Are mortgage interest rates expected to drop in about a year or so?

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alkemyst

No Lifer
Feb 13, 2001
83,967
19
81
Originally posted by: Xavier434
It sounds like the biggest hoop to jump through is finding an honest lender. For this reason, I will most likely be going with USAA since they are exclusive for those in the military, government, and dependents. If not then I will probably rely on personal recommendation only from those who I trust.

In reality of this situation it really wasn't dishonest lenders being the problem. It was dishonest buyers wanting to go with stated income/no doc loans saying they made much more than they did in order to try and buy properties to flip.

By the time the fly-by-nights entered the market, the pros were already pulling out (around 2005).

There isn't much any real brick and mortar lender can do to really screw a mortgagee if they read everything before they sign and get advice on anything they don't understand.

People tend to take 10x the time to research a car/lending process than what they spend on researching mortgages.
 

Xavier434

Lifer
Oct 14, 2002
10,377
1
0
Originally posted by: alkemyst
Originally posted by: Xavier434
It sounds like the biggest hoop to jump through is finding an honest lender. For this reason, I will most likely be going with USAA since they are exclusive for those in the military, government, and dependents. If not then I will probably rely on personal recommendation only from those who I trust.

In reality of this situation it really wasn't dishonest lenders being the problem. It was dishonest buyers wanting to go with stated income/no doc loans saying they made much more than they did in order to try and buy properties to flip.

By the time the fly-by-nights entered the market, the pros were already pulling out (around 2005).

There isn't much any real brick and mortar lender can do to really screw a mortgagee if they read everything before they sign and get advice on anything they don't understand.

People tend to take 10x the time to research a car/lending process than what they spend on researching mortgages.

Yes, I realize the culprits behind the problem. You bring up some good points that I am interested in learning more about though.

First, in regards to foreclosures, what are some good tips when it comes to picking a good foreclosure? My fear is that if I go that route I may end up being stuck with a house that was not as well kept as I originally hoped. I kinda view foreclosures as being a reflection of irresponsibility which can go hand in hand with a poorly kept house. I have a god friend who is an expert at home inspections and is going to be recommending someone for me when the time comes, but even then I would like to dodge that bullet.

Second, being that I live in Broward County (South Florida just north of Miami) I am concerned about buying a place that drops down in value quite a bit the first few years. Assuming I get a place a little over a year from now, should that scenario be a huge concern for me or can I mostly play it by ear? Keep in mind that I do not plan to sell it anytime soon.
 

alkemyst

No Lifer
Feb 13, 2001
83,967
19
81
Originally posted by: Xavier434

Yes, I realize the culprits behind the problem. You bring up some good points that I am interested in learning more about though.

First, in regards to foreclosures, what are some good tips when it comes to picking a good foreclosure? My fear is that if I go that route I may end up being stuck with a house that was not as well kept as I originally hoped. I kinda view foreclosures as being a reflection of irresponsibility which can go hand in hand with a poorly kept house. I have a god friend who is an expert at home inspections and is going to be recommending someone for me when the time comes, but even then I would like to dodge that bullet.

Second, being that I live in Broward County (South Florida just north of Miami) I am concerned about buying a place that drops down in value quite a bit the first few years. Assuming I get a place a little over a year from now, should that scenario be a huge concern for me or can I mostly play it by ear? Keep in mind that I do not plan to sell it anytime soon.

First, it makes no sense to answer any of this if you purchase is still over a year away.

I don't know what you are not understanding about what makes a good foreclosure pick. Have you looked at homes? Are you living on your own now? Find out what you like and what the cost of that is. A foreclosure should get you that stuff for much less.

MANY foreclosures today are homes that have never been lived in, are still under builder warranty and just like new. Over a year from now the only ones left will be left overs or our economy is really heading down the crapper.

I don't know what broward vs any where else in the country matters of value dropping. However all of S. Florida is part of the worst of the bubble breaking. Like I said, it depends what and where you are buying. If you are looking at million dollar condos in a 95% vacant building selling in the high 6 figures now, I'd say you are in for a ride. If you are picking up a home in a community that was sold out and has had resales since then you are in better shape.
 

Xavier434

Lifer
Oct 14, 2002
10,377
1
0
Originally posted by: alkemyst

First, it makes no sense to answer any of this if you purchase is still over a year away.

