3 homebuying rules to keep

2/28/2014 11:23:32 AM

The housing market has made great strides toward recovery over the last two years, and more Americans are finding it easy to receive a low rate mortgage. However, there are several steps in the homebuying process, and the entire transaction will usually take a few weeks. While there are a number of ways to secure your new home, there are certainly best practices to follow while looking on the market and putting down an offer. To avoid longer processing times and ensure that you will be able to get the home of your dreams, keep in mind a few of these homebuying rules:

Get preapproved
Most Americans purchase their home with the help of a mortgage. A preapproval should be the first step you take before even searching for properties online or going with a real estate agent to tour homes. A preapproval means that a lender has already determined that you are eligible for a home loan up to a certain amount. It is important to note that the amount of a preapproval is the top limit, and it doesn't mean that you have to spend that much on a new home purchase. Getting preapproved will allow you to know how much you can afford for a home. Most importantly, a preapproval will make the entire homebuying process much faster when you finally do apply for a home loan. There is a difference between getting preapproved and prequalified. Prequalified simply means that you are likely to get approved for a certain amount, but preapproved means that a lender has already secured you for the amount.

Determine your down payment
The down payment will likely depend on what type of home loan you apply for. Many first-time home buyers opt for FHA mortgages, as the down payments for these home loans can be as low as 3.5 percent. By comparison, jumbo loans may require up to 20 percent of a home's value for a down payment, which is not a feasible figure for many homebuyers. If you do not have enough to make a down payment on a home, you might be better off saving and waiting until you can make the financial commitment. Having the funds to put money down on a home is one sign that you may be ready to become a homeowner.

Take a tour
There are many things that may look good on the Internet but in reality end up not being exactly what is portrayed. As real estate is typically a major investment for most Americans, it is critical to tour a home before buying it. There is a good chance that a home that looks good online will have something that you don't like or won't meet your needs in a new house. New technology and online tours are great supplemental tools to the homebuying process, but nothing will beat an in-person tour when deciding to make an offer.

Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable mortgage options.

Home sales rise with mortgage rates

2/28/2014 11:06:05 AM

While many reports have suggested that the cold weather and heavy snowfall in many regions of the U.S. slowed down the housing market over the last few months, new data has revealed that homebuying remained strong despite the harsh winter conditions.

According to a recent report from the Department of Commerce, new home sales reached a seasonally adjusted annual pace of 468,000 units in January, exceeding previous estimates of 400,000 sales. New single-family home sales rose 9.6 percent nationwide during the first month of 2014 from December, the highest rate since July 2008. New home sales were up 2.2 percent from the same time last year.

The Northeast led the country in home sales, with a 73.7 percent rise, reaching a seven-month high. At the same time, new home sales rose 10.4 percent in the South while the West experienced an 11 percent increase. Home sales is the South were at a five-year high last month. While these regions fared well at the start of the new year, the Midwest, which experienced brutal temperatures from the polar vortex, saw home sales declined 17.2 percent.

A rise in new home sales is a positive sign for the housing market, but other economic reports have indicated that existing-home sales and residential construction starts have declined as of late, which could impact the housing market in 2014. New home sales represent a small portion of the entire housing market. Rising mortgage rates and higher home prices also caused the momentum to slow at the end of 2013, which could continue to carry over throughout 2014.

Last month, the median home price rose 3.4 percent nationally from January 2013. The supply of new homes stayed steady from the previous month at 184,000 units, an inventory pace of 4.7 months, down from December's pace of 5.2 months. 

Mortgage applications
In a separate report, new home purchase applications for home loans fell, according to the Mortgage Bankers Association. MBA reported that mortgage applications fell 4 percent in the last week of February compared to the previous week, the lowest level since 1995. While the cold weather has dampened some housing market activity, rising rates and higher prices has decreased affordability for many Americans.

Overall, mortgage applications for both new purchases and mortgage refinance declined 8.5 percent from the previous week. While it is not unusual for the housing market to slow down in the winter, purchase applications have declined more than typical seasonal changes. During the same time, mortgage rates reached their highest rate since Jan. 17, rising to an average of 4.53 percent for a 30-year fixed-rate mortgage.

