Home Loan Focus

Archive for the ‘rates’ Category

Maybe you have heard of this bill with the cute catch phrase.  It sounds like just the thing most of us need to get a little protection from banks that are trying to get back to profitable with our fees and interest charges fueling their way. 

Well don’t hold your breathe on this one. Sure its going to pass, but its not going to do you a bit of good.

Want to know why?  Read the last ‘Right’ in the provision.

The Credit Cardholders’ Bill of Rights:

1. Protects cardholders against arbitrary interest rate increases
2. Prevents cardholders who pay on time from being unfairly penalized 
3. Protects cardholders from due date gimmicks
4. Shields cardholders from misleading terms 
5. Empowers cardholders to set limits on their credit
6. Requires card companies to fairly credit and allocate payments 
7. Prohibits card companies from imposing excessive fees on cardholders
8. Prevents card companies from giving subprime credit cards to people who can’t afford them
9. Requires Congress to provide better oversight of the credit card industry
10. Contains NO rate caps, fee setting, or price controls

Yep, that’s right.  Your Credit Cardholder bill of rights, if it passes will not prevent banks from continuing to raise your rates sky high!  Sure, they may not be able to nickel and dime you to death, they won’t have to.  They can kill you with a bazooka of an interest rate.

Plus, this law will not be retroactive to say the first of the year or something.  All the banks have been rapidly raising rates and doing all of the things that this bill would block already, so that the changes will be in place before the law is ever signed.  They won’t be able to do these things in the future, but they won’t need to.  The damage will already be done.

What options does this leave you?

The only right you really have left to protect yourself from the credit card companies is either to not use a credit card or if its too late and you can’t pay them all off tomorrow, take a look at bankruptcy.

Yeah, I know.  Congress is really doing you a big favor with this.  Its called pandering.

For more info on this you can visit House Rep Maloney I’m not saying she’s a bad person, but I am saying that this bill of rights is more bill and too few rights.

Wholesale rates in the US skyrocketed to 27 year highs in July.  This happened against the backdrop of home builders continuing to cut back on construction with a glut of unsold homes littering the market from Charlotte to LA.

That means that the Federal Reserve will almost certainly have to increase interest rates or risk the spectre of out of control inflation that could make the value of the US dollar worthless to the point that people would be better off burning bills this winter than spending it on a heating oil.

The Federal Reserve has been trying to avoid raising interest rates for months in an effort to let the housing market correct itself, but that attempt will surely halt to avoid risking the entire US economy.

During periods of inflation, rapid inflation or hyper inflation the cost of items go up.  That means that a gallon of milk that costs $5 today, could cost $10 next month or $500 at the end of a quarter if hyper inflation kicks in.  Hyperinflation has not been seen in the industrialized world in more than 75 years, but that is largely due to the tenacity of modern banking and modern central banks. 

During periods of inflation it is better to own things, commodities or gold, which still have tangible value, while the value of money rapidly decreases.  If the value of the dollar continues to drop month to month, you are better off investing your money in tangible items that you need now as opposed to waiting.

Conceivably, if you buy something on sale with a credit card even today, and pay it back next month with dollars that are worth less than they are today, you are actually getting a better deal (if and only if you pay off your balance, otherwise you could also see your interest rates sky rocket.)

Personally, I have had my eye on a Nokia N95 smart phone to use with my work for months now.  Its on sale at Buy.com for $477.  This may be the right time to buy that phone if the value of the dollar keeps dropping.  Months from now the list price could be much higher as the value of the dollar drops, and it is a tool that I can utilize to get more work done efficiently.

The last step in the 3 steps to improve our mortgage rate is to improve your loan-to-value ratio. A prospective borrowers loan-to-value ratio is figured by dividing the amount you want to borrow by the price of the home you wish to buy. For instance, if you want to buy a $200,000 dollar home and you want a mortgage of $180,000 dollars, your LTV would be 90%.

Most lenders prefer an LTV over 80%. If your LTV is under 80%, a lender will likely insist that you purchase private mortgage insurance for the loan. In order to improve an LTV ratio, a borrower can either increase their down payment or choose a less expensive home to purchase. Unfortunately, a large down payment is like a colon cleanse for your savings, but it will definitely be beneficial in the long-run.

Source: Credit.com

In order for a mortgage lender to determine how much you can afford to borrow, they will look at your debt-to-income ratio. This number is determined based upon your pre-tax income divided by the amount you use to pay off credit cards, student loans, auto loans etc. Keep in mind that your credit card payment is determined as the monthly minimum not the total balance.

A borrowers debt-to-income should be under 30% in order to assure favorable terms on a mortgage. If your DTI is too high, you should consider paying off some of your smaller loans or perhaps pay down your credit cards, focus on large items like airplane tickets and electronics instead of Halloween decorations or sexy costumes. Be sure not to close any of your credit cards because this will lower your credit score. Another way to improve your DTI you can have a spouse co-sign on your application. A co-signer will increase your total income thus improving your DTI.

Source: Credit.com

There are many ways to improve the odds of receiving a favorable mortgage rate. We all know that lenders are going to check all three of your credit scores (Equifax, Experian, and TransUnion). It is extremely important to know exactly what your score is on each of these three reports. If you have a score above 650, you will most likely receive a decent mortgage rate, but if your score is higher than 750 your rate will be even lower.

