Austin Real Estate Expert

“Underwater” has become the popular term for a mortgage loan that is higher than a home’s current market value. According to a recent New York Times article, as many as 4.5 million Americans find themselves in this predicament. That is like every home in Los Angeles plus every home in Boston being underwater. Research has found that when the home value falls to below 75 percent of the home loan, people seriously consider defaulting on the loan and just walking away from the house.

This is not a decision made easily, especially when a person can afford to pay the mortgage each month. This is largely a recent phenomenon, something people wouldn’t have considered just a couple of years ago. The reason for contemplating such an unreasonable option as walking away from a debt obligation is that high mortgage payments are not building any equity.

The Obama administration’s loan modification program that was meant to combat underwater mortgages and runaway interest rates has done little to address either. It was intended to help millions of homeowners, but the reality is that it has helped a fraction of that number. Banks are not very sympathetic to choices that they consider homeowners made willingly and are largely unwilling to reassess or modify loans.

The line between a bank foreclosure and an owner-initiated default is fine, at best. They both ruin credit. Certainly not all of those 4.5 million homeowners are going to walk away, but one estimate puts the number around 17 percent. Also according to the New York Times article, the projection is that 10 percent of all homeowners will be in this predicament by the end of the year.

“The overwhelming bulk of people who have negative equity stay in their homes and keep paying,” said Michael Barr, assistant Treasury secretary for financial institutions. In other words, people talk about it, but the reality of uprooting the family and ruining their credit is too much risk for most people. These days a credit score is used for more than getting a credit card or a mortgage loan. Credit scores and history are used by potential employers and even graduate school programs to evaluate candidates.

As sales of previously occupied homes took a bigger than expected drop in December, the state of the housing industry remains unclear. Over the last two years, home values have fallen an average of 30 percent across the country, but more than 50 percent in some markets. The median home sales price is now around $180,000, which is a 1.5 percent gain from a year earlier and the first yearly gain since August 2007. For those homeowners drowning in negative equity, home values are certainly not rising fast enough. Swimming away from an underwater mortgage could become a popular sport.

Ki has lived and worked in Austin, Texas for over 10 years. He has a comprehensive understanding of Austin Texas real estate. His website offers a free search of properties in the Austin MLS. His site also has a blog covering Austin real estate.

With interest rates near all-time lows, it is tempting for many to refinance their home loans. Before you find yourself in the throes of refinancing, you’ll need to determine several things.

* Are payments for PMI included in your current home loan schedule? If have you paid, at least, 20 percent on the principal of your mortgage, your lender is required by law to remove the PMI.
* Do you owe more on your home than it is worth? If you probably will not be approved for a refinance loan. The exception is the Home Affordable refinance program. If you want more information, do a search on the Internet for the program.

There are many reasons homeowners want to refinance their mortgages, and some might be to:

* Lower your monthly payments.
* Lower your interest rate.
* Combine unsecured debt to lower your interest rate on credit cards.
* Get cash out by loaning more than the balance due to upgrade your home, cover an emergency medical situation or pay for college for the kids.
* Refinance an adjustable rate mortgage (ARM) that is coming due.
* Remove the PMI from your loan, which will definitely lower your payments.

Keep in mind that if your goal in refinancing is either to obtain a lower interest rate or lower your monthly payments, you will restart the clock on your mortgage. When applying for a new loan, you need to decide the preferred duration of your new home loan. The most common are 10-, 15-, 20- or 30-year fixed rate notes. The fewer years on the note, the more you will save. You can save .7 percent or more on your new note. That can add up to thousands of dollars over the life of your loan.

All things considered, do you still want to refinance? If you can save money, there’s no reason not to. Interest rates have remained steady in the 4 percent range for some time now. That will save you loads over the period of a 30-year loan, even if your original mortgage was only a couple of points higher. You will have to pay closing costs, though. Depending on who you are lending from, there may also be administration fees or other fees required. A down payment will, most likely, be required, too.

