Mt. Horeb Area Real Estate Blog

Have I mentioned low interest rates?

I'm not sure if y'all have caught it...but interest rates are low and getting lower.  I saw one of the lenders I work with this AM at 5.25%.  If you were above 6% when you financed your home, this is about $100 savings/month (on a $200,000 home).  That's good deal.

I know some of my clients are waiting to see if rates go lower--say into the 4s.  One lender in town thought that they might for new purchases but not for refinances.  The goal of lowering these rates is to stimulate the buyers.  A homeowner refinancing doesn't really help stimulate the housing market.  Therefore, if they do drop, that rate may not be available to everyone.

5.5%!!!!

Interest rates DROPPED!! I saw 5.5% today on 30 yr fixed!  Awesome news!

Have Great Credit but No Down Payment?

There are programs still out there!  Check out the following community bank programs offering 100% financing to folks with GREAT credit (680+).

Wisconsin Community Bank

Sun Prairie Bank

Hang on and enjoy your ride

Lots of people want to talk mortgage interest rates these days.  You'd likely have to ask me every 20 minutes sometimes to get an accurate response and different lenders are likely to quote different rates.  It's a rollercoaster ride for all of us.

Here's what I know for sure about interest rates (thanks to Wisconsin Community Bank):

 It all depends....on your credit score, on your debt to income ratio, on the down payment, on the type of property, on the amount of your cash reserves, on whether you are escrowing taxes or not, on your type of employment and the length of your rate lock.

If you want the "GOLD" standard interest rates that banks put on websites, you need to have a credit score of 720-740.  The rate increases as your credit score decreases usually anywhere from 1/8 to 1/2 of a percent.

The most important thing I learned from talking to the folks at Wisconsin Community Bank today is that with the recent scoring tightening, your credit score may have drastically changed if you were preapproved more than 3 months ago.  The lesson:  develop a relationship with a lender and stay in touch! 

Yes, Interest Rates are Up....

     

Interest rates were at 6.875% yesterday...Most are predicting them to get to 7% or slightly above before turning back down...

Read more here.

Interest Rates drop below 6%!!

Just saw 5.875% on 30 year and 5.375% on 15 year mortgages.  Holy cow that's exciting!!!  Tell all your buyer friends!!

Focus on Appraisals

Pricing homes can be a painful experience for both Realtors and Sellers.  Sellers are not seeing the value increases they saw their neighbors or friends get a few years ago, and in some cases, they may actually be asking for less than they paid for the home.  Realtors are faced with being brutally honest with sellers and losing the listing or going with the sellers and overpricing the listing.

While there are many problems with overpricing, one of the things I always need to tell sellers is that even if they would get their dream price, it may not appraise out.  Sellers tend to roll their eyes and tell me "oh they will make it work out".   Not anymore.

More and more, Realtors, sellers and buyers are in situations where homes are not appraising out---or being deemed "worth" what the seller is asking for.  In those cases, the buyer can either walk, the seller can reduce the price accordingly or the buyer can come with cash to the closing table to make up the difference.

The Wisconsin State Journal just ran an a good series on appraisals.  They have many different articles and takes on it, but my favorite is the one that focuses on Wisconsin.  I feel Wisconsin has been, by all reports, a little quicker to "make things right" in the appraisal/lender situation.  Like I said earlier, there is certainly, in this area, no guarantee that the appraiser with just "make it come out" at expected value.

The other article that I like was the Q&A for homeowners.  The one piece of advice I liked was that the buyer should pick the appraiser.  I think buyers assume that the lender HAS to pick the appraiser, but the buyer ultimately pays for it, so they have every right to pick it.

The other to articles have a national focus:  Bad Appraisals Hurt Homeowners and American Real Estate Appraisal System is Crippled.

 

Interest Rates to Go Higher?

I was checking in on some of my usual blogs and here was a scary one:

Speaking in an interview with Bloomberg on Friday, Minneapolis Federal Reserve President Gary Stern (voter) said that the Federal Reserve can't wait for the end of the crisis to raise rates.

"I worry about the prospects for inflation, the headline inflation rate is clearly too high," said Stern.

Stern noted that the Fed is well positioned for a downside risk to growth. He commented that the current credit crisis was reminiscent of the early 1990s.

By Steve Stecyk and edited by Cristina Markham
©CEP News Ltd. 2008

Rates were at the worst we've seen recently:  7%, but have pulled back slightly to 6.5%.  Buyers are still waiting for the steal as interest rates may rise?  I heard one economist on a morning news show saying he thought that interest rates should go to 9%....Yikes...

No Closing Costs, No Points, No Credit or Processing Fees?

by Kevin Schram of Asap Mortgage

How many times have you been relaxing, watching your favorite shows when you see the greatest mortgage deals of your life time flash across the screen?  Maybe you’ve heard, “No Closing Cost Refi, No Points, No Credit Report or Processing Fee” or perhaps it was, “No Teaser Rates, No Hidden Fees, No Pre Payment Penalty?”  My personal favorite is, “You can get a $400,000 loan for only $1065/month!!!!”  WOW, I’ll take two!!!!!

Now, there are certain facts in life, such as:  the sun sets in the west, the Bears and the Packers will play at least twice a year and when the cows out in the pasture are lying down, it is going to rain.  Well, perhaps the last one isn’t necessarily a fact of life but I’d think twice about heading to lake when you see the cows lying down.  Another fact is there isn’t a lender in business that is going to give you a free loan.  Shoot, if you find a lender that is doing this, let me know.  They apparently have more business then they can handle and I’d love to work for them.  The fact is every loan has costs associated with it.  The lender has fees, the title company has fees, there will be broker fees if you utilize their wonderful services, there are fees you can’t get around such as pre paid interest and setting up escrow accounts for taxes and insurance.

So here are some facts behind these advertised loans.  They are all assuming an 80% loan to value ratio, you will need to put down $40,000 on a $200,000 loan to achieve this.  You will also need excellent credit, typically 720 plus.  A “No Closing Cost Loan” means the lender has to come up with this money somewhere and they are not going to pay for it themselves.  This is going to be reflected in your rate.  The ad I saw suggested closing costs of $3,300 so as of today’s rates that would put a buyer at a rate of 6.25% to almost cover those costs.  Not bad but wait!  The lender isn’t going to make any money at that rate.  A fair profit for a lender on a loan of this caliber is 1% of the loan amount.  That pushes the rate up to 6.625%.  Ok, not terrible but wait!  What if you want to escrow for your taxes and insurance?  You will have to set up those accounts by pre paying for the months that have gone by plus a 3 month cushion.  For example, say taxes are $300/month and insurance is $40/month.  That would be $340 x 7 months, assuming an April closing, which is $2,380.  To cover the $7,680 in total fees your rate would be at or above 7.25% and even at that rate it isn’t enough.  So, at the end of the day you could end up with a rate of 6.125%, pay your closing costs yourself and save almost $150/month and in a little over 4 years recoup your costs or you could get that “no closing cost loan” and pay over $50,000 more over the 30 year life of the loan to keep a little extra in your pocket now.

$200,000 @ 7.25% = $1,364.35/month P&I

$200,000 @ 6.125% =  $1,215.22,/month P&I

Advertising these loans are a great way to get the phones to ring but it isn’t the best way to choose a loan.  Perhaps the best way to find the right loan and the right loan officer is by asking your Realtor.  They work with lenders almost daily and will be able to recommend some professionals that are trustworthy.  And when it comes to any advertising, always read the fine print!