Do Mortgage Rate Vary by Location?

From the "I heard it so it must be true" file, I was under the impression that Oregon mortgage rates were usually lower than the national average. I did a search on www.bankrate.com for a 30 year mortgage, zero points, 20% down. I used the APR as the rate as that should allow for the most equal comparison of loans (correct me if I am wrong).

Portland: 6.148%
NYC, NY: 6.241%
San Diego: 6.148%
Dallas, TX: 6.148%

So we can probably consider this myth "Busted."

All the 6.148% loans are through American Interbanc Mortgage, LLC. Equally interesting is their bold print homepage:

NOTICE TO OUR COMPETITORS:

By Charles Turner | Jul 20, 2007 | Comments (2)
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Subprime

I found this article on subprime lending interesting. It defines a lot of the terms that we hear. Note that the link at the bottom of the article discloses his relationship with the lending industry. There are also more definitions there.

In a different news article on subprime, AIG has agreed with regulators to talk to their clients regarding the loans they received from the bank. Washington Mutual has already had a similar conversation with the Feds. Also in the article:

Earlier this week, Federal Reserve Board Chairman Ben Bernanke said the Fed will meet with mortgage lenders and consumer advocates on Thursday to discuss whether so-called low-doc or no-doc loans marketed to subprime borrowers should be prohibited.

The changes in the subprime market have not done away with below 20% down financing. The restrictions (lender imposed) on them have made them less common.

By Charles Turner | Jun 10, 2007 | Comments (13)
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Be Aware of Hidden Lender Fees

This is a very common trick used by a large majority of lenders and brokers out there. Instead of being straight-forward, and saying "Mr/Mrs Borrower, I am charging you 1% of your loan amount as an Origination Fee", they will try and hide their profits from you by breaking them into "junk fees".

They give them cute names, like "broker fee", "application fee", "administration fee", "processing fee" and so on. Don't get me wrong, sometimes some of these fees are valid. You can almost always expect a reasonable processing fee on your loan. However, I have heard people brag about how their broker didn't charge them any "points or loan origination fees" on their loan, but when I looked at their Good Faith Estimate, I could see why. The lender was making $4,700 on miscellaneous junk fees!

Keep your eyes open for excessive fees, read the entire Good Faith Estimate, and ask your broker or lender to explain where the money is going so you can know if you are being charged the norm, or if they are trying to suck every last cent out of you in a very devious manner.

Shawn Headlee

Columbia Mortgage

sheadlee@cmortgage.net

By Shawn Headlee | Apr 16, 2007 | Comments (5)
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Mortgage Rate News

Mortgage rates around the country fell this week, with rates on 30-year mortgages sinking to their lowest level in 10 months.

Freddie Mac, the mortgage company, reported Wednesday that 30-year, fixed-rate mortgages averaged 6.18 percent for the week ending Nov. 22. That’s down from 6.24 percent last week and was the lowest rate since the week ending Jan. 26, when 30-year mortgage rates averaged 6.12 percent.  Locally rates have been bouncing between 5.625% and 5.75% for a 30 year fixed mortgage with one discount point.  Typically you have to drop your rate 1% to make it worthwhile to refinance.

It marked the second week in a row that mortgage rates dropped, a development that economists attributed to easing inflation pressures. Inflation is calming down amid stabilizing energy prices, slower overall economic activity and the housing slump.

SHAWN HEADLEE

Senior Loan Officer

Phone/Pager - 503-906-1353

Columbia Mortgage, LLC.

Fax - 503-526-2847

By Shawn Headlee | Nov 29, 2006 | Comments (0)
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Feds Hold Tight on Interest Rates

The whole country has enjoyed years of historically low interest rates. That's been great for real estate and even better for Portland real estate. Market factors have typically allowed Portlanders to get lower interest rates than the national average.

For the first time in 18 meetings, the Federal Reserve held interest rates at their current level. The rise of rates has a much bigger impact on short term loans. In real estate, this means Home Equity Lines of credit (HELOCs) feel the brunt of each Fed hike. Long term rates (30 year mortgages) are not as substantial to the hikes which mean we have seen adjustable rate mortgages increase faster than fixed and they are no longer the great bargain they once were.

No two people have the same mortgage requirements so talking to a competent mortgage broker is your best bet.

