What's Ahead For Mortgage Rates This Week : July 20, 2009

Mortgage markets had an awful week last week as a combination of strong economic data and stand-out earnings results led investors into more risky investments.

The Dow Jones Industrial Average was up 7 percent.

Mortgage rates, unfortunately, didn't fare as well. As the first week since June in which mortgage rates rose, rates were up by a lot.

Mostly for three reasons.

The week's first big mortgage rate bump came Tuesday, right after Goldman Sachs released its blowout quarterly numbers. As one of the world's largest financial firms, Goldman's strong showing hinted that the financial crisis may finally be finished.

Next, rates were impacted by the release of the Fed Minutes from its June meeting. In the report, it was revealed that Ben Bernanke & Co raised the economic forecast for both 2009 and 2010, noting that the recession should be ending soon.
Lastly, June data showed that Retail Sales is expanding and that jobless claims are falling -- two potential positives for the U.S. economy that relies so heavily on consumer spending.

This week, without much data, the mortgage market should continue to take its cue from the stock market. If stocks improve, rates are expected to worsen. And vice versa.

The week's key events are Fed Chairman Bernanke's Tuesday testimony on Capitol Hill and Thursday's Existing Home Sales data. Mortgage rates remain volatile so if you're offered a rate that comfortably fits your household budget, consider locking in before the market can change.

The $8,000 First-Time Home Buyer Tax Credit : Use It By December 1, 2009 Or Lose It

The government's First-Time Home Buyer Tax Credit expires December 1, 2009.

If you expect to use the program in conjunction with a home purchase, you may want to consider yourself officially "on the clock".

Assuming a 60-day window between contract and closing, there are now 77 days left to find a home and get it closed.

The First-Time Home Buyer Tax Credit refunds up to $8,000 at Tax Time for qualified home buyers. A few of the program's qualification criteria include:

• Home buyer must not have owned a primary residence in the past 36 months
• The home may not be purchased from a family member
• The household adjusted gross income must be below $95,000 for single tax
filers and $170,000 for joint tax filers

The tax credit itself is limited to $8,000 or 10% of the purchase price, whichever is less.

Remember, though: The refund is a true tax credit -- not a deduction. This means that a taxpayer owing $8,000 to the IRS and claiming the $8,000 First-Time Home Buyer Tax Credit would owe the IRS nothing on April 15, 2010.

With the tax credit scheduled to expire later this year, some business groups say the amount of the credit, now capped at $8,000, should be raised to $15,000 and applied to anyone who buys a home. In addition, some economists say a tax benefit increase or extension is vital to spur home buying and help stabilize prices. Others economists say raising the tax credit will be difficult because it reduces taxes even more.

A lot of home buyers are taking advantage of it, and expanding the tax credit would help boost the market.

Furthermore, if you're in the market to purchase a home, take advantage of this tax credit, along with great prices and historically low interest rates before it goes away. Don't look back a year or two from now and say what most people will say, "I should have bought a house in 2009."

For more details the complete list of qualifying criteria is posted on the IRS website.

Fannie Mae Restricts 2-Unit Financing Guidelines

For the first time in nearly six months, Fannie Mae is imposing strict, new guidelines on American homeowners.

This time, the hardest hit demographic is owners of 2-unit homes.

In its official announcement, Fannie Mae listed the following changes to its 2-unit financing programs, separated by occupancy type.

Primary Residence

Purchase: Maximum loan-to-value drops to 80%; FICO minimums reset to 640.

Rate-and-Term Refinance: Maximum loan-to-value drops to 80%; FICO minimums reset to 640.

Cash Out Refinance: Maximum loan-to-value drops to 75%; FICO minimums reset to 680.

Investment Property

Purchase: Maximum loan-to-value drops to 75%; FICO minimums reset to 660.

Rate-and-Term Refinance: Maximum loan-to-value drops to 75%; FICO minimums reset to 660.

Cash Out Refinance: Maximum loan-to-value drops to 70%; FICO minimums reset to 680.

