Archive for June, 2012
Mortgage rates rise for first time in seven weeks
WASHINGTON — Average rates on fixed mortgages rose this week, the first increase in seven weeks. But mortgage rates remain near historic lows, boosting prospects for home sales this year.
Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year loan increased to 3.71 percent. That’s up from 3.67 percent last week, the lowest since long-term mortgages began in the 1950s.
The average rate on the 15-year mortgage, a popular refinancing option, rose to 2.98 percent. That’s up from 2.94 percent last week, also a record low.
The rate on the 30-year loan has been below 4 percent since early December. Low rates are a key reason the housing industry is showing modest signs of a recovery this year.
“Fixed mortgage rates edged up slightly from record lows during a mild week of economic data releases,” said Frank Nothaft, vice president and chief economist for Freddie Mac. “The Federal Reserve Board reported that household net worth rose by $2 trillion to $62.9 trillion over the first three months of 2012 primarily due to increases in stock markets. However, this is still well below the peak of $67.5 trillion set in the third quarter of 2007. Nonetheless, homeowners saw an aggregate $372 billion rise in property values over the first three months of this year.”
In April, sales of both previously occupied homes and new homes rose near two-year highs. Builders are gaining more confidence in the market, breaking ground on more homes and requesting more permits to build single-family homes later this year.
Low rates could also provide some help to the economy if more people refinance. When people refinance at lower rates, they pay less interest on their loans and have more money to spend.
Still, the pace of home sales remains well below healthy levels. Economists say it could be years before the market is fully healed.
Many people are still having difficulty qualifying for home loans or can’t afford larger down payments required by banks. Some would-be home buyers are holding off because they fear that home prices could keep falling.
The economy is growing only modestly and job creation slowed sharply in April and May. U.S. employers created only 69,000 jobs in May, the fewest in a year.
Mortgage rates have been dropping because they tend to track the yield on the 10-year Treasury note. Uncertainty about how Europe will resolve its debt crisis has led investors to buy more Treasury securities, which are considered safe investments. As demand for Treasurys increase, the yield falls.
To calculate average rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week.
The average does not include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for 30-year loans was 0.7 point, unchanged from last week. The fee for 15-year loans also was unchanged at 0.7 point.
The average rate on one-year adjustable rate mortgages slipped to 2.78 percent from 2.79 percent last week. The fee for one-year adjustable rate loans was 0.5, up from 0.4.
The Associated Press contributed to this report.
Traditional ‘rules’ of homebuying return
Buyers can balance the bargain hunt with realistic expectations.
By Rachel Koning Beals of U.S. News & World Report
© John Lund/Drew Kelly/Blend Images/Corbis
Depending on the location, house hunters may find themselves in a strange, transitional real-estate market that’s emerging from historic lows.
Does the buyer have an advantage? Yes, in many areas, that’s still the case. (Bing: What areas are still buyers markets?)
But buyers have guidelines for success in this type of market, too. They need to show that they’re serious if they hope to secure their dream house amid stiff deal-sniffing buyer competition or sellers so frustrated they may be willing to hold out for a stronger market turnaround. Professionalism and realistic expectations can go a long way toward ensuring a smooth and timely closing transaction, which is important to buyers and sellers alike.
Deals can be found, but playing hardball with lowball offers that are out of sync with comparable local sales can be time-consuming. Time can mean money.
- On our blog, ‘Listed’: Home prices: Not as bad as they look?
There may be wiggle room with seller concessions — covering closing costs, tossing in repair credits — so entering into a prospective deal armed with local-market knowledge and respectful consideration of the seller’s position can go a long way toward getting a great deal on a great property.
Here are a few tips for buyers to consider, culled from National Association of Realtors data and independent brokerage sites:
- Save yourself and all involved the delay and headache of financial surprises by researching your own credit report. You should also consider securing a preapproved loan or at least let a bank determine the range for which you’ll likely qualify. This will help set realistic expectations for your search.
Common Questions from First-time Homebuyers – HUD
- Short sales, foreclosed properties or rent-to-own dwellings shouldn’t be ruled out as part of a wide and comprehensive home search. But these types of sales may take more time and involve more financial hoops, so be prepared.
