Despite rising home mortgage interest rates, experts believe this is still a good time to consider buying a home in Pleasanton or refinancing an adjustable rate loan.
“There are tons of homes on the market today, and interest rates are still historically low,” said Joanne Berson, a loan specialist with Wells Fargo Home Mortgage in Pleasanton. “It’s a great time to get into the market to buy a home.”
She said homeowners with adjustable rate mortgages should also consider refinancing, especially those whose loans adjust every month or so.
Dave Walden, a certified mortgage planning specialist with Diversified Capital Funding, agreed.
“Rates are going to continue to rise to maybe about the 7 percent rate by the end of the year for conforming loans, which are loans totally $417,000 or less,” he said. “The Fed will continue to raise rates by a quarter of a percent to probably 7.5 percent before backing off to analyze the market. The economy with the strong jobs report last Friday is showing that the economy is storng.”
“I think that the rampant rumors of the ‘housing bubble’ have pretty much been laid to rest by the media experts who realized that what came out in the headlines was not really what they meant to say,” he added.
Berson, who has been in the mortgage loan business for 20 years, said mortgage rates have gone up more in the last two weeks than they have in a year. If buyers act now, they can obtain 5-0 and 10-0 loans that will lock them in to rates below their adjustables.
The 5-0 loan, available to those with good credit ratings, allow borrowers to obtain fixed-rate loans for the typical $450,000 nonconforming loans in Pleasanton at 6.25 percent rate for the first five years, with those loans converting to adjustable rate loans starting in the sixth year. The 10-0 loans are similar, although costlier. They lock in the borrower to a fixed rate for 10 years at a rate of 6.5 percent.
Conforming loans carry the same percentage as the 5-0 package, but would have a more favorable rate of 6.375 percent for those seeking a 10-year fixed loan, Berson said. Thirty-year loans would cost slightly more in interest.
These rates for qualifying buyers also can be locked in for up to a year, although most buyers have a shorter time frame.
“With good credit, and that’s someone in the high 600s to 700s in their credit bureau rating, we can have a loan ready in five days,” Berson said.
Applicants should have their financial data in hand when they apply, including last year’s W-2, a recent pay stub and their 2004 tax return, with a completed 2005 return needed for self-employed applicants.
“The Pleasanton area is strong, and although houses are sitting on the market a little longer, that is only because with interest rates rising and prices up more than 18 percent in the last two years,” Walden said. “I look for more conservative increases this year.”
Berson said some buyers may “whine” because they missed the extraordinarily low interest rates last year, “but whining won’t bring them back.”
“For those of us who remember the high interest rats of the 1980s and much of the ’90s, 6.5 percent is a good rate in the market,” she added.
She said that although some buyers favor the traditional 30-year mortgages, most are now refinancing their homes within three years because of lower interest rates. She said that those taking out the 5-0 or 10-0 mortgage packages, there’s little chance that they won’t find opportunities to lower their fixed rates before that adjustable rate kicks in.
“Right now, though, people are looking for a little more security and they are concerned about the shorter term loans,” she added.
Like Walden, she also discouraged buyers or those seeking to refinance their homes with unknown, out-of-town lenders who advertise only on the Internet. She warned that some of those individuals may not be familiar with the Pleasanton market.
“It just makes sense to see me or another mortgage specialist face-to-face for a one-on-one conversation and evaluation,” she said. “These are major investments and everyone can be more comfortable in that kind of a conversation.”
Berson can be reached at 251-4302, and Walden at 426-8383, Ext. 110.
