Mortgage rates fall below 4%

mortgage rate chart 10-14

Source: ~

There’s a silver lining for home buyers in the clouds hanging over the stock market.

Interest rates on a 30-year, fixed-rate mortgage fell to 3.97% this week, according to Freddie Mac. That’s down from 4.12% last week and the lowest level since June 20, 2013.

The drop in mortgage rates comes as investors have flocked to the safety of U.S. Treasury bonds. The yield on the benchmark 10-year Treasury note has tumbled as low as 1.86% this week.

Mortgage rates usually move lock step with the yield on the 10-year note.

Investors have rushed to bonds because they have been spooked by a combination of economic weakness in Europe, concerns about Ebola and geopolitical turmoil around the world.

“Rates are at their lowest levels since June 2013 amidst continued investor skepticism regarding the precarious economic situation in Europe,” said Frank Nothaft, chief economist at Freddie Mac.

Mortgage rates have gone lower despite expectations that they would start rising as the Federal Reserve starts pulling back its economic stimulus.

The Fed has cut back its program of buying bonds and mortgage-backed securities, which everyone expected would put upward pressure on interest rates.

The latest international turmoil and the stock market rout has instead pushed rates the other way.

If you are in the market to buy (or sell) a home in  Northern California, Realtors associated with Century 21 M&M look forward to walking you through the process. Rest assured that Century 21 M&M Realtors will do their best to make sure that both Buyers and Sellers are protected during the transaction.


Homeownership Expenses You Might Not Anticipate


Source: ~ Author: Tali Wee

Purchasing a home is an exciting time, especially for first-time buyers. However, the financial commitment is sometimes overwhelming.

Beyond the standard mortgage, taxes and insurance calculations, homeowners inevitably face unexpected fees, repairs and lifestyle adjustments when settling into their new homes. We asked a few financial bloggers to share their experiences and advice on the expenses of buying and owning homes.

What was the most unanticipated expense of buying your home?

Two years ago, we purchased our home in New York after owning homes in Georgia and Florida, and we were surprised at how much higher our closing costs were in New York versus the other states. The biggest surprise was the lawyer fee we were required to pay. When we purchased homes in the past, everything was handled through the escrow agent, and additional legal fees were not required. — Shannon McLay of Financially Blonde

What are the most surprising expenses you encounter as a homeowner?

The surprising expenses are seasonal: decorating the house for the holidays, planting flowers in the spring, home projects in the summer. While it’s easy to think about the weekly and monthly routine expenses, those are more difficult to plan around. — Joe Saul-Sehy of Stacking Benjamins

Which bills increased when you became a homeowner?

Condo fees and heat! When we were renting, our landlord paid for heat and hot water. Let’s just say, now that we’re homeowners we’re taking shorter showers and wearing more sweaters in the winter. — Student Debt Survivor

What is the most expensive cost of owning a home vs. renting?

The answer has got to be maintenance. We would never have had to buy a new roof as renters, but we had to pay approximately $15,000 for the entire roof to be reshingled. The others would to have new landscaping put in ($7,000), and all windows, which were installed in 1961, were replaced with double-pane windows ($15,000). Ongoing expenses, like utilities (natural gas, electricity, water, trash), gardeners, property tax, and insurance are not all that costly, but they add up over the course of a year to just under $10,000. — Save and Conquer

How did your budget change after buying a home?

We were very aggressive with saving our money prior to buying our house. We were saving over 50 percent of our income. We didn’t go out very often, and we tried to eat at home. We bought a fixer-upper because it was in a better location and the price was more affordable than new builds. DIY Network and Pinterest make DIY updates seem so easy and affordable. Prior to homeownership, we never had to worry about paying for repairs or really about updating our apartment. We were renters. Now, I have to make sure any purchase fits in our budget. I’m also saving for bigger improvements like the patio. Instead of going shopping for clothes and shoes, I’m allocating that money to Lowe’s or Home Depot! So far, we have had to call a plumber to fix a leak, the exterminator to exterminate, and now, our garbage disposal is broken. $100 here and there adds up. — Savvy Financial Latina

What advice can you offer prospective home buyers beginning their shopping experiences?

Transitioning from a renter to a homeowner can be an expensive endeavor. You need to have much more money in your emergency fund to cover various things that can go wrong. Don’t forget to budget for property taxes, home insurance, repairs, HOA fees, utilities, furnishing and landscaping. There are many more expenses when you’re a homeowner. — Retire By 40

What saving strategies did you use to prepare for the expenses of homeownership?

I’m not sure if it’s a savings strategy, but whenever my wife or I wanted to spend on certain things, we’d say to ourselves, “We’re saving for a house.” That helped us focus on our priorities and goals, and not spend on things that we might have otherwise. I think it is also important to try living on your future budget as a homeowner to ensure that you can afford to buy a house. — Living Rich Cheaply

What financial concerns do you have about purchasing a home now?

