Mistakes to avoid when buying a home

MSN's Money writer Liz Pulliam Weston, shares a article on 8 mistakes you can make when you are buying a home. Here are a few that can help.
(Read the full article here)

Not fixing your credit

Mortgage brokers say they're confounded at the number of buyers who apply for a mortgage with their fingers crossed, hoping their credit will allow them to qualify for a loan.
Before you even think about applying for a mortgage, obtain copies of your credit report and your FICO credit score. Your FICO score is the three-digit number that's used in 75% of mortgage-lending decisions. You can order your FICO score on the Web for a fee of $14.95, which includes a copy of your credit report.
Doing this at least six months in advance should give you plenty of time to challenge any errors on your report and ensure that they're removed by the time you're ready to apply for a loan. You can also see the legitimate factors that are hurting your score and do something about them, such as paying off an overdue bill or paying down credit card debt.

Not looking for first-time home buyers' programs

These programs, typically sponsored by state, county or city governments, often offer better interest rates and terms than you'll find among private lenders, said mortgage consultant Diane St. James. Some are tailored for people with damaged credit, while most can help people with little saved for a down payment.

Not getting pre-approved for a loan

Many first-time borrowers confuse being "pre-qualified" with being "pre-approved." Pre-qualification is a pretty casual process, where a lender tells you how much money you probably can borrow based on how much money you make, how much debt you already have and how much cash you have for the down payment.
Getting pre-approval, by contrast, is a much more rigorous process and involves actually applying for a loan. You typically submit tax returns, pay stubs and other information. The lender verifies the information and checks your credit. If all goes well, the lender agrees in writing to make the loan.
In a hot or even warm real estate market, the house hunter who is only pre-qualified is a cooked goose. Home sellers and their agents give much more weight to offers being made by buyers who already have a loan lined up. (Access Point Loans provides you with a free pre-approval, see the downloads section at the top of the blog.)

Borrowing too much money

Many people take out the biggest loan they possibly can, figuring that their incomes will eventually increase enough to make the payments comfortable. But few first-time buyers have any clear idea of how expensive homeownership can be. Not only will you shell out more for mortgage payments than you probably did for rent, but you'll also need to cover property taxes and homeowners insurance, as well as higher bills for utilities, maintenance and repairs than you faced as a renter.
Lenders are perfectly willing to let you overextend, knowing that you'll probably forgo vacations, retirement savings and new clothes for the kids rather than default on your mortgage.
"Mortgage money … is way too easy to get," said Ted Grose, president of the California Association of Mortgage Brokers. "People tend to overbuy … and that can really stress family life. It's also a formula for foreclosure." Instead of going to the edge of affordability, consider limiting your housing costs -- mortgage payments, property taxes and homeowners insurance -- to 25% or so of your gross income. That's a much more sustainable level for most people, financial planners say, than the 33% lenders are typically willing to give you.

Not having enough cash on hand after closing

After borrowing too much, and scraping together every last dime for closing costs, many home buyers have nothing left in the bank to pay for anything unforeseen happening --and something unforeseen always happens.
"It costs so much just to move in," Grose said. "Then the water heater breaks."
Some people are so tapped out by the process, Jackson said, that they're not able to make their first mortgage payment on time. That's why "more and more lenders are requiring [borrowers have] three months' reserves after closing," Jackson said.
That's a smart idea for borrowers, anyway. Having three months' reserves, which means a fund equal to three months' worth of expenses, will help you handle the added costs of homeownership with much less stress.

Fannie Mae can help

What is Fannie Mae?

Fannie Mae is a financial services company on the New York Stock Exchange (FNM/NYSE) serving the American home mortgage industry. Fannie Mae offers banks and other mortgage lenders financing, credit guarantees, technology and services so lenders can make more home loans to more consumers.

Fannie Mae does not make home loans -- we help mortgage lenders serve homebuyers. By serving more than 1,000 lenders nationwide, large and small, Fannie Mae helps to make home financing more possible for families from all walks of life across America.

Fannie Mae also helps finance affordable housing and community development projects, working with local, state and national housing partners. (For example, we are a major investor in Low Income Housing Tax Credits, which help finance affordable rental housing.) Our goal is to help lenders and housing partners put more families into homes and keep their homes, and to expand the nation's stock of quality affordable housing.

How does Fannie Mae help?

Many Americans still are being overlooked, underserved, and overcharged in their search for affordable homeownership and rental housing options. Fannie Mae is dedicated to helping our partners tear down barriers, lower costs, and increase the opportunities for homeownership and affordable rental housing options for low- to moderate-income individuals and families.

Fannie Mae maintains relationships with a wide range of housing partners, lenders, and other key players to meet specific affordable goals:

• Expand access to homeownership for first-time home buyers and help raise the minority homeownership rate with the ultimate goal of closing the homeownership gap entirely;
• Make homeownership and rental housing a success for families at risk of losing their homes;
• Expand the supply of affordable housing where it is needed most, which includes initiatives for workforce housing and supportive housing for the chronically homeless; and
• Transform targeted communities, including urban, rural and Native American, by channeling all the company’s tools and resources and aligning efforts with partners in these areas.

Fannie Mae is a great institution that helps Americans with home financing. Check out their site www.faniemae.com for more information.
(Information taken from fanniemae.com)

Rates are on the rise

The following report was found on CNN Real Estate.

WASHINGTON (AP) -- Rates on 30-year and 15-year mortgages rose this week, delivering another dose of unwelcome news to the troubled housing industry.

Freddie Mac (FRE, Fortune 500), the mortgage company, reported Thursday that 30-year fixed-rate mortgages averaged 5.88% for the week ending April 3. That was up from last week's 5.85% and was the highest since the middle of March, when 30-year rates stood at 6.13%.

