You’re going to need some luck.

Mortgage rates are unpredictable, ever-changing, and rarely change as expected.

For example, when the Federal Reserve left the mortgage market March 31, 2010, analysts said that mortgage rates would rise by a half-percent or more. It was practically stated as fact on TV.  When April 1 came around, though, rates didn’t rise.

Instead, a volcano erupted and mortgage rates dropped on safe haven buying.

Then, a week later, as  the volcano ash cleared, mortgage rates were supposed to resume their rise. Only they didn’t. Instead, a debt crisis emerged in the Eurozone and mortgage rates dropped.

Since March 31, conforming mortgage rates are lower by roughly 0.125 percent, according to Freddie Mac’s weekly mortgage rate survey.  At today’s rates, the savings are roughly $20 per month per $200,000 borrowed — or $100 per month based on their original, post-March 31 forecast.

It brings us to one of the most important axioms in rate shopping: You can’t shop for good luck.

• On some days, rates go higher
• On some days, rates go lower
• On some days, rates stay the same

Occasionally, there are days when rates do all three.

As a home buyer or would-be refinancer, what rate you get depends on at what time of day you do your shopping.

You can’t predict what will happen next in mortgage markets — even just an hour from now. Therefore, the smartest move, sometimes, is just lock your rate now.  At least that way, you’ve got a guarantee.

Related articles by Zemanta

• Mortgage rates stay above 5 pct (seattletimes.nwsource.com)
• Mortgage rates fall after rising 4 straight weeks (seattletimes.nwsource.com)
• Mortgage rates unchanged from last week (seattletimes.nwsource.com)

Related posts:

1. Mortgage Rates The Week Of March 29, 2010 Also this week, on Wednesday, the Federal Reserve's $1.25 trillion...
2. What’s Ahead For Mortgage Rates This Week : June 21, 2010 Last week, rates fell to all-time lows (again) Thursday. By...
3. Mortgage Rates This Week May 17, 2010 Mortgage rates were wildly volatile between Monday and Friday before...

The changes include newer, harsher ARM qualification standards, the elimination of a once-popular loan product, and tighter rules for interest only mortgages.

Fannie Mae made its official announcement April 30, 2010.  The changes will roll out to home buyers and homeowners over the next 12 weeks.

The first guideline change is tied to ARMs of 5 years or less.

Mortgage applicants must now qualify based on a mortgage rate 2% higher than their note rate.  For example, if your mortgage rate is 5 percent, for qualification purposes, your rate would be 7 percent.

The elevated qualification payment will disqualify borrowers whose debt-to-income levels are borderline.

The second change is Fannie Mae’s elimination of the standard 7-year balloon mortgage.  Balloon mortgages were popular early last decade.  Lately, few borrowers have chosen them, though.  Mostly because rates have been relative high as compared to a comparable 7-year ARM.

And, lastly, Fannie Mae is changing its interest only mortgages guidelines.

Effective June 19, 2010, Fannie Mae interest only mortgages must meet the following criteria:

1. The home must be a 1-unit property
2. The home must be a primary residence, or vacation home
3. The borrower’s FICO must be 720 or higher
4. The mortgage must be a purchase, or rate-and-term refinance. No “cash out” allowed.

Furthermore, borrowers using interest only mortgages must show two full years of mortgage payments “in the bank” at the time of closing.

Earlier this year, Fannie Mae-sister Freddie Mac announced that as of September 2010, it will stop offering interest only loans altogether.

Between Fannie Mae, Freddie Mac, the FHA, and other government-supported entities, the U.S. government now backs 96.5% of the U.S. mortgage market.  So long as mortgage default rates are high, expect approvals for all borrower types to continue to toughen.

Related articles by Zemanta

• Fannie Mae to make qualifying for interest-only loans tougher (money.cnn.com)
• Fannie Mae tightens lending standards (seattletimes.nwsource.com)

Related posts:

1. Lower Rates Higher Guidelines Effective December 13, 2009, the bulk of Fannie Mae's loans...
2. Time To Look At Adjustable Rate Mortgages Each week, government-led Freddie Mac publishes a weekly mortgage rate...
3. 2010 FHA Loan Limits Released FHA home loans are federal assistance mortgages made by lenders,...

