If you're a Columbia SC homeowner with a mortgage loan insured by FHA (Federal Housing Administration) or VA (Department of Veterans Affairs), you should consider using your mortgage loan term as a marketing tool when it comes time to sell your Columbia SC home.
A mortgage loan from both government agencies includes a little-known feature known as assumability. In other words, the buyer of a Columbia SC home financed with an existing VA or FHA mortgage loan may be able to take over, or assume, the seller's loan, under the same terms, rather than take out a new mortgage.
During periods when interest rates are rising, Columbia SC homes offered for sale with an assumable, lower-rate mortgage loan may have extra appeal for certain buyers.
Assuming a VA or FHA Mortgage Loan Can Save You Money
The savings for buyers assuming a mortgage loan extend beyond a lower interest rate. Assuming a loan is cheaper than applying for a new one because there are fewer settlement fees. An appraisal is not required (though a buyer should obtain one anyway).
An FHA mortgage loan does demand that the borrower pay for mortgage insurance over the life of the loan. But when assuming a loan, borrowers do not have to pay the upfront mortgage insurance premium required on a new loan. Because the original mortgage holder would have been paying the loan for a number of years, the buyer assuming the FHA mortgage loan will start at a point deeper into the amortization schedule than on a new loan. That means more of the monthly payment will go toward principal.
Borrowers seeking to assume a loan must also prove their creditworthiness as they would for any VA or FHA mortgage loan.
Under FHA rules, once a new borrower is found to be creditworthy enough to assume a loan, the lender must release the seller from any future liability for payment of that loan.
Columbia SC home buyers considering loan assumption should weigh the costs against other loan options, paying attention to the principal and interest payment, the amount of cash required upfront, and the private mortgage insurance premium.
Get more mortgage tips and information by clicking the Columbia SC Mortgage Info link to your right under Columbia SC Real Estate Categories.
The question on everyone's mind who has even been remotely thinking about buying a home is, "are Columbia SC mortgage rates still headed higher?"
All indications are, not for the time being.
When the Federal Reserve surprised everyone when it announced it would not start tapering its purchase of mortgage-backed securities and Treasure bonds, it basically said to prospective buyers who have been shying away from buying a home, to start shopping again.
What Increased Columbia SC Mortgage Rates Have Meant
Columbia SC mortgage rates have risen significantly amid concerns that the Fed would cut back on its $85 billion a month bond-buying program. Rates on a 30-year fixed mortgage have been hovering around 4.5%, up from 3.35% in early May. That rate increase has meant an extra $132 a month in payments for a Columbia SC area homebuyer with a $200,000 30-year loan.
But now that the Fed has said it will continue to purchase the bonds, rates will likely retrace some of those gains and we expect to see some drops in the coming weeks. We don't expect anything drastic, just a slight decline in the next few weeks.
The day after the Fed announcement, 30-year Columbia SC mortgage rates fell from around 4.57 percent to 4.5 percent.
Freddie Mac's chief economist, Frank Nothaft, said rates were reacting to the same economic trends that influenced the Fed's decision. Among them: slowing growth in retail sales and industrial production and the lowest reading in consumer sentiment since April. He also noted tighter financial conditions, including the sharp increase in Columbia SC mortgage rates in recent months.
Should the economy gain more momentum, however, fears that the Fed will taper off its bond purchases will most certainly resurface and rates will move higher again.
Despite recent increases, Columbia SC mortgage rates are still low by historical standards. During the housing boom years, they typically ranged between 6% and 7%. Higher rates should also prompt some banks to ease up on their lending standards, helping more people to buy homes.
It is believed that rates will be slightly higher in 2014, but not enough to derail the housing market recovery.
During the days of the housing boom, "sub-prime mortgages" — aka 'home loans for people with bad credit' — were very popular. After the housing bust and the financial crisis of 2008, most banks stopped issuing sub-prime mortgage loans, and it became much more difficult for people with bad credit to qualify for a loan to buy a house.
Now the sub-prime mortgage market seems to be making a come-back. There are more options now than there have been since the days of the housing bubble for people with bad credit who want to get a home loan.
Getting a Columbia SC Mortgage When You Have Bad Credit
If you have bad credit, banks and lenders view you as a bigger risk to fail to repay the money they loan you. You can lower your risk by paying more money in advance — otherwise known as the down payment — on your house. Borrowers with bad credit usually have to make down payments of 25%-40% of the purchase price of a home, depending on their credit scores. For example, on a $300,000 house, a 25% down payment would be $75,000.
