Mortgage Rates

Buying a home should not start on the day that you begin looking at houses. Surprisingly, some home buyers go that route and do not prepare to make the purchase. If individuals don't get ready for a home purchase, they will find home buying much more stressful than the prepared buyer.

Buying A Home = Hopes and Dreams

Everyone recognizes home buying as a major commitment. Yet purchasing is a home is also tied in with emotions and hopes and dreams. Some potential home buyers let their emotions get the better of them. They do not focus on the financial and other practical details involved in buying a home.

The unprepared buyer can end up finding the perfect home and then realizing that nothing is in place for the purchase. When the prepared buyer finds the perfect home, everything that needs to be in order is organized at that point. The prepared buyer can enjoy the experience of finding their dream home and will proceed with relative ease through the home buying process.

Preparing to Buy a Home

1. Down Payment

Most home buyers cannot put together a down payment at a moment's notice. A down payment is a substantial expense. The amount varies according to the loan, lender, and loan program. It can be as low as 3.5% of the home's purchase price for FHA (Federal Housing Administration) loans. Down payments, however, can also be as high as 20% of the purchase price. Wherever the amount falls, the down payment reflects a percentage of the sale price of a house so home buyers have to be prepared to pay a hefty sum.

2. Closing Costs

Often first-time home buyers are surprised by the closing costs. Of course, sometimes the seller will offer to help with this expense but this scenario happens mostly in a buyer's market. Home buyers are advised to include closing costs in their budget. They can expect to pay in the range of $2700 in the US market.

3. Credit Rating

Home buyers should enter into the process with the best possible credit rating. If an individual is thinking about buying a home in the near future, they should check their credit rating – preferably, a few months in advance. Being prepared with that information means that a potential buyer has the chance to improve their credit rating.

4. Pre-approval

Pre-approvals for loans give a positive edge to home buyers. Having a pre-approved loan makes it easier to negotiate and arrive at a deal. Home sellers respond well to potential buyers with pre-approvals in hand.

5. Moving-in Expenses

Obviously, home buyers have to factor moving-in expenses into their budget. These costs can include the actual 'moving' as well as new furniture expenses or necessary renovations. Some shopping for furnishings and changes to a house can be deferred until after a home buyer settles into their new home. Yet some things have to be taken care of before a buyer moves into a new property. If basic furniture is needed or renovations are necessary to accommodate young children, these concerns have to be looked after before the move.

What Do You Think Is The Most Important Step In Preparing To Buy A Home?

Depending on your location, home sales experienced a rise or a fall in August. Within the US, California saw an all-time low while British Columbia, Canada, had a temporary increase in home sales. California experienced a drop in many areas of real estate.

California, US – Fall in Home Sales

Home sales in California fell 2.7% from July. That drop in one month seems small compared to other statistics. Home sales fell 20% from June-July 2010 and 14% from August 2009. As well, the median price ($260,000) of California homes dropped 3% in August from July.

San Francisco Bay Area

Within the San Francisco Bay area, the median home price was $385,000. This figure is a 4.2% drop from the median price in July ($402,000). Home sales fell 1.1% in August from July and 10.9% from August 2009. 6,698 homes were sold last month compared to 7,518 homes in the previous August. This drop puts home sales in the Bay area at their lowest point for the month in eighteen years.

Some potential buyers are waiting for prices to fall further and other people are just waiting to be in a position to buy a home. Despite falling prices and low mortgage rates, joblessness is one factor that is having a huge effect on home sales. As well, first-time home buyers no longer have the Home Buyers' Tax Credit to ease the burden.

Foreclosures

While everything else was falling during August in California, foreclosures increased over July's rate. Foreclosures rose from 35.9% to 35.2%. In the San Francisco Bay area, foreclosures accounted for 26.7% of resales in August compared to 25.3% in July. Foreclosures are, however, down from last year during August – down 42.8% on average in California and 24.8% in the San Francisco Bay area.