If you want to avoid a down payment, you may want to consider getting a Fannie Mae or Freddie Mac loan for refinancing. You typically don’t have to come up with a down payment with either. Regardless of where you obtain your home loan, be sure to request all fees that will be included in the note. Get all fees in writing from each lender prior to making your decision. Before making the final decision to refinance, add up all new fees and closings. Divide that by the monthly amount you will save on your new loan. This will tell you how many months it will take you to recoup the charges for your new loan. Ideally, you want them paid off within a year.

If you will be living in the home much longer than it will take you to recoup the charges, then it will be to your advantage to refinance. Your final task will be to check out the lender’s reputation. Does it have any industry memberships or certifications? If so, check with the organization as to the business’ reputation. Also with the Better Business Bureau (BBB) and your state’s attorney general’s office. Compare all the company reputations, fees and interest rates. Select the one that stands out from the rest.

Ki’s works and lives in Austin Texas. His website brings a free search of Austin homes for sale to future homebuyers. Additionally, there is detailed information about Austin real estate. His website also has information on mortgage rate trends and a Austin real estate blog.

We keep hearing that the economy is improving and about the statistics to back up the claim. Personal incomes rose, but unemployment held steady. Consumer spending increased, but not as much as expected. The economy grew at an impressive 5.7 percent in the last quarter of 2009, but most economists expect the overall growth for 2010 to stay under 3 percent. What does all this mean?

Maybe our data driven world puts us on the road to less understanding instead of a better grasp of the world around us. Time magazine made that point in a recent column that the month of January offered no less than 92 pieces of economic data to be mulled, mused and manipulated. However, there is usually a story behind the data, a reason for each and every number that can change the impact of the data.

Take unemployment for example. The national unemployment rate is holding steady at 10 percent. Yet, the unemployment rate in New York City is 10.4 percent and the unemployment rate in Austin, Texas is 6.9 percent. One would think that New York City with all its wealthy bankers and big companies would have a lower unemployment rate, however NYC has a much higher poverty rate than other cities. The 10.4 percent reflects just New York City, not the metropolitan area.

A recent New York Times piece pointed out the correlation between the unemployment rate and the number of college graduates in an area. The national unemployment rate for high school dropouts is 15.3 percent, while the rate for college graduates is 5 percent. The highest unemployment in the country is in the California border town of El Centro at 27.7 percent, with few employers and no universities nearby.

Who do they usually feature on the evening news having a tough time finding a job? Not the family who is barely existing below the poverty level, but rather the college graduate who got laid off from an executive level position. This recession has certainly hit families of every socioeconomic background, but there are far less former executives looking for jobs than there are former factory workers.

Jobless claims are up, spending remains anemic and housing seems unpredictable. The numbers can be mind-numbing. Labor productivity is up while labor costs are down. A survey from the National Association for Business Economics shows a moderate expectation for growth in 2010. Of the companies surveyed, 28 percent expect to cut payrolls, but 29 percent expect to hire in the next six months (Associated Press). So does one cancel out the other?

The reason the evening news features the out-of-work executive and not the factory worker is that the executive spends more on food, clothing and housing than the factory worker. And spending is what it’s all about. Spending accounts for about 70 percent of Gross Domestic Product (GDP), so if there is not spending there is not growth in the GDP. Unfortunately not all jobs, and not all data, are created equally and the 10 percent unemployment statistic doesn’t even begin to tell the whole story.

Ki graduated from the University of Texas in Austin. He maintains a website detailing Austin real estate. The site allows future home buyers to do a graphical search of Austin MLS homes. It also has details on Austin luxury properties.

