Category Archives: mortgages

30-Year Mortgage Rate Rises to Just Below 4%

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Mortgage Rates
Lenny Ignelzi/The Associated PressMortage rates have ended a five-week decline according to the latest survey by mortgage giant Freddie Mac.

WASHINGTON — Average U.S. long-term mortgage rates arrested their five-week decline this week but the benchmark 30-year loan remained below 4 percent. Mortgage company Freddie Mac said Thursday the nationwide average for a 30-year mortgage rose to 3.98 percent from 3.92 percent last week. It remained at its lowest level since June 2013. The rate stood at 4.53 percent back in January.

The average for a 15-year mortgage, a popular choice for people who are refinancing, increased to 3.13 percent from 3.08 percent. The sustained decline in long-term rates sparked a boomlet of homeowners looking to refinance mortgages. Homeowners eager for a bargain rate fired off inquiries to lenders. Applications for “re-fi’s” jumped 23 percent in the week ended Oct. 17 — reaching their highest level since November 2013, according to the Mortgage Bankers Association. But refinance applications fell 7 percent in the latest week, ended Oct. 24.

In recent weeks concern over global economic weaknesses brought market turmoil and sent investors seeking safety by pouring money into U.S. Treasurys. Higher demand drives up prices for those government bonds and causes their yields to drop. The yield on the 10-year Treasury note touched new lows. Mortgage rates often follow the yield in the 10-year note.

This week, the 10-year note rose to 2.32 percent Wednesday from 2.22 percent the previous week. The note traded at 2.29 percent Thursday morning.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage was unchanged from last week at 0.5 point. The fee for a 15-year mortgage also remained at 0.5 point. The average rate on a five-year adjustable-rate mortgage rose to 2.94 percent from 2.91 percent. The fee was steady at 0.5 point.

For a one-year ARM, the average rate edged up to 2.43 percent from to 2.41 percent. The fee held at 0.4 point.

 

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How to Manage a Mortgage After a Divorce

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couple fight over a house...
ShutterstockIn divorce, the matter of who gets the house can become moot without proper financial planning and professional advice.

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In a divorce, it’s bad enough that you’re losing someone you once loved or may still love. It’s even worse when you find out you may lose your house, too. And finding a replacement, much like starting a love life all over, won’t be easy. After all, lenders tend to give mortgage loans to people with good credit and a solid stream of income. If you were previously a two-income household, you aren’t now, and if you’re paying alimony, you have less money than you did.

Whether you’re in the midst of a divorce or its aftermath, here are some things you can do to land a mortgage and what you can reasonably expect.

You may want to get your name or your ex’s name off the mortgage. But perhaps not; it depends. If you are planning to buy a house, and your ex is living in the home you co-own, then ideally, your ex

It can be difficult for a person paying alimony to buy a house because of the way lenders look at that alimony.

needs to refinance in his or her name. That will decrease your debt and increase your odds of being able to get a new mortgage.

What if your ex can’t refinance on her or his own? If you’d like to see your ex and the kids remain in the house, you may want to leave your name on the mortgage and co-own the house for a while with your ex.

“People do that all the time,” says Katie Connell, a family law attorney with Boyd Collar Nolen & Tuggle in Atlanta and a governor-appointed member of the Georgia Commission on Child Support. “I’m stereotyping, but often a woman who didn’t work full time and doesn’t have the income stream or the credit to buy her own house, she and her ex-husband have agreed, with their family transitioning and changing, that it’s in their better interest to keep mom and the kids in the house for, say, four or five years or when the kids go into their college freshman year,” she says. “The husband is often willing to essentially extend his credit to his ex-wife by letting his name stay on the mortgage.”

If you’re going that route, Connell says you’ll want to work out details about how profits will be split once the house is sold down the road. It may not be an equal split since one ex-spouse will be likely making the mortgage payments and possibly spending money to maintain the home for those extra years.

Connell says that arrangement tends to work better if the ex without the house still has enough income and good credit to buy a new home of his or her own.

Don’t buy a home during the divorce proceedings. Even if you’re rich beyond belief, and your credit and income stream are solid, it’s still a risky move. Connell says one of her clients lost $10,000 in earnest money when he tried to buy a house during his divorce proceedings.

“He had great credit, a very good income, but when the lender found out he was going through a divorce, they said, ‘Your alimony and child support payments are question marks,'” Connell says. “By the

Some lenders won’t even consider letting a divorced person who receives alimony use that alimony as evidence of income….

way, this client had a different lawyer back then. If I had been representing him, I would have said, ‘Don’t do it!'”

Connell adds that when the client’s ex learned he lost $10,000 in earnest money, the ex’s lawyer naturally felt that the ex was entitled to at least half of that money – it was, after all, money that otherwise would have been in the pot of assets to split.

