The average thirty year fixed rate mortgage rate dropped below 4% for the first time on record according to Freddie Mac's Weekly Mortgage rate survey. Fifteen year rates and 5/1 ARMs also dropped to record lows as the chart below shows. The drop in mortgage rates corresponds to a drop in 10 year Treasury notes.

There are three main factors responsible for the drop:

• The U.S. economy continued to underperform and looks like it may be headed into another recession. This has depressed bond yields.
• The threat of a Greek default continues to hover over the markets and push investors into the relative safety of Treasury bonds, causing yields to drop.
• The Fed has sold shorter maturity bonds and is buying longer maturity bonds in an effort to drive longer-term yields lower. It appears to be working.

Could 15 Year Rates Go Below 3%?

It's possible yields on 15 year fixed rate mortgages could go below 3%. Looking at the three factors above, the U.S. economy appears to be decelerating instead of getting better. That will drop yields. The Greek default crisis is not resolved and will most likely get worse before it gets better. It's also possible default fears will spread to other vunreable European nations - Italy and Spain - and cause a further flight to U.S. debt. If these two things happen, the Fed will continue to intervene in the markets.

Is is possible this worst case scenario will happen? Yes. Does that mean you should wait to buy a home or refinance? No. Rates continue to hit historic lows. Take the cheap money if you can get it and if it makes economic sense

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With the autumn months upon us, many people are putting their homes on the market in hopes of finding buyers. With mortgage rates at historic lows and falling home prices, there is a good supply of buyers that are looking to jump into the housing market to find the home that they have been looking for. Despite all of the uncertainty, however, there are some trends you can expect to see in the housing industry for the upcoming season.

1. Mortgage rates are probably going to stay low. Today’s mortgage rates are at historic lows and many analysts predict that they will stay near the current level for awhile, but not for too long. Some mortgage experts expect the rates to stay at these record lows at least through the end of 2011. If the economy begins to improve in 2012, the rates may increase slightly. But with more than 14 million people unemployed and the Federal Reserve indicating plans to keep the Fed Funds rate at 0 until 2013 and engaging in the “twist” to lower long term rates, it will be awhile before mortgage rates increase dramatically.

2. Loan qualifications will still be strict. Although mortgage rates will probably remain very low, it’s still going to be difficult to qualify for a mortgage. If your credit history has some blemishes, you will need to have a significant down payment in order to qualify for a mortgage or take some extra time to build up your credit score. Lenders are still being criticized for their past actions which resulted in the housing crisis which has been going on for a few years and they are not going to go back to their old ways of subprime mortgages and approving home loans for people who cannot afford the payments anytime soon.

3. More people will be renters. Since a large number of homeowners who go through foreclosure are not eligible for another home loan for several years, many of them become renters. As a result, individual and group investors are buying up foreclosed homes and turning them into rentals instead of fixing them up and trying to sell them for a profit. The Obama administration is also jumping on this idea as the Federal Housing Finance Agency has requested ideas for programs that can efficiently turn foreclosed properties into rentals.

4. There are going to be more foreclosures occurring. The foreclosure crisis is not even close to being over. Although the number of foreclosures seems to be dropping, the inventory is actually predicted to rise. The reason is because it takes banks so long these days to “catch up” with homeowners who have not made their payments in awhile. In some cases, homeowners have not made a payment for a year or more and they are still in their home because the banks are so far behind on foreclosing on properties. In addition, there will probably be an increase in short sales, which means this upcoming autumn season may be the best time to get a great deal on a home.

The predictions for the housing industry trends for the next few months are not surprising. Fortunately, despite some of the bad news is balanced out by some good news between now and the end of the year. It will be interesting to see what 2012 brings in the mortgage and housing industry.

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A new program designed to offer financial help for the unemployed and underemployed was recently approved by the US Housing Department. Dubbed the Emergency Homeowners’ Loan Program, it provides $1 billion in relief for homeowners who have lost their jobs or had their income significantly reduced but still have the financial responsibility of a mortgage to pay.