After dropping for 4 weeks in a row the 30 year rate rose slightly this week moving from 4.98 to 5.01. The 15 year rose from 4.39 to 4.40. The 5 and 1 year arms rose from 4.25 to 4.27 (5 year arm) and 4.29 to 4.22 (1 year arm). Below are rates from the weeks from Jan 07, 2010 to Feb 04, 2010

Feb 04, 2010
30-fixed 5.01 15-fixed 4.40 5 ARM 4.27 1 ARM 4.22

Jan 28, 2010
30-fixed 4.98 15-fixed 4.39 5 ARM 4.25 1 ARM 4.29

Jan 21, 2010
30-fixed 4.99 15-fixed 4.40 5 ARM 4.27 1 ARM 4.32

Jan 14, 2010
30-fixed 5.06 15-fixed 4.45 5 ARM 4.32 1 ARM 4.39

Jan 07, 2010
30-fixed 5.09 15-fixed 4.50 5 ARM 4.44 1 ARM 4.31

Aug 06, 2009
30-fixed 5.22 15-fixed 4.63 5 ARM 4.73 1 ARM 4.78

All in all we saw hardly any movement with any of the rates this week. And although rates fell the previous 4 weeks we saw very little movement as well. Since January 7, 2010 the 30 year rate has stayed in the range of 4.98 to 5.09. This is in contrast with the last year when rates have seen enormous volatility. Basically in the last month there has been no huge news that would affect the mortgage industry. For the time being, the economy doesn’t seem to be improving or getting much worse.

In addition to rates it is interesting to analyze mortgage payments. We took a today’s rates and translated it into a 200k loan we also did the same thing with rates from January, 21 2010 and rates from August, 06 2009 (six months ago).

Feb 04
30-year $1074.86
15-year $1519.78
5-year ARM $986.22
1-year ARM $980.37

Jan 21
30-year $1072.42
15-year $1519.78
5-year ARM $986.22
1-year ARM $992.09

Aug 06
30-year $1100.69
15-year $1543.3
5-year ARM $1040.88
1-year ARM $1046.91

As we can see the movement has been minimal in the last 2 weeks. In fact a mortgage for a 200k loan would only be 2.43 more a month today than 2 weeks ago. Six months ago a mortgage would have been $25.83 more a month.

So what is our advice to people looking for a mortgage in the next few months? The difference between a 30 year rate and the 5 and 1 year arm has grown over the last few months which makes them more enticing. But I would still recommend a 30 year mortgage. Basically, rates are near historic lows and it makes the most sense to lock in as long as possible. The second question is where are rates heading. Over the next few weeks it’s hard to tell. They might move down a little more if the economy continues to do poorly. But on the other hand sometime between now and the next 12 months the expectation is that rates are going to rise substantially. So there is probably a large risk for waiting to lock into a rate and there is little upside since its doubtful rates will drop substantially.

Ki writes about mortgage interest rates. His site covers Austin Texas real estate. In addition his site has a few mortgage widgets and a mortgage calculator widget along with a blog covering Austin Texas real estate.

It is a common misperception by the general public that fixed rate mortgage interest is tied directly to Federal Reserve interest rate movement. On the contrary, the determinant is the performance of mortgage backed securities (MBS), most of which are issued by Ginnie Mae, Fannie Mae and Freddie Mac.

What does that mean in layman’s terms? MBS are securities traded on the open stock market and are backed by assets, like real estate. When you obtain a home loan, it is typically sold, pooled into a group of home loans as a securities package called MBS to be sold as securities to investors on the open stock market.

MBS are treated like bonds and are typically long-term, fixed-rate yield investments. Many compare the movement of MBS to that of 10-year Treasury Bonds. The higher the investor demand for MBS, the lower the yield for investors. If the demand for MBS increases, the price for MBS rises, MBS investors earn less yield and mortgage interest rates go down. Conversely, if the demand for MBS decreases, the cost for MBS notes goes down, investors earn more for their investment and mortgage interest rates go up.

On a more granular level, consider the inflation factor. Inflation directly impacts interest rates and the movement of MBS. Generally, as inflation rises, interest rates rise and the demand for MBS declines. On the other hand, as inflation goes down, interest rates decline and the demand for MBS increases. Looking at historical mortgage rates, the Carter Administration is a good example of this. Mortgage interest rates were in the double digits and climbed as high as 15 percent for real estate loans and 20 percent for commercial financing.

All factors aside, keep in mind that as investor demand increases for MBS, mortgage interest rates decrease. When MBS are on the decline, mortgage interest rates will be on the rise.

