The SCOOP! Blog by® Refinance or Apply for a Mortgage Online

Buyers would be smart to shop around: The large dispersion in rate offerings among lenders could amount to several hundreds of dollars, Freddie Mac says.

 Home buyers who waited to buy a home this month compared to last month may have some regrets. Home buying is 12% more expensive than just a month ago. Fast-rising mortgage rates—up one percentage point in September alone—have added an extra $250 more onto monthly mortgage payments over the past month, Nadia Evangelou, senior economist and director of forecasting, writes at the National Association of REALTORS® blog.

The higher rates are prompting the housing market to drastically slow: Pending home sales fell 24% last month compared to last year, and existing-home sales were down 20% annually in August.

Freddie Mac reports the 30-year fixed-rate mortgage averaged 6.70% this week. That is up from 3.01% a year ago.

“The uncertainty and volatility in financial markets is heavily impacting mortgage rates,” says Sam Khater, Freddie Mac’s chief economist. He adds that home shoppers would be wise to shop around.

“Our survey indicates that the range of weekly rate quotes for the 30-year fixed-rate mortgage has more than doubled over the last year,” he notes. “This means that for the typical mortgage amount, a borrower who locked-in at the higher end of the range would pay several hundred dollars more than a borrower who locked-in at the lower end of the range. The large dispersion in rates means it has become even more important for home buyers to shop around with different lenders.”

Mortgage Rate Averages for This Week

Freddie Mac reports the following national averages with mortgage rates for the week ending Sept. 29:

  • 30-year fixed-rate mortgages: averaged 6.70%, with an average 0.9 point, rising from last week’s 6.29% average. Last year at this time, 30-year rates averaged 3.01%.
  • 15-year fixed-rate mortgages: averaged 5.96%, with an average 1.3 point, increasing from last week’s 5.44% average. A year ago, 15-year rates averaged 2.28%.
  • 5-year hybrid adjustable-rate mortgages: averaged 5.30%, with an average 0.4 point, rising from last week’s 4.97% average. A year ago, 5-year ARMs averaged 2.48%.

Freddie Mac reports commitment rates with average points to better reflect the total upfront costs of obtaining the mortgage. 

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Posted by Jackie A. Graves on September 29th, 2022 9:11 PM

“If you’re regularly paying your rent on time, that’s a good indication you will also pay your mortgage on time,” says the Federal Housing commissioner.

The Federal Housing Administration published a letter to lenders on Tuesday urging them to consider including a borrower’s positive rental payment history when applying for FHA-insured financing. The move is believed to be a boost for first-time home buyers to help to improve their credit scores when applying for a mortgage, the memo reads.

“If you’re regularly paying your rent on time, that’s a good indication you will also pay your mortgage on time,” says Julia Gordon, Federal Housing commissioner. “We hope that adding this positive factor to all of the characteristics currently considered in an FHA credit evaluation will increase access to affordable FHA-insured mortgages for first-time home buyers.”

The FHA will consider positive rental payment history as the on-time payment of all rental payments over the last 12 months. Lenders originating purchase mortgages for FHA insurance will be required to obtain verification of the borrower’s timely rental payments and indicate it on their TOTAL Mortgage Scorecard, which the FHA uses to evaluate borrower credit history and mortgage application information when underwriting loans.

“This change makes FHA requirements more flexible and can help remove barriers to homeownership, particularly for those with nontraditional credit or thin credit files,” says Julienne Joseph, deputy assistant secretary for single-family housing.

The FHA’s move follows on the heels of an announcement by Experian, one of the main credit bureaus, earlier this month that its Experian Boost program would offer a way for consumers to add qualifying, positive residential rental payments directly to their credit file.  

Experian’s research has determined that 66% of its consumers will see an instant increase in their FICO score by factoring in on-time rental payment data. The credit bureau said consumers who would see the biggest improvement—of about 14 points—are those with thin credit files or low FICO scores.

In 2021, Freddie Mac announced a new program to help renters build up their credit profiles and help make them more creditworthy. The initiative provides a means for owners or managers of multifamily properties to report on-time rental payments to the three major credit bureaus.

The move was aimed at helping a portion of the more than 45 million U.S. adults who have no credit score. 

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Posted by Jackie A. Graves on September 28th, 2022 11:58 AM

Learn strategies for saving a down payment, applying for a mortgage, shopping for a house and more.

