7 Tricks To Get The Best Mortgage Rate | Huffington Post

If you are a run-of-the-mill Joe or Jill, buying a house is probably the single largest financial commitment that you will make during your lifetime. What makes the stakes even higher is the fact that most of us plan to buy a house only once in our lifetime; hence getting it right the first time around becomes even more important. However, getting the best deal is never that easy as multiple factors play a role in determining how high or low your mortgage payment would be. The following are a few tips to get the best possible deal on your mortgage.

A High Credit Score is an Asset

 

It all starts here, doesn’t it? A few late and missed payments later, you suddenly find that your credit score has tanked and you are being denied or being charged prohibitively high interest rates for additional credit – be it a credit card or a mortgage. In this regard, a high credit score can play a key role in securing you the house of your dreams backed by an affordable mortgage. But to get to the point where your credit score becomes an asset, you need to start with the simple things, make all your payments – phone bills, rent, credit card dues, etc. on time and definitely no missed payment. Then there’s the matter of outstanding debt obligations, the lower the outstanding credit in your name, the better off you will be when it comes to handling the mortgage. It is therefore best to get a copy of your credit report and check your score before you apply for a home loan.

Compare Multiple Offerings

 

In case you haven’t been living under a rock, you know that there are choices aplenty when it comes to choosing a mortgage – perhaps one too many. This even after the fact that, subprime lending has been relegated to the position of a historic misadventure. But apart from being spoilt for choice, this also can be the source of a bit of confusion as every one of those will differ in one way or another – interest rate, lock-in details, tenure and so on. Then there is the common mistake of comparing based on only a single criterion such as the interest rate. Don’t make that mistake and compare available options based on multiple criteria such as processing charges, loan tenure and interest rate before zeroing in on an option that suits your requirement. A number of websites offer you the option to check your mortgage options.

 

Ensure that Multiple Credit Checks don’t happen

 

Here’s another common mistake that many prospective applicants make – they apply for multiple mortgages thinking that they can pick the one that offers them the best deal. The problem with this is that, all of these separate applications lead to separate credit checks. Whenever a prospective lender checks on your credit score, it counts as a hard look and future lenders who check your credit report will be able to see the details of these checks. When multiple credit checks show up on your report within a short time period, it will portray you as a credit hungry individual and reduce your chances of being approved for a mortgage. But it does not end there, in case one or more of these lenders rejects your application, your credit score will take a nose dive and make it even more difficult to get approved for credit in the future.

 

The Home Equity Conundrum

 

Home equity or down payment is among the most important considerations when you are planning to get a mortgage. The logic is simple, the more you pay as down payment, lower your mortgage payments will be. The normal down payment is 20% of the house’s purchase price. However, you can pay more or less as per your financial situation. That said, in case you go for lower amounts, your monthly mortgage payments will tend to increase and you will also be charged interest on this extra amount; so you can end up shelling out quite a bit by the time you pay off your mortgage.

Apart from the extra interest charges, there is also the matter of the private mortgage insurance, which is mandatory in case you make a low down payment on your new house. If not anything else, it will just add to your mortgage burden in the long term. The ideal way to deal with this conundrum is to make as much of a down payment as possible without completely hampering your budget and also finding an affordable house, instead of your dream home.

Choose your mortgage tenure wisely

 

It is only natural that you explore multiple tenure options when you are seeking a home loan that works for you. If you seek a longer mortgage term, individual EMI payouts will be lower as compared to a shorter one. But the lower EMI payout comes at a price. The longer your repayment term, the more your absolute interest payouts i.e. the more expensive your mortgage. So be very careful when making this decision, as you need to look out for a tenure which minimizes your interest payout while ensuring that your individual EMI payouts are not prohibitively high. Using a home loan EMI calculator would definitely help you make an informed decision regarding the most affordable tenure for your home loan.

 

Qualification for Special Programs

 

God might have created everyone equal, but the man made financial sector works a bit differently. Some groups of individuals qualify for a reduced rate of interest based on meeting some predetermined qualifying criteria. Find out if you or your spouse qualify for any such programs, as this will make it a lot easier for you to afford your dream house. Some of the leading schemes with regards to a mortgage include VA loans, FHA loans, USDA loans, first-time home buyers program and so on. Information regarding these and other special programs can be found online as well as through various state-sponsored and federal agencies.

