Coming to a close –

Fed’s Involvement in Mortgage Back Securities

The Fed’s involvement  in purchasing Mortgage Back Securities comes to end TODAY.  There have been differing opinions of the overall effect on mortgage interest rates as the go to source has been the Federal Government who isn’t concerned with a high IRR.  However, the replacement  funding source, investors, are concerned with a high IRR and on the heels of the recent MBS market it may prove costly to lure investors back .  So at first blush you would anticipate rates to increase to attract new investors.  We have seen an increase in mortgage interest rates over the past several days indicating lenders hedging on their ability to sell mortgages in the open market.

Now in comes Fannie and Freddie, you remember these guys, the organizations that folded in wake of the crumbling mortgage industry.  (Just as a reminder I think we as tax payers own them)  They say that they will be buying back $200 Billion of bonds backing delinquent mortgages from investors.    Why You Ask? The thought process is that once investors unload these bad eggs they will take their cash and re-invest in new agency-backed securities( MBS).  If this happens then rates will remain low or at least hold at current levels. “I played with a match once and got burnt, I was very careful the next time I touched one.”

So with all the chips on the table where are mortgage interest rates going?  The answers is the same as it is every day.  Mortgage interest rates fluctuate daily up…and down.  In my opinion, the trend is moving upward as demand for new mortgages is down and will remain soft for the balance of the year.  The increase in rates will move those thinking about refinancing to the sidelines as it just wouldn’t make good financial sense.  And at the end of the day, the percentage of mortgage applications converting  to closed loans is still at all time lows as lenders are in their bunkers waiting for this storm to blow over.

So if you are considering a new purchase or  refinance give your mortgage broker a call to look at the options that are available for you.  Remember that in today’s market there are several factors that affect your mortgage interest rate, be wary of those that give you a quote off the cuff.  The likelihood of your closing with that rate would be questionable. 

Chance of a Lifetime: Tips for First-Time Buyers

While the burst real estate bubble might be bad news for the economy, it could be good news for first-time homebuyers. In fact, now might just be the best buying opportunity of a lifetime. Follow these steps to determine where to begin:

Establish a Realistic Budget

Owning a home involves more costs than meet the eye. In addition to mortgage, taxes and insurance, wise homebuyers set aside a little savings toward maintenance and unexpected emergencies. Remember, you will eventually need to repair or replace many items in the home.

Buy What You Need

While a home is often considered an excellent investment, it’s important to only purchase as much home as you actually need. Bigger isn’t always better; sometimes it’s simply more expensive. Higher taxes, bigger insurance bills and more maintenance can eat away at even the best budgets. So buy what you need, unless it’s wise for you to…

Plan for Growth

First-time buyers can also be too modest when it comes to purchasing their first homes. If you intend to begin a family, you may quickly outgrow the home. Plan for growth to ensure you will be as happy in the home tomorrow as you are today.

Understand Appreciation

Although you don’t want to base the purchase of your home solely upon appreciation, it’s important to understand how the future value of your home is likely to impact your ability to move up later in life. When the time comes to sell, rent or exchange the current property, a home with long-term appreciation provides greater buying options in the future. Search for neighborhoods expected to rise in value over time.

Work with a Reputable Agent

A great realtor is often worth his or her weight in gold, which is why you will typically find that investors would never think of going it alone. Unfortunately, many first-time buyers are under the mistaken impression they can save money by helping the seller eliminate or reduce the commission. Research shows this is rarely the case. Most agents help negotiate a lower sales price and ensure that funding, necessary paperwork and other important legal considerations are all taken care of.

Valparaiso Landords

Will you pass the test?

I had the opportunity to listen to Bill Oeding from the City of Valparaiso this week at our Housing Coalition meeting held at the United Way offices. The main topic as the new Rental Property Registration program that is being proposed to city council. The program will establish and ordinance for rental properties and their owners within Valparaiso city limits. The plan includes a online registration and required inspection for each unit of the house or complex. There will be a fee for each unit owned ($10.00 +/- ) and a inspection fee ($25.00 +/-) upon completion of the inspection. Further discussion indicated that the inspection process would require the unit to have minimum requirements to pass. These items include working plumbing and electrical, non leaking roof, and overall safe living environment. If the unit doesn’t pass these bare minimums there will be a plan of correction and the property would be re-inspected in 30 days. If the landlord fails to repair the issues there will be implementation of penalties and fines. The program is currently in a committee comprised of city officials and rental property owners and should move forward to city council in the next few months. I took the opportunity to look at two such policies that are working in two other Indiana cities, Bloomington and West Lafayette. The are linked below.

Based upon what was presented the concept appears to be straight forward intended to provide safe rental housing options in Valparaiso. Overall I believe that the rental properties in Valparaiso will pass the minimum requirements but for those that won’t it allows officials enforce compliance to make rental units habitable. I can’t imagine living in an environment without running water or a roof that consistently leaks with numerous complaints going to the landlord with no resolve, but those cases do exist in Valparaiso. A common sense ordinance to protect a renter in these substandard environments is warranted.

Bloomington Rental Housing Policy

West Lafayette Rental Housing Policy