Home sales in California fall a second straight month

British Columbia, Canada – Rise in Home Sales

Home sales rose (4.1%) in Canada during August compared to the previous month's purchases. July records indicated that it took 7.3 months to sell a home in Canada. August records point to a 6.9 month wait. Yet experts in Canadian real estate do not expect a continued rise throughout the rest of the year.

"Rising interest rates and a projected slowdown in job growth mean that the Canadian housing market is expected to continue to cool," said Georges Pahud, president of CREA.

Although August statistics might be better, sales in July were not high despite the fact that June saw considerable sales. Most buyers in June, however, were trying to purchase before the new HST (Harmonized Sales Tax) regulations came into effect in July.

August sales are probably a throwback to the incredible rate of sales in 2009. During that year, home sales rose by 66% and prices increased by almost 22%. It is hard for any system to maintain that level of activity so things have leveled off somewhat in 2010.

"I don't see the continuation of a dizzying descent in sales activity," says REA chief economist Gregory Klump.

Some changes in Canadian real estate are just marginal improvements. The average price of a Canadian home during August was $324,928. In 2009, the price came in at $324, 843. Demand has increased (1.9%) since last summer but dropped 16% from the peak in April. The Canadian Real Estate Assocaition (CREA) expects home prices to fall but not at any substantial rate.

Home sales rebound, but it won't last long, analyst says

Are Home Sales Rising Or Falling In Your Area?

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Obama's Home Affordable Modification Program was supposed to make things better for financially-strapped homeowners. The idea was to modify the terms of their original mortgages so that they could keep their homes. They could look forward to more favorable arrangements such as lower monthly payments – maybe even more than 50% of the original amount.

Yet it seems that the Home Affordable Modification Program (HAMP) needed its own modification. Current lawsuits against the Bank of America, JPMorgan Chase, and Wells Fargo suggest that everything did not work out as hoped for some home owners. One couple claims that they kept up their end of the bargain and made regular payments according to the revised plan. Yet they still ended up thousands of dollars behind in payments and facing the threat of foreclosure.

Apparently, numerous home owners have made similar complaints about HAMP. The lawsuits focus on dissatisfaction with the treatment of home owners under HAMP and the overall performance of the program. Many home owners point to less-than-outstanding results from the Obama initiative.

The main point of contention is that permanent modifications were given to only about one third of the borrowers in trial plans. Obviously, home owners in distress prefer 'permanent' changes. They lower mortgage payments to 31% of a borrower's pretax monthly income for a five-year period.

The lawsuits allege that the lenders should have given permanent modifications to home owners on a three or four-month trial payment plan. Yet the servicers claim that the trial plans did not constitute contracts and lenders can grant permanent modifications at their discretion. The lawsuit suggests that borrowers would have been better served to find options other than HAMP to save their homes.

Actually, it isn't just home owners who are railing against HAMP.

The Congressional Oversight Panel says, "We are deeply concerned about the unacceptable quality of the denial and cancellation reasons and strongly urge Treasury to take swift action."

Why were so many home owners denied permanent modifications?

A Government Accountability Office report discovered that servicers were applying a formula inaccurately to determine if the value of modification was greater than the proceeds from foreclosure. The use of this formula would disqualify many home owners who needed assistance. Treasury claims that it has required servicers to go back and fix any errors.

Yet Treasury officials say that HAMP home owners are not promised permanent modifications. It appears that there was confusion about HAMP from the beginning. The program was brought out in haste and the guidelines changed during the life of the initiative.

Originally, servicers enrolled borrowers in trial modifications without verifying income or financial hardship. It was not until much later in the program that officials asked for verification. This lack of foresight caused some of the problems that cropped up later down the line. Now the lawyers and officials will argue about the details of the program. Meanwhile, some homeowners are now without a home.

Home mortgage modification snags spark lawsuits

Did The Home Affordable Modification Program (HAMP) Work For You?

Long Term

When home owners take on a mortgage, they agree to a long term commitment. Home buyers should seek out the best professional advice to help them in arranging their mortgage.

Amortization

Mortgages will amortize over a specific period of time. The usual length of a mortgage is 30 years but amortization can be as short as 15 years. On the other hand, mortgages can run longer than 30 years under certain circumstances.

