Mortgage Rate News

One of the more interesting issues to consider when you are in financial straits and planning to declare bankruptcy is what happens to your mortgage when you file. There are many different scenarios. In some cases, it is possible to save your home and protect it — as long as you will be able to afford to make your mortgage payments after the rest of your debts have been discharged. If you can’t afford the payments, you can actually walk away clear, as long as you have not affirmed your debt. First and second mortgages (but not liens) will be cleared as part of your bankruptcy proceedings.

You should realize, though, that any homeowners association fees accumulated after you file will be your responsibility. It’s a bit of a quirky rule. All of what you owe prior to filing can be cleared, but fees that pile up after you have filed need to be paid by you.

Trying to avoid bankruptcy

It is better, though, if you can avoid bankruptcy. Some people use bankruptcy as a method of postponing foreclosure. However, this can backfire, and may not be the best option. Instead, carefully review your options and see whether you can get a loan modification or sell your home in a short sale. (Be careful with a short sale; you may end up signing an agreement to repay a junior lien — and you don’t want to do that.)

In the end, bankruptcy should be your option of last resort. And before you file, make sure you consult with a knowledgeable attorney. You want to arrange things so that you get the maximum protection, and agree as few obligations as possible, if you are truly in need of bankruptcy to get you back on your feet. And once you are through with the process, it is vital that you proceed carefully and begin rebuilding your credit.

This week has seen another change in mortgage interest rates and in the number of mortgage applications seen. Mortgage rates have fallen to 5.12%, reports Freddie Mac. This is on a 30-year fixed loan. The 15-year rate is 4.56%. In addition to falling mortgage rates, there has also been an increase in mortgage loan applications, reports Bloomberg:

Falling home prices and a government tax credit for first- time buyers are bolstering tepid demand. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan rose 5.6 percent to 527 in the week ended Aug. 14, the Washington-based MBA said yesterday.

Refinancing is very popular right now, as people decide to take advantage of lower mortgage rates. And, for those with FHA serviced mortgage loans, it is possible to get refinanced even with negative equity. I just received notice that my home has actually appreciated in value, and I am seriously considering a refinance. Plenty of first-time homebuyers are also finding that there are incentives to take the plunge right now. Paying points up front can even help buyers get the best possible mortgage interest rate.

Refinancing: Improve your credit score

Refinancing is a bit more difficult right now. In order to get approved for some kinds of credit, you need to have a good credit score. Many creditors and lenders have increased their credit requirements, making it difficult to get approved for loans. In order to get a good interest rate, and in order to get approval, you need to have good credit. It can take 30 to 90 days to see a substantial difference, and you may find that you need to make big changes in order to sufficiently move your credit score higher.

However, if you can buy or refinance right now, you have the chance to save a great deal of money in interest payments.

Image by melodramababs via Flickr

New home sales made an unexpectedly large gain in June, according to reports. Data shows that new home sales increased 11% in June. This is providing speculation that the worst of the housing market slide is over. Bloomberg reports on the implications of this jump in new home sales:

Deutsche Bank Securities Inc. and Goldman Sachs Group Inc. economists said today’s figures signal an end to the slide in home construction and sales. While that means the drag on economic growth will turn to a stimulus in the second half of the year, property values are likely to continue falling and rising unemployment will temper the recovery, analysts said.

“We’re barely past the housing bottom, this thing is still fragile,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York. “It’s not premature to talk about home prices bottoming — it’s somewhere in the next three to six months. There is light at the end of the tunnel.”

Of course, this doesn’t mean that everything is fine. There are still concerns over  home values, and there is the possibility that the employment picture could provide another boost to inventory on the market if continued job loss prompts more foreclosures. However, there is hope that this could mean that the housing market — and perhaps the economy — is on its way back up. It will be interesting to see how things go in the coming months.

For those interested in buying a home in the relatively near future, it is time to be on the alert for rising home prices. While the pricing bottom may not have been reached, there are probably some markets where home prices are starting to make a modest recovery. It is a good idea, before you decide to get a home mortgage loan, to do research on your local real estate market, and figure out whether you should start the buying process now, before recovery sets in and you can no longer find the great deals.