Fed may raise interest rates
By Marcie Geffner – LendingTree.com

If you’ve been waiting for the Federal Reserve to lower interest rates again before you apply for a new home loan, you may want to rethink your strategy.

Many financial analysts now believe the Fed is unlikely to lower rates again this year and may even raise rates before the year is over.

The Fed doesn’t directly control interest rates on mortgages, home equity loans, auto loans or other types of credit. But the Fed’s actions affect the interest rates that banks pay and that indirectly affects the direction of consumer interest rates.

If you’re shopping for a mortgage to buy a home or refinance an existing loan or if you’re looking for a home equity loan, you should be aware that interest rates can fluctuate regardless of whether the Fed takes further action or not. If you wait for lower rates, you may be rewarded by lower monthly payments. But if rates increase, your payments could be substantially higher and you may not be able to borrow as much money as you’d wanted to. If you’re shopping for a home, the cost of higher interest rates could even offset the savings of lower home prices.

The Fed has already lowered bank interest rates seven times since late last year to try to hold off an economic recession in the U.S. But Fed Chairman Ben Bernanke recently said there is now less risk that the economy has entered a substantial downturn.

He also said the Fed will pay close attention to inflationary pressures and expectations in the financial markets. That suggests the Fed is less likely to lower bank interest rates further, even though the housing sector is still weak. The Fed is especially concerned that too-low interest rates could trigger an upward spiral of out-of-control inflation.

Of course, no one can predict interest rates with certainty. That means borrowers shouldn’t make important financial decisions on the basis of interest rate forecasts that may not be reliable. Consider your own personal situation. If it makes sense for you to get a new loan today, you might not want to delay in hopes of lower interest rates that might not materialize any time soon.

© 1998 – 2008 LendingTree, LLC. All rights reserved. No part of this article may be used or reproduced without prior written permission of LendingTree, LLC.

Maintenance that makes $ense
By Marcie Geffner – LendingTree.com

If you’re worried about falling home prices, here’s some good news: Ongoing maintenance can help protect your investment, ward off even more expensive repairs and make your home more comfortable for you and your family.

A home is a valuable asset that, for many people, is the biggest investment they will ever make. That’s why it’s important to keep up with repairs and maintenance, especially if you’re concerned about declining home values in your area.

Maintenance may seem mundane, particularly when compared with large-scale renovations, but it’s well worth the time and money. Routine maintenance protects the value of your home just as regular servicing prolongs the useful life of your car and regular checkups maintain your physical health.

What’s more, maintenance can save you money since small problems that are neglected can easily turn into bigger problems that will be much more costly to fix later.

Here’s a list of some basic maintenance tasks that can help you keep your home in tip-top shape:

● Replace broken roof shingles to prevent water damage and extend the life of your roof, which is probably one of the most expensive components of your home.

● Check your heating and cooling system at least annually. Replace disposable filters every few months or as recommended by the service technician.

● Hire a professional chimney sweep to inspect and clean your fireplace . Keep the damper closed when the fireplace is not in use.

● Scrub concrete decks, walls and walkways annually with a bucket of warm water and washing soda, and a stiff brush or push broom.

● Clean exterior doors, window frames and screens after the rainy season ends. Patch torn screens to prolong their life and prevent any intrusion of insects.

● Clear your rain gutters of debris and repair any breaks once or twice a year. Force a stream of water upwards to clear a blocked downspout.

● Empty your hot water heater annually or as recommended by the manufacturer. (Some newer models can be drained from the bottom to save water.) This simple chore can help your water heater last many years longer.

● Paint the exterior and interior of your home every few years or as needed. A fresh coat of paint can improve the look of your home, brighten dark rooms and help to prevent damage and deterioration.

Survey finds tougher loan requirements
By Marcie Geffner – LendingTree.com

It’s no secret that banks have raised the bar for borrowers who want to get a new home loan. The fact is that today’s requirements may be significantly more challenging, regardless of whether you want to buy a home, refinance your current mortgage or take out a home equity loan or line of credit.

Yet these tougher requirements definitely don’t mean that you won’t be able to get a loan. Plenty of borrowers have obtained new loans this year on good terms and often at historically low interest rates.

Banks tighten across the board
Lenders use the phrase “tighter credit standards” to describe their own tougher requirements. And indeed, most banks have tightened their credit standards this year.

A recent Federal Reserve survey of senior loan officers found that 62 percent of the banks surveyed had tightened their standards for prime residential mortgages, and even higher percentages had tightened their standards for non-traditional and subprime home loans, and home equity lines of credit. None of the banks that were surveyed had loosened credit standards for these types of home loans.

