If you see a Seller or Realtor offering to save you .50% off your interest rate if you buy a home, here is why you are seeing this happening. An offer of a .50% Lower Rate might cause you to take a second look at the home and is an excellent marketing move on their part. Below is why this is a Win-Win for the Seller and Buyer.

Years ago it was quite common to pay 1, 2 or 3 points when you took out a mortgage loan. Over the recent years it is quite common not to pay any points. With the current mortgage enviroment before you finalize your mortgage application, you may want to consider paying a point or two in order to lower the rate on your loan.

What is a point? Points are quoted as a percentage of the amount borrowed, therefore if you were to pay 1 Point on a $100,000 loan you would increase your closing costs by $1,000. Up until recently you could only expect to get a .25% reduction in the rate you were paying on your loan for every point that you paid. In the current mortgage market it is possible at times to get a .50% reduction to your rate with the payment of the same 1 Point.

The following Chart does some math to show in monitary terms the effects of paying one point using the current pricing and what it was years ago. The chart show how things have changed. Information presented was based upon pricing as of 12/4/2008. Be aware that loan options are subject to change at any time.

	Loan $	Rate	Payment	Cost	Savings	Months to	Years to
					Per Month	Break Even	Break Even
Base	$100,000.	5.50%	$567.79	N/A	N/A	N/A	N/A
New Standard	$101,000.	5.00%	$542.19	$1,000.	$25.60	39.1	3.3
Old Standard	$101,000.	5.25%	$557.73	$1,000.	$10.06	99.4	8.3

In this example the loan was available at 5.50% with no points. On this date, if the buyer choose to pay 1 point, either by decreasing their down payment or having the seller pay the point for them by offering the seller $1,000 more, the buyer could save $25.60 per month and the break even for the payment of that point would be approx 39 Months. Using the options available a year ago, the buyer would have only saved $10.06 Per month and it would have taken approx 99 months to break even on the payment of the same 1 Point. Considering the fact that in the past people only had their mortgage for approx 7 years (84 Months), you can see why the payment of points was not encouraged by lenders. Looking at the current options, you should see where considering the payment of points could either lower your payments and save you money, It might also llow you to purchase a little bit more expensive home if that would be your desire.

Tim's Informational WebSites

All about Ohio HECM Reverse Mortgages
Rent Vs Own in Ohio Ohio Home Loans
Ohio First Time Buyer Programs Grants
Cleveland and Northern Ohio Realtors
Ohio Buyers and Sellers Resources
Information - Ohio 203K Loan

On the Evening MyFoxNews.com news in Cleveland Ohio they reported that "Low Mortgage Rates are Coming". Here is a link to that news report. The news report was based upon a proposal by the Federal Reserve that is described here. The proposal is to make money available to Banks if they agree to lend the money to home buyers at a rate set by the Federal Reserve. The article makes reference to a 4.50% - 30 year fixed rate which is quite attractive.

Anyone that is considering purchasing a home should talk with a lender now to make sure they will be ready to make a purchase when and if that program becomes available. Any potential buyers should also ask themself if they should wait for the prospect of that GREAT RATE or make a purchse today because it is possible today(December 5, 2008) to get a 30 fixed rate at 5.00%.

In the past it was always said that the LOCATION, LOCATION AND LOCATION were the three things that most affected the price of a home. I understood the logic of that statement as home prices were being increasing in the past. In the economic times of today, we need to look further into the Truer factors that affect the value of a home. Supply and Demand were the driving factors in the past and they are still the driving forces today when it comes to home prices. Supply is great and demand is low for the homes that are on the market. Demand has decreased for a number of reasons and it not a part of this posting.

Also because of liberal lending that occurred in the past housing prices rose because people looked at homes and Real Estate as investments instead of Housing for families.

The purpose of this post is to show that it is not always best to wait for a GREAT PROPSED RATE OF 4.50%. If we are at or near the lows that have adjusted home prices, then when consumer confidence or incentives such as this 4.50% rate come, we should see increased demand for homes. Applying the Supply and Demand principle, when this occurs home prices are more likely to increase than Anything else. Now look at this chart, On a $105,000 loan at 4.50% would cost you $532.02 (Principle and Interest). If you were able to purchase the same home today with a $100,000 loan at 5.00% your payment would be $536.82. The payments are very similar.

