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New Tax Credit to Watch
Mortgage Market Update
Mortgage Market Update
The US Treasury Department and the Federal reserve have outlined a proposal to aid Freddie Mac and Fannie Mae amidst their recent difficulty. Fannie Mae and Freddie Mac own or back $5 trillion in home mortgages across the country. The financial health of these two companies is critical to the US housing recovery process.
Despite investor concerns that caused their stock price to fall, Treasury Secretary Henry Paulson expressed his support for helping these two companies maintain their roles in the lending marketplace. The Treasury is offering access to higher lines of credit, while the Fed is proposing that Fannie and Freddie be given access to funds through the Federal Reserve Bank of New York.
Fixed Rate mortgages for a 30 year loan have bumped up to the mid 6 percent range. The National Association of Realtors (NAR) reported a slight slowdown in existing home sales during the month of June. NAR is currently projecting annual home sales at 4.86 million units for 2008.
Finance Q and A:
Q: Is it wise to pay discount points up front to get a lower interest rate?
A: Depending on your plans for staying in the home, there are benefits to paying discount points to lower your interest rate. Over time, the savings realized from your lower interest rate will offset your initial expense of the lower rate loan. However, this strategy does not work well for buyers planning to move in a few years, who may want to opt for the higher rate. Consult with your mortgage planner today to compare options that work best for you.
Tip of the Month:
When buying a home, its good to get your financial house in order by doing a few small things ahead of time. Pay off small debts and get them off of your balance sheet, since the amount of outstanding credit can work against you when applying for larger loan amounts. You should also check your credit report for any blemishes or misreported items. You are entitled to receive a free credit report each year directly from the consumer credit reporting services. By reducing your debt and checking your credit report, you put yourself in the best position to acquiring a favorable mortgage.
Financing tip...
The Indiana Bond Rate increased effective today to 6.375%. Borrowers can still receive an 1/8th discount by taking the homebuyer education training at the Indiana Bond website, to reduce the rate to 6.25%.
Will Downpayment Assistance Go Away?
For those of you not familiar with the recent housing bill that will eliminate downpayment assistance, please read up on this important issue. The Senate and House of Representatives are fast-tracking this bill. Many home buyers are familiar with the idea of getting into a home with no money down. Many home buyers are familiar with the idea of being able to have the seller of a home cover your closing costs and some or all of your down payment. This may be going away.
In a recent quote from Scott C. Syphax, President & CEO of Nehemiah Corporation of America “By FHA's own estimates, down payment assistance (DPA) comprises nearly 40% of FHA's volume. This means more than 300,000 working class families will be locked out of homeownership in the next year alone.”
This is, in my opinion, an example of looking at certain facts but then drawing bad conclusions. If you give someone an option of getting into a house without spending any money, OF COURSE they’re going to take that option. The conclusion everyone seems to be drawing here is that the end of DPA would mean that all those people won’t buy houses if they’re required to make a down payment. In my experience, this is simply not true. Would they have to save a bit of money, borrow from family, be creative…etc? Yes. So what? People who understand the values of homeownership will buy homes. And they will buy homes within their means.
FHA estimates that 40% of their volume comes from DPA deals. So how many of those deals overextended buyers and put them into homes that they ultimately cannot afford or homes they can barely afford? How many of those homes will be on the reo list in 2-3 years? One thing that never gets said is that of all the foreclosures we’ve been seeing, the vast majority of them are from DPA and various 100% financing deals done in recent years. If DPA gets dropped, will it mean considerable change in the real estate world? Yes. Will it mean the end of civilization as we know it? No. C’mon guys, we have to stand back, take stock and realize we’ve become addicted to easy loans, easy purchases and easy sales. It’s understandable. But as I look out at the landscape of today’s market, I have to say that some change is welcome.
Displaying blog entries 1-6 of 6
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