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The interest rate you pay on your home mortgage has a direct impact on your monthly payment. The higher the rate the greater the payment will be. That is why it is important to look at where rates are headed when deciding to buy now or wait until next year.

Below is a chart created using Freddie Mac’s July 2015 U.S. Economic & Housing Marketing Outlook. As you can see interest rates are projected to increase steadily over the course of the next 12 months.

30 Year Fixed Rate Prediction | Keeping Current Matters

How Will This Impact Your Mortgage Payment?

Depending on the amount of the loan that you secure, a half of a percent (.5%) increase in interest rate can increase your monthly mortgage payment significantly.

Dr. Frank Nothaft, the SVP & Chief Economist for CoreLogic, had this to say in their latest MarketPulse:

“If you are thinking of buying a home and have the financial means to do so, this could be a good time to take a look at the neighborhoods you are interested in. We expect home prices in our national index to be up about 4.3% in the next 12 months, and mortgage rates are also likely to increase over the next year.”

If both the predictions of home price and interest rate increases become reality, families would wind up paying considerably more for their next home.

Bottom Line

Even a small increase in interest rate can impact your family’s wealth. Meet with a local real estate professional to evaluate your ability to purchase your dream home.


Don’t Believe the Housing Bubble Rumors — Unless You’re in These 7 Markets — The Motley Fool

The term “housing bubble” is thrown around right and left lately, but are we really at risk? Not unless you’re in these seven markets, says a new study.

Housing Bubble Rumors

Across the nation, rising home prices suggest a definite recovery from the 2008 recession — and there’s no doubt you’ve come across more than a few articles speculating on an impending real estate bubble.

But are we really in store for a collapse of the housing market? Only in certain parts of the country, says a new study conducted by real estate experts Norm Miller, Hahn Chair of Real Estate Finance in the School of Business Administration’s Burnham-Moores Center for Real Estate at the University of San Diego (USD), Michael Sklarz, president of Collateral Analytics and Jim Follain, senior vice president for research and development at Collateral Analytics.

Pooling new research from almost 400,000 neighborhoods and 20,000 surrounding zip codes across the country, Miller and his co-authors detail their findings in a white paper called, “Is a New Home Price Bubble Forming?” In the study, they focus on defining the characteristics of a “bubble” and finding economically sound ways of evaluating the intrinsic value of homes so as to take a more accurate look at where we are in terms of market sustainability.

Their findings uncover strong correlations between an area’s industry and its real estate market’s volatility. “In markets where wealth is volatile, say for markets with a heavy concentration of recently successful tech start-ups, changes in the value of these companies could also be considered a volatile factor driving prices,” states the research paper. “Changes in incomes, on the other hand, rarely change rapidly and are less likely to trigger rapid price declines except in markets with little industrial diversification.”

What does this mean for specific markets?
Miller cautions against the abounding use of “bubble” when describing the U.S. real estate market as a whole. True real estate bubbles, he adds, are more rare than may be commonly believed:

[A] reason why we do not use the term ‘price bubble’ freely is that real ones are very infrequent. Examples of real bubbles include, stock prices in 1929, 1987, and NASDAQ stocks in 2000, gold and silver in 1980, Japanese land and real estate prices in 1989-90, and, of course, home prices in the U.S. in 2005- 2007. Based on these rare examples, it is reasonable to say that true bubbles only occur on average once in a generation.

Still, several specific markets may have reached levels of unsustainability. Factors that drive this volatility include neighborhoods with low equity and high loan to value ratios, median household income, the value of the U.S. dollar against foreign currency, demand for coastal housing with limited supply and dependence on low interest rates.

The study cites the following areas as at risk for near-bubble levels, in part due to reliance on tech capital and rapidly changing valuations of start-up industry:

  • Miami, FL
  • Denver, CO
  • Portland, OR
  • San Diego, CA
  • Oakland/Berkeley, CA
  • San Francisco, CA
  • San Rafael, CA

U.S. housing as a whole remains sustainable
Miller and his team focused specifically on the neighborhood level, he says, because when markets collapse, they tend not to do so evenly across metro areas. Rather, looking at localized areas is key to getting accurate housing data.

