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What Really Influences Your Credit Score?

by KW Calabasas on General July 22nd has no comments yet!

300x199xiStock_000018936394XSmall-300x199.jpg.pagespeed.ic.celvFt5Pn_Your credit report is essentially your financial report card. It serves as a way for banks, insurance and lending companies to gauge your credit-worthiness and whether you’re likely to miss payments or default on a loan. It’s also common for landlords, employers and government agencies to check your credit before approving an application or confirming a transaction.

But, do you know where the information on your credit report comes from and how it impacts your overall credit score? It might help to know the next time you’re tempted to take out another credit card or just pay the minimum on your balance.

Here are the five most important things that make up your credit score:

Payment history: 31 percent

Paying your bills on time helps you avoid late fees and also helps your credit score. A good payment history shows lenders you have a record of paying on time. And the longer you have that, the better. Late or missing payments negatively affect your score, as do any collections, foreclosures or bankruptcies. Payment history usually pulls the most weight in your credit score calculation, so it’s important to stay current in this category.

Level of debt: 30 percent

It’s not a good idea to use up all your credit. By using most of your credit, or getting close to your credit limit, you can negatively impact your score. A good policy is to keep your credit card balance within 30 percent of your limit. In other words, if your credit card limit is $5,000, charging more than $1,500 can be risky even if you pay off the balance on time. Keeping your debt low shows lenders that you’re likely able to afford monthly payments and possibly take on more expenses.

Length of credit history: 15 percent

How well have you managed your credit accounts over time? Having a longer credit history helps your score. Lenders want to see that you’ve kept a good track record over a long period because someone with little or no credit history is more financially risky because it presents more of an unknown. This means that keeping that credit card you’ve had for a while open can help your credit (as long as you keep the balance low or at zero by paying on time every month).

Types of credit: 14 percent

Showing that you have a record of paying different types of debt helps your credit score. And different types of credit or loans can impact your score more or less. A healthy mix of credit includes credit cards, home loans and auto loans. Credit consisting of only one type, such as credit card accounts, won’t help your score, so diversity is important when it comes to credit accounts.

New credit: 10 percent

Having lots of credit inquiries within a short time lowers your score because it shows you’re actively searching for more credit, which makes lenders nervous. However, when you check your own credit or when an employer does, it won’t impact your score.

The major components of your credit score consist of your payment history and amount of debt. By knowing how the items in your credit report are weighted, you’ll have a better idea of the factors impacting your score.



Q&A: 1031 Tax-Deferred Exchanges and Renters Insurance Coverage

by KW Calabasas on General June 20th has no comments yet!

Q-A-300x199Each month, Zillow Blog contributor Leonard Baron answers two questions from readers regarding buying, selling and investing. Have a question? Send it to

Investment property 1031 tax-deferred exchanges

Hi Leonard — I own a few investment properties, and I want to trade up to bigger properties. I’ve owned them a long time and would like to avoid paying taxes with a 1031 tax-deferred exchange. What are the ins and outs and basics on these? Rob H., Virginia Beach, VA

Hi Rob — OK first, are these investments performing well? If yes, you should really think through whether or not you want to trade up to a bigger property. Trading up to a better property may be a good idea, but not just a bigger one.

When you do an exchange, you might save money on taxes, but you still have the significant transaction fees that all real estate deals incur. So that could easily be 10-15 percent of the sales price — which is a much bigger slice of your equity that is gone, gone, gone due to the transaction.

The basics are simple: Sell one property, sales proceeds are held by a third-party intermediary, buy another property of an equal or higher price. Any taxable gain you would have had to recognize on the sale of the existing property is now deferred until you sell the new property (and it could be deferred indefinitely if you keep doing 1031 exchanges). But don’t forget those transaction fees.

The tough part is that you must identify the property(ies) you plan to purchase within 45 days of selling the first one and close escrow within 180 days. Many people take their own sweet time, and wham: The 45 days go by, the exchange fails, and they pay the taxes!

Make sure to get good quality advice on the rules and regulations way before you start the process to sell the first properties that you plan to exchange.

