Can interest rates be predicted?
Ken Cook
Everyone loves this answer, “Yes … and no.”
Truly if it were simple enough to say “yes” then we would be living in a fully Marxist economy – which is where many high powered elected “officials” want us to go. That’s not a political belief it is a statement of fact. However, in switching from pundit to prognosticator, the short answer is, “yes, rates can be predicted with some accuracy.” Unfortunately the range of time for higher accuracy is a matter of hours not days and certainly not weeks.
Interest rates, at least mortgage interest rates, are not directly impacted by the Federal rates you hear so much talk about. For example with the Federal Prime at .25% interest rates for home mortgages are still in the low 5% range. For December the FHFA survey of closed loans put the average 30 year fixed agency loan at 5.11% and slightly lower on a 15 year fixed loan.
We all know these rates are very low and everyone in banking and finance (and even a few economists) understand this is as low as we can go without completely socializing the banking industry. The reason is profitability for investors. If the return on investment on risky instruments like Mortgage Backed Securities dips lower than other investment opportunities with equal or lower risk there will be no investors into mortgages and the mortgage market will dry even more.
To bottom line the point of this short article would be to notify you to forget about waiting for rates or terms to ever get any better than they are today. Certainly they may swing up and down around the sub 5% range but not lower. Waiting to refinance only puts you and your family at risk of missing the lowest interest rates in modern history including during the frenzy of the boom.
As predicted mortgage rates going higher – beware the "bad ads"
Many of us in the industry and especially the members of my direct subgroup have been telling the public for weeks there would be no long-term 4.5% rates. It was a terrible trick played out upon you by the media once again.? Unfortunately the pen is mightier than the truth and the media depends partially on the truth and mostly on the power of the pen.
Interest rates have begun rising this week after last week’s historic low. The low was fueled in part by the government getting involved in enterprise and creating a false sense of security for investors which quickly faded and resulted in a faster increase in the rates this week. In fact had the fed not become involved we may have held rates lower for an extended period of time.
Rates are up almost 3/4 of a percent higher over last week’s historic lows. In fact we have clients who are locked in and for some reason they have not yet returned their documents even though they are locked with no discount points with rates in the mid to upper four percent range! But there is an answer.
BE WARNED: One very large country wide lender has a reputation of having loan officers who make completely false statements. For example one loan officer there recently told one of our applicants she had to do her streamline FHA refinance! Absolutely not true – Novation Mortgage is a fully approved FHA lender and we can do any FHA purchase or refinance an any property almost anywhere in the southeast.
FHA Streamline Refinance – too good to be true?
Back in the early 1980′s we had just come through one of the worst of the 12 recessions since the Civil War. Unemployment was double digits in the percentile and interest rates for home loans in the lates 1970′s were hovering in the high teens. Add to that the declining values and excessive housing inventory and the country was in trouble.
HUD had a great idea and implemented it through their FHA insurance program in the single family housing product department. The new product was designed to help existing home owners refinance to the new lower rates without having to pass the appraisal which would almost certainly exclude them because the property value on their home would not support a loan large enough to pay off the existing FHA insured loan.
Enter the FHA Streamline Refinance and suddenly people who were keeping up with their payments had the opportunity to refinance without need of an appraisal. But that was only half the battle. Income had also declined over the period so many people who could still make their payments and had so demonstrated would not be able to meet FHA’s strict 43% debt-to-income requirements so they eliminated the need to verify income. Only employment needed to be verified.
Fast forward 28 years and we still have the FHA streamline refinance program and you can still refinance without an appraisal and without an income verification. Most other verifications will still be needed but this is designed to keep people who have been keeping up with their payments refinance into today’s lower FHA interest rates and save their home.
Novation Mortgage is your headquarters and is the HUD approved FHA Streamline Refinance for Georgia and Florida preferred lender of all Novation customers.
Who qualifies for the $7500 first time home buyers tax credit?
The first time home buyers tax credit is available to anyone who purchases a new home before July 1, 2009 and who has not owned a home during the previous 36 months.