My main reservation is that I don’t know how long I plan on staying in one area. I still want to travel the world before I buy. When I’m ready, I’ll create a realistic budget for a home and stick to it. Too many people create a budget and go over, and then fail to realize that they still have to pay property taxes, property, insurance and more. — Alexis Schroeder of FITnancials

How can first-time buyers financially plan for the total costs of homeownership?

Save as much money as you can. If you’re able to save for a 20 percent down payment, that’s even better. Once you move in you’ll be amazed at how often something will need your attention. That will generally take money. Go in with having money set aside to cover things that might pop up. You should also put money aside each month to cover those things. You might feel it, but the last thing you want is to be surprised by an expense and not be financially prepared for it. — John Schmoll of WiseDollar

If you are in the market to buy (or sell) a home in  Northern California, Realtors associated with Century 21 M&M look forward to walking you through the process. Rest assured that Century 21 M&M Realtors will do their best to make sure that both Buyers and Sellers are protected during the transaction.

Breaking Down Debt: How 4 Different Loans Affect Your Mortgage-Worthiness


Source: ~ Contributor:

Want to get a new mortgage? Then, your credit score is a really big deal — it can make or break your mortgage payments, and ultimately determine whether or not you get the house you want.

But before we talk about credit scores, let’s talk about the debt that affects them. There are two types of debt: secured and unsecured. When you borrow money to buy a house, the bank can take back the house to recoup their money if you don’t pay the debt. That means the debt is secured — it’s being balanced against something that you want to keep, and gives the bank some measure of security that they’re going to be able to recover the money they’ve loaned you.

Unsecured debt, on the other hand, means the bank can’t reclaim the thing you’re buying with the borrowed money. (Credit card debt is unsecured, and so are student loans.)

Let’s look at the impact of four key consumer loans, a mix of secure and unsecured debt, on your credit score—and ultimately your mortgage worthiness:

1. Student loans

Student loans are unsecured debt, but they’re not necessarily bad for your credit score — if you pay your bills on time. Because they often take decades to pay off, student loans can actually help your score. Loans held (and paid consistently) over a long period of time raise your score. Student loans will figure into your overall debt-to-income ratio, though, so they might affect your ability to afford a mortgage.

2. Auto loans

Auto loans are secured debt, because the lender can repossess the car if you don’t pay up. In some cases, auto loans raise your credit score by diversifying the types of debt you carry. And because auto loans are harder to get than credit cards, some mortgage lenders may look favorably on you because you’ve already been approved for a loan that wasn’t a slam dunk.

Payday loans don’t usually show up on your credit report. But if you default on the loan, it might ding your credit. Payday loans are unsecured — the lender doesn’t have any collateral — and the interest rates are often exorbitant, costing way more than people expect.

4. Existing mortgage loans

Mortgages are the classic example of a secured debt because the bank has the ultimate collateral — a piece of property. Mortgages, when paid on time, are great for your credit score. Missed payments on previous mortgages will make your new lender very nervous, however. If you already have a mortgage and are applying for another one, the new lender will want to know that you can afford to pay both bills every month, so they’ll be looking closely at your debt-to-income ratio.

If your second mortgage is for a rental property, you may be expecting the rental income to count towards the income side of the equation. But most lenders won’t count rental income until you’ve been a landlord for two years. Until that time, you have to qualify for any mortgages using documented income from other sources.

In general, having different types of debt can boost your credit score. So it’s not necessarily a bad thing to have a student loan and an auto loan when you’re applying for a mortgage. But be careful — over-borrowing can hurt you. Most mortgage companies, in addition to looking at your overall credit score, will look for a debt-to-income ratio below 43 percent. They’ll look at all the money you owe, and the monthly payments on all of that debt. They want to see that your income is enough to cover all your debts, including the mortgage you’re applying for.

If you are in the market to buy (or sell) a home in  Northern California, Realtors associated with Century 21 M&M look forward to walking you through the process. Rest assured that Century 21 M&M Realtors will do their best to make sure that both Buyers and Sellers are protected during the transaction.

Can Paying Off Your Mortgage Early Damage Your Net Worth?

Source: ~ Author: JT Ripton

savings-and-mortgage-flickr-zillowJust about every homeowner has experienced the same sensation at one time or another: The excitement of a home purchase is deflated at the closing table when the closing agent slides over the Truth in Lending Statement that shows just how much money the loan will cost over the term of the loan.

