LAS VEGAS, AVOID THIS COSTLY MISTAKE

If you've been following the financial news, you've probably heard that the Fed's been buying Mortgage Backed Securities and will continue to do so as needed. Unfortunately, some media outlets have picked up on the news and mistakenly reported that these purchases will continue to cause rates to drop lower into the summer.  But is that really what it means? No.  Bottom line: The Fed's purchase of higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today's low rates.  The Problem Is...Many consumers are in situations where they can purchase or even refinance now and save hundreds of dollars a month on their mortgage payments. But when they hear the media throwing around teases of lower rates ahead, they decide to hold off on making the decision to save, in the hopes of gaining a few more dollars of savings per month if a lower rate came their way. Of course, while they're waiting, rates could turn higher - and this window of opportunity could pass them by entirely.  Here’s the clincher:  Even if consumers are ultimately able to time the market perfectly and save another few bucks per month, they could still end up losing. That's because while they delayed, they lost the savings each month they could have gained by taking action sooner. In other words, they may have lost hundreds of dollars for every month they waited. So even if they got lucky and obtained the rate they were looking for, it could take years to make up what they lost by waiting.  I don't want anyone to miss an opportunity by either waiting or misunderstanding the media headline. Let's talk further on this. Call or email me, and let's discuss what this might mean for you.

The Heat is on in Las Vegas

Las Vegas and Henderson Homes are on sale, sellers are motivated, and interest rates are at historic lows...but may not stay that way, which means it makes sense to get moving on that home purchase or refinance you've been contemplating. But if you are among the smart individuals who are going ahead and taking advantage of the low home loan rates to be had right now, there are a few things to be aware of. 

With interest rates at record lows, all lenders in the US have recently seen a sharp increase in loan applications - right at the time that many lenders have cut headcount to save money in a challenging economy. This means that timeframes needed for underwriting, approvals and closing have become longer than normal. Some companies have chosen to actually raise rates just to slow down the volume to a manageable level.  Sound crazy? No crazier than when you go to buy that hot new vehicle...only to find that there is no price negotiation. In fact, you wind up lucky to just pay the sticker price, as the demand usually allows the Dealer to add a markup to the price. And you don't get the car right away; you have to wait on a list for your turn to come up.

Right now, home loans are like that hot new car - but with the timer ticking on interest rates locks, there are a few things you can do to protect yourself.  First, longer lock in time frames than might normally have been considered are a necessity, to ensure that the file has time to be processed, underwritten, approved and closed in time to protect the rate lock in this extremely volatile climate. And that longer, safer lock-in period may be a bit more costly - but it's money well spent. Overall, the mind set here should not be one of greed. Don't try to squeeze every last drop out of rates. If you are within a quarter percent of the lowest rates offered in the history of this country, you did very well. And rates always shoot up higher at a much faster pace than when then dip lower. So if the savings or opportunity makes sense - grab it.  Next, responding quickly to requests for information or documentation is important - the faster the file is submitted and approved, the better off we are to keep that great interest rate protected.

Finally, be aware that it may be a smart idea to pay points to gain the best interest rate - and sometimes is even necessary in today's market. Giant mortgage buyers Fannie Mae and Freddie Mac have recently imposed more "risk-based pricing adjustments", meaning that even credit scores and loan to values which in the past would have been considered very low risk, may now be subject to mandated fees by Fannie and Freddie. And based on the way lenders have changed their rate sheets over time, there is now very little "premium pricing", which used to allow options for fees like these, points or other closing costs to be covered in return for a slightly higher interest rate.  Right now is still an excellent time to act, before the great low rates of today get away from us. But let's be smart - call me for information on how we can get started right away.

Sincerely,

Fed Leaves Rate near Zero:

The Federal Reserve kept its key interest rate near 0% Wednesday, and said it is prepared to take additional steps to try to fix the troubled U.S. economy and credit markets.  The Fed said it stands ready to purchase longer-term Treasury’s if it determines that such a move will help get credit flowing once again. This may help lower the yield on the government bonds and further lower the rates on various types of loans tied to Treasury.  While the Fed said there had been improvement in some financial markets, it is concerned that credit remains tight.  The Fed also warned of a decline in prices that could further slow economic activity, a condition that is generally known as deflation.  Deflation often prompts businesses to further cut production and consumers to delay purchases because they anticipate lower prices to come. Economists warn that deflation can have a more destructive impact on the economy than inflation.  The deflationary threat is really the bottom line, and the Fed wants to do everything they can to minimize the risk. 

Geithner Says ‘Range of Options’ Considered for Bank: 

U.S. Treasury Secretary Timothy Geithner said the department is considering a “range of options” for its financial rescue plan, with the goal of preserving the private banking system.  “We are putting together what we hope will be a comprehensive plan for helping repair the financial system and bring recovery as a critical component to the president’s commitment to get growth going again and bring the economy back on track,” Geithner said.  Under pressure from lawmakers and taxpayers, upset that the rescue plan shows few signs of lifting the economy, the Obama administration plans to overhaul the effort.  In its rescue efforts so far, the Treasury has taken ownership stakes in more than 300 banks as a condition of receiving aid.  Today Geithner said the Treasury will post contracts with TARP participants on the department’s Web site within days after deals are done.  “That’ll give the American public a chance to see those, to look at the detailed terms and conditions, in a relatively short time period after they’re concluded,” Geithner said.

Las Vegas Existing-Home Sales Show Strong Gains In December

1. Many Home Buyers Need Higher Loan Limits, Upper-End Stalled here in Las Vegas:  The drop in mortgage loan limits for conventional financing at the end of 2008 is hurting home sales and trade-up activity in higher price ranges across the country.  Outside of FHA, Fannie Mae and Freddie Mac, mortgages that do not have government backing are still experiencing a credit crunch. Buyers who need jumbo mortgages must pay interest rates that are nearly 2 percentage points higher than conventional financing; as a result, the high-end market is not moving.  All consumers should have access to today’s historically low mortgage interest rates. It’s only fair that all hard-working, tax-paying, successful people who want to purchase a home have equal access to low interest rates regardless of where they live or where they want to buy.  Every segment of the housing market needs a turnaround to spark an overall housing recovery, which will help the economy to begin to recover!