Like any big project, a successful homebuying experience is all about getting the details right from start to finish. These tips for first-time home buyers will help you navigate the process, save money and close the deal. We organized them into four categories:

  • Preparing to buy tips.
  • Mortgage selection tips.
  • Home shopping tips.
  • Home purchasing tips.

Preparing to buy tips

 1. Start saving early

 Here are the main costs to consider when saving for a home:

Down payment: Your down payment requirement will depend on the type of mortgage you choose and the lender. Some conventional loans aimed at first-time home buyers with excellent credit require as little as 3% down. But even a small down payment can be challenging to save. For example, a 3% down payment on a $300,000 home is $9,000. Use a down payment calculator to decide on a goal, and then set up automatic transfers from checking to savings to get started.

Closing costs: These are the fees and expenses you pay to finalize your mortgage, and they typically range from 2% to 5% of the loan amount. If you were making a 3% down payment on that $300,000 home, your closing costs could be between $5,820 and $14,550. That’s additional money you’d have to pay, on top of your down payment. In a buyer's market, you can often ask the seller to pay a portion of your closing costs, and you can save on some expenses, such as home inspections, by shopping around.

Move-in expenses: You'll need some cash after the home purchase. Set some money aside for immediate home repairs, upgrades and furnishings.

2. Decide how much home you can afford

Figure out how much you can safely spend on a house before starting to shop. NerdWallet's home affordability calculator can help with setting a price range based on your income, debt, down payment, credit score and where you plan to live.

3. Check and strengthen your credit

Your credit score will determine whether you qualify for a mortgage and affect the interest rate lenders will offer. Having a higher score will generally get you a lower interest rate, so take these steps to strengthen your credit score to buy a house:

Get free copies of your credit reports from each of the three credit bureaus — Experian, Equifax and TransUnion — and dispute any errors that could hurt your score.

Pay all your bills on time and keep credit card balances as low as possible.

Keep current credit cards open. Closing a card will increase the portion of available credit you use, which can lower your score.

Track your credit score. NerdWallet offers a free credit score that updates weekly.

 Mortgage selection tips

4. Explore mortgage options

 A variety of mortgages are available with varying down payment and eligibility requirements. Here are the main categories:

Conventional mortgages are not guaranteed by the government. Some conventional loans targeted at first-time buyers require as little as 3% down.

FHA loans are insured by the Federal Housing Administration and allow down payments as low as 3.5%.

USDA loans are guaranteed by the U.S. Department of Agriculture. They are for rural home buyers and usually require no down payment.

VA loans are guaranteed by the Department of Veterans Affairs. They are for current and veteran military service members and usually require no down payment.

You also have options when it comes to the mortgage term. Most home buyers opt for a 30-year fixed-rate mortgage, which is paid off in 30 years and has an interest rate that stays the same. A 15-year loan typically has a lower interest rate than a 30-year mortgage, but the monthly payments are larger.

When interest rates are increasing, you might consider an adjustable-rate mortgage, or ARM. ARM rates are often lower than fixed rates, enabling you to buy a more expensive home for the same monthly payment, but they can also increase (or decrease) over time.

5. Research first-time home buyer assistance programs

 Many states and some cities and counties offer first-time home buyer programs, which often combine low-interest-rate mortgages with down payment assistance and closing cost assistance. Tax credits are also available through some first-time home buyer programs.

6. Compare mortgage rates and fees

The Consumer Financial Protection Bureau recommends requesting loan estimates for the same type of mortgage from multiple lenders to compare the costs, including interest rates and possible origination fees.

Lenders may offer the opportunity to buy discount points, which are fees the borrower pays upfront to lower the interest rate. Buying points can make sense if you have the money on hand and plan to stay in the home for a long time. Use a discount points calculator to decide.

In a buyers’ market, some motivated sellers may offer to pay some or all of the buyer’s points to close the deal.

7. Get a preapproval letter

A mortgage preapproval is a lender's offer to loan you a certain amount under specific terms. Having a preapproval letter shows home sellers and real estate agents that you're a serious buyer and can give you an edge over home shoppers who haven’t taken this step yet.

 Apply for preapproval when you're ready to start home shopping. A lender will pull your credit and review documents to verify your income, assets and debt. Applying for preapproval from more than one lender to shop rates shouldn't hurt your credit score as long as you apply for them within a limited time frame, such as 30 days.