I don't know what you are not understanding about what makes a good foreclosure pick. Have you looked at homes? Are you living on your own now? Find out what you like and what the cost of that is. A foreclosure should get you that stuff for much less.

MANY foreclosures today are homes that have never been lived in, are still under builder warranty and just like new. Over a year from now the only ones left will be left overs or our economy is really heading down the crapper.

I don't know what broward vs any where else in the country matters of value dropping. However all of S. Florida is part of the worst of the bubble breaking. Like I said, it depends what and where you are buying. If you are looking at million dollar condos in a 95% vacant building selling in the high 6 figures now, I'd say you are in for a ride. If you are picking up a home in a community that was sold out and has had resales since then you are in better shape.

I should elaborate.

First, I am currently looking into getting a starter home that has good enough space, has a good layout, and is 3/2 or 3/3. Right now, those are running at about 260k on average. Second, I have not gone looking at homes beyond internet ads and I am living in an apartment with my family of one child (second one will be on the way soon enough). If I can swing a foreclosure that has never been lived in and offers me what I want at a better price than I will be happy as a clam. What I fear is buying a foreclosure that was previously owned by someone who was irresponsible and that irresponsibility played a part in the quality of their home. I realize such risks are involved in any house that has been lived in, but I figure that the odds of such things increase if there are signs of financial irresponsibility. So, I guess the idea is to try and get a foreclosed house that doesn't involve those risks. Now, how I go about distinguishing one from the other is something I do not know much about other than just going to each place and taking a look.
 

cubeless

Diamond Member
Sep 17, 2001
4,295
1
81
no one can be sure, but methinks that mortgage rates won't be going down too much more... the banks need to make money doing something, and they aren't going to be churning as many loans so they will try to make more on the ones they do sell... and if inflation kicks up even more the fed will "have" to raise rates and mortgages will follow...

as to whether the house u want to buy is any good, that's why u have an independent professional inspection done (hopefully by someone who comes recommended by someone you know and/or trust) and get a warranty on the house from the seller (but read the fine print on the warranty, since some are worthless)...
 

Vic

Elite Member
Jun 12, 2001
50,415
14,307
136
Are mortgage interest rates expected to drop in about a year or so?
No.

For sure, no one knows where rates are going to go. But with the Fed spurring inflation by cutting short-term rates, and investors increasingly nervous about mortgage-backed, it would be foolish IMO to bet on rates going lower than the historical lows they're already sitting at.
In fact, in a very sideways kind of way, rates have already gone up quite a bit in the past 6 months or so. First, through much tighter underwriting guidelines and elimination of loan programs, particularly at higher LTV's. Second, through the shifting of the subprime loan market onto FHA. And finally, through large fee adds based on credit score, loan purpose, and LTV (for example, ABC mortgage might advertise 5.75% 30 fixed, but what they're not telling you is that that rate is only available for 720+ score and purchase with 40% down payment).
 

AndrewR

Lifer
Oct 9, 1999
11,157
0
0
Originally posted by: Xavier434
It sounds like the biggest hoop to jump through is finding an honest lender. For this reason, I will most likely be going with USAA since they are exclusive for those in the military, government, and dependents. If not then I will probably rely on personal recommendation only from those who I trust.

If you're with USAA, you should also consider joining Pentagon Federal Credit Union. Their auto rates are the best anywhere (better than USAA), and their home loan rates are low as well, lower than comparable rates given by USAA (admittedly, only based on one case with a friend of mine who found out too late). I've only had an auto loan with PFCU, two actually, but I can vouch for their customer service.

Since you haven't mentioned it, I take it you aren't eligible for a VA loan. That takes care of the 20% requirement plus the need for PMI.
 

Vic

Elite Member
Jun 12, 2001
50,415
14,307
136
FHA is still doing less than 3% down at attractive rates, and mortgage insurance is tax deductible for the time being.
 

Aharami

Lifer
Aug 31, 2001
21,296
149
106
Originally posted by: Xavier434
Wouldn't it be easier just to go through the process of getting pre-approved by many lenders and start comparing?

dont do that. each pre-approval is a credit check on your history and too many of those can lower your credit score
 

alkemyst

No Lifer
Feb 13, 2001
83,967
19
81
Originally posted by: Xavier434
I should elaborate.

