Fixed Mortgage Rates Continue To Find New Lows

MCLEAN, Va., May 26, 2011 -- Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), which shows slower economic activity pushing fixed-rate mortgages slightly lower for the sixth consecutive week. The 30-year averaged 4.60 percent; the 15-year averaged 3.78 percent, marking new lows for 2011.

30-year fixed-rate mortgage (FRM) averaged 4.60 percent with an average 0.7 point for the week ending May 26, 2011, down from last week when it averaged 4.61 percent. Last year at this time, the 30-year FRM averaged 4.84 percent.

15-year FRM this week averaged 3.78 percent with an average 0.7 point, down from last week when it averaged 3.80 percent. A year ago at this time, the 15-year FRM averaged 4.21 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.41 percent this week, with an average 0.5 point, down from last week when it averaged 3.48 percent. A year ago, the 5-year ARM averaged 3.97 percent.

1-year Treasury-indexed ARM averaged 3.11 percent this week with an average 0.5 point, down from last week when it averaged 3.15 percent. At this time last year, the 1-year ARM averaged 3.95 percent.

Frank Nothaft, vice president and chief economist at Freddie Mac, reports, "Fixed mortgage rates eased slightly for the sixth consecutive week amid reports of slower economic activity. The index of leading indicators fell 0.3 percent in April and represented the first monthly decline since June 2010. In addition, the Federal Reserve banks reported less business and manufacturing activity in Philadelphia, Chicago and Richmond."

"U.S. house prices indexes may be nearing a bottom soon. On a national basis, prices fell 0.3 percent between February and March, which was the smallest decline since November 2009, according to the Federal Housing Finance Agency. In addition, four of the nine Census Regions exhibited positive growth, compared to none in February. Separately, the Mortgage Bankers Association reported a further reduction in the serious delinquency rate (90 or more days plus foreclosures) in the first quarter, which stood at the lowest reading since the second quarter of 2009."

Published on Realty Times
May 27, 2011

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Creative Ways to Curb Spending

Now is a great time to buy. Homes are affordable and interest rates are at historical lows. Lending is tight, however. You need a stellar credit score and a clean credit report to even get your foot in the door.

And long gone are the days of zero-down down payments. You need money down to venture into the housing market. Some financial experts recommend at least a 20 percent downpayment.

Here are some creative ways to curb spending so you can save up for the house of your dreams.

The first rule of saving is to be patient. Large nest eggs are built up over time. We live in a society that thrives on instant gratification. This is partially responsible for the housing crisis we now find ourselves in. Buyers who should have waited until they could truly afford their dream house took advantage of a flawed system that allowed them to instantly gratify their desires. So, be patient. It may take months or years before you have saved enough.

The next key is to cut out unnecessary spending. It can be easy to give into our wants, or to confuse them with needs. For example, you need food to survive. What you don’t need is to go out to lunch or dinner multiple times a week. It may be time to change habits and learn to pack a lunch for work and to cook meals at home. The same goes for the morning coffee. A home brewed cup can be just as satisfying as a $4 cup from a coffee house. And you just might save yourself $500 a year.

Don’t use credit cards. Credit cards charge exorbitant interest rates. It can take decades to pay off balances when you only make minimum payments.

A great way to avoid overspending is to avoid going to stores. It sounds extreme, but if you go to a store, you’ll buy something. Find fun things to do at home, instead of using shopping as a hobby. Even $20 a week can add up to $1,000 a year.

Substitute spending is another tactic for saving. Let’s say, for example, that you have a gym membership charging $40 a month. That translates to $480 a year. You can buy a simple elliptical, recumbent bike, or treadmill for less than that. Add in a few workout DVD’s and weights and you have a home gym for a fraction of the cost.

Lastly, automatic savings transfers can help procrastinators save. You have to remember to transfer money to savings to build up your account! Most banks allow for automatic savings amounts to be set. You can choose what amount works best for you. $100 a month will translate to $1,200 a year!

With just a few of these scenarios we discussed today, our example saver could save at least $3,000 a year!

Stick to your plans and budget and the dream of homeownership can become a reality.


Written by Carla Hill
May 25, 2011

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Seven Deadly Credit Score Sins

John Ulzheimer, president of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, is an expert on credit reporting, credit scoring and identity theft.

Formerly with FICO, Equifax and Credit.com, Elzheimer is a rare editorial source -- a recognized credit expert who actually comes from the credit industry.

He often references in his writings the "Seven FICO Deadlies," credit scoredeflating actions, but only recently identified them in one consolidated list.

Your credit score, from about 350 (poor) to 800 (excellent) is a numerical rendition of your credit report. The higher your score, the more likely you'll get approved for credit and the more likely you'll get the best rate and terms. Negative actions posted to your credit report, take a bite out of your credit score.

