Interest Rates

Mortgage rates lowest since 1971

Mortgage rates set new record lows this week, per a report by mortgage giant Freddie Mac (the Primary Mortgage Market Survey), hitting rates not seen since 1971.

Rates on 30-year fixed-rate mortgages averaged 4.12 percent with an average 0.7 point for the week ending September 8th, 2011.

Despite the fact that it’s been 40 years since we saw mortgage interest rates this low, the Mortgage Bankers Association simultaneously reports that buyer demand for mortgages remains at record lows, close to the low demand levels last seen in 1996.

(some content above based on original reporting published on Inman.com; chart below originally published by the New York Fed)

30yr mortgage rates from 1970 to 2010

Metro Phoenix: cheaper to buy than rent

[caption id="" align="alignright" width="242" caption="Image credit Shuttermon via StockExchange"]Image ID 1020195 by user Shuttermon[/caption]

Trulia regularly tracks the buy vs. rent equation and reports again that it’s cheaper to buy a home than to rent in metro Phoenix. See full story here: http://explore.trulia.com/datavis/rentvsbuy/Q2-2011/


Meanwhile, mortgage rates are in free-fall, according to an Inman.com interpretation of Freddie Mac’s rate survey…




Rates on fixed-rate mortgages declined for a seventh week in a row to new lows for the year ... Freddie Mac said in releasing the results of its weekly Primary Mortgage Market Survey.



It’s not the ideal time for everybody to buy a home, and mortgages are still a bit difficult to obtain. But it could be a great time for you to buy:




  1. Home prices just double-dipped according to Case-Shiller numbers (they're down over 50% from their Summer 2006 peak)

  2. Sellers are frequently willing to pay the buyer's closing costs,

  3. There's talk in Washington about increasing the minimum cash down payment of the FHA mortgage program from 3.5% to 5% sometime soon, so buying now could save you a couple thousand dollars over waiting


A few questions can help you decide if you should consider buying a home now, or not...

  • Are you emotionally & financially ready to be a homeowner?

  • Do you have stable employment?

  • Do you plan to stay put in your home for 5 to 10 years into the future?

  • Do you have a couple months’ worth of salary in savings?

  • Have you planned your future budget to account for costs of home ownership like maintenance & property taxes?

  • Do you consistently pay your bills on time or even early?

  • Do you know what your credit score is? (studies show that people who know their score tend to have better credit ratings than people who don’t know their score)

  • Have you talked with a lender to find out how much home you’ll qualify for? (In Arizona, buyers *must* submit a loan approval with a purchase offer)


If you answered yes to all or most of these questions, you’re probably a great candidate to buy a home. Contact your Realtor. Don’t have a Realtor yet? You’re in luck, we’re Realtors. Winking smile Read what our clients say about us behind our backs, and then give us a shout by email, phone or even text or Facebook.

Ready to start browsing listings online? We provide you a direct link to the private, Realtors-and-appraisers-only Multiple Listing Service. That's the most up to the second, accurate information consumers can get their hands on. Use our map based home search, or use our Detailed home search to really dial in on your housing wants and needs.

Mortgage Rates Headed Toward 6%

Mortgage rates ended 2010 with a steep ascent but we have to keep the figures in perspective. Rates were higher then the year started versus when it ended. And, historically, we remain well below the average.

That's why mortgage rates should rise in 2011. Momentum is drawing rates up, and the market is moving towards its mean. The Refi Boom is over and higher costs are coming.

Above quote originally published by, and copyright reserved by Dan Green of TheMortgageReports.com, an Ohio-based mortgage lender with an excellent blog.

Here’s a chart showing mortgage rates over the past 40 years.




Historically speaking, rates really have very, very little “down” left in them. It’s almost inevitable that mortgage interest rates will go up. How soon? Hard to say, but if you’re like the average home buyer, Murphy’s Law says rates will go up before you’re ready for them to do so.

Chart showing 30-year fixed rate mortgage rates over past 40 years was originally published by, and copyright of The St. Louis Federal Reserve, which has a website chock-full of useful and fun economic data, charts, graphs and statistics.

Jumbo mortgages

A jumbo mortgage is a home loan that’s too big (in dollars) to be sold to government backed agencies (Fannie Mae, Freddie Mac). The upper dollar limit for jumbos varies geographically but the general rule of thumb is a loan larger than $417,000 is a jumbo.

It seems to me that people who have money continue unaffected when there’s a deep recession in the American economy. I always joke: people with money are always economically safe, the truly poor can rely on welfare and charity, and the working & middle classes buckle down during recessions because they know they’re the ones who are really going to take a beating.

Be that as it may (or not)…   In an odd twist on normal, jumbo mortgages have suffered during the Great Recession. Usually they account for 18% of the real estate market, but according to a new Wall Street Journal (WSJ) report, jumbo mortgages were only 5% of the real estate mortgage market in 2009 and 2010.

Interest rates for jumbo mortgages have been high too, but are now back down to earth. The WSJ reports the average jumbo rate through the week ended Oct. 29 was 5.11%, down from about 6.14% on Jan. 1, 2010

It’s my experience that people who can afford to take out a jumbo mortgage expect to get a mortgage easily, with little trouble and few questions about their financial life. Beware, the New Normal is different, even if you’re wealthy. My favorite brokers and the WSJ story report that mortgage underwriting continues to be strict: Borrowers still need excellent credit profiles and must provide complete documentation and verification of income, unlike several years ago. Down payments of 20% to 40% typically are required.