With Fannie Mae's new loan-to-value limits being reduced, it's a certainty that fewer 2-unit homeowners will be approved for mortgage financing. This could slow both purchase and refinance activity in the coming months.

The good news, though, is that while Fannie Mae recommends that lenders institute the new policy immediately, September 1, 2009, is the "effective date".

Therefore, if you plan to buy a 2-unit home, or if you own one and know you'll need to refinance it soon, it may be a good idea to move up your time frame.

Lenders could implement the new guidelines at any time and usually do so without warning.

Foreclosures By State - May 2009

11 States account for 80% of all the foreclosures in the U.S. with California leading the way.

Get Ready And Be Prepared For The Next Dip In Mortgage Rates BEFORE It Happens!

Forget about that 4.500 percent, 0-point mortgage rate you passed on last month. It's gone. Today, conforming mortgage rates are bearing down on 6 percent.

There are a few reasons why rates are rising -- one fundamental, and one emotional-like. We can't ignore either.

The fundamental reason rates are rising is evidence that shows the global economy in recovery. There's bound to be setbacks from month-to-month, but overall, the foundation for economic growth appears to be in place.

Unfortunately for active home buyers and shoulda-woulda-coulda refinancers, the recovery is coming faster and with more force than was expected. The pace of the recovery is forcing traders to account for longer-term inflation and inflation just kills mortgage rates.

The emotional reason is important, too. It's about heeding trends and patterns -- something Wall Street players call Technical Analysis. It's not super-important that you get how Technical Analysis works, you just need to know the basic premise behind it.

Technical Analysis is a pseudo-science; a way of studying markets that says patterns repeat themselves over time. Ironically, in a blatant case of Self-Fulfilling Prophecy, because traders believe in pattern watching, they often cause the pattern to be fulfilled.

This is why mortgage rates sometimes dip and soar for no apparent reason -- their strings are getting pulled by technical traders. And, part of what's driving rates up right now should eventually drop them back down. Maybe not to 4.500 percent, but somewhere close, perhaps.

If you've missed the bottom in rates, there's still hope:

• Technical trading patterns should eventually draw rates back down

• The Federal Reserve will likely accelerate its commitment to low rates so as not to disrupt the commitment they have already made with the recovery package

• Mortgage rates tend to be seasonal and cyclical

Make sure you don't miss the next rate drop. It will happen -- we just don't know when. TAKE ACTION NOW!!!

Of course, you have a day job and have probably spent more time researching rates than you want to already. Two great informative ways to get your mortgage rate news are to:

1. Follow me on Twitter at http://twitter.com/davidlmcfarland.com You can register to follow me on Twitter at the top of my BLOG where you see my Twitter posts.

2. Register here on my Blog to get my Blog postings sent to your email inbox

Rates move too fast to rely on slow-to-break stories on TV or in the papers. You'll want mortgage rate news in real-time and you'll want my advice on whether to lock a rate or wait it out for something "better", too.

Reach out to me via email at David@DavidLMcFarland.com and I'll put you on my mortgage rate "watch list" so I can alert you when it’s time to lock-in a rate or refinance your current loan.

Applications For Refinancing Down, Purchases Up As Interest Rates Rise

Applications for home loans declined by more than 16% last week as interest rates rose, the Mortgage Bankers Assn. said in a survey today.

As expected, the drop-off occurred in people seeking to refinance their homes because the benefits of refis are driven by interest rate trends.

The average rate for 30-year, fixed-rate mortgages jumped from 4.81% a week earlier to 5.25% -- the biggest weekly increase since October 2008. Typical points charged, including the origination fee, decreased from 1.28% to 1.02% of the loan amount for mortgages amounting to 80% or less of the property value.

The average rate for 15-year, fixed-rate mortgages increased to 4.8% from 4.44%.

Interestingly, applications to purchase homes rose more than 4%. If you think now is the time to buy, a rate in the low 5% range still looks pretty good.

I'm bullish about mortgage interest rates, after a correction of the current rise in rates, for the short-term - next 4 months. 2009 is the year to purchase a home or refinance your current loan. Interest rates in 2010 could exceed 6%, but the days of rates being in the 4% will be behind us. So don't wait...BE READY!!! You will have missed the opportunity for years to come.