 

Get the Closing Cost Issue Sorted

 

The moment you finalize or close the purchase of your house, you have to deal with closing costs. These costs are usually equal to 3% of the home’s purchase price and comprise multiple factors including processing charges, appraisal costs, fee for title insurance and charges for underwriting. If possible do include this in your research for the cheapest mortgage. However, more often than not, the charges are similar, no matter which lender you decide to go with. But trying never hurt, so do take some time to shop around for the lowest closing cost before making this key financial decision.

 

Conclusion

 

You are well within your rights to look for details not just when you are indulging yourself during a festive sale, but also when you are purchasing a new car or a house. So make the most of available resources and follow the seven key tips mentioned above to get the best mortgage deal that you can afford. Keeping in mind that your mortgage is a long term financial commitments, even small savings over the term can accumulate into quite a corpus, which adds to your savings and can be used for other investments as well as luxuries in the future.

What Is the Average Price per Square Foot for a Home — and Why Does It Matter? | Fox News

If you’re hoping to buy a house, the very first dollar figure you’ll want to know is the home’s price, of course. But a close second is its price per square foot — and the average price per square foot for a home in that neighborhood (or the median price, which is actually a better representative of the middle ground). Here’s what you should know about these numbers, and how to use them to your advantage as you shop for a home.

How to calculate the price per square foot for a home

Typically, a home’s price per square foot is prominently featured on the listing — both online as well as in those property information sheets you get at an open house.

But a home’s price per square foot doesn’t tell you much on its own. This number is best understood in comparison with similar homes nearby. So your next step should be to type in the city, neighborhood, or ZIP code of interest into a site like realtor.com/local. This will give you the median price per square foot for homes in that area (as well as median asking price, closing price, and number of homes for sale — all useful info during a house hunt).

What’s the average price per square foot for a home?

According to the latest estimates, the median price per square foot for a home in the United States is $123. But that can vary widely based on where you live and other factors. For instance, on the low end, you’ll pay $24 per square foot in Detroit; on the high end, in San Francisco, $810.

Why such a wide range? Well, it’s no secret that certain neighborhoods are considered more desirable than others, and fetch a higher price as a result.

“The hotter the neighborhood, the higher the price per square foot,” says Anthony Stellini, a Realtorwith RSR, a division of the real estate firm Nourmand & Associates. But odds are you knew that already. What you may not know is how this info can help you get a better deal on a house. More on that next!

How price per square foot can help you negotiate

When you run your comparison of a home’s price per square foot with the neighborhood median, you’ll be able to suss out whether a place is a bargain or overpriced.

Let’s say you see a home you love priced at $150 per square foot, but then you find that the median price per square foot for the neighborhood is $135. This suggests the home you’re looking at could be priced too high — which spells an opportunity for you to negotiate for a lower purchase price. Just point out to the sellers that homes of similar size in the area are going for much less. Or, conversely, if the median price per square foot is $135 but this home is only $120, you may have a bargain in your crosshairs that you should snap right up!

Mortgage Rates Surge to 4-Month High | Realtor Magazine

For the second week, mortgage rates moved higher. This time, the 30-year fixed-rate mortgage inched above 3.5 percent for the first time since June.

“This month, mortgage rates seem to be catching up to Treasury yields and returning to pre-Brexit levels,” says Sean Becketti, Freddie Mac’s chief economist.

Freddie Mac reports the following national averages with mortgage rates for the week ending Oct. 20:

• 30-year fixed-rate mortgages: averaged 3.52 percent, with an average 0.5 point, rising from last week’s 3.47 percent average. Last year at this time, 30-year rates averaged 3.79 percent.
• 15-year fixed-rate mortgages: averaged 2.79 percent, with an average 0.5 point, also rising from last week’s 2.76 percent average. A year ago, 15-year rates averaged 2.98 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 2.85 percent, with an average 0.4 point, increasing from last week’s 2.82 percent average. Last year at this time, 5-year ARMs averaged 2.89 percent.

First-Time Buyers Behind Latest Housing Gains | Realtor Magazine

Existing-home sales rebounded in September as first-time home buyers flooded the market. Sales to first-time home buyers topped a 34 percent share in September, the highest in more than four years, according to the National Association of REALTORS®.

