The fluctuation of home mortgage rates is one of the benchmarks of the overall economy because interest rates are largely tied to the decisions made in New York by the Federal Reserve, among many other economic factors. Interest rates are adjusted according to the financial matters in the US such as exportation and inflation because such factors determine how easy or hard it would be to borrow and lend money.
Mortgage rates are used to help control the economy. If the movement of the economy is deemed to be too fast, higher rates are imposed so that individuals and corporations would be less willing to apply for loans. Conversely if the economy seems to be rather slow or stagnant, rates are lowered so that people would be more enticed to do more business transactions.
Trends in Home Mortgage Rates
It is quite interesting to know that mortgage rates have been lower than 8.5% since the year 1996, with the lowest rates of about 5.5% seen on the middle of 2005. While individuals might see an extremely different mortgage rate at a particular time due to other factors that affect rates (their salaries or credit histories), the trend has generally been observed to be generally consistent throughout financial circles.
The fall of interest rates from the high figures prior to 1996 has allowed a lot of people to buy their homes, purchase lands, or more to larger houses. Perhaps this reflects an effort to speed up the economy from that time up to now. However this year, the rates are rising probably because of an upsurge that the American economy has experienced in the previous year.
Current Home Mortgage Rates
Mortgage rates in the year 2006 are generally higher than that of the previous year with rates of about 6 percent for 30-year fixed rate mortgages (FRM). As of the 21st of September, 30-year FRMs have an average rate of 6.40%, while 15-year FRMs have an average rate of 6.06%. Adjustable Rate Mortgages (ARM) on the other hand are slightly lower with 5/1-year ARMs having an average interest rate of 6.08% and 1-year ARM having a mean rate of 5.54%.
The difference between this year’s and last year’s interest rates are not really significantly high as it would entail only a few hundred dollars increase in yearly payment rates. This probably would not stop a lot of people from getting mortgages, however if the rise continues, more people would become hesitant to get home loans.
Friday, November 28, 2008
Sunday, November 9, 2008
Home Sweet Home… But Can You Afford It?
You’ve finally found your dream house and are ready to commit but there’s that question of home mortgage affordability. Don’t let this thought scare you away just yet. Find out if you can go ahead and buy that house at last.
1. Know how much you have and how much you owe. How much income are you receiving at present? Is there a chance that it would increase? What will be your financial situation several years from now?
How much money do you owe to creditors? How much monthly payments do you make? Can you still afford to shell out more money after the bills are paid?
You’ll need a consistent source of income that can cover your mortgage and other expenses. Try to foresee possibilities that you’ll need to factor in: a new child, changes in the job, back-to-school plans and cash-flow five or several years from now. Be prepared to be in it for the long haul.
2. If your debts are well managed, then you can afford a home mortgage. The lender will approve your loan more quickly if he sees that your debt-to-income ratio is well within manageable range.
The lender will ensure that your payments will only total 33% or less of your monthly gross income. Otherwise, pay off some of your debts before applying for a home mortgage.
3. Decide which one you prefer: fixed, adjustable or balloon rates. Paying a fixed rate is a more popular choice because it can protect you from surges in interests while paying the lowest rate possible for an agreed period of time may be lighter on your budget, but your mortgage payment can go up later.
4. Interest rates will go up and down depending on the activity of the market. If you can read and understand market trends and economic indicators, you can save a lot of money.
5. Be prepared to pay a downpayment. Typically, it is about 20% of the total price. A house priced at $200,000 will require a down of $40,000. There are also loans with low or no-downpayments, but it will cost you in terms of equity in the long run.
6. You have enough money saved that’s equivalent to at least three months’ monthly income. This will help cover unexpected expenses that could affect your mortgage payments.
There is no fixed answer on the affordability of a home mortgage. It will all depend upon your income, debt, interest rate and other factors. If the home mortgage fits into your personal situation, then you can definitely afford it.
1. Know how much you have and how much you owe. How much income are you receiving at present? Is there a chance that it would increase? What will be your financial situation several years from now?
How much money do you owe to creditors? How much monthly payments do you make? Can you still afford to shell out more money after the bills are paid?
You’ll need a consistent source of income that can cover your mortgage and other expenses. Try to foresee possibilities that you’ll need to factor in: a new child, changes in the job, back-to-school plans and cash-flow five or several years from now. Be prepared to be in it for the long haul.
2. If your debts are well managed, then you can afford a home mortgage. The lender will approve your loan more quickly if he sees that your debt-to-income ratio is well within manageable range.
The lender will ensure that your payments will only total 33% or less of your monthly gross income. Otherwise, pay off some of your debts before applying for a home mortgage.