Here's what Ulzheimer says are the seven worst things you can do to your credit score. And speaking of "seven," that's how many years these black marks can stay on your credit report.

• Deadbeat behavior. Frequent, significant and late payments 30 days, 60 days, 90 days late. Don't believe a 30-day-late payment won't hurt. It may not ruin your credit but it's not helpful and can remain on your report for years.

• Collection activity. When the lender gets tired of your deadbeat behavior it will call out the dogs -- a third-party collection agency. The collection agency will report collection activity to the credit bureaus and again, seven years of bad luck.

• Charge offs. If the lender gives up on your collection case, acknowledging you'll never pay the bill, it charges off the debt and puts your credit report on notice for seven years.

• Public recordings. Bankruptcy, tax liens, judgments and the like are killers for your credit rating. Judgments are good (or, from your viewpoint, bad) for seven years, even if you pay them off. Bankruptcies can dog your credit report for 10 years and unpaid tax liens never go away.

• Settlements. If you pay a portion of a debt to your lender in a settlement, say a some of the mortgage in a short sale, you can get a settlement notice on your credit report card for seven years. Credit cards and other debts, likewise can be settled, with negative impact to your credit report.

• Foreclosures. If you can't or won't pay your mortgage the lender will eventually foreclose and relieve you of your home. Another seven year negative notification will drag down your score. The same applies when you give the home to the lender in a deed-in-lieu of foreclosure.

• Repossession – When you don't pay your vehicle loans a bounty hunter will be coming your way. He or she is not coming after you, but your vehicle, and that's often without notice, after you've been dunned for a while. It's all legal. The repo man can take your property down and your credit score will follow.


Written by Broderick Perkins
May 19, 2011

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Choosing Your Neighborhood

Choosing a home is about more than just selecting a house. Every neighborhood offers its own unique set of people, activities, and amenities. Which neighborhood is the right fit?

Take a moment to review the following factors that can influence your decision on where to live.

The first consideration of many home buyers is the education of their children. From private, charter, and magnet to public school, there are a wide range of options. Public schools dictate enrollment according to school district boundaries. Keep this in mind when looking at new homes. You may be surprised to find where lines are drawn. Are you trying to move into a highly rated district or are you wanting to avoid uprooting your children? You may wish to visit area schools to get a feel for which place is best for your family.

Next, analyze the data on the local economy. Is there a high rate of long-term employment? It's always good news when new industries are moving into town rather than out of town. Home values should rise alongside demand. Dig a little deeper and find out what industries are holding steady, how long homes are sitting on the market, as well as your local unemployment rate.

Homeownership is at least partially about making an investment. Over time you hope to build equity in your home, allowing you to have not only a large asset, but also the ability to "move up". Be aware of foreclosed homes in neighborhoods, as they tend to pull values down. And understand that some neighborhoods offer higher rates of appreciation than others.

Are home values on the rise? In today's difficult market, many areas are experiencing depreciation. This is not the normal trend, but rather is the consequence of our recent recession. In general, homes increase in value by about 5 percent per year. Ask your local real estate agent for the stats on past appreciation rates.

An additional factor affecting home values is the condition of the prospective neighborhood. Be sure to drive up and down adjacent streets. Are homes and yards in good repair? You want neighborhoods that reflect care and attention.

Additionally, research the local crime rates. Some neighborhoods experience higher levels of crime, both violent and petty. Safety of your person and property are valid considerations when buying a home.

And finally, on a lighter note, entertainment options are another valid consideration for home buyers. From restaurants and parks to neighborhoods with high ratings of walkability, the choices abound. What works best for you? Are there certain stores, clubs, gyms, or churches that you frequent? Choosing a neighborhood means considering all the options. What do you need and want out of your next home?

Choose wisely and you'll end up with a home that fits you now and for years to come.


Written by Carla Hill
May 17, 2011

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Real Estate Outlook: Sales Across the Nation

It's all about sales this week, with the most recent reports coming out on existing-home, new home, and pending home sales.

According to the National Association of Realtors® (NAR), existing-home sales rose in March, up 3.7 percent. The NAR expects existing-home sale to rise around 5 to 10 percent this year, thanks to high levels of affordability, rising rent costs, and job growth.

In new homes, a segment of the market that took a big hit during the recession, sales were up a healthy 11.1 percent in March.