Home shopping tips

8. Choose a real estate agent carefully

A good real estate agent will scour the market for homes that meet your needs and guide you through the negotiation and closing process. Get agent referrals from other recent home buyers. Interview at least a few agents, and request references. When speaking with potential agents, ask about their experience helping first-time home buyers in your market and how they plan to help you find a home. You might also ask how they find homes that aren't yet on the market, which can be a handy skill when buyer competition is fierce. 

9. Pick the right type of house and neighborhood

Weigh the pros and cons of different types of homes, given your lifestyle and budget. A condominium or townhome may be more affordable than a single-family home, but shared walls with neighbors will mean less privacy. Don't forget to budget for homeowners association fees when shopping for condos and townhomes, or houses in planned or gated communities.

Another option to consider is buying a fixer-upper — a single-family home in need of updates or repairs. Fixer-uppers usually sell for less per square foot than move-in ready homes. However, you may need to budget extra for repairs and remodeling. Renovation mortgages finance both the home price and the cost of improvements in one loan.

Think about your long-term needs and whether a starter home or forever home will meet them best. If you plan to start or expand your family, it may make sense to buy a home with extra room to grow.

Research potential neighborhoods thoroughly. Choose one with amenities that are important to you, including schools and entertainment options, and test out the commute to work during rush hour.

10. Stick to your budget

A lender may offer to loan you more than what is comfortably affordable, or you may feel pressure to spend outside your comfort zone to beat another buyer’s offer. To avoid financial stress down the road, set a price range based on your budget, and then stick to it.

In a competitive market, consider looking at properties below your price limit to give some wiggle room for bidding. In a buyer's market, you may be able to view homes a bit above your limit. Your real estate agent can suggest a range for your offering price. 

11. Make the most of open houses

Online 3D home tours have become more popular as technology improves. These tours let shoppers virtually walk through a home at any hour and observe details that regular photos don't catch. They don't supply all the information in-person visits do — like how the carpets smell — but they can help you narrow the list of properties to visit.

Open your senses when touring homes in person. Listen for noise, pay attention to any odors and look at the overall condition of the home inside and out. Ask about the type and age of the electrical and plumbing systems and the roof.

Home purchasing tips

12. Pay for home inspections

A home inspection is a thorough assessment of the structure and mechanical systems. Professional inspectors look for potential problems, so you can make an informed decision about buying the property. Here are some things to keep in mind:

Standard inspections don’t test for things like radon, mold or pests. Understand what's included in the inspection and ask your agent what other inspections you might need.

Make sure the inspectors can get to every part of the house, such as the roof and any crawl spaces.

It's usually helpful if the buyer attends any inspections. By following the inspectors around you can get a better understanding of the home and ask questions on the spot. If you can't attend the inspections, review the reports carefully and ask about anything that's unclear. 

13. Negotiate with the seller

You may be able to save money by asking the seller to pay for repairs in advance or lower the price to cover the cost of repairs you’ll have to make later. You may also ask the seller to pay some of the closing costs. But keep in mind that lenders may limit the portion of closing costs the seller can pay. 

Your negotiating power will depend on the local market. It's tougher to drive a hard bargain when there are more buyers than homes for sale. Work with your real estate agent to understand the local market and strategize accordingly.

14. Buy adequate home insurance

Your lender will require you to buy homeowners insurance before closing the deal. Home insurance covers the cost to repair or replace your home and belongings if they're damaged by an incident covered in the policy. It also provides liability insurance if you're held responsible for an injury or accident. Buy enough home insurance to cover the cost of rebuilding the home if it's destroyed.

It may be worth buying an umbrella policy if you need to cover your home, cars and other major assets.

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Posted by Jackie A. Graves on September 27th, 2022 6:44 PM

A reverse mortgage is a type of loan that pays you. Unlike a traditional mortgage, which requires you to make payments each month, with a reverse mortgage, you're the one who gets paid — either with a one-time sum, monthly payments, a line of credit or some combination of these approaches.

Reverse mortgages are only for seniors — homeowners who are 62 and older. If you're in this age range, you might consider one of these loans, particularly if you're looking for extra income or to eliminate monthly housing costs in retirement.

