Sarasota Mortgage Rates | The Mortgage Skinny

The Federal Reserve is at a tug of war with setting new Mortgage Regulations.  On one side, the consumers are stating with the new rules set to be enforced in December, there are too many loopholes that will cause consumers to continue to default and allowing reckless lending to continue.  On the other side, the lenders are stating that with the new rules it will limit them on who to lend to and will prompt them to further restrict credit.

 The Fed claims the new regulations will prevent sub prime borrowers from getting into loans they can’t afford.  With the way the rules are currently set up today, borrowers can still obtain mortgages by showing limited documentation.  Consumers are worried this will continue to hurt the economy.

Consumer’s Side 

Consumers are stating the Fed needs to enforce rules that require banks to document the borrower’s ability to pay.  Get rid of all the Stated income loans and require the borrower to prove their ability to pay.  If a consumer is looking to purchase a primary home and claim they make $100,000 a year, then make them prove this in tax returns or W-2’s. 

 The Fed needs to close the doors on fraud and misbehavior so this market can stabilize.  If the fed continues to allow borrowers to obtain a mortgage with the current rules in place, the market will continue on the road to destruction. 

Another rule consumers are hoping the fed will change is to eliminate pre-payment penalties.  Advocates cliam pre-payment penalties cause more harm than good. 

 Lenders side

Lenders claim with the new regulations, lenders will lend fewer mortgages and increase the amount of work they would have to do. 

Also lenders are stating the Fed needs to clarify the new rules on how to determine a borrower’s willingness to pay.  Even though with the new rules it still gives the lender options on how to determine a borrower’s ability to pay.

My Side 

 Overall I agree with both the consumers point of view as well as the lender’s point of view.  Lenders are worried the market is going to continue to spiral downword and the only thing the Fed is doing to prevent this is cause them more work and less loans.  But on the other hand the Fed is putting these rules in place to help the economy in the long run and to prevent this from ever happening again.

It’s a tough market right now and the fed is doing everything they can to prevent the market from getting worse.  Nobody has an answer right now and as a consumer, we’re just going to have to sit here and deal with what we’ve created.

 Being in the mortgage market, of course I’m seeing less loans that what I have in the past, but the loans I have been seeing are cleaner loans.  The borrowers we were seeing before were always looking to go “stated” (Stated = no verification of income or assets) but now we’re seeing borrowers come to us KNOWING they need to document their income.  I personally think the new rules are tough because it’s more paper work and a longer process, but in the long run it’s creating more qulified borrowers and allowing us to lend money to borrowers who can pay the loans back.

We just need to keep working through this tough time.

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Comparing mortgages has never been more important for first time buyers.  The importance of first time buyers for the UK housing market can not be under estimated. Without them, there would be a total collapse in the property market, from the bottom end, relatively low value property, to the top of the ladder involving properties worth millions of pounds.  The problem, and reason to be concerned is that the number of mortgage approvals are at a 15 year low, a record which is expected to be broken several times during 2008.

The reason behind the low number of mortgage approvals can be seen as a side effect of the credit crunch.  As banks have taken a severe hit through risky lending strategies focused on the Sub-Prime borrowers, the entire banking industry is now perhaps overly cautious when it comes down to lending out money.  100% mortgages are a thing of the past, with borrowers now required to put down a minimum of 10% the value of property.  Keeping in mind the average house price in the UK at the minute, deposits for first time buyers are going to be in the region of 10k – 20k.

First time buyers are required to save this money for a mortgage deposit at a time of global economic downturn. Oil prices are exploding upwards, food prices, gas and electricity prices are all rising at unprecedented levels, far above levels of inflation. Taking these factors into consideration, saving 10k – 20k for a mortgage deposit, the average first time buyer is likely to struggle.

