Mortgage Market Update:
In a move to push rates low and stimulate the US housing market, The United State Federal Reserve announced in late November that it would purchase up to $500 Billion worth of mortgage-backed securities over the next year and a half. The Fed's actions were designed to loosen credit and make money available for today's homebuyers. The announcement sent the national average for 30-year fixed-rate mortgages below the 6 percent mark, down almost 3/4 points from the previous month.
Although the National Association of Realtors reported a decline in existing-home sales during October, officials there are optimistic about the move. Lawrence Yun, The association's chief economist, thought the Fed's actions should bring interest rates down considerably. "As we've seen in past recessions, home sales rise when mortgage interest rates fall" Yun said.
The association is currently reporting a 10 month supply of existing homes for sale, and projecting that 4.98 million homes will be sold in the US for 2008.
Finance Q and A:
Q: What is the benefit of a bi-weekly payment schedule?
A: Some borrowers choose to pay back their mortgages over 26 bi-weekly payments per year. The bi-weekly payment schedule speeds up amortization and reduces total interest costs. It typically shortens the loan term from 30 years to approximately 22 years. These smaller bi-weekly payments amount to an extra monthly payment per year.
Payments are deducted automatically from your savings or checking accounts. The same objectives can be accomplished by making an extra payment each year, or by applying an additional amount to principal each month when you send in your payment.
Tip of the Month:
Your credit report offers detailed information on your borrowing and repayment habits. Lenders determine your credit worthiness by looking at the FICO score found in your report. Scores range from 300 to 850, with higher numbers indicating a better credit history. According to Federal law, you are entitled to receive one free credit report each year. Take advantage of this opportunity and make sure you agree with what's on your report!
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