National Association of Home Builders' Chief Economist, David Crowe, reports, "The March pace of new-home sales more accurately reflects current market conditions than the extremely low pace we saw in the first two months of this year, when unusually poor weather likely kept buyers away. That said, the average sales pace for the first quarter of 2011 held at about the same level seen for the last half of 2010. A limiting factor is the extremely thin inventory of new homes for sale, which is now at its second-lowest level in history. Builders continue to confront major challenges in obtaining financing to build new homes, and the shortage of new product makes it that much tougher for them to compete with existing homes on the market. At the same time, tighter lending conditions are making it more difficult for qualified buyers to obtain a mortgage."

Regionally, all areas except the South saw a rise in sales of newly built homes. The Northeast led the way with a 66.7 percent gain. The West posted a distant second at a 25.9 percent gain, and the Midwest saw a still impressive rise of 12.9 percent.

The inventory of new homes for sale fell to 183,000 units in March, which is the second-lowest level on record. This represents a 7.3-month supply at the current sales pace.

Pending home sales were also on the rise. After an uneven recovery the past nine months, the NAR's Pending Home Sales Index saw contract signings rise 5.1 percent. This is still down over 11 percent from March 2010.

Lawrence Yun, NAR chief economist, said home sales activity has shown an uneven but notable improvement. “Since reaching a cyclical bottom last June, pending home sales have posted an overall gain of 24 percent and demonstrate the market is recovering on its own,” he said. “The index means modest near-term gains in existing-home sales are likely, which would be even stronger if tight mortgage lending criteria returned to normal, safe standards.”

Regionally, all regions except the Northeast saw rises, though every region is still below last year's levels. Most are between 10 and 20 percent below March 2010 levels.

The largest increase month over month was seen in the South, rising 10.3 percent.

Continued strides in the job market and economy will help to foster more growth in the housing sector. If recession recovery continues, the housing market should continue to post gains in the months ahead.


Written by Carla Hill
May 2, 2011

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HOA Know How

When you purchase a into a homeowner association (HOA), you automatically become a member and obligate yourself to financially support the operation and obey the rules. That said, few buyers take the time to examine the information to make an informed decision. Here are some of the basic "Know Hows".

HOA Fees. As a member of the HOA, you will pay fees to support management and maintenance. High rise condominiums and HOAs with clubhouses, pools and parks typically have higher fees than those with few common elements.

If the HOA does not have and fund a reserve study (30 year plan for major repairs and replacements) for common elements like roofing, painting, asphalt, decks and fences, a special assessment will be charged to each owner that can run into many thousands of dollars. Since boards of HOAs that don’t follow a reserve study tend to react rather than plan, these special assessment can happen with little notice and the financial obligation will fall on all owners, including new ones. hoa know how: Review and understand the current budget and reserve study. If you are considering buying into a HOA that does not have a reserve study, move on. It’s an accident waiting to happen.

Delinquencies. HOAs can be great when the finances are handled well. Sharing the cost of costly amenities makes them more affordable for all. However, when one or more owners do not pay their share, either the rest must make up the slack or services cut. There is no government bail-out for HOAs. All must pay or all must suffer the consequences. hoa know how: Ask for the current amount of delinquencies and number of owners that are delinquent. If the is over 5% of the annual budget, walk away.

HOA Rules. In addition to maintaining common elements, HOAs also have certain rules and regulations that must be followed. Those rules may include architectural and design restrictions which control the look of your unit or house or lifestyle rules that control pets, parking and other things. Failure to comply may result in fines or restriction from common element use (like the pool). hoa know how: Request copies of all rules and regulations before you buy to make sure there is nothing there you can’t live with.

Get the Big Picture. While the home or unit you are considering may be newly remodeled and picture perfect, as an HOA owner, you have an undivided financial interest in all common elements. hoa know how: Look at all the buildings and common elements, not just the unit you are interested in buying. Do you see deferred maintenance like peeling paint, dilapidated roofing and fences and broken up paving? If so, you are either buying into a soon-to-happen-special assessment or a board with its head in the sand which will fail to maintain your biggest investment. Either way, this is not good news for your property value. This is particularly important in common wall HOAs.

How the Board Does Business. Inquire how often the board meets (should be at least quarterly). Get copies of board meeting minutes for the past year and read them to determine the kinds of issues the board is dealing with. When you read the minutes, do you see evidence of board action to protect and maintain the common elements? If you see a board pattern of “does little” in the minutes, like Nero, the board is fiddling while the HOA burns. hoa know how: Walk away.

Professional Management? If the HOA is self managed, this is a BIG RED FLAG. This means the fate and maintenance of your largest investment is in the hands of untrained part time volunteers. hoa know how: If you are the kind of person that loves a challenge and willing to dedicate many hours of volunteer time to steer board business, this may be the place for you. If you are not, walk away.

Rental Restrictions. As lenders become more aggressive in setting rental limits to HOA loans, rental restrictions are becoming more common. They come in two flavors:

Limited Restrictions. Only a certain percentage or number of the homes or units can be rented. The board/manager must administrate this moving target.