So what kind of mortgage offers are available to first time buyers, and how do they compare? Generally speaking, an interest rate of around 7% is to be expected. On a £100,000 interest only mortgage, this would see repayments at around £580 per month. In many areas and city centres of the UK, a property for £100,000 is unrealistic. Therefore, an interest only mortgage of £160,000 would equate to repayments of around £930 per month. A 25 year repayment mortgage however, would see repayments in excess of £1100 per month.

The sums involved are staggering, considering the average UK wage is estimated to be approximately 23k, meaning that after tax, less than £1,400 will be available, assuming no student loans are to be deducted.  As the average first time buyer is likely to be earning under 23k, it makes the sums even more difficult to justify purchasing a first time property in the current climate.  With this in mind, it has never been more important to compare mortgages.

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Subprime mortgages have now been credited for bankrupting well over 110 lenders and seriously damaging operations at many major mortgage firms. They’ve reportedly wiped out 5 hedge funds, tens of thousands of jobs, and have led to millions of foreclosures with millions more on the way. And, as if that weren’t enough, subprime mortgages are also blamed for massive volatility in the stock, bond, credit, futures, and real estate markets here in the US and around the globe. Some say losses in the mortgage securities market alone could reach hundreds of billions of dollars this year.

This means that, for any Americans looking to buy, sell, or refinance a home, they are confronting a very different market from the one that existed just 6-12 months ago.

How did this happen?
The recent real estate boom was fueled by a period of record home appreciation and historically low interest rates. Banks, in order to compete, loosened guidelines and began offering more funding to more borrowers through riskier, non-conforming or “exotic” mortgages.

These ideal lending conditions persisted for several years, supported by high demand, historical real estate data, home prices, and massive trading volume/profits on mortgage-backed securities and other financial instruments on Wall Street.

Then, in 2006, a slowdown in real estate led to a deterioration of home values, an increase in inventories, and ultimately to today’s tightening of credit guidelines, leaving many investors unable to sell or refinance out of their existing positions. Many Americans who had tapped into their equity were suddenly tapped-out and overextended as home values fell. Foreclosures followed in record numbers and a re-valuation of mortgage bonds and other financial instruments created the credit/liquidity domino effect we’re now experiencing.

Unfortunately, it’s going to get a lot worse before it gets better. According to the latest estimates, over 2 million subprime and Alt-A adjustable rate mortgage (ARM) holders will face payment increases of up to 30%-100% when their loans reset in the next 2 to 18 months. These loans make up less than 40% of the total mortgage market, but the negative effects, as we have seen, of increased foreclosure activity can have a ripple effect throughout the industry and around the globe.

What does this mean to you and your mortgage?

Sellers: If you’re planning on selling your home, be prepared for an even smaller pool of qualified buyers. While some experts predict a settling of this credit crisis over the coming year, tightened credit guidelines and diminishing mortgage products could knock out as many as 15%-30% of potential qualified buyers. Now is not the time to sit and wait for the best possible price. Have a serious talk with your real estate agent. Having experienced buying/selling transactions in your area, he or she can help you price your home accordingly. He or she can also help ensure that your buyers are pre-approved and stay pre-approved throughout the entire transaction.

Buyers: Get pre-approved by your mortgage professional. While there are a lot of great deals out there, getting credit is becoming tougher and tougher, and it’s taking longer and longer to complete a transaction. Remember, what you qualify for today could change tomorrow in a volatile market. For those looking to refinance, keep this in mind. There is no time to delay! Communicate with your lender. Don’t do anything that could negatively affect your credit, and make sure you get all your documentation in on time.

ARMs Borrowers: If your ARM is scheduled to reset in the next 2-18 months, you need to schedule an appointment with a mortgage professional right away. Whether your ARM is subprime, Alt-A, or even if you have a pre-payment penalty, don’t let a default or foreclosure situation sneak up on you. Did you know that your monthly payments can increase anywhere from 30% to 100% once your loan resets? At the very least, give yourself the peace of mind of knowing what your adjusted payment will be.

