Interest Rates at an All Time Historical Low

This great chart shows the history of 30 year fixed interest rates from 1971 to 2009.  It shows how they have gone up and down over the past few decades and how that compares to where they are at today.  The highest interest rate during this time frame was in 1981 with rates at 16.63%.  The chart shows that rates are currently at the historically lowest price ever! Click on the image below for an enlarged version of the chart.

Wall Street Journal Article on Jumbo Loans

This article was recently published in the Wall Street Journal.  It is entitled “The Return of the Jumbo Mortgage” and it discusses non conforming loans being brought back on the market. A jumbo loan means that the loan amount is not conforming to the amount that will allow it to be purchased by Freddie Mac and Fannie Mae. The conforming loan limit was recently changed from $417K nationwide to now be determined by county. In some counties, the conforming loan limit goes up to $729,750. The conforming loan limit in our area is $562,500 for Nevada County and $580,000 in Placer County. To read this entire article click here.

Details about FHA Loans

An FHA Loan is a Federal Assistance Mortgage loan in the U.S. insured by the Federal Housing Administration.  This type of loan is typically for first time home buyers.  The document below outlines some of the details of FHA Loans.

 

First Time Home Buyer Tax Credit

There have been all kinds of incentives for first time home buyers lately!  This chart shows the specific details for the first time home buyer tax credit.  It compares the credit that was created in July of 2008 with the revised credit effective in 2009.  Click on the image below for an enlarged version.

First-time Buyer Housing Affordability Index Methodology

There are all kinds of incentives for first time home buyers right now. It has never been a better time to buy especially if this is your first time getting into the market!  Below is the methodology that is used to calculate C.A.R.’s (California Association of REALTORS) Housing Affordability Index for first time home buyers.

Step 1. MEDIAN PRICE: C.A.R.’s housing affordability index is based on the median price of existing single-family homes sold from C.A.R.’s monthly existing home sales survey. Starting in 1987, this survey is based on reports of closed escrow sales from 80 Boards or more of REALTORS® and multiple listing services around the state. Prior to 1987, the survey was based on reports from 45 Boards. A FIRST-TIME BUYER is assumed to purchase a home at a price equal to 85 percent of the prevailing median price for existing homes.

Step 2. DOWNPAYMENT: A FIRST-TIME BUYER is assumed to make a 10 percent downpayment. Therefore, the loan amount needed to purchase a home would be 90 percent of the median home sales price.

Step 3. INTEREST RATE: A FIRST-TIME BUYER is assumed to finance the home purchase with an adjustable rate mortgage (ARM). This is represented by the effective composite ARM for previously occupied homes, which is reported monthly by the Federal Housing Finance Board.

Step 4.The monthly payment for PRINCIPAL, INTEREST, TAXES AND INSURANCE (PITI) is computed as the sum of three parts:

-Monthly mortgage payment, based on the terms of the mortgage in Steps 2 & 3.
-Monthly PROPERTY TAXES are assumed to be 1 percentof the median home sales price divided by 12.
-Monthly INSURANCE PAYMENTS on the house are assumed to be 0.38 percent of the median home sales price divided by 12.

The results of these three calculations are added together to findthe PITI or total monthly payment for a household that buys the median priced home.

Step 5. It is then assumed that the monthly PITI can be no more than 40 percent of a household’s income. Thus, the monthly housing payment is divided by .4 to come up with the MINIMUM INCOME NEEDED TO QUALIFY FOR A LOAN on the median-priced home.

Step 6. Starting in 1988, data for the distribution of households by various income ranges was obtained from Claritas. INCOME DISTRIBUTION figures were developed based on the projected percent change in the annual median household income. Prior to 1988, household income utilized in the housing affordability index was based on projections by C.A.R. using the 1980 census data as a base.

Step 7. The minimum income amount calculated in Step 5 is multiplied by 12 to determine the minimum annual income needed to qualify. This amount is compared to the income distribution of households. The percent of the households with incomes greater than or equal to the minimum income becomes the HOUSING AFFORDABILITY INDEX FOR FIRST-TIME BUYERS (HAI-FTB).

NOTE: The quarterly HAI-FTB for a given geographic area in a particular quarter is based upon the quarterly median price for that area as well as the quarterly income distribution for that area.

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