Although $1 billion has been allotted for this program and over 100,000 troubled homeowners have applied for the assistance, the Housing Department only expects to use half of that money because fewer than 15,000 people will likely qualify under the strict criteria. In order to qualify for financial help under the new program, a homeowner had to prove that they have lost at least 15 percent of their income as the result of the economy or because of a medical condition that prevented them from working. Also, an applicant had to be at least 90 days delinquent on their mortgage payments and facing foreclosure.

If an applicant qualifies for the program’s financial assistance, they could receive an interest-free loan for up to $50,000 or two years of assistance. This means that if the monetary amount paid out by the program reaches $50,000 within two years, the homeowner receives no further assistance from the program. But even if the assistance has not reached the $50,000 limit after two years is up, the assistance stops as well.

Many in the federal government had high hopes for this program. Until now, the unemployed and underemployed were segments of troubled homeowners that were not being helped by the various initiatives, such as mortgage modifications. The Emergency Homeowners’ Loan Program, however, was passed last year and it was modeled after a Pennsylvania program which helped tens of thousands of homeowners nearly 30 years ago. The current program, however, has turned away thousands of people who did not qualify for some reason or another.

Critics say qualifying for the assistance through this program is too difficult and that Congress made it that way so only a small percentage of applicants would actually qualify for the help. For one thing, if a homeowner makes a partial payment at any time, the clock starts over on the 90 days requirement. If an applicant was only two months behind on their mortgage payments, they were also denied the assistance.

Todd Richardson, the program’s director, had this to say about the program’s requirements: “No one could have anticipated how difficult the statutory requirements would make it to qualify homeowners.” He went on to say that they are finding the “vast majority” of applicants being deemed ineligible because of the strict requirements.

Another criticism of the plan has to do with its marketing. Some critics say that HUD, the department in charge of the program, failed to publicize it which resulted in a lower number of people applying for the financial help. If people didn’t know about the program, how could they even apply for the financial assistance?

Due to the low number of applicants and resultant number of homeowners who actually qualified for the help, the Department of Housing is returning about half of the $1 billion allotted for the program. That seems like a real shame when there are tens of thousands of people who are in real need of mortgage assistance but failed to meet the financial requirements or missed the deadline for applying because they didn’t know that the program even existed.

The mortgage tax deduction is one of the benefits that many homeowners enjoy. It helps them put more money in their pockets each year when they get their taxes done. But lately, there are many people in the federal government who have wanted to do away with this tax deduction and it has been a topic of much discussion. It is even in the president’s latest plan to reduce the deficit.

The mortgage tax deduction has been around since 1913 when Congress passed a bill that made the interest on any type of loan tax deductible. At the time, the tax code allowed for the first $3000 of income for individuals and $4000 for married couples to be excluded. Only about one percent of the population qualified for that deduction. Also, most home buyers paid for homes upfront during that era rather than taking out a mortgage, which meant fewer people took advantage of this deduction. It wasn’t until the Tax Reform Act of 1986 when the deduction applied specifically to the interest on mortgage loans.

There are more than 35 million homeowners in the United States who claim the mortgage deduction on their taxes each year. As a result, the deduction is projected to cost more than $130 billion in 2012. But despite its cost, many proponents of the mortgage tax deduction say it is good for the economy and the housing market. They say it stimulates home ownership and it is a great incentive for people to move from renting a home to buying one.

But opponents of the mortgage tax deduction disagree. They say that the deduction does not stimulate home ownership and they cite the fact that countries like Australia and Canada do not have a mortgage deduction and they still have a comparable number of homeowners, if not more, than the United States.

A recent study showed that the mortgage deduction can also hurt the housing market and the economy in general. In areas where the home inventory is constrained, the deduction can cause the housing prices to increase because it is factored into the price of the home. As prices increase on these homes, it makes it less likely for them to be sold which decreases the number of people becoming homeowners.