In order to increase your credit score quickly, there are a number of steps you can take to improve your rating.  Keep in mind, that you should check your credit scores at least 3-6 months prior to applying for a mortgage to allow enough time for your “fixes” to take.

To help increase your credit score, these steps can start you down the road. First, it is recommended that reduce your card balances below 35% of your total credit limit. Second, keep your accounts stable, make timely payments and avoid unnecessary applications for credit. Lastly, correct any inaccuracies that may be on your reports, you don’t want to be paying for auto parts, expensive dinners and vacations you had nothing to do with.. Be sure to be proactive in regards to your credit, sometimes someone else’s clerical error can be the difference between a good rate and a great one!

Source: Credit.com

If you are ‘fortunate’ enough to own a home that has a value less than $417,000, then you have better than even odds that your home actually is still increasing in value. 

That is because home prices in 56 percent of metropolitan areas, which include 292 cities did increase in the first quarter this year.  What’s the caveat?

The increase in home prices is only happening for homes that are not subject to jumbo loans of $417k or more.  So if your home when sold does not require jumbo financing, then you might still see your home continue to appreciate.

We hear a great deal about home prices coming down, but this is largely because the total numbers are significantly skewed by homes that cost between $500k and $1.5 million.  These are also the homes that have been hit hardest for foreclosure.

To top things up, there are still some markets that are appreciating significantly.  So if you are looking to sell this year, all is not lost.  It may not be a sellers market, but at least you won’t feel like your price has been completely squashed like a fly under a stack of books.

Some markets are appreciating strongly, such as Austin (up 7.7 percent in the past 12 months), Grand Junction, Colo. (up 9.1 percent), Charlotte (up 6.2 percent), and Provo, Utah (up 6.8 percent).

Washington Post

For months the Federal Reserve has been cutting the rates that banks pay to borrow money, but this month those drops only translated to about 0.125 percent.  Banks would seem to be pocketing the difference to either pay for their past losses or to try and lure investors back into the mortgage backed security market with higher yields.  You might hope for a better rate, but you’ll be doing good to get approved for a loan let alone a gift baskets the way things are going in the mortgage market these days.

The average rate on a 30-year U.S. mortgage with no upfront points declined 1/8 percentage point to 6-3/8 percent on Monday, according to BestInfo Inc.

The 30-year mortgage rate with one upfront point dropped 1/8 percentage point to 6-1/8 percent.

US mortgage rates drop 1/8 pt on Monday

If the global market on interest brings reality to the US from the UK, US homeowners might expect an increase in the rate of interest that they are paying on mortgages.  Many people think that the managers of the US economy have been more proactive in working to save the mortgage industry in the US, but at the end of the day arbitrage is the typical factor that levels the playing field around the world.  That means that the higher rates seen in the UK will eventually help to increase the rates paid in the US as well as investors in the US demand a better return on investment like the one they receive in the UK.

Figures compiled by personal finance website MoneyFacts and carried in the Daily Telegraph show that the average rate for a two-year loan has hit 6.64 per cent, up from 4.34 per cent two years ago.

The Press Association: Cost of fixed-rate mortgages soars

The reality is that in a global economy candles can not be burnt from the same end forever and in this the UK and US economies have been and are still tied at the hip in many forms.

The Federal Reserve is expected to drop rates yet again tomorrow in a further attempt to get the US economy out of what most people believe is a true recession.

Oil prices are pushing up on $125 a barrel, food costs are escalating rapidly due to demand for ethanol, and its even rumored that postage prices may increase soon, so postage tape and stamps plus bulk rates could go up as well.

That all points to inflation, which in some cases has started to sneak into some mortgage rates, which despite the Federal reserve moves are not offering people much in the way of savings as banks pocket the adjustment in the form of profits to offset their sub prime loans.  In that regard, another Fed rate cut is likely to be more of a bailout move than it is a boost to the economy.

Finding good news in the mortgage industry and market these days is twice as hard as finding a needle in a haystack that was bull dozed for a new sub division 2 years ago.  Fortunately, there is some good news out there.  Mortgage rates held steady and didn’t increase for the second week in a row despite the continued decline in the value of the dollar and oil prices that went over $115 a barrel this week.

Thirty-year mortgage rates were at an average of 5.88 percent, while 15-year mortgages dipped to an average of 5.40 percent from 5.42 percent last week, Freddie Mac said.

One-year adjustable rate mortgages, or ARMs, fell to an average of 5.10 percent from 5.18 percent.

Freddie Mac said the “5/1″ ARM, set at a fixed rate for five years and adjustable each following year, averaged 5.48 percent, down from 5.56 percent a week earlier.

A year ago, 30-year mortgage rates averaged 6.17 percent, 15-year mortgages 5.89 percent and the one-year ARM 5.45 percent. The 5/1 ARM averaged 5.92 percent. 
US 30-year mortgage rates hold steady for second week

Its not the greatest news, but not the worst either.  The mortgage industry has been suffering from the equivalent of mesothelioma as it fights to exorcise the demons of bad mortgages written under the auspices of sub prime lending.