The external impacts to mortgage interest rates don’t necessarily determine what your rate will be if or when you apply for a mortgage. The other determinant is your credit rating. Before applying for a mortgage, obtain a copy of your credit report. Check it for inaccuracies and inquiries. If you find anything inaccurate, or inquiries that were not approved by you, write a letter to the credit reporting user with factual information.

By law, you may obtain one free copy of your credit report annually from each of the major credit reporting agencies in the U.S. - Equifax, TransUnion and Experian. Your credit rating and payment history are critical factors determining what interest rate you will be issued for your mortgage. If both are stellar and MBS are in high demand, then you should be issued the lowest interest rate available on the market.

In summary, obtain copies of your credit report, and make sure it is accurate. Watch the movement of MBS on the stock market, and monitor current mortgage interest rates. When interest rates are at a comfortable low, apply for a mortgage. You should be able to obtain the best interest rates available on the market.

Ki works in the Austin real estate market. His website has a free search of Austin homes. Austin, Texas has a lot to offer any buyer. His site has statistics and commentary on Austin real estate along with graphs showing historical mortgage rates.

The 30 year rate fell slightly this week moving from 4.99 to 4.98. This is the 4th week in a row where rates have fallen. Although rates have been falling for 4 weeks in a row all the drops have been slight. Four weeks ago rates the 30 year rate stood at 5.14 and today it stands at 4.98 for a total drop of only .16 points. The other major mortgage products fell as well but all the drops were similarly quite small. The 15 year dropped from 4.40 to 4.39. The 5 and 1 year arms dropped from 4.27 to 4.25 (5 year arm) and 4.32 to 4.29 (1 year arm). Below are rates from the weeks from Dec 31, 2009 to Jan 28, 2010 and rates from July 30, 2009 (six months ago).

Jan 28, 2010
30-fixed 4.98 15-fixed 4.39 5-yr ARM 4.25 1-yr ARM 4.29

Jan 21, 2010
30-fixed 4.99 15-fixed 4.40 5-yr ARM 4.27 1-yr ARM 4.32

Jan 14, 2010
30-fixed 5.06 15-fixed 4.45 5-yr ARM 4.32 1-yr ARM 4.39

Jan 07, 2010
30-fixed 5.09 15-fixed 4.50 5-yr ARM 4.44 1-yr ARM 4.31

Dec 31, 2009
30-fixed 5.14 15-fixed 4.54 5-yr ARM 4.44 1-yr ARM 4.33

Jul 30, 2009
30-fixed 5.25 15-fixed 4.69 5-yr ARM 4.75 1-yr ARM 4.80

The expectation for the last month or two has been that rates would increase and rates have steadily defied this expectation. Moving forward the expectation is still that long term rates are going to increase. If they fall its doubtful they will fall much. With the current rate of 4.98 just slightly above the all time low of 4.71 we saw at the end of 2009. When and how fast rates will rise will depend on how committed the US government is to stopping rates from rising. Some believe that a fast rise in mortgage rates could derail the US economic recovery so the government has been paying attention to rates to not let them rise to quickly. Even with government involvement the general expectation is still that rates will be higher in a year.

In addition to rates we also like to look at mortgage payments since these numbers are what really matters in the end for people obtaining a long. We took today’s rates and translated them into a mortgage for a 200k loan. We also did the same thing with rates from January, 14 2010 and rates from July, 30 2009 (six months ago).

Jan 28
30-year $1071.19
15-year $1518.76
5-year ARM $983.87
1-year ARM $988.56

Jan 14
30-year $1080.98
15-year $1524.88
5-year ARM $992.09
1-year ARM $1000.34

Jul 30
30-year $1104.4
15-year $1549.47
5-year ARM $1043.29
1-year ARM $1049.33

As we can see while rates have fallen in the last 2 weeks the effect on mortgage is pretty slight. A mortgage payment would have decreased less than 1 percent from 2 weeks ago (.009 percent). So what is our advice to people looking for a mortgage? I would lock in sooner rather than later. It’s hard to know if rates while move up or down in the near future. But while there is a small chance of rates dropping drastically if the economy suddenly shows signs of strength there is a chance rates could move up quickly.