And while some specific areas are inflated (and this could be seen as more of a “tech bubble” than a “real estate” bubble, where declines will likely be driven by falling stock prices), the U.S. as a whole is not on the precipice of a burst real estate bubble, Miller says.

“Our analysis based on a number of approaches we have used over the years to identify home price bubbles is that we are far from bubble territory on a national or metropolitan level and that anyone claiming otherwise is looking to sensationalize an issue which does not exist.”

Rising interest rates might slow the refinance boom, but the trend is far from finished.

  • When interest rates hit record-setting lows in 2012, the mortgage industry experienced the peak of a refinance boom lasting for three years. But with rates on the rise in 2013, has the boom gone bust? Not exactly. Keep reading to find out why the refinance boom isn't over for everyone.

When interest rates hit record-setting lows in 2012, the mortgage industry experienced the peak of a refinance boom lasting for three years. But with rates on the rise in 2013, has the boom gone bust?

Not yet, according to mortgage industry experts.

“It’s been stalled, slowed down,” says Aaron Vantrojen, state president of the Arizona Association of Mortgage Professionals. “With that being said, there are a ton of people who have haven’t refinanced for whatever reason and still can.”

Freddie Mac, the government-backed home loan agency, noted in its “2013 First Quarter Refinance Report” that refinances made up approximately 70 to 75 percent of single-family home loan originations in 2012. By the end of 2014, Freddie Mac projects the percentage of refinances will drop to about 50 percent of all loan originations.

But Frank Percival, board president of the Washington Association of Mortgage Professionals, says lingering effects of the refinance boom are still in play for borrowers looking to take out a new home loan.

“It’s not over yet,” Percival says. “It’s more of a bang than a boom. When there’s an increasing rate market, it causes some folks debating about refinancing to put the brakes on, and others take a wait-and-see approach.”

Are you on the fence about refinancing your home? If so, keep reading to find out why the refinance boom isn’t over for everyone.

Reason #1: Interest Rates Are Still Relatively Low

Sure, there’s been a lot of news about rates sky-rocketing, but guess what? They’re still near historical lows.

In fact, in its “Weekly Primary Mortgage Market Survey,” Freddie Mac says the average rate for a 30-year fixed-rate mortgage (FRM) was 4.4 percent for the week of August 15, 2013. That’s nearly the identical interest rate for the same time in 2011, when the refinance boom was in high gear.

“In the last 30 years, it’s only been in the last four that we have seen rates below 5 percent,” Percival says. “It’s definitely something people should take advantage of again. If trends follow suit, it might not be another 25 or 30 years before we see rates this low.”

Percival suggests that if you are a homeowner with a 30-year fixed-rate mortgage over 5 percent, it might be worth it to investigate whether a refinance in the current market could save you money.

Homeowners may also want to check whether getting an adjustable-rate mortgage (ARM) could save them money, suggests Percival. That’s because initial ARM interest rates are significantly lower than the rates for a FRM. For example, the interest rate for a 5/1-year ARM – according to Freddie Mac’s weekly report – was 3.23 percent for the week of August 15 (more than 1 percent lower than the 30-year FRM rate we mentioned earlier).

A refinance to this type of ARM would mean a borrower would have a 3.23 percent interest rate for five years before it would change, either up or down, depending on the market.

“If you’re not planning on keeping your loan for 30 years, maybe getting a five-year note with an ARM makes sense,” Percival says. “The potential savings or lowering a mortgage payment are huge, tremendous.”

Reason #2: Property Values Are Increasing

Rising property values, according to experts, could have a positive effect on extending the refinance boom.

“More equity means you have better pricing for a refinance,” Percival says.