Renters insurance

Hi Professor — I’m considering requiring my existing tenants to carry renters insurance when their lease renews. They’re pressing back a little due to the cost. Any guidance on how to deal with this? Martha M., Cushing, OK

Hi Martha — Renters insurance protects everyone: the tenant, the landlord and people who are guests in the house. It’s pretty inexpensive, generally costing $125-$225 per year for basic coverage.

You can explain to them what it covers and why it is worthwhile for them to carry this insurance. It protects their personal property from damages or theft, covers liability in case someone gets hurt at the property and more (check the policy for specifics).

You could also offer to pay for or chip in for the policy for the first year, or longer. It gives you some protection, too. Insurance covers them for losses so they won’t ask you to cover their losses. Note: Even if you are not legally responsible, that doesn’t mean that you wouldn’t be asked to help by the tenant.

You certainly don’t want a good tenant to leave over a couple of hundred dollars, so think it through and do what you need to so your tenant stays in the property for a long time.

10 Mortgage Misconceptions

by KW Calabasas on General May 24th has no comments yet!

True-or-false-5ff753Mortgages are tricky and often hard to understand. Because most people only purchase a home every five to seven years, prospective home buyers understandably don’t spend a lot of time in the interim educating themselves about mortgages and the mortgage process.

With the real estate market picking up and mortgage rates prime for refinancing, Zillow has compiled a list of common mortgage misconceptions based off the results of the just released 2013 Mortgage IQ Survey.

Misconception No. 1:

Your interest rate reflects the true cost of your mortgage

Your annual percentage rate (APR) is actually the figure that represents the true cost of your mortgage. It is inclusive of your interest rate, points, mortgage insurance (when applicable) and other fees, including origination and underwriting fees. It does not include the cost of your homeowners insurance policy. The APR is typically higher than your interest rate because it incorporates the rate and the fees. In fact, when shopping for a mortgage, it is best to compare loans based on APR instead of the interest rate because it gives a better sense of the total cost over the life of the loan.

Misconception No. 2:

Mortgage rates are only released once per day

Mortgage rates for all types of mortgages can change frequently, sometimes dramatically, throughout the day. Because of the rapid changes in mortgage rates and a lender’s ability to control what is offered, it is important to shop around for the best rates. Getting multiple loan quotes is highly recommended.

Misconception No. 3:

All lenders are required by law to charge the same fees for appraisals and credit reports

There are no laws that require lenders to charge the same fees for services such as appraisals or credit reports. In fact, in order to make their loan quotes more competitive, some lenders may waive charges for such services. Conversely, some lenders may charge higher fees for these services, so it’s important to shop around.

Misconception No. 4:

I must get my mortgage through the same lender I was pre-approved with

A pre-approval is a conditional agreement that estimates the size of the home loan a lender would fund for you. It typically involves income verification and a credit check. However, you are under no obligation to proceed with the lender that gave you the pre-approval. Make sure you get at least three loan quotes before proceeding with a mortgage.

Misconception No. 5:

You will almost always get the best mortgage interest rates at the bank where you have a checking account

While some banks do give their customers discounts, it’s unlikely your bank will offer the best interest rate available simply because you bank there. To get a competitive mortgage rate and terms, get quotes from multiple lenders either in person or online — including your bank — and pick the one that works best for you.

Misconception No. 6:

When taking out a mortgage with your spouse, lenders will look at each of your credit reports equally when determining the interest rate you qualify for

When applying jointly for a mortgage, lenders will pull your credit scores from each of the three major credit reporting agencies: Experian, Equifax and TransUnion. They’ll then take the middle score of each set and use the lower of the two to help determine your mortgage interest rate. This means that the least creditworthy borrower will have the greatest effect on your monthly payment. It does not matter who the primary or secondary borrowers are.

Misconception No. 7:

You cannot get a home loan with less than a 5 percent down payment

It is a common misconception that you need to put down 10 percent, 15 percent or even 20 percent on a home, especially in light of the recent housing crash. But with as little as 3.5 percent down, you can often obtain a mortgage through the Federal Housing Administration (FHA). FHA loans have become a popular loan option for those who may not have a large down payment or have blemishes in their credit history. FHA loans are available to everyone, not just first-time home buyers. (Find out more about the advantages and disadvantages of an FHA loan here.)

