4 C's of Mortgage Lending
June 10th, 2009
Categories:Home Buyer Education
Although specific guidelines can vary from one loan program to another, there are four basic principles evaluated for each homebuyer. These are referred to as
the 4C’s of mortgage lending: Capacity, Capital, Credit and Collateral.
Capacity -
The ability to repay your loan based on your employment and income history. Your lender will look at the amount and stability of your income. Housing costs including property taxes, homeowners insurance, mortgage insurance in some cases and homeowners association dues should be approximately 29% of your gross income.
Types of income that are considered will include: Read the rest of this entry »
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Mortgage Apps at 5 Year High
May 1st, 2009
Categories:Real Estate News
Mortgage applications hit a 5 year high, reports MSNBC.com. After the Federal Reserve announced they would buy $500 Billion in mortgage backed securities, the rates continue to drop as lenders anxiously take advantage of the situation.
Freddie Mac reports the average 30 year rate on December 31st as 5.10%. 80% of the applications are for refinances as those with equity in their homes take advantage of the historically low rates. Unfortunately home owners who can not refinance because they are under-water or upside-down continue to see their situation get worse as others in their position continue to walk away from their homes.
Sadly, those who continue to walk away from their homes only make the problem worse as their homes become bank-owned properties which inevitable drive down the home values for their neighbors.
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Highest Mortgage Rate Jump Since '87
October 16th, 2008
Categories:Real Estate News
CNN Money states “Rate on 30-year fixed mortgage jump could climb higher still. One cause: Government’s rescue efforts.”
Freddie Mac reported the average rates for a 30-year-fixed-rate mortgage jumped from 5.94% last week to 6.46%, and it was the largest weekly increase since April 1987, when the jump was 0.84 points.
Ok, so now that we have the frightening news put aside, lets look at some numbers.
Lets assume you were to go out and get a 200,000 mortgage.
- Last week, your monthly mortgage payment would have been $1,225. This week, you’d be paying $1,295 at the 6.74% interest.
- If you were looking for a mortgage back in the 1980′s you’d be looking at 18% interest rate and a monthly payment of $3,014.
I think I’ll take today’s rate thank you. Ok, I’ll admit looking back into the 80′s is a bit of stretch, since after all that was the last time we had a real estate and economy crisis like this one.
Instead of randomly picking dates, I’ve provided a graph below that details our historical interest rate.
The green line is the historical rate with some highs and lows, our lowest being back in Jun of ’03 at 5.23%. The orange line represents a twelve month average trendline. To use this line, take month for example, Jan ’07. The orange line value is approximately 6.25%, this means that from Jan ’06 to Jan’07 the average interest rate is 6.25%.
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