselves on the responsibilities of becoming a homeowner. Prior to signing a sales contract, FHA encourages a home inspection of all properties that will serve as collateral for HECM for purchase transactions. The inspection serves two purposes, to determine the magnitude, if any, of repairs and/or rehabilitation the home as well as helps the buyer to negotiate the purchase price in situation where a home requires repair or rehabilitation.
HECM for Purchase allows seniors, age 62 or older, to purchase a new principal residence using loan proceeds from the reverse mortgage.
What is the purpose of the program?
The program was designed to allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction. The program was also designed to enable senior homeowners to relocate to other geographical areas to be closer to family members or downsize to homes that meet their physical needs, i.e., handrails, one level properties, ramps, wider doorways, etc.
GENERAL OVERVIEW
What is HECM for Purchase?
HECM for Purchase allows seniors, age 62 or older, to purchase a new principal residence using loan proceeds from the reverse mortgage.
What is the purpose of the program?
The program was designed to allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction. The program was also designed to enable senior homeowners to relocate to other geographical areas to be closer to family members or downsize to homes that meet their physical needs, i.e., handrails, one level properties, ramps, wider doorways, etc.
PROCESSING
Is the fixed interest rate eligible in a HECM for purchase loan?
Yes.
PROPERTY
What property types are eligible?
Existing one-to-four unit properties where construction has been completed and the property is habitable as evidenced by local jurisdiction issuance of certificate of occupancy or its equivalent.
Can a lender take application on a property that is under construction and not habitable?
No. The lender may only take application once the Certificate of Occupancy or its equivalent has been issued.
What property types are ineligible?
Cooperative units
Newly constructed residences where a Certificate of Occupancy or its equivalent has not been issued by the appropriate local authority
Boarding houses
Bed and breakfast establishments
Existing manufactured homes built before June 15, 1976; and
Existing manufactured homes built after June 15, 1976 that fail to conform to the Manufactured Home Construction Safety Standards, as evidenced by affixed certification labels (e.g., data plate and HUD certification label) and/or lack a permanent foundation as required in HUD's Permanent Foundations for Manufactured Housing Guide.
FUNDING
Are gifts an acceptable source of funding?
No. Prospective mortgagors may only use their own money or money obtained from the sale of assets. FHA prohibits the use of loan discount points, interest rate buy downs, closing cost assistance, builder incentives, gifts or personal property given by the seller that would benefit financially from the transaction.
What would be an "allowable FHA funding source" for gap financing of the equity portion?
A withdrawal from the mortgagor's savings or retirement account would be an acceptable funding source.
How is the maximum claim amount and principal limit calculated?
For HECM purchase transactions only, The maximum claim amount will be the lesser of the appraised value, sales price or FHA mortgage limit for a one family residence.
Is seller financing permitted?
No.
MISCELLANEOUS
Does FHA have special eligibility requirements for first-time homebuyers?
No. FHA encourages all first-time homebuyers to meet with a reverse mortgage counselor that offers pre-purchase counseling to educate themselves on the responsibilities of becoming a homeowner. Prior to signing a sales contract, FHA encourages a home inspection of all properties that will serve as collateral for HECM for purchase transactions. The inspection serves two purposes, to determine the magnitude, if any, of repairs and/or rehabilitation the home as well as helps the buyer to negotiate the purchase price in situation where a home requires repair or rehabilitation.
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