Housing and mortgage market changes
By Justin Hunter
As the housing
market becomes increasing unstable, so does its
counterpart; mortgage
loans.
Prospective home buyers depending on a mortgage to finance
their new adobe must wait to see if their rate will
rise or lower depending on the Federal Reserve, the
employment market and real estate sales.
However, there are a few tips to help ensure that regardless
of the topsy-turvy market, you will still be able to
sleep soundly at night.
Broderick Perkins, a columnist for Realty Times explains
how people can better handle the ever-changing mortgage
market, in his September 5, 2006 article, “Coping
With A Changing Mortgage Market.”
Interest rates recently fell for the sixth consecutive
time, marking a milestone considering rates had previously
risen 17 consecutive times earlier this year.
“Less than a year ago, experts everywhere, from
the Federal Bureau of Investigations to the Federal
Reserve, questioned appraised values of homes. Now,
as the boom wanes, lenders are more certain mortgages
are backed by accurately valued collateral.”
Needless to say, lenders have still lowered their qualifications
and background checks on mortgage applicants just to
originate a few extra loans.
But the mortgage market is now on a high seas adventure
with giant waves of success and failures. Coping with
these ebbs and flows may require some help.
For the most part, fundamental investing or borrowing
still applies. Steps you previously took to ensure a
successful mortgage transaction should be repeated even
in this stage of the market.
So the first thing you should do is to pull your credit
report from a free agency (there are hundreds of free
agencies throughout the Internet). Then review it thoroughly,
making sure there are no mistakes. You do not have any
time for surprises on your report, which can delay your
mortgage process for months, possibly causing you to
miss out on lower rates.
The next thing to do is to find the best mortgage deal.
“Shop several or more lenders and loan programs,
as well as title and escrow fees, online and off to
get the best deal. To make the best comparison, compare
all loan costs whenever possible including rates, points,
brokers fees, originating fees, yield spread premiums,
recording feeds, title and escrow costs, everything
that will wind up on the HUD-1 Settlement Statement.”
One thing to consider when applying for a mortgage nowadays
is to lock in your rates. Even though rates
have declined for six consecutive weeks, they are
expected to rise again in the near future.
“A rate lock takes the uncertainty out of which
way rates are moving or even where they are, because
it's a lender's guarantee your mortgage will come with
a specific interest rate, points and other terms. Get
the lock in writing and lock in as many costs and terms
as possible, including the lock's effective date, expiration
date and any post-lock options, should the lock expire
before the deal is done.”
You should also be cautious about tapping you home equity
supply. The common trend is to take out as much equity
as possible to make home improvements or invest in other
properties. But since the market is cooling, you may
want to reconsider using retirement money to improve
a home that is going to lose value in the near future.
“Fundamental advice is to tap your equity for
well-investigated business opportunities, education
and other investments that give you a return equal to
or better than the cost of equity loan. Debt consolidation
can be a wise use of equity provided you plan to actually
pay off the debt and close, in writing, consolidated
accounts.”
The housing and mortgage markets are uncertain and always
will be. It is wise to take the necessary precautions
to avoid mortgage pitfalls.