Borrowers with less-than-perfect credit: Each week it seems lenders are shedding more and more mortgage products. Many lenders have stopped offering No-Doc loans and are reducing all forms of Stated-Income loans. While it might be challenging, borrowers with credit issues need to see a loan expert. Often they have credit repair resources and other strategies to help you reach your financial goals.

Finally, there’s an important concept to embrace: all markets, while cyclical in nature, are self-correcting, be it credit, real estate, stocks, or bonds. For the last 6 or 7 years, real estate was booming and riding high. The correction we’re experiencing now – while it seems harsh and could get much worse – is, in a sense, “natural” and directly related to the extremely loose guidelines and perhaps overzealous lending and leveraging during the boom cycle.

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In today’s tough market many banks are closing doors and others are struggling to survive.  The banks that decided to offer “specialized” financing are now wishing they hadn’t and for the banks that stayed on the straight and narrow are glad they did. 

The real estate world is going through what many would call a “Tough Time.”  Most people in the Real Estate profession  have either retired or found new jobs because the last year and a half home sales have dropped more than 40% in some parts of the Nation.  What has the government done to try and fix this?  Well the fed has tried numerous times over the past six months to stabilize rates by lowering the fed funds rate and create a turn in the market to get things back on track.  So far none of those attempts have worked because we’re still dealing with declining home prices and banks are still having a hard time lending money.

Just recently, the Fed started allowing big firms to temporarily borrow money from the Fed for emergency financing that only large banks had access to previously.  These actions have caused many to protest and raise concern because many believe the Fed is putting tax payers hard earned money at risk by simply bailing out Wall Street.  The Bush administration and Fed Officials state this is an action they needed to take to prevent an economic meltdown.  Analysts believe the way the first three months of this year have gone, we’re heading towards what many would call a recession.

Despite all the negatives associated with today’s market, there are a number of positives that we’ve noticed take place during this time.  For the people losing homes to banks and dropping prices on their homes, there’s always new purchasers out there looking for a good deal.  Now is the time for First Time Homebuyers to start buying their dream homes.  Two years ago a home that was going for $250,000 is now going for $150,000.  Despite what people may think, there are still a number of programs out there for First Time Homebuyers.  There’s been a large increase in local and state grants that are strictly for First Time Homebuyers that gives them a chance to own a home and afford it.

Another positive that has been a result of today’s tough market is lowered interest rates.  The Fed has desperately tried to stabilize this market and it hasn’t had much affect on the market so far, but one thing it has done is helped out home owners who have a Home Equity Line of Credit.  Two years ago the prime interest rate was somewhere around 8.25% but over the past year the Fed has dropped that rate and is currently at 5.25%.  This has saved many home owners hundreds of dollars which has created a little relief. 

It’s a tough market but if you can get through the “Tough Times,” just think about how nice the good times are going to be.  Also just remember, you’re not the only one going through “Tough Times,” the whole Nation is.

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For those of you who are wondering what rates are doing each and everyday, we’ve added a Mortgage Rate Update text message alert company on our website.  I think this is a great tool for anyone who is in the Real Estate world because it updates you with the U.S. Average Rates each and everyday and will also update you with rate changes that take place during the day.  If you’re out on the golf course with clients and didn’t go into the office to check on rates, you will already have them texted to you each and every morning.  It’s a great way to stay on top of the market and be able to quote a rate when you need one.

 People who can benefit from this text message alert are:

 Consumers: If you’re in the market to purchase a home or refinance your home this text alert is for you.  If you’re looking to refinance your home and are waiting for that rate to drop below 5.5% this alert will be perfect for you.  When you wake up in the morning and want to know if today is the day to refinance, all you have to do is wait for the text message.  Or if you are purchasing a home and your not exactly sure on when to Lock in your Rate with your Mortgage consultant, all you have to do is wait for the text.  It is the perfect tool!

 Real Estate Professionals:  If you’re in the real estate world and work with clients on a daily basis,  it’s always good to have an understanding of what the market is doing.  Rates change daily, and you want to have an edge on your competitors by being a wealth of knowledge.  If a client asks you “What are today’s rates on a 30 year fixed?”  All you have to do is look down at your cell phone and quote the rate that was texted to you that morning.  It’s a great way to stay on top of today’s market and inform your clients about what’s going on.