Equity, as defined by the U.S. Department of Housing and Urban Development’s glossary, is “an owner’s financial interest in a property, calculated by subtracting the amount still owed on the mortgage loan(s) from the fair market value of the property.” And because property values are on the rise, homeowners are starting to find themselves in better positions to refinance.

“A lot depends on the area where you live,” Percival says, “but property values are higher than before the bubble burst.”

How much have home prices improved? Clear Capital, a provider of data solutions for the real estate industry, released results of its “Home Data Index Market Report” on August 6, 2013, and reported that national home prices increased by 9.3 percent over the last year.

“If your home value is improving, it helps create a bidding war,” Percival says. “Your neighbors will get higher-than-asking-price for their homes, and anyone who wants to refinance will go from being below market value to above market value.”

Reason #3: Government Refinance Programs Are Still Available – For Now

President Obama gave a speech on August 6, 2013, in Phoenix, where he proposed for the first time to “wind down” Fannie Mae and Freddie Mac in an effort to overhaul the two mortgage-finance companies.

Does that mean the refinance boom is over for people who might consider using government programs to refinance? The answer, according to Percival, is that Fannie Mae and Freddie Mac are currently viable options for homeowners interested in refinancing. But, their future is uncertain, so homeowners should take advantage of these programs now – when they’re still available.

So, what programs should homeowners look into?

If your home loan is owned or guaranteed through either Fannie Mae or Freddie Mac, you might be eligible for a refinance from the Home Affordable Refinance Program (HARP). According to Freddie Mac’s website, the program is “designed for homeowners who have not been able to refinance due to a decline in the value of their home.”

“These programs are crucial,” Percival says. “They might be the only refinance opportunity for some people in places where the property values have not yet increased enough (to improve their equity).”

In April of 2013, the Federal Housing Finance Agency (FHFA) announced it had directed Fannie Mae and Freddie Mac to extend HARP by two years, to December 31, 2015.

The Bottom Line

Percival suggests homeowners take a proactive approach when they start thinking about refinancing. He says it makes sense to consult with your mortgage professional on regular basis – once every three to six months or so – to see whether refinancing could help save you money.

“I think people are starting to realize the rates are still pretty good, and we’re starting to see clients come back,” Percival says. “It’s not a boom anymore, but a bang – a good bang that could turn back into a boom.”

If you’re looking for a home and need a larger-than-conforming ,ortgage, you’re a jumbo borrower, defined as one needing a loan for more than $417,000 in most places or $625,500 in some high-price markets.

Over the past 5 years, there have been big questions about jumbo loans’ availability and affordability. Now we observe that things are changing.

Rates for Jumbo and Conforming Loans Are Closest in Years

“Our jumbo and conforming rates are neck and neck both on the fixed and the ARM,” said Cyndee Kendall, a Bank of the West senior vice president in the San Francisco Bay area. “There’s next to no difference between the two.”

Here in New Jersey, we’ve seen our clients get relatively easier access to Jumbo loans over the past two years. And while interest rates have indeed increased, it’s nice to see the rate gap between conventional and jumbo loans decrease.

Want to own your home faster? Learn what these homeowners did to pay off their mortgage in just six years.

Yahoo! Homes

Paying off your mortgage in just six years seems impossible, doesn’t it? It’s definitely not easy, but one Texas couple was able to do it.

And the biggest benefit of doing so is perhaps the savings, says Adiany Barboza, a licensed real estate broker with Abbey Road Realty, LLC in Orlando, Florida.

Barboza says that many consumers don’t realize the true cost of a mortgage. Depending on your interest rate and the amount you took a mortgage out for, you could end up paying more than double the amount of your mortgage in just interest over time, she says.

“That alone should be enough motivation to pay the mortgage earlier,” Barboza explains.

And that was enough motivation for Crystal Stemberger and her husband, Len, who paid off their mortgage in only six years.

How did they do it?