Ki lives in Austin, Tx. He writes frequently about mortgage rates and his website provides a mortgage rate widget along with free mortgage calculators. His site also provides a graphical search for Austin Tx real estate.

Experienced home flippers know that there are pitfalls to any promising piece of property, and avoid the most obvious ones. You can, too. Learning from others’ mistakes can result in huge rewards if you find you are ready to start a home flipping business.
The following are pitfalls and mistakes to avoid and how to work some of the situations to your advantage.
1. If your financial situation is not healthy, don’t start flipping just yet.
If you do not have the following necessities in place, put flipping on the back burner for now:
* Full-time job.
* Income that allows you to put away 10 percent of your monthly income for savings or retirement.
* Six months of income already put away in either a savings account, CD or some other form of liquid holding that draws interest.
* Account separate from your savings or CD with $10,000 for repairs on your future investment.
* Potential investment partner or partners.

2. Don’t use a stated income loan, better known as “liar loans.”
Stated income loans were created to help individuals with variable income qualify for home loans - e.g., small business owners or those who work sales commission jobs. Very little or no proof of income is required for stated income loans; although, they typically charge a higher interest rate to cover the risk.

3. Don’t be untruthful on your loan application.
It is a federal crime to lie on a loan application. You may get the loan, but, if you are caught, you face charges of mail fraud, wire fraud, bank fraud and possibly others. Common fallacies submitted on mortgage applications include an overstatement of income, understatement of debts, and a commitment to live in the home as the primary residence.

4. Don’t start without a business plan.
If you don’t have a personal financial budget, create one. Then, create a business financial budget that indicates how much you have set aside and what you can allocate out of every paycheck for repairing future properties. If your business plans falls short of savings for repairs, wait to flip until your finances are healthier.

5. Don’t take on too many projects at once.
Start with one property. Once you get your feet wet with a successful flip, go on to another one. Don’t get in over your head with too many properties. Unless you have partners who are committed to jumping in with both feet with you, it will be in your best interest to proceed cautiously.

6. Don’t buy a home site unseen.
Never, ever, buy a home site unseen. It doesn’t matter if it is located in the classiest part of town, the asking price is lower than half of what area homes go for and the seller is willing to pay your closing costs. Simply put, don’t do it.

7. Don’t buy a home with structural problems.
Structural problems, like a leaky basement or cracks in the foundation, are an invitation to huge out-of-pocket expenses. Even if you have an expert assess the situation and a licensed contractor who is willing to do the work, but still allow you a healthy profit, you don’t know that the job won’t still turn south on you once you sign on the dotted line. Don’t dive into that pond of possibilities.

8. Don’t buy the property unless you can afford to carry the mortgage if doesn’t sell quickly.
Unless you have monthly income that covers all your expenses and can pay for another mortgage, ignore that flipping itch for now.

9. Don’t quit your day job.
You find THE home that is going to net you a pretty penny, one that will pay your salary for a year, and you think, “I can quit and do this full-time!” Think again. You may net a year’s salary from the flip; however, you may not be able to do it consistently. Wait until you see that you have the knack for turning properties at a significant profit, and then consider quitting your day job.

10. Don’t start without a good exit strategy.
Good intentions don’t necessarily develop into dollars. Even if you’ve done all your homework, followed the ten steps to successful flipping and received a great interest rate on your financing, the situation still has the potential to go south. You received the loan you wanted, performed all the remodeling necessary and you’re sure the home will sell the day it hits the market … but it doesn’t. You go through several months of mortgage payments only to find that it simply isn’t selling, no matter how much you cut the price. Do you have an exit strategy? Maybe you can rent the property out, rent it out with the option to buy or have someone else assume the loan with little or no money down. Whether you run into remodeling that will cost you more than you anticipated or other unforeseen problems, you need to consider all the possibilities that could occur and have a good exit strategy.

Austin, Texas is a growing and thriving community. Ki maintains a website to help future buyers move to this community and understand Austin Texas real estate. They can search for homes in the Austin MLS. He also keeps buyers up to date on his blog covering Austin real estate homes and statistics.