First, I am currently looking into getting a starter home that has good enough space, has a good layout, and is 3/2 or 3/3. Right now, those are running at about 260k on average. Second, I have not gone looking at homes beyond internet ads and I am living in an apartment with my family of one child (second one will be on the way soon enough). If I can swing a foreclosure that has never been lived in and offers me what I want at a better price than I will be happy as a clam. What I fear is buying a foreclosure that was previously owned by someone who was irresponsible and that irresponsibility played a part in the quality of their home. I realize such risks are involved in any house that has been lived in, but I figure that the odds of such things increase if there are signs of financial irresponsibility. So, I guess the idea is to try and get a foreclosed house that doesn't involve those risks. Now, how I go about distinguishing one from the other is something I do not know much about other than just going to each place and taking a look.

You aren't really looking at a 'starter' home . 3/2 and 3/3's are many's end game. A starter home would normally be a resale in an older neighborhood and a 2/2 or 3-4/1. Usually bathrooms are a luxury in starter homes with the emphasis being at least bedrooms for everyone.

$260k still seems a bit high for a starter home in broward. My home in Palm Beach County was $265k about 6 months ago...out of that $265k about $10k went to credit cards, loan costs and my insurance...it's harder to do that now though. This was an older home in a nicer established neighborhood. For around that price I could have bought an equal sized townhome in a newer HOA...but that is not what I wanted. I wanted no HOA, a detached residence and something I could at least get a feel for what the neighbors were like.

The townhouse option would have put me in places which are still under construction and mostly vacant.

I am thinking though you are limiting yourself to brand new homes though. If that's the case then things still have room to go down.

I am not sure what problems you foresee with a foreclosure homes construction. These were built without the assumption that the house would be lost. Build quality is equal to any other home...a lot of times these homes were better optioned as well. You are only looking at lack of maintenance which on a new home is really limited to the yard itself, maybe the swimming pool if equipped. Hardly anything permanently screwed up though.

Occassionally foreclosures will be missing appliances or have some vandalism. Most people buying them are assuming they will at least have to repaint, do carpeting. Your friend the inspector would be who to leverage on these.

Unless you are driving around though you aren't going to see the best deals. This is really something that should be done 2-3 months prior to when you are looking to contract on something. Even 6 months out things change significantly enough that any research is outdated. You also have to sift through the hundreds of people still listing their homes with no intention of wanting to sell. They are still hoping to 'win the lottery'.

In general though the skeletons in a older home will be greater than any 2 year old foreclosed new home. Still that said, almost none of them are the end of the world.

I'd first figure out budget, then figure out what needs you have, then the wishes. Once you know that then you can find out what sacrifices you will have to make or if the situation is a reality. This is really the best way to pick a home or the next rental. There are a lot of steals on rentals now with many homes being FOR SALE/FOR RENT...sellers are desperate. Many that are FOR SALE/RENT do have exclusions though that your lease is over if a contract is written and that they seller / landlord reserves the right to show the property at any time with 24 hour notice (you don't have to agree to it...the law just states that they give you 24hours prior to their entry).

I know a ton of people renting places in the $300-500k range for $2000 and less a month, mostly between $1-1.5k. The owners are losing their asses but can't find buyers.

My last rental was $625 a month in the same neighborhood. Buying a house really cost me more overall, but having your own place you can customize to your liking outweighed the savings to me after 5 years of renting.
 

Red

Diamond Member
Aug 22, 2002
3,704
0
0
Originally posted by: Aharami
Originally posted by: Xavier434
Wouldn't it be easier just to go through the process of getting pre-approved by many lenders and start comparing?

dont do that. each pre-approval is a credit check on your history and too many of those can lower your credit score

Not if you're shopping for the same "type" of loan. Your score is the same if you have 2 or if you have 20 different mortgage companies do hard inquiries for mortgage pre-quals during a 30 day window. However, if you have multiple hard inquiries for different types of credit, ie, credit cards, auto loan, boat loan, mortgage, etc... your scores can tank.
 