Stemberger says finding a low-priced, $114,000 foreclosed home in April 2007 was key to their success. The low initial price of their home, which was a 1,750 square feet, two-story property near Houston, Texas, allowed them to put 20 percent down, and get a 15-year mortgage at 5.375 percent for a $91,200 loan, she explains. That meant their monthly payment was just $740 a month. At that time, Stemberger worked in an office and earned $32,500 a year. Her husband, a public school science teacher, earned a salary of $42,500.

But the couple was driven to pay off their mortgage early, and they took every action necessary to do so.

To start, “We started the process by overpaying from day one,” explains Stemberger. Even though their mortgage payment was $740 per month, they paid $900 total from their very first payment, with the extra $160 going towards the principal.

Another key to the couple’s success was that they weren’t afraid to refinance.

In March 2011, less than four years after getting the original mortgage, Stemberger and her husband refinanced their remaining loan amount of $66,000 to another 15-year mortgage.

“Chase offered us a no-cost refinance to a 4.5 percent interest rate,” she says. This allowed them to save money by getting a lower interest rate, without having to pay closing costs for the new loan. Refinancing also allowed them to lower their monthly mortgage payment to $505.

But because the couple was determined to pay off their mortgage quickly, they decided to continue paying $900 a month, an extra $395 more than necessary. They were able to do this because of her husband’s new job as a school librarian, and the success of an online business that Stemberger launched. In 2012 for example, their gross income totaled $120,000 for the year.

Another thing that helped the couple pay off their mortgage faster was renting out a spare bedroom for $500 a month. They used this strategy on and off for a total of two and half years.

And while this might not be an option for everybody, Stemberger says it “helped us pay off our principal even faster.”

They also made larger payments towards the principal whenever they had enough money saved up.

And it was all worth it when they finally paid off their home just a few months ago in April 2013.

“We ended up paying off our [entire] mortgage in about six years on the dot,” she explains. “That was an amazingly happy day.”

If your mortgage is underwater, find out how to save it from drowning.

Yahoo! Homes

Scuba divers and other submariners might be thrilled by the thought of being underwater. But homeowners? Not really.

Just ask Jim Martin, a senior loan originator with the Metro Advisor Group – a mortgage company based in Pittsburgh, Penn. Martin says homeowners who are “underwater” owe more money on their mortgage than their house is worth. This situation – also known as being “upside down” or having “negative equity” – can cause homeowners to panic about their financial well-being, he says.

But, here’s some good news for those homeowners: The housing market is on the rebound. In fact, rising home prices led to 850,000 residential properties returning to a state of positive equity during the first quarter of 2013, according to a June 2013 study by CoreLogic, an organization that provides comprehensive data for the real estate market.

While this is great news, there are still plenty of homeowners who aren’t out of the water yet. CoreLogic’s analysis also showed that 9.7 million – or 19.8 percent of all residential properties with a mortgage were still underwater.

Thankfully, mortgage professionals say there are a number of potential solutions – like government-backed refinance programs – available to homeowners seeking to rid themselves of negative equity. Here are some options to consider should you have an underwater mortgage.

Option #1: Refinance through HARP

If your mortgage is owned by Fannie Mae or Freddie Mac, the second incarnation of the Home Affordable Refinance Program (HARP) could widen your possibilities of qualifying for a refinance.

Here’s how: HARP 2.0 has eliminated the maximum loan-to-value (LTV) ratio for HARP loans, reports the Federal Housing Finance Agency (FHFA). This means that homeowners who were previously denied from the program because their home’s value was too low (relative to how much they owed on their mortgage) could now qualify.

And along with making it easier for homeowners to be eligible, HARP has also been extended until December 31, 2015. Originally, it was supposed to end in December 2013.

“More than two million homeowners have refinanced through HARP, proving it a useful tool for reducing risk,” said FHFA acting director, Edward J. DeMarco, in a press release announcing the deadline extension. “We are extending the program so more underwater borrowers can benefit from lower interest rates.”