Total Restriction. All owners are restricted from renting. While the most fair approach, a slow real estate market can force certain owners into a difficult position if they can’t sell or rent. hoa know how: If your objective is to buy and rent the home and there are rental restrictions, move on.

HOA Insurance Coverage. Investigate the specifics, particularly if you're in an area prone to flood, earthquake, tornado or hurricanes.

Consider the HOA Lifestyle. Do you hate being told what you can do with your property? hoa know how: If the HOA has extensive architectural and design control, walk away.

A homeowner association can be your best friend when it prevents your neighbor from painting her house neon pink, but your worst enemy when they fail to properly maintain the common property or impose overly restrictive rules. Make sure you know exactly what you are getting into before you sign the dotted line.

For more innovative homeowner association management strategies, see Regenesis.net.


Written by Richard Thompson
March 30, 2011

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Affordability Reaches Generational High

If you have good credit and savings, now is a great time to buy. According to Zillow.com, "Homes are more affordable than they’ve been in the past 35 years."

Not only have home values fallen in many key markets, making homeownership more accessible to the average buyer, interest rates are at historic lows, meaning that once a home is purchased, monthly payments are smaller than in our recent past.

Zillow notes that "today’s median home buyer can expect to pay about 17% of his monthly gross income on his mortgage, compared to a 25% average since 1975."

In the 1980's, when interest rates were dangerously near 20 percent, this would take up nearly 45 percent of a buyers gross monthly income. In comparison, today's rates are an extreme bargain.

The main road block to homeownership at this time is access to credit. Although nearly one-third of all home purchases in recent months have been all-cash, that leaves the majority of the market shares requiring financing.

The tightening of lending standards in recent years, though, has been in direct response to the subprime lending trend during the housing boom.

Federal Reserve research indicates that a quarter of all mortgages in 2006 were subprime. This means that these loans were made to borrowers with credit scores below 620-660 and who were unable to put down the traditional 20 percent.

Today, buyers need credit scores in the 700s, with the higher the better. According to Zillow, "Applicants with FICO scores under 620 were virtually unable to get loans at any rate, thus being effectively excluded from the home-buying market. And those with FICO scores below 620 represent almost a third of the population."

There has also been a return of the 20 percent downpayment. This is in your best interest, as it means savings when it comes to closing costs. "The difference between a 10% and 20% down payment means she now has to save up another $17,220 in addition to any closing costs." (Zillow)

So, while it is more difficult for many homeowners to get into the market in today's economy, for buyers who have good credit and adequate savings, homes may never have been more affordable.


Written by Carla Hill
May 5, 2011

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Are You Ready to Buy?

Making the move from renter to homeowner can be a big step. While homeownership comes with a lot of perks, it's also a huge financial responsibility. How do you know if you're ready to buy?

Are you ready for a more stable home? Rental rates vary year to year, and as a renter you are at the mercy of your apartment's management. Are they good at addressing problems, or are you left with a dwelling full of needed repairs.

Owning a home with a fixed-rate mortgage, the form of mortgage our experts recommend, means you know exactly what your monthly payment will be for the life of the loan. When a problem arises, you have the ability to fix it without having to jump through red management tape.

Stability goes further than just a fixed monthly payment. Studies have shown that owning a home brings stability to both your family (higher graduation rates, lower crime rates) and your community (more civic involvement). And you can't put a price on the privacy and space a home affords you. Single-family detached homes generally comes with yards and bigger square footage than apartments.

Now that you've thought about the dynamics of homeownership, it's time to consider the financial logistics. Does buying a home make financial sense right now? This answer depends on a few important factors.

First, do you have steady employment? There is no backup for making your payments. When you sign a mortgage loan, you are agreeing to make a payment every month. Do you expect your job to continue well into the future. If not, do you have marketable skills that are needed in today's economy?

Second, do you have an 8-month emergency fund? Savings and downpayment aren't enough to ensure security for your family. You must have at least 8-months worth of bill money saved away. If your monthly expenses add up to $3,000 a month, then you need $24,000 in an emergency fund that you don't touch.

Third, do you have good credit? Interest rates are at historic lows, but lending is tight. You must have an excellent credit score to get the best rates. And a sub-par credit score may have you sitting on the sidelines altogether.

Fourth, do you have savings for a downpayment? Financial experts recommend having at least 20 percent to put down. That means on a $200,000 house you'll need $40,000 for a downpayment. If you don't have the money, will family be contributing?

Consider these issues when you deciding whether or not now is the time to buy. If you have all your "ducks in a row," then now is a great time to buy.


Written by Carla Hill
May 4, 2011

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