And don't even get me started on 2011...Inflation will be upon us to make up for the current government spending and rates will soar.

Mortgage Rates Added 1/2 Percent In A Day For The Second Time In A Week

Mortgage rates are on the move.

After a two-month period of relative calm, Memorial Day 2009 ushered in a new era of mortgage rate volatility. Over the last 5 days of trading, mortgage lenders have issued 19 separate rate sheets, or nearly four per day.

Every 2 hours, in other words, mortgage rates are changing and when they change, they change big.

The frenzied pace of change is making it next to impossible for mortgage applicants to shop "the lowest mortgage rate". By the time a buyer talks to competing lenders and gather the rate quotes, it's time to start the process over again. It's time like this that really highlights the importance of working with a Mortgage Professional that can advise you on when to lock in a rate.

More important than the pace of mortgage rate change, though, is the size of mortgage rate change. Look at the action since last week from a sample of lenders:

• Tuesday, May 26, 2009: Rates up by 0.250 percent
• Wednesday, May 27, 2009: Rates up by 0.625 percent
• Thursday, May 28, 2009: Rates down by 0.250 percent
• Friday, May 29, 2009: Rates down by 0.375 percent
• Monday, June 1, 2009: Rates up by 0.500 percent

These are ridiculously out-sized movements for the mortgage market. Furthermore, it's making a real impact on household budgets. The rate hikes since last week have added $92 per month to a $200,000 mortgage -- or, $1,100 per year.

Long-term, the mortgage market can't sustain this pace. That's one part that's clear. But to homebuyers, sustainability is a moot point -- homebuyers don't live in the long-term world. Homebuyers in California or wherever need mortgage rates now and those rates have been both hit-or-miss, and all over the map.

Homebuyers under contract are short-term players by every definition and can only hope to cash in some karma on the day they need to lock a rate.

The most challenging part to homebuyers and other rate shoppers is that the movements of the mortgage markets have neither come with warning signals, nor have been followed specific trading Rules of Thumb like "strong economic data makes rates go up". It's been mostly momentum trading; investors hitching a ride on the sentimental favorite of the day.

Therefore, I highly recommend that you work with an Experienced Mortgage Professional that understands market conditions and has access to the most competitive lenders in the marketplace today.

Please feel free to contact me if you're in the market for mortgage financing. I would be happy to meet with you for a personal consultation.

Mortgage Rates Rose By More Than 1/2 Percent Wednesday

Conforming mortgage rates rose by 0.625 percent Wednesday. Yes, you read it right. Zero-point-six-two-five percent.

The surprise surge in pricing started shortly after 1:00 P.M. ET, then continued all the way until the market's closing yesterday. It was the sharpest one-day surge in mortgage rates in recent history. Perhaps ever.

For mortgage rate shoppers swept up in the surge, monthly payments are now higher by $29 per $100,000 borrowed.

That's a significant shift.

For as rare as Wednesday's events were, though, middle-of-the-day, 0.625 percent rate changes don't just happen. Yesterday, the action was the result of a confluence of factors, including:

• Rising oil prices and gas prices
• Optimistic predictions about the end of the recession
• Concerns over the U.S. total debt load
• Fears of inflation

In addition, momentum trading played a role.

As markets worsened, selling begat more selling, amplifying Wall Street's total losses. As mortgage bond prices fell, mortgage rates went up. By a lot.

Mortgage markets are notoriously fickle and yesterday's events proved it… Days like Wednesday are precisely why I always recommend locking in mortgage rates in a compressed timeframe. The faster you lock-in a rate, the lower the risk of losing low interest rates to new market conditions. And make sure you're working with a Mortgage Professional that understands and follows market conditions and can be strategic with their recommendations.

Foreclosure Update: 80% Of The Country's Foreclosures Are In 20% Of The States

FHA Streamline Refinance: Everything You Need To Know (Including How To Apply For One)

The FHA-insured mortgage market share has increased nearly 10-fold since 2006, indoctrinating first-time FHA borrowers across California and everywhere else across the U.S. into the sometimes-rewarding world of FHA mortgages.

