Is it a good idea to wait for home values to drop another 2.5% to 5%? What if interest rates don’t cooperate? Rates tend to go up a lot quicker than they go down. Watch the video below to see why waiting could cost you.
Click here for a free “The Time Is Now” chart.
What is my rate and can you match it or beat it? The second part of the question is easier to answer then the first…and that answer is always yes! My job as a mortgage consultant is to put you in the best suitable product for you and your family. The lowest rate on the wrong product is far more expensive then a competitive rate on the best product for your situation. During our consultation my team and I will give you various options and our recommendation on what product will save you the most money over your expected time frame in the home.
Don’t get caught up in getting Internet rate quotes before you are pre-approved. These are teaser rates that often have a lot of closing costs involved to acquire those rates. It often is not in your best interest. Watch the video below for more information.
By Polyana da Costa • Bankrate.com
Mortgage rates dropped slightly this week amid weak economic results in the United States and growing concerns that the European debt crisis is worsening.
The benchmark 30-year fixed-rate mortgage fell 2 basis points this week, to 4.75 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.4 discount and origination points. One year ago, the mortgage index was 4.92 percent; four weeks ago, it was 4.95 percent.
The benchmark 15-year fixed-rate mortgage fell 2 basis points, to 3.93 percent. The benchmark 5/1 adjustable-rate mortgage fell 3 basis points, to 3.45 percent. Fixed mortgage rates have dropped for seven weeks in a row, according to Bankrate.com’s surveys. This is the lowest rate on the 30-year fixed in more than five months. On Dec. 1 the rate was 4.71 percent, according to Bankrate’s survey.
Results of Bankrate.com’s May 25, 2011, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
| 30-year fixed | 15-year fixed | 5-year ARM | |
| This week’s rate: | 4.75% | 3.93% | 3.45% |
| Change from last week: | -0.02 | -0.05 | -0.03 |
| Monthly payment: | $860.72 | $1,214.71 | $736.33 |
| Change from last week: | -$1.99 | -$1.64 | -$2.75 |
Signs of a weakening U.S. economy have contributed to keeping rates low, says David Adamo of Luxury Mortgage in Stamford, Conn.
One of those signs was the April durable goods orders data released Wednesday by the Department of Commerce. The report measures consumer and business spending on long-term purchases such as cars, planes, computers, appliances and other durable items. Orders for those types of products decreased 3.6 percent in April, according to the department. That’s worse than the 2.2 percent drop that economists had expected.
Part of the drop can be explained by the impact of Japan’s earthquake on manufacturing industries, but the decrease is still viewed as a clear sign that consumers and businesses are struggling and are putting off major purchases, economists say.
Until economic reports begin to show the economy is recovering and growing, it is unlikely mortgage rates will see any big spikes, Adamo says.
“Whenever you have a lot of negative events, the market sees a flight to quality,” he says.
That flight to quality happens when worried investors pull out of riskier investments, such as stocks, and put their money into bonds. As demand for U.S. bonds increases, yields drop, and that normally translates into lower rates.
This week, investors sought safety in the U.S. bond market as they watched stocks for many major companies fall. Most of the drops in the U.S. stock market were seen in consumer stocks, such as those for clothing and food companies. Polo Ralph Lauren Corp., American Eagle Outfitters Inc. and Kraft Foods Inc. were some of the many companies that saw their stock drop this week.
Investors also have been pulling out of the European bond market as they grow concerned that Greece’s debt woes will spread to European countries, including Spain and even Italy.
Greece’s bonds have plunged on speculation that Greece will not be able to restructure its debt and will eventually default.
“The U.S. mortgage market is a player in the global market, and we are certainly getting help from the eurozone,” says Dan Green of Waterstone Mortgage in Cincinnati. “Money flows from country to country and market to market. Right now, the money is flowing into the U.S.”
But don’t assume that mortgage rates will remain low until the Europeans are able to figure out their financial problems, Green says.
“So many things are unknown,” he says. “Any major unexpected event could be a shock to the system and immediately impact rates.”
There is a very famous saying which asserts “Sell High, Buy Low”. It is obviously great advice no matter what the investment. Below is a graph showing the cycle of investments. It shows the points of maximum risk and maximum opportunity when purchasing. We want to sell high (point of maximum risk) and buy low (point of maximum opportunity).
The challenge is how to determine when we have hit bottom if you are a purchaser. The only time you can guarantee a bottom is after you pass it.
