Adjustable rate mortgages or ARMs can be a wonderful mortgage tool or they can be downright ugly.

ARMs typically come in flavors such as the 3/1, 5/1, 7/1 or 10/1.  The first number is the number of years that the initial interest rate is fixed.  The second number means that after the initial fixed rate period ends, the interest rate can change once a year.

ARMs have caps, typically 5/2/5.  The first number means that the interest rate can go up 5% in the first adjustment after the fixed rate period.  The second number means that the interest rate can go up a maximum of 2% per year after the initial adjustment.  The third number means that the interest rate can only go as high as 5% over the initial fixed rate.

So, if you have a 5/1 ARM with 5/2/5 caps and an initial fixed rate of 4%, the interest rate could go up to 9% at the very first adjustment after 5 years.  But if the ARM rate only went up to 6% after the first adjustment, the rate could only increase by 2% in the second adjustment to 8%. And the rate could never go above 9%.

ARMs can be a great mortgage tool if you are planning to pay off your mortgage or move within the fixed rate time frame.  Rates on 5/1 ARMs are below 4% at this moment.

If you are not planning to move or pay off your mortgage within the fixed rate time frame, ARMs can pose a big risk.  With the U.S. Government spending money as fast as they can print it, mortgage rates are going to go up in the near future.  And rates are probably going to go up dramatically.  If you are in an adjustable rate mortgage and are not planning to move or pay off the mortgage, it would probably be wise to refinance into a fixed rate mortgage while rates are low.

And now for the ugly.  If you have an Option ARM and have been paying the minimum payment, you probably have a negative amortization loan, meaning that the amount of principle that you owe is increasing every month.  You are either underwater or sinking fast.  Refinance if you can, as soon as you can.  

Posted by Terry Brunner.  Terry is a Senior Loan Officer with Horizon Financial.  Terry can be reached toll free @ (877) 627-9211 x150 or email TBrunner@HorizonFinancial.org.  Visit Horizon’s website at www.horizonfinancial.org

Having chosen South Carolina as your home, you’re now ready to find the cheapest first, second, or refinance mortgage rates available. The process of finding and comparing low-cost mortgages can be summarized into the following steps:

• Learn the options.
• Know the rates of interest.
• Determine your budget.
• Collect quotes.
• Compare your offers.

Horizon Financial is here to help. Our content is informative, and our information is accurate. You can request free quotes online, crunch numbers on the mortgage calculators, or calling Horizon Financial directly.  Take advantage by using our thorough South Carolina broker/lender mortgage loan programs knowledge to get the mortgage loan that is right for your situation.  Whether you are just starting to research or have a written offer on your dream home, we have Conventional, FHA, VA & USDA Rural Housing expects ready to assist with your hassle free options.

Posted by Bob Dangelo, a senior Loan Officer with over 20 years mortgage lending experience.  You can reach Bob toll free at Horizon Financial (877) 627-9211 ext 110 in Greenville, SC 864-527-8900 ext 1100 or email at bdangelo@horizonfinancial.org

The reason Fannie Mae has started its Loan Quality Initiative is to improve its loan pool’s performance.    

Better loan quality should help keep conforming mortgage rates down, while reducing the taxpayer’s burden for foreclosures. Unfortunately, it’s also going to lead to more mortgage denials and a lot of busted purchase closings. Therefore, be extra careful with your credit between the date of application and the date of closing. If you must buy something “big”, consider paying cash.  Anything that goes on a card can be used against you as grounds for revoking your approval. Even if your loan is underwritten and ready to close.   

What the bank will do: Look at the Credit Inquiry section of your credit report to look for “non-disclosed liabilities”. If items are found, the bank will ask for supporting documentation on the inquiry, and will use the information to re-underwrite your mortgage.

What you should do about it: Don’t go looking for new credit until after your loan is funded.  Period.  Now re-read the prior sentence, please, to help it sink it.

 For help with your mortgage approval, or questions about the Loan Quality Initiative, let us explain your options in easy terms.

Posted by Bob Dangelo, a senior Loan Officer with over 20 years mortgage lending experience.  You can reach Bob at Horizon Financial (877) 627-9211 ext 110 or email at bdangelo@horizonfinancial.org.

http://forecasts.org/fha.htm

-Gary Schoenholz (864)979-1111.  15+ Years of mortgage experience. Website:  www.GarytheMortgageExpert.com

We are all happy rates are down in 2010!