As mortgage rates fall, demand for FHA Streamline Refinances is off the charts.

Now, if you've never heard of an FHA Streamline Refinance, you're not alone. It's a program exclusive to FHA homeowners and that a club that's been historically pretty small. As a result, FHA Streamline Refis have tended to slip past the American Consciousness.

That doesn't make them less relevant, though.

For FHA homeowners, there are 3 major reason why the streamline refinance program can be superior to traditional, Fannie Mae-like mortgage refinance.

1) It's consumer-friendly : The FHA won't approve your refinance unless the new mortgage payment is less than your current one.

2) It's housing market-friendly : The FHA doesn't ask for an appraisal of your home and doesn't care if you're underwater.

3) It's cost-friendly : If you've had your loan less than 5 years, the FHA refunds a portion of your original closing costs directly to your bottom-line.

So, although you may have been shoe-horned into FHA financing when you bought your home -- and maybe that upset you -- whenever mortgage rates start to fall , you'll be super excited about your FHA Homeowner status.

There's a host of differences between an FHA Streamline Refinance and a traditional conforming mortgage refinance, actually. For one, FHA Streamline refinances don't require proof of income from the homeowner -- no paystubs, no W-2 statements, no tax returns. Instead, the homeowner must just prove that he's still employed.

A phone call into Human Resources can accomplish that requirement.

This "No Income Verification" nature of an FHA Streamline Refinance is in keeping with the FHA's over-riding philosophy that homeowners making payments at a higher mortgage rate should logically be able to make payments at a lower mortgage rate.

It's the same for the "no appraisal" requirement. Unlike conforming mortgages that are securitized and sold via Wall Street, the Federal Housing Authority is the only insurer and guarantor of FHA home loans. Because of this, the FHA isn't concerned about whether its borrowers' home lose value -- it's on the hook for the loan either way.

The FHA is more concerned about helping FHA homeowners get payment relief because it knows lower housing payment makes default less likely in the long-run.

However, getting approved for an FHA Streamline Refinance isn't a rubber stamp. It does come with some obstacles.

1) Homeowners must be current on their mortgage payments. No 30-day, 60-day, or 90-day delinquencies are allowed from the last 12 months.

2) Homeowners must have at least 6 months of history paying on their current mortgage. "Instant refis" are not allowed.

3) The new loan size can't exceed the original size of the FHA loan being replaced
In addition, some lenders -- but not all -- impose minimum credit score requirements.

As of May 2009, the most common minimum credit score for an FHA Streamline Refinance is 620. Not every lender has this requirement, though. Contact me directly if you've been told your FICO is too low for an FHA Streamline Refinance --I can help.

And then there's the closing costs.

Every home loan carries fees and FHA Streamline Refinances are no different. There's title charges, underwriting charges and the other "normal" refinance fees. There's also the FHA's upfront mortgage insurance premium, paid at every FHA closing. MIP often equals one-and-a-half percent of the loan size and rolled right into the mortgage.

However, because the size of an FHA Streamline Refinance home loan can't exceed the starting size of the FHA loan it's replacing, up-front mortgage insurance premiums can sometimes put homeowners in a position where cash is required at closing. Opting for a "no cost" FHA Streamline Refi can diminish the likelihood of this occurring, but there's no promise.

Thankfully, the FHA takes a pragmatic approach to upfront MIP.

If you're current FHA mortgage is less than 36 months old, the FHA will refund a portion of your original upfront mortgage insurance at the time of closing, applying it directly to your settlement statement.

A link to the FHA MIP refund chart is available by clicking on the graph image above.

Similar to driving a car off the lot, the premium's refund value drops 20% in Month 1after which it reduces by 2 percent per month until the 10 percent level in reached in Month 36.

A FHA homeowner that paid $3,000 in upfront MIP six months ago, therefore, would be entitled to a $2,100 refund. After 9 months, the refund falls to $1,920.