Look at this chart do you want to wait and consider a purchase today.

Loan Amount	Interest Rate	Monthly Payment
$100,000.00	5.00%	$536.82
$101,000.00	4.50%	$511.75
$102,000.00	4.50%	$516.82
$103,000.00	4.50%	$521.89
$104,000.00	4.50%	$526.95
$105,000.00	4.50%	$532.02
$106,000.00	4.50%	$537.09
$107,000.00	4.50%	$542.15
$108,000.00	4.50%	$547.22
$109,000.00	4.50%	$552.29
$110,000.00	4.50%	$557.35

If you are a consumer and have considerred purchasing a home, let me know if you think it is better to find that value priced home today or wait for the Great Rates of the Future.

With interest rates now being so low a number of people have asked if it is a good time to refinance.  Here is a calculator that I created to present information to homeowners to determine if refinancing made sense.  Remember this is only a tool that you can use to see if it might make sense to refinance your mortgage.   

 

 If after using this calculator, you believe it is in your best interest to refinance then call a loan officer that is authorized to do business in your state.   If in Ohio, please consider giving me a call.   If outside of Ohio consider searching ActiveRain for a Local Loan Officer.    

I also suggest that you avoid using general internet searches to find the best rates in your state.  The most common companies that you will find are Lead Generation Companies that will then sell your information to a number of lenders.  You are likely to recieve more phone calls and emails than you want. 

 

 

For those that have not heard about the Ohio USDA Rural Home Loans, you may want to look at the program because it allows 100% Financing and there is no Monthly Mortgage Insurance.

If your household income is below those shown in this table and you are considering a home purchase outside of a major metropolitan area, you should check out the Ohio USDA Rural Home Loan Program.

In Ohio, visiting http://www.firsttimebuyers-mortgages.com for additional information. For out of state buyers or realtors, please use the USDA link at the bottom of this page.

Rural Home Income Limits Cleveland MSA In order to qualify for the Rural Home Loan program your income needs to be below these income levels if the property is located in the Cleveland MSA. The Cleveland MSA covers most of the Northern Ohio market Area. If the property is out of the Northern Ohio Area, please call me. I will be glad to assist you.
Cleveland MSA MOD.INC-GUAR.LOAN	1 Person	2 Person	3 Person	4 Person	5 Person	6 Person	7 Person	8 Person
	50000	57150	64300	71450	77150	82900	88600	94300
Base Income Limit for Ohio	49550	56600	63700	70750	76400	82050	87750	93400
Some Counties have higher Limits. If you are above these limits you may wish to look here to see all limits.

Below is a map showing the eligible area for the Ohio Rural Home Loan Program. Below this initial map are one for some Northern Ohio Counties.

USDA - Rural Home Northern Ohio Area OHIO This Map shows Eligible Areas in Northern Ohio

More information is also available at http://www.rurdev.usda.gov

The program does have an upfront Guarantee fee of 2.00%
which is very similar to the upfront fee charged on VA Loans.

Attention Veterans -

100% Financing is still available to Veterans, also they do offer 100% Cash Out. Here is a chart that summarizes the refinance options.

VA Home Loan Refinance Program Comparison

	VA Streamline Refinance	VA Cash-out Refinance
Cash-out Allowed	No	Yes
Must Credit Qualify	No	Yes
Must Income Qualify	No	Yes
Appraisal Required	No	Yes
Can Combine 1st and 2nd Mortgage	No	Yes
Maximum Loan to Value (LTV)	No Maximum	100%
Maximum Loan Amount	$417,000	$417,000
VA Funding Fee	.5% (unless exempt)	3% (unless exempt)
Mortgage Lates Allowed In Last 12 Months	1(30 day)	0
Property Must Be Owner Occupied	No	Yes

Contact a local VA lender if you have any questions.