According to statistics from the Central Oregon Realtors Association the average price for a home in Bend, Oregon at the end of 2010 was $244,844 and the median home price was $191,000. To figure out what costs more, purchase price or interest rates let’s arbitrarily use a home price of $215,000. The example will assume that the buyer puts 20 percent down, or $43,000 for a 30 year fixed-rate mortgage in the amount of $171,000. As of April 13, 2011 the best rate available in bend for a mortgage was 4.75 percent with an APR of 4.998. The monthly payment is $892.02 excluding taxes and insurance.
Now, mortgage rates are considered to be very low. However, if the borrower takes the monthly payment and multiplies it by 360 (30 years time 12 months) the total cost of the mortgage is $331,172.20. Now let’s add the down payment of $43,000 to arrive at the total cash outlay for the mortgaged property – $364,127.20.
By mortgaging the house for 30 years the buyer spent 149,127.20 in interest. The interest expense alone added nearly 50 percent to the cost of buying the property. Interest rates will eventually rise and so will the cost of home ownership. Clearly, the cost of interest rates costs far more than the purchase price of the home.
However, if you take out a 15 year mortgage your monthly payments will be higher but your interest costs will be lower. If you are planning on moving in less than 5 years an adjustable mortgage may be best.
Call the Brokers at The Rinehart, Dempsey, Phelps Group at 541-946-3371. Not only can they assist in finding your perfect home they can offer advice on mortgages.
We have experienced the same climate. The increased purchase activity is causing a shortage of available homes to purchase in Central Oregon. Inventory levels are down by 50% of what they were this summer and are 1/4 of what they were at the peak in 2009. We need more homes to sell!
Mortgage applications for purchases rose to their highest level of the year last week, the Mortgage Bankers Association reports. Purchase applications for mortgages increased 12.5 percent from one week earlier, and on an unadjusted basis, purchase application activity is the highest since last May.
“An improving job market is beginning to pave the way for an improving housing market,” says Michael Fratantoni, MBA’s vice president of research and economics. “Additionally, mortgage interest rates remained below 5 percent for a second week, maintaining affordability for buyers and leading to an increase in refinance applications.”
Refinancings also were on the rise last week, increasing 17.2 percent from one week prior. It was the highest the Refinance Index had been in over a month.
Overall, mortgage applications increased 15.5 percent on a seasonally adjusted basis for the week ending March 4, compared to one week prior, according to MBA.
I am going to take advantage and re-fi my rentals.
Mortgage rates were on the decline this week, a welcome sign for potential home buyers or those looking to refinance.
The 30-year fixed rate mortgage averaged 4.95 percent this week, down from 5 percent the week prior, according to Freddie Mac’s weekly mortgage market survey. Last year at this time, 30-year rates averaged 5.05 percent.
The 15-year, fixed-rate mortgage also dropped for the week, averaging 4.22 percent, down from last week’s 4.27 percent. The 5-year adjustable-rate mortgage dropped slightly to 3.8 percent, compared to 3.87 percent the previous week.
“Low mortgage rates and home prices are sustaining affordability in the housing market,” says Frank Nothaft, Freddie Mac’s chief economist. The National Association of REALTORS® reported earlier this week that existing home sales rose for the third consecutive month in January and were at the strongest pace in eight months.
U.S. 30-year mortgage rates have jumped above 5% for the first time since last spring, in a rapid rise that could present a challenge to the still-troubled housing market.
The average rate on 30-year fixed-rate mortgages climbed to 5.05% in the week ended Thursday, according to a widely watched survey by government-backed mortgage company Freddie Mac, up from 4.81% a week ago. It was the highest rate in the survey since April.
Rising mortgage rates are an immediate consequence of the large jump in the U.S. government’s borrowing costs in recent weeks. Mortgage rates tend to move in line with the yield on the 10-year Treasury note, which closed Thursday at 3.712%, up from its October low of 2.381%.
The sharp rise in mortgage rates has caught some investors and economists off guard, and will likely be watched closely by the Federal Reserve, which has been buying Treasury bonds in an effort to keep rates down and bolster economic activity.