It does not matter how the home is paid for or purchased but there are income limitations to qualify for the first time home buyers tax credit.
“The credit is phased out based on your modified adjusted gross income (MAGI). MAGI is your adjusted gross income plus various amounts excluded from income?for example, certain foreign income. For a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000. This means the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less.” – Directly from the IRS
Yes, the first time home buyers tax credit is available on all homes in Georgia and Florida. The first time home buyers tax credit is not available on investment properties and the home buyer may not own another home anywhere in the United States for any purpose. The first time home buyers tax credit is intended for primary homes only.
Refinance examples of savings based on interest and term
My good friend, in fact probably the closest thing to a brother I have ever had, telephoned me yesterday and asked if I thought he should refinance. His existing rate is 6.25% and par yesterday was 4.875% both on fixed 30 mortgages. His payoff is only $130,000 and his home is worth about $200,000 so there is plenty of room. Since he has already paid 8 years down I suggested we look at both a 20 year and a 30 year solution.
Because I am always very careful to over-estimate on closing costs he will actually end up bringing less to closing or having a slightly lower payment than I have indicated. On the 20 year to get that rate he is required to pay some discount and that is included in the amount to bring to closing or the loan amount. On the 30 year there would have been no discount if we had locked it yesterday.
His current P&I is 796.75 and his goal is not necessarily to lower his payment. In fact, if we go with the 20 year he actually shaves 2 years worth of payments off his total and at 796.75 x 24 = 19,122 that is a significant savings!
Fixed for 20 years at 4.5%
Loan amount $138,500 (includes taxes, insurance, rate buy down and all fees)
Principal and Interest $876.22
Leaving closing with $565.38
Fixed for 20 years at 4.5%
Loan amount $130,000
Principal and Interest $822.44
Bringing to closing $7664.39 (includes rate buy down)
Fixed for 30 years at 4.8755%
Loan amount $138,500 (includes taxes, insurance and all fees)
Principal and Interest $725.02
Leaving closing with $201
Fixed for 30 years at 4.875%
Loan amount $130,000
Principal and Interest $687.97
Bringing to closing $6632.72 (includes taxes, insurance and all fees)
My questions if I were the borrower would be about all that money I am bringing to closing? If it’s not yours it should be. First you have to know nobody works for free. No bank, lender, broker, attorney, underwriter, appraiser, insurance agent, processor, title agent, inspector, or government agency work for free. That’s where those fees go. Since my friend is already in an escrwo program he will get quite a bit back from escrow from his existing lender.
So let’s say he decides to go with the 4.5% fixed 20 where he is bringing $7664 to the closing to pay all the costs and buy the rate down. Remember that $19,122 he was saving from not having those 24 months of payments he will be shaving off? So now he is saving $11,458 and his payment totals over the next 240 months are only $7,200 higher (because the P&I is a little higher on the 20 at the lower rate than the 30 at the existing rate.) This means over the full life of the loan he will spend $4,258 less and own his home outright 2 years earlier. Further, if he really wants to get it paid off more quickly he can reduce his principle more quickly by paying additional principal reduction or bi monthly payments.
Now let’s look at the fixed 20 where he rolls the closing costs into the loan.? So in this example his current pay-off is $130,000. Putting all of the costs including insurance, taxes and the rate buy down into the payoff would be less than I have indicated but let’s stick with that in total costs. (Just a hint – people like that guy who used to advertise all the time who has ex employees now working for me would make the rate higher to accomplish the same goals but cost you every month as much as 100′s of dollars a month. We can do that too but I would not let this friend, a super conservative guy, do it that way.)
Going this way makes his payoff $138,500 and his monthly P&I $876.22. So we’re saving 2 years at $796.74 which is $19,122 but we’re adding a little to the monthly P&I which, over the life of the loan, will be 19,075.20 which results in (a) owning the home 2 years sooner and (b) a net gain of $46.80 in hard cash. But here’s the clincher and well beyond the scope of this short article. I know he is going to make additional principle payments as soon as his son graduates from college which is this Summer. At the 20 year term and the 4.5% rate his additional principle reduction payments will have a much larger impact that if he were financed for 30 years.
