For Your Customers: 3 Tips for Landing a Mortgage

Many home buyers complain that one of the biggest hurdles they face is qualifying for financing. So what are some ways that home shoppers can ensure they qualify for a better mortgage deal — particularly one that takes advantage of the near record-breaking low mortgage rates? A recent article at Money Magazine highlighted some of the following tips when shopping for a mortgage: 1. High credit scores count. The lowest mortgage rates go to home shoppers with credit scores of 760 or higher. Avoid opening new lines of credit or loans for at least three months prior to getting a loan. Also, on your open accounts, try to pay off those balances. “One large balance — even if it’s paid off at the end of the month — can ding your score by 20 points or more,” according to the article at Money Magazine. 2. Gather plenty of quotes. Most experts say shopping around can pay off. Gather at least six quotes from lenders on mortgage rates because they can vary quite a bit from lender to lender. Request quotes from local and regional lenders as well as national ones for comparison. Be sure to ask about estimated closing costs, too, which can be anywhere from 2 percent or more of the loan balance. 3. Ask about lock-ins. To make sure the rate doesn’t go up when you’re under contract, ask about a lock-in period on the loan, in which lenders agree to not raise the interest rate within a certain time period. Home shoppers should ask their lender and REALTOR® how long it takes to close loans similar to theirs and see how long they can lock a rate in for. Some lenders will charge several hundred dollars to extend a lock-in agreement, so experts recommend learning the lock-in terms beforehand when shopping for the best mortgage deal. Source: “6 Ways to Get a Great Mortgage Deal,” Money Magazine (April 30, 2012)

Bidding Wars Catch Buyers Off-Guard

Home buyers are unexpectedly finding more competition this spring in landing their dream home. Bidding wars are increasingly being reported in markets across the country, from California to Florida, The Wall Street Journal reports. "It's a little surprising because we thought bidding wars were done with," Andy Aley, a home shopper in Seattle, told The Wall Street Journal. Aley says he was outbid on a home earlier this year, even though he offered to pay $23,000 above the listing price and also waive inspections and other closing conditions. Home buyers are frustrated and caught off-guard about the bidding wars re-emerging, real estate professionals report. "We're writing a record number of offers, but we're not seeing a record number of closings and that's because it's so competitive," Glenn Kelman, chief executive of Redfin Corp., told The Wall Street Journal. Why are things getting so competitive? Many housing markets are seeing a drastic decrease in the number of homes listed for-sale, leaving home buyers with fewer options and more bidding on the same house. Housing analysts say the shortage in supply is from sellers unwilling to take much less for their home than what they originally paid for it and pulling their homes off the market. Also, a surge in investors has made the market more competitive, as investors snatch up homes in bulk in all-cash deals. “The bidding wars caused by tight inventory provide the latest evidence that housing demand is starting to pick up after a six-year-long slump,” The Wall Street Journal reports. Indeed, the National Association of REALOTRS® reported late last week that pending home sales in March reached their highest level in nearly two years and are up 12.8 percent from a year ago. Source: “Stunned Home Buyers Find the Bidding Wars Are Back,” The Wall Street Journal (April 27, 2012)

Fixed-Rate Mortgages Near Record Lows

Fixed-rate mortgages dropped slightly this week, nearing their average all-time lows and helping to lift home buyers’ purchasing power, Freddie Mac reports in its weekly mortgage market survey. For every week but one this year, the 30-year fixed-rate mortgage, the most popular choice among home buyers, has been below 4 percent. Here’s a closer look at average rates for the week ending April 26: 30-year fixed-rate mortgages averaged 3.88 percent, with an average 0.7 point, dropping from last week’s 3.90 percent average. A year ago at this time, 30-year rates averaged 4.78 percent. The record low for 30-year rates averaged 3.87 percent, a record reached in February. 15-year fixed-rate mortgage averaged 3.12 percent, with an average 0.6 point, dropping from last week’s 3.13 percent. Last year at this time, 15-year rates averaged 3.97 percent. The all-time record low for 15-year fixed-rate mortgages is 3.11 percent, a record reached recently during the week ending April 12. 5-year adjustable-rate mortgages averaged 2.85 percent this week, with an average 0.6 point, rising slightly from last week’s 2.78 percent average. Last year at this time, 5-year ARMs averaged 3.51 percent. 1-year ARMs averaged 2.74 percent, with an average 0.6 point, dropping from last week’s 2.81 percent average. A year ago at this time, 1-year ARMs averaged 3.15 percent. Source: Freddie Mac

Home Builders Report Big Gains in Sales Orders

Some of the country’s largest home builders are reporting increased sales and a rise in new orders, The Wall Street Journal reports. Builder stocks are also reflecting the increased optimism in the sector, rising 31 percent so far this year, according to the Dow Jones U.S. Home Construction index. "Builders say April's sales remain brisk, leaving the the companies optimistic that they will report even stronger quarterly results later this year and giving them enough confidence to raise prices in some markets, including those hit hard by the housing crash," The Wall Street Journal reports. Housing analysts say a big factor helping builders' recovery is the dropping inventory of existing homes. Also, many investors are buying up bargain-priced existing-homes in all-cash deals, which has made other home buyers start considering new home construction more. Several home builders have reported gains in sales orders recently, including Ryland Group, which cited a 46 percent increase in orders; Meritage Homes Corp. reports a 36 percent rise in new orders; D.R. Horton Inc. reports a 19 percent increase; and PulteGroup Inc. reports a 15 percent increase. "As buyers realize the market is tightening, we are seeing a greater sense of urgency than we have for quite some time," Steven J. Hilton, the chief executive of Meritage Homes Corp., said in a recent conference call. "The market has clearly turned in a more positive direction, and we are switching over to offense rather than defense.” Source: “Home Builders’ Health Improves,” The Wall Street Journal (April 26, 2012)