Reverse mortgages, while often beneficial, however, aren't right for everyone. You'll want to consider your personal financial situation, goals and other factors to confirm that these loans are a good fit.

To determine if a reverse mortgage is right for you, speak with an expert who can help guide you. 

Are you thinking of taking out a reverse mortgage? Here are four advantages one may offer you.

1. You get extra cash to use how you like

The biggest benefit of a reverse mortgage is that it gives you access to a large amount of cash that you can use for any purpose. You can put the funds toward everyday living expenses, a trip, paying off debts, investing or achieving any other financial goal you might have.

It can also act as supplemental income — particularly if you choose monthly payments. These can be a great way to offset any loss in earnings you experience when you retire.

2. It reduces your monthly expenses

If you still have a balance on your mortgage, you'll need to use your reverse mortgage funds to pay that off first. While doing so will reduce the total amount of funds you can access, it also comes with a huge perk: You no longer have a monthly payment.

This, combined with the extra income you get from your reverse mortgage payments, can make retirement significantly more comfortable.

If this sounds like something that you could benefit from, contact an expert now who can help you access your equity. 

3. You get to stay in your home

Selling your house or downsizing is one way to access your home equity in retirement, but not everyone is willing — or even able — to move. If you'd prefer to keep your home and age in place, a reverse mortgage can be a smart alternative.

With these loans, you can stay in your home while also turning your home equity into cash. If needed, you can use those funds to pay for modifications to accommodate things like walkers, wheelchairs or other assistive devices.

4. You won't owe extra taxes

Though reverse mortgage payments can often feel like extra income, they aren't taxed like it. In fact, the IRS actually says reverse mortgage funds are loan proceeds, so you won't owe taxes on any payments you receive. This is just another way they can help you keep expenses low in retirement.

Do your homework

There are downsides to reverse mortgages, too. For one, they put your home at risk. If you're unable to stay up to date on your property taxes and home insurance, the lender could foreclose on your house. 

Reverse mortgages also may complicate things for your heirs after your death. Your heirs will either need to repay your balance or sell the home to pay off the debt.

Still, if you need cash or want to increase your monthly income in a secure and reliable way, reverse mortgages can be helpful. 

If you're still not sure if a reverse mortgage is a smart financial move, get in touch with a mortgage professional. They can clearly explain the benefits and help steer you in the right direction. 

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Posted by Jackie A. Graves on September 26th, 2022 12:54 PM

With mortgage rates trending up and home prices still climbing, more borrowers are looking to adjustable-rate mortgages. This type of mortgage can be a more affordable means to get into a home, especially as higher rates on fixed mortgages begin to price some borrowers out — but is it worth the risk?

Why ARMs are back

Adjustable-rate mortgages, or ARMs, come with lower fixed interest rates for an initial period, after which the rate moves up or down at regular intervals for the remainder of the loan’s term.

At the beginning of 2022, very few borrowers were bothering with ARMs — they accounted for just 3.1 percent of all mortgage applications in January, according to the Mortgage Bankers Association (MBA).

Fast-forward to September, and that figure tripled to more than 9 percent.

The surge is directly related to the rise in fixed mortgage rates, which have rapidly gone up past 6 percent, a range not seen since 2008. With less purchasing power at higher fixed rates, the lower introductory rates attached to ARMs have started to look much more appealing:

“Given still-high home prices and this rising rate environment, potential homebuyers are finding ways to reduce their monthly payments and view ARMs as more attractive given the widening spread between rates for ARM and fixed-rate loans,” says Joel Kan, associate vice president of Economic and Industry Forecasting at MBA.

Still, ARM volume isn’t likely to set records this time around. In mid-2005, ARMs represented nearly 45 percent of mortgages originated, according to CoreLogic. (Those teaser rates were part of the lead-up to the housing bubble). Since 2009, they’ve accounted for only as much as 18 percent of originations, and as little as 8 percent.

Is an ARM right for you?