Option #2: Consider an FHA Streamline Refinance

If you don’t qualify for HARP, you still have options – one of which is the Federal Housing Authority’s (FHA) “Streamline Refinance” program, which has looser qualifications than HARP.

In fact, with an FHA Streamline Refinance, employment verification, income verification, and credit score verification are all not required, according to the U.S. Department of Housing and Urban Development (HUD).

So, what exactly is required for a Streamline Refinance? According to HUD, these are basic requirements:

  • The mortgage must be FHA insured
  • The mortgage must not delinquent
  • The refinance results in a lower monthly principal and interest payments or the conversion of an adjustable-rate mortgage (ARM) to a fixed-rate mortgage (FRM).
  • No cash may be taken out on mortgages refinanced through a Streamline Refinance


Option #3: Get the Veterans Affairs’ Interest Rate Reduction Refinance Loan

Members of the armed forces might be trained to deal with adversity on land, at sea, and in the air, but being underwater as homeowners is an entirely different ballgame.

Luckily, the U.S. Department of Veterans Affairs’ Interest Rate Reduction Refinance Loan (IRRRL) is a viable option that assists veterans who are underwater on their mortgage.

“It’s a very strong program, but you have to be a veteran currently in a VA (home loan),” Martin says.

If you fit both of those criteria, according to the VA’s website, the IRRRL program is designed to lower interest rates by refinancing existing VA home loans. The possible end result for the homeowner is paying a more affordable house note.

“By obtaining a lower interest rate, your monthly mortgage payment should decrease,” writes the VA’s website.

The biggest advantages of the IRRRL is that it doesn’t require a home appraisal or credit underwriting, according to Martin. If your home has negative equity, this facet of the program could prove invaluable for homeowners who qualify.

One of the several forces leading to the bursting of the real estate bubble was the availability of “no money down” mortgages.  The lower the amount of investment, or equity, in the home by buyers, the greater the likelihood of mortgage default leading to foreclosure. As property values sank following the peak of the real estate market in 2007-2008, people with no equity or who owed more than their mortgage was worth walked away.

Read the rest of this entry »

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses housing data released by Case Shiller and the FHFA.


  • Housing data from two different sources, Case Shiller and the FHFA, both show continued improvement in residential markets.  Case Shiller data for the 3rd quarter was up 3.6 percent from a year ago and 2.2 percent from the previous quarter.  By comparison, FHFA quarterly data showed a 4 percent gain from one year ago and was up 1.1 percent from the previous quarter.
  • In addition to the quarterly data, both Case Shiller and FHFA reported on monthly house prices.  Case Shiller reported that September prices were up 2.1 and 3.0 percent on the year for the 10- and 20-city indexes and home prices rose in each measure by 0.3 percent from August.  By comparison, FHFA’s monthly data showed a 0.2 percent increase in September.
  • Drilling down, Case Shiller and FHFA both show huge price increases in Phoenix, up 1.1 percent in the month and 20.4 percent in the year according to Case Shiller or up 26.2 percent in the year with FHFA data.
  • Are fiscal cliff worries holding back price growth in big government towns?  Case Shiller data show that in spite of healthy gains over the year in Washington, DC and Tampa, FL (3.2 and5.9 percent, respectively) prices were roughly flat in both areas from the 2nd to 3rd quarters.
  • FHFA data shows price performance by state, and Arizona tops the list with 20 percent price growth over last year.  The District of Columbia, Idaho, North Dakota, and Nevada round out the top 5 performers.  The bottom 6 states show year over year weakening in prices and were mostly in the Northeast; Illinois was the only non-Northeastern state in this group.

By Steve Goldstein, MarketWatch

WASHINGTON (MarketWatch) — U.S. home prices jumped in May, marking the second month of gains, according to a closely followed index released Tuesday.

