Welcome to Mortgage Guide
Mortgage Second Soft Article
. For a permanent link to this article, or to bookmark it for further reading, click here.
Why Can Mortgage Rates Rise in a Down Market?
from:With all the hoopla about the overload of inventory in most states (due to foreclosures), and the dropping of interest rates by the Federal Reserve, you may be wondering why mortgage rates haven risen in the past year over all. The mortgage industry is not the same as the banking and the housing industry. They are connected to these two sectors of the market, but lending products are usually priced on their own merits and not just those of the economy.
The Lender’s Point of View
So, while the amount of inventory can affect home prices and spur competition amongst lenders, it can lower the rates if one lender is trying to grab a bit more business. On the other hand, the mortgage crisis has been so severe in some states that many lenders are wary of lending to unreliable borrowers. They have tightened their credit requirements and when you don’t meet those newer requirements, they may raise the rate to hedge their risk. So, even with a market rate of 6.00% on a 30-year fixed rate mortgage, you could still end up paying more if you don’t meet the new credit requirements of a FICO score of 720 or more, solid employment, and a sizable down payment.
The Market’s Point of View
Mortgage rates can also increase, even if the Federal Reserve decides to lower interest rates. This may spur banks to lend out more money and attract more customers. As the new customers start to flood the market, the demand increases. When the demand of any product goes up, so does the price. That’s why the mortgage rates can even increase when the Federal Reserve cuts rates.
Your Point of View
It is very difficult to time to buy a house at the bottom of mortgage rate drop cycles. Typically, you can do this better if you are refinancing than if you are buying because you are then comparing your new loan to whatever you had before. If it saves you money or drops by at least 1 to 2 points of your mortgage interest, then you are pretty confident that buying at that time is a good move. Otherwise, if you are new buyer and have nothing to compare it to, you still can be relatively comforted by the fact that despite rises and falls over the short-term, mortgage rates are at a historically low-point for now in comparison to years past. They may not drop more than 1 point more and should they do so, you can always refinance your mortgage rates later.
Mortgage Second Soft Specific links
Mortgage Second Soft News
Soft-second mortgage program launch has been 'fairly successful,' Mayor Mitch Landrieu says
The City of New Orleans has committed $3 million to finance 54 home purchases, more than half of which have closed
Read more...Hopeful restart for New Orleans soft-second mortgage program: An editorial
The re-start of the mortgage effort seems like a hopeful move for neighborhoods still recovering
Read more...Mayor Landrieu touts successes of city's "soft second" mortgage program
Maya Rodriguez / Eyewitness News Email: mrodriguez@wwltv.com | Twitter: @mrodriguezwwl NEW ORLEANS -- For Tiffany Polite, her three-bedroom, two-bath home represented a dream just a few months ago. "When I first looked at the house, I knew I couldn't afford it," she said. "I just looked at it -- just marveling at how beautiful it was, knowing I couldn't afford it." Polite works at a non-profit ...
Read more...10 Reasons to Buy Instead of Rent
Home buying has earned a bad rap in recent years: The subprime mortgage crisis and ensuing economic meltdown left many homeowners underwater, unable to pay their mortgage, and even facing foreclosure. ...
Read more...Principal Reductions Won’t Solve the Mortgage Mess
Edward DeMarco, the temporary director of the Federal Housing Finance Agency, continues to endure blistering criticism for refusing to allow Fannie Mae and Freddie Mac to pay for large-scale principal reductions for underwater borrowers (those who owe more than their homes are worth) or to facilitate refinancings for those stuck with high interest rate mortgages.
Read more...