Mortgage Rates 2014

Mortgage Rates Entering 2014

Mortgage Rates 2014There’s a ton of Economic News coming out in the next few weeks, and when taken in combination with Regulation changes, we see rising mortgage interest rates continuing into early 2014.  That is great news, as more people are feeling secure in their jobs in the work force – and BAD news, if you are one of the hopefuls, still trying to buy a dream home, and will now face higher payments.

Mortgage Rates 2014 – REPORTS ON HOUSING STRENGTH

The Housing Starts Reports for this fall was just released with a much better than expected number of homes coming out of the ground – in fact the number of new homes coming online is growing faster than it has since 1990.

We don’t necessarily see this as great news for the Real Estate Market.

Included in the Housing Starts Reports are apartment complex units.  This adds more competition for the houses on the market that are not selling.  Arguably, there are fewer First Time Home Buyer homes available in many North Carolina Metro Real Estate Markets – so bringing Apartment Buildings into those markets means more people can live closer to their jobs.

If you are a Seller in the $400,000 and up price range though – does it really hurt you as you wait for some (probable) second time home buyer to come along and take the house off your hands?  Well, it could.  Because as a Renter in a NEW Apartment Complex, you are not likely to be paying lower rent so that you can save for a larger home (that’s just MHO).

Existing home sales for November will be released this Thursday, and economists are projecting that the National Association of Realtors will then report sales of 4.98 million on a seasonally adjusted annual rate basis.

The consensus is for October Real Estate sales to decline nationally, proving our point that just because there’s a “report” saying everything is GREAT – you need to understand what the Report is ACTUALLY saying.

Plus Real Estate is Local.  What is selling, or not selling in the market that you are interested in?  These National Reports are much better at giving us a “National” view of how the Economy is doing.  And, if you take a 3000 foot view – you might come away from watching CNBC believing that the US Economy is off the Ropes and well into the Rebound.

In fact, the FED Announced today that it is going to stop purchasing quite so many mortgages as part of the QEIII Program in January , as they begin “tapering” the QE program.

This kind thinking usually leads to concerns about Inflation.

Inflation is what tends to push mortgage rates higher.  In fact, since May of 2013, the Fannie Mae yields have gone from 2.28% to a current yield of  3.53%. What does that mean for mortgage interest rates?

In May, we hit the lowest point of the Government Backed Mortgage rates at about 1% above the Fannie Yield.  Today, after the FED Announcement, we are still in the “about” 1% above Fannie Mae yields for Government Backed 30 year fixed rate mortgages (depends on what kind of home you are purchasing, where it is located and what kind of credit profile the borrower has to get an exact rate).

Let’s see how this breaks out for mortgage payments assuming a Sales Price of $225,000 with a minimum down payment on a FHA Loan, 680 Middle Credit Score on a Single Family House, with the Seller paying part of the Closing Costs :

With this same fictitious borrower – a payment of $961 (granted you have to add taxes and insurance) could be much easier to qualify for than say $1186 (plus all of that other stuff).  That means the First Time Home Buyer is now buying a smaller house – which again is not all that helpful to the folks hoping to Sell their home.

REGULATIONS ADDING TO MORTGAGE RATES 2014

Add Regulation to the mix, and the CURRENT mortgage interest rates could look really cheap to those coming into the market in 2014. According to David Stevens, the President of the Mortgage Bankers Association in Washington (and the former chief of FHA), “The new up-front risk-based pricing grid [Required By Regulators] means that fees will increase the most for borrowers in the heart of the home-purchase market, those who have credit scores between 680 and 759 and who are putting down between 5 and 20 percent,” in the early parts of 2014.

With the required fee increases also impacting those with lower credit scores, we do not see an opportunity for LOWER mortgage rates 2014 – at least not in the next few months.  As Fannie and Freddie continue to increase fees to lenders, those will be passed on to borrowers in the form of higher mortgage interest rates, and higher payments.

Additional pressure on qualifying for a mortgage is coming with QM regulations that require the maximum debt to income ratio for those applying for a mortgage be NO MORE than 43.000000%.  As mortgage rates rise, this shift in qualification guidelines will squeeze some borrowers into smaller priced homes.

BOTTOM LINE

The best time to buy a home is right this minute. If you’ve been on the fence – hop off.  Mortgage payments are not likely to be this low for many years to come!

So what are you waiting on?  Tired of Renting?  Buy a House!

When you buy a house, you get a RAISE!  (It’s TRUE! Check out the Tax Advantages of Home Ownership!)  Call Steve and Eleanor Thorne, in Cary NC for more details about Mortgage Rates 2014 –  919-649-5058!

I try and answer all questions :)