Consider this comparison:

• In April 2009, the two products ran neck-and-neck with respect to rates
• In April 2010, the two products are split by 0.99 percent

On a $200,000 home loan, that’s a difference of $117 per month to a mortgage payment.

Adjustable-rate mortgages aren’t suitable for everyone, but they can be a terrific fit given your individual circumstance.  For example, any one of the following scenarios could warrant a 5-year ARM:

1. Buying a home with an intent to sell within 5 years
2. Currently financed with a 30-year fixed mortgage with plans to sell within 5 years
3. Interested in low payments and comfortable with longer-term interest rate and payment uncertainty

Additionally, homeowners with existing ARMs may want to refinance into a brand-new ARM, if only to extend the initial change date on the current note.

Before opting an ARM or a fixed, speak with your loan officer about how adjustable-rate mortgages work, and what longer-term risks may exist.  The savings may be tempting, but there’s more to consider than just the payment.

Related articles by Zemanta

• Mortgage rates fall after rising 4 straight weeks (seattletimes.nwsource.com)
• Mortgage Rates Reverse Course and Fall (online.wsj.com)
• Rates on 30-year home loans rise to 5.21 pct (seattletimes.nwsource.com)
• Mortgage rates rise above 5 percent (seattletimes.nwsource.com)
• Is It Time to Refinance Your Mortgage? (online.wsj.com)

Related posts:

1. Why Look At Adjustable-Rate Mortgages? According to the Freddie Mac weekly mortgage rate survey, the...
2. ARM Guidelines Tighten The changes include newer, harsher ARM qualification standards, the elimination...
3. Mortgage Rates Are Random Shopping multiple lenders for a "good mortgage rate" can sometimes...

If you’ll remember, safe haven buying is when investors sense market risk, then move money toward less risky investments.

Well, because the U.S. government backs the bonds of Fannie Mae and Freddie Mac, mortgage bonds tend to fit the “less risky” description and as Iceland’s volcanoes shut down air traffic in Europe, mortgage bonds benefited.

That was early in the week.

Then, on Friday, when the SEC announced fraud charges against Goldman Sachs, a second wave of bond buying began as Wall Street fled the stock market. Mortgage rates fell a second time and the improvement carried through the market’s weekly close.

Conforming and FHA rates are as low as they’ve been since March.

This week, there’s not much data due until Thursday, but even Thursday’s releases won’t make a huge impact on rates.

1. Initial Jobless Claims : Important vis-a-vis broader employment figures. A strong number could push rates up.
2. Existing Home Sales : Housing remains a key part of the economy. Strong sales are expected because of the tax credit.
3. Producer Price Index : A “Cost of Living” index of business. A weak reading is expected because inflation is low.

Then, Friday, New Home Sales is released.

The bigger risk to home buyers this week than data is the reversal of the safe haven buying patterns that have kept mortgage rates down over the past 10 days.  Keep an eye on the markets and your loan officer on speed dial.  Markets can — and do — change quickly.

You’ll want to time your lock accordingly.

Washington Mortgage Rates, Seattle Mortgage Rates, Gig Harbor Mortgage Rates

Related articles by Zemanta

• GNMAs – Securities That Wont Bring Down the Economy (mint.com)
• How Many Will the New Mortgage Modification Programs Reach? (blogs.wsj.com)
• Debate on the future of Fannie, Freddie heats up (seattletimes.nwsource.com)

Related posts:

1. Mortgage Rates This Week April 12, 2010 Mortgage markets improved last week to the delight of rate...
2. Mortgage Rates Week Of April 26, 2010 Mortgage markets worsened last week in see-saw trading. By the...
3. What’s Ahead For Mortgage Rates Week Of February 8, 2010 Mortgage markets improved last week on domestic jobs data and...

Treasury Sees Another Weak Auction as Supply Issues Loom

No related posts.

HARP’s new end date is June 30, 2011.