In some ways, the rate increase reflects positive news: Rates are rising in large part because there are signs the recovery is strengthening. As the economy gains steam, investors demand higher rates to compensate for an expected uptick in inflation. And if the economy can generate stronger job and wage growth, higher rates may not be a problem for housing.
But many worry that the housing market is lagging behind other parts of the economy. One risk is that higher rates could deter buying, putting further pressure on prices and squelching hope of a housing recovery for now. Many analysts expect nationwide home prices to decline 5% to 10% in the months ahead.
Still, rates remain near historically low levels, and the market has withstood much higher rates in the past. By at least one measure, housing affordability has returned to its levels before the housing boom collapsed.
Keith Hembre, chief economist at Nuveen Asset Management in Minneapolis, says rates still need to rise 0.25 to 0.5 percentage point before they become a hindrance. “But it’s certainly not helpful,” he said.
The Obama administration announced on Friday plans to reform the housing finance market, including winding down government-controlled mortgage giants Fannie Mae and Freddie Mac and turning most of the market over to the private sector, as well as requiring larger down payments. The White House proposed three approaches to replacing Fannie Mae and Freddie Mac rather than offering up one final plan.
The administration’s proposal is expected to reshape the way Americans buy and own homes.
Among the plans outlined in the administration’s “white paper”:
▪ Shrinking the size of the portfolio of mortgages held by Fannie Mae and Freddie Mac by at least 10 percent a year.
▪ Creating an insurance fund for mortgages, supported by premiums paid by lenders.
▪ Winding down government subsidies of mortgages by raising the fees charged to cover the risk of default.
▪ Raising fees for borrowers and requiring larger down payments for home loans.
The administration also recommended measures to make government-backed mortgages more expensive in order to allow the private-sector to better compete in the mortgage market. For example, it called for reducing by this fall the size of mortgages Fannie and Freddie may purchase from $729,750 to $625,500.
Some critics of the proposal are concerned that the administration’s overall plan would raise mortgage rates.
Treasury Secretary Timothy Geithner said that mortgage costs likely will rise in the coming years, as government support is withdrawn and the private sector takes on a bigger role. Credit Suisse has estimated that rates on a 30-year fixed mortgage may rise as much as 2 percentage points if the government withdraws its backing of Fannie Mae and Freddie Mac.
Higher borrowing costs could be a thorn for a recovering housing market, since interest rates greatly affect how much buyers can afford, experts say.
“Reducing the government’s involvement in the mortgage finance market is necessary for a healthy market, but should not be done at the expense of the economy or home buyers,” NAR President Ron Phipps said in a public statement in response to the Obama administration’s plan. “Any proposal for increasing fees and borrowing costs beyond actuarially sound levels will only make it harder for working, middle-class individuals to achieve home ownership, and only the wealthy will be able to achieve the American dream.”
NAR’s economists estimate that a retreat of capital from the housing market will negatively impact the economy too. For every 1,000 home sales, 500 jobs are created for the country, NAR notes.
Geithner estimates that reducing the government’s role in the mortgage market may take five to seven years for the transition.
“Most people in Congress understand that this is a very political, contentious issue,” says David Berson, a former Fannie Mae chief economist. “It’s going to be a very volatile ride as we move toward what ultimately will be the future of Fannie and Freddie. It’s hard to know what that’s going to be.”
Will this help with the backlog? One can only hope…
Bank of America Corp. is splitting its mortgage business into two units in order to get a better handle on the flood of foreclosures.
Bank of America’s new unit, Legacy Asset Servicing, will be charged with resolving issues involving faulty paperwork that had led the bank to temporarily suspend foreclosures across the country for nearly two months in October. The new unit will also handle mortgage modifications and buyback claims on bad loans sold to investors.
Meanwhile, Bank of America’s Home Loans unit will continue to handle new loans and the servicing of current loans.
The company also said it plans to exit the reverse mortgage origination business.
