Mortgage Rate News

With the coming New Year, many people start thinking about the changes they would like to make in the coming year. One of these changes is often to buy a new home. And, while buying a home required planning and preparation in the past, it requires even more now, thanks to the current state of the mortgage market. Here are some of the important things you need to know about financing and credit for 2009:

Lower interest rates make this a good time to buy a home

The government is determined to do what it can to get the housing market moving again, and that includes taking measures to force down mortgage interest rates. Interest rates are lower than they have been for years, and this means that 2009 may be a good year to get a new home loan. Additionally, with such low rates, it can also be a good idea to refinance an existing mortgage — if you do not want to buy a new home.

Changes to the FICO score formula

You need to have good credit in order to get a good interest rate on your home mortgage loan. Indeed, many mortgage lenders have harder credit requirements right now than they have in the past, since they have become worried about the creditworthiness of their borrowers. It is also important to note that FICO is introducing a new credit score formula in 2009. This means that your credit score could change rather dramatically, depending on the finer shadings FICO will be adding to its scoring process.

New FHA loan rules are in place

If you are looking for an FHA loan, be aware that new rules are in place. Down payment assistance is harge to get, and the down payment requirement is higher. (Many mortgage lenders are requiring larger down payments than have been needed in past years.) Remember, though, that the FHA insures mortgages, and does not lend. This means that your mortgage lender might have more stringent rules to approve you.

In general, getting a home mortgage loan in 2009 is going to be a little more difficult than it has been in the past. You are going to need more documentation to prove your income, a higher credit score and a larger down payment. Before you apply for a home mortgage loan in 2009, make sure that you do the following:

1. Know about different types of loans, and how they differ in payment structure.
2. Double check your credit score after the new FICO formula is put into place next week, and make sure you know which direction your credit score is headed.
3. Save up for a down payment of at least 3.5% (FHA rules), but aim for a 5% to 10% down payment.
4. Keep records of your income, and get your tax stuff together for 2008 at soon as possible so that you have it to show your mortgage lender for income verification.
5. Set money aside regularly to make sure that you can afford a mortgage payment.
6. Don’t forget to include taxes, closing costs and maintenance costs when you are figuring the total cost of owning a home.

One of the traditions that I love that my family does is to stay home for Christmas. When we first married, my husband and I decided that we wanted to celebrate Christmas Eve and Christmas Day in a relaxed way. And, since our family all lived hundreds of miles away, traveling was very inconvenient. We so enjoyed our ability to take it easy on Christmas as hermits that we made it our tradition. And now we wait to see family until the day after Christmas.

Grateful for our home

Last year we bought a home, and we are very grateful that we have it. Our home is lovely at Christmas (at least I think so). We are also glad that we were able to get a 30 year fixed rate for our mortgage loan. It is a good mortgage. However, this Christmas we are thinking of refinancing — even though we’ve only been in the house for a year. Interest rates are very low, and we could probably refinance to a 20 year mortgage loan, helping us pay off the mortgage faster and build equity at a more rapid rate.

Other things I have been considering this Christmas, with regard to my home, include:

• Putting in a sprinkler system.
• Planting attractive shrubs to increase curb appeal.
• Moving rooms around so that my home office is upstairs.
• Planting a garden.

Since our home was new construction, a lot of things were missing. We have been saving up money so that we can makes changes to the yard and the landscaping. We would love to  see improvements, since they will increase the value of our home, and allow us to sell it more easily when the time comes.

Christmas is a time of reflection and gratitude, as well as being a time to enjoy family. Happily, we are able to enjoy the season. I hope that you are having a lovely and blessed holiday season as well.

Merry Christmas from the Banks.com Mortgage Blog!

Home prices have reached lows not seen for nearly two decades, and home sales have declined rapidly. That’s the housing market news right now. Indeed, home sales dropped so quickly in November that it has been reported as “breathtaking” by The New York Times:

Sales of existing homes declined 8.6 percent last month, to a seasonally adjusted rate of 4.49 million, according to the National Association of Realtors, a trade association. The median price of a home fell 13 percent in November , to $181,300 from $208,000 a year ago. That was the lowest price since February 2004.

“They’re about as god-awful as they can get,” said Robert Barbera, chief economist at ITG. “This is pretty breathtaking stuff.”

One of the issues right now is that, despite an increase in mortgage loan applications, home sales are not going through. Some would-be buyers can’t seem to get approved for a mortgage loan, while many of the applications are actually for refinancing — to take advantage of the lower interest rates being offered right now. There are some great deals out therefor those in a position to buy homes and qualify for mortgages. Many people are considering buying homes right now, including second homes that they can rent to others (useful, since there are more renters after all the foreclosures).

Meanwhile, government leaders are trying to figure out how much money they will need to throw at banks and other big companies in order to get a “trickle down” effect to work. Perhaps our leaders should consider throwing this money at individuals — the American people — instead. Large payouts to individuals would likely result in the ability to buy homes, make payments and generally get things moving again in the housing market.

And putting the cash directly in consumer hands would also stimulate the economy in other ways.