In three years, the FHA MIP refund falls to $300.

Now, because of how the FHA mortgage insurance refund process is structured, it should be obvious that the FHA compels its borrowers to refinance into lower rate mortgages as soon as possible. The longer that homeowners delay on the decision to refinance, after all, the lower their FHA rebate becomes and, therefore, the higher will be their closing costs.

Again, this approach is consistent with the FHA's goal of getting its homeowners' mortgage payments down whenever possible. The FHA incents people to "act now" as opposed to trying to wait out the market.

FHA streamlines have been especially popular lately and with FHA market share continuing to grow, they'll be a helpful vehicle for FHA homeowners looking to lower their monthly payments. If you would like some FHA mortgage financing advice or need help calculating what your FHA Streamline Refinance MIP refund will be, reach out to me anytime. You can reach me via email at David@DavidLMcFarland.com

A Few Reasons Why Now May Be The Least Expensive And Easiest Time To "Go FHA" For A Mortgage Loan

Shopping for low mortgage rates is a game of luck unless you are partnering with an experienced and well-informed Mortgage Financing professional.

Some days, mortgage rates are favorable. Other days, they're not. And while you can sometimes make an educated guess about where rates might be headed, you're not always going to guess right.

Even the experts get it wrong more often than they'd like.

But some parts of the rate shopping process can be predicted and one of them is the future of mortgage guidelines.

In general, the more often homeowners default on their respective mortgages, the harder it is for future mortgage applicants to be approved.

This is why "now" may be the best time to apply for a FHA mortgage. Defaults are climbing, suggesting that FHA underwriting guidelines are about to tighten.

Indeed, the FHA has implemented two major changes since last summer:

1. The minimum down payment requirement was raised by a half-percent to 3.5%
2. Cash out refinances are now limited to 85 percent, down from 95 percent.

These changes create barriers of entry for potential FHA borrowers, improving the overall quality of the FHA loan pool.

For a taxpayer-funded agency like FHA, loan performance is an important goal. Therefore, as the number of defaults grows, expect FHA guidelines to get tighter.

The problem is, though, we can't predict just where the FHA will tighten. Maybe the FHA raises its minimum FICO score requirement, or maybe it gets tough on seller-paid closing costs (which is currently up to 6% of the sales price). A hike in loan fees isn't out of the question, either -- that's the path Fannie Mae took, after all.

Whatever the FHA does, fewer people will qualify for FHA mortgages once it's done. So, if you're planning to refinance or buy a home and your downpayment is limited, or your credit scores are suspect, or there's some other "red flag" in your profile, consider moving up your timeframe to act.

Mortgage rates may rise or mortgage rates may fall, but neither is going to matter if you can't get qualified for a home loan. And, for FHA mortgage applicants, tougher mortgage guidelines are only a matter of time.

For information about FHA mortgage financing, apply for an FHA loan or would like to discuss your mortgage financing options contact me for a free consultation.

The Obama Refi Plan…"The Making Home Affordable Program" Eligibility Requirements And Tips For Getting Started

Expected to help 5 million homeowners, the Making Home Affordable program "looks the other way" with respect to falling home values, approving mortgage applications based on borrower payment history and benefit to the homeowner.

Not every homeowner is eligible for a Making Home Affordable refinance, however. There are 3 basic criteria that must be met. Here is an overview:

First, your existing home loan must be backed by either Fannie Mae or Freddie Mac. Thankfully, both companies provide online lookup services. Start with the Fannie Mae site because Fannie has a greater market share and because Freddie Mac's site requires your social security number.

Secondly, you must have a perfect mortgage payment history over the last 12 months. Even one payment made 30 days late disqualifies you from participating in the Making Home Affordable program. It is okay, however, if you were 20 days late on your payment and incurred late fees.

And lastly, the balance on your mortgage cannot exceed your home's value by more than 5%. The math formula is (Mortgage Balance) / (Home Value). If the value is greater than 1.05 then your loan-to-value exceeds 105% and you are not eligible for a Making Home Affordable refinance.

