Chitownproperty

This post is from Steve Schneider at PHH Home Loans, Coldwell Banker’s mortgage brokerage affiliate.

“Where do we go from here?” That question from Alicia Keys’ song is on the minds of many Americans, as they wonder where home loan rates are headed after the recent negative news for Bonds.

Last week, Congress was busy at work on negotiations to extend the Bush-era tax cuts. That news kept a lid on any improvement for Bonds and home loan rates, due to the prospect of an ever-increasing deficit.

And adding to the troubles for Bonds and home loan rates last week was news that inflation is growing in China… and growing fast. How does that impact us? Remember, it’s a global economy, so Bond prices all over the world worsen on news of inflation, which is bad for home loan rates.

So the big question is: Will home loan rates go back down?

Although rates are still near historic lows, they have been headed up… and indications are that those unbelievably low home loan rates may be behind us. In fact, there are only a few things that would bring back the lows that we saw in early November:

• If the tax cut package doesn’t get passed, it would be very bad news for the economy and Stock market – but it would help interest rates.
• If the Fed’s recent round of Quantitative Easing falls on its face and doesn’t meet its mission of creating inflation, boosting Stock prices, lowering unemployment and creating consumer demand – Bond prices could make some gains as the threat of deflation reemerges. But this is a long shot.
• If the financial problems in Europe worsen significantly – which would drive investors into the safe haven of the US Bond market – it could help Bond prices, but probably only modestly.

Realistically, the chances of these events happening are unlikely – and in the end, rates may see some brief and fleeting improvements, but many experts believe they will likely continue to creep up over time. And when you include the stimulative action of extending the present tax rates and adding further cuts, it’s tough to see Bonds or home loan rates improving much.

The good news is that home loan rates are still extremely attractive and are still near historic lows for now. If you or someone you know has been thinking about purchasing or refinancing a home, NOW is the time to call or email to get started.

Mortgage rates are still at historic lows, so now is as good a time as ever to refinance. If you haven’t done it before or need a refresher on what to think about with a re-fi, here is a good primer from Yahoo! Finance on refinancing basics.

Lawrence Yun, chief economist for the National Association of Realtors, looks at the latest economic figures and discusses what we can expect for mortgage rates and home values. He expects that moves by Federal Reserve policymakers corcerned about deflation will push mortgage rates up from their historic lows. Home values typically rise with inflation, and coupled with a slow but steady easing of unemployment, both forces should have a positive effect on the market.

Mortgage rates are still at historical lows, and haven’t started to rise like many analysts predicted when the government ended its home buyer tax credit program. The European credit crisis held off increases for a while, but how much longer can rates stay this low? It’s a tough call, and even the experts are hesitant to say. “[I]t’s hard to see how rates might go much lower for very long,” Mark Zandi, the chief economist of Moody’s Analytics, told the New York Times. “Once the recovery gains a bit of traction, rates will rise,” he said.

Coldwell Banker’s home mortgage affiliate, PHH Home loans, is offering a chance to lock in a mortgage rate for 90 days before you start shopping for a home. Click on the image to download a flyer with more details.

The federal tax credit for home buyers is running out. The Treasury Department says the program has been a success, helping 1.8 million people buy homes, but many experts say the program wasn’t cost effective. The New York Times estimates that for every new buyer who was lured into the market by the credit, there were three more to received it who would have purchased a home without it anyway. To take advantage of the benefit, buyers must be under contract by April 30, and close by July 30, 2010.

When you’re a first-time home buyer, or hitting the market again after a long stay, the choice of mortgage options can be overwhelming. Any good lending agent or mortgage broker should educate you on your options, but this Loan Program Guide from the Sun-Times is a good primer for understanding the common mortgage plans in use today.

The single most important thing to understand before you start shopping for a home is how much you can afford to spend. CNNMoney.com has a handy calculator that lets you plug in values such as your annual income, other debts like car payments or student loans, a proposed mortgage rates, and taxes to calculate how much you can afford in both a conservative or aggressive scenario.

From the Tribune, this article answers a reader question about paying down your mortgage–i.e. putting a little extra toward the principal each month–even when you already have a low interest rate:

One of the great benefits of prepaying your mortgage is that each prepayment is applied toward the principal of the loan. Because you’re paying interest on what you’ve actually borrowed, paying down the loan faster than prescribed in a 30-year amortization schedule means you’re paying less interest overall.

Prepaying your mortgage is most effective when interest rates are high, because you’re shortening the life of the load and reducing the amount of higher interest you’ll pay. But even with a low rate, prepaying the loan can shave years off the term of the mortgage.

In a press release last week, National Association of Realtors president Charles McMillan applauded the Federal Reserve’s move to purchase an additional $750 billion on mortgage-based securities from Fannie Mae and Freddie Mac and up to $300 billion in Treasury notes. “Greater numbers of home buyers will be able to purchase a home, and homeowners facing challenges will be able to refinance into better terms,” he said. “We already are experiencing a great improvement in housing affordability due to historically low interest rates, and the Fed’s move will push affordability conditions to the best levels in 40 years.”

Mortgage rates dropped last week; the average 30-year fixed rate loan is now 5.37%, a full point lower than it was at this time last year. The lower rates come at the same time mortgage applications went up over 11%, as people take advantage of the discounts to refinance and buy homes.

House hunting within a budget from CNNMoney.com

CNN/Money posted this short video with tips for buying a home on a budget. We’re a little suspicious of such advice followed by a Porsche commercial, but the pointers are useful. Some highlights:

• Shop for a home priced about 2.5 times your combined annual income
• Be conservative when securing a loan–try to put at least 10-15% down to get a better rate and lower your payments

Plus, check out their mortgage calculator to see exactly what you can afford to buy.

This American Life – Another Frightening Show About the Economy

Last week, Chicago Public Radio’s This American Life broadcast an episode in which Alex Blumberg and NPR’s Adam Davidson explain, in clear, frank language, what caused the current financial crisis, and what remedy we can expect from the current solutions being proposed by lawmakers. It’s essential listening for understanding the problems facing our economy, not just from a real estate mortgage perspective, but for what it means to the average consumer.

You can listen to a stream of the episode online, or download a full copy to your computer for a short time. We will also be making copies of the show available on CD, so please contact us if you’d like one.

Even in this climate, there’s no rule like an old rule — — chicagotribune.com

This week’s Tribune has a useful article about how longstanding “rules” of real estate still apply, even in today’s changing market. Buyers and sellers can count on certain maxims to get the best deal, regardless of the financial environment, including:

• You should always shop around for mortgages
• The right initial price is the key to selling
• Negotiate every offer

Sale ain’t over till it’s closed — chicagotribune.com

You already knew that technically, your house wasn’t sold until you left the closing table and handed over the keys. But if you did sell your home in the past few years, you probably closed the deal mentally as soon as the buyer signed the contract.

Not so these days, as this article in the Tribune points out. The credit crisis means that buyers can have their formal mortgage application turned down at the last minute, even if they had already been pre-approved for that amount. Risks for the lender can shift based on the borrower’s income, credit, and the property’s location, and now that lenders are meticulously analyzing every mortgage, any one of those could unexpectedly derail a deal. Potential buyers would be wise to check with their mortgage broker or bank frequently throughout the purchasing process, and take action to shore up any weaknesses in their resume, like putting down a larger down payment.