Rates on the decline

My problem is not wanting to apply right now. I do not see the bottom even close. Even with binoculars. So why bother.

The trend is your friend and with the market down, standards tightening it can mean only one thing. (Even in desirable Boston). Prices are coming down. I dare not even predict how much more but I am not ready to catch the falling knife.

Some are ready to buy now...Some like to listen to realtors, mortgage brokers and the Globe who say it's never been a better time to buy. But for me I ejoy being on the sidelines with Cash.

When things get really desperate (Not now as this is the third inning in the ballgame), I will take my cash and get into the game.

But I must say it is sweet to be a renter these days. (Pre-2002 buyers and renters can relax)

I don't know if you looked this morning but rates have jumped almost a full point from two days ago. They are closer to 7% right now.

I am on the same boat as chmarcus... I'm ready to buy (first timer) have about 65k saved in cash but I will wait until things settle down. I'm 28 so my 401 is down about 35% (all stock) but I could care less right now because I have 30+ years. I see it as a time to buy in cheaper. My credit is in the 800's so If I cant get a loan then so be it. This is going to get rough over the next year and until houses come in line with salary's we will continue to see a sharp decline worldwide. I love the people who post on this board that their town is immune.... here's some news NO ONE IS IMMUNE!!! your just in denial! ;) when the dust clears a lot of people are going to wake up and realize that the last 6 years was just a dream

We bought a house this summer (end of July). Majority of agents were complaining about tightening lending standards and that many deals fall apart due to inability to secure a mortgage. What strikes me is that we have not faced any credit related problems at all while trying to find a house for ourselves. We placed bids on 5 different houses in Newton; all the times there were another buyer (always just one- we've never been in 3 or more buyer situation) who overbid us. Every time we told ourselves "Well, we have to keep eye on this house, since there is a good chance that the deal will fall apart due to lack of financing". NONE of these deals fell apart. We always called two weeks later to check whether the house is under agreement. We were surprised, but all houses we bid on were successfully financed in two weeks after accepted offers.
When we finally found the house we bought, we had no problem with securing a mortgage. Banks were very welcoming, in fact, and easily giving some perks. Sure, we had more than 20% down payment, 2 well paying secure jobs, and we were borrowing well below our limits; but on the down side, we are foreigners, without green cards, and with relatively short credit histories. We had absolutely no problem.

Yes, I would like to know as well. I'm not in the market, but based on what is going on with the credit freeze, I would expect that is extremely tough to get a loan these days.

I'd like to hear from legitimate posters what their experience has been in securing a loan.

Unfortunately, I'm sure this blog entry will generate several fake posts saying everything is a-OK, Massachusetts is immune to the credit crunch, blah, blah, blah.

I did look this morning. The current average rate is 5.97%. Were you looking at the 30-year fied rate or at some other rate?

Stacey- G is correct. Money is flowing out of mortgage-backed securities and the rates are climbing to the highest we've seen in a few months. Banks are selling because of their liquidity problems and the large institutional investors are getting ready to buy treasury issues that will help fund the $700 billion rescue plan.

For those of us who would need jumbo mortgages the rates are not that low. I'm fine buying a place but the price has to be really good. We would likely stay in the condo around 5 years, but the last thing I want to do is make a 20% down payment and then see prices drop by 15/20% and have not equity in the place. I don't see most sellers cutting prices by enough. We're looking at new construction and I don't see developers cutting prices but I also don't see them selling units.

We want to refinance to a 20 year, even 15. The problem is that mortgage interest rates are not being dropped in kind as the prime is falling. I do understand that what is keeping up the interest rates is that they are based on the libor, but the banks have really jacked up the other charges and fees in addition to not lowering rates more quickly.

By the grace of God, we have excellent credit scores, jobs, no credit card debit and are able to pay for it, but they really seem like they are not interested in the refinance market, whether its customers like us or people that are refinancing an arm or a subprime. Its all talk as far as I am concerned. As my grandfather used to say, a banker is just a member of a different type of mafia that wears suits and is legitimized. I think banks and financial companies will start to turn around their businesses when they start developing products and services that are good for their customers and not selling things like risky mortgages, high interest credit cards to people with financial problems and students, etc.

My problem is that even as conventional rates go down, FHA rates are going up. The best I could do today from Bank of America was 7.5%!!!

I'll raise this scenario again: mortgage rates are low but no one will loan money. If the world governments can do whatever they must do to get lending going again, then you've got an environment (let's say next year) with low rates, house prices that have fallen to (or near to) historical norms, and a good number of buyers who have been on the sidelines waiting for a glimpse of the bottom. That sounds like it has the potential to move us toward a relatively normal buying and selling process in the housing market.

I know, I'm relentlessly, perhaps foolishly, optimistic. Blue ponies and lollipops. Working against that of course is a certain global recession of as-yet-undefined depth, meaning more unemployment. But I'm just throwing it out there as a possibility.