There are also alternative loan programs through other agencies, including the Department of Veterans Affairs (VA) and the United States Department of Agriculture (USDA). These loans also require little-to-no money down.

Misconception No. 8:

If you go through a short sale or foreclosure, you must wait 7 years before getting another home loan

In most cases, to buy a home after a short sale, you’ll typically only need to wait 2-4 years depending on your down payment and the loan type you select. The waiting period after a foreclosure is longer: Typically you’ll need to wait 3-7 years before getting another home loan. Even if you can afford to get a mortgage right now, you’ll need to have a good credit score, which can be difficult to rebuild in just a few years. Unique circumstances can lead to different outcomes, so make sure to check with a lender or two.

Misconception No. 9:

If you are underwater on your home loan, you are unable to refinance

It is estimated that millions of homeowners who are underwater and current on their mortgage can refinance using one of two special government programs. The first, the Home Affordable Refinance Program (HARP), is available to homeowners who have a loan backed by Fannie Mae or Freddie Mac. The second program, FHA Streamline Refinance, has recently been modified to help homeowners with loans insured by the Federal Housing Administration (FHA). Both programs help homeowners refinance into lower interest rate loans and may help dramatically lower payments without very much cost to the borrower. Zillow Mortgage Marketplace is the only online mortgage marketplace where you can get loan quotes for HARP and FHA Streamline. As an added bonus, it is the largest mortgage marketplace where you can anonymously get loan quotes, meaning you don’t enter any personally identifiable information and therefore cannot get spammed and hounded by lenders who were sold you contact information. See if you may qualify.

Misconception No. 10:

You can only refinance your home loan once every 12 months

With conforming loans backed by Fannie Mae or Freddie Mac (the vast majority of loans today), you can refinance as frequently as you’d like so long as you do not take cash out when you refinance and are just refinancing to lower the interest rate and/or term of your mortgage. The rule of thumb is to wait until the difference between your current interest rate and the available interest rate would save you enough money each month to cover the costs of refinancing in 2 years. The amount of time that you plan on being in the home should be considered, as well. In general, refinancing will be more financially beneficial the longer you are in the home. Use the refinance calculator to determine how long it will take to break even on the costs of refinancing.

If any of the misconceptions had your name written all over it, visit the Zillow Mortgage Marketplace Help Center, where you can brush up on everything mortgage before you refinance or purchase your next home. You can also take the Mortgage IQ Quiz for yourself, or send it to a friend who is in the market; they’ll thank you.

Tax Savings: Rental Property Depreciation Explained

by KW Calabasas on General May 17th has no comments yet!

taxOne reason you might be thinking about investing in rental properties is because you think you’ll save money on federal income taxes. While this may be true, you really need to fully understand how rental properties and taxes work in order to determine whether you will in fact save money from your rental property ownership.

If you’re already an investment property owner or are thinking about becoming a landlord, here’s a refresher on how the depreciation expense could help you maximize your tax savings.

The basics

In doing your annual 1040 federal income tax return, you’ll record your rent and all expenses on a Schedule E form. The net amount of gain or (loss) is then recorded on your 1040 form and can shield your income from taxes if you had a loss. One of the bigger expenses on most rental property owners’ Schedule E is something called depreciation. Here’s how it works.

When you own property, each year you write off costs for money you expend where the cost is a one-year expense, such as gardening, general maintenance, repairs, HOA fees, etc. But what if the cost is for an improvement such as a new kitchen or new sidewalks? Because those costs have a useful life beyond one year, you must “capitalize” and depreciate those costs. That means you divide the total cost by the useful life of the improvement, and write off 1/nth of the cost per year. For example, you do $15,000 worth of driveway and sidewalks, with a 15-year useful life, so you can write off $1,000 per year ($15,000 divided by 15 years).