Xavier434

Lifer
Oct 14, 2002
10,377
1
0
Originally posted by: AndrewR

If you're with USAA, you should also consider joining Pentagon Federal Credit Union. Their auto rates are the best anywhere (better than USAA), and their home loan rates are low as well, lower than comparable rates given by USAA (admittedly, only based on one case with a friend of mine who found out too late). I've only had an auto loan with PFCU, two actually, but I can vouch for their customer service.

Since you haven't mentioned it, I take it you aren't eligible for a VA loan. That takes care of the 20% requirement plus the need for PMI.

Unless VA loans now accept military dependents then no. I don't even know if I can join the PFCU.



Originally posted by: Vic
FHA is still doing less than 3% down at attractive rates, and mortgage insurance is tax deductible for the time being.

What's the catch?
 

alkemyst

No Lifer
Feb 13, 2001
83,967
19
81
Originally posted by: Vic
FHA is still doing less than 3% down at attractive rates, and mortgage insurance is tax deductible for the time being.

Very true...as long as one has good credit they should not require 20% down, but they shouldn't expect the best rates not doing so. .

If you have bad credit then right now even 20% may not be enough down...some banks are wanting 35%.

Jumbo loans you are on your own though ...
 

Mxylplyx

Diamond Member
Mar 21, 2007
4,197
101
106
Originally posted by: Capt Caveman
Originally posted by: Xavier434
Originally posted by: Naustica
I would worry more about thing you can control like your credit and downpayment than trying to predict the interest rate.

My credit is tip top. I don't have enough of the down payment yet though. That's just a matter of time. Part of the reason I am asking about this topic is to determine how much I need to dedicate myself to saving for the down payment quickly. If interest rates are not expected to drop due to competition then most likely I should hurry.

Also, I live in South Florida which means housing prices will probably drop more here than most places, but I don't know how much more. Odds are, it won't be enough to really make a substantial difference.

Keep the info coming guys. I am still very interested in hearing about what banks do to compete with each other as demand rises. If it's not interest rates then what is it? Can I expect more banks to offer 103% loans instead of the typical 95% for example? Are there other promotions that they use to convince people to borrow from them instead of the other guy?

The days of 103% loans are over. Banks have tighten up their loan requirements substantially, unless you have tip top credit, you'll need a 20% down payment unless you get a loan thru the FHA or something.

Note, I just closed on a place last friday.


Incorrect. Unless you are in a rapidly declining market, 10% down will get you a loan with PMI. I just refinanced on one a few weeks ago.
 

Xavier434

Lifer
Oct 14, 2002
10,377
1
0
I just did a quick read about FHA and I found this concerning the mortgage insurance and I want your opinions:

FHA Mortgage Insurance

Mortgage insurance is a policy that protects lenders against losses that result from defaults on home mortgages. FHA loans require mortgage insurance primarily for borrowers making a down payment of less than 20 percent.

Mortgage insurance is charged to the homeowner each month at the rate of .5 percent per year of the total loan amount. FHA also charges an upfront mortgage insurance premium of 1.5 percent.

Ok, so if I am doing the math correctly, this is what I am looking at. Please correct me if I am wrong.

Assuming I get a loan of 260k.

($260,000 * 0.005) / 12 = $108.33 per month

Then there is the 1.5 insurance premium. This is the part that I am probably understanding incorrectly.

($108.33 * 0.015) + $108.33 = $109.95 per month
 

Aharami

Lifer
Aug 31, 2001
21,296
149
106
Originally posted by: Red
Originally posted by: Aharami
Originally posted by: Xavier434
Wouldn't it be easier just to go through the process of getting pre-approved by many lenders and start comparing?

dont do that. each pre-approval is a credit check on your history and too many of those can lower your credit score

Not if you're shopping for the same "type" of loan. Your score is the same if you have 2 or if you have 20 different mortgage companies do hard inquiries for mortgage pre-quals during a 30 day window. However, if you have multiple hard inquiries for different types of credit, ie, credit cards, auto loan, boat loan, mortgage, etc... your scores can tank.

that's not what my realtor or the rep at the bank said. yea the rep at the bank might lie to me to keep me from shopping around at other banks, but my mom works at this bank and this rep is a friend of her's. So I doubt he lied to me. And my realtor has no reason to lie to me about this. Not saying both of them couldn't have been wrong, but I trust their advice over yours. No hard feelings.
 