Bank of America Home Loans lost $8.92 billion in 2010 and has been battered by a stream of lawsuits, mostly focused on bad loans it acquired when it purchased Countrywide in 2008.
We believe one of the wild cards for 2011 is the interest rate and the other will be the foreclosure market.
Financial experts suggest that borrowers should apply for a new mortgage loan, or refinance their home loan when the time is right for their individual needs, rather than attempt to time the market. While risk takers may be enthusiastic about waiting until the last minute to lock in a low mortgage interest rate, most homeowners and homebuyers prefer to observe general mortgage market trends and focus more intently on their own finances.
Predicting a specific mortgage rate for a particular time is pretty nearly impossible, but real estate market observers have identified a few trends that they anticipate will impact the mortgage market in 2011:
1. Mortgage rates will slowly rise throughout the year
The Mortgage Bankers Association (MBA) anticipates that rates will rise slightly in 2011, hovering around 5 percent and increasing to about 6 percent in 2012. Holden Lewis of Bankrate wrote this past fall that economists had predicted a rise in mortgage rates by the third quarter of 2010. At the end of 2010, mortgage rates began to climb out of the 4 percent range and slightly above 5 percent. While any increase in mortgage rates is unwelcome to homeowners who want to refinance or to buyers, a 5 percent mortgage rate is still historically in the low range of interest rates.
2. Overall demand for mortgages will decrease
The MBA predicts that total mortgage originations for 2011 will decline to less than $1 trillion, driven by subdued economic growth and a lack of consumer confidence.
3. Mortgage refinancing applications will drop
Mortgage refinancing has represented a large portion of all mortgage applications in any given week this year, with the refinancing applications accounting for about 80 percent of all mortgages written this year. The MBA predicts that refinancing activity will drop below 40 percent of mortgages in 2011 and decline further to 26 percent of mortgages in 2012. Not only will rising mortgage rates reduce the demand for refinancing, but the pool of qualified homeowners will shrink. Homeowners who could qualify are likely to have done so in 2010, and others have difficulty obtaining a loan approval because of reduced equity or credit or income challenges.
4. Mortgage applications for a home purchase will become a greater part of the market
The MBA predicts that stabilizing home prices and modest increases in home sales will increase the number of applications for a mortgage for a home purchase.
5. Jumbo loan mortgages will be more attractive
6. All-cash purchases will become a larger part of the market
Lawrence Yun, chief economist of the National Association of Realtors, says that all-cash purchases represented about a quarter of all existing home purchases in the last four months of 2010. He anticipates all-cash purchases to continue to represent a significant portion of the market in 2011.
7. The mortgage loan process will remain slow and complex
Holden Lewis at Bankrate says even if the number of loan applications drops, lenders anticipate that the time between application and closing will continue to take as much as 60 days. In fact, many lenders recommend a loan lock of 60, 75 or even 90 days to ensure that the loan process will be complete within the lock period. One issue is simply the new level of documentation and verification that is required for a loan approval. Another issue that slows refinancing applications is the existence of a second mortgage or a home equity line of credit, which must be re-subordinated to the first loan when refinancing. Getting a lender to agree to keep the home equity loan in the second position can be time-consuming.
The bottom line
While these general mortgage trends may impact the real estate market overall, each homeowner or buyer considering applying for a mortgage should meet with a lender to determine the cost and availability of a loan that meets his or her needs.
The Wall Street Journal reported that mortgage rates took a jump last week but aren’t continuing to climb, which is great news for anyone looking to purchase a home.
After a big jump last week, home-mortgage rates stabilized this week, with rates on fixed-rate mortgages barely changing, according to Freddie Mac’s weekly survey of conforming mortgage rates, released Wednesday.
Rates on 30-year fixed-rate mortgages averaged 4.4% for the week ended Nov. 24, up from 4.39% last week. The rate averaged 4.78% a year ago.
Fifteen-year fixed-rate mortgages averaged 3.77% this week, up from 3.76% last week. It averaged 4.29% a year ago. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.45% this week, up from 3.4% last week. The ARM averaged 4.18% a year ago.