Opponents of the deduction have other reasons for not liking the deduction. Only about 33 percent of the taxpayers who itemize on their tax returns are eligible for the mortgage deduction and those who are eligible tend to be the more affluent homeowners. About 20 percent of the taxpayers who had an income over $75,000 a year received 60 percent of the financial benefits from the mortgage deduction. Compare that to about 23 percent of taxpayers reporting less than $40,000 income who received less than 10 percent of the financial benefits from the deduction.

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There are many reasons to get your home appraised. One reason is to assess the amount of property taxes you are required to pay. If you are going through a divorce, you may also need to get your home appraised. In cases like these, you may want your home to be appraised at a low value because it would save you money.

However, if you are planning to sell your home, you want your home’s appraised value to be as high as possible so you can get a better price for it. In most cases, the home buyer’s bank is going to conduct a home appraisal because the results of the appraisal will help the bank determine if they are going to loan the money to the buyer to purchase the home. Unfortunately, this appraisal value often comes in much lower than the seller expects. So what should the seller do? If your home appraises for a lot less than what you thought it would, here are some options that you can use.

Drop the Sale Price of the Home

The most common thing to do if your home appraises for less than you expected is to drop the price. Many appraisals occur after a buyer agrees to purchase the home pending certain procedures, including the appraisal and the home inspection. But if you have a higher price on your home than the actual appraised value, it will be nearly impossible to get the price you want for it. If you drop the sale price, you can often negotiate with the buyer for other things, such as asking them to pay the closing costs or asking them to make some of the repairs that need to be done before the home sells. It is often better to give a little on the price rather than to cancel the transaction (in which case the buyer gets back any escrow money and you need to relist the home).

Cancel the Transaction

Many home sellers make a rash decision to cancel the sale of the home when their appraisal comes in much lower than they expected. This is a viable option, but it may not be the best decision for the seller who really wants to sell their home. Once the agreement is canceled, the seller essentially has to go back to square one to find another buyer who is willing to buy without a mortgage contingency (rare) or to hope that the appraisal associated with the next offer is closer to their selling price. In many cases, the buyer simply takes their home off the market for awhile.

Offer a Second Mortgage for the Difference

If the seller really wants to sell the home and the buyer is motivated to purchase it, the two parties may be able to work out an agreement in which the buyer pays the seller the difference in payments or as a lump sum at a later date, with or without interest. This is obviously not a viable alternative for the seller who is going to lose sleep over the buyer's credit, and you should seek legal counsel concerning potential ways to get collateral.

Ask for a Second Appraisal

There is nothing wrong with getting a second opinion about the value of your home. Appraisers do make mistakes from time to time. According to the terms of the buyer’s offer, you may be able to ask the buyer to pay for the second appraisal. Alternatively, you may offer to pay for it yourself if the buyer agrees not to cancel the transaction on the basis of the first appraisal. Find a qualified, independent appraiser with a good reputation in your local area to make sure your appraisal is done correctly.

These are just a few things to keep in mind if you are selling your home. It is often a good idea to get an appraisal before listing your home so you have an idea of its current market value and you won’t be in for too many surprises once you find a buyer for it.

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Everybody is looking for a good deal. When it comes to buying a home, whether it is your first or your tenth home, you want to get it at a fair price. And if you get it at a bargain price, that’s even better! But how do you know if you are getting a fair deal on the home you are considering purchasing? Here are four ways you can ensure you are getting a good deal on your next home purchase.

1. Find Information about Recently Sold Homes that are Comparable

When comparing comparable homes, it is important to look at several factors. The location is definitely one of the main factors in determining a home price. Square footage, features and condition are also important to consider. Start looking for the homes surrounding the one you want to buy and find out what they have been selling for (if any of them have sold recently). The homes you research should also be similar to the one you are considering if you want to get a fairly accurate estimate on how much you should expect to pay.