The biggest capital asset of any property is the actual purchase of the house. When you buy a rental property and will own it for longer than one year, you can depreciate the structure. First you must divide the purchase price of the property between the land and the building. You can use your tax assessor’s estimate of the cost of each of those components, an appraisal or an insurance agent’s estimate of the cost of the building. Either way, you can only depreciate the building, as theoretically the land portion of your purchase price is not “used” up and cannot be depreciated.

Crunching the numbers

Here’s an example: Let’s say you buy a single-family home for $200,000. The tax assessor’s estimate of the land value is $75,000, and the building value estimate is $125,000. Your depreciation expense that you take each year against rental income would be $125,000 divided by the IRS allowed 27.5 years of useful life (residential real estate) for a depreciation expense each year of $4,545. So thanks to that depreciation expense, you are saving (assuming you can use passive activity losses) $4,545 multiplied by your marginal tax rate (which is a topic for another day). This could be tax savings from $1,000 to $2,000 per year, just for the depreciation amount.

The calculation and write-off are pretty straightforward, but the actual tax savings amount gets a little more complicated. Many people flub this calculation from the start, so it’s best to find a licensed tax professional and start saving yourself some money going forward.


4 myths that can hurt underwater homeowners

by KW Calabasas on General March 27th has no comments yet!

Home values are going up, and many struggling homeowners are gaining equity in their property. But nearly 14 million U.S. homeowners remain underwater – with mortgages worth more than their homes.

More than 27 percent of U.S. homeowners with a mortgage had negative equity in their homes at the end of 2012, according to a report by

Many homeowners face foreclosure or are having a difficult time making their payments and are considering options such as a short sale, filing for bankruptcy protection or just handing the bank the house keys and walking away from their debt.

The choices can be confusing.

“There is so much misinformation out there,” said Doug Bickham, a real estate lawyer in Lake Forest, Calif. “The law is constantly evolving, and even Realtors don’t understand all the fine distinctions in the law.”

The Orange County Register asked Bickham, managing attorney at Rasmussen Law Firm, and Bob Hunt, broker at Keller Williams OC Coastal Realty and a longtime member of the California Association of Realtors’ board of directors, to explain the most common misconceptions held by underwater homeowners, or those trying to help them.

Here’s what they said.

MYTH: A “deed-in-lieu” of foreclosure – in which the lender agrees to take back the keys and lets you walk away – is better than spending the time trying to do a short sale, especially because with a deed-in-lieu, you now potentially can get a few months of free rent.

REALITY: Mortgage giants Fannie Mae and Freddie Mac recently came out with new guidelines for a deed-in-lieu of foreclosure. Now homeowners with hardships can turn over the house keys and erase their debt – even if they are still current on their payments. Some struggling borrowers who relinquish their homes can live in them for up to three months without having to make mortgage payments.

But, Bickham said, lenders only approve deed-in-lieu transactions if there is a single loan on the property or multiple loans with the same lender, which greatly limits their usefulness.

“In the vast majority of cases, it’s usually not the most advantageous foreclosure-prevention option for a homeowner, assuming a lender will even agree to a deed-in-lieu,” Bickham said.

It’s better to do a short sale, he said, especially if there is more than one loan. That’s because striking a deal with a first, purchase-money lien holder does not automatically get the homeowner off the hook when it comes to second or other junior loans.

Also, in a deed-in-lieu agreement, a lender can require additional cash contributions be made by the homeowner, which are illegal in a short sale.

MYTH: A bankruptcy prevents a foreclosure.

REALITY: “People always seem to think a bankruptcy is going to solve all their house-debt problems,” Bickham said.

But a Chapter 7 bankruptcy – the most typical bankruptcy protection filed by individuals – will at best delay, but not prevent, a foreclosure. Banks will typically just wait out the bankruptcy case, then immediately proceed with the foreclosure upon discharge. Or, occasionally, the banks will petition the court to release the property even during the bankruptcy if it has no equity so they can proceed with foreclosure, Bickham said. If the home has enough equity, it will be sold as part of the bankruptcy case, with the proceeds going to creditors.