A lower monthly mortgage payment sounds like a no-brainer, but ARMs are risky, and they’re not a fit for every borrower. As you weigh the pros and cons, here are a few key signals an ARM might be right for you today:

  • You’re not buying your forever home. ARMs typically have fixed-rate introductory periods of three, five, seven or 10 years, so they “can make sense for a borrower with plans for a shorter time frame in their new home of five to 10 years, where they would likely sell before their rate resets,” says Kan.
  • You’re comfortable with the risk. If you’re set on buying a home now with a lower payment to start, you might simply be willing to accept the risk that your rate and payments could rise down the line, whether or not you plan to move. “A borrower might perceive that the monthly savings between the ARM and fixed-rates is worth the risk of a future increase in rate,” says Pete Boomer, executive vice president at PNC Bank.
  • You’re borrowing a jumbo loan. These days, borrowers taking out bigger loans tend to go for ARMs. As of March 2022, 37 percent of originations above $1 million were ARMs, according to CoreLogic.
  • You’re able to make extra payments in the introductory period. If you have room in your budget to pay extra toward the loan principal during the initial rate period, a lower-rate ARM can help you maximize those interest savings. (Bankrate’s additional mortgage payment calculator can help you weigh different scenarios.)

Don’t ignore the risks

While ARMs have staged a comeback in today’s rising rate environment, it can be more difficult to qualify for one compared to a fixed-rate mortgage. That’s because you’ll need a higher down payment of at least 5 percent, versus 3 percent for a conventional fixed-rate loan.

There’s also the need to verify that your current financial situation allows for a higher payment down the road — even if you plan to move before the lower-rate period ends.

“Most ARM loans now are underwritten based on the highest payment expected on the loan to ensure the borrower can handle the payment shock from a rate increase,” says Kan. “Many other factors come into play, such as rates over the longer five- to 10-year horizon, the borrowers’ income and employment situation, housing market conditions that impact their ability to refinance or sell (if necessary) when their fixed period expires and more.”

That “if necessary” piece underscores the primary risk with ARMs: It’s impossible to predict the future. What if you’re nearing the end of the introductory period and lose your job? What if your plan to sell the home gets derailed by a market downturn? Nothing in life is certain, so if you need a stable monthly payment — or simply can’t tolerate any level of risk — it’s best to go with a fixed-rate mortgage, despite the expense.

Which kind of ARM is most popular?

If you qualify for an ARM and plan to get one, you’ll have a few options. The 5/1 ARM is the most common type of adjustable-rate mortgage. With this ARM, you’ll have the same interest rate and principal and interest payments for the first five years. After that, the “1” comes into play: Every year, your interest rate will adjust up or down based on the current market.

In addition to 5/1 ARMs, 5/6 ARMs are becoming more popular. With this type of loan, you’ll still get the five-year introductory rate, but the interest rate resets more frequently: every six months.

There are other types of ARMs as well, including:

  • 3/1 or 3/6 ARM – You’ll have an introductory rate for three years, followed by annual or six-month rate resets. Since you’re only getting the fixed rate for a short period of time, that rate might be the lowest ARM rate you find. 3/1 ARMs aren’t as common as other kinds of ARMs, however.
  • 7/1 or 7/6 ARM – You’ll have a fixed rate for seven years, then pay a new rate (either higher or lower) every year or six months.
  • 10/1 or 10/6 ARM – A 10/1 or 10/6 ARM has the longest period of stability: a full decade of fixed-rate, predictable payments, followed by annual or six-month adjustments. Since you’re getting 10 years of the same payments, the introductory rate usually isn’t as competitive as rates on shorter ARMs.

Most ARMs have caps on how much the rate can increase in one year (or whatever the interval is), along with a lifetime cap that limits the amount it can increase throughout the loan’s term. You can use Bankrate’s adjustable-rate mortgage calculator to estimate whether you’d be able to shoulder the largest possible monthly payment based on your lifetime cap.

Bottom line

Although ARMs are buzzy again, the risk hasn’t changed. Generally, this type of loan is better for borrowers who plan to sell their home ahead of the first-rate adjustment and can afford the highest potential monthly payment. Ultimately, if you’re still living in the home once the variable-rate period kicks in, be ready to regularly reevaluate your budget as your payments ebb and flow with each adjustment.

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Posted by Jackie A. Graves on September 25th, 2022 7:53 PM

One of the biggest questions for any refinancing applicant is who to refinance with. As with just about any financial product, it’s important to shop around and understand your own goals to find the right lender.

If you’re thinking of refinancing to tap into home equity or change your loan terms, it’s a good idea to check with your current mortgage lender to see what they can offer.

Can you refinance with the same lender?