Documents may help you qualify
To obtain a loan today, you’ll probably have to jump just a little higher than you would have had to a year ago. You’ll probably have to fill out more paperwork, and you’ll probably be asked to hand over more documents, such as W-2 forms, paycheck stubs and income tax returns, to demonstrate your creditworthiness.

To qualify for a loan at a favorable interest rate and on favorable terms, you’ll also need an acceptable credit score, and the lender likely will require an acceptable appraisal of the home. You may have more loan choices if your employment has been steady for several years, your credit is unblemished, and you are able to make a larger down payment to buy a home or you have some equity in your current home if you want to refinance.

Tighter credit standards mean it’s important to shop around and compare loan offers. You may even be pleasantly surprised to find out you’re better qualified for a loan than you thought you were.

The bottom line is that tighter credit standards should be a welcome trend in home loans. That may seem counterintuitive, but the fact is that tougher requirements protect borrowers as well as lenders and help to ensure that you’re financially able to make the monthly payments on your new loan. Always be sure to read your loans documents before you sign them and ask questions about any aspect of your loan that you don’t understand.

© 1998 – 2008 LendingTree, LLC. All rights reserved. No part of this article may be used or reproduced without prior written permission of LendingTree, LLC.

Rates dip on big mortgages
By Marcie Geffner – LendingTree.com

Interest rates on so-called “jumbo-conforming mortgages” have dipped significantly in recent weeks. The new lower rates should make these larger loans more affordable for people who live in high-cost housing markets and can meet the qualifications to get this type of loan.

Jumbo-conforming loans were created in February, when the federal government raised the loan limits on mortgages that can be purchased by Fannie Mae and Freddie Mac, two government-sponsored corporations that buy packages of securitized mortgages from lenders. The loan limit used to be $417,000 even in most of the nation’s high-cost housing markets, but was raised to as much as $729,750 in some counties. To find maximum loan limits in your county, you can download Fannie Mae’s Jumbo-Conforming Loan Limit Look-Up table.

Initially, interest rates on jumbo-conforming loans remained stubbornly higher than rates on smaller conforming loans. But the interest-rate gap has narrowed considerably now that Fannie Mae has decided to price the larger loans in line with the smaller ones.

As a result, you may be able to get a significantly lower interest rate on a larger loan today, even if you live in an expensive housing market. And a lower interest rate means you may be able to borrow more money than you otherwise could have to buy a home or refinance your current mortgage.

Lenders still have tougher requirements to qualify for jumbo-conforming loans. These requirements include:

• A sizable down payment, which may be advantageous since it creates equity in your home and eliminates the need for mortgage insurance.
• Plenty of equity, which is especially important if you want to refinance an existing jumbo mortgage with a conforming jumbo.
• A strong credit score.
• The ability and willingness to document your income and assets.

You may be among the chief beneficiaries of the lower interest rates on jumbo-conforming loans if you want to buy a home in an expensive housing market and can make a substantial down payment or if you want to refinance an existing jumbo mortgage and have plenty of equity.

If a jumbo-conforming loan might meet your needs, you probably should act quickly because these loans still face an uncertain future. Jumbo-conforming loans haven’t been seasoned in the marketplace, and the higher loan limits are set to expire at the end of this year, unless the federal government extends the sunset date or makes the new higher limits permanent.

© 1998 – 2008 LendingTree, LLC. All rights reserved. No part of this article may be used or reproduced without prior written permission of LendingTree, LLC.

Real estate: A good time to buy?
By Brenda Spiering – LendingTree.com

Today’s headlines can be confusing: Home prices are down, but may fall further; Interest rates are low, but lending standards have become more stringent. What does it all mean? Is now a good time to buy a home?

There’s no question that the current housing market is very different from the one we’ve experienced in recent years. In many parts of the country, there are a lot of homes for sale and interest rates are still near historic lows. These factors combine to create what can be considered a good buyer’s market — at least for some.

If you’ve saved enough for a down payment, have good credit and don’t plan to move in the next five years or so, buying today could be a smart move. Waiting until you believe prices have hit rock bottom may not put you any further ahead if you end up missing out on today’s low financing costs.

If you are shopping for a home today, be sure to:

Pre-qualify for a mortgage
Today’s lending standards are more stringent than they were a year ago. Buyers are generally required to have larger down payments and higher credit scores in order to qualify for the most preferential interest rates. It’s therefore more important than ever to shop around and compare loan options from several different lenders and to arrange financing before you put in an offer on a home.

Beware of deals that sound too good to be true
One of the fallouts from today’s housing market has been a dramatic increase in foreclosure rates. Properties in foreclosure may sell at less-than-market price by lenders attempting to recover money they’re owed. But it’s important to consider the potential hidden costs. Buying a vacant home for a steal may not save you money in the end if you have to pay for a costly renovation to make the place livable. Be sure to arrange a home inspection and to factor in the cost of any necessary repairs if you’re considering buying a home in foreclosure.