2. Look at the Similar Homes that Didn’t Sell

It’s just as important to look at the similar homes in the area that haven’t sold as it is to look at the homes that did sell. If there are homes that have been taken off the market because they simply didn’t sell, it could be because they are priced too high. Is the home you are considering in a similar price range? If so, you could be paying too much. Also, if there are several vacant homes that are similar to the one you are buying, the prices should be relatively lower because of the larger inventory of available homes.

3. Negotiate with the Homeowner

Don’t be afraid to make a lowball offer. In a soft market especially, lowball offers can get the seller to negotiate and to indicate how low they are willing to go. Realtors and agents exist to refuse lowball offers for their clients and to prevent their clients from being upset by an offer. When an actual owner is selling their home, they don’t have to worry about the realtor’s commission and other costs that are typically associated with selling a home. However, this could work against you, too. Without the guidance of a local real estate agent, the home seller may have their home priced higher than it should be. This is where your research about the surrounding homes can help you when negotiating a fair deal.

4. Look for Appreciation and Depreciation Statistics for the Area

If you are moving into a home where the community or neighborhood has held its value well in a declining home price environment nationally, you may be more comfortable with a price that is similar to last year’s. However, if the neighborhood’s homes have decided over the last several years, sellers may want out before running the risk that next year’s prices will be still lower. If you see local businesses closing down or dilapidated building in the community, it is probably an good sign that you may be able to negotiate a lower price.

With a little extra work, you can determine a fair buying price for nearly any home that you are considering purchasing. If done properly, you can save thousands of dollars on your purchase.

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The entire nation is feeling the pain of troubled homeowners who have underwater mortgages, or mortgages in which they owe more on their home than it is actually currently worth. Estimates suggest that 10.9 million homes nationwide, or 22.5 percent of the US’s housing stock, is currently underwater.

California is the nation’s most heavily populated state with approximately 36 million people. It also has one of the highest ratios of underwater mortgages. According to CoreLogic, a Santa Ana, California data firm, more than 2 million homeowners in the Golden State currently owed more on their home than its market value at the end of the second quarter of 2011. The 2 million underwater mortgages in California represents approximately 30% of the state’s total outstanding mortgaged homes.

Estimates suggest that there are also as many as 2 million underwater mortgages in Florida. The Sunshine State’s population is half that of California, and those 2 million underwater homes represent 45% of its total mortgages homes. With a combined total of 4 million underwater homes, California and Florida together represent almost 40% of the nation’s total underwater homes.

While California and Florida have most of the nation’s underwater homes by volume, in some other states underwater mortgages are almost at epidemic proportions. Nevada has the highest percentage of homes with negative equity with a staggering figure of about 60% of its total mortgaged properties. Arizona isn’t too far behind Nevada with 49%. In Michigan, approximately 36% of mortgaged homes are underwater.

More and more homeowners who find themselves underwater on their homes are not able to refinance their mortgage loans. Many of them would benefit from a refinance because mortgage rates are currently at historic lows. But because of negative equity and other problems, they are stuck in this situation with very few options.

About 8 million underwater homeowners (or about 75%) cannot refinance their current mortgage rates and are still paying rates higher than 5%. By contrast, approximately 53% of homeowners who have above-water mortgages are paying rates higher than 5%.

While the news for underwater homeowners isn’t good, it also isn’t good for those who live on their block. Research suggests that in the ZIP codes where there are the highest percentages of underwater mortgages, home sales dropped by more than 80 percent. According to an article in the OC Register in Orange County, one of the more affluent areas of California but also one of the areas where underwater home levels are at their highest, the average listing price for a home fell to $450,000 in August 2011, or a 6.5% drop year-over-year. The average length of time that an Orange County home is on the market is currently 87 days, a 7% increase year-over-year.

There just is not a lot of good news for current homeowners, especially the ones that are underwater on their home mortgages. Hopefully things will turn around soon before they get much worse.

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