Prepare For Higher Rates
Getting a Columbia SC mortgage with a sub-prime loan will have much higher interest rates than conventional loans. Even at a time of historically low interest rates (3% or less on many mortgages), sub-prime borrowers paid interest rates of 7.95% or higher. Terms and conditions will vary by lender, of course, but it's worth knowing that when sub-prime mortgage loans are available, they come at a higher cost.
Prove That You Can Pay
During the height of the housing bubble, people were getting a Columbia SC mortgage approved for sub-prime loans at irresponsible levels. People were getting a Columbia SC mortgage even if they didn't have jobs or any money at all. There was even a joke about "NINJA" loans for people with "No Income, No Jobs/Assets."
Today the situation is different. If you want to get a sub-prime loan, be prepared to show ample proof of income and have a solid work history. This is not an unreasonable expectation for getting a Columbia SC mortgage loan, but it goes to show how relatively insane the situation was during the housing bubble. But banks do their customers no favors when they give them loans that they cannot afford to repay.
The Good News
The housing market is improving. House prices are on the rise again. Millions of homeowners who were "under water" on their mortgages are now getting some relief, and many other people who were blocked out of being able to qualify for a home loan are once again getting a Columbia SC mortgage.
Even if you have bad credit, it is still possible to get a mortgage, but you need to be prepared to offer a sizable down payment, pay higher interest rates, and have your personal financial life in order so you can prove you are a good risk.
Fannie Mae still believes that higher mortgage rates won't hurt the Columbia SC housing recovery. After looking at mortgage rates going back to 1990, Fannie Mae's researchers came to the surprising conclusion that while rising rates were likely to hurt the number of home sales, they had virtually no impact on actual home prices.
The study, which compared historic mortgage rates with home price and sales data, focused on two time periods when rates soared. The first, from October 1993 through December 1994, when rates rose to 9.2% from 6.8% and the second from October 1998 to May 2000 when they climbed to 8.5% from 6.7%.
During the rate spike in the early 1990s, home prices leveled off, then fell only slightly. During the second rate climb, there was no impact on homes prices at all.
Common Theme of Columbia SC Housing Recovery
The common theme that seems to keep the Columbia SC housing recovery from being adversely affected by higher rates is, sellers are reluctant to lower prices, and buyers tend to find ways to stretch their resources, often switching to adjustable rate in lieu of higher fixed rates.
In addition, rates and home prices both track economic trends. When the economy is hot, rates rise and so do hiring and income, which means more people are able to buy homes and pay higher prices for them.
Fannie's research may shine some light on what will happen to the Columbia SC housing recovery in the months ahead, but some housing experts are skeptical.
With rates for 30-year mortgages spiking by more than a percentage point to 4.51% since early May, some economists say rates will most definitely have an impact on home prices and, ultimately, the Columbia SC housing recovery.
While higher interest rates may affect the property a buyer buys, it usually does not prevent them from buying altogether. That thinking doesn't mesh with some economists who believe the dynamics of the Columbia SC housing recovery is that it affects home sales first and then inventory increases. When supplies go up, prices must go down.
Time will tell whether these higher rates will have any adverse effect on the Columbia SC housing recovery. We'd love to know… if you're in the market to buy a home, do higher rates cause you to pull out of the market, or just change the type and price home you're considering? Leave us your comments on this below…
When times get tough, it seems the scammers come out of the woodwork. Now there are several emerging mortgage scams hitting people where it hurts.
This one particular scam is a cash stealing system. It preys and targets vulnerable homeowners when they're at their weakest point and feel like they're cornered with nowhere to turn.
If you're behind on your mortgage, don't fall for one of these mortgage scams. Use a little common sense, and talk to someone if you've received a notice similar to the one Annette Coates received.
Never send money to anyone who makes promises that sound too good to be true, regardless of how legitimate the notice you receive looks. Mortgage scams are becoming more and more common.
If you think you've received a notice that might be one of these mortgage scams, call someone you know and talk to them about it. Preferably someone with some legal experience, or experience with mortgage scams, like your state's attorney general.
NEVER send cash to anyone promising to help you save your home or modification of a delinquent loan . Foreclosure help and mortgage modification advice is free.