"Purchase applications were little changed on an unadjusted basis last week, but this is the time of a year we would expect a significant pickup in purchase activity, and we are not yet seeing it," said MBA Chief Economist Mike Fratantoni.

Contact the Federal Saving Bank, a veteran owned bank, for the best mortgage refinance rates.

Mortgage rates decline at the end of February

2/26/2014 2:58:06 PM

According to a recent report by Mortgage News Daily, interest rates for a 30-year fixed-rate mortgage fell in the last week of February. During the previous week, mortgage rates averaged 4.5 percent before dropping to an average of 4.375 percent to close the month.

Recent housing data reports revealed slower existing-home sales and lower prices at the end of 2013. These reports influenced mortgage rates to slide noticeably. For many borrowers and those looking to make a new home purchase, the decline is a sign of relief, as mortgage rates are expected to rise above 5 percent in 2014.

While Mortgage News Daily reported that rates declined, the current rate for a 30-year fixed-rate mortgage on the Zillow Mortgage Marketplace was at an average of 4.18 percent during the same time period, MarketWatch reported. While it is clear that rates are lower than previous highs seen in 2014, the direction of where rates will go in the coming months is unclear.

"Rates were steady last week as uncertain economic data left markets with a fuzzy picture of the health of the economy," Erin Lantz, director of mortgages at Zillow, told MarketWatch. "This week, we expect the uncertainty to continue, leaving rates fairly flat."

Contact the Federal Savings Bank, a veteran owned bank, to explore the best mortgage rates.

Home equity loans

2/26/2014 2:54:58 PM

Home equity loans allow homeowners to borrow money against the value of their house. During the recession, this option was largely eliminated as home values plummeted. Since home prices have recovered over the last two years, home equity loans may soon start growing in popularity once more. In addition to more equity for homeowners, lenders are feeling more positive about the overall economy and are more willing to originate and approve these types of loans.

Equity is the value of a home and the difference of how much is owed on it. In other words, the amount of the mortgage subtracted from the home's value is a home's equity. Home equity loans allow homeowners to borrow against this value in a single payment. There is a fixed interest rate and monthly payments to repay the loan amount.

For homeowners who are interested in home equity loans, there are a few things you need to know:

Equity is necessary
To borrow against the value of your home, you must already have some home equity. Typically, those with little or no equity will not be qualified for this type of loan. After the loan, homeowners will still need to have a certain portion of equity in the property. In general, the loan-to-value ratio, how much is owed versus the value, will still need to be about 20 percent - or a 80 percent LTV ratio.

The loan is a mortgage
While you are borrowing against the value of your home that is not owed to the bank, a home equity loan is still a form of a mortgage. You will make fixed monthly payments on the loan to repay. Because it is secured against your home, interest rates are likely to be lower than unsecured loans, but higher than a primary mortgage loan. There may be some advantages to interest on a home equity loan, however, as the expense is tax deductible for those with itemized tax deductions.

In addition, because the loan is secured against the home, it is possible that the property could be at risk if payments are missed. It is possible to go into foreclosure as a result of a delinquent home equity loan. Because of this risk, it is important to treat this loan like a full mortgage.

Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable mortgage options.

Index shows 2013 home prices hit highest yearly gain since 2005

2/25/2014 3:11:14 PM

According to the S&P/Case-Shiller Home Price Index, home prices in December declined slightly as a result of tight inventory, higher mortgage rates and the cold winter weather. It is typical for the housing market to slow down in the winter months, as fewer buyers are looking for a home and have less opportunity to make a new home purchase.

Fast growth pace has expired
On a year-over-year basis however, 2013 home prices across the nation were up 11.3 percent in the fourth quarter of 2013 over the previous year, representing the largest gain since 2005. On the 20-city composite index, home prices were up 13.4 percent in 2013. The price gains were mostly from earlier in the year, and prices actually began to decline toward the end as colder weather approached.

"Gains are slowing from month to month, and the strongest part of the recovery in home values may be over," David Blitzer, chairman of the S&P Dow Jones Index Committee, told The Wall Street Journal.

