Rent A Home Or Buy A Home : The Case For Both Sides

Is it better to rent a Minneapolis home, or to buy one? The answer may not be as clear-cut as you think. In this balanced, 3-minute joint interview from NBC's The Today Show, you'll hear the case for both sides.

From the pro-renting part of the talk, there's valid points about the economic impact of low credit scores and/or no cash for downpayment, and the ongoing, annual cost of home maintenance -- estimated at 2% of a home's value.  Plus, renters have the ability to "follow a job" to a new town or region whereas a homeowner may be restricted, somewhat.

From the pro-purchase part, however, there's excellent points that were made, too:

• Mortgage rates are low and each 1% drop to rates equates to a 9% drop to home price
• Buyers can zero in on a particular area with particular schools or walkability, for example, better than renters
• A home can a piggybank over the long-term; a place for "forced savings" for families that want it

The segment then closes with 5 of the best cities in which to rent, and 5 of the best cities in which to buy.

Whether buying or renting, don't try to go at it alone. There's lot of resources online, and an email to a local real estate or mortgage pro can set you in the right direction.

Home Defaults Dropped For The 7th Month In A Row In August

According to foreclosure-tracking firm RealtyTrac, the number of foreclosure filings climbed 4 percent in August from the month prior. A foreclosure filing is defined as default notice, scheduled auction, or bank repossession.

Despite the number of filings surpassing 300,000 for the 18th straight month, RealtyTrac's report shows some bright spots for housing.

1. The number of default notices served per month fell for the 7th time this year
2. Foreclosure activity in Nevada, the nation's leading foreclosure state, is down 25% from last August
3. Foreclosure activity has not materially increased since early-2009, pointing to a stabilization

In addition, each of the 10 leading metro areas for foreclosures posted year-over-year declines for the second month in a row.

But, perhaps, most important, is that mortgage lenders and servicers appear to be managing their REO more effectively, making properties available for sale at a measured pace as opposed to flooding markets with new homes.  As noted by RealtyTrac, the probable reason is "to prevent further erosion of home prices".

For home sellers, it's a welcome development.

Foreclosures have had a hand in falling home values in Minnesota and across the country. And, although it's self-serving for banks to meter the release of homes under ownership, everyday homeowners benefit, too.  Fewer homes on the market helps to provide a floor for Minneapolis housing values.

If you have an interest in buying foreclosed homes, be sure to talk with a real estate agent first. The process of buying a home from a bank is different from buying from "a person". Having the help of a professional should work to your benefit.

Home Affordability Gets A Boost From Weak Back-to-School Retail Receipts

The recent rise in mortgage rates was slowed this week after the government released its Retail Sales report for August.

Prior to Tuesday, mortgage rates had been spiking across Wisconsin on the resurgent hope for U.S. economic recovery. The sentiment shift was rooted in reports including the Pending Home Sales Index and Initial Jobless Claims, both of which showed surprising strength last week.

August's Retail Sales, though, after removing motor vehicles, auto parts and gasoline sales, failed to maintain the momentum. Its figures were actually in-line with expectations -- it's just that expectations weren't all that high.

Wall Street now wonders whether the weak Back-to-School shopping season will trend forward into the holidays.

The doubt spells good news for mortgage rates and home affordability.

Because Retail Sales is tied to consumer spending and consumer spending accounts for two-thirds of the economy, a weak reading tends to drag down stock markets and pump up bonds, and when bonds are in demand, mortgage rates fall.

This is exactly what happened Tuesday. The soft Retail Sales data eased stock markets down, and generated new demand for mortgage bonds. This demand caused bond prices to rise, which, in turn, caused mortgage rates to fall.

Mortgage rates did not cut new lows this week, but they're very, very close.

With mortgage rates at historical lows, it's an excellent time to look at a refinance, or gauge what financing a new home would cost. Low rates like this can't last forever.

The Math Of Choosing A Great Closing Date

Want a lower mortgage rate on your upcoming Plymouth home buy? Think about moving up the closing date.

The reason is rooted in "rate locks", a bank's guarantee to honor a specific mortgage rate for a specific, finite period of time. Rate locks allow home buyers to reserve mortgage rates today even though their respective closings may be scheduled as far as a year into the future.

A rate lock is a contract. No matter what the "current market rate" is at the time of closing, the bank will honor the terms of the original rate lock.

It would be like making an agreement to buy Microsoft stock at a specific price 60 days from now. No matter what the price, you already know what you're paying for it.

In this sense, rate locks are predictions about the future and, meanwhile, as we all know, the future can be a challenge to forecast. Lenders know this, too, of course, so it's easy to understand why longer rate locks tend to be more expensive than shorter ones.

The longer the rate lock, the more risk to the bank.

To compensate for this "time risk", therefore, lenders typically step-up pricing for rate lock guarantees as lock period lengthen.

• 15-day rate lock : The best of all pricing
• 30-day rate lock : 1/8 percent extra cost versus the 15-day rate lock
• 45-day rate lock : 1/4 percent extra cost versus the 15-day rate lock
• 60-day rate lock : 3/8 percent extra cost versus the 15-day rate lock

One percent of "extra cost" is defined as one percent of the borrowed amount.

Now, this incremental price chart is just a rough guideline; exact spreads vary from lender-to-lender. Overall, however, it's fairly close.

That's why it's important to manage your closing date vis-a-vis your mortgage rate. Closing in 30 days versus 31 can save you an eighth-percent in closing costs. Assuming a loan size of $200,000, that's $2,500 saved.

So, when negotiating a closing date on a contract, keep in mind the math of mortgage rate locks. The shorter its length, the more money you might save.

What's Ahead For Mortgage Rates This Week : September 13, 2010

A shift in Wall Street sentiment caused mortgage markets to worsen last week. There wasn't much in the way of new data, but the numbers that did hit the street helped quell fears of a double-dip recession.

Conforming mortgage rates rose between Monday-Friday for the first time since June, and mortgage-backed securities have now lost ground on six of the last 7 trading days. 

During this period, conforming mortgage rates in Minnesota have risen by as much as 0.375 percent. 

Mortgage rates for FHA-insured home loans are higher, too.

Remember, concern for the future of the U.S. economy was a major catalyst for low rates this summer. The drop in rates, which began in April on weaker-than-expected data, accelerated through July and August on record-low home sales and a stalled jobs market.

Lately, though, these concerns are turning to hope.

• The July Pending Home Sales Index showed that housing has life
• Initial jobless claims came in much lower than expected
• Retail Sales is expected to post a gain for August

The growing optimism is putting the Refi Boom at risk. To be sure, it's been a rough two weeks to shop for a mortgage. 

This week may figure no better. In addition to the Retail Sales data, there's key inflation data due both Thursday and Friday, plus, two consumer confidence reports are set for release.  If the overall numbers point to an "improving economy", mortgage rates will likely rise again this week. 

Momentum is moving in that direction, certainly.

If your looking for the right time to lock a rate, now may be the time. Mortgage rates are off their best levels of all-time, but still quite low. There's lot of savings out there for homeowners who qualify.