Marc's Mortgage Matter's

Seven billion is a lot of people. I guess that's about how many of us there are in the world. (And no, contrary to what you think, they won't all be in line in front you at the Apple store this holiday season.) Of course, two of those people are famous-for-being-famous Kim Kardashian and NBA player Kris Humphries, who rocked financial markets Monday with the announcement that they were, gasp, divorcing after being married 72 days. So the NBA lock-out took its first victim as Kim cited irreconcilable differences: low ratings and no NBA paycheck.

Did you know that Apple employees 700,000 people in China? It would be nice if all those jobs were over here, but that’s not how the world works anymore.

Here’s another brilliant design by architect Frank Gehry, a medical clinic in Las Vegas. Spectacular!!

Why you can’t get the lowest mortgage rates

CHICAGO (MarketWatch) — Mortgage rates are near historical lows, but the rates lenders are quoting you aren’t as eye-popping as those you see in the news.

Why is that?

First, remember that mortgage rates are moving constantly, and rate surveys are capturing rates from past points in time. For example, Freddie Mac’s weekly survey collects rate data over the course of a week. Bankrate.com’s survey collects rate data every Wednesday.

By the time results are released, they’re already outdated.

There are other reasons your rate might be higher. Below are five of them.

1. You’re not paying points

Average rates in Freddie Mac’s survey include average discount points paid for the mortgage. But not everyone is willing to pay points.

For the week ending Oct. 27, rates on the 30-year fixed-rate mortgage averaged 4.1%, but that rate required an average 1.5 points to get it. A point is 1% of the mortgage amount, charged as prepaid interest. 

Unless you’re going to live in your home for a very long time, paying points often doesn’t make sense. Where the investment pays off is, if this is a loan you’re going to have for a long period of time.

You’re making an investment of money now to pay the points to get the benefit of a lower monthly payment for years to come. The more years you have of that lower monthly payment, the greater return on that initial investment of points.

2. Your borrower characteristics mean price adjustments

A credit score on the low side will prevent you from getting the lowest rates. Low levels of home equity will also mean a pricier mortgage rate.

That’s thanks to loan level price adjustments (read; fees, penalty..aka points!) from Fannie Mae and Freddie Mac that have been making it tougher for borrowers to get the best rates for the past few years.

The further down the FICO realm you go, and the higher the loan-to-value ratio, the more cost for the consumer. Those with credit scores below 700 will have a tough time getting the rates in the low 4% range that everyone has been talking about.

Meanwhile, a 20% equity cushion in your home for a refinance, or down payment for a purchase, is what’s needed to get the best rates these days. And if you have a jumbo mortgage, lenders usually want 25% or 30% down for the best rates.

However, borrowers who qualify for the newly revamped Home Affordable Refinance Program (HARP) will be able to snag low rates, even if their equity has taken a severe hit. (Call me for details if you qualify)

3. Your property type means higher rates

For condo-unit mortgages, you need a 75% loan-to-value ratio, or a 25% equity position, to get the best rates. And if your mortgage is for a vacation home or investment property, you can also expect to pay a higher rate. All 2 family homes have a 1 point (1%) fee charged at closing - ditto for 3-4 family homes. 

4. You don’t have recent proof of income

For the self-employed — who don’t have pay stubs as proof of recent income — the most recent tax returns are what a lender will look at before giving you a mortgage. If business has improved after your past tax return, that’s not going to be of any help as you try and get a mortgage today.

Business could be off the charts now, but if the tax returns tell a different story, then getting approved or getting the best rates becomes a problem.

5. Your lender isn’t hurting for business

There can be a big disparity in what rates are offered from lender to lender, and it may have to do with how many mortgages they’ve been originating lately.

Some that are lacking volume will tend to be more competitive, those that have enough volume may say we’re going to keep rates high.

But the rate isn’t everything, when shopping for mortgages, borrowers need to focus on comparing their monthly payments. People are drawn to the interest rate… but you have to look deeper. Review the documentation.