I would do the 20 year term refinance personally in a drop of a hat and roll the costs back into the loan.
Are interest rates headed up? Today they are, yes. But …
Interest rates are never stable. In recent years people seemed to assume that if the rate was, for example, 4.875% today they would have a week or two to make up their mind. This is simply not the case. Rates could very easily be 4.875% today and 5.250% tomorrow … or even this afternoon. RATES CAN CHANGE SEVERAL TIMES PER DAY. There is no way to accurately and 100% predict when rates will go up or down. There is a way to be very sure rates cannot drop much lower than they have been during the last 5 days.
You can either take advantage of a great rate or you can gamble. The gamble? Several fold actually.
(a) You could be gambling that rates will come back down below 5% or just lock your rate today, before they go up again.
(b) You could be gambling that your Debt to Income ratio is acceptable – if rates go up your payment goes up and that may throw you into a different category on DTI
(c) You could be gambling that rates don’t steadily increase from now to multiple percentage points higher
Listen, I know what the media has said but you must understand this: most reporters know nothing about banking and finance or the economy and they simply parrot what they have heard from industry insiders like myself. The problem with that is they don’t understand what we are saying so they report bits and pieces out of context. To fully understand what an amazing opportunity you have to refinance or purchase today at these incredibly low rates you simply need to speak with an astute mortgage professional with at least 5 years in the business without a complaint.
Do yourself a huge favor and deal with a professional from your region. We only do Georgia and Florida for a good reason: this is where we live. I am from Georgia and my wife is from Florida.
Call us today while interest rates are still acheviable down into the high 4% range without discount points. Seriously, tomorrow may be too late and these rates could very easily disappear into the pages of history.
Who can do your FHA streamline refinance?
Today a very nice lady telephoned us and asked if we could do an FHA streamline refinance on her home here in Georgia. Of course we can, we reassured her. She did not elaborate but after a short conversation we accepted her application for an FHA streamline, examined her credit, made a few phone calls about saving her some money on closing costs then sent her a Good Faith Estimate and Truth in Lending.
W0w. She was actually amazed that (a) our pricing beat the big country wide lender she is currently financed with and (b) that we actually sent her a GFE and TIL. After reviewing the interest rates and closing costs on her FHA streamline refinance she explained why she had asked if we could do an FHA streamline on her home.
She had been speaking with her big country wide lender and the “loan officer” there had told her in no uncertain terms she could online do an FHA streamline refinance with them! Their interest rate was higher and their closing costs were higher – and they did not send a GFE or TIL (by law they have 3 days).
The truth is it does not matter with whom you are currently financed we can do your FHA refinance and probably save you a very good amount of money on your total package including interest and or closing costs. We’re not always the “cheapest” but we certainly do our best to provide the best service.
FHA Cash Out Refinancing to 95% of Appraised Value
Better news is it can even be in a declining market. Oh I heard you naysayers denying people the opportunity to save their home. Unless we actually enter a full blow depression we are at or near the bottom on almost every property in America. There are people who are in homes who only need 95% to do a rate and term refinance and take advantage of today’s very low interest rates. You will still need an appraisal and in fact with FHA’s new guidelines, thank you HUD, you will now need two appraisals. The good news is you may save as much as one appraisal per month on your payments depending on your home value and existing interst rate.
As always, when looking to do an FHA cash-out refinance, it is best to contact someone from your area to do the finance for you. Some broker up in New Jersey is not going to care about your family home in Kennesaw, Georgia like we do at Novation. Likewise for the order taker at some big national lender.
Mortgage Profits Pledged to Charity – Eliminating Ad Budget
What could be more important than giving back to the community in times like these. While it may not amount to much we believe every little thing we can do to help rebuild lives here in our own communities is more important now than ever. In times past we spent as much as $250,000 per year on advertising alone. We believe $250,000 is just a drop in the bucket of what you can help generate back for the community.
