Tag Archive: Interest rates

Apr 23

Down Payment Assistance In Kentucky

Ever had a loan officer GIVE you money? I am not talking about a $100 knocked off of the closing cost but cold hard cash ranging from $4,500 to $10,000 for down payment!

We had another training session this morning regarding Kentucky Housing Corp (KHC) loans, this time a DE Underwriter helped with the presentation.  In addition to being a Direct Endorsement Underwriter for FHA she is also delegated to sign on behalf of KHC.  That can speed up the timeline in our shop by as much as a week compared to other lenders.

We talked a great deal about the different combinations using an FHA/KHC first mortgage with down payment assistance (DAP).  The DAP’s are in the form of a second mortgages, some forgivable over time and one that must be repaid.    Kentucky Housing DAP’s range from $4,500 to $6,000. 

This is how it works.

The first mortgage is an FHA/KHC loan for 96.5% of the purchase price.

The DAP is a second mortgage for 3.5% of the purchase price. 

The seller can pay all of the closing cost and pre-paids.

The borrower only needs to pay for an appraisal (unless the seller pays for that too). 

Inside scoop for you, I spoke to my source in Louisville Metro last week, they are expecting funding for their DAP program in July.  Last year it was $10,000 a pop plus another $2,000 for closing costs.  This program requires FHA home ownership classes so sign up soon if you want to grab this round.

 

Need Assistance with a Down Payment?

Visit my online application site or print and use this simple form to get started. If you prefer we can do it over the phone, call my direct line during normal office hours, (502) 753-4127.

 

Apr 21

Mortgage Interest Rates Update

Mortgage rates for Kentucky continued to be ranged bound this week ending about where they started.  Not much good news for the economy kept them in check.  Even the mess in Europe had little impact.  The latest update on my Rate Sheet was almost identical to Monday’s posting.

I had a couple of interesting conversations on this topic with people that were inquiring about getting a loan this week.  The first person asked if I thought rates would go a lot lower.  My response was the same as it has been for almost a year now, “How much lower CAN they go?  There are more numbers above the current rate than there are below it.”

Jim’s Rules Regarding Rates:

Rule #1:  What goes up must come down, what goes down must come up.

Rule #2:  Every day you don’t lock a low rate is one day you are closer to locking a higher rate.

Rule #3:  The current rate is either going to get better, stay the same or get worse.  Count on it.

There was actually a quarter point improvement in the Secondary Market Program at KHC which I find odd.  This is a relatively new program and allows borrowers that are not first time home buyers.  Historically KHC has only provided financing to first time home buyers.  Last week both programs were priced the same.

The second interesting conversation on this subject was with a lady that is currently has an adjustable rate mortgage (ARM) and was inquiring about refinancing to a fixed rate.  Her reluctance is that her current ARM rate is about a quarter point lower than the current fixed rate.  Her answers to my questions pointed out that her rate cap is almost 8 points higher than where she is now!

It took her breath when I told her the highest rate on her existing loan could be in the mid 11’s.  See Rules # 1 & 2 above.

HARP 2.0

Harp is helping a lot of home owners refinance that are currently upside down or do not have enough equity.  If you have been told that you do not qualify due to either of these reasons, ask about Harp 2.0.

 

Visit my online application site or print and use this simple formto get started. If you prefer we can do it over the phone, call my direct line during normal office hours, (502) 753-4127.

 

Apr 19

Mortgage Calculator Added in the Buyer’s Section

Over the years I have been asked about 100,000 times, “How much is the payment?”  Obviously that must be an important question if every client wants to know.  I added a mortgage calculator in the Buyer’s section.  The page contains a link to current interest rates and an online application for anyone that wants to apply or be pre-qualified for a mortgage.

We want to provide the very best resources for anyone buying, selling or refinancing a home in Kentucky. Please let us know if there is something you think should be added.  

  

Apr 17

New Pages Added to the Credit Report Section

The Credit Report Section continues to grow.  A couple of new pages added recently, What is a Credit Score and Why Are Credit Scores Important

Coming soon is a page dedicated to taking the information on these two pages and turning it into cold, hard cash!

