Mortgage Market Outlook

The weather has been crazy here! I guess that is Indiana for you. Just like the weather, the interest rates for mortgages can be unpredictable. Here's one mortgage market view point that is worth reading, if you are considering buying a home or refinancing soon.
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AVOID THIS COSTLY MISTAKE

If you've been following the financial news, you've probably heard that the Fed's been buying Mortgage Backed Securities and will continue to do so as needed. Unfortunately, some media outlets have picked up on the news and mistakenly reported that these purchases will continue to cause rates to drop lower into the summer.

But is that really what it means? No.

The truth is, the Fed has been buying Mortgage Bonds. BUT... more precisely, they're buying a lot of FNMA 30-yr 5.0% and 5.5% Bonds. Many of the mortgages in these pools are outstanding home loans with rates between 6.0% and 6.5%, as the rate that a borrower pays is different than the coupon rate given to an investor buying into that mortgage pool, with the difference being taken by Wall Street firms and government agencies. The loans in these pools the Fed is buying hand over fist are likely be refinanced and paid - because current rates make it very attractive to refinance a loan over 6.0% - and thus giving the Fed a quick recoup on some of their investment.

Bottom line: The Fed's purchase of higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today's low rates.

The Problem Is...

Many consumers are in situations where they can buy a home or refinance now and save hundreds of dollars a month on their mortgage payments. But when they hear the media throwing around teases of lower rates ahead, they decide to hold off on making the decision to save, in the hopes of gaining a few more dollars of savings per month if a lower rate came their way. Of course, while they're waiting, rates could turn higher - and this window of opportunity could pass them by entirely.

Here's the Clincher.

Even if consumers are ultimately able to time the market perfectly and save another few bucks per month, they could still end up losing. That's because while they delayed, they lost the savings each month they could have gained by taking action sooner. In other words, they may have lost hundreds of dollars for every month they waited. So even if they got lucky and obtained the rate they were looking for, it could take years to make up what they lost by waiting.
I don't want anyone to miss an opportunity by either waiting or misunderstanding the media headline. Let's talk further on this. Call or email me, and let's discuss what this might mean for you!


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One other note on a related subject, some have been asking me if they can still qualify for the $7,500* first time homebuyers tax credit, even if they have already filed their 2008 taxes. The answer is yes, you can amend your returns and still cash in!

A gift for me? Oh, you shouldn't have!

We all need a little help every now and then. Sometimes that help comes in the form of money! Ever thought about buying a home but did not have all of the down payment right now? The $7,500 first time homebuyers tax credit can be a great help. You can borrow your down payment from a relative and then pay them back using part of that credit. One of our lenders sent us this handy info which is below- list of the people that you are allowed to borrow the money from, for specific loans.


Conventional - Owner Occupied Property (this means that you are living in the house as your own home, meaning not renting it out):

• Relatives
• Domestic partner
• Fiance
• Church
• Municipality
• Nonprofit organizations

The rules are different if this is a second/vacation home or an investment property.
If the LTV/CLTV is 80% or less, the entire down payment may be a gift. Otherwise it is 5%.

Investment Only - Gift funds allowed only under the following conditions:
1-unit Single Family Residence (SFR)/condo/Planned Unit Development (PUD)
Maximum LTV of 70%
Minimum down payment of at least 30%, of which at least 20% must come from the Borrower's own funds




FHA (3.5% down)- Owner Occupied Property:

• A relative of the borrower.
• The borrower's employer or labor union.
• A charitable organization that does not receive funding from seller/builder contributions (see below).
• A governmental agency or public entity that has a program to provide homeownership assistance to low and moderate income families or first-time homebuyers.
• A close friend with a clearly defined interest in the borrower.

A gift from any other source is considered an inducement to purchase and requires a reduction to the sales price.

Donors may borrow gift funds from an acceptable source, i.e., not from a party to the loan transaction including the mortgage lenderPlease be aware of the difference between the two.

These are rules for all lenders that use FHA or Fannie Mae(which is pretty much the two agencies the majority if not all lenders are using)Everything is a paper trail and most lenders if not all will want to see a two month period possibly three. Unusual deposits that are not consistent with normal direct deposits or can be verified the borrower better be able to explain where the deposit came from and document. This is how lending is these days.


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If you have questions about getting pre-approved for a mortgage or down payment stuff (or you were just confused by this whole post) feel free to contact me at rupton@c21scheetz.com