Originally known as Making Home Affordable, HARP aims to help homeowners refinance their mortgage who may otherwise be ineligible because of falling home values.

There are 4 basic HARP criteria every borrower must meet:

1. The existing home loan must be guaranteed by Fannie Mae or Freddie Mac.
2. Your home must be a 1- to 4-unit property
3. You must have a perfect mortgage payment history going back 12 months. No 30-day lates allowed.
4. Your first mortgage balance must be 125% or less of your home’s market value

If you’re not sure whether Fannie Mae or Freddie Mac back your mortgage, you can look it up. Fannie’s website is http://www.fanniemae.com/loanlookup; Freddie’s is http://freddiemac.com/mymortgage.  If you don’t locate your loan on either website, your mortgage is backed by a third-party and is not HARP-eligible.

For homeowners that meet HARP’s criteria, there are some underwriting details of which to be aware.

First, if your original mortgage does not require mortgage insurance, your HARP mortgage will not require it, either — regardless of your new loan-to-value.

Second, all HARP refinances require income verification. It doesn’t matter if your original mortgage was a stated income or no income verification loan. You should expect to produce 1040s and W-2s for your HARP refinance and asset statements, too.

And, lastly, second (and third) mortgages may not be “rolled in” to a new first mortgage loan balance. Junior lien holders must agree to remain in a junior lien position, regardless of combined loan-to-value.

There is a thorough HARP FAQ section on the government’s website, but it’s for general questions only. For specific Home Affordable Refinance Program information, first make sure you’re program-eligible, then pick up the phone to call your loan officer.

HARP is complex enough that you’ll want to talk with a human before taking a proper next step.

Related posts:

1. The FHA Is Changing Its Streamline Refinance Guidelines November 2009 Beginning November 17, 2009, the FHA will make it harder...
2. FHA Streamline Refinance Update FHA Streamline Refinance Update...
3. ARM Guidelines Tighten The changes include newer, harsher ARM qualification standards, the elimination...

By all accounts, FHA home loans are surging in popularity.

• 2006, FHA insured 3.3% of all mortgages made
• Q2 2009, FHA insured 19.2% of all mortgages made

A major reason for the increase can be tied to guidelines.

As compared to its conforming mortgage cousins Fannie Mae and Freddie Mac, FHA home loans have lower downpayment requirements and looser credit standards. The FHA allows downpayments of 3.5 percent and Fannie Mae and Freddie Mac do not, as an example.

Another reason is that FHA home loans aren’t subject to credit score fees the way that conforming mortgages are. Through Fannie or Freddie, a home buyer with a 650 FICO and 20% down is subject to 3% in risk fees.  Via the FHA, the fee is zero, making FHA the better “deal”.

The FHA published its 2010 loan limits. There’s no change from 2009.

The base 2010 FHA loan limits are:

• 1-unit : $271,050
• 2-unit : $347,000
• 3-unit : $419,400
• 4-unit : $521,250

We say “base” because these loan limits don’t apply to all areas equally.  Higher-cost regions get higher loan limits, based on typical home values. Homes in Los Angeles County, for example, can be FHA-insured up to $729,750 in 2010, and there are special exceptions made for Alaska and Hawaii.

The official FHA announcement included a complete, county-by-county FHA loan limit list. The first spreadsheet shows each county at or above the $729,750 maximum; the second list is everyone else.

If your home’s county is on neither list, use the “base” numbers above.

Related posts:

1. ARM Guidelines Tighten The changes include newer, harsher ARM qualification standards, the elimination...
2. Loan Application Alert : Conforming, Interest Only Mortgages Guidelines Change Next Week If you plan to finance your home with a conforming...
3. How To Refinance When Your Home Is Underwater The Federal Housing Finance Agency has extended the government's Home...

The Federal Housing Finance Agency’s Home Price Index report shows values down by 0.3 percent from the month prior – the index’s first down month since April.

The Home Price Index is based on the value of homes financed via Fannie Mae or Freddie Mac and, in this sense, the FHFA Home Price Index is more of a “national” real estate index than its private-sector cousin, the Case-Shiller Index.