Yes, you can usually refinance with the same lender that you originally got a loan through. But keep in mind our mortgage lender is the institution that originated your loan, and that may be different from the current servicer. Some mortgage administrators, the folks you send your monthly check to, don’t originate their own loans, so you’ll want to make sure you’re talking to the right kind of institution.

If your mortgage is currently held by a bank or company that originates loans, however, they may be able and perhaps even eager to extend a competitive rate or terms on a refinance, even if another lender originated the loan.

Is it better to refinance with your current lender?

If you’re just looking for the lowest rate, and that’s all you care about, shopping around as widely as you have patience for is the key thing to do. Find the best rate and terms and see if your current lender will match it but be prepared to go somewhere else if cost is your number one priority.

“Most lenders want to keep their customers, most lenders want to preserve that relationship,” said Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association. “They want to keep the servicing of the loan; they want to keep the customer really.”

That means your current lender may be willing to match lower rates offered by a competitor. But in general, shopping around is the best way to find the lowest rate. Think of it this way: If you don’t shop around, you won’t know whether your lender is offering you a competitive deal.

Advantages of refinancing with the same lender

  • Ease of application — they may already have some of your information on file
  • Ease of payment — you won’t have to learn a new way to log in and pay your mortgage.
  • Account consolidation — if you already do all of your banking at the same place that holds your mortgage, you have fewer accounts to keep track of.

Disadvantages of refinancing with the same lender

  • You may not get the best interest rate possible.
  • You may not get the lowest fees possible.
  • You may not get the best loan terms possible.

Bottom line

If you find yourself needing to refinance, there can be some benefits to sticking with your current lender. Perhaps your lender will waive some of the costs of refinancing to keep you as a customer.

Even if staying put is your preference, it’s a good idea to shop around anyway, and see if you can prod your mortgage holder to give you a better rate by presenting some competitive offers.

Some lenders even have customer retention specialists on staff who may be able to help you get a better deal.

Source: To view the original article click here

Posted by Jackie A. Graves on September 24th, 2022 3:52 PM

The monthly mortgage payment on a $400,000 loan is about $2,470 compared to $1,660 a year ago, according to NAR.

After the Federal Reserve raised its key short-term benchmark rate by another three-quarters of a percentage point on Wednesday, the average for the 30-year fixed-rate mortgage climbed to its highest level in 14 years, remaining above 6% and hitting more home buyers’ pocketbooks. It’s the fifth time this year the Fed has taken aggressive action to try to tame 40-year-high inflation.

The 30-year fixed-rate mortgage jumped a quarter of a percent this week to a national average of 6.29%, Freddie Mac reports.

While mortgage rates are not directly tied to the Fed’s fund rate, the Fed’s action does often trickle down in some ways to rates. Mortgage rates are more closely connected to 10-year Treasury yields, which surged to their highest level since 2011, Freddie Mac reports. That has prompted mortgage rates to double or more their levels of a year ago.

The monthly mortgage payment on a $400,000 loan is about $2,470 compared to $1,660 a year ago, the National Association of REALTORS® reports. Owners may be locked into their current loans as mortgage rates rise, and the 3% rates from last year may not be back anytime soon, Nadia Evangelou, NAR’s senior economist and director of forecasting, says on the association’s blog. “While the nation is suffering from a severe housing shortage, lower mobility can make housing inventory even tighter and cause home prices to continue to escalate.”

“Rising mortgage rates have continued to slow housing market demand, resulting in slowing sales and slower home price appreciation,” adds Ruben Gonzalez, chief economist at Keller Williams. Indeed, existing-home sales slipped further in August, down about 20% compared to a year ago, NAR reported this week. NAR Chief Economist Lawrence Yun has blamed softening sales on escalating mortgage rates.

Freddie Mac reports the following national averages with mortgage rates for the week ending Sept. 22:

  • 30-year fixed-rate mortgages: averaged 6.29%, with an average 0.9 point, up from 6.02% last week. Last year at this time, 30-year rates averaged 2.88%.
  • 15-year fixed-rate mortgages: averaged 5.44%, with an average 1 point, rising from last week’s 5.21% average. A year ago, 15-year rates averaged 2.15%.
  • 5-year hybrid adjustable-rate mortgages: averaged 4.97%, with an average 0.4 point, rising from last week’s 4.93% average. A year ago, 5-year ARMs averaged 2.43%.

