Current home buying conditions are the best in thirty years. You decided yet?

According to Independence Title, company interest rates have been lowest in the last fifty years. You would think today’s mortgage rates of near 3.875% to 4% would bring happiness (lowest rates since 1950). Instead, some see the low rates as a sign of weakness in housing and the economy weakness, a measure of buyers’ difficulty in getting mortgage loans and/or an indicator of coming deflation. With mortgage rates declining, affordability rises, meaning lower payments to buy that desired house or investment property. Rates are projected to stay low through the end of 2013, early 2014

The historical perspective

Starting around 4%, rates moved up through the 1950's. Then, in 1959-60 home buyers got a taste of 6%. People did not like that rate – it was affordability in reverse. Plus, many mortgages couldn't be refinanced at a lower rate without a penalty payment, so buyers hated getting stuck with the higher rates. The next five years of mid- to high-5% interest rates were palatable, and then they took off in earnest, eventually topping at over 18% in 1981. Ten years ago, consumers thought that rates of 6% were the lowest rates that we would ever see again. Comfortably we can tell you that rates will never be this low again!

Refinancing

Borrowers who might have refinanced once in the past 3 to 5 years months and have 30-year rates in the 5%-5.25% range, should do so again given the drop to current lower rates. Given the narrowing in the jumbo/conforming spread, some jumbo borrowers might also seek to refinance, as might adjustable-rate mortgage borrowers who might prefer to move to fixed-rate mortgages even though their rates are adjusting downward.

If you have not bought or refinanced in the last 2 to 3 years, there is a good chance that you can save 15%, substantial savings today. Affordability is an important factor to watch. Many buyers have already taken advantage of lower rates. It is a well-understood and visible stimulus to act, one of the major reasons the Federal Reserve has kept rates low.

The question is, with homes and rates so affordable, what are the chances to see continued improvement not only in Texas but across the rest of the country this summer and on into 2014?

The amount of market inventory is lacking, do the math. This in turn makes the Texas metros markets prime for:

• Investors: Investors will continue to grow in numbers as they realize housing and real estate are the best risk-adjusted return on their money. Real estate continues to be one of the most undervalued assets available.

• Boomerang buyers: Foreclosed homeowners, who are currently renting homes, will come back in droves. There is not a more affordable time to buy in the last 60 years!

• Entry-level buyers: First-time homeowners, who have been sitting on the sidelines for 6+ years, waiting for a sign of the bottom are looking at price increases in their desired neighborhood and are rushing to become homeowners.

• Move-down buyers: Empty nesters and retirees, who have seen their equity return in their existing home, are buying a home that is more suitable to their current lifestyle, which may or may not include adult children as well as their aging parents. Almost all of the Texas metros have seen a larger portion of this market show up in the last year.

• Moveup buyers: The price appreciation that occurred in the last year has already lifted 1 million underwater homeowners above water nationally, and future price appreciation will lift it even more. The consumer who has been sitting on the sidelines is back buying across all price points due to the affordability factor.

People still want to see the negative portions of the market. Don’t listen to the naysayers. They frequently make one or two negative points, which may be valid, but they don’t understand the big picture.

• Housing is cheap, probably the cheapest many will see in their lifetime (hopefully!!)
• People prefer to own
• Get ready for a surge in home prices!
• Most Texas housing is transforming from cost driven pricing to market driven pricing and will continue in through 2014, just due to the lack of inventory.

Case-Shiller Shows Home Prices Up 4.3% From Year Earlier

Here is an article that was found on Mortgage News.

The S&P/Case-Shiller Home Price Indices (HPI) released this morning outstripped analysts expectations with strong increases in home prices over the 12 months ending in October.  Both the 20-City and the 10-City showed anticipated seasonal weaknesses in October itself, however and along with 12 of the 20 cities, posted a monthly price decrease.