Kelvrick

Lifer
Feb 14, 2001
18,438
5
81
I'm hoping things get better for buyers, or stay the same. I don't have much of a downpayment yet and looking at buying next spring/summer.
 

Vic

Elite Member
Jun 12, 2001
50,415
14,307
136
Originally posted by: Xavier434
I just did a quick read about FHA and I found this concerning the mortgage insurance and I want your opinions:

FHA Mortgage Insurance

Mortgage insurance is a policy that protects lenders against losses that result from defaults on home mortgages. FHA loans require mortgage insurance primarily for borrowers making a down payment of less than 20 percent.

Mortgage insurance is charged to the homeowner each month at the rate of .5 percent per year of the total loan amount. FHA also charges an upfront mortgage insurance premium of 1.5 percent.

Ok, so if I am doing the math correctly, this is what I am looking at. Please correct me if I am wrong.

Assuming I get a loan of 260k.

($260,000 * 0.005) / 12 = $108.33 per month

Then there is the 1.5 insurance premium. This is the part that I am probably understanding incorrectly.

($108.33 * 0.015) + $108.33 = $109.95 per month

You got the monthly mortgage insurance premium (MIP) right, but the 1.5% is upfront (called UFMIP). So if you got a loan for $260k, the UFMIP would be $3,900 tacked on top of the $260k.

They'll lend it to you though, and even exclude it from your LTV ratios (but not your debt ratios).
 
Dec 27, 2001
11,272
1
0
If you buy right now you'll have a year of tax savings and be in the second year of your amortization schedule in 12 months which will probably outweigh a savings of a quarter or half point on your interest rate should they drop by then. And, if not, then refinance.

A far more important question is the deal on the house you're getting and THAT I bet will be less by next year than this year.
 

Xavier434

Lifer
Oct 14, 2002
10,377
1
0
Originally posted by: Vic
Originally posted by: Xavier434
I just did a quick read about FHA and I found this concerning the mortgage insurance and I want your opinions:

FHA Mortgage Insurance

Mortgage insurance is a policy that protects lenders against losses that result from defaults on home mortgages. FHA loans require mortgage insurance primarily for borrowers making a down payment of less than 20 percent.

Mortgage insurance is charged to the homeowner each month at the rate of .5 percent per year of the total loan amount. FHA also charges an upfront mortgage insurance premium of 1.5 percent.

Ok, so if I am doing the math correctly, this is what I am looking at. Please correct me if I am wrong.

Assuming I get a loan of 260k.

($260,000 * 0.005) / 12 = $108.33 per month

Then there is the 1.5 insurance premium. This is the part that I am probably understanding incorrectly.

($108.33 * 0.015) + $108.33 = $109.95 per month

You got the monthly mortgage insurance premium (MIP) right, but the 1.5% is upfront (called UFMIP). So if you got a loan for $260k, the UFMIP would be $3,900 tacked on top of the $260k.

They'll lend it to you though, and even exclude it from your LTV ratios (but not your debt ratios).

Wait...when you say "upfront" do you mean I would need to pay $3,900 upfront or is it just tacked on to the loan and spread amongst my monthly mortgage payments? If neither of those are correct, then how exactly will I be paying this 1.5%?
 
Oct 11, 2007
775
0
0
Originally posted by: Xavier434
Originally posted by: AndrewR

If you're with USAA, you should also consider joining Pentagon Federal Credit Union. Their auto rates are the best anywhere (better than USAA), and their home loan rates are low as well, lower than comparable rates given by USAA (admittedly, only based on one case with a friend of mine who found out too late). I've only had an auto loan with PFCU, two actually, but I can vouch for their customer service.

Since you haven't mentioned it, I take it you aren't eligible for a VA loan. That takes care of the 20% requirement plus the need for PMI.

Unless VA loans now accept military dependents then no. I don't even know if I can join the PFCU.



Originally posted by: Vic
FHA is still doing less than 3% down at attractive rates, and mortgage insurance is tax deductible for the time being.

What's the catch?


Anyone can join penfed.
 

Vic

Elite Member
Jun 12, 2001
50,415
14,307
136
Originally posted by: Xavier434
Wait...when you say "upfront" do you mean I would need to pay $3,900 upfront or is it just tacked on to the loan and spread amongst my monthly mortgage payments? If neither of those are correct, then how exactly will I be paying this 1.5%?
It's tacked on top of the loan.
 