Total existing-home sales – which are completed transactions for single-family homes, townhomes, condos, and co-ops – rose 3.2 percent in September month-over-month to a seasonally adjusted annual rate of 5.47 million, NAR reported Thursday. Sales are now at the highest pace since June (5.57 million) and are 0.6 percent higher than a year ago (5.44 million). All major regions across the U.S. saw a pick up in closings last month, NAR reports.

 

Here’s a closer look at how existing-home sales fared across the country in September:

• Northeast: existing-home sales rose 5.7 percent to an annual rate of 740,000, unchanged from a year ago. Median price: $261,600, up 2.1 percent from a year ago.
• Midwest: existing-home sales increased 3.9 percent to an annual rate of 1.32 million in September, and are now 2.3 percent above a year ago. Median price: $184,500, up 5.9 percent from a year ago.
• South: existing-home sales inched up 0.9 percent to an annual rate of 2.16 million, but remain 0.9 percent below a year ago. Median price: $204,000, up 6.6 percent from a year ago.
• West: existing-home sales surged 5 percent to an annual rate of 1.25 million in September, and are now 1.6 percent higher than a year ago. Median price: $345,400, up 8.1 percent from a year ago.

 

First-time home buyers were behind most of that sales momentum last month, NAR reports.

“There’s hope the leap in sales to first-time buyers can stick through the rest of the year and into next spring,” says Lawrence Yun, NAR’s chief economist. “The market fundamentals – primarily consistent job gains and affordable mortgage rates – are there for the steady rise in first-timers needed to finally reverse the decline in the home ownership rate.” 

Still, the limited number of homes for sale on the market could prove a big roadblock.

“The home search over the past several months for a lot of prospective buyers, and especially for first-time buyers, took longer than usual because of the competition for the minimal amount of homes for sale,” Yun adds. “Most families and move-up buyers look to close before the new school year starts. Their diminishing presence from the market towards the end of summer created more opportunities for aspiring first-time home owners to buy last month.”

5 Key Housing Stats

Here are a few key housing indicators from NAR’s September housing report:

1. Home prices: The median existing-home price for all housing types last month was $234,200, a 5.6 percent year-over-year increase.

2. Days on the market: Forty-four percent of homes sold in September were on the market for less than a month. Properties stayed on the market an average of 39 days last month, down from 49 days a year ago. Short sales spent the longest time on the market at a median of 118 days; foreclosures sold in 67 days; and non-distressed homes sold in 38 days.

3. Distressed sales: Foreclosures and short sales dropped to a new low in September, comprising 4 percent of sales. That is down from 7 percent a year ago. In September, 3 percent of sales were foreclosures and 1 percent were short sales. On average, foreclosures sold for a discount of 15 percent below market value while short sales were discounted 11 percent.

4. Cash sales: All-cash sales comprised 21 percent of transactions last month, down from 24 percent a year ago. Individual investors make up the biggest bulk of cash sales. They purchased 14 percent of homes in September, up from 13 percent a year ago.

5. Inventories: More housing stock was added to the market by the end of September, up 1.5 percent month-over-month, but inventories are still 6.8 percent lower than a year ago. Unsold inventory dropped to a 4.5-month supply at the current sales pace.

Five signs you’re ready to buy your first home – The Washington Post

Purchasing a home is one of the biggest decisions of your life. Not just because it’s the place where you’ll lay your head each night, but also because your home is one of the largest purchases you’re likely to make.

As a certified financial planner, I know that purchasing a home, especially for a first-time buyer, can be an extremely stressful, although exciting, time. Over the past few years, as the housing market around Washington has improved, I’ve noticed a few telltale signs that a client is financially prepared to purchase their first home. If you’re thinking about becoming a homeowner, consider these five things.

1. You have positive cash flow.

Positive cash flow means you’re bringing in more income than you’re spending on everyday items and debt payments. The Consumer Financial Protection Bureau puts the debt-to-income ratio at 43 percent. This ratio is one way that lenders measure your ability to repay debt. It can be calculated by dividing your total recurring monthly debt by your gross monthly income. However, just because lenders use this ratio, you may need to take a stricter approach. The debt-to-income ratio uses gross income, which means income before taxes, when really we pay bills with net income after taxes.