Fortunately, most experts agree that the housing market will continue to grow and home prices will rise in 2014, though likely at a slower and more sustainable pace. All 20 cities on the index posted yearly price gains in 2013.

"The S&P/Case-Shiller Home Price Index ended its best year since 2005," Blitzer said. "However, gains are slowing from month-to-month and the strongest part of the recovery in home values may be over. Year-over-year values for the two monthly composites weakened and the quarterly National Index barely improved. The seasonally adjusted data also exhibit some softness and loss of momentum."

Steady growth on the horizon
While the yearly gains were very positive for the housing market recovery, sales and prices did slow down in January, according to the index. Existing-home sales fell at the start of the new year, though that may be a result of the seasonal slowdown. In addition, construction starts, which are a good indicator for housing market health, were down. Overall, the market has recovered back to its pre-recession levels in many regions across the country, with the national average home price on par with 2004 figures.

"Recent economic reports suggest a bleaker picture for housing," Blitzer said. "Existing-home sales fell 5.1 percent in January from December to the slowest pace in over a year. Permits for new residential construction and housing starts were both down and below expectations. Some of the weakness reflects the cold weather in much of the country."

Weather is not the only influence on weaker sales and declining price appreciation, however, as rising mortgage rates could be impacting affordability. Compared to a year ago, mortgage rates have gone up nearly 1 percent. Fortunately, rates have not risen much in 2014, giving more American homebuyers an opportunity to find a low-cost mortgage. The latest report is a positive sign that the housing market has been able to make huge gains since the depth of the recession, when home prices plummeted.

Contact the Federal Savings Bank, a veteran owned bank, to explore affordable housing options.

Existing-home sales freeze in winter weather

2/24/2014 2:45:00 PM

Home prices skyrocketed in many housing markets throughout the U.S. in 2013, largely due to a low inventory of homes for sale. While prices continue to rise, home sales appear to have stalled in the beginning of 2014, according to the National Association of Realtors.

Existing-home sales fall
The report revealed that existing-home sales dropped to their lowest point in 18 months during January, and the extreme winter weather cannot be blamed for the entire slump. Existing-home sales include completed transactions of single-family homes, condominiums, townhomes and co-ops. During the first month of the year, these transactions declined 5.1 percent to an annual rate of 4.62 million units. The annual rate during the previous month and January 2013 was 4.87 million units. The first 2014 rate reported is the slowest sales pace since July 2012, when the annual rate was 4.59 million units.

It is typical for the housing market to notch more real estate transactions during the spring and summer, but there are several other economic factors causing the slowdown than just the weather, NAR reported. While sales fell sharply in areas hit hardest by cold winter weather, a decline of 7.3 percent in the West is a clear sign that other housing market forces are affecting sales more.

"Disruptive and prolonged winter weather patterns across the country are impacting a wide range of economic activity, and housing is no exception," said NAR Chief Economist Lawrence Yun. "Some housing activity will be delayed until spring. At the same time, we can't ignore the ongoing headwinds of tight credit, limited inventory, higher prices and higher mortgage interest rates. These issues will hinder home sales activity until the positive factors of job growth and new supply from higher housing starts begin to make an impact."

Prices remain positive
While the number of sales was down in January, home prices continued to rise. The national median price for all housing types during the month reached $188,900, a 10.7 percent increase from the previous year. At the same time, mortgage rates moved downward slightly, reaching an average rate of 4.43 percent for a 30-year fixed-rate mortgage in January. The previous average in December was 4.46 percent. While these rates are still relatively low on a historical standard, interest a year ago was just 3.41 percent.

A number of existing-home sales were short sales and foreclosures, though the figure is down considerably from a year ago. In January, 11 percent of sales were foreclosures while 4 percent were short sales. In total, distressed homes accounted for 15 percent of all sales in January, compared to 24 percent during the same time last year.

The reduced number of distressed sales may be a result of the success of the Home Affordable Refinance Program. According to a recent report by the Federal Housing Finance Agency, more than 3 million homes have been able to complete a mortgage refinance. Many of these mortgages would have been in danger of falling into default and foreclosure without the refinance program.

Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable mortgage options.

