Finally, the mystery and secrecy that has long embraced personal credit reports and credit scores has been unveiled, or soon will be. You, as a consumer, can access your own credit report, along with detailed information about factors determining your score, without charge. Your personal report and credit score can greatly impact your finances. It can influence your ability to obtain a mortgage loan and terms of that loan, along with many other aspects of your financial affairs.
The score is a complex model that evaluates many types of information in a credit file. It’s used by lenders and others to help determine whether a person qualifies for a particular mortgage, credit card or service. Most credit scores estimate the risk a company incurs by lending a person money or providing a service. Its basic objective is to determine the likelihood that the person will make payments on time in the next two to three years. The higher the score, the less risk the person represents.
Thanks to provisions in the Fair and Accurate Credit Transactions Act, the three national credit bureaus are each required to provide consumers with their personal credit report free once per year. The bureaus (major credit firms) are: Equifax, Experian and TransUnion. However, the service is being phased in by region across the country, starting in the west. It’s now in effect in the western region and will be available to consumers nationwide in about 10 months.
An easy way to obtain your report is by going to the website: www.annualcreditreport.com. Here, you can apply for your report and obtain tools for monitoring your credit files and protecting yourself from identity theft. You could also visit the sites sponsored by the individual bureaus: www.equifax.com www.experian.com www.transunion.com. Or you can phone toll-free: (877) 322-8228. Your mortgage banker or broker can help you obtain your score.
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Conforming Mortgage Limits Raised
Conforming mortgage loan limits have again been raised, it was announced by Fannie Mae and Freddie Mac, the two largest buyers of existing mortgages and suppliers of funds for new mortgages. Conforming mortgages are those that are most salable to those secondary market organizations. That includes most home mortgages. The conforming limit for single-family mortgages has been raised from $333,700 to $359,650. The change will make it possible for many additional individuals and families to purchase and finance a home of their own. But real estate leaders in some high-priced areas say the increase is far short of what’s needed.
Once again, although the new conforming loan limits will help some homebuyers qualify for a lower-cost loan, they do not go far enough to benefit most homebuyers in California, said Jim Hamilton, president of the California Association of Realtors. The median home price in our state is now about $460,000, an increase of 21 percent over last year’s median and more than 28 percent higher than the new national conforming loan limit.
Mortgages greater than the conforming limit are called jumbo loans. These usually carry a higher interest rate. Based on a typical quarter-point spread between conforming and jumbo mortgage loan rates, a typical homebuyer will save up to $21,400 over the life of a 30-year mortgage with a conforming loan, it was noted in a CAR report. In some areas, the spread between a conforming and jumbo loan is as much as a half percentage point.
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Growing Demand for Commercial-Multifamily Mortgages
The current low-rate mortgage market not only benefits single-family home buyers, but is also a great help to buyers and owners of commercial and multifamily properties. It makes it more feasible to own and operate income-producing rental properties, and affords favorable refinancing possibilities for owners. The number of this type of mortgage originations has been growing steadily in recent months and years, according to a report from the Mortgage Bankers Association.
Continued demand for commercial mortgages from both borrowers and lenders is setting up year 2004 to break the previous year’s record origination levels, said Doug Duncan, MBA’s chief economist. While modestly rising interest rates may take some wind out of the sails, stabilizing market conditions and low delinquency rates will likely keep capital flowing to commercial and multifamily properties.
Multifamily loan originations are increasing by about 14 percent over last year’s activity. Originations of industrial property mortgage loans are increasing by 4 percent. This year will probably rack up a record volume of commercial and multifamily loans. That’s very good news for property owners and for individuals and families seeking a rental home. An MBA survey shows multifamily remained the leading property type for all commercial/multifamily mortgage loans this year, with about 39 percent of total originations. Office property mortgages account for about 26 percent retail property 18 percent.
In another survey, by the Federal Reserve Board, it was noted that 26 percent of all commercial bank respondents reported demand for commercial real estate loans was moderately stronger this year, and 5 percent said it was substantially stronger. In addition to almost historically low interest rates, commercial and multifamily mortgages have become increasingly attractive by the recent notice of changes in the underwriting guidelines for these loans, issued by the Dept. of Housing and Urban Development (HUD). Also, limits for multifamily mortgages in 2005 will be raised substantially the amount depending on the number of units in the property according to an announcement by Fannie Mae and Freddie Mac.
This is a time of rare opportunity for buyers and owners of commercial and multifamily properties, said Michael Levy, president-CEO of Home Savings Mortgage, a multi-office mortgage banking firm based in California. It’s a time of growing demand for space in these properties and exceptionally favorable financing possibilities.
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Luxury Home Buyers or Buying More
Sixty-six percent of luxury homeowners say rising mortgage interest rates would have no impact on their plans to purchase another high-end home or other luxury items. That was revealed in a survey conducted by Coldwell Banker. More than a third of those affluent individuals said that they are buying more luxury goods and services than ever before, with many of those purchases going toward making their homes more luxurious and valuable. The homes of those surveyed are valued at $1 million or more.
It was also noted that luxury home owners are now spending more to improve their homes. While 85 percent already have security systems in their home, and 77 percent have gourmet, designer kitchens, home theaters will soon become even more prevalent in luxury homes. The survey indicated the top luxury amenities owners plan to add are home theaters (39 percent), boat docks (15 percent, and topiary-landscaping (13 percent).
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First-time Home Buyers Remain Active in Market
Surprisingly, the number of first-time home buyers remains at a high level, despite rising home prices. One key reason for these consistently high sales figures is the always-strong motivation of young singles and families to own their own home. Also, coupled with rising prices is a particularly friendly mortgage market, with almost record low interest rates still available and a growing number of special mortgage plans that make financing a home a more viable possibility for more buyers.
Today, about four out of every 10 home purchases involves a first-time buyer. Young families want to enjoy pride of ownership in their residence as much as their parents and grandparents did, and many of them are very determined to achieve it. The market share of first-time buyers has been strong and stable since 1993, said David Lereah, chief economist for the National Association of Realtors.
Strong activity by entry level buyers has provided solid and substantial growth to the housing market in recent years. The demographics of our country favor this trend going forward because echo-boomers, the children of the baby boom generation, will be in their prime years for buying a first home for the next decade. These findings demonstrate the underlying demand that will be driving the housing market at a higher plateau for the foreseeable future.
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Mortgages: Past, Present, Future
The Meyers Group, a housing research and consulting firm, recently issued a report on the past, current and projected status of home mortgages. The 30-year mortgage rate has remained below 6 percent for the last several months, the report noted. Rates rose rapidly earlier this year, with eight consecutive weeks of increase, from a low of 5.3 percent in mid-March to 6.3 percent in mid-May. However, since then, diminished inflation risks and the deliberate approach by the Federal Reserve have quelled fears of an interest rate explosion. Mortgage rates have subsided and remained low.
While we still expect interest rates to creep up again by early next year, we anticipate the rise will be gradual enough that they will stay within the comfort zone of most homebuyers for the foreseeable future, the report stated. As for trends in the home sales market, Meyers reported that activity for new and existing homes have apparently peaked. We do not anticipate any new record highs in the near future. While sales will likely moderate further, they will remain high in an historical sense. Year 2004 will be another record-breaking year for housing market activity.
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Jim Woodard writes a nationally syndicated newspaper column on real estate news and trends, carried in about 230 U.S. newspapers along with freelance features. Reproduction of this report, in part or entirety, is prohibited without the express permission of the author. E-mail: storyjim@aol.com. Web site: www.jimwoodard.net/.