Mortgage Bonds ended the week about 3 basis points lower than where they started with the 30 Year Fixed Rate relatively unchanged for the week at 3.875% . A slowdown of the over heated Chinese Economy helped to keep Mortgage Bonds above support levels. Remember, Mortgage Rates move in the opposite direction of Mortgage Bond prices. So, rising bond prices helps to move Mortgage Rates lower.
Waiting For Home Prices to Move Lower Can Cost Plenty
Many still lack confidence in the economy and hesitate to buy a home as they are hoping home prices will fall further. However, delaying that home purchase can actually cost a lot more if mortgage rates rise. Lest say you are hoping for the real estate market to drop by another 10%. That would reduce a $600,000 home by $60,000. So you save $60,000?
Not so fast. Lets say you were going to get a $417,000 mortgage on that home, but while waiting for the market to drop, the rate for a 30 year fixed rate mortgage rose 1.50% from 3.875% to 5.375%. That higher rate will cost $194,000 more in payments over the life of the loan. So the house actually cost $734,000.
How To Shop For A Mortgage
Shopping for a mortgage can be stressful. Many people start at the bank where they have their checking and savings and are quickly dismayed as banks do not employ individuals that are trained, tested & licensed. Additionally, with the difficulties in today’s lending markets, going to a bank limits your options and can result in denial or a higher rate. The reason is that the majority of banks have to adhere to Fannie Mae underwriting guidelines. You know the organization that looses billions of tax payer dollars and relies on government bailouts. Well, Fannie Mae’s guidelines have tightened up and bank underwriters are overly cautious when underwriting loans they sell to Fannie Mae, as they don’t want to have to buy them back. Hence, you want to keep your options open.
A professional Mortgage Broker still has several options the banks do not have. Such as arranging your loan with lenders and banks that do not sell their loans to Fannie Mae. These lenders typically use common sense underwriting guidelines making getting a mortgage easier than one through the Fannie Mae lenders. So how do you shop for a Professional Mortgage Broker? Well there are few left, as many did not survive the credit crisis. So they are a commodity.
A common misconception is that using a Professional Mortgage Broker will cost you more, The fact is using a mortgage broker will cost you less, as they have multiple lenders they can place you loan with. They do the shopping for you. Brokers work with banks wholesale channel, so they have access to the same rates as banks retail channel. You can check a Professional Mortgage Brokers credentials with the Nationwide Mortgage Licensing System http://www.nmlsconsumeraccess.org/
Economic News
The Case-Shiller Home Price Index rose 0.9% in July from June in the 10 and 20 city survey, and was the fourth monthly gain in a row.
Initial Jobless Claims were 391,000. That is a tough number to see this far after the official end of a recession – but it was a bit better than the 419,000 expected. Anything under 400K in Initial Claims feels better.
Personal Income was -0.1%, which was lower than the 0.1% gain expected.
The 2nd Quarter Final reading of GDP was revised higher to 1.3%, from a previous reading of 1.0%. The inflation reading for the 2nd Quarter – showed inflation at 2.5% up from a previous reading of 2.4%. Inflation has gone up every month since last December. ?