LOW MORTGAGE RATES -- BIG REASON WHY OWNING CONTINUES TO BE MORE AFFORDABLE RELATIVE TO RENTING

MORTGAGE RATES HAVE FALLEN SO FAR THAT THE MONTHLY COST OF OWNING A HOME IS MORE AFFORDABLE THAN AT ANY POINT IN THE PAST 15 YEARS. IN A GROWING NUMBER OF CITIES, HOME OWNERSHIP IS LESS EXPENSIVE THAN RENTING. IN 1991, A $1,700 MORTGAGE PAYMENT ALLOWED A BORROWER TO TAKE OUT A $200,000 MORTGAGE . TODAY, IT GETS THE SAME BORROWER A $350,000 MORTGAGE, A 77% INCREASE IN BORROWING POWER; says Dan Green, loan officer with Waterstone Mortgage in Cincinnati.

THE AVERAGE RATE FOR A CONVENTIONAL, 30 YEAR FIXED-AVERAGE RATE MORTGAGE HAS FALLEN BELOW 4 PERCENT FOR THE FIRST TIME ON RECORD; ACCORDING TO FREDDIE MAC’S RECENTLY RELEASED MARKET SURVEY WEEKLY. THE AVERAGE 15-YEAR FIXED RATE FELL BELOW 3.5% “THE LOWEST LEVEL ON RECORD” THE SURVEY REPORTED. AS A RESULT, ONE OF THE MOST STRIKING DEVELOPMENTS OF THE HOUSING TURNDOWNS, MONTHLY MORTGAGE PAYMENTS ON THE AVERAGE MEDIAN PRICED HOME—INCLUDING TAXES AND INSURANCES –ARE LOWER THAN THE AVERAGE RENT LEVELS IN 12 METRO AREAS OUT OF 28 AREAS SURVEYED, ACCORDING TO THE DATA COMPILED FOR THE WALL STREET JOURNAL. "IT’S ONE OF THE MOST STRIKING DEVELOPMENTS OF THE HOUSING DOWNTURN”, ACCORDING TO PAUL DALES, AN ECONOMIST AT CAPITAL ECONOMICS.

PRE--QUALIFIED V. PRE--APPROVED

Often times there is confusion between a buyer being pre-qualified and being pre-approved. Home loan pre-qualification and pre-approval are different and distinct processes, so it is important to understand the difference. Pre-qualification is a preliminary process, which requires the buyer to complete a mortgage application and allows loan officer, loan processor or mortgage broker, to check the buyer's credit to determine how much may be borrowed on a mortgage loan prior to the buyer making a formal application. This is a good first step, which enables the buyer to approximate the price range for the home purchase. But only a mortgage underwriter can pre-approve a buyer for a loan. To be pre-approved, the buyer must provide the underwriter with verification of income and asset documentation (W2’s, bank statements). The underwriter will then approve the buyer for a specific loan amount and property value. Once the buyer is pre-approved, the seller should have comfort that the mortgage contingency clause in the contract of sale will not be a problem and the transaction will close in a timely manner.

FIRST-TIME HOME BUYER CREDIT

As part of the President's stimulus package, first-time homebuyers are eligible to receive a tax credit equal to ten percent of the purchase price of their home, up to a maximum of $8,000; if they purchase after January 1, 2009, but before December 1, 2009. Unlike last year’s Congressional $7,500 tax credit, there is no payback provision. The tax credit will phase out for those individuals with incomes over $75,000 or married couples with incomes over $150,000 who file their taxes jointly. First- time buyer was defined in last year’s law as those individuals who have not owned their home for three years. There is a forfeit provision if the homebuyer sells the home within three years. According to the National Association of Realtors, first-time homebuyers account for approximately 41 percent of total home sales.

NEW FICO CREDIT SCORE DEBUTS

Fair Isaac Corp. has announced its new-improved-FICO score. The new score is touted to be more accurate in predicting borrower defaults and more forgiving of one-time slip-ups, but will take a harder line on repeat offenders. The score will still range from 300 to 850 and is programmed to do a deeper analysis of subprime borrowers or those with “thin” or young credit histories. According to FICO, more customers with accounts in good standing should see a slight increase in their credit scores, in addition to improving the accuracy of lending decisions by as much as 15%. FICO will also factor in credit-card accounts for authorized users, such as children and spouses. FICO has joined with Trans Union LLC and Equifax Inc. - two of the three major credit bureaus. The Experian Group Ltd. has declined to participate.

FREE CREDIT SCORES MAY BE OFFERED

Consumers may soon be able to get “free credit scores” through their bank or credit unions.

Fair Isaac Corp., maker of the FICO credit score, has announced an agreement to approximately 200,000 members of the Pennsylvania State Employees Credit Union. Fair Isaac said that this is an expansion of an existing program, presently being offered to credit-card members at Washington Mutual, which is being acquired by J.P. Morgan Chase. Fair Isaac stated that they are in ongoing discussions with many of their customers to expand the program. In addition to getting their credit scores, consumers will also be advised as to the reasons for their score and the actions they can take to improve their scores.