 

If you’re carrying a great deal of consumer debt, paying just the monthly minimums and increasing your balances every month, you need to get your debt in order before taking on additional debt. If you pay off your credit balances monthly and would still have room in your budget after swapping your rent check for a mortgage payment, then you are definitely a candidate for buying a home.

2. You have enough saved for a down payment.

Many home buyers take money out of their 401(k) or Individual Retirement Account to cover the down payment. This is a costly mistake that can negatively impact retirement savings. Taking money from your 401(k) or IRA denies years of compounding interest and has to be paid back with post-tax money. Instead, dedicate a savings account, which is more liquid, to be used for a down payment.

3. You have job security.

Or, you have a steady stream of income with a high degree of predictability. You will need to reliably generate enough income to withstand a monthly mortgage payment.

A monthly rent check in the Washington region may be comparable to the principal and interest payment of a mortgage here, but mortgage payments also include property taxes and higher insurance costs. The upside to a mortgage payment is the tax deduction. As a result of a larger tax deduction, less money may need to be withheld from your paycheck.

4. You’re ready for a commitment.

You’ve probably given a lot of thought to the house itself, but first-time home buyers should also take into account supplementary expenses. Unlike renting, there is no longer a landlord to fix a broken dishwasher. Additional expenses to consider include home maintenance repairs and replacements, and the expense of selling the home if and when you ever do.

 

You should be prepared to pay these additional expenses, and not be shaken by the possibility that you may eventually have to replace the roof. You should be excited to make the space your own and identify what that means to you. If you want to renovate the kitchen and bathroom on the house, add that cost to your budget.

5. You’re ready to put down roots.

Before you jump into a home or neighborhood, do your due diligence. A home can be viewed as an investment, but that’s not the sole purpose of why you buy. You want the stability it provides and a home that is your own. Depending on how long you plan to live there, your home may or may not appreciate, so you should look at it as more than just a way to build equity.

West Coast Real Estate Update: October 2016 #2 | Holland & Knight LLP – JDSupra

California Legislature Revises De Minimis Exemption of Finance Lenders Law

Real estate projects that utilize federal New Markets Tax Credit (NMTC) financing recently received a reprieve from a state licensing requirement when the California Legislature passed Senate Bill 777. The bill provides that the California Finance Lenders Law (CFLL) does not apply to any person or business that makes only one commercial loan in a 12-month period.

When the CFLL was enacted in 1997, it required any person or business engaged in the business of making consumer or commercial loans to first obtain a license from the commissioner of business oversight. However, those that made only one loan in a 12-month period fell into a de minimis exemption and were not subject to the licensure requirement. In 2013, the legislature attempted to expand the de minimis exemption by increasing the number of allowable loans made in a 12-month period to five. But the 2013 amendment included an important caveat: To qualify for the de minimis exemption, the making of the loans had to be incidental to the business of the entity making the loans.

This new caveat created headaches for certain lenders, particularly those utilizing NMTC financing. In a typical NMTC financing scenario, a community development entity (CDE) applies to the U.S. Department of the Treasury Community Development Financial Institutions Fund for an allocation of NMTC tax credits. When a project is ready to be funded, the CDE creates a single-purpose entity to receive money from investors, allocate tax credits and disburse the proceeds of the investment. The creation of a specific entity to facilitate the flow of funds on NMTC projects not only is demanded by investors, but also is required by law when the CDE is a nonprofit, which is common. However, because the entity’s sole purpose is to disburse loan proceeds, its lending activities are not incidental to its business. Accordingly, under the 2013 amendment to the CFLL, such single-purpose entities were not eligible for the de minimis exemption.

SB 777 retains the language of the 2013 amendment, but adds back the original exemption for those that make only one commercial loan in a 12-month period, regardless of whether it is incidental to their business. Therefore, the bill ensures that single-purpose entities created to make a single loan, such as those used in the context of NMTC projects, do not have to be licensed under the CFLL. The new exemption takes effect on Jan. 1, 2017, and will remain in effect until Jan. 1, 2022.

Congress Extends EB-5 Program

Congress has extended the U.S. Immigrant Investor Program, or the EB-5 program as it is commonly known. The program had been set to expire on Sept. 30, 2016, but will now run through Dec. 9, 2016.