But like the Case-Shiller, the HPI is as notable for what it specifically excludes as for what it includes. Most notably, the Home Price Index doesn’t account for homes meeting any of the following descriptions:

1. Is considered new construction
2. Is a multi-unit property
3. Is financed by an entity other than Fannie Mae or Freddie Mac

Given the resurgence of FHA financing this year, this last exclusion is especially glaring.  FHA represents about one-third of all mortgage loans in 2009.

Because of these exceptions, some analysts label the Home Price Index incomplete.  The same could be said of every method of home valuation, however. Case-Shiller only collects data from 20 markets, for example.

In light of these shortcomings, therefore, what’s most important is to recognize that both of the “popular” home valuation reports show similar patterns — home prices have leveled and are showing signs of a rebound.

For a region-by-region breakdown of the Home Price Index, visit the FHFA website.

Related posts:

1. Home Prices Still On The Rise Because of these exclusions, some analysts call the HPI incomplete....
2. The Flawed Home Price Index Shows Home Values Up 0.8 Percent Last week, the Case-Shiller Index reported home values up 0.8...
3. The Home Price Index Shows Home Values Lower Home values fell again in January, according to the Federal...

According to the Freddie Mac weekly mortgage rate survey, the relative cost of a 5-year ARM is dropping versus its 30-year fixed-rate cousin.

During the first 5 months of 2009, the products ran neck-and-neck. Today, they’re a half-percent apart.

On a $200,000 home loan, that’s a difference of $60 per month.

Adjustable-rate mortgages aren’t for everyone, but for the right household, they can be a terrific fit.  A few scenarios that warrant consideration of a 5-year ARM include persons:

1. Buying a home with an intent to sell within 5 years
2. With a 30-year fixed mortgage and plans to sell within 5 years
3. Interested in low payments and comfortable with longer-term interest rate and payment uncertainty

Additionally, with homeowners with existing ARMs may want to consider taking on a new ARM, if only to extend their initial, fixed rate period.

Before choosing an ARM, make sure to speak with your loan officer about how adjustable-rate mortgages work, and what causes them to adjust.  Although conventional ARMs are limited in how far they can adjust, it’s important to know the risks.

Related posts:

1. Time To Look At Adjustable Rate Mortgages Each week, government-led Freddie Mac publishes a weekly mortgage rate...
2. Should You Refinance Your ARM, Or Let It Adjust Lower? If your adjustable rate mortgage is due to adjust this...
3. The New Good Faith Estimate (GFE) For Mortgages The New Good Faith Estimate (GFE) For Mortgages...

Furthermore, versus November 2008, the Home Price Index has clawed back to unchanged.

The housing market appears to be holding its own.

However, we have to be careful about putting our full faith in the Federal Housing Finance Agency’s data.  It’s somewhat flawed.

1. The Home Price Index is a national statistic and all real estate is local
2. The Home Price Index’s methodology specifically excludes key housing demographics

As an obvious example, HPI only accounts for homes with Fannie Mae- or Freddie Mac-backed mortgage. Lately, the percentage of homes meeting that description is shrinking.

As FHA financing rises in popularity, Fannie and Freddie back far fewer loans than in the past.  Furthermore, the HPI sample set also excludes newly-built homes and multi-unit properties.

Because of these exclusions, some analysts call the HPI incomplete.  The same could be said of all home price metrics, however – including the venerable Case-Shiller Index.

Therefore, what should be of interest to today’s buyers and sellers is that all of “popular” home valuation models seem to be telling the same story – home prices have stopped falling and look like they’re beginning to rebound.

For a region-by-region breakdown of the Home Price Index, visit the FHFA website.

Related posts:

1. Home Prices Edged Lower In August ecause of these exceptions, some analysts label the Home Price...
2. Why Home Prices Will Rise This Fall As reported by the National Association of Realtors®, the Pending...
3. Housing Starts Rise In April, Exerting Downward Pressure On Home Prices Furthermore, for the first time since June 2009, Housing Starts...