Interest rates tick up slowly

2/24/2014 11:42:55 AM

According to Mortgage News Daily, mortgage rates moved higher during the week ending Feb. 21, despite other market conditions strengthening. Rates rose an average of 0.02 percent to 4.5 percent for a 30-year fixed-rate mortgage - a small but measurable incline.

Recent weak housing and economic reports have shown that the severe winter weather seen this year across the country has slowed economic activity across nearly every industry. Typically, when the economy contracts, mortgage rates tend to dip. However, because much of the downturn is attributed to foul weather, mortgage rates did not follow the trend and fall, according to Mortgage News Daily.

Although the change in mortgage rates was minimal, it reveals that they are subject to market volatility and any economic report could have an impact for homebuyers.

"Is the data truly weak or has the bad weather been too strong?" Manny Gomes, Norcom Mortgage branch manager, told Mortgage News Daily. "That is the question most traders are pondering. This leaves rates vulnerable to any data that manages to come in above consensus."

Mortgage rates will mostly be influenced by what the Federal Reserve decides to do with its fiscal policy over the coming months. A high rate of bond buying has helped keep mortgage rates low, but rates will likely rise as the Fed reduces spending. According to MarketWatch however, the bond purchasing may last until 2015.

Contact the Federal Savings Bank, a veteran owned bank, to explore mortgage options.

Mortgage rates rise as competition slumps

2/21/2014 11:06:37 AM

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The Federal Reserve recently released minutes from its latest January meeting, revealing that officials considered suspending the decrease in stimulus spending. As a result, mortgage rates inched higher in the second part of February, according to a recent report by Freddie Mac.

The average rate for a 30-year fixed-rate mortgage reached 4.33 percent during the week ending Fed. 20, above the previous week's average of 4.28 percent. While slightly higher, interest rates are still below their highest point in 2013, above 4.5 percent. A year ago, mortgage rates averaged much lower at 3.56 percent.

Short-term interest rates also rose in the third week of February, increasing to 3.35 percent from the previous week's average of 3.33 percent. During the same time last year, mortgage rates were averaging 2.77 percent for a 15-year fixed-rate home loan.

"Mortgage rates crept up further following the uptick in the 10-year Treasury yield as minutes of the Federal Reserve's last meeting indicated little possibility of a pause in the central bank's reduction of bond purchases," said Frank Nothaft, Freddie Mac vice president and chief economist. "Housing starts in January fell 16 percent to a seasonally adjusted annual rate of 888,000 units, below consensus forecast. Permits were at a seasonally adjusted annual rate of 937,000 in January, also below consensus."

Fed fiscal decision
While there was a consensus among Fed officials that the stimulus spending would continue to be tapered in 2014, some argued that because the economy was showing signs of slowing down and hiring was sputtering, the reduction in spending should be put on hold. Additionally, the low rate of inflation played a role in the questioning of the fiscal policy and tapering throughout the year.

Mortgage rates are expected to continue rising as the Fed pulls back its bond-purchasing program, with some economists expecting rates for a 30-year fixed-rate mortgage to climb above 5 percent. However, because the economy recovered strongly in the second half of 2013, the Fed will continue to taper spending for the immediate future.

Homebuying prospects improve
Despite higher mortgage rates, homebuyers may find 2014 to be a better year to purchase a home. A separate report by Redfin revealed that home buyers may find that the spring selling season will be less competitive and offer a better chance to find a new home. The low inventory of homes for sale during 2013 created a competitive market that made it particularly difficult for first-time home buyers to make a new home purchase. Fortunately, the bidding wars in January were significantly down, Redfin reported.

In the 22 markets measured by Redfin, real estate agents encountered competition in just over 58 percent of the offers they drafted in the first month of 2014. While there were fewer competitive bids in December - about 52 percent of offers - the figure is still well below the 70 percent of competitive offers seen last year. This means that buyers have a better chance of securing a new home in 2014 than last year.

Contact the Federal Savings Bank, a veteran owned bank, to explore affordable housing options.

3 reasons rising mortgage rates are good

2/20/2014 3:57:55 PM

Over the past year, mortgage rates have risen from their historic low levels reached in late 2012. Though most Americans are still able to find a low cost mortgage, the rapid rise has left many homeowners wondering if housing affordability will decline.