The EB-5 program grants green cards to foreign individuals who invest at least $1 million in ventures that produce permanent jobs in the U.S. The required investment amount is lowered to $500,000 in certain targeted employment areas. The program has proven extremely popular among foreign investors seeking a fast-tracked process to U.S. citizenship and U.S. developers seeking funding for real estate projects. In 2014, EB-5 investment totaled $2.6 billion nationally, and California led all states in EB-5 activity.

However, an extension of a few months is not the victory for which some had hoped. Sen. Patrick Leahy (D-Vt.) proposed a bill last June that would have extended the EB-5 program for five years. However, Leahy’s bill has languished in the Senate Judiciary Committee as Congress and stakeholders discuss substantial reforms to the EB-5 program. Some investors will stay on the sidelines until the long-term fate of the program is known.

“We believe the current extension has been a positive, but the market will still be waiting to see what happens,” said Ronnie Fieldstone, an attorney who represents developers and EB-5 regional centers.

While Congress is unlikely to pass a comprehensive bill that provides both major reforms to and a lengthy extension of the program before Dec. 9, 2016, many believe that a smaller bill that provides another minor extension and increases the minimum investment levels to $800,000 and $1.2 million is forthcoming.

Cities Use Inclusionary Zoning Policies to Address Urban Housing Needs

As cities across the U.S. experience economic growth in the wake of the Great Recession, a lack of affordable housing is pricing workers out of urban areas, lengthening their commutes and diminishing livability. In response, local officials in cities such as New York, Los Angeles, San Francisco, Atlanta and Seattle are turning to inclusionary zoning policies.

Under inclusionary zoning policies, cities require or encourage developers to create below-market housing as a condition to obtaining zoning approval of a proposed market-rate development. While each city’s inclusionary zoning policy follows the same general principle, no two are exactly alike. Some policies include inflexible mandatory requirements that require a greater number of affordable units, impose longer rent restrictions and apply community-wide with no opt-outs. Other policies are more voluntary, require fewer affordable units, impose shorter rent restrictions, and apply only to specific housing types and locations with available opt-outs.

“Local zoning policies can effectively encourage development of workforce housing, mostly in strong real estate market environments where communities provide the optimal mix of incentives,” says Stockton Williams, author of a recent Urban Land Institute report on the effectiveness of inclusionary zoning policies.

However, the Urban Land Institute report noted that inclusionary zoning policies tend to be ineffective in areas not experiencing significant market-rate development. According to the report, inclusionary zoning policies must have the ability to adapt in response to changing market conditions. Appropriately balancing consistency and flexibility is perhaps the central challenge for cities seeking to make the best use of this particular policy tool.

4 reasons why paying off your mortgage isn’t always the best move

You’ve likely heard about the debt-free philosophy espoused by financial gurus such as Dave Ramsey. The idea of gaining financial freedom by paying off all your debts as quickly as possible — even a mortgage with a low, fixed rate — may be appealing, but it’s not always a wise strategy, some financial experts say.

With rates still hovering near historic lows, mortgages are considered “cheap” debt. And unless you’re earning a high income relative to your living expenses, putting extra money into your home could eat up a considerable chunk of your monthly take-home pay.

Here are four reasons why you shouldn’t be in a rush to pay off your home.

1. You’ll lose monthly cash flow

The concept of borrowers wanting to own their homes sooner is mind-boggling to financial planner Ric Edelman, chairman and CEO of Edelman Financial Services.

“The best financial planning advice I give to people is to carry a 30-year, fixed-rate loan. No one should be in a hurry to pay it off or to refinance to a 10- or 15-year loan,” Edelman says. “You lose liquidity when you take a dollar and give it to your lender to pay off a [mortgage] loan; you’ll never see that money again.”

Sure, it might feel great to pay off your home sooner, Edelman says, but those warm fuzzies will dissipate when you’re trying to make payments on a high-interest credit card or student loans.

“You’ll never eliminate property taxes, homeowners insurance or maintenance costs,” Edelman says, “and you’ll always need money in the future to pay for all of these things.”