Now, assuming you meet the criteria, there are some noteworthy details of the Making Home Affordable program that you should be aware of:

■ If you didn't pay mortgage insurance prior to refinancing, you won't have to pay it after refinancing -- even if your loan-to-value exceeds 80%.

■ All refinances require income verification -- even if the original mortgage was a stated income loan.

■ Second mortgages cannot be paid off using loan proceeds -- they must be subordinated.

■ Cash out refinances are not eligible. Only Rate-and-Term refinances are allowable.

■ Loan Limits: In most cities, the conforming loan limit is $417,000. However, there are some cities, like Los Angeles, in which conforming loan limits are as high at $729,750.

■ Closing Costs: Mortgage balances can be increased to cover closing costs in addition to other monies due at closing such as escrow reserves, accrued daily interest, and a small amount of cash to cover the per diems of a mortgage payoff.

■ Interest Rates: The mortgage rates available to Making Home Affordable participants are the same interest rates offered to every other conforming mortgage applicant.

■ FICO (Credit) Scores: There is no minimum credit score requirement for Making Home Affordable refis. Lower credit scores may be subject to higher loan-level pricing adjustments, though.

■ What does the term "DU Refi Plus" mean? “DU Refi Plus” is the name Fannie Mae assigned to its Making Home Affordable program. "DU" stands for Desktop Underwriter.

■ The Making Home Affordable Refinance program ends June 10, 2010

Therefore, if you have specific questions about the Making Home Affordable program and your own refinance eligibility, please contact me to discuss and to set an appointment.

Californians Get Additional $10,000 Home Buyer Tax Credit

More good news for California home buyers...

If you’re a California resident, you know that our Legislature ended a “Californian stand-off” last week when they agreed to approve the State Budget. While the budget was laden with pork, there might just be a little slice of bacon for you.

Buyers of “new” homes or condominiums might qualify for a $10,000 tax credit, granted over three years, in addition to the $8,000 Federal tax credit.
Here are some of the details:

1) It applies to new California houses or condos bought as primary residences
between March 1, 2009 and March 1, 2010.

2) It’s for 5 percent of the purchase price or $10,000, whichever is lower.

3) The state will take $3,333 off a buyer’s state taxes starting in the year of purchase and for the next two years.

4) The owner must live in the new home or condo for two years or lose the break.

5) Collectively, the state tax break is limited to $100 million. At $10,000 per tax break, that's 10,000 new dwellings.

What does this mean for you? Tax breaks shouldn’t be a justification to overpay for a property. Yet if you’re comparing apples to apples, this might just be the edge you need to choose the new home over the resale.

As always, feel free to contact me if you have any questions or need any additional information pertaining to the new California Home Buyer Tax Credit.

Great Real Estate Investment News: Fannie Mae Removes Its 4-Financed Property Max Limit

Fannie Mae has announced that it is reversing one of its least popular mortgage guideline updates of the last 12 months.

Effective March 1, 2009, real estate investors can once again own and finance up to 10 individual properties. The restriction reversal does come with new minimum requirements, however.

Homeowners buying a 5th, 6th, 7th, 8th, 9th or 10th home must meet the following standards, as set forth by Fannie Mae:

1) 720 credit score
2) 25% downpayment for a 1-unit (30% for a 2-4 unit)
3) No mortgage delinquencies in the last 12 months
4) 6 months of reserves for each investment property

In other words, Fannie Mae is re-opening access to lending for real estate investors with good credit, a sizeable downpayment and ample reserves.

According to Fannie Mae, the change rationale is that experienced investors can "play a key role in the housing recovery". Until now, foreclosure auctions have gone at less than full speed because investors unable to pay cash have been halted by the existing 4-property Fannie Mae limit.

Going forward, expect a more expedient foreclosure liquidation nationwide which should, in turn, provide further support for the housing market.

And lastly, not to be forgotten, homeowners with more than 4 properties can finally participate in the ongoing conforming mortgage Refinance Boom. Until now, they've been stymied by the 4-property restriction, too.

