Joe's Money

Mortgage rates continue to decrease.  A 30 year fixed rate came through at 4.76% and 15 year fixed rate settled at 3.97%.

These rates are amazing!  When I locked in close to two years ago at 4.875, I didn’t think that rate would be around very long, much less, go lower.

Here we are almost two years after my purchase, and in my opinion, this country is still facing the same challenges.  Most people have strong opinions about how housing got to where it is today.  About four or five years ago, I announced my thoughts, and stick to them to this day.

When the housing market crashed, I think we can all settle on the fact that home owners simply couldn’t afford their payments in the first place.  You can pass the blame on the banks for issueing the loans, or take the personal accountability route and blame it towards the borrower.  Either way, I don’t think the borrowers could afford the payments in the first place.  Of course in return, we get the wave of forclosures.

So why after a few years, are we still experiencing the same issues?  The housing market is flooded with vacant homes, why aren’t people buying?  Well, on the surface we have high unemployment so those buyers are taken off the table.  Most folks that are well off, more than likely have already settled somewhere.  That leaves the poor and middle class.  The issue with these groups, is they still sipmly can’t afford a home.  The remainder of the market is simply waiting for homes to come down in price enough to meet their needs.  Until then, nothing will change.

To be honest, I thought rates would have been raised by now.  Once Fannie Mae and Freddie Mac stopped buying mortgages, I didn’t think there would be anyone left to borrow money at such low rates.  I was wrong.  Since the rates have stayed around 5% for a 30 year fixed rate, the only answer is lower home prices, or I suppose even lower rates, but I don’t see that happening.  There simply won’t be enough incentive to borrow the money out.

Hopefully, the market returns and stabilizes shortly, however, I think we’ve got a long road ahead.

Winter is here and if you don’t control your thermostat, you can expect one of those hefty bills from your friendly energy company.  Here are some ways to save on your heating bill.

1.  Planning on being out for the evening?  Turn down the thermostat.  Also, if you’ll be away for a weekend or longer, lower your dial to 55 F.  You will save on heat without risking a freeze up to your pipes.
2.  Whenever you are able to turn the thermostat down significantly, you will save a little on the operation of the refrigerator and freeze.  They simply won’t need to work as hard to maintain the lower temps.

3.  Try to accustom yourself to lower temperatures.  Lower the thermostat by one degree every week for 3 to 4 weeks.  Gradually, you may be able to save a chunk of money by lowering the thermostat by just three to four degrees.

4.  Try turning down the thermostat at night by 5-10 degrees and then fire it back up in the morning.  This can easily shave 5%-10% off your monthly bill.

5.  For increase ease, install a programmable thermostat.  These are generally available for most heating systesm and can be had for less than $50.  You may not even notice the difference in temperature as you will be sleeping throughout the lower temps.  You can program these to heat up the house right before you get home and then back down before you leave.

6.  Some programmable thermostats have a weekend setting.  This makes it even easier.  These will be a great money saver for you.

7.  If you heat your home with electricity, you can take advantage of the individual room thermostats.  Simply turn off heat to rooms that are not used.

8.  When its time to open the windows in the spring, don’t forget to turn the thermostat off.  When the cooler temps enter the house, this will trigger the furnace to go into overdrive wasting lots of fuel.

9.  Planning a party or get together?  Every person in the house puts out as much heat as a 175 watt heater.

Follow these and compare your current heating bill to your next one.  You will be thrilled to see the savings!

Well well…  I received a notice in the mail today informing me the ownership of my mortgage has been transfered, sold, or assigned to our good friend, Fannie Mae.  What does this mean for me?  According to the notice, nothing.

Since I am in a fixed 30 year loan at 4.85% interest, my loan rate will never change.  The Fannie Mae notice also reflects this stating: The transfer of ownership does not affect any term or condition of the mortgage.

Something I learned from this notice…  I was always under the impression that Fannie Mae, along with others, originated (Issued) loans.  This appears to be a false assumption.  It states “Fannie Mae is a shareholder owned company with a public mission.  We do not make mortgage loans but instead provide funds to lenders by purchasing the loans they make.”  I had no idea.  Maybe I’m the only one that was clueless about this.

I had heard of loans being sold over and over when I started to look for financing for my home.  I chose a local credit union to try and avoid this but it looks like I failed considering my loan was sold not even 6 months later.  I still make my payments to my credit union but I still find this odd.  At least I didn’t end up sending my money to another bank I really can’t stand.  My credit union has always been leaps and bounds better than any bank I have ever tried.  I really wanted to keep my money within this community based organization.  At this point, I would only assume the interest made off my mortgage payments will go to Fannie Mae.

I wish I could make the assumption that all loans picked up by Fannie Mae were as secure as mine is.  If that were the case, maybe I’d buy a few shares.  After seeing them implode as of late throughout the housing bubble, I doubt thats the case.

One of the key indicators of the housing market is the corresponding loan rates.  Over the last week, the average rates dropped back into the 5% range.

According to Freddie Mac’s weekly report, the 30 year average mortgage rate dropped back to 4.87%.  This is the lowest rate seen since May of this year.  Mortgage tracker BankRate.com also noticed a drop in rates, but not quite as large as Freddie Mac.  BankRate.com sees the average rate at 5.22%.  15 year rates are even lower at 4.64%.

Also this past week, congress has been working to extend the $8,000 first time home buyers tax credit.  This should help would be home buyers jump into an already excellent buyers market.  Currently, the tax credit is set to expire November 30th.

Home owners last year definitely took advantage of the credit.  Last year the average 30 year mortgage weighed in at 6.2%.  To show the savings on these rates, consider this.  A $200,000 loan at last years 6.2% would show a monthly payment of $1225 while the same $200,000 loan at todays rates would save you about $125 per month.  Not bad!

These low rates helped boost mortgage applications last week.  Applications were up over 16%.