2. You might be in a bind during an emergency

Let’s say you lose your job or home values in your area take a nosedive, the way they did during the Great Recession. If you don’t have an emergency fund of at least three to six months’ worth of living expenses — including your mortgage payments — and your money is tied up in a short-term home loan, you’ll be struggling.

That increases your risk of losing your home, which defeats the goal of trying to claim ownership sooner, says Brian Koss, an independent mortgage lender in Danvers, Massachusetts.

“If you can’t make your monthly payment, having a ton of equity won’t really help you. It’s wonderful, but you can’t keep it,” Koss says. “And banks tend to foreclose on the homes with the most equity faster because they make more money.”

3. You might not be able to save enough for retirement or other financial goals

In a recent Bank of America survey, 92% of homebuyers said saving for or paying off a home is important, while 91% feel that saving for retirement is critical.

It’s true that debt can be intimidating. But if you’re not maxing out your matching contributions to a 401(k) or otherwise saving for retirement, you’ll be burning a bridge, Koss says. Saving for retirement early is critical if you want to take advantage of compound interest, the process by which your investment gains earn their own gains over time.

If you’re truly gung-ho about paying off your home ahead of schedule, consider setting up automatic transfers to an interest-bearing account each month. That can let you pay off your home, say, 20 years down the road, Koss says.

By then, you’ll be more certain of your income growth, cash reserves and whether you’ve saved enough to fully fund your retirement — and you can take into account inheritance or whether your children might need financial help.

“Keep in mind that in the last 10 or 15 years of a 30-year mortgage, you’re paying the least amount of interest in the amortization schedule,” Koss says. “By then, it makes little sense to rush and pay off the back end of that loan.”

4. You’ll lose tax benefits

Ask any homeowner, and they’ll tell you that one of the best financial aspects of homebuying comes at tax time. When you buy or refinance, the IRS generally allows you to deduct interest you’ve paid on home equity debt of up to $100,000 — $50,000 if you’re married and file separately.

Paying your home off sooner means that you’ll lose that tax perk much earlier, says Ann Thompson, Bank of America regional mortgage sales manager for Northern California.

That said, the amount you’ll save with the mortgage interest deduction probably won’t outweigh what you’d save on interest. The real benefit comes in the initial years of borrowing; but over time, you’ll pay less to interest and more to principal.

If you have an emergency fund, plan to stay in your home until you’re old and gray, and you’re in good shape for retirement, making an extra home payment each year can shave a few years off your home loan, Thompson says.

But be careful not to sell yourself or your financial goals short in order to own your home sooner. After all, financial experts consider mortgage debt good debt, provided you’ve bought within your means and have a loan that’s manageable for the long haul.

3 Key Tips for Mortgage Shopping — The Motley Fool

Buying a home is likely to be the biggest financial transaction that you will ever make, so it is natural to feel overwhelmed. To help make the process a little bit easier for you, we asked a team of Fools to share their top tip to keep in mind when shopping for a mortgage. Read on to see what they had to say.

It pays to shop around

Matt Frankel: Far too few people shop around for a lender before getting a mortgage. Interest rates and origination costs can vary considerably between lenders, and you might be surprised at how big of a difference a seemingly small rate savings can make.

For example, let’s say that you’re buying a home for $300,000 and putting 20% down, which means that you’ll need a $240,000 mortgage. One lender offers you a rate of 4% while another offers you 3.9% with the same origination costs on a 30-year mortgage. Sounds pretty close, right? Well, the “barely” cheaper rate will save you over $5,000 in interest over the term of the loan. That’s why it’s important to shop around.

Applying to several mortgage lenders won’t ding your credit score, either. It’s true that credit applications can affect your score, but the FICO formula has a rate-shopping provision for just this purpose. Essentially, if you complete all of your mortgage or auto loan applications within a normal shopping period (14 or 45 days, depending on the exact version of the FICO formula), it will count as a single inquiry for scoring purposes. In other words, whether you apply for one mortgage or 20, it will have the exact same impact on your credit.

By doing a little rate-shopping, you have nothing to lose and thousands of dollars to potentially save.

Consider an adjustable-rate mortgage

Selena Maranjian: With interest rates having been near-historic lows for a long time now, opting for a fixed-rate mortgage has generally been a sensible move. There are times when an adjustable-rate loan will serve you better, though.