In 2012, the Federal Reserve decided to increase its stimulus spending in order to encourage growth in the housing market. The central bank increased its monthly spending to $85 billion in bond purchases, which pushed mortgage rates to record lows. As a result, more Americans purchased homes or applied for a mortgage refinance. The impact on the housing market has been great, with home prices rising back toward their pre-recession levels. Additionally, the fiscal policy allowed more homeowners to get more house for their money with affordable mortgages.

Now that the economy has seen a substantial recovery, the Fed has recently decided to start scaling back its spending. With less bond purchasing, mortgage rates are expected to rise throughout 2014. Fed officials have concluded that the economy is strong enough to continue growing on its own and that the housing market will be able to absorb higher rates, as affordability is still positive for most Americans.

While the typical response to higher mortgage rates is not positive, there are several advantages in the broader scheme of the economy:

• Improving economic conditions - There is certainly one thing to be joyous about when mortgage rates start to rise: The economy is improving. When the Federal Reserve increased spending to an astonishing figure of $85 billion per month, it acted without precedence but did so in order to prevent a financial and housing disaster on par with the Great Depression. The fact that the Fed has deemed the economy healthy enough to cut some of its spending is surely a sign that the worst is over and that the housing market won't get worse.
• New home purchases will rise - When mortgage rates reach extraordinarily low levels, homeowners will often jump at the chance to apply for a mortgage refinance. Over the past few years, refinance applications have accounted for a large majority of mortgage activity. As mortgage rates rise, fewer homeowners will apply for refinancing, giving rise to a larger number of new home purchase loan applications. More loan applications for property purchases will help improve the mortgage market.
• More home sales - It may seem counterintuitive, but higher mortgage rates will actually lead to an increase in home sales. While mortgage rates have no direct impact on home prices, they do affect the competition among buyers. Those who were on the fence about purchasing a home will want to get in before mortgage rates rise higher. In addition, residential investors purchased a large portion of real estate properties while prices were still very low immediately following the housing bubble burst. Now that home prices and interest rates are higher, regular home buyers, including first-time home buyers, will have more opportunities to secure a new home purchase.

Contact the Federal Savings Bank, a veteran owned bank, to find the best mortgage rates and affordable housing options.

Housing market stalls amid recovery

2/19/2014 1:46:28 PM

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Five years after President Barack Obama signed into law the American Recovery and Reinvestment Act of 2009, many of the housing programsintended to help American homeowners have proven to be successful for millions.

Recovery programs find success
In a recent report, the Department of Urban Housing and Development revealed that the relief provided through the legislation created new jobs, prevented more foreclosures and increased energy efficiency in the housing market. Three cities that received large amounts of federal aid to alleviate the housing crisis were Miami, Denver and Columbus, Ohio - three areas that were severely impacted by the recession.

Through the HUD's Neighborhood Stabilization Program, $2 billion was given to some of the neighborhoods that were hit the hardest by the recession. The program purchased and redeveloped thousands of foreclosed properties and abandoned homes. According to HUD, the program created 25,100 temporary jobs and has completed half of its projects to date. Fewer foreclosed and abandoned homes will help the overall housing market recovery, as this inventory can have a negative impact on area property values.

In addition, the act included homelessness prevention initiatives, including $1.5 billion for 1.3 million families and individuals who were struggling. The Homelessness Prevention and Rapid Re-Housing Program provided immediate relief to those who were left homeless by the recession. The program has been very successful, with 87 percent of those finding permanent housing upon exiting the program.

In the final cornerstone of the housing act, the federal aid aimed to improve energy efficiency in the housing market. The Public Housing Capital Fund allocated $4 billion to increase the energy efficiency in the nation's public housing buildings and therefore reduce utility expenses for families. The thousands of units that received energy upgrades are expected to save 27 percent on utility bills. The HUD report revealed that to date, the updated buildings are saving about 20 percent, which adds up to millions of dollars saved. 

2014 homebuyers
Five years down the road, the success of these programs have given relief to millions of American families and homeowners, but the road to recovery is still not complete.