- With your agent or on your own, thoroughly study the comparable nearby sales. Limit the search to recent transactions — no older than six months if such data are available. Extend the time frame if you need to. Price isn’t all that matters; find out how long properties are staying on the market, on average. This statistic can also help inform how far below the asking price you might consider for an opening bid.
- Speaking of negotiations, they’re back and have been for a few years. Gone — in most markets — are the bidding wars where would-be buyers didn’t stand a chance unless they came in above the asking price from the start. Ironically, tough competition has cropped up in some instances, thanks to the weak housing market. If buyers are going for a foreclosure, for instance, all-cash offers from property developers and other buyers are edging out bank-financed offers. Again, be prepared and know your own financial situation in advance.
- Keep in mind that real-estate health is not only a local market story (you can essentially ignore national sales statistics), but it can change street by street. Maybe the property you desire is near a prestigious hospital, university, large government employer or vibrant restaurant and shopping district. That’s good for your long-term investment, but it also means the seller has a pricing advantage at the outset and couldn’t care less about macro-pricing trends. Competition may be tight; if the economy remains spotty, other buyers will look for this kind of neighborhood stability. (MSN Money: 10 cities with collapsing home prices)
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- It’s perfectly acceptable to ask how firm the seller is on the price. You or your agent can pose this question to the seller’s agent. Semantics are important: Ask, “How flexible are they on the price?” Avoid: “How much less will they take?” Consult with your agent for his opinion on the likelihood of the success of a lowball offer. You have the right to go in at whatever level you want, but keep in mind that a lowball number may turn off the seller and close down any chance at negotiation. You may have to bid on several properties before you get a seller to jump. Of course, this tactic might work on your first try. Try to check your emotions at the door.
- Incentives are great, but buyers may still be responsible for closing costs and should plan on this expense well ahead of house-hunting. The average amount of closing costs and prepaid items needed to cover your closing are approximately 4% of your loan amount. Buyers may also have to put up “earnest” or “good faith” money, which is essentially a deposit before moving into the offer/contract phase.
- Regardless of market conditions, there are a few basics to add to the checklist. These can be a jumping-off point for negotiations. Buyers should hire a title company to check the house for liens and tax arrearages and hire their own inspector, not the seller’s. Buyers should have their inspector also check for any potentially unpermitted work, such as an addition. Keep in mind that some states have specific rules about disclosures. Verify the accuracy of the property lines by requesting a seller-secured survey, or buyers may have to buy their own survey. Be respectful as you talk with sellers and their agents about these needs. Sellers should be accommodating, as these steps show that a buyer is serious about the property.
Bottom line: Savvy buyers should know what they’re up against and what opportunities abound, as another traditional springtime homebuying season ramps up — this one as market traffic and pricing are on the rise.
Tips for buying a house
The top 10 things you need to know when buying a home.
If you can’t commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner – even in a rising market. When prices are falling, it’s an even worse proposition.
2. Start by shoring up your credit.
Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.
3. Aim for a home you can really afford.
The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But you’ll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford.
4. If you can’t put down the usual 20 percent, you may still qualify for a loan.
There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a down payment as small as 3 percent of the purchase price.
5. Buy in a district with good schools.
In most areas, this advice applies even if you don’t have school-age children. Reason: When it comes time to sell, you’ll learn that strong school districts are a top priority for many home buyers, thus helping to boost property values.
6. Get professional help.
Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the bidding process.
7. Choose carefully between points and rate.
When picking a mortgage, you usually have the option of paying additional points — a portion of the interest that you pay at closing — in exchange for a lower interest rate. If you stay in the house for a long time — say three to five years or more — it’s usually a better deal to take the points. The lower interest rate will save you more in the long run.
8. Before house hunting, get pre-approved.
Getting pre-approved will you save yourself the grief of looking at houses you can’t afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history.
9. Do your homework before bidding.
Your opening bid should be based on the sales trend of similar homes in the neighborhood. So before making it, consider sales of similar homes in the last three months. If homes have recently sold at 5 percent less than the asking price, you should make a bid that’s about eight to 10 percent lower than what the seller is asking.
10. Hire a home inspector.
Sure, your lender will require a home appraisal anyway. But that’s just the bank’s way of determining whether the house is worth the price you’ve agreed to pay. Separately, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road.