Craig's Mortgage News

Saturday, September 5, 2009

Buyers-What are you waiting for?

Buyers-an argument to Get off that Fence

Why are Buyers holding off on buying? There are a number of reasons, for example fear that home prices may decline and fear of possible job loss are a couple. However, the positives of buying now include a huge inventory and super low interest rates; and if the monthly payment is important to you, keep reading.

"Seven of the top eight most affordable months occurred during this year, according to the National Association of REALTORS (NAR) Housing Affordability Index, which dates back to 1971."

WOW. For those of you that are on the fence, do you understand the power of that statement? Interest rates are extremely good. According to Frank Nothaft, Freddie Mac VP and Chief Economist, "overall, inflation remains in check..." This time last year, rates averaged 6.35%, compared to 5.08% during this week. That's a 1.27% improvement. That's HUGE! A rate drop of that amount increases one's purchasing power by nearly 13%.

Interest rates have a big affect on a borrower's ability to borrow money Do your realize if you continue to wait for prices to fall, but if interest rates increase in the meantime, you may end up with a higher monthly payment?

On a $400,000 loan, if interest rates go up 1%, the income needed to qualify increases by 10.5%. In other words, at a 5% interest rate, a client may qualify with an income of $5,000. However, if the interest rate goes to 6%, the income needed to qualify for the same loan amount under the same conditions increases to $5,580.

For those that want to wait for a lower price, you are gambling that interest rates will not go up significantly. If the loan amount goes down by 2.5% (hence a lower purchase price), but the interest rate increases by 0.25%, the monthly payment will be more.

It is widely believed that we will continue to see favorable interest rates through the month of September; they may even dip a bit. However, as the Feds near the end of their commitment to purchase their allotment of mortgage backed securities, it is almost certain that interest rates will go up and I would not be surprised if we do not have rates in the mid 6% range again within the next 3-6 months. Posted by Craig Haueisen at 8:09 AM 0 comments Links to this post

Thursday, August 27, 2009

Banks, Home Equity Lines being frozen

I will try to stay away from the Bank failure stories as much as possible, but I wanted to post this comment to inform that we are not out of the woods yet, not by a long shot.

Reported by http://www.cnnmoney.com/ "The number of institutions on the government's so-called "problem bank" list surpassed 400 in the latest quarter ...according to a government report published Thursday (today)."

I mention this to remind that although there are some positive news reports out there, please keep in mind that no company is immune (think Countrywide, Washington Mutual, IndyMac Bank, GM, AIG etc.)

If you have a Home Equity Line of Credit (HELOC) and you think you might need the money that is available to you in the near future, I would strongly suggest considering taking it out now before the Bank possibly fails or freezes (cuts off your access to the available funds) the HELOC. Posted by Craig Haueisen at 5:54 AM 0 comments Links to this post

Labels: cnn, freezes, Home Equity Line

Saturday, August 22, 2009

Bank Failure, again

Noted on Thursday's post, and unfortunately proved correct on Friday, another BIG bank failure occurs, Guaranty Bank.

Federal regulators closed Guaranty Bank Friday in the third largest bank failure this year bringing the total number of failures to 81 in 2009. The estimated cost of Guaranty's failure to the FDIC is $3 billion.

Friday's closure brings the total number of bank failure this year to 81, compared with 25 in all of 2008.

What does this mean? It indicates we are still in a crises and with job loses continuing and the prospect of people being rehired is unlikely in a timely manner, this news will continue.

What can you do to protect yourself? Stay tuned for tips in upcoming blog sessions.

Next is the foreclosure outlook. Posted by Craig Haueisen at 10:33 AM 0 comments Links to this post

Labels: bank failures, FDIC, foreclosure, job loss

Friday, August 21, 2009

Credit Card and HELOC Tightening

Recently the news stated that 58 million Americans had their credit card limit reduced. Good news for the card insurer, bad news for the card holder?

The good news for the insurer of the cards is that they will not lose as much money (as if they did nothing) from the people who will be defaulting on their credit cards and/or filing bankruptcy in the coming months/years.

Additionally, it is going to make some people live within their means a bit more as they will not have access to as much credit as they previously did.

Consider the best position for someone to be in is when they use less than 30% of their available credit limit, the second best position is when they use less than 50%, and the third best position is when they use less than 70%. Obviously, if the consumer is maxed out on the credit card, that is the worst scenario.

What is the downside of the credit card issuers lowering the available credit to a borrower? The downside is borrower's credit scores could go down because of this. That is right, down.

How you ask? Simple, easy, and most likely overlooked by the borrower until it is too late. The scenario is the borrower has a $10,000 credit card limit, and owes $2,500. They are currently using 25% (2,500/10,000 = 25%). However, if the card issuer lowers their limit to $3,500, the borrower is now using 71.4% (2,500/43,500=71.4%).

As a result, a borrower who was not close to being in a poorly rated category (using 30%-70% of available credit), is now thrust into an area where the credit score is sure to take a hit as a result of the credit limit being lowered.

The HELOCs (Home Equity Lines of Credit) will be covered on another warm day, as it is a chilling/freezing topic that resembles the lending institution taking away the borrower's ability to utilize credit. Posted by Craig Haueisen at 2:40 PM 0 comments Links to this post

Labels: credit card, freezing, HELOC, limits, tightening

Wednesday, August 19, 2009

Bank Failures...more to come

Aloha,

Last week Colonial Bank (most of you have probably never heard of them) became the biggest bank failure of the year. You might say, so what. Just another bank gone under.

But no. Colonial Bank is the 6th largest bank to go under since this crises started a couple years ago. And there's more bad news, Guaranty's is most likely going under (being seized by the FDIC) later this week. (I know, you probably haven't heard of them either.)

But that doesn't mean it isn't BIG news.

They (Colonial Bank) are currently the 6th largest bank to have failed (Indy Mac another one that you may not be familiar with is currently in 4th place). Remember the American Saving and Loan crises of 1988, that is currently in 5th place. (For reference, Washington Mutual is way ahead of everybody else in first place.)

Guaranty's (GFG) closing would mark the second-biggest bank failure of 2009, after last week's collapse of Alabama's Colonial Bank, which was seized by the FDIC and sold to regional bank BB&T (BBT, Fortune 500).

Another example of why working with a mortgage broker and banker is key in this current era. A mortgage broker and banker like myself have multiple backup plans. Posted by Craig Haueisen at 10:36 PM 0 comments Links to this post

Labels: bank failures, brokers, Colonial Bank, Guaranty's, mortgage

Craig's Mortgage and Real Estate Industry thoughts

Aloha!

My name is Craig and as a Certified Mortgage Planner I am here to keep you on the right path when it comes to what is going on in the mortgage and real estate industry.

Depressing economic, lending and real estate information is on the TV, on the radio, on hand held devices (PDAs), friends, etc. I will be writing on a regular basis and my hope is to educate you with the right information in a timely manner that either supports news or challenges the rumors that you hear. Additionally, I will offer my opinions and thoughts on items relative to the Mortgage and Real Estate industry.

Topics to be covered in the near future include recent bank failures, is the $8,000 First Time Home Buyer's Tax Credit going to be extended or improved, is now a good time to buy, and what are mortgage rates going to do. Posted by Craig Haueisen at 1:58 PM 1 comments Links to this post

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