The 10-City Composite Index was up 3.4 percent on an annual basis in October compared to 2.1 percent in September and the 20-City Composite rose 4.3 percent compared to 3.0 percent.  On a month-over-month basis both composites declined 0.1 percent.   S&P/Case-Shiller presents most of its data on a non-seasonally adjusted basis.

In 19 of the 20 cities the annual increase in October was higher than that in September and only two cities, Chicago and New York, had negative annual returns.  The recovery seems well established in some markets; for example Phoenix home prices increased for the 13th consecutive month and San Diego for the ninth.

David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices said, "The October monthly numbers were weaker than September as 12 cities saw prices drop compared to seven the month before.  The five which turned down in October but not in September, were Atlanta, Dallas, Miami, Minneapolis and Seattle. Among all 20 cities, Chicago was the weakest with prices dropping 1.5%, followed by Boston where prices fell 1.4%. Las Vegas saw the strongest one-month gain with prices up 2.8%.

"Annual rates of change in home prices are a better indicator of the performance of the housing market than the month-over-month changes," Blitzer said, "because home prices tend to be lower in fall and winter than in spring and summer.  Both the 10- and 20-City Composites and 19 of 20 cities recorded higher annual returns in October 2012 than in September. The impact of the seasons can also be seen in the seasonally adjusted data where only three cities declined month-to-month. The 10-City Composite annual rate of +3.4% in October was lower than the 20-City Composite annual figure of +4.3% because the two weaker cities - Chicago and New York - have higher weights in the 10-City Composite."

Blitzer said it is clear that the housing recovery is gathering strength.  Continued annual price gains and the strong performances in both the southwest and in California, both of which were strongly affected by the housing bust, "confirm that housing is now contributing to the economy. Last week's final revision to third quarter GDP growth showed that housing represented 10% of the growth while accounting for less than 3% of GDP."

Even cities at the bottom are showing gains.  Detroit had a 24.2 percent annual increase even though prices there are still about 20 percent lower than they were 12 years ago.  Blitzer also cited 22.5 percent and 22.1 percent increases in San Francisco and Phoenix from their recent lows and prices "comfortably higher" than 12 years ago.

As of October average home prices nationwide were back to autumn 2003 levels.  Measured from their June/July 2006 peaks, the decline for both Composites is approximately 30% through October 2012 and approximately 35% from the June/July 2006 peak values to their recent lows in early 2012. The October 2012 levels for both Composites are about 8.4 to 9% above their early 2012 lows.

In October 2012, 12 MSAs and both Composites posted negative month-over-month returns. Detroit, Las Vegas, Los Angeles, Phoenix, Portland, San Diego and San Francisco were the only cities that recorded positive monthly returns. Denver remained flat.

The S&P/Cash Shiller Home Price Index is a composite of single family home price indices for the nine U.S. Census divisions and is calculated quarterly. The 10- and 20-City indices are weighted averages of metropolitan area indices. Each index has a base value of 100 in January 2000.

Mortgage bill faces tough road in Congress

As per USA Today ,A sharply divided Congress isn't likely to jump at President Barack Obama's challenge for quick passage of a mortgage refinancing bill that supporters say could help millions of homeowners save big each year and boost the economy.
Obama praised the legislation in his State of the Union speech last week, saying the proposal would help more homeowners with mortgages backed by Fannie Mae and Freddie Mac take advantage of low interest rates and refinance their loans.

Even with mortgage rates near a 50-year low, Obama said, too many families that have never missed a payment and want to refinance are being turned down.
"That's holding our entire economy back, and we need to fix it," the president said. "Right now, there's a bill in this Congress that would give every responsible homeowner in America the chance to save $3,000 a year by refinancing at today's rates. Democrats and Republicans have supported it before."