Getting to the bottom of the financial crisis of the last two years has begun in earnest. The bipartisan Financial Crisis Inquiry Commission, made up of private citizens with extensive financial sector backgrounds, has been given the job of unraveling the cause of the biggest financial meltdown since the Great Depression.

The blame lies not only at the feet of the banking and investment industry, but also the U.S. regulators who were supposed to be watching out for such a disaster. To discover the extent that each group is culpable, the commission will seek testimony from a wide range of financial players, including former Federal Reserve Chairman Alan Greenspan, among other current and former regulators.

Commission chairman Phil Angelides has promised to scrutinize and question the regulators as much as the private sector. One of the early people in the hot seat, Federal Deposit Insurance Corp Chairman Sheila Bair, admitted that mistakes were made. “Not only did market discipline fail to prevent the excesses of the last few years, but the regulatory system also failed in its responsibilities,” she said. (Reuters) Bair admitted, as others are likely to do so, that when the profits are sky high, it’s hard to look for the cracks in the foundation.

As Time magazine pointed out recently, Congressional investigations after a crisis are not rare, though it’s been a long time since one investigated a financial crisis. In 1912 the Pujo Committee was followed by the Pecora Commission in 1932. The current commission could become known as the Phil Commission after the chairman, to keep the alliteration going.

As an extension of the Fraud Enforcement and Recovery Act of 2009, the ten members of the commission have been charged with scrutinizing 22 specific areas. According to the government website set up for the commission, the inquiry will include investigating fraud in the private sector, particularly in terms of the abuse of mortgage products. Also, the failure of state and federal regulators will be examined, as well monetary policy, credit ratings and global impact.

So far, those who have come before the commission have been regretful, but not necessarily apologetic. Bankers have acknowledged taking too much risk, but are quick to defend the structure of their companies and the size of their pay packages. This comes in the midst of the Obama administration trying to get banks to payback taxpayers for every penny of the bailout, to the tune of $117 billion.

Regulators have admitted that programs at many levels failed to do what they were intended to do. Key regulators like Bair, reportedly an early critic of subprime mortgages, are working to change the system, along with legislation now in Congress. The role the commission will play in the future of the financial markets may take some time to be determined, but it is likely to have a lasting impact. After all, the SEC was created from the findings of the Pecora Commission.

In Austin, Texas, Ki set up his real estate office three years ago. He also has a website with a free, dedicated search of available Austin Texas real estate. It lists procurable Austin homes for sale. Ki also writes regularly on his blog covering Austin real estate.

The politics of punishment are tricky. Take the playground, for example. The boy in the striped shirt not only pushed your child out of the way at the top of the slide, but also gives your child a good kick for his efforts when he reaches the bottom. You can comfort your own child, but you can’t truly punish the boy in the striped shirt; he is a stranger. You can hope that his parents have a vigilant eye on the playground and will step in and say something, but that doesn’t always happen.

It’s even trickier to punish adults who are acting within legal parameters, if not moral ones. President Obama would like to create a tax to punish banks for effectively taking the bailout money and running. He is calling it a fee, but the proposal is actually for a 0.15 percent tax on the liabilities of large financial institutions. The tax only applies to companies with assets of more than $50 billion, a rather intimate group of about 50. (Reuters)

The tax is proposed to last 10 years and estimated to generate about 90 billion for the government, the majority of that from the ten largest banks. The question is who will really be paying? In all likelihood the banks will use creative accounting to sidestep the tax, as well as share the pain with bank customers in higher fees and tighter rules.

The idea behind the tax is that the Obama administration hopes this fee will give banks and other companies an incentive to whittle down burgeoning balance sheets. Even as President Obama defends the necessity of the bailout in the first place, he has criticized the banking industry for proposing nearly record-breaking bonuses. According to the Associated Press, “Six of the biggest U.S. banks are on track to pay $150 billion in total executive compensation for 2009, slightly less than the record $164 billion in 2007 before the financial crisis struck, according to the New York state comptroller’s office.”

