Housing and mortgage market changes
As the housing market becomes increasing unstable, so does its counterpart; mortgage loans. Prospective home buyerssdepending 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.