HOUSING: States' foreclosure pace affects home Prices

The economy's slow recovery from the recession gives the idea urgency, Obama said. "Send me that bill," he told members of Congress listening to his speech in the House chamber.
The proposal is part of a push by Democrats and the White House to help homeowners take advantage of low interest rates as a way to help the housing market recover and to give the economy a shot in the arm.
While the bill could gain traction in the Democratic-controlled Senate, it faces a rough road in the GOP-run House, where many Republicans favor scaling back the government's role in the housing market as a way of aiding the economy. Similar versions of the measure died in the House and Senate's lame duck sessions last year.
"At the moment, it's an uphill battle," said Rep. Peter Welch, D-Vt., who plans to file the House version of the bill.

JOBS: Housing holds key to full job growth rebound

Welch said he will reach out to Republicans this year in hopes of building more support, but the bill's association with the government-controlled Fannie Mae and Freddie Mac, the federal housing agencies partly blamed for the collapse of the housing market, hurts its support base among GOP lawmakers.
"The American taxpayers have already sunk $190 billion dollars into the operations of Fannie and Freddie," said Rep. Randy Neugebauer, R-Tex., a member of the House Financial Services Committee. "It's time that we wind their operations down instead of using them as a piggy bank for failed programs that further delay the housing recovery.

 "In the Senate, Democrats Bob Menendez of New Jersey and Barbara Boxer of California have legislation to aid borrowers who are current on their loans backed by Fannie Mae and Freddie Mac, but who are not able to refinance because their home values have declined too much.

Nearly 12 million homeowners have Fannie Mae and Freddie Mac loans and stand to benefit refinancing, the two senators said. Many can't refinance at a lower rate because of red tape and high fees. The red tape has reduced competition among banks, so borrowers pay higher interest rates than they would if they were able to shop around more, according to the senators.

The bill also would reduce up-front fees that borrowers pay on refinances and eliminate appraisal costs for all borrowers. The measure seeks to expand the Obama administration's Home Affordable Refinancing Program, which saves an average homeowner about $2,500 per year, they said.

"Homeowners will have more money in their pockets, Fannie and Freddie will see fewer foreclosures, and the housing market and economy will continue building momentum," Boxer said.

Among the bill's supporters are the Mortgage Bankers Association, the National Association of Realtors and the National Association of Home Builders.

"It is another tool that can be out there to help stabilize the housing market and kick start the economy if consumers can, in fact, put another $100 bucks in their pockets every month," said John Hudson, government affairs chairman of the Association of Mortgage Professionals.

Similar proposals by Boxer and Menendez last year got bogged down in the Senate Banking, Housing and Urban Affairs Committee. Republican attempts to add amendments on other housing issues beyond refinancing led to a stalemate.

Twenty Senate Democrats are co-sponsors of this year's bill, but no Republicans have signed on."I support finding ways to smartly streamline the refinance process, but I'm not sure that eliminating all documentation requirements makes sense," said GOP Sen. Bob Corker of Tennessee, a committee member. "I also think we need to quickly move beyond short-term stimulus and start focusing on the structural issues in our housing finance system."Sen. Mike Crapo, the committee's top Republican, declined through a spokeswoman to comment on the bill.Welch's House bill also died during the last Congress. Welch accused Republicans of not wanting to give Obama an election-year boost by passing the mortgage refinance measure.

"Last year was even tougher because it was an election year," said Welch. "The Republican leadership wanted Obama to fail."

Mortgage Applications Recover from Holiday Doldrums

As per mortgage news..Applications for mortgages increased substantially during the week ended January 11 as purchase applications soared to their highest levels in nearly two years.  The Mortgage Bankers Association's (MBA)  Market Composite Index for the first full working week of the New Year increased 15.2 percent on a seasonally adjusted basis and 45 percent on an unadjusted basis compared to the holiday shortened week ended January 4.

The seasonally adjusted Purchase Index was up 13 percent on a seasonally adjusted basis from the previous week to the highest level since April 2011.  The unadjusted index was 47 percent higher than the previous week and 5 percent above that of one year earlier.  The Refinance Index increased 15 percent from the previous week and the refinance share of mortgage activity remained unchanged at 82 percent of total applications.