The increase in mortgage rates also isn't welcome news to prospective home buyers in an environment where obtaining financing to buy a home or other big-ticket items has become more difficult.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, rose this week to 5.42%, up from 5.34% last week.

"Housing .... continues to be a drag on the economy," said Frank Nothaft, Freddie Mac's chief economist.

However, rates on shorter term mortgages dipped this week

For five-year adjustable-rate mortgages, rates dropped to 5.59% this week, from 5.67% last week. And, rates on one-year, adjustable-rate mortgages averaged 5.19% this week, down from 5.24% in the prior week.

The mortgage rates do not include add-on fees known as points. For 30-year and 15-year mortgages as well as one-year adjustable-rate mortgages the nationwide average fee was 0.5 point. Five-year mortgages carried a 0.6 point average fee.

A year ago: A year ago, rates on 30-year mortgages stood at 6.17%, 15-year mortgage rates averaged 5.87%, five-year adjustable-rate mortgages were 5.92% and one-year adjustable-rate mortgages were at 5.44%.

Housing has been suffering through a severe slump that has dragged down house prices in many parts of the country. The fallout is afflicting both homeowners and the economy at large.

For the first time, Federal Reserve Chairman Ben Bernanke acknowledged on Wednesday the possibility that the country could fall into recession, something that hasn't happened since 2001. The economy is being clobbered by a trio of crises - housing, credit and financial. That's taking its toll on the willingness people to make big financial investments like buying a home.

Foreclosures, meanwhile, have swelled to record highs, aggravating housing's problems by dumping more empty homes on an already depressed market.

Home Sales Up in February

With all the negative media focusing on the bad aspects of the financial market it is hard to hear some of the positive reports and stories that are out there.
All we hear is, the market is slow, stocks are struggling and the economy is bad. Home sales were up in February but prices of those home are down, but that is ok. The market is correcting itself. The good news is that people are still buying, selling and consumers are still able to get a mortgage.

Read the report here

Federal Reserve Cut Interest Rates

March 18th, 2008
The Federal Reserve cuts their rate by 3/4 a point, lowering the rate to 2.25% What does this mean to the mortgage industry? Well, we are not sure. Most of the projections that are being broadcast is that 30 year interest rates are on the rise despite the rate cut. The mortgage industry is going through multiple changes daily. What is causing all the unrest and multiple changes? Many of the banks and mortgage companies that you go to get your mortgage, will give you a initial loan for your home, they will then take your loan and file and try to sell it on what is called the "secondary market". This market is for the buying and selling of mortgages. When the buyers on this market decide to stop buying a certain type of loan or mortgage, the industry will change, so that they can create more loans that will appeal to the buyers, thus creating a change in mortgage loans that are available to the consumer.
The Federal Reserve stated that the rate cut was done to help a slowing economy and falling job market. They did not how ever state that the cut was implemented to help the real estate market or to get mortgage rates to drop. All we can due is watch to see what happens and hope that rates will not rise and hurt an already struggling real estate market.

Knowing when to buy

Buyers rights

As a home buyer you have certain rights that are yours. RESPA has a great website that has tips and information for anyone that is buying, selling or refinancing their home.
Here are some of the rights that they list. Remember, these rights are yours and will help you save money.

• You have the RIGHT to shop for the best loan for you and compare the charges of different mortgage brokers and lenders.

• You have the RIGHT to be informed about the total cost of your loan including the interest rate, points and other fees.

• You have the RIGHT to ask for a Good Faith Estimate of all loan and settlement charges before you agree to the loan and pay any fees.

• You have the RIGHT to know what fees are not refundable if you decide to cancel the loan agreement.

• You have the RIGHT to ask your mortgage broker to explain exactly what the mortgage broker will do for you.

• You have the RIGHT to know how much the mortgage broker is getting paid by you and the lender for your loan.

• You have the RIGHT to ask questions about charges and loan terms that you do not understand.

• You have the RIGHT to a credit decision that is not based on your race, color, religion, national origin, sex, marital status, age, or whether any income is from public assistance.

• You have the RIGHT to know the reason if your loan was turned down.

You have the RIGHT to ask for the HUD settlement costs booklet "Buying Your Home."

FHA- Raised Loan Limits

The bill, which passed by a vote of 93-1, seeks to make the Federal Housing Administration more relevant in the current housing and mortgage lending environment by expanding the agency, loosening some underwriting standards, and raising its current restrictive loan limit.
The FHA was established in 1934 to help borrowers, particularly those with low incomes, purchase homes by guaranteeing banks that those loans would be repaid should the borrower default. But the agency's loan limits have generally lagged behind those of Freddie Mac and Fannie Mae and as home prices climbed dramatically and lenders with looser underwriting standards proliferated the agency became less and less of a player in the mortgage market.

The Changing Mortgage Market

There are many changes that take place in the mortgage and loan industry ti keep banks, lenders and invester on the same track and to keep the market stable. In the past changes to loan products, interest rates and bank lending regulations only came every once in a while, but lately these changes are happening every day. These changes effect borrowers and buyers who are in the proccess of purchaing or refinancing. The changes are both positive and negative to the consumer. Positve in a way that lenders are making certain that there will not be another mortage meltdown and bundles of foreclosures. Also positive becuause rates are dropping daily. The negative effect is not seen by all, but is there and very costly to some. Those looking to invest in Real Estate and others that are in different ARM loans. Many of the loans that were avaliable months ago do not exist anymore. This causes some borrowers to look for new loan products and change their investment strategy. While from the outside these changes look safe and good for the market, it has a deep impact on those investors and borrowers that have been paying on the ARM loans for years and helping the market by purchasing, renting and re-selling properties.