Current Mortgage Rates Remain Low as Housing Construction Declines

Have you heard the latest news?

Housing construction slipped in July:

-Is this good news??
-Bad news??

It is definitely mixed news if you have had an opportunity to examine the latest reports associated with housing construction.
The report goes on to say: “Construction of new homes and apartments dipped slightly last month, missing expectations, in a sign that the building industry’s recovery from the housing bust is likely to be bumpy and gradual.

The Commerce Department said Tuesday that new construction fell 1 percent in July to a seasonally adjusted annual rate of 581,000 units, from an upwardly revised rate of 587,000 in June. Economists polled by Thomson Reuters expected a pace of 600,000 units.

The decline was led by a 13 percent drop in apartment building.

On a positive note, construction of single-family homes rose 1 percent to the highest level since October 2008. It was the fifth-straight monthly increase.

I guess we could spend a great amount of time debating if the headlines should have lead off reading “Single Family New Construction rose to the highest level since Oct 2008.

I am wondering if economists and Weathermen/women are inter changeable.   Today will be partly sunny, Wait there is a change in the weather forecast to  partly cloudy…wait there may be a chance of  rain…

Evidently, the report must have been viewed in a positive light because the stock market is up today and current mortgage rates are also higher, ending their 5 out of the last 6 days of improvements in rates (lower)

Mortgage Rates Remain Low

Regardless of the economic news for the day a couple of things are still accurate and are holding true to fact… mortgage rates are still at historically low levels and it is still a buyers market for homes. This brings me to my next things to consider…….

I have been receiving quite a few inquiries into FHA’s graduated payment / rate buy down options.  I am surprised more borrowers do not take advantage of the availability of this option.  It works like this:  depending on the specific lender’s requirement there are 2 available options  for fixed rate mortgages.

1. One of the options is a 1-0 buy down which means for the first year the current mortgage rates for your mortgage will be 1% lower.�
Example:  if your current mortgage rate is 5% then for the 1st year, your current mortgage rate will be 4%, then

Years 2-30 the current mortgage rate will be 5%.  To access this option, it will usually cost you @ 1% of your loan amount.

2. The second type of buy down available is called a 2-1 buy down.  Instead of only having a discounted rate for 1 year, with the 2-1 buy down, the rate will be discounted for the first 2 years of the loan.

Example:  If the interest rate of your loan is 5% then for the 1st year or the first 12 payments your current mortgage rate will be discounted by 2% or at 3%,

For the 2nd year of your loan or for payments 13 through 24 the mortgage rate will be discounted by 1% or at an interest rate of 4% then

Years started at year 3 through year 30 the interest rate of your mortgage will be at 5%.  This option may cost you up from 2 % to 2.875% of your loan amount.

The two buy downs noted above, while they can be expensive, they may be very advantageous in the following situations.
- If one borrower is on or will be going on an extended maternity leave of a year or two.
- If one of the borrowers is still enrolled in school yet expected to graduate and enter the work force within a year or two.
- If any of the borrowers expects a significant pay increase or promotion within the next year in two.
- If know for a fact your current monthly financial obligations will be decreasing within the next 2 yrs, yet you do not want to wait to purchase a home.

Keep in Mind…

Another thing to keep in mind when buying a home and applying for a mortgage while considering if the above loan type is beneficial for your situation is:

FHA allows up to 6% of the purchase price to be paid towards the closing cost by the seller.  The seller can pay for the costs of this program for you.  The real estate market is still a buyers market; it would not be out of the realm of possibility to negotiate these costs within the sales contract, not to mention if you are a first time home buyer receiving 8k from the federal government if you close by November 30th. 2009

Current mortgage rates are still higher for the today, August 18, 2009

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