Freddie Mac reports commitment rates along with average points to better reflect the total upfront cost of obtaining a mortgage.

Source: To view the original article click here

Posted by Jackie A. Graves on September 23rd, 2022 2:22 PM

In addition to finding the right house, securing the right mortgage loan is a critical first step toward long-term, sustainable homeownership. A mortgage lender will help you compare the available options and determine how much money you are able to borrow.

What Is a Lender?

A mortgage lender is the financial institution that provides the funds for your mortgage. Your lender is a key part of your homebuying team. They will:

There are four types of lenders that you can work with:

  1. Banks: Federally insured institutions that offer traditional loan products in addition to banking services, such as checking and savings accounts.
  2. Credit unions: Member-owned institutions that offer services similar to commercial banks. Credit unions are formed to serve people who share things in common, such as an employer or military service, or people with a connection to a geographic area.
  3. Mortgage brokers: Independent finance professionals who connect borrowers to different lenders. They do not make lending decisions or lend money, but they will collect paperwork and information from you to shop to different lenders.
  4. Non-bank lenders: Companies that offer mortgage products but do not have a banking license, meaning they are not subject to the same regulation as traditional banks and credit unions, but they are subject to state and certain federal regulation.

If you are unsure which type of lender is best suited to your needs, you can consult a housing counselor for assistance.

Looking for a Lender

With different choices for lenders and types of loans, you should shop around to determine which options work best for you. Comparing lenders will allow you to gather more information about what mortgage products are available, which can ultimately save you money.

In addition to finding a lender that offers a competitive mortgage rate, it is important to find someone who provides good service and helpful information. Homebuying can be a stressful process but surrounding yourself with the right team is a great way to ensure success.

Lenders vs. Servicers

It is important to understand the difference between mortgage lenders and mortgage servicers, and the different roles each one plays throughout the lifecycle of your mortgage loan.

Mortgage lenders provide the actual funds for your loan and will typically work with you through the end of the closing process. A mortgage servicer handles the administration of your loan after you have closed on your home — this includes the collection of your monthly mortgage payments and management of your escrow account.

Depending on how your lender decides to manage your loan, your servicer and lender may be the same. In many cases, however, the lender will decide to sell your mortgage to a different servicer. This is a common occurrence and is not a cause for concern — you will be notified directly about changes regarding your servicer.

Servicers can also provide help if you are having trouble making your monthly mortgage payment. If you are likely to miss a mortgage payment, you should contact your servicer immediately to discuss your options.

To learn more about lenders and mortgage options, visit My Home by Freddie Mac®.

Source: To view the original article click here

Posted by Jackie A. Graves on September 22nd, 2022 2:54 PM

The Federal Reserve raised rates by three-quarters of a percentage point for the third time this year during its September meeting, part of an effort to tamp down soaring inflation. While the Fed does not set mortgage rates (and the central bank’s decisions don’t drive mortgage rates as directly as they do other products, like savings accounts and CD rates), key players in the mortgage industry keep a close eye on the Fed, and the mortgage market’s attempts to interpret the Fed’s actions affects how much you pay for your home loan. The central bank’s latest aggressive move will sway trends in the mortgage market.

What the Federal Reserve does

The Federal Reserve sets borrowing costs for shorter-term loans in the U.S. by moving its federal funds rate. The Fed kept this rate set near zero during much of the coronavirus pandemic. The rate governs how much banks pay each other in interest to borrow funds from their reserves kept at the Fed on an overnight basis.

Mortgages, on the other hand, track the 10-year Treasury rate. Changes to the federal funds rate might or might not move the rate on 10-year Treasury bonds, which are issued by the government and take a decade to mature.

The Fed also influences mortgage rates through monetary policy, such as when it buys or sells debt securities in the marketplace. Early in the pandemic there was severe disruption in the Treasury market, making the cost of borrowing money more expensive than the Fed wanted it to be. In response, the Federal Reserve announced it would buy billions of dollars in Treasuries and mortgage-backed securities (MBS). The move was to support the flow of credit, which helped push mortgage rates to record lows. 

What influences mortgage rates

Fixed-rate mortgages are tied to the 10-year Treasury rate. When that rate goes up, the popular 30-year fixed-rate mortgage tends to do the same, and vice versa.