It is a sinking feeling to see that a $250,000 loan will likely cost in excess of $500,000. To avoid this, many people strive to pay off their loans early. Indeed, one extra mortgage payment a year can make a huge dent in reducing the length and total cost of your loan. Assuming you can, the question still remains: Should you? Saving money seems like a no-brainer, but the answer that is right for you may be more complex.

Don’t throw away money on prepayment penalties

Before you can even crunch the numbers to decide if it is right for you, make sure you know what — if any — prepayment penalty you will be accountable for. Depending on the area of the country and the lending institution, you may or may not be liable for paying a penalty on an early payoff. Penalties are wasted money. They are funds that could be doing more productive work. At least if you are making mortgage payments, you get the benefit of tax deductions. You might be able to find a better use of your funds.

Have savings for retirement or cash cushion

Are you maxing out your retirement investing? If not, it is likely your financial planner will tell you to do this first. Besides the numerous benefits of maxing out retirement account payments, your money may be better suited toward alternative endeavors rather than reducing your mortgage debt payments. By continuing to carry your mortgage debt, you will be able to devote more of your funds to the here and now. You can increase your present-day savings by squirreling away for a cash cushion so that in the case of an unfortunate event in the future (such as illness or job loss), you will not feel the hit as much. If you spent all your extra money reducing your mortgage principal, you may be forced into a situation where you have to refinance to get that money back.

Consider your other debt payments and prioritize

If you carry consumer debt from month to month, especially credit card debt, you should first consider using all extra money to reduce those debt payments that have interest rates higher than your mortgage rate. If you start paying back low interest rate loans (mortgages) before high interest rate loans (credit cards), you are leaving money on the table each month. Until your high-rate loans are paid off, it does not even make sense for you to think about an early payoff. Why pay off a principal of a 4.5 percent loan and continue paying interest on a 14.5 percent loan?

Using your mortgage to outlast inflation

Your monthly payment may seem high to you today, but it is likely that in 30 years the same amount will seem like a joke. As inflation rises, keeping your mortgage may actually be a hedge against inflation if you have a fixed-rate loan. Your payments will never increase and over time will actually become “cheaper” comparatively.

Gaining emotional freedom

Perhaps the best argument for paying down your mortgage debt is the psychological release you will get in owning your home debt-free. There is a liberating sense of freedom in paying off a loan, especially when that means you now own a piece of property outright. It gives you flexibility, confidence and a method to avoid risk of loss since your dollars have been spent on achieving equity. But this may not be the fastest way at growing your net worth because those dollars are no longer working for you. The funds are tied up in your property and not out there in the world gaining interest.

Just like most decisions in life, there are positives and negatives when deciding whether to pay down your mortgage early. On the one hand, you may have a debt-free asset. On the other, it may not make financial sense. The best advice is to first seek guidance from a financial planner. And then be honest with yourself about your goals. Only you can make the best decision for you.

If you are in the market to buy (or sell) a vacation home in  Northern California, Realtors associated with Century 21 M&M look forward to walking you through the process. Rest assured that Century 21 M&M Realtors will do their best to make sure that both Buyers and Sellers are protected during the transaction.

Home Buying – Step 5. Loan approval or commitment

loan approval
Step 5 in the home buying process is maybe the most important step in the whole process – loan approval and commitment. But first, the mortgage lender will want to fully approve your credit, debt and income history.

Whether you are buying a home or refinancing an existing home loan, you will find out that lenders today can be pretty demanding during the process of a loan approval. Even well-qualified borrowers have to jump through hoops to qualify for loan financing.

The following conditions are what the mortgage lender will be looking at:

  • Your ability to pay the interest and principal due on the loan along with the expenses of home owners insurance and property taxes.
  • Your track record of paying debts, which includes your credit score and credit history.
  • Your down payment and what percentage that is of your current home’s value.
  • And, the appraised value -vs- the agreed upon purchase price, along with the safety and soundness of the home as determined by a pest inspection and/or a home inspection.

What mortgage lenders like to see is strength and stability in all four of the above mentioned conditions. Of course providing the supporting documents for these condition means a pile of paperwork that support the borrower’s financial position which may include (but not limited to):

  • One month of paycheck stubs
  • 2 years of w-2 forms
  • 3 months of  bank statements
  • 2 years of income tax returns
  • If you filed for bankruptcy within the last 7 years, you will need your bankruptcy papers
  • If you have deferred repayment of student loans, you should bring your deferral agreement as well.

In addition to your credit approval, the bank will want to make certain that the property appraises at no less than the contract price,  and approve the property’s preliminary title report to make sure there are no liens recorded against the property that might affect its value.

Mortgage lenders may take up to 30 days to complete this review, but the review has been completed to the bank’s satisfaction, you are guaranteed a loan and you are one step closing to home ownership.