3. Decide which one you prefer: fixed, adjustable or balloon rates. Paying a fixed rate is a more popular choice because it can protect you from surges in interests while paying the lowest rate possible for an agreed period of time may be lighter on your budget, but your mortgage payment can go up later.
4. Interest rates will go up and down depending on the activity of the market. If you can read and understand market trends and economic indicators, you can save a lot of money.
5. Be prepared to pay a downpayment. Typically, it is about 20% of the total price. A house priced at $200,000 will require a down of $40,000. There are also loans with low or no-downpayments, but it will cost you in terms of equity in the long run.
6. You have enough money saved that’s equivalent to at least three months’ monthly income. This will help cover unexpected expenses that could affect your mortgage payments.
There is no fixed answer on the affordability of a home mortgage. It will all depend upon your income, debt, interest rate and other factors. If the home mortgage fits into your personal situation, then you can definitely afford it.
Tuesday, November 4, 2008
Home Mortgage Loan Types
Choosing the mortgage that is right for you is essential when one is involved in the process of home purchasing. Thus it is important that all options are understood.
Basically, the two things one should consider when considering a home loan is what type meets best your home purchasing needs as well as which loan offers the most ideal schedule for repayment.
The fixed mortgage rate loan types
Fixed rate home mortgage loans have an interest rate that basically remain the same for the whole life of the loan.
These payments have predictable monthly fees yet you are immune to any rising interest rates. Therefore, your interest and principal payments will not increase.
The adjustable home mortgage rate
Mortgages that are adjustable in rate have rates of interest that adjust in a periodic manner as based on the exiting conditions of the market.
The rate is initially fixed during the period of its introduction (anywhere between one year to a decade) and is usually lower compared to a mortgage that has its rate fixed.
After this period, the rate then adjusts every year or about semi-annually as based on the index of the market, however it cannot go beyond the pre-determined cap adjustment.
Jumbo home mortgage loans
The amount given out on this type of loan exceeds the amount established by corporations. Since jumbo home mortgage loans are sold and bought on a scale that is smaller, they have rates that are a little high compared to other type of home loans.
B/C home mortgage loans
These types of loans are given to those borrowers that have filed recently for foreclosure or bankruptcy or those who have late payments on their reports of credit.
The purpose of B/C home mortgage loans is the offer of temporarily financing to applicants until they could qualify for type A conforming financing.
Government home mortgage loan programs
One type of government loan programs is VA loans. These types of loans are definitely guaranteed by the US Department of Veterans Affairs.
This allows service persons or veterans to acquire home mortgage loans with terms that are favorable (usually in the absence of a down payment).
RHS home mortgage loan programs
RHS means Rural Housing Service if the USDA or the US Department of Agriculture. This type of loan guarantees residents in the rural area with very minimum costs for closing. Down payments are also unnecessary.
All in all, there are a lot of home mortgage loan programs available. It all depends on your needs, wants and means.
Basically, the two things one should consider when considering a home loan is what type meets best your home purchasing needs as well as which loan offers the most ideal schedule for repayment.
The fixed mortgage rate loan types
Fixed rate home mortgage loans have an interest rate that basically remain the same for the whole life of the loan.
These payments have predictable monthly fees yet you are immune to any rising interest rates. Therefore, your interest and principal payments will not increase.
The adjustable home mortgage rate
Mortgages that are adjustable in rate have rates of interest that adjust in a periodic manner as based on the exiting conditions of the market.
The rate is initially fixed during the period of its introduction (anywhere between one year to a decade) and is usually lower compared to a mortgage that has its rate fixed.
After this period, the rate then adjusts every year or about semi-annually as based on the index of the market, however it cannot go beyond the pre-determined cap adjustment.
Jumbo home mortgage loans
The amount given out on this type of loan exceeds the amount established by corporations. Since jumbo home mortgage loans are sold and bought on a scale that is smaller, they have rates that are a little high compared to other type of home loans.
B/C home mortgage loans
These types of loans are given to those borrowers that have filed recently for foreclosure or bankruptcy or those who have late payments on their reports of credit.
The purpose of B/C home mortgage loans is the offer of temporarily financing to applicants until they could qualify for type A conforming financing.
Government home mortgage loan programs
One type of government loan programs is VA loans. These types of loans are definitely guaranteed by the US Department of Veterans Affairs.
This allows service persons or veterans to acquire home mortgage loans with terms that are favorable (usually in the absence of a down payment).
RHS home mortgage loan programs
RHS means Rural Housing Service if the USDA or the US Department of Agriculture. This type of loan guarantees residents in the rural area with very minimum costs for closing. Down payments are also unnecessary.
All in all, there are a lot of home mortgage loan programs available. It all depends on your needs, wants and means.
Subscribe to:
Posts (Atom)