Differences

Mortgages are not all the same. They differ in loan amount, terms, interest rate, and monthly payments. A mortgage must suit individual needs and finances.

Risks

Lenders assess the risk of granting a mortgage to a home owner. Before applying for a mortgage, individuals should try to be in the best possible financial condition. They should work to get their credit rating to the most favorable level. Lenders will reward a good credit rating with a low interest rate.

Market

Just like shopping for any major purchase, people should look for the best deal with their mortgage. Shop around for the lowest interest rate. If all lenders offer the same rate, they might still offer different terms and conditions.

Questions

Borrowers should ask lenders about the mortgage process. Home buyers must be as informed as possible about the steps in getting and managing a mortgage.

Pre-Approval

Pre-approval makes for an easier process down the line. Yet home buyers should not get overenthusiastic about pre-approvals. An individual might be able to get a substantial loan but that does not mean that it is a wise decision to pursue an exorbitant amount.

Down Payment

Generally, lenders require a down payment. The deposit is seen as a portion of the value of the property. If home buyers make a 30% down payment, they have a loan-value ratio of 70%.

Constant Terms

Lenders will offer constant terms to borrowers for a set time – usually ranging anywhere from six months to five years. During this period, interest rates and payments will remain constant despite market fluctuations.

Variable Rate

If a home buyer expects a drop in rates, a variable rate mortgage is a sensible choice. The interest rate will fluctuate according to the market rate.

Payments

Home buyers must be realistic about what they can afford to pay per month. Although a mortgage payment is high priority, so are food, utilities, transportation to work and school, and other basic expenses. The monthly payment should account for only 30% of the gross combined family income.

Rounding Up

Borrowers can ask lenders to round up their mortgage payment - for example, from $141.52 to $160. That $18.48 difference per month might not seem like a big deal but it can add up to thousands over amortization of the mortgage.

Skipping

Skipping a mortgage payment is not a good idea. That action adds to the interest on the outstanding balance. 'Skipping' increases interest costs on the life of the mortgage.

Mortgage Basics

What Question Would You Ask Your Lender About Mortgages?

The original Hardest Hit Fund, announced by the Obama administration in February 2010 to ease the housing crisis, included five of the "hardest hit" states. The expansion of the fund in March added five more states. On Wednesday, August 11, the US Treasury Department started the next round of help and added seven more states to the "hardest hit" list.

FIVE...THEN TEN

February's funding ($1.5 billion) was earmarked for five states in crisis - Arizona, California, Florida, Michigan, and Nevada. The second round in March ($600 million) was designed to help North Carolina, Ohio, Oregon, Rhode Island, and South Carolina.

MORE THAN TEN

Last week's additional $2 billion extended the aid to Alabama, Illinois, Kentucky, Mississippi, and New Jersey, as well as the District of Columbia. The amount of money given to each state depends on its population.

UNEMPLOYED OR UNDEREMPLOYED

The recipients of the benefits will be unemployed or underemployed home owners who cannot afford their mortgages. The money comes from the Troubled Assets Relief Program (part of the Making Home Affordable Program). Whether you agree with this approach or not, it is hard to deny the need.

CRISIS

Obviously, the crisis is fueled by the same turmoil which was the inspiration for the 'Zero Down' program or the Federal Home Buyers' Tax Credit. The aid might be dressed in different packages and address slightly different angles. Yet when you get right down to the basics, all these measures are meant to raise everyone out of the economic slump. Although many people are finding their way back, some individuals and families are still in crisis. Unemployment is the cause of much of the distress out there.

DIFFERENCE

Last week's 'Hardest-Hit Fund' is slightly different from the original assistance. This recent $2 billion in funding can be used only to help with mortgage payments for "the unemployed or underemployed" home owner. With the February funding, money was given to state housing agencies and they could design individual programs (such as foreclosure prevention programs and similar initiatives) to help their markets.

NEED

The administration believes that there is an urgent and immediate need for this latest program. California though has yet to use the first part of its funding ($700 million) but the state has now received an additional $476 million. Of course, California did come up with a plan – four new programs – from the February funding. The plan has just not gone into operation to date.

