Smart Borrower Blog

Archive for January, 2008

Fed Cuts Rates - Again

The Fed cut rates for the second time in a week yesterday, reducing the funds rate by ½ point to 3 percent. The cuts are being given due to the final quarter of 2007, when the gross domestic product expanded at 0.6 percent – less than half the expected rate. This makes five times that the funds rate has been cut since September, in response to the credit crisis. Whenever the Fed takes such an action, it makes credit "cheaper," which it hopes will boost the economy by encouraging people to borrow more money. The problems with the nation's economy... more »

How can Mortgage Payments Change? Part 2

One reason mortgage payments can be altered, even though you might carry a fixed-rate mortgage, is that it's legal for lenders to raise the monthly payment if they determine that there is a deficit in the escrow account. So, imagine that you remodeled your home last year. Because you had to apply for a permit, a red flag went up in the county offices; subsequently, your property was reassessed and taxes were raised. The lender in turn raised your monthly payment because they didn't have enough in escrow to cover next year's higher taxes. In the second month of the... more »

How can Mortgage payments Change?

Someone asked recently whether mortgage payments ever change for the better – going down instead of up. Of course my immediate reaction was: Yes, if the interest rate on your Adjustable Rate Mortgage drops. But then I realized there could be other instances in which the monthly payment would change. For example, if your mortgage escrow account changes. An escrow account is a third-party service that collects and holds funds to help buyers accrue payments they need, like annual taxes and insurance. The advantage of having escrow is that they divide your bills and collect the funds over 12 months;... more »

Texas Company Is Flipping Homes

It was inevitable, and I am surprised it has not happened before this.   A company in Texas, Econohomes, is buying up foreclosed property, and turning around and selling it to people in need for a price they can afford.   The company is buying these properties for pennies on the dollar, giving it a slight markup, and flipping the home in record time.   Here’s an example - a mother and daughter in Cleveland had purchased a home in 2003, complete with an adjustable ARM.   Payments on this modest home were only $470 on the purchase price of... more »

Refinancing Is On The Rise

According to Reuters, the Fed cut has had some effect on the mortgage market.   The cut has made refi much more enticing, and with interest rates steadily dropping, it makes about $1 trillion dollars in current loans looking much better for refi.    The fears of a recession are really drubbing the market, with a benchmark 10 year Treasury note yielding as little as 3.30%.   This is down from 3.70% a week ago.   Relying on Bears and Stearns data, this action has made the number of mortgages that can be refinanced increase by at least 50% equal... more »

30 Year Mortgages Continue To Decline

As reported earlier, 30 year mortgages have been taking a hit in the market.   This usually stable mortgage has hit its lowest level in four years.   The market is hoping that these low rates will help spur the market.   Today on Loan.com, interest rates were at 5.79% for 30 year fixed rates.   (A little tip here - when ever you look at these graphs, it is wise to clear your cache to insure that you are getting the correct data.) Last week, Freddie Mac reported interest rates at 5.69%.   This week, they have fallen to... more »

ARMs Becoming Less Popular with Consumers

Freddie Mac recently released its 24th Adjustable Rate Mortgage Survey. The survey is taken during a given week, in this case the week of Dec. 17, and from 112 lenders. The results show that ARMs have dropped off recently, for the first time since 2003. Hopefully this means that borrowers are finally getting the message. ARMs are not "bad," but it is important that mortgage holders understand all the ramifications of a fluctuating interest rate. Too often borrowers fall into the sunny-day trap, assuming the rate will remain fairly constant. Then when rates get too high (meaning they can't afford... more »

Sellers can Help Buyers - Part II

Last week I blogged about some ways that sellers can help their home seem more appealing to buyers. Seller concessions, like the buy-down or paying part of the mortgage, are two easy ways to do that. In fact, covering any of the fees — closing costs, discount points, appraisal or attorney fees, inspections fees, etc. will assist the buyer, because it’s that much less money out of his or her pocket. Some of these will even be tax deductible for you as a seller. Discount points and real estate taxes usually are — check with your tax advisor to be... more »

FHA Looking Better Every Day

Rates on 20 year fixed mortgages continue to fall.   Taking a look at Loan.com’s front page, you can see that today’s national average is 5.79%.   Although this rate is good, you can pretty much bet that not a lot of people are going for a new mortgage or refi.   The evening news tonight spoke about the effect that this has on not only the housing market, but Wall Street.   It is understandable that people selling a home do not wish to sell it for less than what it is worth, or what they have in it.... more »

Controversy In The Mortgage Market

It seems every where we turn, we see lenders being dinged for their participation in the sub prime rat race.   There is talk of “liar” and “no doc” paperwork, of “teaser” loans, unethical lenders and the whole smelly ball of wax.   It is no wonder then, when you read about Continental Home Loans. The Melville-based company is working hard to promote mortgages for the paltry sum of $1K down, and it seems that they are doing business. The company is using a loophole that allows sellers to funnel down payments to FHA-qualified buyers through nonprofits.   Fine and... more »