Real Estate Investors Financing Update: Finding Great Loans Is Tougher Than Finding Good Deals, But Investors Are Still Investing In Real Estate

With home prices falling across most parts of the country, investors in real estate are finding good value in certain rental properties. Unfortunately, they're also finding it harder to get approved for a home loan.

After getting stung by defaults, conforming mortgage standards for non-owner occupied home loans tightened dramatically last quarter.

One major change was the reduction in the total number of homes Fannie Mae or Freddie Mac will finance for any one borrower.

Prior to the change, the number of financed properties could be as high as 10. Today, that number is 4, stinging investors with large real estate portfolios. Going forward, buying properties isn't the problem; financing them with conforming mortgage money is...

Another guideline change mandates larger down payments.

Versus early 2008, when a real estate investor could buy a home with 10 percent down, today's investor is required to put down 15 percent. But, as an added wrinkle, few private mortgage insurers write policies against rental homes anymore, rendering the 15 percent down payment insufficient. The de facto requirement, therefore, is now 20 percent down.

And then came the fees…

As part of its "pay-for-risk" pricing model, Fannie Mae added mandatory fees to all of its investor property mortgages this year. Based on loan-to-value, the fees are:

• 75% LTV or less: 1.750 percent of the borrowed amount
• 75.01 - 80.00% LTV : 3.000 percent of the borrowed amount
• Greater than 80% LTV : 3.750 percent of the borrowed amount

So, if your personal plan includes the purchase of investment properties in 2009, consider the impact that tighter conforming guidelines, larger down payments and higher fees will have on your bottom line.

All things considered, now may be a good time to make that rental property investment purchase. Prices may fall going forward, and that’s a great consideration for investors.

But consider the increased acquisition costs. Remember, with once in a lifetime real estate deals to be had, these acquisition costs may not be that significant given the equity that you will gain vs. purchasing in a normal market.

Mortgage Rate Forecast for 2009 ...How Low Can They Go?

Early 2009 could very well mark the lowest rates that we will see during our lifetime. Think about that. More importantly, you should be thinking about that too. I expect interest rates to stay in a range of 4.5 - 5.5%, with the potential to see rates moving toward the higher part of the range later in the year. But in early 2009 will we probably see 4.5%. In fact I locked 4 of my clients today at 4.675%.

The forecast for the beginning of the year is important of course, but count on me and my BLOG “The McFarland Report” to keep informing and advising you throughout the coming year.

With so many of my fellow mortgage broker colleagues having dropped out of the business, many consumers have orphaned mortgages. Many of these consumers do not have a Mortgage Planner watching over their mortgage and advising them on their mortgage planning and real estate investment strategies. If you know anyone that I could be of value to, please feel free to recommend me to them or contact me at David@DavidLMcFarland.com and I will contact them personally.

During these volatile and historic times, I am proud to be with you on this journey, and appreciate each of you being part of my Mortgage Planning and Real Estate Investing family.

Thank you!

2009 Outlook And Forecast…What Next? As We Enter 2009, Here's What My Crystal Ball Is Showing Me

The economy will have a tough go once again during the coming year. But I do see things as being better than during 2008, with more optimism in the air by this time next year.

The Fed and the Treasury have and will continue to add lots of stimulus to our economy. It will just take some time for the "medicine" to work its way through the system. After hogging the spotlight with many different moves, I expect the Fed to be on hold with their interest rate policy throughout the majority of 2009. After all, there's no room to cut further, and I don't see a hike until economic conditions show signs of improvement. When a hike comes, we may all take it as a welcome sign that things are getting better.

The job market will get worse before it gets better, and don't be surprised to see the unemployment rate rise to 8% from its present 6.7% level before things start to improve.

I can safely predict, without much disagreement from anybody, that volatility will continue for Stocks, but I do see hints that there will be a significant first quarter rally. By the end of 2009, I would forecast that Stock prices will see some handsome gains. This play on financials has a generous dividend yield, and stands to improve greatly should financials start to recover...and I think they will.

Look for the Dollar to weaken a bit, but eventually strengthen as the US stabilizes while Europe declines a bit further.