The S&P/Case-Shiller 20-city composite rose 2.2% on the month to take the 12-month change to 0.7%. All 20 cities in the index saw monthly gains, including a 4.5% surge in Chicago and a 4% gain in hard-hit Atlanta.

On a year-over-year basis, prices are down 0.7%, the smallest fall in 18 months. By this metric, Phoenix prices have climbed 11.5% while Atlanta’s have dropped 14.5%.

“We have observed two consecutive months of increasing home prices and overall improvements in monthly and annual returns; however, we need to remember that spring and early summer are seasonally strong buying months so this trend must continue throughout the summer and into the fall,” said David Blitzer, chairman of the index committee at S&P Dow Jones Indices.

“June data for existing home sales, new home sales, housing starts and mortgage default rates were a bit mixed, but all are better than their year-ago levels. The housing market seems to be stabilizing, but we are definitely in a wait-and-see mode for the next few months.” Read more on existing home sales.

On a seasonally adjusted basis, prices climbed 0.9% on the month.

The Case-Shiller report relies on three months of data, so it includes housing transactions in March and April.

Other measures of home prices have been quicker to register gains. CoreLogic, for instance, reported that prices on a year-over-year basis rose 2% in May.

Factors including record-low mortgage rates and a slowly improving labor market have helped put a floor on prices. Still, they have come down precipitously from prerecession levels. According to Case Shiller, prices are down by roughly a third from their peak in 2006.

Before you start combing the classifieds and cruising open houses, you need to know how much house you can afford. There’s no hard and fast rule about this, regardless of what you might read. How much house you can afford is primarily a function of how much you want to spend.

The Real Cost of a House

Your home costs more than just the mortgage. Your down payment is between 10 and 20 percent of the assessed value of the home. You need to have that up front, as lenders will not cover it. Homeowner’s insurance also might be required by your lender.

Either way, it’s a good idea to protect your investment with some kind of insurance. The average homeowners’ insurance premium stood at $880 in 2009, according to the Insurance Information Institute. Property taxes are also a significant cost of owning a home and vary widely from one municipality to another. Usually, your property tax ends up being between 1 and 2 percent of the home’s value.

How Much Can You Spend?

How much you can technically spend is not as important as how much you can reasonably afford. While there are different guidelines on how much of your monthly income you should spend — some say a quarter, some say a third, some say even more, lenders tend to say 28 percent, while still other experts suggest that it’s a function of your annual income — it’s really up to you to determine how much you can comfortably and realistically afford.

And, of course, the figure that you arrive at is something that you should be prepared to defend to your lender. Once you determine how much you can spend every month, it’s time to determine how much house you can afford.

The Elephant in the Room: Your Credit Rating

Your credit rating can wildly impact your monthly mortgage payment. The interest rate on your mortgage is largely determined by your credit rating, and this impacts both the monthly cost and overall cost of owning your own home. Several percentage points lie between the interest rate of those with an 800 credit score and those with a 500 credit score.

Further, even a small difference in your credit score can impact your interest rate by as much as point and a half, depending on which side of the fence you lie on. For those with less than stellar credit, it’s worth holding off until your credit score is at least 660 or above until you buy a home to get optimum rates.

Mortgage Calculators: How Much House You Can Afford

Mortgage calculators help you determine how big your mortgage can be, showing you what a monthly payment will look like. Mortgage calculators factor in the value of the home, the amount of the mortgage, how good your credit score is, the loan’s term, property tax and interest rate. Mortgage calculators provide you with a to-the-dollar assessment of how much a mortgage will cost you every month. Consulting a mortgage calculator allows you to determine whether or not you can afford a house. Once you run the cost of a house or two, you’ll get a clearer idea of your price range.

Of course, there’s no reason to buy more house than you want, even if you can afford it. At the end of the day, money isn’t everything and you might be far happier in a house that is below your maximum limit than you are with the most expensive house that you can find. Know what you can spend, but don’t let it be the ultimate arbiter of what you choose to buy.