MSNBC reported yesterday that mortgage rates have risen for the second week, but still remain below five percent. According to Freddie Mac, the average fixed rate on a 30 year mortgage is at 4.94% this week, up from 4.81% last week, and up from the record low 4.71% on December 3rd.

The average rate on a 15 year fixed mortgage also rose, to 4.38% this week from 4.32% last week. Average rates on 5 year adjustable rate mortgages rose to 4.37 percent, up from 4.26 percent last week. Rates on 1 year adjustable-rate mortgages rose to 4.34 percent from 4.24 percent.

The Dave Murray Team

As many have been predicting, mortgage rates are starting to rise, reports the Wall Street Journal: rates were up last week to 5.07%, from 5.02% two weeks ago. Some see big jumps coming, reads the headline.

“To lock in the average 5.07% rate, borrowers had to pay fees equivalent to around 1.1% of the loan with a 20% down payment,” reports WSJ. “While rates have been low for most of the year—particularly since falling below 5% in September for the second time this year—one big question looming is what happens to those rates once the Federal Reserve slows, and ultimately stops, its debt purchases from Fannie Mae and Freddie Mac.”

The Austin Statesman recently published “8,000 Reasons to Buy,” re-capping a great program that is nearing its end. A lot has been said about the $8,000 Tax Credit, but there are a few things to remember:

1. The credit increases your refund, dollar for dollar. “For first-time home buyers whose income falls within certain limits, purchasing a house, condominium or townhome might make them eligible for a tax credit worth 10 percent of the purchase price of their home, or $8,000, whichever is less. This amount reduces the amount of taxes you owe, or increases your refund, dollar for dollar, according to the IRS. For example, if you normally would have a refund next spring of $100, with a qualifying home purchase your refund could be $8,100.”

2. It takes little effort.  ”It’s money in your mailbox,” as one agent says. She likens the amount to 4% appreciation in value on a $200,000 home.

3. Now is the time to find a house. You need to have closed on a house by the deadline, and loan approval is taking four to six weeks, as the Statesman reports. The house should be under contract by later this month.

4. There are more reasons to buy a home now, not just the tax credit. “Interest rates are at a historic low. Because the market has dipped, you will be buying at a lower price point instead of a higher one,” says a 28 year real estate veteran.

Other sales promotions and tax breaks exist. For instance, Freddie Mac is offering to pay 3.5% closing costs and offers a two year warranty on Freddie Mac owned homes. For this program, you need to have made a first offer on a home before October 30.  You must first contact a buyer’s agent for this program to be valid.

Texas and Austin both offer unique first time homebuyer programs, as well.

If you have any questions about buying an home and are interested in looking, talk to your real estate agent today.

Time is running out on taking advantage of the up to $8,000 Federal Housing Tax Credit for qualified first time home buyers. The tax credit is available for qualified first time home buyers purchasing a principal residence before December 1, 2009. That deadline is only 3 months away! If you are considering purchasing your first home, now is definitely time to get off the fence and buy. Interest rates are low, it’s still a buyer’s market for residential real estate and the government is offering an $8,000 tax credit. Don’t let this opportunity pass you up!

After our blog on the subject, the Austin-American Statesman published an AP article about the current problems in home appraisals, yesterday. Here are a couple excerpts.

Home sales stabilizing, but prices still falling

By Alan Zibel
ASSOCIATED PRESS
Wednesday, June 24, 2009

WASHINGTON — Nationwide home sales may have finally hit bottom, new data show, but a host of thorny problems are hindering a recovery.

Sales of previously occupied homes rose by 2.4 percent from April to May — the third monthly increase this year — but the results missed analysts’ expectations.

Home sellers are still competing against a growing number of bargain-priced foreclosures, buyers are paying higher mortgage rates, and new rules for property appraisers are delaying or scuttling many deals.

“We have just been flooded with e-mails, telephone calls on the appraisal problems,” said Lawrence Yun, the Realtors’ chief economist.

…New rules designed to tackle conflicts of interests in the property appraisal process have caused many transactions to fall apart or be delayed.

Responding to widespread complaints about inflated appraisals during the real estate boom, New York Attorney General Andrew Cuomo reached a pact last year with mortgage companies Fannie Mae and Freddie Mac on a new code of conduct for the industry.

Since the rules took effect May 1, real estate agents and mortgage brokers say a number of appraisals are coming in surprisingly low.

The National Association of Realtors is pressing regulators to put an 18-month hold on the code, arguing in a letter Monday to regulators that the code is “hampering the housing market’s recovery.”

Although the new rules are not ideal, appraisers are not to blame for a market in which prices are falling rapidly, said Bill Garber, director of governmental relations at the Appraisal Institute.

He defended the industry, saying, “The appraisers only report what’s going on in the market.”

The Neal Spelce Austin Letter from June 19 outlined a new problem trending in home sales in Austin and Travis County. That problem is surrounding the home appraisal process.

For anyone unfamiliar with the real estate process: a Home Seller and a Home Buyer negotiate, then agree on a price for a home. The Home Buyer is pre-approved for a loan, from the bank. The home is then inspected. If it passes inspection, the Home Seller and Home Buyer agree to make the deal. The lender requires third party appraisal. Where does that appraisal come from? 

It used to be that loan officers, mortgage brokers, real estate brokers or real estate agents could help select an appraiser. But as of May 1, 2009, a new National Home Valuation Code of Conduct was put into place. The new policy states that any mortgage to be owned or guaranteed by Freddie Mac or Fannie Mae cannot allow those parties (loan officers, mortgage brokers and licensed Realtors) any role in selecting the appraiser.

This agreement, struck back in March 2008 between Freddie Mac/Fannie Mae, the Federal Housing Finance Agency and the Attorney General seems like it may be in the interest of fairness. But the result is that many lenders are now outsourcing to appraisal management agencies. These agencies take part of the appraisal fee, from 30% – 50%. (With these cuts to their fees, experienced appraisers are turning down these agency offered jobs.)  There’s also a “quantity over quality” mentality, as the agencies often impose a 48 hour deadline for the appraisals. These quick appraisals are often done by out-of-area appraisers. 

The result of the “faster, quicker, cheaper” mindset? Less accuracy and less certainty of a home’s value. Further, if there isn’t a comparable sale, an in-area appraiser has a better and surer understanding of intricacies from neighborhood to neighborhood, and street to street.  

What can a Home Seller expect to see, then? Their appraisal may be outrageously incorrect, although there are cases of these appraisals being challenged.