Deciding Between Mortgage Programs

Choose a Loan Type from Mortgage Loan Programs

When considering the many mortgage loan programs that are available, you may find yourself overwhelmed. Click on a mortgage loan type to get a primer (in layman’s terms) on how a particular mortgage plan works. Fixed-Rate Mortgage - A mortgage loan program where the interest rate does not change for the life of the loan. Adjustable Rate Mortgage (ARM) - A mortgage loan program in which the interest rate is adjusted periodically based on an index. Also called a variable rate mortgage. Balloon Mortgage - Behaves like a fixed-rate mortgage loan for a set number of years (usually five or seven) and then must be paid off in full in a single “balloon” payment. Balloon mortgage loan programs are popular with those expecting to sell or refinance their property within a definite period of time. Two-Step Mortgage - A mortgage loan program where the interest rate is fixed for the first seven years and then is adjusted one time for the balance of the loan period. Conforming Loan - A mortgage loan program for up to and including $417,000 in the continental United States (Alaska and Hawaii limits are higher). Jumbo Loan - A mortgage loan program for $417,001 or more in the continental United States (Alaska and Hawaii limits are higher). These limits are set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

Daily Mortgage Comment

Tuesday’s bond market has opened in positive territory as investors await today’s FOMC meeting results. The stock markets are mixed with the Dow down 21 points and the Nasdaq up 3 points. The bond market is currently up 12/32, which will likely improve this morning’s mortgage rates by approximately .250 of a discount point.

There is no relevant economic news scheduled for release today, but this afternoon does brings us the results of today’s FOMC meeting. There seems to be a slight consensus that another rate cut is coming today, but with much debate on the size. Some are predicting a quarter point cut while others are calling for a half point. There are still some analysts that think the Fed may wait until early next year before making another move.

Daily Mortgage Comment

Monday’s bond market has opened in negative territory as Friday’s selling carries into the new week. The stock markets are showing gains with the Dow up 95 points and the Nasdaq up 15 points. The bond market is currently down 12/32, which will likely push this morning’s mortgage rates higher by approximately .250 – .375 of a discount point over Friday’s morning rates.

There is no relevant economic news scheduled for release today or tomorrow, but the rest of the week is fairly busy. There are five monthly reports scheduled for release between Wednesday and Friday along with tomorrow’s FOMC meeting.

Weekly Mortgage Talk

Mortgage bonds prices fell last week applying significant upward pressure to mortgage interest rates. Trading was volatile throughout the week, as market participants remained concerned over the recent credit issues and inflation. Lower than expected unemployment and higher than expected average hourly earnings resulted in bonds falling considerably last Friday. Adding to the volatility were triple digit movements in stock prices throughout the week.For the week, interest rates on government and conventional loans rose by about 3/4 of a discount point.

The Fed meeting Tuesday will be the most important event this week. Trade data, retail sales, producer price index, consumer price index, industrial production, and capacity use data will also be important.

Daily Mortgage Comment

Friday’s bond market has opened well in negative territory following stronger than expected employment figures. The stock markets are showing modest losses with the Dow down 2 points and the Nasdaq down 8 points. The bond market is currently down 24/32, which will likely push this morning’s mortgage rates higher by approximately .375 of a discount point over yesterday’s morning rates.

The Labor Department posted November’s Employment data this morning, showing that the unemployment rate remained at 4.7% last month and that 94,000 new jobs were added to the economy. Analysts were expecting to see 70,000 jobs and a 0.1% up tick in the unemployment rate.

Daily Mortgage Comment

Thursday’s bond market has opened in negative territory yet again as the stock markets show early gains and investors await tomorrow’s employment figures. Stocks are in positive territory with the Dow up 35 points and the Nasdaq up 14 points. The bond market is currently down 9/32, which will likely push this morning’s mortgage rates higher by approximately .125 of a discount point.

There is no important news scheduled for release today. The Labor Department did post weekly unemployment claims, saying that 338,000 new claims were filed last week. Analysts were expecting to see 335,000 new claims. This was not enough of a variance to affect trading since the data is considered to be relatively low in importance.

Choosing a Fixed Rate Loan

Fixed rate loans generally come with one of two options; the 30-Year Fixed and the 15-Year Fixed. If a borrower is planning on being in the same home for a long period of time, a 30-Year Fixed may be more attractive because it offers stability. The monthly payment will remain consistent over the life of the loan. If interest rates are at historic lows at the time the borrower is seeking to obtain financing, this is a good program to consider.

A 15-Year Fixed loan program offers the same stability, but the accelerated amortization schedule makes the monthly payment substantially higher. While the interest rate may be lower on this type of loan, the borrower must be willing to commit to a higher monthly payment. If the borrower wishes to retire in 15 years and be debt-free at that time, this loan program may be more suitable to the borrower’s long-term needs.

It is also possible to make pre-payments on a 30-Year loan and reduce the life of the loan, as well as the overall interest payment, without committing to the higher monthly payment of a 15-Year program. As long as there is no pre-payment penalty associated with the 30-Year mortgage, pre-payment offers the borrower the latitude to make additional payments when it is affordable. If cash flow becomes difficult, this arrangement will not put the borrower in a compromising position.

 Courtesy of David Messineo, APEX Home Loans 301-365-3100 Ext 110

Daily Mortgage Comment

Wednesday’s bond market has opened in negative territory again following early stock strength and mixed economic news. The stock markets are posting strong gains with the Dow up 101 points while the Nasdaq has gained 33 points. The bond market is currently down 8/32, which will likely push this morning’s mortgage rates higher by approximately .250 of a discount point.

The first of today’s two releases gave us favorable news when the 3rd Quarter Productivity index was revised significantly higher. It showed that worker output improved at a 6.3% annual pace. This was higher than the 5.8% that was expected and much higher than the previous estimate of 4.9%. This is good news because high levels of productivity allow economic growth without significant inflationary pressures.

Fannie & Freddie Conforming Loan Limits Stay The Same

Courtesy of David Messineo, Loan Officer
Apex Home Loans
301-365-3100

Fannie Mae and Freddie Mac have recently announced that conforming (non JUMBO) loan limits for a single family home in 2008 will remain at the current level of $417,000. This is the second consecutive year that loan limit has stayed the same, having been originally set at the current limit back in 2006. In the meantime, long term mortgage interest rates have remained stubbornly low. In fact, just last week, the 25 month low for 30 yr fixed rate mortgages was reached.Combine this with lower home prices and an increase in inventory in many neighborhoods, and today’s real estate market presents a variety of great long-term opportunities. Entire neighborhoods that you may not have been able to afford in 2005 could now be open to you! I have included a portion of Fannie Mae’s press release below, in case you would like to review it. Feel free to call me at your convenience to discuss potential opportunities for you or someone you know in need of mortgage financing.

Weekly Mortgage Talk

Mortgage bonds prices rose last week applying downward pressure to mortgage interest rates. Trading was volatile throughout the week as market participants remained concerned over the recent credit issues and high energy prices. Adding to the volatility were triple digit movements in stock prices. For the week, interest rates on government and conventional loans fell by about 1/4 of a discount point.

The employment report Friday will be the most important event this week. ISM Index, productivity, factory orders, and consumer sentiment data will also be important.