However, there is more and more evidence that the COST of a home has in fact hit bottom. Notice we have used the word COST. Unless you are an all cash buyer, you must take into consideration the expense of financing a property to determine the true cost of purchasing the home. Interest rates have increased over the last quarter; and the rise in rates has counteracted any fall in prices.
Let’s look at an example:
Let’s say you were going to take out a $200,000 30-year-fixed-rate mortgage in November of 2010. At that time, interest rates were 4.17% (as per Freddie Mac). Your principle and interest payment would have come to $974.54. According to the most recent report from Case Shiller house prices fell 3.9% in the 4th quarter of 2010. The most recent report from the Federal Housing Finance Agency shows a 0.8% fall in prices. Let’s use the larger percentage decrease: 3.9%.
For the sake of keeping the math simple, we will now say you can get the same house with a $192,000 mortgage (4% discount from November price). Interest rates are now 4.95% (as per Freddie Mac).
Your principle and interest payment would now be $1,024.84.
By waiting to pay less for the PRICE of the house, the COST increased over $50 a month. That adds up to more than $600 a year and over $18,000 over the life of the loan.
We realize that there are other things to consider (ex. the mortgage tax deduction, etc.). This example is just a simple way to show that there is a difference between COST and PRICE.
If you want to buy low, buy now. It appears COST has hit its lowest point.
[Thank you to the KCM Crew for this great post.]
Mortgage markets worsened for the 7th straight day Tuesday, equaling the longest losing streak of the last 5 years. Conventional, 30-year fixed mortgage rates are now scratching 5 percent, with FHA mortgage rates running roughly the same. This is a huge increase from just 11 weeks ago when mortgage rates were riding an 8-month-long hot streak, and appeared headed into the 3s. Then the Federal Reserve intervened. On November 3, as additional support for markets, the Fed announced its second round of bond buys, a $600 billion program dubbed QEII — short for Quantitative Easing, Round II. Wall Street got spooked on the news; investors feared runaway inflation.
That’s when low rates ended. Here’s why: (A) Inflation makes the U.S. dollar lose its value, And, (B) U.S. mortgage bond payments are paid in U.S. dollars. Therefore, (C) Inflation makes mortgage bond repayments lose their value. When mortgage bond repayments are worth less, bond demand falls among the global investor set and that causes bond prices to fall along with it. When bond prices fall, mortgage rates rise and that’s exactly what we’re seeing right now. Since the Fed’s QEII announcement, mortgage rates have soared and home affordability is taking a hit. Given recent trends, it’s probably safe to declare the Refi Boom “officially over” and the era of low mortgage rates may be over, too. Home prices may move up or down in Provo this year, but rising mortgage rates could render the point moot. If you’re looking for a great “deal” with low, long-term payments, the time to get in contract may be now. Because of rising rates, homeowners have lost roughly 10% of their purchasing power since November. Mortgage markets worsened for the 7th straight day Tuesday, equaling the longest losing streak of the last 5 years. Conventional, 30-year fixed mortgage rates are now scratching 5 percent, with FHA mortgage rates running roughly the same. This is a huge increase from just 11 weeks ago when mortgage rates were riding an 8-month-long hot streak, and appeared headed into the 3s. Then the Federal Reserve intervened. On November 3, as additional support for markets, the Fed announced its second round of bond buys, a $600 billion program dubbed QEII — short for Quantitative Easing, Round II. Wall Street got spooked on the news; investors feared runaway inflation. That’s when low rates ended. Here’s why:
(A) Inflation makes the U.S. dollar lose its value,
And, (B) U.S. mortgage bond payments are paid in U.S. dollars.
Therefore, (C) Inflation makes mortgage bond repayments lose their value.
When mortgage bond repayments are worth less, bond demand falls among the global investor set and that causes bond prices to fall along with it. When bond prices fall, mortgage rates rise and that’s exactly what we’re seeing right now. Since the Fed’s QEII announcement, mortgage rates have soared and home affordability is taking a hit. Given recent trends, it’s probably safe to declare the Refi Boom “officially over” and the era of low mortgage rates may be over, too. Home prices may move up or down in Provo this year, but rising mortgage rates could render the point moot. If you’re looking for a great “deal” with low, long-term payments, the time to get in contract may be now. Because of rising rates, homeowners have lost roughly 10% of their purchasing power since November.