What a bankruptcy will do is convert all “recourse” loans – where a borrower has personal responsibility for repayment – into “non-recourse” loans, where lenders cannot sue a borrower to get repayment, Bickham said. That’s because a Chapter 7 bankruptcy will discharge the borrower’s personal responsibility for the debt even though it will not release the liens on the property for the loans.

So while the bankruptcy does not eliminate secured home loans and a homeowner can still be foreclosed on, all home loans, including second mortgages and home equity lines of credit, will become non-recourse, and lenders cannot sue the homeowners for any balance owed.

MYTH: Doing a short sale will require money from homeowners.

REALITY: “There’s literally zero out-of-pocket costs to the homeowner to do a short sale and, in fact, they can often get cash back to help with moving expenses,” Bickham said. “In a short sale, essentially, the seller’s lenders step into the shoes of the seller. Most of the closing costs on the seller’s side are picked up by the seller’s lenders.”

That includes agent commissions, escrow fees, title insurance fees, taxes and even homeowner association transfer fees. They’ll only cover so much, though, and the buyer will have to assume the rest. Many programs are available now where lenders will actually give cash back to homeowners who agree to a short sale, as well.

Short sale buyers should be prepared to kick in an additional 3 percent above the price of the home to cover any costs that the seller’s lender declines to pay, Bickham said. But buyers can typically purchase a short sale property for 5 to 10 percent below full fair market value even with the additional costs, he said.

MYTH: A foreclosure absolves a homeowner of delinquent homeowners association dues.

REALITY: “People often think that if a property is foreclosed or it was given back to the lender as a deed-in-lieu, the homeowner will be absolved of all back dues they owe the association. But HOA dues are actually a homeowner’s personal obligation,” Bickham said. “Even after a bank forecloses on a home, the HOA can still sue the homeowner to collect on any unpaid back dues.”

In a short sale, however, the delinquent HOA dues will often be fully paid off or settled as part of the short sale negotiations, he said, since all lien holders, including the HOA, must agree to release their liens for the short sale to successfully close.

By MARILYN KALFUS — The Orange County Register

What Should We Expect in the 2013 Real Estate Market?

by KW Calabasas on General February 14th has no comments yet!

The real estate market seems to be strengthening, and it’s starting to show locally.

Single-family home sales in Massachusetts rose 38 percent in November, according to a recent report by Banker & Tradesman publisher The Warren Group. This was the largest year-over-year percentage increase of 2012 and continued 11 consecutive month of gains, and marked the best November for sales since 2005.

Prices are rising as well. According to The Warren Group’s report, the median price of single-family homes in Massachusetts rose almost 2 percent from $270,000 in November 2011 to $275,000 in November 2012.

“We’re winding down a pretty strong year of real estate in Massachusetts. It looks like sales will be the highest since 2006,” said The Warren Group CEO Timothy M. Warren Jr. “We’re also seeing median prices start to creep up, another positive sign of a healthy market recovery.”

What does this mean for 2013, and specifically the North Andover area?

“I am cautiously optimistic for 2013,” said Rosemary Draper of Draper Real Estate. “Draper Real Estate has just moved to a larger office in order to expand and make room for more agents. We had a great 2012 and an uptick in buyer and seller activity the last quarter of 2012. We were showing on New Years day as well!”

Lisa Sevajian of RE/MAX Partners said local market activity indicates a trend upward as well.

“North Andover has less inventory than we have had in a very long time,” Sevajian said. “The amount of time it takes to sell a single family home in town is shrinking and the prices have stabilized. Many homes are selling with multiple offers when priced correctly.”

The condominium market is still struggling, Sevajian added, because so many developments were hit with short sales and foreclosures.

“As we move into the spring market in North Andover, we can expect to see a sense of normalcy return as many buyers are ready and waiting for new property to hit the market,” Sevajian said. “February will be a month that sets the tone for the next 3-to-6 months. If we see the typical increase in inventory during the month of February the buyers searching for homes in town will feel the pressure of buying during a sellers market. If we see an above average amount of inventory come on as I am expecting buyers may regain some of the control in negotiations. I am anxious to see what happens over the next eight weeks.”