Prices have risen more than 3% since May, according to S&P/Case-Shiller.

But most forecasts predict price declines in 2010, with possible losses ranging from anywhere from 3% on up. Fiserv Lending Solutions, a financial analytics firm, forecasts that prices will fall in all but 39 of the 381 markets it covers, with an average drop of 11.3%.

“We’ve seen recent price stabilization because of low mortgage interest rates and the impact of the first-time homebuyers tax credit,” said Pat Newport of IHS Global Research. “But there are really good reasons to think prices will now start going down.”

There are three main reasons for the reversal: a coming flood of foreclosures, rising interest rates and the eventual end of the tax credits.

For Gus Faucher, the director of macroeconomics for Moody’s Economy.com, the huge number of foreclosures that remain in the pipeline is the big problem.

Moody’s upped its estimate of defaults recently because of shortcomings of the government-led mortgage modification programs. Trial workouts are not being made permanent and completed modifications are redefaulting at high rates.

“There are going to be fewer [successful] modifications than we thought,” said Faucher.

Even so, he added, much of the price decline has already occurred and Moody’s forecast is for only another 8% drop. The worst-hit markets will be the ones suffering the most foreclosures, places like Arizona, California, Florida and Nevada. (See 7 tips for buying foreclosures)

Resetting option ARMs (adjustable rate mortgages) will also aggravate the foreclosure problem. These mortgages allow borrowers to pick their own payments, which can be so low they don’t even cover the interest. Balances swell.

For many of the more than 350,000 option-ARM borrowers, it’s time to pay the piper. Their loans will change into fully amortizing mortgages that will carry much higher monthly payments. A very large percentage of these homeowners will default, according to Shari Olefson, author of “Foreclosure Nation: Mortgaging the American Dream.”

“We’ve still only seen the tip of the foreclosure iceberg,” she said.

She also predicts more strategic defaults, people deliberately walking away from even fixed-rate mortgages as the value of their homes dips well below the amount they owe.

Olefson’s forecast is for price declines of 5% to 15%, depending on the area, with a national median price drop of about 10% for 2010.

Also affecting prices will be higher interest rates. Some analysts, according to Newport, think rates for a 30-year mortgage will pass 6% next year as the government curtails housing market support.

The Federal Reserve has helped keep rates low through purchases of mortgage-backed securities. But that program is winding down and will end in March.

“The government is throwing everything at the market but the kitchen sink,” said Peter Schiff, president of Euro pacific Capital. “It can’t prop up housing markets forever.”

Schiff is among the bigger bears. Though he gave no specific prediction, he thinks prices — already down 29% from the peak — are only halfway to the bottom.

As a tool for supporting housing markets and prices, the tax credit for homebuyers is a two-edged sword. It reduces taxes dollar-for-dollar by up to $8,000 for new homebuyers and $6,500 for buyers who already own a home and should support home prices. But it ends at the end of April.

Many buyers will push their deals forward to get in before the deadline and then demand for homes could sink afterward.

One of the few bulls out there is NAR, whose chief economist, Lawrence Yun, is counting on the tax credit to provide temporary support for housing markets until the economy recovers enough to start fueling sales. He predicts price improvement in 2010 of more than 3%.

“The headwind we face is rising mortgage interest rates,” Yun said, “but the compensating factors will be the homebuyers tax credit in the first half of the year and increased job creation in the second half.”

All of this means, now is the time to buy!  To talk to a mortgage manager, call 864-979-1111 and ask for Gary Schoenholz (15 years of mortgage experience) or go to my website: www.GaryTheMortgageExpert.com.

Posted by Terry Brunner.  Terry is a Senior Loan Officer with Horizon Financial.  Terry can be reached toll free @ (877) 627-9211 x150 or email TBrunner@HorizonFinancial.org.  Visit Horizon’s website at www.horizonfinancial.org

Mortgage rates are near an all time low, but with many indicators pointing toward future inflation (a interest rate killer that always increases mortgage rates), now is the time for the mortgage rate fence sitters to lock a rate.  It’s only a matter of time (a few more weeks, maybe a few more months) and rates will approach the more normal 6% to 7% range that is the typical average for the last 10 or 20 years.  Right now, rates under 5% are still available, which is amazing.  Lock in today, before it’s too late.

-Gary Schoenholz – Manager- 864-979-1111,

 Website: www.GaryTheMortgageExpert.com