mortgage

Rates flat as homebuyers waited

Mortgage rates did not budge in Bankrate's weekly survey.

The benchmark 30-year, fixed-rate mortgage remained unchanged at 5.35 percent, according to the Bankrate.com's national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.31 discount and origination points. One year ago, the mortgage index was 6.44 percent; four weeks ago, it was 5.22 percent.

The benchmark 15-year, fixed-rate mortgage dipped 2 basis points, to 4.72 percent. The benchmark 5/1 adjustable-rate mortgage remained unchanged, at 4.64 percent.

Extra credit

Homebuyers will receive an early holiday gift from Congress and the White House.

This week, the Senate and House passed an unemployment relief bill that also extends the federal homebuyer tax credit into 2010 and expands the pool of eligibility beyond first-time buyers. President Barack Obama signed the measure into law Friday.

"Any program expansion can be considered a good thing for those seeking a primary residence," says Cameron Findlay, chief economist at LendingTree in Charlotte, N.C.

Weekly national mortgage survey
Results of Bankrate.com's Nov. 4, 2009, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed15-year fixed5-year ARM
This week's rate:5.35%4.72%4.64%
Change from last week:N/C-0.02N/C
Monthly payment:$921.38$1,280.87$849.81
Change from last week:N/C-$1.70N/C

Extending and expanding the credit will likely shape the type of home purchases that occur over the next few months, according to Findlay.

"Sales activity itself may not see a large increase," he says. "But we expect the mix of the sales to shift toward (the) primary residence owner."

Bill details

The legislation extends the existing $8,000 first-time homebuyer credit beyond its scheduled Nov. 30 expiration date and into the spring. A $6,500 credit also will be offered to existing homeowners who sell their current property and purchase a primary residence that costs $800,000 or less. To be eligible for the credit, move-up buyers must have lived in their present house for at least five years.

Income limits for the credit will increase to $125,000 for individuals and $225,000 for couples. Homebuyers who qualify must stay in their new homes for at least three years, or they will have to repay the credit. To be eligible for the tax break, homebuyers will have to be under contract by April 30, 2010, with closings wrapped up no later than 60 days after that.

The bill excludes investor-owned properties from eligibility, a move that appears to keep the program focused on "promoting long-term community price stabilization," Findlay says.

Act soon

Buyers will be the most obvious beneficiaries of the expanded credit. But sellers also can get a boost, especially if they live in states stung by dramatic property value declines. David Kuiper, a mortgage planner at First Place Bank in Holland, Mich., says homeowners who fear selling at a loss might be persuaded to do so anyway if they know they'll get money back in the form of a tax credit after buying a new home.

"It would help with the equity loss in the home they sell," he says.

Jim Sahnger, mortgage consultant for Palm Beach Financial Network in Stuart, Fla., says the credit could help reimburse other costs associated with selling a property, including "updating, minor renovations (or) recapture of closing costs."

However, the credit's impact also could cut in negative ways. As the spring expiration date draws nearer, sellers might use the credit as leverage against buyers who are "under the gun to get a deal done," Sahnger says.

"The closer we are to the deadline, the more sellers may be apt to hold firm on pricing," Sahnger says, noting that such a pattern emerged in recent weeks as the original Nov. 30 deadline loomed.

Meanwhile, a seller who "waits until the last minute to accept an offer" might not have enough time to find a new home before the credit expires, he says.

"Waiting until the last minute here should not be to anyone's advantage," Sahnger says.

Instead, Sahnger urges buyers to promptly take advantage of the tax credit and today's low mortgage rates.

"I would encourage someone to act sooner rather than later," he says.

If you're in the market for a mortgage or refinance, you can look for the best interest rate by searching Bankrate's rate tables.

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