In a separate report by Redfin, the rate of home purchases appears to be slowing in the first few months of 2014. According to the report, the number of new homebuyers grew 8 percent in the first six weeks of the year, a dismal figure compared to the 51 percent increase seen during the same time period in 2013. In addition, the number of mortgage applications was significantly lower than it was a year ago and sales were at their lowest pace in four years.

Redfin attributes the decline in homebuyers to rising home prices and increased mortgage rates, which have decreased affordability for many Americans. While it is typical for the housing market to slow down during the winter months, the freezing weather has apparently not been the main deterrent, according to Redfin. 

Fortunately, home prices are expected to continue growing in 2014, but at a much slower pace than in 2013. For potential homebuyers, this means that there is a greater chance of finding a new home this year.

Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable mortgage options.

Mortgage bailout set to expire amid positive findings

2/18/2014 11:35:38 AM

It's been nearly five years since President Barack Obama signed into law the Home Affordable Modification Program, and the housing market has recovered well since then. However, the program is set to expire fairly soon, bringing up a debate over what will happen in the mortgage market.

In the Obama administration's January Scorecard released by the Department of Housing and Urban Development, it was revealed that home equity was up $3.4 trillion since the beginning of 2012. Additionally, home sales reached their highest levels from the last few years and foreclosure starts were way down, indicating that the housing initiatives set in place have had great success.

"The January Housing Scorecard shows that the Obama administration's efforts continue to have a positive effect on the housing market," said Kurt Usowski, deputy assistant secretary for economic affairs at the HUD. "In 2013, the number of U.S. properties which started the foreclosure process was down 33 percent from 2012, while sales of previously owned homes rose by 9.1 percent. With foreclosures down, home sales up, and equity continuing to grow, the housing market continues to make slow, but steadily improving progress."

Mortgage rates set to rise
While there have been great improvements in the housing market and more opportunities for Americans to become homeowners, the program will soon come to an end - and many economists expect mortgage rates to rise as a result.

In May 2013, the Obama administration extended the deadline for the program through Dec. 31, 2015, in order to ensure that more homeowners would be able to take advantage of it. The program guarantees homeowners a low rate mortgage for a certain period of time. In this case, the original plan was five years. However, because many homeowners are still struggling and there is still more work to be done in the housing recovery, the administration granted an extension.

"The housing market is gaining steam, but many homeowners are still struggling," said Jacob Lew, Treasury secretary. "Helping responsible homeowners avoid foreclosure is part of our wide-ranging efforts to strengthen the middle class, and Making Home Affordable offers homeowners some of the deepest and most dependable assistance available to prevent foreclosure. Extending the program for two years will benefit many additional families while maintaining clear standards and accountability for an important part of the mortgage industry."

CNBC reported that 30,000 borrowers who have taken part in the program will see their rates start to rise 1 percent in the fall. Rates will continue to increase until reaching the market value, which currently hovers around 4.5 percent for a 30-year fixed-rate mortgage. Monthly mortgage payments are set to increase for 88 percent of borrowers in the program. Fortunately, the market mortgage rate is still relatively affordable for most American homeowners, though interest has risen nearly 1 percent from a year ago. For most borrowers involved in the Home Affordable Modification Program, mortgage rates will not rise until September.

Contact the Federal Savings Bank, a veteran owned bank, to explore affordable mortgage rates and first-time home buyer programs.

Mortgage market branches out as foreclosures rise

2/14/2014 2:46:47 PM

According to a recent report from RealtyTrac, foreclosure activity increased in some regions in the U.S. during the first month of 2014. The U.S. Foreclosure Market Report revealed that there were 124,419 foreclosure filings, including repossessed homes, default notices and scheduled auctions.

The number of foreclosure filings declined for the 40th consecutive month in January, but was 8 percent higher than December's figure. From a year ago, foreclosure filings were down 18 percent, the smallest annual decline since September 2012.

The new RealtyTrac report that there is still work to be done in the housing market recovery, though conditions have significantly improved since the housing bubble burst.

"The monthly increase in January foreclosure activity was somewhat expected after a holiday lull, but the sharp annual increases in some states shows that many states are not completely out of the woods when it comes to cleaning up the wreckage of the housing bust," said RealtyTrac Vice President Daren Blomquist.