The President is strongly suggesting that banks pay the fee out of the bonus pool, rather than find ways to pass the cost of the fee down to the customer. However, it is more likely that banks will keep the bonuses and find ways around the tax. Some of those solutions could involve risky loans, which is what started this whole mess in the first place.

While the President is insisting that Congress will pass the proposed bank tax, it is hardly a foregone conclusion. Republicans, not to mention the financial industry, is opposing it. And just what will the bankers spend all those billions in bonus money on? According to CNNMoney, at the top of the list is real estate. Bank execs will spend money on swanky New York apartments and European vacation homes. Also on the banking bonus wish list is private school tuition, expensive vacations, boats, cars and Botox. Yes, Botox. Apparently big time bankers need to look wrinkle-free to stay competitive.

Ki is helping streamline the search for homes in the Austin MLS on his website. He provides a free search of available Austin real estate. His site has a real estate blog covering statistics on the different Austin MLS areas.

The 30 year rate fell from 5.06 to 4.99 this week. This marks the 3rd week in a row where rates have fallen. Although rates have been falling they are still quite a bit off the all time low of 4.71 we saw on December 3, 2009. That said it’s nice to see rates falling again. Looking at other rates the 15 year dropped from 4.45 to 4.40. The 5 and 1 year arms dropped from 4.32 to 4.27 (5 year arm) and 4.39 to 4.32 (1 year arm). Below are rates from the weeks from Dec 24, 2009 to Jan 21, 2010

Jan 21, 2010
30-fixed 4.99 15-fixed 4.40 5-yr ARM 4.27 1-yr ARM 4.32

Jan 14, 2010
30-fixed 5.06 15-fixed 4.45 5-yr ARM 4.32 1-yr ARM 4.39

Jan 07, 2010
30-fixed 5.09 15-fixed 4.50 5-yr ARM 4.44 1-yr ARM 4.31

Dec 31, 2009
30-fixed 5.14 15-fixed 4.54 5-yr ARM 4.44 1-yr ARM 4.33

Dec 24, 2009
30-fixed 5.05 15-fixed 4.45 5-yr ARM 4.40 1-yr ARM 4.38

Jul 23, 2009
30-fixed 5.20 15-fixed 4.68 5-yr ARM 4.74 1-yr ARM 4.77

It’s a little surprising to see rates falling at a time when the major stories are that long term rates are going to increase. And in spite of the recent drops we still expect rates to rise long term. While it’s hard to know what rates are going to do next week we still expect rates to be substantially higher in a year or two.

In addition to mortgage rates it’s always nice to look at actual mortgage payments. We took today’s rates and used our free mortgage calculator and turned them into mortgage payments for a 200k loan. We also did the same thing with rates from January, 07 2010 and rates from July, 23 2009

Jan 21
30-year $1072.42
15-year $1519.78
5-year ARM $986.22
1-year ARM $992.09

Jan 07
30-year $1084.67
15-year $1529.98
5-year ARM $1006.25
1-year ARM $990.91

Jul 23
30-year $1098.22
15-year $1548.44
5-year ARM $1042.08
1-year ARM $1045.7

So although rates are down the change in a mortgage payment is not that drastic. Compared to two weeks ago a mortgage payment on a 200k mortgage would be down $12.25 less or down 1.12 percent.
So what is our advice to people looking for a mortgage? First it’s best to start the mortgage process early. This means to get one’s credit score and start talking to the bank or mortgage broker they plan on using. We are no longer in 2007 and banks are still balking on clients with small problems with their credit reports. It’s also probably wise to lock in now instead of waiting. While rates might drop slightly there is more of a chance of them rising drastically in the next few weeks than falling drastically since they simply don’t have much room to fall. Also while the lower rates on the 5 and 1 arms is appealing it’s probably a good idea to stick with the 30 year mortgage. Since rates are expected to rise its best to lock in with a long term rate instead of being forced to refinance in a few years.

Ki is a real estate agent in Austin Texas. His site provides a search for Austin Texas real estate. It also provides a free mortgage calculator and a mortgage rates widget.