Prices are Low! Mortgages Cheap! But You Can't Get One

With home values continuing to fall, and mortgage interest rates at record lows, you might think it's a buyers market these days. You would be wrong. According to the Federal Reserve (via CNN), nearly a quarter of Americans who apply for home loans are being turned down.

"Good borrowers with one or two blemishes on their credit are being denied credit," said Lawrence Yun, chief economist for the National Association of Realtors.

The denial rates tell only half the story. Many potential buyers aren't even applying for loans because they assume they can't get one.

"A lot of people know it's very difficult to get a mortgage and they're not even trying," said Alan Rosenbaum, CEO of GuardHill Financial, a New York-based mortgage broker.

That shows up in credit scores for loans financed with backing from Fannie Mae and Freddie Mac. The average credit score has risen to 760 from 720 a few years ago. For FHA loans, the average score has gone to 700 from 660. Loans made to borrowers with sub-620 scores are almost nonexistent.

Another factor keeping people out of the mortgage market is that lenders now require much more up-front cash. The median down payment for purchase is about 15%. During the housing boom, it approached zero.

Read more at CNN.com…

Will Rising Mortgage Rates Spur Home Sales?

The historically low mortgage rates we’ve seen over the last year or so haven’t done much to spur home sales, but raising the rates might? Seems strange, but some experts are predicting that increasing rates might just push Americans into buying.

According to CNN.com, rates surged to a six-month high this past week after President Barack Obama and congressional Republicans agreed to extend tax cuts for two years.

Though the deal is still being debated in Washington, financial markets interpreted the development as likely to accelerate the economic recovery but also swell the budget deficit. Though the yield on the benchmark 10-year bond has retreated some, it has still increased 21 basis points this week.

Because yields on Treasuries, especially the 10-year bond, largely influence mortgage rates, borrowing costs for mortgages have suddenly gone up. The average rate for a 30-year fix loan increased to 4.61% in the week ended Thursday from 4.46% the previous week, following a fourth week of increases, according to Freddie Mac (FMCC). The average 15-year rate rose to 3.96% from 3.81%. These rates are the highest they've been since June.

This follows a period of historically low mortgage rates. But even though borrowing costs for new home loans are cheap, they haven't exactly spurred the kind of home buying that one would expect. What's more, lower rates haven't spawned much refinancing, since many home owners are stuck holding property valued at less than what they owe on their mortgages. The latest Case Schiller Index reported that home prices nationwide declined 2% during the three months ending in September, after rising 2.4% during the previous quarter. According to Zillow, home prices have lost $1.7 trillion in value in the past year.

Read more here

Mortgage rates hit new low

Wow, CNNMoney.com is reporting that 30-year fixed mortgage rates have dropped to an amazing 4.69%. Freddie Mac is saying it is the lowest level since they started tracking it 38 years ago. This means, yes, it is cheaper to buy a house. Unfortunately it is doubtful there will be a spike in home sales with unemployment so high, wages stagnant and tax incentives expiring.

With low home sales, home prices will continue to fall. Economists on CNNMoney.com predict by the end of next year, home prices will be at least 5% lower. However, lower home prices are bittersweet news. It’s great news for buyers, but bad news for all of those in or near foreclosure.

Read the full article here.

Mortgage Rates on 30-Year U.S. Loans Rise to 5.05

According to Bloomberg.com, US mortgage rates climbed for the first time in nearly a month; this increased the cost of borrowing and caused home sales to be the lowest levels on record. The 30-year fixed rate rose to 5.05%, up from 4.93%.

“This is potentially a preview of the data we’ll have to watch over the next few months,” Donald Rissmiller, Chief Economist at Strategas Research Partners in New York, said in a telephone interview. “Big changes are on the horizon that are going to be critical for the economy.”

Mortgage rates may rise further when a Federal Reserve program to purchase as much as $1.25 trillion in mortgage-backed securities ends next month. The program is credited with helping reduce mortgage rates, which fell to a record low of 4.71 percent in December.

Bond purchases from Fannie Mae, Freddie Mac and Ginnie Mae, which buy home loans from lenders and package them into securities, brought down yields and allowed lenders to reduce mortgage rates while still selling the bonds at a profit.