Mortgage requirements loosen
As more homes headed to foreclosure in January, CNBC reported that subprime mortgages - which were largely the cause of the housing crisis - have reemerged in the mortgage market. Since the recession, lenders have tightened their credit requirement in order to make only the safest home loans, but looser standards may soon be reintroduced.

Lower credit standards could temporarily boost housing demand from those who were most affected by the housing bust or have previously gone through a foreclosure or short sale. However, subprime mortgages carry much more risk for both borrowers and lenders. To offset the risk of borrowers with low credit scores, lenders are requiring larger down payments.

Since the enactment of the Dodd-Frank legislation, if a borrower defaults on their home loan after being approved for a subprime mortgage, they can sue the lender and make the claim that the loan should have never been given in the first place. As a result, banks and lenders have stated they will begin to crack down on their loan requirements. However, it appears that certain lenders have begun targeting less qualified borrowers. According to CNBC, Wells Fargo now has a credit requirement of 600, while the previous limit was 640.

The introduction of lower standards may come as a result of rising mortgage rates. Although interest is currently hovering around levels last seen November, mortgage rates are expected to rise above 5 percent later in 2014 as a result of the Federal Reserve's fiscal policy. The rise in rates could deter some potential homebuyers from applying for a mortgage, so lenders are branching out.

While some lenders continue to offer subprime mortgages, there are still far fewer than were approved before the recession. Mark Fleming, chief economist at CoreLogic, told CNBC that the number of subprime mortgages completed in October accounted for just 0.3 percent of all new mortgages. By comparison, in February 2004, the annual average of subprime mortgages reached 29 percent.

Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable mortgage options.

Mortgage rates hold steady in February

2/14/2014 10:40:30 AM

According to a recent report by the Mortgage Bankers Association, the number of mortgage applications for a new home purchase has soared during the first two months of 2014. Cold weather dampened momentum in the housing market at the end of 2013, but new homes appear to be on the rise, a positive sign for 2014.

"While the big jump may appear to conflict with other data, such as MBA's purchase application index and NAR's existing home sales data that point to a weak market for existing homes, our Builder Application Survey estimate is consistent with reports of homebuilder sentiment that show strength in the market for new homes," said MBA's Chief Economist Mike Fratantoni. "It is also worth noting that the significant January increase also followed a particularly slow pace of sales in November and December."

In January, new single-family home sale reached an annual rate of 543,000 units, a 35 percent increase from December's rate of 402,000. Mortgage applications for new home purchases also were up 27 percent in January compared to December.

Mortgage rates remain steady
The increase in new home sales and mortgage activity comes just after reports that mortgage rates have remained around low levels last seen in November. Freddie Mac recently revealed that mortgage rates for a 30-year fixed-rate mortgage average 4.28 percent during the week ending Feb. 13. While this is a slight increase from the previous week's average of 4.23 percent, interest is still well below rates seen late last year.

The average rate for a 15-year fixed-rate mortgage was unchanged during the week ending Feb. 13, staying at 3.33 percent. Interest rates for short-term mortgages averaged just 2.7 percent a year ago. The mortgage market saw little change after the Bureau of Labor Statistics released its January national employment report, which revealed that just 113,000 jobs had been added to the economy during the month. 

"Mortgage rates were little changed amid a week of light economic reports," said Frank Nothaft, chief economist with Freddie Mac. "Of the few releases, the economy added 113,000 jobs in January, which was below the market consensus forecast and followed a slight upward revision of 1,000 jobs in December. Meanwhile, the unemployment rate fell to 6.6 percent, which makes thirteen consecutive months without an increase."

Mortgage rates had seen a five-week decline leading up to mid-February as a result of weak economic reports. The Federal Reserve's stimulus spending has helped keep interest rates near record lows since 2012, but many economists anticipate the average rate for a 30-year fixed-rate mortgage to rise above 5 percent in 2014. However, rates appear to be holding steady for the time being, giving first-time home buyers a better chance to find a property heading into the housing market's seasonal selling. First-time home buyers are more likely to apply for a long-term mortgage for a new home purchase than other buyers.

Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable mortgage options.