Xavier434

Lifer
Oct 14, 2002
10,377
1
0
Originally posted by: Tooncesthedrivingcat
Originally posted by: Xavier434
Originally posted by: AndrewR

If you're with USAA, you should also consider joining Pentagon Federal Credit Union. Their auto rates are the best anywhere (better than USAA), and their home loan rates are low as well, lower than comparable rates given by USAA (admittedly, only based on one case with a friend of mine who found out too late). I've only had an auto loan with PFCU, two actually, but I can vouch for their customer service.

Since you haven't mentioned it, I take it you aren't eligible for a VA loan. That takes care of the 20% requirement plus the need for PMI.

Unless VA loans now accept military dependents then no. I don't even know if I can join the PFCU.



Originally posted by: Vic
FHA is still doing less than 3% down at attractive rates, and mortgage insurance is tax deductible for the time being.

What's the catch?


Anyone can join penfed.

Actually, that is not true but I looked into it anyways and it sounds like I am eligible as a military dependent. Here is a link to the 6 ways one is eligible:

penfed
 

PingSpike

Lifer
Feb 25, 2004
21,733
565
126
Originally posted by: Aharami
Originally posted by: Red
Originally posted by: Aharami
Originally posted by: Xavier434
Wouldn't it be easier just to go through the process of getting pre-approved by many lenders and start comparing?

dont do that. each pre-approval is a credit check on your history and too many of those can lower your credit score

Not if you're shopping for the same "type" of loan. Your score is the same if you have 2 or if you have 20 different mortgage companies do hard inquiries for mortgage pre-quals during a 30 day window. However, if you have multiple hard inquiries for different types of credit, ie, credit cards, auto loan, boat loan, mortgage, etc... your scores can tank.

that's not what my realtor or the rep at the bank said. yea the rep at the bank might lie to me to keep me from shopping around at other banks, but my mom works at this bank and this rep is a friend of her's. So I doubt he lied to me. And my realtor has no reason to lie to me about this. Not saying both of them couldn't have been wrong, but I trust their advice over yours. No hard feelings.

I've heard the same thing as Red said in a lot places. They changed the way credit reporting works but I never heard they changed that.
 

Greenman

Lifer
Oct 15, 1999
20,655
5,346
136
Originally posted by: Xavier434
Originally posted by: alkemyst

First, it makes no sense to answer any of this if you purchase is still over a year away.

I don't know what you are not understanding about what makes a good foreclosure pick. Have you looked at homes? Are you living on your own now? Find out what you like and what the cost of that is. A foreclosure should get you that stuff for much less.

MANY foreclosures today are homes that have never been lived in, are still under builder warranty and just like new. Over a year from now the only ones left will be left overs or our economy is really heading down the crapper.

I don't know what broward vs any where else in the country matters of value dropping. However all of S. Florida is part of the worst of the bubble breaking. Like I said, it depends what and where you are buying. If you are looking at million dollar condos in a 95% vacant building selling in the high 6 figures now, I'd say you are in for a ride. If you are picking up a home in a community that was sold out and has had resales since then you are in better shape.

I should elaborate.

First, I am currently looking into getting a starter home that has good enough space, has a good layout, and is 3/2 or 3/3. Right now, those are running at about 260k on average. Second, I have not gone looking at homes beyond internet ads and I am living in an apartment with my family of one child (second one will be on the way soon enough). If I can swing a foreclosure that has never been lived in and offers me what I want at a better price than I will be happy as a clam. What I fear is buying a foreclosure that was previously owned by someone who was irresponsible and that irresponsibility played a part in the quality of their home. I realize such risks are involved in any house that has been lived in, but I figure that the odds of such things increase if there are signs of financial irresponsibility. So, I guess the idea is to try and get a foreclosed house that doesn't involve those risks. Now, how I go about distinguishing one from the other is something I do not know much about other than just going to each place and taking a look.

That's a very odd criteria for buying a home. Without actively trying to wreak the place, there isn't that much the owner can do to damage the property. Buy limiting yourself to homes that have never been occupied you're eliminating almost the entire market.
 
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