Uncertainty Rules Over Boston Mortgage Market

September 26, 2013 By

The ongoing turbulence in the world economy continues to impact the mortgage market. As a consequence, mortgage rates, property values and numerous other factors keep changing. Recently, mortgage rates in Boston fell again. Rates are not currently showing indications of inching up either. According to recent surveys, the rate for 30-year fixed-rate mortgage has fallen to 4.65% from 4.72% in Boston. Nationally, the rate for 30-year fixed-rate mortgage is 4.66%.

Additional movement for mortgage rates in Boston is present. The rate for 30-year jumbo mortgages for a loan of around $465,750 was 4.86% a few weeks back. It has recently dropped to 4.77%. For the 15-year fixed rate mortgage, rates have fallen to 3.66% from the 3.77%. The rate for 5/1 adjustable rate mortgage (ARM) has also come down slightly to 3.34% from 3.36%.

Mortgage Rates in Boston, MA

The drop in mortgage rates in Boston, relatively speaking, is not terribly severe, however, there is no positive sign of improvement in the market either. In such circumstances, banks are planning to focus on property purchase rather than refinancing. This is considered to be a strange decision according to numerous market experts. According to the banks, the overall market condition in Massachusetts has forced them pursue a refocused effort on purchase versus refinance.

On the other hand, property value continues to increase in Boston, and sales velocity is at some of the highest levels the market has ever seen. Boston has seen home sales prices increase by 10%, outpacing any similar gains seen at the national level where data shows a 6% increase.  Needless to say, this increase in value contrasts the market trend of the previous years.

Market experts are focusing on property values in Greater Boston. The drop in values in Greater Boston was less dramatic right after the housing bubble burst than the remainder of Massachusetts or the rest of the nation for that matter.

Boston Property Values Rise, Inventory Low

Immediately following the sustained economic progress and industrial development, sale prices increased in Boston. While the increase in value is considered to be beneficial for Boston sellers, buyers are faced with low inventory and bidding wars – we’re seeing sale prices greater than list prices for South Boston condo sales over the past 6 months.

Apart from general mortgage rates, there are additional significant changes in the commercial mortgage market also. However, changes are not that positive. By the second quarter of 2013, returns on commercial mortgages owned by life insurance companies dropped by nearly 1.92%. Total income was around 1.29% and the expense was 3.21% in the second quarter of 2013 with higher mortgage spreads serving as the main reason behind the loss.

It’s definitely not easy to predict whether the mortgage market in Boston is going to be stable in the coming months or not. As for now, increasing property prices, reduced mortgage rates, and low inventory levels of property listed for sale in Boston create an interesting dynamic not seen for more than 7 years in the Hub.

Filed Under: Mortgage Information Tagged With:

How Much Can I Borrow for a Home?

February 10, 2013 By

As a real estate buyer, are you waiting for your lender or mortgage broker to tell you whether you’re capable of obtaining a mortgage? If so, you should know that you can calculate how much you can afford to borrow on your own.

Knowledge is power, and knowing “how much I can borrow” now is important not only in the home buying process, but the information can help you avoid default and foreclosure later on.

How Much Can I Borrow for a Home?

Consider the following when you investigate taking out a mortgage:

1. Down Payment: You need to understand whether you can afford to take out the amount you plan to borrow. Before you take out a loan, you need to find out whether you can afford to make the down payment. Most lenders in today’s market require borrowers to make down payments of approximately 20% of a home’s purchase price. Federal Housing Administration (FHA) lenders may offer more flexible terms as it relates to down payment requirements – if you apply for an FHA loan, then you should expect a down payment of at least 3.5% of the home’s sale price. However, you need to meet the eligibility criteria to get an FHA loan.

2. Calculate your monthly income: When you plan to take out a mortgage to buy a home, take an honest look at your income. Your monthly salary, in conjunction with your monthly expenses (don’t forget about annual expenses like car insurance), are the starting points to determine your total monthly income. You need to include your monthly salary, money you get from investments and other sources of income. Try to analyze your budget to understand the amount you owe – deduct total debt expenses from your monthly salary to get your total monthly income figure.

3. Evaluate your credit score: You can analyze your credit score in order to know whether you can get the loan on favorable terms. If your credit report is blemished, then you may not be able to take out the loan, or, at a desirable low interest rate. Investigate and correct any incorrect entries on your credit report, and start early, working through the credit bureaus to correct misinformation on a credit report can take significant lead time.

4. Lower your debt to income ratio: Consider lowering your debt to income ratio in order to get the loan on affordable terms. It is easier to decide how much you can afford when you’re aware of the total amount you owe and your income. If your debt exceeds your income, then you can decide whether you can afford to borrow money.

How to Avoid Debt & Mortgage Debt Relief

Keep the above mentioned points in mind when you need to decide the amount you can afford to borrow when attempting to buy your new home. With an understanding of your income situation, and efforts to correct any misinformation on a credit report, you can have your eyes wide open going into a mortgage in knowing how much you can afford as well as avoiding default due borrowing more than you can afford.

Filed Under: Mortgage Information

Condo Mortgage Lending Rules Tightened in Boston

January 24, 2013 By

According to 2012 data, condominium values in Boston crossed a record high level during the 2nd and 3rd quarter with an overwhelming supply of eager buyers who drove up sales. The median price of condominiums in Boston neighborhoods like the Fenway, Beacon Hill, South Boston, and the North End, rose to approximately $520,000 during the second quarter of 2012 – this figure topped the previous peak set before the financial crisis hit the US.

The price increase contributes to the fact that the housing market within Massachusetts is gradually mending and this is nothing but a positive note for the Boston real estate market. As more and more buyers jump into the Boston condo market, so too is there an increase in mortgage needs.

However, on an unfortunate note, borrowers in Boston run into two common problems when attempting to purchase a condo

  1. Strict lending standards
  2. Above average home values

These two aforementioned items beset the prospective buyers as well as Boston condo owners who wish to refinance their existing loans.

Tight Boston Condominium Lending Rules

Mortgage brokers who are involved in the core business of condominium lending, are of the opinion that the biggest reason real estate transactions fall apart is due to financing. Even with pre-approvals, a large down payment, and stellar credit ratings, there are borrowers who are finding it tough to close the deal on a condo mortgage loan.

Both Fannie Mae and Freddie Mac have tightened the condominium borrowing regulations in order to limit “risky lending” that might lead to increased levels of foreclosure. Exuberant condo HOA fees have been shown to cause borrower default.

Unfortunately, the majority of the real estate market in downtown Boston is comprised of condominiums. Single family homes are quite rare in the city center, and are quite costly even if they do exist

Another FHA regulation affecting the condo mortgage lending market, including impacts to projects like W Boston, The 1850, and FP3, states that 72% of the condominium development should be sold or under agreement to people who are planning to occupy the units as a primary residence – the FHA believes that it is a development with this owner mix and structure that will make it successful (financially) in the long run. Further, Private Mortgage Insurance (PMI) companies who previously insured loans of greater than 80% are now asking for a minimum of 10-15% down on loans.

All the aforementioned regulations have restricted the buying power of prospective condominium buyers. Consider your financial outlook before buying a Boston condo so that you don’t make missteps that can boomerang in the long run. Shop various mortgage lenders so as to choose the best loan in the market and a loan with the most competitive rate that best meets your personal situation.

Filed Under: Lending Markets