 Mortgage Loan Officers:  Obviously your business is based around Mortgage Rates and getting clients approved and locked in.  This tool is extremely helpful for your business especially if you’re put on the spot and not exactly sure if rates went up or down.  The best feature about this text message blast is that it sends you an immediate text if there has been a price change during the day on mortgage rates.

 Overall, I recommend subscribing to the Mortgage Rate text message.  If you work in the real estate world or just curious about what today’s rates are, then I would reccomend you subscribe today.  It’s just an overall great way to stay on top of the market and be in the know.  Type in your number below to sign up for your Mortgage Rate Subscription or text ”MortgageRate” to 41411.

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If you’re having a tough time making your monthly mortgage payments then read the rest of this article and maybe you will be able to figure out how to make ends meet.  There are 6 different decisions you can make in order to make ends meet.  Some of them may be very difficult to make but in order for you to make the right decision you need to have no emotion.  I know it’s extremely tough to have no emotion when you’re deciding if you should keep your home or not but having no emotion will be better for you in the long run.  Below are the 6 decisions you may need to make:

1. Re-negotiate your monthly payment with the bank.  I’ve heard a number of people have tried to do this and have not succeeded, but more recenently banks are starting to open their ears.  I just heard a story about a CPA who was working out new monthly payments with his clients mortgage companies and coming up with great results.  Supposedly he helped lower his clients interest rate down to 2% which allowed his clients to keep their home. 

2. Refinance your loan.  If you are in a situation where you have a high monthly mortgage payment due to a high interest rate and you have enough equity left in your home to refinance, then I highly suggest this.  This may not be a choice for some homeowners because they are in a situation where they owe more on the home than it’s worth.

3. Sell and Cut your Losses.  A great way to get rid of your monthly payment is to sell your home and cut your losses.  If you have money in the bank to pay for these losses then this is an option.  If your home is worth more than what you owe on the home, then this is a great option as well.  This isn’t a great option if you owe more on the home than what it’s worth and you don’t have any money in the bank to pay for your losses.

4. Short Sale.  Short selling your home in today’s market is the best way to cut your losses if you can’t do any of the above.  A Short Sale consists of presenting your bank with a contract that is below market price and asking if they would be willing to accept the contract and close out your lien without putting a deficiency lien against you for the difference.  With the way the market is going, banks are more likely to accept a short sale.  A number of banks are dealing with a lot of foreclosures which consists of a lot of fees for a bank, so doing a short sale cuts out a lot of these fees.  More than likely if they don’t accept a short sale it will result in foreclosure which is extremely costly.

5. Foreclose.  Foreclosing on a property is probably the worst thing you can do.  But if you have no other option, then foreclosing is definitely a way out.  If you read my previous article about foreclosing than you know exactly why you shouldn’t.  Your credit score will go down, it costs the bank a lot of money, and the bank has 4 years to put a deficiency lien against you which may cause you to be in the same position years down the road. 

6. Bankruptcy.  Bankruptcy is not a bad decision if you have no other way out and there is no light at the end of the tunnel.  Filing a Chapter 7 Bankruptcy will wipe away all your debts and is basically be the end of the story.  In today’s world it’s tougher to qualify for bankruptcy, you either need to have an income below the median income or you need to be qualified as insolvent.  Either way, once you have qualified your creditors can no longer contact you and your assets will be divided between the creditors.  The creditors can not put any lien against you and you are officially working with a clean slate.  Only problem with this is your credit score drops dramatically and you’ll have a tougher time qualifying for credit cards, auto loans, and mortgages.

None of these decisions are something you want to make.  But depending on your situation it may be something you have to make.  As I’ve said before, I don’t reccomend you making a decision this big without first consulting an attorney or CPA. Every situation is different so contact someone who can review yours and help you make the right decision.

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