Archive for December, 2008

Where’s the Money?

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With credit tight and standards even tighter, finding the money to buy a home in today’s market can be a challenge.
In today’s market, the best place to find a mortgage might just be your local credit union.

Credit unions never got involved with sub-prime mortgages, and are, therefore, very solvent and have the money to loan.

Of course, their lending is more along the lines of Jimmy Stewart’s “It’s a Wonderful Life”, which means you’ll have to document everything.

The interesting thing about credit unions is they are non-profit. That means loans are not only competitive with banks that sell their loans on Wall Street, but are usually lower than bank mortgages.

Credit unions use their own money to lend and then keep the loans in house and return the “profit”, the interest payments, to their members. Credit unions serve their members who pool their money together with the expectation they’ll get a return on their investment.

According to the National Credit Union Administration, credit unions, through September, saw an increase of 15.1% in the number of fix-rate mortgages outstanding compared to the same period in 2007. Adjustable rate mortgages were up 11.8%.

Membership Eligibility. By current federal statute, credit unions cannot serve the general public. People qualify for a credit union membership through their employer, organizational affiliations like churches or social groups, or a community-chartered credit union.

To find a credit union, go here: http://www.findacreditunion.com/

Another place to find a mortgage is a local bank. As with credit unions, local banks will look long and hard at your application. You will need to have a down payment. Local banks are not going to give a loan to someone who can’t afford it.

Even if you’re not in the market for a home right now, it will pay off in the future to gain membership in a credit union and/or open a bank account at a small local bank.

Mortgage Rate Outlook

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The overall cost of mortgage money, as gauged by HSH’s Fixed-Rate Mortgage Indicator (FRMI), spiked 34 basis points (.34%) higher, making it the third consecutive week of at least a 30-basis-point movement in rates. However, the swings from week to week are becoming somewhat smaller; they’ve moved 40 basis points up, then 37 down, and now 34 up again. Five-one Hybrid ARMs jumped 11 BP, leaving the most popular alternative to the traditional 30-year fixed rate at 6.80%.

The price of a conforming 30-year fixed-rate mortgage nudged 33 basis points higher, while private-market 30-year Jumbo fixed rates finished the week at 7.90%.
 
There’s plenty of negativity to go around these days, and October will finish as one of the most difficult months ever for financial markets. That said, the sheer volume of new programs put in place by regulators, as well as the attempts to re-liquify the financial markets by the Treasury and Federal Reserve, means that we may just be enduring the worst period at the moment, with better things to come. If nothing else, the passing of the election cycle, with its unending repetitions of negative messages, should produce a level of quiet not enjoyed for many, many months.
 
That’s not to say there’s all that much to cheer about, given all the troubles which face the economy. Still, there are encouraging signs here and there which get pushed out of the headlines, downplayed, or outright ignored. Take home sales, for example: last week, Existing Home Sales popped much higher than expected, only to have detractors claim that they would have fallen if not for discounted prices for foreclosures. That’s equivalent of saying "That store would have closed except for that big half-off sale!" The point here is that even good news — in this case, that home sales are rising — is too often treated with scorn.
 
Such was the case this week for sales of New Homes. The unexpected lift in sales to an annualized 464,000 in September was, in part, explained away by the 9% year-over-year decline in the cost of a new house. We prefer to focus on the fact that despite challenging financing conditions and a troubled economy, homes are being sold. Better yet, inventory levels are now well below the present rate of sale, and this in turn suggests that at least some life in the building trades may be coming before long.