ATTENTION POTENTIAL MORTGAGE BORROWERS: Rates are NOT going down. They are going UP right now. The media is ALWAYS a day late and a percentage point short. Mortgage rates are tied to the 10 year Treasury Bond, which has jumped nearly 50 basis points in the last 4 days. The secondary market is pricing and re-pricing at will with the volatility of the Bond. Today's 30 year fixed mortgage rate based on standard vanilla assumptions averaged 6.875%. If you are shopping for a mortgage, WATCH THE 10 YR BOND!!! The lower the yield, the better the rates. EDUCATE YOURSELF by finding someone you trust, DO NOT TRUST THE MEDIA!!!

PS - Chris - my bank's FHA rate today was 7%. Keep shopping.

THis is just a bizarre time

I'd love to hear what is going on with mortgages, whether they are getting funded or shut down in the process.

THe macro credit market is just stopping making sense.

Rates have gone up this week from 5.25% 2pts to 5.75% 2pts FNMA, FHA from 6.0% 0 points to 6.5% 0 points today and as of the bond market close losing another 20/32nds or about .125-.25 increase to the rate . I am having no problems funding loans

appears there is another Charles now. Welcome. Just be aware that use of the name Charles will not result in sparkly blue ponies and lollipops being tossed to you. Hurled, maybe.

Hmm. I could call myself original charles, but I'm sure the other charles is just as original as I am.

Gloom and Doom Charles? lacks a ring, and I'm lazy

I could count on people using context to figure out who is who......

Accidental - I think there is a fair chance of that happening. Though we'll have a recession no matter what - probably have been for a while.

Devil is in the details though, historic norms is going to make people unhappy.

Mortgage rates down this week? yeah, and the stock market was up this week.

Mortgage rates increased about .375% in the real world. Not bad considering how ugly the rest of the financial world fared.

Nobody wants to buy mortgage paper right now (and fixed rates are not priced off LIBOR, sorry). Check the price of the FNMA 5.5% coupon for the last week - not one single day did the price go up (which means rates go down.)

Mortgage rates got worse every day for the last 5 days in a row. BankRate? Puh-leeezz! Ever hear about truth in advertising?

The problem right now in the media is commercial lending, not so much mortgage lending. There is a difference, one being that mortgages are backed by a tangible asset and the buyer is now heavily scrutinized and the risk has been calculated and relayed into the interest rate.

My buyers are really being put through the wringer on their mortgage apps, and so far all have had clear-to-close issued on-time. I have had other agents in my office have deals fall apart, but it has never been because they couldn't qualify for a loan, they just couldn't match the rate with the property they wanted because of their own credit issues. I think buyers are still operating under the assumption that lending standards are the same as the were 6 months ago. This is just not the case.

The problem on the commercial side is that it is very difficlut to calculate risk, especially on larger companies with complex balance sheets. There is a loss of confidence in that risk calculation (rightfully so) and has made the lending more expensive, sometimes prohibitively.

Overall, I still think rates will rise over time. And at that time it will be a great time to get into the mortgage business as a lender. There's not many places that you can get 5-7% ROI per year right now. As interest rates rise, savvy, solvent sellers will start holding mortgages. I watched and benefitted when this happened in the '80s where rates were near credit card levels. People with cash are going to make buckets of money in the next few years.

I bought a condo in Brighton in May/June of this year. I have credit scores in the 800s. I bought right in the middle of changing underwriting standards and went through 3 different lenders to secure mortgage financing.

My bank wasn't aware at the time that their PMI company listed all of Eastern Mass. a declining market and, as such, the minimum down payment for condos jumped from 5% to 10%. I was pre-approved under the assumption I could pay 5% down and had a signed purchase and sale agreement already. I had more than 10% saved, but would've rather kept it and paid a higher monthly payment to stay more liquid. So, I withdrew that application and turned to a mortgage broker. He found that my condo association was FHA-approved so I would be eligible for as little as 3% down (since then the FHA minimum has increased to 3.5%).

Got to 10 days before close and the FHA came back and declined my mortgage application because my association was less than 51% owner-occupied. Why would the FHA bother "approving" our association then? Weird.

So, a last-minute scramble by my amazing broker produced a 10% down 30-year fixed mortgage at 6.375%. I'm not as liquid as I once was but, as a first-time homebuyer, I qualify for the $7,500 tax credit this year (it's actually an interest-free loan paid back to the govnerment over 15 years) which will help replenish my coffers once again. My monthly payment is much lower than it would've been had I paid less down, so I'm saving each month that way too...it's about the same I was paying in rent before I bought, actually so it's very affordable.

I was very lucky and many times I thought I'd lose the place. It's nasty out there if you don't have 20% down!

mortgage rates are higher, but still very attractive. Mortgages are being made and funded to those with credit and income. Mortgage rates are NOT tied to Prime or the 10 YR Treasury. They are based on the mortgage backed security market. You would think we would have learned especially considering Bush uttered those three words, mortgage backed security. Dont take advice from someone following the 10 yr Treasury.
Our FHA rates were at 6.5 with 0 points on Friday. There are large swings in interests rates comparable to the stock market. We are seeing 1 pt in cost difference while the stock market is seeing swings of 500 points.

