May 23rd Moorings

Hello and welcome to this week’s edition of Moorings, your source for local and national news from the Mortgage Industry. Let’s jump right in and take a look at Housing Starts and Building Permits, which are leading indicators of the new home construction market, and both came in below expectations that were already low. If you consider the significant amount of foreclosures and inventory overhang weighing on the market, it is no surprise to see a weak indicator on new home construction. Broadly speaking, foreclosures and short sales are expected to continue weighing on new home construction for the next couple of quarters… but as we all know, real estate is very local. For instance most new construction in our area that is priced right (under $300,000) is moving steadily enough.


Also, the major undercurrent theme of the economy is that economic growth will slow, which recent reports seemed to indicate. The recent rally in bonds and home loan rates (rates are down), seem to be sparked by this notion. And when you also factor that the only two ways the government can lower the budget deficit is either by cutting spending or raising taxes – or some mix of both – the austerity measures could indeed slow the economy.


Now that we have the major news behind us, let’s take a look at a rate or two for this week. A client looking to purchase a two hundred thousand dollar home, with 5% down on a conventional thirty year mortgage would likely have an interest rate of 4.75%, assuming their credit score and other assets qualify them. Even better are 100% USDA loans which are currently being offered at 4.625%. This is truly a phenomenal bargain on a mortgage for anyone looking at a home that qualifies for USDA financing. Just keep in mind that rates are down right now for a reason, and eventually they will go back up.  Contact your preferred lender now if you want to discuss refinancing or purchasing a home.


Last but not least, I thought I would discuss the question of paying off your mortgage early. I recently had a client tell me they were dead set on paying off their newly refinanced 15 year mortgage in less than ten years. I cautioned them to examine this thought process carefully and discuss it with a tax specialist. While not having a mortgage payment may seem attractive to many people, the money you will put into that endeavor may likely be put to better use in a safe investment acquiring interest. In addition, mortgages are what many people consider “good debt” in that it allows you to claim a vast amount of tax deductions over the course of your loan, which can greatly help you each year. A financial planner or tax specialist can help you plan your path to a prosperous future and retirement. Well that’s it for this week, until next, Be Blessed and Numbers 6:24-26 be on you.