It can be difficult for a person paying alimony to buy a house because of the way lenders look at that alimony. “Alimony is considered a debt,” says Susan Pryor, branch manager of Silverton Mortgage Specialists, a direct lender in Atlanta. “If you make $10,000 a month and give $3,000 to your ex-spouse, the lender doesn’t look at it like you’re making $7,000 a month. They look at it like you have a $3,000 car payment every month.”

Where should you live during the divorce proceedings? Assuming you aren’t selling the house immediately and you’re both looking for a place to rent, there are two common approaches couples take, according to Connell.

  • Stay in your house with your soon-to-be ex. “We definitely see more people grinning and bearing it and living together longer,” Connell says. “We saw a lot of that in this last recession.” It’s an idea that makes some sense. Living together awhile longer will save you both money. And especially if you have children, maintaining a civil relationship under the same roof may help with your post-divorce relationship.
  • You could nest. You hear “nesting” used a lot in pregnancy, but Connell says that in the divorce industry, the term refers to renting an apartment near the house and living there while a divorce is worked out. “We see a lot of couples who take turns living there, and the kids stay in the house,” Connell says.

Connell adds the latter arrangement may not work for couples who still harbor a lot of anger or suspicion. She recalls an instance where a wife was convinced the husband was unplugging lamps and cable cords throughout the house before he would leave for the week.

“No damage or harm was done, but [the wife felt] it was just to be a pest,” Connell says. Meanwhile, the husband said the cords came unplugged from his vacuuming, and that the wife was leaving dirty dishes in the sink.

Whatever you do, Pryor urges divorcing homeowners to not rush their decision of where to live next. “You may be under tremendous stress, and it’s an emotional situation. Divorce can shake your planning, and you may not be able to make the right decisions,” she says.

Besides, you may not be able to rush, even if you want to. Some lenders won’t even consider letting a divorced person who receives alimony use that alimony as evidence of income until there’s a six-month history of alimony payments being paid on time, Connell says.

You may be better off without a mortgage. This may be the last thing you want to hear if you want to hang onto your house or buy a new home. But the money math may not add up.

It’s a common mistake with divorced homeowners, says Jean Ann Dorrell, a certified estate planner in Sumter County, Florida. Many people, she says, are “trying to hold onto a house because it’s where the kids grew up or because you don’t want the kids to have to change schools, you don’t want to lose friends and you stay too long trying to afford something you never could have or should have.”
Pryor agrees. “We see it a lot,” she says. “It’s especially emotional when children are involved.” She adds that spouses who didn’t know a divorce was coming tend to be the ones who can’t face their new budget.

Pryor recommends professional help for anyone divorced and struggling to keep their home or figure out where to live next.

“I think it’s important to do some financial planning, and there are planners who focus on divorce, so you can see what money is coming in and what’s going out,” Pryor says. “Just because you can barely make that mortgage payment every month doesn’t mean you should stay in the house.”

 

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Why Missing Mortgage Payments Carries a Heavy Price

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ShutterstockAbout 6 percent of all mortgage loans were found to be at least one payment behind at the end of the March.

By Chris Birk

Homeowners who stop paying their mortgage do so for a host of reasons. Lives and financial circumstances change. Job loss or relocation might put consumers in a bind. Housing values can plummet, leaving homeowners owing far more than the property is worth. About 6 percent of all mortgage loans were at least one payment behind at the end of the March, according to the Mortgage Bankers Association.

Whatever the catalyst, deciding to forgo that monthly payment is a choice few take lightly. Foreclosure can inflict serious damage on your credit. It’ll also make obtaining another home loan next to impossible in the short-term. Missing one or even a couple mortgage payments doesn’t

There’s no significant difference in score impact between a foreclosure and a short sale or deed-in-lieu of foreclosure. They’re all going to hurt.

mean foreclosure is imminent. But forgoing them will set in motion a process that can have long-lasting consequences for your credit and finances.

New Foreclosure Procedures: Deceptive practices and mismanagement regarding distressed borrowers remains one of the more disturbing legacies of the housing crisis. New foreclosure avoidance procedures crafted by the Consumer Financial Protection Bureau took effect earlier this year. Mortgage servicers must now send written notice to homeowners before they become 45 days delinquent. That notice will include information on all available foreclosure avoidance options, such as a loan modification or a short sale. Under a loan modification, the servicer will add the delinquent payments and penalties to the loan balance and create a new payment plan.

A short sale is when the servicer allows the homeowner to sell the property for less than they owe. There are also additional protections for military members facing the prospect of mortgage default. There are two basic types of foreclosure — judicial and non-judicial — and what you encounter will depend in part on where you live. The major difference is a judicial foreclosure requires formal court proceedings, which usually means a more drawn-out process. In a non-judicial setting, the servicer can initiate a foreclosure sale without a judge’s approval. Neither path is especially speedy. It took banks 572 days on average to complete the foreclosure process, according to first quarter data from RealtyTrac.