Remember that a fixed-rate mortgage features an interest rate that’s locked in. Lock in a 4.5% rate on a 30-year fixed-rate mortgage, for example, and no matter where interest rates go, you’ll get to enjoy that low rate for up to 30 years. (And with rates so low, it’s likely that they will go up in the coming years, at least to some degree.)

Meanwhile, an adjustable-rate loan typically features a starting interest rate that’s often lower than what you’d get with a fixed-rate loan. It’s typically locked in for a relatively short while, such as three or five or seven years. A 5/1 adjustable-rate mortgage, for example, will hold the rate steady for the first five years before starting to adjust it annually — upping it if prevailing rates rise or dropping it if prevailing rates fall. There’s often a cap limiting how much your interest rate can jump at one time, but if we head back into double-digit interest rates in the future, your adjustable-rate mortgage could feature double-digit rates at some point, too — and that can make your monthly payments much steeper.

That presents a scary scenario, but not if you’re only going to be in your home for a few years — or if you’re very sure that rates will fall or stay stable. As an example of how low adjustable-rate interest rates can go, note that the Bank of America website recently advertised a 30-year fixed-rate loan (with 0.813 points) for 3.625%, vs. a rate of 2.5% for a 5/1 adjustable loan (with 0.761 points).

Don’t forget about online lenders

Brian Feroldi: As Matt said above, it can really pay off to shop around. However, your natural inclination might be to only consider banks that have a branch in your local area. That could be a mistake as many online-only lenders can offer incredible deals, so do not forget to include them in your search. 

I experienced this firsthand less than a month ago. I saw that mortgage rates had fallen, so I crunched the numbers and realized I could save a great deal of money by refinancing. I called a handful of local lenders to get quotes, but I also decided to fill out an application with Bank of Internet (NASDAQ:BOFI), too. To my surprise, Bank of Internet offered me the best deal by far, so I decided to move forward with them.

Fast-forward a few weeks and the closing was a success. When it was all said and done, I calculated that going with an online-only bank saved me more than $1,000 in closing costs over what my local lenders were offering.

If you are in the market for a mortgage, make sure you include a handful of online lenders in your search. You might just be surprised at how competitive their prices can be.

How Much Mortgage Can I Get? Home Loan Math Made Simple

Of all the questions you may have when buying a home, one of the biggest that may stump you is this: How much mortgage can I get? After all, the amount of money you can borrow could spell the difference between snagging your dream home or being priced out of your favorite neighborhood entirely.

Of course, one way to know for sure is to head to a lender and get pre-approved for a mortgage—that way you’ll know exactly how much money you can spend on a house. Still, if you don’t want to wait until the banks open (e.g., it’s 2 a.m., you’ve found the perfect home online, and you need to know right now if you can buy it), there are ways to do the mortgage math yourself.

Break down the mortgage into monthly payments

The beauty of a mortgage is that you can pay it off over time rather than all at once (otherwise, you’d just pay cash upfront). Still, this complicates matters because you have to not only figure out what you’ll have to pay every month, but also factor in interest—that’s the extra money you give your lender for the privilege of borrowing all that cash. Then, on top of that, you will also have to pay property taxes and home insurance. So how can you figure all that out?

Luckily there are online mortgage calculators that make the number crunching easy. All you have to do is enter the price of the house you’re eyeing, as well as what you’ve scrounged together for a down payment and the terms of your loan.

Let’s say, for instance, that you’ve found a home in Toledo, OH, for $200,000. Presuming you have $40,000 to put toward a down payment and you get a 30-year fixed-rate mortgage at 4%, this will mean your housing payments will end up being around $1,022 per month ($764 to your mortgage, $208 to property taxes, and $50 to home insurance).

These monthly mortgage payments will change based on the terms of your loan and other factors, explains Keith Canter, CEO of First Community Mortgage in Murfreesboro, TN. For instance, if instead you get a 15-year mortgage at a 3% interest rate, your payments rise to $1,363 per month. Put down only $20,000 as a down payment, and your monthly payments rise further, to $1,595. The area you buy in also makes a huge difference, because property taxes vary wildly. Toledo’s may amount to $283 per month, but in Birmingham, AL, you’ll pay less than half that, at $125.

