Boy…What a week!
We started out really well, then the fed meeting results came out with the lowest federal funds rate in the history of the federal reserve at .25%. That’s right, the banks are now borrowing their money at .25%. At one point on Tuesday, I was quoting rates at 4.75% with no points and 4.25% with 1% origination. Can you believe that?!
Then the air let out of the balloon on Wednesday as bond traders got nervous and we are back to the low 5% range with no points. Try not to cry over a terrible rate of 5% (wink), but the volatility in the market is a
strong indication that you should be ready to pull the trigger when the time comes. If you are worried about rumors of 4.5% rates coming available through the government, be aware of a few things:
1) A bird in the hand is better than a rumor and a maybe – If the government were to force a stimulus that will take rates down to 4.5%, it will only affect first time buyers. And if you have kept up with any of the government attempts to stimulate, you will notice that they have failed miserably (including the most recent Hope For Homeowners which to date has had fewer than 100 closed loans nationwide due to the heavy restrictions in qualifying).
2) The difference in monthly payment is negligible – The difference in monthly payment on a $200,000 loan at 4.5% vs. 5.0% is about $13.76 per week. With all of the stresses of searching for and buying a home, there is no need to add watching the bond market on a daily basis to it.
3) Historically low rates, and prices dating back to 2003 – I mean….what else can I say?! If you can’t see the value in buying an asset at the lowest price in over 5 years, combined with the cost of financing at historic lows, there is not much more that I can say.
Self Employed Alert: As we near the end of the year, and tax season is right around the corner, be aware of your income taxes and how they affect your ability to buy a home. If you are even remotely considering buying a home in this buyers market, pull out your last 2 tax returns right now. Look at the bottom right corner of your 1040 form where it says “Adjusted Gross Income”. This is the figure that is considered taxable income after expenses. That is the number that underwritiers use to calculate income and debt ratio for qualifying for a mortgage. This means that if you told your loan officer that you make $100k per year, and after reviewing your tax returns, you have written off $80k in expenses, you will probably not qualify for a mortgage (purchase or refinance).
This is important now, because you can address this with your accountant for the coming tax year. Underwriters will take your last 2 years signed tax returns, add them together, and divide by 24, and that is the monthly income that you have for the sake of a mortgage.
I hope this helps, and if I can help you, give me a call anytime at 850-497-6325 or go to www.SteveRussellOnline.com.
Steve Russell
Mortgage Banker
Primary Residential Mortgage
850-497-6325 Office
850-221-8334 Cell
{ 13 comments… read them below or add one }
Wow, just like Japan. Remember the Yen Carry Trade that unwound earlier this year? You get to use money almost for free, just don’t loose it!
test comentluv
Andy Bailey’s last blog post..Its oh so quiet… and suddenly… wow
Hi Andy, comment was moderated through if you need to go check it. I see your link showing up, but don’t see the comment selector box for me!
4.25%, I sure hope this sticks around a little while. It will make for a good selling season. Bring on the Buyers!!!!
Hey Mike,
Come back and comment with your blog url and see what the CommentLuv does. See andy’s post above.
I am with Mike if the interest rates can stay down around 5% it will help alot of new home buyers make a purchase.
James Wheelock’s last blog post..Humble Apartments
Bring those mortgage rates down, I think that is what is on the fed’s mind. I bet we will be seeing 4.5% mortgages for new real estate purchases in the coming weeks.
To mean my website/blog. i will try that
Here is my blog, What is it suppose to do?
See James Whellocks comment above. When he registered to make a comment, linkluv gave him a keyword link in the name area, but below the comment the commentluv polls his blog and lets him choose which blog entry he wants linked to from the comment. You may have to log out and then come back and enter a new comment to see the option since you may have registered before commentluv was installed. Where you enter name and URL, be sure to put your blog feed as your URL. http://www.fiddyp.co.uk/commentluv-wordpress-plugin/
Ciao and greetings from Italy, I am Mario a Realtor from Rome, grazie for posting such interesting information, for me is appropriate as now the Real Estate Recovery is the same similar situation in Europe and indeed very relevent to the Real Estate at this moment Market here in Italy.
We in the UK have a record, almost silly, low rate. Still nothing seems to be kickstarting as a lot of the lenders are simply not passing on the rate.
Wasn’t it greed from the banks that got us in this mess?
Yes, and the mortgage companies and the investment bankers and the buyers of their impossible to comprehend investment vehicles and the politicians and the buyers that think that they will get rich putting nothing down and holding short term and the home equity lenders that allowed real property to become a handy ATM machine and the consumers that jumped into debt up to their noses and the loan products that made people feel like they had no risk when they really exposed themselves to being upside down super quickly and on and on and on – yes greed!
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