Unfortunately, the program has been seeing limited success. It relies on voluntary help from mortgage lenders, and it excludes those with even higher loan to value ratios. Yesterday Obama made a move to expand the Making Home Affordable program. Now, those with a loan to value ratio of up to 125% are eligible. There are also continuing incentives to encourage mortgage lenders to deal with homeowners.

As far as the housing market is concerned, this new move is unlikely to have a huge impact immediately. It probably won’t even arrest falling home values, or do much in terms of stabilizing the overall housing market. But it does have the potential to help prime borrowers who are looking to refinance to a lower rate. Mortgage interest rates are still relatively low, and refinancing could save folks who made good homebuying decisions a great deal of money.

It even benefits people like me. I bought my home two years ago with 5% down and a 30 year fixed rate. Obviously, I haven’t had time to make up a lot of ground in terms of home equity. My home has lost some value in the last two years, and I have a loan to value ratio of about 94%. (The new rules don’t change my eligibility.) We can easily afford our mortgage payment, but I wouldn’t mind if I got an interest rate that is 1 percentage point lower. Plus, there are places in town offering no-fee refinancing. We could refinance to a 15-year loan and only pay $200 more per month, saving us a great deal over the long haul.

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Post from: EveryJoe

Making Home Affordable Gets Upgrade

If you have seven and a half minutes, this is a better description of quantitative easing than I could ever provide.

Mortgage rates drop

Yesterday’s announcement from the Federal Reserve has resulted in lower mortgage interest rates today. Because mortgage rates are long term debt, they are connected to long-term Treasury bonds, specifically the ten-year bonds. As Treasury yields change, so do mortgage rates. Right now, mortgage rates have dropped to historic lows.

As a result, if you have good credit and if you have a reasonable amount of equity in your home, now might be a good time to refinance. Indeed, you could save tens of thousands of dollars over the life of your home mortgage loan if you refinance to these rates. Even 30-year fixed rates are below 5% right now. You can get even better rates with a 15-year fixed mortgage.

Post from: EveryJoe

Quantitative Easing and Mortgage Rates

I know that you’re supposed to stay around 30% of your income for housing costs per month. Is that 30% of net or gross, and is that only for the housing, or do they recommend staying under 30% for housing and all utilities?

This is an interesting question without a straightforward answer. “They” say many things, but from what I can tell from talking with some other financial types and consulting my common sense, the basic rule is 30% of your pre-tax (or gross) earnings, and that doesn’t include utitilies.

That said, here is what I, personally, think:

Try to keep your housing payment to 28% of your net monthly income.

Many mortgage lenders, if you want the best mortgage interest rate, have what is known as the 28/36 qualifying ratio. This means that your mortgage payment should only be 28% of your monthly income and no more than 36% of your monthly income should go to total debt (mortgage + other obligations). I suspect that this is even more common in the current economic climate.

I think that you would be wise to keep your housing payment — mortgage or rent — to 28% of your net income, rather than relying on your pre-tax income. (Our mortgage payment is 25% of our net income.) It might get you qualified, but you want to be able to afford the home without being “house poor” . I would even go so far as to include PMI and property taxes in the category of “mortgage payment”. We’ve done this, and our total housing expenses (including utilities and maintenance) is less than 30% of our monthly income.

What do you think is a reasonable percentage of your monthly income to make for housing?

image source: sxc.hu

Post from: EveryJoe

30% Housing Costs: Net or Gross?

Post from: EveryJoe

How Will Tomorrow’s Fed Rate Cut Affect You?

Sure, lending standards are going to tighten. But on the other hand, mortgages rates have dropped already. And if the housing market and the mortgage loan market wants a recovery, they will have to drop further. If you have good credit, and if you can provide good documentation, you could get a good deal on your mortgage loan interest rate.

Another interesting thing to consider is that you have other opportunities associated with the subprime lending crash is the drop in stock prices. Yesterday’s rather dramatic fall, and today’s rather spectacular struggle on the stock market are leading to some good deals in terms of investments. You can pick up some stocks for cheap. But remember to carefully consider your options. You want to buy stock in a company that will likely recover.

Post from: EveryJoe

What the Subprime Lending Crash is Going to Do to You

Why home equity loan debt consolidation seems attractive

If you have a great deal of debt, home equity loan debt consolidation seems attractive because you would never be able to get a debt consolidation loan that would pay off such a large amount unless it were secured by a large asset. Putting your home up as collateral makes it more likely you will get the loan to begin with.

Then there are other advantages. The interest rate is lower on a home equity loan debt consolidation because home mortgage rates are lower than other loan rates. Additionally, that interest rate is often tax deductible. If you are very disciplined, and you have wherewithal to stick to a debt plan, you can benefit from a home equity loan debt consolidation. But watch out for the risk.

Risk of home equity loan debt consolidation

The main risk to home equity loan debt consolidation is the fact that your home is at risk. Rather than having unsecured debt, it is now secured – by arguably your most valuable asset. If something happens and you can’t make the payments on your second mortgage, your home can be taken from you. This is quite a blow! Before you go the home equity loan debt consolidation route, make sure you carefully consider your alternatives. And if you do take that route, make sure you have a good debt plan in place for paying of the loan as quickly as possible.

Post from: EveryJoe

Home Equity Loan Debt Consolidation