Posts Tagged ‘Adjustable-rate mortgage’

Home buyers lack mortgage know-how

 

A new survey indicates that home buyers are ill-prepared to take out a mortgage, answering basic

questions about mortgage information incorrectly nearly half (46 percent) of the time, according to a

Zillow Mortgage Marketplace.

MAKING SENSE OF THE STORY

statements, including “The rates of 5/1 adjustable-rates mortgages always increase after years.”

Although the correct answer is false, because 5/1 ARMs do adjust after five years, but the rates

could go up or down, 57 percent of people surveyed answered this question incorrectly.

More than 1,000 home buyers were asked to respond true or false to eight mortgage-related

always buy mortgage discount points. The fact is, the decision hinges on how long the borrower

plans to own the property, and in some situations, buying mortgage discount points is not

worthwhile.

Forty-five percent of home buyers surveyed also incorrectly stated that home buyers should

by lender, incorrectly thinking lenders are required by law to charge the same fees for credit

reports and appraisals.

An additional one-third of respondents do not understand that lender fees are negotiable and vary

financing. With a pre-qualification, which is the earliest step in the mortgage process when a

lender approximates the amount the borrower can afford, the lender does not run the borrower’s

credit or request any documentation to verify the information provided by the borrower.

Survey respondents also believe that pre-qualifying for a loan means they have secured

Housing Administration (FHA) loans are available to all buyers, but instead believe only first-time

buyers qualify. In reality, FHA loans can cost less for many buyers, including repeat buyers with

low to average credit scores and with down payments of less than 20 percent.

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Slightly less than half of the polled prospective home buyers also do not understand that Federal

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Mortgage rates: Average on 30-year fixed loans rises to 4.86%

By Janna Herron

Associated Press

Posted: 03/31/2011 08:08:04 AM PDT

Updated: 03/31/2011 09:07:11 AM PDT

 

NEW YORK — Fixed mortgage rates rose slightly this week, but the average rate on the 30-year loan remained below 5 percent.

Freddie Mac says the average rate on the 30-year fixed mortgage rose to 4.86 percent from 4.81 percent the previous week. It hit a 40-year low of 4.17 percent in November.

The average rate on the 15-year fixed mortgage increased to 4.09 percent from 4.04 percent. It reached 3.57 percent in November, the lowest level on records dating back to 1991.

Mortgage rates tend to track the yield on the 10-year Treasury note, which rose this week. Investors sold off Treasurys on fears the Federal Reserve might end its bond-buying program sooner than expected.

Low rates have done little to jumpstart the weak housing market. Home sales remain sluggish and prices are falling in most major markets. Most analysts expect prices to decline through midyear.

More Americans did sign contracts to buy homes last month, the National Association of Realtors said Monday. But there was “a measurable level of contract cancellations” in February, meaning many pending sales might not translate into closed sales.

In another dismal sign, Lennar said Tuesday that new orders dropped 12 percent from December through February, while home deliveries slipped 3 percent.

High unemployment and strict lending requirements have kept many people from buying homes. And a record number of foreclosures are forcing down home prices, leaving many would-be buyers worried that the market has yet to bottom out.

To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.

The average rate on a five-year adjustable-rate mortgage rose to 3.70 percent from 3.62 percent. The five-year hit 3.25 percent last month, the lowest rate on records dating back to January 2005.

The average rate on one-year adjustable-rate home loans increased to 3.26 percent from 3.21 percent. Two weeks ago, the rate hit 3.17 percent, the lowest level in records dating starting in 1984.

The rates do not include add-on fees, known as points. One point is equal to 1 percent of the total loan amount. The average fee for the 30-year fixed loan, 15-year fixed loan and the five-year ARM in Freddie Mac’s survey was 0.7 point. The average fee for the 1-year ARM was 0.6 point.
 

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