Purchase Index vs 30 Yr Fixed

Refinance Index vs 30 Yr Fixed

Interest rates for the week were mixed. The average contract rate for 30-year fixed-rate mortgages (FRM) with conforming balances of $417,500 or less remained unchanged at 3.61 percent with points decreasing to 0.38 from 0.41.  The effective loan rate decreased from the previous week.

Jumbo 30-year FRM - loans with balances over $417,500 - rose 10 basis points to 3.88 percent with points unchanged at 0.38.  The effective rate increased. The average contract rate for 30-year FRM backed by FHA increased to 3.39 percent with 0.58 point from 3.35 percent with 0.69 point and the effective rate increased.  The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 2.88 percent, with points decreasing to 0.27 from 0.39 and the effective rate decreased. .The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) increased to 2.66 percent from 2.64 percent, with points decreasing to 0.34 from 0.37. The effective rate increased from last week.   The ARM share of activity increased to 3 percent of total applications.MBA's Weekly Application Survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.  Respondents include mortgage bankers, commercial banks and thrifts.  Rates are based on loans with an 80 percent loan-to-value ratio and points include the origination fee.  Base period and value for all indexes is March 16, 1990=100. 

FHA Home loan

What is an FHA Loan?

An FHA loan is a loan that is insured by the Federal Housing Administration (FHA). It is designed to help people, who are in a lower income bracket, purchase a home. The FHA was created through the National Housing Act of 1934 and is designed as a loan program to assist lenders by offering a federal insurance on home loans. It is important to understand that the FHA does not act as a lender and is not a home builder. It is an insurance program to protect the lender in the case that you are no longer able to make your mortgage payments. Recently, the FHA program has undergone some changes to help people buy a home today as a result of the recession and jump in foreclosures.

FHA Loan Requirements

An FHA loan has to be obtained through an FHA approved lender and there are several FHA loan requirements/guidelines that you should be aware of:

• Credit - The FHA will examine your credit history and you will need to show that your credit is in good standing and that you have a proven record of paying your bills on time.
• Loan checklist - There are several things that you will need to submit to the FHA lender in order to be approved for the loan. You should also plan to pay some money out of pocket for the credit report check and for an FHA appraisal on the property you are purchasing.
• Loan limit - Each state and county has its own lending limits when it comes to an FHA loan so you want to be sure to research the guidelines for your area to see if you can qualify.
• FHA mortgage insurance - Part of FHA loan qualifications call for the necessity of carrying mortgage insurance in case you are no longer able to meet your payments.
• Debt ratio - The amount of money that you can borrow on an FHA loan will depend on your debt to income ratio. This is done to help you avoid purchasing a home that you cannot really afford.
• Closing costs - The details of what you will be required to pay, as part of your closing costs, will vary as each FHA office determines what is appropriate.

FHA Loan Limits

The FHA determines how much you can borrow in your area by examining the median price for the type of home that you are looking at in that specific area. This is why loan limits are different for each area and for each state.

FHA Loan Vs Conventional Loan

• Government insured - the biggest difference between an FHA loan and a conventional loan is the fact that an FHA loan is insured by a government agency which a conventional loan is not.
• Credit history - a conventional loan requires a good credit history and has strict requirements you must meet while an FHA loan is a little more relaxed.
• Down payment - With an FHA loan, you can make a smaller down payment. A conventional loan requires a bigger down payment.
• Mortgage insurance - all FHA approved loans include mortgage insurance. Conventional loans use a separate process and you must qualify for the insurance.

Conventional Loans

What Makes a Loan a Conventional Loan?

A fixed rate or adjustable rate mortgage (ARM) loan is considered a conventional loan if it has no federal government backing. FHA and VA loans are examples of mortgage loans that have government value and these types of loans are called government loans. With a conventional loan, you will have to go through a regular bank, or your local credit union instead of through government supported organizations like Freddie Mae and Freddie Mac.

What Does a Conventional Loan Require?