By Charles Turner | Aug 8, 2006 | Comments (1)
Permalink: Feds Hold Tight on Interest Rates

What are interest-only loans all about?

Inevitably, I field this question during just about every loan application, backyard BBQ, and even in my dreams. 

So what’s the buzz around “Interest-only” loans?  Are they good?  Bad?  Are they going to cause the “real estate bubble” to pop?

The answer is…...it depends.  Let’s take a closer look at what interest-only loans are. 

Under traditional programs a borrower’s monthly payment remains fixed.  A portion of that payment is applied to the interest charge determined by the remaining balance and interest rate.  The rest of the payment is applied to paying back the loan.  Over time, the proportion of each payment that goes towards paying back the principal increases.

With interest-only payment programs a borrower is only required to pay the interest portion of the monthly payment.  This keeps the monthly payment lower  but delays repayment of the loan.

To compare, lets evaluate two brothers who take out a $200,000 loan at 6.00% on a 30 year loan.  Brother A decides to take out a traditional principal and interest mortgage.  Brother B takes out an interest-only loan.

After 36 months, brother A has made $43,168 in total payments and owes $192,168 on his original mortgage.

Brother B, who took out an interest-only mortgage has made $36,000 in payments($7,168 less than brother A)   and still owes $200,000 on his loan ($7,832 more than brother A). 

At initial glance one may say that brother A is $664 better off than his brother.

However, this may not be the case.  Let’s say that brother B had taken his $199 savings per month and invested it in a liquid asset that earned an annualized return of 7.00% over those three years.  In that case, brother B would have a liquid investment account worth $7,946 after 36 months.

At this point brother B would be better off by $114.  Now lets say that brother A and B both lose their job and their ability to pay their mortgage.  Unless brother A had other savings he may have a difficult time paying his mortgage.  Brother b however has a liquid asset account that he could use to pay his mortgage for ay least 6 months. 

The bottom line is that there are very real risks associated with interest-only loans.  However, when used properly, interest-only loans offer borrowers a tool which can increase liquidity and security.   

By swannybb | Oct 14, 2005 | Comments (1)
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Fed hikes rates, yet mortgage rates decline?

Since the middle of 2004, the Fed has raised short-term interest rates by 1.75% from historic lows yet during this time period mortgage interest rates have actually declined.  Likewise, in the past when the Fed has lowered interest rates, mortgage rates have actually risen.  This phenomenon is strange but true...

But how does this work and why? Although it may seem counter-intuitive at first, it really does make perfect sense.

First, put yourself in the position of a mortgage bondholder… like the mortgage lender. If you lend the money, you receive interest over time. If that were a mortgage, it could be a full 30 years worth of repayments and interest. Let's say you were going to be receiving $1,000 per month for the entire 30-year term. At first, that $1,000 may be a very fair return, as you calculate what you can do with that money every month. But over time, inflation requires that you spend more money to purchase the very same goods and services that you can purchase today for less. That same $1,000 just doesn't go as far in future years as it does today. This eats away at the value of a long-term fixed instrument like a bond or a mortgage, and explains why inflation is the main enemy of bonds. Because bond investors are very aware of this, they will require a higher rate of return or interest on their investment to compensate them, if they feel that inflation will be increasing.

In today's improving economic environment, inflation is expected to be on the rise. In response, interest rates on long-term bonds, like mortgages, have moved markedly higher in expectation of this. Interestingly, the increase in mortgage rates during the first half of the year has occurred without any movement by the Fed, and some mistakenly think that this is anticipation of a Fed rate hike. Not true. Reality is that bond rates are simply pricing in the expectation of higher inflation over time.

Now think about it - a move to tighten or hike rates by the Fed is designed to slow inflation, and we can now see why tempering inflation is very good news for bond holders or mortgage lenders. With inflation reduced, the buying power of their future returns will face less erosion from the effects of inflation.

So believe it or not, this is why a Fed rate hike actually helps reduce mortgage rates.

-Written by Barry Habib, CEO of Mortgage Market Guide

Contributed by Evan Swanson, Senior Loan Officer, Continental Home Mortgage

evan@continentalhomemortgage.com

By Evan Swanson | Apr 14, 2005 | Comments (1)
Permalink: Fed hikes rates, yet mortgage rates decline?