As always, my position is, “It’s not how much you pay for a house, it’s how you pay for it that matters”. 

 

 

Apr 16

Interest Rates Remain Steady

The mortgage bond market opened up this morning and has remained on the plus side all day, a good sign for long-term mortgage rates.  Interest rates do the opposite of the price of bonds, if bonds go up, rates go down. So the price on interest rates improved slightly this morning.  That sounds funny doesn’t it? The price of interest rates, most people don’t think of it as buying money. 

The driving force seems to be the mess in Europe.

How much lower can rates go?

Not very much, there are fixed costs just to bring the money to the table.  The stock broker that sells the bonds must be paid, the investor that buys the bonds wants some return, the company that originates the mortgage needs a little to keep the lights on, the servicer that collects the payments and pays the bills gets a little bit.  Seems like I am missing something, oh yeah, the loan officer! 
Choose your own numbers assigned to all of that stuff and it becomes clear, they can’t go much lower. 

Rates are here.

Online Loan Application is here.

Apr 10

Interest Rates Bouncing Around

Mortgage backed securities are being choppy today, they are the driving force behind mortgage interest rates.  The market opened strongly this morning gaining up to 12/32 before I left for lunch.  Interest rates do the opposite of the price of the bonds, if bond prices go up interest rates go down.  When I returned they had pulled back to 4/32 and I received an alert recommending lock.  

Clients frequently ask me if I think rates are going lower.  Anyone asking this question may want to calculate how small the difference of another 1/8 of a point interest makes.  When you see how small that difference is it may seem like a good idea to follow the advice of the alert I just received and lock that rate!

Mar 06

KHC Home Buyer Tax Credit

Kentucky Housing Corporation (KHC) is making available a tax credit to home buyers throughout the Commonwealth.  The tax credit reduces the amount of federal tax a home buyer must pay to the federal government.  KHC provides the home buyer a Mortgage Credit Certificate (MCC) which reduces the amount of Federal income tax by a substantial amount.  The result is more available income to qualify for a mortgage loan.

The tax credits are not mortgages, or any kind of debt for that matter. In fact, the net effect provides the tax payer/home buyer additional cash flow that could be used to pay off the mortgage quicker.  One way this can be accomplished is to have your employer reduce the amount of tax dollars withheld from your regular pay check.  This move will increase your take home pay even though the gross income remains the same.

Under the current federal tax code the government allows a homeowner to deduct the interest portion of their house payment from their income when filing their tax return.  A deduction is different than a tax credit.  A deduction is a reduction of the amount of income that is taxed.  A tax credit is reduction of the amount of tax you owe, big difference.

The MCC is a tax credit equal to 25% of the interest you pay up to a maximum of $2,000.  If the amount of mortgage interest you pay during the year is $8,000 then the tax credit would equal $2,000.  You could still deduct the remaining $6,000 on your tax return. Let’s say that you still own $2,500 in taxes after taking the deduction, here is where the tax credit kicks in, the amount of tax owed drops to $500.

The MCC stays in effect for the life of the loan as long as you continue to live in the house.

In order to be eligible to apply for the program you must be a first-time home buyer or have not owned a home in the last three years.  The sale price of the home must not exceed $243,000.  There are also income limits, 1-2 person household income up to $83,400 and a 3-4 person household is up to $97,300.

Of course the home must be located in Kentucky.  Take advantage of this exciting program offered by KHC.   Low down payments, low interest rates and a tax credit, now that is a trifecta you can count on!

Buying a property in Kentucky and want to be pre-approved for a mortgage and or tax credit? Visit my online application site or printand use this simple form to get started. If you prefer we can do it over the phone, call my direct line during normal office hours, (502) 753-4127.

May 11

Real Estate Snapshot for Louisville Kentucky

The Louisville real estate market has been doing much better than many parts of the country but there are still negative figures showing up in the reports.  Most notably is the number of sales, 2,892 as of 5/10/2011 verses 3,435 for the same period last year or 543 fewer homes sold so far this year. 