Expect lower rates once this settles out, but dont wait for a lower rate to buy. The after tax difference of .50% in rate isnt a ton of money.
Based on what I am seeing and hearing from my investor clients, we are as close to the bottom as anyone can time. The rule is, once the investor are back, the market is back. My investors have been back for a few months.

charles . . incomes will never be in line with housing prices in MA -- if this is what you are waiting for, you will never buy a home in this state. if you're saying is true about your down payment and credit score . . you're waiting for no reason and are throwing money away buy renting. prices may continue to fall yes, but I just bought a house and I'm not worried about this scenario. I bought a house in a great neighborhood and got $15K off asking. Yes, I could have gotten it for cheaper, but I do not plan on moving in the next 5-7 years, so I am confident that I will do well because the area of town I bought in has always been desirable.

i got denied for a construction loan by mt washington, cambridge savings, and bank of canton. the unit, after fully built out, would have had about 100k of equity in it. ohh, and i was willing to put down 30%. not good news.

bmack - not the charles to whom you refer, but to respond - why won"t Mass prices reflect incomes? The money has to come from somewhere, either incomes or credit, and its absurdly unlikely it will be coming from credit again in our lifetime!

Bmack...

I would have to slightly disagree I think that Incomes to price ratio have shot up way too fast for the average family to afford a mortgage, utilities, food, gas etc... Hence why the country is in the current situation. I know that Mass has always been traditionally higher than most other parts of the country and last time I checked the median 4 family income was about 80k. I make that now and I'm single and still when I run the numbers for everything cannot afford a house here comfortably. I think that the days of zero down no income verification are gone for good. A bank will not loan out money now if you have nothing to bring to the table. Hence why I think Mass still has a way to go on a correction on prices. Oh and my rent is 600 per month living with 2 roomies. So as you can see I max my 401 have no school loans and put the rest into savings so I highly think I'm "throwing my money away by renting" rather being smart and saving it for when i'll need it

Charles the second (not to confuse with the original Charles)

Hey "Responsible Mortgage Banker"...

Get a clue. Mortgage rates are not priced off the 10 yr t-bill. That is one of the first lessons in the mortgage business, right after how to calculate piti for a borrower.

Mortgage rates are priced off the mortgage backed securities market, not the unsecured t-bills. You should know this. Stop being an embarrasment to our industry , providing false, inaccurate information and get out. BTW the FNMA 5.5 coupon closed down 38bps today, as opposed to the UST10Y, which was down 159bps today. Are you planning on sticking clients with higher rates because you have them following the 10 yr?

Hey Brad - sory to break the (good) news to you, but there were at least 2 separate PMI companies (PMI and UGIC) that did not consider Brighton to be a declining market. There is no reason you should have had to put down 10%, if you qualified for an FHA loan w/ 3% down, and were able to put 10% down, you should have been able to qualify for a conventional loan with 5% down.

Fact of the matter is, most banks and lenders (to say *nothing* of mortgage brokens*)(sic) do not put the extra time and diligence into finding a way to make the loan work.

Sorry they made you scramble - first question when dealing with a FHA condo is, how many units? (at least 4) Second question is how many are owner occupied, regardless of FHA project approval status.

A pro mortgage person would have solved all of these for you. Most mortgage people are not pros, hence the national situation we are in.

in the future, I suggest finding a mortgage person who has been nationally certified by the MBA or the NAMB - *not* the private label "CMPS".
How many are out there? For example, there are only 4 people in the entire state of Mass that have the nationally recognized NAMB, CRMS designation. yes I'm one of them. And 2 of the four of us work at the same company.

Mortgage rates will stay relative low UNTIL the bond market bubble bursts. When that happens, long term interest rates are going to skyrocket. That will be the ultimate nail in the coffin for real estate. Can you say hyper-deflation?

I'd be interested in hearing more on how mortgages are priced - I've always thought that they tracked the 10 year treasury + a risk premium, and it seems like many others (including bloomberg et al) think the same thing.

Obviously the 10 year bond is not where the funding comes from, but considering the usual duration of mortgages the 10 year provides a baseline, no?

Thanks to anyone who explains this.

The interest rate offered is based upon mortgage back securities (MBS). These are not tied to the 10 year treasury. However, if you want to get an idea of MBS trading is doing for the day and you can usually check to see if the 10 year treasury bill. They typically follow the same trend. I am no mortgage banker but am in the process of buying a home and wanted to get educated on the subject. The other thing to pay attention to is the spread between MBS and 10 year treasury bill. By spread I mean comparing the yields is how much investors get in return. From what I have read I believe the typical spread is between 100 and 150 basis points (100 basis points = 1% change in yield). Right now the spread is over 200 basis points which means the market if volatile. But it also might signify undervaluation of the MBS and bond rates will rise and yields will fall. But you really knows.