NEED FOR FAIRNESS

Besides California's unemployed home owners who are waiting for the program, people in other states are facing similar challenges. As a whole, these states did not qualify in the 'top 17' but that does little to help these unemployed individuals. Actually though, there is supposed to be a $1 billion program under development to help in the other states. The program is expected to be released under the U.S. Department of Housing and Urban Development.

If this program does not come to life, we are left with an odd scenario. Two people are facing the same challenge and one gets help and one doesn't - because of their location. Within any system, the perception of being fair is as important as fairness itself.

What Do You Think About The Expansion Of The "Hardest Hit Fund?"

Although the television commercials about mortgages are filled with smiling couples, life isn't always like that. Actually, maybe life even shouldn't be like that. Life is best experienced as a smorgasbord. Indeed, real life is not the stuff of commercials and every couple does not smile all the way through the mortgage process. (In fact, maybe no couple ever accomplished that).

Now a frown or two does not mean that they do not "feel the love." It is simply a fact that getting a mortgage is a stressful time for couples. Sometimes people forget that positive things in one's life come with their own type of stress. The healthy form of stress helps us to meet challenges. Understanding stress is the key to differentiating between good stress and bad stress.

Significant events in your life can bring about this natural response. During the process of getting a mortgage, however, stress levels can go though the roof. Couples can be torn apart at a time when they should be working together.

How To Save Your Marriage and Your Mortgage

1. Understand The Process

Couples must understand that the process of buying a home takes time and patience. It is normal to feel the pressure but your spouse didn't create the system. Sometimes people get annoyed with the process but complain about the socks on the floor or the dishes in the sink. Really, your partner is not to blame for the long wait, honest, trust me! Of course, couples know that, but it's easy to loose sight of what's important when your dream home is nearly – but not quite – in your grasp.

2. Don't Confuse The Dream With Reality

Without a doubt, go for your dream, but maybe you can't get it today. Anyway, a dream without effort seems rather unreal – sort of forever like a 'dream' – but a dream achieved through effort is a dream come true. Maybe you might like the 'penthouse' but your budget screams "small home". When the dreamer marries the practical person, however, a mortgage could be a nightmare but only if they lose their way. Once they remember that a marriage is about a team effort, things get back to normal in short order.

3. There Are No Winners

Don't get too focused on specific things to the exclusion of what matters in life. The – "I have to have" - statement can meet with the reply from your spouse – "But I don't want that." Individuality is admirable and nobody should lose themselves in a partnership. The problem arises, however, when one or both make it their mission to be the winner. They end up living in a house where one half of the couple may not feel at home. I forget; what did the other half win anyway?

4. Know Your Finances

If a couple doesn't know the real state of their finances at the beginning, there is bound to be stress down the road. Couples must determine if they can afford the whole package – the mortgage payments, the maintenance, and other expenses involved in buying a home. A couple might love a house, but if they can't afford it in the long term, it won't feel like a home.

Talbot Boggs wrote recently in the Canadian Press - Mortgages a tricky, scary business.

Mortgages are tricky and they can be scary but being informed gives you a definite advantage. For couples, remembering that, hopefully, the marriage will even outlast the mortgage helps them to put their priorities in order.

Daniel Huerta has some great advice for couples buying a home - The First Five Years of Marriage.

Do You Have Any Advice For Couples Buying A Home?

The estaterebate.com blog was created to be your source for "everything real estate." We have covered topics from low mortgage rates to green homes as well as other relevant and timely real estate issues. The estaterebate.com team is open to your suggestions about real estate topics that you would like to see covered in our blog.

We know that many people have concerns and questions about real estate. In the past, the real estate industry was not so open with its customers. In fact, real estate agents were not even required to explain an agent's true role to their clients. Many customers did not know that a real estate agent is bound by law to represent the seller. A buyer's best option is always a broker who works exclusively for the buyer.

