Buyers: Window of Opportunity Still Open

The Fed recently announced they would continue their current pace of purchasing bonds until the economy was stronger. This bond purchasing program is the reason that mortgage interest rates are at historic lows. Rates began to increase over the last several months just on the anticipation that the Fed would announce that they would be reducing the level of bond purchases last month. When that didn’t happen, rates actually decreased (4.50 to 4.37).

That was great news for any buyer in the process of purchasing a home. However, this window of opportunity is expected to close in the very near future as most experts expect the Fed to taper the bond purchasers in December. Even Ben Bernanke, Chairman of the Fed, suggested that the Fed could still scale back the stimulus this year. He stated:

"If the data confirms our basic outlook, then we could move later this year.”

Where will mortgage rates head in 2014?

The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors have each projected that the 30 year fixed rate mortgage will have interest rates in excess of 5% by this time next year. The average of their four projections is 5.3%. The table below shows the impact this will have on the monthly principal and interest payment on a $250,000 mortgage:

 A buyer should take advantage of the current window of opportunity before it is too late.

TOP 10 OVERLOOKED QUESTIONS WHEN BUYING A HOME

NAR's Projections through 2014 [INFOGRAPHIC]

Does Your Credit Score Effect Your Homeowners Insurance Cost?

Your credit score and your insurance payments- what’s the connection?

You’re likely not surprised when your loan officer asks for your social security number- a thorough credit check is standard when applying for a loan. However, many consumers are caught off-guard when a homeowners insurance agent asks for their social security number.  It’s widely debated, but quite commonly practiced- for an insurance carrier to use a customer’s credit score to determine their insurance premiums.

What does your credit score really mean to your potential insurance carrier?

While many businesses will use a consumer’s credit score to determine eligibility for a line of credit or to discern whether a deposit should be held for an advance of services, insurance companies actually perform a different type of credit inquiry that they use for a very different reason.

A “Soft” Credit Check

First and foremost, it’s important to know that when an insurance company runs your credit they are actually performing what is called a “soft” credit check which accesses only your credit score and is not reflected as an inquiry on your credit report. As you probably can surmise, this is different from a “hard” credit check that a lender, for example, may run which does show up on your credit report as an inquiry. Since credit inquiries from “hard” credit checks can hurt your overall score it’s good to limit these types of credit checks when shopping for a mortgage, for example. However, since insurance carriers only perform a “soft” credit check you can feel free to shop for multiple insurance quotes without worrying about hurting your credit rating.

What they use it for

Here’s where a lot of confusion, and sometimes even frustration, can set in from a consumer’s perspective. Once an insurance company has your credit score, they use it (along with many other factors about you and your home, car, etc.) to assign you an “insurance score”. This insurance score reflects your potential risk to the insurer.

The insurance carrier then takes your risk potential and calculates your premiums. The more risk you pose, the higher your premiums will most likely be. This is where the real question comes in:

What does poor credit history have to do with my potential to file a claim?

If you’re asking this question, you’re not alone.

There is much debate over the use of credit scoring as a way to determine risk, and therefore assign rates to insurance consumers. However, insurance companies defend the practice saying that studies have shown a direct correlation between a person’s credit score and their likelihood to file a claim. Therefore, consumers with a lower credit score often pay higher rates for insurance.

Whether you agree with the practice or not, qualifying for better insurance premiums is just one other way that you can save money by keeping a good credit rating.

Compliance Issues Still Causing Delays in Closings

Compliance Issues Still Causing Delays
Assessing if a buyer has the income, funds, and credit needed to buy a home is never much of
an issue. Either the buyer fits into the qualification box or they don’t based on income or credit.
The biggest delays are caused by government mandated compliance issues. Anti-Money Laundering laws make it mandatory that all monies be tracked, verified, and sourced. Truth in Lending Laws require a blizzard of paperwork be generated and signed within a certain amount of
time and if the sales price, loan amount, or interest rate changes during the escrow then all the
paperwork has to be generated and signed again.

Why Do American Families Buy a Home?

There is a plethora of opinions voiced by real estate gurus as to why the dream of home ownership is so important to most Americans. However, study after study reveals the same five reasons families decide to buy a home. They…

1. Want a good place to raise children
2. Want a place where their family feels safe
3. Want more living space
4. Want control of that living space
5. Realize that owning makes better financial sense than does renting

Why Do American Families Buy a Home?

There is a plethora of opinions voiced by real estate gurus as to why the dream of home ownership is so important to most Americans. However, study after study reveals the same five reasons families decide to buy a home. They…

1. Want a good place to raise children
2. Want a place where their family feels safe
3. Want more living space
4. Want control of that living space
5. Realize that owning makes better financial sense than does renting

(For those who question the validity of  number five after the recent housing crisis, Harvard University just finished a study on the issue)

If you are considering purchasing a home, look at the five reasons mentioned above. If any of them apply to you and your family, perhaps it is time for you to take the plunge. With both prices and interest rates rising, waiting will only increase your monthly cost as we move forward.

Top 5 Reasons Why You Need a Realtor