Mortgage Loans

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For a 30 Year mortgage on June 5th the monthly mortgage payment would have been $1210.69. Three week later on June 26th a mortgage on the same amount would have risen 4% to $1257.56. Now another 3 weeks the mortgage payment has fallen 2% to $1232.73

The other major change occuring with mortgages is that banks are becoming more selective in giving out mortgages. We have noticed over the last month that more restrictions from lenders have been coming into play. So although mortgage rates are relatively low it has become more difficult to get a loan. Over the last few years lenders would give a loan to anyone that could walk in the door this has changed over the last year. This is why potential home buyers should start paying more attention to their credit scores. Also lenders are expecting larger downpayments. Lenders are also cracking down on investment loans. The biggest change has been that most lenders are not allowing borrowers to get more than 4 investment loans. This has essentially stopped many investors from purchasing new properties.

So what do we expect to happen in the future. The general feeling among mortgage brokers is that lenders are unlikely to return to the free wheeling style we saw in 2006. But at the same time its likely that the current extreme restrictions in lending might ease up some over the next six months.

So looking at the numbers above one would have saved almost $50 by getting a 30 Year loan a month ago compared to today. In contrast a mortgage on a 1 Year Arm has remained relatively constant only move up $6 compared to a year ago. Why Banks would want to promote 1 Year Arms is anyone’s guess since its a riskier product that more frequently leads to foreclosures. Based on the other recent decisions by banks it would not be a bad assumption to assume banks have no idea what they are doing this point.

At this point getting a 5 Year Loan doesn’t really seem worth it compared to getting a 30 Year loan since the cost savings is not that high (5%). On the other hand if you plan on keeping the property for a short period of time a 1 Year loan seems attractive considering the cost savings (12%).

So as always the next question is what rates are going to be doing over the next month. In the absence of future rate cuts its unlikely that rates will go down very much. Additionally, since rates have risen over the last few week it seems that banks are becoming more satisfied with the current rate spread between the FED and current mortgage rates. So one would expect rates to remain flat or have a small rise through the rest of the summer.

Mortgage payments on most of the mortgage products went up quite a bit over the last month. Looking at a 30 year note the mortgage on a 200k loan has increased $57.10 or about 4.8 percent in a little over a month. In fact the only mortgage product to fall is the 1 Year Arm ($6.18 or about 0.5 percent). Why banks would want to push ARM which is the very loan product that caused all the problems in the first place is anyones guess. Although I typically avoid ARMs the cost savings on a 1 or 5 Year ARM is hard to ignore. That said I would only look at ARMs if you think their is a reasonable chance you will sell your property in that time frame. The general expectation is that rates should be higher and not lower in a few years.

So the question remains where are rates going to be in the next month. While I was fairly confident that rates would rise this month I am not as sure what will happen in a month. If the FED continues to avoid anymore rate cuts I would expect to see mortgage rates at about the same level or higher. Banks have been dealing with massive losses from foolish bets on subprime loans and are looking to make up for these losses through higher mortgage rates.

Another change occuring with loans is a limit on the number of investment properties an individual can recieve a loan on. It looks like most banks are limiting the number of investment property loans per individual to 4. This should obviously have a negative effect on investment properties. I also expect to see more cash offers from investors looking to pick up properties at currently depressed prices

The interesting thing about various home mortgage lenders is that each of them offers their own set of features and benefits, so sometimes you may find it confusing to choose the best one.

So here is a guide to help you with a few helpful tips to compare various mortgage rates more easily…

The first thing you want to pay attention to, if the Interest Rate each mortgage company offers. Because at the end it shows how much extra money you’ll have to pay back.

So the smartest way is to try to find a company that asks for the lowest interest rate for your mortgage, so you save a lot of money.

When you find various mortgage loan companies, you can use a free mortgage calculator to calculate their rates easily and fast.