Most of the price bands below $400,000 show a decline in the number of units sold while the bands above that level showed a dramatic increase.  The percentage increase is skewed because the numbers are so small.  If there was one sale in a band last year and two this year that is a 100% increase but still not hot.  I suspect the increase in sales for the expensive homes is not necessarily a good sign, it could very well be an indication they sold for less overall.  

There is twice the number of monthly inventory today than the same time last year, also a sign of softening.  New listings so far this year are 8,455 with reported sales of only 2,892. 

The interest rates have declined even further this year hitting all time lows, a very big signal it is time to buy.  I have been watching interest rates all my adult life and there is not much left on the downside.  Anyone that is waiting for them to go lower is betting on the wrong side.  There are many more rates available above the current level than there are below it.  There are also some expenses built in to the rates system that no one seems to be pointing out. By that I mean there is an absolute bottom to how low they can go but there is no ceiling for how high they can go.  

Servicing, investor yield, and cost of delivery are just a few examples of expenses imbedded in the interest rate.  The yields to investors are where most if not all of the reduction has been taking place.  At some point (are we there yet?) investors are going to stop buying 30 year bonds at such ridiculously low yields.  Would you buy a 30 year cd at 4% if cashing it in cost 25% of the principal?  I wouldn’t.  

I propose that artificial pressures are holding down mortgage rates.  That is the only answer that makes sense to me.  I filled up my car yesterday, gas prices are not being held down.  My banana index tells me we are in a world of hurt, the value of the dollar slipped again this week against the price of bananas, 11.54%!!!   

5 13 116 300x125 Real Estate Snapshot for Louisville Kentucky

Okay, here is the scoop, when this thing we are living through changes directions it will blast like a rocket.  When the demand for money exceeds the ability to push rates down we can see dramatic jumps in the cost of borrowing money.  Tiny moves in interest rates become a very big pile of money when stretched over 30 years.  A large jump would pay for an entire boat load of bananas! 

It’s time to move!

May 09

LIBOR Adjustable Rate Mortgages (ARM) Return

May 9,2011, adjustable rate mortgages returned to our rate sheet today.  Could this be a sign that things are settling down in the mortgage industry?  I see it as a good sign.  We have not offered ARM’s for a couple of years now.  For awhile they were still listed but with interest rates higher than fixed rate mortgages, then they were removed from our product list entirely.  Historically adjustable rates started much lower than fixed rates.

Today the difference is not as large as in the past but still enough to make them useful in some instances.  Our 5/1 ARM for example has a start rate about 1% lower than the 30 year fixed rate.  If the intended holding period is less than five years the difference could be substantial.  

If the holding period exceeds five years then the current low fixed rates are hard to beat.  

The current ARM indexes are currently the lowest I remember them.  The 1 year LIBOR index was .746 today, that is the lowest it has been since 1989 which was the oldest published rate on the chart at Mortgage-X.  

I am pleasantly surprised that rates have remained as low as they have and they are so incredibly low it is perplexing.  There doesn’t seem to be any problems in terms of availability of funds and yet demand remains low as well.  Strange times.

May 06

Mortgage Rates Remain Low – Louisville Kentucky

Mortgage rates remained low today in spite of better-than-expected unemployment figures.  The bond market was off this morning, with mortgage-backed securities down 11/32 in early trading.  By the end of the day they had regained all of their losses and even gone into positive territory.

I am shocked that the rates are as low as they have been so far this year.  Hold on to your seats when they do start to edge up because it is going to be a fast ride. 

New Mortgage Interest Rate Calculator

I received a new piece of software this week, something our IT guys have been working on for some time.  It is a mortgage interest rate calculator designed to factor in all of the adjustments based on client’s criteria.  It really speeds up the process.

 While I was test driving the new calculator I discovered something exciting.  Conventional interest rates are tiered based on credit scores and loan-to-value but only if the term of the loan is 20 years or longer.  I never knew that!

I plugged in a 15 year fixed-rate loan and made this discovery.  The findings looked strange because there were no adjustments to the rate.  I pulled up the rate sheet and that is when I discovered there are no adjustments for loan terms under 20 years.  This little tidbit makes a 15 year loan a much better deal than the longer-terms.  With rates as low as they are today considering shorter-term makes a lot of sense.

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