For instance, it’s possible for someone to get an offer of a very low rate on a mortgage backed by the Federal Housing Administration (FHA) — that loan also may come with a higher insurance premium. That person may be better off taking a conventional mortgage with lower priced private mortgage insurance, even if their interest rate is a little higher.

Home prices may be down to where they were in 2002 and interest rates at their lowest in 2011, at an average 4.50% for a 30-year fixed mortgage. But for many who make the jump into home ownership for the first time, properties in triple-mint condition with pruned yards and top-of-the-line appliances are still too pricey.

So many first-time home buyers look to so-called fixer-uppers. A home that costs less than one in move-in condition and would require extensive renovations or repair to become livable. While shaving thousands of dollars off the cost of a property sounds appealing, though, a fixer-upper isn’t for just anybody. Many buyers underestimate the amount of time, money and labor that need to be put into transforming it into something fit for an HGTV dream home showcase.

There are many factors that go into determining whether or not a fixer-upper is right for you — and while the flowchart below may seem like a lighthearted way of tackling this serious question, it’s a good way to get started thinking about this important decision. Read on for the details.

Optimism about a plan to shore up wobbly Greek debt markets continues to diminish, and investors are again favoring the safe haven of US Treasury debt. Few countries have signed up for the euro-bailout plan and there is no indication as of yet that a deal will actually get done soon. Of course, troubles in the world often end up being good news for U.S. mortgage borrowers, and this was again the case this week.

While news about the economy continues to suggest we will avoid falling into a new recession, there's not much to suggest that a strong breakout of growth is imminent, either, and the slow economic slog continues, if at perhaps a better pace. No one knows this better than the Federal Reserve, which noted in the release which signaled the close of their two-day meeting this week that "economic growth strengthened somewhat in the third quarter" but "recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated."

The Fed also released its latest set of economic projections, and marked down the paths for GDP growth and unemployment while increasing their projections for inflation for 2012 and beyond. None of this was particularly good news, but did underscore the Fed's recent decision to hold short-term interest rates at low levels at least though mid-2013 as it would appear the economy may need the additional support should the Fed's expectations turn into reality.

Of course, there's nothing that says these forecasts will come true. Previous ones predicting a more rosy economy by now never materialized, and just as the old ones were wrong to the upside, perhaps these new ones will be wrong to the downside, too.

Given fractious political bodies, both domestic and abroad, there's little reason to expect that any sort of deal will be satisfying to any one. This rings as true for Greek and other euro-zone bailouts as well as President Obama's half-trillion-dollar jobs bill or any Federal Reserve plans to stimulate the economy which may yet come. That we are in the midst (again) of an election cycle give one the uneasy feeling that nothing of any value will be accomplished for another whole year, and even then perhaps not for some while after any electoral change.

In its way, this concept foments or perpetuates the gloomy mood which is keeping things from improving. That's not to say that a sunny outlook would suddenly fix the economy or poorly-capitalized governments; however, political and regulatory bodies need to lead or at least show the kind of leadership qualities that ordinary people can rally behind. People are angry, depressed and moody, not just here but around the world, and there doesn't seem like there's a lot of relief anytime soon. Ultimately right or wrong, moving in any direction with consistency, clarity and purpose would help. Seems unlikely, so more muddy mess ahead will be our path.
Mortgage rates love a Greek (or any other) tragedy.

Opportunities to finance or refinance remain strong, and if you are so inclined, you might do well to get your loan in process before month's end, when at least a minor crush of refinancing is to be expected due to the expansion of the HARP program.

The slight slip in rates this week will probably hold for next week, unless a spate of optimism for a Greek deal comes to market. Figure on a couple basis point move upward at most.

Word contexts are important for those of us who use words (unlike my  daughter, who only knows three: "maybe," "no," and "why").

"Mr. Winter, I have reviewed this case very carefully,' the divorce court judge said, 'and I've decided to give your wife $775 a week."
"That's very fair, your honor," the husband said. "And every now and then I'll try to send her a few bucks myself."

A doctor, examining a woman who had been rushed to the Emergency Room, took the husband aside, and said, "I don't like the looks of your wife at all."
"Me neither, doc," said the husband. "But she's a great cook and really good with the kids."