If you are in the market to buy (or sell) a vacation home in  Northern California, Realtors associated with Century 21 M&M look forward to walking you through the process. Rest assured that Century 21 M&M Realtors will do their best to make sure that both Buyers and Sellers are protected during the transaction.


U.S. postpones 2014 hike in mortgage fees

By Les Christie

New housing finance chief Mel Watt says he will postpone fee increases set for April.

New housing finance chief Mel Watt says he will postpone fee increases set for April.

It’s a Christmas miracle! Planned fee increases that would have added to the cost of millions of mortgages will be postponed.

Currently, borrowers seeking loans backed by Fannie Mae and Freddie Mac are set to pay higher upfront fees starting April 1.

The fees, ordered by the Federal Housing Finance Agency earlier this month, are meant to help safeguard banks against risky borrowers who might default.

But housing experts say they will add thousands of dollars to the cost of all mortgages insured by Fannie and Freddie, with the biggest hits taken by borrowers with less than perfect credit histories.

On Friday, the incoming chief of the FHFA, Mel Watt, said he intends to postpone the fees — and perhaps even cancel them — until more analysis is done. The FHFA oversees Fannie Mae and Freddie Mac.

Watt, a former Democratic member of Congress, has been confirmed to his post by the Senate and takes office on January 6.

In a statement, Watt said he intends to “evaluate fully the rationale” for the fees and their impact on Fannie and Freddie and the “availability of credit.”

The mortgage industry has been bracing for substantial increases in the price of loans in 2014.

“If these [policies] had been implemented, it would have increased borrowing costs dramatically,” said David Stevens, CEO of the Mortgage Bankers Association.

The hit for individual borrowers would depend on the amount of the home purchase being financed, according to Brian Koss, executive vice president at Massachusetts-based lender Mortgage Network.

Borrowers would have paid a fee when they took out the loan, or they could have effectively rolled the higher fees into their interest rate, raising monthly mortgage payments by as much as a quarter percentage point.

Even with the reversal, however, mortgages will probably get more expensive over the next few months anyway as the Federal Reserve cuts back on its purchases of mortgage backed securities, a program designed to keep interest rates low.

Stevens, the mortgage industry representative, said the proposed increases made little sense. Defaults on mortgages made in recent years have been much lower than on those made before the housing crash.

As a result, Fannie and Freddie are flush with profits, so much so that they have already returned almost all of their $187 billion taxpayer-funded bailout.

“The GSEs are making a lot of money,” said Stevens. “There’s no rationale for the increases.”

Understanding the New Ability to Repay Rule

By , Courtesy of

Understanding the New Ability to Repay RuleThe next time you go back to the bank for a new mortgage loan, your lender may be asking you a few more personal questions. It’s part of the newAbility to Repay rule that lenders are subject to as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).

Rule changes

Lenders have always been concerned with a borrower’s ability to repay a loan, but in the late 1990s, lenders began selling off more of the loans they originated, making repayment less of their problem and more of a problem for the buyer. This led to some behavior that didn’t benefit consumers, and many point to the subprime mortgage crisis as the result.

Lenders are now held accountable for the loans they make and must prove that borrowers who get home financing can actually repay it. Lenders can be asked to buy a loan back from the quasi-government investors, Fannie Mae and Freddie Mac (now in conservatorship by the government), if they make a mistake. In fact, the only way to protect themselves from these buybacks is to follow a strict set of rules that result in a “qualified mortgage.”

Regulators have built the Ability to Repay rule into the qualified mortgage rules by capping the debt-to-income ratio at 43 percent. It also limits the fee that can be charged by the lender to 3 percent of the total amount of the loan. Interest-only and negative-amortization loans do not meet the guidelines of the qualified mortgage.

Consumer impact

What does this mean for consumers? According to the Mortgage Bankers Association, the Consumer Financial Protection Bureau’s definition of a qualified mortgage should not change the capacity for most borrowers to obtain mortgage loans, but others aren’t so sure.

Borrowers who need larger mortgages, or jumbo loans, might find getting a loan more difficult, for instance. Of course, new lenders could move into the gap to provide these loans, even though they aren’t qualified mortgages under the rules.

And there are likely to be some exceptions to the final rule when it goes into effect next year. With concerns high regarding struggling borrowers, regulators may find ways for certain borrowers to bypass the rules with certain products. Exceptions in this case might include allowing lenders to refinance risky mortgages such as interest-only and adjustable-rate loans without having to meet the Ability to Repay requirements.

The Ability to Repay rule will go into full effect in January, with many lenders already adapting to the new requirements. Courtesy of

If you are considering either buying or selling a home in the coming months, feel free to contact a Northern California Century 21 M&M Realtor with regard to this Understanding the New Ability to Repay Rule. Our real estate experts will be sure to answer your questions and help you with all of your real estate needs.