But the wait was considerably longer in some states where judicial foreclosure is the primary path, including New Jersey (1,103 days), New York (986 days) Florida (935 days) and Hawaii (840 days). The lag time gives homeowners ample time to evaluate their options. And keep in mind that servicers can’t formally file for foreclosure until you’re more than 120 days delinquent on your mortgage. They’re also not allowed to start the process if you’ve applied for assistance.

Avoiding Foreclosure: Homeowners hoping to keep their property will need to work with their servicer toward an acceptable mitigation plan. The government has a pair of programs that might also be able to help distressed borrowers, one geared toward refinancing your mortgage and another focused on modifying the existing loan. Those who can’t or don’t want to continue making payments can explore a short sale or a deed-in-lieu of foreclosure, which involves the borrower deeding the property back to the servicer.

Filing for bankruptcy protection can also allow homeowners to temporarily halt the foreclosure process. Every borrower’s situation is different. Consulting with financial professionals and attorneys can help provide clarity in terms of how best to proceed in your specific situation. If you continue missing payments or otherwise fail to finalize or make good on a loss mitigation plan, the servicer will trudge on toward foreclosure.

Credit Consequences: No matter what route you choose, foreclosure — as well as a short sale or deed-in-lieu of foreclosure — will hurt your credit profile. How much depends in part on what kind of credit you had going in to the foreclosure. (If you’re not sure what condition your credit is in now, there are many resources that allow you to check your credit scores for free, including Credit.com.)

FICO studies have shown consumers with high scores could lose up to 160 points, a drop that could take as long as seven years to fully rebound. Contrary to common misconception, FICO also found there’s no significant difference in score impact between a foreclosure and a short sale or deed-in-lieu of foreclosure. They’re all going to hurt. Homeowners who experience a foreclosure will also likely need to wait at least two years to purchase another home. But the wait can be longer, depending on the type of loan they lost, the type they’re pursuing and other specific factors.

 

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Freddie Mac: Average 30-year mortgage rate down slightly to 4.12%

The interest rates offered to mortgage borrowers leveled off early this week, with the average 30-year fixed home loan edging down to 4.12% from 4.14% last week, housing finance giant Freddie Mac said.

CoreLogic: Gain in Home Prices Less Robust in May

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Home Prices
Lynne Sladky/AP

By JOSH BOAK

WASHINGTON — U.S. home prices rose in May compared with a year earlier, but the gains have slowed.

Data provider CoreLogic (CLGX) said Tuesday that prices increased 8.8 percent in May compared with 12 months earlier. The pace of gains has slowed as more homes have come onto the market, according to CoreLogic.

On a month-to-month basis, prices rose 1.2 percent from April to May. But CoreLogic’s monthly figures aren’t adjusted for seasonal patterns, such as warmer weather, which can affect sales.

Prices increased the most in Western states, including Hawaii, California and Nevada.

Home sales began to stall in the middle of last year after double-digit price increases and higher mortgage rates made real estate less affordable for many people.

But sales rose last month as price gains have moderated and mortgage rates have dipped.

Sales of existing homes climbed 4.9 percent in May to a seasonally adjusted annual rate of 4.89 million homes, according to the National Association of Realtors.

However, sales are down 5 percent year-over-year.

The Realtors forecast that sales of existing homes will decline 2.8 percent this year to 4.95 million, compared with 5.1 million in 2013.

Sluggish sales, in turn, will slow annual price gains this year to roughly 5 percent or 6 percent, economists predict.

Prices rose in the 12 months ending in May in every state, CoreLogic said. The states with the biggest price gains were Hawaii, 13.2 percent; California, 13.1 percent; Nevada, 12.6 percent; Michigan, 11.8 percent; New York, 11 percent; Georgia, 10.3 percent; and Oregon, 10.1 percent.

Ninety-four of the 100 largest metro areas reported higher prices in May compared with a year earlier.

The six that did not record an increase were: Worcester, Massachusetts; Hartford, Connecticut; New Haven, Connecticut; Little Rock, Arkansas; Rochester, New York; and Winston-Salem, North Carolina.

Average prices have risen nationwide for the past 27 months. Still, homes nationwide are 13.5 percent below their peak values in April 2006.

Ten states have exceeded their previous peaks, including Alaska, Louisiana, Oklahoma, Nebraska, Iowa, South Dakota, North Dakota, Colorado, Texas and New York.

 

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New Mortgage Strategies for Homebuyers Without 20% Down

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ShutterstockWhat should you do if you don’t have 20 percent down to buy a home, and you want to avoid private mortgage insurance? You have some options.