On housing, I see 2009 as a period of price stabilization for most markets. One good gauge that home prices are stabilizing in your area is to figure a monthly payment with 20% down and compare that to rents for the same property. If it would actually be cheaper to purchase the home than to rent it - that's a good sign.

Home prices in some markets may still decline some during 2009, but those who make savvy purchases below market value should fare quite well, especially longer term. There's a lot of inventory on the market, which is viewed negatively, and needs to be sopped up before the housing market really turns.

But...the inventory in the housing market does make this a fantastic time to be a buyer. Homebuyers will have a strong negotiating stance from the get-go, and are likely to make favorable deals, maybe even a once-in-lifetime deal. Those who buy a home and live in it for the long term are likely to be rewarded handsomely. Let's face it, people need homes. They are not going to start living in tents just because the economy is bad. I predict that consumers will start buying again in the coming year, particularly with attractive home loan rates and many homes to choose from.

My next BLOG posting will discuss my Mortgage Rate Forecast for 2009. I’m predicting that Mortgage Rates could be the lowest we will see in our lifetime. So if you’re in the market to purchase real estate or refinance your current mortgage, early 2009 is the time to make it happen.

The Truth About Those "4.5 Percent Mortgage Rates" You Keep Hearing About

Business television and news is abuzz this morning with talk of 4.5% - "four-point-five percent mortgage rates.” The news stems from a leaked story that the U.S. Treasury will intervene in the mortgage market, lowering rates a full percentage point below their current levels.

As cited by every journalist in every major news publication, however, the story is 100% speculation. Naturally, that doesn't stop the press from covering it. When hope for homeowners gets spread in this manner, it's important to remember some important facts:

1. The U.S Treasury doesn't set mortgage rates -- Wall Street traders do. Historically, rates are based on the Supply and Demand for mortgage-backed bonds.

2. U.S. Treasury intervention doesn't guarantee low rates. The fact that mortgage rates are up by a half-percent (.5%) since last week proves it.

3. “Zero details about the plan have been confirmed”, quoting business news network CNBC. Everything you've heard about 4.5 percent rates is a guess at this point and time.

But, perhaps most importantly, nearly every analyst and industry expert interviewed has expressed a belief that a U.S. Treasury-sponsored stimulus would be aimed at reducing rates to 4.5% for people buying homes only. Those looking to refinance would not qualify. Homeowners wanting to refinance, in other words, would be ineligible for this type of interest rate.

Mortgage rates are very low today compared to where they've been in 2006, 2007 and 2008. If you think your mortgage rate is too high for this market, feel free to contact me to review all of your options.

How Big Can A Mortgage Be And Not Be Considered A "Jumbo" Loan?

For the 4th consecutive year, the government has set the conforming mortgage loan size limit at $417,000.

A conforming mortgage is one that, quite literally, conforms to the mortgage guidelines set forth by Fannie Mae or Freddie Mac.

The 2009 conforming loan limits, as released by the government, are:

• 1-unit properties : $417,000
• 2-unit properties : $533,850
• 3-unit properties : $645,300
• 4-unit properties : $801,950

Loans in excess of conforming loan limits are more commonly called "jumbo", or "super jumbo" home loans, depending on their size.

Out-sized mortgages like these are often more costly than their conforming-mortgage counterparts because jumbo loans are not guaranteed by the U.S. government like Fannie Mae loans.

There are loan limit exceptions, however.

Left over from the Economic Stimulus Act of 2008, specific, "high-cost" areas around the country have their own conforming loan limits, not to exceed $625,500. There are 59 designated high-cost regions in the U.S., most of which are in California (i.e. Los Angeles & San Francisco).

Loan limits are re-assigned each year, based on "typical" housing costs around the country. Since 1980, as home prices have increased, so have conforming loan limits. As home prices have fallen in recent years nationwide, however, the conforming loan limit has not.

If you're loan is above the $625,500 loan limit you're considered to need a "jumbo" home loan.

Feel free to call me if you are considering financing a new home or need to restructure and refinance you current loan(s).