In the 1990s, the Federal Trade Commission (FTC) regulated real estate agents to present a clear picture about their role. Since that time, the industry has been more forthcoming with answers. Yet many people are still in the dark about certain areas of real estate.

Actually, some industry experts believe that the recent housing collapse was spurred on by misinformation given to borrowers. Home buyers and sellers need access to accurate information. Many people have burning questions about the current real estate market.

'Hot' Real Estate Topics

Should I buy now while prices are favorable to buyers?

You should go ahead and purchase a home if you are ready for the commitment. Ultimately, the decision to buy a home has to be based on an individual or family's ability to handle the long term consequences. No matter how good a short term offer or benefit, home buyers have to think in terms of the future. Government incentives or low mortgage rates can be tremendous benefits to buyers who are ready to buy a home. Yet if one is just thinking in the short term, it is easy to get in over your head.

Why do housing markets vary across the US?

Most variations in housing markets are tied to the unemployment rate in the region. Generally, the real estate market is not as strong in areas of high unemployment. Yet sometimes there are exceptions to that rule.

Should I expect a slight drop in my home's value?

The current market does not favor the seller. You can probably expect a substantial drop from 2007 prices. Many sellers in today's market are not expecting the lower returns. They find it hard to believe their real estate agent's quote. A home seller can check with additional sources about local prices. Yet sellers must be prepared to make some compromises in the current marketplace.

How will real estate investors fare in the current market?

The real estate game can usually be lucrative for investors if they are involved in buying and selling. When you are playing both sides, price is not as huge a factor as for the individual home buyer or seller. Real estate investors have to keep the motion going to build profitable investments. Investors cannot afford to be stalled in the process.

Do You Have A 'Hot' Real Estate Topic Suggestion For estaterebate.com? 

Low mortgage rates translate to affordable monthly payments in the short term and substantial savings over the life of a loan. As well, low rates make home owners consider refinancing. The cost of the refinance does not seem so bad with savings in the picture.

Drop In Rates

During the past week, the rate on the 30-year fixed mortgage, the most widely-held type, fell from 4.38% to 4.28%. Within the past few days, 15-year fixed mortgage rates dropped from 3.87% to 3.85%. With similar decreases in adjustable rate mortgages (ARMS), it looks like the low mortgage rates might take some of the sting out of the economy in this post-Federal Home Buyers' Tax Credit period. The only catch is that lending guidelines are tighter than ever before and not everyone will qualify for a low rate.

High Credit Score

When it comes to credit and mortgages, the person with the highest credit score (usually 740 and higher) gets the lowest rate. Although a high credit score is not the only requirement to be eligible for a low mortgage rate, it can make a big difference. Borrowers must aim for the more favorable rate because it can make a noticeable impact on monthly payments.

A person with a 760-850 credit score could end up with a monthly payment in the range of $1500; an individual with a 620-639 score might have to pay over $1700 per month. High credit scores can mean huge savings. It is advisable for a borrower to have the best possible credit rating before he approaches a lender.

Debt-to-Income Ratio

As well as that high credit score, borrowers must have a certain debt-to-income ratio. Usually lenders insist that a borrower's overall debt does not exceed 45% of their income. Actually, debt-to-income ratio is given huge consideration in getting low mortgage rates. Even if a person's credit score is less than perfect, a sizeable income (or assets) can turn the tables in their favor.

Few Takers

Despite the low mortgage rates, you need not expect to see every ' home for sale' sign taken down in the next few weeks. Some people are taking advantage of the low mortgage rates but not everyone is taking the plunge. On the surface, low mortgages look like a deal that nobody could (or even should) resist but people worried about unemployment are not in a buying mood.

High Standards

In addition, lenders have those strict guidelines in place. The rules are not written to welcome the person with the low credit score. Of course, it does not follow that an individual with bad credit can never buy a home.

Credit Restoration

Credit repair is always an option and a restored rating can eventually open the doors to a new home. The repair process takes effort and commitment but credit restoration is worth the effort. With a good credit score, you won't miss out on opportunities such as the current low mortgage rates.

Are You Planning To Take Advantage Of The Low Mortgage Rates?