By Gerri Detweiler

Buying a primary home? The 20-percent-down rule is yesterday’s news. More down payment options exist now, including both government and private sector alternatives, allowing more flexible choices for homebuyers. Don’t be fooled however, as most of the programs that allow for less than 20 percent down include private mortgage insurance, aka PMI — which is an added premium built into the mortgage payment.

PMI is meant to protect the lender if you have less than 20 percent equity in the home and default on your mortgage. Your PMI is a percentage of the loan amount added to the monthly payment. For example, with conventional mortgages, a loan of $400,000 may carry $166 or so per month in PMI, so that’s $166 added to the principal, interest, homeowners insurance and property taxes. And a typical FHA mortgage with a loan amount of $400,000 will carry $450 per month in PMI. (The PMI is higher on FHA loans because they tend to carry lower interest rates, more flexible credit requirements, and lower down payments than conventional loans.)

Either way, that’s quite a bit of money each month. So what should you do if you don’t have 20 percent down to buy a home, and you want to avoid PMI? You have some options.

1. The Old-School 80/10/10 Method: Popularized in the lending heyday from 2004-2007, the 80/10/10 program allows a buyer to put down just 10 percent of the purchase price of the home. In most cases, a 10 percent down payment would require monthly PMI. Using the 80/10/10 approach, your lender would provide 80 percent first mortgage, that same lender and/or a subsequent lender would provide a 10 percent second mortgage in lieu of the monthly PMI, while you contribute the 10 percent down payment, sealing the deal.

Most lenders will allow for secondary financing up to 90 percent combined loan-to-value (combined loan-to-value meaning first and second mortgage combined loans) up to the maximum conforming loan limit for the county in which the property is located. While the majority of mortgage lenders typically do not offer second mortgages, smaller pocket-size lenders are entering the marketplace aggressively with the 80/10/10 solution. You’ll likely have to meet at least a 700 credit score requirement and 10 percent down of your own funds to close escrow.

Also, some lenders may even still allow 10 percent to be gift funds, so check with a qualified mortgage professional.

2. Prepaid Private Mortgage Insurance: Alternatively, rather than electing for the monthly payment option, a buyer with as little as 5 percent down can chose to prepay the mortgage insurance upfront in a one-time premium called single-pay mortgage insurance. Not all lenders offer it, so buyers should shop around. The program works by simply pre-paying a chunk of the future PMI payments upfront as a fee at the closing table. This can be anywhere from 1.75 percent to 3 percent of the loan amount.

Like the 80/10/10 program, a 700 credit score would be required and the single pay mortgage insurance amount can be gifted.

3. Gift of Equity: Do you live in a family-owned property? Or do you have the ability to purchase the property you rent from your landlord? In either instance, the owner of the property — whether a family member or a landlord — can provide a gift of equity for at least 5 percent of the purchase price, as well as for closing costs and single-pay mortgage insurance. A gift of equity is simply the seller of the property providing funds for the benefit of the buyer and accepting less net proceeds at closing.

The lender will require a letter of motivation on why the family member or the landlord is selling their property to a buyer with whom they have a personal relationship. There could be a variety of reasons, so it’s crucial to make sure the deal is properly reviewed by a qualified mortgage professional. This letter of motivation will address what’s called a non-arm’s length transaction, when there is a relationship between the buyer and seller. In these situations, the lender places more scrutiny on the transaction due to the potential for fraud.

4. Military Veteran Perks: Do you have previous military experience with a general or honorable discharge? The Department of Veterans Affairs allows eligible veterans with a certificate of eligibility from the VA (which shows their loan eligibility) to purchase a home with no money down as well as no monthly PMI, with loan sizes even as high as $1,050,000 in some high-cost areas.

Eligible veterans will typically pay a 2.15 percent guarantee fee of the loan amount to the Department of Veterans Affairs, which is added to the loan amount and then re-amortized over the term of the loan. For example, on a loan of $500,000, that’s $10,750 added to the loan amount, making the financed loan amount $510,750. That’s still the most attractive option, compared to a PMI premium on another program.

If you plan to buy a house in the near future, these possibilities represent a tangible alternative to simply putting down funds and taking PMI on a monthly basis. While you might elect to do that anyway, PMI — depending on the loan program — may be removed in the future. Check with your lender on PMI removal, and how it may apply to your initial down payment and mortgage loan program.

Finally, because credit scores are also an important factor in some of these approaches, it can help to know where you stand and whether you’ll qualify for these programs. Checking your credit in advance of buying a home can help you determine whether you need to take some time to build your credit before applying for a mortgage. You can pull your credit reports for free once a year through AnnualCreditReport.com — and you should check for any errors or problems that are dragging your credit score down. (You can also check your credit scores for free through Credit.com, as well as get an overview of what’s affecting your scores and a plan to improve them.)

 

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Home prices jump nearly 11% in April

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