3 Housing Trends Emerging This Spring

What can home buyers expect to face this selling season? An improving housing market has made it a different picture in many areas compared to recent years, housing experts say. A recent article at Bankrate.com notes some of the following trends taking shape in the housing market this spring: 1. Fierce competition. Housing affordability is at record highs, due to falling home values and mortgage rates hovering near record lows. More buyers are taking notice and jumping off the sidelines. And mixed with sinking inventories of homes listed for sale, the competition is getting more fierce. Investors are snapping up bargain prices, often in all-cash deals, which means greater competition for traditional home buyers too. "Rents are going up, and as long as there are properties at the level where investors can get the positive cash flow, they will continue to invest," says Jed Smith, managing director of quantitative research for the National Association of REALTORS®. Smith adds that first-time home buyers, in particular, may find increased competition from investors in trying to snag some of the best deals on the market. 2. More renters show desire to become home owners. Recent surveys have shown that buying a home nowadays is more affordable than renting. As such, more renters are finding home ownership more enticing. The signs are already starting to show: About 59.5 percent of tenants recently surveyed say they intend to renew their leases this year, which is the lowest rate since early 2009, according to a study by Kingsley Associates. 3. Mortgages may be a little pricier. Fannie Mae, Freddie Mac, and the Federal Housing Administration recently have raised their loan fees, which means home buyers can expect to pay a little more for their mortgage this spring. "Those who don't have credit scores in the high 600s to low 700s may be forced to go the FHA route," says Ed Conarchy, a mortgage planner at Cherry Creek Mortgage in Gurnee, Ill. "And they will be stuck with the higher fees." Buyers with smaller down payments can expect to pay more for FHA mortgage insurance premiums, which have risen to 1.75 percent of the loan total. Bankrate.com cites an example illustrating the higher fees: A borrower who takes out a $200,000 FHA loan will likely have to pay about $3,500 for mortgage insurance upfront. Prior to the increase taking effect, borrowers would pay about $2,000 for that same loan amount. Borrowers with higher mortgages can expect higher fees too. The FHA announced that in June it’ll increase its annual insurance for mortgages more than $625,500. "A borrower who lives in a high-cost area and takes out the maximum $729,750 (which is the FHA limit for high-cost areas) will pay $912 each month in mortgage insurance alone," Bankrate.com reports. Read about more trends expected for the spring selling-season. Source: “5 Mortgage and Housing Trends in Spring 2012,” Bankrate.com (April 21, 2012)

Half of U.S. Metros See Pick up in Foreclosures

Housing analysts have warned that a foreclosure wave is coming, and the signs are starting to show. After several months of declining numbers in foreclosures nationwide, more U.S. metros are seeing a reversal as foreclosure activity begins to increase. Fifty-four percent of U.S. metros posted increases in foreclosure activity in the first quarter over the previous quarter, RealtyTrac reports. The metro areas reporting the highest percentage of increases in the first quarter are: Pittsburgh: Foreclosure activity is up 49% Indianapolis: Up 37% Philadelphia: Up 30% New York: Up 24% Raleigh, N.C.: Up 23% Virginia Beach, Va.: Up 22% While foreclosure activity has increased in several metros, overall foreclosure activity still remains down from a year ago in the majority of metros, according to RealtyTrac’s latest report. Also, some areas are still seeing foreclosure activity continue to fall. Foreclosure activity during the first quarter declined the most in the following areas: Portland, Ore.: Down 28% Las Vegas: Down 26% Providence, R.I.: Down 24% Salt Lake City: Down 22% Boston: Down 21% San Jose, Calif.: Down 21% “First quarter metro foreclosure trends were a mixed bag,” says Brandon Moore, RealtyTrac’s CEO. “While the majority of metro areas continued to show foreclosure activity down from a year ago, more than half reported increasing foreclosure activity from the previous quarter — an early sign that long-dormant foreclosures are coming out of hibernation in many local markets.” Source: RealtyTrac

Fed Renews Vow to Keep Interest Rates Low

The Fed voted this week to continue its near-zero interest rate policy for the next quarter and likely much longer. The move will keep mortgage rates low in the coming months, if not years. In recent weeks, mortgage rates have hovered around record lows, which has helped increase home buyer purchasing power as well as helped refinancers trim their monthly mortgage payments. Last summer, the Fed made a rare move in vowing to keep the key rate near zero through late 2014. The move has been criticized by some who say it will cause inflation and awards spenders, not savers. Critics have pushed the Fed to reverse its policy. However, the Fed says the subdued outlook for inflation has not warranted a change in its policies. Federal Reserve Chairman Ben Bernanke, following the Fed’s policy-making committee meeting this week, affirmed the Fed’s intention to continue keeping short-term interest rates down until late 2014—and possibly even longer. The Fed has kept short-term interest rates near zero since late 2008. The Fed has also acted to reduce long-term rates by purchasing Treasury securities and mortgage bonds. The Fed’s policy-making committee also released its economic forecast, projecting moderate economic growth in the coming months before a steady pick up, as well as a gradual drop in unemployment. The committee also projects for inflation to remain under control, despite the recent rise in oil prices. “If there’s a substantial change in the economic outlook in either direction, then there would be a change in the outlook,” Bernanke said. “But for now, I think the committee is comfortable.” Source: “Fed to Keep Interest Rate Near Zero for Extended Period,” HousingWire (April 25, 2012) and “Fed Cuts U.S. Growth Forecast for 2013 and 2014,” The New York Times (April 25, 2012)