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hat tip Relator John Wake for the inspiration and source article for this post

Mortgage rates hit the mid-4’s!

A snippet of an article from CNN’s Money section:




NEW YORK (CNNMoney.com) -- Mortgage rates continued to decline this week, plunging to the lowest level in decades, according to surveys from Freddie Mac and Bankrate.


Freddie Mac's weekly report said the 30-year fixed rate slipped to 4.44% for the week ended Thursday, the lowest since the government-backed lender began tracking the rate in 1971. Last week's rates stood at 4.49%, and a year ago it was at 5.29%.



Wow!  Some of our readers are doubtless old enough (like us) to remember the early 1980s rates of 14%, 16% and higher.


Here’s a nifty chart from The New York Times that gives a great visual of the history of home mortgage interest rates going all the way back to 1900!



historic mortgage rates 1900 to 2009

What’s it mean to you, the home buyer?


If you’re buying, a 1-point drop in interest rates means you can buy more house. A lot more. Call or email us to help you figure out the numbers for your own situation. But here’s an example.

Let’s say you’re financing $150,000. . .














Amount Financed = $150,0004.5%
Mortg Rate
5.5%
Mortg Rate
6.5%
Mortg Rate
Monthly Payment
(principal & interest only)
$760$852$948

Let’s work it the other way.

Let’s say you’re trying to keep your payment at about $950 per month, for principal and interest (not including property taxes, HOA fees, etc).














Desired Payment = $950/monthInterest Rates are 4.50%Interest Rates are 5.50%Interest Rates are 6.50%
How much home can you buy for desired payment?$187,000$167,000$150,000

Holy cow! If rates drop from 6.50% to 4.50%, the homebuyer who’s aiming for a monthly mortgage payment of $950 can suddenly buy $37,000 more house for the same monthly payment.


Given that mortgage rates change almost daily, but home prices change much more slowly, home buyers do themselves a favor if they watch long-term mortgage trends instead of focusing only on home prices.



What does this mean for home sellers?


If you’ve been considering a price drop lately, you might be able to put it off for a few more weeks. The rate drop means potential buyers’ money goes further. Of course whether you need  a price drop or not depends on your situation. Check with your Realtor. And ask yourself why you didn’t hire Chris & Heather, The Phoenix Agents at Thompson’s Realty in the first place. We’re awesome and here’s some of our clients who say so.

FHA.com is not the FHA

File this in the category of Stuff You Should Know.


The website at FHA.com is not run by the FHA (Federal Housing Administration) or by HUD (Housing and Urban Development) or by any other governmental agency.


It’s run by a (presumably for-profit) group that collects information from users including their social security number, credit information, income & debt information, employment, etc. FHA.com then “shares” that information with “third party affiliates”.


In other words, they’re not going to give you a loan and they’re not the FHA. It’s likely they’re going to sell your information to a loan originator, who will then pester you about mortgages.


FHA.com does disclose this information.. . . .



We are not the FHA. They insure the FHA loans that our lenders assist people in getting. If you need to contact the FHA directly, you can do so at:

US Department of Housing and Urban Development
451 7th Street, S.W.
Washington, DC 20410

. . . ..but this disclosure is buried pretty far down in their page structure. Nice how they don’t list a phone number or website link. I will. You can reach the FHA by telephone at (800) CALL-FHA or (800) 225-5342, or online at fha.GOV



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The 40 Year Mortgage. Why Not?

I don't understand why lenders don't offer 40 year mortgages more often. Anyone?


I also don't understand why lenders won’t talk about extending homeowners’ 30-year mortgages for 40-year mortgages, when the homeowners get behind and face foreclosure.


So many metro Phoenix-area homeowners are underwater but aren't eligible for federal Making Home Affordable money because those refi limits cut off at 105% of current market value.  Home values in the metro Phoenix region are down way more than 5%. More like 30% to 60%.


Let's do the math. All calculations below were obtained using Mortgage-Info.com’s amortization wizard. You can click over to BankRate.com to get today’s Prime Rate.


Example -- $250,000 borrowed, 30-Year Mortgage













































AmountTermRatePymtLifetime Interest Earned by LenderHomeowner Savings per Month
$250,00030-yr6.50%$1,580$318,861-
$250,00040-yr6.50%$1,464$452,548$116
$250,00040-yr5.125%$1,226$338,606$354
$250,00040-yr4.25%$1,084$270,344$496


Where’d the Numbers Come From?


If the lender in this example would do nothing but extend the term of the mortgage from 30 years to 40, the homeowner’s payment drops by $116 each month.


If the lender would drop the interest rate and extend the term, bingo, homeowner savings of $354 per month. All of a sudden, we’re talking about real numbers here. Probably enough to keep most folks in their home, happily & safely making their payment on time, every month (at least as long as those folks haven't already joined the lines at the unemployment office).


Not only is this a win for the homeowner, the lender wins too, by collecting a lot more interest over the life of the modified loan. The only way the lenders lose is if they drop the interest rate below current market rates and extend the term (see the last line of the chart above, 4.25% at 40 years).


Win-win. Sounds like a no-brainer to me. Lenders?