Consider your income—and debts

 

Knowing how much a mortgage will cost per month is helpful, but still, another question remains: Can you handle paying it? To know the answer to that, you’ll have to factor in a few more numbers of a more personal nature—namely, your income and monthly debts.

 

Understanding why income is important is easy—the higher your salary, the more money you can put toward a mortgage. Still, the funds you’re funneling every month toward debts—like college loans, car payments, and credit cards—can put a crimp in how much you have for home financing. But how much?

Simple: Just navigate to a home affordability calculator and enter the necessary info, including your income, debts, and down payment, to find out how much house (and mortgage) you can afford. In Toledo, for example, if you earn $60,000 per year, pay $500 per month to debts such as credit cards, and have $40,000 for a down payment, then you can afford a house worth $228,500 at 4% interest—which will amount to monthly payments of $1,298.

Keep in mind that as useful as these tools can be for fleshing out a budget, these numbers are just estimates. You will need to talk to lenders to learn exactly how large a home loan they are willing to give you. Still, having a general understanding of the numbers you need is a good place to start—and can help you set your sights on homes that are realistically within reach.

Happy house hunting!

Mortgage rates rise in anticipation of Federal Reserve rate increase later this year – The Washington Post

Mortgage rates climbed higher this week following long-term U.S. Treasury yields.

The movement of bonds usually is one of the best indicators of whether mortgage rates will rise or fall. When yields go up, home loan rates tend to follow.

With the bond market anticipating a Federal Reserve rate increase later this year, Treasury prices fell this week, pushing yields to four-month highs. Investors have been selling bonds because they expect the Fed to raise short-term rates before the end of the year. Rising oil prices also pushed up yields.

 

Yields hit bottom after Brexit, falling from 1.87 percent in late May to 1.37 percent in early July. They have been moving steadily higher since Sept. 29, rising from 1.56 percent on Sept. 29 to 1.79 percent Wednesday. They are still well below where they started the year at 2.24 percent.

Bankrate.com, which puts out a weekly mortgage rate trend index, found that more than two-thirds of the experts it surveyed think rates will continue to rise in the coming week. Mitch Ohlbaum, a loan officer with Macoy Capital Partners in Los Angeles, is one of the panelists who participated in the survey. He noted that 68 percent of the experts think the Federal Reserve will raise rates in December but he isn’t convinced.

“I think the market will continue to anticipate an increase which will drive rates up [until December] but will be surprised when December comes,” he said.

 

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average climbed to 3.47 percent with an average 0.6 points. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.42 percent a week ago and 3.82 percent a year ago. Except for the one week in September when the 30-year fixed average ticked up to 3.5 percent, it has remained below that level since late June.

The 15-year fixed-rate average grew to 2.76 percent, with an average 0.6 point. It was 2.72 percent a week ago and 3.03 percent a year ago.

The five-year adjustable-rate average rose to 2.82 percent, with an average 0.4 point. It was 2.8 percent a week ago and 2.88 percent a year ago.

 

“This week the 10-year Treasury yield continued its climb as an increasing number of financial market participants foresee a December rate hike after a series of positive economic data releases,” Sean Becketti, Freddie Mac’s chief economist, said in a statement. “The 30-year fixed-rate mortgage moved up 5 basis points to 3.47 percent in this week’s survey, the first increase in one month. Even though we’ve seen economic activity pick up, consumer price inflation and implied inflation expectations remain below the Federal Reserve’s 2 percent target.”

Meanwhile, mortgage applications dropped this week, according to the latest data from the Mortgage Bankers Association.

The market composite index — a measure of total loan application volume –tumbled 6 percent from the previous week. The refinance index fell 8 percent, while the purchase index decreased 3 percent.

Sometimes denial is easier than being afraid or confused.

This content is paid for by an advertiser and published by WP BrandStudio. The Washington Post newsroom was not involved in the creation of this content.

The refinance share of mortgage activity accounted for 62.4 percent of all applications.

“Mortgage rates rose to their highest level in a month last week, and refinance application volume dropped to its lowest levels since June as a result,” said Mike Fratantoni, MBA chief economist. “This was driven by recent economic data indicating solidifying U.S. growth and financial markets returning to a view that a December Fed hike is likely. Mortgage rates remain quite low by historical standards, but even a modest increase is sufficient to significantly reduce refinance application volume.”