By Bryan McGonigle

Housing Recovery is Halfway Back to Normal

by KW Calabasas on General January 28th has no comments yet!

Each month, Trulia’s Housing Barometer charts how quickly the housing market is moving back to “normal.” We summarize three key housing market indicators: construction starts (Census), existing home sales (NAR), and the delinquency-plus-foreclosure rate (LPS First Look). For each indicator, we compare this month’s data to (1) how bad the numbers got at their worst and (2) their pre-bubble “normal” levels.

In November 2012, home sales saw strong increases, and the delinquency-and-foreclosure rate held steady — both signs of market improvement. However, new construction starts declined.

Hurricane Sandy appears to have lowered construction (and sales, to a lesser extent) in the Northeast. Average monthly construction starts were 14 percent higher nationally in October and November — the months affected by Sandy — than in the previous four months, but 5 percent lower in the Northeast. Average monthly home sales were 7 percent higher nationally in October and November than in the previous four months, but just 3 percent higher in the Northeast.

Construction starts dipped in November but remain strong. Starts in November were at an 861,000 annualized rate, down 3 percent month-over-month and up 22 percent year-over-year. For the past three months, construction starts have remained solidly above 800,000 — the highest level since September 2008. Nationally, construction starts are 37 percent of the way back to normal.

Existing home sales rose once again in November. After climbing in October, existing home sales rose 6 percent month-over-month to 5.04 million in November–the highest level since November 2009. Sales are 73 percent back to normal. Even better, “distressed” sales (foreclosures and short sales) represent a declining share of overall sales, making way for more “conventional” home sales.

The delinquency-and-foreclosure rate maintained a new post-crisis low. In November, 10.63 percent of mortgages were delinquent or in foreclosure, down a hair from 10.64 percent in October. The combined delinquency-and-foreclosure rate is at its lowest level in four years and is 41 percent back to normal.

Averaging these three back-to-normal percentages together, the housing market is now 51 percent of the way back to normal, compared with 28 percent in November 2011. Trulia’s Housing Barometer has jumped 5 points in each of the last two months. Does halfway back to normal mean the glass is half-full or half-empty? The half-empty view is that our three housing measures hit bottom (on average) in 2009, so it’s taken the market a long time-three years-to get to the halfway mark. But the half-full view is that halfway back to normal is better than anyone — myself included — predicted for 2012 at the start of this year.

By Jed Kolko, Trulia Chief Economist

6 Tax Facts Home Sellers in the Los Angeles Real Estate Market Should Know

by KW Calabasas on General January 3rd has no comments yet!

Homeowners should seek information about the different tax laws when selling Los Angeles real estate. Red Blue Realty issues the following tips for prospective home sellers that are looking to take advantage of the current trend in the Los Angeles real estate market.

1. For sellers who have lived in their homes for two of the five years prior to the sale, have the ability to deduct up to $250,000 of the gain from their income. In cases where the homeowners are married and filing a joint return, the amount increases to $500,000. This means that a couple owning a home with a tax basis of $ 250,000 can sell the home for $ 750,000 without paying taxes on the $500,000 to the Internal Revenue Service. Moreover, they can take the exclusion every 2 years.

2. Los Angeles real estate sellers who sold another principal residence within the past two years and excluded the allowable gain from their income do not qualify for the above exclusion. This means that they must have lived in the property as their principal residence for at least two out of the five years ending on the date of the sale. Two years must also have elapsed since the last deduction.

3. Those who can exclude all the gain from the sale of their primary residence do not need to report the sale on their tax return. Gains that cannot be excluded are taxable and have to be reported on Form 1040, Schedule D, Capital Gains and Losses.

4. If a seller for one of the Los Angeles homes for sale has a gain on their primary residence that exceeds the allowable deduction, it is taxable. Where a homeowner has two homes, the one they spend most of the time in is considered their primary residence. Therefore, they have to remit taxes on the sale of any other home.