Compare apples to apples
Despite all the doom and gloom about today’s housing market, home prices are not down everywhere. While prices in certain regions of the country have fallen dramatically, prices in others have held steady or continued to rise. To get a good sense of a home’s true value, go online to compare the price of similar homes in the same neighborhood or have a local REALTOR prepare a professional competitive market analysis.

And remember, at the end of the day, the decision to buy a home is a personal one that needs to factor in your own financial situation and lifestyle preference. While historically, real estate has usually appreciated in value over the long term, no one can predict the perfect time to buy.

© 1998 – 2008 LendingTree, LLC. All rights reserved. No part of this article may be used or reproduced without prior written permission of LendingTree, LLC.

Improve your financial fitness
By Marcie Geffner – LendingTree.com

Did you know financial fitness can save your life?

Well, maybe not literally. But being well informed about money can reduce stress and help you live a healthier and happier life. Here are three tips to get you started:

1. Did you know? The U.S. has one of the lowest personal savings rates among the world’s economically developed countries. In February 2008, people in the U.S. saved only 0.3 percent of their disposable income, on average, according to the U.S. Department of Economic Analysis.

Saving money is crucial to financial well-being. Savings can help you cope with a financial emergency, make a major purchase and even get ready for retirement.

Saving is easier if you start early and make a habit of it. One good practice is to sign up for an automatic savings plan that deducts money from your paycheck or checking account and sets it aside before you have a chance to spend it. Stash your savings in a savings account, certificate of deposit (CD), investment account or retirement account to meet your future needs.

2. Did you know? Nearly 40 percent of adults have a budget and keep close track of how much they spend on food, housing, entertainment and other categories, according to a survey conducted
for the nonprofit National Foundation for Credit Counseling.

Approximately half of the adults surveyed said they had a good idea of how much they spend or tried to stay within certain limits. Seven percent had no idea and no set limits.

A budget is an important tool to plan and track how much you’re spending and saving each month. To make a budget, start with your monthly income and then allocate specific amounts for each expense. Try to set aside at least 10 percent for savings and no more than 30 percent for housing, 25 percent for living expenses and 15 percent for transportation.

3. Did you know? Nearly 70 percent of young adults have a credit card and 64 percent worry about their debts at least occasionally, according to a survey conducted for the National Endowment for Financial Education.

Paying credit card bills and other debts on time is essential because a history of on-time payments strengthens your credit score, which measures your creditworthiness. It’s much better to build your credit record slowly and patiently than to take on more credit cards than you can handle or spend more than you can repay.

To learn more about saving, budgeting and using credit responsibly explore the LendingTree Smart Borrower Center, which contains hundreds of articles that can help you improve your financial literacy and achieve your goals.

And that, financially speaking, can be a real lifesaver.

© 1998 – 2008 LendingTree, LLC. All rights reserved. No part of this article may be used or reproduced without prior written permission of LendingTree, LLC.

Fed cuts key interest rate
By Marcie Geffner – LendingTree.com

As expected, the Federal Reserve yesterday trimmed a key bank interest rate by one-quarter of a percentage point from 2.25 percent to just 2 percent. The Fed has now lowered the federal funds rate 3 percentage points in the last seven months.

In its statement, the Fed noted that turmoil in the financial markets, tougher requirements for new loans and weak housing markets have put pressure on the U.S. economy.

“Tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters,” the Fed said.

One of the Fed’s primary objectives is to protect the U.S. economy from inflation. That means the Fed has to find a balance between lower interest rates and higher prices. This week’s statement said the Fed would “continue to monitor inflation developments carefully.”

The Fed doesn’t directly control interest rates on home loans, credit cards or other consumer debts. But this week’s rate cut could still be a positive development for many borrowers since the Fed’s actions can indirectly influence the interest rates on some loans.

Rate cut may aid ARM borrowers
The Fed’s previous rate cuts were especially welcome for borrowers who were facing resets on adjustable-rate mortgages (ARMs) tied to certain indices. Interest rates on ARMs often are tied to the U.S. Treasury or the London Interbank Offer Rate (Libor) rate, both of which have dropped this year.

As an indirect result of the Fed’s rate cuts, some ARM adjustments and resets have been much smaller and less painful for borrowers than they otherwise would have been. The savings due to smaller ARM rate adjustments could amount to hundreds of dollars a month for some homeowners.

The Fed’s rate cuts also influence the prime rate, which is the rate banks offer their best customers. This means short-term interest rates on home equity lines of credit, ARMs tied to the prime rate, auto loans, and some credit cards may move lower as well.

© 1998 – 2008 LendingTree, LLC. All rights reserved. No part of this article may be used or reproduced without prior written permission of LendingTree, LLC.