When you refer someone to Novation Mortgage you can know several things. Mostly we will NEVER mislead them or “stuff” them into a loan like some of the biggest names in the industry continue to do. It almost disgusts me that people would even consider doing business with the largest lenders who did the most damage to our economy. But they do – they are still the top lenders even after the economic terrorism they have brought on America.
Our rates are as competitive as anyone and we consistently beat Countrywide and Bank of America in rates and costs on every loan. We shop our competition every day and while it is not just about rate and closing costs but more importantly accuracy and integrity we make sure we are competitive for your sakes.
GIVING BACK TO THE COMMUNITY – ELIMINATION OF AD BUDGET
Novation Mortgage is putting our money where your heart is. Five percent (5%) of our net proceeds will be contributed to your church, favorite recognized charity or one of our choice from every loan. These monies may go to feed children in America, provide services for the homeless or humanitarian efforts through faith based organizations. If you want us to give to your charity simply provide us the information at application. What we need from you is word of mouth to spread – we have highly competitive rates and costs and we live where you do. No ad budget means we need your support, too. Call 678-946-0101 for full details
10 Basic Habits of Successful Real Estate Investors
There are men, and women, whom I know who own dozens or hundreds of rental units. Single family to multi-family these habits are pretty much the same. Often it is the “getting started” which is the most difficult. To overcome that you really should attend my Real Estate Investor’s 123 Quick Start – it has been called “the most intense 3 hours” of real estate investment workshop you can attend. The price? Email me and I will send you a coupon so that no matter the current fee you will get a 90% rebate when you pay in advance online.
These habits are certainly not the only habits but they are common habits of the most successful investors.
- Develop a plan and stick to it. Anything that causes it to change should be considered carefully and the options should be examined in full.
- Establish the types of properties you will be buying. Anything outside of these must be carefully considered and all of the differences it will result in for financing, management and exit strategy.
- Know whether you are a flipper (speculator/gambler) or investor. Investors are in it for the long haul -win or lose. Speculators are gamblers who buy hoping to make a quick return. Some speculators are very successful -most are not.
- Understand the costs and requirements of using other people’s money. Chances are you are not going to borrow money for free. The more risk you present the higher the cost to you.
- Keep your emotions out of the game. When I offer a property for sale and the first thing an “investor” asks is, “do you have any pictures” I know they are not an investor at all. Investing is done on paper, buying a home is done with the eyes and the heart.
- Know your market area. If you know everything you need to know about your market area, often called your “farm”, you can quickly and easily make decisions about buy opportunities.
- Use professionals where professionals should be used. Sure you “can” buy and sell properties without a licensed agent but what do you do about the exposure you have for which they are insured? (I give very good information on how to use agents in the 123 QS Workshop.)
- Be honest with yourself. The easiest thing in the world for a new investor to do is to fall victim to some helpful wholesaler who paints a fantastic story of your certain success with a property.
- Create a relationship with some successful professionals. A lender, an agent, a general contractor, a home inspector, and an appraiser should all be a part of your list of professional contacts. (You will not be able to use “your appraiser” for any loans but they can help you determine values.)
- Successful investors are in it for the long haul. Can you imagine where Donald Trump would be today if he had just done a couple of deals?
I am a true believer in investing being more powerful than speculating and it is evident on paper often generations down the road. Imagine if Joe Kennedy had “flipped” the Chicago Mercantile Exchange instead of holding it. The Kennedy name would likely have faded decades ago. All of his bootlegging money was long spent but that CME money just kept rolling in through the generations.
Always remember and be respectful that the people with whom you are speaking may have done what you are doing for decades and thousands of times.
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Daily Rates for Qualified Buyers
Today |
Last Week |
|
| 30 Year Fixed | 3.50% | 3.65% |
| 15 Year Fixed | 2.87% | 2.89% |
| 5/1 ARM | 2.66% | 2.57% |
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