5. Those selling their homes cannot deduct a loss from the sale of their primary residence. The exclusion breaks do no apply to personal assets that homeowners may sell for profit. Any income from such a sale is therefore counted as reportable income during the year of the sale. Home sellers cannot deduct any loss on the sale of personal assets, as they did not buy them to earn income or make profit. Profit on the sale of a home cannot be reduced by any loss suffered from the sale of such items e.g. furniture. Basically, their sale is treated as a separate transaction.

6. Special rules apply when selling a home for which the homeowner received the first-time buyer credit. For instance, if a homeowner receives the credit and stops using the property as their primary residence within 36 months, they are required to repay the credit. The repayment is due with the income tax return for the year the home stopped being used as their principal residence.

A good Los Angeles real estate agentshould be able to clearly explain the above tax facts to their clients selling homes. It is important to note that a realtor is not a licensed CPA, and any and all information regarding taxes should be confirmed with an experienced tax accountant.

Check out for all your Los Angeles real estate needs.

Mortgage rates fall to new lows this week

by KW Calabasas on General November 15th has no comments yet!

WASHINGTON (AP) — Average rates on fixed mortgages fell to fresh record lows this week, a trend that has helped the housing market start to recover this year.

Mortgage buyer Freddie Mac says the average rate on 30-year loans dipped to 3.34%, lowest on records dating back to 1971. That’s down from 3.40% last week and the previous record low of 3.36% reached last month.

The average on the 15-year fixed mortgage also dropped to 2.65%. That’s down from 2.69% last week and also a new record.

The average rate on 30-year loans has been below 4% all year. It has fallen further since the Federal Reserve started buying mortgage bonds in September to encourage more borrowing and spending.

In a speech in Atlanta, Federal Reserve Chairman Ben Bernanke said Thursday that banks’ overly tight lending standards may be holding back the U.S. economy by preventing creditworthy borrowers from buying homes.

Bernanke says some tightening of credit standards was needed after the 2008 financial crisis. But he says “the pendulum has swung too far the other way.” He says some qualified borrowers are being prevented from getting home loans.

Nevertheless, low mortgage rates have helped boost sales of newly built and previously occupied homes this year. Home prices are also increasing, and builders are more confident and starting work on more new homes.

Lower rates have also persuaded more people to refinance. That usually leads to lower monthly mortgage payments and more spending. Consumer spending drives nearly 70% of economic activity.

Still, the housing market has a long way to a full recovery. And many people are unable to take advantage of the low rates, either because they can’t qualify for stricter lending rules or they can’t afford the larger down payments that many banks require.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1% of the loan amount.

The average fee for 30-year loans was 0.7 point, unchanged from last week. The fee for 15-year loans also remained at 0.7 point.

The average rate on a one-year adjustable-rate mortgage declined to 2.55% from 2.59%. The fee for one-year adjustable rate loans one-tenth to 0.3 point.

The average rate on a five-year adjustable-rate mortgage ticked up to 2.74% from 2.73%. The fee was unchanged at 0.6 point.

by Christopher S. Rugaber, Associated Press

Mortgage rates remain near record lows

by KW Calabasas on General November 12th has no comments yet!

Mortgage interest rates moved slightly lower this week, according to housing finance giant Freddie Mac, with lenders offering 30-year fixed-rate home loans to solid borrowers at an average of 3.39%, compared with 3.41% last week.

The 15-year fixed mortgage, often used by refinancers seeking to pay off their housing debt faster, dropped from 2.72% last week to 2.7%. The rates are hovering near the all-time lows of 3.36% for the 30-year and 2.66% for the 15-year, set last month.

Borrowers would have paid an average of 0.7% of the loan balance in upfront fees to the lender to obtain the rates, Freddie Mac said in its weekly report on mortgage pricing,

Start rates on variable mortgages also edged down, the report showed.

Freddie Mac asks lenders Monday through Wednesday about the terms they are offering creditworthy borrowers with at least a 20% down payment or 20% equity if they are refinancing their loans. Costs for third-party services such as appraisals and title insurance are not included.

By E. Scott Reckard LA Times