Rates for fixed mortgages are also influenced by other factors, such as supply and demand. When mortgage lenders have too much business, they raise rates to decrease demand. When business is light, they tend to cut rates to attract more customers.

Price inflation pushes on rates as well. When inflation is low, rates trend lower. When inflation picks up, so do fixed mortgage rates.

The secondary market where investors buy MBS plays a role, too. Most lenders bundle the mortgages they underwrite and sell them in the secondary marketplace to investors. When investor demand is high, mortgage rates trend a little lower. When investors aren’t buying, rates may rise to attract buyers.

The Fed’s actions do indirectly influence the rates consumers pay on their fixed-rate home loans when they refinance or take out a new mortgage.

What Fed rate decisions mean for mortgages

The Fed sets the federal funds rate. This is an interest rate applied to money that banks and other depository institutions lend to each other overnight.

The fed funds rate affects short-term loans, such as credit card debt and adjustable-rate mortgages, which, unlike fixed-rate mortgages, have a floating interest rate that goes up and down with the market on a monthly basis. Long-term rates for fixed-rate mortgages are generally not directly affected by changes in the federal funds rate. 

What to consider if you’re shopping for a mortgage

When you’re shopping for a mortgage, compare interest rates and APR, which is the total cost of the mortgage. Some lenders might advertise low interest rates but offset them with high fees, which are reflected in the APR.

To begin your search, compare offers online, read lender reviews and go directly to lenders’ websites.

If you have a relationship with a lender, bank or credit union, find out what interest rate or customer discount you might qualify for. Often, lenders will work with existing customers to give them a better deal than they might otherwise get at another place.

Mortgage rates are on a rising track, so pay attention to the Fed and the economy and make sure to shop around so you get a rate that suits your budget and goals.

Source: To view the original article click here

Posted by Jackie A. Graves on September 21st, 2022 2:57 PM

Millennials in a changing housing market

Millennials are typically defined as those born sometime between the mid-1980s and mid-1990s. Their entry into the real estate market has looked different than that of older generations. Generally, millennials are buying their first homes later than their baby boomer parents. There are a number of reasons behind that delay, but high student loan debt loads and the lingering effects of career stagnation caused by the Great Recession are some of the most commonly cited reasons.

Moreover, saving money continues to prove challenging. Twenty-seven percent of younger millennials say saving for a down payment is the “most difficult step” of the homebuying process, according to NAR, with 25 percent relying on a gift from family or friends to help with their purchase.

As the housing market shifts toward more balanced conditions between homebuyers and sellers, millennials are still facing the challenge of saving, along with higher mortgage rates and inflation. Among millennial non-homeowners surveyed by Bankrate earlier this year, 44 percent cited too-high home prices as their reason for continuing to rent.

In addition to being held back by financial considerations, many millennials are in a general pattern of reaching life milestones later. The average age for getting married has been rising, for example. In 2020, the median age for a man’s first marriage was above 30 for the first time in history, according to Census estimates, while the median age of a first-time bride was above 28, also for the first time. Subsequently, millennials are starting their families later.

How millennials use technology for homebuying

Whether it’s browsing real estate listings online or applying for their mortgage through an app, millennials are more likely than previous generations to take advantage of tech innovations in the real estate sphere. With listings snapped up quickly, app notifications allow them to check out property details and schedule showings within minutes. Comparable to other generations, virtually all millennial homebuyers (99 percent, according to NAR) use the internet at some stage in the homebuying process. However, millennials rely on mobile devices much more so than the Silent Generation.

Tips for millennial homebuyers

If you’re looking to buy a home, there are a few key bits of advice to keep in mind:

  • Work with a real estate agent. Although the housing market is showing signs of cooling, now’s not the time to embark on a purchase without someone to guide you through the process. If you’re a first-time homebuyer, it’s even more important to have someone who understands your needs, concerns and stresses.
  • Shop around with multiple mortgage lenders to make sure you’re getting the best deal. It’s not just about interest rates, but the all-in costs and other terms and conditions on your loan.
  • Make a budget and stick to it. You don’t want to wind up with more house than you can afford. Keep that budget going once you move, too. In a separate Bankrate survey, the top regret for millennial homebuyers was unexpected maintenance costs. You’ll want to be ready to cover whatever issues inevitably crop up. 

Source: To view the original article click here

Posted by Jackie A. Graves on September 19th, 2022 12:49 PM


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