If you want to get a conventional home loan, you will need to have a significant amount of money saved since they do require a higher down payment. Conventional loan requirements also include a high credit score which can make it difficult for you to qualify for one of these loans if you have ever had a problem with your credit or if you have not simply built up enough credit. Furthermore, a lender might also require you to get private mortgage insurance if you borrow more than 80 percent of the home's value or the purchase price, a term known as loan-to-value ratio.

Conforming vs Non-Conforming Loans

The United States government has put guidelines into place related to conventional loan requirements and other loan requirements. Loans that follow the guidelines set forth by the government sponsored entities, Freddie Mae and Freddie Mac, are considered conforming loans and loans that do not follow these guidelines are called non-conforming loans.
Non-conforming loans that go over the limit set by conforming guidelines are usually referred to as jumbo mortgages. These are generally used for the purchase of luxury homes and banks consider them riskier, which means that you can expect the interest rate on these types of loans to be higher. These loans come in options that include fixed and adjustable rate mortgage programs.

Government Loans

If a conventional loan is not a good option for you, then you will want to look at government loans. These loans are insured by the government and are designed to help people with lower incomes purchase a home. Furthermore, they can be obtained through a large number of lenders and it is a good idea to examine these loans to see if you can qualify for them.

FHA Loan

The FHA loan is the most popular type of loan when it comes to government loans. This loan is insured and guaranteed by the Federal Housing Administration, and requires a much smaller down payment than a conventional loan. If you go with this loan, you should plan to pay for mortgage insurance as it is required.

VA Loan

The U.S. Department of Veterans Affairs backs the VA loan which benefits anyone who has served honorably in the military. These typically involve lower down payments and lower mortgage payments to assist current and former military members in purchasing a home.

USDA Loan

The U.S. Department of Agriculture backs this loan, which helps people in rural areas purchase a home with no money down. These loans are 100 percent financed.

Refinance Investment Property

With investment property loan rates at all time lows, there is not better time than now to refinance an your investment property. There are many benefits associated with investment property refinance. However, as with all financial decisions, you should carefully evaluate your situation before making that choice.

Benefits of Refinancing Investment Property

Lower interest rates

By refinancing your investment property, you can take advantage of the decrease of interest rates, enabling you to pay more money on the principle of your loan.

Greater rental income

Lower mortgage rates for investment property increases your potential to receive more income from the rental fees.

Buy another investment property

Some investment property refinance programs allow you to take money out of the investment home's equity in the form of cash, which you can then use as a down payment for a second investment property.

Pay off mortgage on investment property

Refinancing investment property can help you pay off the mortgage on that property sooner, saving you thousands of dollars in interest fees.

Build equity faster

Changing your investment property mortgage from a 30 year loan to a 15 year loan will help you build equity at a faster rate.

What to Consider When Thinking About Investment Property Refinance

More is required for refinance investment property

Investment property mortgages are thought of as riskier by lenders, and therefore, they may have higher requirements for you to meet, such as a specific credit score, appraisal of the property, higher reserve requirements.

Loan-to-value

Most lenders will only allow you to apply for mortgage as long as it is below 75% of the value of your property. For example, if your investment property has a value of $500,000, then the highest amount you will be able to apply for in refinancing is $375,000. This can hurt you if you owe more than $375,000 on the investment property.

Charge for early repayment

Before you start looking for investment property refinance, it is important to evaluate the terms of your current mortgage to make sure that there are no charges for early repayment of the mortgage.

Investment property loan rates are at their lowest

If you meet the qualifications for refinance, you will benefit from the fact that investment property loan rates are currently at all-time lows and First Rate Mortgage offers the lowest rates in the industry. These conditions make this perfect time to refinance your investment property.

Cash Out refinance adds to your principal

One of the options available for investment property refinance is cash out refinance, which allows you to take cash out of the properties equity. However, before you decide to take this route, it is important to remember that the amount you borrow will be added to the principal of the mortgage for the investment property.